Special Note Regarding Forward-Looking Statements
the ongoing effects of the COVID-19 pandemic on our business, financial
? condition, results of operations and cash flows, and the fact that many of the
other factors discussed below may be amplified by the COVID-19 pandemic and the
restrictions that have been instituted as a result of the pandemic;
? the availability of credit and compliance with the agreements governing our
? risks related to our history of net losses and ability to raise additional
capital and fund future operating requirements;
? the development of the market for and customer uses of our microturbines,
including our Energy as a Service solutions;
? our ability to develop new products and enhance existing products;
? our ability to produce products on a timely basis in a high quality manner;
? availability of sources for and costs of component parts;
? competition in the markets in which we operate;
? operational interruption by fire, earthquake and other events beyond our
? federal, state and local regulations of our markets and products;
? usage of our federal and state net operating loss carryforwards;
? the financial performance of the oil and natural gas industry and other general
business, industry and economic conditions applicable to us;
changes to international trade regulation, quotas, duties or tariffs, and
? sanctions caused by the changing U.S. and geopolitical environment, including
the ongoing conflict between Russia and the Ukraine;
? security and cybersecurity risks related to our electronic processing of
sensitive and confidential business and product data;
? the impact of the recent departure of several key management and other
? the additional covenants imposed by our most recent amendment to the A&R Note
Purchase Agreement with Goldman Sachs;
? our ability to adequately protect our intellectual property rights;
? the impact of pending or threatened litigation; and
? other risks and uncertainties discussed in "Item 1A. Risk Factors" included in
our Annual Report on Form 10-K for Fiscal 2022.
Our goals for Fiscal 2023 are to:
? expand our EaaS business by growing the long-term rental fleet,
? focus on growing top line revenue through our new Direct Solutions Sales team
and growing the DSS subscription program,
? broaden our diverse energy products and service offerings,
? increase aftermarket margins and escalate parts availability, and
? focus on managing working capital and inventory turns.
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
1. energy systems offering scalable solutions in addition to a broad range of
customer-tailored solutions. We target specific market verticals for these
The following table summarizes our percentage or product revenues by vertical markets for which we had product revenues for the periods presented:
Natural Resources-Crude Oil, Natural Gas, Shale Gas & Mining
Sales and Distribution Channels We seek out distributors that have business
experience and capabilities to support our growth plans in our targeted
2. 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 66
distributors, OEMs and national accounts. In the United States and Canada, we
currently have 10 distributors, OEMs and national accounts. Outside of the
United States and Canada, we currently have 56 distributors, OEMs and national
accounts. We continue to refine our distribution channels to address our
Service As part of our Energy as a Service 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
3. 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.
Product Robustness and Life Cycle Maintenance Costs We continue to invest in
enhancements that relate to high performance and high reliability. An
4. important element of our continued innovation and product strategy is to focus
on the engineering of our product hardware and electronics to make them work
together more effectively and deliver improved microturbine performance,
reliability and low maintenance cost to our customers.
New Product Development Our new product development is targeted specifically
to meet the needs of our selected vertical markets. We expect that our
5. existing product platforms, the C65, C200 and C1000 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
Cost and Core Competencies We believe that the core competencies of our
products are air-bearing technology, advanced combustion technology and
sophisticated power electronics to form efficient and ultra-low emission
electricity and cooling and heat production systems. Our core intellectual
property is contained within our air-bearing technology. We continue to review
6. avenues for cost reduction by sourcing to the best value supply chain option.
In order to utilize manufacturing facilities and technology more effectively,
we are focused on continuous improvements in manufacturing processes.
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.
Critical Accounting Policies and Estimates
? Inventory write-downs and classification of inventories;
? Deferred tax assets and valuation allowance;
? Impairment of long-lived assets, including intangible assets with finite lives;
Three Months Ended June 30, 2022 and 2021
The following table summarizes our revenue (revenue amounts in millions):
Interest Expense for the three months ended June 30, 2022 and 2021 was $1.4 million and $1.2 million, respectively. See Liquidity and Capital Resources below for additional discussion on our interest expense.
The following is a summary of the significant sources (uses) of cash from operating activities (amounts in thousands):
Represents change in gain on extinguishment of debt, warranty provision, (1) depreciation and amortization, stock-based compensation expense, inventory
provision and accounts receivable allowances.
September 2019 Pre-Funded and Series D Warrants
The advance under the PPP Loan bore interest at a rate per annum of 1%.
? the continuing impact of the COVID-19 pandemic on the global economy and
specifically on oil and gas markets;
? 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.
Refer to Note 3 - Recently Issued Accounting Pronouncements in the Notes to Condensed Consolidated Financial Statements (Part I, Item 1 of this Form 10-Q) for information regarding new accounting standards.
We do not have any material off-balance sheet arrangements.
© Edgar Online, source Glimpses