What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-11-13 compared with 2025-08-08 · 126 added, 147 removed, 121 unchanged (69% of the section changed)

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All references in this Quarterly Report on Form 10-Q to “the Company,” “we,” “us,” “our,” or “Capstone” are to Capstone Green Energy Holdings, Inc.

and its consolidated subsidiaries as of June 30, 2025, and March 31, 2025, and for the three months ended June 30, 2025 and 2024.

and its consolidated subsidiaries as of September 30, 2025, and March 31, 2025, and for the three and six months ended September 30, 2025 and 2024.

Special Note Regarding Forward-Looking Statements

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● risks related to our history of net losses and ability to raise additional capital and fund future operating requirements;

● our ability to continue as a going concern;

● our ability to continue as a going concern and the upcoming maturity of the Exit New Money Notes (as defined in Note 8 – Debt) on December 7, 2025;

● our ability to remediate the material weaknesses in internal control over financial reporting disclosed in our Annual Report on Form 10-K for Fiscal 2025;

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● the restrictions imposed by the covenants contained in the Note Purchase Agreement (as defined in Note 8— Debt) and the Operating Subsidiary LLC Agreement (as defined in Note 17— Commitments and Contingencies) and our ability to comply with the financial covenants contained in the Note Purchase Agreement;

● the uncertainty associated with the imposition of tariffs and trade barriers and changes in trade policies;

● uncertainties associated with investments into efforts to capture market share in the emerging data center artificial intelligence (“AI”) market for microturbines;

● our ability to realize the anticipated benefits of the recently completed Cal Microturbine acquisition;

● the impact of pending or threatened litigation;

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● the financial performance of the oil and natural gas industry and other general business, industry and economic conditions applicable to us;

● the uncertainty associated with the imposition of tariffs and trade barriers and changes in trade policies;

● the geopolitical environment, including the ongoing conflict in Ukraine;

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These solutions include stationary distributed power generation applications and distribution networks, including cogeneration (combined heat and power (“CHP”), integrated combined heat and power (“ICHP”), and combined cooling, heat and power (“CCHP”), renewable energy, natural resources, and critical power supply.

We are the market leader in microturbine energy systems based on the number of microturbines sold annually and total installed base.

We are a market leader in microturbine energy systems based on the number of microturbines sold annually and total installed base.

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

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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, 2025, we had a net loss of $0.7 million and a basic and diluted net loss per share of $0.04 compared to net loss of $3.9 million and basic and diluted net loss per share of $0.21 during the three months ended June 30, 2024.

The $3.2 million change in net loss was primarily due to improved gross profit of $3.8 million, driven by the impacts of price increases and lower unit costs offset by $0.4 million higher total operating expenses, and by a $0.2 million decrease in other income as compared to the three months ended June 30, 2024.

In the energy markets, we continue to expand our presence in the energy efficiency, natural resources, renewable energy, critical power, and microgrid power type of applications in the first quarter of Fiscal 2026.

During the three months ended September 30, 2025, we had a net income of $0.8 million, accretion of dividends of Preferred Units of $18.2 million, basic and diluted net loss per share of $0.89, compared to net loss of $0.4 million, no change in Preferred Units and basic and diluted net loss per share of $0.02 during the three months ended September 30, 2024.

The $1.3 million change in net income was primarily due to improved gross profit of $2.0 million, driven by the impacts of price increases and lower unit costs, offset by $0.6 million higher total operating expenses, a $0.1 million decrease in other income and a $0.1 million increase in interest expense as compared to the three months ended September 30, 2024.

The microgrid market is for electrification demand.

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Our product sales in the oil and gas and other natural resources market is driven by our microturbines’ reliability, emissions profile and ease of installation.

Given further volatility of the oil and gas market, our business strategy is to continue diversification within the microgrid energy efficiency and renewable energy markets.

Given the continued volatility of the oil and gas market, our business strategy is to continue diversification within the microgrid energy efficiency and renewable energy markets.

As part of our diversification strategy, we have begun to utilize our microgrid solutions into a reference design package for AI and Data Center infrastructure.

On October 21, 2025, we released a press release announcing that the Company has developed a new 800-volt direct-current (“VDC”) microturbine to support NVIDIA’s new AI Infrastructure requirements.

With the Company’s compute partner, Microgrid for AI (“MG4AI), the Company can now provide power and cooling plus compute as an engineered equipment package as “on-site power to chip” for the next generation of AI factories.

Refer to Risk Factors (Part II, Item 1A of this Form 10-Q) for further discussion of the risks associated with AI-related investments.

We continue to focus on improving our products based on customer input, building brand awareness and bringing new channels to market by developing a diversified network of strategic distribution partners.

Our focus is on products

and solutions that provide near-term and longer-term opportunities to drive repeatable business and larger deal size rather than discrete projects for niche markets.

Our focus is on products and solutions that provide near-term and longer-term opportunities to drive repeatable business and larger deal size rather than discrete projects for niche markets.

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 higher average selling prices, lower direct material costs, positive new order flow, reduced cash usage and expansion of the EaaS business.

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

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.

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.

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, critical power and microgrid markets.

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

Three Months Ended June 30,

Energy efficiency

Natural resources

Renewable energy

Critical power supply

Energy Efficiency—CHP/CCHP

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

In such applications, our microturbines are designed 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 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.

Natural Resources—Crude Oil, Natural Gas, Shale Gas & Mining

Our microturbines are installed in the natural resource market for use in both onshore and offshore applications, including oil and gas exploration, production, and at compression and transmission sites as a highly efficient and reliable source of power.

In some cases, these oil and gas or mining operations have no electric utility grid and rely solely on power generated on-site.

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 sour gas, into a useable fuel to provide prime power to these sites.

Renewable Energy

There is a growing transition to renewable energy sources and technologies on a global scale.

Our microturbines run efficiently on renewable fuels such as methane and other biogases from landfills, wastewater treatment facilities and renewable natural gas.

They also run efficiently on other small biogas applications like food processing plants, livestock farms and agricultural green waste operations.

Microturbines can burn these renewable fuels with minimal emissions, thereby, in some cases, avoiding the imposition of penalties incurred

for pollution while simultaneously producing electricity from this “free” renewable fuel source for use at the site or in the surrounding areas.

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.

Critical Power Supply

Because of the potentially catastrophic consequences of system failure, momentary or otherwise, certain high -demand power users, including high technology, health care and information systems facilities, require higher levels of reliability in their power generation service.

To meet these customer requirements, traditional solutions utilize Uninterruptible Power Supplies (“UPS”) to protect critical loads from power disturbances along with back-up diesel generators for extended outages.

We offer an alternative solution where our microturbines can also be installed along with a rotary UPS to provide a complete line interactive continuous power solution.

In this case, the microturbines remain in grid connect mode while the rotary UPS stabilizes the utility voltage and provides a seamless transfer from operation connected to the grid to operation isolated from 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.

Microgrids can be connected to larger electricity grids;

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 are designed 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.

We have seen continued development in the microgrid market segment.

Transportation

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.

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

Net product orders were approximately $16.5 million and $3.4 million for the three months ended June 30, 2025 and 2024, respectively.

Ending backlog was approximately $24.6 million at June 30, 2025, compared to $12.4 million at June 30, 2024.

The book-to-bill ratio was 1.07:1 and 0.7:1 for the three months ended June 30, 2025 and 2024, respectively.

Backlog Net product orders were approximately $6.2 million and $9.2 million for the three months ended September 30, 2025 and 2024, respectively.

Ending backlog was approximately $14.8 million at September 30, 2025, compared to $10.6 million at September 30, 2024.

The book-to-bill ratio was 0.4:1 and 0.8:1 for the three months ended September 30, 2025 and 2024, 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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As a result, management believes the book-to-bill ratio reflects 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 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 48 distributors, Original Equipment Manufacturers (“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 40 distributors, OEMs and national accounts.

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

Service 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.

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.

New Product Development 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 We believe that the core competencies of our products are our recuperator design and 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 propriety technology is contained within our air bearing technology.

We continue to review avenues for cost reduction by sourcing from 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 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.

Many components used in the manufacture of our products are readily fabricated from commonly available raw materials or off-the-shelf items available from multiple supply sources;

however, certain items are custom made to meet our specifications and require longer lead times.

We believe that in most cases, adequate capacity exists at our suppliers and that alternative sources of supply are available or could be developed within a reasonable period of time, however, it may be more challenging to transition to another supplier from single source suppliers with long lead times.

We regularly reassess the adequacy and abilities of our suppliers to meet our future needs.

We believe that effective execution in each of these key areas will be necessary to leverage our promising technology and early market leadership into achieving positive cash flow with growing market presence and improving financial performance.

We currently occupy warehouse and office space in Van Nuys, California with a production capacity of approximately 2,000 units per year, depending on product mix.

We currently occupy warehouse and office space in Costa Mesa, California and office space and a production facility in Van Nuys, California with a production capacity of approximately 2,000 units per year, depending on product mix.

Critical Accounting Estimates

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Results of Operations

Three Months Ended June 30, 2025 and 2024

Three Months Ended September 30, 2025 and 2024

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, 2025 increased $12.3 million to $27.9 million from $15.6 million for the three months ended June 30, 2024.

The increase was primarily driven by increases in revenue of $14.1 million in the United States and Canada and $0.8 million in Latin America, offset by a decrease in revenue of $1.4 million in Europe, $1.1 million in Asia and Australia and $0.1 million in Middle East and Africa.

Revenue for the three months ended September 30, 2025 increased $5.7 million to $28.4 million from $22.7 million for the three months ended September 30, 2024.

The increase was primarily driven by increases in revenue of $5.7 million in the United States and Canada, $2.4 million in Europe and $0.6 million in Asia and Australia, offset by a decrease in revenue of $2.8 million in Latin America and $0.2 million in Middle East and Africa.

The increases in the United States and Canada, Latin America and Europe were due to increased microturbine product, parts and rental demand.

The decrease in Europe, Asia and Australia were primarily due to decreases in microturbine deliveries for projects in those regions during the three months ended June 30, 2025.

The decrease in Europe, Asia and Australia were primarily due to decreases in microturbine deliveries for projects in those regions during the three months ended September 30, 2025.

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

For the three months ended June 30, 2025, revenue from microturbine products and accessories increased $10.3 million, or 191%, to $15.7 million from $5.4 million for the three months ended June 30, 2024.

The $10.3 million increase was driven primarily by product mix, with the 4.5 megawatts increase in shipments during the three months ended June 30, 2025, including increased demand for our C1000 turbines, compared to the three months ended June 30, 2024.

Average revenue per megawatt shipped was approximately $1.8 million and $1.3 million during the three months ended June 30, 2025 and 2024, respectively.

The increase in revenue per megawatt resulted from price increases and product mix.

Parts and service revenue, which are part of our EaaS business line and includes revenue from our spare parts shipments, FPP contracts, and other service revenue, for the three months ended June 30, 2025, was consistent with increased revenues of $0.2 million, or 3%, to $8.0 million from $7.8 million for the three months ended June 30, 2024.

Rentals revenue for three months ended June 30, 2025 increased $1.8 million or 75%, to $4.2 million from $2.4 million for the three months ended June 30, 2024.

This increase was driven by growth in rental utilization and increased rental prices.

Sales to Cal Microturbine and Lone Star Power Solutions, LLC (“Lone Star”), two of the Company’s domestic distributors, accounted for 47% and 10% of revenue for the three months ended June 30, 2025, respectively.

Lone Star, Cal Microturbine and E-Finity Distributed Generation (“E-Finity”), three of the Company’s domestic distributors and Optimal Group Australia Pty Ltd, one of the Company’s international distributors, accounted for 16%, 13%, 11% and 11% of revenue for the three months ended June 30, 2024, respectively.

For the three months ended September 30, 2025, revenue from microturbine products and accessories increased $4.8 million, or 42%, to $16.1 million from $11.3 million for the three months ended September 30, 2024.

The $4.8 million increase was driven primarily by an increase in product demand, with the 4.3 megawatts increase in shipments during the three months ended September 30, 2025, including increased demand for our C1000 turbines, compared to the three months ended September 30, 2024.

Average revenue per megawatt shipped was approximately $1.4 million and $1.6 million during the three months ended September 30, 2025 and 2024, respectively.

The decrease in revenue per megawatt is mainly due to product mix of microturbine configurations.

Parts and service revenue, which are part of our EaaS business line and includes revenue from our spare parts shipments, FPP contracts, and other service revenue of $7.9 million for the three months ended September 30, 2025, was comparable at $7.9 million for the three months ended September 30, 2024.

Rentals revenue for three months ended September 30, 2025 increased $0.9 million or 26%, to $4.4 million from $3.5 million for the three months ended September 30, 2024.

This increase was driven by an increase in rental utilization and increased rental prices.

Sales to E -Finity Distributed Generation (“E-Finity”) , Cal Microturbine, LLC (“Cal Microturbine”) and Lone Star Power Solutions, LLC (“Lone Star”), three of the Company’s domestic distributors, accounted for 36%, 13% and 10% of revenue for the three months ended September 30, 2025, respectively.

On August 13, 2025, the Company completed its acquisition of Cal Microturbine.

E -Finity, Arctic Energy Inc.

(“Arctic”) and Lone Star Power Solutions, LLC (“Lone Star”) , three of the Company’s domestic distributors, and GET/CWS Limited, one of the Company’s international customers, accounted for 21%, 14%, 10% and 11% of revenue for the three months ended September 30, 2024, 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 $7.6 million, or 27% of revenue for the three months ended June 30, 2025, compared to a gross profit of $3.8 million, or 24% of revenue for the three months ended June 30, 2024.

The improvement was primarily the result of an increase in product sales volume and the full effect of an increase in pricing and decreases in production and service center labor and overhead expenses.

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

Gross profit was $9.0 million, or 32% of revenue for the three months ended September 30, 2025, compared to a gross profit of $7.0 million, or 31% of revenue for the three months ended September 30, 2024.

The increase was primarily the result of an increase in product sales volume and the full effect of an increase in pricing and decreases in production and service center labor and overhead expenses.

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

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 $1.8 million in product and accessories gross profit was primarily due to higher product pricing, improved cost efficiencies, high volume and product mix.

Product and accessories gross margin as a percentage of product and accessories revenue improved to 8% during the three months ended June 30, 2025, from negative 11% during the three months ended June 30, 2024, primarily due to higher product volume and revenue for the three months ended June 30, 2025.

Parts and services gross margin as a percentage of parts and service revenue decreased to 53% during the three months ended June 30, 2025, compared to 56% during the three months ended June 30, 2024, primarily as a result additional cost for service during the three months ended June 30, 2025.

Rentals gross margin as a percentage of rental revenue increased to 52% for the three months ended June 30, 2025, compared to 0% for the three months ended June 30, 2024, primarily due to increased rental pricing and utilization.

Research and Development (“R&D”) Expenses R&D expenses were $0.8 million and $0.5 million during the three months ended June 30, 2025 and 2024, respectively, and was 3% and 4% of revenue for the three months ended June 30, 2025, and 2024, respectively.

During the three months ended June 30, 2025 as R&D programs for new product development and product enhancements expanded.

Selling, General, and Administrative (“SG&A”) Expenses SG&A expenses were $6.9 million and $6.8 million during the three months ended June 30, 2025 and 2024, respectively, and was 25% and 43% of revenue for the three months ended June 30, 2025, and 2024, respectively.

Other Income Other income was $0.4 million and $0.6 million during the three months ended June 30, 2025 and 2024.

The increase of $1.3 million in product and accessories gross profit was primarily due to higher product pricing, improved cost efficiencies, high volume and product mix.

Product and accessories gross margin as a percentage of product and accessories revenue improved to 12% during the three months ended September 30, 2025, from 6% during the three months ended September 30, 2024, primarily due to higher product volume and revenue for the three months ended September 30, 2025.

Parts and services gross margin as a percentage of parts and service revenue decreased to 60% during the three months ended September 30, 2025, compared to 66% during the three months ended September 30, 2024, primarily as a result of additional cost for service during the three months ended September 30, 2025.

Rentals gross margin as a percentage of rental revenue increased to 52% for the three months ended September 30, 2025, compared to 31% for the three months ended September 30, 2024, primarily due to increased rental pricing and utilization.

Research and Development (“R&D”) Expenses R&D expenses were $0.8 million and $0.6 million during the three months ended September 30, 2025 and 2024, respectively, and was 3% of revenue for the three months ended September 30, 2025, and 2024.

During the three months ended September 30, 2025, there were additional R&D programs for new product development and product enhancements.

Selling, General, and Administrative (“SG&A”) Expenses SG&A expenses were $6.8 million and $6.4 million during the three months ended September 30, 2025 and 2024, respectively, and was 24% and 28% of revenue for the three months ended September 30, 2025, and 2024, respectively.

Compared to prior year, we have lower restructuring, restatement and SEC investigation expense, partially offset by higher Cal Microturbine acquisition expense.

Additionally, we accrued Executive AIP bonuses during the three months ended September 30, 2025, compared to zero accrual during the three months ended September 30, 2024.

Other Income Other income was $0.5 million and $0.6 million during the three months ended September 30, 2025 and 2024 and is primarily due to service fees earned related to the DSS.

Interest Income.

Interest income was $0.1 million and less than $0.1 million during the three months ended June 30, 2025 and 2024, respectively..

Interest Expense Interest expense was $1.0 million during both the three months ended June 30, 2025 and 2024.

Interest income was $0.1 million and less than $0.1 million during the three months ended September 30, 2025 and 2024, respectively.

Interest Expense Interest expense was $1.1 million and $1.0 million for the three months ended September 30, 2025 and 2024, respectively.

Six Months Ended September 30, 2025 and 2024

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, 2025 increased $17.9 million to $56.3 million from $38.4 million for the six months ended September 30, 2024.

The increase was primarily driven by increases in revenue of $19.8 million in the United States and Canada and $0.9 million in Europe, offset by a decrease in revenue of $1.9 million in Latin America, $0.6 million in Asia and Australia and $0.3 million in Middle East and Africa.

The increases in the United States and Europe were due to increased microturbine product, parts and rental demand.

The decrease in Latin America, Asia and Australia and the Middle East and Africa were primarily due to decreases in microturbine deliveries for projects in those regions during the six months ended September 30, 2025.

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, 2025, revenue from microturbine products and accessories increased $15.2 million, or 92%, to $31.8 million from $16.6 million for the six months ended September 30, 2024.

The $15.2 million increase was driven primarily by an 8.8 megawatts increase in shipments during the six months ended September 30, 2025, including increased demand for our C1000 turbines, compared to the six months ended September 30, 2024.

Average revenue per megawatt shipped was approximately $1.6 million and $1.5 million during the six months ended September 30, 2025 and 2024, respectively, and is mainly due to price increase and product mix.

Parts and service revenue, which are part of our EaaS business line and includes revenue from our spare parts shipments, FPP contracts, and other service revenue was $15.9 million for the six months ended September 30, 2025, compared to $15.8 million for the six months ended September 30, 2024.

Rentals revenue for six months ended September 30, 2025 increased $2.6 million or 43%, to $8.6 million from $6.0 million for the six months ended September 30, 2024.

This increase was driven by increased rental utilization and increased rental prices.

Sales to Cal Microturbine, E -Finity and Lone Star, three of the Company’s domestic distributors, accounted for 30%, 22%, and 10% of revenue for the six months ended September 30, 2025, respectively.

E -Finity and Lone Star , two of the Company’s domestic distributors accounted for 17% and 13% of revenue for the six months ended September 30, 2024, 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 $16.5 million, or 29% of revenue for the six months ended September 30, 2025, compared to a gross profit of $10.8 million, or 28% of revenue for the six months ended September 30, 2024.

The increase was primarily the result of an increase in product sales

volume and the full effect of an increase in pricing, partially offset by increases in production and service center labor and overhead expenses.

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

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

As a percentage of rentals revenue

Total gross profit

As a percentage of total revenue

The increase of $3.1 million in product and accessories gross profit was primarily due to higher product pricing, improved cost efficiencies, high volume and product mix.

Product and accessories gross margin as a percentage of product and accessories revenue increased to 10% during the six months ended September 30, 2025, from 1% during the six months ended September 30, 2024, primarily due to higher product volume and revenue for the six months ended September 30, 2025.

Parts and services gross margin as a percentage of parts and service revenue decreased to 56% during the six months ended September 30, 2025, compared to 61% during the six months ended September 30, 2024, primarily as a result additional cost for service during the six months ended September 30, 2025.

Rentals gross margin as a percentage of rental revenue increased to 52% for the six months ended September 30, 2025, compared to 19% for the six months ended September 30, 2024, primarily due to increased rental pricing and utilization.

Research and Development (“R&D”) Expenses R&D expenses were $1.6 million and $1.1 million during the six months ended September 30, 2025 and 2024, respectively, and remained at 3% of revenue for the six months ended September 30, 2025 and 2024.

During the six months ended September 30, 2025, there were additional R&D programs for new product development and product enhancements.

Selling, General, and Administrative (“SG&A”) Expenses SG&A expenses were $13.7 million and $13.2 million during the six months ended September 30, 2025 and 2024, respectively, and was 24% and 34% of revenue for the six months ended September 30, 2025 and 2024, respectively.

Compared to prior year, we have lower restructuring, restatement and SEC investigation expense, partially offset by higher Cal Microturbine acquisition expense.

Additionally, we accrued Executive AIP bonuses during the six months ended September 30, 2025, compared to zero accrual during the six months ended September 30, 2024.

Other Income Other income was $1.0 million and $1.2 million during the six months ended September 30, 2025 and 2024 and is mainly due to service fee earned related to the DSS.

Interest Expense Interest expense was $2.1 million and $2.0 million for the six months ended September 30, 2025 and 2024, respectively.

Liquidity and Capital Resources

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

Our cash and cash equivalents balance decreased $2.0 million during the three months ended June 30, 2025, compared to an increase in cash of $1.9 million during the three months ended June 30, 2024.

The decrease in cash during the three months ended June 30, 2025 was primarily due to net cash used in operating activities.

Operating Activities During the three months ended June 30, 2025, net cash used by operating activities was $1.6 million, consisting of a net loss for the period of $0.7 million, changes in operating assets and liabilities of $4.0 million offset by non-cash adjustments, primarily representing depreciation and amortization, non-cash lease expense, stock based compensation and paid-in-kind interest expense, totaling $3.1 million.

For the three months ended June 30, 2024, net cash provided by operating activities was $2.1 million, consisting of net loss of $3.9 million, offset by changes in operating assets and liabilities of $2.8 million and non-cash adjustments, primarily representing depreciation and amortization, non-cash lease expense and paid-in-kind interest expense, of $3.2 million.

Our cash and cash equivalents balance decreased $1.0 million during the six months ended September 30, 2025, compared to

an increase in cash of $0.6 million during the six months ended September 30, 2024.

The decrease in cash during the six months ended September 30, 2025 was primarily due to net cash used in operating activities.

Operating Activities During the six months ended September 30, 2025, net cash used by operating activities was $1.0 million, consisting of a net income for the period of $0.1 million, changes in operating assets and liabilities of $7.0 million offset by non-cash adjustments, primarily representing depreciation and amortization, non-cash lease expense, stock based compensation, paid-in-kind interest expense, provision for credit losses and inventory write-down totaling $5.9 million.

For the six months ended September 30, 2024, net cash provided by operating activities was $0.9 million, consisting of net loss of $4.4 million, offset by changes in operating assets and liabilities of $1.5 million and non-cash adjustments, primarily representing depreciation and amortization, non-cash lease expense and paid-in-kind interest expense, totaling $6.7 million.

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

Three Months Ended June 30,

Six Months Ended September 30,

Non-cash operating activities(1)

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(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 $3.4 million increase in use of cash in accounts receivable resulted from the timing of sales in the three months ended June 30, 2025 and 2024.

The $1.8 million decrease in cash provided by accounts payable resulted from the timing of payment of trade accounts.

The $0.5 million increase in cash provided by accrued expenses was primarily due to a decrease in legal accrual and accrued sponsorship related to litigation that has since been resolved.

The $6.4 million increase in use of cash in accounts receivable resulted from the timing of sales in the six months ended September 30, 2025 compared to the six months ended September 30, 2024.

The $2.8 million decrease in cash provided by inventory is due to higher shipment at quarter-end.

The $1.7 million increase in cash provided by accounts payable resulted from the timing of payment of trade accounts.

The $0.5 million increase in cash provided by accrued expenses was primarily due to an increase in the AIP bonus accrual compared to no bonus accrual in the six months ended September 30, 2024.

The $0.4 million decrease in use of cash by operating lease liability was primarily due to a decrease in lease liability.

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The $2.5 million increase in cash provided by FFP liability was primary driven by an increase in value of new claims outpacing the fulfillment of claims.

The $3.2 million increase in cash used in other operating assets and liabilities, was primarily driven by an increase in cash used in deferred revenue of $3.8 million primarily driven by increased shipments in the three months ended June 30, 2025 compared to the three months ended June 30, 2024, lowering attributable customer deposits, and decrease in FPP deferred revenue, offset by $0.6 increase in cash provided in accrued salaries and wages and other long term liabilities primarily driven by the Company’s Annual Incentive Program (“AIP”) bonus accrual in the three months ended June 30, 2025.

There were no significant changes in inventory or lease receivable.

Investing Activities Net cash used in investing activities was $0.1 million during the three months ended June 30, 2025 and 2024, respectively, primarily due to investments in operating assets.

Financing Activities Net cash used in financing activities of $0.3 million and $0.1 million during the three months ended June 30, 2025 and 2024, respectively, was used for repayment of finance lease obligations.

Additionally, during the three months ended June 30, 2025 there was the accumulation of treasury stock resulting from the tax withholdings of employee stock vesting.

The $0.3 million increase in cash used in other operating assets and liabilities, was primarily driven by an increase in cash used in deferred revenue of $0.2 million primarily driven by increased shipments in the six months ended September 30, 2025 compared to the six months ended September 30, 2024, lowering related customer deposits.

Investing Activities Net cash provided in investing activities was $1.0 million during the six months ended September 30, 2025 and was primarily due to cash acquired in acquisitions net of cash paid.

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

Financing Activities Net cash used in financing activities of $1.0 million and $0.1 million during the six months ended September 30, 2025 and 2024, respectively, was primarily used for repayment of finance lease obligations.

Additionally, during the six months ended September 30, 2025, treasury stock was accumulated as a result of the tax withholdings of employee stock vesting.

Debt Refer to Note 8— 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 9— Leases in the Notes to Condensed Consolidated Financial Statements for information related to our leases.

Going Concern In connection with the preparation of the Condensed Consolidated Financial Statements for the three months ended June 30, 2025, management evaluated whether there were conditions and events, considered in the aggregate, that raised substantial doubt about the Company’s ability to meet its obligations as they become due over the next twelve months from the date of the issuance of the financial statements.

As of June 30, 2025, the Company had cash

of $6.6 million and a working capital deficit of $14.2 million.

The Company incurred a net loss of $0.7 million during the three months ended June 30, 2025.

Lease Commitments Refer to Note 9— Leases in the Notes to Condensed Consolidated Financial Statements (Part I, Item 1 of this Form 10-Q) for information related to our leases.

Going Concern In connection with the preparation of the Condensed Consolidated Financial Statements for the six months ended September 30, 2025, management evaluated whether there were conditions and events, considered in the aggregate, that raised substantial doubt about the Company’s ability to meet its obligations as they become due over the next twelve months from the date of the issuance of the financial statements.

As of September 30, 2025, the Company had cash of $7.7 million, which includes restricted cash of $0.7 million, and a working capital deficit of $14.2 million.

The Company had net income of $0.8 million and $0.1 million during the three and six months ended September 30, 2025, respectively.

A robust plan to improve the Company’s future financial performance has been developed.

The plan includes multiple process improvement workstreams directed to drive operational and financial performance.

The process improvement initiatives are supported with external resources with the needed specific level of expertise.

The process improvement initiatives are supported with external resources as needed for a specific level of expertise.

The plan includes cost reduction in products, services and operating expenses, margin expansion through price increases, and sales volume initiatives focused on improving the Company’s liquidity.

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There is no guarantee that such steps will be successful, or to result in our ability to meet our payment obligations coming due within the twelve month period after the date of this report.

The Company has initiated financing discussions with its advisors to refinance the New Money Note and add additional liquidity.

There is not guarantee that the Company will be successful in it is financing efforts.

Given the Company’s current cash position, lack of liquidity, short term debt repayments, limits to accessing capital and debt funding options and current economic and market risks, there exists substantial doubt regarding the Company’s ability to continue as a going concern and its ability to meet its 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, 2025

The Company and its advisors are considering various alternatives to address the upcoming maturity of the Exit New Money Notes, which may include issuances of equity or the incurrence of additional indebtedness;

however there can be no assurance that the Company will be successful in refinancing the Exit New Money Notes.

New Accounting Pronouncements 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.

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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