Financial Analysis

20 . Business Combinations Acquisition of Cal Microturbine, LLC On August 13, 2025, the Company entered into an Equity Purchase Agreement (the Purchase Agreement) to acquire 100% of the equity interests of Cal Microturbine for total consideration of approximately $14.9 million, which was comprised of $6.0 million cash paid at closing, $3.4 million in deferred consideration, and the settlement of preexisting relationships of $5.5 million. The acquisition expands the Companys direct distribution and service capabilities in key markets and is expected to enhance operational efficiencies and customer reach. The transaction closed on August 13, 2025 (Closing Date) and was funded using available cash on hand. The table below summarizes the total consideration transferred at the Closing Date (in thousands): As of the Closing Date Cash paid at close $ 5,951 Deferred consideration (1) 3,427 Settlement of preexisting relationships (2) 5,538 Total consideration $ 14,916 (1) The deferred consideration reflects cash payments of $4.0 million which will be distributed over 24 monthly installments starting in January 2026. These payments were discounted to their present value using an 11.45% discount rate. (2) The settlement of preexisting relationships reflects the resolution of outstanding accounts receivable and deferred revenue balances between Capstone and Cal Microturbine that existed as of the Closing Date. In accordance with ASC 805-10-25-20, this settlement was accounted for separat …

BusinessCombinationDisclosureTextBlock · excerpt; the full note is in the filing

"11. Debt Exit Facility Agreement On December 7, 2023, in connection with the Company's emergence from Chapter 11 bankruptcy, the Company entered into a Note Purchase Agreement (the ""Exit Note Purchase Agreement"") for an aggregate principal amount of $28.1 million, consisting of $21.1 million of Exit Roll Up Notes (including accrued and unpaid interest and commitment fees) and $7.0 million of Exit New Money Notes (together, the ""Exit Notes""). The Exit Note Purchase Agreement was entered into by and among Capstone Green Energy LLC (the ""Operating Subsidiary""), as issuer, the Company and Capstone Turbine Financial Services, LLC, as guarantors (the ""Guarantors""), Capstone Distributor Support Services Corporation (""CDSS""), as Purchaser, and Goldman Sachs Specialty Lending Group, L.P. (""Goldman Sachs""), as Collateral Agent. The Exit Notes bear interest at Adjusted Term SOFR plus 7.00% per annum. A portion of the interest accrues as paid-in-kind (""PIK"") through the third year following the closing date of December 7, 2023. The Exit Note Purchase Agreement also provided for a $10.0 million uncommitted incremental facility, which remained undrawn as of March 31, 2026. The Exit Notes are secured by a lien on substantially all of the present and future property and assets of the Operating Subsidiary and each Guarantor, subject to customary exceptions and exclusions. The Exit Note Purchase Agreement includes customary representations and warranties, affirmative and negativ …

DebtDisclosureTextBlock · excerpt; the full note is in the filing

Year Ended March 31, 2026 2025 Microturbine Products $ 53,929 $ 36,732 Accessories 2,113 2,240 Total Product and Accessories 56,042 38,972 Parts and Service 33,200 30,877 Total ASC 606 Revenue 89,242 69,849 Microturbine Products 907 1,309 Rentals 15,855 14,406 Total ASC 842 Revenue 16,762 15,715 Total Revenue $ 106,004 $ 85,564 …

DisaggregationOfRevenueTableTextBlock · excerpt; the full note is in the filing

"9. 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. The asset or liabilitys fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair …

FairValueDisclosuresTextBlock · excerpt; the full note is in the filing

18. Income Taxes Income (loss) before provision for income taxes consisted of the following for the years ended March 31, 2026 and 2025 (in thousands): Year Ended March 31, 2026 2025 United States $ 2,706 $ (7,066) Foreign 65 51 Income (loss) before provision for income taxes $ 2,771 $ (7,015) The current income tax provision represents income taxes reported or expected to be reported on the Company's federal, state, and foreign income tax returns for the respective periods. The Company has recorded a full valuation allowance against its net deferred tax assets. The components of the provision for income tax expense (benefit) are as follows for the years ended March 31, 2026 and 2025 (in thousands): Year Ended March 31, 2026 2025 Current: Federal $ (19) $ 85 State (16) 61 Foreign (19) 29 (54) 175 Deferred: Federal State Foreign Total income tax expense (benefit) $ (54) $ 175 Actual income tax expense differed from the amount computed by applying statutory corporate income tax rates to income from operations before income taxes. A reconciliation of income tax expense (benefit) to the U.S. federal statutory rate, presented in accordance with ASU 2023-09, follows (in thousands, except percentages): Year Ended March 31, 2026 Amount Percent Federal income tax at the statutory rate $ 582 21.0% State and local taxes, net of federal income tax effect (1) (13) (0.5)% Foreign tax effects United Kingdom Statutory tax rate difference between United Kingdom and United States 16 0.6% Other …

IncomeTaxDisclosureTextBlock · excerpt; the full note is in the filing

"12. Commitments and Contingencies Purchase Commitments As of March 31, 2026 the Company had firm commitments to purchase inventories of approximately $49.3 million through Fiscal 2029. 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 inventory. Lease Commitments Refer to Note 10 Leases. Related Party Transactions On December 7, 2023 (the ""Effective Date""), in connection with the Company's emergence from Chapter 11 bankruptcy, certain assets of the predecessor entity (""Reorganized PrivateCo) including the Company's trademarks and distributor support services business were retained by Reorganized PrivateCo and held by Capstone Distributor Support Services Corporation (""CDSS""), an entity controlled by Goldman Sachs. A series of agreements were entered into on the Effective Date governing the relationship between the Company and CDSS, as described below. On March 31, 2026, in connection with the closing of the March 2026 PIPE (see Note 15) the Company completed a series of transactions that substantially unwound these related party arrangements, as further described below. Reorganized PrivateCo Services Agreement On the Effective Date, the Operating Subsidiary entered into a Services Agreement with Reorganized PrivateCo (the ""Reorganized PrivateCo Services Agreement""), pursuant to which Reorganized PrivateCo provided the Operating Subsidiary's d …

LegalMattersAndContingenciesTextBlock · excerpt; the full note is in the filing

Impact of Recently Issued Accounting Standards Adopted In December 2023, the FASB issued ASU No. 2023-09, Income Taxes: Improvements to Income Tax Disclosures (Topic 740). The standard requires enhanced annual disclosures primarily related to the rate reconciliation and income taxes paid, intended to improve the transparency and decision usefulness of income tax disclosures. The Company adopted this standard for the fiscal year ended March 31, 2026, on a prospective basis . The adoption resulted in enhanced disclosures within Note 18 Income Taxes. The adoption did not have an impact on the Company's consolidated financial position, results of operations, or cash flows. Prior-period amounts were not recast and continue to be presented in accordance with the accounting standards in effect for those periods. In March 2024, the FASB issued ASU No. 2024-01, CompensationStock Compensation (Topic 718): Scope Application of Profits Interest and Similar Awards . The amendments clarify the scope of Topic 718 as it relates to profits interest and similar awards. The Company adopted this guidance for the fiscal year ended March 31, 2026. The Company evaluated the impact of this guidance on its stock-based compensation arrangements, including profit unit arrangements associated with noncontrolling interests, and determined that the adoption did not have a material impact on its consolidated financial statements. Not Yet Adopted In November 2024, the FASB issued ASU No. 2024-03, Income Sta …

NewAccountingPronouncementsPolicyPolicyTextBlock · excerpt; the full note is in the filing

"3. Revenue Recognition The following table presents disaggregated revenue by business group (in thousands): Year Ended March 31, 2026 2025 Microturbine Products $ 53,929 $ 36,732 Accessories 2,113 2,240 Total Product and Accessories 56,042 38,972 Parts and Service 33,200 30,877 Total ASC 606 Revenue 89,242 69,849 Microturbine Products 907 1,309 Rentals 15,855 14,406 Total ASC 842 Revenue 16,762 15,715 Total Revenue $ 106,004 $ 85,564 The following table presents disaggregated revenue by geography based on the primary operating location of the Companys customers (in thousands): Year Ended March 31, 2026 2025 United States $ 70,133 $ 55,732 Mexico 13,600 2,822 All other North America 506 718 Total North America 84,239 59,272 Europe 9,939 11,281 Asia 3,778 2,248 Australia 1,438 5,843 All other 6,610 6,920 Total Revenue $ 106,004 $ 85,564 Substantially all of the Companys operating assets are in the United States. Contract Balances The Company's contract liabilities consist of customer deposits and advance payments received for microturbine products, parts, accessories, and equipment ordered under sales contracts for which the related goods or services have not yet been delivered or performed. Contract liabilities also include advance payments received for service obligations, Factory Protection Plan (""FPP"") contracts, Long-Term Maintenance Agreements (""LTMAs""), and extended warranties. Customer deposits are primarily non-refundable cash payments received from distributors f …

RevenueFromContractWithCustomerTextBlock · excerpt; the full note is in the filing

"19. Segment Information Segment Structure The Company operates as a single reportable segment encompassing the development, manufacture, sale, and rental of microturbine energy systems and their related parts and services. This determination is consistent with how the Company's Chief Executive Officer (the ""CODM"") evaluates performance and allocates resources on a consolidated basis. The CODM assesses segment performance using consolidated net income (loss) on a GAAP basis, consistent with the basis of presentation in these financial statements. This measure is compared against prior periods and forecasted results to support operational decision-making, cost management, and business expansion initiatives. The CODM does not evaluate the segment using asset or liability information, and there are no intersegment sales or transfers within the consolidated entity. Segment Profit or Loss and Reconciliation to Consolidated Statements of Operations The following table presents reported segment revenue, gross profit, significant segment expenses regularly provided to the CODM, and a reconciliation to consolidated net income (loss) (in thousands): Year Ended March 31, 2026 2025 Revenue, net: $ 106,004 $ 85,564 Less: Cost of revenue 72,133 62,266 Gross profit 33,871 23,298 Less: Research and development 3,621 2,667 Selling, general & administrative expenses 22,928 19,328 Non-recurring professional expenses 3,930 6,877 Other (income) expense items (1) 567 1,616 Consolidated net i …

SegmentReportingDisclosureTextBlock · excerpt; the full note is in the filing

"15. Common Stock Issuance and Private Investment in Public Equity (""PIPE"") Financing Transaction November 2025 PIPE Financing Transaction Overview On November 24, 2025, the Company entered into a Securities Purchase Agreement with certain accredited investors pursuant to which the Company agreed to issue and sell (collectively, the November 2025 PIPE) (i) 3,980,000 shares of common stock at $2.00 per share and (ii) pre-funded warrants to purchase 3,520,000 shares of common stock at a purchase price equal to the common stock purchase price minus $0.001, with an exercise price of $0.001 per share. The transaction closed on November 25, 2025, generating gross proceeds of approximately $15.0 million before placement agent fees and offering costs. Total offering costs were approximately $1.4 million, consisting of a placement agent cash fee of 7.0% of gross proceeds received from investors who were not directors or executive officers, plus reimbursement of up to $100,000 of legal and out-of-pocket expenses. Offering costs were recorded as a reduction of additional paid-in capital. Net proceeds were approximately $13.6 million, of which approximately $8.3 million was used to repay the Exit New Money Notes maturing December 7, 2025 (see Note 11 Debt), with the remainder available for working capital and general corporate purposes. As of March 31, 2026, all 3,520,000 pre-funded warrants from this transaction remained outstanding and unexercised. March 2026 Common Stock Issuance an …

StockholdersEquityNoteDisclosureTextBlock · excerpt; the full note is in the filing

22. Subsequent Events Subsequent to March 31, 2026, certain investors exercised warrants issued in connection with the Companys March 2026 PIPE. On May 8, 2026, an investor exercised warrants to purchase 2,019,812 shares of common stock pursuant to a cashless exercise feature. On April 21, 2026, the Companys Board of Directors approved Amendment No. 2 to the Capstone Energy+, Inc. 2023 Equity Incentive Plan (the 2023 Plan), increasing the maximum number of shares authorized for issuance under the 2023 Plan from 4,000,000 to 7,000,000 shares. This amendment was disclosed in the Companys Current Report on Form 8-K filed on April 21, 2026. The Company evaluated subsequent events through the date of issuance of these financial statements and determined that no events occurred that require recognition or disclosure, other than those described above. …

SubsequentEventsTextBlock · excerpt; the full note is in the filing

20. Business Combination On August 13, 2025, the Company entered into an Equity Purchase Agreement (the Purchase Agreement) to acquire 100% of the equity interests of Cal Microturbine for total consideration of approximately $14.9 million, which was comprised of $6.0 million cash paid at closing, $3.4 million in deferred consideration, and the settlement of preexisting relationships of $5.5 million. The acquisition expands the Companys direct distribution and service capabilities in key markets and is expected to enhance operational efficiencies and customer reach. The transaction closed on August 13, 2025 (Closing Date) and was funded using available cash on hand. The table below summarizes the total consideration transferred at the Closing Date (in thousands): As of the Closing Date Cash paid at close $ 5,951 Deferred consideration (1) 3,427 Settlement of preexisting relationships (2) 5,538 Total consideration $ 14,916 (1) The deferred consideration reflects cash payments of $4.0 million which will be distributed over 24 monthly installments starting in January 2026. These payments were discounted to their present value using an 11.45% discount rate. (2) The settlement of preexisting balances related to accounts receivable and deferred revenue. At the time of acquisition, Capstone and Cal Microturbine were engaged in ongoing litigation and arbitration related to their distributor agreement. As a result of the Purchase Agreement, these disputes were resolved, and mutual rele …

BusinessCombinationDisclosureTextBlock · excerpt; the full note is in the filing

8. Debt Exit Note Purchase Agreement The Company entered into an exit facility on December 7, 2023 (the Exit Note Purchase Agreement), for an aggregated principal amount of $28.1 million, consisting of $21.1 million of Exit Roll Up Notes, including accrued and unpaid interest and 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 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 Holdings, 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 and 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 was 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 matured on December 7, 2025. The scheduled maturities of the Companys debt are as follows as of December 31, 2025: Year Ending March 31, 2026 (remainder of fiscal year) $ 2027 25,384 2028 2029 2030 …

DebtDisclosureTextBlock · excerpt; the full note is in the filing

Three Months Ended December 31, Nine Months Ended December 31, 2025 2024 2025 2024 Microturbine Products $ 12,512 $ 7,873 $ 43,872 $ 24,021 Accessories 1,061 399 1,533 944 Total Product and Accessories 13,573 8,272 45,405 24,965 Parts and Services 9,327 7,405 25,126 23,166 Total ASC 606 Revenue $ 22,900 $ 15,677 $ 70,531 $ 48,131 Rentals 3,862 4,471 12,487 10,382 Total ASC 842 Revenue 3,862 4,471 12,487 10,382 Total Revenue $ 26,762 $ 20,148 $ 83,018 $ 58,513 …

DisaggregationOfRevenueTableTextBlock · excerpt; the full note is in the filing

15. Fair Value Measurements The FASB has established a framework for measuring fair value using GAAP. 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. The asset or liabilitys 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 techni …

FairValueDisclosuresTextBlock · excerpt; the full note is in the filing

18. Commitments and Contingencies Purchase Commitments As of December 31, 2025, the Company had firm commitments to purchase inventories of approximately $41.3 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 inventory. Lease Commitments See Note 9 Leases. Related Party Transactions On December 7, 2023, Capstone Green Energy Corporation was reorganized and became a privately-held company (Reorganized PrivateCo). Reorganized PrivateCo continues to own assets consisting of (i) all of the Companys 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 December 7, 2023, 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 Subsidiarys distributors on a subcontracted basis and, where applicable, to Operating Subsidiary, certai …

LegalMattersAndContingenciesTextBlock · excerpt; the full note is in the filing

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 after December 15, 2024, early adoption is permitted. We are evaluating the effect that this guidance will have on our consolidated financial statements and related disclosures. In November 2024, the FASB issued ASU No. 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40). 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. This would be effective for the Company in Fiscal 2028 and for interim reporting periods beginning with the first quarter of Fiscal 2029. We are evaluating the effect that this guidance will have on our consolidated financial statements and related disclosure …

NewAccountingPronouncementsPolicyPolicyTextBlock · excerpt; the full note is in the filing

10. Revenue Recognition 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 Companys 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 Companys 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 t …

RevenueFromContractWithCustomerTextBlock · excerpt; the full note is in the filing

19. 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 Companys 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 as 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 Companys information about reported segment revenue, segment gross profit, segment profit or loss and significant segment expenses that are regularly provided to the Companys CODM as a single reporting segment and a reconciliation of the Condensed Con …

SegmentReportingDisclosureTextBlock · excerpt; the full note is in the filing

12. Private Investment in Public Equity (PIPE) Financing Overview On November 24, 2025, the Company entered into a Securities Purchase Agreement with certain accredited investors pursuant to which the Company agreed to issue and sell (i) 3,980,000 shares of its common stock at a purchase price of $2.00 per share and (ii) 3,520,000 pre-funded warrants to purchase shares of common stock at a purchase price per pre-funded warrant equal to the common stock purchase price minus $0.001. The pre-funded warrants have an exercise price of $0.001 per share. The transaction closed on November 25, 2025, and generated gross proceeds of approximately $15.0 million before deducting placement agent fees and other offering costs. At December 31, 2025, all of the 3,520,000 pre-funded warrants remained outstanding. The Company paid the placement agent a cash fee of 7.0% of the gross proceeds received from investors that were not directors or executive officers of the Company and reimbursed up to $100,000 of legal and out-of-pocket expenses, resulting in total offering costs of approximately $1.2 million, which were recorded as a reduction of additional paid-in capital in accordance with ASC Topic 505, Accounting for Distributions to Shareholders with Components of Stock and Cash. Net proceeds from the offering were approximately $13.8 million. The Company used approximately $8.3 million of the net proceeds to repay outstanding indebtedness maturing December 7, 2025, and intends to use the remai …

StockholdersEquityNoteDisclosureTextBlock · excerpt; the full note is in the filing

21. Subsequent Events The Company has evaluated all subsequent events through the filing date of this Form 10-Q with the SEC, to ensure that this filing includes appropriate disclosure of events both recognized in the financial statements as of December 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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