Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from the results discussed in the forward-looking statements. Factors that might cause a difference include, but are not limited to, those discussed under “Note Regarding Forward-Looking Statements” and Item 1A (Risk Factors) in this Form 10-K. The following section is qualified in its entirety by the more detailed information, including our financial statements and the notes thereto, which appears elsewhere in this Form 10-K.
Recent Developments
During Fiscal 2026, the Company executed several strategic, financing, and operational initiatives that impacted its capital structure, liquidity, and operations.
Refer to Note 2 – Basis of Presentation and Significant Accounting Policies for information regarding the Company’s liquidity position, and recent financing activities.
Refer to Note 11 – Debt for additional information on the Company’s Exit Note Purchase Agreement and related debt obligations, including outstanding balances and maturity profile.
Refer to Note 12 – Commitments and Contingencies for information related to legal matters, service agreements, and other contractual obligations.
Refer to Note 13 – Temporary Equity for a discussion of the Company’s capital structure, including the issuance of convertible preferred stock and related impact on stockholders’ equity.
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Refer to Note 15 – Common Stock Issuance and Private Investment in Public Equity ("PIPE") Financing Transaction for additional information regarding equity financings completed during Fiscal 2026, including the November 2025 and March 2026 transactions. References to the “November 2025 PIPE” and “March 2026 PIPE” mean the Company’s equity financings completed in November 2025 and March 2026, respectively (see Note 15 – Common Stock Issuance and PIPE Financing Transaction). Collectively, these transactions are referred to as the “PIPE Financings.”
Refer to Note 20 – Business Combinations for information on the acquisition of distributor-related operations, including the Cal Microturbine acquisition and the acquisition of Capstone Distributor Support Services Corporation, and the related recognition of intangible assets.
Overview
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 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 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. Because our microturbines can provide a reliable source of power and can operate on multiple fuel sources, management believes they help solve the “Energy Trilemma” of resiliency, sustainability and affordability. Management also believes our products and services offer a level of flexibility not currently offered by other technologies such as reciprocating engines.
In addition to our traditional market verticals, we are actively developing advanced energy solutions for the AI data center market. The surging demand for artificial intelligence compute power has created a critical need for on-site, high-reliability power generation that traditional utility grids are struggling to meet. We are developing an 800-volt direct-current microturbine solution designed to interface directly with next-generation AI chip architecture, delivering grid-independent, high-voltage DC power with meaningfully improved efficiency compared to legacy conversion systems. These integrated AI Power Blocks are scalable from edge deployments to AI giga-campus environments and represent a significant near-term commercial opportunity for the Company. We have not yet generated revenue from AI data center applications, and commercialization and customer adoption of these solutions remain subject to execution, validation and market risks.
For Fiscal 2026, net revenue was $106.0 million compared to $85.6 million for Fiscal 2025, a 24% increase from the prior year. Product and Accessories revenue increased $16.6 million, or 41% primarily driven by the marketplace’s increased confidence in Capstone’s long-term business outlook, which allowed us to capture stronger demand and better pricing from customers & distributors. Rental revenue also increased $1.5 million, or 10%, due to higher utilization of our rental fleet compared to the prior year, and Parts and Services revenue increased $2.3 million or 7% primarily driven by the compounding effect of prior years’ sales. Cost of goods sold totaled $72.1 million in Fiscal 2026 compared to $62.3 million in Fiscal 2025, a 16% increase primarily driven by product mix. Gross profit was $33.9 million in Fiscal 2026 compared to $23.3 million in Fiscal 2025, a 45% increase from the prior year, reflecting margin improvement across all three revenue streams. Product and Accessories gross margin increased approximately 7 percentage points, from 3% to 10%, primarily reflecting improved pricing realization and a more favorable product mix. Parts and Services gross margin increased approximately 8 percentage points, from 56% to 64%, driven by the higher-margin contribution of an expanding installed base and operating leverage on a largely fixed cost structure. Rental gross margin increased approximately 9 percentage points, from 35% to 44%, reflecting higher fleet utilization spread over a relatively fixed asset base.
During Fiscal 2026, we reported net income of $2.8 million, or $0.14 per basic share, compared to a net loss of $7.2 million, or $0.38 per basic share, in Fiscal 2025, reflecting a $10.0 million improvement driven primarily by revenue growth of $20.4 million, improved gross margins, and only minimal increases in operating expenses. Net loss attributable
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to common stockholders was $66.8 million, or $3.21 per basic and diluted share for Fiscal 2026, compared to $7.2 million, or $0.38 per basic and diluted share, for Fiscal 2025. The difference between net income and net loss attributable to common stockholders in Fiscal 2026 reflects a non-cash deemed dividend of $69.6 million arising from the accretion of the Operating Subsidiary's Redeemable Preferred Units to their maximum redemption value immediately prior to their full redemption on March 31, 2026. This non-cash charge does not affect the Company's revenues, operating cash flows, or total assets, and management believes net income of $2.8 million is the most meaningful measure of the Company's operational performance for the period.
In the energy efficiency market, we continue to expand our market presence in hotels, office buildings, hospitals, retail and industrial applications globally. The energy efficiency segment remained the leading market segment in Fiscal 2026. 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. 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 competitive selling prices, lower direct material costs, positive new order flow, reduced cash usage and expansion of the Energy-as-a-Service (“EaaS”) business.
Key Initiatives
Focus on Vertical Markets. 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.
Within the distributed generation markets that we serve, we focus on vertical markets that we identify as having the greatest near-term potential. In our primary products and applications (energy efficiency, natural resources, renewable energy, critical power supply, microgrid, bridge power transportation and EV charging, ports, and AI data center products), we identify specific targeted vertical market segments. 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 target projects within the energy efficiency market.
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 can maximize the availability of usable energy to provide a significant economic advantage to customers while reducing their on-site emissions. Combined Heat and Power (“CHP”) and Combined Cooling, Heat and Power (“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% up to 85% for hot water and chilled water to as much as 90% or more for certain steam and direct drying applications. 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.
Natural Resources – Crude Oil, Natural Gas, Shale Gas & Mining
Our microturbines are installed in the natural resource market for use in both onshore and offshore applications, including oil and gas exploration, production, and at compression and transmission sites as a highly efficient and reliable source of power. In some cases, these oil and gas or mining operations have no electric utility grid and rely solely on power generated on-site. There are numerous locations, on a global scale, where the drilling, production, compression and
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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 sour gas, into a useable fuel to provide prime power to these sites.
Renewable Energy
There is a growing transition to renewable energy sources and technologies on a global scale. Our microturbines run efficiently on renewable fuels such as methane and other biogases from landfills, wastewater treatment facilities and renewable natural gas. They also run efficiently on other small biogas applications like food processing plants, livestock farms and agricultural green waste operations. Microturbines can burn these renewable fuels with minimal emissions, thereby, in some cases, avoiding the imposition of penalties incurred for pollution while simultaneously producing electricity from this “free” renewable fuel source for use at the site or in the surrounding areas. Our microturbines have demonstrated effectiveness in these smaller applications and may outperform conventional combustion engines in some situations, including when the gas contains a high amount of sulfur, as the sulfur can contaminate combustion engines’ lube oil, leading to equipment breakdowns and higher lifecycle costs.
Critical Power Supply
Certain mission-critical, high-demand power users, including advanced technology facilities, healthcare campuses, and data-intensive operations, require a level of power reliability that the traditional utility grid alone cannot consistently deliver. Grid vulnerability during severe weather events, wildfires, and other disruptions has increased the urgency for on-site power solutions capable of operating independently of centralized infrastructure.
Capstone's microturbine solutions offer a compelling alternative to conventional uninterruptible power supply (“UPS”) systems and diesel backup generators for these environments. Designed for continuous operation, our systems feature built-in black-start capability and seamless transition to stand-alone islanding mode, ensuring uninterrupted power when grid availability cannot be assured. We believe demand for dispatchable, behind-the-meter critical power solutions will continue to grow as grid reliability concerns persist and the consequences of downtime intensify across these sectors.
Bridge Power
Commercial and industrial customers increasingly face a significant timing disconnect between their operational power requirements and the availability of permanent grid infrastructure. Interconnection queues have lengthened considerably, substations in high-growth areas are operating at or near capacity, and utility construction timelines routinely lag the development schedules of data centers, manufacturing facilities, EV charging networks, and other high-load projects.
Capstone's modular, containerized microturbine solutions address this gap by delivering reliable, dispatchable on-site generation while permanent grid access is secured. Compared to conventional diesel generation, our low-emission microturbines are better positioned to meet stringent air quality requirements, can be rapidly deployed and scaled to load, and integrate into a facility's long-term energy infrastructure upon grid interconnection. As grid constraints continue to intensify across high-growth markets, we believe Capstone is well-positioned to capture an expanding opportunity in bridge power, offering customers a cleaner, more flexible alternative to legacy temporary generation solutions.
Microgrid
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. Microgrids can be connected to larger electricity grids; 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 can 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. We have seen continued development in the microgrid market segment.
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Transportation and EV Charging
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. Capstone is actively expanding its global EV charging deployments, targeting fleet operators, remote installations, and high-demand charging environments where grid-independent power solutions deliver the greatest value.
Ports
Regulatory pressure to electrify port operations is intensifying, yet marine terminal power infrastructure faces significant constraints in quality, reliability, and availability. Capstone's containerized microturbine systems address these demands directly, delivering up to 1 MW of ultra-low-emission on-site power and EV charging within a single 30-foot container. The compact, relocatable form factor eliminates the civil works requirements of permanent infrastructure and allows operators to right-size and reposition generation assets as operational needs evolve. Our validated 30% hydrogen-natural gas blended and 100% hydrogen operation further positions Capstone to support port operators through current emissions compliance and toward longer-term net-zero objectives.
We believe the convergence of tightening electrification mandates, grid constraints, and demand for fuel-flexible distributed generation creates a substantial and growing opportunity in this vertical. With a differentiated product profile purpose-built for complex port environments, we are actively pursuing this market as a meaningful contributor to long-term revenue growth.
AI Data Center
Surging demand for AI compute has driven unprecedented capital investment in data center infrastructure globally, while exposing a critical vulnerability: the inability of traditional utility grids to deliver power at the speed, scale, and reliability that next-generation facilities require. Grid constraints, rising electricity costs, and the power density demands of modern AI workloads are accelerating the shift toward on-site generation, a shift that plays directly to Capstone's core strengths.
Capstone's microturbine-based systems address the sector's requirements for integrated redundancy, ultra-low emissions, and thermal efficiency. Waste heat recovery converted to chilled water at approximately one-tenth the energy consumption of conventional electric chillers improves total site efficiency to approximately 85%. Our microturbines natively produce approximately 760 VDC, a strong technical foundation for the emerging 800 VDC data center standard, enabling a direct-current solution that eliminates multiple AC/DC conversion stages, reduces copper mass by up to 45%, and improves power efficiency by as much as 5% compared to legacy systems. These integrated AI Power Blocks scale from edge deployments to 200 MW AI campus configurations.
Although revenue contribution from this vertical remains in early stages, we view the AI data center market as one of the most significant long-term growth opportunities in Capstone's history. We are actively pursuing opportunities in this market and investing in product development, strategic partnerships, and commercial readiness to capitalize on the next generation of AI and data center infrastructure. With a differentiated technical profile and a compelling 800 VDC product advantage, we believe Capstone is well-positioned to compete for a meaningful share of one of the largest infrastructure buildouts of the decade
Sales and Distribution Channels
Distributors
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. We have a total of 47 distributors and partners, Original Equipment Manufacturers (“OEMs”) and national accounts. In the United States and Canada, we currently have 8 distributors, OEMs and national accounts. Outside of the United States and Canada, we currently have 39 distributors, OEMs and national accounts. We continue to refine our distribution channels to address our specific targeted markets.
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Direct Sales
In addition to our distributor network, during fiscal year 2026 we expanded our go-to-market strategy to include direct sales through the acquisition of Cal Microturbine, formerly one of our distributors. This acquisition marks a strategic evolution in how we reach end users, enabling us to capture additional margin, deepen customer relationships, and gain more immediate insight into end-user demand and purchasing patterns. Through our direct sales channel, we are able to offer customers more tailored service and support while maintaining greater control over pricing and product positioning. We believe our direct sales capability complements our existing distributor relationships and strengthens our overall commercial platform as we continue to grow.
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 comprehensive service plans 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. LTMAs and FPPs are generally paid monthly or 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 strategy focuses on meeting the specific needs of our target vertical markets. Our C65, C200, C600, C800, and C1000 Series microturbines will continue to be our foundational product lines, and we are actively expanding this lineup with the development of the C250, a 250-kilowatt engine that has completed successful test runs and is advancing through our commercialization process. The C250 is designed to serve as a highly efficient, modular building block for distributed generation applications, including AI data center deployments where its power output maps well to the block-power topology increasingly favored by data center operators. Our research and development efforts are directed at enhancing the features and capabilities of both our existing product lines and these new platform additions.
To bolster power resilience, we have developed an 800-volt direct-current ("800 VDC") output platform utilizing our core microturbine technology. In October 2025, we announced, together with Microgrids 4 AI, Inc. ("MG4AI"), the integration of this 800 VDC microturbine with MG4AI's modular, liquid-cooled data center kits to create turnkey, grid-independent "AI Power Blocks." Each AI Power Block delivers power, liquid cooling, and compute as a unified, rapidly deployable system. The 800 VDC architecture directly powers GPU server racks without the AC-to-DC conversion stage required by legacy systems, improving efficiency by eliminating rectification losses and reducing copper distribution requirements by up to 45% compared to conventional 208/480 VAC distribution. These AI Power Blocks are designed to scale from edge deployments to AI giga-campus environments exceeding 1 GW and are aligned with the 800 VDC architectures endorsed by leading semiconductor and infrastructure platforms. This advancement also broadens our applications beyond AI data centers, allowing our microturbine solutions to be deployed in EV charging and other direct-current applications without requiring synchronization with traditional high-voltage alternating-current ("AC") utility grids, and providing a bridge during the rigorous grid interconnect certification process.
We are also developing new combustion liner technology capable of delivering approximately 5 ppm NOx without emissions aftertreatment, further strengthening our competitive position in markets with stringent air quality requirements. Additionally, we are collaborating with industry leaders to create autonomous power solutions designed to anticipate overload conditions and proactively supplement insufficient grid resources with readily available microturbine power. We are accelerating the development of onboard remote monitoring systems designed to ensure reliable power service and asset telemetry through cloud-based features, significantly improving the user experience.
The Company continues to advance fuel flexibility across its product lines, including validated operation on hydrogen fuel blends. Our microturbines have demonstrated the capability to operate on hydrogen-blended fuels, which we believe positions the Company to support customers with longer-term decarbonization objectives as hydrogen infrastructure continues to develop.
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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. We continue to review avenues for cost reduction by sourcing from the best value supply chain option. In order to utilize manufacturing facilities and technology more effectively, we are focused on continuous improvements in manufacturing processes. Additionally, considerable effort is being directed to manufacturing cost reduction through process improvement, product design, advanced manufacturing technology, including robotics, supply chain management and logistics. 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. Many components used in the manufacture of our products are readily fabricated from commonly available raw materials or off-the-shelf items available from multiple supply sources; 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 regularly reassess the adequacy and abilities of our suppliers to meet our future needs.
We believe that effective execution in each of these key areas will be necessary to leverage our promising technology and early market leadership into achieving positive cash flow with growing market presence and improving financial performance.
Critical Accounting Estimates
Our discussion and analysis of our financial condition and results of operations is based upon our Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of these 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.
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.
Management has discussed the development and selection of these critical accounting estimates with the Audit Committee of our Board. In addition, there are other items within our financial statements that require estimation but are not deemed critical as defined above. Changes in estimates used in these and other items could have a material impact on our financial statements.
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Results of Operations
Year Ended March 31, 2026, Compared to Year Ended March 31, 2025
The following table summarizes our revenue by geographic markets (in millions):
Year Ended March 31,
United States and Canada $ 70.7 $ 56.5
Latin America 19.0 9.1
Asia and Australia 5.2 8.1
Middle East and Africa 1.2 0.6
Revenue. Revenue for Fiscal 2026 increased $20.4 million, or 24%, to $106.0 million from $85.6 million for Fiscal 2025. Increases in revenue in the United States and Canada were primarily attributable to higher sales in Cal West territories, driven by customers taking advantage of the investment tax credit (“ITC”) safe harbor ahead of its expiration. In Latin America, revenue growth was primarily driven by increased activity in Mexico, reflecting the reshoring of manufacturing from Asia following announced U.S. tariffs, as well as changes in interconnection regulations that allowed for larger project sizes. Decreases in revenue in Europe were primarily due to the conversion of a large customer from rental to product sales during Fiscal 2026, while decreases in Asia and Australia were attributable to reduced funding availability associated with ongoing geopolitical instability in the Middle East.
The following table summarizes our revenue (revenue amounts in millions):
Year Ended March 31,
Accessories 2.1 2.2
Total Product and Accessories 56.9 40.3
Parts and Service 33.2 30.9
Rentals 15.9 14.4
Total $ 106.0 $ 85.6
For Fiscal 2026, revenue from microturbine products and accessories increased $16.6 million, or 41%, to $56.9 million from $40.3 million for Fiscal 2025. The $16.6 million increase or additional 10.5 MWs compared to the previous year, was the result of Capstone’s stronger standing as a provider of reliable and high-quality equipment and services in the microturbines market. Average revenue per megawatt shipped was approximately $1.5 million and $1.4 million during Fiscal 2026 and Fiscal 2025, respectively, primarily driven by the effect of previously announced product price increases and rental unit sales. The timing of shipments is variable and based on several factors (including customer deposits,
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payments, availability of credit and delivery schedule changes), most of which are not within our control and can affect the timing of revenue recognition.
On August 13, 2025, the Company completed the acquisition of Cal Microturbine, LLC, one of the Company’s existing distributors serving the western United States. Following the acquisition, the Company directly conducts sales, aftermarket parts, and service for customers in California, Hawaii, Nevada, Oregon, and Washington under the business unit “Capstone West Territory.” The acquisition contributed approximately $4.0 million of revenue to the Company’s consolidated results for the period from the closing date through March 31, 2026. Refer to Note 20 - Business Combination for additional information.
Parts and service revenue for Fiscal 2026 increased $2.3 million, or 7%, to $33.2 million from $30.9 million for Fiscal 2025 benefiting from the impact of direct sales as a result of the Cal Microturbine acquisition.
Rentals revenue for Fiscal 2026 increased $1.5 million, or 10%, to $15.9 million from $14.4 million for Fiscal 2025. This increase was driven by a surge in the average rental prices per MW from $29,500 in Fiscal 2025 to $33,300 in Fiscal 2026.
Customer Concentration. For the year ended March 31, 2026, sales to E-Finity, Cal Microturbine, DTC, and Lone Star accounted for approximately 17%, 16%, 13% and 10%, respectively, of our total revenue for Fiscal 2026. Sales to E-Finity, Lone Star, Horizon Power Systems (“Horizon”) accounted for 13%, 12% and 11%, respectively, of our revenue for Fiscal 2025.
Gross Profit. Cost of goods sold includes direct material costs, production and service center labor and overhead, applicable depreciation, inventory charges and provision for estimated product warranty expenses. Gross profit was approximately $33.9 million, or 32% of revenue, for Fiscal 2026, compared to gross profit of $23.3 million, or 27% of revenue, for Fiscal 2025. The increase of $10.6 million during Fiscal 2026 compared to Fiscal 2025 was primarily driven by increased profitability on product and accessories sales and the rentals and parts & services businesses which increased 10 points and 9 points, respectively. During Fiscal 2026, we continued to implement cost-out initiatives, which includes negotiating better pricing with vendors and vendor selection.
The following table summarizes our gross profit (in millions except percentages):
Year Ended March 31,
March 31,
Gross Profit
Product and accessories $ 5.5 $ 1.1
As a percentage of product and accessories revenue 10 % 3 %
Parts and services $ 21.4 $ 17.2
As a percentage of parts and service revenue 64 % 56 %
Rentals $ 7.0 $ 5.0
As a percentage of rentals revenue 44 % 35 %
Total Gross Profit $ 33.9 $ 23.3
As a percentage of total revenue 32 % 27 %
Product and accessories gross margin improved $4.4 million or 10% during Fiscal 2026 from 3% during Fiscal 2025, primarily due to higher-margin product revenue in Fiscal 2026. This improvement occurred despite increased tariffs and higher inbound freight costs during Fiscal 2026. Parts and service gross margin as a percentage of parts and service revenue increased to 64% for Fiscal 2026 compared to 56% for Fiscal 2025 primarily due to increased parts sales, service agreement pricing and overhead costs absorption in Fiscal 2026. These improvements were achieved despite increased tariffs and higher inbound freight costs during Fiscal 2026. Rentals gross margin as a percentage of rentals revenue increased to 44% for Fiscal 2026 compared to 35% for Fiscal 2025 primarily due to higher rental pricing and timing of maintenance costs in Fiscal 2026.
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Research and Development (“R&D”)Expenses. R&D expenses for Fiscal 2026 and 2025 increased to $3.6 million in Fiscal 2026, compared to $2.7 million in Fiscal 2025. Higher R&D spend drove key cost-out initiatives and reliability projects in Fiscal 2026.
Selling, General and Administrative (“SG&A”) Expenses. SG&A expenses for Fiscal 2026 increased $0.7 million to $26.9 million from $26.2 million for Fiscal 2025 and was 25% of revenue in Fiscal 2026. The net increase in SG&A expenses was driven by higher spend in Fiscal 2026 of $3.6 million related to headcount growth, outside accounting and legal services, partially offset by a $2.9 million reduction in non-recurring expenses relative to Fiscal 2025 related to litigation, restatements, and debt restructuring.
Other Income. Other income for Fiscal 2026 increased to $3.3 million from $2.3 million in Fiscal 2025. The increase was primarily attributable to the recognition of income related to a customer deposit on a project that did not proceed during Fiscal 2026.
Interest Income. Interest income for Fiscal 2026 was $0.2 million, slightly higher than the $0.2 million in Fiscal 2025 driven by our higher cash balances.
Interest Expense. Interest expense for Fiscal 2026 increased to $4.1 million from $3.9 million in Fiscal 2025. The increase in interest expense was primarily due to the New Money Note, interest on leased equipment, and exit debt issuance amortization. See Liquidity and Capital Resources below for additional discussion on our interest expense.
Income Tax Provision. Income tax expense (benefit) decreased from $175,000 during Fiscal 2025 to ($54,000) during Fiscal 2026. Income tax benefit incurred was mostly related to prior year true-up adjustments. The effective income tax rate of (1.9)% differs from the federal and state blended rate primarily as a result of maintaining a full valuation allowance against net deferred tax assets.
On March 31, 2026, we had federal and state net operating loss carryforwards of approximately $8.0 million and $4.2 million, respectively, which may be utilized to reduce future taxable income, subject to any limitations under Section 382 of the Internal Revenue Code of 1986. We provided a valuation allowance for 100% of our net deferred tax asset of $26.0 million at March 31, 2026 as the realization of the benefits of these favorable tax attributes in future income tax returns is not deemed more likely than not. Similarly, at March 31, 2025, the net deferred tax asset had a 100% valuation allowance of $2.3 million.
Liquidity and Capital Resources
Our cash requirements depend on many factors, including the execution of our business strategy and plan. Our cash balance increased $20.2 million during Fiscal 2026, compared to an increase of $6.6 million during Fiscal 2025, with Fiscal 2026 including $0.7 million of restricted cash compared to none in Fiscal 2025. The increase in cash during Fiscal 2026 was primarily due to cash used in operating and investing activities, offset by cash provided by financing activities.
Operating Activities. During Fiscal 2026, net cash used in operating activities was $2.5 million, reflecting net income for the period of $2.8 million and non-cash adjustments of $10.4 million including depreciation and amortization, non-cash lease expense, paid-in-kind interest expense, and stock-based compensation. These were offset by net uses of cash from changes in operating assets and liabilities of $15.8 million, primarily reflecting working capital outflows associated with business growth, including increases in accounts receivable of $7.1 million and inventories of $4.2 million, decreases in customer deposits of $6.1 million and factory protection liability of $1.6 million, which were partially offset by increases in accounts payable of $5.2 million and accrued expenses of $1.8 million.
During Fiscal 2025, net cash provided by operating activities was $7.7 million. Net loss for the period of $7.2 million was offset by increased use of inventory and prepaids as well as the realization of deferred revenue, less changes in lease assets and liabilities and an increase in accounts receivable. The net loss was also offset by non-cash adjustments of $13.0 million, primarily non-cash lease expense, depreciation and amortization, and paid-in-kind interest expense.
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The following is a summary of the significant sources (uses) of cash from operating activities (in millions):
Year Ended March 31,
March 31,
Net income (loss) $ 2.8 $ (7.2)
Non-cash operating activities(1) 10.4 13.0
Changes in operating assets and liabilities:
Accounts receivable (7.1) (2.1)
Inventories (4.2) 7.6
Lease receivable (0.6) (1.3)
Accounts payable 5.2 (1.0)
Accrued expenses 1.8 (0.3)
Operating lease liability, net (3.0) (4.0)
Prepaid expenses, other current assets and other assets 0.1 2.1
Other changes in operating assets and liabilities (7.9) 0.9
Net cash (used in) provided by in operating activities $ (2.5) $ 7.7
The $5.0 million increase in use of cash in accounts receivable resulted from increases in both sales and DSO in Fiscal 2026, compared to Fiscal 2025. The $11.8 million change in inventory compared to Fiscal 2025 was primarily the result of increased spending on long lead inventory in preparation of future shipments. The $6.2 million increase in cash provided by accounts payable and $2.1 million increase in accrued expenses resulted from more proactive management of vendor payments in Fiscal 2026. The $8.8 million change in other operating assets and liabilities during Fiscal 2026, compared to Fiscal 2025, was primarily driven by the use of customer deposits and lease receivables and liabilities.
Investing Activities. Net cash used in investing activities was $0.9 million and $0.9 million during Fiscal 2026 and Fiscal 2025, respectively. Fiscal 2026 included cash acquired in the Cal Microturbine, LLC acquisition, net of cash paid, as well as investments in fixed assets including our rental fleet. Refer to Note 20 - Business Combination for additional information.
Financing Activities. During Fiscal 2026, we generated approximately $23.7 million in cash from financing activities primarily as a result of the November 2025 PIPE of approximately $13.6 million and $104.0 million of proceeds from March 2026 PIPE, partially offset by repayment of outstanding debt to optimize our capital structure. During Fiscal 2025, net cash used by financing activities was approximately $0.2 million. Refer to Note 11 – Debt in the Notes to Consolidated Financial Statements for further discussion of outstanding debt and post emergence financing.
Debt Refer to Note 11 - Debt in the Notes to Consolidated Financial Statements for information related to our notes.
Lease Commitments Refer to Note 10 - Leases in the Notes to Consolidated Financial Statements for information related to our leases.
Impact of Recently Issued Accounting Standards
Refer to Note 2 - Basis of Presentation and Significant Accounting Policies in the Notes to Consolidated Financial Statements for information regarding new accounting standards.
Item 7A. Quantitative and Qualitative Disclosure about Market Risk.
As a “smaller reporting company,” as defined by Item 10 of Regulation S-K, we are not required to provide information required by this Item.
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Item 8. Financial Statements and Supplementary Data.
Our Consolidated Financial Statements are included in this Form 10-K. Supplementary data incorporated in this Item 8 by reference within the Exhibits.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
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, 2026, 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, 2026, our disclosure controls and procedures were effective.
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:
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 effective as of March 31, 2026.
Remediation of Previously Reported Material Weakness As previously disclosed in our Annual Report on Form 10-K for the fiscal year ended March 31, 2025, management identified a material weakness in internal control 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.
During fiscal year 2026, management, under the direction and oversight of the Audit Committee and the Board, undertook the following remediation actions to address this material weakness:
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As of March 31, 2026, management has concluded, through testing of the design and operating effectiveness of the related controls, that the previously reported material weakness has been fully remediated. There are no remaining material weaknesses in our internal control over financial reporting.
Changes in Internal Control over Financial Reporting
Except as described above, there were no changes in our internal control over financial reporting during the most recent fiscal quarter that were identified in connection with management’s evaluation required by paragraph (d) of Rules 13d-15 and 15d-15 under the Exchange Act that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Inherent limitations 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, 2026, 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.”
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not applicable.
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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 2026 Annual Meeting of Stockholders under the captions “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 2026 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 2026 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 2026 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 2026 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 2026 Annual Meeting of Stockholders under the caption “Ratification of Appointment of Independent Registered Public Accounting Firm.”
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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.
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 ENERGY+, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Consolidated Financial Statements:
Consolidated Balance Sheets as of March 31, 2026 and 2025 F-5
Consolidated Statements of Operations F-6
Consolidated Statements of Cash Flows F-8
Notes to Consolidated Financial Statements F-9
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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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors of
Capstone Energy +, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Capstone Energy+, Inc. (the “Company”) as of March 31, 2026 and 2025, the related consolidated statements of operations, temporary equity and stockholders’ deficit, and cash flows for each of the two years in the period ended March 31, 2026 and 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, 2026 and 2025, and the results of its operations and its cash flows for each of the two years in the period ended March 31, 2026, in conformity with accounting principles generally accepted in the United States of America.
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 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 auditsprovide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Net Realizable Value of Inventories
Description of the Matter
The Company’s inventories totaled approximately $24.8 million as of March 31, 2026 and approximately $2.7 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
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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, among others:
Valuation of Intangible Assets Acquired in a Business Combination
Description of the Matter
As described in Note 20 to the consolidated financial statements, the Company completed the acquisition of Cal Microturbine on August 13, 2025. The Company accounted for this transaction under the acquisition method for business combinations in accordance with ASC 805. Accordingly, the purchase price was allocated to the assets acquired and liabilities assumed based on their respective fair values, including identified customer relationship related intangible assets.
We identified the valuation of the customer relationship related intangible asset as a critical audit matter due to (i) the significant estimates and assumptions made by management, (ii) high degree of auditor judgment when performing audit procedures to evaluate the reasonableness of management's forecast of future cash flows, and (iii) use of significant unobservable inputs and assumptions, including the need to involve our fair value specialists.
How We Addressed the Matter
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included, among others:
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o testing the mathematical accuracy of the calculations.
/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, California
June 25, 2026
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CAPSTONE ENERGY+, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
March 31, March 31,
Assets
Current Assets:
Cash and cash equivalents $ 28,179 $ 8,671
Restricted cash 715 —
Lease receivable, current 377 113
Prepaid expenses and other current assets 3,547 3,653
Property, plant, equipment and rental assets, net 16,185 19,362
Intangible assets, net 5,546 —
Finance lease right-of-use assets 4,789 3,787
Operating lease right-of-use assets 9,859 8,282
Non-current portion of inventories 2,736 3,464
Lease receivable, non-current 1,868 1,175
Liabilities, Temporary Equity and Stockholders’ Deficit
Current Liabilities:
Accrued salaries and wages 3,233 2,838
Accrued warranty reserve 971 1,070
Deferred acquisition costs, current 1,726 —
Finance lease liability, current 1,520 2,017
Operating lease liability, current 1,862 3,539
Factory protection plan liability 4,698 6,256
Exit notes, net of discount, current 25,320 7,968
Deferred revenue, non-current 648 598
Deferred acquisition costs, non-current 1,430 —
Finance lease liability, non-current 991 248
Operating lease liability, non-current 8,132 4,988
Exit notes, net of discount, non-current — 24,213
Commitments and contingencies (Note 12)
Temporary equity:
Redeemable noncontrolling interests — 13,859
Stockholders’ deficit:
Total stockholders’ deficit (44,467) (21,620)
See accompanying notes to consolidated financial statements.
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CAPSTONE ENERGY+, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
Year Ended March 31,
Revenue, net:
Cost of goods sold:
Operating expenses:
Selling, general and administrative 26,858 26,205
Income (loss) from operations 3,392 (5,574)
Income (loss) before provision for income taxes 2,771 (7,015)
Provision (benefit) for income taxes (54) 175
See accompanying notes to consolidated financial statements.
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CAPSTONE ENERGY+, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF TEMPORARY EQUITY AND STOCKHOLDERS’ DEFICIT
(In thousands, except share amounts)
Temporary Equity Permanent Equity
Net loss — — — — — — — — — (7,190) — (7,190)
Net income — — — — — — — — — 2,825 — 2,825
See accompanying notes to consolidated financial statements.
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CAPSTONE ENERGY+, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Year Ended March 31,
Cash Flows from Operating Activities:
Depreciation and amortization 4,281 3,858
Amortization of financing costs and discounts 105 71
Paid-in-kind interest expense 1,365 3,199
Interest related to deferred acquisition costs 229 —
Non-cash lease expense 2,862 3,996
Provision for credit loss expense 151 823
Inventory write-down 480 900
Provision (benefit) for warranty expenses 195 (184)
Loss on disposal of equipment — 67
Changes in operating assets and liabilities:
Accounts receivable (7,051) (2,083)
Lease receivable (591) (1,288)
Prepaid expenses, other current assets and other assets 149 2,128
Accrued expenses 1,810 (268)
Operating lease liability, net (2,972) (4,041)
Accrued salaries and wages and long-term liabilities (332) (94)
Accrued warranty reserve (294) (183)
Deposits (6,121) —
Factory protection plan liability (1,558) (1,003)
Net cash (used in) provided by operating activities (2,529) 7,688
Cash Flows from Investing Activities:
Cash acquired in acquisitions, net of cash paid 410 —
Payment of deferred acquisition costs (500) —
Expenditures for property, plant, equipment and rental assets (835) (879)
Net cash used in investing activities (925) (879)
Cash Flows from Financing Activities:
Proceeds from the issuance of common stock and warrants 43,660 —
Shares withheld related to employee tax withholding obligations (512) —
Payment of Exit Note, net (8,331) —
Settlement of redeemable noncontrolling interests (83,465) —
Issuance of new redeemable preferred stock 73,936 —
Repayment of finance lease obligations (1,611) (223)
Net cash provided by (used in) financing activities 23,677 (223)
Net increase in cash, cash equivalents, and restricted cash 20,223 6,586
Cash, cash equivalents, and restricted cash, Beginning of Period 8,671 2,085
Cash, cash equivalents, and restricted cash, End of Period $ 28,894 $ 8,671
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Supplemental Disclosures of Non-Cash Information:
Settlement of lease obligations with accounts receivable due $ 360 $ 775
Rental assets transferred to inventory $ — $ 3,067
Sales-type lease $ 333 $ 981
Operating lease modified to finance lease $ 614 $ —
Accounts payable negotiated in lease modification $ 1,289 $ —
Acquisition of treasury stock by incurring a liability $ — $ 46
See accompanying notes to consolidated financial statements.
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CAPSTONE ENERGY+, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Business and Organization
Capstone Energy+, Inc. (the “Company”), formerly known as Capstone Green Energy Holdings, Inc., the public successor to Capstone Green Energy Corporation, together with its consolidated operating subsidiary Capstone Green Energy LLC (the “Operating Subsidiary”) is a provider of behind-the-meter clean microturbine energy solutions for industrial and commercial operations, with solutions designed for the next generation of artificial intelligence ("AI") and data center applications. The Company addresses the "Energy Trilemma" facing today's commercial, industrial, and utility customers: the simultaneous need for resiliency, affordability, and sustainability.
Effective April 30, 2026, the Company changed its name from Capstone Green Energy Holdings, Inc. to Capstone Energy+, Inc.
The Company’s offerings include stationary distributed power generation and energy distribution solutions, including cogeneration systems such as combined heat and power (“CHP”), integrated combined heat and power (“ICHP”), and combined cooling, heat and power (“CCHP”), as well as solutions for renewable energy, natural resources, and critical power supply applications. The Company’s inverter-based technologies enable operation in parallel with the electric grid or in island mode within localized microgrids and serves as the stabilizing backbone for microgrid installations integrating renewables, battery energy storage, and other distributed energy resources.
The Company’s energy conversion products business line is driven by its industry-leading, highly efficient, low-emission and resilient microturbine energy systems, which offer scalable configurations and customer-tailored solutions ranging from 65 kilowatts to multiple megawatts. The Company is also actively developing energy solutions purpose-built for AI and data center applications, including an 800-volt direct-current ("VDC") microturbine solution designed to interface directly with next-generation AI chip architectures, and its Energy Surplus Program ("ESP"), an integrated architecture purpose-built for the high-density, mission-critical power demands of modern AI workloads.
Through its EaaS business line, the Company provides Build, Own, Operate and Maintain (“BOOM”) and energy rental solutions, as well as power purchase agreements ("PPA") and lease-to-own structures, utilizing its microturbine energy systems. The Company also offers long-term maintenance agreements ("LTMAs") covering planned and unplanned maintenance to protect customers' total cost of ownership and ensure maximum system availability, with access to Original Equipment Manufacturer ("OEM") parts.
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, the Company’s common stock was suspended from trading on the Nasdaq Capital Market effective October 5, 2023 and formally delisted effective October 23, 2023. Following completion of the financial statement restatements for Fiscal 2022 and 2023 and completion of the filings for Fiscal 2024, the Company became current with all periodic filings with the SEC. Effective January 2, 2025, the Company’s common stock began trading on the over-the-counter market (“OTC”). On September 26, 2025, the Company’s common stock was approved for quotation on the OTCQX Best Market, under the symbol “CGEH.”
All references in these footnotes to “the Company,” “we,” “us,” “our,” or “Capstone” are to Capstone Energy+, Inc. and its consolidated subsidiaries.
2. Basis of Presentation and Significant Accounting Policies
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 have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”). The Consolidated Financial Statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in
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consolidation. The fiscal years presented herein are the years ended March 31, 2026, and March 31, 2025. In the opinion of management, the Consolidated Financial Statements reflect all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the Company’s financial position as of March 31, 2026 and 2025, and the results of its operations and its cash flows for the years then ended.
The preparation of Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Consolidated Financial Statements, as well as the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
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, and Cal Microturbine LLC (“Cal Microturbine”) after elimination of inter-company transactions.
Business CombinationsThe Company accounts for business combinations using the acquisition method in accordance with ASC Topic 805, Business Combinations. Under this method, the total purchase consideration is measured at fair value on the acquisition date, and identifiable assets acquired and liabilities assumed are recognized at their estimated fair values as of that date. The excess of purchase consideration over the fair value of net identifiable assets acquired is recorded as goodwill. If the fair value of net identifiable assets acquired exceeds the purchase consideration, the resulting gain is recognized in earnings on the acquisition date. Acquisition-related costs, including advisory, legal, and other professional fees, are expensed as incurred and recorded within selling, general and administrative expenses in the Consolidated Statements of Operations.
For transactions that do not meet the definition of a business under ASC 805, the Company applies asset acquisition accounting, under which the total purchase consideration, including assumed liabilities, is allocated to the assets acquired on a relative fair value basis. No goodwill is recognized in an asset acquisition.
The operating results of acquired businesses are included in the Company's Consolidated Statements of Operations from the acquisition date. The determination of fair values of assets acquired and liabilities assumed requires management to make significant estimates and assumptions, particularly with respect to intangible assets. The Company may adjust the preliminary purchase price allocation during the measurement period, which may not exceed one year from the acquisition date, as additional information becomes available. Refer to Note 20 – Business Combinations for information regarding the Company's acquisitions completed during Fiscal 2026.
Noncontrolling Interests in Consolidated Operating SubsidiaryNoncontrolling interests in the Company’s consolidated operating subsidiary represented the equity interests held by a related party. These interests were redeemable and were therefore presented as temporary equity in the Company’s Consolidated Balance Sheets. See Note 13 – Temporary Equity and Note 12 – Commitments and Contingencies, Related Party Transactions for additional information.
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 this method, amounts reported as noncontrolling interests in the consolidated Operating Subsidiary on the Consolidated Balance Sheets represent the amounts the noncontrolling interest holders would hypothetically receive at each balance sheet date under the liquidation provisions of the governing agreements, assuming net assets were liquidated at recorded amounts and distributed in accordance with the governing documents. Net income attributable to noncontrolling interests reflected the change in the noncontrolling interest holders' contractual claims between the beginning and end of the reporting period, assuming hypothetical liquidation at each date, after removing the impact of any contributions or distributions. The Company separately remeasured and adjusted the noncontrolling interest to reflect changes in the redemption value of the Preferred Units, with an offsetting adjustment to retained earnings at the end of each period. Refer to Note 13 – Temporary Equity for further details.
For the fiscal year ended March 31, 2026, the Company reported a net gain; accordingly, net income was allocated between the controlling and noncontrolling interests pursuant to the HLBV method based on the change in the respective holders' contractual claims on the net assets of the consolidated Operating Subsidiary. The allocation reflected the contractual provisions of the governing agreements, including the liquidation preference of the noncontrolling interest
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holders. As a result, the amount of net income attributable to noncontrolling interests may differ from the noncontrolling interests' proportionate ownership percentage. For the fiscal year ended March 31, 2025, the Company reported a net loss; accordingly, no allocation of losses was made to the noncontrolling interests, as the holders' contractual liquidation preference protects them from absorbing losses.
Reclassification Certain prior period amounts have been reclassified to conform to the current year presentation for comparability purposes. Such reclassifications had no effect on previously reported results of operations or financial position.
Cash, Cash Equivalents and Restricted Cash Cash and cash equivalents include cash on hand and highly liquid investments with original maturities of three months or less at the time of purchase. The Company maintains cash balances at financial institutions which, at times, may exceed federally insured limits.
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Consolidated Balance Sheets to the total amounts presented in the Consolidated Statements of Cash Flows:
March 31, March 31,
Cash and cash equivalents $ 28,179 $ 8,671
Restricted cash 715 —
Total cash and cash equivalents $ 28,894 $ 8,671
Restricted cash represents amounts deposited with the Registry of the Court in connection with ongoing litigation, which are held as security pending resolution of the matter and are not available for operational use. See Note 12 - Commitments and Contingencies for more information on the ongoing litigation.
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 9 – Fair Value Measurements, for disclosure regarding the fair value of other financial instruments.
Accounts Receivable and Allowance for Credit Losses Accounts receivable 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 riskfactors that could likely cause estimated credit losses to differ from historical experience. The factors include assessments of various economic conditions, significant events that have or will occur, 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. Refer to Note 4 – Customer Concentrations and Accounts Receivable for disclosure regarding the change in allowance for expected credit loss.
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 items, which are assessed for potential write-down, including consideration of engineering changes to the Company's products. Inventories expected to be used beyond one year are classified as long-term.
Depreciation and Amortization Depreciation and amortization are recognized using the straight-line method over estimated useful lives ranging from two to ten years. Leasehold improvements are amortized over the shorter of the remaining lease term or the estimated useful life of the asset. Finite-lived intangible assets are amortized on a straight-line basis over their estimated useful lives. Refer to Note 8 – Intangible Assets for amortization information.
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
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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 unguaranteed residual asset is recognized on a discounted basis upon lease commencement. Residual values are evaluated for impairment quarterly, and impairments are recognized as incurred.
Deferred Revenue Deferred revenue consists of deferred product, service revenue and customer deposits, and is 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.
Temporary Equity Common or preferred shares that are conditionally redeemable upon the occurrence of events not solely within the Company's control are classified outside of permanent equity as temporary equity ("mezzanine equity"). This classification conveys that such securities may not be permanently part of equity and could result in a future demand for cash or other assets. Where redemption of such shares becomes probable, the Company adjusts the carrying value 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.
Revenue is recognized in accordance with the following five-step model under ASC 606:
● Identification of the contract(s) 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
● Recognition of revenue when, or as, each performance obligation is satisfied.
Microturbine ProductsRevenue from microturbine product sales is recognized at the point in time when control transfers to the customer in accordance with contractual terms, which is generally upon shipment. The Company occasionally enters into bill-and-hold arrangements, which are recognized as revenue only when all required criteria are met: (i) the reason for the arrangement is substantive; (ii) the product is segregated from other inventory; (iii) the product is ready for shipment; and (iv) the Company cannot redirect the product to another customer.
Customer deposits representing advance payments are typically received for a substantial portion of contract value prior to shipment and are not considered a significant financing component, as they are generally received less than one year before the related performance obligations are satisfied. Standard payment terms are 0 to 60 days, with extensions beyond 60 days granted only on a limited basis.
Accessories and Parts Revenue from accessories and parts is recognized at the point in time when control transfers to the customer, generally upon shipment.
Warranty Services The Company provides standard (assurance) warranties which do not represent separate performance obligations and are reflected as product liability. Shipping and handling costs billed to customers are included in revenue; costs associated with outbound freight after control transfers are recorded as fulfillment costs in cost of goods sold. Sales and usage-based taxes are excluded from revenue.
Factory Protection Plan (“FPP”), Long Term Maintenance Agreements (“LTMA”) and Service Cost Reimbursement The Company is transitioning from its Factory Protection Plan to Long-Term Maintenance Agreements. Both programs are designed to minimize product downtime and provide predictable maintenance costs. Revenue related to the obligation to provide replacement parts is recognized over the term of the contract aligned to monthly service periods. LTMA contracts typically range from four to twelve years and are cancellable at any time. Related costs are accrued when a customer submits a qualifying claim, based on the Company's best estimate of the probable obligation.
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LTMA contracts cover critical components including engine, fuel, and electronic components, and include an annual escalator but exclude freight and labor reimbursement. Advance payments received at contract inception are classified as deferred revenue and recognized on a straight-line basis over the contract term. These advance payments are not considered a significant financing component.
Remaining FPP contracts may include labor reimbursements for work performed by Authorized Service Providers ("ASPs"). These reimbursements are accounted for under ASC 460 and recognized as contra revenue under ASC 606. The labor reimbursement is treated as a distinct performance obligation, with a portion of the transaction price allocated based on relative standalone selling price ("SSP"). A liability is recognized at contract inception for the labor component, with income recognized on a straight-line basis and reimbursement costs expensed as incurred.
RentalsThe Company accounts for customer leases under lessor accounting guidance in ASC 842, utilizing a portfolio approach for similar assets leased to a single customer. Leases are classified as either sales-type or operating leases based on whether one of the five ASC 842 classification criteria are met.
For sales-type leases, the Company recognizes at commencement a lease receivable (equal to the present value of lease payments) and a residual asset, with revenue recognized in the amount of the lease receivable as part of Product and Accessories revenue, and cost of sales equal to the carrying value of the underlying asset less the unguaranteed residual asset. Subsequent to commencement, interest income is recognized using the effective interest method.
For operating leases, the underlying asset is recorded as a rental lease asset and depreciated on a straight-line basis to its estimated residual value. Lease payments are recognized as Rental Revenue on a straight-line basis over the lease term.
Contracts with Multiple Performance ObligationsContracts with customers often include promises to transfer multiple products, parts, accessories, and services. The Company evaluates whether each promised good or service is distinct and should be accounted for as a separate performance obligation, which may require significant judgment. Products, parts, and accessories are generally sold separately and are therefore considered distinct. Service contracts, including FPP and LTMA agreements, are evaluated based on availability from other vendors, the nature of the services, timing relative to product delivery, and contractual dependencies. To date, the Company has concluded that all service contracts within multiple-element arrangements are distinct.
The transaction price is allocated to each performance obligation based on relative SSP, which the Company determines by considering overall pricing objectives, market conditions, discounting practices, transaction size, customer demographics, geographic factors, price lists, and historical contract data. SSP is established using observable prices where available; otherwise, a range is used based on market conditions and other observable inputs. The Company typically maintains more than one SSP for individual products and services due to stratification by customer size and geography.
Unsatisfied Performance Obligations The Company has elected the practical expedient to disclose unsatisfied performance obligations only for contracts with an original expected duration greater than one year. The majority of product sales have lead times of less than one year and are therefore excluded. Service contracts, while often exceeding one year in duration, are cancellable without significant penalty; accordingly, their enforceable duration is considered one year or less, and they are also excluded from this disclosure.
Practical Expedients For contracts with a duration of one year or less, the Company expenses incremental costs to obtain a contract as incurred. Such costs are recorded within sales and marketing expenses in the Consolidated Statements of Operations.
Warranty The Company accrues estimated warranty costs at the time revenue is recognized. Warranty terms vary by product and geography and generally extend up to 24 months from the delivery date. Key factors in the warranty estimate include product failure rates, anticipated operating hours, and estimated repair or replacement costs. These estimates are updated each period as new information becomes available. The Company may also accrue costs for reliability repairs on out-of-warranty products when, in management's judgment, a specific remediation plan makes such accrual prudent. Warranty liabilities are assessed quarterly and adjusted as necessary, including when product improvements alter historical failure rates.
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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 2026 and 2025.
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 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 Balance Sheet date 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, 2026, 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 $27.7 million as of March 31, 2026. 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. See Note 4 – Customer Concentrations and Accounts Receivable for further detail.
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 both common stock and non-voting common stock outstanding. The non-voting common stock has the same economic rights as the common stock; accordingly, earnings per share (“EPS”) is presented on a combined basis. Basic net income (loss) per share is computed using the weighted-average number of common and non-voting common shares outstanding during the period. Diluted net income (loss) per share reflects the potential dilution from common stock equivalents, including stock options, restricted stock units, and warrants, as their inclusion would be anti-dilutive. The carrying value adjustments related to the redeemable noncontrolling interests in the consolidated Operating Subsidiary, including remeasurement of the Preferred Units to their redemption value, are reflected in the calculation of net income (loss) attributable to common stockholders for purposes of computing earnings per share. As a result, for the years ended March 31, 2026, and 2025 basic and diluted weighted-average shares outstanding were the same.
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,
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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.
Leases As lessee, the Company classifies lease arrangements as operating or financing leases and records a right-of-use asset and corresponding lease liability on the Consolidated Balance Sheet, measured by discounting fixed lease payments over the lease term at the rate implicit in the lease or the Company's incremental borrowing rate. For operating leases, interest on the lease liability and amortization of the right-of-use asset result in straight-line rent expense over the lease term. The Company has elected to (i) combine lease and non-lease components and (ii) exclude short-term leases with initial terms of twelve months or less from balance sheet recognition, with rent expense recorded on a straight-line basis.
As lessor, financing receivables arising from sales-type leases are recorded separately on the Consolidated Balance Sheets. Lease terms generally range from one to eight years, with most terms between one and two years. Certain agreements provide the lessee with an option to purchase the underlying asset at end of term, including occasional bargain purchase options.
Segment Reporting The Company determines its reporting units in accordance with ASC Topic 280, Segment Reporting. The Company's chief operating decision maker ("CODM") is the Chief Executive Officer. Based on how the CODM evaluates performance and allocates resources, the Company is considered to operate as a single reportable segment, encompassing the development, manufacture, and sale of turbine generator sets and related parts, services, and rentals.
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, Compensation—Stock 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 Statement (Subtopic 220-40): Disaggregation of Income Statement Expenses, as subsequently clarified by ASU No. 2025-01. The amendments require disaggregated disclosure of certain income statement expense line items. The guidance is effective for fiscal years beginning after December 15, 2026, and interim periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact of this guidance on its consolidated financial statements and related disclosures.
In July 2025, the FASB issued ASU No. 2025-05, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. The amendments provide an optional practical expedient for estimating expected credit losses on current accounts receivable and contract assets arising from revenue transactions. The guidance is effective for fiscal years beginning after December 15, 2025. Early adoption is permitted. The Company is currently evaluating the impact of this guidance on its consolidated financial statements and related disclosures.
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In 2025, the FASB issued ASU No. 2025-12, Codification Improvements. The amendments include clarifications related to diluted earnings per share when a loss from continuing operations exists, disclosure requirements for lease receivables arising from sales-type or direct financing leases, and permissible methods for accounting for treasury stock retirements. The guidance is effective for fiscal years beginning after December 15, 2026. The Company is currently evaluating the impact of this guidance on its consolidated financial statements and related disclosures.
In April 2026, the FASB issued ASU 2026-01, Equity (Topic 505): Initial Measurement of Paid-in-Kind Dividends on Equity-Classified Preferred Stock. The new guidance requires an entity to initially measure paid-in-kind (“PIK”) dividends on equity-classified preferred stock based on the dividend rate stated in the underlying preferred stock agreement. The Company has issued Redeemable Series A Convertible Preferred Stock that accrues PIK dividends. The guidance will apply to the Company’s measurement of such dividends upon adoption. The guidance is effective for the Company for annual reporting periods beginning after December 15, 2026, and interim periods within those annual periods. Early adoption is permitted. The Company is currently evaluating the impact that adoption of this guidance will have on its consolidated financial statements.
3. Revenue Recognition
The following table presents disaggregated revenue by business group (in thousands):
Year Ended March 31,
Total Product and Accessories 56,042 38,972
Microturbine Products 907 1,309
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,
All other North America 506 718
Substantially all of the Company’s operating assets are in the United States.
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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 for future orders.
The current and non-current portions of deferred revenue are presented within Current Liabilities and Long-Term Liabilities, respectively, on the Consolidated Balance Sheets.
Changes in deferred revenue consisted of the following (in thousands):
March 31, March 31,
Opening balance, beginning of the year $ 13,949 $ 11,858
Closing balance, end of the year $ 10,688 $ 13,949
Revenue recognized during the year from:
FPP and LTMA Contract Liabilities
Deferred revenue attributable to FPP and LTMA contracts represents the unearned portion of advance payments received under those agreements. Payments are generally received quarterly in advance, with revenue recognized on a straight-line basis over the applicable contract period. As of March 31, 2026, approximately $6.1 million is expected to be recognized from remaining FPP and LTMA contract liabilities. The Company expects to recognize approximately $5.5 million of these remaining performance obligations over the next 12 months, with the remaining balance of $0.6 million to be recognized thereafter.
Distributor Support System ("DSS") Program
The Company’s DSS program provides support for business development activities, including customer lead generation, brand awareness, and tailored marketing services across the Company’s major geographic and vertical markets. Prior to March 31, 2026, these activities were administered through third-party distributors and funded by participating distributors.
Effective March 31, 2026, in connection with the acquisition of CDSS (see Note 20 – Business Combinations), the Company internalized these activities and now performs such services directly.
DSS program fees are generally invoiced and paid quarterly, with revenue recognized on a straight-line basis over the applicable service period, which is typically one year. As of March 31, 2026, approximately $2.0 million is expected to be recognized from remaining DSS contract liabilities. The Company expects to recognize substantially all of these remaining performance obligations within the next 12 months.
Refer to Note 12 – Commitments and Contingencies for information regarding the transition of PrivateCo's distributor services business in connection with the Company's emergence from the Chapter 11 Cases.
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4.Customer Concentrations and AccountsReceivable
The Company recorded credit loss expense of $0.5 million and $0.8 million for the fiscal years ended March 31, 2026 and 2025, respectively. The following table presents the changes in the allowance for expected credit losses for the periods presented (in thousands):
Provision for credit losses 823
Recoveries 31
Write-offs (3,534)
Provision for credit losses 524
Recoveries 302
Write-offs (96)
Revenue Concentrations
The Company’s revenue is concentrated among a limited number of distributors. For the year ended March 31, 2026, sales to E-Finity Distributed Generation (“E-Finity”), Cal Microturbine, DTC Soluciones SA de CV (“DTC”), and Lone Star Power Solutions, LLC (“Lone Star”) accounted for approximately 17%, 16%, 13%, and 10% of total revenue, respectively.
On August 13, 2025, the Company completed its acquisition of Cal Microturbine. See Note 20 - Business Combination for additional information. Cal Microturbine revenue for Fiscal 2026 reflects the period subsequent to acquisition.
For the year ended March 31, 2025, sales to E-Finity, Lone Star, and Horizon Power Systems accounted for approximately 13%, 12%, and 11% of total revenue, respectively.
Accounts Receivable Concentrations
As of March 31, 2026, E-Finity, Lone Star and RSP Systems accounted for approximately 14%, 14% and 10%, respectively, of total accounts receivable. As of March 31, 2025, Lone Star and Optimal Group Australia accounted for approximately 18% and 10%, respectively, of total accounts receivable.
5. 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,
Work in process 1,597 —
Less: non-current portion (2,736) (3,464)
Total inventory, net non-current portion $ 22,106 $ 16,615
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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 and could include 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, 2026, over the periods presented in the following table (in thousands):
Non-current Inventory
Balance Expected
Expected Period of Use to be Used
6. Accrued Warranty Reserve
The Company accrues the estimated costs of product warranties at the time the related revenue is recognized. Warranty terms and conditions vary by product and geography; however, the Company's standard product warranties generally commence on the delivery date and extend for up to twenty-four months.
The Company's warranty obligation is influenced by several key estimates, including product failure rates, anticipated hours of product operation, and the expected costs of repair or replacement necessary to correct product failures. These estimates are reviewed and updated each reporting period as new information becomes available, including field performance data and engineering assessments. When the Company has sufficient evidence that product modifications or design changes are materially affecting historical failure rates, those changes are incorporated prospectively into the warranty liability estimate.
In addition to standard warranty obligations, the Company may accrue estimated costs for reliability repairs on products that are no longer under warranty. Such accruals are recorded when, in management's judgment, and in accordance with a specific remediation plan approved by the Company, it is prudent to provide such repairs. The adequacy of all recorded warranty liabilities is assessed quarterly, and adjustments are made as warranted by updated estimates or actual claims experience.
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Changes in the accrued warranty reserve consisted of the following (in thousands):
March 31, March 31,
Balance, beginning of the period $ 1,070 $ 1,437
Standard warranty provision 195 (184)
Deductions for warranty claims (294) (183)
Balance, end of the period $ 971 $ 1,070
7. Property, Plant, Equipment and Rental Assets