What changed in this filing

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Item 1A. Risk Factors

2022-07-14 compared with 2021-06-14 · 110 added, 67 removed, 481 unchanged (27% of the section changed)

12 unchanged sentences

We anticipate further losses and we may never become profitable.

● We may be unable to fund our future operating requirements, which could force us to curtail our operations.

● Our recently implemented expenses reduction plan and organizational changes undertaken to align to our focus on our EaaS business and achieving profitability may not be successful.

● If we are unable to either substantially improve our operating results or obtain additional financing, we may be unable to continue to operate at current levels.

● We may be unable to fund our future operating requirements, which could force us to curtail our operations;

we were in breach of our secured note purchase agreement as of May 27, 2022.

● A sustainable market for microturbines may never develop or may take longer to develop than we anticipate which would adversely affect our results of operations.

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● We may not be able to produce our products on a timely basis if we fail to correctly anticipate product supply requirements or if we suffer delays in production resulting from issues with our suppliers.

Our suppliers may not

supply us with a sufficient number of components or components of adequate quality, or they may provide components at significantly increased prices.

Our suppliers may not supply us with a sufficient number of components or components of adequate quality, or they may provide components at significantly increased prices.

● Commodity market factors impact our costs and availability of materials.

● We operate in a highly competitive market among competitors that have significantly greater resources than we have and we may not be able to compete effectively.

● Our business and financial performance depends in part on the oil and natural gas industry, where a continued movement towards clean energy and away from fossil fuels, as well as a decline in prices for oil and natural gas may have an adverse effect on our revenue, cash flows, profitability, and growth.

● Our business and financial performances depend in part on the oil and natural gas industry, where a continued movement towards clean energy and away from fossil fuels, as well as a decline in prices for oil and natural gas may have an adverse effect on our revenue, cash flows, profitability, and growth.

● Our sales and results of operations could be materially and adversely impacted by risks inherent in international markets.

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● We have significant tax assets, usage of which may be subject to limitations in the future.

● We are subject to a number of pending lawsuits.

● We may be subject to lawsuits.

Risks Related to Data, Security, and Intellectual Property

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Due to such volatility, we may not be able to raise additional capital, if needed, on favorable terms, or at all.

Further adverse economic events resulting from the COVID-19 pandemic, including sustained economic downturn, could materially and adversely affect our business, access to capital markets and the value of our common stock.

Further adverse economic events resulting from the COVID-19 pandemic, including sustained economic downturn, supply chain disruptions, or increasing cost pressures, could materially and adversely affect our business, access to capital markets and the value of our common stock.

Additionally, our liquidity could be negatively impacted if these conditions continue for a significant period of time and we may be required to pursue additional sources of financing to obtain working capital, maintain appropriate inventory levels, and meet our financial obligations.

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The ultimate impact of the COVID-19 pandemic is highly uncertain and subject to change.

We do not yet know the full extent of potential impacts on our business, healthcare systems, the medical device industry or the global economy as a whole.

We do not yet know the full extent of potential impacts on our business or the global economy as a whole.

However, these effects could adversely impact our business, financial condition, results of operations, or cash flows.

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Our business is such that we have relatively few repeat end use customers and limited repeat business compared to our competitors.

As a result, we may not maintain or increase revenue.

As a result, we

may not maintain or increase revenue.

We may not have adequate cash resources to reach the point of profitability, and we may never become profitable.

Even if we do achieve profitability, we may be unable to increase our sales and sustain or increase our profitability in the future.

We may be unable to fund our future operating requirements, which could force us to curtail our operations.

Our recently implemented expenses reduction plan and organizational changes undertaken to align to our focus on our EaaS business and achieving profitability may not be successful.

In March 2022, we implemented an expenses reduction plan and announced our efforts to reduce our operating costs and modify our operating model to better match our expanding EaaS business.

Beginning on February 28, 2022, we furloughed 17 employees for a period of 120 days, eliminated the position of Chief Revenue Officer, which was held by Jim Crouse, effective April 15, 2022, instituted 15% temporary pay cuts for approximately 36 employees and 25% temporary pay cuts for members of our senior leadership team, among other actions.

We believe these changes were needed to streamline our organization and reallocate our resources to better align with our current strategic goals, including our current focus of achieving profitability and expanding our EaaS business.

However, these expense reduction measures have and may continue to yield unintended consequences and costs, such as the loss of institutional knowledge and expertise, attrition beyond our intended reduction-in-force, a reduction in morale among our remaining employees, and the risk that we may not achieve the anticipated benefits, all of which may have an adverse effect on our results of operations or financial condition.

In addition, while positions have been eliminated certain functions necessary to our reduced operations remain, particularly with respect to our financial and accounting function, and we may be unsuccessful in distributing the duties and obligations of departed employees among our remaining employees or to external service providers.

We may also discover that the reductions in workforce and cost cutting measures will make it difficult for us to pursue new opportunities and initiatives and require us to hire qualified replacement personnel, which may require us to incur additional and unanticipated costs and expenses.

We may further discover that, despite the implementation of our expense reduction plan, we may require additional capital to continue expanding our EaaS business and we may be unable to obtain such capital.

Moreover, there is no assurance we will be successful in our pursuit of expanding our EaaS business.

Our failure to successfully accomplish any of the above activities and goals may have a material adverse impact on our business, financial condition, and results of operations.

We may be unable to fund our future operating requirements, which could force us to further curtail our operations;

we were in breach of our secured note purchase agreement as of May 27, 2022.

To the extent that the funds we now have on hand are insufficient to fund our future operating requirements, we would need to raise additional funds, through further public or private equity or debt financings depending upon prevailing market conditions.

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If adequate capital were not available to us, we likely would be required to significantly curtail our operations or possibly even cease our operations.

In March 2022, we implemented an expense reduction plan, which included furloughs, employment terminations and pay cuts.

See “— Our recently implemented expenses reduction plan and organizational changes undertaken to align to our focus on our EaaS business and achieving profitability may not be successful .”

We are party to an Amended and Restated Note Purchase Agreement (the “A&R Note Purchase Agreement”) dated October 1, 2020 (the “Closing Date”) among the Company, certain subsidiaries of the Company, Goldman Sachs Specialty Lending Group, L.P.

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The Notes do not amortize and the entire principal balance is due and payable on October 1, 2023.

As of March 31, 2021, $51.0 million in borrowings were outstanding under the Notes, which includes the accrual for an exit fee to be paid at maturity or upon pre-payment.

As of March 31, 2022, $51.0

million in borrowings were outstanding under the Notes, which includes the accrual for an exit fee to be paid at maturity or upon pre-payment.

Obligations under the A&R Note Purchase Agreement are secured by all of the Company’s assets, including intellectual property and general intangibles.

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On May 13, 2021, the Company, and the collateral agent, entered into a First Amendment, dated as of May 13, 2021 (the “Amendment”), to the A&R Note Purchase Agreement.

The Amendment amended certain provisions of the A&R Note Purchase Agreement, including to (a) require the Company to expand its Rental Fleet (as defined in the A&R Note Purchase Agreement) by (i) at least 2.00 MW by the 9-month anniversary of the Closing Date (instead of 6.25 MW as provided in the A&R Note Purchase Agreement prior to the Amendment), and (ii) at least 12.50 MW by the 18-month anniversary of the Closing Date (which is unchanged from the covenant set forth in in the A&R Note Purchase Agreement prior to the Amendment), and (b) increase the Company’s minimum consolidated liquidity requirement from $9,000,000 to $12,200,000 for the period from May 13, 2021 to March 31, 2022.

The A&R Note Purchase Agreement also defines an event of default as, among other things, payment default, bankruptcy events, cross defaults, breaches of covenants and representations and warranties, changes of control, judgment defaults and an ownership change within the meaning of Section 382 of the Internal Revenue Code.

The Amendment amended certain provisions of the A&R Note Purchase Agreement, including to (a) require the Company to expand its Rental Fleet (as defined in the A&R Note Purchase Agreement) by (i) at least 2.00 MW by the 9-month anniversary of the Closing Date (instead of 6.25 MW as provided in the A&R Note Purchase Agreement prior to the Amendment), and (ii) at least 12.50 MW by the 18-month anniversary of the Closing Date (which is unchanged from the covenant set forth in the A&R Note Purchase Agreement prior to the Amendment), and (b) increase the Company’s minimum consolidated liquidity requirement from $9 million to $12.2 million, for the period from May 13, 2021 to March 31, 2022, and $9 million thereafter.

The financial covenants of the A&R Note Purchase Agreement require the Company not to exceed specified levels of Adjusted EBITDA losses relative to its financial model, beginning with the fiscal quarter ending September 30, 2021.

As of March 31, 2022, we were not in compliance with the Adjusted EBITDA covenant contained in the A&R Note Purchase Agreement and did not cure such non-compliance by prepaying the Notes.

As a result, we were in breach of the Adjusted EBITDA covenant as of May 27, 2022.

On July 13, 2022 we entered into the Second Amendment to the A&R Note Purchase Agreement (the “A&R NPA Second Amendment”) with the purchaser thereunder (the “Purchaser”) and Goldman Sachs Specialty Lending Group, L.P.

as collateral agent (the “Collateral Agent”), pursuant to which (i) the Purchaser and the Collateral Agent waived our breach of the Adjusted EBITDA covenant and (ii) the A&R Note Purchase Agreement has been amended to, among other things, add certain new covenants, including requirements that we use our commercially reasonable best efforts to both (a) raise at least $10 million through a sale of our common stock by September 14, 2022 and (b) refinance the Notes by October 1, 2022.

See Item 9B “Other Information” for a summary of the A&R NPA Second Amendment.

The A&R Note Purchase Agreement, as amended, also defines an event of default as, among other things, payment default, bankruptcy events, cross defaults, breaches of covenants and representations and warranties, changes of control, judgment defaults and an ownership change within the meaning of Section 382 of the Internal Revenue Code.

An event of default, if not waived, could have a material adverse effect on us.

Our obligations under the A&R Note Purchase Agreement could have important consequences, including the following:

Our obligations under the A&R Note Purchase Agreement, as amended, have important consequences, including the following:

● We may have difficulty obtaining additional financing at favorable interest rates to meet our requirements for operations, capital expenditures, general corporate or other purposes.

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Accordingly, our desire to preserve our federal and state net operating loss (“NOL”) carryforwards may cause us to forgo otherwise attractive funding opportunities.

We may be required to repay the Notes immediately if we default on any of the numerous financial or other restrictive covenants contained in the A&R Note Purchase Agreement.

We may be required to repay the Notes immediately if we again default on any of the numerous financial and other covenants contained in the A&R Note Purchase Agreement, including any of those added pursuant to the A&R NPA Second Amendment, and Goldman does not waive such default.

It is not certain whether we will have, or will be able to obtain, sufficient funds to make any such accelerated payments.

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This compares to $919.3 million, $49.5 million and $52.5 million, respectively, on March 31, 2021.

As a condition of the A&R Note Purchase Agreement with the Purchasers, our consolidated liquidity (defined as the aggregate amount of unrestricted cash and cash equivalents included in the consolidated balance of the Company and our subsidiaries, subject to certain conditions as defined in the A&R Note Purchase Agreement) on any date may not be less than $12.2 million for the period from the Amendment Date to March 31, 2022.

Our business strategy is focused on profitability-oriented initiatives such as reducing operating expenses, increasing sales of products and services, thereby diversifying, and increasing revenue, and improving gross margin.

We may not be able to execute the business strategy successfully and if we are unable to generate positive cash flow, potential customers may choose not to purchase our products or utilize our program.

In particular, we are focused on expanding our Energy-as-a-Service business.

We may not be able to execute our business strategy successfully and if we are unable to generate positive cash flow, potential customers may choose not to purchase our products or utilize our program.

Moreover, the business strategy is based upon projections, which are in turn based upon estimates and assumptions.

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To succeed, demand for our products must increase significantly in existing markets, and there must be strong demand for products that we introduce in the future.

In addition, as part of our business strategy, we are focusing our marketing efforts on the energy

efficiency, renewable energy, natural resources, critical power, microgrid and transportation markets.

In addition, as part of our business strategy, we are focusing our marketing efforts on expanding our Energy as a Service business and on the energy efficiency, renewable energy and, natural resources markets.

We may be unable to grow our business in these target markets.

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Further, we have at times undertaken programs to enhance the performance of units previously sold.

For example, during Fiscal 2017, we recorded a non-cash warranty provision of approximately $5.2 million to proactively retrofit select non-Signature Series C200 microturbines with the more robust new Signature Series generator components to improve product performance and reliability.

Additionally, our warranty provision was negatively impacted in Fiscal 2019 and Fiscal 2021 because of a supplier defect identified in fielded units.

For example, our warranty provision was negatively impacted in Fiscal 2019 and Fiscal 2021 because of a supplier defect identified in fielded units.

In Fiscal 2021 a warranty reserve in the amount of $4.9 million was established related to reliability programs to account for the replacement of remaining high risk failure parts in some of our fielded units due to a supplier defect.

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We obtained this settlement following a multi-year arbitration process.

Any future product quality issues with our parts suppliers could lead

to lengthy and costly litigation, even if the outcome is ultimately in our favor.

Any future product quality issues with our parts suppliers could lead to lengthy and costly litigation, even if the outcome is ultimately in our favor.

In addition, such quality issues with any of our parts could lead to us to fail to meet the product quality expectations of our own customers, which could adversely affect our operating results, financial condition and cash flow and affect the marketability of our products.

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If sales in any period fall significantly below anticipated levels, our financial condition, results of operations and cash flow would suffer.

If demand in any period increases well above anticipated levels, we may have difficulties in responding, incur greater costs to respond, or be unable to fulfill the demand in sufficient time to retain the order, which would negatively impact our operations.

order, which would negatively impact our operations.

In addition, our operating expenses are based on anticipated sales levels, and a high percentage of our expenses are generally fixed in the short term.

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Our sales and marketing efforts may not achieve intended results and, therefore, may not generate the revenue we anticipate.

As a result of our corporate strategies, we have decided to focus our resources on selected vertical markets.

As a result of our corporate strategies, we have decided to focus our resources on expanding our Energy as a Service business and further developing selected vertical markets.

We may change our focus to other markets or applications in the future.

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companies access to critical raw materials.

A “trade war” of this nature or other governmental action related to tariffs or international trade agreements or policies has the

potential to adversely impact demand for our products, our costs, customers, suppliers and/or the U.S.

A “trade war” of this nature or other governmental action related to tariffs or international trade agreements or policies has the potential to adversely impact demand for our products, our costs, customers, suppliers and/or the U.S.

economy or certain sectors thereof and, thus, to adversely impact our businesses.

government imposes sanctions through executive orders restricting U.S.

companies from conducting business activities with specified individuals and companies, such as in Russia and the Ukraine, and requires export licenses for certain of such activities.

While we believe that the executive orders currently do not have a material impact on our business, the sanctions imposed by the U.S.

government could be expanded in the future.

If we are unable to conduct business with new or existing customers or pursue opportunities with sanctioned countries, our business, including revenue, profitability, and cash flows, could be materially adversely affected.

companies from conducting business activities with specified individuals and companies, and requires export licenses for certain of such activities.

Following Russia’s military invasion of Ukraine in March 2022, we re-evaluated our efforts in the Russian and the surrounding Commonwealth of Independent States (CIS) markets and have ceased exploring growth opportunities in such markets.

We do however continue to evaluate customer orders and ensure that we are in compliance with all laws and regulations upon acceptance and before shipment.

If we are unable to conduct business with new or existing customers or pursue opportunities with sanctioned countries, including Russia, our business, including revenue, profitability, and cash flows, could be materially adversely affected.

We may not be able to retain or develop relationships with OEMs or distributors in our targeted markets, in which case our sales would not increase as expected.

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Loss of a significant customer could have a material adverse effect on our results of operations.

CAL and E-Finity accounted for approximately 15% and 12%, respectively, of our revenue for Fiscal 2021.

E-Finity accounted for approximately 18% of our revenue for Fiscal 2022.

Additionally, E-Finity accounted for 28% of net accounts receivable as of March 31, 2022.

The loss of CAL, E-Finity or any other significant customer could have a material adverse effect on our results of operations and financial condition.

The loss of E-Finity or any other significant customer could have a material adverse effect on our results of operations and financial condition.

We may not achieve production cost reductions necessary to competitively price our products, which would adversely affect our sales.

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As a result of these cost-cutting initiatives, which we have already undertaken over an extended period of time, we may have a more limited ability to further reduce costs to increase our liquidity should such measures become necessary.

Any further reductions may have a materially negative impact on our business.

In March 2022, we implemented an expense reduction plan, which included furloughs, employment terminations and pay cuts.

See “— Our recently implemented expenses reduction plan and organizational changes undertaken to align to our focus on our EaaS business and achieving profitability may not be successful .” Any further reductions may have a materially negative impact on our business.

We may incur costs and liabilities as a result of product liability claims.

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Transitioning to outsourcing may cause certain of our affected employees to leave before the outsourcing is complete.

This could result in a lack of the experienced in-house talent necessary to successfully

implement the outsourcing.

This could result in a lack of the experienced in-house talent necessary to successfully implement the outsourcing.

Further, depending on the nature of operations outsourced and the structure of agreements we reach with suppliers to perform these functions, we may experience impairment in the value of manufacturing assets related to the outsourced functions or other unanticipated charges, which could have a material adverse effect on our operating results.

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The failure of our personnel to execute our strategy or our failure to retain management and personnel could have a material adverse effect on our business.

In March 2022, we implemented an expense reduction plan, which included furloughs, employment terminations and pay cuts.

See “— Our recently implemented expenses reduction plan and organizational changes undertaken to align to our focus on our EaaS business and achieving profitability may not be successful .”

Our success, growth prospects, and ability to capitalize on market opportunities also depend to a significant extent on our ability to identify, hire, motivate and retain qualified managerial personnel, including senior members of management.

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The demand for skilled workers is currently high.

We face an increasingly competitive labor market due to sustained labor shortages in part from the COVID-19 pandemic and are subject to inflationary pressures on employee wages and salaries which may increase labor costs.

In addition, we have already experienced involuntary turnover due to increased commuting costs for our employees.

If gas prices remain high for a sustained period, we may experience further involuntary turnover as employees seek to shorten their commutes.

Our competitors may be able to offer a work environment with higher compensation or more opportunities than we can.

If we are unable to attract and retain a sufficient number of skilled personnel, our ability to successfully implement our business plan, grow our Company and maintain or expand our product offerings may be adversely affected, and the costs of doing so may increase, which may adversely impact our business, financial condition and results of operations.

In addition, our internal control systems rely on employees trained in the execution of the controls.

In addition, our internal control systems rely on employees trained in the execution of the controls, particularly within our financial and accounting function.

Loss of these employees or our inability to replace them with similarly skilled and trained individuals or new processes in a timely manner could adversely impact our internal control mechanisms.

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Because the Southern California area is located in an earthquake-sensitive area and because we have no redundancy facility located within or outside of Southern California, we are particularly susceptible to the risk of damage to, or total destruction of, our facilities in Southern California and the surrounding transportation infrastructure, which could affect our ability to make and transport our products.

If an earthquake, fire, or other natural disaster occurs at or near our facilities, our business, financial condition, operating results and cash flow could be materially adversely affected.

While we take steps to mitigate the impact of severe weather, environmental and natural disasters, the frequency and severity of which may be impacted by climate change and other natural and manmade events, such events could result in severe disruption to our business operations at these facilities.

If an earthquake, fire, or other man-made or natural disaster occurs at or near our facilities, our business, financial condition, operating results and cash flow could be materially adversely affected.

Activities necessary to integrate any future acquisitions may result in costs in excess of current expectations or be less successful than anticipated.

We may acquire other businesses in the future and the success of these transactions will depend on, among other things, our ability to develop productive relationships with the corresponding distributors and to integrate assets and personnel, if any, acquired in these transactions and to apply our internal controls processes to these acquired businesses.

impairment charges, incur amortization expenses related to certain intangible assets, incur large acquisition and integration costs, immediate write-offs, and restructuring and other related expenses, and become subject to litigation.

Future acquisitions may require us to raise financing including by issuing common stock that would dilute our current stockholders’ percentage ownership, assume or otherwise be subject to liabilities of an acquired company, record goodwill and non-amortizable intangible assets that will be subject to impairment testing on a regular basis and potential periodic impairment charges, incur amortization expenses related to certain intangible assets, incur large acquisition and integration costs, immediate write-offs, and restructuring and other related expenses, and become subject to litigation.

The benefits of an acquisition may also take considerable time to develop, and we cannot be certain that any particular acquisition will produce the intended benefits in a timely manner or to the extent anticipated or at all.

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If we are unable to fully benefit from anticipated synergies, our business, financial condition, results of operations, and cash flows could be materially adversely affected.

We may be adversely impacted by the effects of climate change and may incur increased costs and experience other impacts due to new or more stringent greenhouse gas regulations designed to address climate change.

The scientific consensus indicates that emissions of greenhouse gases (GHG) continue to alter the composition of Earth’s atmosphere in ways that are affecting, and are expected to continue to affect, the global climate.

The potential impacts of climate change on our customers, product offerings, operations, facilities and suppliers are accelerating and uncertain, as they will be particular to local and customer-specific circumstances.

These potential impacts may include, among other items, physical long-term changes in freshwater availability and the frequency and severity of weather events as well as customer product changes either through preference or regulation.

Concerns regarding climate change may lead to additional international, national, regional and local legislative and regulatory responses.

Various stakeholders, including legislators and regulators, shareholders and non-governmental organizations, are continuing to look for ways to reduce GHG emissions.

Increased input costs, such as fuel, utility, transportation and compliance-related costs could increase our operating costs.

While we aim to position ourselves as a solution for climate change related issues to our customers, there are other solutions in the market that may be cheaper or better suited to our customers’ needs, and we may not be able to capitalize on the move towards renewable energy.

As the impact of any future GHG legislative or regulatory requirements on our global businesses and products is dependent on the timing, scope and design of the mandates or standards, we are currently unable to predict its potential impact which could have a material adverse effect on our results of operations, financial condition and cash flows.

Risks Related to Our Product Offerings

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The success of our products is dependent on several factors, including proper product definition, product cost, timely completion and introduction of the products, differentiation of products from those of our competitors, meeting changing customer requirements, emerging industry standards and market acceptance of these products.

The development of new, technologically advanced products and enhancements is a complex and uncertain process requiring high levels of innovation, as well as the accurate anticipation of technological and market trends.

The development of new, technologically advanced products and enhancements is a complex and uncertain

process requiring high levels of innovation, as well as the accurate anticipation of technological and market trends.

There can be no assurance that we will successfully identify new product opportunities, develop and bring new or enhanced products to market in a timely manner, successfully lower costs and achieve market acceptance of our products, or that products and technologies developed by others will not render our products or technologies obsolete or uncompetitive.

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Continued development towards a 100% hydrogen product will require a long time horizon and a significant amount of financial resources.

There can be no assurance that we will have the resources or financial ability to develop a 100% hydrogen product.

We do not currently have and there can be no assurance that we will develop the resources or financial ability to develop a 100% hydrogen product.

Our operating results are dependent, in large part, upon the successful commercialization of our products.

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We may experience delays in production if we fail to identify alternative suppliers, or if any parts supply is interrupted, each of which could materially adversely affect our business and operations.

In addition, the COVID-19 pandemic continues to cause labor shortages and disrupt global supply chains, which has contributed to prolonged disruptions.

The COVID-19 pandemic is also contributing to growing inflationary pressures, particularly in the U.S., where inflation continues to show signs of acceleration.

In order to reduce manufacturing lead times and ensure adequate component supply, we enter into agreements with certain suppliers that allow them to procure inventories based upon criteria defined by us.

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Financial problems of suppliers on whom we rely could limit our supply of components or increase our costs.

Also, we cannot

guarantee that any of the parts or components that we purchase will be of adequate quality or that the prices we pay for the parts or components will not increase.

Also, we cannot guarantee that any of the parts or components that we purchase will be of adequate quality or that the prices we pay for the parts or components will not increase.

Inadequate quality of products from suppliers could interrupt our ability to supply quality products to our customers in a timely manner.

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The pricing could impact the costs to manufacture our products.

During Fiscal 2022, as a result of COVID-19 and other ongoing macroeconomic events, we saw significant price increases in the cost of our commodity materials.

If we are not able to acquire commodity materials at prices and on terms satisfactory to us or at all, our operating results may be materially adversely affected.

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Our business and financial performance depends in part on the oil and natural gas industry, where a continued movement towards clean energy and away from fossil fuels, as well as a decline in prices for oil and natural gas may have an adverse effect on our revenue, cash flows, profitability and growth.

We experienced a decrease in revenue in Fiscal 2021 and Fiscal 2020 due to declining oil prices, as well as a movement towards clean energy and away from fossil fuels, which has impacted capital expenditures in the oil and natural gas industry.

Revenue in the oil and natural gas industry has been in decline for several years from our historical highs, due to volatility in oil prices, as well as a movement towards clean energy and away from fossil fuels, which has impacted capital expenditures in the oil and natural gas industry.

We continue to be impacted by the volatility of the global oil and gas industry.

If prices were to remain low or decline further, we would expect to see additional declines in our customers' spending which would have an adverse effect on our revenue.

If prices were to decline and remain low for a sustained period, we would expect to see additional declines in our customers' spending which would have an adverse effect on our revenue.

In addition, a worsening of these conditions may result in a material adverse impact on certain of our customers' liquidity and financial position resulting in further spending reductions, delays in the collection of amounts owing to us and other similar adverse effects.

Despite a recent increase in oil prices, we have not yet seen a corresponding increase in sales activity, primarily due to the customers in our natural resources market vertical not yet increasing their spend on capital expenditures that would include our microturbine product.

Our sales and results of operations could be materially and adversely impacted by risks inherent in international markets.

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We may incur material costs or liabilities in complying with government regulations.

In addition, potentially significant expenditures could be required in order to comply with evolving environmental and health and safety laws, regulations, requirements and approvals that may be adopted or imposed in the future.

In addition, potentially significant expenditures could be required in order to comply with evolving environmental and health and safety laws, regulations,

requirements and approvals that may be adopted or imposed in the future.

We can provide no assurances that we will be able to obtain any such approvals in a timely manner, or at all.

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Any subsequent accumulations of common stock ownership leading to a change of control under Section 382 of the U.S.

Internal Revenue Code of 1986, including through sales of stock by large stockholders, which are outside of our control, could limit and defer our ability to utilize our net operating loss carryforwards to offset future federal income tax liabilities.

We are subject to a number of pending lawsuits.

We and certain of our current and former officers are named as defendants in a shareholder class action lawsuit filed in the United States District Court for the Central District of California, and in a separate but similar lawsuit brought by two individual shareholders in the United States District Court for the Central District of California.

Additionally, we and certain of our current and former officers and directors are named as defendants in various state and federal derivative suits.

Internal Revenue Code of 1986, as amended, including through sales of stock by large stockholders, which are outside of our control, could limit and defer our ability to utilize our net operating loss carryforwards to offset future federal income tax liabilities.

We may be subject to lawsuits.

We may be named as defendants in future lawsuits.

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We seek to protect our intellectual property rights through a combination of patent, trademark, copyright and trade secret laws, as well as licensing and confidentiality agreements.

These protections may not be adequate to prevent third parties from using our intellectual property without our authorization, breaching any confidentiality agreements with us, copying or reverse engineering our products, or developing and marketing products that are substantially equivalent to or superior to our own.

developing and marketing products that are substantially equivalent to or superior to our own.

The unauthorized use of our intellectual property by others could reduce our competitive advantage and harm our business.

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As a manufacturer of high technology commercial products, we face security and cyber security threats, as well as the potential for business disruptions associated with information technology failures or cyber security attacks.

Given the nature of our business, we collect process and retain sensitive and confidential customer and associate data, in addition to proprietary business information.

Given the nature of our business, we collect, process and retain sensitive and confidential customer and associated data, in addition to proprietary business information.

Our business, including our turbines and related energy assets may be vulnerable to a data compromise, computer viruses, physical and electronic break-ins and manipulations and similar disruptions, which may not be prevented by our efforts to secure our computer systems and assets, which include vulnerability scans and patching, network firewalls, identity and access management, data encryption, intrusion detection and prevention devices.

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Consequently, we may incur significant costs related to prevention and compliance with laws regarding the protection and unauthorized disclosure of personal information.

A failure to comply with the stringent rules of the GDPR could result in fines of up to €20 million.

Further, a greater number of our employees are working remotely in response to the COVID-19 pandemic and related government actions, which could expose us to greater risks related to cybersecurity and our information technologies systems.

Further, a greater number of our employees are working remotely, which could expose us to greater risks related to cybersecurity and our information technologies systems.

Risks Related to Ownership of Our Common Stock

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If we cannot adequately maintain the effectiveness of our internal controls over financial reporting, we may not be able to produce timely and accurate financial statements.

If that were to happen, our investors could lose confidence in our reported financial information, the market price of our common stock could decline and we might be subject to sanctions or investigation by regulatory authorities, such as the SEC.

If that were to

happen, our investors could lose confidence in our reported financial information, the market price of our common stock could decline and we might be subject to sanctions or investigation by regulatory authorities, such as the SEC.

Future issuances or sales of our common stock or exercises by holders of our outstanding warrants could lower our stock price and dilute the interests of existing stockholders.

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In addition, the sale of a substantial amount of common stock in the public market, either in the initial issuance or in a subsequent resale by investors that acquired such common stock, could have a material adverse effect on the market price of our common stock.

We may sell up to $50.0 million of shares of our common stock in “at-the-market’ offerings pursuant to the sales agreement entered into with H.C.

Pursuant to the A&R NPA Second Amendment, we are required to use our commercially reasonable efforts to raise at least $10 million through a sale of our common stock by September 14, 2022.

We may also sell up to $50 million of shares of our common stock in “at-the-market’ offerings pursuant to the sales agreement entered into with H.C.

Wainwright & Co., LLC on June 7, 2018 and as amended on July 15, 2020 and March 29, 2021.

The sale of a substantial number of shares of our common stock pursuant to the sales agreement, or anticipation of such sales, could cause the trading price of our common stock to decline or make it more difficult for us to sell equity or equity-related securities in the future at a time and at a price that we might otherwise desire.

The sale of a substantial number of shares of our common stock, pursuant to the capital raise contemplated by the A&R NPA Second Amendment, the at-the-market offering sales agreement or otherwise, or anticipation of any such sales, could cause the trading price of our common stock to decline or make it more difficult for us to sell equity or equity-related securities in the future at a time and at a price that we might otherwise desire.

In addition, issuances of any shares of our common stock sold pursuant to the sales agreement will have a dilutive effect on our existing stockholders.

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This variability could affect our operating results and thereby adversely affect our stock price.

Many factors that contribute

to this volatility are beyond our control and may cause the market price of our common stock to change, regardless of our operating performance.

Many factors that contribute to this volatility are beyond our control and may cause the market price of our common stock to change, regardless of our operating performance.

Factors that could cause fluctuation in our stock price may include, among other things:

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● further decreases in or continued low levels of oil, natural gas and electricity prices.

Market conditions may result in volatility in the level of, and fluctuations in, market prices of stocks generally and, in turn, our common stock and sales of substantial amounts of our common stock in the market, in each case being unrelated or disproportionate to changes in our operating performance.

Concerns over global stability and economic conditions in the United States and abroad have contributed to the extreme volatility of the markets which may influence the market price of our common stock.

In the past, following periods of volatility in the market price of a company’s

securities, securities class action litigation has often been instituted against the company.

Market conditions may result in volatility in the level of, and fluctuations in, market prices of stocks generally and, in turn, our common stock.

For example, between April 1, 2019 and March 31, 2022, the market price of our common stock ranged from $8.90 to $4.12.

Global financial markets have been experiencing extreme disruption in recent months, including, among other things, extreme volatility in securities prices.

We are unable to predict the likely duration and severity of the current disruptions in financial markets and adverse economic conditions throughout the world.

In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been instituted against the company.

This type of litigation, regardless of whether we prevail on the underlying claim, could result in substantial costs and a diversion of management’s attention and resources, which could materially harm our financial condition, results of operations and cash flow.

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On May 6, 2019, we and Broadridge Financial Solutions, Inc.

successor-in-interest to Computershare Inc., as Rights Agent, entered into a Rights Agreement (the “NOL Rights Agreement”) designed to diminish the risk that our ability to use our net operating losses and certain other tax assets to reduce potential future federal income tax obligations would become subject to limitations by reason of us experiencing an “ownership change,” as defined in Section 382 of the Internal Revenue Code of 1986, as amended.

successor-in-interest to Computershare Inc., as Rights Agent, entered into the NOL Rights Agreement, which is designed to diminish the risk that our ability to use our net operating losses and certain other tax assets to reduce potential future federal income tax obligations would become subject to limitations by reason of us experiencing an “ownership change,” as defined in Section 382 of the Internal Revenue Code of 1986, as amended.

The NOL Rights Agreement replaces the Company’s Rights Agreement, dated May 6, 2016, by and between the Company and Broadridge Financial Solutions, Inc., as successor-in-interest to Computershare Inc., as rights agent (the “Original Rights Agreement”).

On April 7, 2022, our Board approved an extension of the NOL Rights Agreement from May 6, 2022 to May 6, 2025, subject to obtaining shareholder approval ratifying such extension.

While this NOL Rights Agreement is intended to preserve our net operating losses, it effectively deters current and future purchasers from becoming 4.99% stockholders.

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Adverse economic conditions may have an impact on our business and financial condition, including some effects we may not be able to predict.

Adverse economic conditions may prevent our customers from purchasing our products or delay their purchases, which would adversely affect our business, financial condition and results of operations.

In addition, our ability to access the capital markets may be severely restricted or made very expensive at a time when we need, or would like, to do so,

which could have a material adverse impact on our liquidity and financial resources.

Adverse economic conditions, such as recent supply chain disruptions, labor shortages and persistent inflation, may prevent our customers from purchasing our products or delay their purchases, which would adversely affect our business, financial condition and results of operations.

In addition, our ability to access the capital markets may be severely restricted or made very expensive at a time when we need, or would like, to do so, which could have a material adverse impact on our liquidity and financial resources.

Certain industries in which our customers do business and certain geographic areas have been and could continue to be adversely affected by adverse economic conditions.

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dollar (making our products more expensive overseas) and ongoing global geopolitical tensions.

Adverse economic developments affect businesses such as ours and those of third parties on which we rely in a number of ways that could result in unfavorable consequences to us.

Current economic conditions or a deepening economic downturn in the United States and elsewhere may reduce our ability to access capital, which could negatively impact our short-term and long-term liquidity.

Our business may be impacted by international instability, war, terrorism, and geopolitical events.

International political and economic instability or volatility, geopolitical regional conflicts, terrorist activity, political unrest, civil strife, acts of war, public corruption, expropriation and other economic or political uncertainties could interrupt and negatively affect the performance of our services, sale of our products or other business operations.

See “—Changes to trade regulation, quotas, duties or tariffs, and sanctions caused by the changing U.S.

and geopolitical environments or otherwise, may increase our costs or limit the amount of raw materials and products that we can import or may otherwise adversely impact our business” for a discussion of the impact of Russia’s military invasion of Ukraine on our business and results of operations.

A slowdown in economic growth in some emerging markets could result in long sales cycles, greater risk of uncollectible accounts and longer collection cycles.

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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.

What changed 10-K

Item 1A. Risk Factors