CEPL 10-Q
Capstone Energy Plus, Inc. (CEPL)
f+
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of | (I.R.S. Employer | |
|
|
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of exchange on which registered | ||
|
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ | Accelerated filer ☐ | Smaller reporting company | |
Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes
As of August 7, 2026, the registrant had
CAPSTONE ENERGY+, INC.
TABLE OF CONTENTS
2
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
CAPSTONE ENERGY+, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
| June 30, | | March 31, | |||
2026 | 2026 | |||||
(Unaudited) | ||||||
Assets | ||||||
Current Assets: | ||||||
Cash | $ | | $ | | ||
Restricted cash | | | ||||
Accounts receivable, net of allowances of $ |
| |
| | ||
Inventories |
| |
| | ||
Prepaid expenses and other current assets | | | ||||
Total current assets |
| |
| | ||
Property, plant, equipment and rental assets, net |
| |
| | ||
Intangible assets, net | | | ||||
Finance lease right-of-use assets | | | ||||
Operating lease right-of-use assets | | | ||||
Non-current portion of inventories |
| |
| | ||
Other assets | | | ||||
Total assets | $ | | $ | | ||
Liabilities, Temporary Equity and Stockholders’ Deficit | ||||||
Current Liabilities: | ||||||
Accounts payable | $ | | $ | | ||
Accrued expenses | | | ||||
Accrued warranty reserve |
| |
| | ||
Deferred revenue, current |
| |
| | ||
Deferred acquisition costs, current | | | ||||
Finance lease liability, current | | | ||||
Operating lease liability, current | | | ||||
Factory protection plan liability | | | ||||
Exit notes, net of discount, current | | | ||||
Total current liabilities |
| |
| | ||
Deferred revenue, non-current | | | ||||
Deferred acquisition costs, non-current | | | ||||
Finance lease liability, non-current | | | ||||
Operating lease liability, non-current | | | ||||
Total liabilities | | | ||||
Commitments and contingencies (Note 12) | ||||||
Temporary equity: | ||||||
Redeemable preferred stock, $ | | | ||||
Total temporary equity | | | ||||
Stockholders’ deficit: | ||||||
Common stock, $ |
| |
| | ||
Non-voting common stock, $ |
| |
| | ||
Additional paid-in capital |
| |
| | ||
Accumulated deficit |
| ( |
| ( | ||
Treasury stock, at cost; | ( | ( | ||||
Total stockholders’ deficit |
| ( |
| ( | ||
Total liabilities, temporary equity and stockholders' deficit | $ | | $ | | ||
See accompanying notes to condensed consolidated financial statements.
3
CAPSTONE ENERGY+, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended June 30, | ||||||
| 2026 | | 2025 | |||
Revenue, net: | ||||||
Product and accessories | $ | | $ | | ||
Parts and services | | | ||||
Rentals | | | ||||
Total revenue, net | | | ||||
Cost of goods sold: |
|
| ||||
Product and accessories | | | ||||
Parts and services | | | ||||
Rentals | | | ||||
Total cost of goods sold | | | ||||
Gross profit |
| |
| | ||
Operating expenses: | ||||||
Research and development |
| | | |||
Selling, general and administrative |
| | | |||
Total operating expenses |
| |
| | ||
Income (loss) from operations |
| | ( | |||
Other income (expense), net |
| ( | | |||
Interest income |
| | | |||
Interest expense |
| ( | ( | |||
Income (loss) before provision for income taxes |
| |
| ( | ||
Provision for income taxes |
| | | |||
Net income (loss) | $ | | $ | ( | ||
Net loss per share of common stock and non-voting common stock—basic and diluted | $ | ( | $ | ( | ||
Weighted average shares used to calculate basic net loss per share of common stock and non-voting common stock |
| |
| | ||
See accompanying notes to condensed consolidated financial statements.
4
CAPSTONE ENERGY+, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN TEMPORARY EQUITY AND STOCKHOLDERS’ DEFICIT
(In thousands, except share amounts)
(Unaudited)
Permanent Equity | ||||||||||||||||||||||||||||
Redeemable | Non-Voting | Additional | Total | |||||||||||||||||||||||||
Preferred Stock | Common Stock | Common Stock | Paid-in | Accumulated | Treasury Stock | Stockholders’ | ||||||||||||||||||||||
| | Shares | | Amount | | Shares | | Amount | | Shares | | Amount | | Capital | | Deficit | | Amount | | Deficit | ||||||||
Balance, March 31, 2026 | | $ | | | $ | | | $ | | $ | | $ | ( | $ | ( | $ | ( | |||||||||||
Stock-based compensation | — | — | — | — | — | — | | — |
| — | | |||||||||||||||||
Stock awards to Board of Directors | — | — | | — | — | — | — | — |
| — | — | |||||||||||||||||
Exercise of prefunded warrants | — | — | | | — | — | — | — |
| — | | |||||||||||||||||
Vested restricted stock units | — | — | | — | — | — | — | — | — | — | ||||||||||||||||||
Issuance of restricted stock awards | — | — | | — | — | — | — | — | — | — | ||||||||||||||||||
Repurchase of shares for employee taxes on restricted stock units | — | — | ( | — | — | — | — | — |
| ( | ( | |||||||||||||||||
PIK dividend on Series A Preferred Stock | — | | — | — | — | — | ( | — | — | ( | ||||||||||||||||||
Net income | | — | — | — | — | — | — | |
| — | | |||||||||||||||||
Balance, June 30, 2026 | | | | | | | | ( | $ | ( | ( | |||||||||||||||||
Temporary Equity | Permanent Equity | ||||||||||||||||||||||||||||
| Redeemable | Non-Voting | Additional | Total | |||||||||||||||||||||||||
Noncontrolling Interest | Common Stock | Common Stock | Paid-in | Accumulated | Treasury Stock | Stockholders’ | |||||||||||||||||||||||
LLC Units | | Amount | | Shares | | Amount | | Shares | | Amount | | Capital | | Deficit | | Shares | | Amount | | Deficit | |||||||||
Balance, March 31, 2025 | | $ | | | $ | | | $ | | $ | | $ | ( | | ( | $ | ( | ||||||||||||
Purchase of treasury stock | — | — | ( | — | — | — |
| — |
| — | |
| ( | ( | |||||||||||||||
Vested restricted stock units | — | — | | | — | — | — | — | — |
| — | | |||||||||||||||||
Stock-based compensation | — | — | — | — | — | — | | — | — |
| — | | |||||||||||||||||
Net loss | | | — | — | — | — | — | ( | — |
| — | ( | |||||||||||||||||
Balance, June 30, 2025 | | | | | | | | ( | | ( | ( | ||||||||||||||||||
| (1) | The common stock par value in total does not change the total common stock par value presented in thousands. |
See accompanying notes to condensed consolidated financial statements.
5
CAPSTONE ENERGY+, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended June 30, | ||||||
| 2026 | | 2025 | |||
Cash Flows from Operating Activities: | ||||||
Net income (loss) | $ | | $ | ( | ||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||
Depreciation and amortization | | | ||||
Amortization of financing costs and discounts | | | ||||
Paid-in-kind interest expense | — | | ||||
Interest related to deferred acquisition costs | | — | ||||
Non-cash lease expense | | | ||||
Non-cash cost of assets sold | | — | ||||
Provision for credit loss expense | | | ||||
Inventory write-down | — | | ||||
Provision for warranty expenses | | | ||||
Gain on termination of lease | ( | — | ||||
Stock-based compensation | | | ||||
Changes in operating assets and liabilities: | ||||||
Accounts receivable | | ( | ||||
Inventories | ( | | ||||
Lease receivable | | | ||||
Prepaid expenses, other current assets and other assets | | | ||||
Accounts payable | | | ||||
Accrued expenses | ( | | ||||
Operating lease liability, net | ( | ( | ||||
Accrued salaries and wages and long-term liabilities | | | ||||
Accrued warranty reserve | ( | ( | ||||
Deferred revenue | ( | ( | ||||
Deposits | | — | ||||
Factory protection plan liability | | | ||||
Net cash provided by (used in) operating activities | | ( | ||||
Cash Flows from Investing Activities: | ||||||
Payment of deferred acquisition costs | ( | — | ||||
Expenditures for property, plant, equipment and rental assets | ( | ( | ||||
Net cash used in investing activities | ( | ( | ||||
Cash Flows from Financing Activities: | ||||||
Acquisition of treasury stock | ( | ( | ||||
Repayment of finance lease obligations | ( | ( | ||||
Net cash used in financing activities | ( | ( | ||||
Net increase in cash and restricted cash | | ( | ||||
Cash and restricted cash, Beginning of Period | | | ||||
Cash and restricted cash, End of Period | $ | | $ | | ||
Supplemental Disclosures of Cash Flow Information: | ||||||
Cash paid during the period for: | ||||||
Interest | $ | | $ | | ||
Income taxes | $ | | $ | | ||
Supplemental Disclosures of Non-Cash Information: | ||||||
Right-of-use assets obtained in exchange for operating lease obligations | $ | — | $ | | ||
Right-of-use assets obtained in exchange for finance lease obligations | $ | — | $ | | ||
Acquisition of treasury stock with accrued liabilities | $ | — | $ | | ||
Settlement of lease liabilities through accounts receivable | $ | — | $ | | ||
Operating lease modified to finance lease | $ | — | $ | | ||
Accounts payable negotiated in lease modification | $ | — | $ | | ||
See accompanying notes to condensed consolidated financial statements.
6
CAPSTONE ENERGY+, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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 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 serve 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 expansive multi-megawatt deployments. 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 (as defined herein) 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.
On July 8, 2026, the Company's common stock commenced trading on the Nasdaq Global Market (“Nasdaq”) under the symbol “CEPL,” following a period during which the Company's common stock traded 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
Basis of Presentation The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and the instructions to Form 10-Q and Regulation S-X promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). They do not include all of the information and footnotes required by GAAP for complete financial statements. The Condensed Consolidated Balance Sheet as of March 31, 2026, was derived from audited Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2026. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, the interim Condensed Consolidated Financial Statements include all adjustments (including normal recurring adjustments) necessary for a fair presentation of the financial condition, results of operations and cash flows for such periods. Results of operations for any interim period are not necessarily indicative of results for any other interim period or for the full year. These Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2026, filed with the SEC on June 25, 2026.
7
This Quarterly Report on Form 10-Q (this “Form 10-Q”) refers to the Company’s fiscal years ending
Basis for Consolidation The Condensed Consolidated Financial Statements included in this filing include the accounts of the Company, the Operating Subsidiary, Capstone Turbine Financial Services, LLC, its wholly owned subsidiary formed in October 2015, and Cal Microturbine LLC (“Cal Microturbine”) after elimination of inter-company transactions.
Reclassification Certain prior-period amounts have been reclassified to conform to the current period presentation. These reclassifications include the presentation of lease receivables, current within prepaid expenses and other current assets, lease receivables, non-current within other assets, and accrued salaries and wages within accrued expenses. The reclassifications had no effect on the Company's financial statements.
Significant Accounting Policies Except as described below, there have been no changes to the Company’s significant accounting policies described in the Annual Report on Form 10-K for Fiscal Year 2026 filed with the SEC, that have had a material impact on the Company's Condensed Consolidated Financial Statements.
Impact of Recently Issued Accounting Standards
Adopted
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. Effective
In April 2026, the FASB issued ASU No. 2026-01, “Equity (Topic 505): Initial Measurement of Paid-in-Kind Dividends on Equity-Classified Preferred Stock”. The 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 adopted ASU 2026-01 effective April 1, 2026. The adoption of this guidance did not have a material impact on the Company's condensed 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
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 condensed consolidated financial statements and related disclosures.
3. Revenue Recognition
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. |
8
Products and Accessories
Products and Accessories revenue consists primarily of sales of microturbine products and accessories, with revenue recognized when control of the underlying product transfers to the customer in accordance with the terms of the contract.
Microturbine Products The Company recognizes revenue when the performance obligation identified under the terms of the contract with its customer is satisfied, which generally occurs, for microturbine products, upon the transfer of control in accordance with the contractual terms and conditions of the sale. The majority of the Company’s revenue associated with a microturbine product is recognized at a point in time when the microturbine product is shipped to the customer. On occasion, the Company enters into bill-and-hold arrangements. Each bill-and-hold arrangement is reviewed and revenue is recognized only when certain criteria have been met: (i) the reason for the bill-and-hold arrangement is substantive; (ii) the product is segregated from the Company’s other inventory items held for sale; (iii) the product is ready for shipment to the customer; and (iv) the Company does not have the ability to use the product or direct it to another customer.
Advanced payments in the form of customer deposits are received on these contracts, typically providing for a substantial portion of the contract value to be paid prior to shipment. Advance payments are not considered a significant financing component as they are typically received less than one year before the related performance obligations are satisfied. Payment terms in contracts with customers typically are
Accessories Revenue from accessories is recognized at the point in time when control transfers to the customer, generally upon shipment.
Parts and Services
Parts and Services revenue consists primarily of sales of replacement parts and revenues generated from maintenance and service programs, including Long-Term Maintenance Agreements ("LTMAs"), legacy Factory Protection Plan ("FPP") arrangements, warranty-related activities, and other service cost reimbursement programs.
Parts Revenue from 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 to
LTMA contracts cover critical components including engine, electronic, and fuel components, and include an annual escalator. Freight is excluded by default but may be added when requested while labor reimbursement is excluded. Advance payments received at contract inception are classified as deferred revenue and recognized on a straight-line basis over the contract term. These payments are typically made annually or semi-annually, except where an alternate schedule is requested, and 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.
Distribution Services The Company provides distribution support services to customers and distributors, including customer lead generation, brand awareness initiatives, and tailored marketing programs. Revenue is recognized over the period in which the services are performed.
9
Rentals
Rentals The 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 Obligations
Contracts 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.
The following table presents disaggregated revenue by business group (in thousands):
Three Months Ended June 30, | ||||||
| 2026 | | 2025 | |||
Microturbine Products | $ | | $ | | ||
Accessories | | | ||||
Total Product and Accessories | | | ||||
Parts and Services | | | ||||
Total ASC 606 Revenue | | | ||||
Rentals |
| |
| | ||
Total ASC 842 Revenue | | | ||||
Total Revenue | $ | | $ | | ||
The following table presents disaggregated revenue by geography based on the primary operating location of the Company’s customers (in thousands):
Three Months Ended June 30, | ||||||
| 2026 | | 2025 | |||
United States | $ | | $ | | ||
Mexico |
| | | |||
All other North America |
| |
| | ||
Total North America |
| |
| | ||
Europe | | | ||||
Asia |
| |
| | ||
Australia |
| |
| | ||
All other |
| |
| | ||
Total Revenue | $ | | $ | | ||
10
Contract Balances
The Company’s deferred revenues consist of deposits and advance payments for microturbine products, parts, accessories and parts ordered under sales contracts, which have not yet been delivered (contract liabilities), as well as advance payments on service obligations, FPP contracts and extended warranties. Deposits are primarily non-refundable cash payments from distributors for future orders. The current portion of deferred revenue and the non-current portion of deferred revenue are included in Current Liabilities and Long-Term Liabilities, respectively, in the Condensed Consolidated Balance Sheets.
Changes in deferred revenue consisted of the following (in thousands):
| Three Months Ended June 30, | |||||
2026 | 2025 | |||||
Opening balance, beginning of the period | $ | | $ | | ||
Closing balance, end of the period | $ | | $ | | ||
Revenue recognized in the period from: |
| |||||
Amounts included in deferred revenue at the beginning of the period | $ | | $ | | ||
FPP and LTMA Contract Liabilities
Deferred revenue attributed 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 June 30, 2026, approximately $
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.
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 June 30, 2026, approximately $
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
Practical Expedients
For contracts with a duration of
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
11
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
4. Customer Concentrations and Accounts Receivable
Accounts receivable are presented on the Condensed Consolidated Balance Sheets, net of estimated credit losses. The Company applies the aging method by pooling receivables based on levels of delinquency and applying historical loss rates on what has been historically uncollectible by aging categories. The historical loss rate is adjusted for current conditions and reasonable and supportable forecasts of future losses, as necessary. Additionally, the allowance for credit loss calculation includes subjective adjustments for qualitative risk factors that could likely cause estimated credit losses to differ from historical experience. The factors include assessments of various economic conditions, significant events that 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.
Changes in the current expected credit losses (“CECL”) allowance for accounts receivable are as follows (in thousands):
Balance, March 31, 2026 | $ | | |
Provision for credit loss |
| | |
Write-offs |
| — | |
Balance, June 30, 2026 | $ | |
Revenue Concentrations
The Company’s revenue is concentrated among a limited number of distributors. For the three months ended June 30, 2026, sales to Horizon Power Systems and E-Finity Distributed Generation (“E-Finity”) accounted for approximately
For the three months ended June 30, 2025, sales to Cal Microturbine and Lone Star accounted for approximately
Accounts Receivable Concentrations
As of June 30, 2026, RSP Systems and E-Finity accounted for approximately
5. Inventories
Inventories are valued at the lower of cost (determined on a first-in, first-out (“FIFO”) basis) or net realizable value and consisted of the following (in thousands):
June 30, | March 31, | |||||
2026 | 2026 | |||||
Raw materials | | $ | | | $ | |
Work in process | — |
| | |||
Finished goods | | | ||||
Total | | | ||||
Less: non-current portion | ( | ( | ||||
Total inventory, net non-current portion | $ | | $ | | ||
12
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 June 30, 2026 over the periods presented in the following table (in thousands):
Non-current Inventory | |||
Balance Expected | |||
Expected Period of Use | to be Used | ||
13 to 24 months | $ | | |
25 to 36 months |
| | |
Total | $ | |
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
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.
Changes in the accrued warranty reserve consisted of the following (in thousands):
| Three Months Ended June 30, | |||||
| 2026 | | 2025 | |||
Balance, beginning of the period | $ | | $ | | ||
Standard warranty provision |
| |
| | ||
Deductions for warranty claims |
| ( |
| ( | ||
Balance, end of the period | $ | | $ | | ||
7. Property, Plant, Equipment and Rental Assets
Property, plant, equipment and rental assets consisted of the following (in thousands):
June 30, | March 31, | |||||
| 2026 | | 2026 | |||
Machinery, equipment, automobiles and furniture | $ | | $ | | ||
Leasehold improvements |
| |
| | ||
Molds and tooling | | | ||||
Rental assets | | | ||||
Total property, plant, equipment and rental assets |
| |
| | ||
Less: accumulated depreciation |
| ( |
| ( | ||
Total property, plant, equipment and rental assets, net | $ | | $ | | ||
The Company regularly assesses the useful lives of property and equipment and retires assets no longer in service. Depreciation expense for property, plant, equipment and rental assets was $
13
8. Intangible Assets
The Company's intangible assets relate to two acquisitions completed during Fiscal 2026. In connection with the acquisition of Cal Microturbine, which was accounted for as a business combination under ASC 805, the Company recognized customer relationship intangible assets. In connection with the acquisition of CDSS (as defined herein), which was accounted for as an asset acquisition under ASC 805-50, the Company recognized trademark intangible assets. These intangible assets have finite useful lives and are being amortized on a straight-line basis over their estimated useful lives.
Intangible assets consisted of the following (in thousands):
| |||||||||
Total |
| ||||||||
Estimated |
| June 30, | March 31, | ||||||
Useful Life | 2026 | 2026 | |||||||
Customer relationships | | | $ | | | $ | | | |
Less: accumulated amortization |
|
| ( |
| ( | ||||
Customer relationships, net | | | |||||||
Trademark | | | |||||||
Less: accumulated amortization | ( | — | |||||||
Trademark, net | | | |||||||
Total intangible assets, net | $ | | $ | |
Amortization expense related to intangible assets was $
Estimated future amortization expense for intangible assets as of June 30, 2026 is as follows (in thousands):
Year Ending March 31, | | |
$ | | |
2028 | | |
2029 | | |
2030 | | |
2031 | | |
Thereafter | | |
Total | $ | |
9. Fair Value Measurements
The FASB has established a framework for measuring fair value using generally accepted accounting principles. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of the fair value hierarchy are described as follows:
Level 1. Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets.
Level 2. Inputs to the valuation methodology include:
| ● | Quoted prices for similar assets or liabilities in active markets |
| ● | Quoted prices for identical or similar assets or liabilities in inactive markets |
| ● | Inputs other than quoted prices that are observable for the asset or liability |
| ● | Inputs that are derived principally from or corroborated by observable market data by correlation or other means |
14
If the asset or liability has a specified (contractual) term, the level 2 input must be observable for substantially the full term of the asset or liability.
Level 3. Inputs to the valuation methodology are unobservable and significant to the fair value measurement.
The asset or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used must maximize the use of observable inputs and minimize the use of unobservable inputs.
Basis for Valuation
The carrying amounts reported in the Condensed Consolidated Balance Sheets for cash, accounts receivable, and accounts payable approximate fair value due to the short-term nature of these instruments. The Company had
10. Leases
Lessor
The Company rents microturbine equipment to customers under lease agreements with terms ranging from a few months to
Monthly rental payments are fixed. Certain leases also include variable payment components for items such as fuel, excess labor, additional equipment, or technician labor and engineering support. Variable payments are not included in the measurement of the lease receivable and are recognized as revenue in the period earned.
Leases are classified at commencement as either sales-type leases or operating leases in accordance with ASC 842. In connection with its Energy-as-a-Service ("EaaS") business, the Company also enters into arrangements under which it rents certain microturbine equipment back from customers and subleases that equipment to end users, as further described in the Lessee section below.
Lessor – Operating Leases
At June 30, 2026, the Company’s minimum rental revenue to be received was as follows (in thousands):
Leased | Owned and | |||||
Year Ending March 31, | | Assets |
| Financed Assets | ||
2027 (remainder of fiscal year) | $ | | $ | | ||
2028 |
| |
| | ||
2029 |
| — |
| | ||
Thereafter | — | — | ||||
Total minimum rental revenue | $ | | $ | | ||
15
Lessor – Sales-Type Leases
At June 30, 2026, the Company’s future scheduled minimum payments to be received from its sales-type lease was as follows (in thousands):
Year Ending March 31, | | ||
2027 (remainder of fiscal year) | $ | | |
2028 |
| | |
2029 |
| | |
2030 |
| | |
2031 |
| | |
Thereafter | | ||
Total minimum lease payments | $ | | |
Less: imputed interest | ( | ||
Plus: unguaranteed residual value | | ||
Present value of lease receivable | $ | |
The Company recognized less than $
June 30, | March 31, | ||||
2026 | 2026 | ||||
Gross receivables | $ | | | $ | |
Unguaranteed residual value | | | |||
Total, net | $ | | $ | | |
Reported as: | |||||
Current | | | |||
Long-Term | | | |||
Total, net | $ | | | $ | |
Lessee
The Company leases facilities and equipment under various non-cancellable operating and finance leases with expiration dates through Fiscal 2037. All leases require the Company to pay maintenance, insurance, and property taxes. Lease agreements for the Company's primary office and manufacturing facilities include rent escalation provisions over the lease term and
EaaS Sublease Arrangements
As part of its EaaS business, the Company rents used microturbine equipment from customers where that equipment would otherwise not be in use, and subleases that equipment to end users. During the three months ended June 30, 2026, the Company did
As of June 30, 2026, lease commitments totaled approximately
16
Lease Cost
The components of lease expense were as follows (in thousands):
Three Months Ended June 30, | ||||||
| 2026 | | 2025 | |||
Finance lease costs (1) | $ | | $ | | ||
Operating lease costs | | | ||||
Variable lease expense | | | ||||
Total lease costs | $ | | $ | | ||
| (1) | Finance lease costs include both the amortization of the right-of-use asset and interest expense on the finance lease liability. |
Supplemental Balance Sheet Information
Right-of-use assets and lease liabilities consisted of the following (in thousands):
| June 30, | | March 31, | |||
2026 | 2026 | |||||
Finance lease right-of-use assets | $ | | $ | | ||
Operating lease right-of-use assets | | | ||||
Total right-of-use assets | $ | | $ | | ||
Finance lease liability, current | $ | | $ | | ||
Operating lease liability, current | | | ||||
Finance lease liability, non-current | | | ||||
Operating lease liability, non-current |
| |
| | ||
Total lease liabilities | $ | | $ | | ||
Finance leases: | ||||||
Weighted average remaining lease life |
|
| ||||
Weighted average discount rate | ||||||
Operating leases: | ||||||
Weighted average remaining lease life |
|
| ||||
Weighted average discount rate | ||||||
Supplemental Cash Flow Information (in thousands):
Three Months Ended June 30, | ||||||
| 2026 | | 2025 | |||
Cash paid for amounts included in the measurement of lease liabilities | ||||||
Finance cash flows from finance leases | $ | | $ | | ||
Operating cash flows from finance leases | $ | | $ | | ||
Operating cash flows from operating leases | $ | | $ | | ||
Change in Right-of-use assets through modification of lease obligations | ||||||
Finance leases | $ | — | $ | | ||
Operating leases | $ | — | $ | ( | ||
17
Lease Maturity Analysis
At June 30, 2026, the Company’s minimum commitments under non-cancelable operating and finance leases were as follows (in thousands):
Finance | Operating | |||||
Year Ending March 31, | | Leases | | Leases | ||
2027 (remainder of fiscal year) | $ | | $ | | ||
2028 | | | ||||
2029 |
| |
| | ||
2030 |
| — |
| | ||
2031 |
| — |
| | ||
Thereafter | — | | ||||
Total lease payments | $ | | $ | | ||
Less: imputed interest | ( | ( | ||||
Present value of lease liabilities | $ | | $ | | ||
11. Debt
Exit Facility Agreement
On
The Exit Note Purchase Agreement was amended three times through March 29, 2026, as described in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2026. There were no amendments to the Exit Note Purchase Agreement during the three months ended June 30, 2026.
Financial Covenants
As of June 30, 2026, the minimum consolidated liquidity covenant required the Company and its subsidiaries to maintain minimum average consolidated liquidity of $
Outstanding Balance and Maturity
As of June 30, 2026, the outstanding Exit Notes balance was $
Interest expense related to the Exit Notes during the three months ended June 30, 2026 and 2025 was $
18
The scheduled maturities of the Company's long-term debt as of June 30, 2026 were as follows (in thousands):
Year Ending March 31, | | ||
2027 (remainder of fiscal year) | $ | | |
Thereafter | — | ||
Total principal payments and debt maturities | | ||
Less unamortized issuance costs | ( | ||
Net principal payments and debt maturities | $ | | |
12. Commitments and Contingencies
Purchase Commitments
As of June 30, 2026, the Company had firm commitments to purchase of approximately $
Lease Commitments
See Note 10 – Leases.
Related Party Transactions
In connection with the Company's emergence from Chapter 11 bankruptcy on December 7, 2023, the Company and its Operating Subsidiary were party to a series of agreements with Capstone Distributor Support Services Corporation ("CDSS"), an entity controlled by Goldman Sachs, and its affiliate (“Reorganized PrivateCo”), including a Services Agreement between the Operating Subsidiary and Reorganized PrivateCo (the "Reorganized PrivateCo Services Agreement"). On March 31, 2026, in connection with the closing of the March 2026 PIPE (see Note 15), the Company completed a series of transactions that fully unwound these arrangements, including:
| ● | the acquisition of the Distributor Support Services assets previously held by CDSS for $ |
| ● | the acquisition of the Capstone trademarks previously licensed from Reorganized PrivateCo, terminating the Trademark License Agreement (see Note 8 – Intangible Assets); and |
| ● | the redemption of all outstanding Preferred Units (as defined herein) held by CDSS (see Note 13 – Temporary Equity), following which the Operating Subsidiary became a wholly owned subsidiary of the Company. |
For additional information regarding these related party relationships and the March 31, 2026 unwind, see Note 12 to the Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2026. There were no related party transactions during the three months ended June 30, 2026, and no related party balances were outstanding as of June 30, 2026 or March 31, 2026.
Legal Proceedings
Capstone Turbine Corporation v. Turbine International, LLC.
On February 3, 2020, Capstone Turbine Corporation filed suit against its former distributor, Turbine International, LLC (“Turbine Intl.”), in the Superior Court of California alleging breach of contract relating to the parties’ prior distributor relationship (which terminated at the end of March 2018) and Turbine Intl.’s failure to satisfy its payment obligations under certain financial agreements, namely an accounts receivable agreement and promissory note in favor of Capstone. The Company subsequently modified its complaint to include Turbine Intl. guarantors as defendants. The Company was seeking approximately $
For information regarding recent developments occurring subsequent to June 30, 2026, see Note 20 - Subsequent Events.
19
13. Temporary Equity
Overview
As of June 30, 2026, the Company’s temporary equity consists of the Redeemable Series A Convertible Preferred Stock issued on March 31, 2026, in connection with the March 2026 PIPE (as defined in Note 15). The Operating Subsidiary’s Series A Redeemable Preferred Units, which had been classified as temporary equity in prior periods, were fully redeemed on March 31, 2026, as described below.
Part I — Redeemable Preferred Units (Extinguished March 31, 2026)
In connection with the Company's emergence from Chapter 11 bankruptcy on
During the three months ended June 30, 2025, the Preferred Units were outstanding, and a portion of the Operating Subsidiary’s net income (loss) was allocated to them under the HLBV method, as reflected in net income (loss) attributable to redeemable noncontrolling interests. The Preferred Units were
Part II — Redeemable Series A Convertible Preferred Stock
Issuance
On March 31, 2026, in connection with the March 2026 PIPE, the Company issued
Dividends
The Series A Preferred Stock accrues a cumulative paid-in-kind ("PIK") dividend at an initial rate of
20
The following table presents the activity in the Redeemable Series A Convertible Preferred Stock since issuance (in thousands):
Three Months Ended | |||
June 30, 2026 | |||
Balance, beginning of the period | $ | | |
Issuance of Redeemable Series A Preferred Stock, net of issuance costs | — | ||
PIK dividend accrual | | ||
Balance, end of the period | $ | |
Conversion
The Series A Preferred Stock is initially recorded at its allocated purchase price, net of $
Redemption
The Series A Preferred Stock is redeemable at the option of the holder upon certain breaches by the Company, subject to available funds and the restrictions of the Exit Note Purchase Agreement. Because redemption is contingent upon events not solely within the Company's control, the Series A Preferred Stock is classified as temporary equity rather than permanent equity.
Governance Rights
So long as Monarch holds at least
Registration Rights
In connection with the issuance of the Series A Preferred Stock, the Company entered into a registration rights agreement pursuant to which the Company agreed to file a resale registration statement with the SEC registering the resale of the shares of common stock underlying the Series A Preferred Stock. The resale registration statement was filed with the SEC on April 28, 2026.
14. Stock Compensation
The following table summarizes stock-based compensation expense by line item in the Condensed Consolidated Statements of Operations (in thousands):
Three Months Ended June 30, | ||||||
| 2026 | | 2025 | |||
Cost of goods sold | $ | | $ | | ||
Research and development |
| |
| | ||
Selling, general and administrative |
| |
| | ||
Stock-based compensation expense | $ | | $ | | ||
21
2023 Equity Incentive Plans
The Company's stock-based compensation is provided under the Capstone Energy+, Inc. 2023 Equity Incentive Plan, as amended (the "2023 Plan"), the terms of which are described in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2026. On April 21, 2026, the Board of Directors approved Amendment No. 2 to the 2023 Plan, increasing the maximum number of shares authorized for issuance from
Non-Voting Common Stock
In connection with the Company's emergence from bankruptcy, a class of non-voting common stock was issued to certain key employees and directors as an incentive following the restructuring. The non-voting common stock is fully vested and ranks equally with the common stock in all respects, including as to dividends and distributions and upon liquidation, and each share automatically converts into
Restricted Stock Awards
During the three months ended June 30, 2026, the Company began granting restricted stock awards ("RSAs") under the 2023 Plan. RSAs are shares of common stock that are issued and outstanding upon grant but remain subject to forfeiture until vesting, and generally vest over
The following table summarizes RSA activity for the three months ended June 30, 2026:
Weighted | |||||
| Average Grant | ||||
Date Fair | |||||
Restricted Stock Awards | Shares | Value | |||
Non-vested restricted stock awards outstanding at April 1, 2026 | | | $ | | |
Granted |
| | | ||
Vested and issued |
| — | — | ||
Cancelled or forfeited |
| — | — | ||
Non-vested restricted stock awards outstanding at June 30, 2026 |
| | $ | | |
Restricted Stock Units and Performance Restricted Stock Units
The following table summarizes RSU activity:
Weighted | |||||
| Average Grant | ||||
Date Fair | |||||
Restricted Stock Units | Shares | Value | |||
Non-vested restricted stock units outstanding at April 1, 2026 (as adjusted) | | | $ | | |
Granted |
| — | — | ||
Vested and issued |
| | | ||
Cancelled or forfeited |
| — | — | ||
Non-vested restricted stock units outstanding at June 30, 2026 |
| | $ | | |
The beginning non-vested RSU balance includes a
22
The following table summarizes PRSU activity:
Weighted | ||||||
Average Grant | ||||||
Date Fair | ||||||
Performance Restricted Stock Units | Shares | Value |
| |||
Non-vested restricted stock units outstanding at April 1, 2026 | | $ | | |||
Granted | | | ||||
Vested and issued | — | — | ||||
Forfeited/cancelled | — | — | ||||
Non-vested restricted stock units outstanding at June 30, 2026 | | | $ | | ||
15. Common Stock Issuance and Private Investment in Public Equity ("PIPE") Financing Transaction
During the fiscal year ended March 31, 2026, the Company completed two PIPE financing transactions, each of which is described in the Company's Annual Report on Form 10-K for that fiscal year. No new PIPE financing transactions were entered into during the three months ended June 30, 2026. A summary of each transaction and related instruments outstanding as of June 30, 2026 follows.
November 2025 PIPE Financing Transaction
On November 24, 2025, the Company entered into a Securities Purchase Agreement with certain accredited investors (the "November 2025 PIPE") pursuant to which it issued and sold (i)
March 2026 Common Stock Issuance and PIPE Financing Transaction
In connection with the issuance of the Series A Preferred Stock on March 31, 2026 (see Note 13 – Temporary Equity), the Company issued
On March 31, 2026, the Company also issued
Pre-Funded Warrants
The pre-funded warrants issued in both PIPE financings have substantially similar terms. Each warrant is exercisable at any time following issuance until exercised in full, subject to beneficial ownership limitations restricting exercise if the holder would beneficially own more than
23
On May 8, 2026, an investor exercised
The following table summarizes pre-funded warrant activity for the three months ended June 30, 2026:
November 2025 PIPE | March 2026 PIPE | Total | |
Warrants outstanding at April 1, 2026 | | | |
Warrants issued | — | — | — |
Warrants exercised | ( | ( | ( |
Warrants outstanding at June 30, 2026 | |
Registration Rights
In connection with each transaction, the Company entered into a Registration Rights Agreement requiring it to file a resale registration statement covering the shares issued and the shares underlying the pre-funded warrants. Neither agreement imposes cash penalties for failure to meet filing or effectiveness deadlines; accordingly,
16. Employee Benefit Plans
The Company maintains a defined contribution 401(k) profit-sharing plan (the "Plan") in which all employees are eligible to participate. Employees may contribute up to the lesser of
The Plan provides for both Company matching contributions and discretionary contributions, with discretionary contributions determined by the Board. The Company makes matching contributions at a rate of
The Company recorded matching contribution expense of approximately $
17. Net Income (Loss) Per Common Share
The Company has common stock and non-voting common stock outstanding. As both classes carry identical economic rights, earnings per share is presented on a combined basis. Basic income (loss) per share is computed using the weighted average number of combined common and non-voting common shares and pre-funded warrants outstanding during the period.
Diluted income (loss) per share includes potentially dilutive instruments, including restricted stock units, restricted stock awards, and shares issuable upon conversion of the Series A Convertible Preferred Stock, when their inclusion would be dilutive. For periods in which the Company reports a net loss available to common stockholders, all potentially dilutive instruments are excluded from the diluted share count as their inclusion would reduce the loss per share.
For the three months ended June 30, 2025, the accretion of the Operating Subsidiary's Preferred Units to their maximum redemption value is reflected as a reduction in net income (or increase in net loss) available to common and non-voting common stockholders in the computation of basic and diluted earnings per share, consistent with the two-class method requirements under ASC 260. The Preferred Units were fully redeemed on March 31, 2026 and, accordingly, no such accretion is reflected for the three months ended June 30, 2026. For the three months ended June 30, 2026, net income (loss) available to common and non-voting common stockholders reflects a reduction for cumulative paid-in-kind dividends accrued on the Series A Convertible Preferred Stock. Refer to Note 13 – Temporary Equity for additional information regarding the Preferred Units and the Series A Convertible Preferred Stock.
24
The following table presents the computation of basic and diluted net income (loss) per share for the three months ended June 30, 2026 and 2025 (in thousands, except per share amounts):
Three Months Ended June 30, | ||||||
| 2026 | | 2025 | |||
Numerator: | ||||||
Consolidated net income (loss) | $ | | $ | ( | ||
Less: PIK dividends on Series A Convertible Preferred Stock | ( | — | ||||
Net loss available to holders of common stock and non-voting common stock | $ | ( | $ | ( | ||
Denominator: | ||||||
Weighted average shares outstanding of common stock and non-voting common stock |
| |
| | ||
Pre-funded warrants and other equivalents (1) | ||||||
Weighted average shares outstanding - diluted | | | ||||
Net loss per share of common stock and non-voting common stock—basic and diluted | $ | ( | $ | ( | ||
| (1) | For the three months ended June 30, 2026 and 2025, all potentially dilutive instruments were excluded from the diluted share count as their inclusion would be anti-dilutive given the net loss available to common stockholders in each period. |
The following table summarizes the potentially dilutive securities excluded from the diluted share calculation for each period presented:
Three Months Ended June 30, | ||||||
| 2026 | | 2025 | |||
Restricted stock units | | | ||||
Performance restricted stock units | | | ||||
Restricted stock awards | | — | ||||
Series A Redeemable Preferred Stock | | — | ||||
Total potentially dilutive securities excluded | | | ||||
18. Segment Information
Segment Structure
The Company operates as a single reportable segment encompassing the development, manufacture, sale, and rental of microturbine energy systems and their related parts and services. This determination is consistent with how the Company's Chief Executive Officer (the "CODM") evaluates performance and allocates resources on a consolidated basis.
The CODM assesses segment performance using consolidated net income (loss) on a GAAP basis, consistent with the basis of presentation in these financial statements. This measure is compared against prior periods and forecasted results to support operational decision-making, cost management, and business expansion initiatives. The CODM does not evaluate the segment using asset or liability information, and there are no intersegment sales or transfers within the consolidated entity.
25
Segment Profit or Loss and Reconciliation to Consolidated Statements of Operations
The following table presents reported segment revenue, gross profit, significant segment expenses regularly provided to the CODM, and a reconciliation to consolidated net income (loss) (in thousands):
Three Months Ended June 30, | ||||||
| 2026 | | 2025 | |||
Revenue, net: | $ | | | $ | | |
Less: | ||||||
Cost of revenue | | | ||||
Gross profit | | | ||||
Less: | ||||||
Research and development | | | ||||
Selling, general & administrative expenses | | | ||||
Non-recurring expenses (1) | | | ||||
Other (income) expense items (2) | | | ||||
Consolidated net income (loss) | $ | | $ | ( | ||
| (1) | Non-recurring expenses include costs such as restructuring, financing, shareholder litigation, non-recurring legal, restatement, merger and acquisition activity, and SEC investigation. |
| (2) |
19. Supplemental Balance Sheet Information
Prepaid Expenses and Other Assets
As of June 30, 2026, the Company had $
A
The current and long-term portions of prepaid royalties and prepaid and other assets were as follows (in thousands):
| June 30, | | March 31, | |||
2026 | 2026 | |||||
Other royalty-related current assets | $ | | $ | | ||
Other royalty-related noncurrent assets | |
| | |||
Total royalty-related assets | $ | | $ | | ||
Prepaid insurance current asset | | | ||||
Prepaid insurance noncurrent asset | | | ||||
Total prepaid insurance | $ | | $ | | ||
Deposits current asset | | | ||||
Deposits noncurrent asset | | | ||||
Total deposits | $ | | $ | | ||
Prepaid vendor inventory | | | ||||
Prepaid taxes | | | ||||
Other current assets | | | ||||
Lease receivable, current | | | ||||
Lease receivable, noncurrent | | | ||||
Total Prepaid expenses, other current assets and other assets | $ | | $ | | ||
26
Accrued Expenses
Accrued Expenses consisted of the following (in thousands):
June 30, | March 31, | ||||||
2026 | 2026 | ||||||
Accrued salaries and employee benefits | $ | | $ | | |||
Accrued bonus | | | |||||
Accrued professional fees | | | |||||
Inventory - related accruals | | | |||||
Accrued interest | | | |||||
Service claims and utilities | | | |||||
Sales tax payable | | | |||||
Other accrued expenses | | | |||||
Total accrued expenses | $ | | $ | | |||
20. Subsequent Events
Nasdaq Listing. On July 8, 2026, the Company's common stock commenced trading on the Nasdaq Stock Market LLC under the symbol “CEPL.” Prior to the listing, the Company's common stock was quoted on OTCQX Best Market under the symbol “CGEH.” The listing did not involve the issuance of any new shares of common stock or the receipt of any proceeds by the Company.
Impact on Series A Preferred Stock. As a result of the listing of the Company's common stock on a U.S. national securities exchange (see Note 13 – Temporary Equity), the provision of the Series A Preferred Stock that would have increased the PIK dividend rate by
Shelf Registration Statement. On July 7, 2026, the Company filed a shelf registration statement on Form S-3 with the SEC which was declared effective on August 6, 2026 and permits permit the Company to offer and sell, from time to time, up to $
California Air Resources Board (“CARB”) Notice of Violation In August 2026, subsequent to quarter end, CARB issued a Notice of Violation (“NOV”) alleging violations of California’s Distributed Generation Certification Regulation involving
The Company evaluated subsequent events through the date of issuance of these financial statements and determined that no events occurred that require recognition or disclosure, other than those described above.
27
Item 2. 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 should be read in conjunction with the Condensed Consolidated Financial Statements and notes thereto included in this Form 10-Q and the Consolidated Financial Statements and notes thereto included in our Annual Report on Form 10-K for our fiscal year ended March 31, 2026 (“Fiscal 2026”). All dollar amounts in this Management’s Discussion and Analysis of Financial Condition and Results of Operations are approximate.
All references in this Quarterly Report on Form 10-Q to “the Company,” “we,” “us,” “our,” or “Capstone” are to Capstone Energy+, Inc. and its consolidated subsidiaries as of June 30, 2026, and March 31, 2026, and for the three months ended June 30, 2026 and 2025.
Special Note Regarding Forward-Looking Statements
This Form 10-Q contains forward-looking statements regarding future events and our future results that are subject to the safe harbors created under the Securities Act of 1933, as amended, (the “Securities Act”) and the Securities Exchange Act of 1934, as amended, (the “Exchange Act”). All statements other than statements of historical facts are forward-looking statements. These include statements that are based on current expectations, estimates, forecasts and projections about the industries in which we operate and the beliefs and assumptions of our management. Words such as “expects,” “anticipates,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “continues,” “strives,” “potential,” “predict,” “may,” “will,” “might,” “could,” “intend,” “assumes” and variations of such words and similar expressions are intended to identify forward-looking statements. In addition, any statements that refer to projections of our future financial performance, our anticipated growth and trends in our businesses, and other characterizations of future events or circumstances are forward-looking statements. Readers are cautioned that these forward-looking statements are subject to risks, uncertainties, and assumptions that are difficult to predict, including, among others:
| ● | our ability to execute on our evolving business model and strategy, including our ability to diversify and expand into the market for artificial intelligence (“AI”) solutions and data centers; |
| ● | our limited experience with respect to new markets we are entering, including the market for data centers; |
| ● | the significant risks related to our substantial indebtedness and our long-term liquidity requirements; |
| ● | risks related to our history of net losses and ability to raise additional capital and fund future operating requirements and expansion opportunities into the AI market; |
| ● | our ability to retain key personnel; and |
| ● | other risks and uncertainties discussed in “Item 1A. Risk Factors” in our Annual Report on Form 10-K for Fiscal 2026. |
Furthermore, new risks may emerge in the future and it is not possible for us to predict all risks, nor can we assess the impact of all factors on the business or the extent to which any factor, or combination of factors, may cause actual results, performance or achievement to differ materially from those contained in any forward-looking statements. Forward-looking statements speak only as of the date of this Form 10-Q. Except as expressly required under federal securities laws and the rules and regulations of the Securities and Exchange Commission (the “SEC”), we do not have any obligation, and do not undertake, to update any forward-looking statements to reflect events or circumstances arising after the date of this Form 10-Q, whether as a result of new information or future events or otherwise. Readers should not place undue reliance on the forward-looking statements included in this Form 10-Q or that may be made elsewhere from time to time by us, or on our behalf. All forward-looking statements attributable to us are expressly qualified by these cautionary statements.
Overview
We believe demand for resilient, on-site power generation is accelerating, driven in large part by the energy needs of AI infrastructure and data centers. Our microturbine-based energy solutions are designed to help commercial, industrial, and utility customers meet this demand while balancing resiliency, affordability, and sustainability which are the "Energy Trilemma" facing the market today.
Our offerings include stationary distributed power generation systems and distribution networks, including cogeneration applications 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, including data centers, station power, and ports.
28
We remain a market leader in microturbine energy systems based on the number of microturbines sold annually and our total installed base. While power purchased from the electric utility grid is generally less costly than power produced by distributed generation technologies operating in simple-cycle mode, utilities may also impose interconnection costs and other fees. When waste heat recovery is incorporated through CHP or CCHP configurations, the overall economic benefits of microturbine systems improve significantly. In addition, our microturbines provide highly efficient, low-emission, and resilient power generation, producing thermal energy with a lower carbon footprint. These benefits may be enhanced when fuel costs are favorable, when grid interconnection is costly or impractical, such as in remote locations or where new grid services are required, where reliability and power quality are critical, including data center, station power, and port operations, or in situations where peak shaving may be economically advantageous due to highly variable electricity prices.
Our microturbines are inverter-based technologies that can be integrated with other distributed energy resources to form microgrids, also referred to as distribution networks, within a defined geographic area, providing power to one or more facilities. Because microturbines are capable of operating on multiple fuel sources and delivering reliable on-site power, we believe they support customer objectives related to resiliency, sustainability, and affordability across data center, station power, and port applications. We also believe our products and services provide greater operational flexibility compared to certain alternative technologies, such as reciprocating engines. We continue to evaluate energy conversion technologies at the lower end of the distributed power spectrum.
We serve customers across energy efficiency, natural resources, renewable energy, critical power, microgrid power, data centers, station power, and port applications. The microgrid market is driven by electrification demand and the need for resilient, on-site power solutions. The renewable energy market is fueled by landfill gas, biodiesel and biogas from sources such as food processing, agricultural waste and livestock manure. Product sales in the oil and gas and other natural resources markets are driven by our microturbines’ reliability, emissions profile and ease of installation. Data center, station power, and port customers require highly reliable, low-emission, and scalable power solutions to support continuous operations, grid constraints, and critical infrastructure requirements.
Given the continued volatility of the oil and gas market, our business strategy is to continue diversification across the microgrid energy efficiency, critical power, including data centers, station power, and ports, and renewable energy markets.
As part of our diversification strategy, we have begun to utilize our microgrid solutions in a reference design package for AI and Data Center infrastructure. On October 21, 2025, we released a press release announcing that we have developed a new 800-volt direct-current (“VDC”) microturbine to support NVIDIA’s new AI Infrastructure requirements. We plan to provide power and cooling solutions as an engineered “behind-the-meter” equipment package for the next generation of AI factories. This initiative is in the early stages of commercialization, and there can be no assurance regarding market adoption, customer demand, or revenue generation. Refer to Risk Factors in Part II, Item 1A of this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the fiscal year ended March 31, 2026 for further discussion of the risks and uncertainties associated with this emerging market opportunity.
We continue to focus on product development informed by customer requirements, increasing brand awareness, and expanding distribution channels through a diversified network of strategic partners. We prioritize products and solutions designed to support repeatable revenue opportunities and larger transaction sizes, rather than discrete projects for niche markets. We also closely monitor operating expenses and seek to improve manufacturing efficiency, reduce direct material costs, and increase average selling prices. Key factors that we believe influence operating performance include average selling prices, direct material costs, order flow, cash utilization, and growth in the EaaS business.
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.
We currently occupy warehouse and office space in Costa Mesa, California and office space and a production facility in Van Nuys, California with a production capacity of approximately 2,000 units per year, depending on product mix.
During the three months ended June 30, 2026, we had a net income of $0.04 million, paid-in-kind dividends accrued on the Series A Convertible Preferred Stock of $1.0 million, basic and diluted net loss per share of $0.03, compared to net loss of $0.7 million, no change in Preferred Units and basic and diluted net loss per share of $0.04 during the three months ended June 30, 2025. The $0.7 million improvement in net income was primarily due to a $1.2 million increase in gross profit, driven by the higher-margin microturbine system sales, and the impact of revenue from distributor distribution services partially offset by $0.1 million of higher total operating expenses and a $0.6 million decrease in other income,
29
partially offset by a $0.1 million increase in interest income and a $0.2 million decrease in interest expense as compared to the three months ended June 30, 2025.
Critical Accounting Estimates
Our discussion and analysis of our financial condition and results of operations is based upon our Condensed Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of these Condensed Consolidated Financial Statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, and expenses and related disclosures of contingent liabilities. On an ongoing basis, we evaluate our estimates, including but not limited to those related to 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 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.
Item 7 of our Annual Report on Form 10-K for the fiscal year ended March 31, 2026 describes the significant accounting estimates used in the preparation of our Condensed Consolidated Financial Statements.
Results of Operations
Three Months Ended June 30, 2026 and 2025
Revenue The following table summarizes our revenue by geographic markets (in millions):
Three Months Ended June 30, | ||||||
| 2026 | | 2025 | |||
United States and Canada | $ | 17.6 | $ | 23.1 | ||
Europe | 1.7 | 2.0 | ||||
Latin America | 4.0 | 1.6 | ||||
Asia and Australia | 1.4 | 1.1 | ||||
Middle East and Africa | 0.2 | 0.1 | ||||
Total Revenue | $ | 24.9 | $ | 27.9 | ||
Revenue for the three months ended June 30, 2026 decreased $3.0 million to $24.9 million, from $27.9 million for the three months ended June 30, 2025. The decrease was primarily driven by decreases in revenue in the United States and Canada of $5.5 million and $0.3 million in Europe, partially offset by increases in revenue of $2.4 million in Latin America, $0.3 million across Asia and Australia, and $0.1 million in the Middle East and Africa. The increases in Latin America, Asia and Australia were driven by higher demand for microturbine product and parts, including higher product sales via our international distributors to customers in Chile and Mexico. The decreases in the United States, Canada, and Europe were due to fewer microturbine deliveries for projects in those regions and lower rental utilization during the three months ended June 30, 2026.
The following table summarizes our revenue by category (only revenue amount in millions):
Three Months Ended June 30, | ||||||||||||||
2026 | 2025 | |||||||||||||
| Revenue | | Megawatts | | Units | | Revenue | | Megawatts | | Units | |||
Microturbine Product | $ | 12.8 | 11.2 | 26 | $ | 15.4 | 8.5 | 32 | ||||||
Accessories |
| 0.2 |
| 0.3 | ||||||||||
Total Product and Accessories |
| 13.0 |
| 15.7 | ||||||||||
Parts and services |
| 9.7 |
| 8.0 | ||||||||||
Rentals |
| 2.2 |
| 4.2 | ||||||||||
Total Revenue | $ | 24.9 | $ | 27.9 | ||||||||||
30
Revenue from microturbine products and accessories is inherently variable from period to period, as it is driven by the timing of large customer orders, project milestones, and shipment schedules. For the three months ended June 30, 2026 revenue decreased $2.7 million, or 17%, to $13.0 million from $15.7 million for the three months ended June 30, 2025, driven primarily by this order-timing variability. Average revenue per unit shipped was approximately $0.5 million during each of the three months ended June 30, 2026 and 2025. Revenue per unit is driven by the mix of microturbine configurations sold.
Parts and services revenue, which is part of our EaaS business line and includes revenue from our spare parts shipments, FPP contracts, and other service revenue, was $9.7 million for the three months ended June 30, 2026, improved from $8.0 million for the three months ended June 30, 2025, driven by continued growth in our customer base.
Rentals revenue for three months ended June 30, 2026 decreased $2.0 million, or 48%, to $2.2 million from $4.2 million for the three months ended June 30, 2025. The decrease was mainly driven by lower rental utilization due to uncertainty around oil prices from geopolitical events in the Middle East.
Sales to Horizon Power Systems (“Horizon”), one of our distributors, accounted for 41% of revenue for the three months ended June 30, 2026 driven primarily by their sale of 8 megawatts of rental units. Sales to E-Finity Distributed Generation (“E-Finity”), one of our distributors, accounted for 12% of revenue for the three months ended June 30, 2026.
Gross Profit Gross profit was $8.8 million, or 35% of revenue, for the three months ended June 30, 2026, compared to a gross profit of $7.6 million, or 27% of revenue, for the three months ended June 30, 2025. The increase was primarily the result of sales of microturbine systems at higher margins reflecting a favorable product mix, along with a contribution from distributor distribution services revenue.
The following table summarizes our gross profit (in millions except percentages):
Three Months Ended June 30, | ||||||||
| 2026 | | 2025 | |||||
Gross Profit | ||||||||
Product and accessories | $ | 4.0 | $ | 1.2 | ||||
As a percentage of product and accessories revenue |
| 31 | % |
| 8 | % | ||
|
| |||||||
Parts and services | $ | 4.0 | $ | 4.2 | ||||
As a percentage of parts and services revenue |
| 41 | % |
| 53 | % | ||
Rentals | $ | 0.8 | $ | 2.2 | ||||
As a percentage of rentals revenue |
| 36 | % |
| 52 | % | ||
|
| |||||||
Total gross profit | $ | 8.8 | $ | 7.6 | ||||
As a percentage of total revenue | 35 | % | 27 | % | ||||
Product and accessories gross margin improved to 31% during the three months ended June 30, 2026, from a gross margin of 8% during the three months ended June 30, 2025, primarily due to the sale of previously rented units, and the continued impact of cost reduction programs. Parts and services gross margin decreased to 41% during the three months ended June 30, 2026, compared to 53% during the three months ended June 30, 2025, primarily as a result of higher claims under our FPP contracts and increases in shipments of higher-cost parts for warranty claims during the three months ended June 30, 2026 relative to the prior period. Rental gross margin decreased to 36% for the three months ended June 30, 2026, compared to 52% for the three months ended June 30, 2025, due to lower rental utilization.
Research and Development (“R&D”) Expenses R&D expenses were $1.2 million and $0.8 million during the three months ended June 30, 2026 and 2025, respectively, and were 5% and 3% of revenue for the three months ended June 30, 2026, and 2025, respectively. Higher spend during the three months ended June 30, 2026, was driven by R&D programs for new product development and product enhancements supporting future growth and expansion into new markets.
Selling, General, and Administrative (“SG&A”) Expenses SG&A expenses were $6.6 million and $6.9 million during the three months ended June 30, 2026 and 2025, respectively, and were 26% and 25% of revenue for the three months ended June 30, 2026, and 2025, respectively. Lower SG&A expenses relative to the prior year were driven by reductions in legal services, outside consulting, rent and bad debt, partially offset by increases in our salesforce to support our shift to direct sales and subcontracting services.
31
Other Income (expense), net Other income (expense) was an expense of $0.2 million for the three months ended June 30, 2026, compared to income of $0.4 million during the three months ended June 30, 2025. This $0.6 million unfavorable change was primarily attributable to the absence of service income from the Reorganized PrivateCo Services Agreement, which was terminated in connection with the March 2026 PIPE transaction (see Note 15), and a settlement recorded in the current-year period related to a matter with a third-party vendor.
Interest Income. Interest income was $0.2 million for the three months ended June 30, 2026, $0.1 million higher than during the three months ended June 30, 2025, driven by higher money market rates and our higher cash balance during the three months ended June 30, 2026 relative to the prior year. Interest income is mainly derived from our money market investment and interest on our sales-type leases.
Interest Expense Interest expense was $0.9 million and $1.0 million for the three months ended June 30, 2026 and 2025, respectively. Interest expense is mainly attributable to our notes payable.
Liquidity and Capital Resources
Cash Flows
Our cash requirements depend on many factors, including the execution of our business strategy and plan. Our cash balance increased $3.4 million during the three months ended June 30, 2026, compared to a decrease in cash of $2.0 million during the three months ended June 30, 2025. The increase in cash during the three months ended June 30, 2026 was primarily driven by operating activities which generated $5.4 million of cash compared to a $1.6 million net use of cash in the three months ended June 30, 2025.
Operating Activities During the three months ended June 30, 2026, net cash provided by operating activities was $5.4 million, consisting of net income for the period, and changes in operating assets and liabilities of $0.4 million, which included a $3.7 million customer deposit on an order for delivery later this fiscal year, and non-cash adjustments totaling $5.8 million, including depreciation and amortization of $1.2 million.
During the three months ended June 30, 2025, net cash used in operating activities was $1.6 million, consisting of a net loss for the period of $0.7 million, changes in operating assets and liabilities of $4.0 million, partially offset by non-cash adjustments, primarily depreciation and amortization, non-cash lease expense, stock based compensation and paid-in-kind interest expense, totaling $3.1 million.
The following is a summary of the significant sources (uses) of cash from operating activities (in millions):
Three Months Ended June 30, | ||||||
| 2026 | | 2025 | |||
Net income (loss) | $ | 0.04 | $ | (0.7) | ||
Non-cash operating activities (1) |
| 5.8 |
| 3.1 | ||
Changes in operating assets and liabilities: | ||||||
Accounts receivable |
| — |
| (4.2) | ||
Inventories |
| (5.0) |
| 0.3 | ||
Accounts payable |
| 1.7 |
| 2.4 | ||
Accrued expenses | (0.6) | 0.1 | ||||
Operating lease liability, net | (0.3) | (0.8) | ||||
Prepaid expenses, other current assets and other assets | — | 0.3 | ||||
Deposits | 3.7 | — | ||||
Factory protection plan liability | 0.2 | 0.6 | ||||
Other changes in operating assets and liabilities |
| (0.1) |
| (2.7) | ||
Net cash provided by (used in) operating activities | $ | 5.4 | $ | (1.6) | ||
| (1) | Represents changes in depreciation and amortization, non-cash lease expenses, PIK interest, stock-based compensation expense, inventory, warranty and credit loss provisions. |
The $4.2 million increase in cash provided by accounts receivable reflects higher cash collected from customers and the increase in cash provided by deposits (driven by a $3.7 million customer deposit on an order for delivery later this fiscal year). The $5.3 million increase in cash used in inventory resulted from purchases of materials, accessories and parts to support sales during the quarter and purchases of long-lead time material to support future sales. The decrease in cash
32
provided by accounts payable and the increase in cash used in accrued expenses as compared to the three months ended June 30, 2025 was primarily due to the timing of payments to suppliers.
Investing Activities Net cash used in investing activities was $1.4 million during the three months ended June 30, 2026 and was primarily due to payments of deferred acquisition costs, and higher spend on capex and fixed assets to support operations and future business growth. Net cash used in investing activities was $0.1 million during the three months ended June 30, 2025, and was primarily due to investments in operating assets.
Financing Activities Net cash used in financing activities was $0.6 million and $0.3 million during the three months ended June 30, 2026 and 2025, respectively. Cash used in financing activities during the three months ended June 30, 2026 was driven by repayment of finance lease obligations of $0.4 million. Net cash used in the three months ended June 30, 2025 reflects the repayment of finance lease obligations of $0.2 million.
Debt Refer to Note 11 – Debt in the Notes to Condensed Consolidated Financial Statements (Part I, Item 1 of this Form 10-Q) for information related to our existing indebtedness.
Lease Commitments Refer to Note 10 – Leases in the Notes to Condensed Consolidated Financial Statements (Part I, Item 1 of this Form 10-Q) for information related to our leases.
New Accounting Pronouncements Refer to Note 2 – Basis of Presentation and Significant Accounting Policies – Impact of Recently Issued Accounting Standards in the Notes to Condensed Consolidated Financial Statements (Part I, Item 1 of this Form 10-Q) for information regarding new accounting standards.
Item 3. Quantitative and Qualitative Disclosures 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.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure 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-Q for the three months ended June 30, 2026, an evaluation was performed under the supervision and with the participation of our management, including our 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 June 30, 2026, our disclosure controls and procedures were effective.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the three months ended June 30, 2026 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.
33
PART II — OTHER INFORMATION
Item 1. Legal Proceedings
California Air Resources Board Notice of Violation
On August 4, 2026, the California Air Resources Board (“CARB”) issued a Notice of Violation (the “NOV”) alleging violations of California’s Distributed Generation Certification Regulation (Cal. Code Regs., tit. 17, §§ 94200–94214) involving 27 distributed generation units sold or leased for use in California. The NOV states that violations may result in civil penalties of up to $12,940 per day per violation but does not specify an aggregate penalty amount. The Company intends to meet with CARB to discuss the allegations and seek resolution. The matter is at a preliminary stage, and the Company cannot predict its outcome or reasonably estimate any resulting loss or range of loss.
Refer to Note 12 – Commitments and Contingencies – Legal Proceedings, in the Notes to Condensed Consolidated Financial Statements (Part I, Item 1 of this Form 10-Q) for information regarding legal proceedings in which we are involved. The Company is from time to time a party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of business. The outcome of litigation is inherently uncertain. If one or more legal matters were to be resolved against the Company in a reporting period for amounts in excess of management’s expectations, the Company’s financial condition and operating results for that reporting period could be materially adversely affected.
Item 1A. Risk Factors
In addition to the other information set forth in this report, you should carefully consider the factors discussed in the “Risk Factors” section contained in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2026, together with the cautionary statement under the caption “Special Note Regarding Forward-Looking Statements” included elsewhere in this Quarterly Report on Form 10-Q. The risks described are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.
There are uncertainties and risks related to the profitability, safety and regulatory environment of AI that could adversely affect our business and operations.
In order to position ourselves to take advantage of growth opportunities, we have made, and may continue to make, investments, strategic acquisitions, mergers, partnerships, joint ventures and alliances related to AI-infrastructure and data centers that involve significant risks and uncertainties. We only recently began to pursue initiatives in AI related technologies and have not made any sales to AI infrastructure clients. Some of our competitors, including competitors that have significantly greater resources, have already successfully generated revenues from AI business lines. AI technologies and their uses are currently evolving rapidly. If we fail to successfully integrate our products in AI infrastructure or develop new products in response to changes in technology or industry standards or fail to bring product enhancements or new product developments to market quickly enough, our products could rapidly become less competitive or obsolete for use in the development of AI infrastructure. Thus, the future profitability of any AI-related investments is highly uncertain and such investments may adversely affect our business and operations.
Data centers are increasingly scrutinized by federal, state, and local authorities, and have been subject to environmental activists and negative public perception, due to concerns regarding energy consumption, land use, carbon emissions, water usage, environmental impacts, data-sovereignty considerations and national-security-related issues. Regulators may impose new permitting requirements, energy-efficiency standards, carbon-reduction mandates, sustainability reporting rules, or operational restrictions specific to data centers, AI infrastructure, or high-density compute environments. For example, on July 14, 2026, New York State Governor Kathy Hochul signed an executive order barring the construction of new hyperscale data centers using 50 megawatts or more of power for up to one year in the state of New York. On July 1, 2026, Texas Governor Greg Abbot called for blocking new data center development in rural parts of the state.
If we continue to invest in utilizing our products for the development of AI data centers and other AI infrastructure, then any such regulatory developments may significantly impact our business and operations in ways that are difficult to predict. New regulations targeting data centers, at the federal level or by state and local governments, could increase our capital expenditures, delay development and implementation timelines, limit expansion opportunities, or require costly modifications to existing technology. Any such restrictions or new policy initiatives could also limit our opportunities to utilize our systems in AI infrastructure and restrict our ability to expand into the AI market, which may adversely affect our business or limit the economic viability of our strategic diversification initiatives. Given the evolving
34
nature of digital asset and data-center regulation, and the difficulty of predicting the outcomes of ongoing or future governmental actions, we cannot assure you that future regulatory or legislative developments will not have a material adverse effect on our business, prospects, financial condition, or operations. Even in the absence of new regulations or legislation, increased public scrutiny or negative publicity regarding the development and environmental impact of data centers could harm our reputation, which may adversely affect our business, financial condition and results of operations.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
| (a) | Unregistered Sales of Equity Securities. On May 8, 2026, an investor exercised 1,719,840 pre-funded warrants issued in the November 2025 PIPE on a cashless basis. In addition, during the three months ended June 30, 2026, holders exercised 299,972 pre-funded warrants issued in the March 2026 PIPE. In the aggregate, 2,019,812 pre-funded warrants were exercised on a cashless basis, resulting in the issuance of 2,019,812 shares of common stock. The shares were issued in reliance on the exemption from registration provided by Section 3(a)(9) of the Securities Act of 1933, as amended, as the shares were exchanged by the Company exclusively with an existing security holder and no commission or other remuneration was paid or given directly or indirectly for soliciting the exchange. The Company received no proceeds from the cashless exercise. See Note 15 to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q. |
| (c) | Issuer Purchases of Equity Securities. The following table sets forth information regarding shares of common stock acquired by the Company during the three months ended June 30, 2026. All of the shares shown were withheld from employees to satisfy tax withholding obligations upon the vesting of restricted stock units under the 2023 Plan. The Company does not have a publicly announced share repurchase plan or program. |
Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs | ||||
April 1, 2026 to April 30, 2026 | 29,221 | $5.93 | — | — | ||||
May 1, 2026 to May 31, 2026 | — | — | — | — | ||||
June 1, 2026 to June 30, 2026 | — | — | — | — | ||||
Total | 29,221 | $5.93 | — | — |
Item 5. Other Information
Rule 10b5-1 Trading Plans
During the quarter ended June 30, 2026, none of our directors or officers
35
Item 6. Exhibits
Exhibit | | Description |
3.1 | Second Amended and Restated Certificate of Incorporation of Capstone Green Energy Holdings, Inc. (a) | |
3.2 | Certificate of Amendment to the Second Amended and Restated Certificate of Incorporation (b) | |
3.3 | ||
3.4 | ||
10.1 | Amendment No. 2 to the Capstone Green Energy Holdings, Inc. 2023 Equity Incentive Plan (d) | |
31.1* | ||
31.2* | ||
32** | ||
101.INS* | XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the inline XBRL document | |
101.SCH* | XBRL Schema Document | |
101.CAL* | XBRL Calculation Linkbase Document | |
101.LAB* | XBRL Label Linkbase Document | |
101.PRE* | XBRL Presentation Linkbase Document | |
101.DEF* | XBRL Definition Linkbase Document | |
104* | The cover page from Capstone Energy+, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2026, formatted in Inline XBRL and contained in Exhibit 101 |
*Filed herewith
**Furnished herewith
(a) | Incorporated by reference to the Company’s Current Report on Form 8-K12G3 filed on December 11, 2023 (File No. 001-15957). |
(b) | Incorporated by reference to the Company’s Current Report on Form 8-K filed on April 29, 2026 (File No. 001-15957). |
(c) | Incorporated by reference to the Company’s Current Report on Form 8-K filed on April 1, 2026 (File No. 001-15957). |
(d) | Incorporated by reference to the Company’s Current Report on Form 8-K filed on April 22, 2026 (File No. 001-15957). |
36
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
CAPSTONE ENERGY+, INC. | ||
By: | /s/ JOHN P. MILLER | |
John P. Miller | ||
Interim Chief Financial Officer | ||
(Duly Authorized Officer and Interim Principal Financial Officer) | ||
Date: August 12, 2026 | ||