What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-08-12 compared with 2026-02-12 · 68 added, 165 removed, 85 unchanged (73% of the section changed)

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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.

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

and its consolidated subsidiaries as of June 30, 2026, and March 31, 2026, and for the three months ended June 30, 2026 and 2025.

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.

All statements other than statements of historical facts are 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.

Words such as “expects,” “anticipates,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “continues,” “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;

Readers are cautioned that these forward-looking statements are subject to risks, uncertainties, and assumptions that are difficult to predict, including, among others:

● our ability to execute on our evolving business model and strategy, including our ability to diversify and expand into the market for artificial intelligence (“AI”) solutions and data centers;

● our limited experience with respect to new markets we are entering, including the market for data centers;

● the significant risks related to our substantial indebtedness and our long-term liquidity requirements;

● risks related to our history of net losses and ability to raise additional capital and fund future operating requirements and expansion opportunities into the AI 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;

● 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;

● other risks and uncertainties discussed in “Item 1A.

Risk Factors” included in our Annual Report on Form 10-K for Fiscal 2025.

Risk Factors” in our Annual Report on Form 10-K for Fiscal 2026.

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.

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

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.

We believe demand for resilient, on-site power generation is accelerating, driven in large part by the energy needs of AI infrastructure and data centers.

Our microturbine-based energy solutions are designed to help commercial, industrial, and utility customers meet this demand while balancing resiliency, affordability, and sustainability which are the "Energy Trilemma" facing the market today.

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.

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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.

Refer to Risk Factors in Part II, Item 1A of this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the fiscal year ended March 31, 2026 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.

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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.

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.

During the three months ended June 30, 2026, we had a net income of $0.04 million, paid-in-kind dividends accrued on the Series A Convertible Preferred Stock of $1.0 million, basic and diluted net loss per share of $0.03, compared to net loss of $0.7 million, no change in Preferred Units and basic and diluted net loss per share of $0.04 during the three months ended June 30, 2025.

The $0.7 million improvement in net income was primarily due to a $1.2 million increase in gross profit, driven by the higher-margin microturbine system sales, and the impact of revenue from distributor distribution services partially offset by $0.1 million of higher total operating expenses and a $0.6 million decrease in other income,

partially offset by a $0.1 million increase in interest income and a $0.2 million decrease in interest expense as compared to the three months ended June 30, 2025.

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.

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.

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 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.

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Results of Operations

Three Months Ended December 31, 2025 and 2024

Three Months Ended June 30, 2026 and 2025

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

Three Months Ended December 31,

Three Months Ended June 30,

United States and Canada

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Total Revenue

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.

Revenue for the three months ended June 30, 2026 decreased $3.0 million to $24.9 million, from $27.9 million for the three months ended June 30, 2025.

The decrease was primarily driven by decreases in revenue in the United States and Canada of $5.5 million and $0.3 million in Europe, partially offset by increases in revenue of $2.4 million in Latin America, $0.3 million across Asia and Australia, and $0.1 million in the Middle East and Africa.

The increases in Latin America, Asia and Australia were driven by higher demand for microturbine product and parts, including higher product sales via our international distributors to customers in Chile and Mexico.

The decreases in the United States, Canada, and Europe were due to fewer microturbine deliveries for projects in those regions and lower rental utilization during the three months ended June 30, 2026.

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

Three Months Ended December 31,

Three Months Ended June 30,

Microturbine Product

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Total Revenue

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.

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.

Revenue from microturbine products and accessories is inherently variable from period to period, as it is driven by the timing of large customer orders, project milestones, and shipment schedules.

For the three months ended June 30, 2026 revenue decreased $2.7 million, or 17%, to $13.0 million from $15.7 million for the three months ended June 30, 2025, driven primarily by this order-timing variability.

Average revenue per unit shipped was approximately $0.5 million during each of the three months ended June 30, 2026 and 2025.

Revenue per unit is driven by the mix of microturbine configurations sold.

Parts and services revenue, which is part of our EaaS business line and includes revenue from our spare parts shipments, FPP contracts, and other service revenue, was $9.7 million for the three months ended June 30, 2026, improved from $8.0 million for the three months ended June 30, 2025, driven by continued growth in our customer base.

Rentals revenue for three months ended June 30, 2026 decreased $2.0 million, or 48%, to $2.2 million from $4.2 million for the three months ended June 30, 2025.

The decrease was mainly driven by lower rental utilization due to uncertainty around oil prices from geopolitical events in the Middle East.

Sales to Horizon Power Systems (“Horizon”), one of our distributors, accounted for 41% of revenue for the three months ended June 30, 2026 driven primarily by their sale of 8 megawatts of rental units.

Sales to E -Finity Distributed Generation (“E-Finity”) , one of our distributors, accounted for 12% of revenue for the three months ended June 30, 2026.

Gross Profit Gross profit was $8.8 million, or 35% of revenue, for the three months ended June 30, 2026, compared to a gross profit of $7.6 million, or 27% of revenue, for the three months ended June 30, 2025.

The increase was primarily the result of sales of microturbine systems at higher margins reflecting a favorable product mix, along with a contribution from distributor distribution services revenue .

The following table summarizes our gross profit (in millions except percentages):

Three Months Ended December 31,

Three Months Ended June 30,

Product and accessories

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As a percentage of total revenue

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.

Product and accessories gross margin improved to 31% during the three months ended June 30, 2026, from a gross margin of 8% during the three months ended June 30, 2025, primarily due to the sale of previously rented units, and the continued impact of cost reduction programs.

Parts and services gross margin decreased to 41% during the three months ended June 30, 2026, compared to 53% during the three months ended June 30, 2025, primarily as a result of higher claims under our FPP contracts and increases in shipments of higher-cost parts for warranty claims during the three months ended June 30, 2026 relative to the prior period.

Rental gross margin decreased to 36% for the three months ended June 30, 2026, compared to 52% for the three months ended June 30, 2025, due to lower rental utilization.

Research and Development (“R&D”) Expenses R&D expenses were $1.2 million and $0.8 million during the three months ended June 30, 2026 and 2025, respectively, and were 5% and 3% of revenue for the three months ended June 30, 2026, and 2025, respectively.

Higher spend during the three months ended June 30, 2026, was driven by R&D programs for new product development and product enhancements supporting future growth and expansion into new markets.

Selling, General, and Administrative (“SG&A”) Expenses SG&A expenses were $6.6 million and $6.9 million during the three months ended June 30, 2026 and 2025, respectively, and were 26% and 25% of revenue for the three months ended June 30, 2026, and 2025, respectively.

Lower SG&A expenses relative to the prior year were driven by reductions in legal services, outside consulting, rent and bad debt, partially offset by increases in our salesforce to support our shift to direct sales and subcontracting services.

Other Income (expense), net Other income (expense) was an expense of $0.2 million for the three months ended June 30, 2026, compared to income of $0.4 million during the three months ended June 30, 2025.

This $0.6 million unfavorable change was primarily attributable to the absence of service income from the Reorganized PrivateCo Services Agreement, which was terminated in connection with the March 2026 PIPE transaction (see Note 15), and a settlement recorded in the current-year period related to a matter with a third-party vendor.

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,

United States and Canada

Latin America

Asia and Australia

Middle East and Africa

Total Revenue

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

Total Product and Accessories

Parts and Services

Total Revenue

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, 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,

Product and accessories

As a percentage of product and accessories revenue

Parts and services

As a percentage of parts and services revenue

As a percentage of rentals revenue

Total gross profit

As a percentage of total revenue

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.

Interest income was $0.2 million for the three months ended June 30, 2026, $0.1 million higher than during the three months ended June 30, 2025, driven by higher money market rates and our higher cash balance during the three months ended June 30, 2026 relative to the prior year.

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

Interest Expense Interest expense was $0.9 million and $1.0 million for the three months ended June 30, 2026 and 2025, respectively.

Interest expense is mainly attributable to 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 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.

Our cash balance increased $3.4 million during the three months ended June 30, 2026, compared to a decrease in cash of $2.0 million during the three months ended June 30, 2025.

The increase in cash during the three months ended June 30, 2026 was primarily driven by operating activities which generated $5.4 million of cash compared to a $1.6 million net use of cash in the three months ended June 30, 2025.

Operating Activities During the three months ended June 30, 2026, net cash provided by operating activities was $5.4 million, consisting of net income for the period, and changes in operating assets and liabilities of $0.4 million, which included a $3.7 million customer deposit on an order for delivery later this fiscal year, and non-cash adjustments totaling $5.8 million, including depreciation and amortization of $1.2 million.

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

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

Nine Months Ended December 31,

Three Months Ended June 30,

Net income (loss)

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Accounts receivable

Lease receivable

Accounts payable

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Other changes in operating assets and liabilities

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 $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

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.

Net cash provided by (used in) operating activities

(1) Represents changes in depreciation and amortization, non-cash lease expenses, PIK interest, stock-based compensation expense, inventory, warranty and credit loss provisions.

The $4.2 million increase in cash provided by accounts receivable reflects higher cash collected from customers and the increase in cash provided by deposits (driven by a $3.7 million customer deposit on an order for delivery later this fiscal year).

The $5.3 million increase in cash used in inventory resulted from purchases of materials, accessories and parts to support sales during the quarter and purchases of long-lead time material to support future sales.

The decrease in cash

provided by accounts payable and the increase in cash used in accrued expenses as compared to the three months ended June 30, 2025 was primarily due to the timing of payments to suppliers.

Investing Activities Net cash used in investing activities was $1.4 million during the three months ended June 30, 2026 and was primarily due to payments of deferred acquisition costs, and higher spend on capex and fixed assets to support operations and future business growth.

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

Financing Activities Net cash used in financing activities was $0.6 million and $0.3 million during the three months ended June 30, 2026 and 2025, respectively.

Cash used in financing activities during the three months ended June 30, 2026 was driven by repayment of finance lease obligations of $0.4 million.

Net cash used in the three months ended June 30, 2025 reflects the repayment of finance lease obligations of $0.2 million.

Debt Refer to Note 11 – Debt in the Notes to Condensed Consolidated Financial Statements (Part I, Item 1 of this Form 10-Q) for information related to our existing indebtedness.

Lease Commitments Refer to Note 10 – 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.

New Accounting Pronouncements Refer to Note 2 – Basis of Presentation and Significant Accounting Policies – Impact of Recently Issued Accounting Standards in the Notes to Condensed Consolidated Financial Statements (Part I, Item 1 of this Form 10-Q) for information regarding new accounting standards.

Quantitative and Qualitative Disclosures about Market Risk

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Item 2. Management’s Discussion and Analysis