Item 9A. Controls and Procedures
Item 9A. Controls and Procedures.
Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that the information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.
In connection with the preparation of this Form 10-K for the fiscal year ended March 31, 2025, 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, 2025, due to the material weakness in our internal control over financial reporting described below, our disclosure controls and procedures were not effective.
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Notwithstanding the identified material weakness, 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, 2025 and March 31, 2024, and our financial condition as of each such date and have been prepared in conformity with U.S. GAAP.
Management’s 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 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, 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 U.S. GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and
● 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 our internal control over financial reporting was not effective as of March 31, 2025 because of the material weakness 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 weakness was identified:
● We did not design and maintain effective controls over financial reporting related to the proper accounting, presentation and disclosure for FPP service contracts, including controls relating to the relevant information technology systems used in this process.
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 weakness described above. The Company’s remediation actions include, but are not limited to the following:
● Management has reviewed and refined the Company’s current accounting memorandums related to FPP service contracts to address the proper financial reporting considerations. Additionally, management is enhancing the design of and implementing controls over financial reporting for FPP service contracts, including controls over the Information Technology systems specifically used in Company’s process for receiving notice of FPP claims.
We believe these measures will remediate the material weakness, but management is assessing the need for any additional steps to remediate the underlying causes that gave rise to this weakness. The material weakness 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.
Changes in Internal Control over Financial Reporting
Throughout the year ended March 31, 2025, the Company undertook remediation measures related to certain previously reported material weaknesses in internal control over financial reporting. We completed these remediation
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measures in the quarter ended March 31, 2025, including testing of the design and operating effectiveness of the related controls.
Specifically, we undertook the following remediation measures:
● We reinforced the Company’s tone at the top through employee meetings, CEO letters, management training and enhanced communication of the Company’s values and expected business conduct to Company personnel directly from senior leadership;
● We enhanced 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;
● We hired additional accounting and compliance personnel as necessary to maintain an effective control environment commensurate with our financial reporting requirements;
● We implemented a process to periodically review and update accounting policies; and
● We reviewed and refined our accounting memorandums related to product, parts, and accessories sales to address the proper financial reporting considerations. Additionally, we enhanced the design of and implemented controls over financial reporting for systems, products, parts, and accessories sales subject to bill and hold arrangements with customers.
As a result, we have concluded that the previously reported material weaknesses related to the above items have been remediated. However, the completion of remediation procedures for these material weaknesses does not provide assurance that our modified controls will continue to operate properly or that our financial statements will be free from error. We continue to undertake remediation measures related to the remaining material weakness disclosed in the Management’s Report on Internal Control over Financial Reporting section above.
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.
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.
Item 9B. Other Information.
Rule 10b5-1 Trading Plans
During the year ended March 31, 2025, none of our directors or officers adopted or terminated any contract , instruction or written plan for the purchase or sale of our securities to satisfy the affirmative defense conditions of “Rule 10b5-1 trading arrangement” or any “non-Rule 10b5-1 trading arrangement.”
Goldman NPA Liquidity Covenant Waiver Letter
Pursuant to a waiver letter dated June 23, 2025 (the “Waiver Letter”), the Purchaser and the Collateral Agent under the Exit Purchase Agreement agreed to defer the minimum liquidity increase from $2.5 million to $3.0 million from June 20, 2025 to July, 31, 2025.
The foregoing description of the Waiver Letter does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Waiver Letter, which is filed herewith as Exhibit 10.24 and is incorporated by reference herein.
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Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not applicable.
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
The information required by this Item is incorporated by reference from our proxy statement for our 2025 Annual Meeting of Stockholders under the captions “Proposal No. 1 Election of Directors to the Board of Directors,” “Executive Officers of the Company,” “Governance of the Company and Practices of the Board of Directors,” “Insider Trading Policies and Procedures,” and “Code of Business Conduct and Code of Ethics.” With regard to the information required by this Item regarding compliance with Section 16(a) of the Exchange Act, we will provide disclosure of delinquent Section 16(a) reports, if any, in our Proxy Statement related to the 2025 Annual Meeting of Shareholders in a section entitled “Additional Information—Delinquent Section 16(a) Reports,” and such disclosure, if any, is incorporated herein by reference.
Item 11. Executive Compensation.
The information required by this Item is incorporated by reference from our proxy statement for our 2025 Annual Meeting of Stockholders under the caption “Compensation of Officers,” and “Compensation of Directors.”
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The information required by this Item is incorporated by reference from our proxy statement for our 2025 Annual Meeting of Stockholders under the caption “Security Ownership of Certain Beneficial Owners and Management”
Item 13. Certain Relationships and Related Transactions, and Director Independence.
The information required by this Item is incorporated by reference from our proxy statement for our 2025 Annual Meeting of Stockholders under the caption “Other Information.”
Item 14. Principal Accountant Fees and Services.
The information required by this Item is incorporated by reference from our proxy statement for our 2025 Annual Meeting of Stockholders under the caption “Proposal No. 4 Ratification of Appointment of Independent Registered Public Accounting Firm.”
PART IV
Item 15. Exhibits and Financial Statement Schedules.
(a) 1. and 2. 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 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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3. Exhibits
The exhibits filed as part of this Form 10-K are set forth on the Exhibit Index immediately preceding the signatures of this Form 10-K. The Exhibit Index is incorporated herein by reference.
Item 16. Form 10-K Summary.
Not applicable.
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CAPSTONE GREEN ENERGY HOLDINGS, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Report of Independent Registered Public Accounting Firm (PCAOB 00 199 ); CBIZ CPAs P.C. , Los Angeles, CA
F-2
Report of Independent Registered Public Accounting Firm (PCAOB 00 688 ); Marcum , Los Angeles, CA
F-4
Consolidated Financial Statements:
Consolidated Balance Sheets as of March 31, 2025 and 2024
F-6
Years Ended March 31, 2025 and 2024:
Consolidated Statements of Operations
F-7
Consolidated Statements of Changes in Temporary Equity and Stockholders’ Deficiency
F-8
Consolidated Statements of Cash Flows
F-9
Notes to Consolidated Financial Statements
F-10
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.
F-1
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors of
Capstone Green Energy Holdings, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of Capstone Green Energy Holdings, Inc. and Subsidiaries (the “Company”) as of March 31, 2025, the related consolidated statements of operations, temporary equity and stockholders’ deficiency, and cash flows for the year ended March 31, 2025, 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, 2025, and the results of its operations and its cash flows for the year ended March 31, 2025, 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 a significant working capital deficiency, 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
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter 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 matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which they relate.
F-2
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Net Realizable Value of Inventories
Description of the Matter
The Company’s inventories totaled approximately $20.1 million as of March 31, 2025. In addition, approximately $3.5 million of inventories were 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. In determining this estimate, the Company will both (a) perform a monthly analysis to compare the previous 36-month usage of its inventories to the current quantities on hand and (b) judgmentally review their inventories 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 net realizable value of inventories.
The principal considerations for our determination that performing procedures relating to the net realizable value of inventories is a critical audit matter are (i) the significant judgement required by management when determining the net realizable value; and (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures to evaluate management’s estimate and significant assumptions in determining the net realizable value.
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:
● Obtained an understanding of the Company’s financial reporting processes in place to estimate the net realizable value of inventories;
● 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 net realizable value of inventories, 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 net realizable value of inventories existed if management were to use a different look-back time period in their calculation; and
● Performed a retrospective analysis of the Company’s net realizable value of inventories by comparing the Company’s historical write-downs in prior periods to the actual current period usage and movement.
/s/ CBIZ CPAs P.C.
CBIZ CPAs P.C.
We have served as the Company’s auditor since 2017 (such date takes into account the acquisition of the attest business of Marcum LLP by CBIZ CPAs P.C. effective November 1, 2024)
Los Angeles, CA
June 26, 2025
F-3
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors of
Capstone Green Energy Holdings, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of Capstone Green Energy Holdings, Inc. and Subsidiaries (the “Company”) as of March 31, 2024, the related consolidated statements of operations, temporary equity and stockholders’ deficiency and cash flows for the year ended March 31, 2024, 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, 2024, and the results of its operations and its cash flows for the year ended March 31, 2024, 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 a significant working capital deficiency, has incurred significant operating 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
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
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) 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 matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.
F-4
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Net Realizable Value of Inventories
Description of the Matter
The Company’s inventories totaled approximately $24.6 million as of March 31, 2024. In addition, approximately $3.9 million of inventories were 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. In determining this estimate, the Company will both (a) perform a monthly analysis to compare the previous 36-month usage of its inventories to the current quantities on hand and (b) judgmentally review their inventories 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 net realizable value of inventories.
The principal considerations for our determination that performing procedures relating to the net realizable value of inventories is a critical audit matter are (i) the significant judgement required by management when determining the net realizable value; and (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures to evaluate management’s estimate and significant assumptions in determining the net realizable value.
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:
● Obtained an understanding of the Company’s financial reporting processes in place to estimate the net realizable value of inventories;
● 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 net realizable value of inventories, 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 net realizable value of inventories existed if management were to use a different look-back time period in their calculation; and
● Performed a retrospective analysis of the Company’s net realizable value of inventories by comparing the Company’s historical write-downs in prior periods to the actual current period usage and movement.
/s/ Marcum llp
Marcum llp
We served as the Company’s auditor from 2017 through 2025
Los Angeles, CA
September 26, 2024
F-5
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CAPSTONE GREEN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
March 31,
March 31,
2025
2024
Assets
Current Assets:
Cash
$
8,671
$
2,085
Accounts receivable, net of allowances of $ 607 at March 31, 2025 and $ 3,287 at March 31, 2024
7,037
6,552
Inventories
16,615
20,642
Lease receivable, current
113
—
Prepaid expenses and other current assets
3,653
5,449
Total current assets
36,089
34,728
Property, plant, equipment and rental assets, net
19,362
25,854
Finance lease right-of-use assets
3,787
4,391
Operating lease right-of-use assets
8,282
12,279
Non-current portion of inventories
3,464
3,917
Lease receivable, non-current
1,175
—
Other assets
2,705
3,037
Total assets
$
74,864
$
84,206
Liabilities, Temporary Equity and Stockholders’ Deficiency
Current Liabilities:
Accounts payable
$
14,092
$
15,094
Accrued expenses
3,113
3,118
Accrued salaries and wages
1,172
1,220
Accrued warranty reserve
1,070
1,437
Deferred revenue
13,351
11,183
Finance lease liability, current
2,017
964
Operating lease liability, current
3,539
4,041
Factory protection plan liability
6,256
7,259
Exit new money notes, net of discount, current
7,968
28,911
Total current liabilities
52,578
73,227
Deferred revenue, non-current
598
675
Finance lease liability, non-current
248
2,300
Operating lease liability, non-current
4,988
8,527
Exit new money notes, net of discount, non-current
24,213
—
Other non-current liabilities
—
264
Total liabilities
82,625
84,993
Commitments and contingencies (Note 14)
Temporary equity:
Redeemable noncontrolling interests
13,859
13,859
Stockholders’ deficiency:
Preferred stock, $ .001 par value; 1,000,000 shares authorized; none issued
—
—
Common stock, $ .001 par value; 59,400,000 shares authorized, 18,643,587 shares issued and outstanding at March 31, 2025; 59,400,000 shares authorized, 18,540,789 shares issued and outstanding at March 31, 2024
18
18
Non-voting common stock, $ .001 par value; 600,000 shares authorized, 508,475 shares issued and outstanding at March 31, 2025 and March 31, 2024
1
1
Additional paid-in capital
955,407
955,145
Accumulated deficit
( 977,000 )
( 969,810 )
Treasury stock, at cost; 57,202 shares at March 31, 2025 and 0 shares at March 31, 2024
( 46 )
—
Total stockholders’ deficiency
( 21,620 )
( 14,646 )
Total liabilities, temporary equity and stockholders' deficiency
$
74,864
$
84,206
See accompanying notes to consolidated financial statements.
F-6
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CAPSTONE GREEN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
Year Ended March 31,
2025
2024
Revenue, net:
Product and accessories
$
40,219
$
49,107
Parts and service
30,939
30,681
Rentals
14,406
11,431
Total revenue, net
85,564
91,219
Cost of goods sold:
Product and accessories
39,200
51,259
Parts and service
13,660
16,460
Rentals
9,406
9,216
Total cost of goods sold
62,266
76,935
Gross profit
23,298
14,284
Operating expenses:
Research and development
2,667
2,463
Selling, general and administrative
26,205
32,175
Total operating expenses
28,872
34,638
Loss from operations
( 5,574 )
( 20,354 )
Other income
2,317
674
Interest income
186
110
Reorganization items, net
—
32,505
Interest expense
( 3,944 )
( 5,529 )
Income (loss) before provision for income taxes
( 7,015 )
7,406
Provision for income taxes
175
14
Net income (loss)
( 7,190 )
7,392
Net income (loss) per share of common stock and non-voting common stock—basic and diluted
$
( 0.38 )
$
0.39
Weighted average shares used to calculate basic and diluted net income (loss) per common stock and non-voting common stock
19,056
18,753
See accompanying notes to consolidated financial statements.
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CAPSTONE GREEN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF TEMPORARY EQUITY AND STOCKHOLDERS’ DEFICIENCY
(In thousands, except share amounts)
Temporary Equity
Permanent Equity
Redeemable
Non-Voting
Additional
Total
Noncontrolling Interest
Common Stock
Common Stock
Paid-in
Accumulated
Treasury Stock
Stockholders’
Shares
Amount
Shares
Amount
Shares
Amount
Capital
Deficit
Shares
Amount
Deficiency
Balance, April 1, 2023
—
$
—
18,511,555
$
18
—
$
—
$
955,228
$
( 977,202 )
117,014
$
( 2,139 )
$
( 24,095 )
Vested restricted stock units
—
—
61,474
—
—
—
14
—
12,501
( 15 )
( 1 )
Stock awards to Board of Directors
—
—
97,275
—
—
—
—
—
—
—
—
Cancellation of Capstone Green Energy Corporation stock
—
—
( 18,670,392 )
( 18 )
—
—
( 2,154 )
—
( 129,515 )
2,154
( 18 )
Issuance of Capstone Green Energy Holdings, Inc. stock
—
—
18,540,877
18
—
—
—
—
—
—
18
Issuance of non-voting stock
—
—
—
—
508,475
1
—
—
—
—
1
Redeemable noncontrolling interests
10,449,863
13,859
—
—
—
—
—
—
—
—
—
Stock-based compensation
—
—
—
—
—
—
2,057
—
—
—
2,057
Net income
—
—
—
—
—
—
—
7,392
—
—
7,392
Balance, March 31, 2024
10,449,863
13,859
18,540,789
18
508,475
1
955,145
( 969,810 )
—
—
( 14,646 )
Purchase of treasury stock
—
—
( 57,202 )
—
—
—
—
—
57,202
( 46 )
( 46 )
Vested restricted stock units (1)
—
—
160,000
—
—
—
—
—
—
—
—
Stock-based compensation
—
—
—
—
—
—
262
—
—
—
262
Net income
—
—
—
—
—
—
—
( 7,190 )
—
—
( 7,190 )
Balance, March 31, 2025
10,449,863
$
13,859
18,643,587
$
18
508,475
$
1
$
955,407
$
( 977,000 )
57,202
$
( 46 )
$
( 21,620 )
(1) The common stock par value in total does not change the total common stock par value presented in thousands.
See accompanying notes to consolidated financial statements.
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CAPSTONE GREEN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Year Ended March 31,
2025
2024
Cash Flows from Operating Activities:
Net income (loss)
$
( 7,190 )
$
7,392
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization
3,858
3,988
Amortization of financing costs and discounts
71
53
Paid-in-kind interest expense
3,199
1,957
Non-cash lease expense
3,996
3,431
Provision for credit loss expense
823
439
Inventory write-down
900
779
Provision for warranty expenses
( 184 )
32
Loss on disposal of equipment
67
—
Stock-based compensation
262
2,057
Non-cash reorganization items, net
—
( 35,255 )
Changes in operating assets and liabilities:
Accounts receivable
( 2,083 )
( 571 )
Inventories
7,628
15,382
Lease receivable
( 1,288 )
—
Prepaid expenses, other current assets and other assets
2,128
871
Accounts payable
( 1,002 )
( 12,337 )
Accrued expenses
( 268 )
3,583
Operating lease liability, net
( 4,041 )
( 3,413 )
Accrued salaries and wages and long-term liabilities
( 94 )
15
Accrued warranty reserve
( 183 )
( 171 )
Deferred revenue
2,092
( 12,305 )
Factory protection plan liability
( 1,003 )
( 3,585 )
Net cash provided (used) in operating activities
7,688
( 27,658 )
Cash Flows from Investing Activities:
Expenditures for property, plant, equipment and rental assets
( 879 )
( 4,674 )
Net cash used in investing activities
( 879 )
( 4,674 )
Cash Flows from Financing Activities:
Proceeds from debtors-in-process facility
—
12,000
Proceeds from three-year term note
—
3,000
Proceeds from exit new money note
—
7,000
Debt issuance costs
—
( 244 )
Repayment of finance lease obligations
( 223 )
( 178 )
Net cash provided (used) by financing activities
( 223 )
21,578
Net increase (decrease) in Cash
6,586
( 10,754 )
Cash, Beginning of Period
2,085
12,839
Cash, End of Period
$
8,671
$
2,085
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest
$
533
$
1,620
Income taxes
$
126
$
14
Supplemental Disclosures of Non-Cash Information:
Renewal of insurance contracts financed by notes payable
$
—
$
648
Right-of-use assets obtained in exchange for lease obligations
$
—
$
7,348
Settlement of lease obligations with accounts receivable due
$
775
$
502
Conversion of inventory to rental assets
$
—
$
280
Rental assets transferred to inventory
$
3,067
$
—
Sales-type lease
$
981
$
—
Conversion of prepaid expenses to rental assets
$
—
$
623
Paid-in-kind debt discount in connection with the three-year term note
$
—
$
500
Acquisition of treasury stock with accrueds
$
46
$
—
See accompanying notes to consolidated financial statements.
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CAPSTONE GREEN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Business and Organization
Capstone Green Energy Holdings, Inc., (f/k/a Capstone Turbine International, Inc.), along with its consolidated operating subsidiary Capstone Green Energy LLC (the “Operating Subsidiary”) is a provider of customized microgrid solutions, on-site resilient Energy-as-a-Service (“EaaS”) solutions, and on-site energy technology systems focused on helping customers around the globe solve the “Energy Trilemma” of resiliency, sustainability, and affordability. These solutions include stationary distributed power generation applications and distribution networks, including cogeneration (combined heat and power (“CHP”), integrated combined heat and power (“ICHP”), and combined cooling, heat and power (“CCHP”), renewable energy, natural resources, and critical power supply. The Company’s inverter-based technologies solve resiliency by being able to seamlessly connect to the electric grid or be the backbone of a localized microgrid. The Company’s Energy Conversion Products business line is driven by the Company’s industry-leading, highly efficient, low-emission, resilient microturbine energy systems offering scalable solutions in addition to a broad range of customer-tailored solutions. Through the EaaS business line the Company offers build, own, operate and maintain (“BOOM”) as well as energy rental solutions utilizing the Company’s microturbine energy systems. The Company offers comprehensive factory protection plan service contracts that limit life-cycle costs, as well as providing aftermarket spare parts. The Company’s emerging business line is Hydrogen Energy Solutions. Through the Hydrogen Energy Solutions business line, the Company offers customers the ability to run on hydrogen blended fuel source. Because this is still an emerging offering, Hydrogen Energy Solutions revenue has been immaterial to date.
Historically, the business described above was conducted by Capstone Green Energy Corporation, which was organized in 1988 and has been commercially producing its microturbine generators since 1998. In connection with emergence from the Chapter 11 Bankruptcy (the “Chapter 11 Bankruptcy”) on December 7, 2023 (the “Effective Date”), Capstone Green Energy Corporation was reorganized (the “Reorganization”) and became a privately-held company (“Reorganized PrivateCo”). Capstone Turbine International, Inc., a former wholly owned subsidiary of Capstone Green Energy Corporation, which was incorporated in Delaware on June 10, 2004, became a publicly-traded company and was renamed Capstone Green Energy Holdings, Inc. The Operating Subsidiary was also formed as part of the Reorganization.
As a result of past delays in filing the Company’s periodic reports with the Securities Exchange Commission (the “SEC”) and the requirements relating to Market Value of Listed Securities (“MVLS”), the Company was unable to comply with the Nasdaq listing standards, and as a result, common stock was su spended from trading on the Nasdaq Capital Market effective October 5, 2023 and formally delisted effective October 23, 2023. Post emergence from the Chapter 11 Bankruptcy, and affecting the Plan of Reorganization, the Company had completed filing of its Quarterly Report on Form 10-Q for the quarter ended June 30, 2024, on October 17, 2024, and with the filing, the Company became current with all of its periodic filings with the SEC. On January 2, 2025, the Company’s common stock was approved for trading by Financial Industry Regulatory Authority on the over-the-counter (OTC) market.
All references in these footnotes to “the Company,” “we,” “us,” “our,” or “Capstone” are to Capstone Green Energy Corporation and its consolidated subsidiaries prior to the Effective Date and to Capstone Green Energy Holdings, Inc. and its consolidated subsidiaries following the Effective Date.
2. Basis of Presentation, Significant Accounting Policies and Going Concern
These Consolidated Financial Statements refer to the Company’s fiscal years ended March 31 as its “Fiscal” year.
Basis of Presentation The accompanying Consolidated Financial Statements are presented in United States (“U.S.”) dollars and have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities Exchange Commissions (“SEC”).
Basis for Consolidation The Consolidated Financial Statements included in this filing include the accounts of the Company, the Operating Subsidiary and Capstone Turbine Financial Services, LLC, its wholly owned subsidiary that was formed in October 2015, after elimination of inter-company transactions.
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Noncontrolling Interests in Consolidated Operating Subsidiary Noncontrolling interests in the Company’s consolidated Operating Subsidiary represent the equity interests held by a related party. The noncontrolling interests in the consolidated Operating Subsidiary are redeemable and are presented as temporary equity in the Company’s Consolidated Balance Sheet. Refer to Note 10— Temporary Equity for details of the noncontrolling interests. The Company uses the hypothetical liquidation at book value (“HLBV”) method to attribute the earnings of the consolidated Operating Subsidiary between the controlling and noncontrolling interests. Under the HLBV method, the amounts reported as noncontrolling interests in the consolidated Operating Subsidiary on the Consolidated Balance Sheets represent the amounts the noncontrolling interests would hypothetically receive at each balance sheet reporting date under the liquidation provisions of the governing agreements assuming the net assets of the consolidated Operating Subsidiary were liquidated at recorded amounts and distributed between the controlling and noncontrolling interests in accordance with the governing documents. The net income attributable to noncontrolling interests in the Operating Subsidiary on the Consolidated Statements of Operations is associated with the increase or decrease in the noncontrolling interest holders’ contractual claims on the respective entities’ balance sheets assuming a hypothetical liquidation at the end of that reporting period when compared with their claims on the respective entities’ balance sheets assuming a hypothetical liquidation at the beginning of that reporting period, after removing the impact of any contributions or distributions. The Company separately remeasures and adjusts the noncontrolling interest to reflect the change in redemption value of the Preferred Units, with an offsetting adjustment to retained earnings at the end of each period. Refer to Note 10 — Temporary Equity for details on remeasuring the redemption value of the Preferred Units.
The Company had a net loss for the fiscal year ended March 31, 2025, so there was no allocation of earnings for the fiscal year ended March 31, 2025. Prior to the emergence from bankruptcy, the Company recorded a gain on debt extinguishment, as detailed in Note 3— Chapter 11 Proceedings and Emergence, of $ 35.3 million, within Reorganization items, net on the Company’s Consolidated Statement of Operations, which resulted in net income of $ 7.4 million during the year ended March 31, 2024. Therefore, the Company did not allocate earnings to the Operating Subsidiary as of March 31, 2024, as the Company incurred a net loss after the Effective Date and the noncontrolling interest owners hold a liquidation preference that protects the holder from absorbing losses.
Reclassification Certain items in prior financial statements have been reclassified to conform to the current presentation and provide comparability but have no effect on the reported financial statements.
Bankruptcy Accounting The Consolidated Financial Statements included herein have been prepared as if the Company were a going concern and in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic No. 852— Reorganizations (“ASC 852”). Refer to Note 3— Chapter 11 Proceedings and Emergence for further details regarding the bankruptcy. At emergence from Chapter 11, the Company evaluated the criteria to apply fresh-start accounting under ASC 852 and determined that pre-petition shareholders maintained control of the Company following the restructuring transactions contemplated within the Company’s Plan (as defined below). As the pre-petition shareholders did not lose control, fresh-start accounting did not apply and the existing carrying values and activities continued as the reporting entity did not change. In addition, the Company has classified all income, expenses, gains or losses that were incurred or realized as a result of the proceedings since filing for Chapter 11 as Reorganization items, net in the Company’s Consolidated Statements of Operations.
Cash Equivalents The Company considers only those investments that are highly liquid and readily convertible to cash with original maturities of three months or less at the date of purchase as cash equivalents.
Fair Value of Financial Instruments The carrying value of certain financial instruments, including cash equivalents, accounts receivable, accounts payable, revolving credit facility and notes payable approximate fair market value based on their short-term nature. Refer to Note 11— Fair Value Measurements, for disclosure regarding the fair value of other financial instruments.
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Trade Accounts Receivable and Allowance for Credit Loss Accounts receivables are presented on the Consolidated Balance Sheets, net of estimated credit losses. The Company applies the aging method by pooling receivables based on levels of delinquency and applying historical loss rates on what has been historically uncollectible by aging categories. The historical loss rate is adjusted for current conditions and reasonable and supportable forecasts of future losses, as necessary. Additionally, the allowance for credit loss calculation includes subjective adjustments for qualitative risk factors that could likely cause estimated credit losses to differ from historical experience. The factors include assessments of various economic conditions, significant events that occurred, geographic location, size and credit ratings of the customers. The Company may also record a specific reserve for individual accounts when the Company becomes aware of specific customer circumstances, such as in the case of a bankruptcy filing or deterioration in the customer’s operating results or financial position. Accounts deemed uncollectible are written off against the allowance for credit loss.
Changes in the allowance for expected credit loss for accounts receivable are as follows (in thousands):
Balance, April 1, 2023
$
4,813
Provision for credit losses
439
Write-offs
( 1,965 )
Balance, March 31, 2024
$
3,287
Provision for credit losses
823
Recoveries
31
Write-offs
( 3,534 )
Balance, March 31, 2025
$
607
Inventories The Company values inventories at the lower of cost (determined on a first in, first out (“FIFO”) basis) or net realizable value. The composition of inventory is routinely evaluated to identify slow-moving, excess, obsolete or otherwise impaired inventories. Inventories identified as impaired are evaluated to determine if write-downs are required. Included in the assessment is a review for obsolescence as a result of engineering changes in the Company’s products. All inventories expected to be used in more than one year are classified as long-term.
Depreciation and Amortization Depreciation and amortization are provided for using the straight-line method over the estimated useful lives of the related assets, ranging from two to ten years . Leasehold improvements are amortized over the remaining lease term or the estimated useful lives of the assets, whichever is shorter . Intangible assets that have finite useful lives are amortized over their estimated useful lives using the straight-line method.
Long-Lived Assets The Company reviews the recoverability of long-lived assets, including intangible assets with finite lives, whenever events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. If the expected future cash flows from the use of such assets (undiscounted and without interest charges) are less than the carrying value, the Company may be required to record a write-down, which is determined based on the difference between the carrying value of the assets and their estimated fair value.
Residual Assets The Company estimates the residual asset as the amount expected to be derived from the underlying asset following the end of the lease term. In a sales-type lease, the Company recognizes the unguaranteed residual asset, measured on a discounted basis, upon lease commencement. The Company evaluates residual values for impairment quarterly and recognizes impairments as incurred.
Deferred Revenue Deferred revenue consists of deferred product and service revenue and customer deposits. Deferred revenue will be recognized when earned in accordance with the Company’s revenue recognition policy. The Company has the right to retain all or part of customer deposits under certain conditions.
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Temporary Equity Where common or preferred shares are determined to be conditionally redeemable upon the occurrence of certain events that are not solely within the control of the Company, and upon such event, the shares would become redeemable at the option of the holders, they are classified as temporary equity (‘mezzanine equity’), outside permanent equity. The purpose of this classification is to convey that such a security may not be permanently part of equity and could result in a demand for cash, securities or other assets of the entity in the future. If the events are such that the shares are probable of becoming redeemable, then the Company will adjust the shares to reflect the maximum redemption value at the end of the reporting period.
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:
● Identification of the contract, or contracts, with a customer
● Identification of the performance obligations in the contract
● Determination of the transaction price
● Allocation of the transaction price to the performance obligations in the contract
● Recognition of revenue when, or as, the Company satisfies a performance obligation
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.
Advanced payments in the form of Customer Deposits are taken on these contracts, typically providing for a substantial portion of the contract value to be paid prior to shipment. Advance payments are not considered a significant financing component as they are typically received less than one year before the related performance obligations are satisfied. Payment terms in Contracts with Customers typically are 30 or 60 days . The Company extends payment terms past one year only on a limited basis, and thus any financing component is not considered material.
Accessories and Parts 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. The revenue associated with accessories is recognized at a point in time when the accessory is shipped to the customer.
Warranty Services Revenue from extended warranties is recognized when or as the obligations are satisfied. There are two types of warranties: standard (assurance) and extended warranties. Standard warranties do not represent separate performance obligations but are reflected as a liability associated with the purchase of the product. Extended warranties are separate offerings for 12 -, 24 - or 36 -month periods beyond the standard warranty that are separate performance obligations recognized as an over-time performance obligation based on the extended warranty period. The Company records amounts billed to customers for reimbursement of shipping and handling costs within revenue. Shipping and handling costs associated with outbound freight after control over a system has transferred to a customer are accounted for as fulfillment costs and are included in cost of goods sold. Sales taxes and other usage-based taxes are excluded from revenue.
Factory Protection Plan and Service Cost Reimbursement In addition to the provision of standard warranties, the Company offers Factory Protection Plans (“FPP”) to minimize product downtime and control 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 term of the FPP contract, in 30 -day intervals aligned to the monthly service period for that customer. FPP contracts have an initial term period of one year , with automatic renewals with durations of 5 , 10 , 15 , or 20 years and may be cancelled at any time.
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The related costs for FPP contracts become the Company’s obligation and are accrued at the time a customer submits a claim, and the claim’s compliance with the terms of the plan are confirmed. 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.
Comprehensive FPP service contracts require payment at the beginning of the contract period. Advance payments are not considered a significant financing component as they are typically received less than one year before the related performance obligations are satisfied. These payments are a contract liability and are classified as deferred revenue in the Consolidated Balance Sheets. The performance obligation is fulfilled as the control passes to the customer through the passage of time and recognition of deferred revenue from the FPP contracts is recognized in the Consolidated Statement of Operations. The deferred revenue relating to the annual maintenance service contracts is recognized in the Consolidated Statement of Operations on a straight-line basis over the expected term of the contract.
Some FPPs offer 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 and are recognized as contra revenue as consideration paid to a customer under ASC 606. 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 FPP contracts 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.
Rentals The Company accounts for leases to customers in accordance with lessor accounting under ASC 842. The Company utilizes a portfolio approach by grouping together many similar assets being leased to a single customer. Leases are classified as either sales-type leases or operating leases. The Company’s leases are classified as a sale-type lease if one of the five criteria are met. Other leases are classified as operating leases.
For sales-type leases, the Company recognizes and presents, upon lease commencement, the present value of the lease payments is recognized, along with the residual asset discounted using the rate implicit in the lease. Revenue is recognized in the amount of the lease receivable and the cost of sales in the amount of the carrying value of the underlying asset less the unguaranteed residual asset. The Company presents sales-type leases on the Consolidated Statements of Operations as part of Product and Accessories Revenue and Cost of Goods Sold separately. The Company believes this is more aligned to our current presentation of product sales, generally. After the commencement date, the Company recognizes interest income as part of the net sales using the effective interest method.
For operating leases, the Company recognizes the underlying asset as rental lease assets. The asset is depreciated on a straight-line basis to its estimated residual value over the estimated useful life. The lease payments are recognized over the lease term on a straight-line basis as part of Rental Revenue.
Contracts with Multiple Performance Obligations
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. 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 generally considered 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: availability of the services from other vendors, the nature of the services, the timing of when the
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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 SSP is the price at which the Company would sell a promised product or service separately to a customer. Judgment is required to determine the SSP for each distinct performance obligation.
The Company determines SSP by considering its overall pricing objectives and market conditions. Significant pricing practices taken into consideration include the Company’s discounting practices, the size and volume of the Company’s transactions, the customer demographic, the geographic area where systems and services are sold, price lists, its go-to-market strategy, historical sales and contract prices. The determination of SSP is made through consultation with and approval by the Company’s management, taking into consideration the go-to-market strategy. As the Company’s go-to-market strategies evolve, the Company may modify its pricing practices in the future, which could result in changes to SSP.
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. The Company uses a single amount to estimate SSP when it has observable prices.
If SSP is not directly observable, for example when pricing is highly variable, the Company uses a range of SSP. The Company determines the SSP range using information that may include market conditions or other observable inputs. 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.
Practical Expedients
The Company applies a practical expedient to expense costs as incurred for costs to obtain a contract when the amortization period would have been one year or less. Contracts are considered as the individual orders received from the distributors and less than one year in duration. These costs are recorded within sales and marketing expenses in the accompanying Consolidated Statement of Operations.
Warranty The Company provides for the estimated costs of warranties at the time revenue is recognized. The specific terms and conditions of those warranties vary depending upon the microturbine product sold and the geography of sale. The Company’s product warranties generally start from the delivery date and continue for up to twenty-four months . Factors that affect the Company’s warranty obligation include product failure rates, anticipated hours of product operations and costs of repair or replacement in correcting product failures. These factors are estimates that may change based on new information that becomes available each period. Similarly, the Company also accrues the estimated costs to address reliability repairs on products no longer in warranty when, in the Company’s judgment, and in accordance with a specific plan developed by the Company, it is prudent to provide such repairs. The Company assesses the adequacy of recorded warranty liabilities quarterly and adjusts the liability as necessary. When the Company has sufficient evidence that product changes are altering the historical failure occurrence rates, the impact of such changes is then taken into account in estimating future warranty liabilities.
Research and Development (“R&D”) The Company accounts for grant distributions and development funding as offsets to R&D expenses and both are recorded as the related costs are incurred in the Company’s statement of operations. There were no offsets to R&D during Fiscal 2025 and 2024.
Income Taxes Deferred income tax assets and liabilities are computed for differences between the consolidated financial statement and income tax basis of assets and liabilities. Such deferred income tax asset and liability computations are based on enacted tax laws and rates applicable to periods in which the differences are expected to reverse. Valuation allowances are established, when necessary, to reduce deferred income tax assets to the amounts expected to be realized.
ASC Topic 740-10, Income Taxes (“ASC 740”), clarifies the accounting for uncertainty in income taxes recognized in the financial statements in accordance with U.S. GAAP. 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
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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. The Company’s policy is to recognize interest and penalties accrued on any unrecognized tax benefits as interest and other expense, net in the Consolidated Statements of Operations.
Contingencies The Company records an estimated loss from a loss contingency when information available prior to issuance of its financial statements indicates that it is probable that an asset has been impaired or a liability has been incurred at the date of the financial statements and the amount of the loss can be reasonably estimated.
Risk Concentrations Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and accounts receivable. At March 31, 2025, the majority of our cash balances were held at financial institutions located in California. The accounts at these institutions are insured by the Federal Deposit Insurance Corporation up to certain limits. Balances that exceed the insurance coverage aggregate to approximately $ 8.2 million as of March 31, 2025. The Company places its cash with high credit quality institutions. The Company performs ongoing credit evaluations of its customers and maintains an allowance for potential credit losses.
Sales to E-Finity Distributed Generation (“E-Finity”), Lone Star Power Solutions (“Lone Star”) and Horizon Power Systems accounted for 13 %, 12 % and 11 %, respectively, of the Company’s revenue for Fiscal 2025. Sales to Cal Microturbine and E-Finity accounted for 16 % and 13 %, respectively, of the Company’s revenue for Fiscal 2024. Additionally Lone Star and Optimal Group Australia accounted for 18 % and 10 % of net accounts receivable as of March 31, 2025, respectively, and Supernova Energy Services and Capstone Engineered Solutions accounted for 14 % and 11 % of net accounts receivable as of March 31, 2024, respectively.
Certain components of the Company’s products are available from a limited number of suppliers. An interruption in supply could cause a delay in manufacturing, which would affect operating results adversely.
Estimates and Assumptions The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Significant estimates include accounting for accounts receivable allowances for credit losses, stock-based compensation, inventory write-downs, valuation of equity and long-lived assets including intangible assets with finite lives, product warranties, income taxes and other contingencies. Actual results could differ from those estimates.
Net Income (Loss) Per Common Share The Company has common and non-voting common stock outstanding. The non-voting common stock has the same economic rights as the common stock; therefore, earnings per share is presented on a combined basis. Basic income (loss) per share is computed using the weighted-average number of common shares and non-voting common shares outstanding for the period. Diluted income (loss) per share is computed without consideration of potentially dilutive common stock equivalents such as stock options, restricted stock units and warrants as the effect would have been anti-dilutive if the Company incurred a loss. In addition, the change in the carrying value of the redeemable noncontrolling interests are excluded from the calculation of diluted earnings per share.
As a result of the cancellations to these instruments on the Effective Date of the Plan, the Company did not have any outstanding stock options or warrants at March 31, 2025, and 2024. There was no change in the carrying value of the redeemable noncontrolling interests for the years ended March 31, 2025, and 2024 as the carrying value equaled the fair value at issuance.
Stock-Based Compensation Stock-based awards exchanged for services are accounted for under the fair value method. Accordingly, stock-based compensation cost is measured at the grant date based on the estimated fair value of the award. The expense for awards is recognized over the requisite service period (generally the vesting period of the award). The Company has elected to treat awards with only service conditions and with graded vesting as one award. Consequently, the total compensation expense is recognized straight-line over the entire vesting period, so long as the compensation cost recognized at any date at least equals the portion of the grant date fair value of the award that is vested at that date. The Company has elected to account for forfeitures as they occur.
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Leases Arrangements meeting the definition of a lease whereby the Company is the lessee 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 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.
In calculating the right-of-use asset and lease liability, the Company elected to combine lease and non-lease components and elected not to recognize right-of-use assets and lease liabilities for short-term leases having initial terms of twelve months or less and recognizes rent expense on a straight-line basis over the lease term.
Lessor financing receivables consist of the financing receivables from leases which are classified as sales-type leases. Lease terms generally range from 1 to 8 years , with most terms ranging between 1 to 2 years . The lease agreements may provide the lessee the option to purchase the underlying asset at the end of the lease term. Occasionally, the leases provide the lessee a bargain purchase option.
Going Concern In connection with the preparation of these Consolidated Financial Statements for the fiscal year ended March 31, 2025, management evaluated whether there were conditions and events, considered in the aggregate, that raised substantial doubt about the Company’s ability to meet its obligations as they became due for the next twelve months from the date of issuance of its Fiscal 2025 Consolidated Financial Statements. As of March 31, 2025, the Company had cash of $ 8.7 million and a working capital deficit of $ 16.5 million. The Company incurred a loss from operations of $ 5.6 million and generated cash from operating activities of $ 7.7 million during Fiscal 2025.
Given the Company’s current cash position, lack of liquidity, limits to accessing capital and debt funding options, and current economic and market risks, there is substantial doubt regarding the Company’s ability to continue as a going concern and its ability to meet its financial obligations as they become due over the next twelve months from the date of issuance of the financial statements as of, and for the period ended March 31, 2025.
Segment Reporting The Company determines its reporting units in accordance with FASB ASC Topic No. 280, Segment Reporting (“ASC 280”) . The Company evaluates a reporting segment by first identifying its operating segments under ASC 280. Operating segments are defined as components of an enterprise about which separate financial information is evaluated regularly by the chief operating decision maker (“CODM”) to allocate resources and assess performance. The Company defines its CODM to be the Chief Executive Officer. The Company is considered to be a single reporting segment. The business activities of this reporting segment are the development, manufacture and sale of turbine generator sets and their related parts and services, including rentals.
Impact of Recently Issued Accounting Standards
Adopted
In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting : Improvements to Reportable Segment Disclosures (Topic 280). This update applies to all reporting public entities. The amendments in this update revise reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The amendments in this update are effective for annual periods beginning after December 15, 2023, early adoption is permitted. The amendments in this update do not change how a public entity identifies its operating segments, aggregates those operating segments, or applies quantitative thresholds to determine its reportable segments. Upon adoption , the guidance was applied retrospectively to all prior periods presented in the financial statements. For additional information, refer to Note 17 – Segment Information.
Not Yet Adopted
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes: Improvements to Income Tax Disclosures (Topic 740), which requires that an entity, on an annual basis, disclose additional income tax information, primarily related to the rate reconciliation and income taxes paid. The amendment in the ASU is intended to enhance the transparency and decision usefulness of income tax disclosures. The amendments in this update are effective for annual periods beginning
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after December 15, 2024, early adoption is permitted. The Company is in the process of evaluating the impact that the adoption of this ASU will have on the consolidated financial statements and related disclosures, which is expected to result in enhanced disclosures.
In November 2024, the FASB issued ASU No. 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (ASU 2024-03). The guidance was further clarified for the effective date by ASU 2025-01. The new guidance requires disaggregated information about certain income statement expense line items on an annual and interim basis. This guidance will be effective for all public business entities for fiscal years beginning after December 15, 2026, and for interim within fiscal years beginning after December 15, 2027, early adoption is permitted. We are evaluating the effect that this guidance will have on our consolidated financial statements and related disclosures.
3. Chapter 11 Proceedings and Emergence
Voluntary Filing under Chapter 11
Plan of Reorganization — On September 28, 2023 (the “Petition Date”), Capstone Green Energy Corporation and its wholly owned direct subsidiaries, Capstone Turbine International, Inc. and Capstone Turbine Financial Services, LLC (the “Debtors”) filed voluntary petitions for relief 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. as Case No. 23-11634 (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. As a result, from the Petition Date through December 7, 2023 (the “Effective Date” and “Emergence”), the Debtors operated as a debtor-in-possession (“DIP”) under the protection of the U.S. Bankruptcy Court following filings by the Debtors of voluntary petitions for relief under Chapter 11 the Bankruptcy Code in the Bankruptcy Court.
Concurrent with the petition, the Debtors entered into the TSA 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 TSA, among other things, provided that Broad Street and the Collateral Agent would support the Debtors’ restructuring efforts as set forth in, and subject to the terms and conditions of, the TSA. The TSA contained 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 TSA. The TSA also provided for termination by the parties upon the occurrence of certain events.
Overview of the Plan — On September 28, 2023 , Capstone Green Energy Corporation and its Debtor Affiliates (the “Debtors”) filed their Joint Prepackaged Chapter 11 Plan of Reorganization (the “Plan”) and Disclosure Statement. Subsequent updates and supplements were filed, leading to a combined Court hearing on November 13, 2023, for approval of the Disclosure Statement and Plan. The Plan was confirmed on November 14, 2023 , and became effective on December 7, 2023 , when the Company emerged from Chapter 11.
The following is a summary of certain provisions of the Plan that became effective on December 7, 2023 , and is not intended to be a complete description of the Plan. The following summary is qualified in its entirety by reference to the full text of the Plans (including the Plan Supplement).
- All of the Capstone Green Energy Corporation’s assets and liabilities (other than the equity of Capstone Turbine International, Inc., the impaired pre-petition secured claim (the “Pre-Petition Secured Claim”) and DIP Notes issued pursuant to the DIP Note Purchase Agreement, dated as of October 2, 2023 (as has been amended, restated, modified, supplemented or replaced from time to time, the “DIP NPA”), and specific assets and liabilities directly related to the distributor support services activities (referred to in the Plan as “Retained Assets” and defined in Note 14— Commitments and Contingencies) and tax attributes were transferred to a new subsidiary called Capstone Green Energy LLC (the “Operating Subsidiary”);
- Capstone Turbine International, Inc. contributed all assets to the Operating Subsidiary;
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- The Operating Subsidiary issued the preferred units, representing 37.5 % equity ownership, and common units, representing 62.5 % equity ownership, to Capstone Green Energy Corporation;
- Capstone Green Energy Corporation contributed all common units of the Operating Subsidiary to Capstone Turbine International, Inc. providing a 62.5 % equity ownership in the Operating Subsidiary;
- Capstone Turbine International, Inc. became a public company and was renamed Capstone Green Energy Holdings, Inc. and became the successor to Capstone Green Energy Corporation for purposes of Securities and Exchange Commission registration, and is the successor with respect to any claims against, or interest in, Capstone Green Energy Corporation and any Debtor subsidiary; provided that, for the avoidance of doubt Capstone Turbine International, Inc. is not the successor to Capstone Green Energy Corporation for United States federal, state or local income tax purposes, and is not the successor to Capstone with respect to the employment of the directors, officers, and employees of the Debtors or relating to any employment obligations;
- Capstone Green Energy Corporation became a private company (the “Reorganized PrivateCo”) that continued to own the Retained Assets and the preferred units of the Operating Subsidiary and has no liabilities relating to, arising under or in connection with any claims against, or interest in, any Debtor;
- The holder of the $ 57 million Pre-Petition Secured Claim and purchaser DIP Claim (defined term as described below), received one hundred percent ( 100 % ) of the equity interests in Reorganized PrivateCo in exchange for agreed-upon portions of such Claims;
- Existing shareholders of Capstone Green Energy Corporation received one hundred ( 100 % ) percent of the common stock of Capstone Green Energy Holdings, Inc., subject to any dilution from any stock issued pursuant to the employee incentive stock plan, including the shares of non-voting common stock issued to certain key employees and directors;
- Reorganized PrivateCo and the Operating Subsidiary entered into a Reorganized PrivateCo Services Agreement (the “Reorganized PrivateCo Services Agreement”) with respect to ongoing support for the Retained Assets of Reorganized PrivateCo.
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. Under this agreement, Broad Street provided a $ 30 million DIP Facility, consisting of $ 12 million in new money DIP notes and an $ 18 million roll-up of pre-petition debt. The Debtors filed a motion on September 28, 2023, seeking the Bankruptcy Court’s approval for this DIP Facility.
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 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 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 Note Purchase Agreement. Substantially all of the Debtors’ assets were encumbered by first-priority liens of the purchaser under the DIP Note Purchase Agreement. Pursuant to the terms of the Plan, on the Effective Date, the obligations of Reorganized PrivateCo to the DIP NPA, were cancelled and converted into an Exit Facility (the “Exit Note Purchase Agreement”).
Treatment of claims
- Secured Tax Claims, Other Secured Claims, Other Priority Claims were unimpaired, expected to be paid in full during the course of the bankruptcy proceedings, or reinstated to be paid in full after Emergence.
- General Unsecured Claims were unimpaired and received cash in the amount of such allowed claim as of the Effective Date or during the ordinary course of business following such date.
- Pre-Petition Secured Claim was impaired and received in full satisfaction and discharge of the holder’s claim the pro rata amount (pro rata along with the DIP Claims) of Reorganized PrivateCo equity and the indirect ownership of the Operating Subsidiary preferred units issued to Reorganized PrivateCo.
- DIP Claim received in full satisfaction, settlement, release and discharge of such claim the pro rata amount (pro rata along with Pre-Petition Secured Claim) of Reorganized PrivateCo equity and the indirect ownership
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of the Operating Subsidiary preferred units issued to Reorganized PrivateCo, and exit financing roll-over notes issued at Emergence, which is referred to as part of the Exit Note Purchase Agreement detailed below.
- Equity Interests were impaired and deemed to reject the Plan. Each shareholder in Capstone Green Energy Corporation received its pro rata share of 100 % of Capstone Green Energy Holdings, Inc., subject to dilution for the executive stock plans. The shares in Capstone Green Energy Corporation, including any warrants, restricted stock or similar contractual equity rights thereto were cancelled and terminated and received no other distribution of value.
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. Upon emergence, new share capital was issued under the Plan. Refer to the Statement of Stockholders’ Equity.
Basis of Presentation — Effective on the Petition Date, the Company applied accounting standards applicable to reorganizations, ASC 852, in preparing the accompanying Consolidated Financial Statements as of and for the year ended March 31, 2024, which requires the financial statements, for periods subsequent to the commencement of the Chapter 11 Cases, to distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business. Accordingly, certain charges related to the Chapter 11 Cases were recorded as Reorganization items, net, in the accompanying Consolidated Financial Statement of Operations. All pre-petition obligations of the Debtors that were impacted by the Chapter 11 Cases that were previously classified as Liabilities Subject to Compromise (“LSTC”) were resolved at Emergence.
Gain on Extinguishment of Debt at Emergence — In accordance with ASC 470, Debt, on December 7, 2023, the Company recognized a gain on extinguishment of debt that was recorded in Reorganization items, net in the accompanying Consolidated Financial Statement of Operations. The components of the gain for Fiscal 2024 were as follows (in thousands):
Pre-petition senior secured principal
$
53,000
Accrued interest and fees on pre-petition senior secured principal
3,953
Additional New Money DIP Notes
12,000
DIP commitment fee
600
DIP PIK interest (post-petition interest)
755
New Money Exit Notes
3,000
Fair value of Preferred Units of Operating Subsidiary exchanged
( 13,859 )
Fair value of Exit Notes and net retained assets
( 24,106 )
Total gain from debt extinguishment
$
35,343
The Net Operating Losses (the “NOLs”) that were provided through the transfer of ownership of Capstone Green Energy Corporation, which held all of the tax attributes, including the NOLs had a full valuation allowance against them and did not have any value to Capstone Green Energy Corporation immediately prior to the Effective Date. Refer to Note 8— Income Taxes for additional information.
Fresh-Start Applicability — On December 7, 2023, the Company evaluated the criteria to apply fresh-start accounting under ASC 852 and determined the pre-petition shareholders maintained control of the Company during and after the reorganization and did not lose control as a result of the reorganization. As pre-petition shareholders did not lose control, fresh-start did not apply and historical activities and balances remained at carrying value. At Emergence, the restructured debt was treated as a debt extinguishment and the shareholders’ equity was revised to reflect the new common stock of Capstone Green Energy Holdings, Inc.
Reorganization Items — Reorganization items represent the direct and incremental costs related to the Company’s Chapter 11 cases, such as professional fees, pre-petition liability claim adjustments and losses that are probable and can be estimated, net of interest income earned on accumulated cash during the Chapter 11 process and net gains on the sale of assets or resulting from certain settlement agreements related to the Company’s restructuring activities. The Company’s restructuring activities resulted in additional charges and other adjustments for expected allowed claims (including claims
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that may be subsequently allowed by the U.S. Bankruptcy Court) and other reorganization items that were material to the Company’s financial position or results of operations during the period.
The table below lists the components of reorganization items for Fiscal 2024 (in thousands):
Professional fees
$
( 2,750 )
Adjustment of debt to approved claim
512
DIP commitment fee
( 600 )
Gain on debt extinguishment
35,343
Total reorganization items, net
$
32,505
Interest Expense— Interest expense related to pre-petition LSTC was reported only to the extent that it was paid during the pendency of the Chapter 11 cases or was permitted by orders of the U.S. Bankruptcy Court. Contractual interest (at non-default rates) owed to unrelated parties on pre-petition LSTC not reflected on the Company’s Consolidated Financial Statements was $ 1.4 million incurred from the periods of October 1, 2023, through December 7, 2023.
Liabilities Subject to Compromise — Liabilities subject to compromise refers to pre-petition obligations which may be impacted by the Chapter 11 reorganization process. At the Effective Date the Company no longer had amounts classified as LSTC, as the pre-petition liabilities the Company anticipated would be allowed as claims in the Chapter 11 Cases were resolved in connection with the Chapter 11 Cases. As a result, the accompanying Consolidated Balance Sheet as of March 31, 2024, does not include amounts classified as LSTC.
4. Inventories
Inventories are valued at the lower of cost (determined on a FIFO basis) or net realizable value and consisted of the following (in thousands):
March 31,
March 31,
2025
2024
Raw materials
$
19,914
$
23,779
Finished goods
165
780
Total
20,079
24,559
Less: non-current portion
( 3,464 )
( 3,917 )
Total inventory, net non-current portion
$
16,615
$
20,642
The non-current portion of inventories represents that portion of inventories in excess of amounts expected to be sold or 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 Company expects to use the non-current portion of the inventories on hand as of March 31, 2025 over the periods presented in the following table (in thousands):
Non-current Inventory
Balance Expected
Expected Period of Use
to be Used
13 to 24 months
$
1,265
25 to 36 plus months
2,199
Total
$
3,464
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5. Property, Plant, Equipment and Rental Assets
Property, plant, equipment and rental assets consisted of the following (in thousands):
March 31,
March 31,
2025
2024
Machinery, equipment, automobiles and furniture
$
14,467
$
14,921
Leasehold improvements
8,919
8,889
Molds and tooling
3,510
3,476
Rental assets
27,963
31,762
54,859
59,048
Less: accumulated depreciation
( 35,497 )
( 33,194 )
Total property, plant, equipment and rental assets, net
$
19,362
$
25,854
The Company regularly assesses the useful lives of property and equipment and retires assets no longer in service. Depreciation expense for property, plant, equipment and rental assets was $ 3.9 million and $ 4.0 million for Fiscal 2025 and 2024, respectively. There was no inventory converted to rental assets during Fiscal 2025. Inventory converted to rental assets during Fiscal 2024 was $ 0.3 million. Rental assets sold as product revenue and cost of goods sold in Fiscal 2025 had a net book value of $ 3.1 million. There were no rental asset sales in Fiscal 2024. The depreciation expense recorded to cost of sales during Fiscal 2025 and 2024, was $ 3.7 million and $ 3.8 million, respectively.
6. Accrued Warranty Reserve
The Company provides for the estimated costs of warranties at the time revenue is recognized. The specific terms and conditions of those warranties vary depending upon the microturbine product sold and the geography of sale. The Company’s product warranties generally start from the delivery date and continue for up to twenty-four months . Factors that affect the Company’s warranty obligation include product failure rates, anticipated hours of product operations and costs of repair or replacement in correcting product failures. These factors are estimates that may change based on new information that becomes available each period. Similarly, the Company also accrues the estimated costs to address reliability repairs on products no longer in warranty when, in the Company’s judgment, and in accordance with a specific plan developed by the Company, it is prudent to provide such repairs. The Company assesses the adequacy of recorded warranty liabilities quarterly and adjusts the liability as necessary. When the Company has sufficient evidence that product changes are altering the historical failure occurrence rates, the impact of such changes is then taken into account in estimating future warranty liabilities. Changes in the accrued warranty reserve consisted of the following (in thousands):
March 31,
March 31,
2025
2024
Balance, beginning of the period
$
1,437
$
1,576
Standard warranty provision
( 184 )
32
Deductions for warranty claims
( 183 )
( 171 )
Balance, end of the period
$
1,070
$
1,437
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7. Revenue Recognition
The following table presents disaggregated revenue by business group (in thousands):
Year Ended March 31,
2025
2024
Microturbine Products
$
36,670
$
47,787
Accessories
2,240
1,320
Total Product and Accessories
38,910
49,107
Parts and Service
30,939
30,681
Total ASC 606 Revenue
$
69,849
$
79,788
Microturbine Products
$
1,309
$
—
Rentals
14,406
11,431
Total ASC 842 Revenue
15,715
11,431
Total Revenue
$
85,564
$
91,219
The following table presents disaggregated revenue by geography based on the primary operating location of the Company’s customers (in thousands):
Year Ended March 31,
2025
2024
United States
$
55,732
$
54,574
Mexico
2,822
5,070
All other North America
718
1,278
Total North America
59,272
60,922
Europe
11,281
18,333
Asia
2,248
3,137
Australia
5,843
4,746
All other
6,920
4,081
Total Revenue
$
85,564
$
91,219
Substantially all of the Company’s operating assets are in the United States.
Contract Balances
The Company’s deferred revenues consist of advance payments for microturbine products, parts, accessories and parts ordered under FPP contracts, but not yet delivered (contract liabilities), as well as advance 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.
Changes in deferred revenue consisted of the following (in thousands):
March 31,
March 31,
2025
2024
Opening balance, beginning of the year
$
11,858
$
24,189
Closing balance, end of the year
$
13,949
$
11,858
Revenue recognized during the year from:
Amounts included in deferred revenue at the beginning of the year
$
10,054
$
16,527
Deferred revenue attributed to FPP contracts represents the unearned portion of the Company’s contracts. FPP contracts are generally paid quarterly in advance with revenue recognized on a straight-line basis over the contract period. As of March 31, 2025, approximately $ 5.3 million of revenue is expected to be recognized from remaining performance obligations for FPP contracts. The Company expects to recognize revenue of approximately $ 4.7 million of
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these remaining performance obligations over the next 12 months and the balance of $ 0.6 million will be recognized thereafter.
The Distributor Support System (the “DSS program”) provides additional support for distributor business development activities, customer lead generation, brand awareness and tailored marketing services for each of the Company’s major geographic and market verticals. This program is funded by distributors and was developed to provide improved worldwide distributor training, sales efficiency, website development, company branding and funding for increased strategic marketing activities. DSS program revenue is generally paid quarterly with revenue recognized on a straight-line basis over a calendar year period. Deposits are primarily non-refundable cash payments from distributors for future orders. Refer to Note 14 – Commitments and Contingencies — Related Party Transactions, in the Notes to Consolidated Financial Statements for information regarding Reorganized PrivateCo’s distributor services business transition connected to the Company’s emergence from the Chapter 11 Cases.
8. Income Taxes
Income (loss) before provision for income taxes consisted of the following for the years ended March 31, 2025 and 2024 (in thousands):
Year Ended March 31,
2025
2024
United States
$
( 7,066 )
$
7,357
Foreign
51
49
Income (loss) before provision for income taxes
$
( 7,015 )
$
7,406
Current income tax provision is the amount of income taxes reported or expected to be reported on our federal, state and foreign income tax return. The Company has no deferred income tax due to the full valuation allowance recorded against its net deferred tax assets.
The components of the provision for income taxes are as follows the years ended March 31, 2025 and 2024 (in thousands):
Year Ended March 31,
2025
2024
Current:
Federal
$
85
$
—
State
61
14
Foreign
29
—
175
14
Deferred:
Federal
—
—
State
—
—
Foreign
—
—
—
—
Total income tax expense
$
175
$
14
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Actual income tax expense differed from the amount computed by applying statutory corporate income tax rates to loss from operations before income taxes. A reconciliation of income tax expense to the federal statutory rate follows (in thousands):
Year Ended March 31,
2025
2024
Federal income tax at the statutory rate
$
( 1,473 )
$
1,556
State taxes, net of federal effect
( 304 )
( 609 )
Redeemable noncontrolling interest
563
973
Impact of Reorganization, net
—
147,838
Change in Valuation Allowance
2,208
( 153,075 )
Research and Development Credits
( 44 )
—
Excess Business Interest Expense
218
—
True-up of prior year's estimates
( 1,004 )
3,326
Other
11
5
Income tax expense
$
175
$
14
The Company’s deferred tax assets and liabilities consisted of the following at March 31, 2025 and 2024 (in thousands):
Year Ended March 31,
2025
2024
Deferred tax assets:
NOL carryforwards
$
1,456
$
144
Tax credit carryforwards
—
—
Investment in Partnership
825
—
Deferred tax assets
2,281
144
Valuation allowance for deferred tax assets
( 2,281 )
( 96 )
Deferred tax assets, net of valuation allowance
—
48
Deferred tax liabilities:
Investment in Partnership
—
( 48 )
Net deferred tax assets
$
—
$
—
As previously discussed, the Company emerged from bankruptcy on December 7, 2023 and effected a financial and organizational restructuring in accordance with the Plan. The Company’s non-recurring restructuring activities resulted in a significant change in the components of the Company’s deferred tax assets and liabilities as of March 31, 2024.
Elements of the Plan provided that certain secured and unsecured debt that the Company held was exchanged for 18,540,877 shares of common stock of Capstone Green Energy Holdings, Inc., par value $ 0.001 per share (the “Common Stock”) and 10,449,863 Series A Redeemable Preferred Units (the “Preferred Units”). Absent an exception, a debtor recognizes cancellation of indebtedness income (“CODI”) upon discharge of its outstanding indebtedness equal to the excess of the adjusted issue price of the cancelled debt over the amount of consideration received in satisfaction of such debt. The Internal Revenue Code (“IRC”) of 1986, as amended, provides that a debtor in a Chapter 11 bankruptcy case may exclude CODI from taxable income but must reduce certain of its tax attributes by the amount of any CODI realized as a result of the consummation of a plan of reorganization. The amount of CODI realized by a taxpayer is determined based on the fair market value of the consideration received by the creditors in settlement of outstanding indebtedness. As a result of the market value of equity upon emergence from bankruptcy, the estimated amount of CODI is approximately $ 35.3 million, which reduced some of the value of the Company’s NOL carryover prior to reorganization. Any remaining tax attributes after attribute reduction remained with Capstone Green Energy Corporation, the Reorganized Private Co, and are no longer a part of Capstone Green Energy Holdings, Inc.’s (the successor) tax attributes.
Due to the uncertainty surrounding the timing of realizing the benefits of favorable tax attributes in future income tax returns, the Company has placed a valuation allowance against its net deferred income tax assets. The change in valuation allowance for fiscal years ended March 31, 2025, and 2024, was a $ 2.3 million decrease and a $ 153.1 million decrease, respectively. The decrease at March 31, 2024, was primarily attributable to the impact of the Plan reorganization.
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The Company’s NOL for federal and state income tax purposes at March 31, 2025, were as follows (in thousands):
Expiration
Amount
Period
Federal NOL
$
5,699
Indefinite
State NOL
$
3,774
2044
IRC Section 382 (“Section 382”) limits the use of net operating loss (“NOL”) and tax credit carryforwards when changes occur in the capital stock ownership of the Company. Any annual limitation may result in the expiration of NOL and credits before utilization. Should the Company have an ownership change, utilization of the NOL and carryforwards could be significantly reduced. The Company is not expected to utilize NOL and tax credit carryforwards in the near term, and this does not have a material impact on the Company’s financial statements due to the full valuation allowance.
ASC 740 clarifies the accounting for income taxes by prescribing a minimum recognition threshold that a tax position is required to meet before being recognized in the financial statements. ASC 740 also provides guidance on derecognition, measurement, classification, interest and penalties, accounting interim periods, disclosure and transition. Based on management’s evaluation, there were no research and development credits or interest or penalties related to unrecognized tax benefits as of March 31, 2025, and 2024.
As part of the reorganization, the research and development credits remained with Capstone Green Energy Corporation, the Reorganized PrivateCo. As such, there are no remaining unrecognized tax benefits as of March 31, 2024.
A reconciliation of the beginning and ending amount of total gross unrecognized tax benefits is as follows (in thousands):
Balance at April 1, 2023
$
1,856
Gross decrease due to reorganization
( 1,856 )
Balance at March 31, 2024
$
—
Gross increase related to prior year tax positions
19
Lapse of statute of limitations
—
Balance at March 31, 2025
$
19
The Company does not expect a material change to its unrecognized tax benefits over the next twelve months.
The Company files income tax returns in the U.S. federal jurisdiction and various state, local and foreign jurisdictions. When applicable, the Company accounts for interest and penalties generated by tax contingencies as interest and other expense, net in the Consolidated Statement of Operations.
9. Stock Compensation
The following table summarizes, by Consolidated Statements of Operations line item, stock-based compensation expense (in thousands):
Year Ended March 31,
2025
2024
Cost of goods sold
$
7
$
139
Research and development
5
93
Selling, general and administrative
250
1,825
Stock-based compensation expense
$
262
$
2,057
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2017 and 2023 Equity Incentive Plans
Capstone Green Energy Corporation 2017 Equity Incentive Plan
In June 2017, the Company’s Board of Directors (the “Board”) adopted the Capstone Green Energy Corporation 2017 Equity Incentive Plan, as amended (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 provided for 3,400,000 aggregate number of shares of Common Stock authorized for issuance under the 2017 Plan.
Shares available for future grants and all outstanding unvested equity awards under the 2017 Plan were cancelled on the Effective Date in accordance with the Plan. The Company recorded $ 2.1 million of stock-based compensation expense for the acceleration of cancelling the unvested forfeited awards during Fiscal 2024.
Capstone Green Energy Holdings, Inc. 2023 Equity Incentive Plan
In connection with the Emergence, on December 7, 2023, the Capstone Green Energy Holdings, Inc. 2023 Equity Incentive Plan (the “Incentive Plan”) was approved and adopted by the Capstone Green Energy Holdings, Inc. 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 is administered by the Capstone Green Energy Holdings, Inc. Compensation and Human Capital Committee or the Board. No more than 3,000,000 shares of 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 Capstone Green Energy Holdings, Inc. 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.
Non-Voting Common Stock
Capstone Green Energy Corporation, as the sole stockholder of Capstone Turbine International, Inc., approved Capstone Turbine International, Inc.’s Amended and Restated Certificate of Incorporation (“COI”), which provided designation of a new class of non-voting common stock with a par value of $ 0.001 per share for Capstone Turbine International, Inc. The non-voting common stock are to be issued to certain key employees and directors of the Company. The intent of issuing the non-voting common share was to provide value to the employees and officers after the restructuring and substantial de-leveraging following the Company’s Chapter 11 Bankruptcy. T he non-voting common stock do not have any voting rights on any matter on which stockholders of Capstone Green Energy Holdings, Inc. are entitled to vote. However, the non-voting common stock have the right to vote, separately or together with the common stock, on any amendments to the COI (including with respect to any changes to (i) the authorized number of shares of common stock or non-voting common stock or (ii) any preferences, rights or powers of the non-voting common stock). The number of authorized shares of non-voting common stock or common stock may be increased or decreased (but not below the number of such shares of non-voting common stock or common stock then outstanding, as applicable) by the affirmative vote of the holders of a majority of the common stock. All common stock and all non-voting common stock have the same rights and powers, rank equally (including upon any liquidation, dissolution or winding up of the Company), share ratably in any dividends and distributions, and are identical in all respects as to all other matters, other than as to voting rights. The holders of non-voting common stock may not transfer any such shares of non-voting common stock
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until the end of the period ending on the date that is twelve months immediately following the date of the COI (the “Lock-Up Period”), with certain exceptions as described in the COI. Each share of non-voting common stock will automatically upon transfer, convert into a share of common stock on a 1 :1 basis.
Upon Emergence, a step-up in value was calculated as the maximum value the shares could have after considering a discount for lack of voting rights and the Lock-Up Period. On the Effective Date, $ 0.5 million was recorded as a one-time compensation expense in the Company’s Consolidated Statement of Operations and within Additional paid-in capital (“APIC”) on the Company’s Consolidated Balance Sheet.
As of March 31, 2025 and 2024, 508,475 shares of fully vested non-voting common stock were outstanding.
Restricted Stock Units and Performance Restricted Stock Units
All outstanding unvested equity awards as of the Effective Date under the Capstone Green Energy Corporation 2017 Equity Incentive Plan were cancelled on the Effective Date in accordance with the Plan. Through the new 2023 Plan, the Company intends to issue equity awards to incentivize employees whose unvested equity awards were terminated in accordance with the Plan. The 2023 Plan authorizes the award of restricted stock units and performance restricted stock units. Awards granted under the 2023 Plan generally vest over three years .
The following table summarizes restricted stock unit activity:
Weighted
Average Grant
Date Fair
Restricted Stock Units
Shares
Value
Non-vested restricted stock units outstanding at April 1, 2023
842,631
$
3.13
Granted
1,647,538
1.20
Vested and issued
( 673,084 )
1.08
Forfeited/cancelled
( 1,357,085 )
0.71
Non-vested restricted stock units outstanding at March 31, 2024
460,000
$
1.05
Granted
519,740
0.92
Vested and issued
( 160,000 )
1.05
Forfeited/cancelled
( 92,917 )
1.03
Non-vested restricted stock units outstanding at March 31, 2025
726,823
0.96
Restricted stock units expected to vest beyond March 31, 2025
726,823
$
0.96
The following table summarizes performance restricted stock unit (“PRSU”) activity:
Weighted
Average Grant
Date Fair
Performance Restricted Stock Units
Shares
Value
Non-vested restricted stock units outstanding at April 1, 2023
—
$
—
Granted
—
—
Vested and issued
—
—
Forfeited/cancelled
—
—
Non-vested restricted stock units outstanding at March 31, 2024
—
$
—
Granted
56,033
0.93
Vested and issued
—
—
Forfeited/cancelled
( 2,500 )
0.93
Non-vested restricted stock units outstanding at March 31, 2025
53,533
0.93
Restricted stock units expected to vest beyond March 31, 2025
53,533
$
0.93
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As of March 31, 2025, there was $ 0.7 million of aggregate unrecognized compensation cost related to unvested restricted stock units (including PRSU) expected to be recognized in compensation expense in future periods with a weighted-average period of 1.98 years.
Stockholder Rights Plan
In connection with the Emergence and in accordance with the Plan, the NOL rights agreement was terminated and the obligations of the Company thereunder were discharged by order of the Bankruptcy Court.
Warrants
The warrants outstanding as of the Effective Date to purchase up to 3,763,860 shares of Reorganized PrivateCo. at various exercise prices for each series were cancelled on the Effective Date in accordance with the Plan.
10. Temporary Equity
Redeemable Preferred Units
Redeemable noncontrolling interests are reported on the Consolidated Balance Sheet as Temporary Equity.
During Fiscal 2024, in connection with the Reorganization, the Operating Subsidiary issued 10,449,863 Preferred Units that include a redemption feature. The Preferred Units have an aggregate value representing 37.5 % equity ownership in the Operating Subsidiary (“Aggregate Purchase Price”). At any time during the six-month period following the sixth anniversary of the Effective Date, the holders of the Preferred Units may elect to have all, but not less than all, of the then outstanding Preferred Units redeemed. Therefore, the Preferred Units are probable of becoming redeemable and will be classified as temporary (‘mezzanine’) equity.
The Preferred Units also provide the holder with the option to convert all or less than all of the Preferred Units into Operating Subsidiary Common Units (“Common Units”) at any time and from time to time without the payment of additional consideration. If the holder elects to convert the Preferred Units, the specified number of Preferred Units to be converted will be divided by the total number of Preferred Units then outstanding times 37.50 % of the Common Units deemed outstanding. To the extent some, but not all of the Preferred Units are converted, the 37.50 % percentage will be proportionately reduced, and the same adjustment will apply for purposes of calculating other as-converted entitlements of the Preferred Units. None of the Preferred Units had been converted into Common Units as of March 31, 2025.
Additionally, the Preferred Units provide the holder with a put option to sell the shares to the Operating Subsidiary and the Liquidation Preference provides the holder with the option to exchange the Preferred Units for cash.
The holder of the noncontrolling interest hold a liquidation preference that protects the holder from absorbing losses. The Company incurred a net loss of $ 7.2 million and as of March 31, 2025, therefore, there were no earnings to allocate to Operating Subsidiary. Prior to the emergence from bankruptcy, the Company recorded a gain on debt extinguishment, as detailed in Note 3— Chapter 11 Proceedings and Emergence, of $ 35.3 million, within Reorganization items, net on the Company’s Consolidated Statement of Operations, which resulted in net income of $ 7.4 million during the year ended March 31, 2024. Therefore, the Company did not allocate earnings to the Operating Subsidiary as of March 31, 2024, as the Company incurred a net loss after the Effective Date.
Management’s initial valuation of the Preferred Units was made under ASC 480-10-S99-3A and is specifically determined by the ‘redemption value’ This initial value was established using a fair value methodology, to establish the initial redemption value per the terms of the Capstone Green Energy LLC Agreement, the fair value of $ 1.33 per Preferred Unit at the date below was determined through the use of an option-pricing method (“OPM”) that treats the common and preferred units as call options on the enterprise value of the Company with exercise prices based on the liquidation preference of the preferred units. The OPM incorporated multiple thresholds that represent future change of control sale prices where the payout structure would differ based on the rights and preferences of each share class. The OPM used was the Black-Scholes Metron (“BSM”) model to price the call option, which includes the below variables. The enterprise
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value utilized by the Company in the OPM represents the value agreed upon by the parties involved the restructuring as approved by the Chapter 11 Bankruptcy Court:
Year Ended March 31,
2024
Fair value of common units
$
1.15
Dividend yield
—
%
Volatility
93.0
%
Risk-free interest rate
4.2
%
Expected term
6.2 years
Subsequent measurement under ASC 480-10-S99-3A for the redemption value follows the definition of redemption value as per the Capstone Green Energy LLC Agreement, which has been defined as greater of 1) the share price of CGEH shares (if CGEH is publicly traded), with appropriate adjustments for customary and appropriate factors, or 2) the Aggregate Purchase Price plus declared but unpaid dividends, the ‘maximum redemption value’. The subsequent measurement based on the redemption value method should not result in an amount that is less than the initial recorded value of $ 13.9 million.
For the year ended March 31, 2025, the Company’s Common Stock is publicly trading and the Preferred Units are not currently redeemable. The Company will measure the maximum redemption value at the end of each accounting period, which is based on the Company’s Common Stock value at period end. As of March 31, 2025, the closing value of CGEH stock was $ 0.75 .
At each reporting period, the Company remeasures the redemption value of the Preferred Units and adjusts the carrying value, if that value exceeds the initial fair value, to equal the maximum redemption value to retained earnings. The initial fair value was $ 13.9 million. Subsequent remeasurement of fair value has not exceeded the initial fair value; therefore, no adjustments have been made prior to the current period. The remeasurement as of March 31, 2025, did not exceed the initial fair value; therefore, an adjustment to the carrying value was not recorded.
11. Fair Value Measurements
The FASB has established a framework for measuring fair value using generally accepted accounting principles. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of the fair value hierarchy are described as follows:
Level 1. Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets.
Level 2. Inputs to the valuation methodology include:
● Quoted prices for similar assets or liabilities in active markets
● Quoted prices for identical or similar assets or liabilities in inactive markets
● Inputs other than quoted prices that are observable for the asset or liability
● Inputs that are derived principally from or corroborated by observable market data by correlation or other means
If the asset or liability has a specified (contractual) term, the level 2 input must be observable for substantially the full term of the asset or liability.
Level 3. Inputs to the valuation methodology are unobservable and significant to the fair value measurement.
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The asset or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used must maximize the use of observable inputs and minimize the use of unobservable inputs.
Basis for Valuation
The carrying values reported in the Consolidated Balance Sheets for cash, accounts receivable and accounts payable approximate their fair values because of the immediate or short-term maturities of these financial instruments. Financial and nonfinancial assets and liabilities measured on a recurring basis are those that are adjusted to fair value at each reporting period and include the Company’s Preferred Units. The Company used the BSM model (Level 3) with standard valuation inputs to value the Preferred Units for Fiscal 2024. The Company considers the Fiscal 2025 measurement to be Level 2. The primary input is the measurement of the Preferred Units using the value of publicly traded shares of CGEH, which trade in an actively traded public market (OTC market). We consider the shares of CGEH to be similar to the Common Units of Operating Subsidiary into which the Preferred Units may convert, and for which the underlying value are the assets, liabilities and operations of the Operating Subsidiary. CGEH is a holding company with no other business activity. Refer to Note 10— Temporary Equity.
12. Debt
Exit Facility Agreement
The Company entered into an Exit Facility during Fiscal 2024 (the “Exit Note Purchase Agreement”), for an aggregated principal amount of $ 28.1 million, consisting of $ 21.1 million Exit Roll Up Notes, including accrued and unpaid interest, commitment fees and $ 7.0 million of Exit New Money Notes (together the “Exit Notes”) subject to the terms and conditions set forth in the Exit Note Purchase Agreement by and among the Operating Subsidiary, as the issuer, the Company and Capstone Financial Services, as the guarantors (the “Guarantors”), Broad Street Credit Holdings LLC (the “Purchaser”) and Goldman Sachs Specialty Lending Holding, Inc. (the “Collateral Agent”).
The Exit Note Purchase Agreement also provides for a $ 10.0 million uncommitted incremental facility. The proceeds from the fully drawn $ 7.0 million of Exit New Money Notes were used to fund restructuring expenses and for working capital, for general corporate purposes. The Exit Notes bear interest at a rate equal to the Adjusted Term SOFR (as defined in the Exit Note Purchase Agreement) plus 7.00 % per annum. A portion of the interest on the Exit Notes is paid-in-kind until the third year following December 7, 2023.
The Exit Roll Up Notes mature on December 7, 2026 , and the Exit New Money Notes mature on December 7, 2025 .
The scheduled maturities of the Company’s long-term debt are as follows as of March 31, 2025 (in thousands):
Year Ending March 31,
2026
$
8,001
2027
24,351
2028
—
2029
—
2030
—
Thereafter
—
Total principal payments and debt maturities
32,352
Less unamortized issuance costs
( 171 )
Net principal payments and debt maturities
$
32,181
The Exit Notes issued pursuant to the Exit Note Purchase Agreement are secured by a lien on substantially all of the present and future property and assets of Operating Subsidiary and each Guarantor, subject to customary exceptions and exclusions. The Exit Note Purchase Agreement also includes conditions precedent, representations and warranties, affirmative and negative covenants, events of default, and other customary provisions, including financial covenants with respect to minimum consolidated liquidity and minimum consolidated adjusted EBITDA.
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On March 27, 2024, the Company obtained a waiver from the Purchaser and the Collateral Agent in anticipation of default on March 31, 2024. The waiver granted was specific to the $ 1.0 million consolidated adjusted EBITDA covenant for the measurement date of March 31, 2024, and covered the period until June 30, 2024. There can be no assurance that the Purchase and the Collateral Agent will waive any future defaults that may occur. If future defaults occur, the Purchaser and the Collateral Agent can exercise their rights and remedies under the Exit Note Purchase Agreement (and other security related documents), including a right to accelerate the maturity of the Company’s repayment obligations under the Exit Notes. The Company has the right to cure an event of default for a breach of the consolidated adjusted EBITDA covenant with a prepayment on the Exit Notes up to the amount that is required to achieve the minimum consolidated adjusted EBITDA covenant for the quarter. In the event the Company does not cure the breach, the requisite Purchaser may cause the Collateral Agent to enforce any and all liens and security interests created pursuant to the Collateral Documents and may enforce any and all rights and remedies available. The Company believes it is probable the minimum consolidated liquidity and minimum consolidated adjusted EBITDA financial covenants discussed below will be satisfied for all measurement dates in the upcoming 12 months.
On June 28, 2024, the Company entered into the First Amendment (the “First Amendment”) to the Exit Note Purchase Agreement. The First Amendment provides for: (i) the amendment of the minimum consolidated adjusted EBITDA financial covenant to (a) allow adjustment for costs related to the restatement of, or other adjustments to, the financial statements of the Company for the period beginning on the Closing Date (as defined in the Exit Note Purchase Agreement) and ending at the end of the 2025 Fiscal Year and (b) the minimum consolidated adjusted EBITDA financial covenant to be first tested at the quarter ended September 30, 2024, (ii) the amendment of the minimum consolidated liquidity financial covenant to (a) reduce the minimum consolidated liquidity to $ 1,000,000 from September 30, 2024 to March 30, 2025 and (b) defer the testing of the minimum consolidated liquidity financial covenant to September 30, 2024 and (iii) the extension of the deadline for the delivery of the Company’s audited financial statements for the fiscal year ended March 31, 2024 (the “fiscal 2024 financial statements”) to September 27, 2024 and the removal of the covenant that the fiscal 2024 financial statements be accompanied by a report and opinion of an independent certified public accountant which is not subject to any “going concern” or like qualification.
The minimum consolidated liquidity covenant will be tested at all times from and after September 30, 2024, and requires the Company and its subsidiaries to maintain a minimum average Consolidated Liquidity (as defined in the First Amendment) during any seven consecutive day period of no less than:
(i) from September 30, 2024 to March 30, 2025, $ 1,000,000 ;
(ii) from March 31, 2025 to July 30, 2025, $ 2,500,000 *;
(iii) from July 31, 2025 to September 29, 2025, $ 3,000,000 *;
(iv) from September 30, 2025 to March 30, 2026, $ 3,500,000 ; and
(v) from March 31 2026 to December 7, 2026, $ 4,000,000 .
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*On June 23, 2025 the Company received an additional waiver to defer the minimum liquidity increase from $ 2.5 million to $ 3.0 million from June 20, 2025 to July, 31, 2025.
The minimum consolidated adjusted EBITDA covenant will be tested on the last day of each fiscal quarter, commencing with September 30, 2024, and will require the Company and its subsidiaries to maintain a minimum consolidated adjusted EBITDA (as defined in the First Amendment) as at the end of any fiscal quarter (i) from the Closing Date until September 30, 2024, for the period of the fiscal quarters then ended in such calendar year and (ii) from October 1, 2024, for the four fiscal quarter period then ended, to be less than the correlative amount indicated below (with corresponding calendar quarters also included as reference):
Fiscal Quarter Ending
Consolidated Adjusted EBITDA
September 30, 2024
$ 2,500,000
December 31, 2024
$ 4,000,000
March 31, 2025
$ 5,000,000
June 30, 2025
$ 5,500,000
September 30, 2025
$ 6,000,000
December 31, 2025
$ 6,500,000
March 31, 2026
$ 8,000,000
June 30, 2026
$ 8,000,000
September 30, 2026
$ 8,000,000
As of March 31, 2025, the Company has an outstanding Exit Notes balance of $ 32.2 million, comprised of $ 21.1 million of Exit Roll Up Notes, $ 7.0 million of the Exit New Money Notes, and $ 4.3 million of total PIK interest, less debt issuance costs of $ 0.2 million. Debt issuance costs in relation to the Exit New Money Notes and Exit Roll Up Notes are being amortized over the term at an effective interest rate of 11.75 % as of March 31, 2025. As of March 31, 2025, the Company was in compliance with all financial covenants.
Three-Year Term Note
On February 4, 2019 , the Company entered into a Note Purchase Agreement (as amended, the “Note Purchase Agreement”), by and among the Company, certain subsidiaries of the Company party thereto as guarantors, the Collateral Agent and any other purchasers party thereto from time to time (collectively, the “Purchaser”). On October 1, 2020 , the Company entered into an Amended & Restated Note Purchase Agreement (the “A&R Note Purchase Agreement”). As of March 31, 2023, the Company had borrowings under the Note Purchase Agreement of $ 51.0 million. The A&R Note Purchase Agreement contained a covenant, among others requiring the Company to have at all times a minimum consolidated liquidity (the “Liquidity Covenant”) of at least $ 9.0 million. On April 21, 2023, the Company breached the Liquidity Covenant when its total funds in accounts subject to account control agreements fell below $ 9.0 million. On July 3, 2023, the Company failed to make an interest payment.
On July 6, 2023, the Company entered into a Fourth Amendment (the “Fourth Amendment”) to the A&R Note Purchase Agreement by and among the Company, certain subsidiaries of the Company, Goldman Sachs Specialty Lending Group, L.P. (as successor in interest to Goldman Sachs Specialty Lending Holdings, Inc.), as Collateral Agent 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 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 of the Fourth Amendment (the “Fourth Amendment Effective Date”); (iv) a due date for the next interest payment on the date that is 30 days from the Fourth Amendment Effective Date, which interest payment was originally due on July 3, 2023; (v) following the Company’s entry into a TSA, 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 the Collateral Agent to either (A) force a
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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 Collateral Agent 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 TSA within 30 days of the Fourth Amendment 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 TSA in form and substance satisfactory to the Collateral Agent within 45 days after the Fourth Amendment Effective Date; (iii) close the transactions specified by the TSA 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 the Collateral Agent on a quarterly basis. The Fourth Amendment also imposes restrictions on the Company’s ability to (i) pay professional fees for 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 by and among the Company, certain subsidiaries of the Company, the Collateral Agent 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 TSA with one or more lenders in form and substance mutually satisfactory to the Collateral Agent and the Company 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 Fourth Amendment Effective Date 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 TSA to require that the Company (A) agree to the terms and form of the TSA (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 TSA 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 in its sole discretion, and (C) that the Company shall have closed the transactions specified by the TSA 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 A&R Note Purchase Agreement among the Company, certain subsidiaries of the Company, the Collateral Agent 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.
On the Petition Date, the principal balance of the A&R Note Purchase Agreement of $ 53.0 million, including accrued interest of $ 3.5 million and $ 0.5 million of issuance costs, were classified as LSTC on the Company’s Consolidated Balance Sheet. The Company suspended accruing and paying interest and amortizing deferred financing costs, discounts and premiums, as applicable. During Fiscal 2024, $ 18.0 million of the LSTC balance, including accrued interest of $ 1.3 million, was rolled up into the Debtor-in-Possession financing agreement and recorded within Exit New Money Notes, net, current on the Company’s Consolidated Balance Sheet as of March 31, 2024.
On June 23, 2025, the Company received an additional waiver from Goldman Sachs Specialty Lending Group, L.P. (the Collateral Agent) to defer the minimum liquidity increase from $ 2.5 million to $ 3.0 million from June 30, 2025, to July 31, 2025.
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Interest expense related to the term note payable during Fiscal 2025 and 2024 was $ 3.8 million and $ 3.3 million, respectively.
Gain on Extinguishment of Debt
The Company incurred a $ 35.3 million gain as a result of the debt amendment related to emerging from Chapter 11 Bankruptcy on December 7, 2023. The gain was recorded within Reorganization items, net on the Company’s Consolidated Statement of Operations.
13. Leases
Lessor
The Company rents microturbine equipment to its customers for terms ranging from a couple of months to up to ninety-six months with most of the leases generally with thirty-six months term with an extension option , which may impact the lease term. The leases may provide the lessee with the option to purchase the underlying assets at the end of 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. The leases are classified as either sales-type leases or operating leases, as appropriate. 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.
At March 31, 2025, the Company’s minimum rental revenue to be received was as follows (in thousands):
Leased
Owned and
Year Ending March 31,
Assets
Financed Assets
2026
$
2,398
$
6,279
2027
397
1,101
2028
—
295
2029
—
22
2030
—
—
Thereafter
—
—
Total minimum rental revenue
$
2,795
$
7,697
The profit recognized from sales-type leases at their commencement date were as follows (in thousands):
Year Ended March 31,
2025
2024
Net sales
$
1,309
$
—
Cost of sales
911
—
Gross profit
$
398
$
—
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At March 31, 2025, the Company’s future scheduled minimum lease payments to be received from its sales-type lease was as follows (in thousands):
Year Ending March 31,
2026
$
264
2027
264
2028
264
2029
264
2030
264
Thereafter
528
Total minimum lease payments
$
1,848
Less: imputed interest
( 639 )
Plus: unguaranteed residual value
79
Present value of lease receivable
$
1,288
The Company recognized $ 0.2 million of interest income related to lease receivables in Fiscal 2025. There was no interest income related to lease receivables in Fiscal 2024.
Year Ended March 31,
2025
2024
Gross receivables
$
1,209
$
—
Unguaranteed residual value
79
—
Total, net
$
1,288
$
—
Reported as:
Current
113
—
Long-Term
1,175
—
Total, net
$
1,288
$
—
Lessee
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, which may include extension periods.
There were no new rental agreements in Fiscal 2025. During Fiscal 2024, the Company entered into eight rental agreements to rent used microturbine equipment from customers where that equipment was not currently in use. The existing rental agreements provide the Company an option to extend the lease, however, the Company is not likely to exercise these options and therefore not included in the determination of the lease term. As of March 31, 2025, lease commitments totaled approximately 17.8 megawatts of microturbines and have an average term of 43 months and a total remaining commitment value of approximately $ 8.6 million.
The components of lease expense were as follows (in thousands):
Year Ended March 31,
2025
2024
Finance lease costs (1)
$
719
$
804
Operating lease costs
5,335
4,948
Total lease costs
$
6,054
$
5,752
(1) Interest expense is included in finance lease costs.
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Supplemental balance sheet information related to the leases was as follows (in thousands):
March 31, 2025
March 31, 2024
Finance lease right-of-use assets
$
3,787
$
4,391
Operating lease right-of-use assets
8,282
12,279
Total right-of-use assets
$
12,069
$
16,670
Finance lease liability, current
$
2,017
$
964
Operating lease liability, current
3,539
4,041
Finance lease liability, non-current
248
2,300
Operating lease liability, non-current
4,988
8,527
Total lease liabilities
$
10,792
$
15,832
Finance leases:
Weighted average remaining lease life
0.42 years
1.41 years
Weighted average discount rate
12.81 %
13.00 %
Operating leases:
Weighted average remaining lease life
4.41 years
4.48 years
Weighted average discount rate
12.33 %
13.00 %
Supplemental cash flow information related to the leases was as follows (in thousands):
Year Ended March 31,
2025
2024
Cash paid for amounts included in the measurement of lease liabilities
Finance cash flows from finance leases
$
222
$
173
Operating cash flows from finance leases
$
33
$
42
Operating cash flows from operating leases
$
5,380
$
4,930
Right-of-use assets obtained in exchange for lease obligations
Finance leases
$
—
$
447
Operating leases
$
—
$
6,901
At March 31, 2025, the Company’s minimum commitments under non-cancelable operating and finance leases were as follows (in thousands):
Finance
Operating
Year Ending March 31,
Leases
Leases
2026
$
2,051
$
4,368
2027
252
1,747
2028
—
1,636
2029
—
1,337
2030
—
256
Thereafter
—
1,626
Total lease payments
$
2,303
$
10,970
Less: imputed interest
( 38 )
( 2,443 )
Present value of lease liabilities
$
2,265
$
8,527
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14. Commitments and Contingencies
Purchase Commitments
As of March 31, 2025 the Company had firm commitments to purchase inventories of approximately $ 31.4 million through Fiscal 2027. 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
Refer to Note 13 – Leases.
Related Party Transactions
On the Effective Date, Reorganized PrivateCo 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.
Services Agreement between Reorganized PrivateCo and Operating Subsidiary
On the Effective Date, Operating Subsidiary entered into a Services Agreement by and among Reorganized PrivateCo and Operating Subsidiary (the “Reorganized PrivateCo Services Agreement”). The Reorganized PrivateCo Services Agreement provides that, among other things, Operating Subsidiary will provide certain services to Reorganized PrivateCo, and Reorganized PrivateCo will provide the Operating Subsidiary’s distributors on a subcontracted basis and, where applicable, to Operating Subsidiary, certain ongoing services and transition services related to Reorganized PrivateCo’s distributor support services business. Reorganized PrivateCo will pay to Operating Subsidiary a service fee (the “Reorganized PrivateCo Services Fee”) of an amount in cash equal to 90 % of Reorganized PrivateCo’s Income (as defined in the Reorganized PrivateCo Services Agreement) less itemized expenses incurred and actually paid in cash by Reorganized PrivateCo in direct support of Operating Subsidiary’s distributors and in Reorganized PrivateCo’s performance of the services (excluding the Reorganized PrivateCo Services Fees). The Company reported $ 2.5 million and $ 0.7 million in other income for DSS service fees for Fiscal 2025 and Fiscal 2024, respectively.
Trademark License Agreement
On the Effective Date, the Company entered into a Trademark License Agreement (the “Trademark License Agreement”) by and between Reorganized PrivateCo, as licensor, and the Company, as licensee. The Trademark License Agreement provides that, among other things, Reorganized PrivateCo grants the Company a non-exclusive, royalty-bearing, non-transferable, non-sublicensable (except to the Company’s affiliates), worldwide, perpetual (subject to the terms and conditions of the Trademark License Agreement), irrevocable (subject to the terms and conditions of the Trademark License Agreement), limited license, under all of its right, title and interest in and to the Capstone Trademarks (as defined in the Trademark License Agreement) to use the Capstone Trademarks solely in connection with the Business (as defined in the Trademark License Agreement). In consideration for the license, the Company pays Reorganized PrivateCo an annual royalty of $ 100,000 . Reorganized PrivateCo may not assign the Capstone Trademarks to any third party without the Company’s consent, not to be unreasonably withheld, delayed or conditioned (subject to the terms and conditions of the Trademark License Agreement). If Reorganized PrivateCo does not use any of the Capstone Trademarks for six consecutive months, then the Capstone Trademarks will be assigned to the Company for no further consideration.
Services Agreement between the Company and Operating Subsidiary
On the Effective Date, the Company entered into a Services Agreement (the “Services Agreement”) by and among the Company and Operating Subsidiary. The Services Agreement provides, among other things, that the Company will provide certain services to Operating Subsidiary, in its capacity as a majority equity holder of Operating Subsidiary, and in consideration for the services provided by the Company, Operating Subsidiary will reimburse the Company for its reasonable audit, board and executive compensation expenses incurred in connection with being a publicly traded company (the “New Capstone Services Fee”). The New Capstone Services Fee will not exceed $ 2,500,000 , per fiscal year (the
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“Services Fee Cap”), to be increased on April 1 of each year, beginning with April 1, 2024, by an amount equal to the greater of (a) 3.5000 % and (b) the Consumer Price Index, as set by the U.S. Bureau of Labor Statistics and available on March 31 of each year; provided however, that for the Fiscal Year ending March 31, 2024, such amount was prorated based on the number of days in such fiscal year following the execution of the Reorganized PublicCo Services Agreement; provided, further, however, that such increase effective on April 1, 2024, was equal to 1.7500 %.
Service Agreement with CFGI
On January 12, 2024, the Company entered into a services agreement with CFGI, pursuant to which CFGI provides third party accounting consultancy services to the Company. A related person who is the son of John Juric, our Chief Financial Officer, is a staff employee at CFGI. We have been advised that, under the CFGI compensation policy, Mr. Juric’s son is being paid a commission related to the fees paid by the Company during the first year of the engagement. The Company incurred service fee expense of $ 1.3 million and $ 0.3 million for Fiscal 2025 and 2024, respectively. The potential bonus to be earned by Mr. Juric’s son is estimated to be $ 65,000 .
Other Commitments
The Company has agreements with certain of its distributors requiring that, if the Company renders parts obsolete in inventories the distributors own and hold in support of their obligations to serve fielded microturbines, then the Company is required to replace the affected stock at no cost to the distributors. While the Company has never incurred costs or obligations for these types of replacements, it is possible that future changes in the Company’s product technology could result and yield costs to the Company if significant amounts of inventory are held at distributors. As of March 31, 2025, no significant inventories of this nature were held at distributors.
Legal Matters
Capstone Turbine Corporation v. Turbine International, LLC.
On February 3, 2020, Capstone Turbine Corporation filed suit against its former distributor, Turbine International, LLC (“Turbine Intl.”), in the Superior Court of California alleging breach of contract 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. The Company subsequently modified its complaint to include Turbine Intl. guarantors as defendants. The Company was seeking approximately $ 4.8 million in compensatory damages, along with injunctive relief and attorney’s fees, interest, and costs. In 2024, the Court ordered default judgments first against Turbine International and then against the other defendants. The default judgement in the amount of approximately $ 7.3 million, which included pre-judgement interest and costs of the suite, was entered and placed on the docket in June 2025. The Company has prevailed in this proceeding. The ability of Capstone to collect on the judgement is unclear, as the defendants are overseas or without U.S.-based assets, therefor we have no t recorded a receivable as of March 31, 2025.
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 an Investigation into certain accounting and internal control matters of the Company, principally focused on certain revenue recognition matters (the “Revenue Recognition Investigation”), and self-reported its findings to the Division of Enforcement of the SEC. Following the self-report, the SEC Enforcement Division commenced an investigation into the circumstances surrounding the restatement of the Company’s quarterly and annual financial statements (the “SEC Investigation”). The Audit Committee further self-reported its findings pursuant to an investigation into FPP related practices to the SEC. The Company cooperated with the SEC in connection with its investigation. On June 10, 2025, the SEC Division of Enforcement notified the Company that it closed its investigation with no action taken against the Company.
Cal Microturbine Arbitration
On March 13, 2024 , Cal Microturbine, a current distributor of the Company, filed a complaint before the American Arbitration Association, seeking approximately $ 24.5 million in damages and alleging that the Company
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breached the Distributor Agreement between the parties and committed fraud by allowing another company, to sell, rent and service turbines in Cal Microturbine’s exclusive territory. On August 18, 2024, Cal Microturbine amended its complaint and reduced its damages claim to $ 18.8 million. On September 9, 2024, the Company filed a counterclaim against Cal Microturbine for $ 20.0 million, alleging various violations of the Distributor Agreement. On September 27, 2024, Cal Microturbine provided the second amendment to its complaint and increased its damages to $ 25.0 million. The parties have completed selection of a three-person arbitration panel and a hearing date is scheduled for September 2025. The parties engaged in mediation in November and December 2024, and they are currently in settlement discussions. Discovery was scheduled to begin in November 2024 but has been stayed due to ongoing settlement discussions. On December 8, 2024, the Company issued a notice of intent to terminate the Distributor Agreement with Cal Microturbine due to the alleged violations by Cal Microturbine. In February 2025, Cal Microturbine filed an action in California state court seeking a temporary restraining order (“TRO”) to preclude the Company from terminating the Distributor Agreement. Due to ongoing settlement discussions and extensions of the termination date during those discussions, the court has refrained from scheduling a TRO hearing. The Company has no t recorded a liability as of March 31, 2025, as a loss is neither probable nor estimable.
Spitzer v. 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 various claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 based on allegedly false and misleading statements and allegedly inadequate disclosure regarding 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 is not a named respondent in this matter and has not engaged legal counsel.
The parties reached agreement on a settlement amount and on April 4, 2025, the parties filed an unopposed motion for the court to approve settlement and notice procedures. A preliminary hearing date was held on June 5, 2025, and a final settlement hearing date has been set for November 13, 2025. Expenses up to the $ 1.3 million insurance deductible amount have either been incurred or accrued.
Mark Estrada and Ricardo Montalvo, vs. Capstone Green Energy LLC and Erick Kim.
In August 2024, two filings were made by lawyers on behalf of current and former non-exempt Capstone employees against Capstone and one supervisory employee. Both filings allege various pay violations. The first action filed with the Superior Court of the State of California, requested that the Court certify the employees as a Class. Capstone has arbitration agreements in place with those current and former employees, agreements which include a class action waiver. Accordingly, Capstone moved that the Court compel arbitration, which Plaintiffs opposed. At a hearing in January 2025, the Court determined that the arbitration agreements were enforceable. Then in April 2025, the Court determined that the employees were not entitled to exemption from the enforcement of the arbitration agreements under the Federal Arbitration Act. The second filing was made with the Labor Development Workforce Agency. While Plaintiffs are positioned to pursue that claim privately under the Private Attorney General Act, they have not yet filed suit. The Company has no t recorded a liability as of March 31, 2025, as a loss is neither probable nor estimable.
DV Energy, LLC vs Capstone Green Energy Holdings, Inc, Capstone Turbine Corporation, Capstone Green Energy Corporation, and Capstone Green Energy, LLC.
On August 26, 2024 , DV Energy, LLC (“DV Energy”), a Capstone distributor in Russia, filed a lawsuit in the Superior Court of California, County of Los Angeles to recover a $ 0.7 million parts deposit, along with interest and legal fees. Among other things, DV Energy alleges breach of contract associated with a product order that Capstone was unable to deliver due to the imposition of U.S. sanctions following Russia’s invasion of Ukraine. The Company disputes DV Energy’s claim. DV Energy is also an unsecured creditor in the Chapter 11 Cases of the Company’s predecessors but opted to file the complaint in the state court as well. The Bankruptcy Court placed pre-conditions on closure of the Chapter 11 Cases. In April 2025, the Company filed motions with the Bankruptcy Court to deposit funds with the Registry of the
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Court pending the outcome of the state court litigation and to close the Chapter 11 Cases. At a hearing on June 5, 2025, the Bankruptcy Court granted the Company’s motion to deposit funds with the Registry of the Court in the amount of $ 0.8 million as a security pending the outcome of the state court litigation. The Company is in the process of depositing funds with the Registry of the Court, and on June 13, 2025, the Bankruptcy Court issued its Final Decree and Order Closing Debtors’ Chapter 11 Cases and Terminating Services of Kroll Restructuring Administration LLC as Claims and Noticing Agent which amount other things, closed the Chapter 11 Cases for the Debtors with immediate effect. The value of the DV Energy deposit is recorded in the Company’s financial statements as a current liability as of March 31, 2025.
15. Employee Benefit Plans
The Company maintains a defined contribution 401(k) profit-sharing plan in which all employees are eligible to participate. Employees may contribute up to Internal Revenue Service annual limits or, if less, 90 % of their eligible compensation. 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. The Company has been matching 50 cents on the dollar up to 6 % of the employee’s contributions since February 2019. Prior to that date, the Company had been matching 50 cents on the dollar up to 4 % of the employee’s contributions since October 2006. There were no Company contributions to the plan prior to October 2006. The Company’s match vests 25 % a year over four years starting from the employee’s hire date. The Company recorded expense of approximately $ 0.3 million for each of Fiscal 2025 and 2024.
16. Supplemental Balance Sheet Information
Prepaid and Other Assets
As of March 31, 2025, the Company had $ 2.2 million of royalty-related assets remaining, recorded within the Prepaid and other current assets and other assets line items on the accompanying Consolidated Balance Sheets. The asset is being amortized over a 15 -year period through September 2033 using an effective royalty rate.
A 15 -year amortization period is the minimum expected life cycle of the current generation of product. The effective royalty rate is calculated as the prepaid royalty settlement divided by total projected microturbine system units over the 15 -year amortization period. On a quarterly basis, the Company performs a re-forecast of microturbine system unit shipments to determine if an adjustment to the effective royalty rate is necessary and accordingly whether an impairment exists. The Company determined an impairment did no t exist as of March 31, 2025 or 2024.
The current and long-term portions of prepaid royalties and prepaid and other assets were as follows (in thousands):
March 31,
March 31,
2025
2024
Other royalty-related current assets
$
124
$
124
Other royalty-related noncurrent assets
2,102
2,239
Total royalty-related assets
$
2,226
$
2,363
Prepaid insurance current asset
148
345
Prepaid insurance noncurrent asset
431
563
Total prepaid insurance
$
579
$
908
Deposits current asset
169
131
Deposits noncurrent asset
172
235
Total deposits
$
341
$
366
Prepaid vendor inventory
2,126
3,417
Prepaid taxes
698
397
Other Assets
388
1,035
Total Prepaid expenses, other current assets and other assets
$
6,358
$
8,486
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17. Segment Information
The Company has a single reportable segment: microturbine systems and their related parts, rentals and services. The Company is one line of business that provides for the development, manufacture, sale and rental of turbine generator sets and their related parts and services to customers. The Company derives revenue primarily in North America and the Company’s Chief Operating Decision Maker (“CODM”) regularly reviews financial information presented on a consolidated basis for purposes of allocating resources and assessing performance. The Company defines its CODM to be the Chief Executive Officer.
The CODM assesses performance for the single reportable segment under a GAAP basis of accounting, consistent with the basis of presentation in our financial statements and decides how to allocate resources based on consolidated net loss. This measure is used to monitor performance which is compared to prior periods and forecasted results to support operational efficiencies and business expansion. The CODM does not evaluate its reportable segment using asset or liability information. There are no intra-equity sales or transfers between the reporting units within the consolidated entity.
The following table presents the Company’s information about reported segment revenue, segment gross profit, segment profit or loss and significant segment expenses that are regularly provided to the Company’s CODM as a single reporting segment and a reconciliation of the consolidated statement of operations:
Year Ended March 31,
2025
2024
Revenue, net:
$
85,564
$
91,219
Less:
Cost of revenue
62,266
76,935
Gross profit
23,298
14,284
Less:
Research and development
2,667
2,463
Selling, general & administrative expenses
19,328
19,149
Non-recurring professional expenses (1)
6,877
13,026
Reorganization items, net
—
( 32,505 )
Other (income) expense items (2)
1,616
4,759
Consolidated net income (loss)
$
( 7,190 )
$
7,392
(1) Non-recurring professional expenses include restructuring, financing, shareholder litigation, nonrecurring legal, restatement and SEC investigation.
(2) Other segment items included in segment (income) expense include other income (expense), interest expense, interest income and income tax expense.
18. 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, 2025, and events which occurred subsequently but were not recognized in the financial statements. There were no subsequent events, other than what has been described above, which required recognition, adjustment to or disclosure in the financial statements.
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Exhibit Index
Exhibit
Number
Description
2.1
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) (k)
2.2
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 (j)
2.3
Notice of Filing of Additional Exhibits to Plan Supplement, dated as of November 9, 2023 (k)
2.4
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 (k)
3.1
Second Amended and Restated Certificate of Incorporation of Capstone Green Energy Holdings, Inc. (l)
3.2
Amended and Restated Bylaws of Capstone Green Energy Holdings, Inc. (1)
4.1
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 (l)
4.2
First Amendment to Note Purchase Agreement, dated as of June 28, 2024, by and among Capstone Green Energy Holdings, Inc., Capstone Green Energy LLC, Capstone Turbine Financial Services, LLC, Goldman Sachs Specialty Lending Group, L.P. and the Purchaser party thereto (n)
4.3
Description of the Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (o)
10.1
*
Amended and Restated Capstone Turbine Corporation Change of Control Severance Plan (a)
10.2
Development and License Agreement between Capstone Turbine Corporation and Carrier Corporation, successor-in-interest to UTC Power Corporation, dated September 4, 2007 (b)
10.3
Promissory Note between Capstone Turbine Corporation and Turbine International, LLC, dated October 13, 2017 (c)
10.4
Guaranty between Capstone Turbine Corporation and Hispania Petroleum, S.A., dated October 13, 2017 (c)
10.5
First Amendment to the Accounts Receivable Assignment Agreement and Promissory Note between Capstone Turbine Corporation and Turbine International, LLC, dated June 5, 2018 (d)
10.6
*
Capstone Green Energy Corporation Amended and Restated Severance Pay Plan and Summary Plan Description, dated July 3, 2018, as amended March 2023 (e)
10.7
*
Form of Capstone Green Energy Corporation Change in Control Agreement (f)
10.8
Consulting Agreement between Capstone Green Energy Corporation and Capstone Engineered Solutions, dated May 22, 2022 (g)
10.9
National Account Agreement between Capstone Green Energy Corporation and Capstone Engineered Solutions, dated May 20, 2022 (g)
10.10
Installation Agreement between Capstone Green Energy Corporation and Capstone Engineered Solutions Corporation (g)
10.11
Lease Agreement between Capstone Green Energy Corporation and Prologis, L.P., dated January 25, 2023 (h)
10.12
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)
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Exhibit
Number
Description
10.13
Reorganized PublicCo Services Agreement, dated December 7, 2023, by and among Capstone Green Energy Holdings, Inc. and Capstone Green Energy LLC (l)
10.14
Trademark License Agreement, dated December 7, 2023, by and among Capstone Distributor Support Services Corporation and Capstone Green Energy Holdings, Inc. (l)
10.15
*
Capstone Green Energy Holdings, Inc. Form of Indemnity Agreement (l)
10.16
*
Severance Pay Plan of Capstone Green Energy Holdings, Inc. (l)
10.17
*
2023 Equity Incentive Plan of Capstone Green Energy Holdings, Inc. (l)
10.18
Amended and Restated Limited Liability Company Agreement, dated December 7, 2023, of Capstone Green Energy LLC. (l)
10.19
Reorganized PrivateCo Services Agreement, dated December 7, 2023, by and among Capstone Distributor Support Services Corporation and Capstone Green Energy LLC (l)
10.20
Registration Rights Agreement, dated December 7, 2023, by and among Capstone Green Energy LLC and Capstone Distributor Support Services Corporation (l)
10.21
*
Employment Offer Letter for Vincent J. Canino, dated February 22, 2024 (m)
10.22
*
Capstone Green Energy Holdings, Inc. Form of Amended and Restated Change in Control Agreement (m)
10.23
*
Form of Restricted Stock Unit Agreement (o)
10.24
Exit Note Purchase Agreement Waiver Letter dated June 23, 2025.
19 .1
Capstone Green Energy Holdings, Inc. Insider Trading Policy.
21.1
List of Subsidiaries of Capstone Green Energy Holdings, Inc.
23.1
Consent of CBIZ CPAs P.C.
23.2
Consent of Marcum llp
24
Power of Attorney (included on the signature page of this Form 10-K)
31.1
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes–Oxley Act of 2002
31.2
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes–Oxley Act of 2002
32
Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes–Oxley Act of 2002 (furnished herewith)
97.1
Capstone Green Energy Holdings, Inc. Clawback Policy, effective October 2, 2023 (p)
101.INS
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
101.SCH
XBRL Schema Document
101.CAL
XBRL Calculation Linkbase Document
101.LAB
XBRL Label Linkbase Document
101.PRE
XBRL Presentation Linkbase Document
101.DEF
XBRL Definition Linkbase Document
104
The cover page from Capstone Green Energy Corporation’s Annual Report on Form 10-K for the fiscal year ended March 31, 2025, formatted in Inline XBRL and contained in Exhibit 101
*Management contract or compensatory plan or arrangement
(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. 001-15957).
(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. 001-15957).
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(c) Incorporated by reference to Capstone Turbine Corporation’s Current Report on Form 8-K filed on October 13, 2017 (File No. 001-15957).
(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. 001-15957).
(e) Incorporated by reference to Capstone Green Energy Corporation’s Current Report on Form 8-K filed on March 6, 2023 (File No. 001-15957).
(f) Incorporated by reference to Capstone Turbine Corporation’s Current Report on Form 8-K filed on June 5, 2018 (File No. 001-15957).
(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. 001-15957).
(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. 001-15957).
(i) Incorporated by reference to Capstone Green Energy Corporation’s Current Report on Form 8-K filed on September 28, 2023 (File No. 001-15957).
(j) Incorporated by reference to Capstone Green Energy Corporation’s Current Report on Form 8-K filed on October 25, 2023 (File No. 001-15957).
(k) Incorporated by reference to Capstone Green Energy Corporation’s Current Report on Form 8-K filed on November 17, 2023 (File No. 001-15957).
(l) Incorporated by reference to Capstone Green Energy Holdings, Inc.’s Current Report on Form 8-K12G3 filed on December 11, 2023 (File No. 001-15957).
(m) Incorporated by reference to Capstone Green Energy Holdings, Inc.’s Current Report on Form 8-K filed on March 12, 2024 (File No. 001-15957).
(n) Incorporated by reference to Capstone Green Energy Holdings, Inc.’s Current Report on Form 8-K filed on June 28, 2024 (File No. 001-15957).
(o) Incorporated by reference to Capstone Green Energy Holdings, Inc.’s Annual Report on Form 10-K for the fiscal year ended March 31, 2023 (File No. 001-15957).
(p) Incorporated by reference to Capstone Green Energy Holdings, Inc.’s Annual Report on Form 10-K for the fiscal year ended March 31, 2024 (File No. 001-15957).
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SIGNATURES
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 HOLDINGS, INC.
Date: June 26, 2025
By:
/s/ John J. Juric
John J. Juric
Chief Financial Officer
(Principal Financial Officer)
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 Holdings, Inc. 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.
Signature
Title
Date
/s/ Vince J. Canino
President, Chief Executive Officer and Director (Principal Executive Officer)
June 26, 2025
Vince J. Canino
/s/ John J. Juric
Chief Financial Officer (Principal Financial Officer)
June 26, 2025
John J. Juric
/s/ Celia Fanning
Controller and Chief Accounting Officer (Principal Accounting Officer)
June 26, 2025
Celia Fanning
/s/ Robert C. Flexon
Chair of the Board of Directors
June 26, 2025
Robert C. Flexon
/s/ Robert F. Powelson
Director
June 26, 2025
Robert F. Powelson
/s/ Denise Wilson
Director
June 26, 2025
Denise Wilson
/s/ Ping Fu
Director
June 26, 2025
Ping Fu
/s/ John Miller
Director
June 26, 2025
John Miller