UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2023

☐

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: 001-15957

Capstone Green Energy Holdings, Inc.

(Exact name of registrant as specified in its charter)

Delaware		20-1514270
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

16640 Stagg Street Van Nuys, California (Address of principal executive offices)		91406 (Zip Code)

818-734-5300

(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
Common Stock, par value $0.001 per share	N/A	N/A

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. Yes ☐ No ☒

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). Yes ☐ No ☒

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 ☐	Non-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 ☐ No ☒

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 ☐ No ☒

As of September 6, 2024, the registrant had 18,540,789 shares of voting common stock, par value $0.001 per share, and 508,475 shares of non-voting common stock, par value $0.001 per share, outstanding.

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CAPSTONE GREEN ENERGY HOLDINGS, INC.

INDEX

		Page Number
PART I — FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)	3

	Condensed Consolidated Balance Sheets as of December 31, 2023 and March 31, 2023	3

	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended December 31, 2023 and 2022	4

	Condensed Consolidated Statements of Changes in Temporary Equity and Stockholders’ Deficiency for the Three and Nine Months December 31, 2023 and 2022	5

	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended December 31, 2023 and 2022	6

	Notes to Condensed Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	42

Item 4.	Controls and Procedures	42

PART II — OTHER INFORMATION

Item 1.	Legal Proceedings	44

Item 1A.	Risk Factors	44

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	44

Item 5.	Other Information	44

Item 6.	Exhibits	45

Signatures		47

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PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

CAPSTONE GREEN ENERGY HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)

(Unaudited)


	December 31,		March 31,
	2023		2023
Assets
Current Assets:
Cash and cash equivalents	$	3,866	$	12,839
Accounts receivable, net of allowances of $4,366 at December 31, 2023 and $4,813 at March 31, 2023		5,617		7,102
Inventories		30,000		37,328
Prepaid expenses and other current assets		7,276		7,447
Total current assets		46,759		64,716
Property, plant, equipment and rental assets, net		26,578		24,275
Finance lease right-of-use assets		4,542		4,529
Operating lease right-of-use assets		13,227		8,808
Non-current portion of inventories		3,531		3,112
Other assets		3,110		2,591
Total assets	$	97,747	$	108,031
Liabilities, Temporary Equity and Stockholders’ Deficiency
Current Liabilities:
Accounts payable and accrued expenses	$	22,331	$	30,290
Accrued salaries and wages		1,260		1,223
Accrued warranty reserve		1,593		1,576
Deferred revenue		17,694		23,372
Finance lease liability, current		964		773
Operating lease liability, current		3,936		2,492
Factory protection plan liability		8,317		10,844
Term note payable, current		—		50,983
Total current liabilities		56,095		121,553
Deferred revenue, non-current		718		817
Finance lease liability, non-current		2,541		2,903
Operating lease liability, non-current		9,581		6,588
Exit new money notes, net, non-current		24,051		—
Other non-current liabilities		265		265
Total liabilities		93,251		132,126
Commitments and contingencies (Note 15)
Temporary equity:
Redeemable noncontrolling interests		13,859		—
Stockholders’ deficiency:
Preferred stock, $.001 par value; 1,000,000 shares authorized and none issued		—		—
Common stock, $.001 par value; 59,400,000 shares authorized, 18,540,789 shares issued and outstanding at December 31, 2023; 18,511,555 shares issued and 18,394,541 shares outstanding at March 31, 2023		18		18
Non-voting common stock, $.001 par value; 600,000 shares authorized, 508,475 shares issued and outstanding at December 31, 2023; 0 shares issued and outstanding at March 31, 2023		1		—
Additional paid-in capital		955,146		955,228
Accumulated deficit		(964,528)		(977,202)
Treasury stock, at cost; 0 shares at December 31, 2023 and 117,014 shares at March 31, 2023		—		(2,139)
Total stockholders’ deficiency		(9,363)		(24,095)
Total liabilities, temporary equity and stockholders' deficiency	$	97,747	$	108,031

See accompanying notes to condensed consolidated financial statements.

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CAPSTONE GREEN ENERGY HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)
(Unaudited)


	Three Months Ended December 31,				Nine Months Ended December 31,
	2023		2022		2023		2022
Revenue, net:
Product and accessories	$	5,165	$	11,143	$	33,464	$	30,535
Parts, services and rentals		9,435		9,868		33,407		29,365
Total revenue, net		14,600		21,011		66,871		59,900
Cost of goods sold:
Product and accessories		6,575		12,272		36,037		33,118
Parts, services and rentals		5,007		7,039		19,124		19,178
Total cost of goods sold		11,582		19,311		55,161		52,296
Gross profit		3,018		1,700		11,710		7,604
Operating expenses:
Research and development		579		633		1,897		1,726
Selling, general and administrative		9,749		5,597		25,713		15,623
Total operating expenses		10,328		6,230		27,610		17,349
Loss from operations		(7,310)		(4,530)		(15,900)		(9,745)
Other income (expense), net		53		5		59		(43)
Interest income		7		42		106		74
Interest expense		(1,100)		(1,853)		(4,619)		(4,469)
Reorganization items, net		32,589		—		33,042		—
Income (loss) before provision (benefit) for income taxes		24,239		(6,336)		12,688		(14,183)
Provision (benefit) for income taxes		(1)		—		14		6
Net income (loss)		24,240		(6,336)		12,674		(14,189)
Less: Deemed dividend on purchase warrant for common shares		—		—		—		97
Net income (loss) attributable to common stockholders	$	24,240	$	(6,336)	$	12,674	$	(14,286)

Net income (loss) per share of common stock and non-voting common stock—basic and diluted	$	1.27	$	(0.35)	$	0.68	$	(0.85)
Weighted average shares used to calculate basic and diluted net income (loss) per common stock and non-voting common stock		19,047		18,351		18,655		16,824

See accompanying notes to condensed consolidated financial statements.

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CAPSTONE GREEN ENERGY HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN TEMPORARY EQUITY AND STOCKHOLDERS’ DEFICIENCY

(In thousands, except share amounts)
(Unaudited)


	Temporary Equity			Permanent Equity
	Redeemable						Non-Voting			Additional							Total
	Noncontrolling Interest			Common Stock			Common Stock			Paid-in		Accumulated		Treasury Stock			Stockholders’
	Shares	Amount		Shares	Amount		Shares	Amount		Capital		Deficit		Shares	Amount		Deficiency
Balance, March 31, 2023	—	$	—	18,511,555	$	18	—	$	—	$	955,228	$	(977,202)	117,014	$	(2,139)	$	(24,095)
Vested restricted stock awards	—		—	39,923		—	—		—		11		—	8,771		(11)		—
Stock-based compensation	—		—	—		—	—		—		306		—	—		—		306
Net loss	—		—	—		—	—		—		—		(5,679)	—		—		(5,679)
Balance, June 30, 2023	—		—	18,551,478		18	—		—		955,545		(982,881)	125,785		(2,150)		(29,468)
Issuance of non-voting common stock	—		—	—		—	508,475		1		—		—	—		—		1
Vested restricted stock awards	—		—	10,743		—	—		—		4		—	3,730		(4)		—
Stock-based compensation	—		—	—		—	—		—		81		—	—		—		81
Stock awards to Board of Directors	—		—	97,275		—	—		—		—		—	—		—		—
Net loss	—		—	—		—	—		—		—		(5,887)	—		—		(5,887)
Balance, September 30, 2023	—		—	18,659,496		18	508,475		1		955,630		(988,768)	129,515		(2,154)		(35,273)
Stock-based compensation	—		—	—		—	—		—		1,670		—	—		—		1,670
Vested restricted stock awards	—		—	10,808		—	—		—		—		—	—		—		—
Preferred units issued, subject to possible redemption	10,449,863		13,859	—		—	—		—		—		—	—		—		—
Cancellation of Capstone Green Energy Corporation stock	—		—	(18,670,392)		(18)	(508,475)		(1)		(2,154)		—	(129,515)		2,154		(19)
Issuance of Capstone Green Energy Holdings, Inc. stock	—		—	18,540,877		18	508,475		1		—		—	—		—		19
Net income	—		—	—		—	—		—		—		24,240	—		—		24,240
Balance, December 31, 2023	10,449,863	$	13,859	18,540,789	$	18	508,475	$	1	$	955,146	$	(964,528)	—	$	—	$	(9,363)



.	Temporary Equity			Permanent Equity
	Redeemable						Non-Voting			Additional							Total
	Noncontrolling Interest			Common Stock			Common Stock			Paid-in		Accumulated		Treasury Stock			Stockholders’
	Shares	Amount		Shares	Amount		Shares	Amount		Capital		Deficit		Shares	Amount		Deficiency
Balance, March 31, 2022	—	$	—	15,398,368	$	15	—	$	—	$	946,969	$	(952,583)	101,633	$	(2,088)	$	(7,687)
Vested restricted stock awards	—		—	33,234		—	—		—		36		—	9,296		(36)		—
Stock-based compensation	—		—	—		—	—		—		232		—	—		—		232
Net loss	—		—	—		—	—		—		—		(4,200)					(4,200)
Balance, June 30, 2022	—		—	15,431,602		15	—		—		947,237		(956,783)	110,929		(2,124)		(11,655)
Vested restricted stock awards	—		—	28,882		—	—		—		15		—	6,085		(15)		—
Stock-based compensation	—		—	—		—	—		—		154		—	—		—		154
Stock awards to Board of Directors	—		—	54,585		—	—		—		—		—	—		—		—
Issuance of common stock, net of issuance costs	—		—	2,934,498		3	—		—		7,247		—	—		—		7,250
Deemed dividend on purchase warrant for common shares	—		—	—		—	—		—		97		(97)	—		—		—
Net loss	—		—	—		—	—		—		—		(3,653)	—		—		(3,653)
Balance, September 30, 2022	—		—	18,449,567		18	—		—		954,750		(960,533)	117,014		(2,139)		(7,904)
Vested restricted stock awards	—		—	35,915		—	—		—		—		—	—		—		—
Stock-based compensation	—		—	—		—	—		—		231		—	—		—		231
Net loss	—		—	—		—	—		—		—		(6,336)	—		—		(6,336)
Balance, December 31, 2022	—	$	—	18,485,482	$	18	—	$	—	$	954,981	$	(966,869)	117,014	$	(2,139)	$	(14,009)

See accompanying notes to condensed consolidated financial statements.

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CAPSTONE GREEN ENERGY HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Nine Months Ended December 31,
	2023		2022
Cash Flows from Operating Activities:
Net income (loss)	$	12,674	$	(14,189)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization		3,001		2,309
Amortization of financing costs and discounts		49		60
Paid-in-kind interest expense		1,100		—
Amortization of right-of-use assets		2,482		848
Allowance for credit loss expense		—		437
Inventory provision		552		771
Provision for warranty expenses		143		369
Stock-based compensation		2,057		617
Non-cash reorganization items, net		(35,255)		—
Changes in operating assets and liabilities:
Accounts receivable		981		3,725
Inventories		6,638		(7,535)
Prepaid expenses, other current assets and other assets		(1,029)		(933)
Accounts payable and accrued expenses		(4,646)		920
Operating lease liability		(2,464)		(931)
Accrued salaries and wages and long-term liabilities		59		274
Accrued warranty reserve		(126)		(312)
Deferred revenue		(5,752)		2,472
Factory protection plan liability		(2,527)		2,678
Net cash used in operating activities		(22,063)		(8,420)
Cash Flows from Investing Activities:
Expenditures for equipment and leasehold improvements		(4,551)		(3,999)
Net cash used in investing activities		(4,551)		(3,999)
Cash Flows from Financing Activities:
Proceeds from debtors-in-possession facility		12,000		—
Proceeds from three-year term note		3,000		—
Proceeds from exit new money note		3,000		—
Debt issuance costs		(244)		—
Repayment of finance lease obligations		(115)		(772)
Net proceeds from sale of common stock and warrants		—		7,250
Net cash provided by financing activities		17,641		6,478
Net decrease in Cash and Cash Equivalents		(8,973)		(5,941)
Cash and Cash Equivalents, Beginning of Period		12,839		22,559
Cash and Cash Equivalents, End of Period	$	3,866	$	16,618
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest	$	1,620	$	4,128
Income taxes	$	14	$	13
Supplemental Disclosures of Non-Cash Information:
Acquisition of property and equipment through accounts payable	$	—	$	565
Renewal of insurance contracts financed by notes payable	$	—	$	665
Deemed dividend	$	—	$	97
Right-of-use assets obtained in exchange for lease obligations	$	7,348	$	9,764
Settlement of lease obligations with accounts receivable due	$	502	$	—
Conversion of inventory to rental assets	$	280	$	—
Rental assets capitalized from prepaids	$	623	$	—
Paid-in-kind debt discount in connection with the three-year term note	$	500	$	—

See accompanying notes to condensed consolidated financial statements.

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CAPSTONE GREEN ENERGY HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Business and Organization

Capstone Green Energy Holdings, Inc., along with its consolidated operating subsidiary Capstone Green Energy LLC (“Capstone,” “We” or the “Company”) (f/k/a Capstone Turbine International, Inc.) is a provider of customized microgrid solutions, on-site resilient Energy-as-a-Service (“EaaS”) solutions, and on-site energy technology systems focused on helping customers around the globe solve the “Energy Trilemma” of resiliency, sustainability, and affordability. These solutions include stationary distributed power generation applications and distribution networks, including cogeneration (combined heat and power (“CHP”)), integrated combined heat and power (“ICHP”), and combined cooling, heat and power (“CCHP”), renewable energy, natural resources, and critical power supply. The Company’s inverter-based technologies solve resiliency by being able to seamlessly connect to the electric grid or be the backbone of a localized microgrid. The Company’s Energy Conversion Products business line is driven by the Company’s industry-leading, highly efficient, low-emission, resilient microturbine energy systems offering scalable solutions in addition to a broad range of customer-tailored solutions. Through the EaaS business line the Company offers build, own, operate and maintain (“BOOM”) as well as energy rental solutions utilizing the Company’s microturbine energy systems. The Company offers comprehensive factory protection plan service contracts that limit life-cycle costs, as well as providing aftermarket spare parts. The Company’s emerging business line is Hydrogen Energy Solutions. Through the Hydrogen Energy Solutions business line, the Company offers customers the ability to run on hydrogen blended fuel source. Because these are still emerging offerings, Hydrogen Energy Solutions revenue has been immaterial to date.

Historically, the business described above was conducted by Capstone Green Energy Corporation, which was organized in 1988 and has had been commercially producing its microturbine generators since 1998. In connection with emergence from the Chapter 11 Cases (as defined below), Capstone Green Energy Corporation was reorganized pursuant to the Transaction Support Agreement dated September 28, 2023 by and among the Debtors (as defined below), Goldman Sachs Specialty Lending Group, L.P. and Broad Street Credit Holdings LLC (the “TSA”) and became a privately-held company that continues to own the Retained Assets (as defined below). Capstone Turbine International, Inc., a former wholly-owned subsidiary of Capstone Green Energy Corporation, which was incorporated in Delaware on June 10, 2004, became a publicly-traded company and was renamed Capstone Green Energy Holdings, Inc. In addition, Capstone Green Energy LLC (the “Operating Subsidiary”) was formed as a result of the Plan.

2. Basis of Presentation, Significant Accounting Policies and Going Concern

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. 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 generally accepted accounting principles for complete financial statements. The Condensed Consolidated Balance Sheet as of March 31, 2023 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, 2023. 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, 2023 filed with the Securities Exchange Commission (“SEC”) on June 13, 2024. This Quarterly Report on Form 10-Q (this “Form 10-Q”) refers to the Company’s fiscal years ending March 31 as its “Fiscal” years.

Basis for Consolidation In connection with the Plan of Reorganization (the “Plan”) (as defined in Note 3— Chapter 11 Proceedings and Emergence), on December 7, 2023, Capstone Green Energy Corporation completed a series of transactions pursuant to which, among other things, Capstone Turbine International, Inc. was renamed “Capstone Green Energy Holdings, Inc.” and became the successor to Capstone Green Energy Corporation for SEC reporting purposes by operation of Rule 12g-3(a) under the Securities Exchange Act of 1934, as amended. The Condensed Consolidated Financial Statements included in this filing include the accounts of the Company, the Operating Subsidiary and Capstone

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Turbine Financial Services, LLC, its wholly owned subsidiary that was formed in October 2015, after elimination of inter-company transactions.

Noncontrolling Interests in Consolidated Operating Subsidiary Noncontrolling interests in the Company’s consolidated Operating Subsidiary represent the equity interests held by a related third party. Refer to Note 3— Chapter 11 Proceedings and Emergence for details on the formation of the Operating Subsidiary. The noncontrolling interests in the consolidated Operating Subsidiary are redeemable and are presented as temporary equity in the Company's Condensed Consolidated Balance Sheet. Refer to Note 9— Temporary Equity for details of the noncontrolling interests. The Company accounts for the noncontrolling interest using the hypothetical liquidation at book value (“HLBV”) method to attribute the earnings of the consolidated Operating Subsidiary between the controlling and noncontrolling interests. Under the HLBV method, the amounts reported as noncontrolling interests in the consolidated Operating Subsidiary on the Condensed Consolidated Balance Sheets represent the amounts the noncontrolling interests would hypothetically receive at each balance sheet reporting date under the liquidation provisions of the governing agreements assuming the net assets of the consolidated Operating Subsidiary were liquidated at recorded amounts and distributed between the controlling and noncontrolling interests in accordance with the governing documents. The net income attributable to noncontrolling interests in the Operating Subsidiary on the Condensed Consolidated Statements of Operations is associated with the increase or decrease in the noncontrolling interest holders’ contractual claims on the respective entities’ balance sheets assuming a hypothetical liquidation at the end of that reporting period when compared with their claims on the respective entities’ balance sheets assuming a hypothetical liquidation at the beginning of that reporting period, after removing the impact of any contributions or distributions.

Prior to the emergence from bankruptcy, the Company recorded a gain on debt extinguishment, as detailed in Note 3— Chapter 11 Proceedings and Emergence, of $35.3 million, within Reorganization items, net on the Company’s Condensed Consolidated Statement of Operations, which resulted in net income of $12.7 million during the nine months ended December 31, 2023. Therefore, the Company did not allocate earnings to the Operating Subsidiary as of December 31, 2023, as the Company incurred a net loss after the Effective Date (as defined below) and the noncontrolling interest owners hold a liquidation preference that protects the holder from absorbing losses.

Reclassification Certain items in prior financial statements have been reclassified to conform to the current presentation and provide comparability but have no effect on the reported results of operations. The Company reclassified certain revenue stream and cost of goods sold on the Condensed Consolidated Statements of Operations for the nine months ended December 31, 2022 to conform to the presentation of the current period. The reclassification has not materially impacted the Company’s financial statements and did not result in a change in total revenue, net income or cash flows from operations for the periods presented.

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 2023 filed with the SEC, that have had a material impact on the Company's Condensed Consolidated Financial Statements.

Bankruptcy Accounting The Condensed Consolidated Financial Statements included herein have been prepared as if the Company were a going concern and in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic No. 852— Reorganizations (“ASC 852”). See Note 3 – Chapter 11 Proceedings and Emergence for further details regarding the bankruptcy. At emergence from Chapter 11, the Company evaluated the criteria to apply fresh-start accounting under ASC 852 and determined that pre-petition shareholders maintained control of the Company following the restructuring transactions contemplated within the Company’s Plan of Reorganization. As the pre-petition shareholders did not lose control, fresh-start accounting did not apply and the existing carrying values and activities continued as the reporting entity did not change. In addition, the Company has classified all income, expenses, gains or losses that were incurred or realized as a result of the proceedings since filing for Chapter 11 as “Reorganization Items, net” in the Company’s Condensed Consolidated Statement of Operations.

Segment Reporting The Company determines its reporting units in accordance with FASB ASC Topic No. 280, Segment Reporting (“ASC 280”). The Company evaluates a reporting segment by first identifying its operating segments under ASC 280. Operating segments are defined as components of an enterprise about which separate financial information is evaluated regularly by the chief operating decision maker (“CODM”) to allocate resources and assess performance. The Company defines its CODM to be the Chief Executive Officer. The Company is considered to be a single reporting segment. The business activities of this reporting segment are the development, manufacture and sale of turbine generator sets and their related parts and service.

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Going Concern In connection with the preparation of these Condensed Consolidated Financial Statements for the three and nine months ended December 31, 2023, management evaluated whether there were conditions and events, considered in the aggregate, that raised substantial doubt about the Company’s ability to meet its obligations as they become due over the next twelve months from the date of the issuance of the financial statements. As of December 31, 2023, the Company had cash and cash equivalents of $3.9 million and a working capital deficit of $9.3 million. The Company recorded net income of $12.7 million and used cash from operating activities of $22.1 million during the nine months ended December 31, 2023.

On September 28, 2023, the Company filed for a prepackaged financial restructuring with its Senior Lender, Goldman Sachs under the U.S. Chapter 11 Bankruptcy laws, as further discussed in Note 3— Chapter 11 Proceedings and Emergence in the Notes to Condensed Consolidated Financial Statements. The Company emerged from Bankruptcy on December 7, 2023 and effected a financial and organizational restructuring. However, given its current cash position, lack of liquidity, limits to accessing capital and debt funding options, and current economic and market risks, there is substantial doubt regarding the Company’s ability to continue as a going concern and its ability to meet its financial obligations as they become due over the next twelve months from the date of issuance of the financial statements as of, and for the period ended December 31, 2023.

Trade Accounts Receivable and Allowance for Credit Loss On April 1, 2023, the Company adopted Accounting Standards Update (“ASU”) 2016-13, Topic No. 326— Credit Loss, Measurement of Credit Losses on Financial Instruments, which replaces the incurred loss methodology with an expected loss methodology referred to as the current expected credit loss (“CECL”) The CECL model applies to financial assets measured at amortized cost, including accounts receivable. Under the CECL model, the Company identifies allowances for credit losses based on future expected losses when accounts receivable are created rather than when losses are probable.

The Company applies the aging method by pooling receivables based on levels of delinquency and applying historical loss rates on what has been historically uncollectible by aging categories. The historical loss rate is adjusted for current conditions and reasonable and supportable forecasts of future losses, as necessary. Additionally, the allowance for credit loss calculation includes subjective adjustments for qualitative risk factors that could likely cause estimated credit losses to differ from historical experience. The factors include assessments of various economic conditions, significant events that occurred, geographic location, size and credit ratings of the customers. The Company may also record a specific reserve for individual accounts when the Company becomes aware of specific customer circumstances, such as in the case of a bankruptcy filing or deterioration in the customer's operating results or financial position. Accounts deemed uncollectible are written off against the allowance for credit loss. Refer to Note 5- Customer Concentrations and Accounts Receivable in the Notes to Condensed Consolidated Financial Statements for details of the allowance for credit loss recorded.

Temporary Equity Where common or preferred shares are determined to be conditionally redeemable upon the occurrence of certain events that are not solely within the control of the Company, and upon such event, the shares would become redeemable at the option of the holders, they are classified as temporary equity (‘mezzanine equity’), outside permanent equity. The purpose of this classification is to convey that such a security may not be permanently part of equity and could result in a demand for cash, securities or other assets of the entity in the future. If the events are such that the shares are probable of becoming redeemable, then the Company will adjust the shares to reflect the maximum redemption value at the end of the reporting period.

3. Chapter 11 Proceedings and Emergence

Voluntary Filing under Chapter 11

Plan of Reorganization— On September 28, 2023 (the “Petition Date”), Capstone Green Energy Corporation and its wholly owned direct subsidiaries, Capstone Turbine International, Inc. and Capstone Turbine Financial Services, LLC (the “Debtors”) filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”). The Chapter 11 proceedings were jointly administered under the caption, In re Capstone Green Energy Corporation, Inc., et al. as Case No. 23-11634 (the “Chapter 11 Cases”). The Debtors continued to operate their business in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court. At hearings before the Bankruptcy Court on September 29, 2023, the Debtors obtained approval from the Bankruptcy Court of certain “first day” motions containing customary relief intended to assure the Debtors’ ability to continue their ordinary course operations during the Chapter 11 Cases. As a result, from the Petition Date through December 7, 2023 (the “Effective Date” and “Emergence”),

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the Debtors operated as a debtor-in-possession (“DIP”) under the protection of the U.S. Bankruptcy Court following filings by the Debtors of voluntary petitions for relief under Chapter 11 the Bankruptcy Code in the Bankruptcy Court.

Concurrent with the petition, the Debtors entered into the TSA with the pre-petition senior secured creditor, Broad Street Credit Holdings, LLC. (“Broad Street”), and Goldman Sachs Specialty Lending Group, L.P. (the “Collateral Agent”). The TSA, among other things, provided that Broad Street and the Collateral Agent would support the Debtors’ restructuring efforts as set forth in, and subject to the terms and conditions of, the TSA. The TSA contained customary conditions, representations, and warranties of the parties and is subject to a number of conditions, including, among others, the accuracy of the representations and warranties of the parties and compliance with the obligations set forth in the TSA. The TSA also provided for termination by the parties upon the occurrence of certain events.

Overview of the Plan— On September 28, 2023, the Debtors filed their Joint Prepackaged Chapter 11 Plan of Reorganization of Capstone Green Energy Corporation and its Debtor Affiliates (the “Plan”) and Disclosure Statement for the Joint Prepackaged Chapter 11 Plan of Reorganization (the “Disclosure Statement”). On October 24, 2023, a Plan supplement was filed, which included schedules for enterprise valuations, assumed and rejected executory contracts, among other updates. Additional updates were filed in early November 2023 for the completion of schedules and exhibits containing information including governance documents, service contracts and other asset listing materials. On November 13, 2023, the Court held a combined hearing to consider approval of the adequacy of the Disclosure Statement and confirmation of the Plan. On November 14, 2023, the Court entered an order confirming the Plan and the Debtors satisfied all conditions required for Plan effectiveness and the Company emerged from the Chapter 11 Cases on December 7, 2023.

The following is a summary of certain provisions of the Plan that became effective on December 7, 2023, and is not intended to be a complete description of the Plan. The following summary is qualified in its entirety by reference to the full text of the Plans (including the Plan Supplement).

All of the Capstone Green Energy Corporation’s assets and liabilities (other than the equity of Capstone Turbine International, Inc., the impaired pre-petition secured claim (the “Pre-Petition Secured Claim”) and DIP Notes issued pursuant to the DIP Note Purchase Agreement, dated as of October 2, 2023 (as has been amended, restated, modified, supplemented or replaced from time to time, the “DIP NPA”), and specific assets and liabilities directly related to the distributor support services activities (referred to in the Plan as “Retained Assets” and defined in Note 15— Commitments and Contingencies) and tax attributes were transferred to a new subsidiary called Capstone Green Energy LLC (the “Operating Subsidiary”);

Capstone Turbine International, Inc. contributed all assets to the Operating Subsidiary;

The Operating Subsidiary issued the preferred units, representing 37.5% equity ownership, and common units, representing 62.5% equity ownership, to Capstone Green Energy Corporation;

Capstone Green Energy Corporation contributed all common units of the Operating Subsidiary to Capstone Turbine International, Inc. providing a 62.5% equity ownership in the Operating Subsidiary;

Capstone Turbine International, Inc. became a public company and was renamed Capstone Green Energy Holdings, Inc. and became the successor to Capstone Green Energy Corporation for purposes of Securities and Exchange Commission registration, and is the successor with respect to any claims against, or interest in, Capstone Green Energy Corporation and any Debtor subsidiary; provided that, for the avoidance of doubt Capstone Turbine International, Inc. is not the successor to Capstone Green Energy Corporation for United States federal, state or local income tax purposes, and is not the successor to Capstone with respect to the employment of the directors, officers, and employees of the Debtors or relating to any employment obligations;

Capstone Green Energy Corporation became a private company (the “Reorganized PrivateCo”) that continued to own the Retained Assets and the preferred units of the Operating Subsidiary and has no liabilities relating to, arising under or in connection with any claims against, or interest in, any Debtor;

The holder of the $57 million Pre-Petition Secured Claim and purchaser DIP Claim (defined term as described below), received one hundred percent (100%) of the equity interests in Reorganized PrivateCo in exchange for agreed-upon portions of such Claims;

Existing shareholders of Capstone Green Energy Corporation received one hundred (100%) percent of the common stock of Capstone Green Energy Holdings, Inc., subject to any dilution from any stock issued pursuant to the employee incentive stock plan, including the shares of non-voting common stock issued to certain key employees and directors;

Reorganized PrivateCo and the Operating Subsidiary entered into a Reorganized PrivateCo Services Agreement (the “Reorganized PrivateCo Services Agreement”) with respect to ongoing support for the Retained Assets of Reorganized PrivateCo.

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DIP Note Purchase Agreement— On October 3, 2023, the Debtors entered into a super-priority senior secured debtor-in-possession note purchase agreement (the “DIP Note Purchase Agreement”) with Broad Street and the Collateral Agent. Broad Street provided the Debtors with a credit facility (the “DIP Facility”) in an aggregate principal amount of $30.0 million (the “DIP Claim”), consisting of (1) $12.0 million new money DIP notes (“DIP New Money Notes”), and (2) a roll-up of a portion of secured obligations under the existing pre-petition debt with Broad Street in the amount of $18.0 million, subject to the terms and conditions set forth in the DIP Note Purchase Agreement. On September 28, 2023, the Debtors filed the Motion of Debtors for Interim and Final Orders (I) Authorizing the Debtors to Obtain Senior Secured Postpetition Financing, (II) Granting Liens and Superpriority Administrative Expense Status, (III) Authorizing the Use of Cash Collateral, (IV) Granting Adequate Protection to Pre-Petition Secured Parties, (V) Scheduling a Final Hearing, and (VI) Granting Related Relief (the “DIP Motion”) seeking the Bankruptcy Court’s approval of the DIP Facility and certain related relief. A copy of the DIP Note Purchase Agreement was attached to the joint prepackaged Chapter 11 plan of reorganization (as amended, restated, supplemented or otherwise modified from time to time, the “Plan”) filed as part of the voluntary petition.

On October 2, 2023, the Bankruptcy Court granted the DIP Motion and entered an interim order (the “Interim DIP Order”) approving the DIP Facility on an interim basis and providing the Debtors with the necessary liquidity to continue to operate in Chapter 11. Upon entry of the Interim DIP Order and satisfaction of all applicable conditions precedent, as set forth in the DIP Note Purchase Agreement, the Debtors were authorized to make a single, initial draw of $9.0 million on the DIP Facility (the “Initial Draw”). The remaining $3.0 million of the DIP Facility became available to be drawn by the Debtors on November 13, 2023, after the Bankruptcy Court entered the Final DIP Order (the “Final Order”). The amount was drawn by the Debtors on October 24, 2023, after the entry of the Final Order and compliance with the terms, conditions, and covenants to be set forth in the DIP Note Purchase Agreement. Substantially all of the Debtors’ assets were encumbered by first-priority liens of the purchaser under the DIP Note Purchase Agreement. Pursuant to the terms of the Plan, on the Effective Date, the obligations of Reorganized PrivateCo to the DIP NPA, were cancelled and converted into an Exit Facility (the “Exit Note Purchase Agreement”).

Treatment of claims

Secured Tax Claims, Other Secured Claims, Other Priority Claims were unimpaired, expected to be paid in full during the course of the bankruptcy proceedings, or reinstated to be paid in full after Emergence.

General Unsecured Claims were unimpaired and received cash in the amount of such allowed claim as of the Effective Date or during the ordinary course of business following such date.

Pre-Petition Secured Claim was impaired and received in full satisfaction and discharge of the holder’s claim the pro rata amount (pro rata along with the DIP Claims) of Reorganized PrivateCo equity and the indirect ownership of the Operating Subsidiary preferred units issued to Reorganized PrivateCo.

DIP Claim received in full satisfaction, settlement, release and discharge of such claim the pro rata amount (pro rata along with Pre-Petition Secured Claim) of Reorganized PrivateCo equity and the indirect ownership of the Operating Subsidiary preferred units issued to Reorganized PrivateCo, and exit financing roll-over notes issued at Emergence, which is referred to as part of the Exit Note Purchase Agreement detailed below.

Equity Interests were impaired and deemed to reject the Plan. Each shareholder in Capstone Green Energy Corporation received its pro rata share of 100% of Capstone Green Energy Holdings, Inc., subject to dilution for the executive stock plans. The shares in Capstone Green Energy Corporation, including any warrants, restricted stock or similar contractual equity rights thereto were cancelled and terminated and received no other distribution of value.

Exit Facility— The DIP Facility converted into an Exit Note Purchase Agreement for an aggregate principal amount of $28.0 million, consisting of (1) $7.0 million new money notes (the “Exit New Money Notes”), (2) a roll-up of a $20.0 million portion of the secured DIP Claim plus accrued and unpaid interest thereon, subject to the terms and conditions set forth in the Exit Note Purchase Agreement by and among Capstone Green Energy LLC, as the issuer, Capstone Green Energy Holdings, Inc. and Capstone Turbine Financial Services, LLC, as the guarantors (the “Guarantors”), Broad Street and the Collateral Agent. The new money notes mature two years from the Effective Date, and the roll-up debts mature three years from the Effective Date. Interest is calculated using a SOFR rate plus an applicable margin, and a portion is paid-in-kind until the third year following Emergence. In the original Plan, the Exit Note Purchase Agreement was to be for an aggregate principal amount of $25.0 million, with only $5.0 million in new money notes. The final approved Plan increased the new money notes to $7.0 million upon the confirmation of the Plan by Bankruptcy Court.

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As of December 31, 2023, the outstanding balance of $24.1 million, recorded as Exit new money notes, net, non-current on the Condensed Consolidated Balance Sheet, was made up of $3.0 million, less debt issuance costs of $0.2 million, drawn on the Exit New Money Notes, $20.0 million of the DIP Claim and $1.2 million of accrued interest.

Nasdaq Delisting of Common Stock— Effective at the opening of the trading session on October 5, 2023, the Company’s common stock was suspended from trading on the Nasdaq Capital Market. Effective October 23, 2023, the Company’s common stock was delisted from the Nasdaq Capital Market.

Basis of Presentation— Effective on the Petition Date, the Company applied accounting standards applicable to reorganizations, ASC 852, in preparing the accompanying Condensed Consolidated Financial Statements as of and for the three months ended December 31, 2023, which requires the financial statements, for periods subsequent to the commencement of the Chapter 11 Cases, to distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business. Accordingly, certain charges related to the Chapter 11 Cases were recorded as Reorganization items, net in the accompanying unaudited Condensed Consolidated Financial Statement of Operations. All pre-petition obligations of the Debtors that were impacted by the Chapter 11 Cases that were previously classified as Liabilities Subject to Compromise (“LSTC”) were resolved at Emergence.

Gain on Extinguishment of Debt at Emergence— In accordance with ASC 470, Debt, on December 7, 2023, the Company recognized a gain on extinguishment of debt that was recorded in Reorganization items, net in the accompanying unaudited Condensed Consolidated Financial Statement of Operations. The components of the gain were as follows (in thousands):


Pre-petition senior secured principal	$	53,000
Accrued interest and fees on pre-petition senior secured principal		3,953
Additional New Money DIP Notes		12,000
DIP commitment fee		600
DIP PIK interest (post-petition interest)		755
New Money Exit Notes		3,000
Fair value of Preferred Units of Operating Subsidiary exchanged		(13,859)
Fair value of Exit Notes and net retained assets		(24,106)
Total gain from debt extinguishment	$	35,343

The Net Operating Losses (the “NOLs”) that were provided through the transfer of ownership of Capstone Green Energy Corporation, which held all of the tax attributes, including the NOLs had a full valuation allowance against them and did not have any value to Capstone Green Energy Corporation immediately prior to the Effective Date. Refer to Note 8— Income Taxes in the Company’s previously issued financial statements included in its Annual Reports on Form 10-K for the fiscal year ended March 31, 2023.

Fresh-Start Applicability— On December 7, 2023, the Company evaluated the criteria to apply fresh-start accounting under ASC 852 and determined the pre-petition shareholders maintained control of the Company during and after the reorganization and did not lose control as a result of the reorganization. As pre-petition shareholders did not lose control, fresh-start did not apply and historical activities and balances remained at carrying value. At Emergence, the restructured debt was treated as a debt extinguishment and the shareholders’ equity was revised to reflect the new common stock of Capstone Green Energy Holdings, Inc.

Reorganization Items— Reorganization items represent the direct and incremental costs related to the Company’s Chapter 11 cases, such as professional fees, pre-petition liability claim adjustments and losses that are probable and can be estimated, net of interest income earned on accumulated cash during the Chapter 11 process and net gains on the sale of assets or resulting from certain settlement agreements related to the Company’s restructuring activities. The Company’s restructuring activities resulted in additional charges and other adjustments for expected allowed claims (including claims that may be subsequently allowed by the U.S. Bankruptcy Court) and other reorganization items that were material to the Company’s financial position or results of operations during the period.

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The table below lists the components of reorganization items for the three and nine months ended December 31, 2023 (in thousands):