{"url_path":"/sec/cgeh/10-q/2026/item-2","section_key":"item-2","section_title":"Item 2 ** **Management’s Discussion and Analysis of Financial Condition and Results of Operation****s**","topic":"sec","document":{"doc_type":"10-Q","doc_date":"2026-02-12","source_url":"https://www.sec.gov/Archives/edgar/data/1009759/0001104659-26-014292-index.html","accession_number":"0001104659-26-014292","cik":"0001009759","ticker":"CGEH","issuer_name":"Capstone Energy Plus, Inc.","edgar_url":"https://www.sec.gov/Archives/edgar/data/1009759/0001104659-26-014292-index.html","primary_entity_key":"0001009759","primary_entity_name":"Capstone Green Energy Holdings, Inc."},"word_count":2311,"has_tables":true,"body_markdown":"**Item 2.** **Management’s Discussion and Analysis of Financial Condition and Results of Operation****s**\n\n*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, 2025 (“Fiscal 2025”). All dollar amounts in this Management’s Discussion and Analysis of Financial Condition and Results of Operations are approximate.*\n\n*All references in this Quarterly Report on Form 10-Q to “the Company,” “we,” “us,” “our,” or “Capstone” are to Capstone Green Energy Holdings, Inc. and its consolidated subsidiaries as of December 31, 2025, and March 31, 2025, and for the three and nine months ended December 31, 2025 and 2024.*\n\n**Special Note Regarding Forward-Looking Statements**\n\nThis Form 10-Q contains forward-looking statements regarding future events and our future results that are subject to the safe harbors created under the Securities Act of 1933, as amended, (the “Securities Act”) and the Securities Exchange Act of 1934, as amended, (the “Exchange Act”). All statements other than statements of historical facts are statements that could be deemed to be forward-looking statements. These include statements that are based on current expectations, estimates, forecasts and projections about the industries in which we operate and the beliefs and assumptions of our management. Words such as “expects,” “anticipates,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “continues,” “endeavors,” “strives,” “potential,” “predict,” “may,” “will,” “might,” “could,” “intend” “assumes” and variations of such words and similar expressions are intended to identify forward-looking statements. In addition, any statements that refer to projections of our future financial performance, our anticipated growth and trends in our businesses, and other characterizations of future events or circumstances are forward-looking statements.\n\nOur actual results may differ materially from those expressed in, or implied by, the forward-looking statements included in this Form 10-Q as a result of various factors, including, among others:\n\n●the significant risks related to our substantial indebtedness and our long-term liquidity requirements following our emergence from Chapter 11 and reorganization;\n\n●risks related to our history of net losses and ability to raise additional capital and fund future operating requirements;\n\n●our ability to continue as a going concern and the upcoming maturity of the Exit New Money Notes (as defined in Note 8 – Debt) on December 7, 2025;\n\n●our ability to remediate the material weaknesses in internal control over financial reporting disclosed in our Annual Report on Form 10-K for Fiscal 2025;\n\n●the limited public trading market for our common stock on the OTC market;\n\n●our ability to retain key personnel;\n\n●the restrictions imposed by the covenants contained in the Note Purchase Agreement (as defined in Note 8— Debt) and the Operating Subsidiary LLC Agreement (as defined in Note 17— Commitments and Contingencies) and our ability to comply with the financial covenants contained in the Note Purchase Agreement;\n\n●the uncertainty associated with the imposition of tariffs and trade barriers and changes in trade policies;\n\n●uncertainties associated with investments into efforts to capture market share in the emerging data center artificial intelligence (“AI”) market for microturbines;\n\n●our ability to realize the anticipated benefits of the recently completed Cal Microturbine acquisition;\n\n●the impact of pending or threatened litigation;\n\n●the development of the market for and customer uses of our microturbines, including our Energy-as-a-Service solutions;\n\n●our ability to develop new products and enhance existing products;\n\n●our ability to produce products on a timely basis in a high-quality manner;\n\n●the availability of sources for and costs of component parts;\n\n●our ability to obtain direct material products on a timely and cost-effective basis;\n\n●competition in the markets in which we operate;\n\n●operational interruption by fire, earthquake and other events beyond our control;\n\n●federal, state and local regulations of our markets and products;\n\n●the financial performance of the oil and natural gas industry and other general business, industry and economic conditions applicable to us;\n\n30\n\n[Table of Contents](#TOC)\n\n●the geopolitical environment, including the ongoing conflict in Ukraine;\n\n●corruption risks in the markets where our products are sold;\n\n●security and cybersecurity risks related to our electronic processing of sensitive and confidential business and product data;\n\n●our ability to adequately develop and protect our intellectual property rights; and\n\n●other risks and uncertainties discussed in “Item 1A. Risk Factors” included in our Annual Report on Form 10-K for Fiscal 2025.\n\n​\n\nFurthermore, 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.\n\n**Overview**\n\nCapstone Green Energy Holdings, Inc., the public successor to Capstone Green Energy Corporation together with its consolidated operating subsidiary, Capstone Green Energy LLC (the “Operating Subsidiary”), provides customized microgrid solutions, on-site resilient Energy-as-a-Service (“EaaS”) solutions, and distributed on-site energy technology systems. We deliver behind-the-meter microturbine energy solutions for industrial and commercial customers, including data centers, station power, and port applications, as well as other critical power uses, designed to address the “Energy Trilemma” of resiliency, sustainability, and affordability.\n\nOur 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.\n\nWe 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.\n\nOur 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.\n\nWe 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.\n\n31\n\n[Table of Contents](#TOC)\n\nGiven 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.\n\nAs 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 (Part II, Item 1A of this Form 10-Q) for further discussion of the risks and uncertainties associated with this emerging market opportunity.\n\nWe 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.\n\nWe 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.\n\nWe 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.\n\nDuring the three months ended December 31, 2025, we had a net income of $1.2 million, accretion to redemption value of Preferred Units of $38.82 million, basic and diluted net loss per share of $1.79, compared to net loss of $2.7 million, no change in Preferred Units and basic and diluted net loss per share of $0.14 during the three months ended December 31, 2024. The $3.9 million change in net income was primarily due to improved gross profit of $5.4 million, driven by the impacts of price increases and lower unit costs, offset by $1.3 million of higher total operating expenses, a $0.2 million decrease in other income and a $0.2 million increase in interest expense as compared to the three months ended December 31, 2024.\n\n**Backlog**\n\nNet product orders were approximately $9.3 million and $24.1 million for the three months ended December 31, 2025 and 2024, respectively. Ending backlog was approximately $11.6 million at December 31, 2025, compared to $26.8 million at December 31, 2024. The book-to-bill ratio was 0.7:1 and 3.1:1 for the three months ended December 31, 2025 and 2024, respectively. Book-to-bill ratio is the ratio of new orders we received to units shipped and billed during a period. The decrease in our book-to-bill ratio is due to a reductions in new orders, including the cancellation of pre-acquisition Cal Microturbine orders.\n\nThe timing of the backlog is based on the requirement date indicated by our customers and part availability. However, based on historical experience, management expects that a portion of our backlog may not be shipped within the next 12 months. Additionally, the timing of shipments is subject to change based on several variables (including customer deposits, payments, availability of credit and customer delivery schedule changes), most of which are not within our control and can affect the timing of our revenue. As a result, management believes the book-to-bill ratio reflects the current demand for our products in the given period.\n\n**Critical Accounting Estimates**\n\nOur 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\n\n32\n\n[Table of Contents](#TOC)\n\nbelieve to be reasonable under the circumstances. The results of these estimates and assumptions which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.\n\nWe 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."}