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Item 9A. Controls and Procedures

2024-06-13 compared with 2022-07-14 · 1660 added, 433 removed, 726 unchanged (74% of the section changed)

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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, 2022, 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 were effective as of March 31, 2022 to provide 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.

In connection with the preparation of this Form 10-K for the fiscal year ended March 31, 2023, 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 and pursuant to Rules 13a-15(e) and 15d-15(e) under the Exchange Act).

Based on this evaluation, our CEO and CFO have concluded that, as of March 31, 2023, due to the material weaknesses in our internal control over financial reporting described below, our disclosure controls and procedures were not effective.

Notwithstanding the identified material weaknesses, management believes the consolidated financial statements included in this Annual Report on Form 10-K fairly present, in all material respects, our consolidated financial position and consolidated results from operations and cash flows for the fiscal years ended March 31, 2023 and March 31, 2022, and our financial condition as of each such date and have been prepared in conformity with U.S.

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.

Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) under the Exchange Act as a process designed by, or under the supervision of, our CEO and CFO and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP and includes those policies and procedures that:

Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act as a process designed by, or under the supervision of, our CEO and CFO and effected by our board of directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S.

GAAP and includes those policies and procedures that:

● Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;

● Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors;

● Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S.

GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors;

● 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, 2022.

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 fiscal year ended March 31, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Based on this evaluation, management concluded that our internal control over financial reporting was not effective as of March 31, 2023 because of the material weaknesses described below.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual and interim financial statements will not be detected or prevented on a timely basis.

The following material weaknesses were identified:

● There was an inappropriate tone at the top established by certain former senior executives.

For example, certain former senior executives delayed shipments of parts under the FPP service contracts, which because of our incorrect accounting for our FPP program resulted in delayed recording of the associated expense and liabilities on the Company’s financial statements.

These business practices were also not properly communicated to our Board, Audit Committee, or independent registered public accounting firm.

● We lacked sufficient qualified professionals with an appropriate level of accounting and internal control knowledge, training and experience to (i) appropriately analyze, record and disclose accounting matters timely and accurately and (ii) design and maintain effective internal control over financial reporting.

● We did not perform a sufficient review of accounting policies to ensure ongoing adherence with U.S.

● We did not design and maintain effective controls over financial reporting for systems, products, parts, and accessories sales subject to bill and hold arrangements with customers.

● We did not design and maintain effective controls over financial reporting related to the proper accounting, presentation and disclosure for FPP service contracts, including the cost recognition of parts and labor associated with FPP service contracts.

Management’s Remediation Plan

Management, with the direction and oversight of the Audit Committee and the Board of Directors, is engaged in remediation actions to address the material weaknesses described above.

The Company’s remediation actions include, but are not limited to the following:

● The Company has reinforced and will continue to reinforce its tone at the top through enhanced communication of the Company’s values and expected business conduct to their personnel directly from the Company’s senior leadership.

● Management is enhancing our quarterly disclosure committee meetings to require additional communication of business activities to the appropriate finance and accounting personnel and to our Board and Audit Committee as required.

● The Company has hired and continues to hire additional accounting and compliance personnel as is necessary to maintain an effective control environment commensurate with our financial reporting requirements.

Management will continue to assess the composition of its resource needs, both internal and external, which may include hiring additional accounting and compliance resources, including engaging in third-party advisors when necessary.

● Management is implementing a formal process to periodically review and update accounting policies.

● Management has reviewed and refined the Company’s current accounting memorandums related to product, parts, and accessories sales and FPP service contracts to address the proper financial reporting considerations.

Additionally, management is enhancing the design of and implementing controls over financial reporting for (i) systems, products, parts, and accessories sales subject to bill and hold arrangements with customers and (ii) FPP service contracts, including the cost recognition of parts and labor associated with FPP service contracts.

We believe these measures will remediate the material weaknesses, but management is assessing the need for any additional steps to remediate the underlying causes that gave rise to these weaknesses.

The material weaknesses will not be considered remediated until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

There is no assurance that additional remediation steps will not be necessary.

Inherent Limitations of the Effectiveness of Internal Control

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the internal control system are met.

Because of the inherent limitations of any internal control system, no evaluation of controls can provide absolute assurance that all control issues, if any, within a company have been detected.

Management recognizes that a control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect errors or misstatements in our consolidated financial statements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree or compliance with the policies or procedures may deteriorate.

Changes in Internal Control Over Financial Reporting

Except as described above, there were no changes in our internal control over financial reporting during the most recent fiscal quarter that were identified in connection with management’s evaluation required by paragraph (d) of Rules 13d-15 and 15d-15 under the Exchange Act that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Other Information.

On April 7, 2022, our Board approved an extension of the NOL Rights Agreement from May 6, 2022 to May 6, 2025, subject to obtaining stockholder approval of such extension.

We intend to seek that approval at our 2022 annual meeting of stockholders.

On May 20, 2022, we entered into a National Account Agreement with Capstone Engineered Solutions (“CES”), a company directly owned by Jim Crouse, our former Chief Revenue Officer.

Under the terms of the National Account Agreement, CES is authorized to market, actively promote, and sell Capstone microturbines, related parts, and service.

The dollar value of this contract will depend on the amount of sales generated by CES.

2022, the Company also entered into a Consulting Agreement with CES, whereby CES will provide certain engineering services to the Company on an as needed basis, at a rate of $150 per hour.

Additionally on May 10, 2022, the Company entered into an agreement with CES, whereby CES will provide general contract and installation services for one of the Company’s Energy as a Service projects for approximately $0.2 million.

The foregoing descriptions of the National Account Agreement, Engineering Consulting Agreement, and Installation Services Agreement are not complete and are subject to, and qualified in their entirety by reference to, the text of the National Account Agreement, Engineering Consulting Agreement, and Installation Services Agreement, copies of which are included as Exhibit 10.29, 10.28, and 10.30 respectively, attached hereto.

On July 13, 2022, we entered into the Second Amendment to the A&R Note Purchase Agreement with the guarantors party thereto, the Purchaser and the Collateral Agent.

The A&R NPA Second Amendment provides for (i) the waiver by the Purchaser and the Collateral Agent of our breach of the Adjusted EBITDA covenant contained in the A&R Note Purchase Agreement for the 12 months ended June 30, 2022 and (i) the amendment to certain provisions of the A&R Note Purchase Agreement, including to add a number of new covenants.

Those include requirements that we (i) deliver a revised financial plan to the Collateral Agent by no later than 42 days after the effective date of the A&R NPA Second Amendment, (ii) deliver 13-week cash flow forecasts to the Collateral Agent every week commencing on July 15, 2022 through October 1, 2022, (iii) enter into an engagement letter with an investment bank satisfactory to the Collateral Agent by August 10, 2022, (iv) use commercially reasonable best efforts to raise a minimum of $10 million through a sale of common stock by September 14, 2022, and (v) use commercially reasonable best efforts to refinance the Notes by October 1, 2022, (iv) take all actions necessary to maintain our engagement of Riveron Consulting, LLC or another financial advisor acceptable to the Collateral Agent and (v) retain an interim chief financial officer on terms acceptable to the Collateral Agent (it being understood that Scott Robinson and the terms offered to him are acceptable to the Collateral Agent).

The A&R NPA Second Amendment also provides that, for purposes of determining our compliance with the Adjusted EBITDA covenant with respect to our fiscal quarter ended June 30, 2022, we may increase our Adjusted EBITDA for the period by prepaying the Notes up to the amount that the required level for consolidated Adjusted EBITDA for the

fiscal quarter ended March 31, 2022 exceeded our consolidated Adjusted EBITDA for that fiscal quarter (i.e., approximately $1.4 million) (the “Cure Cap”);

provided that any reversal made with respect to allowances or reserves for bad debt for that fiscal quarter will reduce the Cure Cap on a dollar for dollar basis.

We have not, however, yet determined if we will need to make any such prepayment to comply with the Adjusted EBITDA covenant for the fiscal quarter ended June 30, 2022, as we have not yet closed our books for that fiscal quarter.

The A&R NPA Second Amendment eliminates the Adjusted EBITDA covenant cure right for any future period.

The foregoing description of the A&R NPA Second Amendment does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the A&R NPA Second Amendment, which is filed herewith as Exhibit 4.16 and is incorporated by reference herein.

Not applicable.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

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Directors, Executive Officers and Corporate Governance.

The information required by this Item will be included in the Company’s 2022 Proxy Statement to be filed with the SEC in connection with the solicitation of proxies for the Company’s 2022 Annual Meeting of Shareholders (“2022 Proxy Statement”) and is incorporated herein by reference.

Such Proxy Statement will be filed with the SEC within 120 days after the end Fiscal 2022.

Board of Directors;

Leadership Structure

Set forth below is certain information regarding the directors of the Company.

The ages of and biographical information regarding the directors is based on information furnished to the Company by each director and is as of May 31, 2024.

Audit Committee

Compensation & Human Capital Committee

Governance & Sustainability Committee

(1) Chair of the Board

Canino joined the Board on March 11, 2024 in connection with his appointment as President and Chief Executive Officer

(3) Lead Independent Director

Miller joined the Board on February 26, 2024

The principal occupations and business experience for at least the last five years for each director are set forth below.

The biographies of each of the directors below contain information regarding the person’s service as a director, business experience, director positions held currently or at any time during the last five years, information regarding the experiences, qualifications, attributes or skills that caused the Governance and Sustainability Committee and the Board to determine that the person should serve as a director.

Flexon has been a director since April 2018 and has served as Chair since January 2021.

Flexon served as our Executive Chairman from August 9, 2023 until March 31, 2024 and as our Interim President and Chief Executive Officer from August 22, 2023 until March 10, 2024.

Flexon has served as a director of PG&E Corporation (NYSE:

PCG) since June 2020 and is currently the chair of the board.

He has also served as a director for Charah Solutions, Inc.

CHRA) from June 2018 to July 2023 and of the Electric Reliability Council of Texas (ERCOT) since 2021.

Flexon was President and Chief Executive Officer and a director of Dynegy Inc.

DYN), a power-generating company that owns and operates a number of natural gas-fueled or coal-fueled power stations in the U.S, from July 2011 to April 2018.

Prior to joining Dynegy, Mr.

Flexon served as the Chief Financial Officer of UGI Corporation (NYSE:

UGI), a distributor and marketer of energy products and related services from February 2011 to July 2011.

Flexon was the Chief Executive Officer of Foster Wheeler AG (Nasdaq:

FWLT) from June to October 2010 and the President and Chief Executive Officer of Foster Wheeler USA from November 2009 to May 2010.

Prior to joining Foster Wheeler, Mr.

Flexon was Executive Vice President and Chief Financial Officer of NRG Energy, Inc.

NRG) from February to November 2009.

Flexon previously served as Executive Vice President and Chief Operating Officer of NRG Energy from March 2008 to February 2009 and as its Executive Vice President and Chief Financial Officer from 2004 to 2008.

Prior to joining NRG Energy, Mr.

Flexon held executive positions with Hercules, Inc.

and various key positions, including General Auditor, with Atlantic Richfield Company.

In addition, Mr.

Flexon was a CPA with the former Coopers & Lybrand from 1980 to 1987.

Flexon served on the public board of directors of Foster Wheeler from 2006 until 2009 and from May to October 2010, of Westmoreland Coal Company from 2017 to 2019 and of TransAlta Corp.

from 2019 to 2020.

He served on the Board of Directors for Genesys Works-Houston, an organization that transforms the lives of disadvantaged high school students through meaningful work experience, from 2016 to 2021.

He also served on the board of directors of Baker Ripley, a Texas non-profit organization that connects low-income people to opportunities, from 2014 to 2016.

Flexon holds a Bachelor of Science degree in Accounting from Villanova University.

He became a Certified Public Accountant (inactive) in the State of Pennsylvania.

Among his other skills and expertise, Mr.

Flexon brings to the Board over a decade of experience in accounting and financial matters and has a breadth of executive management experience.

In his years as an energy industry executive, he has developed a deep comprehension of wholesale power generation markets and customers.

See “Executive Officers” for information pertaining to Mr.

Jorden has been a director since April 2017.

Jorden has also served as director and audit committee and nominating & governance committee member of Cohu, Inc.

COHU) since May 2021, which is a global leader in back-end semiconductor equipment and services, delivering leading-edge solutions for the manufacturing of semiconductors.

She has also served as director and audit committee member of Alignment Healthcare, Inc.

ALHC), which is a tech-enabled Medicare Advantage plan company, since January 2022.

Additionally, she serves as a director and finance committee member of Methodist Health System, a not-for-profit Texas-based hospital system since 2008.

Prior to her current roles, Ms.

Jorden served as director, chairperson of the compensation committee, a member of the audit committee and a member of the governance and nominating committee, the latter of which she previously served on as chairperson, for Maxwell Technologies (Nasdaq:

MXWL), a leader in development and manufacturing of energy storage and power delivery solutions from 2008 to 2017.

In addition, she also served as director and chairperson of the audit committee of Magnatek, Inc.

MAG), a manufacturer of digital power control systems, U.S.

Oncology, a privately-held oncology services company, and BioScrip, Inc.

BIOS), a national provider of infusion and home care management solutions.

During her business career, Ms.

Jorden has served as chief financial officer of four publicly traded companies, including as Executive Vice President and Chief Financial Officer of AdvancePCS (Nasdaq:

ADVP), a pharmacy benefits management company, from 2002 to 2004.

Previously she was chief financial officer of Informix, a Nasdaq-listed technology company, Oxford Health Plans, a Nasdaq-listed provider of managed health care services, and WellPoint, Inc., a NYSE-listed managed care company.

Jorden received her Bachelor of Science degree in Accounting from the California State University, Los Angeles.

Earlier in her career, she was a senior auditor with Arthur Andersen & Co., where she became a Certified Public Accountant (inactive) in the State of California.

Among her other skills and expertise, Ms.

Jorden brings to the Board decades of extensive experience as both a chief financial officer as well as a board member in all areas of corporate governance and finance, including mergers and acquisitions, structuring IPOs, restructurings, and managing public debt and equity offerings.

Jorden is a board

leadership fellow of the National Association of Corporate Directors, demonstrating her commitment and leadership as a board member.

Powelson has been a director since June 2019.

Powelson has served as the President and Chief Executive Officer of the National Association of Water Companies (“NAWC”) since June 2018.

Prior to joining NAWC, Mr.

Powelson was nominated to the Federal Energy Regulatory Commissioner (“FERC”) by President Donald J.

Trump in May 2017, confirmed by the U.S.

Senate in August 2017, and served as a member of FERC until August 2018.

Prior to his appointment to FERC, Mr.

Powelson served on the Pennsylvania Public Utility Commission (“PUC”) from June 2008 to August 2017, and served as the PUC’s chairman from February 2011 to May 2015.

Powelson also served on Pennsylvania’s Marcellus Shale Advisory Commission from March 2011 to July 2011.

Prior to joining the PUC, Mr.

Powelson served as president of the Chester County Chamber of Business & Industry from February 1994 to July 2008.

Powelson was also a past president of the National Association of Regulatory Utility Commissioners (“NARUC”), where he also was a member of the board of directors from March 2011 to July 2017.

Powelson served as chairman of the NARUC Committee on Water and Power and represented the Water Committee on NARUC’s Task Force on Climate Policy.

Powelson holds a Masters of Governmental Administration from the University of Pennsylvania and a Bachelor of Arts from St.

Joseph’s University.

Among his other skills and expertise, Mr.

Powelson brings to the Board extensive expertise in public utilities, the regulatory environment and public policy.

Wilson has been a director since November 2019.

Wilson served as Executive Vice President and President, Alternative Energy Businesses for NRG Energy, Inc.

NRG), an independent power company with generation, energy retail business and cleantech ventures, from July 2011 through January 2016.

Wilson served as Executive Vice President and Chief Administrative Officer of NRG from September 2008 through July 2011.

Prior to September 2008, Ms.

Wilson served as Executive Vice President, Human Resources for Nash-Finch Company, a national food distributor, and other various senior roles at NRG from 2000 through 2007.

Prior to joining NRG, Ms.

Wilson held various key positions as Vice President Human Resources with Metris Companies Inc.

and Director, Human Resources with General Electric ITS.

Wilson holds a Masters in Industrial Relations from the University of Minnesota.

Wilson brings to the Board extensive experience as President of a Fortune 500 company that generates electricity and provides energy solutions and natural gas to more than 3.7 million residential, small business, and commercial and industrial customers.

Fu has been a director since August 2021.

She currently serves on the board of directors of Live Nation Entertainment (NYSE:

LYV), the world’s largest live entertainment Company, as well as the boards of Long Now Foundation and Burning Man Project.

Fu co-founded Geomagic, a leader in 3D imaging and 3D printing technologies that has fundamentally changed the way products are designed and manufactured around the world, and she served as its CEO until 2013.

Following the acquisition by 3D Systems (NYSE:

DDD) of Geomagic in 2013, Ms.

Fu served as Chief Strategy Officer and Chief Entrepreneur Officer at 3D Systems until 2016.

She was also part of the team that created the NCSA Mosaic software and HTTP server software which were key in the early development of the Internet.

Fu has received numerous awards for her leadership, including the Outstanding American by Choice award from the U.S.

Citizenship and Immigration Services, the Ernst & Young Entrepreneur of the Year award and Inc.

Magazine’s Entrepreneur of the Year award.

Fu’s book, Bend Not Break:

A Life in Two Worlds, was on the New York Times bestseller list.

Fu brings to the Board extensive experience in senior executive and leadership positions, global business experience and expertise in technology trends, social change and policy making.

Miller has over 40 years of broad-based executive management experience in the manufacturing, distribution and transportation industries and has served in senior finance and leadership roles at public and private companies across a range of industry categories.

He has served on the board of directors of Spruce Power Holding Corporation, an owner and operator of distributed solar energy assets, since 2022.

From 2017 to 2021, he served as Chief Executive Officer of Power Solutions International, Inc., a publicly traded company focusing on the design, engineering and manufacture of a broad range of advanced, emission-certified engines and power systems.

From 2008 until 2016, Mr.

Miller served in operational and financial management positions of increasing responsibility at Navistar International

Corporation, a global vehicle manufacturer and solutions provider, including as senior vice president of operations and corporate finance.

Prior to such roles, he served in the role of Chief Financial Officer of Laidlaw International, Inc., a provider of public transportation services, Chicago Metallic Corporation, a global manufacturer of suspended ceiling and metal products, Fleetpride, Inc., a distributor of heavy duty truck parts, and Peapod, an online grocery delivery company.

Miller received his Master of Business Administration from the University of Michigan and a Bachelor of Arts degree in economics from DePauw University.

Miller brings to the Board extensive industry experience and expertise in financial management and strategic planning.

Other than Mr.

Flexon and Mr.

Juric in respect of the Chapter 11 Cases, no director or officer has been involved in any legal proceedings required to be disclosed under Item 401(f) of Regulation SK.

The Board met ten (10) times during the fiscal year ended March 31, 2023 (the “2023 Fiscal Year” or “Fiscal 2023”).

The Board has established an Audit Committee (the “Audit Committee”), a Compensation and Human Capital Committee (the “Compensation and Human Capital Committee”), and a Governance and Sustainability Committee (the “Governance and Sustainability Committee”).

During Fiscal 2023, each director attended at least 75% of the aggregate of (1) the total number of meetings of the Board (held during the period for which he or she was a director) and (2) the total number of meetings of all committees of the Board of the Company on which the director served (during the periods that he or she served).

The Company strongly encourages each member of the Board to attend each annual meeting of stockholders.

All of the directors serving on the Board at the time attended the 2022 Annual Meeting.

The Company’s independent directors met in executive session, without members of the Company’s management present, at all of the regularly scheduled meetings of the Board in Fiscal 2023.

Risk Oversight

The Board oversees an enterprise-wide approach to risk management designed to support the achievement of organizational objectives, including strategic objectives, to improve long-term organizational performance and to enhance stockholder value.

A fundamental part of risk management is not only understanding the risks the Company faces and what steps management is taking to manage those risks, but also understanding what level of risk is appropriate for the Company.

The involvement of the full Board in setting the Company’s business strategy is a key part of its assessment of management’s appetite for risk and also a determination of what constitutes an appropriate level of risk for the Company.

The full Board participates in an annual enterprise risk management assessment.

While the Board has the ultimate oversight responsibility for the risk management process, various committees of the Board also have responsibility for risk management.

In particular, the Audit Committee focuses on financial risk, including internal controls, and receives an annual risk assessment report from the Company’s internal auditors.

In setting compensation, the Compensation and Human Capital Committee strives to create incentives that encourage a level of risk-taking behavior consistent with the Company’s business strategy and is responsible for oversight with respect to compensation and succession planning risks.

Audit Committee

The Audit Committee currently consists of Ms.

Jorden (Chair), Ms.

The Audit Committee consisted of Ms.

Jorden (Chair), Mr.

Flexon, and Ms.

Fu as of March 31, 2023.

Following his appointment as Executive Chairman in August 2023, Mr.

Flexon resigned from the Audit Committee.

Upon his appointment to the Board on February 26, 2024, Mr.

Miller was appointed to the Audit Committee.

The Audit committee is constituted to comply with Section 3(a)(58)(A) of the Exchange Act and is responsible, among other items, for:

(i) overseeing the Company’s accounting and financial reporting practices;

(ii) annually retaining the independent public accountants as auditors of the financial statements and accounts of the Company;

(iii) monitoring the scope of audits made by the independent public accountants and the audit reports submitted by the independent public accountants;

(iv) overseeing the systems of internal control which management and the Board have established;

and (v) discussing with management and the independent and internal auditors the Company’s major financial risk exposure and the steps taken to monitor and control such exposure.

In addition, the Audit Committee reviews and approves all related party transactions.

The Audit Committee operates under a written charter adopted by the Board, a copy of which is available on the Company’s website at www.capstonegreenenergy.com.

Pursuant to its written charter, the Audit Committee reviews its charter on an annual basis for compliance, best practices and any other needed updates or changes.

During Fiscal 2023, the Audit Committee held six meetings.

The Board has determined that Ms.

Jorden is an “audit committee financial expert,” as that term is defined by applicable rules adopted by the SEC.

The Board has further determined that each member of the Audit Committee is independent and financially literate as defined by Nasdaq and SEC rules, as applicable.

Compensation and Human Capital Committee

The Compensation and Human Capital Committee currently consists of Ms.

Wilson (Chair), Mr.

Powelson, and Ms.

Jorden, which was also the composition as of March 31, 2023.

The Compensation and Human Capital Committee is comprised solely of directors who qualify as independent for purposes of Nasdaq rules in conformance with the Compensation and Human Capital Committee’s charter, and are “non-employee directors,” as defined in Rule 16b-3 under the Exchange Act and “outside directors,” as defined under Section 162(m) of the Internal Revenue Code of 1986, amended (the “Code”).

The functions of the Compensation and Human Capital Committee include:

(i) annually reviewing and recommending to the Board the corporate goals and objectives relevant to the compensation of our Chief Executive Officer, (ii) evaluating the performance of our Chief Executive Officer in light of such corporate goals and objectives and, based on such evaluation, recommending to the Board the compensation of our Chief Executive Officer, (iii) determining the compensation of all executive officers other than the Chief Executive Officer, (iv) retaining, terminating and approving the compensation of any compensation advisors, (v) reviewing and approving our policies and procedures for the grant of equity based awards, (vi) reviewing and approving grants of awards under our incentive based compensation plans and equity based plans, (vii) reviewing and making recommendations to the Board with respect to director compensation, (viii) reviewing and overseeing the Company’s policies and practices relating to human capital management, (ix) reviewing, monitoring and providing recommendations to our Board on our workplace policies and practices, including corporate culture and employee engagement, talent management and leadership development, employee diversity and inclusion, and ensuring a respectful workplace free of discrimination and harassment, and (x) reviewing and evaluating, at least annually, the performance of our Compensation and Human Capital Committee and its members, and reporting to the Board on the results of such evaluation.

The Compensation and Human Capital Committee operates under a written charter adopted by the Board, a copy of which is available on the Company’s website at www.capstonegreenenergy.com.

Pursuant to its written charter, the Compensation and Human Capital Committee reviews its charter on an annual basis for compliance, best practices and any other needed updates or changes.

During Fiscal 2023, the Compensation and Human Capital Committee held six meetings.

Processes and procedures for determining executive and director compensation, including authority and delegation, and the role of executive officers, if any, are discussed in the section titled “Compensation of Officers and Directors.”

Governance and Sustainability Committee

The Governance and Sustainability Committee consisted of Mr.

Powelson (Chair), Ms.

Wilson, and Ms.

Fu as of March 31, 2023.

Upon his appointment to the Board on February 26, 2024, Mr.

Miller was appointed to the Governance and Sustainability Committee.

The Governance and Sustainability Committee is comprised solely of “independent directors” as defined by Nasdaq rules in conformance with the Governance and Sustainability Committee’s charter.

The Governance and Sustainability Committee is responsible for, among other things, (i) monitoring corporate governance matters;

(ii) recommending to the full Board candidates for election to the Board and committees of the Board;

(iii) coordinating the Board evaluation process;

(iv) providing general oversight in respect of corporate governance, social responsibility, and sustainability matters;

and (v) overseeing succession planning of the CEO and other key positions.

The Governance and Sustainability Committee operates under a written charter adopted by the Board, a copy of which is available on the Company’s website at www.capstonegreenenergy.com.

Pursuant to its written charter, the Governance and Sustainability Committee reviews its charter on an annual basis for compliance, best practices and any other needed updates or changes.

During Fiscal 2023, the Governance and Sustainability Committee held four meetings.

The Governance and Sustainability Committee met subsequent to the end of Fiscal 2023 to recommend to the full Board each of the nominees for election to the Board as presented herein.

Board of Directors and Committee Performance Evaluations

The charter of each of the Audit Committee, the Compensation and Human Capital Committee and the Governance and Sustainability Committee requires an annual performance evaluation, and the Company’s Corporate

Governance Principles also mandate an annual evaluation of the Board.

Such performance evaluations are designed to assess whether the Board and its committee’s function effectively and make valuable contributions to the Company.

In June 2023, the Governance and Sustainability Committee conducted an assessment of the performance of the Board, as well as an assessment of each member’s skill sets and experience and how such skill sets and experience align with the needs of the Company in reaching the Company’s strategic objectives.

In June 2023, the Governance and Sustainability Committee and the Board discussed the results of the assessments and put a follow-up process in place to conduct the annual performance evaluation of the Audit Committee, the Compensation and Human Capital Committee and the Governance and Sustainability Committee as well as the Board.

Director Recommendation and Nomination Process

Nominations of persons for election to our Board by the stockholders may be made at an annual meeting of stockholders by any stockholder who (i) was a stockholder of record entitled to vote in the election of directors at the time of giving of notice provided for below and at the time of the annual meeting, and (ii) complies with the notice procedures set forth below and as further described in our bylaws as to such nomination.

Without qualification, for nominations, the stockholder must have given timely notice thereof in writing to the secretary of the corporation at:

Capstone Green Energy Holdings, Inc.

16640 Stagg Street

Van Nuys, CA 91406

Mark Funaki, Secretary

To be timely, a stockholder’s notice shall be delivered to the Secretary at the principal executive offices of the corporation not earlier than the close of business on the 150th calendar day and not later than the close of business on the 120th calendar day prior to the first anniversary of the date of the immediately preceding annual meeting of stockholders;

provided, however, that if no annual meeting was held in the previous year or the date of the annual meeting is advanced by more than thirty (30) calendar days prior to such anniversary date or delayed more than seventy (70) calendar days after such anniversary date, a proposal shall be received by the corporation not earlier than the close of business on the 150th day before the meeting and not later than the later of (a) the close of business on the 120th day before the meeting or (b) the close of business on the tenth day following the day on which public announcement of the date of the annual meeting is first made by the corporation.

In no event shall the public announcement of an adjournment of an annual meeting commence a new time period for the giving of a stockholder’s notice as described above.

As discussed in the Company’s bylaws, the notice must set forth:

(A) certain information as to each nominee such stockholder proposes to nominate at the meeting as set forth in the Company’s bylaws, including such person’s written consent to being named in the proxy statement, proxy card and ballot as a nominee and to serving as a director if elected, and (B) certain information as to, and certain representations and certifications from, the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination is being made, as set forth in the Company’s bylaws.

The above does not purport to provide in detail the requirements for a stockholder’s nomination of the director.

A stockholder interested in nominating a director to our Board is encouraged to review our bylaws and the SEC’s proxy rules, as any stockholder nomination must comply with the applicable provisions of our bylaws and the SEC’s proxy rules and will be handled in accordance with our bylaws and applicable laws.

The Governance and Sustainability Committee reviews the composition and size of the Board and determines the criteria for Board membership.

In addition, the Governance and Sustainability Committee reviews the qualifications, qualities, skills and other expertise of prospective candidates to determine whether they will make good candidates for membership on the Company’s Board.

This consideration includes, at a minimum, a review of each prospective candidate’s character, judgment, experience, expertise, age, diverse characteristics, independence under applicable law and freedom from other conflicts, as well as other factors that the Governance and Sustainability Committee deems relevant in light of the needs of the Board and the Company and/or that are in the best interests of the Company, including the ability to dedicate sufficient time, energy and attention to performance of Board duties, among other things.

The Governance and Sustainability Committee selects qualified candidates and recommends those candidates to the Board, and the Board then

decides if it will invite the candidates to be nominees for election to the Board.

The Governance and Sustainability Committee also considers legal requirements, including stock exchange requirements and applicable laws and regulations.

The Governance and Sustainability Committee also considers issues of diversity, such as diversity of education and professional experience and differences in viewpoints, skills and backgrounds, including gender, race and ethnicity differences, as well as other differentiating characteristics.

The Governance and Sustainability Committee actively considers all relevant factors when considering nominees for directors, including the factors outlined above, when evaluating potential nominees to the Board.

The Board and the Governance and Sustainability Committee believe that it is essential that members of the Board represent diverse viewpoints.

As of the date of this Annual Report on Form 10-K, we meet California state laws (that were recently ruled to be unconstitutional by California Superior Courts) to have (i) at least one director who self-identifies as a member of an underrepresented community (as defined by such law) and (ii) based on the current size of our Board, at least three female directors.

The Governance and Sustainability Committee uses the following process to identify prospective candidates for the Board and to evaluate all candidates, including candidates recommended by stockholders in accordance with the Company’s policy regarding stockholder recommendations and the director nominations process.

The Governance and Sustainability Committee:

(i) reviews the composition and size of the Board and determines the criteria for Board membership;

(ii) evaluates the Board for effectiveness and makes a verbal presentation of its findings to the Board;

(iii) determines whether the current members of the Board who satisfy the criteria for Board membership are willing to continue in service;

if the current members of the Board are willing to continue in service, the Governance and Sustainability Committee evaluates the performance of such board members and considers those current members for re-nomination, and if the current members of the Board are not willing to continue in service or if there will be an increase in the number of directors on the Board, the Governance and Sustainability Committee considers candidates who meet the criteria for Board membership;

(iv) if necessary, engages a search firm to assist with the identification of potential candidates;

(v) compiles a list of potential candidates;

(vi) evaluates the prospective candidates, including candidates recommended by stockholders, to determine which of the prospective candidates, if any, will best represent the interests of all stockholders and determines whether any conflicts of interest exist;

(vii) holds meetings to narrow the list of prospective candidates;

(viii) along with the Chair of the Board and management, interviews a select group of prospective candidates;

(ix) approves the candidate or candidates who are most likely to advance the best interests of the stockholders;

and (x) recommends the selected candidate or candidates to the Board and the stockholders for approval.

The Governance and Sustainability Committee, which may request the assistance of members of the Board who are not on the Governance and Sustainability Committee in the execution of its duties, carefully documents the selection and evaluation process.

Pursuant to our Corporate Governance Guidelines, management directors are required to offer to resign from the Board upon their termination as an officer of the Company (other than as a result of normal retirement), which resignation may be accepted by the Board in its sole discretion.

A non-employee director must inform, and offer his or her resignation to, the Board in the event of any principal occupation or business association change, including retirement.

The Board does not believe that directors who retire from or change the primary occupation that they held when they were first elected to the Board should necessarily leave the Board in every instance.

Stockholder Communications

The Company has a policy whereby stockholders may communicate directly with the Company’s Board, or individual members of the Board, by writing to the Company at:

Capstone Green Energy Holdings, Inc.

16640 Stagg Street

Van Nuys, CA 91406

Mark Funaki, Secretary

and indicating prominently on the outside of any envelope that the communication is intended for:

(i) the Board;

(ii) the Chair of the Board;

(iii) a specific committee of the Board;

(iv) the non-management directors;

or (v) any director or subset of directors of the Board.

The Secretary of the Board reviews all correspondence and regularly forwards to the appropriate director, directors or the Board, copies of all communications that, in the opinion of the Secretary, deal with the functions

of or otherwise require the attention of individual directors, the Board or committees or subsets thereof.

Unless, in the opinion of the Secretary, a communication is improper or irrelevant, a communication will not be withheld from its intended recipient(s) without the approval of the Chair of the Board, the Chair of the appropriate committee or the director who presides during non-management executive sessions.

Directors may, at any time, review a log of all correspondence received by the Company in accordance with the policy and request copies of any such correspondence.

Executive Officers

The names and ages of all executive officers of the Company and the principal occupation and business experience for at least the last five years for each are set forth below.

The age of and biographical information regarding each executive officer is based on information furnished to the Company by each executive officer and is as of May 31, 2024.

The following list identifies the name, age and position(s) of the executive officers of the Company:

President & Chief Executive Officer

Chief Financial Officer

General Counsel

The term of each executive officer runs until his or her successor is elected and qualified, or until his or her earlier death, resignation or removal.

The following is a biographical summary of the experience of the executive officers of the Company who are not members of the Company’s Board of Directors:

Canino was appointed as President and Chief Executive Officer and a member of the Board on March 11, 2024.

Prior to joining the Company, Mr.

Canino served as the Chief Operating Officer of ESS Tech, Inc.

GWH), a developer of long-duration energy storage solutions, from September 2022 to March 2024.

He previously spent approximately eight years with Smardt Chiller Group, Inc.

(“Smardt”), a manufacturer of oil-free chillers, most recently serving as Smardt’s President and Chief Executive Officer.

Canino also served in various roles with Trane Commercial Systems (“Trane”), a manufacturer of heating, ventilation and air conditioning systems, including as Trane’s Vice President, Enterprise Businesses and Renewable Energy.

Canino’s career includes multiple leadership, management, operations and sales roles with publicly traded and privately held organizations.

Canino serves as a board member of Western Washington University and holds a Master of Science in Engineering Mechanics from Pennsylvania State University and a Bachelor of Technology in Mechanical Engineering from the State University of New York at Binghamton.

Among his other skills and expertise, Mr.

Canino brings to the Board his unique perspective as President and Chief Executive Officer of the Company and substantial executive and industry experience.

Juric was appointed Chief Financial Officer in March 2023.

Prior to joining the Company, Mr.

Juric spent nearly two years providing management and financial consulting services to C-suite executives in multiple industries.

Previously, Mr.

Juric served as Vice President of Finance and Chief Financial Officer of USALCO, LLC, a chemical manufacturing and distribution company, for six years, and as President Americas & Asia Industrial Division and Americas Region Chief Financial Officer of Fiberweb, PLC., a global nonwoven products manufacturer and distributor, for nearly five years.

Additionally, Mr.

Juric’s career includes multiple leadership, finance, and accounting roles with publicly traded and privately held organizations.

He also previously served as the Director of Finance at Hercules, Inc., a global specialty chemical manufacturing company.

Juric is a Certified Public Accountant, and holds an MBA and Bachelor of Science in Accounting degree from West Chester University.

Mark Funaki .

Funaki was appointed General Counsel in April 2024.

Funaki has extensive experience as a senior legal officer operating in complex legal environments, with a focus on transactional and compliance matters.

He has served as a member of the board of directors of Vorwerk (US) Inc., a distributor of kitchen appliances, since 2016 and as a consultant for Vorwerk & Co.

Interholding GmbH, an international conglomerate with home and kitchen appliance distribution, financial services and venture capital operations, since 2022.

Previously, Mr.

Funaki spent approximately 21 years in the legal department of Jafra Cosmetics International, Inc., a privately held cosmetics company, most recently serving as Senior Vice President, General Counsel from 2018-2022.

Funaki began his career as an associate at Cades

Schutte LLP and holds a law degree from the Vanderbilt University Law School and a Bachelor of Arts degree in Public Policy from Duke University.

Code of Business Conduct and Code of Ethics

The Company has adopted a Code of Business Conduct and Ethics that applies to all directors, officers and employees of the Company.

All directors, officers and employees of the Company are expected to be committed to the highest standards of honest, ethical and legal behavior.

The Board reviews the Code of Business Conduct and Ethics on an annual basis or more often, if necessary.

The Code of Business Conduct and Ethics is available on the Company’s website at www.capstonegreenenergy.com .

The Company has also adopted a Code of Ethics for Principal and Senior Financial Officers, which is also available on the Company’s website at www.capstonegreenenergy.com.

Delinquent Section 16(a) Reports

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 2022 Proxy Statement under the heading “Delinquent Section 16(a) Reports” and is incorporated herein by reference.

Section 16(a) of the Exchange Act requires the Company’s directors and executive officers and persons who own more than 10% of a registered class of the Company’s equity securities to file with the SEC initial reports of ownership and reports of changes in ownership of the Company’s equity securities.

The Company endeavors to assist officers and directors in making these filings.

Based solely on its review of the reports filed with the SEC during the Company’s fiscal year ended March 31, 2023, the Company believes that all reporting requirements under Section 16(a) for the fiscal year ended March 31, 2023 were met in a timely manner by its directors, executive officers, and greater than 10% beneficial owners, except for the following late filings:

(1) filing made by Frederick S.

Hencken III in connection with the withholding of 1,730 shares to cover the tax liability resulting from the vesting of restricted stock units, the information for which was filed on Form 4 on May 17, 2022;

(2) filing made by Mr.

Jamison in connection with the withholding of 2,356 shares to cover the tax liability resulting from the vesting of restricted stock units, the information for which was filed on Form 4 on May 17, 2022;

(3) filing made by Mr.

Crouse in connection with the withholding of 1,342 shares to cover the tax liability resulting from the vesting of restricted stock units, the information for which was filed on Form 4 on May 17, 2022;

and (4) filing made by Mr.

Jamison in connection with the withholding of 6,085 shares to cover the tax liability resulting from the vesting of restricted stock units, the information for which was filed on Form 4 on August 31, 2022.

Executive Compensation.

The information required by this Item will be included in the Company’s 2022 Proxy Statement and is incorporated herein by reference.

The Company is a “smaller reporting company” under Item 10 of Regulation S-K promulgated under the Exchange Act and has elected to comply with certain of the requirements applicable to smaller reporting companies in connection with this Annual Report on Form 10-K.

Although the rules allow the Company to provide less detail about its executive compensation program, the Compensation and Human Capital Committee is committed to providing the information necessary to help stockholders understand its executive compensation-related decisions.

The information below summarizes the executive compensation program and results for our named executive officers (“NEOs”) for Fiscal 2023.

2023 Summary Compensation Table

The following table sets forth information regarding the compensation paid to or earned by the Company’s CEO and our other NEOs, for services rendered to the Company and its subsidiaries for the fiscal years indicated.

Non-Equity Incentive

Plan Compensation

Name and Principal Position

President & Chief Executive Officer (5)

Chief Financial Officer (6)

Former Chief Financial Officer (7)

(1) This column represents the aggregate grant date fair value of restricted stock units (“RSUs”) and performance restricted stock units (“PRSUs”) granted in the years presented in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718, excluding the estimated impact of forfeitures related to service-based vesting conditions.

Grant date fair value is calculated using the closing price of Capstone’s common stock on the date of grant.

For a discussion of the valuation assumptions, see Note 9 in the Notes to Consolidated Financial Statements.

For PRSUs granted in Fiscal 2023, the amount reported in the table above represents the grant date fair value of such award assuming the probable outcome of the performance conditions.

The value of such award, assuming the maximum achievement of the performance conditions, is $181,085 for Mr.

Hencken forfeited his PRSU award upon his termination of service.

Juric joined the Company in March 2023 and did not receive a PRSU award for Fiscal 2023.

Juric earned a signing bonus of $100,000 upon joining the Company on March 6, 2023.

(3) This column represents non-equity incentive plan compensation earned pursuant to the Capstone Executive Annual Incentive Plan (the “AIP”).

(4) Amounts reported in this column include Company vacation payouts, Company contributions to the 401(k) plan and premiums paid by the Company for life insurance.

Jamison departed the Company on August 22, 2023.

Juric joined the Company on March 6, 2023.

Hencken departed the Company on July 15, 2022.

Components and Results of the Fiscal 2023 Executive Compensation Program

The primary components of the compensation program for our NEOs are base salary, annual incentive compensation and long-term incentives and awards.

Our NEOs are also eligible for employee benefits consistent with those offered to other employees of the Company and for severance and change in control benefits.

Base Salary Base salary is intended to provide a level of assured cash compensation that is competitive in the marketplace to our executive officers.

It is based on the individual’s qualifications, experience with the Company, past performance, taking into account all relevant criteria, value to the Company, the Company’s ability to pay and relevant competitive market data.

For Fiscal 2023, the Compensation and Human Capital Committee approved the following base salaries:

Base Salary at the end

Named Executive Officer

of 2023 Fiscal Year

of 2022 Fiscal Year

Hencken III (3)

Jamison departed the Company on August 22, 2023.

Juric joined the Company on March 6, 2023.

Hencken departed the Company on July 15, 2022.

Annual Incentive Compensation, Targets and Results The AIP for Fiscal 2023 was designed to focus our NEOs on driving future growth and profitability.

Specifically, this plan was designed to reward our NEOs and other senior executives if the Company were to achieve pre-determined total revenue, adjusted EBITDA, and cash provided by working capital targets, subject to the Company’s standard clawback provisions.

Target annual incentive opportunities are expressed as a percentage of base salary and were established based on each NEO’s level of responsibility and ability to impact overall results.

The Compensation and Human Capital Committee also considers market data in setting target award amounts.

Jamison’s target award opportunity for Fiscal 2023 was 100% of his base salary.

Hencken’s target award opportunity for Fiscal 2023 was 45% of his base salary.

Juric will begin participating in the AIP in Fiscal 2024, and his target award opportunity will be 60% of his base salary.

All awards require compliance with the $50.0 million 3-year term note covenants to be eligible for any incentive payout regardless of goal achievement(s).

The Compensation and Human Capital Committee also has the discretion to determine if any amendments to the note covenants that have a financial impact on the Company could result in the performance gate/trigger to not have been met.

The weightings for the performance measures for Fiscal 2023 are set forth in the table below.

Cash Provided by

The Fiscal 2023 AIP performance goals were structured to encourage growth:

Performance Payout Level

Performance Metrics

Threshold (50%)

Target (100%)

Maximum (150%)

Actual Results(3)

Revenue (in millions)

Adjusted EBITDA (in millions)

Cash provided by working capital (in millions)

(1) Adjusted EBITDA for purposes of the AIP is defined as EBITDA before loss on debt extinguishment, stock-based compensation and other expense, non-recurring legal settlement, reliability repair accrual, and non-recurring legal costs related to settlement and other items determined at the discretion of the Compensation and Human Capital Committee.

Refer to page 84 for a reconciliation of Net Loss, as reported to adjusted EBITDA.

(2) Cash provided by the changes in operating assets and operating liabilities of the Company’s working capital accounts for Fiscal 2023 was $3.3 million.

(3) Actual results as presented herein do not reflect the impact of the Restatement.

On June 13, 2023, the Compensation and Human Capital Committee met to determine if certain performance targets were met under the terms of awards granted for the 2023 Fiscal Year pursuant to the AIP.

The Compensation and Human Capital Committee determined that the Company reached slightly above the target level of achievement for the revenue performance criteria and slightly less than the maximum payment for working capital performance criteria, but the performance gate/trigger requiring compliance with the $50.0 million 3-year term note covenants was not met.

As such, the Compensation and Human Capital Committee did not authorize non-equity incentive plan compensation payments for Fiscal 2023 pursuant to the AIP.

Juric was appointed at the end of the fiscal year and did not receive an award under this plan for Fiscal 2023.

Long-Term Incentive Targets and Awards In discharging its responsibility for administering the Company’s stock-based compensation programs, the Compensation and Human Capital Committee regularly monitors and evaluates the total cost of such programs, based on information provided annually by, and in consultation with, Pearl Meyer, the Company’s independent compensation consultant.

This information includes share utilization and annual grant levels.

The Compensation and Human Capital Committee determines the appropriate award to each NEO by assessing equity incentive awards made to officers of comparable companies.

Long-term incentive awards are designed to have senior executives focused on the execution of longer-term financial and strategic growth goals that drive stockholder value creation, strengthen our financial position, and support the Company’s leadership retention strategy.

At the beginning of Fiscal 2023, Mr.

Jamison’s target long-term incentive opportunity was set at 65% of his base salary.

Juric’s target long-term incentive opportunity was set at 60% of his base salary for Fiscal 2024.

Hencken’s target long-term incentive opportunity was set at 50% of his base salary.

Value of Target

Executive Officer

RSUs Granted(1)

PRSUs Granted(1)

Hencken III (3)

(1) Award amounts for RSUs and PRSUs were determined based on the closing price of our common stock on the Nasdaq Capital Market on the date of grant, which was April 7, 2022.

The closing price of the common stock on April 7, 2022 was $3.80.

(2) In connection with his appointment as Chief Financial Officer, Mr.

Juric received 125,000 RSUs, which will vest on March 6, 2025, provided that Mr.

Juric remains employed as Chief Financial Officer on such date.

The closing price of the common stock on March 6, 2023 was $1.76.

(3) All unvested grants were forfeited by Mr.

Jamison and Mr.

Hencken upon their respective departures.

Outstanding Equity Awards at 2023 Fiscal Year-End

Information about outstanding equity awards held by our NEOs as of the end of Fiscal 2023 is set forth in the table below.

Option Awards

Equity Incentive

Market or Payout

Number of Securities

Unearned Shares,

Value of Unearned

Units of Stock

Units or Other

Shares, Units or

Unexercised Options

Rights That Have

Other Rights That

Unexercisable

Have Not Vested

(1) Options vested 25% on the first anniversary of the grant date and monthly thereafter on a pro rata basis over the next 36 months, conditioned on continued service to the Company.

However, all grants were cancelled on the Effective Date in connection with Emergence.

(2) All options terminate, if not sooner, at the expiration of ten years following the grant date.

However, all grants were cancelled on the Effective Date in connection with Emergence.

(3) Based on the closing price of our common stock of $1.33 on the Nasdaq Capital Market on March 31, 2023, the last trading day of Fiscal 2023.

(4) These RSUs vest in three equal installments on each anniversary of April 7, 2022, conditioned on continued service to the Company.

However, all grants were cancelled on the Effective Date in connection with Emergence.

(5) These RSUs vest in three equal installments on each anniversary of April 13, 2021, conditioned on continued service to the Company.

However, all grants were cancelled on the Effective Date in connection with Emergence.

(6) These RSUs vest in three equal installments on each anniversary of August 27, 2020, conditioned on continued service to the Company.

However, all grants were cancelled on the Effective Date in connection with Emergence.

(7) These RSUs vest in one installment on March 6, 2025, conditioned on continued service to the Company.

However, all grants were cancelled on the Effective Date in connection with Emergence.

(8) These PRSUs are earned based on the achievement of pre-determined Free Cash Flow and Aftermarket Sales Absorption goals measured in the third year of a three-year performance period (2022-2024).

However, all grants were cancelled on the Effective Date in connection with Emergence.

(9) These PRSUs are earned based on the achievement of pre-determined Free Cash Flow and Aftermarket Sales Absorption goals measured in the third year of a three-year performance period (2021-2023).

However, all grants were cancelled on the Effective Date in connection with Emergence.

Jamison departed the Company on August 22, 2023 and unvested shares were forfeited upon his departure.

Employee Benefits Executive officers are generally entitled only to health, welfare and retirement benefits that are consistent with those offered to other employees of the Company.

The Company offers group life, disability, medical, dental and vision insurance and an employee stock purchase program.

The Company maintains a defined contribution 401(k) profit - sharing plan in which all employees are eligible to participate.

The plan also provides for both Company matching and discretionary contributions, which are determined by the Board.

The Company matches 50 cents on the dollar up to 6% of the employee’s compensation that is contributed.

The Company’s match vests 25% a year over four years starting from the employee’s hire date.

Executive Employment Contracts, Termination of Employment and Change in Control Arrangements

In July 2018, the Company adopted the Capstone Turbine Corporation Amended and Restated Severance Pay Plan (the “Original Severance Plan”).

The Original Severance Plan provided that, in the event that a NEO’s employment is terminated by the Company without Cause (as defined in the Original Severance Plan), the NEO would be entitled to receive, subject to the execution of a separation agreement containing a general release of claims, 26 weeks (or 52 weeks in the case of the Chief Executive Officer) of base salary continuation and reimbursement of COBRA premiums for six months (or twelve months in the case of the Chief Executive Officer).

In connection with the termination of employment of Mr.

Crouse, effective on April 15, 2022, the Company executed a separation agreement with Mr.

Crouse providing for twelve months of reimbursement of COBRA premiums.

On March 2, 2023, the Company amended the Original Severance Plan (the “Amended Original Severance Plan”) to provide that, in the event that the Chief Financial Officer’s employment is terminated by the Company without Cause, the Chief Financial Officer will be entitled to receive, subject to the execution of a separation agreement containing a general release of claims, 52 weeks of base salary continuation and reimbursement of COBRA premiums for twelve months.

The amendment also provides that, in the event that the Chief Executive Officer’s employment is terminated by the Company without Cause, the Chief Executive Officer will be entitled to receive, subject to the execution of a separation agreement containing a general release of claims, 18 months of base salary continuation and reimbursement of COBRA premiums for eighteen months.

On the Effective Date, the Company adopted the Capstone Green Energy Holdings, Inc.

Severance Pay Plan (the “New Severance Plan”), which contains terms substantially similar to those set forth in the Amended Original Severance Plan.

Prior to the Effective Date, the Company entered into Change in Control Agreements with each of our NEOs that provide for certain payments and benefits following a termination of the NEO’s employment either by the Company without Cause (as defined in the Change in Control Agreements) (other than due to the NEO’s death, the NEO being Disabled (as defined in the Change in Control Agreements), or the NEO becoming an employee of any direct or indirect successor to the business or assets of the Company, rather than continuing as an employee of the Company) or by the NEO for Good Reason (as defined in the Change in Control Agreements), in either case within six months prior to or 24 months following a Change in Control (as defined in the Change in Control Agreements and such a termination, a “Qualifying Termination”).

In the event of a Qualifying Termination, subject to the NEO signing and not revoking a separation agreement containing a general release of claims and a non-disparagement covenant (the “Separation Agreement”), compliance with his or her obligations under the Separation Agreement and compliance with any other continuing obligations to the Company or its successor, the NEO will be eligible to receive (a) a lump sum severance payment equal to 1.0 times (or 1.5 times in the case of Mr.

Juric and 2.0 times, in the case of Mr.

Jamison) the sum of the NEO’s (i) annual base salary for the calendar year in which the Qualifying Termination occurs (or annual base salary in effect immediately prior to the Change in Control, if higher) and (ii) target annual incentive compensation for the calendar year in which the Qualifying Termination occurs, but pro-rated for the portion of such calendar year that falls prior to the Qualifying Termination;

(b) a monthly cash payment in an amount equal to the monthly employer contribution that the Company

would have made to provide health insurance to the NEO if he or she had remained employed by the Company for up to 18 months;

and (c) acceleration of any unvested equity awards outstanding on the date of the Qualifying Termination, assuming achievement of performance criteria at target and without reduction for any shortened performance period in the case of performance-based equity awards.

Payments under the Change in Control Agreements are in lieu of payments under the Severance Plan.

Our recently completed financial restructuring constituted a Change in Control under the Change in Control Agreements.

If a NEO experiences a Qualifying Termination within 24 months following such restructuring, such NEO would be eligible to the receive the foregoing severance payments and benefits, as applicable, pursuant to such NEO’s Change in Control Agreement.

On the Effective Date, the Company entered into a Change in Control Agreement with Mr.

Juric (the “Effective Date Change in Control Agreement”).

The Effective Change in Control Agreement provides for certain payments and benefits following a Qualifying Termination (as defined in the Effective Date Change in Control Agreement).

In the event of a Qualifying Termination, subject to such officer’s execution and non-revocation of a Separation Agreement, compliance with such officer’s obligations under the Separation Agreement and compliance with any other continuing obligations to the Company or its successor, such officer will be eligible to receive:

(a) a severance payment equal to 1.5 times the sum of such officer’s (i) annual base salary for the calendar year in which the Qualifying Termination occurs (or annual base salary in effect immediately prior to the Change in Control, if higher) and (ii) target annual incentive compensation for the calendar year in which the Qualifying Termination occurs, but pro-rated for the portion of such calendar year that falls prior to the Qualifying Termination;

(b) a monthly cash payment in an amount equal to the monthly employer contribution that the Company would have made to provide health insurance to such officer if he or she had remained employed by the Company, for up to 18 months;

Payments under the Effective Date Change in Control Agreements are in lieu of payments under the Severance Plan.

In connection with the appointment of Mr.

Canino as President and Chief Executive Officer, the Company amended and restated its form Effective Date Change in Control Agreement (the “Amended and Restated Change in Control Agreement”) to revise the definition of “Severance Pay” that will be paid in the event of a Qualifying Termination within the CIC Window (each such term, as defined in the Amended and Restated Change in Control Agreement) to mean an amount equal to a multiple of the sum of the employee’s:

(i) annual base salary for the calendar year in which the Date of Termination (as defined in the Amended and Restated Change in Control Agreement) occurs (or the employee’s annual base salary in effect immediately prior to the change in control, if higher);

and (ii) target annual incentive compensation for the calendar year in which the Date of Termination occurs.

For calculating Mr.

Canino’s Severance Pay, the Compensation and Human Capital Committee of the Board approved a multiple of two and one-half (2.5).

The Company has entered into indemnification agreements with its officers and directors containing provisions which may require the Company, among other things, to indemnify its officers and directors against certain liabilities that may arise by reason of their status or service as officers or directors (other than liabilities arising from willful misconduct of a culpable nature) and to advance their expenses incurred as a result of any proceeding against them as to which they could be indemnified.

The tables below set forth the amount of compensation payable to each of Messrs.

Jamison and Juric, as if each situation occurred on March 31, 2023, under the Severance Plan or Change in Control Agreements discussed above.

Jamison departed the Company on August 22, 2023.

Involuntary Termination

Executive Benefits and Payments upon Termination

without Cause

Change in Control

Cash Payments

RSUs (unvested)

Insurance Benefits

(1) Reflects severance payments of Mr.

Jamison’s annual base salary as of March 31, 2023 over a period of 52 weeks, payable under the Severance Plan.

(2) Reflects a lump sum severance payment equal to two times the sum of Mr.

Jamison’s annual base salary as of March 31, 2023 and target annual incentive compensation, payable under the Change in Control Agreement with Mr.

(3) Reflects the value of unvested RSUs and PRSUs that become vested upon a Qualifying Termination, pursuant to the Change in Control Agreement with Mr.

Jamison, based on the market value of $1.33 per share on March 31, 2023, the last trading day of Fiscal 2023.

In the event of a Qualifying Termination, unvested equity awards outstanding on the date of the Qualifying Termination accelerate and vest in full, assuming achievement of performance criteria at target and without reduction for any shortened performance period in the case of performance-based equity awards.

Full vesting is also triggered if the acquirer of the Company does not assume the awards issued under the Capstone Green Energy Corporation 2017 Equity Incentive Plan (the “2017 Plan”).

(4) Reflects monthly payments of health benefit premiums over a period of 12 months, payable under the Severance Plan.

(5) Reflects monthly payments of health benefit premiums over a period of 18 months, payable under the Change in Control Agreement with Mr.

Jamison departed the Company on August 22, 2023.

Involuntary Termination

Executive Benefits and Payments upon Termination

without Cause

Change in Control

Cash Payments

RSUs (unvested)

Insurance Benefits

(1) Reflects severance payments of Mr.

Juric’s annual base salary as of March 31, 2023 over a period of 52 weeks, payable under the Severance Plan.

(2) Reflects a lump sum severance payment equal to two times the sum of Mr.

Juric’s annual base salary as of March 31, 2023 and target annual incentive compensation, payable under the Change in Control Agreement with Mr.

(3) Reflects the value of unvested RSUs and PRSUs that become vested upon a Qualifying Termination, pursuant to the Change in Control Agreement with Mr.

Juric, based on the market value of $1.33 per share on March 31, 2023, the last trading day of Fiscal 2023.

Full vesting is also triggered if the acquirer of the Company does not assume the awards issued under the 2017 Plan.

(4) Reflects monthly payments of health benefit premiums over a period of 12 months, payable under the Severance Plan.

(5) Reflects monthly payments of health benefit premiums over a period of 18 months, payable under the Change in Control Agreement with Mr.

Director Compensation

On August 24, 2022, each non-employee director received an annual grant of RSUs with a grant date fair value of approximately $50,000, calculated using the closing price of our common stock on the date of grant.

These RSUs will become vested upon completion of the annual term of the Board that includes the date of grant.

The director fee schedule for the 2023 Fiscal Year remained unchanged from the previous fiscal year.

The director cash retainer was $35,000, the Chair of the Board additional cash retainer was $25,000, and the director equity retainer was $50,000.

The Audit Committee Chair retainer was $17,000, the Compensation and Human Capital Committee Chair retainer was $15,000, and the Governance and Sustainability Committee Chair retainer was $10,000.

Each non-employee director who served on the Audit Committee received an $8,000 annual retainer.

Each non-employee director who served on the Compensation and the Governance and Sustainability Committees received a $5,000 annual retainer.

Non-employee directors may elect to receive shares of Common Stock in lieu of any cash retainer, based on the fair market value of Common Stock on the date that cash would have otherwise been paid.

All payments are paid quarterly

If requested, all director expenses incurred in attending the Board or committee meetings are reimbursed by the Company.

On the Effective Date, the Board adopted a new director compensation policy.

Pursuant to the revised director compensation policy, each non-executive director will receive an annual base retainer of $75,000, payable in cash on a quarterly basis.

The Audit Committee chair will receive an additional annual retainer of $17,000 and each other Audit Committee member will receive an additional annual retainer of $8,000.

The Compensation and Human Capital Committee chair will receive an annual retainer of $15,000 and each other Compensation and Human Capital Committee chair will receive an additional annual retainer of $6,000.

The Governance and Sustainability Committee chair will receive an additional annual retainer of $10,000 and each other Governance and Sustainability Committee Chair will receive an additional annual retainer of $6,000.

Non-executive directors will also receive an annual grant of $10,000 of restricted stock units, commencing with the 2024 annual meeting of stockholders.

On January 22, 2024, the Board approved a policy providing for the grant of 10,000 RSU’s to each new director appointed on or prior to December 7, 2024.

Jamison, the Company’s former President and Chief Executive Officer, did not receive compensation for serving as a member of the Board.

The Company uses its fiscal year in reporting compensation rather than the term of the Board.

Compensation amounts may differ between the Company’s fiscal year and the term of the Company’s Board.

Information about the compensation of the non-employee directors for the 2023 Fiscal Year is set forth in the table below.

Fees Earned or

Paid in Cash ($)(1)

Awards ($)(2)

Paul DeWeese (3)

(1) For each term of the Board (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 his or her annual retainer or committee fee cash payment.

The award is calculated by dividing the amount of the fee by the fair market value of a share of common stock on the date the fee is payable.

For the 2023 Fiscal Year, due to limited share pool availability, 100% of the amount of the aggregate directors’ fees was paid in cash.

(2) This column represents the aggregate grant date fair value of stock awards granted during the 2023 Fiscal Year calculated in accordance with FASB ASC Topic 718, excluding the estimated impact of forfeitures related to service-based vesting conditions.

For a discussion of valuation assumptions, see Note 9 to the Notes to Consolidated Financial Statements.

Deweese resigned as a Director in March 2022.

Non-GAAP Measures Reconciliation

Because we disclose Adjusted EBITDA in connection with the disclosure regarding the AIP targets, we have provided the below reconciliation of net loss to Adjusted EBITDA:

Reconciliation of Reported Net Loss to EBITDA and Adjusted EBITDA

(In thousands)

Net loss, as reported

Interest expense

Provision for income taxes

Depreciation and amortization

Loss (gain) on debt extinguishment

Stock-based compensation and other expense

Non-recurring legal/consulting

Stock to vendors

Executive bonus

Adjusted EBITDA

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 2022 Proxy Statement and is incorporated herein by reference .

The table below sets forth certain information as of May 31, 2024 (unless otherwise indicated) regarding beneficial ownership of our common stock and non-voting common stock by:

(1) each director, nominee for director and NEO of the Company;

(2) all directors and executive officers as a group;

and (3) each person known by the Company to be the beneficial owner of more than 5% of the outstanding common stock of the Company.

As of June 10, 2024, there were 18,546,649 shares of common stock and 508,475 shares of non-voting common stock outstanding.

Except as otherwise indicated, the beneficial owners listed below have sole voting and investment power with respect to all shares owned by them, except to the extent such power is shared by a spouse under applicable law.

The information provided in the table below is based on the Company’s records, information filed publicly with the SEC and other information provided to the Company.

Non-Voting Common Stock

% of Combined

Name and Address of Beneficial Owner**(1)

Stockholders Beneficially Owning More Than 5%

Non-Management

AIGH Capital Management, LLC(2)

Named Executive Officers and Directors

All directors, director nominees and executive officers as a group (9 persons)

Less than one percent.

Unless otherwise indicated, the address of each person listed is c/o Capstone Green Energy Holdings, Inc., 16640 Stagg Street, Van Nuys, California 91406.

(1) In computing the number of shares beneficially owned by an individual and the percentage ownership of that individual, shares of common stock, shares of non-voting common stock and shares underlying options held by that individual that are currently exercisable, or will become exercisable within 60 days from May 31, 2024, are deemed outstanding.

In addition, shares underlying RSUs that will vest within 60 days from May 31, 2024 are deemed outstanding.

Percentage of combined total voting power excludes our non-voting common stock, any shares of non-voting common stock underlying options held by that individual that are currently exercisable, or will become exercisable within 60 days from May 31, 2024, or any shares of non-voting common stock underlying RSUs that will vest within 60 days from May 31, 2024 , as our non-voting common stock is non-voting.

(2) AIGH Capital Management, LLC (“AIGH”) filed a Schedule 13G on September 29, 2023 reporting beneficial ownership, as of September 28, 2023, of the number of shares reflected in the above table.

AIGH reported having sole voting power and sole dispositive power over 1,800,000 shares of common stock.

The business address of AIGH is 6006 Berkeley Avenue, Baltimore, MD 21209.

Stock Ownership Guidelines In 2012, the Board established stock ownership guidelines applicable to senior executives (including the NEOs) and non-employee directors in order to further align the interests of executives and directors with the interests of stockholders.

These ownership guidelines provide that the subject persons should own common stock equal in value to a multiple of their annual salary (or, in the case of directors, their annual retainer) as follows:

Chief Executive Officer

4 times annual base salary

Executive Vice Presidents

2 times annual base salary

Senior Vice Presidents and other NEOs

1 times annual base salary

Non-employee members of the Board

4 times annual retainer

Covered persons are expected to hold the specified amount of stock within five years from the later of June 6, 2012 or the date they become subject to the ownership guidelines.

Although, the Board has extended the amount of time in which covered persons will be expected to hold the specified amount of stock based on the recent low price of the Company’s stock, the Board is committed to increasing the stock ownership of the executive team and the non-employee members of the Board within the next several years.

The Board will continue to monitor progress towards the achievement of the ownership guidelines.

Clawbacks Prior to the Effective Date, it was the policy of the Company, to the extent determined to be appropriate by the Board, in their sole discretion, based on relevant facts and circumstances, in connection with any material restatement of any financial statements included in a filing by the Company with the SEC, because of noncompliance with financial reporting requirement under federal securities laws, to require its executive officers to repay to the Company, upon demand, any excess proceeds from any incentive compensation received by the executive officer.

Alternatively, the Board could in their sole discretion may reduce the amount of future compensation, in accordance with applicable law, including, without limitation, any future salary, bonus or severance, or the future grant or vesting of any equity award, payable to any executive officer by an amount equal to the excess proceeds from incentive compensation received by the executive officer.

Any repayment or reduction in future compensation pursuant to this policy is in addition to, and not in lieu of, any other relief available to the Company.

On the Effective Date, the Company adopted the Executive Officer Incentive Compensation Recoupment (Clawback) Policy in accordance with Rule 10D-1 of the Exchange Act (the “Clawback Policy”).

The Clawback Policy applies to incentive-based compensation that is granted, earned or vested based wholly or in part upon the attainment of a financial reporting measure and requires the Company to recover Erroneously Awarded Compensation (as defined below) from covered executive officers in the event that the Company is required to prepare an Accounting Restatement (as defined below) (except in certain limited circumstances).

Current and former covered executive officers of the Company are subject to the Clawback Policy regardless of whether such covered executive officers engaged in misconduct or otherwise caused or contributed to the requirement for an Accounting Restatement.

“Erroneously Awarded Compensation” means, in the event of an accounting restatement, the amount of incentive-based compensation previously received by covered executive officers that exceeds the amount of incentive-based compensation that otherwise would have been received had it been determined based on the restated amounts in such accounting restatement, and must be computed without regard to any taxes paid by the relevant covered executive officer.

“Accounting Restatement” means an accounting restatement of the Company’s financial statements due to the Company’s material noncompliance with any financial reporting requirement under U.S.

federal securities laws, including any required accounting restatement to correct an error in previously issued financial statements that is material to the previously issued financial statements, or to correct an error that is not material to the previously issued financial statements, but that would result in a material misstatement if the error were corrected or left uncorrected in the current period.

In connection with the Restatement, the Board expects to seek a recoupment of certain incentive compensation paid to certain former executive officers of the Company.

Anti-Hedging Policy The Company’s insider trading policy prohibits officers and directors and employees designated by the Company’s executive officers as more likely to have access to material, nonpublic information (and their family members, including spouses, minor children, or any other family members living in the same household) from engaging in short sales of the Company’s common stock prohibited by Section 16 of the Exchange Act, i.e., sales of shares which the insider does not own at the time of sale, or sales of common stock against which the insider does not deliver the shares within 20 days after the sale involving the Company’s securities, including the Company’s common stock, options or warrants.

The insider trading policy further directs officers, directors and employees designated by the Company’s executive officers as more likely to have access to material, nonpublic information (and their family members, including spouses, minor children, or any other family members living in the same household) to obtain clearance from the Company’s Audit Committee prior to buying or selling puts, calls, other derivative securities of the Company or any derivative securities that that provide the economic equivalent of ownership of any of the Company’s securities or an opportunity, direct or indirect, to profit from any change in the value of the Company’s securities or engage in any other hedging transaction with respect to the Company’s securities.

Any request for approval of such a pledge by an insider must be submitted to the Audit Committee in writing at least two (2) weeks prior to the proposed execution of documents evidencing the proposed transaction.

Any such request submitted by an insider will be considered by the Audit Committee on a case-by-case basis and, if permitted, shall be subject to all of the other restrictions set forth in the Company’s trading policy.

Anti-Pledging Policy The Company’s insider trading policy also states that no insider may pledge Company securities as collateral for a loan (or modify an existing pledge) unless the pledge has been approved by the Audit Committee of the Board.

Compliance The responsibilities and authority of the Compensation and Human Capital Committee are set forth in its charter, which is intended to set forth best practices for compensation.

The members of the Compensation and Human Capital Committee are all “independent directors,” as defined under Nasdaq rules.

Equity incentive awards are granted by the Compensation and Human Capital Committee in a manner that is intended to satisfy Rule 16b-3 under the Exchange Act.

Securities Authorized for Issuance Under Equity Compensation Plans

The following table sets forth information regarding securities authorized for issuance under equity compensation plans as of March 31, 2023:

securities to

available for

upon exercise

Weighted-average

future issuance

of outstanding

exercise price of

Plan category

options and rights

Equity Compensation Plans Approved by Securityholders

Equity Compensation Plans Not Approved by Securityholders

(1) These shares available for stock options, restricted stock, RSUs, PRSUs and other awards under the 2017 Plan.

(2) The weighted-average exercise price does not take into account RSUs and PRSUs as there is no exercise price associated with RSUs and PRSUs.

Capstone Green Energy Holdings, Inc.

2023 Equity Incentive Plan

In connection with Emergence, on November 30, 2023, the Capstone Green Energy Holdings, Inc.

2023 Equity Incentive Plan (the “Incentive Plan”) was approved and adopted by the Board.

The Incentive Plan is intended to, among other things, (i) attract and retain the types of employees, consultants and directors who will contribute the Company’s long-term success, (ii) provide incentives that align the interests of employees, consultants and directors with those of the stockholders of the Company, and (iii) promote the success of the Company’s business.

The Incentive Plan was not approved by the Company’s stockholders.

All outstanding unvested equity awards outstanding under the Capstone Green Energy Corporation 2017 Equity Incentive Plan were cancelled on the Effective Date in accordance with the Plan.

The Incentive Plan is administered by the Compensation and Human Capital Committee or the Board.

No more than 3,000,000 shares of New Common Stock are available for the grant of awards under the Incentive Plan.

The Company intends to issue equity awards to incentivize employees whose unvested equity awards were terminated in accordance with the Plan.

The aggregate value of awards granted during a single fiscal year to any non-employee director, together with any cash fees paid or to be paid to such non-employee director during the fiscal year and the value of awards granted to such non-employee director under any other equity compensation plan of the Company during the fiscal year, will not exceed a total value of $300,000.

The Board at any time, and from time to time, may amend or terminate the Incentive Plan.

However, (i) in some situations, no amendment shall be effective unless approved by the stockholders of the Company to the extent stockholder approval is necessary to satisfy any applicable laws, and (ii) rights under any award granted before an amendment shall not be impaired by any amendment without the grantee’s written consent.

Certain Relationships and Related Transactions, and Director Independence.

The information required by this Item will be included in the Company’s 2022 Proxy Statement and is incorporated herein by reference .

Certain Relationships and Related Transactions

The Audit Committee has adopted written policies and procedures regarding related party transactions.

The policies and procedures require that the Audit Committee, whose members are all independent directors, review and approve all related party transactions.

This review covers any material transaction, arrangement or relationship, or any series of similar transactions, arrangements or relationships, in which we were or are to be a participant, and a related person had or will have a direct or indirect material interest, including, purchases of goods or services by or from the related person or entities in which the related person has a material interest, indebtedness, guarantees of indebtedness and employment by us of a related person.

A “related person” is any person who is or was one of our executive officers, directors or director nominees or is a holder of more than 5% of our common stock, or their immediate family members or any entity owned or controlled by any of the foregoing persons.

In determining whether to approve or ratify a related party transaction, the Audit Committee considers, among other factors, whether the related party transaction is on terms no more favorable than terms generally available to an unaffiliated third party under the same or similar circumstances, the extent of the related person’s interest in the transaction and, in the case of directors and officers, whether the provisions of Section 144 of the Delaware General Corporation Law have been met.

Any director who is a related person with respect to a transaction under review may not participate in the discussion or approval of the transaction.

On May 20, 2022, the Company entered into a National Account Agreement (the “National Account Agreement”) with Capstone Engineered Solutions (“CES”), a corporation wholly owned by our former Chief Revenue Officer, Mr.

Under the terms of the National Account Agreement, CES is authorized to market, actively promote, and sell the Company’s products, parts, and services.

The dollar value of this contract will depend on the amount of sales generated by CES.

On May 20, 2022, the Company also entered into a Consulting Agreement with CES, whereby CES will provide certain engineering services to the Company on an as needed basis at a rate of $150 per hour.

The aggregate amount paid to CES in Fiscal 2023 was $0.3 million.

Director Independence and Board Structure

The Board is committed to having a sound governance structure that promotes the best interests of all of the Company’s stockholders.

To that end, the Board has evaluated and actively continues to examine emerging corporate governance trends and best practices.

Stockholder perspectives play an important role in that process.

The following are the key aspects of the Company’s governance structure:

● The Board is predominantly independent.

Of our seven directors, one (our President and Chief Executive Officer) is an employee of the Company.

Further, the Board has affirmatively determined that all six of our other directors are independent under SEC and Nasdaq corporate governance rules, as applicable.

● Our board committees are comprised exclusively of independent directors.

● Our independent directors meet in executive session at every regularly scheduled board and committee meeting.

● We have separated the roles of Chair of the Board and Chief Executive Officer.

Our Chair focuses on board oversight responsibilities, strategic planning, setting board agendas and mentoring company officers, as well as facilitating communications between the Board and management.

Flexon served as both Chairman and Interim President and Chief Executive Officer from August 22, 2023 until March 10, 2024, following the departure of our former President and Chief Executive Officer Darren Jamison and in order to lead the Company through its bankruptcy and financial restructuring.

● Our Board is very active and our directors are engaged.

As noted above, each of our directors attended more than 75% of the 2023 Fiscal Year board meetings and meetings of the committees on which such director served.

We believe our Board structure serves the interests of stockholders by balancing board continuity and the promotion of long-term thinking with the need for director accountability.

Principal Accounting Firm Fees and Services.

The information required by this Item will be included in the Company’s 2022 Proxy Statement and is incorporated herein by reference .

The table below provides information concerning fees for services rendered by our current principal independent registered public accounting firm, Marcum, for the audit of our annual consolidated financial statements for the fiscal years ended March 31, 2023 and March 31, 2022.

All fees described below were pre-approved by the Audit Committee.

Amount of Fees

Description of Fees

Audit-Related Fees

All Other Fees

Audit Fees These fees were primarily for professional services rendered by Marcum in connection with the audit of the Company’s consolidated annual financial statements and reviews of the interim condensed consolidated financial statements included in the Company’s quarterly reports on Form 10-Q for the first three fiscal quarters of the 2023 Fiscal Year and the 2022 Fiscal Year, respectively.

The fees also relate to Marcum’s comfort letters and consents related to SEC filings.

Finally, of the total amount for Fiscal 2023, $406,850 pertained to fees incurred in connection with the restatement of our March 31, 2022 and 2021 consolidated annual financial statements.

Exhibits and Financial Statement Schedules.

Financial statements and financial statement schedule

The financial statements and notes 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 Form 10-K.

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.

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Consolidated Statements of Operations

Consolidated Statements of Stockholders’ Equity

Consolidated Statements of Stockholders’ (Deficiency) Equity

Consolidated Statements of Cash Flows

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Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Capstone Green Energy Corporation (the “Company”) as of March 31, 2022 and 2021, the related consolidated statements of operations, stockholders’ equity and cash flows for each of the two years in the period ended March 31, 2022, and the related notes (collectively referred to as the “financial statements”).

We have audited the accompanying consolidated balance sheets of Capstone Green Energy Corporation (the “Company”) as of March 31, 2023 and 2022, the related consolidated statements of operations, stockholders’ equity (deficiency) and cash flows for each of the two years in the period ended March 31, 2023, 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, 2023 and 2022, and the results of its operations and its cash flows for each of the two years in the period ended March 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

Explanatory Paragraph – Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.

As more fully described in Note 2, the Company has incurred significant losses and needs to raise additional funds to meet its obligations and sustain its operations.

These conditions raise substantial doubt about the Company's ability to continue as a going concern.

Management's plans in regard to these matters are also described in Note 2.

The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

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.

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

We determined that there are no 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

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

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

The communication of the critical audit matter 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 matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Inventory Reserves

Description of Matter

The Company’s accounts receivable totaled approximately $24.7 million, net of an allowance of approximately $845,000, as of March 31, 2022.

As a result of the ongoing COVID-19 pandemic, along with current geopolitical tensions, the Company saw an increase in its overall days sales outstanding during the year ended March 31, 2022 resulting in delays in the collections of its accounts receivable.

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 required 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.

The Company’s gross inventory and inventory reserve totaled approximately $42.9 million and $2.5 million as of March 31, 2023, respectively.

In addition, approximately $3.1 million of inventory was classified as long-term on the Company’s consolidated balance sheet.

As described in Note 2 to the consolidated financial statements, management values inventories at the lower of cost (determined on a first-in-first-out basis) or net realizable value and estimates a potential reserve for obsolete or slow-moving goods.

In determining this estimate, the Company will both (a) perform a monthly analysis to compare the previous 36-month usage of its inventory to the current quantities on hand and (b) judgmentally review their reserve estimate for any non-recurring adjustments that may be necessary based on their knowledge of the business.

Changes in the assumptions used could have a significant impact on the valuation of inventory.

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

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 inventory reserve.

How We Addressed the Matter

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These procedures included:

● Obtaining an understanding of the Company’s processes in place in order to estimate the allowance for doubtful accounts;

● Testing management’s calculation and significant assumptions made in determining its allowance for doubtful accounts;

● Testing the Company’s subsequent cash collections through the date the consolidated financial statements were issued;

● Evaluating the credit worthiness of customers whose balances were past due as of March 31, 2022 by testing the historical collection trends over the past 5 years;

● Evaluating the Company’s historical accounts receivable write-offs as compared to their past estimates allowance for doubtful accounts.

● Evaluated the design and implementation of the Company’s information technology (“IT”) general controls pertaining to relevant applications used by the Company in reviewing its inventory usage and determining an appropriate inventory reserve;

● Obtained an understanding of the Company’s financial reporting processes in place in order to estimate the inventory reserve;

● Compared the assumptions made by management in evaluating its-slow moving or obsolete goods to prior years to ensure such estimates and policies have remained consistent;

● Tested management’s calculation and significant assumptions made in determining its current year inventory reserve, which included substantively testing the inventory usage and movement used in such calculations;

● Performed an independent sensitivity analysis to determine whether or not material differences in the reserve existed if management was to use a different look-back time period in their reserve calculation;

● Performed a retrospective analysis of the Company’s reserve by comparing the Company’s unreserved quantities in prior periods to the actual current period usage and movement.

Revenue Recognition – Bill and Hold Transactions

Description of Matter

The Company’s revenues totaled approximately $73.9 million for the year ended March 31, 2023.

During the year ended March 31, 2023, the Company utilized third-party warehouses in the normal course of business to store customer-ordered equipment for various periods of time until such customers we ready to take delivery of the equipment.

Such transactions, which are commonly referred to as Bill-and-Hold transactions, required the Company to evaluate whether or not revenue is properly recognized in connection with the ASC 606.

The Company has historically failed to properly identify and apply the appropriate guidance under ASC 606 to such transactions, which has resulted in the identification of material weaknesses in internal controls over financial reporting.

The principal consideration for our determination that performing procedures related to bill and hold transactions was a critical audit matter was the high degree of effort in performing the audit procedures to test such transactions.

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 the following:

● Evaluated management’s revised technical accounting analysis in applying the provisions of ASC 606 as it pertains to bill and hold transactions.

● Performed an analysis comparing invoice and custodial information from the third-party warehouses to the Company’s records to ensure accuracy and completeness of the population of bill and hold transactions;

● Confirmed directly with the customers the periods for which they had taken delivery of the goods;

● Selected a sample of sales transactions to substantively test whether or not the revenue was properly recognized in the appropriate period;

● For transactions where a third-party warehouse was used to hold product, we examined evidence between the Company and customer to determine if the bill-and-hold revenue recognition was properly applied.

Factory Protection Plan Liability

Description of Matter

The Company’s factory protection plan (“FPP”) liability as of March 31, 2023 was $10.8 million.

The Company accounts for the costs of such factory protection plans at the time the customer orders the spare part.

The Company has historically failed to properly identify and apply the appropriate accounting guidance to such transactions, which has resulted in the identification of material weaknesses in internal controls over financial reporting.

The principal consideration for our determination that performing procedures related to the FPP liability was a critical audit matter was the high degree of effort in performing the audit procedures to test such transactions.

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 the following:

● Evaluated management’s revised technical accounting analysis in applying the provisions of ASC 606 as it pertains to FPP transactions;

● Performed a substantive test of details and cutoff testing procedures over such transaction to ensure (i) costs associated with the FPP contracts were recorded in the appropriate period and (ii) accuracy and completeness of the population of such transactions.

/s/ Marcum LLP

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Los Angeles, CA

July 13, 2022

June 12, 2024

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

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Property, plant, equipment and rental assets, net

Non-current portion of accounts receivable

Finance lease right-of-use assets

Operating lease right-of-use assets

Non-current portion of inventories

Liabilities and Stockholders’ Equity

Liabilities and Stockholders’ (Deficiency) Equity

Current Liabilities:

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Deferred revenue

Current portion of notes payable and lease obligations

Finance lease liability, current

Operating lease liability, current

Factory protection plan liability

Term note payable

Total current liabilities

Deferred revenue, non-current

Term note payable, net

Long-term portion of notes payable and lease obligations

Finance lease liability, non-current

Operating lease liability, non-current

Other non-current liabilities

Total liabilities

Commitments and contingencies (Note 13)

Stockholders’ Equity:

Stockholders’ (Deficiency) Equity:

Preferred stock, $ .001 par value;

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117,014 shares at March 31, 2023 and 101,633 shares at March 31, 2022

Total stockholders’ equity

Total liabilities and stockholders' equity

Total stockholders’ (deficiency) equity

Total liabilities and stockholders' (deficiency) equity

See accompanying notes to consolidated financial statements.

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(In thousands, except per share amounts)

Year Ended March 31,

Revenue, net:

Product and accessories

Parts and service

Total revenue

Parts, service and rentals

Total revenue, net

Cost of goods sold:

Product and accessories

Parts and service

Parts, service and rentals

Total cost of goods sold

4 unchanged sentences

Loss from operations

Other income (expense)

Interest income

Interest expense

Gain (loss) on debt extinguishment

Gain on debt extinguishment

Loss before provision for income taxes

6 unchanged sentences

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIENCY) EQUITY

(In thousands, except share amounts)

1 unchanged sentence

Stockholders’

Balance, March 31, 2020

Equity (Deficiency)

Balance, April 1, 2021

Purchase of treasury stock

3 unchanged sentences

Issuance of common stock, net of issuance costs

Warrants issued

Warrants exercised

Change in warrants valuation

Deemed dividend on purchase warrant for common shares

Balance, March 31, 2022

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Issuance of common stock, net of issuance costs

Deemed dividend on purchase warrant for common shares

Balance, March 31, 2023

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Amortization of right-of-use assets

Loss (gain) on debt extinguishment

(Gain) loss on debt extinguishment

Bad debt expense (recovery)

1 unchanged sentence

Provision for warranty expenses

Gain on disposal of equipment

Stock-based compensation

3 unchanged sentences

Accounts payable and accrued expenses

Operating lease liability

Accrued salaries and wages and long-term liabilities

1 unchanged sentence

Deferred revenue

Factory protection plan liability

Net cash used in operating activities

3 unchanged sentences

Cash Flows from Financing Activities:

Net proceeds from term note payable

Repayment of notes payable and lease obligations

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Net cash provided by financing activities

Net (decrease) increase in Cash and Cash Equivalents

Net (decrease) in Cash and Cash Equivalents

Cash and Cash Equivalents, Beginning of Period

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Deemed dividend

Right-of-use assets obtained in exchange for lease obligations

Rental assets capitalized from inventory

See accompanying notes to consolidated financial statements.

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

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.

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Accounts receivable that is expected to be received past 12 months are recorded as non-current accounts receivable.

The Company has determined any financing component of non-current receivables to be immaterial.

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

Balance, March 31, 2021

Reductions charged to costs and expenses

Additions charged to expenses

Bad debt write-off

Balance, March 31, 2022

Additions charged to costs and expenses

Additions charged to expenses

Bad debt write-off

15 unchanged sentences

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

Revenue 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.

Revenue The Company derives its revenues primarily from the sale of microturbine products, accessories, parts, equipment rentals and services.

The Company determines revenue recognition through the following steps:

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● Allocation of the transaction price to the performance obligations in the contract

● Recognition of revenue when, or as, the Company satisfies a performance obligation

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

● Recognition of revenue when, or as, the Company satisfies a performance obligation

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.

Microturbine Products The Company recognizes revenue when the performance obligation identified under the terms of the contract with its customer is satisfied, which generally occurs, for microturbine products, 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 a microturbine product is recognized at a point in time when the microturbine product is shipped to the customer.

On occasion, the Company enters into bill-and-hold arrangements.

Each bill-and-hold arrangement is reviewed and revenue is recognized only when certain criteria have been met:

(i) the reason for the bill-and-hold arrangement is substantive;

(ii) the product is segregated from the Company’s other inventory items held for sale;

(iii) the product is ready for shipment to the customer;

and (iv) the Company does not have the ability to use the product or direct it to another customer.

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

Parts and Services Revenue from extended warranties and post-shipment performance obligations is recognized when or as those obligations are satisfied.

The Company primarily offers assurance-type standard warranties that do not represent separate performance obligations and will separately offer and price extended warranties that are separate performance obligations for which the associated revenue is recognized over-time based on the extended warranty period.

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The Company extends payment terms past one year only on a limited basis, and thus any financing component is not considered material.

Factory Protection Plan In addition to the provision of standard warranties, the Company offers comprehensive Factory Protection Plans (“FPP”) to minimize product downtime and guarantee maintenance costs to ensure the microturbine system will operate when needed and perform as intended at the lowest cost of ownership.

Revenue related to the Company’s performance obligation to provide replacement parts as needed is recognized over the 30-day , noncancellable FPP contract period with automatic renewals for 5 , 10 , 15 , or 20 years under ASC 606.

The related costs are accrued at the time a customer submits an order for a replacement part to reflect the Company’s obligation.

The accrual reflects the Company’s best estimate of the probable liability under the replacement part obligation.

The provision is periodically adjusted to reflect actual experience.

FPP contracts typically go into effect once the standard warranty expires.

The current carrying amount of the liability is $ 10.8 million.

Some FPPs offer a labor reimbursement on the labor performed on a microturbine system.

Due to the nature of the arrangement, labor reimbursements are accounted for under ASC 460.

See below for additional information on the labor reimbursement within the FPP offering.

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

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The Company enters into contracts with its customers that often include promises to transfer multiple products, parts, accessories, FPP and services.

A performance obligation is a promise in a contract with a customer to transfer products or services that are distinct.

A performance obligation is a promise in a contract with a customer to transfer

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

products or services that are distinct.

Determining whether products and services are distinct performance obligations that should be accounted for separately or combined as one unit of accounting may require significant judgment.

Products, parts and accessories are distinct as such services are often sold separately.

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

In determining whether FPP and other 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.

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 Company allocates the transaction price to each performance obligation on a relative stand-alone 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 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-

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

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 typically has more than one SSP for individual products and services due to the stratification of those products and services by customer size and geography.

Unsatisfied Performance Obligations

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.

As of March 31, 2022 , the FPP backlog was approximately $ 79.1 million, which represents the value of the contractual agreement for FPP services that has not been earned and extends through Fiscal 2042 .

Practical Expedients

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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.

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Factory Protection Plan Service Cost Reimbursement

Each FPP is a 30-day contract period with automatic renewals for 5 , 10 , 15 , or 20 years .

As previously noted, some FPPs offer a labor reimbursement on the labor performed on a product.

An Authorized Service Provider (ASP) must perform the labor.

ASPs submit claims for labor reimbursements and are credited for the cost of labor if the repairs meet the Company’s prescribed standards.

The Company is unable to develop a reasonable estimate of the maximum potential payout under these arrangements because the FPPs do not contain a limit on the number of labor reimbursements that may be submitted.

However, given historical practice, the Company has priced the FPP to cover all costs incurred related to the labor reimbursement and is not exposed to significant losses over the FPP premium.

The labor reimbursement is separate and distinct from the parts offering;

therefore the Company allocates a portion of the transaction price to the labor reimbursement based on SSP.

The Company applies judgment in determining the SSP as the labor reimbursement is not sold separately.

The Company will recognize a liability at the inception of the executed FPP agreement for the premium received in advance for the Labor offering.

Income will be recognized on a net, straight-line basis with labor reimbursement costs recognized when incurred.

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 in the Company’s statement of operations.

There were no offsets to R&D during Fiscal 2023 and 2022.

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Income tax positions must meet a more-likely-than-not recognition threshold to be recognized.

Income tax positions that previously failed to meet the more-likely-than-not threshold are recognized in the first subsequent financial

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

reporting period in which that threshold is met.

Income tax positions that previously failed to meet the more-likely-than-not threshold are recognized in the first subsequent financial reporting period in which that threshold is met.

Previously recognized tax positions that no longer meet the more-likely-than-not threshold are derecognized in the first subsequent financial reporting period in which that threshold is no longer met.

7 unchanged sentences

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

Sales to E-Finity Distributed Generation, LLC (“E-Finity”) and RSP Systems accounted for 12 % and 11 %, respectively, of the Company’s revenue for Fiscal 2023.

Sales to E-Finity accounted for 18 % of the Company’s revenue for Fiscal 2022.

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

Additionally, E-Finity accounted for 28 % and 13 % of net accounts receivable as of March 31, 2022 and March 31, 2021, respectively.

Additionally, E-Finity accounted for 12 % of net accounts receivable as of March 31, 2023, and E-Finity and Radian Oil & Gas Services Co.

accounted for 28 % and 14 % of net accounts receivable as of March 31, 2022, respectively.

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

10 unchanged sentences

Leases 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.

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

For operating leases, interest on the lease liability and the amortization of the right of use asset result in straight-line rent expense over the lease term.

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

In calculating the right of use asset and lease liability, the Company elects to combine lease and non-lease components.

The Company excludes short-term leases having initial terms of twelve 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.

Evaluation of Ability to Maintain Current Level of Operations In connection with preparing the consolidated financial statements for the fiscal year ended March 31, 2022, 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 2022 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 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, the Russian invasion of Ukraine, and ongoing global geopolitical tensions.

We incurred a net loss of $ 20.2 million and used cash from operating activities of $ 27.5 million during the Fiscal 2022.

Our working capital requirements during Fiscal 2022 were primarily for increases in inventory to continue to produce product despite supply chain challenges, as well as the delayed timing of accounts receivable collections due to the COVID-19 pandemic and impacts from the ongoing conflict between Russia and Ukraine.

Our net loss increased during Fiscal 2022 primarily due to lower overhead and operating expenses in Fiscal 2021 from our COVID-19 Business Continuity Plan.

As of March 31, 2022, we had cash and cash equivalents of $ 22.6 million, and outstanding debt of $ 51.0 million at fair value (see Note 11–Term Note Payable in the Notes to the Consolidated Financial Statements for further discussion of the outstanding debt).

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 through a cost reduction plan implemented in March 2022, expanding the Energy as a Service (“EaaS”) revenue streams, as well as price increases on our Factory Protection Plan and certain product offerings.

In March 2022, we implemented an expense reduction plan and announced our efforts to reduce operating costs and modify our operating model to better match our expanding EaaS business.

In order to implement the expense reduction plan, we undertook a holistic review of our operations, taking the growing EaaS business into account.

Beginning on February 28, 2022, we furloughed 17 employees for a period of 120 days , eliminated the position of Chief Revenue Officer, held by Jim Crouse, effective April 15, 2022, instituted 15 % temporary pay cuts for approximately 36 employees and 25 % temporary pay cuts for members of our senior leadership team, among other actions.

We believe that the implementation of the expense reduction plan will help better align our current cost structure to support our higher margin EaaS revenues.

In February 2022, we announced that we reached our goal of having 21.1 MW of rental units in our fleet and under contract.

The EaaS rental unit timeline includes a delay between the time of manufacture and the time revenue from that unit is realized.

The microturbine rental unit is built, allocated by a signed rental contract, and then commissioned at the customer site, at which point it begins to generate revenue.

We expect to have all rental units contracted, commissioned, and generating revenue by our second quarter of Fiscal 2023.

We expect rental revenue to more than double in Fiscal 2023 from the $ 2.8 million of rental revenue in Fiscal 2022.

Additionally in March 2022, we announced that we increased the Distributor Support System, or DSS, program fee to 5% of prior calendar year revenue, from 3%, to support the expanding EaaS business.

To help offset inflation and the rising cost of components, as well as improve our profitability, we implemented price increases on our Factory Protection Plan contracts effective April 1, 2022, and implemented price increases on certain of our product offerings including the C65 and C1000 products, effective May 1, 2022.

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.

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 and current financial projections, including the cost reduction plan, expanding EaaS business, and price increases, we will be able to meet our financial obligations as they become due over the next twelve months from the date of issuance of our Fiscal 2022 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 Senior 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 as of the date hereof.

On March 27, 2020, President Trump signed the Coronavirus Aid, Relief and Economic Security (the “CARES Act”), which, among other things, outlines the provisions of the Paycheck Protection Program (the “PPP”).

The Company determined that it met the criteria to be eligible to obtain a loan under the PPP because, among other reasons, in light of the COVID-19 outbreak and the uncertainty of economic conditions related thereto, the loan was necessary to support the Company’s ongoing operations.

Under the PPP, the Company could obtain a U.S.

Small Business Administration loan in an amount equal to the average of the Company’s monthly payroll costs (as defined under the PPP) for calendar 2019 multiplied by 2.5 (approximately 10 weeks of payroll costs).

Section 1106 of the CARES Act contains provisions for the forgiveness of all or a portion of a PPP loan, subject to the satisfaction of certain requirements.

The amount eligible for forgiveness is, subject to certain limitations, the sum of the Company’s payroll costs, rent and utilities paid by the Company during the eight-week period beginning on the funding date of the PPP loan.

On April 24, 2020 , the Company closed on a PPP loan in the amount of $ 2,610,200 , which was transferred by the Company into an account dedicated to allowable uses of the PPP loan proceeds.

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.

In February 2021, the Company applied for forgiveness in full of the original balance of the PPP loan and the loan was forgiven in full on June 30, 2021.

The Company received a refund of $ 660,200 and recorded these amounts within other income on the Company’s Condensed Consolidated Statements of Operations.

Going Concern In connection with preparing the consolidated financial statements for the fiscal year ended March 31, 2023, 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 for the next twelve months from the date of issuance of our Fiscal 2023 consolidated financial statements.

The Company incurred a net loss of $ 24.5 million and used cash from operating activities of $ 7.9 million during Fiscal 2023.

As of March 31, 2023, the Company had cash and cash equivalents of $ 12.8 million, and outstanding debt of $ 51.0 million at fair value.

We reduced our outstanding debt via proceedings in U.S.

Chapter 11 Bankruptcy Court.

On September 28, 2023, the Company filed for a prepackaged financial restructuring with its Senior Lender, Goldman Sachs under the U.S.

Chapter 11 Bankruptcy laws, as further discussed in Note 17–Subsequent Events in the Notes to Consolidated Financial Statements.

The Company emerged from Bankruptcy on December 7, 2023, and affected the financial and organizational restructuring.

Given our current cash position, lack of liquidity, limits to accessing capital and debt funding options, the economic and market risk of the forecast, there is substantial doubt regarding the Company’s ability to continue as a going concern and our ability to meet our financial obligations as they become due over the next twelve months from the date of issuance of our Fiscal 2023 financial statements.

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

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Impact of Recently Issued Accounting Standards

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes.

The new guidance removes certain exceptions to the general principles of Accounting Standards Codification (“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 periods within those fiscal years, beginning after December 15, 2020.

The Company adopted ASU 2019-12 on April 1, 2021 and it did not have a material impact on the Company’s consolidated financial statements and related disclosures.

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Not yet adopted

In August 2020, the FASB issued ASU No.

2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.

The amendments in this ASU reduce the number of accounting models for convertible debt instruments and convertible preferred stock in order to simplify the accounting for convertible instruments.

In addition, it amends the guidance for the scope exception surrounding derivatives for contracts in an entity’s own equity.

In each case, the related guidance surrounding EPS has also been amended.

The amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2023.

The Company is currently evaluating the impact of ASU 2020-06 on its consolidated financial statements and related disclosures.

In June 2016, the FASB issued ASU No.

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The expected loss approach will require entities to incorporate considerations of historical information, current information and reasonable forecasts.

With certain exceptions, transition to the new guidance will be through a cumulative effect adjustment to opening accumulated deficit as of the beginning of the first reporting period in which the guidance is adopted.

In November 2019, the FASB issued ASU 2019-10, Financial Instruments - Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842) (“ASU 2019-10”), which defers the adoption of ASU 2016-13 for Smaller Reporting Companies (“SRCs”) as defined by the SEC for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

The Company is currently evaluating the impact of ASU 2016-13 on its consolidated financial statements and related disclosures.

With certain exceptions, the transition to the new guidance will be through a cumulative effect adjustment to opening accumulated deficit as of the beginning of the first reporting period in which the guidance is adopted.

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2016-13 for Smaller Reporting Companies (“SRCs”) as defined by the SEC for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

On April 1, 2023 , the Company adopted Financial Instruments—Credit Losses (Topic 326).

The standard will require entities to record a cumulative-effect adjustment to the balance sheet as of the beginning of the first reporting period in which the guidance is effective.

The adoption did not have a material impact on its financial statements.

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):

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

Raw materials

Work in process

Finished goods

2 unchanged sentences

Total inventory, net-current portion

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

The non-current inventories are primarily comprised of repair parts for older generation products that are still in operation but are not technologically compatible with current configurations.

The weighted average age of the non-current portion of inventories on hand as of March 31, 2022 is 1.2 years.

The weighted average age of the non-current portion of inventories on hand as of March 31, 2023 and 2022 were 0.9 years and 1.2 years, respectively.

The Company expects to use the non-current portion of the inventories on hand as of March 31, 2023 over the periods presented in the following table (in thousands):

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Total property, plant, equipment and rental assets, net

During Fiscal 2022, the Company deployed an additional 11.1 megawatts (“MWs”) of microturbine systems with a book value of approximately $ 8.7 million under its long-term rental program, bringing the total rental fleet to 21.1 MWs.

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

5 unchanged sentences

Earned royalties of approximately $ 99,500 and $ 76,400 were unpaid as of March 31, 2023 and 2022, respectively, and are included in accrued expenses in the accompanying consolidated balance sheets.

Amortization expense for the intangible assets was $ 0.1 million for Fiscal 2022 and 2021.

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Amortization expense for the intangible assets was zero and $ 0.1 million for Fiscal 2023 and 2022, respectively.

Accrued Warranty Reserve

7 unchanged sentences

Changes in the accrued warranty reserve during the years ended March 31, 2022 and 2021 are as follows (in thousands):

Changes in the accrued warranty reserve consisted of the following (in thousands):

Balance, beginning of the period

Standard warranty provision

Accrual related to reliability repair programs

Deductions for warranty claims

2 unchanged sentences

As of March 31, 2023, the accrual related to this reliability repair program was zero as the Company has determined it replaced a sufficient quantity of high-risk failure parts in its fielded units under this reliability repair program and that it should be terminated.

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Revenue Recognition

5 unchanged sentences

Total Revenue

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

All other North America

Total North America

All other Europe

Total Revenue

(1) $ 0.4 million and $ 0.3 million of parts and service revenue reported were non-ASC-606 revenue related to the labor reimbursement of FPP contracts as of March 31, 2023 and 2022, respectively.

Contract Balances

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.

The Company’s deferred revenues consist of advance payments for microturbine products, parts, accessories, and parts ordered under an FPP plan, but not yet delivered (contract liabilities), as well as advanced payments on service obligations and extended warranties.

The current portion of deferred revenue is included in Deferred revenue and the non-current portion of deferred revenue is included in Deferred revenue, non-current in the consolidated balance sheets.

As of March 31, 2023, the balance of deferred revenue was approximately $ 24.2 million compared to $ 15.8 million as of March 31, 2022.

This overall increase in the balance of deferred revenue of $ 3.1 million during Fiscal 2022 was comprised of increases in deferred revenue attributable to deposits of $ 2.0 million and Distributor Support System (“DSS program”) of $ 1.3 million, offset by a decrease in FPP contracts of $ 0.2 million.

Changes in deferred revenue during the year ended March 31, 2022 and 2021 are as follows (in thousands):

FPP Balance, beginning of the period

FPP Revenue recognized

Balance attributed to FPP contracts

Deferred revenue balance, end of the period

This overall increase in the balance of deferred revenue of $ 8.4 million during Fiscal 2023 was comprised of increases in deferred revenue attributable to deposits of $ 8.4 million and FPP contracts of $ 0.3 million, offset by a decrease in deferred revenue attributable to Distributor Support System (“DSS program”) of $ 0.3 million.

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

Opening balance, beginning of the period

Closing balance, end of the period

Revenue recognized in the period from:

Amounts included in contract liability at the beginning of the period

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

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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, 2023, approximately $ 4.9 million of revenue is expected to be recognized from remaining performance obligations for FPP service contracts.

The Company expects to recognize revenue on approximately $ 4.1 million of these remaining performance obligations over the next 12 months and the balance of $ 0.8 million will be recognized thereafter.

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Loss before provision for income taxes consisted of the following for the years ended March 31, 2023 and 2022 (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 $ 19,000 for the years ended March 31, 2022 and March 31, 2021.

The provision for current income taxes was $ 7,000 and $ 19,000 for the years ended March 31, 2023 and March 31, 2022, 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, 2022.

The Company did no t have current federal income taxes for the fiscal years ended March 31, 2023 and March 31, 2022.

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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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, 2022 and 2021 was $ 1.9 million and $ 1.9 million, respectively.

Based on management’s evaluation, the total amount of unrecognized tax benefits related to research and development credits as of March 31, 2023 and 2022 was $ 1.9 million.

There were no interest or penalties related to unrecognized tax benefits as of March 31, 2023 or March 31, 2022.

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

The amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate as of March 31, 2023 and 2022 was $ 1.9 million.

However, this impact would be offset by an equal increase in the deferred tax valuation allowance as the

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

as of March 31, 2022 and March 31, 2021 was $ 1.9 million and $ 1.9 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.

Company has recorded a full valuation allowance against its deferred tax assets because of uncertainty as to future realization.

The fully reserved recognized federal and state deferred tax assets related to research and development credits balance as of March 31, 2023 and 2022 was $ 5.0 million and $ 9.7 million, and $ 5.7 million and $ 9.7 million, respectively.

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

Stockholders’ Equity

Stockholders’ Equity (Deficiency)

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

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2000 and 2017 Equity Incentive Plans

In June 2017, the Company’s Board adopted the Capstone Green Energy 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 of Directors (the “Board”) adopted the Capstone Green Energy 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 initially provided for awards of up to 300,000 shares of Common Stock.

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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

On June 5, 2018, the Board adopted an amendment to 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.

Since this time, the Company’s stockholders have approved amendments to increase the aggregate number of shares authorized for issuance under the 2017 Plan by an additional 2,200,000 shares of Common Stock, including, most recently, on June 7, 2022, the Board adopted Amendment No.

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

Since this time, the Company’s stockholders have approved amendments to increase the aggregate number of shares authorized for issuance under the 2017 Plan by an additional 1,600,000 shares of Common Stock, including, most recently, on June 2, 2021, the Company’s Board of Directors adopted Amendment No.

4 (the “Plan Amendment”) of the 2017 Plan to increase the aggregate number of shares of Common Stock authorized for issuance under the 2017 Plan by 500,000 shares of Common Stock.

The Plan amendment was approved by the Company’s stockholders at the 2021 annual meeting of stockholders on August 27, 2021.

“Plan Amendment”) of the 2017 Plan to increase the aggregate number of shares of Common Stock authorized for issuance under the 2017 Plan by 600,000 shares of Common Stock.

The Plan amendment was approved by the Company’s stockholders at the 2022 annual meeting of stockholders on September 12, 2022.

As of March 31, 2023, there were 984,411 shares available for future grants under the 2017 Plan.

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As of March 31, 2023, there was approximately $ 1.6 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 2.1 years.

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

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

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

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The program is intended to have overlapping performance measurement periods (e.g., a new three-year cycle begins each year on April 1), subject to Compensation Committee approval.

At the end of each

The overall performance at the end of the three-year period will be defined as the average of the yearly goals to determine the payout.

Overall performance and payout at the end of the three-year period will be defined as the average of the three annual goals achievement.

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

During Fiscal 2023, the Company granted 72,412 PRSUs with a three-year performance measurement and the criteria measured by the Company’s aftermarket sales absorption.

During Fiscal 2022, the Company granted 35,986 PRSUs

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

performance measurement period, the Compensation Committee will determine the achievement against the performance objectives.

During Fiscal 2022, the Company granted 35,986 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.

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 weighing for the individual metric.

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The Compensation Committee will use an interpolation table that weighs performance between levels for determining the portion of the Target PRSU that is earned.

The weighted average per share grant date fair value of PRSUs granted during Fiscal 2022 was $ 8.39 .

Based on the Company’s assessment as of March 31, 2022, the Company will not meet the threshold of the performance measurements, and as a result, no compensation expense was recorded during Fiscal 2022.

The weighted average per share grant date fair value of PRSUs granted during Fiscal 2023 and 2022 was $ 3.80 and $ 8.39 , respectively.

Based on the Company’s assessment as of March 31, 2023, the Company will not meet the threshold of the performance measurements, and as a result, no compensation expense was recorded during Fiscal 2023 and 2022.

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.

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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

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

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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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”).

On April 7, 2022, our Board approved an extension of the NOL Rights Agreement from May 6, 2022 to May 6, 2025, subject to obtaining shareholder approval ratifying such extension.

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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In the event of any merger, consolidation or other transaction in which shares of Common Stock are converted or exchanged, each share of Preferred Stock will be entitled to receive 1,000 times the amount received per one share of Common Stock.

Offerings of Common Stock and Warrants and At-the-Market Offering Program

At-the-Market Offering

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

On April 7, 2022, the Board approved an extension of the NOL Rights Agreement from May 6, 2022 to May 6, 2025.

This extension was approved by the stockholders at the 2022 annual meeting of stockholders held on September 12, 2022.

Offerings of Common Stock and Warrants

Common Stock Offerings

On June 17, 2021, the Company entered into an amended and restated underwriting agreement (the “Wainwright Underwriting Agreement”) with H.C.

Wainwright & Co., LLC (”Wainwright”) whereby the Company agreed to sell to Wainwright, and Wainwright agreed to purchase, in a firm commitment underwritten public offering 1,904,763 shares (the “Wainwright Shares”) of the Company’s Common Stock, $ 0.001 par value per share (the “Wainwright Offering”).

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

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 our 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 from the date of the amendment to the Sales Agreement, subject to certain limitations set forth in the amendment.

During Fiscal 2022, we issued approximately 0.1 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 $ 0.7 million after deducting commissions paid of approximately $ 26,000 .

As of March 31, 2022, approximately $ 49.3 million remained available for issuance with respect to this ATM Program.

offering price to the public in the Offering was $ 5.25 per share of Common Stock, and the Underwriter agreed to purchase the Wainwright Shares from the Company pursuant to the Wainwright Underwriting Agreement at a price of $ 4.91 per share, representing an underwriting discount of 6.5 % .

Pursuant to the Wainwright Underwriting Agreement, the Company also granted Wainwright an option to purchase, for a period of 30 days from the date of the Underwriting Agreement, up to an additional 285,714 shares of Common Stock (the “Option Shares”).

On June 21, 2021, Wainwright exercised the option in full.

The Wainwright Offering of the Wainwright Shares was registered pursuant to a shelf registration statement (No.

333-254290) on Form S-3 filed by the Company with the Securities and Exchange Commission on March 22, 2021, and declared effective on April 14, 2021 (the “Registration Statement”), and made pursuant to a prospectus supplement, dated June 17, 2021, and accompanying prospectus that form a part of the Registration Statement relating to the Offering.

The Offering closed on June 22, 2021, and the Company received net proceeds of $ 10.5 million after deducting $ 1.0 million in underwriting discounts, commissions and offering expenses paid by the Company.

On August 18, 2022, the Company entered into an underwriting agreement (the “Lake Street Underwriting Agreement”) with Lake Street Capital Markets, LLC and Joseph Gunnar and Company, LLC (the “Underwriters”) whereby the Company agreed to sell to the Underwriters, and the Underwriters agreed to purchase, in a firm commitment underwritten public offering 2,934,498 (the “Lake Street Shares”) of the Company’s Common Stock, $ 0.001 par value per share (the “Lake Street Offering”) and accompanying warrants to purchase up to 2,934,498 shares of common stock.

The offering price to the public in the Offering was $ 2.75 per share of Common Stock and accompanying warrant, and the Underwriter agreed to purchase the shares and accompanying warrants from the Company pursuant to the Underwriting Agreement at a price of $ 2.585 per share and accompanying warrant, representing an underwriting discount of 6.0 %.

The Lake Street Offering of the Lake Street Shares was registered pursuant to the Registration Statement, and made pursuant to a prospectus supplement, dated August 22, 2022, and accompanying prospectus that form a part of the Registration Statement relating to the Lake Street Offering.

The Lake Street Offering closed on August 24, 2022, and the Company received net proceeds of $ 7.3 million after deducting $ 0.8 million in underwriting discounts, commissions and offering expenses paid by the Company.

Goldman Warrant

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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.

The Warrant may be exercised by the Holder at any time after August 4, 2019 at an exercise price equal to $ 8.86 and will expire on February 4, 2024 .

The Warrant may be exercised by the Holder at any time after August 4, 2019 at an exercise price equal to $ 8.86 and expired on February 4, 2024 .

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.

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1 also amends 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.

As a result of the decrease in exercise price, the Company recorded the change in valuation

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

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Goldman “2020 Warrant”

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

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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 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 expired on February 4, 2024 .

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Expected volatility

Amendment No.

2 also amends 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)

September 2019 Pre-Funded and Series D Warrants

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As of March 31, 2023, there were 75,000 Series D warrants outstanding.

August 2022 Warrants

On August 24, 2022, the Company issued 2,934,498 of common stock warrants with an exercise price of $ 2.75 in conjunction with the Lake Street Offering.

Stock to Vendors

From time to time, the Company may enter into agreements with vendors for sponsorship, marketing or investor relation services whereby it may agree to compensate the vendor in cash and unregistered shares of Common Stock of the

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The value of the unregistered shares of Common Stock is recorded as prepaid marketing cost and included in prepaid expenses and other current assets and stockholder’s equity in the Condensed Consolidated Balance Sheets and is amortized in proportion to the terms of their respective agreements.

On February 10, 2020, the Company issued 229,886 shares of the Company’s Common Stock, under a sponsorship agreement to its vendor.

The prepaid marketing cost amortization associated with the Common Stock issued were $ 1.1 million during Fiscal 2021 and were included in selling, general and administrative expense in the Consolidated Statements of Operations.

On February 17, 2021 and April 1, 2021, the Company issued 105,933 and 9,541 shares of the Company’s Common Stock, under a sponsorship agreement and an investor relations consulting agreement, respectively to vendors.

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The three levels of the fair value hierarchy are described as follows:

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets.

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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

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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, certain of its subsidiaries as guarantors, the Collateral Agent and various purchasers party thereto.

Under the A&R Note Purchase Agreement, the Company issued an additional $ 20 million in Notes, increasing total borrowings to $ 50.0 million.

Under the A&R Note Purchase Agreement, the Company issued an

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

additional $ 20 million in Notes, increasing total borrowings to $ 50.0 million.

Following entry into the A&R Note Purchase Agreement, all outstanding Notes bear interest at the Adjusted (London Interbank Offer) LIBO Rate (as defined in the A&R Note Purchase Agreement) plus 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.

The Notes do not amortize and the entire principal balance is due in a single payment on the maturity date, September 1, 2024.

As of March 31, 2023, $ 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.

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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.

On May 12, 2021, the Company and the collateral agent, entered into a First Amendment (the “Amendment”), to the A&R Note Purchase Agreement.

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 $ 9.0 million to $ 12.2 million for the period from May 12, 2021 to March 31, 2022, and $ 9.0 million thereafter.

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 September 30, 2021.

As of March 31, 2022, the Company was not in compliance with the Adjusted EBITDA covenant contained in the A&R Note Purchase Agreement and did not cure such non-compliance by prepaying the Notes.

As a result, the Company was in breach of the Adjusted EBITDA covenant as of May 27, 2022.

On July 13, 2022 the Company entered into the A&R NPA Second Amendment with the Purchaser and the Collateral Agent, pursuant to which (i) the Purchaser and the Collateral Agent waived our breach of the Adjusted EBITDA covenant and (ii) the A&R Note Purchase Agreement has been amended to, among other things, add certain new covenants, including requirements that the Company uses its commercially reasonable best efforts to raise at least $ 10 million through a sale of its common stock by September 14, 2022 and refinance the Notes by October 1, 2022.

On March 13, 2023, the Company transferred $ 9 million of funds from Bridge Bank, Affiliate of Western Alliance Bank, to Wells Fargo Bank.

The Wells Fargo Bank account did not have an account control agreement in place, resulted in a breach of the covenant requiring the Company to have at all times a liquidity (i.e., cash in accounts covered by account control agreements) (the “Liquidity Covenant”) of at least $ 9 million.

The Company transferred the $ 9 million back to its Bridge Bank account on April 5, 2023.

On April 21, 2023, the Company again breached the Liquidity Covenant when its total funds in accounts subject to account control agreements fell below $ 9 million.

On July 3, 2023, the Company failed to make the interest payment for the most recently ended quarter.

On July 6, 2023, the Company entered into the A&R NPA Fourth Amendment with the Purchase and the Collateral Agent.

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

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 A&R Note Purchase Agreement.

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 $ 9.0 million to $ 12.2 million for the period from the Amendment Date to March 31, 2022, and $ 9.0 million thereafter.

As of March 31, 2022, the Company was in compliance with the covenants contained in the A&R Note Purchase Agreement.

As a result of the Company’s restated earnings, we were not in compliance with the Adjusted EBITDA covenant contained in the A&R Note Purchase Agreement.

The breach required a change in classification of the term note payable to a current liability on our consolidated balance sheet resulting in a liquidity issue for the Company (see Note 17–Subsequent Events in the Notes to the Consolidated Financial Statements for further discussion of the outstanding debt and the post emergence financing).

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 $ 34,000 and $ 0.6 million for Fiscal 2022 and 2021, 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 2022 and 2021 was $ 5.0 million and $ 5.2 million and includes $ 34,000 and $ 0.6 million in amortization of debt issuance costs, respectively.

Amortization of the debt discount and debt issuance costs was $ 34,000 for both Fiscal 2023 and 2022, 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 2023 and 2022 was $ 6.2 million and $ 5.0 million, respectively, and includes $ 34,000 in amortization of debt issuance costs in both periods.

SBA Paycheck Protection Program Loan

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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.

In February 2021, the Company applied for forgiveness of the PPP Loan, and the loan was forgiven in full on June 30, 2021 (See “Gain on extinguishment of debt” below).

In February 2021, the Company applied for forgiveness of the PPP Loan, and the loan was forgiven in full on June 30, 2021 (see “Gain and Loss on Extinguishment of Debt” below).

Gain and Loss on Extinguishment of Debt In June 2021, the Company received notification from Western Alliance that the SBA approved forgiveness of the PPP loan in its entirety.

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and recorded these amounts within other income on the Company’s Consolidated Statements of Operations.

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

The Company rents microturbine equipment to our customer for twelve to thirty six months with an extension option , which may impact the lease term.

Monthly rental payments are fixed;

however, the leases may include variable payments for fuel, excess labor, additional equipment, or technician labor and engineering support.

As further described below, the Company rents certain microturbine equipment back from customers and subleases this equipment to end users as a part of its Energy-as-a-Service business.

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

Commitments and Contingencies

Purchase Commitments

As of March 31, 2022, the Company had firm commitments to purchase inventories of approximately $ 40.5 million through Fiscal 2023.

Certain inventory delivery dates and related payments are not scheduled;

therefore amounts under these firm purchase commitments will be payable upon the receipt of the related inventories.

Lease Commitments

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.

Upon the lease commencement date in July 2019, the Company recorded $ 0.5 million of right-of-use assets and operating lease liabilities.

In May 2021, the Company entered into new lease of office and warehouse spaces at Unit 800 & 810 Fareham Reach, Fareham Road, Gosport, Hampshire, United Kingdom.

Upon commencement of the lease, the Company recorded $ 1.9 million of right-of-use assets and operating lease liabilities.

The Company leases offices and manufacturing facilities under various non-cancelable operating leases expiring at various times through Fiscal 2037.

At March 31, 2023, the Company’s minimum rental revenue to be received under operating leases were as follows (in thousands):

Year Ending March 31,

Total minimum rental revenue

The Company leases facilities and equipment under various non-cancelable operating and finance leases expiring at various times through Fiscal 2037.

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 lease term and renewal options for five-year periods .

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

Lease expense is recognized on a straight-line basis over the term of the lease, which may include extension periods.

During Fiscal 2023, the Company entered into several rental agreements to rent used microturbine equipment from customers where that equipment was not currently in use.

These rental agreements provide the Company an option to extend the lease, however, the Company is not likely to exercise these options and they are therefore not included in the determination of the lease term.

These agreements totaled approximately 9.8 MW of microturbines and have an average term of 36 months , and a total commitment value of approximately $ 8.9 million.

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

Year Ended March 31,

Operating lease cost

Finance lease costs (1)

Operating lease costs

Total lease costs

(1) Interest expense is included in finance lease costs.

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

1 unchanged sentence

March 31, 2022

Finance lease right-of-use assets

Operating lease right-of-use assets

Total operating lease right-of-use assets

Total right-of-use assets

Finance lease liability, current

Operating lease liability, current

Finance lease liability, non-current

Operating lease liability, non-current

Total operating lease liabilities

Total lease liabilities

Finance leases:

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.

Operating leases:

Weighted average remaining lease life

Weighted average discount rate

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

1 unchanged sentence

Cash paid for amounts included in the measurement of lease liabilities

Financing cash flows from finance leases

Operating cash flows from finance leases

Operating cash flows from operating leases

Right-of-use assets obtained in exchange for lease obligations

Finance leases

Operating leases

Other supplemental operating lease information consists of the following:

At March 31, 2022, the Company’s minimum commitments under non-cancelable operating leases were as follows (in thousands):

At March 31, 2023, the Company’s minimum commitments under non-cancelable operating and finance leases were as follows (in thousands):

Year Ending March 31,

1 unchanged sentence

imputed interest

Present value of operating lease liabilities

Present value of lease liabilities

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Commitments and Contingencies

Purchase Commitments

As of March 31, 2023, the Company had firm commitments to purchase inventories of approximately $ 54.2 million through Fiscal 2026.

Certain inventory delivery dates and related payments are not scheduled;

therefore amounts under these firm purchase commitments will be payable upon the receipt of the related inventories.

Other Commitments

11 unchanged sentences

The Company has 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 and promissory note in favor of Capstone.

for breach of contract and for injunctive relief relating to the parties’ prior distributor relationship, which terminated at the end of March 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, the Company is 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)

On March 18, 2020, Turbine Intl.

10 unchanged sentences

All of the new defendants have been served and have filed answers.

A trial date in the matter has been set for December 12, 2022.

Discovery is ongoing.

The Company has not recorded any liability as of March 31, 2023 as the matter is too early to estimate.

As of March 31, 2023, discovery had been served and answered on both sides.

On May 17, 2024, the trial was set for July 29, 2024;

and the court ordered the parties to mediate the matter by June 19, 2024.

SEC Investigation

In June 2023, prior to the issuance of the Company’s consolidated financial statements for the fiscal year ended March 31, 2023, the Audit Committee of the Company’s Board commenced the Revenue Recognition Investigation into

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

certain accounting and internal control matters of the Company, principally focused on certain revenue recognition matters, and self-reported its findings to the Division of Enforcement of the Securities and Exchange Commission (the “SEC”) upon the conclusion of the Revenue Recognition Investigation.

Following the self-report, The SEC Enforcement Division has commenced an investigation into the circumstances surrounding the Restatement (the “SEC Investigation”).

The Audit Committee further self-reported its findings pursuant to the FPP Investigation to the SEC.

The Company is cooperating with the SEC in connection with its investigation.

Investigations of this nature may be costly and require management to devote significant time and attention away from the ongoing operation of the business.

The Company cannot predict the duration or outcome of this matter.

Cal Microturbine Arbitration

On March 13, 2024, Cal Microturbine, a distributor of the Company, submitted a demand for arbitration before the American Arbitration Association seeking, among other things, approximately $ 24.5 million in damages and alleging that the Company breached its distributor agreement with Cal Microturbine and committed fraud in allowing another company, Capstone Engineered Solutions, to sell, rent and service turbines in Cal Microturbine’s exclusive territory under the distribution agreement.

The parties are in the process of selecting the arbitration panel.

The matter is in its preliminary stages with no hearing date set as of the date hereof.

The Company cannot estimate the outcome and will fight this claim vigorously.

Flexon, Jamison, Juric, Robinson, and Hencken

On October 13, 2023, a putative securities class action was filed in the U.S.

District Court for the Central District of California, captioned Spitzer v.

Flexon, et al., Case No.

2:23-cv-08659, naming certain of the Company’s current and former directors and officers as defendants.

The suit alleges claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 promulgated thereunder based on allegedly false and misleading statements regarding, and allegedly inadequate disclosure surrounding, the Company’s business, operations and prospects and the circumstances leading up to the restatement of the Company’s quarterly and annual financial statements.

The suit is purportedly brought on behalf of persons and entities that purchased or otherwise acquired the Company’s securities between June 14, 2021 and September 22, 2023 and seeks to recover unspecified compensatory damages and other relief, including attorney’s fees.

The Company may incur significant legal expenses in defending the legal matters described above during the pendency of these matters, and in connection with any other potential legal matters, including expenses for the potential reimbursement of legal fees of officers and directors under indemnification obligations.

The Company anticipates these legal fees to not exceed the insurance deductible of $ 1.2 million.

Employee Benefit Plans

2 unchanged sentences

Employees are fully vested in their contributions to the plan.

The plan also provides for both Company matching and discretionary contributions, which are determined by the Board of Directors.

The plan also provides for both Company matching and discretionary contributions, which are determined by the Board.

The Company has been matching 50 cents on the dollar up to 6 % of the employee’s contributions since February 2019.

5 unchanged sentences

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.

On July 25, 2018, the

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

4 unchanged sentences

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)

amount and timing of royalty expense the Company recognizes.

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 prepaid royalty asset could be written down to fair value.

3 unchanged sentences

Royalty-related assets

Restatement of Consolidated Financial Statements

As previously disclosed in the Current Report on Form 8-K filed by the Company on September 22, 2023 with the SEC, the Company’s previously issued financial statements included in its Annual Reports on Form 10-K for the fiscal year ended March 31, 2022, and each of the interim financial statements for the quarterly periods in 2023, 2022, and 2021 included in its Quarterly Reports on Form 10-Q (collectively, the “Restated Periods”), should no longer be relied upon and a restatement is required for these previously issued consolidated financial statements.

In accordance with ASC Topic 250, Accounting Changes and Error Corrections, the Company has restated herein the unaudited financial information for the quarterly periods ended June 30, 2022, September 30, 2022, and December 31, 2022.

The categories of misstatements and their impact on the Company’s previously issued consolidated financial statements are described in more detail below.

Restatement of Previously Issued Consolidated Financial Statements

In connection with the restatement, the Company restated the consolidated financial statements as of and for the years ended March 31, 2022 and March 31, 2021, as well as the relevant unaudited quarterly financial information for the quarterly periods ended June 30, 2021, September 30, 2021, December 31, 2021, June 30, 2020, September 30, 2020, and December 31, 2020 in its 2022 Annual Report, as amended, on Form 10-K/A, filed with the SEC on June 12, 2024.

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Description of Misstatements

The following includes descriptions of the significant adjustments to the Company’s financial position and results of operations from previously reported consolidated financial statements.

Revenue Recognition of Bill-and-Hold Arrangements (“Bill and Hold”) The Company previously recognized revenue related to the sale of products, parts, and accessories at the point of shipment.

In certain circumstances, the Company recognized revenue when the order is shipped to an in-transit warehouse where it is held until it is shipped to the customer.

Under ASC 606, Revenue from Contracts with Customers (“ASC 606”), revenue recognized under bill-and-hold arrangements is required to meet specific criteria including:

(i) the reason for the bill-and-hold arrangement is substantive, (ii) the product is segregated from the Company’s other inventory items held for sale, (iii) the product is ready for shipment to the customer, and (iv) the Company does not have the ability to use the product or direct it to another customer.

As the Company’s previous revenue recognition policy did not correctly apply the required criteria to recognize revenue related to bill-and-hold arrangements, the Company concluded certain revenue related to bill-and-hold arrangements was prematurely recognized.

The Company has since revised the revenue recognition policy, and related internal controls, to properly consider the required bill-and-hold criteria.

Some of previously recognized revenue that did not meet the bill-and-hold criteria, related to products, parts, and accessories that were subsequently returned to the Company.

In the third quarter of fiscal year 2023, the Company began recording a sales return allowance for returned systems.

Under the revised revenue recognition policy, the sales return allowance is no longer required .

To correct this error, (i) the revenue and cost of goods sold were reversed in the period in which the accounting errors took place, (ii) the revenue and cost of goods sold was recognized in subsequent periods when all of the revenue recognition criteria had been met, and (iii) the bad debt expense relating to prematurely recognized revenue was reversed in the periods prior to achieving the revenue recognition criteria and recognized in subsequent periods consistent with the Company’s policy, and (iv) the sales return allowance was reversed in the period in which it was originally recorded.

Additionally, the related adjustments to accounts receivable, inventory, accrued expenses, and deferred revenue were made in the consolidated financial statements for the relevant Restated Periods.

In correcting for the bill-and-hold error, sales were identified where revenue was prematurely recognized, and the Company had entered into a subsequent agreement to lease the system from the customer to re-rent the system to others as part of the Company’s rental fleet (“Re-rent Agreement”).

The Re-rent Agreements were recorded as finance leases under ASC 842, Leases.

The related lease payments to the customer were recorded as a reduction to the customer’s outstanding accounts receivable balance from the initial recognition of the sale and no cash was exchanged.

As the initial sale of the system to the customer did not satisfy the requirements for revenue recognition and the Re-rent Agreement lacked economic substance, the Company concluded the Re-rent Agreements were improperly accounted for as finance leases.

Additionally, resulting from mandatory buyout clauses contained in certain Re-rent Agreements, the amounts owed to the customer as stated in the Re-rent Agreement exceeded the accounts receivable associated with the prematurely recognized sale.

The Company concluded this payment reflected consideration payable to a customer under ASC 606.

To correct this error (i) the finance lease right-of-use asset and lease liability were removed and the related system was recognized as a rental asset in the period the Re-rent Agreements were executed, (ii) the finance lease costs, including interest expense, and right-of-use asset amortization were reversed in the period the Re-rent Agreements were executed and subsequent periods, and (iii) consideration payable to a customer was recognized in the period the Re-rent Agreements were executed .

Recognition of Costs Associated with Factory Protection Plan Contracts (“FPP Contracts”) The Company offers a comprehensive factory protection plan to microturbine system customers guaranteeing service in the form of labor and spare parts to maintain product performance.

For a fixed fee, the customer can purchase a FPP for either spare parts only or spare parts and labor reimbursement.

The Company previously recognized the FPP revenue on a straight-line basis

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

for the term of the contract, typically 5, 10, 15, or 20 years, and recorded the costs when the replacement parts shipped and when the labor reimbursement request was received.

In addition, FPP revenues and costs were presented on a gross basis in the Consolidated Statements of Operations.

As part of the restatement efforts, the Company reviewed the previous accounting conclusions related to FPP recognition, including a separate analysis of the spare parts and labor reimbursement offerings and the general terms of the contract.

For FPP Contract revenue, under both the spare parts and labor reimbursement offerings, the Company concluded revenue was properly recognized.

As it relates to the accounting for spare parts (“FPP Parts”), the Company concluded the timing of cost recognition was delayed and the cost should be recognized when the customer orders the spare parts.

As it relates to the accounting for labor reimbursement (“FPP Labor”), the income, based on the respective standalone selling price, and related costs should be presented on a net basis in the Consolidated Statements of Operations.

In addition, the Company concluded the FPP Contract term is 30 days, as the customer has the right to cancel with a 30-day notice.

The Company has since revised its policy, and related internal controls, to properly consider the recognize FPP Contracts.

To correct this error, as it relates to FPP Parts, the cost of goods sold was recognized at the time the spare parts order was received and a liability was recognized for any orders that had not been shipped to the customers in the period the accounting error took place.

As it relates to FPP Labor, the labor reimbursement cost was reversed out of cost of goods sold and reclassified to revenue, net.

The Company also revised the FPP contract disclosure included in Note 2 – Summary of Significant Accounting Policies to reflect the revised classification of the contract term.

The Company also corrected for revenue improperly recognized relating to a cancelled FPP contract.

Note Classification As a result of the restated earnings, the Company was in breach of its Consolidated Adjusted EBITDA Financial Covenant to the Note Purchase Agreement dated as of December 9, 2019, and later amended for the quarter ended June 30, 2021.

The breach required a reclassification of the term note payable to a current liability on the Consolidated Balance Sheets as of June 30, 2022 and September 30, 2022.

For further discussion on the Company’s ability to continue as a going concern see Note 3 – Summary of Significant Accounting Policies.

Reclassifications Certain reclassifications have been made to the Company’s previously issued Consolidated Statements of Operations to enhance comparability with the current year’s financial statements.

As a result, certain amounts relating to revenues and cost of goods sold for the sale of parts, previously reflected in Product, accessories and parts have been reclassified to Parts and service.

These reclassifications had no impact on previously reported net income, cash flows, or shareholders’ equity.

Reclassifications Certain reclassifications have been made to the Company’s previously issued Consolidated Balance Sheets to enhance comparability with the current year’s financial statements.

As a result, certain amounts relating to finance and operating leases have been reclassified, as noted below.

• Finance and operating lease right-of-use assets, previously presented in Property, plant, equipment and rental assets, net and Other assets, respectively, have been reclassified to Finance lease right-of-use assets and Operating lease right-of-use assets, respectively.

• Current finance and operating lease liabilities, both previously presented in Current portion of notes payable and lease obligations, have been reclassified to Finance lease liability, current and Operating lease liability, current, respectively.

• Long-term finance and operating lease liabilities, both previously presented in Long-term portion of notes payable and lease obligations, have been reclassified to Finance lease liability, non-current and Operating lease liability, non-current, respectively.

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Description of Quarterly Restatement Tables

The following tables present the impact of the restatement on the previously reported Consolidated Balance Sheets, Consolidated Statements of Operations, and Statements of Cash Flows for quarterly periods ended June 30, 2022, September 30, 2022, and December 31, 2022.

Changes to the Consolidated Statements of Stockholders’ Equity (Deficiency) for the quarterly periods ended June 30, 2022, September 30, 2022, and December 31, 2022 as a result of the restatement are due to the changes in net income.

The values as previously reported for the quarterly periods ended June 30, 2022, September 30, 2022, and December 31, 2022 were derived from our Quarterly Reports on Form 10-Q filed on August 11, 2022, November 14, 2022, and February 14, 2023, respectively.

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As of June 30, 2022

(in thousands)

Reclassifications

Bill and Hold

Classification

Current Assets:

Cash and cash equivalents

Accounts receivable, net of allowances

Inventories, net

Prepaid expenses and other current assets

Total current assets

Property, plant, equipment and rental assets, net

Finance lease right-of-use assets

Operating lease right-of-use assets

Non-current portion of accounts receivable

Non-current portion of inventories

Liabilities and Stockholders’ (Deficiency) Equity

Current Liabilities:

Accounts payable and accrued expenses

Accrued salaries and wages

Accrued warranty reserve

Deferred revenue

Current portion of notes payable and lease obligations

Finance lease liability, current

Operating lease liability, current

Factory protection plan liability

Term note payable

Total current liabilities

Deferred revenue, non-current

Long-term portion of notes payable and lease obligations

Finance lease liability, non-current

Operating lease liability, non-current

Term note payable, non-current

Other long-term liabilities

Total liabilities

Stockholders’ (Deficiency) Equity:

Additional paid-in capital

Accumulated deficit

Treasury stock

Total stockholders’ (deficiency) equity

Total liabilities and stockholders' (deficiency) equity

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As of September 30, 2022

(in thousands)

Reclassifications

Bill and Hold

Classification

Current Assets:

Cash and cash equivalents

Accounts receivable, net of allowances

Inventories, net

Prepaid expenses and other current assets

Total current assets

Property, plant, equipment and rental assets, net

Finance lease right-of-use assets

Operating lease right-of-use assets

Non-current portion of accounts receivable

Non-current portion of inventories

Liabilities and Stockholders’ (Deficiency) Equity

Current Liabilities:

Accounts payable and accrued expenses

Accrued salaries and wages

Accrued warranty reserve

Deferred revenue

Current portion of notes payable and lease obligations

Finance lease liability, current

Operating lease liability, current

Factory protection plan liability

Term note payable

Total current liabilities

Deferred revenue, non-current

Long-term portion of notes payable and lease obligations

Finance lease liability, non-current

Operating lease liability, non-current

Term note payable, non-current

Other long-term liabilities

Total liabilities

Stockholders’ (Deficiency) Equity:

Additional paid-in capital

Accumulated deficit

Treasury stock

Total stockholders’ (deficiency) equity

Total liabilities and stockholders' (deficiency) equity

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As of December 31, 2022

(in thousands)

Reclassifications

Bill and Hold

Current Assets:

Cash and cash equivalents

Accounts receivable, net of allowances

Inventories, net

Prepaid expenses and other current assets

Total current assets

Property, plant, equipment and rental assets, net

Finance lease right-of-use assets

Operating lease right-of-use assets

Non-current portion of accounts receivable

Non-current portion of inventories

Liabilities and Stockholders’ (Deficiency) Equity

Current Liabilities:

Accounts payable and accrued expenses

Accrued salaries and wages

Accrued warranty reserve

Deferred revenue

Current portion of notes payable and lease obligations

Finance lease liability, current

Operating lease liability, current

Factory protection plan liability

Term note payable

Total current liabilities

Deferred revenue, non-current

Long-term portion of notes payable and lease obligations

Finance lease liability, non-current

Operating lease liability, non-current

Term note payable, non-current

Other long-term liabilities

Total liabilities

Stockholders’ (Deficiency) Equity:

Additional paid-in capital

Accumulated deficit

Treasury stock

Total stockholders’ (deficiency) equity

Total liabilities and stockholders' (deficiency) equity

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Three Months Ended June 30, 2022

(in thousands)

Bill and Hold

Revenue, net:

Product and accessories

Parts, service and rentals

Total revenue, net

Cost of goods sold:

Product and accessories

Parts, service and rentals

Total cost of goods sold

Operating expenses:

Research and development

Selling, general and administrative

Total operating expenses

Loss from operations

Other income (expense)

Interest income

Interest expense

Gain (loss) on debt extinguishment

Loss before provision for income taxes

Provision for income taxes

Deemed dividend on purchase warrant for common shares

Net loss attributable to common stockholders

Net loss per share—basic and diluted

Weighted average shares outstanding

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Three Months Ended September 30, 2022

(in thousands)

Bill and Hold

Revenue, net:

Product and accessories

Parts, service and rentals

Total revenue, net

Cost of goods sold:

Product and accessories

Parts, service and rentals

Total cost of goods sold

Operating expenses:

Research and development

Selling, general and administrative

Total operating expenses

Loss from operations

Other income (expense)

Interest income

Interest expense

Gain (loss) on debt extinguishment

Loss before provision for income taxes

Provision for income taxes

Deemed dividend on purchase warrant for common shares

Net loss attributable to common stockholders

Net loss per share—basic and diluted

Weighted average shares outstanding

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Six Months Ended September 30, 2022

(in thousands)

Bill and Hold

Revenue, net:

Product and accessories

Parts, service and rentals

Total revenue, net

Cost of goods sold:

Product and accessories

Parts, service and rentals

Total cost of goods sold

Operating expenses:

Research and development

Selling, general and administrative

Total operating expenses

Loss from operations

Other income (expense)

Interest income

Interest expense

Gain (loss) on debt extinguishment

Loss before provision for income taxes

Provision for income taxes

Deemed dividend on purchase warrant for common shares

Net loss attributable to common stockholders

Net loss per share—basic and diluted

Weighted average shares outstanding

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Three Months Ended December 31, 2022

(in thousands)

Bill and Hold

Revenue, net:

Product and accessories

Parts, service and rentals

Total revenue, net

Cost of goods sold:

Product and accessories

Parts, service and rentals

Total cost of goods sold

Operating expenses:

Research and development

Selling, general and administrative

Total operating expenses

Loss from operations

Other income (expense)

Interest income

Interest expense

Gain (loss) on debt extinguishment

Loss before provision for income taxes

Provision for income taxes

Deemed dividend on purchase warrant for common shares

Net loss attributable to common stockholders

Net loss per share—basic and diluted

Weighted average shares outstanding

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Nine Months Ended December 31, 2022

(in thousands)

Bill and Hold

Revenue, net:

Product and accessories

Parts, service and rentals

Total revenue, net

Cost of goods sold:

Product and accessories

Parts, service and rentals

Total cost of goods sold

Operating expenses:

Research and development

Selling, general and administrative

Total operating expenses

Loss from operations

Other income (expense)

Interest income

Interest expense

Gain (loss) on debt extinguishment

Loss before provision for income taxes

Provision for income taxes

Deemed dividend on purchase warrant for common shares

Net loss attributable to common stockholders

Net loss per share—basic and diluted

Weighted average shares outstanding

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Three Months Ended June 30, 2022

(in thousands)

Reclassifications

Bill and Hold

Cash Flows from Operating Activities:

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

Depreciation and amortization

Amortization of financing costs and discounts

Amortization of right-of-use assets

Inventory provision

Provision for warranty expenses

Stock-based compensation

Changes in operating assets and liabilities:

Accounts receivable

Prepaid expenses, other current assets and other assets

Accounts payable and accrued expenses

Operating lease liability

Accrued salaries and wages and long-term liabilities

Accrued warranty reserve

Deferred revenue

Factory protection plan liability

Net cash used in operating activities

Cash Flows from Investing Activities:

Expenditures for property, plant, equipment and rental assets

Net cash used in investing activities

Cash Flows from Financing Activities:

Repayment of notes payable and lease obligations

Cash used in employee stock-based transactions

Net proceeds from issuance of common stock and warrants

Net cash used in financing activities

Net increase (decrease) increase in Cash and Cash Equivalents

Cash and Cash Equivalents, Beginning of Period

Cash and Cash Equivalents, End of Period

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Six Months Ended September 30, 2022

(in thousands)

Reclassifications

Bill and Hold

Cash Flows from Operating Activities:

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

Depreciation and amortization

Amortization of financing costs and discounts

Amortization of right-of-use assets

Bad debt expense (recovery)

Inventory provision

Provision for warranty expenses

(Gain) loss on disposal of equipment

Stock-based compensation

Changes in operating assets and liabilities:

Accounts receivable

Prepaid expenses, other current assets and other assets

Accounts payable and accrued expenses

Operating lease liability

Accrued salaries and wages and long-term liabilities

Accrued warranty reserve

Deferred revenue

Factory protection plan liability

Net cash used in operating activities

Cash Flows from Investing Activities:

Expenditures for property, plant, equipment and rental assets

Net cash used in investing activities

Cash Flows from Financing Activities:

Repayment of notes payable and lease obligations

Cash used in employee stock-based transactions

Net proceeds from issuance of common stock and warrants

Net cash provided by financing activities

Net increase (decrease) increase in Cash and Cash Equivalents

Cash and Cash Equivalents, Beginning of Period

Cash and Cash Equivalents, End of Period

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Nine Months Ended December 31, 2022

(in thousands)

Reclassifications

Bill and Hold

Cash Flows from Operating Activities:

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

Depreciation and amortization

Amortization of financing costs and discounts

Amortization of right-of-use assets

Bad debt expense (recovery)

Inventory provision

Provision for warranty expenses

Provision for sales returns, net

Stock-based compensation

Changes in operating assets and liabilities:

Accounts receivable

Prepaid expenses, other current assets and other assets

Accounts payable and accrued expenses

Operating lease liability

Accrued salaries and wages and long-term liabilities

Accrued warranty reserve

Deferred revenue

Factory protection plan liability

Net cash used in operating activities

Cash Flows from Investing Activities:

Expenditures for property, plant, equipment and rental assets

Net cash used in investing activities

Cash Flows from Financing Activities:

Repayment of notes payable and lease obligations

Cash used in employee stock-based transactions

Net proceeds from issuance of common stock and warrants

Net cash provided by financing activities

Net increase (decrease) increase in Cash and Cash Equivalents

Cash and Cash Equivalents, Beginning of Period

Cash and Cash Equivalents, End of Period

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Subsequent Events

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, 2022 and events which occurred subsequently but were not recognized in the financial statements.

Except as described below, there were no other subsequent events which required recognition, adjustment to or disclosure in the financial statements.

During the first quarter of Fiscal 2023, the Company has entered into several rental agreements, to rent used microturbine equipment from customers where that equipment was not currently in use.

The Company is then renting this equipment to end users as part of its Energy as a Service business.

These agreements total approximately 11.8 MW of microturbines, have an average term of 36 months , and have a total commitment value of approximately $ 9.5 million.

On July 13, 2022 we entered into the Second Amendment to the A&R Note Purchase Agreement with the Purchaser and the Collateral Agent, pursuant to which (i) the Purchaser and the Collateral Agent waived our breach of the Adjusted EBITDA covenant and (ii) the A&R Note Purchase Agreement has been amended to, among other things, add certain new covenants, including requirements that we use our commercially reasonable best efforts to raise at least $ 10 million through a sale of our common stock by September 14, 2022 and refinance the Notes by October 1, 2022.

On July 6, 2023, the Company entered into a Fourth Amendment (the “Fourth Amendment”) to the A&R Note Purchase Agreement among the Company, certain subsidiaries of the Company, Goldman and the purchaser party thereto (the “Purchaser”).

The Fourth Amendment provides for (i) the waiver by the Purchaser and the Collateral Agent of the Company’s breach of the minimum Consolidated Liquidity covenant contained in the A&R Note Purchase Agreement, the failure to make the interest payment for the most recently ended quarter and certain other breaches specified therein;

(ii) the extension of the maturity of the $ 50 million aggregate principal amount of Notes outstanding pursuant to the A&R Note Purchase Agreement from October 1, 2023 to September 1, 2024;

(iii) an amendment fee payable by the Company at maturity equal to 1.00 % of the principal balance of the Notes on the Effective Date;

(iv) a due date for the next interest payment on the date that is 30 days from the Effective Date, which interest payment was originally due on July 3, 2023;

(v) following the Company’s entry into a Transaction Support Agreement (as defined below), the payment-in-kind of the quarterly interest payments that are due following the next the interest payment;

(vi) a new minimum Consolidated Liquidity covenant requirement of $ 4.0 million, commencing on July 14, 2023, which amount will increase to $ 4.5 million on August 16, 2023 and to $ 6.0 million on August 31, 2023;

(vii) the replacement of the Adjusted LIBO Rate with a Term SOFR interest rate benchmark;

(viii) the ability for Goldman to either (A) force a conversion of the interest rate benchmark to Base Rate or (B) impose default interest during an Event of Default;

(ix) the right for one designated Goldman board observer to attend the meetings of the Company’s Board of Directors (and committees thereof) in a non-voting capacity, subject to certain customary exceptions;

and (x) the amendment to certain provisions of the A&R Note Purchase Agreement, including to add a number of new covenants.

Those new covenants include requirements that the Company (i) enter into a transaction support agreement with one or more lenders in form and substance mutually satisfactory to Goldman and the Company (the “Transaction Support Agreement”) within 30 days of the Effective Date;

(ii) subject to necessary stockholder approvals, execute and deliver, or reach agreement on substantially final versions of, the definitive documentation with respect of the transactions specified in the Transaction Support Agreement in form and substance satisfactory to the Collateral Agent within 45 days after the Effective Date;

(iii) close the transactions specified by the Transaction Support Agreement by September 15, 2023;

and (iv) provide a Section 382 analysis (i.e., an analysis relating to the potential limitation of the use of the Company’s net operating loss carryforwards due to ownership changes, which loss carryforwards the Company understands may be potentially valuable in one or more transaction structures) to Goldman on a quarterly basis.

The Fourth Amendment also imposes restrictions on the Company’s ability to (i) pay professional fees for the next 30 days in excess of $ 2,000,000 in the aggregate;

(ii) make certain other cash disbursements in excess of thresholds set forth in the Fourth Amendment;

and (iii) amend existing, or enter into new, employment agreements or pay or incur any bonus or severance payment.

On August 16, 2023, the Company entered into a Fifth Amendment (the “Fifth Amendment”) to the A&R Note Purchase Agreement among the Company, certain subsidiaries of the Company, Goldman and the purchaser.

The Fifth Amendment provides for (i) the waiver by the Purchaser and the Collateral Agent of the Company’s breach of a covenant contained in the A&R Note Purchase Agreement to enter into a transaction support agreement with one or more lenders in form and substance mutually satisfactory to the Collateral Agent and the Company (the “Transaction Support Agreement”) within 30 days of the Fourth Amendment Effective Date and the failure to make an interest payment within 30 days of the Fourth Amendment Effective Date;

(ii) a due date for the next interest payment on August 22, 2023 or such later date as is agreed to by the Collateral Agent in its sole discretion, which interest payment was originally due within 30 days of the effective date of the Fourth Amendment to the A&R Note Purchase Agreement;

(iii) a minimum Consolidated Liquidity covenant requirement of $ 3.5 million, commencing on July 14, 2023 and operative through September 1, 2024;

and (iv) the amendment of the milestones with respect of the Transaction Support Agreement to require that the Company (A) agree to the terms and form of the Transaction Support Agreement (which may include a structure including bankruptcy proceedings) with one or more lenders in form and substance mutually satisfactory to the Collateral Agent and the Company by August 22, 2023 or such later date as is agreed to by the Collateral Agent in its sole discretion,(B) subject to any necessary stockholder approvals, execute and deliver, or reach agreement on substantially final versions of, the definitive documentation with respect of the transactions specified in the Transaction Support Agreement in form and substance satisfactory to the Collateral Agent by August 31, 2023 or such later date as is agreed to by the Collateral Agent

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

in its sole discretion, and (C) that the Company shall have closed the transactions specified by the Transaction Support Agreement by September 15, 2023 or such later date as is agreed by the Collateral Agent in its sole discretion.

On September 22, 2023, the Company entered into a Sixth Amendment (the “Sixth Amendment”) to the Amended and Restated Note Purchase Agreement among the Company, certain subsidiaries of the Company, Goldman Sachs Specialty Lending Group, L.P.

and the purchaser.

Pursuant to the Sixth Amendment, the Company issued and the Purchaser purchased for $ 3,000,000 in cash additional senior secured notes on September 22, 2023 (the “Additional Notes”).

The Additional Notes bear interest at the SOFR Rate plus 8.75 % per annum, payable-in-kind 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 entire principal amount of the Additional Notes is due and payable on September 1, 2024 (the “Maturity Date”).

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

Voluntary Filing under Chapter 11

On September 28, 2023, the Company and its wholly owned direct subsidiaries, Capstone Turbine International, Inc.

(“Capstone Turbine International”) and Capstone Turbine Financial Services, LLC.

(together with the Company, the “Debtors”), commenced voluntary proceedings under Chapter 11 of the United States Bankruptcy Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”).

The Chapter 11 proceedings were jointly administered under the caption In re Capstone Green Energy Corporation, Inc., et al.

(the “Chapter 11 Cases”).

The Debtors continued to operate their business in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court.

At hearings before the Bankruptcy Court on September 29, 2023, the Debtors obtained approval from the Bankruptcy Court of certain “first day” motions containing customary relief intended to assure the Debtors’ ability to continue their ordinary course operations during the Chapter 11 Cases.

Concurrent with the petition, the Debtors entered into the Transaction Support Agreement with the pre-petition senior secured creditor, Broad Street Credit Holdings, LLC.

(“Broad Street”), and Goldman Sachs Specialty Lending Group, L.P.

(the “Collateral Agent”).

The Transaction Support Agreement, among other things, provides that Broad Street and the Collateral Agent will support the Debtors’ restructuring efforts as set forth in, and subject to the terms and conditions of, the Transaction Support Agreement.

The Transaction Support Agreement contains customary conditions, representations, and warranties of the parties and is subject to a number of conditions, including, among others, the accuracy of the representations and warranties of the parties and compliance with the obligations set forth in the Transaction Support Agreement.

The Transaction Support Agreement also provides for termination by the parties upon the occurrence of certain events.

DIP Note Purchase Agreement

On October 3, 2023, the Debtors entered into a super-priority senior secured debtor-in-possession note purchase agreement (the “DIP Note Purchase Agreement”) with Broad Street and the Collateral Agent.

Broad Street provided the Debtors with a credit facility (the “DIP Facility”) in an aggregate principal amount of $ 30.0 million, consisting of (1) $ 12.0 million new money DIP notes, and (2) a roll-up of secured obligations under the existing pre-petition debt with Broad Street in the amount of $ 18.0 million, subject to the terms and conditions set forth in the DIP Note Purchase Agreement.

On September 28, 2023, the Debtors filed the Motion of Debtors for Interim and Final Orders (I) Authorizing the Debtors to Obtain Senior Secured Postpetition Financing, (II) Granting Liens and Superpriority Administrative Expense Status, (III) Authorizing the Use of Cash Collateral, (IV) Granting Adequate Protection to Pre-Petition Secured Parties, (V) Scheduling a Final Hearing, and (VI) Granting Related Relief (the “DIP Motion”) seeking the Bankruptcy Court’s approval of the DIP Facility and certain related relief.

A copy of the DIP Note Purchase Agreement was attached to the joint prepackaged Chapter 11 plan of reorganization (as amended, restated, supplemented or otherwise modified from time to time, the “Plan”) filed as part of the voluntary petition.

On October 2, 2023, the Bankruptcy Court granted the DIP Motion and entered an interim order (the “Interim DIP Order”) approving the DIP Facility on an interim basis and providing the Debtors with the necessary liquidity to

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

continue to operate in Chapter 11.

Upon entry of the Interim DIP Order and satisfaction of all applicable conditions precedent, as set forth in the DIP Note Purchase Agreement, the Debtors were authorized to make a single, initial draw of $ 9.0 million on the DIP Facility (the “Initial Draw”).

The remaining $ 3.0 million of the DIP Facility became available to be drawn by the Debtors on November 13, 2023, after the Bankruptcy Court entered the Final DIP Order (the “Final Order”).

The amount was drawn by the Debtors on October 24, 2023, after the entry of the Final Order and compliance with the terms, conditions, and covenants to be set forth in the DIP Documents.

Substantially all of the Debtors’ assets were encumbered by first-priority liens of the Purchaser.

The Bankruptcy Court originally set a final hearing date on November 7, 2023, in accordance with the requirements of the Transaction Support Agreement.

On November 3, 2023, the final hearing was cancelled and rescheduled to November 13, 2023, with the permission of the Bankruptcy Court.

Emergence from Voluntary Chapter 11 Proceedings

The Bankruptcy Court confirmed the Plan on November 14, 2023, and the Debtors satisfied all conditions required for Plan effectiveness and emerged from the Chapter 11 Cases ("Emergence") on December 7, 2023.

On or following the emergence date and pursuant to the terms of the Plan, the following occurred or became effective:

▪Restructuring:

The Company was reorganized pursuant to the Transaction Support Agreement and became a private company that continues to own assets consisting of (i) all of the Company’s right, title, and interest in and to certain trademarks of the Company and (ii) assets owned by the Company relating to distributor support services ((i) and (ii) together, the “Retained Assets”) and certain income tax attributes that remained with Reorganized PrivateCo.

Capstone Turbine International became a publicly traded company and was renamed Capstone Green Energy Holdings, Inc.

This entity is the successor entity for purposes of Securities and Exchange Commission registration.

Pre-petition equity holders received 100 % of the common equity in this public entity, subject to dilution for any equity incentive plans implemented as part of the reorganization.

All equity of the predecessor entity was cancelled, and the predecessor entity became a reorganized private company.

The reorganized private company equity is owned 100 % by the pre-petition senior secured lender in exchange for the satisfaction of $ 35.0 million of its pre-petition claims, and $ 10.0 million of its DIP claim.

A new subsidiary to the public entity was created, issuing 100 % of its common equity to the public entity, and 100 % of its preferred equity to the reorganized private entity.

Such new subsidiary conducts all of the Capstone business (other than in respect of the Retained Assets).

The preferred equity is convertible at the option of the holder at any time to 37.5 % of the common equity deemed outstanding, making the common equity of the new subsidiary subject to dilution to 62.5 % ownership.

▪Exit Financing:

The DIP Facility converted into an exit facility (as defined herein) for an aggregate principal amount of $ 27.0 million, consisting of (1) $ 7.0 million new money notes, (2) a roll-up of secured obligations under the pre-petition debt in the amount of $ 8.0 million, and (3) a roll-up of the DIP new money notes of $ 12.0 million, subject to the terms and conditions set forth in the Exit Note Purchase Agreement by and among Capstone Green Energy LLC, as the issuer, Capstone Green Energy Holdings, Inc.

and Capstone Turbine Financial Services, LLC, as the guarantors, Broad Street and the Collateral Agent.

The new money notes mature two years from the Effective Date, and the roll-up debts mature three years from the emergence date.

Interest is calculated using a SOFR rate plus an applicable margin, and a portion is paid-in-kind until the third year following emergence.

In the original Plan, the exit facility was to be for an aggregate principal amount of $ 25.0 million, with only $ 5.0 million in new money notes.

The final approved Plan increased the new money notes to $ 7.0 million upon the confirmation of the Plan by Bankruptcy Court.

CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Nasdaq Delisting of Common Stock

Effective at the opening of the trading session on October 5, 2023, the Company’s common stock was suspended from trading on the Nasdaq Capital Market.

Effective October 23, 2023, the Company’s common stock was delisted from the Nasdaq Capital Market.

Capstone Green Energy Holdings, Inc.

2023 Equity Incentive Plan

In connection with the Emergence, on November 30, 2023, the Capstone Green Energy Holdings, Inc.

2023 Equity Incentive Plan (the “Incentive Plan”) was approved and adopted by the Board.

The Incentive Plan was not approved by the Company’s stockholders.

All outstanding unvested equity awards outstanding under the Capstone Green Energy Corporation 2017 Equity Incentive Plan were cancelled on the Effective Date in accordance with the Plan.

The Incentive Plan is administered by the Compensation and Human Capital Committee or the Board.

No more than 3,000,000 shares of New Common Stock are available for the grant of awards under the Incentive Plan.

The Company intends to issue equity awards to incentivize employees whose unvested equity awards were terminated in accordance with the Plan.

The Board at any time, and from time to time, may amend or terminate the Incentive Plan.

Exhibit Index

Conformed Copy of Second Amended and Restated Certificate of Incorporation of Capstone Turbine Corporation, as amended through April 22, 2021 (a)

Conformed Copy of Fifth Amended and Restated Bylaws of Capstone Green Energy Corporation effective as of April 22, 2021, as amended through August 26, 2021(b)

Certificate of Elimination of Series A Junior Participating Preferred Stock of Capstone Turbine Corporation, dated May 9, 2016(d)

Certificate of Designations of Series B Junior Participating Preferred Stock of Capstone Turbine Corporation(d)

Specimen stock certificate(e)

NOL Rights Agreement, dated May 6, 2019, between Capstone Turbine Corporation and Broadridge Financial Solutions, Inc.

successor-in-interest to Computershare Inc.(f)

Form of Series A Warrant issued to investors in the April 2016 public offering(g)

Form of Pre-Funded Series B Warrant issued to investors in the April 2016 public offering(g)

Form of Series A Warrant issued to investors in the October 2016 public offering(h)

Form of Pre-Funded Series B Warrant issued to investors in the October 2016 public offering(h)

Purchase Warrant for Common Shares issued in favor of Goldman Sachs & Co.

LLC, dated February 4, 2019 (i)

Form of Prefunded Series C Warrant issued to investors in the September 2019 public offering (j)

Form of Series D Warrant issued to investors in the September 2019 public offering (j)

Amendment No.

1 to the Purchase Warrant for Common Shares issued in favor of Special Situations Investing Group II, LLC (a successor in interest to Goldman Sachs & Co.

LLC), dated December 9, 2019 (k)

Note between Western Alliance Bank and Capstone Turbine Corporation, effective as of April 24, 2020 (l)

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.

2 to the 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 June 16, 2020 (n)

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)

Second Amendment to the Amended and Restated Note Purchase Agreement dated as of July 13, 2022, by and among Capstone Green Energy Corporation, certain subsidiaries of the Company, the purchaser party thereto and Goldman Sachs Specialty Lending Group, L.P.

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)

Fourth Amendment to Lease, dated June 7, 2017, between Capstone Turbine Corporation and Prologis, L.P., for leased premises at 16640 Stagg Street, Van Nuys, California(p)

Capstone Turbine Corporation 2017 Equity Incentive Plan effective August 30, 2017(q)

Capstone Turbine Corporation Employee Stock Purchase Plan effective August 30, 2017(r)

Amended and Restated Capstone Turbine Corporation Change of Control Severance Plan(s)

Development and License Agreement between Capstone Turbine Corporation and Carrier Corporation, successor-in-interest to UTC Power Corporation, dated September 4, 2007(t)

Promissory Note between Capstone Turbine Corporation and Turbine International, LLC, dated October 13, 2017(u)

Guaranty between Capstone Turbine Corporation and Hispania Petroleum, S.A., dated October 13, 2017(u)

First Amendment to the Accounts Receivable Assignment Agreement and Promissory Note between Capstone Turbine Corporation and Turbine International, LLC, dated June 5, 2018 (v)

Capstone Turbine Corporation Amended and Restated Executive Performance Incentive Plan as amended and restated effective August 29, 2013(w)

Amendment to the Capstone Turbine Corporation Amended and Restated Executive Performance Incentive Plan, dated June 9, 2014(x)

Form of Inducement Stock Option Agreement(y)

Form of Inducement Restricted Stock Unit Agreement(y)

Amended and Restated Change in Control Severance Agreement with Darren R.

Jamison, dated June 14, 2012(z)

First Amendment to Amended and Restated Change in Control Severance Agreement with Darren R.

Jamison, effective June 14, 2015(aa)

Capstone Turbine Corporation Severance Pay Plan as amended and restated effective February 1, 2010(aa)

Form of Securities Purchase Agreement used in the September 2019 offering (j)

At the Market Offering Agreement, dated June 7, 2018, between Capstone and H.C.

Wainwright & Co., LLC (bb)

Second Amendment to the Development and License Agreement, dated July 25, 2018, between Capstone Turbine Corporation and Carrier Corporation (cc)

Capstone Turbine Corporation 2017 Equity Incentive Plan, as amended (dd)

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 (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)

Consulting Agreement between Capstone Green Energy Corporation and Capstone Engineered Solutions, dated May 22, 2022

National Account Agreement between Capstone Green Energy Corporation and Capstone Engineered Solutions, dated May 20, 2022

Installation Agreement between Capstone Green Energy Corporation and Capstone Engineered Solutions Corporation

Code of Business Conduct(ff)

Code of Ethics for Senior Financial Officers and Chief Executive Officer (ff)

Subsidiary List

Consent of Marcum LLP

Joint Prepackaged Chapter 11 Plan of Reorganization of Capstone Green Energy Corporation and its Debtor Affiliates (incorporated by reference to Exhibit A of Findings of Fact, Conclusions of Law, and Order (I) Approving the Disclosure Statement;

(II) Confirming the Joint Prepackaged Chapter 11 Plan of Reorganization of Capstone Green Energy Corporation and Its Debtor Affiliates;

and (III) Granting Related Relief, dated November 14, 2023) (l)

Plan Supplement to Joint Prepackaged Chapter 11 Plan of Reorganization of Capstone Green Energy Corporation and its Debtor Affiliates, dated as of October 24, 2023 (k)

Notice of Filing of Additional Exhibits to Plan Supplement, dated as of November 9, 2023 (l)

Second Amended and Restated Certificate of Incorporation of Capstone Green Energy Holdings, Inc.

Amended and Restated Bylaws of Capstone Green Energy Holdings, Inc.

Super-Priority Senior Secured Debtor-In-Possession Note Purchase Agreement, dated as of October 2, 2023, among Capstone Green Energy Corporation, as a Chapter 11 Debtor and Debtor-in-Possession, the other debtors party thereto from time to time, each as a Chapter 11 Debtor and Debtor-in-Possession and as a Guarantor, Broad Street Credit Holdings LLC, as Purchaser, and Goldman Sachs Specialty Lending Group, L.P., as Collateral Agent (j)

First Amendment to Super-Priority Senior Secured Debtor-In-Possession Note Purchase Agreement, dated as of November 15, 2023, among Capstone Green Energy Corporation, as a Chapter 11 Debtor and Debtor-in-Possession, the other debtors party thereto from time to time, each as a Chapter 11 Debtor and Debtor-in-Possession and as a Guarantor, Broad Street Credit Holdings LLC, as Purchaser, and Goldman Sachs Specialty Lending Group, L.P., as Collateral Agent (l)

Exit Note Purchase Agreement, dated December 7, 2023, by and among Capstone Green Energy LLC, Capstone Green Energy Holdings, Inc., Capstone Financial Services, Broad Street Credit Holdings LLC, as Purchaser, and Goldman Sachs Specialty Lending Group, L.P., as Collateral Agent (m)

Description of the Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934, as amended

Amended and Restated Capstone Turbine Corporation Change of Control Severance Plan (a)

Development and License Agreement between Capstone Turbine Corporation and Carrier Corporation, successor-in-interest to UTC Power Corporation, dated September 4, 2007 (b)

Promissory Note between Capstone Turbine Corporation and Turbine International, LLC, dated October 13, 2017 (c)

Guaranty between Capstone Turbine Corporation and Hispania Petroleum, S.A., dated October 13, 2017 (c)

First Amendment to the Accounts Receivable Assignment Agreement and Promissory Note between Capstone Turbine Corporation and Turbine International, LLC, dated June 5, 2018 (d)

Capstone Green Energy Corporation Amended and Restated Severance Pay Plan and Summary Plan Description, dated July 3, 2018, as amended March 2023 (e)

Form of Capstone Green Energy Corporation Change in Control Agreement (f)

Consulting Agreement between Capstone Green Energy Corporation and Capstone Engineered Solutions, dated May 22, 2022 (g)

National Account Agreement between Capstone Green Energy Corporation and Capstone Engineered Solutions, dated May 20, 2022 (g)

Installation Agreement between Capstone Green Energy Corporation and Capstone Engineered Solutions Corporation (g)

Lease Agreement between Capstone Green Energy Corporation and Prologis, L.P., dated January 25, 2023 (h)

Transaction Support Agreement, dated September 28, 2023, by and among Capstone Green Energy Corporation and certain of its subsidiaries, Goldman Sachs Specialty Lending Group, L.P., and Broad Street Credit Holdings LLC (i)

Reorganized PublicCo Services Agreement, dated December 7, 2023, by and among Capstone Green Energy Holdings, Inc.

and Capstone Green Energy LLC (m)

Trademark License Agreement, dated December 7, 2023, by and among Capstone Distributor Support Services Corporation and Capstone Green Energy Holdings, Inc.

Capstone Green Energy Holdings, Inc.

Form of Indemnity Agreement (m)

Severance Pay Plan of Capstone Green Energy Holdings, Inc.

2023 Equity Incentive Plan of Capstone Green Energy Holdings, Inc.

Amended and Restated Limited Liability Company Agreement, dated December 7, 2023, of Capstone Green Energy LLC.

Reorganized PrivateCo Services Agreement, dated December 7, 2023, by and among Capstone Distributor Support Services Corporation and Capstone Green Energy LLC (m)

Registration Rights Agreement, dated December 7, 2023, by and among Capstone Green Energy LLC and Capstone Distributor Support Services Corporation (m)

Employment Offer Letter for Vincent J.

Canino, dated February 22, 2024 (n)

Capstone Green Energy Holdings, Inc.

Form of Amended and Restated Change in Control Agreement (n)

Form of Restricted Stock Unit Agreement

Power of Attorney (included on the signature page of this Form 10-K)

1 unchanged sentence

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 and Chief Financial Officer pursuant to Section 906 of the Sarbanes–Oxley Act of 2002 (furnished herewith)

XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the inline XBRL document

6 unchanged sentences

*Management contract or compensatory plan or arrangement

(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.

(a) Incorporated by reference to Capstone Turbine Corporation’s Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2004 (File No.

(b) Incorporated by reference to Capstone Turbine Corporation’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2007 (File No.

(c) Incorporated by reference to Capstone Turbine Corporation’s Current Report on Form 8-K filed on October 13, 2017 (File No.

(d) Incorporated by reference to Capstone Turbine Corporation’s Annual Report on Form 10-K for the fiscal year ended March 31, 2018 (File No.

(e) Incorporated by reference to Capstone Green Energy Corporation’s Current Report on Form 8-K filed on March 6, 2023 (File No.

(f) Incorporated by reference to Capstone Turbine Corporation’s Current Report on Form 8-K filed on June 5, 2018 (File No.

(g) Incorporated by reference to Capstone Green Energy Corporation’s Annual Report on Form 10-K for the fiscal year ended March 31, 2022 (File No.

(h) Incorporated by reference to Capstone Green Energy Corporation’s Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2022 (File No.

(i) Incorporated by reference to Capstone Green Energy Corporation’s Current Report on Form 8-K filed on September 28, 2023 (File No.

(j) Incorporated by reference to Capstone Green Energy Corporation’s Current Report on Form 8-K filed on October 3, 2023 (File No.

(k) Incorporated by reference to Capstone Green Energy Corporation’s Current Report on Form 8-K filed on October 25, 2023 (File No.

(l) Incorporated by reference to Capstone Green Energy Corporation’s Current Report on Form 8-K filed on November 17, 2023 (File No.

(m) Incorporated by reference to Capstone Green Energy Holdings, Inc.’s Current Report on Form 8-K12G3 filed on December 11, 2023 (File No.

(n) Incorporated by reference to Capstone Green Energy Holdings, Inc.’s Current Report on Form 8-K filed on March 12, 2024 (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 GREEN ENERGY CORPORATION

July 13, 2022

/s/ Frederick S.

CAPSTONE GREEN ENERGY HOLDINGS, INC.

June 12, 2024

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 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.

KNOW ALL MEN BY THESE PRESENTS, that we, the undersigned officers and directors of Capstone Green Energy Holdings Inc., hereby severally constitute Vince Canino and John J.

Juric, 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.

/s/ Darren R.

/s/ Vince Canino

President, Chief Executive Officer and Director (Principal Executive Officer)

July 13, 2022

/s/ Frederick S.

June 12, 2024

Chief Financial Officer (Principal Financial Officer)

July 13, 2022

June 12, 2024

/s/ Celia fanning

Controller and Chief Accounting Officer

Celia Fanning

(Principal Accounting Officer)

June 12, 2024

/s/ Robert C.

Chair of the Board of Directors

July 13, 2022

June 12, 2024

/s/ Robert F.

July 13, 2022

June 12, 2024

/s/ Denise Wilson

July 13, 2022

June 12, 2024

Denise Wilson

July 13, 2022

June 12, 2024

/s/ John Miller

June 12, 2024

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