What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-08-08 compared with 2025-02-14 · 145 added, 169 removed, 123 unchanged (72% of the section changed)

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All dollar amounts in this Management’s Discussion and Analysis of Financial Condition and Results of Operations are approximate.

All references in this Quarterly Report on Form 10-Q to “the Company,” “we,” “us,” “our,” or “Capstone” are to Capstone Green Energy Corporation and its consolidated subsidiaries for the three and nine months ended December 31, 2023 and to Capstone Green Energy Holdings, Inc.

and its consolidated subsidiaries as of December 31, 2024 and March 31, 2024 and for the three and nine months ended December 31, 2024.

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

and its consolidated subsidiaries as of June 30, 2025, and March 31, 2025, and for the three months ended June 30, 2025 and 2024.

Special Note Regarding Forward-Looking Statements

This Form 10-Q contains or refers to certain statements that are not historical fact and are “forward-looking” statements as defined in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

These statements can be identified by the fact that they do not relate strictly to historical or current facts.

Words such as “expect,” “anticipate,” “should,” “believe,” “target,” “project,” “goals,” “estimate,” “potential,” “predict,” “may,” “will,” “might,” “could,” “intend” and variations of these terms and similar expressions are intended to identify these forward-looking statements, although not all forward-looking statements contain these identifying words.

These forward-looking statements include, among others, statements relating to our future financial performance, our business prospects and strategy, anticipated financial position, liquidity and capital needs and other similar matters.

These forward-looking statements are based on management's current expectations and assumptions about future events, which are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict.

This Form 10-Q contains forward-looking statements regarding future events and our future results that are subject to the safe harbors created under the Securities Act of 1933, as amended, (the “Securities Act”) and the Securities Exchange Act of 1934, as amended, (the “Exchange Act”).

All statements other than statements of historical facts are statements that could be deemed to be forward-looking statements.

These include statements that are based on current expectations, estimates, forecasts and projections about the industries in which we operate and the beliefs and assumptions of our management.

Words such as “expects,” “anticipates,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “continues,” “endeavors,” “strives,” “potential,” “predict,” “may,” “will,” “might,” “could,” “intend” “assumes” and variations of such words and similar expressions are intended to identify forward-looking statements.

In addition, any statements that refer to projections of our future financial performance, our anticipated growth and trends in our businesses, and other characterizations of future events or circumstances are forward-looking statements.

Our actual results may differ materially from those expressed in, or implied by, the forward-looking statements included in this Form 10-Q as a result of various factors, including, among others:

● our short and long-term liquidity requirements and the adequacy of our capital resources;

● our ability to realize the anticipated benefits of our financial restructuring completed in December 2023;

● the restrictions imposed by the covenants contained in the Note Purchase Agreement (as defined in Note 11— Debt) and the Operating Subsidiary LLC Agreement (as defined in Note 13— Commitments and Contingencies) and our ability to comply with the financial covenants contained in the Note Purchase Agreement;

● the impact of several recent key management changes and our ability to retain key employees following the financial restructuring completed in December 2023;

● risks related to the restatement of our previously issued consolidated financial statements, including costs, risks and uncertainties associated with the pending SEC investigation into the circumstances surrounding such restatement;

● our ability to remediate the material weaknesses in internal control over financial reporting disclosed in our Annual Report on Form 10-K for Fiscal 2024;

● the significant risks related to our substantial indebtedness and our long-term liquidity requirements following our emergence from Chapter 11 and reorganization;

● risks related to our history of net losses and ability to raise additional capital and fund future operating requirements;

● risks related to the limitation of capital available to us;

● our ability to continue as a going concern;

● our ability to remediate the material weaknesses in internal control over financial reporting disclosed in our Annual Report on Form 10-K for Fiscal 2025;

● the limited public trading market for our common stock on the OTC market;

● our ability to retain key personnel;

● the restrictions imposed by the covenants contained in the Note Purchase Agreement (as defined in Note 8— Debt) and the Operating Subsidiary LLC Agreement (as defined in Note 17— Commitments and Contingencies) and our ability to comply with the financial covenants contained in the Note Purchase Agreement;

● the impact of pending or threatened litigation;

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● the financial performance of the oil and natural gas industry and other general business, industry and economic conditions applicable to us;

● changes to trade regulation, quotas, duties or tariffs and sanctions caused by the changing U.S.

and geopolitical environments, including the tariffs proposed by the current administration and the ongoing conflicts in Ukraine, Israel and Gaza;

● the uncertainty associated with the imposition of tariffs and trade barriers and changes in trade policies;

● the geopolitical environment, including the ongoing conflict in Ukraine;

● corruption risks in the markets where our products are sold;

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

Furthermore, new risks may emerge from time to time and it is not possible for us to predict all risks, nor can we assess the impact of all factors on the business or the extent to which any factor, or combination of factors, may cause actual results, performance or achievement to differ materially from those contained in any forward-looking statements.

Furthermore, new risks may emerge in the future and it is not possible for us to predict all risks, nor can we assess the impact of all factors on the business or the extent to which any factor, or combination of factors, may cause actual results, performance or achievement to differ materially from those contained in any forward-looking statements.

Forward-looking statements speak only as of the date of this Form 10-Q.

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

Capstone Green Energy Holdings, Inc., the successor to Capstone Green Energy Corporation 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.

We are the market leader in microturbine energy systems based on the number of microturbines sold annually and total installed base.

Generally, power purchased from the electric utility grid is less costly than power produced by distributed generation technologies in simple cycle mode.

Utilities may also charge fees to interconnect to their power grids.

Utilities may also charge fees to interconnect with their power grids.

However, when considering and including the waste heat from our microturbine (CHP and CCHP) the economic benefit improves significantly.

Further, our highly efficient, low emission, resilient technology can produce thermal energy at a lower carbon footprint.

These benefits can be especially realized when fuel costs are low, where the costs of connecting to the grid may be high or impractical (such as remote power applications or new grid services need to be provided), where reliability and power quality are of critical importance, or in situations where peak shaving could be economically advantageous because of highly variable electricity prices.

These benefits can be enhanced when fuel costs are low, where the costs of connecting to the grid may be high or impractical (such as remote power applications or new grid services need to be provided), where reliability and power quality are of critical importance, or in situations where peak shaving could be economically advantageous because of highly variable electricity prices.

Our microturbines are an inverter-based technology and can be interconnected to other distributed energy resources to form “microgrids” (also called “distribution networks”) located within a specific geographic area and provide power to a group of buildings.

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We are currently exploring energy conversion options for the smaller end of the power spectrum.

During the three months ended December 31, 2024, we had a net loss of $2.7 million and a basic and diluted net loss per share of $0.14 compared to net income of $24.2 million and basic and diluted net income per share of $1.27 during the three months ended December 31, 2023.

The change in net income (loss) was primarily due to the non-recurring positive effect of the reorganization items of $32.6 million recognized during the three months ended December 31, 2023, offset by an improved gross profit of $2.0 million, driven by a $5.5 million revenue increase, $3.3 million lower total operating expense, $0.3 million increase in other income, and $0.1 million of lower interest expense as compared to the three months ended December 31, 2023.

In the energy efficiency market, we continue to expand our market presence in hotels, office buildings, hospitals, retail, and industrial applications globally.

During the three months ended June 30, 2025, we had a net loss of $0.7 million and a basic and diluted net loss per share of $0.04 compared to net loss of $3.9 million and basic and diluted net loss per share of $0.21 during the three months ended June 30, 2024.

The $3.2 million change in net loss was primarily due to improved gross profit of $3.8 million, driven by the impacts of price increases and lower unit costs offset by $0.4 million higher total operating expenses, and by a $0.2 million decrease in other income as compared to the three months ended June 30, 2024.

In the energy markets, we continue to expand our presence in the energy efficiency, natural resources, renewable energy, critical power, and microgrid power type of applications in the first quarter of Fiscal 2026.

The microgrid market is for electrification demand.

The renewable energy market is fueled by landfill gas, biodiesel and biogas from sources such as food processing, agricultural waste and livestock manure.

Our product sales in the oil and gas and other natural resources market are driven by our microturbines’ reliability, emissions profile and ease of installation.

Given the volatility of the oil and gas market, our business strategy is to ensure diversification by also targeting projects within the energy efficiency and renewable energy markets.

We continue to focus on improving our products based on customer input, building brand awareness and new channels to market by developing a diversified network of strategic distribution partners.

Our focus is on products and

solutions that provide near term opportunities to drive repeatable business rather than discrete projects for niche markets.

Our product sales in the oil and gas and other natural resources market is driven by our microturbines’ reliability, emissions profile and ease of installation.

Given further volatility of the oil and gas market, our business strategy is to continue diversification within the microgrid energy efficiency and renewable energy markets.

We continue to focus on improving our products based on customer input, building brand awareness and bringing new channels to market by developing a diversified network of strategic distribution partners.

Our focus is on products

and solutions that provide near-term and longer-term opportunities to drive repeatable business and larger deal size rather than discrete projects for niche markets.

In addition, management closely monitors operating expenses and strives to improve manufacturing efficiencies while simultaneously lowering direct material costs and increasing average selling prices.

The key drivers to our success are revenue growth, higher average selling prices, lower direct material costs, positive new order flow, reduced cash usage and expansion of the Energy-as-a-Service (“EaaS”) business.

The key drivers to our success are higher average selling prices, lower direct material costs, positive new order flow, reduced cash usage and expansion of the EaaS business.

An overview of our direction, targets and key initiatives are as follows:

Our Energy Conversion Products business line is driven by our industry-leading, highly efficient, low-emission, resilient microturbine energy systems offering scalable solutions in addition to a broad range of customer-tailored solutions.

Our industry-leading, highly efficient, low-emission, resilient microturbine energy systems offer scalable solutions in addition to a broad range of customer-tailored solutions.

We target specific market verticals for these products.

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Within each of these segments, we identify what we believe to be the critical factors to success and base our plans on those factors.

Given the volatility of the oil and gas market, we have refocused our business strategy to principally target projects within the energy efficiency and renewable energy markets.

The following table summarizes our percentage or product revenues by vertical markets for which we had product revenues for the periods presented:

Three Months Ended December 31,

Nine Months Ended December 31,

Given the volatility of the oil and gas market, we have refocused our business strategy to target projects within the energy efficiency, critical power and microgrid markets.

The following table summarizes our percentage of product revenues by vertical markets for which we had product revenues for the periods presented:

Three Months Ended June 30,

Energy efficiency

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Renewable energy

Transportation

Critical power supply

Energy Efficiency—CHP/CCHP

Energy efficiency refers to the proper utilization of both electrical and thermal energies in the power production process.

In such applications, our microturbines are designed to maximize the availability of usable energy to provide a significant economic advantage to our customers while reducing their on-site emissions.

CHP and CCHP can improve site economics by capturing the waste heat created from a single combustion process to increase the efficiency of the total system, from approximately 30% to approximately 85% for hot water and chilled water to as much as 90% or more for some steam and direct drying applications.

In such applications, our microturbines are designed to maximize the availability of usable energy to provide a significant economic advantage to customers while reducing their on-site emissions.

Compared with more traditional, independent generation sources, the increase in operational efficiency also reduces greenhouse gas emissions through the displacement of other separate systems, which can also reduce operating costs and industrial waste.

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There are numerous locations, on a global scale, where the drilling, production, compression and transportation of natural resources and other extraction and production processes create fuel byproducts, which are traditionally burned or released into the atmosphere.

Our microturbines can turn these fuel byproducts, such as flare gas, or associated gas, into useable fuel to provide prime power to these sites.

Our microturbines can turn these fuel byproducts, such as flare gas or sour gas, into a useable fuel to provide prime power to these sites.

Renewable Energy

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Because of the potentially catastrophic consequences of system failure, momentary or otherwise, certain high -demand power users, including high technology, health care and information systems facilities, require higher levels of reliability in their power generation service.

The majority of microturbine-based distributed generation installations have powered through hurricanes with little or no downtime.

To meet these customer requirements, traditional solutions utilize Uninterruptible Power Supplies (“UPS”) to protect critical loads from power disturbances along with back-up diesel generators for extended outages.

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In this case, the microturbines remain in grid connect mode while the rotary UPS stabilizes the utility voltage and provides a seamless transfer from operation connected to the grid to operation isolated from the grid.

Microgrid is a group of interconnected loads and distributed energy resources that acts as a single controllable energy entity with respect to the grid.

Microgrid is a group of interconnected loads and distributed energy resources that act as a single controllable energy entity with respect to the grid.

Distributed energy resources typically include other dual-mode microturbines, reciprocating engines, solar photovoltaic (PV), wind turbines, fuel cells and battery storage.

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however, in the event of a widespread outage, the microgrid will disconnect from the main grid and continue to operate independently to maintain the electricity supply to the homes and businesses that are connected to the microgrid’s electricity network.

Our microturbines have the ability to meet the needs of microgrid end-users by lowering their overall cost to operate and by providing versatile dispatchable technology that is fuel flexible and scalable enough to fit a wide variety of applications.

Our microturbines are designed to meet the needs of microgrid end users by lowering their overall cost to operate and by providing a versatile dispatchable technology that is fuel flexible and scalable enough to fit a wide variety of applications.

We have seen continued development in the microgrid market segment.

Transportation

Our technology can also be used to support Electric Vehicle (“EV”) market by providing power solutions to charge vehicles.

Our products can fill a void in the EV market for vehicle charging capacity and charging convenience.

Our technology can also be used to support the Electric Vehicle (“EV”) market by providing power solutions to charge vehicles.

Our products can fill a void in the EV market for vehicle charging capacity and convenience.

Our customers have applied our products in EV applications for fleets and remote location charging stations.

We are continuing to pursue global EV charging opportunities to fill the demand for power in this market segment .

Net product orders were approximately $24.1 million and $5.9 million for the three months ended December 31, 2024 and 2023, respectively.

Ending backlog was approximately $26.8 million at December 31, 2024, compared to $14.2 million at March 31, 2024.

The book-to-bill ratio was 3.05:1 and 1.2:1 for the three months ended December 31, 2024 and 2023, respectively.

Net product orders were approximately $16.5 million and $3.4 million for the three months ended June 30, 2025 and 2024, respectively.

Ending backlog was approximately $24.6 million at June 30, 2025, compared to $12.4 million at June 30, 2024.

The book-to-bill ratio was 1.07:1 and 0.7:1 for the three months ended June 30, 2025 and 2024, respectively.

Book-to-bill ratio is the ratio of new orders we received to units shipped and billed during a period.

A portion of the backlog is subject to project schedules and supply chain limitations, whist are outside the control of the Company.

Additionally, the timing of shipments is subject to change based on several variables (including customer deposits, payments, availability of credit and customer delivery schedule changes), most of which are not in our control and can affect the timing of our revenue.

As a result, management believes the book-to-bill ratio demonstrates the current demand for our products in the given period.

Sales and Distribution Channels We seek out distributors that have business experience and capabilities to support our growth plans in our targeted markets.

The timing of the backlog is based on the requirement date indicated by our customers and part availability.

However, based on historical experience, management expects that a portion of our backlog may not be shipped within the next 12 months.

Additionally, the timing of shipments is subject to change based on several variables (including customer deposits, payments, availability of credit and customer delivery schedule changes), most of which are not within our control and can affect the timing of our revenue.

As a result, management believes the book-to-bill ratio reflects the current demand for our products in the given period.

Sales and Distribution Channels We seek out distributors that have business experience and capabilities to support our growth plans in our target markets.

A significant portion of our revenue is derived from sales to distributors that resell our products to end users.

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We continue to refine our distribution channels to address our specific targeted markets.

Service As part of our EaaS business line, we provide service primarily through our global distribution network.

Together with our global distribution network, we offer a comprehensive factory protection plan for a fixed fee to perform regularly scheduled and unscheduled maintenance as needed.

Service As part of our EaaS business line, we provide services primarily through our global distribution network.

Together with our global distribution network, we offer a comprehensive factory protection plan (“FPP”) for a fixed fee to perform regularly scheduled and unscheduled maintenance as needed.

We provide factory and on-site training to certify all personnel that are allowed to perform service on our microturbines.

Factory protection plans (“FPPs”) are generally paid quarterly in advance.

We offer new and remanufactured parts through our global distribution network.

Parts and Services revenue in the three months ended December 31, 2024 and 2023 was approximately 37% and 46% of total revenue, respectively.

Parts and Services revenue during the nine months ended December 31, 2024 and 2023 was approximately 40% and 35% of total revenue, respectively.

FPPs are generally paid quarterly in advance.

Product Robustness and Life Cycle Maintenance Costs We continue to invest in enhancements that relate to high performance and high reliability.

An important element of our continued innovation and product strategy is to focus on the engineering of our product hardware and electronics to make them work together more effectively and deliver improved microturbine performance, reliability and low maintenance costs to our customers.

New Product Development Our new product development is targeted specifically to meet the needs of our selected vertical markets.

We expect that our existing product platforms, the C65, C200, C600, C800 and C1000S Series microturbines, will be our foundational product lines for the foreseeable future.

Our research and development project portfolio are centered on enhancing the features of these base products.

We have continued to develop our new hydrogen products.

In March 2022, we released a commercially available hydrogen-based combined heat and power product, which can safely run on a 30% hydrogen-70% natural gas mix.

In continuing these efforts, we are testing a 100% hydrogen gas combustion system through our research and development partnership with Argonne National Laboratory.

Cost and Core Competencies We believe that the core competencies of our products are our recuperator design, air-bearing technology, advanced combustion technology and sophisticated power electronics to form efficient and ultra-low emission electricity and cooling and heat production systems.

Our core intellectual property is contained within our air-bearing technology.

New Product Development Our new product development strategy focuses on meeting the specific needs of our target vertical markets.

Our C65, C200, C600, C800, and C1000S Series microturbines will continue to be our foundational product lines.

Our research and development efforts are primarily directed at enhancing the features and capabilities of these existing products.

To bolster power resilience, we are developing Direct Current (“DC”) output power solutions utilizing our core microturbine technology.

This advancement will broaden our applications, allowing our microturbine solutions to be deployed in markets such as EV charging without requiring synchronization with traditional high-voltage Alternating Current (“AC”) utility grids.

This offering will also provide a bridge during the rigorous process of grid interconnect certification from nationally recognized test laboratories.

We are also collaborating with industry leaders to create autonomous power solutions.

These solutions are designed to anticipate overload conditions and proactively supplement insufficient grid resources with readily available microturbine power.

Additionally, we are accelerating the development of onboard remote monitoring systems that are designed to ensure reliable power service and asset telemetry through cloud-based features, significantly improving the user experience.

We are committed to advancing our hydrogen product line.

In March 2022, we launched a commercially available hydrogen-based combined heat and power (CHP) product capable of operating safely on a 30% hydrogen / 70% natural gas mixture.

Building on this progress, we are currently testing a 100% hydrogen gas combustion system through our research and development partnership with Argonne National Laboratory.

Following the successful operation of the C65 model, we are now working towards qualifying a 100% hydrogen-fueled C200 engine.

Cost and Core Competencies We believe that the core competencies of our products are our recuperator design and air bearing technology, advanced combustion technology and sophisticated power electronics to form efficient and ultra-low emission electricity and cooling and heat production systems.

Our core propriety technology is contained within our air bearing technology.

We continue to review avenues for cost reduction by sourcing from the best value supply chain option.

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Additionally, considerable effort is being directed to manufacturing cost reduction through process improvement, product design, advanced manufacturing technology, supply management and logistics.

Management expects to be able to leverage our costs as product volumes increase.

Management expects to be able to lower our costs as product volumes increase.

Our manufacturing designs include the use of conventional technology, which has been proven in high-volume automotive and turbocharger production for many years.

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however, certain items are custom made to meet our specifications and require longer lead times.

We believe that in most cases, adequate capacity exists at our suppliers and that alternative sources of supply are available or could be developed within a reasonable period of time;

however, it may be more challenging to transition to another supplier from single source suppliers with long lead times.

We believe that in most cases, adequate capacity exists at our suppliers and that alternative sources of supply are available or could be developed within a reasonable period of time, however, it may be more challenging to transition to another supplier from single source suppliers with long lead times.

We regularly reassess the adequacy and abilities of our suppliers to meet our future needs.

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Our discussion and analysis of our financial condition and results of operations is based upon our Condensed Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

The preparation of these Condensed Consolidated Financial Statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, and expenses

and related disclosures of contingent liabilities.

On an ongoing basis, we evaluate our estimates, including but not limited to those related to inventories, credit losses and redeemable noncontrolling interests valuations.

We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

The preparation of these Condensed Consolidated Financial Statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, and expenses and related disclosures of contingent liabilities.

On an ongoing basis, we evaluate our estimates, including but not limited to those related to credit losses, inventories, warranty obligations, redeemable noncontrolling interest valuation and stock-based compensation.

We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances.

The results of these estimates and assumptions which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

Actual results may differ from these estimates under different assumptions or conditions.

Critical accounting estimates are defined as follows:

We consider an accounting estimate to be critical if:

(1) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and (2) changes in the estimate that are reasonably likely to occur from period to period, or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations.

Item 7 of our Annual Report on Form 10-K for the fiscal year ended March 31, 2024 describe the significant accounting estimates used in the preparation of our Condensed Consolidated Financial Statements.

Item 7 of our Annual Report on Form 10-K for the fiscal year ended March 31, 2025 describes the significant accounting estimates used in the preparation of our Condensed Consolidated Financial Statements.

Results of Operations

Three Months Ended December 31, 2024 and 2023

Three Months Ended June 30, 2025 and 2024

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

Three Months Ended December 31,

Three Months Ended June 30,

United States and Canada

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Total Revenue

Revenue for the three months ended December 31, 2024 increased $5.5 million to $20.1 million from $14.6 million for the three months ended December 31, 2023.

The $5.5 million increase was primarily driven by increases in revenue of $3.8 million in the United States and Canada, $1.4 million in Latin America and $0.7 million in Europe, offset by a decrease in revenue of $0.5 million in Asia and Australia.

The increases in the United States and Canada, Latin America and Europe was due to increased microturbine product, parts and rental demand.

The decrease in Asia and Australia were primarily due to decreases in product deliveries for projects in those regions during the three months ended December 31, 2024.

Revenue for the three months ended June 30, 2025 increased $12.3 million to $27.9 million from $15.6 million for the three months ended June 30, 2024.

The increase was primarily driven by increases in revenue of $14.1 million in the United States and Canada and $0.8 million in Latin America, offset by a decrease in revenue of $1.4 million in Europe, $1.1 million in Asia and Australia and $0.1 million in Middle East and Africa.

The increases in the United States and Canada, Latin America and Europe were due to increased microturbine product, parts and rental demand.

The decrease in Europe, Asia and Australia were primarily due to decreases in microturbine deliveries for projects in those regions during the three months ended June 30, 2025.

The following table summarizes our revenue (revenue amounts in millions):

Three Months Ended December 31,

Three Months Ended June 30,

Microturbine Product

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Total Revenue

For the three months ended December 31, 2024, revenue from microturbine products and accessories increased $3.0 million, or 58%, to $8.2 million from $5.2 million for the three months ended December 31, 2023.

The $3.0 million increase was driven primarily by a 2.1 megawatts shipped increase during the three months ended December 31, 2024, compared to the three months ended December 31, 2023.

Average revenue per megawatt shipped was approximately $1.3 million and $1.2 million during the three months ended December 31, 2024 and 2023, respectively.

The timing of shipments is variable and based on several factors (including customer deposits, payments, availability of credit and delivery schedule changes), most of which are not within our control and can affect the timing of revenue recognition.

Parts, service and rentals revenue (which are part of our EaaS business line and includes revenue from our parts shipments, factory protection plan (“FPP”) contracts, rentals, and other service revenue) increased $2.5 million, or 27%, to $11.9 million for three months ended December 31, 2024 from $9.4 million for the three months ended December 31, 2023.

The $2.5 million increase was primarily due to increases in our part shipments and rentals due to our growing EaaS business line as our distributors increase their sales.

Parts and services revenue also increased due to order timing and improved parts availability.

E -Finity Distributed Generation (“E-Finity”), Lone Star Power Solutions, LLC (“Lone Star”) and Cal Microturbine, three of our domestic distributors, accounted for 15%, 14% and 11% of revenue for the three months ended December 31, 2024, respectively.

Cal Microturbine, accounted for 17% of revenue for the three months ended December 31, 2023.

For the three months ended June 30, 2025, revenue from microturbine products and accessories increased $10.3 million, or 191%, to $15.7 million from $5.4 million for the three months ended June 30, 2024.

The $10.3 million increase was driven primarily by product mix, with the 4.5 megawatts increase in shipments during the three months ended June 30, 2025, including increased demand for our C1000 turbines, compared to the three months ended June 30, 2024.

Average revenue per megawatt shipped was approximately $1.8 million and $1.3 million during the three months ended June 30, 2025 and 2024, respectively.

The increase in revenue per megawatt resulted from price increases and product mix.

Parts and service revenue, which are part of our EaaS business line and includes revenue from our spare parts shipments, FPP contracts, and other service revenue, for the three months ended June 30, 2025, was consistent with increased revenues of $0.2 million, or 3%, to $8.0 million from $7.8 million for the three months ended June 30, 2024.

Rentals revenue for three months ended June 30, 2025 increased $1.8 million or 75%, to $4.2 million from $2.4 million for the three months ended June 30, 2024.

This increase was driven by growth in rental utilization and increased rental prices.

Sales to Cal Microturbine and Lone Star Power Solutions, LLC (“Lone Star”), two of the Company’s domestic distributors, accounted for 47% and 10% of revenue for the three months ended June 30, 2025, respectively.

Lone Star, Cal Microturbine and E-Finity Distributed Generation (“E-Finity”), three of the Company’s domestic distributors and Optimal Group Australia Pty Ltd, one of the Company’s international distributors, accounted for 16%, 13%, 11% and 11% of revenue for the three months ended June 30, 2024, respectively.

Gross Profit Cost of goods sold includes direct material costs, production and service center labor and overhead, inventory charges and provision for estimated product warranty expenses.

Gross profit was $5.0 million, or 25% of revenue for the three months ended December 31, 2024, compared to a gross profit of $3.0 million, or 21% of revenue for the three months ended December 31, 2023.

The improvement was primarily the result of an increase in product sales volume and pricing, lower warranty charges and decreases in production and service center labor and overhead expenses.

Effective March 2024, we increased our sales prices and are negotiating with vendors to reduce material costs.

Gross profit was $7.6 million, or 27% of revenue for the three months ended June 30, 2025, compared to a gross profit of $3.8 million, or 24% of revenue for the three months ended June 30, 2024.

The improvement was primarily the result of an increase in product sales volume and the full effect of an increase in pricing and decreases in production and service center labor and overhead expenses.

Effective March 2024, we increased our sales prices and we are continually negotiating to reduce material costs with vendors.

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

Three Months Ended December 31,

Three Months Ended June 30,

Product and accessories

As a percentage of product and accessories revenue

Parts, services and rentals

As a percentage of parts, services and rentals revenue

Total gross profit

The improvement of $0.6 million in product and accessories gross profit was primarily due to an increasing revenue per megawatt, as a result of previously announced product price increases, while decreasing the cost per megawatt.

Product and accessories gross margin as a percentage of product and accessories revenue increased to (10)% during the three months ended December 31, 2024, from (27)% during the three months ended December 31, 2023, primarily due to increased megawatts sold and a favorable product sales mix for the three months ended December 31, 2024.

Parts, services and rentals gross margin as a percentage of parts and service revenue increased to 49% during the three months ended December 31, 2024, compared to 47% during the three months ended December 31, 2023, primarily as a result of increased gross profit of $1.8 million of rentals the three months ended December 31, 2024.

Research and Development (“R&D”) Expenses R&D expenses were $0.7 million and $0.6 million during the three months ended December 31, 2024 and 2023, respectively.

Selling, General, and Administrative (“SG&A”) Expenses SG&A expenses decreased $3.4 million, or 35%, to $6.3 million for the three months ended December 31, 2024, from $9.7 million for the three months ended December 31, 2023, primarily due to a $2.4 million reduction of legal and accounting fees for the restatement and restructuring activities and a $1.4 million decrease in stock-based compensation expense.

Interest Expense Interest expense for the three months ended December 31, 2024 and 2023 was $1.0 million and $1.1 million, respectively, reflecting a decline in interest rates.

Nine Months Ended December 31, 2024 and 2023

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

Nine Months Ended December 31,

United States and Canada

Latin America

Asia and Australia

Middle East and Africa

Total Revenue

Revenue for the nine months ended December 31, 2024, decreased $8.4 million to $58.5 million from $66.9 million for the nine months ended December 31, 2023.

The $8.4 million decrease was primarily driven by decreases in revenue of $5.7 million in Europe, $2.8 million in Asia and Australia, and $0.7 million in the United States and Canada.

The decrease was offset by an increase in revenue of $0.5 million in Latin America and $0.3 million in the Middle East and Africa.

The decreases in Europe, Asia and Australia and the United States and Canada w ere primarily due to lower product deliveries for projects in those regions during the nine months ended December 31, 2024.

The increases in Latin America and i n the Middle East and Africa was primarily due to an increase in our parts shipments to the region, compared to the nine months ended December 31, 2023.

The following table summarizes our revenue (revenue amounts in millions):

Nine Months Ended December 31,

Microturbine Product

Total Product and Accessories

Parts and services

Total Revenue

For the nine months ended December 31, 2024, revenue from microturbine products and accessories decreased by $8.6 million, or 26%, to $24.9 million from $33.5 million for the nine months ended December 31, 2023.

The $8.6 million decrease was primarily driven by a decrease of 10.3 in megawatts shipped during the nine months ended December 31, 2024, compared to the nine months ended December 31, 2023.

Average revenue per megawatt shipped was approximately $1.4 million and $1.2 million during the nine months ended December 31, 2024 and 2023, respectively, which resulted from the previously announced product price increases.

Parts, service and rentals revenue (which are part of our EaaS business line and includes revenue from our parts shipments, FPP contracts, rentals and other service revenue) increased $0.2 million, or 1%, to $33.6 million for the nine months ended December 31, 2024, from $33.4 million for the nine months ended December 31, 2023, due to an increase in our rental and service contracts revenue of $1.0 million as a result of increased sales from our EaaS business line distributors and a $0.4 million increase in parts revenue, offset by a $1.2 million of DSS fees reported in revenue during the nine months ended December 31, 2023.

Those fees are being recorded as Other Income for the nine months ended December 31, 2024.

E-Finity and Lone Star accounted for 16% and 13% of revenue for the nine months ended December 31, 2024, respectively.

E-Finity and Cal Microturbine accounted for 14% and 11% of revenue for the nine months ended December 31, 2023, respectively.

Gross Profit Cost of goods sold includes direct material costs, production and service center labor and overhead, inventory charges and provision for estimated product warranty expenses.

Gross profit was $15.8 million, or 27% of

revenue for the nine months ended December 31, 2024, compared to a gross profit of $11.7 million, or 18% of revenue for the nine months ended December 31, 2023.

The increase was primarily the result of an increase in product pricing, parts pricing and rental pricing, lower warranty and inventory charges and lower production and service center labor and overhead expense.

Effective March 2024, we increased our sales prices and are negotiating with vendors to reduce material costs.

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

Nine Months Ended December 31,

Product and accessories

As a percentage of product and accessories revenue

Parts, services and rentals

As a percentage of parts, services and rentals revenue

As a percentage of parts and services revenue

As a percentage of rentals revenue

Total gross profit

As a percentage of total revenue

Product and accessories gross margin as a percentage of product and accessories revenue increased to (3)% during the nine months ended December 31, 2024, from (8)% during the nine months ended December 31, 2023, primarily due to increased revenue per megawatt in the nine months ended December 31, 2024.

Parts, services and rentals gross margin as a percentage of parts and service revenue increased to 49% during the nine months ended December 31, 2024, compared to 43% during the nine months ended December 31, 2023, primarily as a result of increases in parts price, rental price, rental utilization and lower overhead costs in the nine months ended December 31, 2024.

Research and Development (“R&D”) Expenses R&D expenses were $1.9 million during both the nine months ended December 31, 2024 and 2023.

Selling, General, and Administrative (“SG&A”) Expenses SG&A expenses decreased $6.2 million, or 24%, to $19.5 million for the nine months ended December 31, 2024, from $25.7 million for the nine months ended December 31, 2023, primarily due to a $3.4 million reduction of legal and accounting fees for the restatement and restructuring activities and a $1.7 million decrease in stock-based compensation expense.

Interest Expense Interest Expense for the nine months ended December 31, 2024 and 2023 was $3.0 million and $4.6 million, respectively, resulting from the Company’s lower debt level following the December 2023 restructuring.

The improvement of $1.8 million in product and accessories gross profit was primarily due to higher product pricing, improved cost efficiencies, high volume and product mix.

Product and accessories gross margin as a percentage of product and accessories revenue improved to 8% during the three months ended June 30, 2025, from negative 11% during the three months ended June 30, 2024, primarily due to higher product volume and revenue for the three months ended June 30, 2025.

Parts and services gross margin as a percentage of parts and service revenue decreased to 53% during the three months ended June 30, 2025, compared to 56% during the three months ended June 30, 2024, primarily as a result additional cost for service during the three months ended June 30, 2025.

Rentals gross margin as a percentage of rental revenue increased to 52% for the three months ended June 30, 2025, compared to 0% for the three months ended June 30, 2024, primarily due to increased rental pricing and utilization.

Research and Development (“R&D”) Expenses R&D expenses were $0.8 million and $0.5 million during the three months ended June 30, 2025 and 2024, respectively, and was 3% and 4% of revenue for the three months ended June 30, 2025, and 2024, respectively.

During the three months ended June 30, 2025 as R&D programs for new product development and product enhancements expanded.

Selling, General, and Administrative (“SG&A”) Expenses SG&A expenses were $6.9 million and $6.8 million during the three months ended June 30, 2025 and 2024, respectively, and was 25% and 43% of revenue for the three months ended June 30, 2025, and 2024, respectively.

Other Income Other income was $0.4 million and $0.6 million during the three months ended June 30, 2025 and 2024.

Interest Income.

Interest income was $0.1 million and less than $0.1 million during the three months ended June 30, 2025 and 2024, respectively..

Interest Expense Interest expense was $1.0 million during both the three months ended June 30, 2025 and 2024.

Liquidity and Capital Resources

Our cash requirements depend on many factors, including the execution of our business strategy and plan.

Our cash and cash equivalents balance increased $1.2 million during the nine months ended December 31, 2024, primarily due to net cash provided by operating activities, partially offset by cash used in investing and financing activities.

Operating Activities During the nine months ended December 31, 2024, $2.2 million in cash was provided by our operating activities, which consisted of a net loss for the period of $7.1 million, changes in operating assets and liabilities of $0.7 million and offset by non-cash adjustments of $10.0 million.

For the nine months ended December 31, 2023, $22.1 million in cash was used in operating activities, which consisted of net income of $12.7 million, non-cash adjustments of $9.4 million, offset by $35.3 million in non-cash reorganization items and $8.7 million change in operating assets and liabilities.

Non-cash charges consist of primarily of depreciation and amortization, non-cash lease expenses and paid-in-kind (“PIK”) interest, and stock-based compensation.

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

Nine Months Ended December 31,

Net income (loss)

Our cash and cash equivalents balance decreased $2.0 million during the three months ended June 30, 2025, compared to an increase in cash of $1.9 million during the three months ended June 30, 2024.

The decrease in cash during the three months ended June 30, 2025 was primarily due to net cash used in operating activities.

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

For the three months ended June 30, 2024, net cash provided by operating activities was $2.1 million, consisting of net loss of $3.9 million, offset by changes in operating assets and liabilities of $2.8 million and non-cash adjustments, primarily representing depreciation and amortization, non-cash lease expense and paid-in-kind interest expense, of $3.2 million.

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

Three Months Ended June 30,

Non-cash operating activities(1)

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Accounts receivable

Accounts payable and accrued expenses

Lease receivable

Accounts payable

Accrued expenses

Operating lease liability, net

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Net cash provided by (used in) operating activities

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

The change in non-cash operating activities during the nine months ended December 31, 2024, compared to the nine months ended December 31, 2023, was primarily due to a decrease in non-cash reorganization expenses of $35.3 million.

The $4.3 million of cash provided from inventory during the nine months ended December 31, 2024, was the result of improved supply chain management from reduced lead times for parts and the sale of rental equipment returned to inventory, compared to the $6.6 million of cash provided from inventory during the nine months ended December 31, 2023, primarily due to the reduction in finished goods inventory levels.

The change in accounts receivable was primarily the result of reduced revenue and collections during the nine months ended December 31, 2024, compared to the nine months ended December 31, 2023.

The change in effect of payable and accrued expenses was primarily due to establishing a normal payment rate to vendors during the nine months ended December 31, 2024, compared to the nine months ended December 31, 2023 when vendor payments were accelerated to be in line with their terms.

The change in other operating assets and liabilities during the nine months ended December 31, 2024, compared to the nine months ended December 31, 2023, was primarily due to the decreases in deferred revenue attributable to customer deposits and the removal of the DSS service fees .

Investing Activities Net cash used in investing activities of $0.8 million and $4.6 million during the nine months ended December 31, 2024 and 2023, respectively, was primarily due to investments in operating and rental fleet assets, respectively.

Financing Activities Net cash used in financing activities during the nine months ended December 31, 2024, was used for repayment of finance lease obligations.

The funds generated from financing activities during the nine months ended December 31, 2023 were primarily the result of $12.0 million of funding under the DIP Facility, cash of $3.0 million received from the issuance of additional pre-petition senior secured notes under the A&R Note Purchase Agreement during the second quarter of Fiscal 2024 and $3.0 million of funding under the Exit Facility during the third quarter of Fiscal 2024, partially offset by issuance costs of $0.2 million.

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

The $3.4 million increase in use of cash in accounts receivable resulted from the timing of sales in the three months ended June 30, 2025 and 2024.

The $1.8 million decrease in cash provided by accounts payable resulted from the timing of payment of trade accounts.

The $0.5 million increase in cash provided by accrued expenses was primarily due to a decrease in legal accrual and accrued sponsorship related to litigation that has since been resolved.

The $0.2 million decrease in use of cash by operating lease liability was primarily due to a decrease in lease liability.

The $0.6 million decrease in cash provided from prepaid and other assets is primarily the result of usage of prepaid inventory.

The $1.5 million increase in cash provided by FFP liability was primary driven by an increase in value of new claims outpacing the fulfillment of claims.

The $3.2 million increase in cash used in other operating assets and liabilities, was primarily driven by an increase in cash used in deferred revenue of $3.8 million primarily driven by increased shipments in the three months ended June 30, 2025 compared to the three months ended June 30, 2024, lowering attributable customer deposits, and decrease in FPP deferred revenue, offset by $0.6 increase in cash provided in accrued salaries and wages and other long term liabilities primarily driven by the Company’s Annual Incentive Program (“AIP”) bonus accrual in the three months ended June 30, 2025.

There were no significant changes in inventory or lease receivable.

Investing Activities Net cash used in investing activities was $0.1 million during the three months ended June 30, 2025 and 2024, respectively, primarily due to investments in operating assets.

Financing Activities Net cash used in financing activities of $0.3 million and $0.1 million during the three months ended June 30, 2025 and 2024, respectively, was used for repayment of finance lease obligations.

Additionally, during the three months ended June 30, 2025 there was the accumulation of treasury stock resulting from the tax withholdings of employee stock vesting.

Debt Refer to Note 8— Debt in the Notes to Condensed Consolidated Financial Statements (Part I, Item 1 of this Form 10-Q) for information related to our notes.

Lease Commitments Refer to Note 9— Leases in the Notes to Condensed Consolidated Financial Statements for information related to our leases.

Going Concern In connection with preparing the Condensed Consolidated Financial Statements for the nine months ended December 31, 2024, management evaluated whether there were conditions and events, considered in the aggregate, that raised substantial doubt about our ability to meet our obligations as they became due for the next twelve months from the date of issuance of our financial statements.

As of December 31, 2024, we had cash of $3.3 million, and a working capital deficit of $15.6 million.

We incurred a net loss of $7.1 million during the nine months ended December 31, 2024.

On September 28, 2023, we filed for a prepackaged financial restructuring with our senior lender, Goldman Sachs under the U.S.

Chapter 11 Bankruptcy laws.

We emerged from bankruptcy on December 7, 2023, and effected a financial and organizational restructuring.

Given its current cash position, lack of liquidity, limits to accessing capital and debt funding options, current economic and market risks, and the continued impact of the Chapter 11 Bankruptcy and the Reorganization on customer and vendor relationships, 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 December 31, 2024.

New Accounting Pronouncements

Refer to Note 3— Recently Issued Accounting Pronouncements in the Notes to Condensed Consolidated Financial Statements (Part I, Item 1 of this Form 10-Q) for information regarding new accounting standards.

Going Concern In connection with the preparation of the Condensed Consolidated Financial Statements for the three months ended June 30, 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 become due over the next twelve months from the date of the issuance of the financial statements.

As of June 30, 2025, the Company had cash

of $6.6 million and a working capital deficit of $14.2 million.

The Company incurred a net loss of $0.7 million during the three months ended June 30, 2025.

A robust plan to improve the Company’s future financial performance has been developed.

The plan includes multiple process improvement workstreams directed to drive operational and financial performance.

The process improvement initiatives are supported with external resources with the needed specific level of expertise.

The plan includes cost reduction in products, services and operating expenses, margin expansion through price increases, and sales volume initiatives focused on improving the Company’s liquidity.

Achieving the targeted product cost reductions has risk, and is being challenged by the current geopolitical environment, including the impact of tariffs.

There is no guarantee that such steps will be successful, or to result in our ability to meet our payment obligations coming due within the twelve month period after the date of this report.

The Company has initiated financing discussions with its advisors to refinance the New Money Note and add additional liquidity.

There is not guarantee that the Company will be successful in it is financing efforts.

Given the Company’s current cash position, lack of liquidity, short term debt repayments, limits to accessing capital and debt funding options and current economic and market risks, there exists 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 June 30, 2025

New Accounting Pronouncements Refer to Note 3— Recently Issued Accounting Pronouncements in the Notes to Condensed Consolidated Financial Statements (Part I, Item 1 of this Form 10-Q) for information regarding new accounting standards.

Quantitative and Qualitative Disclosures about Market Risk

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What changed 10-Q

Item 2. Management’s Discussion and Analysis