What changed in this filing

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Item 9A. Controls and Procedures

2021-06-14 compared with 2020-06-29 · 564 added, 695 removed, 621 unchanged (67% of the section changed)

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Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that the information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate, to allow timely decisions regarding required disclosure.

In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

In connection with the preparation of this Form 10-K for the fiscal year ended March 31, 2021, an evaluation was performed under the supervision and with the participation of our management, including the CEO and CFO, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act).

Based on this evaluation, our CEO and CFO have concluded that our disclosure controls and procedures are effective as of March 31, 2020 to ensure that the information required to be disclosed by us in reports we submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms prescribed by the SEC.

Additionally, such information is accumulated and communicated to management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.

Management’s Annual Report on Internal Control Over Financial Reporting

Based on this evaluation, our CEO and CFO have concluded that our disclosure controls and procedures were effective as of March 31, 2021 and provided reasonable assurance that the information required to be disclosed by us in reports we submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms prescribed by the SEC and that such information is accumulated and communicated to management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.

Management’s Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over our financial reporting.

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● Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

We conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework).

Based on this evaluation, management concluded that we maintained effective internal control over financial reporting as of March 31, 2021.

Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting (as defined in Rules 13a‑15(f) and 15d‑15(f) under the Exchange Act) during our most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during our fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Other Information.

Directors, Executive Officers and Corporate Governance.

The information required by this Item will be included in the Company’s 2020 Proxy Statement to be filed with the SEC in connection with the solicitation of proxies for the Company’s 2020 Annual Meeting of Shareholders (“2020 Proxy Statement”) and is incorporated herein by reference.

Such Proxy Statement will be filed with the SEC within 120 days after the end of the fiscal year to which this report relates.

The information required by this Item will be included in the Company’s 2021 Proxy Statement to be filed with the SEC in connection with the solicitation of proxies for the Company’s 2021 Annual Meeting of Shareholders (“2021 Proxy Statement”) and is incorporated herein by reference.

Such Proxy Statement will be filed with the SEC within 120 days after the end Fiscal 2021.

Delinquent Section 16(a) Reports

The information required regarding Section 16(a) beneficial ownership reporting compliance will be included in the Company’s 2020 Proxy Statement and is incorporated herein by reference.

The information required regarding our directors’ and executive officers’ compliance with Section 16(a) of the Exchange Act will be included in the Company’s 2021 Proxy Statement under the heading “Delinquent Section 16(a) Reports” and is incorporated herein by reference.

Executive Compensation.

The information required by this Item will be included in the Company’s 2020 Proxy Statement and is incorporated herein by reference.

The information required by this Item will be included in the Company’s 2021 Proxy Statement and is incorporated herein by reference.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The information required by this Item will be included in the Company’s 2020 Proxy Statement and is incorporated herein by reference .

The information required by this Item will be included in the Company’s 2021 Proxy Statement and is incorporated herein by reference .

Certain Relationships and Related Transactions, and Director Independence.

The information required by this Item will be included in the Company’s 2020 Proxy Statement and is incorporated herein by reference .

The information required by this Item will be included in the Company’s 2021 Proxy Statement and is incorporated herein by reference .

Principal Accounting Firm Fees and Services.

The information required by this Item will be included in the Company’s 2020 Proxy Statement and is incorporated herein by reference .

The information required by this Item will be included in the Company’s 2021 Proxy Statement and is incorporated herein by reference .

Exhibits and Financial Statement Schedules.

Financial statements and financial statement schedule

The financial statements, notes and financial statement schedule are listed in the Index to Consolidated Financial Statements on page F‑1 of this Report.

The financial statements and notes are listed in the Index to Consolidated Financial Statements on page F-1 of this Report.

Financial statement schedules not included in this Form 10-K have been omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.

The exhibits filed as part of this Form 10-K are set forth on the Exhibit Index immediately preceding the signatures of this Form 10-K.

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Not applicable.

CAPSTONE TURBINE CORPORATION AND SUBSIDIARIES

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

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Consolidated Statements of Operations

Consolidated Statements of Stockholders’

Consolidated Statements of Stockholders’ Equity

Consolidated Statements of Cash Flows

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To the Shareholders and Board of Directors of

Capstone Turbine Corporation

Capstone Green Energy Corporation

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Capstone Turbine Corporation (the “Company”) as of March 31, 2020 and 2019, the related consolidated statements of operations, stockholders’

equity and cash flows for each of the two years in the period ended March 31, 2020, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of March 31, 2020 and 2019, and the results of its operations and its cash flows for each of the two years in the period ended March 31, 2020 and 2019, in conformity with accounting principles generally accepted in the United States of America.

We have audited the accompanying consolidated balance sheets of Capstone Green Energy Corporation (the “Company”) as of March 31, 2021 and 2020, the related consolidated statements of operations, stockholders’ equity and cash flows for each of the two years in the period ended March 31, 2021 and 2020, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of March 31, 2021 and 2020, and the results of its operations and its cash flows for each of the two years in the period ended March 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

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Our responsibility is to express an opinion on the Company's financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Those standards require that we plan and perform the audit [s] to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

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Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

We believe that our audits provides a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Accounts Receivable Allowances

Description of Matter

As described in Note 2 to the consolidated financial statements, management maintains allowances for estimated losses resulting from the inability of customers to make required payments and other accounts receivable allowances.

The principal considerations for our determination that performing procedures relating to the accounts receivable allowances is a critical audit matter are (i) the significant judgement by management when determining the estimate for the accounts receivable allowances;

and (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures to evaluate management’s estimate and significant assumptions related to the customers continued ability to make required payments.

How We Addressed the Matter

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included, among others, testing management’s process for determining the accounts receivable allowances.

Procedures related to management’s estimate included evaluating the appropriateness of the method used by management, the completeness, accuracy, and relevance of underlying data used in the estimate, and the reasonableness of significant assumptions used by management in estimating the customers continued ability to make required payments.

Evaluating management’s assumptions relating to customers’ credit worthiness, historical payment experience with the customer, and the customers’ new business opportunities.

Extended Warranty – Powerhead Failure

Description of Matter

As described in Note 6 to the consolidated financial statements, management accrued an extended warranty to account for the replacement of high risk failure parts in fielded systems due to a supplier defect.

Management’s estimate of this extended warranty liability is generally affected by historical failure rates within a certain population of components, repair costs, and the point of failure within the product life cycle.

The principal considerations for our determination that performing procedures relating to the extended warranty liability is a critical audit matter are (i) the significant judgement by management when determining the estimate for the extended warranty liability;

and (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures to evaluate management’s estimate and significant assumptions related to historical failure rates, repair costs, and the point of failure within the product life cycle.

How We Addressed the Matter

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included, among others, testing management’s process for determining the extended warranty liability.

Procedures related to management’s estimate included evaluating the appropriateness of the method used by management, the completeness, accuracy, and relevance of underlying data used in the warranty estimate, and the reasonableness of significant assumptions used by management in estimating the extended warranty liability related to the component failure rates, repair costs, and the point of failure within the product life cycle.

Evaluating management’s assumptions relating to the component failure rates, repair costs, and the point of failure within the product life cycle involved evaluating whether the assumptions were reasonable considering historical product experience of the Company.

/s/ Marcum LLP

We have served as the Company’s auditor since 2017.

Costa Mesa, California

June 11, 2021

CAPSTONE TURBINE CORPORATION AND SUBSIDIARIES

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

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Non-current portion of inventories

Intangible assets, net

Liabilities and Stockholders’

Liabilities and Stockholders’ Equity

Current Liabilities:

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Long-term portion of notes payable and lease obligations

Other long-term liabilities

Total liabilities

Commitments and contingencies (Note 12)

Stockholders’

Stockholders’ Equity:

Preferred stock, $.001 par value;

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73,954 shares at March 31, 2021 and 57,577 shares at March 31, 2020

Total stockholders’

Total stockholders’ equity

Total liabilities and stockholders' equity

See accompanying notes to consolidated financial statements.

CAPSTONE TURBINE CORPORATION AND SUBSIDIARIES

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

Product, accessories and parts

Product and accessories

Parts and service

Total revenue

Cost of goods sold:

Product, accessories and parts

Product and accessories

Parts and service

Total cost of goods sold

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Loss from operations

Other income (expense)

Interest income

Interest expense

Loss on debt extinguishment

Loss before provision for income taxes

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Net loss attributable to common stockholders

Net loss per common share attributable to common stockholders—basic and diluted

Weighted average shares used to calculate basic and diluted net loss per common share attributable to common stockholders

See accompanying notes to consolidated financial statements.

CAPSTONE TURBINE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except share amounts)

Treasury Stock

Stockholders’

Balance, March 31, 2019

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Warrants exercised

Warrants issued

Change in warrants valuation

Deemed dividend on purchase warrant for common shares

Balance, March 31, 2020

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Stock-based compensation

Exercise of employee stock purchases

Stock awards to Board of Directors

Issuance of common stock, net of issuance costs

Warrants issued

Warrants exercised

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See accompanying notes to consolidated financial statements.

CAPSTONE TURBINE CORPORATION AND SUBSIDIARIES

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

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Cash Flows from Operating Activities:

Adjustments to reconcile net loss to net cash used in operating activities:

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Depreciation and amortization

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Amortization of right-of-use assets

Loss on debt extinguishment

Provision for (reduction in) accounts receivable allowances

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Deferred revenue

Net cash used in operating activities

Net cash provided by (used in) operating activities

Cash Flows from Investing Activities:

Expenditures for property, equipment and rental assets

Expenditures for property, plant, equipment and rental assets

Net cash used in investing activities

Cash Flows from Financing Activities:

Repayment of revolving credit facility

Net proceeds from term note payable

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Net cash provided by financing activities

Net increase (decrease) in Cash, Cash Equivalents and Restricted Cash

Cash, Cash Equivalents and Restricted Cash, Beginning of Year

Cash, Cash Equivalents and Restricted Cash, End of Year

Net increase (decrease) in Cash and Cash Equivalents

Cash and Cash Equivalents, Beginning of Year

Cash and Cash Equivalents, End of Year

Supplemental Disclosures of Cash Flow Information:

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Acquisition of property and equipment through accounts payable

Issuance of common stock for services to be received

Renewal of insurance contracts which was financed by notes payable

Deemed dividend

See accompanying notes to consolidated financial statements.

CAPSTONE TURBINE CORPORATION AND SUBSIDIARIES

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Description of the Company and Basis of Presentation

Capstone Turbine Corporation (the “Company”) develops, manufactures, markets and services microturbine technology solutions for use in 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.

The Company also remanufactures microturbine engines and provides aftermarket parts and services, which includes our Factory Protection Plan (“FPP”), Distributor Support System program (“DSS program”), and long-term microturbine rentals.

Capstone Green Energy Corporation (“Capstone”, “We” or the “Company”) is a provider of customized microgrid solutions and on-site energy technology systems focused on helping customers around the globe meet their environmental, energy savings, and resiliency goals.

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.

In April 2021, we added additional products to our portfolio and shifted our focus to four key business lines.

Our Energy Conversion Products business lines is driven by the Company’s industry-leading, highly efficient, low-emission, resilient microturbine energy systems offering scalable solutions in addition to a broad range of customer-tailored solutions, including hybrid energy systems and larger frame industrial turbines.

Through our Energy as a Service business line, we offer rental solutions utilizing our microturbine energy systems and battery storage systems, comprehensive factory protection plan service contracts that guarantee life-cycle costs, as well as aftermarket spare parts.

Our two emerging business lines are Energy Storage Products and Hydrogen Energy Solutions.

Our Energy Storage Products business line designs and installs microgrid storage systems creating customized solutions using a combination of battery technologies and monitoring software.

Through our Hydrogen Energy Solutions business line, we offer customers a variety of hydrogen products, including the Company’s microturbine energy systems.

Because these are new offerings, Energy Storage Products and Hydrogen Energy Solutions revenue has been immaterial to date.

The Company was organized in 1988 and has been commercially producing its microturbine generators since 1998.

This Annual Report on Form 10‑K (this “Form 10‑K”) refers to the Company’s fiscal years ended March 31 as its “Fiscal”

On April 22, 2021, the Company filed with the Secretary of State of the State of Delaware a Certificate of Amendment of the Second Amended and Restated Certificate of Incorporation of the Company for the sole purpose of changing the Company’s name to Capstone Green Energy Corporation effective as of 12:01 a.m.

Eastern Time on April 22, 2021 (the “Corporate Name Change”).

In addition, the Company amended and restated its Fourth Amended and Restated Bylaws, effective as of April 22, 2021, solely to reflect the Corporate Name Change.

This Annual Report on Form 10-K (this “Form 10-K”) refers to the Company’s fiscal years ended March 31 as its “Fiscal” years.

The consolidated financial statements include the accounts of the Company, Capstone Turbine International, Inc., its wholly owned subsidiary that was formed in June 2004, Capstone Turbine Singapore Pte., Ltd., its wholly owned subsidiary that was formed in February 2011, and Capstone Turbine Financial Services, LLC, its wholly owned subsidiary that was formed in October 2015, after elimination of inter-company transactions.

The Company closed its wholly owned subsidiary, Capstone Turbine Singapore Pte., Ltd and the corporate structure related to this entity was dissolved in September 2018.

Certain reclassifications have been made to the prior year’s financial statements to enhance comparability with the current year’s financial statements.

As a result, certain line items have been amended in the Consolidated Statements of Operations and the related notes to the consolidated financial statements.

Comparative figures have been adjusted to conform to the current year’s presentation.

The items were reclassified as follows (in thousands):

Previously Reported

After Reclassification

March 31, 2020

Product, accessories and parts

Product and accessories

Parts and service

Total revenue

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Summary of Significant Accounting Policies

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Fair Value of Financial Instruments The carrying value of certain financial instruments, including cash equivalents, accounts receivable, accounts payable, revolving credit facility and notes payable approximate fair market value based on their short-term nature.

See Note 10—Fair Value Measurements, for disclosure regarding the fair value of other financial instruments.

Accounts Receivable Trade accounts receivable are recorded at the invoiced amount and are typically non-interest bearing.

The Company maintains allowances for estimated losses resulting from the inability of customers to make required payments and other accounts receivable allowances.

Changes in the accounts receivable allowances are as follows as of March 31, 2020 and 2019 (in thousands):

Changes in the accounts receivable allowances are as follows (in thousands):

Balance, March 31, 2019

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Balance, March 31, 2021

Inventories The Company values inventories at the lower of cost (determined on a first in first out (“FIFO”) basis) or net realizable value.

The composition of inventory is routinely evaluated to identify slow-moving, excess, obsolete or otherwise impaired inventories.

Inventories identified as impaired are evaluated to determine if write-downs are required.

Included in the assessment is a review for obsolescence as a result of engineering changes in the Company’s products.

All inventories expected to be used in more than one year are classified as long-term.

CAPSTONE TURBINE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Depreciation and Amortization Depreciation and amortization are provided for using the straight-line method over the estimated useful lives of the related assets, ranging from two to ten years.

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The Company performed an analysis as of March 31, 2021 and determined that no impairment was necessary.

See Note 5—Intangible Assets.

Deferred Revenue Deferred revenue consists of deferred product and service revenue and customer deposits.

Deferred revenue will be recognized when earned in accordance with the Company’s revenue recognition policy.

The Company has the right to retain all or part of customer deposits under certain conditions.

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Revenue On April 1, 2018, the Company adopted the new revenue standard ASU 2014-09 and applied it to all contracts using the modified retrospective method.

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The Company derives its revenues primarily from system sales, service contracts and professional services.

Revenues are recognized when control of the systems and services is transferred to the Company’s customers in an amount that reflects the consideration it expects to be entitled to in exchange for those services.

The Company determines revenue recognition through the following steps:

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The Company recognizes revenue when performance obligations identified under the terms of contracts with its customers are satisfied, which generally occurs, for systems, upon the transfer of control in accordance with the contractual terms and conditions of the sale.

The majority of the Company’s revenue associated with systems is recognized at a point in time when the system is shipped to the customer.

Revenue from service contracts and post-shipment performance obligations is recognized when or as those obligations are satisfied.

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Sales taxes and other usage-based taxes are excluded from revenue.

Comprehensive Factory Protection Plan (“FPP”) service contracts require payment at the beginning of the contract period.

Advance payments are not considered a significant financing component as they are typically received

CAPSTONE TURBINE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

less than one year before the related performance obligations are satisfied.

These payments are treated as a contract liability and are classified in deferred revenue in the Condensed Consolidated Balance Sheets.

Once control transfers to the customer and the Company meets the revenue recognition criteria, the deferred revenue is recognized in the Condensed Consolidated Statement of Operations.

The deferred revenue relating to the annual maintenance service contracts is recognized in the Condensed Consolidated Statement of Operations on a straight line basis over the expected term of the contract.

Comprehensive factory protection plan service contracts require payment at the beginning of the contract period.

Advance payments are not considered a significant financing component as they are typically received less than one year before the related performance obligations are satisfied.

These payments are treated as a contract liability and are classified in deferred revenue in the Consolidated Balance Sheets.

Once control transfers to the customer and the Company meets the revenue recognition criteria, the deferred revenue is recognized in the Consolidated Statement of Operations.

The deferred revenue relating to the annual maintenance service contracts is recognized in the Consolidated Statement of Operations on a straight line basis over the expected term of the contract.

Significant Judgments - Contracts with Multiple Performance Obligations

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In determining whether FPP and service contracts are distinct, the Company considers the following factors for each FPP and services agreement:

availability of the services from other vendors, the nature of the services, the timing of when the services contract was signed in comparison to the product delivery date and the contractual dependence of the product on the customer’s satisfaction with the professional services work.

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

satisfaction with the professional services work.

To date, the Company has concluded that all of the FPP and services contracts included in contracts with multiple performance obligations are distinct.

The Company allocates the transaction price to each performance obligation on a relative standalone selling price (“SSP”) basis.

The SSP is the price at which the Company would sell a promised product or service separately to a customer.

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The Company determines SSP by considering its overall pricing objectives and market conditions.

Significant pricing practices taken into consideration include the Company’s discounting practices, the size and volume of the Company’s transactions, the customer demographic, the geographic area where systems and services are sold, price lists, its go-to-market strategy, historical sales and contract prices.

The determination of SSP is made through consultation with and approval by the Company’s management, taking into consideration the go-to-market strategy.

As the Company’s go-to-market strategies evolve, the Company may modify its pricing practices in the future, which could result in changes to SSP.

The determination of SSP is made through consultation with and approval by the Company’s management, taking into consideration the go-to-market strategy.

As the Company’s go-to-market strategies evolve, the Company may modify its pricing practices in the future, which could result in changes to SSP.

In certain cases, the Company is able to establish SSP based on observable prices of products or services sold separately in comparable circumstances to similar customers.

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The Company has elected the practical expedient to disclose only the value of unsatisfied performance obligations for contracts with an original expected length greater than one year.

The majority of the Company’s revenues resulted from sales of inventoried systems with short periods of manufacture and delivery and thus are excluded from this disclosure.

CAPSTONE TURBINE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The majority of the Company’s revenues resulted from sales of inventoried systems with short periods of manufacture and delivery and thus are excluded from this disclosure.

As of March 31, 2021, the FPP backlog was approximately $75.1 million, which represents the value of the contractual agreement for FPP services that has not been earned and extends through Fiscal 2041.

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The specific terms and conditions of those warranties vary depending upon the product sold and geography of sale.

The Company’s product warranties generally start from the delivery date and continue for up to twenty-four months.

Factors that affect the Company’s warranty obligation include product failure rates, anticipated hours of product operations and costs of repair or replacement in correcting product failures.

The Company’s product warranties generally start from the delivery date and continue for up to twenty-four months.

Factors that affect the Company’s warranty obligation include product failure rates, anticipated hours of product operations and costs of repair or replacement in correcting product failures.

These factors are estimates that may change based on new information that becomes available each period.

Similarly, the Company also accrues the estimated costs to address reliability repairs on products no longer in warranty when, in the Company’s judgment, and in accordance with a specific plan developed by the Company, it is prudent to provide such repairs.

The Company assesses the adequacy of recorded warranty liabilities quarterly and makes adjustments to the liability as necessary.

When the Company has sufficient evidence that product changes are altering the historical failure occurrence rates, the impact of such changes is then taken into account in estimating future warranty liabilities.

Research and Development (“R&D”) The Company accounts for grant distributions and development funding as offsets to R&D expenses and both are recorded as the related costs are incurred.

There were no offsets to R&D during the fiscal year ended March 31, 2020 and 2019.

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Research and Development (“R&D”) The Company accounts for grant distributions and development funding as offsets to R&D expenses and both are recorded as the related costs are incurred.

There were no offsets to R&D during Fiscal 2021 and 2020.

Income Taxes Deferred income tax assets and liabilities are computed for differences between the consolidated financial statement and income tax basis of assets and liabilities.

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The Company performs ongoing credit evaluations of its customers and maintains an allowance for potential credit losses.

CAPSTONE TURBINE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Sales to E‑Finity Distributed Generation, LLC (“E‑Finity”), one of the Company’s domestic distributors, accounted for 12% and 13% of the Company’s revenue for the fiscal years ended March 31, 2020 and 2019, respectively.

Sales to Cal Microturbine (“CAL”), one of the Company’s domestic distributors, accounted for 12% of the Company’s revenue for the year ended March 31, 2019.

Additionally, E-Finity accounted for 14% of net accounts receivable as of March 31, 2020.

Reliable Secure Power Systems, (“RSP”), one of our domestic distributors and E-Finity, accounted for 14% and 10%, respectively, of net accounts receivable as of March 31, 2019.

On October 13, 2017, the Company entered into an Accounts Receivable Assignment Agreement (the “Assignment Agreement”) and Promissory Note (the “Note”) with Turbine International, LLC (“TI”).

Pursuant to the terms of the Assignment Agreement, the Company agreed to assign to TI the right, title and interest to receivables owed to the Company from BPC Engineering, its former Russian distributor (“BPC”), upon TI’s payment to the Company of $2.5 million in three payments by February 1, 2018.

The Company received payments from TI of approximately $1.0 million under the Assignment Agreement during Fiscal 2018, which was recorded as bad debt recovery.

On October 13, 2017, the Company and Hispania Petroleum, S.A.

(the “Guarantor”) entered into a Guaranty Agreement (the “Guaranty Agreement”) whereby the Guarantor guarantees TI’s obligations under the Agreement and Note.

However, due to the Company’s limited business relationship with TI and the missed payments on the Assignment Agreement, the Company deferred recognition of the Assignment Agreement and Note until collectability is reasonably assured.

In connection with the terms of the Note, the Company granted TI the sole distribution rights for its products and services in the Russian oil and gas sector.

As a result of this appointment, TI agreed to pay the Company $3.8 million over a three-year period in 35 equal monthly installments starting in August 2018.

On June 5, 2018, the Company entered into an amendment to the Assignment Agreement (the “Amended Assignment Agreement”) and the Note (the “Amended Note”) with TI.

Pursuant to the terms of the Amended Assignment Agreement, the right, title and interest to receivables owed to the Company from BPC was be contingent upon TI’s payment to the Company of the remaining approximately $1.5 million in five payments by September 20, 2019.

Under the terms of the Amended Note, TI agreed to pay the Company $3.8 million over a three-year period in 13 equal quarterly installments starting on December 20, 2019.

The payments of $0.4 million, $0.3 million, and $0.3 million, due March 20, 2019, June 20, 2019, and September 20, 2019, respectively, under the Amended Assignment Agreement, have not been received at the time of this filing.

In September 2019, the Company sent TI a notice to cure default with a deadline of October 31, 2019.

TI failed to cure the noticed default and the Company has since terminated TI’s distributor agreement.

As a result, the BPC accounts receivable and related accounts receivable reserve of $4.8 million were written off.

The Company recorded net bad debt expense of $0.4 million and net bad debt recovery of $0.3 million for the fiscal years ended March 31, 2020 and 2019, respectively.

As of September 30, 2019, the Company cumulatively collected approximately $1.8 million from BPC on their accounts receivable, which has been previously reserved.

The Company cumulatively collected approximately $1.5 million from TI, under the terms of the Assignment Agreement and the Amended Assignment Agreement.

The BPC accounts receivable and related accounts receivable reserve of $4.8 million were written off as of March 31, 2020.

Certain components of the Company’s products are available from a limited number of suppliers.

Sales to CAL and E-Finity accounted for 15% and 12%, respectively, of the Company’s revenue for Fiscal 2021.

Sales to E-Finity accounted for 12% of Company’s revenue for Fiscal 2020.

Additionally, E-Finity accounted for 13% and 14% of net accounts receivable as of March 31, 2021 and March 31, 2020, respectively.

The Company recorded net bad debt recovery of $0.2 million and net bad debt expense of $0.4 million for Fiscal 2021 and 2020, respectively.

Certain components of the Company’s products are available from a limited number of suppliers.

An interruption in supply could cause a delay in manufacturing, which would affect operating results adversely.

Estimates and Assumptions The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make certain estimates and assumptions that

CAPSTONE TURBINE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

affect the amounts reported in the financial statements and accompanying notes.

Significant estimates include accounting for accounts receivable allowances, stock-based compensation, inventory write-downs, valuation of long-lived assets including intangible assets with finite lives, product warranties, income taxes and other contingencies.

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Outstanding stock options and restricted stock units at March 31, 2021 and 2020 were 0.5 million and 0.3 million, respectively.

As of March 31, 2020 and 2019, the number of warrants excluded from diluted net loss per common share computations was approximately 1.5 million and 0.7 million, respectively.

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

March 31, 2021 and 2020, the number of warrants excluded from diluted net loss per common share computations was approximately 1.1 million and 1.5 million, respectively.

Stock-Based Compensation Options or stock awards are recorded at their estimated fair value at the measurement date.

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Leases Effective April 1, 2019, the Company accounts for its leases under ASC 842, Leases.

Under this guidance, arrangements meeting the definition of a lease are classified as operating or financing leases and are recorded on the consolidated balance sheet as both a right of use asset and lease liability, calculated by discounting fixed lease payments over the lease term at the rate implicit in the lease or the Company’s incremental borrowing rate.

Lease liabilities are increased by interest and reduced by payments each period, and the right of use asset is amortized over the lease term.

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The Company excludes short-term leases having initial terms of 12 months or less from the new guidance as an accounting policy election and recognizes rent expense on a straight-line basis over the lease term.

The Company continues to account for leases in the prior period financial statements under ASC Topic 840.

Reverse Stock Split At the annual meeting of stockholders of the Company held on August 29, 2019, the Company’s stockholders approved an amendment to our Second Amended and Restated Certificate of Incorporation (the “Amendment”) to effect a reverse stock split of our common stock at a ratio in the range of one-for-five (1:5) to one-for-ten (1:10).

Pursuant to such authority granted by the stockholders, the Company’s board of directors approved a one-for-ten (1:10) reverse stock split (the “Reverse Stock Split”) of the common stock and the filing of the Amendment.

The certificate was filed with the Secretary of State of Delaware, effective on October 21, 2019 and the Reverse Stock Split became effective as of that date as filed with the SEC under the Securities and Exchange Act.

Accordingly, all references to numbers of common shares, including the number of common shares on an as-if-converted basis, per-share data and share prices and exercise prices in the accompanying condensed consolidated financial statements have been adjusted to reflect the reverse stock split on a retroactive basis.

Evaluation of Ability to Maintain Current Level of Operations In connection with preparing the consolidated financial statements for the fiscal year ended March 31, 2020, 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 became due for the next twelve months from the date of issuance of our Fiscal 2020 financial statements.

Management assessed that there were such conditions and events, including a history of recurring operating losses, negative cash flows from operating activities, the continued negative impact by the volatility of the global oil and gas markets, a strong U.S.

dollar in certain markets making our products more expensive in such markets, the COVID-19 pandemic, and ongoing global geopolitical tensions.

We incurred a net loss of $21.9 million and used cash in operating activities of $19.7 million during the fiscal year ended March 31, 2020.

Our working capital requirements during the fiscal year ended March 31,

CAPSTONE TURBINE CORPORATION AND SUBSIDIARIES

Reverse Stock Split At the annual meeting of stockholders of the Company held on August 29, 2019, the Company’s stockholders approved an amendment to the Company’s Second Amended and Restated Certificate of Incorporation (the “Amendment”) to effect a reverse stock split of the Company’s common stock, $0.001 par value per share (“Common Stock”) at a ratio in the range of one-for-five (1:5) to one-for-ten (1:10).

Pursuant to such authority granted by the stockholders, the Company’s Board of Directors (the “Board”) approved a one-for-ten (1:10) reverse stock split (the “Reverse Stock Split”) of the Common Stock and the filing of the Amendment.

The Certificate of Amendment was filed with the Secretary of State of Delaware, effective on October 21, 2019 and the Reverse Stock Split became effective as of that date.

Accordingly, all references to numbers of shares of Common Stock, including the number of shares of Common Stock on an as-if-converted basis, per-share data and share prices and exercise prices in the accompanying condensed consolidated financial statements have been adjusted to reflect the reverse stock split on a retroactive basis.

Evaluation of Ability to Maintain Current Level of Operations In connection with the preparation of these consolidated financial statements for Fiscal 2021, 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 became due over the next twelve months from the date of issuance of the Company’s Fiscal 2021 consolidated financial statements.

Management assessed that there were such conditions and events, including a history of recurring operating losses, negative cash flows from operating activities, the continued impact of the COVID-19 pandemic, volatility of the global oil and gas markets, a strong U.S.

dollar in certain markets making its products more expensive in such markets and ongoing global geopolitical tensions.

The Company incurred a net loss of $18.4 million and provided cash from operating activities of $1.7 million during Fiscal 2021.

The Company’s working capital requirements during Fiscal 2021 were in-line with management’s expectations, which included reductions in inventory and accounts payable primarily due our lower revenue levels.

The Company’s net loss improved during Fiscal 2021 primarily due to reduced overhead and operating expenses resulting from the Company’s COVID-19 Business Continuity Plan described below, as well as reduced FPP costs as the Company’s reliability improved due to the reduced impact of the part defect from a supplier first identified during the first quarter of Fiscal 2019.

As of March 31, 2021, the Company had cash and cash equivalents of $49.5 million, and outstanding debt of $51.0 million at fair value (see Note 11–Term Note Payable for further discussion of the outstanding debt).

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2020 were higher than management’s expectations due to a higher level of finished goods in inventory due to the COVID-19 pandemic, which has affected the timing of customer demand for our products, as well as cash used for accounts payable due to timing of payments.

Our net loss expanded during the year ended March 31, 2020 primarily because of a decrease in product volume and higher FPP scheduled and unscheduled maintenance activities primarily as a result of a supplier defect identified during the first quarter of Fiscal 2019.

Additionally, operating expenses were higher in Fiscal 2020 compared to Fiscal 2019 primarily due to the recording of a bad debt reserve for certain past due receivables because of uncertain collectability due to the COVID-19 pandemic in Fiscal 2020 whereas we received approximately $0.4 million under the Assignment Agreement with TI in Fiscal 2019.

As of March 31, 2020, we had cash and cash equivalents of $15.1 million, and outstanding debt of $30.0 million.

Management evaluated these conditions in relation to our ability to meet our obligations as they become due.

Our ability to continue current operations and to execute on management ’

s plan is dependent on our ability to generate cash flows from operations.

Management believes that we will continue to make progress on our path to profitability by continuing to lower our operating costs and to develop our geographical and vertical markets.

We may seek to raise funds by selling additional securities (through the at-the-market offering or otherwise) to the public or to selected investors or by obtaining additional debt financing.

There is no assurance that we will be able to obtain additional funds on commercially favorable terms or at all.

If we raise additional funds by issuing additional equity or convertible debt securities, the fully diluted ownership percentages of existing stockholders will be reduced.

In addition, any equity or debt securities that we would issue may have rights, preferences or privileges senior to those of the holders of our common stock.

Based on our current operating plan, management anticipates that, given current working capital levels, current financial projections, the term note payable with Goldman Sachs and the funds raised by selling additional securities through the at-the-market offering as of the date of issuance of our Fiscal 2020 financial statements, we will be able to meet our financial obligations as they become due over at least the next twelve months from the date of issuance of our Fiscal 2020 financial statements.

Management evaluated these conditions in relation to the Company’s ability to meet its obligations as they become due over the next twelve months from the date of issuance of these consolidated financial statements.

The Company’s ability to continue current operations and to execute on management’s plan is dependent on its ability to generate sufficient cash flows from operations.

Management believes that the Company will continue to make progress on its path to profitability by continuing to maintain low operating expenses and develop its geographical and vertical markets.

The Company may seek to raise funds by selling additional securities (through the at-the-market offering or otherwise) to the public or to selected investors or by obtaining additional debt financing.

There is no assurance that the Company will be able to obtain additional funds on commercially favorable terms or at all.

If the Company raises additional funds by issuing additional equity or convertible debt securities, the fully diluted ownership percentages of existing stockholders will be reduced.

In addition, any equity or debt securities that the Company would issue may include rights, preferences or privileges senior to those of the holders of its common stock.

Based on the Company’s current operating plan, management anticipates that, given current working capital levels, current financial projections and funds received under debt agreements as further described in Note 11-Term Note Payable, the Company will be able to meet its financial obligations as they become due over at least the next twelve months from the date of issuance of the Company’s Fiscal 2021 consolidated financial statements.

Company Response to COVID-19

In March 2020, the Company began to monitor the global effects of COVID-19, the worldwide spread of which led the World Health Organization (“WHO”) to characterize it as a pandemic on March 11, 2020.

Thereafter, most U.S.

states imposed “stay-at-home” orders on their populations to stem the spread of COVID-19.

Of specific interest to the Company, stay-at-home orders were imposed in the state of California on March 20, 2020.

On March 23, 2020 the Company enacted a Business Continuity Plan in response to COVID-19.

Beginning March 30, 2020, the Company furloughed 52 employees, leaving behind only staff deemed essential for day-to-day administrative operations for a minimum period of 45 days.

The Company’s Leadership Team volunteered to take a 25% temporary salary cut.

In addition, 25 other top Company managers volunteered to take a similar 15% reduction in salary.

Several employees returned to work June 1, 2020, most with the 15% voluntary salary cuts, with others returning in a staggered manner through the end of September 2020.

Additionally, in March 2020, the Board voted to take a temporary 25% reduction in base cash retainer in support of the Company’s Business Continuity Plan.

As a result of the continued global economic slowdown due to COVID-19 and the associated decline in global crude oil prices, the Company eliminated 26 positions on June 1, 2020.

During the period of March 30, 2020 to June 1, 2020, the Company had limited production capability of new microturbine products, but had pre-built approximately 5.9 MW of microturbine finished goods during March 2020 for shipment during this period of suspended production.

On September 28, 2020 salaries were returned to 100% and remaining furloughed employees returned to work.

The Company’s vendor supply chain has also been impacted by the pandemic;

however, the Company has been able to maintain sufficient supply flow to continue operations.

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Segment Reporting The Company is considered to be a single reporting segment.

The business activities of this reporting segment are the development, manufacture and sale of turbine generator sets and their related parts and service.

Following is the geographic revenue information based on the primary operating location of the Company’s customers (in thousands):

Year Ended March 31,

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Total Revenue

CAPSTONE TURBINE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table summarizes the Company’s revenue by product (in thousands):

Year Ended March 31,

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Microturbine Products

Accessories and Parts

Total Product, Accessories and Parts

Total Product and Accessories

Parts and Service

Total Revenue

Substantially all of the Company’s operating assets are in the United States.

Recent Accounting Pronouncements In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), (“ASU 2016-02”).

The purpose of ASU 2016-02 is to provide financial statement users a better understanding of the amount, timing, and uncertainty of cash flows arising from leases.

The adoption of ASU 2016-02 will result in the recognition of a right-of-use asset and a lease liability for most operating leases.

New disclosure requirements include qualitative and quantitative information about the amounts recorded in the financial statements.

In September 2017, the FASB issued ASU 2017-13, Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842), which provides additional implementation guidance on the previously issued ASU 2016-02 Leases (Topic 842).

ASU 2016-02 requires a lessee to recognize assets and liabilities on the balance sheet for leases with lease terms greater than 12 months.

ASU 2016-02 is effective for fiscal years beginning after December 15, 2018.

ASU 2016-02 requires a modified retrospective transition by means of a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year in which the guidance is effective with the option to elect certain practical expedients.

Early adoption is permitted.

On April 1, 2019, the Company adopted this standard.

See Note 12—Leases for additional discussion of the impact of the adoption of ASU 2016-02.

In June 2018, the FASB issued ASU 2018-07, “Share-Based Payment Arrangements with Nonemployees”

(Topic 505), (“ASU 2018-07”).

ASU 2018-07 simplifies the accounting for share-based payments granted to nonemployees for goods and services.

Under ASU 2018-07, most of the guidance on such payments to nonemployees will be aligned with the requirements for share-based payments granted to employees.

Under the ASU 2018-07, the measurement of equity-classified nonemployee share-based payments will be fixed on the grant date, as defined in ASC 718, and will use the term nonemployee vesting period, rather than requisite service period.

The amendments in this update are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.

Early adoption is permitted if financial statements have not yet been issued.

The Company adopted ASU 2018-07 on April 1, 2019 and it did not have a material impact on the Company’s condensed consolidated financial statements.

On August 17, 2018, the SEC issued Release No.

33-10532, “Disclosure Update and Simplification”, (“Release No.

33-10532”) which amends certain redundant, duplicative, outdated, superseded or overlapping disclosure requirements.

The amendments in this rule are intended to facilitate the disclosure of information to investors and to simplify compliance without significantly impacting the mix of information provided to investors.

The amendments also expand the disclosure requirements regarding the analysis of stockholders’

equity for interim financial statements, in which entities will be required to present a reconciliation for each period for which a statement of comprehensive income is required to be filed.

The final rule became effective on November 5, 2018, however the SEC announced that it would not object if a filer’s first presentation of the changes in stockholders’

equity were included in its Form 10-Q for the

CAPSTONE TURBINE CORPORATION AND SUBSIDIARIES

Substantially all of the Company’s operating assets are in the United States.

Impact of Recently Issued Accounting Standards

Not yet adopted

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes .

The new guidance removes certain exceptions to the general principles of ASC 740 in order to simplify the complexities of its application.

These changes include eliminations to the exceptions for intraperiod tax allocation, recognizing deferred tax liabilities related to outside basis differences, and year-to-date losses in interim periods, among others.

The effective date of this guidance for public companies is for fiscal years, and interim period within those fiscal years, beginning after December 15, 2020.

The Company does not anticipate the adoption will have a material impact on its financial statements

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

quarter that begins after the effective date of the amendments.

The Company adopted Release No.

33-10532 on April 1, 2019 and it did not have a material impact on the Company’s financial disclosures.

Inventories are valued at the lower of cost (determined on a first in first out (“FIFO”) basis) or net realizable value and consisted of the following as of March 31, 2020 and 2019 (in thousands):

Management considers the applicability and impact of all Accounting Standards Updates (“ASUs”).

The ASUs not listed were assessed and determined by management to be either not applicable or are expected to have minimal impact on our consolidated financial position and/or results of operations.

Inventories are valued at the lower of cost (determined on a first in first out (“FIFO”) basis) or net realizable value and consisted of the following (in thousands):

Raw materials

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Finished goods

Less inventory reserve

Less non-current portion

Current portion

inventory reserve

non-current portion

Total inventory, net-current portion

The non-current portion of inventories represents that portion of the inventories in excess of amounts expected to be used in the next twelve months.

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Property, Plant and Equipment

Property, plant and equipment as of March 31, 2020 and 2019 consisted of the following (in thousands):

Property, plant, equipment and rental assets consisted of the following (in thousands):

Machinery, equipment, automobiles and furniture

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Rental assets

Less, accumulated depreciation

accumulated depreciation

Total property, plant, equipment and rental assets, net

The Company regularly reassesses the useful lives of property and equipment and retires assets no longer in service.

Depreciation expense for property, plant and equipment was $1.3 million and $1.0 million for the fiscal years ended March 31, 2020 and 2019, respectively.

CAPSTONE TURBINE CORPORATION AND SUBSIDIARIES

The Company regularly assesses the useful lives of property and equipment and retires assets no longer in service.

Depreciation expense for property, plant, equipment and rental assets was $1.3 million for Fiscal 2021 and 2020.

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Intangible Assets

Intangible assets consisted of the following (in thousands):

March 31, 2020

Manufacturing license

Trade name & parts, service and TA100 customer relationships

1.2 to 5 years

March 31, 2019

Manufacturing license

Trade name & parts, service and TA100 customer relationships

1.2 to 5 years

Amortization expense for the intangible assets was $0.2 million for the fiscal years ended March 31, 2020 and 2019.

The manufacturing license provides the Company with the ability to manufacture recuperator cores previously purchased from Solar Turbines Incorporated (“Solar”).

The Company is required to pay a per‑unit royalty fee for the life of Capstone’s patents for cores manufactured and sold by the Company using the technology.

Royalties of approximately $26,400 and $33,200 were earned by Solar for the fiscal years ended March 31, 2020 and 2019, respectively.

Earned royalties of approximately $52,500 and $26,100 were unpaid as of March 31, 2020 and 2019, respectively, and are included in accrued expenses in the accompanying balance sheets.

Intangible assets, net of amortization include intellectual property such as manufacturing licenses providing the Company with the ability to manufacture recuperator cores previously purchased from Solar Turbines Incorporated (“Solar”) and were fully amortized as of March 31, 2021 and March 31, 2020.

The Company is required to pay a per-unit royalty fee over a seventeen-year period for cores manufactured and sold by the Company using the technology.

Royalties of approximately $27,400 and $26,400 were earned by Solar for Fiscal 2021 and 2020, respectively.

Earned royalties of approximately $53,800 and $52,500 were unpaid as of March 31, 2021 and 2020, respectively, and are included in accrued expenses in the accompanying consolidated balance sheets.

Amortization expense for the intangible assets was $0.1 million and $0.2 million for Fiscal 2021 and 2020, respectively.

Accrued Warranty Reserve

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The specific terms and conditions of those warranties vary depending upon the microturbine product sold and the geography of sale.

The Company’s product warranties generally start from the delivery date and continue for up to twenty-four months.

Factors that affect the Company’s warranty obligation include product failure rates, anticipated hours of product operations and costs of repair or replacement in correcting product failures.

The Company’s product warranties generally start from the delivery date and continue for up to twenty-four months.

Factors that affect the Company’s warranty obligation include product failure rates, anticipated hours of product operations and costs of repair or replacement in correcting product failures.

These factors are estimates that may change based on new information that becomes available each period.

The Company assesses the adequacy of recorded warranty liabilities quarterly and makes adjustments to the liability as necessary.

When the Company has sufficient evidence that product changes are altering the historical failure occurrence rates, the impact of

CAPSTONE TURBINE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

such changes is then taken into account in estimating future warranty liabilities.

Changes in the accrued warranty reserve are as follows as of March 31, 2020 and 2019 (in thousands):

Changes in the accrued warranty reserve are as follows (in thousands):

Balance, beginning of the period

Standard warranty provision

Accrual related to reliability repair programs

Deductions for warranty claims

Balance, end of the period

During the fourth quarter of Fiscal 2021, we recorded a specific $4.9 million accrual related to reliability repair programs to account for the replacement of remaining high risk failure parts in some of our fielded units due to a supplier defect.

Revenue Recognition

The following table presents disaggregated revenue by business group for the fiscal year ended March 31, 2020 (in thousands):

Fiscal Year Ended

March 31, 2020

The following table presents disaggregated revenue by business group (in thousands):

Year Ended March 31,

Microturbine Products

Accessories and Parts

Total Product, Accessories and Parts

Total Product and Accessories

Parts and Service

Total Revenue

Following is the geographic revenue information based on the primary operating location of the Company’s customers for the fiscal year ended March 31, 2020 (in thousands):

Fiscal Year Ended

March 31, 2020

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Following is the geographic revenue information based on the primary operating location of the Company’s customers (in thousands):

Year Ended March 31,

United States

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Contract Balances

Our contract liabilities consist of advance payments for systems as well as deferred revenue on service obligations and extended warranties.

The Company’s contract liabilities consist of advance payments for systems as well as deferred revenue on service obligations and extended warranties.

The current portion of deferred revenue is included in current liabilities under deferred revenue and the non-current portion of deferred revenue is included in other non-current liabilities in the consolidated balance sheets.

As of March 31, 2021, the balance of deferred revenue was approximately $7.1 million compared to $8.8 million as of March 31, 2020.

This overall increase in the balance of deferred revenue of $0.6 million during the fiscal year ended March 31, 2020 was comprised of increases in deferred revenue attributable to FPP contracts of $0.5 million

CAPSTONE TURBINE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

and DSS program of $0.1 million.

Changes in deferred revenue during the fiscal year ended March 31, 2020 and 2019 are as follows (in thousands):

This overall decrease in the balance of deferred revenue of $1.7 million during Fiscal 2021 was comprised of decreases in deferred revenue attributable to deposits of $0.7 million, FPP contracts of $0.6 million and Distributor Support System (“DSS program”) of $0.4 million.

Changes in deferred revenue are as follows (in thousands):

FPP Balance, beginning of the period

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Deferred revenue balance, end of the period

Deferred revenue attributed to FPP contracts represents the unearned portion of our agreements.

Deferred revenue attributed to FPP contracts represents the unearned portion of the Company’s agreements.

FPP agreements are generally paid quarterly in advance with revenue recognized on a straight line basis over the contract period.

The DSS program provides additional support for distributor business development activities, customer lead generation, brand awareness and tailored marketing services for each of the Company’s major geography and market vertical.

This program is funded by the Company’s distributors and was developed to provide improved worldwide distributor training, sales efficiency, website development, company branding and provide funding for increased strategic marketing activities.

DSS program revenue is generally paid quarterly with revenue recognized on a straight line basis over a calendar year period.

Deposits are primarily non-refundable cash payments from distributors for future orders.

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As of March 31, 2021, approximately $4.8 million of revenue is expected to be recognized from remaining performance obligations for FPP service contracts.

The Company expects to recognize revenue on approximately $4.0 million of these remaining performance obligations over the next 12 months and the balance of $0.8 million will be recognized thereafter.

Revenue from remaining performance obligations for professional services contracts as of March 31, 2020 was not material.

Loss before provision for income taxes consisted of the following for the years ended March 31, 2021 and 2020 (in thousands):

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Current income tax provision is the amount of income taxes reported or expected to be reported on our income tax return.

The provision for current income taxes was $12,000 and $8,000 for the years ended March 31, 2020 and March 31, 2019, respectively.

The provision for current income taxes was $19,000 and $12,000 for Fiscal 2021 and 2020, respectively.

The current income taxes were related to state income and foreign taxes.

The Company did not have current federal income taxes for the fiscal year ended March 31, 2020.

CAPSTONE TURBINE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company did not have current federal income taxes for Fiscal 2021 and 2020.

Actual income tax expense differed from the amount computed by applying statutory corporate income tax rates to loss from operations before income taxes.

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Valuation allowance

Shortfall in tax benefit—stock compensation

Income tax expense

The Company’s deferred tax assets and liabilities consisted of the following at March 31, 2020 and 2019 (in thousands):

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company’s deferred tax assets and liabilities consisted of the following at March 31, 2021 and 2020 (in thousands):

Year Ended March 31,

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Deferred revenue

Net operating loss (“NOL”) carryforwards

Tax credit carryforwards

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Because of the uncertainty surrounding the timing of realizing the benefits of favorable tax attributes in future income tax returns, the Company has placed a valuation allowance against its net deferred income tax assets.

The change in valuation allowance for fiscal years ended March 31, 2020 and 2019 was $1.8 million and $2.1 million, respectively.

CAPSTONE TURBINE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company’s NOL and tax credit carryforwards for federal and state income tax purposes at March 31, 2020 were as follows (in thousands):

The change in valuation allowance for Fiscal 2021 and 2020 was $10.2 million and $1.8 million, respectively.

The Company’s NOL and tax credit carryforwards for federal and state income tax purposes at March 31, 2021 were as follows (in thousands):

Federal NOL generated before April 1, 2018

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The state tax credits consist of a research and development credit can be carried forward indefinitely.

Accounting Standards Codification (“ASC”) 740, Income Taxes clarifies the accounting for income taxes by prescribing a minimum recognition threshold that a tax position is required to meet before being recognized in the financial statements.

ASC 740 also provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition.

Based on management’s evaluation, the total amount of unrecognized tax benefits related to research and development credits as of March 31, 2020 and 2019 was $2.3 million and $2.4 million, respectively.

ASC 740 also provides guidance on de-recognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition.

Based on management’s evaluation, the total amount of unrecognized tax benefits related to research and development credits as of March 31, 2021 and 2020 was $1.9 million and $2.3 million, respectively.

There were no interest or penalties related to unrecognized tax benefits as of March 31, 2021 or March 31, 2020.

The amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate as of March 31, 2020 and March 31, 2019 was $2.3 million and $2.4 million, respectively.

The amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

as of March 31, 2021 and March 31, 2020 was $1.9 million and $2.3 million, respectively.

However, this impact would be offset by an equal increase in the deferred tax valuation allowance as the Company has recorded a full valuation allowance against its deferred tax assets because of uncertainty as to future realization.

17 unchanged sentences

However, net operating loss carryforwards remain subject to examination to the extent they are carried forward and impact a year that is open to examination by tax authorities.

The Company's evaluation was performed for the tax years which remain subject to examination by major tax jurisdictions as

CAPSTONE TURBINE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

of March 31, 2020.

The Company's evaluation was performed for the tax years which remain subject to examination by major tax jurisdictions as of March 31, 2021.

When applicable, the Company accounts for interest and penalties generated by tax contingencies as interest and other expense, net in the statements of operations.

In response to the coronavirus (COVID-19) pandemic, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted on March 27, 2020 in the U.S.

The CARES Act includes many measures to assist companies, including temporary changes to income and non-income-based tax laws.

The Company currently does not expect the CARES Act to have a material impact on the Company’s financial results, including on the Company’s annual estimated effective tax rate.

The Company will continue to monitor and assess the impact the CARES Act, and similar legislation in other countries, with respect to what impact they may have on the Company’s business and financial results.

Stockholders’

The following table summarizes, by statement of operations line item, stock-based compensation expense for the fiscal years ended March 31, 2020 and 2019 (in thousands):

The Company currently does not expect the CARES Act to have a material impact on the Company’s financial results, including on the Company’s annual estimated effective tax rate.

On December 27, 2020 the Consolidated Appropriations Act, 2021 was signed into law.

It provides additional COVID-19 focused relief and extends certain provisions of the CARES Act.

At this time, we do not expect that the Consolidated Appropriations Act, 2021 to have a material impact on the Company’s financial results.

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Stockholders’ Equity

The following table summarizes, by consolidated statements of operations line item, stock-based compensation expense (in thousands):

Year Ended March 31,

Cost of goods sold

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2000 and 2017 Equity Incentive Plans

In June 2000, the Company adopted the 2000 Equity Incentive Plan (“2000 Plan”).

The 2000 Plan provides for a total maximum aggregate number of shares which may be issued of 184,900 shares.

In June 2017, the Company’s Board of Directors (the “Board”) adopted the Capstone Turbine Corporation 2017 Equity Incentive Plan (the “2017 Plan”) which was approved by the stockholders at the Company’s 2017 annual meeting of stockholders on August 31, 2017 (the “2017 Annual Meeting”).

In June 2017, the Company’s Board adopted the Capstone Turbine Corporation 2017 Equity Incentive Plan (the “2017 Plan”), which was approved by the stockholders at the Company’s 2017 annual meeting of stockholders on August 31, 2017 (the “2017 Annual Meeting”).

The 2017 Plan provides for awards of up to 300,000 shares of Common Stock.

The 2017 Plan is administered by the Compensation Committee designated by the Board (the “Compensation Committee”).

The Compensation Committee’s authority includes determining the number of incentive awards and vesting provisions.

On June 5, 2018, the Company’s Board of Directors adopted an amendment of the 2017 Plan to increase the aggregate number of shares of common stock authorized for issuance under the 2017 Plan by 300,000 shares of common stock.

The amendment of the 2017 Plan was approved by the Company’s stockholders at the 2018 annual meeting of stockholders on August 30, 2018.

On August 29, 2019, at the Company’s 2019 annual meeting, the Registrant’s stockholders approved another amendment to the 2017 Plan to increase the aggregate number of shares authorized for issuance under the 2017 Plan by 300,000 shares to 900,000 shares of common stock.

The 2017 Plan is administered by the Compensation Committee designated by the Board (the “Compensation Committee”).

The Compensation Committee’s authority includes determining the number of incentive awards and vesting provisions.

On June 5, 2018, the Company’s Board of Directors adopted an amendment of the 2017 Plan to increase the aggregate number of shares of Common Stock authorized for issuance under the 2017 Plan by 300,000 shares of Common Stock.

The amendment of the 2017 Plan was approved by the Company’s stockholders at the 2018 annual meeting of stockholders on August 30, 2018.

On August 29, 2019, at the Company’s 2019 annual meeting, the Company’s stockholders approved another amendment to the 2017 Plan to increase the aggregate number of shares authorized for issuance under the 2017 Plan by 300,000 shares to 900,000 shares of Common Stock.

On August 27, 2020, at the Company’s 2020 annual meeting, the Company’s stockholders approved another amendment to the 2017 Plan to increase the aggregate number of shares authorized for issuance under the 2017 Plan by 500,000 shares to 1,400,000 shares of Common Stock.

As of March 31, 2020, there were 603,677 shares available for future grants under the 2017 Plan.

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Stock Options

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All options are subject to the following vesting provisions:

one-fourth vest one year after the issuance date and 1/48th vest on the

CAPSTONE TURBINE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

first day of each full month thereafter, so that all options will be vested on the first day of the 48th month after the grant date.

Information relating to stock options for fiscal year ended March 31, 2020, is as follows:

one-fourth vest one year after the issuance date and 1/48th vest on the first day of each full month thereafter, so that all options will be vested on the first day of the 48th month after the grant date.

The following table summarizes information relating to the Company’s stock option activity during Fiscal 2021:

Exercise Price

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Black-Scholes Model Valuation Assumptions

There were no stock options granted during the fiscal year ended March 31, 2020 or 2019.

There was no expense associated with stock options during the fiscal year ended March 31, 2020 or 2019.

There were no stock options granted and no expense associated with stock options during Fiscal 2021 or 2020.

There were no unvested stock option awards as of March 31, 2021.

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The Company issued restricted stock units under the 2000 Plan and issues restricted stock units under the 2017 Plan to employees, non-employee directors and consultants.

The restricted stock units are valued based on the closing price of the Company’s common stock on the date of issuance, and compensation cost is recorded on a straight-line basis over the vesting period.

During the fiscal year ended March 31, 2017, the Company established an accounting policy election to assume zero forfeiture for restricted stock units and account for forfeitures when they occur through the adoption of ASU 2016-09.

The restricted stock units vest in equal installments over a period of four years.

The restricted stock units issued to employees vest in equal installments over a period of two, three or four years.

For restricted stock units with two year vesting, 100% vests on the second year anniversary.

For restricted stock units with three year vesting, one-third vest annually beginning one year after the issuance date.

For restricted stock units with four year vesting, one-fourth vest annually beginning one year after the issuance date.

The restricted stock units issued to non-employee directors vest one year after the issuance date.

The following table outlines the restricted stock unit and performance restricted stock unit (“PRSU”) activity:

The following table summarizes restricted stock unit and performance restricted stock unit (“PRSU”) activity during Fiscal 2021:

Average Grant

Restricted Stock Units and Performance Restricted Stock Units

Nonvested restricted stock units outstanding at March 31, 2019

Non-vested restricted stock units outstanding at March 31, 2020

Vested and issued

Nonvested restricted stock units outstanding at March 31, 2020

Non-vested restricted stock units outstanding at March 31, 2021

Restricted stock units expected to vest beyond March 31, 2021

CAPSTONE TURBINE CORPORATION AND SUBSIDIARIES

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table provides additional information on restricted stock units and performance restricted stock units for the Company’s fiscal years ended March 31, 2020 and 2019:

The following table provides additional information on restricted stock units and performance restricted stock units:

Year Ended March 31,

Restricted stock compensation expense (in thousands)

2 unchanged sentences

As of March 31, 2021, there was approximately $1.8 million of total compensation cost related to unvested restricted stock units that is expected to be recognized as expense over a weighted average period of 2.3 years.

The Company’s PRSU activity is included in the above restricted stock units tables.

The PRSU program has a two-year or three-year performance measurement period.

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At the end of each performance measurement period, the Compensation Committee will determine the achievement against the performance objectives.

During the fiscal year ended March 31, 2020, the Company granted 30,139 PRSUs with a third-year performance measurement and the criteria measured by the Company’s cash flow from operations and aftermarket sales absorption.

There were no PRSUs granted during Fiscal 2021.

During Fiscal 2020, the Company granted 30,139 PRSUs with a third-year performance measurement and the criteria measured by the Company’s cash flow from operations and aftermarket sales absorption.

The target PRSU awards for each participant, will be paid upon achievement of the target level of performance for cash flow from operations and aftermarket sale absorption, taking into account the applicable weighting for the individual metric.

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The weighted average per share grant date fair value of PRSUs granted during Fiscal 2020 was $8.90.

Based on the Company’s assessment as of March 31, 2020, the threshold for one of the performance measurements on the 2-year vesting PRSU was met and as a result we recorded compensation expense of approximately $0.1 million during the fiscal year ended March 31, 2020.

Such compensation expense is recognized over the corresponding requisite service period and will be adjusted in subsequent reporting periods if the Company’s assessment of the probable level of achievement of the performance goals changes.

The Company will continue to periodically assess the likelihood of the PRSU threshold being met until the end of the applicable performance period.

Restricted Stock Awards

The Company issued restricted stock awards under the 2000 Plan to employees and non-employee directors.

There were no restricted stock awards granted during the fiscal year ended March 31, 2020 or 2019.

No expense was recorded associated with its restricted stock awards during the fiscal year ended March 31, 2020 or 2019.

For each term of the Board of Directors (beginning on the date of an annual meeting of stockholders and ending on the date immediately preceding the next annual meeting of stockholders), a non-employee director may elect to receive a stock award in lieu of all or any portion of their annual retainer or committee fee cash payment.

The shares of stock were valued based on the closing price of the Company’s common stock on the date of grant.

CAPSTONE TURBINE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Based on the Company’s assessment as of March 31, 2021, the Company will not meet the threshold of the performance measurements, and as a result, no compensation expense was recorded during Fiscal 2021.

Compensation expense is recognized over the corresponding requisite service period and will be adjusted in subsequent reporting periods if the Company’s assessment of the probable level of achievement of the performance goals change.

The Company will continue to assess the likelihood of the PRSU threshold being met until the end of the applicable performance period.

Employee Stock Purchase Plan

In June 2000, the Company adopted the Employee Stock Purchase Plan (the “ESPP”).

The ESPP provides for the granting of rights to purchase common stock to regular full and part-time employees or officers of the Company and its subsidiaries.

In June 2017, the Board unanimously approved an amendment and restatement to the ESPP which was approved by the stockholders at the Company’s annual meeting of stockholders on August 31, 2017.

Prior to the current amendment, 7,000 shares of the Company’s common stock had been reserved for issuance.

As amended, the ESPP continued by its terms and the number of shares of the Company’s common stock available increased by 50,000 shares which reserved for issuance a total of 57,000 shares of common stock.

Under the ESPP, shares of the Company’s common stock are issued upon exercise of the purchase rights.

The ESPP will continue by its terms through June 30, 2020, unless terminated sooner.

The maximum amount that an employee can contribute during a purchase right period is $25,000 or 15% of the employee’s regular compensation.

In June 2017, the Board unanimously approved an amendment and restatement to the ESPP which was approved by the stockholders at the Company’s annual meeting of stockholders on August 31, 2017.

Prior to the amendment, 7,000 shares of the Company’s Common Stock had been reserved for issuance.

Under the ESPP, shares of the Company’s common stock are issued upon exercise of the purchase rights.

The ESPP terminated as of March 31, 2021.

The maximum amount that an employee can contribute during a purchase right period is $25,000 or 15% of the employee’s regular compensation.

Under the ESPP, the exercise price of a purchase right is 95% of the fair market value of such shares on the last day of the purchase right period.

The fair market value of the stock is its closing price as reported on the Nasdaq Capital Market on the day in question.

During the fiscal years ended March 31, 2020 and 2019, the Company issued a total of 522 shares and 101 shares of stock, respectively, to regular full and part-time employees or officers of the Company who elected to participate in the ESPP.

As of March 31, 2020, there were 48,838 shares available for future grant under the ESPP.

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Stockholder Rights Plan

On May 6, 2019, the Company’s Board of Directors (the “Board”), declared a dividend of one right (a “New Right”) for each of the Company’s issued and outstanding shares of common stock, $0.001 par value per share (“Common Stock”).

The dividend will be paid to the stockholders of record at the close of business on May 16, 2019 (the “Record Date”).

Each New Right entitles the registered holder, subject to the terms of the NOL Rights Agreement (as defined below), to purchase from the Company one one-thousandth of a share of the Company’s Series B Junior Participating Preferred Stock (the “Preferred Stock”) at a price of $5.22 (the “Exercise Price”), subject to certain adjustments.

The description and terms of the New Rights are set forth in the Rights Agreement dated as of May 6, 2019 (the “NOL Rights Agreement”) between the Company and Broadridge Financial Solutions, Inc., as Rights Agent (the “Rights Agent”).

The NOL Rights Agreement replaces the Company’s Rights Agreement, dated May 6, 2016, by and between the Company and Broadridge Financial Solutions, Inc., as successor-in-interest to Computershare Inc., as rights agent (the “Original Rights Agreement”).

On May 6, 2019, the Board declared a dividend of one right (a “New Right”) for each of the Company’s issued and outstanding shares of Common Stock.

The dividend will be paid to the stockholders of record at the close of business on May 16, 2019 (the “Record Date”).

The NOL Rights Agreement replaced the Company’s Rights Agreement, dated May 6, 2016, by and between the Company and Broadridge Financial Solutions, Inc., as successor-in-interest to Computershare Inc., as rights agent (the “Original Rights Agreement”).

The Original Rights Agreement, and the rights thereunder to purchase fractional shares of Preferred Stock, expired at 5:00 p.m., New York City time, on May 6, 2019 and the NOL Rights Agreement was entered into immediately thereafter.

The purpose of the NOL Rights Agreement is to diminish the risk that the Company’s ability to use its net operating losses and certain other tax assets (collectively, “Tax Benefits”) to reduce potential future federal income tax obligations would become subject to limitations by reason of the Company’s experiencing an “ownership change,”

as defined in Section 382 of the Internal Revenue Code of 1986, as amended (the “Tax Code”).

A company generally experiences such an ownership change if the percentage of its stock owned by its “5-percent shareholders,”

as defined in Section 382 of the Tax Code, increases by more than 50 percentage points over a rolling three-year period.

The NOL Rights Agreement is designed to reduce the likelihood that the Company will experience an ownership change under Section 382 of the Tax Code by (i) discouraging any person or group from becoming a 4.9% shareholder and (ii) discouraging any existing 4.9% shareholder from acquiring additional shares of the Company’s stock.

which is defined as a person or group of affiliated or associated persons who, at any time after the date of the NOL Rights Agreement, have acquired, or obtained the right to acquire, beneficial ownership of 4.9% or more of the Company’s outstanding shares of Common Stock, subject to certain exceptions or (ii) the close of

CAPSTONE TURBINE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

business on the tenth business day after the commencement of, or announcement of an intention to commence, a tender offer or exchange offer the consummation of which would result in any person becoming an Acquiring Person (the earlier of such dates being called the “Distribution Date”).

Certain synthetic interests in securities created by derivative positions, whether or not such interests are considered to be ownership of the underlying Common Stock or are reportable for purposes of Regulation 13D of the Securities Exchange Act, are treated as beneficial ownership of the number of shares of Common Stock equivalent to the economic exposure created by the derivative position, to the extent actual shares of the Common Stock are directly or indirectly held by counterparties to the derivatives contracts.

A company generally experiences such an ownership change if the percentage of its stock owned by its “5-percent shareholders,” as defined in Section 382 of the Tax Code, increases by more than 50 percentage points over a rolling three-year period.

The NOL Rights Agreement is designed to reduce the likelihood that the Company will experience an ownership change under Section 382 of the Tax Code by (i) discouraging any person or group from becoming a 4.9% or greater shareholder and (ii) discouraging any existing 4.9% or greater shareholder from acquiring additional shares of the Company’s stock.

The New Rights will not be exercisable until the earlier to occur of (i) the close of business on the tenth business day after a public announcement or filing that a person has, or group of affiliated or associated persons have, become an “Acquiring Person,” which is defined as a person or group of affiliated or associated persons who, at any time after the date of the NOL Rights Agreement, have acquired, or obtained the right to acquire, beneficial ownership of 4.9% or more of the Company’s outstanding shares of Common Stock, subject to certain exceptions or (ii) the close of business on the tenth business day after the commencement of, or announcement of an intention to commence, a tender offer or exchange offer the consummation of which would result in any person becoming an Acquiring Person (the earlier of such dates being called the “Distribution Date”).

Certain synthetic interests in securities created by derivative positions, whether or not such interests are considered to be ownership of the underlying Common Stock or are reportable for purposes of Regulation 13D of the Exchange Act, are treated as beneficial ownership of the number of shares of Common Stock equivalent to the economic exposure created by the derivative position, to the extent actual shares of the Common Stock are directly or indirectly held by counterparties to the derivatives contracts.

With respect to certificates representing shares of Common Stock outstanding as of the Record Date, until the Distribution Date, the New Rights will be evidenced by such certificates for shares of common stock registered in the names of the holders thereof, and not by separate Rights Certificates, as described further below.

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Until the earlier of the Distribution Date and the Expiration Date, as described below, the transfer of any shares of common stock outstanding on the Record Date will also constitute the transfer of the New Rights associated with such shares of common stock.

As soon as practicable after the Distribution Date, separate certificates evidencing the New Rights (“Right Certificates”) will be mailed to holders of record of the Common Stock as of the close of business on the Distribution Date, and such Right Certificates alone will evidence the New Rights.

The New Rights, which are not exercisable until the Distribution Date, will expire prior to the earliest of (i) May 6, 2022 or such later day as may be established by the Board prior to the expiration of the New Rights, provided that the extension is submitted to the Company’s stockholders for ratification at the next annual meeting of stockholders of the Company succeeding such extension;

As soon as practicable after the Distribution Date, separate certificates evidencing the New Rights (“Right Certificates”) will be mailed to holders of record of the common stock as of the close of business on the Distribution Date, and such Right Certificates alone will evidence the New Rights.

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(ii) the time at which the New Rights are redeemed pursuant to the NOL Rights Agreement;

1 unchanged sentence

(iv) the time at which the New Rights are terminated upon the occurrence of certain transactions;

(v) the close of business on the first day after the Company’s 2019 annual meeting of stockholders, if approval by the stockholders of the Company of the NOL Rights Agreement has not been obtained on or prior to the close of business on the first day after the Company’s 2019 annual meeting of stockholders;

(vi) the close of business on the effective date of the repeal of Section 382 of the Tax Code, if the Board determines that the NOL Rights Agreement is no longer necessary or desirable for the preservation of Tax Benefits;

and (vii) the close of business on the first day of a taxable year of the Company to which the Board determines that no Tax Benefits are available to be carried forward, (the earliest of (i), (ii), (iii), (iv), (v), (vi) and (vii) is referred to as the “Expiration Date”).

Each share of Preferred Stock will be entitled, when, as and if declared, to a preferential per share quarterly dividend payment equal to the greater of (i) $1.00 per share or (ii) an amount equal to 1,000 times the aggregate quarterly dividend declared per share of common stock since the immediately preceding quarterly dividend payment date for the common stock (or, with respect to the first quarterly dividend payment on the Common Stock, since the first issuance of the Preferred Stock).

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At-the-Market Offering

Effective August 28, 2015, the Company entered into a sales agreement with Cowen and Company, LLC with respect to an at-the-market offering program pursuant to which the Company offered and sold, from time to time at its sole discretion, shares of its common stock, having an aggregate offering price of up to $30.0 million.

During the fiscal year ended March 31, 2019, the Company issued 0.3 million shares of the Company’s common stock under this at-the-market offering program and the net proceeds to the Company from the sale of the Company’s common stock were

CAPSTONE TURBINE CORPORATION AND SUBSIDIARIES

On June 7, 2018, we entered into a Sales Agreement with H.C.

Wainwright & Co., LLC (the “Sales Agreement”) with respect to an at-the-market offering program (the “ATM Program”) pursuant to which we may offer and sell, from time to time at our sole discretion, shares of our Common Stock, having an aggregate offering price of up to $25.0 million.

We will set the parameters for sales of the shares, including the number to be sold, the time period during which sales are requested to be made, any limitation on the number that may be sold in one trading day and any minimum price below which sales may not be made.

During Fiscal 2021, we issued approximately 2.0 million shares of our Common Stock under the ATM program and the net proceeds to us from the sale of our Common Stock were approximately $15.9 million after deducting commissions paid of approximately $0.5 million.

During our fourth fiscal quarter ended March 31, 2021, we issued 1,242,253 shares of our common stock under the ATM program and the net proceeds to us were approximately $14.5 million after deducting commissions paid of approximately $0.5 million.

On July 15, 2020, we entered into an amendment to the Sales Agreement, which modified the Sales Agreement to, among other things, amend the termination provisions of the Agreement and amend the maximum amount of shares of our Common Stock that we may offer and sell through or to H.C.

Wainwright & Co., LLC from time to time under the ATM Program.

On March 19, 2021, we entered into a second amendment to the Sales Agreement, which modified the Sales Agreement to, among other things, reflect the Company’s filing of a new Registration Statement on Form S-3 with the SEC on March 22, 2021 and set the maximum amount of shares of our Common Stock that we may offer and sell through or to H.C.

Wainwright at $50 million, subject to certain limitations set forth in the amendment.

As of March 31, 2021, approximately $3.9 million remained available for issuance with respect to this ATM Program.

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

approximately $4.0 million after deducting commissions paid of approximately $0.1 million.

As of March 31, 2019, 2.6 million shares of the Company’s common stock were cumulatively sold pursuant to the at-the-market offering program and the net proceeds to the Company from the sale of the common stock were approximately $28.6 million after deducting commissions paid of approximately $0.8 million.

This at-the-market offering program expired on May 29, 2018.

On June 7, 2018, the Company entered into a sales agreement with H.C.

Wainwright & Co., LLC with respect to an at-the-market offering program pursuant to which the Company may offer and sell, from time to time at its sole discretion, shares of its common stock, having an aggregate offering price of up to $25.0 million.

The Company will set the parameters for sales of the shares, including the number to be sold, the time period during which sales are requested to be made, any limitation on the number that may be sold in one trading day and any minimum price below which sales may not be made.

During the fiscal year ended March 31, 2020, the Company issued 1.7 million shares of the Company’s common stock under the at-the-market offering program and the net proceeds to the Company from the sale of the Company’s common stock were approximately $5.3 million after deducting commissions paid of approximately $0.2 million.

As of March 31, 2020, approximately $12.2 million remained available for issuance with respect to this at-the-market offering program.

On April 13, 2018, a warrant holder exercised its rights to the warrant agreement to exercise on a cashless basis 576,000 Series A warrants at an exercise price of $6.00 per share under the warrant agreement.

In accordance with terms of the warrant agreement, after taking into account the shares withheld to satisfy the cashless exercise option, the Company issued 380,621 shares of common stock.

As of March 31, 2020, there were 271,875 Series A warrants outstanding and there are no Series B warrants outstanding.

Of the total Series A warrants outstanding, 217,875 Series A warrants were issued with an exercise price of $25.50 per share of common stock, and have an expiration date of October 25, 2021, and 54,000 Series A warrants with anti-dilution provisions were issued with an initial exercise price of $13.40 per share of common stock, and have an expiration date of April 22, 2021.

Series A Warrants

As of March 31, 2021, there were 271,875 Series A warrants outstanding.

217,875 Series A warrants were issued with an exercise price of $25.50 per share of Common Stock, are exercisable into an aggregate amount of up to 217,875 shares of our common stock, and have an expiration date of October 25, 2021.

54,000 Series A warrants with anti-dilution provisions were issued with an initial exercise price of $13.40 per share of Common Stock, are exercisable into an aggregate amount of up to 54,000 shares of our common stock, and have an expiration date of April 22, 2021.

As of March 31, 2021, because of the anti-dilution provisions, these warrants had an adjusted exercise price of $1.15 per share of Common Stock.

Goldman Warrant

On February 4, 2019, the Company sold to Goldman Sachs & Co.

LLC (the “Holder”), a Purchase Warrant for Common Shares (the “Warrant”) pursuant to which the Holder may purchase shares of the Company’s common stock, par value $0.001 per share (the “Common Shares”) in an aggregate amount of up to 404,634 shares (the “Warrant Shares”).

LLC (the “Holder”), a Purchase Warrant for Common Shares (the “Warrant”) pursuant to which the Holder may purchase shares of the Company’s in an aggregate amount of up to 404,634 shares (the “Warrant Shares”).

The Warrant was sold to the Holder at a purchase price of $150,000, in a private placement exempt from registration under the Securities Act.

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The Warrant contains standard adjustment provisions in the event of additional stock issuances below the exercise price of the warrant, stock splits, combinations, rights offerings and similar transactions.

The value of the Warrant was $2.3 million, and has been classified as an equity instrument in additional paid in capital in the Company’s condensed consolidated balance sheets.

The Company’s Common Stock and warrant transactions during Fiscal 2021 triggered certain anti-dilution provisions in the warrants outstanding.

As a result, the Company issued an additional 8,542 warrants and recorded a deemed dividend amounting to $15,000 during Fiscal 2021 in the Company’s consolidated statements of operations.

As of March 31, 2021, the Holder may purchase shares of the Company’s Common Stock in an aggregate amount of up to 463,067 shares.

On December 9, 2019, the Company entered into an Amendment No.

1 to the Purchase Warrant for Common Shares (the “Amendment No.

1”) with Special Situations Investing Group II, LLC (as successor in interest to Goldman Sachs & Co.

LLC) (the “Warrant Holder”) that amended the Warrant.

The Amendment No.

1 amended the Warrant to increase the number of Warrant Shares issuable under the Warrant (on a post-reverse split basis) and to decrease the exercise price from $8.86 per share (on a post-reverse split basis) to $3.80 per share (the “Per Share Warrant Exercise Price”).

The Amendment No.

1 also amended the Warrant such that the Per Share Anti-Dilution Price is equal to the Per Share Warrant Exercise Price.

As a result of the decrease in exercise price, the Company recorded the change in valuation of $0.3 million as additional debt discount with a corresponding entry to additional paid-in capital in the condensed consolidated balance sheets and statements of stockholders equity.

On June 16, 2020, the Company entered into an Amendment No.

2 to the Purchase Warrant for Common Shares (“Amendment No.

2”) with the Warrant Holder to increase the number of Warrant Shares (as defined therein) issuable under the Warrant and to decrease the exercise price from $3.80 per share to $2.61 per share (the “Per Share Warrant Exercise Price”).

The Company would receive aggregate gross proceeds of $1,186,313 if the outstanding Warrant is exercised at the new Per Share Warrant Exercise Price.

Amendment No.

2 also amended the Warrant such that the Per Share Anti-Dilution Price (as defined therein) is equal to the Per Share Warrant Exercise Price as provided in the Amendment No.

2 to the Warrant.

As a result of the decrease in exercise price, the Company recorded the change in valuation of $0.1 million as additional debt discount with a corresponding entry to additional paid in capital in the condensed consolidated balance sheets and statements of stockholders equity.

All other terms and provisions in the Warrant remain in effect.

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Goldman “2020 Warrant”

On October 1, 2020, the Company entered into an Amendment No.

3 to the Purchase Warrant for Common Shares (the “Amendment No.

3”) with Special Situations Investing Group II, LLC (as successor in interest to Goldman Sachs & Co.

LLC) (the “Warrant Holder”) that amends that certain Purchase Warrant for Common Shares originally issued by the Company to Goldman Sachs & Co.

LLC, dated February 4, 2019, as amended (the “Original Warrant”).

Amendment No.

3 amends the Original Warrant to amend Section 2.1, Section 2.2(c) and Section 18.1 of the Warrant to, among other things, make certain changes necessitated by the issuance of a second Warrant (the “2020 Warrant”) to the Warrant Holder pursuant to the Company’s entry into the Amended & Restated (“A&R”) Note Purchase Agreement (See Note 11 – Term Note Payable).

On October 1, 2020, and pursuant to the Company’s entry into the A&R Note Purchase Agreement, the Company sold to the Warrant Holder the 2020 Warrant to purchase up to 291,295 shares (the “2020 Warrant Shares”) of the Company’s Common Stock.

The 2020 Warrant was sold to the Warrant Holder at a purchase price of $10,000, in a private placement exempt from registration under the Securities Act.

The 2020 Warrant may be exercised by the Warrant Holder at any time after October 1, 2020 at an exercise price equal to $4.76 and will expire on February 4, 2024.

The value of the Warrant was $0.8 million, and has been classified as an equity instrument in additional paid in capital in our consolidated balance sheets.

The value of the Warrant was determined using the Black-Scholes Option Pricing model using the following assumptions:

Fiscal Year Ended

March 31, 2021

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Expected volatility

CAPSTONE TURBINE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company’s common stock and warrant transactions during Fiscal 2020 triggered certain anti-dilution provisions in the warrants outstanding.

As a result, the Company issued an additional 49,891 warrants and recorded a deemed dividend amounting to $87,362.

On December 9, 2019, the Company entered into an Amendment No.

1 to the Purchase Warrant for Common shares (the “Amendment No.

1”) with Special Situations Investing Group II, LLC (as successor in interest to Goldman Sachs & Co.

LLC) (the “Warrant Holder”) that amends the Warrant.

The Amendment No.

1 amends the first paragraph of the Warrant to increase the number of Warrant Shares issuable under the Warrant (on a post-reverse split basis) and to decrease the exercise price from $8.86 per share (on a post-reverse split basis) to $3.80 per share (the “Per Share Warrant Exercise Price”).

The Amendment No.

1 also amends Section 2.1 of the Warrant such that the Per Share Anti-Dilution Price is equal to the Per Share Warrant Exercise Price.

As a result of the decrease in exercise price, we recorded the change in valuation of $0.3 million as additional debt discount with a corresponding entry to additional paid in capital in the consolidated balance sheets.

On September 4, 2019, the Company entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with certain institutional and accredited investors pursuant to which the Company agreed to issue and sell in a registered direct offering (the “Registered Direct Offering”) an aggregate of 580,000 shares of our common stock, par value $0.001 per share at a negotiated purchase price of $5.00 per share, and pre-funded warrants to purchase up to an aggregate of 440,000 shares of our common stock at a negotiated purchase price of $5.00 per Pre-Funded Warrant, for aggregate gross proceeds of approximately $5.1 million (580,000 shares of our common stock plus 440,000 pre-funded warrants at a $5.00 per share purchase price), before deducting placement agent fees and other offering expenses.

September 2019 Pre-Funded and Series D Warrants

On September 4, 2019, the Company entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with certain institutional and accredited investors pursuant to which the Company agreed to issue and sell in a registered direct offering (the “Registered Direct Offering”) an aggregate of 580,000 shares of Common Stock, at a negotiated purchase price of $5.00 per share, and pre-funded warrants to purchase up to an aggregate of 440,000 shares of Common Stock at a negotiated purchase price of $5.00 per Pre-Funded Warrant, for aggregate gross proceeds of approximately $5.1 million (580,000 shares of Common Stock plus 440,000 pre-funded warrants at a $5.00 per share purchase price), before deducting placement agent fees and other offering expenses.

Net proceeds from the offering were $4.6 million.

1 unchanged sentence

On October 24, 2019, a warrant holder exercised its rights to the warrant agreement to exercise on a cash basis 440,000 pre-funded warrants at an exercise price of $0.001 per share under the warrant agreement.

In a concurrent private placement, we agreed to issue to the purchasers warrants to purchase 765,000 shares of Common Stock, which represent 75% of the number of shares of Common Stock and shares underlying the Pre-Funded Warrants purchased in the Registered Direct Offering, pursuant to the Securities Purchase Agreement.

In a concurrent private placement, the Company issued to the purchasers warrants to purchase 765,000 shares of Common Stock, which represent 75% of the number of shares of Common Stock and shares underlying the Pre-Funded Warrants purchased in the Registered Direct Offering, pursuant to the Securities Purchase Agreement.

The Common Warrants will be exercisable for shares of Common Stock at an initial exercise price of $6.12 per share for a period of five years, starting on April 2, 2020 and expiring on April 2, 2025.

None of these warrants have been exercised as of the date of this report.

In January 2021, three warrant holders exercised their rights to the warrant agreement to exercise on a cashless basis 690,000 Series D warrants at an exercise price of $6.12 per share under the warrant agreement.

In accordance with terms of the warrant agreement, after taking into account the shares withheld to satisfy the cashless exercise option, the Company issued 352,279 shares of Common Stock.

As of March 31, 2021, there were 75,000 Series D warrants outstanding.

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Stock to Vendors

On February 17, 2021, the Company and Andretti Autosport 6, Inc.

(“AA”), a race team participating in the IndyCar Series sanctioned by INDYCAR, LLC (the “Series”), entered into a Sponsorship Agreement (the “Sponsorship Agreement”) effective January 1, 2020 through December 31, 2020, whereby the Company agreed to sponsor AA’s Car #88 participation in the Series on a full-time basis.

In exchange for AA’s participation in the Series, the Company agreed to a sponsorship fee in the total amount of approximately, $1.3 million of which $0.7 million will be paid in cash due and payable in four installments and $0.6 million in unregistered shares of common stock of the Company.

(“AA”), a race team participating in the IndyCar Series sanctioned by INDYCAR, LLC (the “Series”), entered into a Sponsorship Agreement (the “Sponsorship Agreement”) effective January 1, 2021 through December 31, 2021, whereby the Company agreed to sponsor AA’s Car #88 participation in the Series on a full-time basis.

In exchange for AA’s participation in the Series, the Company agreed to a sponsorship fee in the total amount of approximately, $1.1 million of which $0.2 million due and payable in cash and $0.9 million in unregistered shares of Common Stock of the Company.

During the term of the Sponsorship Agreement and any renewal or extension of the agreement, the Company has agreed that it shall exclusively sponsor the AA Group (as defined therein).

The Sponsorship Agreement contains, among other provisions, certain representations and warranties by the parties, intellectual property protection covenants, certain indemnification rights in favor of each party and customary confidentiality provisions.

Due to the COVID-19 pandemic, the IndyCar Series was delayed and did not begin until June 2020.

Cash paid under the Sponsorship Agreement was $0.3 million as of March 31, 2020 and stock in the amount of 229,886 was issued as of February 10, 2020.

Both the cash and the value of the unregistered shares of common stock have been recorded as

CAPSTONE TURBINE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

a prepaid marketing cost and are included in Prepaid expenses and other current assets and Stockholder’s Equity in the Consolidated Balance Sheets as of March 31, 2020.

Under the Sponsorship Agreement, 105,933 shares of the Company’s Common Stock were issued as of February 17, 2021.

The value of the unregistered shares of Common Stock have been recorded as a prepaid marketing cost and are included in prepaid expenses and other current assets and stockholder’s equity in the consolidated balance sheets as of March 31, 2021.

Fair Value Measurements

11 unchanged sentences

Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The asset or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Basis for Valuation

The carrying values reported in the condensed consolidated balance sheets for cash and cash equivalents, accounts receivable and accounts payable approximate fair values because of the immediate or short-term maturities of these financial instruments.

The term note payable has been recorded net of a discount based on the fair value of the associated warrant and capitalized debt issuance costs.

The carrying values reported in the condensed consolidated balance sheets for cash and cash equivalents, accounts receivable and accounts payable approximate their fair values because of the immediate or short-term maturities of these financial instruments.

The term note payable has been recorded net of a discount based on the fair value of the associated warrant and capitalized debt issuance costs and as of March 31, 2021 includes both the Three-Year Term Note and the SBA Paycheck Protection Program (“PPP”) Loan as discussed in Note 11–Term Note Payable.

The carrying values and estimated fair values of these obligations are as follows (in thousands):

2 unchanged sentences

Term note payable

CAPSTONE TURBINE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Term Note Payable

On February 4, 2019 (the “Closing Date”), we entered into a Note Purchase Agreement (the “Note Purchase Agreement”), by and among us, certain subsidiaries of us party thereto as guarantors, Goldman Sachs Specialty Lending Holdings, Inc.

and any other purchasers party thereto from time to time (collectively, the “Purchaser”) and Goldman Sachs Specialty Lending Holdings, Inc.

Under the Note Purchase Agreement, we sold to the Purchaser $30.0 million aggregate principal amount of senior secured notes (the “Notes”), which bear interest at a rate of 13.0% per annum and payable quarterly on March 31, June 30, September 30 and December 31 of each year until maturity.

The first interest payment on the Notes will be on March 31, 2019.

The entire principal amount of the Notes is due and payable on February 4, 2022 (the “Maturity Date”).

The Notes do not amortize and the entire principal balance is due in a single payment on the Maturity Date.

As of March 31, 2019, $30.0 million in borrowings were outstanding under the three-year term note.

Obligations under the Note Purchase Agreement are secured by all of our assets, including intellectual property and general intangibles.

The Note Purchase Agreement contains customary covenants, including, among others, covenants that restrict our ability to incur debt, grant liens, make certain investments and acquisitions, pay dividends, repurchase equity interests, repay certain debt, amend certain contracts, enter into affiliate transactions and asset sales or make certain equity issuances (including equity issuances that would cause an ownership change within the meaning of Section 382 of the Internal Revenue Code), and covenants that require us to, among other things, provide annual, quarterly and monthly financial statements, together with related compliance certificates, maintain its property in good repair, maintain insurance and comply with applicable laws.

On December 9, 2019, the Company entered into a Second Amendment (the “Second Amendment”) to the Note Purchase Agreement.

Under the Second Amendment, the parties agreed to amend Section 6.21 of the Note Purchase Agreement to increase the Section 382 Ownership Shift threshold to not exceed 40.0%.

The financial covenants of the Note Purchase Agreement require the Company not to exceed specified levels of Adjusted EBITDA losses relative to its financial model, beginning with the fiscal quarter ending September 30, 2020.

Additionally, we shall not permit our minimum consolidated liquidity, which consists of our cash and cash equivalents, to be less than $12.0 million through February 4, 2020, and $9.0 million thereafter.

As of March 31, 2020, the Company was in compliance with the covenants contained in the Note Purchase Agreement.

The three-year term note has been recorded net of a discount based on the fair value of the associated common stock warrants and debt issuance costs totaling $2.0 million.

Amortization of the debt discount and debt issuance costs was $1.2 million for the fiscal year ended March 31, 2020, based on an effective interest rate, and has been recorded as interest expense in the consolidated statements of operations.

Interest expense related to the term note payable during the fiscal year ended March 31, 2020 was $5.2 million, which includes $1.2 million in amortization of debt issuance costs.

When we entered into the Note Purchase Agreement the existing credit facility with Bridge Bank was paid in full.

As such, there was no interest expense related to the credit facility during the fiscal year ended March 31, 2020.

Interest expense related to the credit facility during the fiscal year ended March 31, 2019 was $0.7 million, which includes $0.1 million in amortization of debt issuance costs.

CAPSTONE TURBINE CORPORATION AND SUBSIDIARIES

Three-Year Term Note

On February 4, 2019, the Company entered into a Note Purchase Agreement (as amended, the “Note Purchase Agreement”), by and among the Company, certain subsidiaries of the Company party thereto as guarantors, Goldman Sachs Specialty Lending Holdings, Inc.

and any other purchasers party thereto from time to time (collectively, the “Purchaser”).

Under the Note Purchase Agreement, the Company sold to the Purchaser $30.0 million aggregate principal amount of senior secured notes (the “Notes”), bearing interest at a rate of 13.0% per annum and payable quarterly on March 31, June 30, September 30 and December 31 of each year until maturity.

On December 9, 2019, the Company entered into a Second Amendment (the “Second Amendment”) to the Note Purchase Agreement.

Under the Second Amendment, the parties agreed to amend the Note Purchase Agreement to increase the Section 382 Ownership Shift threshold to not exceed 40.0%.

On April 24, 2020, the Company entered into a Third Amendment (the “Third Amendment”) to the Note Purchase Agreement.

Under the Third Amendment, the parties agreed to amend the Note Purchase Agreement to, among other things, carve out the PPP Loan pursuant to the CARES Act from the negative covenants restricting the Company from incurring certain debt and the related terms and conditions as a result of such PPP Loan.

On May 13, 2020, the Company entered into a Fourth Amendment (the “Fourth Amendment”) to the Note Purchase Agreement.

Under the Fourth Amendment, the parties agreed to amend certain repayment language in the Note Purchase Agreement with respect to the PPP Loan pursuant to the CARES Act.

On June 16, 2020, the Company entered into a Fifth Amendment (the “Fifth Amendment”) to the Note Purchase Agreement.

Under the Fifth Amendment, the parties agreed to amend Section 6.21 of the Note Purchase Agreement to increase the Section 382 Ownership Shift (as defined therein) threshold to not exceed 42.0% until April 1, 2021, and 40% thereafter.

On October 1, 2020, the Company entered into an Amended & Restated Note Purchase Agreement (the “A&R Note Purchase Agreement”).

The A&R Note Purchase Agreement amends and restates that certain Note Purchase Agreement, as amended, dated February 4, 2019, by and among the Company, the Collateral Agent and the other parties party thereto.

Under the A&R Note Purchase Agreement, the Company issued $20 million in additional Notes.

The Notes bear interest at the Adjusted (London Interbank Offer) LIBO Rate (as defined in the A&R Note Purchase Agreement) plus

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

8.75% per annum, payable on the last day of each interest period of one-, two-, three- or six-months (but, in the case of a six-month interest period, every three-months).

The Notes do not amortize and the entire principal balance is due in a single payment on the maturity date, October 1, 2023.

As of March 31, 2021, $51.0 million in borrowings were outstanding under the Notes, which includes the accrual for an exit fee to be paid at maturity or upon pre-payment.

Obligations under the A&R Note Purchase Agreement are secured by all of the Company’s assets, including intellectual property and general intangibles.

The A&R Note Purchase Agreement contains customary covenants, including, among others, covenants that restrict the Company’s ability to incur debt, grant liens, make certain investments and acquisitions, pay dividends, repurchase equity interests, repay certain debt, amend certain contracts, enter into affiliate transactions and asset sales or make certain equity issuances (including equity issuances that would cause an ownership change within the meaning of Section 382 of the Internal Revenue Code), and covenants that require the Company to, among other things, provide annual, quarterly and monthly financial statements, together with related compliance certificates, maintain its property in good condition, maintain insurance and comply with applicable laws.

The financial covenants of the A&R Note Purchase Agreement require the Company not to exceed specified levels of Adjusted EBITDA losses relative to its financial model, beginning with the fiscal quarter ending December 31, 2020.

Additionally, the Company shall not permit the Company’s minimum consolidated liquidity, which consists of its cash and cash equivalents, to be less than $9.0 million.

Furthermore, the covenants require the Company to expand its Rental Fleet (as defined in the A&R Note Purchase Agreement) by (i) at least 6.25 MW by the 9-month anniversary of the Closing Date, and (ii) at least 12.50 MW by the 18-month anniversary of the Closing Date.

As of March 31, 2021, the Company was in compliance with the covenants contained in the A&R Note Purchase Agreement.

On May 13, 2021, the Company and the collateral agent, entered into a First Amendment, dated as of May 13, 2021 (the “Amendment”), to the Amended and Restated Note Purchase Agreement, dated as of October 1, 2020.

The Amendment amends certain provisions of the A&R Note Purchase Agreement, including to (a) require the Company to expand its Rental Fleet (as defined in the A&R Note Purchase Agreement) by (i) at least 2.00 MW by the 9-month anniversary of the Closing Date (instead of 6.25 MW as provided in the A&R Note Purchase Agreement prior to the Amendment), and (ii) at least 12.50 MW by the 18-month anniversary of the Closing Date (which is unchanged from the covenant set forth in in the A&R Note Purchase Agreement prior to the Amendment), and (b) increase the Company’s minimum consolidated liquidity requirement from $9,000,000 to $12,200,000 for the period from the Amendment Date to March 31, 2022.

The Notes have been recorded net of a discount based on the debt issuance costs totaling $0.1 million.

Amortization of the debt discount and debt issuance costs was $0.6 million and $1.2 million for Fiscal 2021 and 2020, respectively, based on an effective interest rate, and has been recorded as interest expense in the consolidated statements of operations.

Interest expense related to the Notes payable during Fiscal 2021 and 2020 was $5.2 million and includes $0.6 million and $1.2 million in amortization of debt issuance costs, respectively.

Loss on extinguishment of debt The Company determined the A&R Note Purchase Agreement should be accounted for as an extinguishment of debt rather than a modification of debt in accordance with ASC 470.

Accordingly, the Company recognized a loss on extinguishment of debt of approximately $4.3 million during Fiscal 2021.

The loss on extinguishment of debt comprised of the write-off of approximately $1.5 million of unamortized debt issuance costs, a facility fee in the amount of $1.0 million paid to the lender, an accrual of $1.0 million for anticipated exit fees due upon repayment of the principal balance to the lender and the fair value of common stock warrants issued to the warrant holder in connection with Amendment No.

3 to the Purchase Warrant of $0.8 million.

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SBA Paycheck Protection Program Loan

On April 15, 2020, the Company submitted an application to its banking partner Western Alliance Bank, an Arizona corporation (“Western Alliance”) under the Small Business Administration (the “SBA”) Paycheck Protection Program enabled by the Coronavirus Aid, Relief and Economic Security Act of 2020 (the “CARES Act”).

Western Alliance entered into a note on April 24, 2020 with the Company and agreed to make available to the Company a loan in the amount of $2,610,200 (the “PPP Loan”).

The Company received the full amount of the PPP Loan on April 24, 2020 (the “Initial Disbursement Date) and has used the proceeds to support fixed costs such as payroll costs, rent and utilities in accordance with the relevant terms and conditions of the CARES Act.

On May 13, 2020, the Company repaid $660,200 of the PPP Loan in accordance with the Fourth Amendment to the Note Purchase Agreement between the Company and Goldman Sachs Specialty Lending Group, L.P.

As of December 31, 2020, approximately $1.9 million in borrowings were outstanding under the PPP Loan.

The advance under the Loan bears interest at a rate per annum of 1%.

The term of the PPP Loan is two years, ending April 24, 2022.

Beginning on the seventh month following the Initial Disbursement Date, the Company is required to pay monthly principal and interest payments, with each installment payment first to pay interest accrued since the Initial Disbursement Date, then to bring principal current.

The Company may adjust the payment amount periodically to amortize the principal over the remaining term of the PPP Loan.

The PPP Loan may be forgiven partially or fully if the funding received is used for payroll costs, interest on mortgages, rent, and utilities, provided that at least 75% of the forgiven amount has been used for payroll costs.

Forgiveness is based on the Company maintaining, or quickly rehiring employees and maintaining applicable salary levels.

Forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease.

Any forgiveness of the PPP Loan shall be subject to approval of the SBA and will require the Company and Western Alliance to apply to the SBA for such treatment in the future.

In February 2021, the Company applied for forgiveness on its PPP Loan and is awaiting review and approval.

The Company will account for forgiveness on the PPP Loan in accordance with ASC 470 and record a gain on extinguishment of debt on its condensed consolidated financial statements and related footnote disclosures, provided the forgiveness is approved by the SBA.

No assurance can be provided that forgiveness of any portion of the PPP loan will be obtained.

Commitments and Contingencies

4 unchanged sentences

Lease Commitments

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), to require lessees to recognize most leases on the balance sheet, while recognition on the statement of operations will remain similar to current lease accounting.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), requiring lessees to recognize most leases on the balance sheet, while recognition on the statements of operations will remain similar to current lease accounting.

The ASU requires lessees to recognize a liability for lease obligations, which represents the discounted obligation to make future lease payments, and a corresponding right-of-use (ROU) asset on the balance sheet.

The guidance requires disclosure of key information about leasing arrangements that is intended to give financial statement users the ability to assess the amount, timing and potential uncertainty of cash flows related to leases.

The guidance requires disclosure of key information about leasing arrangements that is intended to give financial statement users the ability to assess the

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

amount, timing and potential uncertainty of cash flows related to leases.

The ASU also eliminates real estate-specific provisions and modifies certain aspects of lessor accounting.

The Company adopted the new standard on April 1, 2019 using the modified retrospective approach.

The Company has elected to apply the transition method that allows companies to continue applying the guidance under the lease standard in effect at that time in the comparative periods presented in the consolidated financial statements and recognize a cumulative-effect adjustment to the opening balance of retained earnings on the date of adoption.

The Company also elected the “package of practical expedients”;

which permits us not to reassess under the new standard our prior conclusions about lease identification, lease classification and initial direct costs;

the use of hindsight in order to calculate the lease term of existing assets;

the use of the portfolio approach on similar assets;

and has elected not to separate lease and non-lease assets.

Results for reporting periods beginning after April 1, 2019 are presented under the new standard, while prior period amounts are not adjusted and continue to be reported under the accounting standards in effect for the prior period.

Upon adoption of the new lease standard, on April 1, 2019, the Company recorded approximately $5.5 million of right-of-use assets, adjusted for the reclassification of deferred rent and lease incentive of approximately $0.3 million, and $5.8 million of operating lease liabilities, within the Company’s condensed consolidated balance sheets upon adoption.

The adoption of this standard did not have an impact on the Company’s condensed consolidated statement of operations or cash flows and did not result in a cumulative catch-up adjustment to the opening balance of retained earnings.

Financed leases are not material to the Company’s condensed consolidated financial statements and are therefore not included in the disclosures.

The Company elected to apply the transition method allowing companies to continue applying the guidance under the lease standard in effect at that time in the comparative periods presented in the consolidated financial statements and recognize a cumulative-effect adjustment to the opening balance of retained earnings on the date of adoption.

The Company also elected the “package of practical expedients;” which permits the Company not to reassess under the new standard the Company’s prior conclusions about lease identification, lease classification and initial direct costs;

the use of hindsight in order to calculate the lease term of existing assets and the use of the portfolio approach on similar assets;

and the Company has elected not to separate lease and non-lease assets.

Upon adoption of the new lease standard on April 1, 2019, the Company recorded approximately $5.5 million of right-of-use assets, adjusted for the reclassification of deferred rent and lease incentive of approximately $0.3 million, and $5.8 million of operating lease liabilities, within the Company’s condensed consolidated balance sheets upon adoption.

The adoption of this standard did not have an impact on the Company’s condensed consolidated statements of operations or cash flows and did not result in a cumulative catch-up adjustment to the opening balance of retained earnings.

Financed leases are not material to the Company’s condensed consolidated financial statements and are therefore not included in the footnote disclosures.

In June 2019, the Company entered into a new lease of approximately 9,216 square feet of warehouse space at 16701 Stagg Street in Van Nuys, California.

2 unchanged sentences

All of the leases require the Company to pay maintenance, insurance and property taxes.

The lease agreements for primary office and manufacturing facilities provide for rent escalation over the

CAPSTONE TURBINE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

lease term and renewal options for five-year periods.

The lease agreements for primary office and manufacturing facilities provide for rent escalation over the lease term and renewal options for five-year periods.

Lease expense is recognized on a straight-line basis over the term of the lease.

The components of lease expense were as follows for the year ended March 31, 2020 (in thousands):

March 31, 2020

The components of lease expense were as follows (in thousands):

Year Ended March 31,

Operating lease cost

Rental expense for operating leases classified under the previous accounting standard, Accounting Standards Codification (“ASC”) Topic 840, for the fiscal year ended March 31, 2019 was approximately $2.3 million.

Supplemental balance sheet information related to the leases was as follows (in thousands):

Operating Leases

March 31, 2021

March 31, 2020

Operating lease right-of-use assets

3 unchanged sentences

Total operating lease liabilities

Weighted average remaining lease life

Weighted average discount rate

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company records its right-of-use assets within other assets (non-current) and its operating lease liabilities within current and long-term portion of notes payable and lease obligations.

Supplemental cash flow information related to the leases was as follows (in thousands):

March 31, 2020

Year Ended March 31,

Cash paid for amounts included in the measurement of lease liabilities

1 unchanged sentence

Other supplemental operating lease information consists of the following:

Weighted average remaining lease life

Weighted average discount rate

At March 31, 2020, the Company’s minimum commitments under non-cancelable operating leases were as follows (in thousands):

At March 31, 2021, the Company’s minimum commitments under non-cancelable operating leases were as follows (in thousands):

Year Ending March 31,

2 unchanged sentences

Present value of operating lease liabilities

CAPSTONE TURBINE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Other Commitments

The Company has agreements with certain of its distributors requiring that, if the Company renders parts obsolete in inventories the distributors own and hold in support of their obligations to serve fielded microturbines, then the Company is required to replace the affected stock at no cost to the distributors.

While the Company has never incurred costs or obligations for these types of replacements, it is possible that future changes in the Company’s product technology could result and yield costs to the Company if significant amounts of inventory are held at distributors.

As of March 31, 2021, no significant inventories were held at distributors.

Legal Matters

Federal Securities Class Action

Two putative securities class action complaints were filed against us and certain of our current and former officers in the United States District Court for the Central District of California under the following captions:

David Kinney, etc.

Capstone Turbine, et al., No.

2:15-CV-08914 on November 16, 2015 (the “Kinney Complaint”) and Kevin M.

Capstone Turbine, et al., No.

2:15-CV-09155 on November 25, 2015 (the “Grooms Complaint”).

The Kinney Complaint alleged material misrepresentations and omissions in public statements regarding BPC and the likelihood that BPC would not be able to fulfill many legal and financial obligations to us.

The Kinney Complaint also alleged that our financial statements were not appropriately adjusted in light of this situation and were not maintained in accordance with GAAP, and that we lacked adequate internal controls over accounting.

The Kinney Complaint alleged that these public statements and accounting irregularities constituted violations by all named defendants of Section 10(b) of the Exchange Act, and Rule 10b-5 thereunder, as well as violations of Section 20(a) of the Exchange Act by the individual defendants.

The Grooms Complaint made allegations and claims that were substantially identical to those in the Kinney Complaint, and both complaints sought compensatory damages of an undisclosed amount.

On January 16, 2016, several shareholders filed motions to consolidate the Kinney and Grooms actions and for appointment as lead plaintiff.

On February 29, 2016, the Court granted the motions to consolidate, and appointed a lead plaintiff.

On May 6, 2016, a Consolidated Amended Complaint with allegations and claims substantially identical to those of the Kinney Complaint was filed in the consolidated action.

The putative class period in the Consolidated Amended Complaint was June 12, 2014 to November 5, 2015.

Defendants filed a motion to dismiss the Consolidated Amended Complaint on June 17, 2016.

On March 10, 2017, the Court issued an order granting defendants’

motion to dismiss in its entirety with leave to amend.

Plaintiffs filed an amended complaint on April 28, 2017.

Defendants’

motion to dismiss was filed June 2, 2017.

Plaintiffs filed their opposition to the motion to dismiss on July 7, 2017, and defendants filed their reply in support of the motion to dismiss on July 28, 2017.

The court vacated the hearing that was scheduled for August 18, 2017.

On February 9, 2018, the Court issued an Order denying defendants’

motion to dismiss.

On March 30, 2018, defendants filed an answer to the Consolidated Amended Complaint.

On May 17, 2018, the Court issued a scheduling order setting a trial date of March 17, 2020.

On June 26, 2018, the Court entered an order vacating all deadlines through the end of October 2018 and temporarily staying formal discovery and other proceedings to allow the parties time to conduct a mediation.

The parties participated in mediation on September 24, 2018, which did not result in a settlement.

On November 16, 2018, after further settlement discussions, the parties advised the Court that they had reached an agreement in principle to settle the action in its entirety.

The agreement in principle was subject to several conditions, including the execution of a stipulation of settlement that was satisfactory to all parties, and preliminary and final approval from the court, among other things.

Plaintiffs filed a motion seeking preliminary approval of the proposed settlement on April 12, 2019, and filed supplementary declarations in support of the motion on May 2, 2019.

Preliminary approval of the settlement was granted on May 17, 2019.

On September 24, 2019, lead counsel for plaintiffs filed a motion for attorneys’

fees and reimbursement of litigation expenses.

On October 25, 2019, plaintiffs filed a motion for final approval of the settlement.

On November 15, 2019, the Court issued an order

CAPSTONE TURBINE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

approving the settlement and the payment of attorneys’

fees, litigation expenses, and class representative payments, and entering final judgment in the action.

Our insurance carrier funded the settlement amount.

Federal Individual Securities Action

An individual securities complaint was filed against us, our Chief Executive Officer, and additional unidentified defendants in the United States District Court for the Central District of California under the following caption:

FiveT Investment Management LTD, et al., v.

Capstone Turbine, et al., No.

2:18-CV-03512 on April 25, 2018.

The lawsuit alleged material misrepresentations and omissions regarding our revenue, sales, and operations because of alleged improper revenue recognition and backlog calculations related to BPC.

The lawsuit alleged that these statements constituted violations by all named defendants of Section 10(b) of the Exchange Act, and Rule 10b-5 thereunder, as well as violations of Section 20(a) of the Exchange Act by the individual defendants.

The complaint also asserted claims against all named defendants for fraud, negligent misrepresentation, violations of California Civil Code sections 1709 and 1710, and California Corporations Code sections 25400 and 25401.

Additionally, the complaint asserted a cause of action against the individual defendants for breach of fiduciary duty.

It demanded compensatory damages for the amount of damages allegedly suffered, pre-judgment and post-judgment interest, and fees.

On June 29, 2018, the plaintiffs filed an Amended Complaint for Common Law Fraud and Negligent Misrepresentation.

The Amended Complaint asserted claims for common law fraud and negligent misrepresentation, against the Company, Mr.

Jamison, and unidentified individual defendants.

The Amended Complaint demanded damages in an unspecified amount, plus pre-judgment and post-judgment interest and fees.

Defendants filed their answer to the Amended Complaint on August 17, 2018.

The parties participated in a mediation on September 24, 2018.

The mediation did not result in a settlement.

On October 12, 2018, the plaintiffs filed a motion for leave to amend their complaint, seeking to reinstate the cause of action for violation of California Civil Code section 25401.

On November 29, 2018, the Court granted plaintiffs’

motion for leave to amend and plaintiffs filed their Second Amended Complaint, which asserted claims for common law fraud, negligent misrepresentation, and violation of California Civil Code section 25401 against the Company, Mr.

Jamison, and unidentified individual defendants.

On December 20, 2018, defendants filed their answer to the Second Amended Complaint.

On June 6, 2019, the parties reached a confidential settlement of the action and the suit was dismissed with prejudice on July 1, 2019.

Our insurance carrier funded the settlement amount.

State Derivative Lawsuits —

On February 18, 2016, a purported shareholder derivative action was filed in Los Angeles Superior Court in the State of California against us and certain of our current and former officers and directors under the following caption:

Jamison, et al., No.

The lawsuit alleges that certain of our current and former officers and directors knew or should have known that BPC would be unable to fulfill its obligations to us, but allowed us to make false and misleading statements regarding BPC and our financial condition.

The complaint also alleges that the defendants failed to timely adjust our account receivables and backlog to reflect BPC’s inability to pay us.

The complaint asserts causes of action for breach of fiduciary duty and unjust enrichment.

It demands damages for the amount of damage sustained by us as a result of the individual defendants’

alleged breach of fiduciary duties and unjust enrichment, that we institute corporate governance reforms, and disgorgement from the individual defendants.

On May 5, 2016, the parties filed a stipulation and proposed order seeking to stay this action until such time as the defendants’

motion(s) to dismiss the federal securities class action were either granted with prejudice or denied in whole or in part.

On May 10, 2016, the Court entered that proposed order.

On March 9, 2018, following the Court’s order denying defendants’

motion to dismiss in the federal securities class action, the parties filed a stipulation and proposed order seeking to stay this action until the close of fact discovery in the federal securities class action.

On March 20, 2018, the Court entered that proposed order.

A status conference is scheduled for July 1, 2020.

CAPSTONE TURBINE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

On June 8, 2016, a purported shareholder derivative action entitled Velma Kilpatrick v.

Simon, et al., No.

BC623167, was filed in Los Angeles Superior Court in the State of California against us and certain of our current and former officers and directors.

The complaint alleges that certain of our current and former officers and directors knew or should have known that BPC would be unable to fulfill its obligations to us, but allowed us to make false and misleading statements regarding BPC and our financial condition.

The complaint also alleges that the defendants failed to timely adjust our account receivables and backlog to reflect BPC’s inability to pay us.

The complaint asserts causes of action for breach of fiduciary duty.

It demands damages for the amount of damage sustained by us as a result of the individual defendants’

alleged breach of fiduciary duties, and that we institute corporate governance reforms.

On August 23, 2016, the parties filed a stipulation and proposed order seeking to stay this action until such time as the defendants’

motion(s) to dismiss the federal securities class action were either granted with prejudice or denied in whole or in part.

On March 9, 2018, following the Court’s order denying defendants’

On March 20, 2018 the Court entered that proposed order.

A status conference is scheduled for June 26, 2020.

The parties in both of the above state derivative lawsuits participated in a mediation held on September 24, 2018.

On May 6, 2019, the parties reached an agreement in principle regarding corporate governance reforms to be implemented in settlement of the action.

The parties have not yet formalized a settlement, however, which is subject to several conditions, including the execution of a stipulation of settlement that is satisfactory to all parties and preliminary and final approval from the court, among other things.

Settlement discussions are ongoing.

We have not recorded any liability as of March 31, 2020 as our insurance carrier will fund the settlement amount.

Federal Derivative Lawsuits

On March 7, 2016, a purported shareholder derivative action was filed in the United States District Court for the Central District of California against us and certain of our current and former officers and directors under the following caption:

Jamison, et al., No.

CV16-01569-DMG (RAOx).

The complaint asserts a cause of action for breach of fiduciary duty.

It demands damages for the amount of damage sustained by us as a result of the individual defendants’

alleged breach of fiduciary duties, and equitable relief, including that we institute appropriate corporate governance reforms.

On May 11, 2016, the parties filed a stipulation and proposed order seeking to stay this action until such time as the defendants’

motion(s) to dismiss the federal securities class action were either granted with prejudice or denied in whole or in part.

On May 13, 2016, the Court entered that proposed order.

On July 12, 2016 and July 18, 2016, respectively, two additional purported shareholder derivative actions were filed in the United States District Court for the Central District of California against us and certain of our current and former officers and directors, under the caption Tuttle v.

Atkinson, et al., No.

CV16-05127, and Boll v.

Jamison, et al., No.

CV16-5282, respectively.

The lawsuits allege that certain of our current and former officers and directors knew or should have known that BPC would be unable to fulfill its obligations to us, but allowed us to make false and misleading statements regarding BPC and our financial condition.

The Tuttle complaint asserts causes of action for breach of fiduciary duty, gross mismanagement, and unjust enrichment, and the Boll complaint asserts causes of action for breach of fiduciary duty, unjust enrichment, abuse of control, gross mismanagement, and waste of corporate assets.

Both complaints demand damages sustained by us as a result of the individual defendants’

alleged breaches of fiduciary duties, and equitable relief, including that we institute appropriate corporate governance reforms.

The federal derivative actions were stayed until such time as the defendants’

motion(s) to dismiss the federal securities class action were either granted with prejudice or denied in whole or in part.

On March 9, 2018, following the Court’s order denying defendants’

On March 13, 2018, the Court granted the parties’

CAPSTONE TURBINE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The parties in the above federal derivative lawsuits participated in a mediation held on September 24, 2018.

On May 6, 2019, the parties reached an agreement in principle regarding corporate governance reforms to be implemented in settlement of the action.

Settlement discussions are ongoing.

We have not recorded any liability as of March 31, 2020 as our insurance carrier will fund the settlement amount.

Capstone Turbine Corporation v.

Regatta Solutions, Inc.

On August 23, 2018, we initiated arbitration proceedings against its former distributor, Regatta Solutions, Inc.

(“Regatta”), with the American Arbitration Association (“AAA”), under the following caption:

Capstone Turbine Corp.

Regatta Solutions, Inc., Case No.

01-18-0003-0860 (the “Capstone-Regatta Arbitration”).

We have alleged claims against Regatta for breach of contract and unjust enrichment relating to the parties’

prior distributor relationship, which terminated at the end of March of 2018, and the related wind-down agreement between the parties.

As remedies for these claims, we are seeking compensatory, consequential, and punitive damages, along with declaratory relief and attorney’s fees, interest, and costs.

On October 18, 2018, Regatta filed its answer and cross-claims in the Capstone-Regatta Arbitration.

In its cross-claims, Regatta asserted claims for breach of contract, intentional interference with prospective economic advantage, fraud, and intentional interference with contractual relations, relating to the parties’

agreement to wind-down relations and Regatta’s purported sales efforts in California.

As remedies for these alleged claims, Regatta sought no less than $1.5 million in general and compensatory damages, along with punitive and exemplary damages, as well as attorney’s fees and costs.

We have filed and served an answering statement denying Regatta’s counterclaims and asserting several affirmative defenses.

Also on October 18, 2018, Regatta filed a lawsuit in the Superior Court of the State of California, County of Orange, alleging two counts of fraud, and one count of interference with contractual relations, individually against Mr.

James Crouse, then Executive Vice President of Sales for the Company, arising out of the same allegations made in Regatta’s counterclaim.

As remedies for these alleged claims, Regatta again sought no less than $1.5 million in general and compensatory damages, along with punitive and exemplary damages, as well as attorney’s fees and costs.

The case was filed under the caption Regatta Solutions, Inc., v.

Jim Crouse, et.

al., Case No.

30-2018-01026571-CU-FR-CJC.

On December 14, 2018, Regatta stipulated and agreed to arbitrate its claims against Mr.

James Crouse and dismissed him from the Superior Court action.

On January 16, 2019, the parties participated in a mediation that did not resolve the dispute.

The parties continued their settlement discussions and held a follow-on mediation on April 24, 2019 at which point the parties came to a resolution of the matter.

Following initial compliance with the settlement terms, Regatta breached its obligations thereunder and the parties thereafter resolved the continuing dispute at a further mediation on January 29, 2020.

As of March 31, 2020, Regatta met all of its material obligations under the settlement terms, and all matters related to the litigation were dismissed with prejudice on April 10, 2020.

The settlement did not have a material impact on our condensed consolidated financial statements.

Capstone Turbine Corporation v.

Turbine International, LLC.

On February 3, 2020, Capstone Turbine Corporation filed suit against its former distributor, Turbine International, LLC (“Turbine Intl.”), in the Superior Court of California for the County of Los Angeles under the following caption:

Capstone Turbine Corporation v.

Turbine International, LLC;

20STCV04372 (“Capstone-Turbine Intl.

Litigation”).

20STCV04372 (“Capstone-Turbine Intl.

Litigation”).

We have alleged claims against Turbine Intl.

for breach of contract and for injunctive relief relating to the parties’

prior distributor relationship, which terminated at the end of March of 2018, and Turbine Intl.’s failure to satisfy its payment obligations under certain financial agreements, namely an accounts receivable agreement

CAPSTONE TURBINE CORPORATION AND SUBSIDIARIES

for breach of contract and for injunctive relief relating to the parties’ prior distributor relationship, which terminated at the end of March of 2018, and Turbine Intl.’s failure to satisfy its payment obligations under certain financial agreements, namely an accounts receivable agreement and promissory note in favor of Capstone.

As remedies for these claims, we are seeking compensatory, consequential, along with injunctive relief and attorney’s fees, interest, and costs.

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

and promissory note in favor of Capstone.

As remedies for these claims, we are seeking compensatory, consequential, along with injunctive relief and attorney’s fees, interest, and costs.

On March 18, 2020, Turbine Intl.

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has asserted claims against Capstone, and individually against Mr.

James Crouse, Capstone’s Chief Revenue Officer, for breach of contract under the distributor agreement, accounts receivable agreement and promissory note, fraud, breach of the covenant of good faith and fair dealing, unjust enrichment and constructive trust, negligent misrepresentation, violation of the unfair practices act, violation of racketeer influenced corrupt organizations act, and conspiracy to commit fraud.

As remedies for these alleged claims, Turbine Intl.

are seeking compensatory, consequential, and punitive damages along with attorney’s fees, interest, and costs.

Capstone answered the cross-claims on May 7, 2020.

A case management conference is scheduled for August 19, 2020.

On June 29, 2020, Capstone filed a motion to file a First Amended Complaint that would add, among other things, a claim for enforcement of a personal guaranty signed by an entity related to Turbine Intl., Hispania Petroleum, S.A., and personal claims against the principals of Turbine Intl.

and Hispania.

That motion was granted on August 19, 2020, and the First Amended Complaint (“FAC”) is now on file.

All of the new defendants have been served and have filed answers.

A case management conference is set in the matter for June 21, 2021.

Discovery is ongoing.

We have not recorded any liability as of March 31, 2021, as the matter is too early to estimate.

4 unchanged sentences

The plan also provides for both Company matching and discretionary contributions, which are determined by the Board of Directors.

The Company has been matching 50 cents on the dollar up to 6% of the employee’s contributions since February 2019.

Prior to that date, the Company had been matching 50 cents on the dollar up to 4% of the employee’s contributions since October 2006.

The Company has been matching 50 cents on the dollar up to 6% of the employee’s contributions since February 2019.

Prior to that date, the Company had been matching 50 cents on the dollar up to 4% of the employee’s contributions since October 2006.

There were no Company contributions to the plan prior to October 2006.

The Company’s match vests 25% a year over four years starting from the employee’s hire date.

The Company recorded expense of approximately $0.3 million for the fiscal year ended March 31, 2020 and 2019.

The Company was a party to a Development and License Agreement with Carrier Corporation (“Carrier”) regarding the payment of royalties on the sale of each of the Company’s 200 kilowatt (“C200”) microturbines.

During the three months ended September 30, 2013, we reached our repayment threshold level and the fixed rate royalty was reduced by 50%.

On July 25, 2018, the Company and Carrier entered into a Second Amendment to the Development and License Agreement (“Second Amendment”) whereby the Company agreed to pay Carrier approximately $3.0 million to conclude the Company’s current royalty obligation under the Development and License Agreement, dated as of September 4, 2007, as amended (“Development Agreement”) and release the Company from any future royalty payment obligations.

The Company’s match vests 25% a year over four years starting from the employee’s hire date.

The Company recorded expense of approximately $0.2 million and $0.3 million for Fiscal 2021 and 2020, respectively.

In 2013, the Company reached its repayment threshold level and the fixed rate royalty was reduced by 50%.

On July 25, 2018, the Company and Carrier entered into a Second Amendment to the Development and License Agreement (“Second Amendment”) whereby the Company agreed to pay Carrier approximately $3.0 million to conclude the Company’s current royalty obligation under the Development and License Agreement, dated as of September 4, 2007, as amended (“Development Agreement”), and release the Company from any future royalty payment obligations.

The Second Amendment also removed non-compete provisions from the Development Agreement, allowing the Company to design market or sell its C200 System in conjunction with any energy system and compete with Carrier products in the CCHP market.

Carrier earned zero and $0.4 million in royalties for C200 and C1000 Series system sales during each of the fiscal years ended March 31, 2020 and 2019, respectively.

There were no unpaid, earned royalties as of March 31, 2020 and 2019.

On September 19, 2018, the Company paid in full the negotiated royalty settlement of $3.0 million to Carrier, and as such, there is no further royalty obligation to Carrier.

The prepaid royalty of $3.0 million has been recorded under the captions “Prepaid expenses and other current assets”

and “Other assets”

in the accompanying condensed consolidated balance sheets and will be amortized in the accompanying condensed consolidated statement of operations over a 15-year amortization period through September 2033 using an effective royalty rate.

The prepaid royalty of $3.0 million has been recorded under the captions “Prepaid expenses and other current assets” and “Other assets” in the accompanying consolidated balance sheets and will be amortized in the accompanying consolidated statements of operations over a 15-year amortization period through September 2033 using an effective royalty rate.

A 15-year amortization period is the minimum expected life cycle of the current generation of product.

The effective royalty rate is calculated as the prepaid royalty settlement divided by total projected C200 System units over the 15-year amortization period.

On a quarterly basis, the Company will perform a re-forecast of C200 System unit shipments, to see if a change needs to be made to the effective royalty rate.

Accordingly, if the Company’s future projections change, its effective royalty rates would change, which could affect the amount and timing of royalty expense the Company recognizes.

If impairment exists, then the

CAPSTONE TURBINE CORPORATION AND SUBSIDIARIES

On a quarterly basis, the Company will perform a re-forecast of C200 System unit shipments, to determine if an adjustment to the effective royalty rate is necessary.

Accordingly, if the Company’s future projections change, its effective royalty rates would change, which could affect the

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

prepaid royalty asset could be written down to fair value.

Prepaid royalties are classified as current assets to the extent that such amounts will be recognized in the Company’s condensed consolidated statements of operations within the next 12 months.

amount and timing of royalty expense the Company recognizes.

If impairment exists, then the prepaid royalty asset could be written down to fair value.

Prepaid royalties are classified as current assets to the extent that such amounts will be recognized in the Company’s consolidated statements of operations within the next 12 months.

The current and long-term portions of prepaid royalties, included in other current assets and other assets, respectively, consisted of (in thousands):

3 unchanged sentences

The Company has evaluated all subsequent events through the filing date of this Form 10-K with the SEC, to ensure that this filing includes appropriate disclosure of events both recognized in the financial statements as of March 31, 2021, and events which occurred subsequently but were not recognized in the financial statements.

There were no subsequent events which required recognition, adjustment to or disclosure in the financial statements other than disclosed in this note.

SBA Paycheck Protection Program Loan

Western Alliance entered into a Note on April 24, 2020 (the “Note”) with the Company and agreed to make available to the Company a loan in the amount of $2,610,200 (the “Loan”).

The Company received the full amount of the Loan on April 24, 2020 (the “Initial Disbursement Date) and currently plans to use the proceeds to support fixed costs such as payroll costs, rent and utilities in accordance with the relevant terms and conditions of the CARES Act.

On May 13, 2020, the Company repaid $660,200 of the loan in accordance with the Fourth Amendment to the Note Purchase Agreement between the Company and Goldman Sachs Specialty Lending Group, L.P.

The advance under the Loan bears interest at a rate per annum of 1%.

The term of the Loan is two years, ending April 24, 2022 (the “Maturity Date”).

The Company may adjust the payment amount periodically to amortize the principal over the remaining term of the Note.

The Loan may be forgiven partially or fully if the funding received are used for payroll costs, interest on mortgages, rent, and utilities, provided that at least 75% of the forgiven amount has been used for payroll costs.

Forgiveness is based on the Company maintaining, or quickly rehiring employees and maintaining applicable salary levels.

Forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease.

Any forgiveness of the Loan shall be subject to approval of the SBA and will require the Company and Western Alliance to apply to the SBA for such treatment in the future.

The Company is currently evaluating the impact on its financial statements and the accounting will largely depend on the Company’s ability to have the loan forgiven.

CAPSTONE TURBINE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note Purchase and Warrant Amendments

On April 24, 2020, the Company entered into a Third Amendment (the “Third Amendment”) to the Note Purchase Agreement.

Under the Third Amendment, the parties agreed to amend the Note Purchase Agreement to, among other things, carve out the Loan pursuant to the CARES Act from the negative covenants restricting the Company from incurring certain debt and the related terms and conditions as a result of such Loan.

On May 13, 2020, the Company entered into a Fourth Amendment (the “Fourth Amendment”) to the Note Purchase Agreement.

Under the Fourth Amendment, the parties agreed to amend the Note Purchase Agreement to amend certain repayment language with respect to the Loan pursuant to the CARES Act.

On June 16, 2020, the Company entered into a Fifth Amendment (the “Fifth Amendment”) to the Note Purchase Agreement.

Under the Fifth Amendment, the Parties agreed to amend Section 6.21 of the Note Purchase Agreement to increase the Section 382 Ownership Shift (as defined therein) threshold to not exceed 42.0% until April 1, 2021, and 40% thereafter.

All other provisions, terms and conditions of the Note Purchase Agreement remain in effect.

On June 16, 2020, the Company entered into an Amendment No.

2 to the Purchase Warrant for Common Shares (“Amendment No.

2”) with Special Situations Investing Group II, LLC (as successor in interest to Goldman Sachs & Co.

LLC) (the “Warrant Holder”) that amends that certain Purchase Warrant for Common Shares originally issued by the Company to Goldman Sachs & Co.

LLC, dated February 4, 2019 (the “Warrant”).

Amendment No.

2 amends the first paragraph of the Warrant to decrease the number of Warrant Shares (as defined therein) issuable under the Warrant and to decrease the exercise price from $3.80 per share to $2.61 per share (the “Per Share Warrant Exercise Price”).

The Company would receive aggregate gross proceeds of approximately $1,186,312.86 if the outstanding Warrant is exercised at the new Per Share Warrant Exercise Price.

Amendment No.

2 also amends Section 2.1 of the Warrant such that the Per Share Anti-Dilution Price (as defined therein) is equal to the Per Share Warrant Exercise Price as provided in the Amendment No.

2 to the Warrant.

All other terms and provisions in the Warrant remain in effect.

On May 13, 2021, the Company and Goldman Sachs Specialty Lending Group, L.P.

(as successor in interest to Goldman Sachs Specialty Lending Holdings, Inc.) entered into a First Amendment, dated as of May 13, 2021, to the Amended and Restated Note Purchase Agreement (the “A&R Note Purchase Agreement”), dated as of October 1, 2020 (the “Closing Date”).

Exhibit Index

1 unchanged sentence

Certificate of Amendment to the Second Amended and Restated Certificate of Incorporation of Capstone Turbine Corporation, filed October 21, 2019(b)

Fourth Amended and Restated Certificate of Incorporation of Capstone Turbine Corporation(c)

Certificate of Amendment of the Second Amended and Restated Certificate of Incorporation of Capstone Turbine Corporation, filed April 22, 2021(m)

Fifth Amended and Restated Bylaws of Capstone Green Energy Corporation effective as of April 22, 2021(m)

Certificate of Elimination of Series A Junior Participating Preferred Stock of Capstone Turbine Corporation, dated May 9, 2016(d)

7 unchanged sentences

Form of Pre-Funded Series B Warrant issued to investors in the October 2016 public offering(h)

Note Purchase Agreement, date as of February 4, 2019, by and among Capstone Turbine Corporation, certain of its subsidiaries party thereto as guarantors, Goldman Sachs Specialty Lending Holdings, Inc., as purchase and any other purchasers party thereto from time to time and Goldman Sachs Specialty Lending Holdings, Inc.

as collateral agent (i)

Purchase Warrant for Common Shares issued in favor of Goldman Sachs & Co.

3 unchanged sentences

Form of Series D Warrant issued to investors in the September 2019 public offering (j)

Second Amendment to the Note Purchase Agreement, dated as of December 9, 2019, by and among Capstone Turbine Corporation, certain subsidiaries of the company and Goldman Sachs Specialty Lending Group L.P.

(a successor in interest to Goldman Sachs Specialty Lending Holdings, Inc.) (k)

Amendment No.

1 unchanged sentence

LLC), dated December 9, 2019 (k)

Third Amendment to the Note Purchase Agreement, dated as of April 24, 2020, by and among Capstone Turbine Corporation, certain subsidiaries of the Company and Goldman Sachs Specialty Lending Group, L.P.

(as successor in interest to Goldman Sachs Specialty Lending Holdings, Inc.) (l)

Note between Western Alliance Bank and Capstone Turbine Corporation, effective as of April 24, 2020 (l)

Fourth Amendment to the Note Purchase Agreement, dated as of May 13, 2020, by and among Capstone Turbine Corporation, certain subsidiaries of the Company and Goldman Sachs Specialty Lending Group, L.P.

Fifth Amendment to the Note Purchase Agreement, dated as of June 16, 2020, by and among Capstone Turbine Corporation, certain subsidiaries of the Company and Goldman Sachs Specialty Lending Group, L.P.

(as successor in interest to Goldman Sachs Specialty Lending Holdings, Inc.) (n)

Amended and Restated Note Purchase Agreement dated October 1, 2020 by and among Capstone Turbine Corporation, certain subsidiaries of the company and Goldman Sachs Specialty Lending Group, L.P.

(as successor in interest to Goldman Sachs Specialty Lending Holdings, Inc.) (gg)

First Amendment to the Amended and Restated Note Purchase Agreement, dated as of May 13, 2021, by and among Capstone Green Energy Corporation, certain subsidiaries of the Company and Goldman Sachs Specialty Lending Group, L.P.

Amendment No.

1 unchanged sentence

LLC), dated June 16, 2020 (n)

Description of the Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934, as Amended

Amendment No.

3 to the Purchase Warrant for Common Shares issued in favor of Special Situations Investing Group II, LLC (as success in interest to Goldman Sachs & Co.

LLC), dated October 1, 2020 and Purchase Warrant for Common Shares issued in favor of Special Situations Investing Group II, LLC (as successor in interest to Goldman Sachs & Co.

LLC), dated October 1, 2020 (gg)

Description of the Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934, as Amended (kk)

Lease between Capstone Turbine Corporation and Prologis, L.P., formerly known as AMB Property, L.P., dated September 25, 2000, as amended, for leased premises at 16640 Stagg Street, Van Nuys, California(o)

18 unchanged sentences

At the Market Offering Agreement, dated June 7, 2018, between Capstone and H.C.

Wainright & Co., LLC (bb)

Wainwright & Co., LLC (bb)

Second Amendment to the Development and License Agreement, dated July 25, 2018, between Capstone Turbine Corporation and Carrier Corporation (cc)

1 unchanged sentence

Form of Change in Control Agreement (ee)

Form of Restricted Stock Unit Award Agreement for Company Employees under the Capstone Turbine Corporation 2017 Stock Option and Incentive Plan –Four Year Vesting Schedule

Form of Restricted Stock Unit Award Agreement for Company Employees under the Capstone Turbine Corporation 2017 Stock Option and Incentive Plan –Three Year Vesting Schedule

Form of Restricted Stock Unit Award Agreement for Company Employees under the Capstone Turbine Corporation 2017 Stock Option and Incentive Plan –Two Year Vesting Schedule

Form of Performance Restricted Stock Unit Award Agreement for Company Employees under the Capstone Turbine Corporation 2017 Stock Option and Incentive Plan

Form of Restricted Stock Unit Award Agreement for Company Employees under the Capstone Turbine Corporation 2017 Stock Option and Incentive Plan –Four Year Vesting Schedule (kk)

Form of Restricted Stock Unit Award Agreement for Company Employees under the Capstone Turbine Corporation 2017 Stock Option and Incentive Plan –Three Year Vesting Schedule (kk)

Form of Restricted Stock Unit Award Agreement for Company Employees under the Capstone Turbine Corporation 2017 Stock Option and Incentive Plan –Two Year Vesting Schedule (kk)

Form of Performance Restricted Stock Unit Award Agreement for Company Employees under the Capstone Turbine Corporation 2017 Stock Option and Incentive Plan (kk)

Amendment, dated July 15, 2020, to At The Market Offering Agreement, dated June 7, 2018, between Capstone Turbine Corporation and H.C.

Wainwright & Co., LLC (ii)

Amendment, dated March 19, 2021, to At the Market Offering Agreement, dated June 7, 2018, between Capstone Turbine Corporation and H.C.

Wainwright & Co., LLC (jj)

Code of Business Conduct(ff)

3 unchanged sentences

Power of Attorney (included on the signature page of this Form 10-K)

Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes–Oxley Act of 2002

Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes–Oxley Act of 2002

Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes–Oxley Act of 2002

Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes–Oxley Act of 2002

Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes–Oxley Act of 2002

Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes–Oxley Act of 2002

XBRL Instance Document

5 unchanged sentences

*Management contract or compensatory plan or arrangement

Incorporated by reference to Capstone Turbine Corporation’s Registration Statement on Form S-1/A, dated May 8, 2000 (File No.

Incorporated by reference to Capstone Turbine Corporation’s Current Report on Form 8-K, filed on October 21, 2019 (File No.

Incorporated by reference to Capstone Turbine Corporation’s Current Report on Form 8-K, filed September 1, 2017 (File No.

Incorporated by reference to Capstone Turbine Corporation’s Current Report on Form 8-K, filed on May 9, 2016 (File No.

Incorporated by reference to Capstone Turbine Corporation’s Registration Statement on Form S-1/A, dated June 21, 2000 (File No.

Incorporated by reference to Capstone Turbine Corporation’s Current Report on Form 8-K, filed on May 6, 2019 (File No.

Incorporated by reference to Capstone Turbine Corporation’s Current Report on Form 8-K, filed on April 21, 2016 (File No.

Incorporated by reference to Capstone Turbine Corporation’s Current Report on Form 8-K, filed on October 18, 2016 (File No.

Incorporated by reference to Capstone Turbine Corporation’s Current Report on Form 8-K, filed on February 5, 2019 (File No.

Incorporated by reference to Capstone Turbine Corporation’s Current Report on Form 8-K, filed on September 4, 2019 (File No.

Incorporated by reference to Capstone Turbine Corporation’s Current Report on Form 8-K, filed on December 9, 2019 (File No.

Incorporated by reference to Capstone Turbine Corporation’s Current Report on Form 8-K, filed on April 29, 2020 (File No.

Incorporated by reference to Capstone Turbine Corporation’s Current Report on Form 8-K, filed on May 15, 2020 (File No.

Incorporated by reference to Capstone Turbine Corporation’s Current Report on Form 8-K, filed on June 17, 2020 (File No.

Incorporated by reference to Capstone Turbine Corporation’s Annual Report on Form 10-K for the fiscal year ended March 31, 2013 (File No.

Incorporated by reference to Capstone Turbine Corporation’s Annual Report on Form 10-K for the fiscal year ended on March 31, 2017 (File No.

Incorporated by reference to Appendix A to Capstone Turbine Corporation’s Definitive Proxy Statement, filed on July 21, 2017 (File No.

Incorporated by reference to Appendix B to Capstone Turbine Corporation’s Definitive Proxy Statement, filed on July 21, 2017 (File No.

Incorporated by reference to Capstone Turbine Corporation’s Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2004 (File No.

Incorporated by reference to Capstone Turbine Corporation’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2007 (File No.

Incorporated by reference to Capstone Turbine Corporation’s Current Report on Form 8-K, filed on October 13, 2017 (File No.

Incorporated by reference to Capstone Turbine Corporation’s Annual Report on Form 10-K, filed on June 7, 2018 (File No.

Incorporated by reference to Capstone Turbine Corporation’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2013 (File No.

Incorporated by reference to Appendix B to Capstone Turbine Corporation’s Definitive Proxy Statement, filed on July 16, 2014 (File No.

Incorporated by reference to Capstone Turbine Corporation’s Registration Statement on Form S-8, dated June 17, 2009 (File No.

Incorporated by reference to Capstone Turbine Corporation’s Annual Report on Form 10-K for the fiscal year ended on March 31, 2012 (File No.

Incorporated by reference to Capstone Turbine Corporation’s Annual Report on Form 10-K for the fiscal year ended on March 31, 2015 (File No.

Incorporated by reference to Capstone Turbine Corporation’s Current Report on Form 8-K, filed on June 7, 2018 (File No.

Incorporated by reference to Capstone Turbine Corporation’s Current Report on Form 8-K, filed on July 26, 2018 (File No.

Incorporated by reference to Appendix A to Capstone Turbine Corporation’s Definitive Proxy Statement, filed July 13, 2018 (File No.

Incorporated by reference to Capstone Turbine Corporation’s Current Report on Form 8-K filed on June 5, 2018 (File No.

Incorporated by reference to Capstone Turbine Corporation’s Annual Report on Form 10-K for the fiscal year ended March 31, 2014 (File No.

(a) Incorporated by reference to Capstone Turbine Corporation’s Registration Statement on Form S-1/A, dated May 8, 2000 (File No.

(b) Incorporated by reference to Capstone Turbine Corporation’s Current Report on Form 8-K, filed on October 21, 2019 (File No.

(c) Incorporated by reference to Capstone Turbine Corporation’s Current Report on Form 8-K, filed September 1, 2017 (File No.

(d) Incorporated by reference to Capstone Turbine Corporation’s Current Report on Form 8-K, filed on May 9, 2016 (File No.

(e) Incorporated by reference to Capstone Turbine Corporation’s Registration Statement on Form S-1/A, dated June 21, 2000 (File No.

(f) Incorporated by reference to Capstone Turbine Corporation’s Current Report on Form 8-K, filed on May 6, 2019 (File No.

(g) Incorporated by reference to Capstone Turbine Corporation’s Current Report on Form 8-K, filed on April 21, 2016 (File No.

(h) Incorporated by reference to Capstone Turbine Corporation’s Current Report on Form 8-K, filed on October 18, 2016 (File No.

(i) Incorporated by reference to Capstone Turbine Corporation’s Current Report on Form 8-K, filed on February 5, 2019 (File No.

(j) Incorporated by reference to Capstone Turbine Corporation’s Current Report on Form 8-K, filed on September 4, 2019 (File No.

(k) Incorporated by reference to Capstone Turbine Corporation’s Current Report on Form 8-K, filed on December 9, 2019 (File No.

(l) Incorporated by reference to Capstone Turbine Corporation’s Current Report on Form 8-K, filed on April 29, 2020 (File No.

(m) Incorporated by reference to Capstone Turbine Corporation’s Current Report on Form 8-K, filed on April 22, 2021 (File No.

(n) Incorporated by reference to Capstone Turbine Corporation’s Current Report on Form 8-K, filed on June 17, 2020 (File No.

(o) Incorporated by reference to Capstone Turbine Corporation’s Annual Report on Form 10-K for the fiscal year ended March 31, 2013 (File No.

(p) Incorporated by reference to Capstone Turbine Corporation’s Annual Report on Form 10-K for the fiscal year ended on March 31, 2017 (File No.

(q) Incorporated by reference to Appendix A to Capstone Turbine Corporation’s Definitive Proxy Statement, filed on July 21, 2017 (File No.

(r) Incorporated by reference to Appendix B to Capstone Turbine Corporation’s Definitive Proxy Statement, filed on July 21, 2017 (File No.

(s) Incorporated by reference to Capstone Turbine Corporation’s Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2004 (File No.

(t) Incorporated by reference to Capstone Turbine Corporation’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2007 (File No.

(u) Incorporated by reference to Capstone Turbine Corporation’s Current Report on Form 8-K, filed on October 13, 2017 (File No.

(v) Incorporated by reference to Capstone Turbine Corporation’s Annual Report on Form 10-K, filed on June 7, 2018 (File No.

(w) Incorporated by reference to Capstone Turbine Corporation’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2013 (File No.

(x) Incorporated by reference to Appendix B to Capstone Turbine Corporation’s Definitive Proxy Statement, filed on July 16, 2014 (File No.

(y) Incorporated by reference to Capstone Turbine Corporation’s Registration Statement on Form S-8, dated June 17, 2009 (File No.

(z) Incorporated by reference to Capstone Turbine Corporation’s Annual Report on Form 10-K for the fiscal year ended on March 31, 2012 (File No.

(aa) Incorporated by reference to Capstone Turbine Corporation’s Annual Report on Form 10-K for the fiscal year ended on March 31, 2015 (File No.

(bb) Incorporated by reference to Capstone Turbine Corporation’s Current Report on Form 8-K, filed on June 7, 2018 (File No.

(cc) Incorporated by reference to Capstone Turbine Corporation’s Current Report on Form 8-K, filed on July 26, 2018 (File No.

(dd) Incorporated by reference to Appendix A to Capstone Turbine Corporation’s Definitive Proxy Statement, filed July 13, 2018 (File No.

(ee) Incorporated by reference to Capstone Turbine Corporation’s Current Report on Form 8-K filed on June 5, 2018 (File No.

(ff) Incorporated by reference to Capstone Turbine Corporation’s Annual Report on Form 10-K for the fiscal year ended March 31, 2014 (File No.

(gg) Incorporated by reference to Capstone Turbine Corporation’s Current Report on Form 8-K filed on October 5, 2020 (File No.

(hh) Incorporated by reference to Capstone Turbine Corporation’s Current Report on Form 8-K filed on May 14, 2021 (File No.

(ii) Incorporated by reference to Capstone Turbine Corporation’s Current Report on Form 8-K filed on July 15, 2020 (File No.

(jj) Incorporated by reference to Capstone Turbine Corporation’s Current Report on Form 8-K filed on March 22, 2021 (File No.

(kk) Incorporated by reference to Capstone Turbine Corporation’s Annual Report on Form 10-K for the fiscal year ended March 31, 2020 (File No.

Pursuant to the requirements of Sections 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

CAPSTONE TURBINE CORPORATION

CAPSTONE GREEN ENERGY CORPORATION

June 11, 2021

/s/ Frederick S.

Chief Financial Officer & Chief Accounting Officer

(Principal Financial and Accounting Officer)

KNOW ALL MEN BY THESE PRESENTS, that we, the undersigned officers and directors of Capstone Turbine Corporation, hereby severally constitute Darren R.

Chief Financial Officer

(Principal Financial Officer)

KNOW ALL MEN BY THESE PRESENTS, that we, the undersigned officers and directors of Capstone Green Energy Corporation, hereby severally constitute Darren R.

Jamison and Frederick S.

Hencken III, and each of them singly, our true and lawful attorneys with full power to them, and each of them singly, to sign for us and in our names in the capacities indicated below, this Annual Report on Form 10‑K and any and all amendments to said Form 10‑K, and generally to do all such things in our names and in our capacities as officers and directors to enable Capstone Turbine Corporation to comply with the provisions of the Securities Exchange Act of 1934, and all requirements of the Securities and Exchange Commission, hereby ratifying and confirming our signatures as they may be signed by our said attorneys, or any of them, to said Form 10‑K and any and all amendments thereto.

Hencken III, and each of them singly, our true and lawful attorneys with full power to them, and each of them singly, to sign for us and in our names in the capacities indicated below, this Annual Report on Form 10-K and any and all amendments to said Form 10-K, and generally to do all such things in our names and in our capacities as officers and directors to enable Capstone Green Energy Corporation to comply with the provisions of the Securities Exchange Act of 1934, and all requirements of the Securities and Exchange Commission, hereby ratifying and confirming our signatures as they may be signed by our said attorneys, or any of them, to said Form 10-K and any and all amendments thereto.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

3 unchanged sentences

/s/ Frederick S.

Chief Financial Officer and Chief Accounting Officer (Principal Financial and Accounting Officer)

Chief Financial Officer (Principal Financial Officer)

June 11, 2021

/s/ Neshan N.

Chief Accounting Officer (Principal Accounting Officer)

June 11, 2021

/s/ Robert C.

Chair of the Board of Directors

2 unchanged sentences

June 11, 2021

/s/ Robert C.

June 11, 2021

June 26, 2020

/s/ Robert F.

4 unchanged sentences

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-K

Item 9A. Controls and Procedures