Item 2. Management’s Discussion and Analysis
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operation s
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Condensed Consolidated Financial Statements and notes thereto included in this Form 10-Q and the Consolidated Financial Statements and notes thereto included in our Annual Report on Form 10-K for our fiscal year ended March 31, 2025 (“Fiscal 2025”). All dollar amounts in this Management’s Discussion and Analysis of Financial Condition and Results of Operations are approximate.
All references in this Quarterly Report on Form 10-Q to “the Company,” “we,” “us,” “our,” or “Capstone” are to Capstone Green Energy Holdings, Inc. 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
This Form 10-Q contains forward-looking statements regarding future events and our future results that are subject to the safe harbors created under the Securities Act of 1933, as amended, (the “Securities Act”) and the Securities Exchange Act of 1934, as amended, (the “Exchange Act”). All statements other than statements of historical facts are statements that could be deemed to be forward-looking statements. These include statements that are based on current expectations, estimates, forecasts and projections about the industries in which we operate and the beliefs and assumptions of our management. Words such as “expects,” “anticipates,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “continues,” “endeavors,” “strives,” “potential,” “predict,” “may,” “will,” “might,” “could,” “intend” “assumes” and variations of such words and similar expressions are intended to identify forward-looking statements. In addition, any statements that refer to projections of our future financial performance, our anticipated growth and trends in our businesses, and other characterizations of future events or circumstances are forward-looking statements.
Our actual results may differ materially from those expressed in, or implied by, the forward-looking statements included in this Form 10-Q as a result of various factors, including, among others:
● the significant risks related to our substantial indebtedness and our long-term liquidity requirements following our emergence from Chapter 11 and reorganization;
● 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 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;
● the limited public trading market for our common stock on the OTC market;
● our ability to retain key personnel;
● 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;
● 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;
● the availability of sources for and costs of component parts;
● our ability to obtain direct material products on a timely and cost-effective basis;
● competition in the markets in which we operate;
● operational interruption by fire, earthquake and other events beyond our control;
● federal, state and local regulations of our markets and products;
● the financial performance of the oil and natural gas industry and other general business, industry and economic conditions applicable to us;
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● the geopolitical environment, including the ongoing conflict in Ukraine;
● corruption risks in the markets where our products are sold;
● security and cybersecurity risks related to our electronic processing of sensitive and confidential business and product data;
● our ability to adequately develop and protect our intellectual property rights; and
● other risks and uncertainties discussed in “Item 1A. Risk Factors” included in our Annual Report on Form 10-K for Fiscal 2025.
Furthermore, new risks may emerge in the future and it is not possible for us to predict all risks, nor can we assess the impact of all factors on the business or the extent to which any factor, or combination of factors, may cause actual results, performance or achievement to differ materially from those contained in any forward-looking statements. Forward-looking statements speak only as of the date of this Form 10-Q. Except as expressly required under federal securities laws and the rules and regulations of the Securities and Exchange Commission (the “SEC”), we do not have any obligation, and do not undertake, to update any forward-looking statements to reflect events or circumstances arising after the date of this Form 10-Q, whether as a result of new information or future events or otherwise. Readers should not place undue reliance on the forward-looking statements included in this Form 10-Q or that may be made elsewhere from time to time by us, or on our behalf. All forward-looking statements attributable to us are expressly qualified by these cautionary statements.
Overview
Capstone Green Energy Holdings, Inc., the successor to Capstone Green Energy Corporation along with its consolidated operating subsidiary, Capstone Green Energy LLC (the “Operating Subsidiary”), is a provider of customized microgrid solutions, on-site resilient Energy-as-a-Service (“EaaS”) solutions, and on-site energy technology systems focused on helping customers around the globe solve the “Energy Trilemma” of resiliency, sustainability, and affordability. 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 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. 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 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. 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.
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.
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 half of Fiscal 2026. The microgrid market is for electrification demand. The renewable energy market is fueled by landfill gas, biodiesel and biogas from sources such as food processing, agricultural waste and livestock manure. 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 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.
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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. 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.
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.
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 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 within our control and can affect the timing of our revenue. As a result, management believes the book-to-bill ratio reflects the current demand for our products in the given period.
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 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
Our discussion and analysis of our financial condition and results of operations is based upon our Condensed 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 Condensed 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 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.
We consider an accounting estimate to be critical if: (1) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and (2) changes in the estimate that are reasonably likely to occur from period to period, or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations.
Item 7 of our Annual Report on Form 10-K for the fiscal year ended March 31, 2025 describes the significant accounting estimates used in the preparation of our Condensed Consolidated Financial Statements.
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Results of Operations
Three Months Ended September 30, 2025 and 2024
The following table summarizes our revenue by geographic markets (in millions):
Three Months Ended September 30,
2025
2024
United States and Canada
$
21.6
$
15.9
Europe
3.9
1.5
Latin America
1.6
4.4
Asia and Australia
1.2
0.6
Middle East and Africa
0.1
0.3
Total Revenue
$
28.4
$
22.7
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 September 30, 2025.
The following table summarizes our revenue (revenue amounts in millions):
Three Months Ended September 30,
2025
2024
Revenue
Megawatts
Units
Revenue
Megawatts
Units
Microturbine Product
$
16.0
11.1
27
$
10.9
6.8
29
Accessories
0.1
0.4
Total Product and Accessories
16.1
11.3
Parts and services
7.9
7.9
Rentals
4.4
3.5
Total Revenue
$
28.4
$
22.7
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 .
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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 $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 September 30,
2025
2024
Gross Profit
Product and accessories
$
2.0
$
0.7
As a percentage of product and accessories revenue
12
%
6
%
Parts and services
$
4.7
$
5.2
As a percentage of parts and services revenue
60
%
66
%
Rentals
$
2.3
$
1.1
As a percentage of rentals revenue
52
%
31
%
Total gross profit
$
9.0
$
7.0
As a percentage of total revenue
32
%
31
%
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 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.
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Six Months Ended September 30, 2025 and 2024
The following table summarizes our revenue by geographic markets (in millions):
Six Months Ended September 30,
2025
2024
United States and Canada
$
44.7
$
24.9
Europe
5.9
5.0
Latin America
3.3
5.2
Asia and Australia
2.2
2.8
Middle East and Africa
0.2
0.5
Total Revenue
$
56.3
$
38.4
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,
2025
2024
Revenue
Megawatts
Units
Revenue
Megawatts
Units
Microturbine Product
$
31.4
19.6
59
$
16.1
10.8
48
Accessories
0.4
0.5
Total Product and Accessories
31.8
16.6
Parts and Services
15.9
15.8
Rentals
8.6
6.0
Total Revenue
$
56.3
$
38.4
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
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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,
2025
2024
Gross Profit
Product and accessories
$
3.2
$
0.1
As a percentage of product and accessories revenue
10
%
1
%
Parts, services and rentals
$
8.8
$
9.6
As a percentage of parts, services and rentals revenue
56
%
61
%
Rentals
$
4.5
$
1.1
As a percentage of rentals revenue
52
%
19
%
Total gross profit
$
16.5
$
10.8
As a percentage of total revenue
29
%
28
%
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
Cash Flows
Our cash requirements depend on many factors, including the execution of our business strategy and plan. Our cash and cash equivalents balance decreased $1.0 million during the six months ended September 30, 2025, compared to
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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):
Six Months Ended September 30,
2025
2024
Net loss
$
0.1
$
(4.4)
Non-cash operating activities(1)
5.9
6.7
Changes in operating assets and liabilities:
Accounts receivable
(9.3)
(2.9)
Inventories
—
2.8
Lease receivable
0.3
—
Accounts payable
5.4
3.7
Accrued expenses
(0.3)
(0.8)
Operating lease liability, net
(1.6)
(2.0)
Prepaid expenses, other current assets and other assets
—
1.5
Factory protection plan liability
0.8
(1.7)
Other changes in operating assets and liabilities
(2.3)
(2.0)
Net cash provided by (used in) operating activities
$
(1.0)
$
0.9
(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 $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. The $1.5 million decrease in cash provided from prepaid and other assets is primarily the result of usage of prepaid inventory. 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 $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.
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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 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. Achieving the targeted product cost reductions has risk, and is being challenged by the current geopolitical environment, including the impact of tariffs. 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 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.
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 September 30, 2025.
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.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
As a “smaller reporting company,” as defined by Item 10 of Regulation S-K, we are not required to provide information required by this Item.
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