What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-06-27 compared with 2024-09-27 · 128 added, 114 removed, 161 unchanged (60% of the section changed)

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Generally, power purchased from the electric utility grid is less costly than power produced by distributed generation technologies in simple cycle mode.

Utilities may also charge fees to interconnect to their power grids.

Utilities may also charge fees to interconnect with their power grids.

However, when considering and including the waste heat from our microturbine (CHP and CCHP) the economic benefit improves significantly.

Further, our highly efficient, low emission, resilient technology can produce thermal energy at a lower carbon footprint.

These benefits can be especially realized when fuel costs are low, where the costs of connecting to the grid may be high or impractical (such as remote power applications or new grid services need to be provided), 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.

These benefits can be enhanced when fuel costs are low, where the costs of connecting to the grid may be high or impractical (such as remote power applications or new grid services need to be provided), where reliability and power quality are of critical importance, or in situations where peak shaving could be economically advantageous because of highly variable electricity prices.

Our microturbines are an inverter-based technology and can be interconnected to other distributed energy resources to form “microgrids” (also called “distribution networks”) located within a specific geographic area and provide power to a group of buildings.

Because our microturbines can provide a reliable source of power and can operate on multiple fuel sources, management believes they help solve the “Energy Trilemma” of resiliency, sustainability and affordability.

Because our microturbines can provide a reliable source of power and can operate on multiple fuel sources, management believes they help solve the “Energy

Trilemma” of resiliency, sustainability and affordability.

Management also believes our products and services offer a level of flexibility not currently offered by other technologies such as reciprocating engines.

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

For Fiscal 2024, net revenue was $91.2 million, a 23% increase from the prior year.

The increase was led by product and accessories revenue, which were up 40% to $49.1 million primarily due to an increase in product sales.

Cost of goods sold totaled $76.9 million and delivered $14.3 million of gross profit in Fiscal 2024.

Gross profit increased from $9.1 million at Fiscal 2023, primarily due to the shift of sales mix to our higher margin rental business, higher product and parts pricing, higher sales volume, greater cost absorption and product mix.

During Fiscal 2024, we had net income of $7.4 million and our basic and diluted net income per share was $0.39, compared to a $24.5 million loss and $1.43 net loss per share, respectively, in Fiscal 2023.

The $31.9 million increase to net income during Fiscal 2024 was primarily due to the impact of the Chapter 11 reorganization, inclusive of a gain on settlement of debt upon emergence from Chapter 11 on December 7, 2023 of $35.3 million.

See Note 3— Chapter 11 Proceedings and Emergence in the Notes to Consolidated Financial Statements for further discussion of our outstanding indebtedness and the post emergence financing.

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

For Fiscal 2025, net revenue was $85.6 million compared to $91.2 million for Fiscal 2024, a 6% decrease from the prior year.

Product and accessories revenue declined $8.9 million, or 18% primarily due to a decrease in sales resulting from distributor hesitancy post emergence from Chapter 11 and our reorganization.

The decrease in product and accessories revenue was offset, in part, by an increase in rental revenue of $3.1 million, or 27%, due to higher utilization of our rental fleet compared to the prior year.

Cost of goods sold totaled $62.3 million in Fiscal 2025 compared to $76.9 million in Fiscal 2024, a 19% decrease due to cost efficiencies, and decreased sales.

Gross profit was $23.3 million in Fiscal 2025 compared to $14.3 million in Fiscal 2024, a 63% increase from the prior year, primarily due to higher margins on rental units, cost efficiencies, and improved margins on product and accessory sales.

During Fiscal 2025, we had net loss of $7.2 million and our basic and diluted net loss per share was $0.38, compared to a $7.4 million net income and $0.39 net income per share, in Fiscal 2024, a 197% decrease from the prior year.

The $14.6 million decrease in net income (loss) was primarily due to the Fiscal 2024 gain on extinguishment of debt and reorganization items, net, of $32.5 million.

Excluding the Fiscal 2024 gain on extinguishment of debt and reorganization items, net, net income improved by $17.9 million.

Refer to Note 3— Chapter 11 Proceedings and Emergence in the Notes to Consolidated Financial Statements for further discussion of our outstanding indebtedness and the post emergence financing.

In the energy efficiency market, we continue to expand our market presence in hotels, office buildings, hospitals, retail and industrial applications globally and it has become the leading market segment in Fiscal 2025, accounting for 51% of product revenue.

The renewable energy market is fueled by landfill gas, biodiesel and biogas from sources such as food processing, agricultural waste and livestock manure.

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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 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:

Our Energy Conversion Products business line is driven by our industry-leading, highly efficient, low-emission, resilient microturbine energy systems offering scalable solutions in addition to a broad range of customer-tailored solutions.

Our industry-leading, highly efficient, low-emission, resilient microturbine energy systems offer scalable solutions in addition to a broad range of customer-tailored solutions.

We target specific market verticals for these products.

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Within each of these segments, we identify what we believe to be the critical factors to success and base our plans on those factors.

Given the volatility of the oil and gas market, we have refocused our business strategy to target projects within the energy efficiency and renewable energy markets.

Given the volatility of the oil and gas market, we have refocused our business strategy to target projects within the energy efficiency market.

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

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Renewable energy

Critical Power Supply

Transportation

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Energy efficiency refers to the proper utilization of both electrical and thermal energies in the power production process.

In such applications, our microturbines are able to maximize the availability of usable energy to provide a significant economic advantage to customers while reducing their on-site emissions.

CHP and CCHP can improve site economics by capturing the waste heat created from a single combustion process to increase the efficiency of the total system, from approximately 30% to approximately 85% for hot water and chilled water to as much as 90% or more for some steam and direct drying applications.

In such applications, our microturbines can maximize the availability of usable energy to provide a significant economic advantage to customers while reducing their on-site emissions.

Combined Heat and Power (“CHP”) and Combined Cooling, Heat and Power (“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% to approximately 85% for hot water and chilled water to as much as 90% or more for certain steam and direct drying applications.

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 and industrial waste.

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There are numerous locations, on a global scale, where the drilling, production, compression and transportation of natural resources and other extraction and production processes create fuel byproducts, which are traditionally burned or released into the atmosphere.

Our microturbines can turn these fuel byproducts, such as flare gas, or associated gas, into a useable fuel to provide prime power to these sites.

Our microturbines can turn these fuel byproducts, such as flare gas, or sour gas, into a useable fuel to provide prime power to these sites.

Renewable Energy

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Our microturbines have demonstrated effectiveness in these smaller applications and may outperform conventional combustion engines in some situations, including when the gas contains a high amount of sulfur, as the sulfur can contaminate combustion engines’ lube oil, leading to equipment breakdowns and higher lifecycle costs.

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

Microgrid is a group of interconnected loads and distributed energy resources that act 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.

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however, in the event of a widespread outage, the microgrid will disconnect from the main grid and continue to operate independently to maintain the electricity supply to the homes and businesses that are connected to the microgrid’s electricity network.

Our microturbines have the ability to meet the needs of microgrid end-users by lowering their overall cost to operate and by providing a versatile dispatchable technology that is fuel flexible and scalable enough to fit a wide variety of applications.

Our microturbines can meet the needs of microgrid end users by lowering their overall cost to operate and by providing a versatile dispatchable technology that is fuel flexible and scalable enough to fit a wide variety of applications.

We have seen continued development in the microgrid market segment.

Transportation

Our technology can also be used to support Electric Vehicle (“EV”) market by providing power solutions to charge vehicles.

Our products can fill a void in the EV market for vehicle charging capacity and charging convenience.

Our technology can also be used to support the Electric Vehicle (“EV”) market by providing power solutions to charge vehicles.

Our products can fill a void in the EV market for vehicle charging capacity and convenience.

Our customers have applied our products in EV applications for fleets and remote location charging stations.

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

A portion of our backlog is concentrated in the oil and gas market, which may impact the overall timing of shipments or the conversion of backlog to revenue.

The timing of the backlog is based on the requirement date indicated by our customers.

The timing of the backlog is based on the requirement date indicated by our customers and part availability.

However, based on historical experience, management expects that a significant portion of our backlog may not be shipped within the next 12 months.

Additionally, the timing of shipments is subject to change based on several variables (including customer deposits, payments, availability of credit and customer delivery schedule changes), most of which are not in our control and can affect the timing of our revenue.

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 within our control and can affect the timing of our revenue.

As a result, management believes the book-to-bill ratio demonstrates the current demand for our products in the given period.

Sales and Distribution Channels.

We seek out distributors that have business experience and capabilities to support our growth plans in our targeted markets.

We seek out distributors that have business experience and capabilities to support our growth plans in our target markets.

A significant portion of our revenue is derived from sales to distributors that resell our products to end users.

We have a total of 53 distributors, Original Equipment Manufacturers (“OEMs”) and national accounts.

In the United States and Canada,

we currently have 8 distributors, OEMs and national accounts.

In the United States and Canada, we currently have 8 distributors, OEMs and national accounts.

Outside of the United States and Canada, we currently have 45 distributors, OEMs and national accounts.

We continue to refine our distribution channels to address our specific targeted markets.

As part of our EaaS business line, we provide service primarily through our global distribution network.

Together with our global distribution network, we offer a comprehensive factory protection plan for a fixed fee to perform regularly scheduled and unscheduled maintenance as needed.

As part of our EaaS business line, we provide services primarily through our global distribution network.

Together with our global distribution network, we offer a comprehensive factory protection plan (“FPP”) for a fixed fee to perform regularly scheduled and unscheduled maintenance as needed.

We provide factory and on-site training to certify all personnel that are allowed to perform service on our microturbines.

Factory protection plans are generally paid quarterly in advance.

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

Service revenue was approximately 22% and 29% of total revenue in Fiscal 2024 and Fiscal 2023, respectively.

FPPs are generally paid quarterly in advance.

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.

We expect that our existing product platforms, the C65, C200, C600, C800 and C1000S Series microturbines, will be our foundational product lines for the foreseeable future.

Our research and development project portfolio is centered on enhancing the features of these base products.

We have continued to develop our new hydrogen products.

In March 2022, we released a commercially available hydrogen-based combined heat and power (CHP) product, which can safely run on a 30% hydrogen-70% natural gas mix.

In continuing these efforts, we are testing a 100% hydrogen gas combustion system through our research and development partnership with Argonne National Laboratory.

Our new product development strategy focuses on meeting the specific needs of our target vertical markets.

Our C65, C200, C600, C800, and C1000S Series microturbines will continue to be our foundational product lines.

Our research and development efforts are primarily directed at enhancing the features and capabilities of these existing products.

To bolster power resilience, we are developing Direct Current (“DC”) output power solutions utilizing our core microturbine technology.

This advancement will broaden our applications, allowing our microturbine solutions to be deployed in markets such as EV charging without requiring synchronization with traditional high-voltage Alternating Current (“AC”) utility grids.

This offering will also provide a bridge during the rigorous process of grid interconnect certification from nationally recognized test laboratories.

We are also collaborating with industry leaders to create autonomous power solutions.

These solutions are designed to anticipate overload conditions and proactively supplement insufficient grid resources with readily available microturbine power.

Additionally, we are accelerating the development of onboard remote monitoring systems that are designed to ensure reliable power service and asset telemetry through cloud-based features, significantly improving the user experience.

We are committed to advancing our hydrogen product line.

In March 2022, we launched a commercially available hydrogen-based combined heat and power (CHP) product capable of operating safely on a 30% hydrogen / 70% natural gas mixture.

Building on this progress, we are currently testing a 100% hydrogen gas combustion system through our research and development partnership with Argonne National Laboratory.

Following the successful operation of the C65 model, we are now working towards qualifying a 100% hydrogen-fueled C200 engine.

Cost and Core Competencies .

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Additionally, considerable effort is being directed to manufacturing cost reduction through process improvement, product design, advanced manufacturing technology, supply management and logistics.

Management expects to be able to leverage our costs as product volumes increase.

Management expects to be able to lower our costs as product volumes increase.

Our manufacturing designs include the use of conventional technology, which has been proven in high-volume automotive and turbocharger production for many years.

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Critical Accounting Estimates

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”).

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.

On an on-going basis, we evaluate our estimates, including but not limited to those related to credit losses, inventories, warranty obligations, redeemable noncontrolling interests valuations and stock-based compensation.

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.

On an ongoing basis, we evaluate our estimates, including but not limited to those related to credit losses, inventories, warranty obligations, redeemable noncontrolling interest valuation and stock-based compensation.

We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances.

The results of these estimates and assumptions which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

Actual results may differ from these estimates under different assumptions or conditions.

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Future product enhancement and development may render certain inventories obsolete, resulting in additional write-downs of inventories.

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.

In addition, inventories are classified as current or long-term based on our sales forecast and, in part, based on our projected usage for warranty claims and service.

A change in forecast could impact the classification of inventories.

● The process for estimating the ultimate collection of accounts receivable involves significant assumptions and judgments.

The determination of the contractual life of accounts receivable, the aging of outstanding receivables, as well as the historical collections and write-offs are integral parts of the estimation process related to reserves for expected credit losses and the establishment of contractual allowances.

The determination of the contractual life of accounts receivable, the aging of outstanding receivables, as well as the historical collections and write-offs, and future assumptions about the collectability are all integral parts of the estimation process related to reserves for expected credit losses and the establishment of contractual allowances.

Accounts receivable are analyzed on a quarterly basis to assess the adequacy of reserves for expected credit losses.

Trade accounts receivable are recorded at the invoiced amount and are typically non-interest bearing.

We maintain allowances for estimated credit losses resulting from the inability of our customers to make required payments and other credit loss allowances.

We maintain allowances for estimated credit losses resulting from this analysis.

We evaluate all accounts aged over 60 days past payment terms.

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Refer to Note 2— Basis of Presentation, Significant Accounting Policies and Going Concern in the Notes to Consolidated Financial Statements.

● The Company accounts for the noncontrolling interest using the hypothetical liquidation at book value (“HLBV”) method to attribute the earnings of the consolidated Operating Subsidiary between the controlling and noncontrolling interests.

Under the HLBV method, the amounts reported as noncontrolling interests in the consolidated Operating Subsidiary on the Consolidated Balance Sheets represent the amounts the noncontrolling interests would hypothetically receive at each balance sheet reporting date under the liquidation provisions of the governing agreements assuming the net assets of the consolidated Operating Subsidiary were liquidated at recorded amounts and distributed between the controlling and noncontrolling

interests in accordance with the governing documents.

The net income attributable to noncontrolling interests in the Operating Subsidiary on the Consolidated Statements of Operations is associated with the increase or decrease in the noncontrolling interest holders’ contractual claims on the respective entities’ balance sheets assuming a hypothetical liquidation at the end of that reporting period when compared with their claims on the respective entities’ balance sheets assuming a hypothetical liquidation at the beginning of that reporting period, after removing the impact of any contributions or distributions.

Separately, the Company will also determine whether an adjustment should be recorded to remeasure the redemption feature attached to the Preferred Units to their maximum redemption value through retained earnings.

Refer to Note 10— Temporary Equity for details on remeasuring the redemption value of the Preferred Units.

● The Company accounts for noncontrolling interests in the consolidated Operating Subsidiary, which represent the equity interests held by a related party.

Refer to Note 3— Chapter 11 Proceedings and Emergence for details on the formation of the Operating Subsidiary.

The noncontrolling interests in the consolidated Operating Subsidiary are redeemable and are presented as temporary equity in the Company’s Consolidated Balance Sheet.

Refer to Note 10— Temporary Equity for details of the noncontrolling interests.

The Company uses the hypothetical liquidation at book value (“HLBV”) method to attribute the earnings of the consolidated Operating Subsidiary between the controlling and noncontrolling interests .

Under the HLBV method, the amounts reported as noncontrolling interests in the consolidated Operating Subsidiary on the Consolidated Balance Sheets represent the amounts then noncontrolling interests would hypothetically receive at each balance sheet reporting date under the liquidation provisions of the governing agreements assuming the net assets of the consolidated Operating Subsidiary were liquidated at recorded amounts and

distributed between the controlling and noncontrolling interest in accordance with the governing documents.

We separately remeasure and adjust the noncontrolling interest for changes in the redemption value as needed at the end of each period.

We measure the maximum redemption value, which is based on our Common Stock value at period end.

Refer to Note 10 – Temporary Equity for more information.

Results of Operations

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Middle East and Africa

Revenue for Fiscal 2024 increased $17.3 million, or 23%, to $91.2 million from $73.9 million for Fiscal 2023.

The change in revenue for Fiscal 2024 compared to Fiscal 2023 included increases in revenue of $8.9 million from the United States and Canadian markets, $6.7 million in the European market, $3.0 million from the Latin American markets and $1.8 million from the Asian and Australian markets.

These overall increases in revenue were offset by decreases in revenue of $2.9 million from the Russian market and $0.2 million from the Middle East and African markets.

The increases in the United States and Canada, Europe, Latin America and Asia and Australia were primarily attributable to an increase in our EaaS long-term rental services and product deliveries for projects during the year ended March 31, 2024.

The decrease in Russia was a result of United States sanctions and the decrease in the Middle East and Africa was primarily attributable to decreases in product shipments into the energy efficiency vertical markets compared to the same period last year.

Revenue for Fiscal 2025 decreased $5.6 million, or 6%, to $85.6 million from $91.2 million for Fiscal 2024.

The change in revenue for Fiscal 2025 compared to Fiscal 2024 included a decrease in revenue of $7.0 million from the European markets.

The overall decrease in revenue was offset, in part, by increases in revenue of $0.6 million from the United States and Canadian markets, $0.3 million from the Middle East and African markets, $0.3 million from the Latin American markets, and $0.2 million from the Asia and Australia markets.

The decrease in Europe was primarily due to continued instability and higher natural gas costs resulting in a decrease in product deliveries in Fiscal 2025 compared to Fiscal 2024.

The increases in the United States and Canada, Latin America and Asia and Australia were primarily attributable to an increase in our EaaS long-term rental services during Fiscal 2025.

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

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Parts and Service

For Fiscal 2024, revenue from microturbine products and accessories increased $14.1 million, or 40%, to $49.1 million from $35.0 million for Fiscal 2023.

The $14.1 million increase was primarily driven by an increase in megawatts shipped during the year ended March 31, 2024 compared to the same period last year.

Megawatts shipped were 40.5 megawatts and 29.0 megawatts during the year ended March 31, 2024 and 2023, respectively.

Average revenue per megawatt shipped was approximately $1.2 million and $1.1 million during the year ended March 31, 2024 and 2023, respectively, illustrating the effect 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, factory protection plan (“FPP”) contracts, rentals, Distributor Support Subscription fees, and other service revenue) for Fiscal 2024 increased $3.2 million, or 8%, to $42.1 million from $38.9 million for Fiscal 2023.

The $3.2 million increase was driven by an increase in rental revenue as a result of our EaaS business plan, and an increase in revenue from our FPP contracts, partially offset by lower engineering service revenue and spare parts.

Refer to Note 14— Commitments and Contingencies— Related Party Transactions, in the Notes to Consolidated Financial Statements for information related to Reorganized PrivateCo’s retained assets and distributor support services business in connection with the Company’s emergence from the Chapter 11 Cases.

Sales to Cal Microturbine and E-Finity Distributed Generation (“E-Finity”) accounted for 16% and 13%, respectively, of our revenue for Fiscal 2024.

Sales to E-Finity and RSP Systems accounted for 12% and 11%, respectively, of our revenue for Fiscal 2023.

For Fiscal 2025, revenue from microturbine products and accessories decreased $8.9 million, or 18%, to $40.2 million from $49.1 million for Fiscal 2024.

The $8.9 million decrease was primarily driven by a decrease in megawatts shipped during Fiscal 2025 compared to the same period last year, due to a decrease in sales due to emergence from Chapter 11 and our reorganization.

Megawatts shipped were 26.7 megawatts and 40.5 megawatts during Fiscal 2025 and Fiscal 2024, respectively.

Average revenue per megawatt shipped was approximately $1.4 million and $1.2 million during Fiscal 2025 and Fiscal 2024, respectively, primarily due to the effect of previously announced product price increases and sale of rental units.

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 and service revenue, which are part of our EaaS business line and includes revenue from our parts shipments, FPP contracts, and other service revenue, for Fiscal 2025 was consistent year over year, with an increase $0.2 million, or 1%, to $30.9 million from $30.7 million for Fiscal 2024.

Rentals revenue for Fiscal 2025 increased $3.1 million, or 27%, to $14.5 million from $11.4 million for Fiscal 2024.

This increase was driven by a 4% increase in rental utilization and increased rental prices.

Sales to E-Finity Distributed Generation (“E-Finity”), Lone Star Power Solutions (“Lone Star”), Horizon Power Systems (“Horizon”) accounted for 13%, 12% and 11%, respectively, of our revenue for Fiscal 2025.

Sales to Cal Microturbine and E-Finity accounted for 16% and 13%, respectively, of our revenue for Fiscal 2024.

Gross Profit.

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Gross profit was approximately $23.3 million, or 27% of revenue, for Fiscal 2025, compared to gross profit of $14.3 million, or 16% of revenue, for Fiscal 2024.

The increase during Fiscal 2024 compared to Fiscal 2023 was primarily the result of an increase in product pricing and increased revenue from our higher margin rental business and lower inventory charges, partially offset by higher production and service center labor and overhead expense.

Starting in January 2023, we increased our sales prices and negotiated with vendors to reduce material costs.

Production and service center labor and overhead expense increased $2.1 million during Fiscal 2024 compared to Fiscal 2023 primarily because of increases of approximately $2.9 million in depreciation and rent expense related to our rental business, partially offset by decreases of $0.8 million in freight expense and $0.5 million in supplies expense.

The increase of $9.0 million during Fiscal 2025 compared to Fiscal 2024 was primarily the result of an increase in rental revenue margins, increase in service revenue margins and increase in product pricing.

During Fiscal 2025 we realized price increases announced in the prior year and started to implement cost-out initiatives, which includes negotiating better pricing with vendors and vendor selection.

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

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As a percentage of product and accessories revenue

Parts, service and rentals

As a percentage of parts, service and rentals revenue

Parts and services

As a percentage of parts and service revenue

As a percentage of rentals revenue

Total Gross Profit

As a percentage of total revenue

The improvement of $2.7 million in product and accessories gross profit during Fiscal 2024 compared to Fiscal 2023 was primarily due to higher product pricing, improved cost absorption and product mix in Fiscal 2024.

Product and accessories gross margin as a percentage of product and accessories revenue improved to (4)% during Fiscal 2024 from (14)% during Fiscal 2023, primarily due to higher margin product revenue in Fiscal 2024.

Parts, service and rentals gross margin as a percentage of parts, service and rentals revenue increased to 39% for Fiscal 2024 compared to 36% for Fiscal 2023 primarily due to lower overhead costs and increased higher margin rental business in Fiscal 2024.

The improvement of $3.2 million in product and accessories gross profit during Fiscal 2025 compared to Fiscal 2024 was primarily due to higher product pricing, improved cost efficiencies and product mix in Fiscal 2025.

Product and accessories gross margin as a percentage of product and accessories revenue improved to 2% during Fiscal 2025 from negative 4% during Fiscal 2024, primarily due to higher margin product revenue in Fiscal 2025.

Parts and service gross margin as a percentage of parts and service revenue increased to 56% for Fiscal 2025 compared to 47% for Fiscal 2024 primarily due to increased parts sales within the US market, service agreement pricing and overhead costs absorption in Fiscal 2025.

Rentals gross margin as a percentage of rentals revenue increased to 35% for Fiscal 2025 compared to 19% for Fiscal 2024 primarily due to increased rental pricing and timing of maintenance costs in Fiscal 2025.

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

R&D expenses for Fiscal 2024 and 2023 was $2.5 million and $2.4 million, respectively.

R&D expenses for Fiscal 2025 and 2024 were $2.7 million and $2.5 million, respectively, and was 3% of revenue in Fiscal 2025.

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

SG&A expenses for Fiscal 2024 increased $7.0 million to $32.2 million from $25.1 million for Fiscal 2023.

The net increase in SG&A expenses was primarily as a result

of increases of approximately $7.7 million in legal fees, $2.4 million in accounting fees, $1.1 million in consulting expenses incurred primarily for restatement activities and $1.1 million in stock-based compensation expense, partially offset by decreases of $3.8 million of net credit loss expense, $0.7 million in facility costs, $0.3 million in travel related costs, and $0.2 million in marketing costs.

SG&A expenses for Fiscal 2025 decreased $6.0 million to $26.2 million from $32.2 million for Fiscal 2024, and was 31% of revenue in Fiscal 2025.

The net decrease in SG&A expenses was primarily a result of decreases of approximately $4.1 million in legal fees, $1.6 million in stock-based compensation expense, $1.3 million in decreased event sponsorship and one-time contract settlement, and $0.5 million other, partially offset by an increase of $1.5 million of bonus expense.

Other Income.

Other income for Fiscal 2025 increased to $2.3 million from $0.7 million in Fiscal 2024.

The increase in other income was primarily due to a full year of CDSSC service fees.

Interest Income.

Interest income for Fiscal 2025 increased to $0.2 million from $0.1 million in Fiscal 2024.

The increase in interest income was primarily due to interest income from a sales-type lease in Fiscal 2025.

Interest Expense.

Interest expense for Fiscal 2025 decreased to $3.9 million from $5.5 million in Fiscal 2024.

The decrease in interest expense was primarily due to a lower average debt balance during Fiscal 2024 due to restructuring compared to the $51.0 million pre-petition notes during Fiscal 2023.

The decrease in interest expense was primarily due to a lower average debt balance during Fiscal 2025 due to the Fiscal 2024 restructuring.

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

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

Our cash balance decreased $10.8 million during Fiscal 2024, compared to a decrease of $9.7 million during Fiscal 2023.

The decrease in cash during Fiscal 2024 was primarily due to cash used in operating activities, partially offset by net cash provided by financing activities and a decrease in cash used in investing activities.

Operating Activities During Fiscal 2024, net cash used by operating activities was $27.7 million, consisting of net income for the period of $7.4 million, offset by changes in operating assets and liabilities of $12.5 million and non-cash adjustments (primarily representing non-cash reorganization items, net, depreciation and amortization, non-cash lease expense, stock-based compensation expense and paid-in-kind interest expense) of $22.5 million.

During Fiscal 2023, net cash used by operating activities was $7.9 million, consisting of a net loss for the period of $24.5 million and changes in operating assets and liabilities of $5.3 million, partially offset by non-cash adjustments (primarily representing provision for credit loss expense, depreciation and amortization, non-cash lease expense and stock-based compensation expense) of $11.3 million.

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

Our cash balance increased $6.6 million during Fiscal 2025, compared to a decrease of $10.8 million during Fiscal 2024.

The increase in cash during Fiscal 2025 was primarily due to cash generated by operating activities, partially offset by cash used in investing and financing activities.

Operating Activities During Fiscal 2025, net cash provided by operating activities was $7.7 million, consisting of net loss for the period of $7.2 million, offset by changes in operating assets and liabilities of $1.9 million and non-cash adjustments (primarily representing depreciation and amortization, non-cash lease expense, and paid-in-kind interest expense) of $13.0 million.

During Fiscal 2024, net cash used by operating activities was $27.7 million, consisting of a net income for the period of $7.4 million less changes in operating assets and liabilities of $12.5 million, further reduced by non-cash adjustments (primarily representing non-cash reorganization items, net, depreciation and amortization, non-cash lease expense, stock-based compensation expense and paid-in-kind interest expense) of $22.5 million.

The increase in net cash provided in operating activities during Fiscal 2025, compared to Fiscal 2024 was primarily driven by the Fiscal 2024 $35.3 million non-cash reorganization items, net, which included our gain on debt extinguishment.

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

Year Ended March 31,

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Accounts receivable

Accounts payable and accrued expenses

Lease receivable

Accounts payable

Accrued expenses

Operating lease liability, net

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Other changes in operating assets and liabilities

Net cash used in operating activities

Net cash provided (used) in operating activities

(1) Primarily represents non-cash reorganization items, net (in Fiscal 2024), depreciation and amortization, non-cash lease expense, stock-based compensation expense and paid-in-kind interest expense.

The change in non-cash operating activities during Fiscal 2024, compared to Fiscal 2023 was primarily driven by the non-cash reorganization items, net, which included our gain on debt extinguishment and our provision for credit loss expense, partially offset by increases in non-cash lease expenses, paid-in-kind interest expense and stock-based compensation expense.

The change in accounts receivable was primarily the result of delayed collections in Fiscal 2024, compared to Fiscal 2023.

The change in inventory compared to Fiscal 2023 was primarily the result of a decrease in finished goods during Fiscal 2024.

The change in accounts payable and accrued expenses was primarily due to higher payments to vendors during Fiscal 2024, compared to Fiscal 2023.

The change in other operating assets and liabilities during Fiscal 2024, compared to Fiscal 2023, was primarily driven by the decreases in our deferred revenue attributable to customer deposits, FPP contracts and DSS program.

Investing Activities Net cash used in investing activities was $4.7 million and $8.2 million during Fiscal 2024 and 2023, respectively, which the decrease was primarily due to fewer additions to our rental fleet during Fiscal 2024.

Financing Activities During Fiscal 2024, we generated approximately $21.6 million in cash from financing activities compared to cash generated during Fiscal 2023 of approximately $6.4 million.

The funds generated from financing activities during Fiscal 2024 were primarily the result of $12.0 million of funding under the DIP facility, $7.0 million of funding under the Exit Facility, net of issuance fees of $0.2 million and $3.0 million received from the issuance of additional pre-petition senior secured notes under the A&R Note Purchase Agreement.

See Note 3— Chapter 11 Proceedings and Emergence in the Notes to Consolidated Financial Statements and Note 12— Debt for further discussion of the outstanding debt and post emergence financing.

The funds generated from financing activities during Fiscal 2023 were primarily the result of net proceeds from the issuance of common stock and warrants of $7.3 million, partially offset by $0.8 million in repayments of lease obligations.

The $1.5 million increase in use of cash in accounts receivable resulted from the timing of sales in the last quarter of Fiscal 2025, compared to Fiscal 2024.

The $7.7 million decrease in use of cash in inventory compared to Fiscal 2024 was primarily the result of higher shipments of units in Fiscal 2024 and the focused management of raw material levels during Fiscal 2025.

The $1.3 million increase in use of cash for lease receivable is due to a sales-type lease contract in Fiscal 2025 in connection with a product sale.

The $11.4 million increase of cash provided by accounts payable resulted from the payment of past due accounts in Fiscal 2024 and $3.9 million increase in the use of cash by accrued expenses was primarily due to payments to vendors net of increased accruals related to restructuring during Fiscal 2024, compared to Fiscal 2025.

The $1.2 million increase cash used from prepaid and other assets is primarily the result of usage of prepaid inventory during Fiscal 2025.

The $16.9 million change in other operating assets and liabilities during Fiscal 2025, compared to Fiscal 2024, was primarily driven by the decrease in deferred revenue of $14.4 million primarily driven by increases of shipments in Fiscal 2024 compared to Fiscal 2025, lowering attributable customer deposits, decrease in DSS program deferred revenue and a $2.6 million decrease in FPP liability due to fulfillment of open claims.

Investing Activities Net cash used in investing activities was $0.9 million and $4.7 million during Fiscal 2025 and 2024, respectively.

The decrease was primarily due to fewer additions to our rental fleet during Fiscal 2025.

Financing Activities During Fiscal 2025, we used approximately $0.2 million in cash from financing activities compared to cash generated during Fiscal 2024 of approximately $21.6 million.

Refer to Note 3— Chapter 11 Proceedings and Emergence in the Notes to Consolidated Financial Statements and Note 12— Debt for further discussion of the outstanding debt and post emergence financing.

Debt Refer to Note 12— Debt in the Notes to Consolidated Financial Statements for information related to our notes.

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As of March 31, 2025, we had cash of $8.7 million and a working capital deficit of $16.5 million.

We incurred a loss from operations of $20.4 million and used cash from operating activities of $27.7 million during the Fiscal 2024.

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 working capital requirements may vary materially from those now planned.

The amount of capital that we will need in the future to fund our operations will require us to achieve significantly increased sales volume, which is dependent on many factors, including:

● the market acceptance of our products and services;

● our business, product and capital expenditure plans;

● capital improvements to new and existing facilities;

● our competitors’ response to our products and services;

● our relationships with customers, distributors, dealers and project resellers;

● our customers’ ability to afford and/or finance our products;

● reliability of the supply chain, including availability of raw materials.

We incurred a loss from operations of $5.6 million and generated cash from

operating activities of $7.7 million during Fiscal 2025.

The principal and accrued interest on the Exit New Money Note are due and payable on December 7, 2025.

Management evaluated these conditions in relation to our ability to meet our obligations as they become due.

Our ability to continue current operations and to execute on management’s plan is dependent on our ability to generate cash flows.

The Company has assessed its position and hired a new CEO, is refocusing its marketing efforts, and is expanding the professional staff to focus on market development for its products.

The success of these efforts is uncertain and may not result in improvement in the liquidity position.

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

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

See Note 3— Chapter 11 Proceedings and Emergence in the Notes to Consolidated Financial Statements for additional information.

In spite of these efforts and 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 our financial statements as of, and for the period ended March 31, 2024.

Refer to Note 3— Chapter 11 Proceedings and Emergence in the Notes to Consolidated Financial Statements for additional information.

In spite of these efforts and given our current cash position, limits to accessing capital and debt funding options, and the obligation for the payment of the Exit New Money Note, 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 our financial statements as of, and for the period ended March 31, 2025.

Impact of Recently Issued Accounting Standards

Refer to Note 2— Basis of Presentation, Summary of Significant Accounting Policies and Going Concern in the Notes to Consolidated Financial Statements for information regarding new accounting standards.

Refer to Note 2— Basis of Presentation, Significant Accounting Policies and Going Concern in the Notes to Consolidated Financial Statements for information regarding new accounting standards.

Quantitative and Qualitative Disclosure about Market Risk.

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Financial Statements and Supplementary Data.

Our Consolidated Financial Statements included in this Form 10-K beginning at page F-77 are incorporated in this Item 8 by reference.

Our Consolidated Financial Statements are included in this Form 10-K.

Supplementary data incorporated in this Item 8 by reference within the Exhibits.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

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 7. Management’s Discussion and Analysis