Annual report pursuant to Section 13 and 15(d)

Restatement of Consolidated Financial Statements

Restatement of Consolidated Financial Statements

12 Months Ended

Mar. 31, 2022

Restatement of Consolidated Financial Statements

Restatement of Consolidated Financial Statements

2. Restatement of Consolidated Financial Statements

The Company’s previously issued financial statements included in its Annual Reports on Form 10-K for the years ended March 31, 2022 and 2021, and each of the interim financial statements for the quarterly periods in 2023, 2022, and 2021 included in its Quarterly Reports on Form 10-Q (collectively, the “Restated Periods”) should no longer be relied upon and a restatement is required for these previously issued consolidated financial statements.

In accordance with ASC Topic 250, Accounting Changes and Error Corrections, the Company has restated herein the audited consolidated financial statements as of and for the fiscal years ended March 31, 2022 and 2021 and the unaudited quarterly financial information for the 2022 and 2021 fiscal years. Refer to Note 16. Restatement of Quarterly Financial Information (Unaudited) for the quantitative restatement impacts related to the Restated Interim Periods.

Description of Misstatements

The following include descriptions of the significant adjustments to the Company’s financial position and results of operations from previously reported consolidated financial statements.

Revenue Recognition of Bill-and-Hold Arrangements (“Bill and Hold”) The Company previously recognized revenue related to the sale of products, parts, and accessories at the point of shipment. In certain circumstances, the Company recognized revenue when the order is shipped to an in-transit warehouse where it is held until it is shipped to the customer. Under ASC 606, Revenue from Contracts with Customers (“ASC 606”), revenue recognized under bill-and-hold arrangements are required to meet specific criteria including: (i) the reason for the bill-and-hold arrangement is substantive, (ii) the product is segregated from the Company’s other inventory items held for sale, (iii) the product is ready for shipment to the customer, and (iv) the Company does not have the ability to use the product or direct it to another customer. As the Company’s previous revenue recognition policy did not correctly apply the required criteria to recognize revenue related to bill-and-hold arrangements, the Company concluded certain revenue related to bill-and-hold arrangements was prematurely recognized. The Company has revised the revenue recognition process, and related internal controls, to properly consider the required bill-and-hold criteria.

To correct this error, (i) the revenue and cost of goods sold were reversed in the period in which the accounting errors took place, (ii) the revenue and cost of goods sold was recognized in subsequent periods when all of the revenue recognition criteria had been met, and (iii) the bad debt expense relating to the accounts receivable associated with prematurely recognized revenue was reversed in the periods prior to achieving the revenue recognition criteria and recognized in subsequent periods consistent with the Company’s policy. Additionally, the related adjustments to accounts receivable, inventory, and deferred revenue were made in the consolidated financial statements for the relevant Restated Periods.

Recognition of the Factory Protection Plan Contracts (“FPP Contracts”) The Company offers a comprehensive factory protection plan (“FPP”) to microturbine system customers guaranteeing service in the form of labor and spare parts to maintain product performance. For a fixed fee, the customer can purchase a FPP for either spare parts only or spare parts and labor reimbursement. The Company previously recognized the FPP revenue on a straight-line basis for the term of the contract, typically 5, 10, 15, or 20 years, and recorded the costs when the replacement parts shipped and when the labor reimbursement request was received. In addition, FPP revenues and costs were presented on a gross basis in the Consolidated Statements of Operations.

As part of the restatement process, the Company reviewed the previous accounting conclusions related to FPP recognition including a separate analysis of the spare parts and labor reimbursement offerings and the general terms of the contract. The Company concluded the timing of cost recognition was improperly delayed and the cost should be recognized when the customer orders the spare parts. As it relates to the accounting for labor reimbursement (“FPP Labor”), the income, based on the respective standalone selling price, and related costs should be presented on a net basis in the Consolidated Statements of Operations. In addition, the Company concluded the FPP contract term is 30 days, as the customer has the right to cancel with a 30-day notice. The Company has since revised its policy, and related internal controls, to properly consider the recognition of FPP contracts.

To correct this error, as it relates to FPP Parts, the cost of goods sold was recognized at the time the spare parts order was received and a liability was recognized for any orders that had not been shipped to the customers in the period the accounting error took place. As it relates to FPP Labor, the labor reimbursement cost was reversed out of cost of goods sold and reclassified to revenue, net. The Company also revised the FPP contract disclosure included in Note 3 – Summary of Significant Accounting Policies to reflect the revised classification of the contract term.

Note Classification As a result of our restated earnings, we were in breach of the Consolidated Adjusted EBITDA Financial Covenant to the Note Purchase Agreement dated as of December 9, 2019, and later amended for the quarter ended June 30, 2021. The breach required a reclassification of the term note payable to a current liability on our

consolidated balance sheets for the year ended March 31, 2022, and each of the interim financial statements for the quarterly periods in 2022. For further discussion on the Company’s ability to continue as a going concern see Note 3 – Summary of Significant Accounting Policies.

Reclassifications Certain reclassifications have been made to the Company’s previously issued Consolidated Statements of Operations to enhance comparability with the current year’s financial statements. As a result, certain amounts relating to revenues and cost of goods sold for the sale of parts, previously reflected in Product, accessories and parts have been reclassified to Parts and service. These reclassifications had no impact on previously reported net income, cash flows, or shareholders’ equity.

Description of Annual Restatement Tables

The following tables present the impact of the restatement on the previously reported Consolidated Balance Sheets, Consolidated Statements of Operations, and Statements of Cash Flows for the years ended March 31, 2022 and 2021, and the impact of the restatement on beginning stockholders’ equity (deficiency) as of April 1, 2020. The values as previously reported for the years ending March 31, 2022 and 2021 were derived from our Annual Reports on Form 10-K filed on July 14, 2022 and June 14, 2021, respectively.


	As of March 31, 2022
					FPP		Note
(in thousands)	As Reported		Bill and Hold		Contracts		Classification		As Restated
Assets
Current Assets:
Cash and cash equivalents	$	22,559	$	—	$	—	$	—	$	22,559
Accounts receivable, net of allowances		24,665		(8,771)		—		—		15,894
Inventories, net		18,465		11,702		—		—		30,167
Prepaid expenses and other current assets		5,519		—		—		—		5,519
Total current assets		71,208		2,931		—		—		74,139
Property, plant, equipment and rental assets, net		18,038		—		—		—		18,038
Non-current portion of accounts receivable		1,212		(1,212)		—		—		—
Non-current portion of inventories		1,680		—		—		—		1,680
Other assets		8,635		—		—		—		8,635
Total assets	$	100,773	$	1,719	$	—	$	—	$	102,492
Liabilities and Stockholders’ (Deficiency) Equity
Current Liabilities:
Accounts payable and accrued expenses	$	25,130	$	—	$	—	$	—	$	25,130
Accrued salaries and wages		1,147		—		—		—		1,147
Accrued warranty reserve		1,483		—		—		—		1,483
Deferred revenue		9,185		5,650		—		—		14,835
Current portion of notes payable and lease obligations		675		—		—		—		675
Factory protection plan liability		—		—		9,170		—		9,170
Term note payable		—		—		—		50,949		50,949
Total current liabilities		37,620		5,650		9,170		50,949		103,389
Deferred revenue, non-current		981		—		—		—		981
Long-term portion of notes payable and lease obligations		5,809		—		—		—		5,809
Term note payable, non-current		50,949		—		—		(50,949)		—
Total liabilities		95,359		5,650		9,170		—		110,179
Commitments and contingencies
Stockholders’ (Deficiency) Equity:
Preferred stock		—		—		—		—		—
Common stock		15		—		—		—		15
Additional paid-in capital		946,969		—		—		—		946,969
Accumulated deficit		(939,482)		(3,931)		(9,170)		—		(952,583)
Treasury stock		(2,088)		—		—		—		(2,088)
Total stockholders’ (deficiency) equity		5,414		(3,931)		(9,170)		—		(7,687)
Total liabilities and stockholders' (deficiency) equity	$	100,773	$	1,719	$	—	$	—	$	102,492


	As of March 31, 2021
(in thousands)	As Reported		Bill and Hold		FPP Contracts		As Restated
Assets
Current Assets:
Cash and cash equivalents	$	49,533	$	—	$	—	$	49,533
Accounts receivable, net of allowances		20,593		(7,691)		—		12,902
Inventories, net		11,829		9,859		—		21,688
Prepaid expenses and other current assets		4,953		—		—		4,953
Total current assets		86,908		2,168		—		89,076
Property, plant, equipment and rental assets, net		9,630		—		—		9,630
Non-current portion of inventories		1,845		—		—		1,845
Other assets		7,639		—		—		7,639
Total assets	$	106,022	$	2,168	$	—	$	108,190
Liabilities and Stockholders’ (Deficiency) Equity
Current Liabilities:
Accounts payable and accrued expenses	$	19,767	$	—	$	—	$	19,767
Accrued salaries and wages		1,889		—		—		1,889
Accrued warranty reserve		5,850		—		—		5,850
Deferred revenue		6,374		5,448		—		11,822
Current portion of notes payable and lease obligations		576		—		—		576
Factory protection plan liability		—		—		7,662		7,662
Total current liabilities		34,456		5,448		7,662		47,566
Deferred revenue, non-current		765		—		—		765
Long-term portion of notes payable and lease obligations		4,762		—		—		4,762
Term note payable, net		52,865		—		—		52,865
Total liabilities		92,848		5,448		7,662		105,958
Commitments and contingencies
Stockholders’ (Deficiency) Equity:
Preferred stock		—		—		—		—
Common stock		13		—		—		13
Additional paid-in capital		934,381		—		—		934,381
Accumulated deficit		(919,271)		(3,280)		(7,662)		(930,213)
Treasury stock		(1,949)		—		—		(1,949)
Total stockholders’ (deficiency) equity		13,174		(3,280)		(7,662)		2,232
Total liabilities and stockholders' (deficiency) equity	$	106,022	$	2,168	$	—	$	108,190


	Year Ended March 31, 2022
(in thousands)	As Reported		Bill and Hold		FPP Contracts		As Restated
Revenue, net:
Product and accessories	$	37,181	$	(4,461)	$	—	$	32,720
Parts and service		32,464		(707)		(513)		31,244
Total revenue, net		69,645		(5,168)		(513)		63,964
Cost of goods sold:
Product and accessories		40,483		(3,377)		—		37,106
Parts and service		20,624		(402)		995		21,217
Total cost of goods sold		61,107		(3,779)		995		58,323
Gross profit		8,538		(1,389)		(1,508)		5,641
Operating expenses:
Research and development		3,359		—		—		3,359
Selling, general and administrative		22,980		(738)		—		22,242
Total operating expenses		26,339		(738)		—		25,601
Loss from operations		(17,801)		(651)		(1,508)		(19,960)
Other income (expense)		642		—		—		642
Interest income		21		—		—		21
Interest expense		(5,004)		—		—		(5,004)
Gain (loss) on debt extinguishment		1,950		—		—		1,950
Loss before provision for income taxes		(20,192)		(651)		(1,508)		(22,351)
Provision for income taxes		19		—		—		19
Net loss		(20,211)		(651)		(1,508)		(22,370)
Less: Deemed dividend on purchase warrant for common shares		—		—		—		—
Net loss attributable to common stockholders	$	(20,211)	$	(651)	$	(1,508)	$	(22,370)

Net loss per share—basic and diluted	$	(1.37)	$	(0.04)	$	(0.10)	$	(1.52)
Weighted average shares outstanding		14,727		14,727		14,727		14,727


	Year Ended March 31, 2021
(in thousands)	As Reported		Bill and Hold		FPP Contracts		As Restated
Revenue, net:
Product and accessories	$	36,517	$	134	$	—	$	36,651
Parts and service		31,119		570		(733)		30,956
Total revenue, net		67,636		704		(733)		67,607
Cost of goods sold:
Product and accessories		42,025		(38)		—		41,987
Parts and service		18,756		206		2,173		21,135
Total cost of goods sold		60,781		168		2,173		63,122
Gross profit		6,855		536		(2,906)		4,485
Operating expenses:
Research and development		2,417		—		—		2,417
Selling, general and administrative		18,391		—		—		18,391
Total operating expenses		20,808		—		—		20,808
Loss from operations		(13,953)		536		(2,906)		(16,323)
Other income (expense)		4,993		—		—		4,993
Interest income		30		—		—		30
Interest expense		(5,156)		—		—		(5,156)
Gain (loss) on debt extinguishment		(4,282)		—		—		(4,282)
Loss before provision for income taxes		(18,368)		536		(2,906)		(20,738)
Provision for income taxes		19		—		—		19
Net loss		(18,387)		536		(2,906)		(20,757)
Less: Deemed dividend on purchase warrant for common shares		15		—		—		15
Net loss attributable to common stockholders	$	(18,402)	$	536	$	(2,906)	$	(20,772)

Net loss per share—basic and diluted	$	(1.63)	$	0.05	$	(0.26)	$	(1.84)
Weighted average shares outstanding		11,280		11,280		11,280		11,280


				Additional							Total
	Common Stock			Paid-in		Accumulated		Treasury Stock			Stockholders’
	Shares	Amount		Capital		Deficit		Shares	Amount		(Deficiency) Equity
Balance as of April 1, 2020	10,286,366	$	10	$	915,755	$	(900,869)	57,577	$	(1,875)	$	13,021
(As previously reported)
Adjustments:
Bill and Hold	—		—		—		(3,816)	—		—		(3,816)
Re-rents	—		—		—		—	—		—		—
FPP Contracts	—		—		—		(4,756)	—		—		(4,756)
Note Classification	—		—		—		—	—		—		—
Cumulative restatement adjustments	—		—		—		(8,572)	—		—		(8,572)
Balance as of April 1, 2020
(As Restated)	10,286,366	$	10	$	915,755	$	(909,441)	57,577	$	(1,875)	$	4,449

Other changes to the Consolidated Statements of Stockholders’ Equity (Deficiency) for the years ended March 31, 2022 and 2021 as a result of the restatement are due to the changes in net income.


	Year Ended March 31, 2022
(in thousands)	As Reported		Bill and Hold		FPP Contracts		As Restated
Cash Flows from Operating Activities:
Net loss	$	(20,211)	$	(651)	$	(1,508)	$	(22,370)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		1,915		—		—		1,915
Amortization of financing costs and discounts		35		—		—		35
Amortization of right-of-use assets		657		—		—		657
(Gain) loss on debt extinguishment		(1,950)		—		—		(1,950)
Bad debt expense (recovery)		1,129		(738)		—		391
Inventory provision		791		—		—		791
Provision for warranty expenses		646		—		—		646
Stock-based compensation		1,245		—		—		1,245
Changes in operating assets and liabilities:
Accounts receivable		(6,413)		3,030		—		(3,383)
Inventories		(7,262)		(1,843)		—		(9,105)
Prepaid expenses, other current assets and other assets		164		—		—		164
Accounts payable and accrued expenses		4,485		—		—		4,485
Accrued salaries and wages and long-term liabilities		(743)		—		—		(743)
Accrued warranty reserve		(5,013)		—		—		(5,013)
Deferred revenue		3,027		202		—		3,229
Factory protection plan liability		—		—		1,508		1,508
Net cash used in operating activities		(27,498)		—		—		(27,498)
Cash Flows from Investing Activities:
Expenditures for property, plant, equipment and rental assets		(9,924)		—		—		(9,924)
Net cash used in investing activities		(9,924)		—		—		(9,924)
Cash Flows from Financing Activities:
Repayment of notes payable and lease obligations		(685)		—		—		(685)
Cash used in employee stock-based transactions		(138)		—		—		(138)
Net proceeds from issuance of common stock and warrants		11,271		—		—		11,271
Net cash provided by financing activities		10,448		—		—		10,448
Net increase (decrease) increase in Cash and Cash Equivalents		(26,974)		—		—		(26,974)
Cash and Cash Equivalents, Beginning of Period		49,533		—		—		49,533
Cash and Cash Equivalents, End of Period	$	22,559	$	—	$	—	$	22,559
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest	$	5,095	$	—	$	—	$	5,095
Income taxes	$	20	$	—	$	—	$	20
Supplemental Disclosures of Non-Cash Information:
Acquisition of property and equipment through accounts payable	$	264	$	—	$	—	$	264
Renewal of insurance contracts financed by notes payable	$	567	$	—	$	—	$	567
Issuance of common stock for services to be received	$	75	$	—	$	—	$	75


	Year Ended March 31, 2021
(in thousands)	As Reported		Bill and Hold		FPP Contracts		As Restated
Cash Flows from Operating Activities:
Net loss	$	(18,387)	$	536	$	(2,906)	$	(20,757)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		1,452		—		—		1,452
Amortization of financing costs and discounts		623		—		—		623
Amortization of right-of-use assets		378		—		—		378
(Gain) loss on debt extinguishment		4,282		—		—		4,282
Bad debt expense (recovery)		(228)		—		—		(228)
Inventory provision		305		—		—		305
Provision for warranty expenses		5,930		—		—		5,930
(Gain) loss on disposal of equipment		(1)		—		—		(1)
Stock-based compensation		937		—		—		937
Changes in operating assets and liabilities:
Accounts receivable		(4,125)		382		—		(3,743)
Inventories		8,702		168		—		8,870
Prepaid expenses, other current assets and other assets		653		—		—		653
Accounts payable and accrued expenses		4,652		—		—		4,652
Accrued salaries and wages and long-term liabilities		245		—		—		245
Accrued warranty reserve		(2,014)		—		—		(2,014)
Deferred revenue		(1,703)		(1,086)		—		(2,789)
Factory protection plan liability		—		—		2,906		2,906
Net cash used in operating activities		1,701		—		—		1,701
Cash Flows from Investing Activities:
Expenditures for property, plant, equipment and rental assets		(3,209)		—		—		(3,209)
Net cash used in investing activities		(3,209)		—		—		(3,209)
Cash Flows from Financing Activities:
Net proceeds from term note payable		20,833		—		—		20,833
Repayment of notes payable and lease obligations		(691)		—		—		(691)
Cash used in employee stock-based transactions		(74)		—		—		(74)
Net proceeds from issuance of common stock and warrants		15,905		—		—		15,905
Net cash provided by financing activities		35,973		—		—		35,973
Net increase (decrease) increase in Cash and Cash Equivalents		34,465		—		—		34,465
Cash and Cash Equivalents, Beginning of Period		15,068		—		—		15,068
Cash and Cash Equivalents, End of Period	$	49,533	$	—	$	—	$	49,533
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest	$	4,287	$	—	$	—	$	4,287
Income taxes	$	14	$	—	$	—	$	14
Supplemental Disclosures of Non-Cash Information:
Acquisition of property and equipment through accounts payable	$	36	$	—	$	—	$	36
Renewal of insurance contracts financed by notes payable	$	593	$	—	$	—	$	593
Deemed dividend	$	15	$	—	$	—	$	15