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 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
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 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. 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.
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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.
Backlog
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. 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.
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
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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.
Results of Operations
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,
2025
2024
United States and Canada
$
12.5
$
12.4
Europe
2.8
3.3
Latin America
10.0
2.9
Asia and Australia
1.4
1.4
Middle East and Africa
0.1
0.1
Total Revenue
$
26.8
$
20.1
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,
2025
2024
Revenue
Megawatts
Units
Revenue
Megawatts
Units
Microturbine Product
$
12.5
9.5
35
$
7.9
6.5
28
Accessories
1.1
0.4
Total Product and Accessories
13.6
8.3
Parts and services
9.3
7.4
Rentals
3.9
4.4
Total Revenue
$
26.8
$
20.1
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 $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.
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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 December 31,
2025
2024
Gross Profit
Product and accessories
$
0.9
$
(0.8)
As a percentage of product and accessories revenue
7
%
(10)
%
Parts and services
$
8.2
$
3.5
As a percentage of parts and services revenue
88
%
47
%
Rentals
$
1.3
$
2.3
As a percentage of rentals revenue
33
%
51
%
Total gross profit
$
10.4
$
5.0
As a percentage of total revenue
39
%
25
%
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 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.
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Interest Income. 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,
2025
2024
United States and Canada
$
57.2
$
37.4
Europe
8.7
8.2
Latin America
13.3
8.1
Asia and Australia
3.6
4.2
Middle East and Africa
0.2
0.6
Total Revenue
$
83.0
$
58.5
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,
2025
2024
Revenue
Megawatts
Units
Revenue
Megawatts
Units
Microturbine Product
$
43.9
29.1
94
$
24.0
17.3
76
Accessories
1.5
1.0
Total Product and Accessories
45.4
25.0
Parts and Services
25.1
23.1
Rentals
12.5
10.4
Total Revenue
$
83.0
$
58.5
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.
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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):
Nine Months Ended December 31,
2025
2024
Gross Profit
Product and accessories
$
4.0
$
(0.6)
As a percentage of product and accessories revenue
9
%
(2)
%
Parts and services
$
17.0
$
13.0
As a percentage of parts and services revenue
68
%
56
%
Rentals
$
6.0
$
3.4
As a percentage of rentals revenue
48
%
33
%
Total gross profit
$
27.0
$
15.8
As a percentage of total revenue
33
%
27
%
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.
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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 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):
Nine Months Ended December 31,
2025
2024
Net income (loss)
$
1.3
$
(7.1)
Non-cash operating activities(1)
8.6
10.0
Changes in operating assets and liabilities:
Accounts receivable
(6.7)
(6.1)
Inventories
(0.9)
4.3
Lease receivable
0.4
—
Accounts payable
4.9
(0.6)
Accrued expenses
1.2
(0.1)
Operating lease liability, net
(2.3)
(3.0)
Prepaid expenses, other current assets and other assets
(1.5)
1.9
Factory protection plan liability
(1.3)
(1.0)
Other changes in operating assets and liabilities
(1.7)
3.9
Net cash provided by operating activities
$
2.0
$
2.2
(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 $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 $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 $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
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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 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 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.
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.
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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