What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-02-12 compared with 2025-11-13 · 130 added, 127 removed, 120 unchanged (68% 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 September 30, 2025, and March 31, 2025, and for the three and six months ended September 30, 2025 and 2024.

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

Special Note Regarding Forward-Looking Statements

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All forward-looking statements attributable to us are expressly qualified by these cautionary statements.

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.

Capstone Green Energy Holdings, Inc., the public successor to Capstone Green Energy Corporation together with its consolidated operating subsidiary, Capstone Green Energy LLC (the “Operating Subsidiary”), provides customized microgrid solutions, on-site resilient Energy-as-a-Service (“EaaS”) solutions, and distributed on-site energy technology systems.

We deliver behind-the-meter microturbine energy solutions for industrial and commercial customers, including data centers, station power, and port applications, as well as other critical power uses, designed to address the “Energy Trilemma” of resiliency, sustainability, and affordability.

Our offerings include stationary distributed power generation systems and distribution networks, including cogeneration applications such as combined heat and power (“CHP”), integrated combined heat and power (“ICHP”), and combined cooling, heat and power (“CCHP”), as well as solutions for renewable energy, natural resources, and critical power supply applications, including data centers, station power, and ports.

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

While power purchased from the electric utility grid is generally less costly than power produced by distributed generation technologies operating in simple-cycle mode, utilities may also impose interconnection costs and other fees.

When waste heat recovery is incorporated through CHP or CCHP configurations, the overall economic benefits of microturbine systems improve significantly.

In addition, our microturbines provide highly efficient, low-emission, and resilient power generation, producing thermal energy with a lower carbon footprint.

These benefits may be enhanced when fuel costs are favorable, when grid interconnection is costly or impractical, such as in remote locations or where new grid services are required, where reliability and power quality are critical, including data center, station power, and port operations, or in situations where peak shaving may be economically advantageous due to highly variable electricity prices.

Our microturbines are inverter-based technologies that can be integrated with other distributed energy resources to form microgrids, also referred to as distribution networks, within a defined geographic area, providing power to one or more facilities.

Because microturbines are capable of operating on multiple fuel sources and delivering reliable on-site power, we believe they support customer objectives related to resiliency, sustainability, and affordability across data center, station power, and port applications.

We also believe our products and services provide greater operational flexibility compared to certain alternative technologies, such as reciprocating engines.

We continue to evaluate energy conversion technologies at the lower end of the distributed power spectrum.

We serve customers across energy efficiency, natural resources, renewable energy, critical power, microgrid power, data centers, station power, and port applications.

The microgrid market is driven by electrification demand and the need for resilient, on-site power solutions.

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.

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.

Product sales in the oil and gas and other natural resources markets are driven by our microturbines’ reliability, emissions profile and ease of installation.

Data center, station power, and port customers require highly reliable, low-emission, and scalable power solutions to support continuous operations, grid constraints, and critical infrastructure requirements.

Given the continued volatility of the oil and gas market, our business strategy is to continue diversification across the microgrid energy efficiency, critical power, including data centers, station power, and ports, and renewable energy markets.

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

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

We plan to provide power and cooling solutions as an engineered “behind-the-meter” equipment package for the next generation of AI factories.

This initiative is in the early stages of commercialization, and there can be no assurance regarding market adoption, customer demand, or revenue generation.

Refer to Risk Factors (Part II, Item 1A of this Form 10-Q) for further discussion of the risks and uncertainties associated with this emerging market opportunity.

We continue to focus on product development informed by customer requirements, increasing brand awareness, and expanding distribution channels through a diversified network of strategic partners.

We prioritize products and solutions designed to support repeatable revenue opportunities and larger transaction sizes, rather than discrete projects for niche markets.

We also closely monitor operating expenses and seek to improve manufacturing efficiency, reduce direct material costs, and increase average selling prices.

Key factors that we believe influence operating performance include average selling prices, direct material costs, order flow, cash utilization, and growth in the EaaS business.

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.

During the three months ended December 31, 2025, we had a net income of $1.2 million, accretion to redemption value of Preferred Units of $38.82 million, basic and diluted net loss per share of $1.79, compared to net loss of $2.7 million, no change in Preferred Units and basic and diluted net loss per share of $0.14 during the three months ended December 31, 2024.

The $3.9 million change in net income was primarily due to improved gross profit of $5.4 million, driven by the impacts of price increases and lower unit costs, offset by $1.3 million of higher total operating expenses, a $0.2 million decrease in other income and a $0.2 million increase in interest expense as compared to the three months ended December 31, 2024.

Net product orders were approximately $9.3 million and $24.1 million for the three months ended December 31, 2025 and 2024, respectively.

Ending backlog was approximately $11.6 million at December 31, 2025, compared to $26.8 million at December 31, 2024.

The book-to-bill ratio was 0.7:1 and 3.1:1 for the three months ended December 31, 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 decrease in our book-to-bill ratio is due to a reductions in new orders, including the cancellation of pre-acquisition Cal Microturbine orders.

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

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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.

Critical Accounting Estimates

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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.

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.

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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,

Three Months Ended December 31, 2025 and 2024

Revenue The following table summarizes our revenue by geographic markets (in millions):

Three Months Ended December 31,

United States and Canada

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Total Revenue

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,

Revenue for the three months ended December 31, 2025 increased $6.7 million to $26.8 million from $20.1 million for the three months ended December 31, 2024.

The increase was primarily driven by increases in revenue of $0.1 million in the United States and Canada and $7.1 million in Latin America, offset by a decrease in revenue of $0.5 million in Europe.

The increases in the United States and Canada and Latin America were due to increased microturbine product and parts demand which includes product sales to our international distributor Supernova.

The decrease in Europe is primarily due to decreases in microturbine deliveries for projects in those regions during the three months ended December 31, 2025.

The following table summarizes our revenue by category (only revenue amount in millions):

Three Months Ended December 31,

Microturbine Product

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Total Revenue

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.

For the three months ended December 31, 2025, revenue from microturbine products and accessories increased $5.3 million, or 64%, to $13.6 million from $8.3 million for the three months ended December 31, 2024.

The $5.3 million increase was driven primarily by an increase in product demand, with the 3.0 megawatts increase in shipments during the three months ended December 31, 2025, including increased demand for our C1000 turbines, compared to the three months ended December 31, 2024.

Average revenue per megawatt shipped was approximately $1.3 million and $1.2 million during the three months ended December 31, 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 $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.

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 $9.3 million for the three months ended December 31, 2025, was improved from $7.4 million for the three months ended December 31, 2024.

Rentals revenue for three months ended December 31, 2025 decreased $0.5 million or (11)%, to $3.9 million from $4.4 million for the three months ended December 31, 2024.

This decrease was driven by a decrease in rental utilization.

Sales to DTC Soluciones (“DTC”), one our distributors, accounted for 27% of revenue for the three months ended December 31, 2025.

Sales to E -Finity Distributed Generation (“E-Finity”), Lone Star Power Solutions, LLC (“Lone Star”) and Cal Microturbine, LLC (“Cal Microturbine”), three our distributors, accounted for 15%, 14% and 11% of revenue for the three months ended December 31, 2024, respectively.

Gross Profit Gross profit was $10.4 million, or 39% of revenue for the three months ended December 31, 2025, compared to a gross profit of $5.0 million, or 25% of revenue for the three months ended December 31, 2024.

The increase was primarily the result of an increase in product sales volume, higher parts and service revenue and the full effect of an increase in pricing and decreases in production costs 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,

Three Months Ended December 31,

Product and accessories

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The increase of $1.7 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.

Product and accessories gross margin as a percentage of product and accessories revenue improved to 7% during the three months ended December 31, 2025, from a negative gross margin of 10% during the three months ended December 31, 2024, primarily due to higher product volume and cost reduction programs.

Parts and services gross margin as a percentage of parts and service revenue increased to 88% during the three months ended December 31, 2025, compared to 47% during the three months ended December 31, 2024, primarily as a result of fewer FPP claims and FPP claims cancellations during the three months ended December 31, 2025.

Rentals gross margin as a percentage of rental revenue decreased to 33% for the three months ended December 31, 2025, compared to 51% for the three months ended December 31, 2024, primarily due to lower rental utilization.

Research and Development (“R&D”) Expenses R&D expenses were $1.0 million and $0.7 million during the three months ended December 31, 2025 and 2024, respectively, and were 4% of revenue for the three months ended December 31, 2025, and 2024.

During the three months ended December 31, 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 $7.4 million and $6.3 million during the three months ended December 31, 2025 and 2024, respectively, and were 28% and 31% of revenue for the three months ended December 31, 2025, and 2024, respectively.

Compared to the prior year, we have higher financing expenses and Cal Microturbine acquisition expenses, partially offset by lower restructuring, restatement, SEC investigation and extraordinary legal expenses and a lower Executive AIP bonus expense during the three months ended December 31, 2025, compared to the three months ended December 31, 2024.

Other Income Other income was $0.2 million and $0.4 million during the three months ended December 31, 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.

Six Months Ended September 30, 2025 and 2024

The following table summarizes our revenue by geographic markets (in millions):

Six Months Ended September 30,

Interest income was $0.1 million and less than $0.1 million during the three months ended December 31, 2025 and 2024, respectively.

Interest income is mainly derived from our money market investment and interest on our sale-type leases.

Interest Expense Interest expense was $1.1 million and $1.0 million for the three months ended December 31, 2025 and 2024, respectively.

Interest expense is mainly derived from our notes payable.

Nine Months Ended December 31 2025 and 2024

Revenue The following table summarizes our revenue by geographic markets (in millions):

Nine Months Ended December 31,

United States and Canada

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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,

Revenue for the nine months ended December 31, 2025 increased $24.5 million to $83.0 million from $58.5 million for the nine months ended December 31, 2024.

The increase was primarily driven by increases in revenue of $19.8 million in the United States and Canada, $0.5 million in Europe and $5.2 million in Latin America, offset by a decrease in revenue of $0.6 million in Asia and Australia and $0.4 million in Middle East and Africa.

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

The decrease in Asia and Australia and the Middle East and Africa were primarily due to decreases in microturbine deliveries for projects in those regions during the nine months ended December 31, 2025.

The following table summarizes our revenue by category (in millions):

Nine Months Ended December 31,

Microturbine Product

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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.

For the nine months ended December 31, 2025, revenue from microturbine products and accessories increased $20.4 million, or 82%, to $45.4 million from $25.0 million for the nine months ended December 31, 2024.

The $20.4 million increase was driven primarily by an 11.8 megawatt increase in shipments during the nine months ended December 31, 2025, including increased demand for our C1000 turbines, compared to the nine months ended December 31, 2024.

Average revenue per megawatt shipped was approximately $1.5 million and $1.4 million during the nine months ended December 31, 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 $25.1 million for the nine months ended December 31, 2025, compared to $23.1 million for the nine months ended December 31, 2024 and is mainly due to higher volume of parts shipped.

Rentals revenue for nine months ended December 31, 2025 increased $2.1 million or 20%, to $12.5 million from $10.4 million for the nine months ended December 31, 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.

Sales to Cal Microturbine, E-Finity, DTC and Lone Star , four distributors, accounted for 20%, 17%, 12% and 10% of revenue for the nine months ended December 31, 2025, respectively.

On August 13, 2025, we completed our acquisition of Cal Microturbine.

E -Finity and Lone Star accounted for 16% and 13% of revenue for the nine months ended December 31, 2024, respectively.

Gross Profit Gross profit was $27 million, or 33% of revenue for the nine months ended December 31, 2025, compared to a gross profit of $15.8 million, or 27% of revenue for the nine months ended December 31, 2024.

The increase was primarily the result of an increase in product sales volume and the full effect of an increase in pricing coupled with cost reduction programs, 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,

Nine Months Ended December 31,

Product and accessories

As a percentage of product and accessories revenue

Parts, services and rentals

As a percentage of parts, services and rentals revenue

Parts and services

As a percentage of parts and services revenue

As a percentage of rentals revenue

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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.

The increase of $4.6 million in product and accessories gross profit was primarily due to higher product pricing, improved cost efficiencies, higher volume and product mix.

Product and accessories gross margin as a percentage of product and accessories revenue increased to 9% during the nine months ended December 31, 2025, from a negative 2% during the nine months ended December 31, 2024, primarily due to higher product volume and cost reduction programs.

Parts and services gross margin as a percentage of parts and service revenue increased to 68% during the nine months ended December 31, 2025, compared to 56% during the nine months ended December 31, 2024, primarily as a result of higher product pricing, improved cost efficiencies, fewer FPP claims, FPP claims cancellations, higher demand and product mix during the nine months ended December 31, 2025.

Rentals gross margin as a percentage of rental revenue increased to 48% for the nine months ended December 31, 2025, compared to 33% for the nine months ended December 31, 2024, primarily due to increased rental pricing and utilization.

Research and Development (“R&D”) Expenses R&D expenses were $2.6 million and $1.9 million during the nine months ended December 31, 2025 and 2024, respectively, and remained at 3% of revenue for the nine months ended December 31, 2025 and 2024.

During the nine months ended December 31, 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 $21.1 million and $19.5 million during the nine months ended December 31, 2025 and 2024, respectively, and was 25% and 33% of revenue for the nine months ended December 31, 2025 and 2024, respectively.

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

Additionally, we accrued a higher Executive AIP bonus expense during the nine months ended December 31, 2025, compared to the nine months ended December 31, 2024.

Other Income Other income was $1.2 million and $1.6 million during the nine months ended December 31, 2025 and 2024 and is mainly due to service fee earned related to the DSS.

Interest Expense Interest expense was $3.3 million and $3.0 million for the nine months ended December 31, 2025 and 2024, respectively.

Interest expense is mainly derived from our notes payable.

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 $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.

Our cash and cash equivalents balance increased $6.5 million during the nine months ended December 31, 2025, compared to an increase in cash of $1.2 million during the nine months ended December 31, 2024.

The increase in cash during the nine months ended December 31, 2025 was primarily due to the proceeds from the PIPE financing, net of the repayment of the Exit New Money Notes in December 2025.

Operating Activities During the nine months ended December 31, 2025, net cash provided operating activities was $2.0 million, consisting of a net income for the period of $1.3 million, changes in operating assets and liabilities of $7.9 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 $8.6 million.

For the nine months ended December 31, 2024, net cash provided by operating activities was $2.2 million, consisting of net loss of $7.1 million, offset by changes in operating assets and liabilities of $0.7 million and non-cash adjustments, primarily representing depreciation and amortization, non-cash lease expense and paid-in-kind interest expense, totaling $10.0 million.

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

Six Months Ended September 30,

Nine Months Ended December 31,

Net income (loss)

Non-cash operating activities(1)

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Other changes in operating assets and liabilities

Net cash provided by (used in) operating activities

Net cash provided by operating activities

(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 $5.2 million decrease in cash provided by inventory was to support higher sales of products, accessories and parts.

The $5.5 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 $1.3 million increase in cash provided by accrued expenses was primarily due to higher accruals of vendors invoices in the nine months ended December 31, 2024.

The $0.7 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.

The $3.4 million decrease in cash provided from prepaid and other assets is primarily the result of higher prepaid inventory.

The $0.3 million increase in cash used by FPP liability was primary driven by claim cancellations.

The $5.6 million increase in cash used in other operating assets and liabilities, was primarily driven by an increase in cash used in deferred revenue of $4.6 million primarily driven by increased shipments in the nine months ended December 31, 2025 compared to the nine months ended December 31, 2024, lowering related customer deposits.

Investing Activities Net cash provided in investing activities was $0.6 million during the nine months ended December 31, 2025 and was primarily due to cash acquired in acquisitions net of cash paid, partially offset by investment in our rental fleet.

Net cash used in investing activities was $0.8 million during the nine months ended December 31, 2024, and was primarily due to investments in operating and rental fleet assets.

Financing Activities Net cash provided in financing activities of $3.9 million and used $0.2 million during the nine months ended December 31, 2025 and 2024, respectively.

Cash provided from financing activities during the nine

months ended December 31, 2025 was driven by net proceeds from the PIPE of $13.6 million, partially offset by the repayment of our Exit New Money Notes of $8.3 million and finance lease obligations of $1.2 million.

The nine months ended December 31, 2024 reflect the repayment of finance lease obligations of $0.2 million.

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 (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.

Going Concern In connection with the preparation of the Condensed Consolidated Financial Statements for the nine months ended December 31, 2025, management evaluated whether there were conditions and events, considered in the aggregate, that raised substantial doubt about our ability to meet our obligations as they become due over the next twelve months from the date of the issuance of the financial statements.

As of December 31, 2025, we had cash of $15.2 million, which includes restricted cash of $0.7 million, and a working capital deficit of $22.9 million.

We had net income of $1.2 million and $1.3 million during the three and nine months ended December 31, 2025, respectively.

We have developed a plan to improve future financial performance.

The plan includes multiple process improvement workstreams intended 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.

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

We and our advisors are considering various alternatives to address the upcoming maturity of the Exit Roll Up Notes, which may include issuances of equity or the incurrence of additional indebtedness;

however, there can be no assurance that we will be successful in refinancing the Exit Roll Up Notes.

Given our current cash position, short term debt repayments, limits to accessing capital and debt funding options and current economic and market risks, there exists substantial doubt regarding our 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 December 31, 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.

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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