What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-11-12 compared with 2024-10-17 · 112 added, 68 removed, 179 unchanged (50% of the section changed)

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All dollar amounts in this Management’s Discussion and Analysis of Financial Condition and Results of Operations are approximate.

All references in this Quarterly Report on Form 10-Q to “the Company,” “we,” “us,” “our,” or “Capstone” are to Capstone Green Energy Corporation and its consolidated subsidiaries for the three months ended June 30, 2023 and to Capstone Green Energy Holdings, Inc.

and its consolidated subsidiaries as of June 30, 2024 and March 31, 2024 and for the three months ended June 30, 2024.

All references in this Quarterly Report on Form 10-Q to “the Company,” “we,” “us,” “our,” or “Capstone” are to Capstone Green Energy Corporation and its consolidated subsidiaries for the three and six months ended September 30, 2023 and to Capstone Green Energy Holdings, Inc.

and its consolidated subsidiaries as of September 30, 2024 and March 31, 2024 and for the three and six months ended September 30, 2024.

Special Note Regarding Forward-Looking Statements

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● risks related to the limitation of capital available to us;

● the impact of pending or threatened litigation;

● the development of the market for and customer uses of our microturbines, including our Energy-as-a-Service solutions;

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● our ability to adequately protect our intellectual property rights;

● the impact of pending or threatened litigation;

● other risks and uncertainties discussed in “Item 1A.

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We are currently exploring energy conversion options for the smaller end of the power spectrum.

During the three months ended June 30, 2024, our net loss decreased by $1.8 million, or 32%, to $3.9 million and our basic and diluted loss per share decreased by 32% to $(0.21), compared to a $5.7 million net loss and $(0.31) net loss per share during the three months ended June 30, 2023.

The decrease to net loss during the three months ended June 30, 2024 was primarily due to lower interest expenses, an increase in other income, net and lower operating expenses, offset by a decrease in revenue and a decrease in contribution from our higher parts, services and rentals business.

During the three months ended September 30, 2024, our net loss decreased by $5.5 million, or 93%, to $0.4 million and our basic and diluted loss per share decreased by 93% to $(0.02), compared to a $5.9 million net loss and $(0.32) net loss per share during the three months ended September 30, 2023.

The decrease to net loss during the three months ended September 30, 2024, was primarily due to the $1.7 million improvement in gross profit, lower operating expenses of $2.8 million, lower interest expense of $0.8 million and an increase in other income, net of $0.6 million, partially offset by reorganization items, net of $0.5 million.

In the energy efficiency market, we continue to expand our market presence in hotels, office buildings, hospitals, retail, and industrial applications globally.

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In addition, management closely monitors operating expenses and strives to improve manufacturing efficiencies while simultaneously lowering direct material costs and increasing average selling prices.

The key drivers to our success are revenue growth, higher average selling prices, lower direct material costs, positive new order flow, reduced cash usage and expansion of the Energy-as-a-Service (“EaaS”) business.

The key drivers to our success

are revenue growth, higher average selling prices, lower direct material costs, positive new order flow, reduced cash usage and expansion of the Energy-as-a-Service (“EaaS”) business.

An overview of our direction, targets and key initiatives are as follows:

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We target specific market verticals for these products.

Focus on Vertical Markets.

Within the distributed generation markets that we serve, we focus on vertical markets that we identify as having the greatest near-term potential.

Focus on Vertical Markets Within the distributed generation markets that we serve, we focus on vertical markets that we identify as having the greatest near-term potential.

In our primary products and applications (energy efficiency, natural resources, renewable energy, critical power supply, microgrid and transportation products), we identify specific targeted vertical market segments.

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The following table summarizes our percentage or product revenues by vertical markets for which we had product revenues for the periods presented:

Three Months Ended June 30,

Three Months Ended September 30,

Six Months Ended September 30,

Energy efficiency

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Microgrid is a group of interconnected loads and distributed energy resources that acts as a single controllable energy entity with respect to the grid.

Distributed energy resources typically include other dual-

mode microturbines, reciprocating engines, solar photovoltaic (PV), wind turbines, fuel cells and battery storage.

Distributed energy resources typically include other dual-mode microturbines, reciprocating engines, solar photovoltaic (PV), wind turbines, fuel cells and battery storage.

Microgrids can be connected to larger electricity grids;

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We are continuing to pursue global EV charging opportunities to fill the demand for power in this market segment.

Net product orders were approximately $3.4 million and $2.8 million for the three months ended June 30, 2024 and 2023, respectively.

Ending backlog was approximately $12.4 million at June 30, 2024, compared to $14.2 million at March 31, 2024.

The book-to-bill ratio was 0.7:1 and 0.2:1 for the three months ended June 30, 2024 and 2023, respectively.

Net product orders were approximately $9.2 million and $6.3 million for the three months ended September 30, 2024 and 2023, respectively.

Ending backlog was approximately $10.6 million at September 30, 2024, compared to $14.2 million at March 31, 2024.

The book-to-bill ratio was 0.8:1 and 0.4:1 for the three months ended September 30, 2024 and 2023, respectively.

Book-to-bill ratio is the ratio of new orders we received to units shipped and billed during a period.

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We offer new and remanufactured parts through our global distribution network.

Service revenue in the first quarter of Fiscal 2025 and Fiscal 2024 was approximately 29% and 21% of total revenue, respectively.

Service revenue in the three months ended September 30, 2024 and 2023 was approximately 23% and 19% of total revenue, respectively.

Service revenue during the six months ended September 30, 2024 and 2023 was approximately 25% and 20% of total revenue, respectively.

Product Robustness and Life Cycle Maintenance Costs We continue to invest in enhancements that relate to high performance and high reliability.

An important element of our continued innovation and product strategy is to focus on the engineering of our product hardware and electronics to make them work together more effectively and deliver improved microturbine performance, reliability and low maintenance costs to our customers.

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 costs to our customers.

New Product Development Our new product development is targeted specifically to meet the needs of our selected vertical markets.

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Results of Operations

Three Months Ended June 30, 2024 and 2023

Three Months Ended September 30, 2024 and 2023

The following table summarizes our revenue by geographic markets (in millions):

Three Months Ended June 30,

Three Months Ended September 30,

United States and Canada

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Total Revenue

Revenue for the three months ended June 30, 2024 decreased $8.3 million to $15.6 million from $23.9 million for the three months ended June 30, 2023.

The $8.3 million decrease was primarily driven by decreases in revenue of $3.5 million in Europe, $3.1 million in the United States and Canada, $1.5 million in Asia and Australia and $0.3 million in Latin America, offset by an increase of $0.1 million in the Middle East and Africa.

The decreases in Europe, United States and Canada, Asia and Australia and Latin America were primarily due to decreases in product deliveries for projects during the three months ended June 30, 2024.

The increase in the Middle East and Africa was primarily due to an increase in our revenue from our parts shipments to the region, compared to the three months ended June 30, 2023.

Revenue for the three months ended September 30, 2024 decreased $5.7 million to $22.7 million from $28.4 million for the three months ended September 30, 2023.

The $5.7 million decrease was primarily driven by decreases in revenue of $2.9 million in Europe, $1.5 million in the United States and Canada, $0.8 million in Asia and Australia and $0.5 million in Latin America.

The decreases in Europe, United States and Canada, Asia and Australia and Latin America were primarily due to decreases in product deliveries for projects in those regions during the three months ended September 30, 2024.

Parts and services revenue was impacted by order timing and parts availability.

The following table summarizes our revenue (revenue amounts in millions):

Three Months Ended June 30,

Three Months Ended September 30,

Microturbine Product

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Total Revenue

Revenue from microturbine products and accessories for the three months ended June 30, 2024, decreased $7.8 million, or 59%, to $5.4 million from $13.2 million for the three months ended June 30, 2023.

The $7.8 million decrease was primarily driven by a decrease in megawatts and units shipped during the three months ended June 30, 2024, compared to the three months ended June 30, 2023.

Megawatts shipped were 4.0 megawatts and 11.0 megawatts during the three months ended June 30, 2024 and 2023, respectively.

Product demand was adversely affected by the Chapter 11 Bankruptcy as customers assessed the long-term viability of the Company.

Average revenue per megawatt shipped was approximately $1.3 million and $1.2 million during the three months ended June 30, 2024 and 2023, respectively.

For the three months ended September 30, 2024, revenue from microturbine products and accessories decreased $3.8 million, or 25%, to $11.3 million from $15.1 million for the three months ended September 30, 2023.

The $3.8 million decrease was primarily driven by a decrease in 5.4 megawatts shipped from 12.2 to 6.8 during the three months ended September 30, 2024, compared to the three months ended September 30, 2023.

Product demand was adversely affected by the restructuring as customers assessed the long-term viability of the Company.

Average revenue per megawatt shipped was approximately $1.6 million and $1.2 million during the three months ended September 30, 2024 and 2023, respectively, which was the result of previously announced product price increases.

The timing of shipments is variable and based on several factors (including customer deposits, payments, availability of credit and delivery schedule changes), most of which are not within our control and can affect the timing of revenue recognition.

Parts, service and rentals revenue (which are part of our EaaS business line and includes revenue from our parts shipments, FPP contracts, rentals, Distributor Support Subscription (“DSS”) fees, and other service revenue) decreased $0.5 million, or 5%, to $10.2 million for three months ended June 30, 2024 from $10.7 million for the three months ended June 30, 2023.

The $0.5 million decrease was primarily due to a decrease of $0.7 million in rentals as a result of lower utilization, a decrease of $0.2 million in revenue from our distributor support services as this revenue is no longer reported by us, and DSS service fees are reported as Other income and a decrease of $0.2 million in revenue from our FPP contracts, partially offset by an increase of $0.6 million in spare parts revenue during the three months ended June 30, 2024, compared to the three months ended June 30, 2023.

Refer to Note 13— Commitments and Contingencies— Related Party Transactions, in the Notes to Condensed Consolidated Financial Statements for information related to the distributor support services business in connection with our Reorganization during Fiscal 2024.

Sales to Lone Star Power Solutions, LLC, Cal Microturbine, E-Finity Distribution Generation and Optimal Group Australia Pty Ltd, accounted for 16%, 13%, 11% and 11% of our revenue for the three months ended June

Parts, service and rentals revenue (which are part of our EaaS business line and includes revenue from our parts shipments, factory protection plan (“FPP”) contracts, rentals, Distributor Support Subscription (“DSS”) fees and other service revenue) decreased $1.9 million, or 14%, to $11.4 million for three months ended September 30, 2024 from $13.3 million for the three months ended September 30, 2023.

The $1.9 million decrease was primarily due to decreases in our spare parts revenue of $1.3 million and $0.6 million in DSS fees as, following the Reorganization, the DSS service fees are reported as Other income during the three months ended September 30, 2024.

Refer to Note 13— Commitments and Contingencies— Related Party Transactions, in the Notes to Condensed Consolidated Financial Statements for information related to the DSS fees in connection with the Reorganization during Fiscal 2024.

Sales to E -Finity Distributed Generation (“E-Finity”), Arctic Energy Inc.

(“Arctic”) and Lone Star Power Solutions, LLC (“Lone Star”) , three of our domestic distributors, and GET/CWS Limited, one of our international customers, accounted for 21%, 14%, 10% and 11% of revenue for the three months ended September 30,

2024, respectively.

Sales to Horizon Power Systems, Optimal Group Australia Pty Ltd and E-Finity Distribution Generation, accounted for 15%, 13% and 10% of our revenue for the three months ended June 30, 2023, respectively.

Gross Profit.

Cost of goods sold includes direct material costs, production and service center labor and overhead, inventory charges and provision for estimated product warranty expenses.

Gross profit was $3.8 million, or 24% of revenue for the three months ended June 30, 2024, compared to a gross profit of $3.4 million, or 14% of revenue for the three months ended June 30, 2023.

The $0.4 million increase was primarily the result of increases in product pricing and relatively increased revenue from our higher margin parts and service revenue, and lower inventory and warranty charges, partially offset by higher direct material costs and production and service center labor and overhead expenses.

Sales to E-Finity and Cal Microturbine accounted for 21% and 11% of our revenue for the three months ended September 30, 2023, respectively.

Gross Profit Cost of goods sold includes direct material costs, production and service center labor and overhead, inventory charges and provision for estimated product warranty expenses.

Gross profit was $7.0 million, or 31% of revenue for the three months ended September 30, 2024, compared to a gross profit of $5.3 million, or 19% of revenue for the three months ended September 30, 2023.

The increase was primarily the result of an increase in product pricing, resulting in an increase of average revenue per megawatt shipped, lower warranty charges and decreases in production and service center labor and overhead expenses.

Effective March 2024, we increased our sales prices and are negotiating with vendors to reduce material costs.

The following table summarizes our gross profit (in millions except percentages):

Three Months Ended June 30,

Three Months Ended September 30,

Product and accessories

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As a percentage of total revenue

The improvement of $0.4 million in product and accessories gross profit was primarily due to higher product pricing and product mix during the three months ended June 30, 2024, compared to the three months ended June 30, 2023.

Product and accessories gross margin as a percentage of product and accessories revenue decreased to (11)% during the three months ended June 30, 2024, from (7)% during the three months ended June 30, 2023, primarily due to lower margin product revenue in the three months ended June 30, 2024.

Parts, services and rentals gross margin as a percentage of parts and service revenue increased to 43% during the three months ended June 30, 2024, compared to 41% during the three months ended June 30, 2023, primarily as a result of increases in parts prices and lower overhead costs in the three months ended June 30, 2024.

Research and Development (“R&D”) Expenses.

R&D expenses were $0.5 million and $0.7 million during the three months ended June 30, 2024 and 2023, respectively.

The decrease of $0.2 million, or 29%, was primarily due to lower labor costs incurred during the three months ended June 30, 2024.

Selling, General, and Administrative (“SG&A”) Expenses.

SG&A expenses were $6.8 million during the three months ended June 30, 2024 and 2023.

Interest Expense.

Interest Expense for the three months ended June 30, 2024 and 2023 was $1.0 million and $1.7 million, respectively.

The decrease in interest expense was primarily due to a lower average debt balance during the first quarter of Fiscal 2025 as a result of the Reorganization compared to the $51.0 million pre-petition debt balance during the first quarter of Fiscal 2024.

See Liquidity and Capital Resources below for additional discussion on our interest expense.

The improvement of $0.9 million in product and accessories gross profit was primarily due to higher product pricing and changes in product mix during the three months ended September 30, 2024, compared to the three months ended September 30, 2023.

Product and accessories gross margin as a percentage of product and accessories revenue increased to 6% during the three months ended September 30, 2024, from (1)% during the three months ended September 30, 2023, primarily due to higher product pricing in the three months ended September 30, 2024.

Parts, services and rentals gross margin as a percentage of parts and service revenue increased to 55% during the three months ended September 30, 2024, compared to 41% during the three months ended September 30, 2023, primarily as a result of increases in parts prices and lower overhead costs in the three months ended September 30, 2024.

Research and Development (“R&D”) Expenses R&D expenses were $0.6 million and $0.7 million during the three months ended September 30, 2024 and 2023, respectively.

Selling, General, and Administrative (“SG&A”) Expenses SG&A expenses decreased $2.8 million, or 30%, to $6.4 million for the three months ended September 30, 2024, from $9.2 million for the three months ended September 30, 2023, primarily due to unusually high legal fees incurred during the three months ended September 30, 2023 for reorganization and restatement activities, resulting in a decrease of $3.3 million and lower marketing expenses of $0.4 million, partially offset by an increase of $0.9 million in accounting expenses.

Interest Expense Interest expense for the three months ended September 30, 2024 and 2023 was $1.0 million and $1.8 million, respectively.

The decrease in interest expense was primarily due to a lower average debt balance during the second quarter of Fiscal 2025 due to our Reorganization, compared to $51.0 million of indebtedness outstanding under the pre-petition notes during Fiscal 2024.

Six Months Ended September 30, 2024 and 2023

The following table summarizes our revenue by geographic markets (in millions):

Six Months Ended September 30,

United States and Canada

Latin America

Asia and Australia

Middle East and Africa

Total Revenue

Revenue for the six months ended September 30, 2024 decreased $13.9 million to $38.4 million from $52.3 million for the six months ended September 30, 2023.

The $13.9 million decrease was primarily driven by decreases in revenue of $6.3 million in Europe, $4.6 million in the United States and Canada, $2.3 million in Asia and Australia and $0.9 million in Latin America, partially offset by an increase of $0.2 million in the Middle East and Africa.

The decreases in Europe, the United States and Canada, Asia and Australia and Latin America were primarily due to decreases in product deliveries for projects in those regions during the six months ended September 30, 2024.

The increase in the Middle East and Africa was primarily due to an increase in our revenue from our parts shipments to the region, compared to the six months ended September 30, 2023.

The following table summarizes our revenue (revenue amounts in millions):

Six Months Ended September 30,

Microturbine Product

Total Product and Accessories

Parts and Services

Total Revenue

For the six months ended September 30, 2024, revenue from microturbine products and accessories decreased by $11.7 million, or 41%, to $16.6 million from $28.3 million for the six months ended September 30, 2023.

The $11.7 million decrease was primarily driven by a decrease of 13.4 in megawatts shipped of 10.8 from 24.2 during the six months ended September 30, 2024, compared to the six months ended September 30, 2023.

Product demand was adversely affected by the restructuring as customers assess the long-term viability of the Company.

Average revenue per megawatt shipped was approximately $1.5 million and $1.2 million during the six months ended September 30, 2024 and 2023, respectively, which was a result of previously announced product price increases.

Parts, service and rentals revenue (which are part of our EaaS business line and includes revenue from our parts shipments, FPP contracts, rentals, DSS fees and other service revenue) decreased $2.2 million, or 9%, to $21.8 million for the six months ended September 30, 2024 from $24.0 million for the six months ended September 30, 2023.

The $2.2 million decrease was primarily due to decreases of $0.9 million in DSS fees as DSS service fees are reported as Other income, $0.8 million in rental revenue, $0.7 million in spare parts revenue, partially offset by an increase of $0.2 million in revenue from our FPP contracts and engineering services revenue d uring the six months ended September 30, 2024, compared to the six months ended September 30, 2023.

E-Finity and Lone Star accounted for 17% and 13% of revenue for the six months ended September 30, 2024, respectively.

E-Finity and Cal Microturbine accounted for 16% and 10% of revenue for the six months ended September 30, 2023, respectively.

Gross Profit Cost of goods sold includes direct material costs, production and service center labor and overhead, inventory charges and provision for estimated product warranty expenses.

Gross profit was $10.8 million, or 28% of revenue for the six months ended September 30, 2024, compared to a gross profit of $8.7 million, or 17% of revenue for the six months ended September 30, 2023.

The increase was primarily the result of an increase in product pricing and lower warranty and inventory charges, partially offset by higher production and service center labor and overhead expense.

Effective March 2024, we increased our sales prices and are negotiating with vendors to reduce material costs.

The following table summarizes our gross profit (in millions except percentages):

Six Months Ended September 30,

Product and accessories

As a percentage of product and accessories revenue

Parts, services and rentals

As a percentage of parts, services and rentals revenue

Total gross profit

As a percentage of total revenue

The improvement of $1.3 million in product and accessories gross profit was primarily due to higher product pricing and changes in product mix during the six months ended September 30, 2024, compared to the six months ended September 30, 2023.

Product and accessories gross margin as a percentage of product and accessories revenue increased to 0% during the six months ended September 30, 2024, from (4)% during the six months ended September 30, 2023, primarily due to higher product pricing in the six months ended September 30, 2024.

Parts, services and rentals gross margin as a percentage of parts and service revenue increased to 49% during the six months ended September 30, 2024, compared to 41% during the six months ended September 30, 2023 primarily as a result of increases in parts prices and lower overhead costs in the six months ended September 30, 2024.

Research and Development (“R&D”) Expenses R&D expenses were $1.1 million and $1.3 million during the six months ended September 30, 2024 and 2023, respectively.

The decrease of $0.2 million, or 14%, was primarily due to lower labor and supplies costs incurred during the six months ended September 30, 2024.

Selling, General, and Administrative (“SG&A”) Expenses SG&A expenses decreased $2.8 million, or 17%, to $13.2 million for the six months ended September 30, 2024, from $16.0 million for the six months ended September 30, 2023, primarily due to unusually high legal fees incurred during the six months ended September 30, 2023 for reorganization and restatement activities, resulting in a decrease of $2.7 million, lower marketing and consulting expenses of $1.4 million and $0.6 million, respectively, partially offset by an increase of $1.8 million in accounting expenses.

Interest Expense Interest Expense for the six months ended September 30, 2024 and 2023 was $2.0 million and $3.5 million, respectively.

The decrease in interest expense was primarily due to a lower average debt balance during the six months ended September 30, 2024 due to our Reorganization, compared to $51.0 million of indebtedness outstanding under the pre-petition notes during Fiscal 2024.

Liquidity and Capital Resources

Our cash requirements depend on many factors, including the execution of our business strategy and plan.

Our cash increased $1.9 million during the three months ended June 30, 2024, primarily due to net cash provided by operating activities, partially offset by cash used in investing activities.

Operating Activities During the three months ended June 30, 2024, $2.1 million was provided by cash in our operating activities, which consisted of a net loss for the period of $3.9 million, partially offset by changes in operating assets and liabilities of $2.8 million and non-cash adjustments (primarily representing depreciation and amortization, non-cash lease expenses and paid-in-kind (“PIK”) interest) of $3.2 million.

During the three months ended June 30, 2023, $4.8 million in cash was used in our operating activities, which consisted of a net loss for the period of $5.7 million, changes in

operating assets and liabilities of $1.2 million and non-cash adjustments (primarily representing depreciation and amortization, non-cash lease expenses and stock-based compensation expense) of $2.1 million.

Our cash increased $0.6 million during the six months ended September 30, 2024, primarily due to net cash provided by operating activities, partially offset by cash used in investing and financing activities.

Operating Activities During the six months ended September 30, 2024, $0.9 million in cash was provided by our operating activities, which consisted of a net loss for the period of $4.4 million and changes in operating assets and liabilities of $1.5 million, partially offset by non-cash adjustments (primarily representing depreciation and amortization, non-cash lease expenses and paid-in-kind (“PIK”) interest) of $6.7 million.

During the six months ended September 30, 2023, we used $9.4 million in cash for our operating activities, which consisted of a net loss for the period of $11.6 million and changes in operating assets and liabilities of $2.0 million, partially offset by non-cash adjustments (primarily representing depreciation and amortization, non-cash lease expense, non-cash reorganization items, net, stock-based compensation, inventory and warranty provision) of $4.2 million.

The following is a summary of the significant sources (uses) of cash from operating activities (in thousands):

Three Months Ended June 30,

Six Months Ended September 30,

Non-cash operating activities(1)

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Net cash provided by (used in) operating activities

(1) Represents changes in depreciation and amortization, non-cash lease expenses, PIK interest, stock-based compensation expense and inventory, warranty and credit loss provisions.

The change in non-cash operating activities during the three months ended June 30, 2024, compared to the three months ended June 30, 2023, was primarily driven by an increase in paid-in-kind interest expense related to the interest incurred since issuing the Notes in December 2023.

The change in accounts receivable was primarily the result of lower revenue levels and timing of collections during the three months ended June 30, 2024, compared to the three months ended June 30, 2023.

The change in inventory was primarily the result of an increase in finished goods during the three months ended June 30, 2024, compared to the three months ended June 30, 2023.

The change in accounts payable and accrued expenses was primarily due to lower payments to vendors during the three months ended June 30, 2024, compared to the three months ended June 30, 2023.

The change in other operating assets and liabilities during the three months ended June 30, 2024, compared to the three months ended June 30, 2023, was primarily due to the increases in deferred revenue attributable to customer deposits, FPP contracts and the DSS program.

Investing Activities Net cash used in investing activities of $0.1 million and $2.2 million during the three months ended June 30, 2024 and 2023, respectively, was primarily due to investment in operating and rental fleet assets during the three months ended June 30, 2024 and 2023.

Financing Activities Net cash used in financing activities during the three months ended June 30, 2024 and 2023 was for repayment of notes payable and lease obligations.

(1) Represents changes in depreciation and amortization, non-cash lease expenses, PIK interest, stock-based compensation expense, non-cash reorganization items, net, and inventory, warranty and credit loss provisions.

The change in non-cash operating activities during the six months ended September 30, 2024, compared to the six months ended September 30, 2023, was primarily due to an increase in PIK interest of $1.7 million related to the issuance of the Exit Notes during Fiscal 2024 and a decrease in non-cash reorganization expenses of $0.5 million that was not incurred during the six months ended September 30, 2024.

The $2.8 million of cash provided from inventory during the six months ended September 30, 2024, was primarily the result of improved supply chain management and reduced lead times for parts, compared to the $7.7 million of cash provided from inventory during the six months ended September 30, 2023, primarily due to the reduction in finished goods inventory levels.

The change in accounts receivable was primarily the result of delayed collections during the six months ended September 30, 2024, compared to the six months ended September 30, 2023.

The change in accounts payable and accrued expenses was primarily due to an increase in payments to vendors during the six months ended September 30, 2024, compared to the six months ended September 30, 2023.

The change in other operating assets and liabilities during the six months ended September 30, 2024, compared to the six months ended September 30, 2023, was primarily due to the decreases in deferred revenue attributable to customer deposits and the removal of the DSS service fees.

Investing Activities Net cash used in investing activities of $0.2 million and $3.9 million during the six months ended September 30, 2024 and 2023, respectively, was primarily due to investments in operating and rental fleet assets, respectively.

Financing Activities Net cash used in financing activities during the six months ended September 30, 2024 was used for repayment of finance lease obligations.

Net cash provided by financing activities during the six months ended September 30, 2023 was primarily the result of net cash of $3.0 million received from the issuance of additional pre-petition senior secured notes.

Debt Refer to Note 11— Debt in the Notes to Condensed Consolidated Financial Statements (Part I, Item 1 of this Form 10-Q) for information related to our notes.

Lease Commitments Refer to Note 14— Leases in the Notes to Condensed Consolidated Financial Statements for information related to our leases.

Going Concern In connection with preparing the Condensed Consolidated Financial Statements for the three months ended June 30, 2024, management evaluated whether there were conditions and events, considered in the aggregate, that raised substantial doubt about our ability to meet our obligations as they became due for the next twelve months from the date of issuance of our financial statements.

As of June 30, 2024, we had cash of $4.0 million and a working capital deficit of $12.0 million.

We incurred a net loss of $3.9 million during the three months ended June 30, 2024.

Going Concern In connection with preparing the Condensed Consolidated Financial Statements for the six months ended September 30, 2024, management evaluated whether there were conditions and events, considered in the aggregate, that raised substantial doubt about our ability to meet our obligations as they became due for the next twelve months from the date of issuance of our financial statements.

As of September 30, 2024, we had cash of $2.7 million, and a working capital deficit of $7.8 million.

We incurred a net loss of $4.4 million during the six months ended September 30, 2024.

On September 28, 2023, we filed for a prepackaged financial restructuring with our Senior Lender, Goldman Sachs under the U.S.

Chapter 11 Bankruptcy laws.

We emerged from Bankruptcy on December 7, 2023 (“Emergence”) and effected a financial and organizational restructuring.

However, given our current cash position, lack of liquidity, limits to accessing capital and debt funding options, and current economic and market risks, there is substantial doubt regarding our ability to continue as a going concern and our ability to meet our financial obligations as they become due over the next twelve months from the date of issuance of the financial statements as of, and for the period ended June 30, 2024.

We emerged from bankruptcy on December 7, 2023 and effected a financial and organizational restructuring.

New Accounting Pronouncements

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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-Q

Item 2. Management’s Discussion and Analysis