2. Basis of Presentation and Significant Accounting Policies

These Consolidated Financial Statements refer to the Company’s fiscal years ended March 31 as its “Fiscal” year.

Basis of Presentation The accompanying Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”). The Consolidated Financial Statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in

consolidation. The fiscal years presented herein are the years ended March 31, 2026, and March 31, 2025. In the opinion of management, the Consolidated Financial Statements reflect all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the Company’s financial position as of March 31, 2026 and 2025, and the results of its operations and its cash flows for the years then ended.

The preparation of Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Consolidated Financial Statements, as well as the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

Basis for Consolidation The Consolidated Financial Statements included in this filing include the accounts of the Company, the Operating Subsidiary and Capstone Turbine Financial Services, LLC, its wholly owned subsidiary that was formed in October 2015, and Cal Microturbine LLC (“Cal Microturbine”) after elimination of inter-company transactions.

Business Combinations The Company accounts for business combinations using the acquisition method in accordance with ASC Topic 805, Business Combinations. Under this method, the total purchase consideration is measured at fair value on the acquisition date, and identifiable assets acquired and liabilities assumed are recognized at their estimated fair values as of that date. The excess of purchase consideration over the fair value of net identifiable assets acquired is recorded as goodwill. If the fair value of net identifiable assets acquired exceeds the purchase consideration, the resulting gain is recognized in earnings on the acquisition date. Acquisition-related costs, including advisory, legal, and other professional fees, are expensed as incurred and recorded within selling, general and administrative expenses in the Consolidated Statements of Operations.

For transactions that do not meet the definition of a business under ASC 805, the Company applies asset acquisition accounting, under which the total purchase consideration, including assumed liabilities, is allocated to the assets acquired on a relative fair value basis. No goodwill is recognized in an asset acquisition.

The operating results of acquired businesses are included in the Company's Consolidated Statements of Operations from the acquisition date. The determination of fair values of assets acquired and liabilities assumed requires management to make significant estimates and assumptions, particularly with respect to intangible assets. The Company may adjust the preliminary purchase price allocation during the measurement period, which may not exceed one year from the acquisition date, as additional information becomes available. Refer to Note 20 – Business Combinations for information regarding the Company's acquisitions completed during Fiscal 2026.

Noncontrolling Interests in Consolidated Operating Subsidiary Noncontrolling interests in the Company’s consolidated operating subsidiary represented the equity interests held by a related party. These interests were redeemable and were therefore presented as temporary equity in the Company’s Consolidated Balance Sheets. See Note 13 – Temporary Equity and Note 12 – Commitments and Contingencies, Related Party Transactions for additional information.

The Company uses the hypothetical liquidation at book value (“HLBV”) method to attribute the earnings of the consolidated Operating Subsidiary between the controlling and noncontrolling interests. Under this method, amounts reported as noncontrolling interests in the consolidated Operating Subsidiary on the Consolidated Balance Sheets represent the amounts the noncontrolling interest holders would hypothetically receive at each balance sheet date under the liquidation provisions of the governing agreements, assuming net assets were liquidated at recorded amounts and distributed in accordance with the governing documents. Net income attributable to noncontrolling interests reflected the change in the noncontrolling interest holders' contractual claims between the beginning and end of the reporting period, assuming hypothetical liquidation at each date, after removing the impact of any contributions or distributions. The Company separately remeasured and adjusted the noncontrolling interest to reflect changes in the redemption value of the Preferred Units, with an offsetting adjustment to retained earnings at the end of each period. Refer to Note 13 – Temporary Equity for further details.

For the fiscal year ended March 31, 2026, the Company reported a net gain; accordingly, net income was allocated between the controlling and noncontrolling interests pursuant to the HLBV method based on the change in the respective holders' contractual claims on the net assets of the consolidated Operating Subsidiary. The allocation reflected the contractual provisions of the governing agreements, including the liquidation preference of the noncontrolling interest

holders. As a result, the amount of net income attributable to noncontrolling interests may differ from the noncontrolling interests' proportionate ownership percentage. For the fiscal year ended March 31, 2025, the Company reported a net loss; accordingly, no allocation of losses was made to the noncontrolling interests, as the holders' contractual liquidation preference protects them from absorbing losses.

Reclassification Certain prior period amounts have been reclassified to conform to the current year presentation for comparability purposes. Such reclassifications had no effect on previously reported results of operations or financial position.

Cash, Cash Equivalents and Restricted Cash Cash and cash equivalents include cash on hand and highly liquid investments with original maturities of three months or less at the time of purchase. The Company maintains cash balances at financial institutions which, at times, may exceed federally insured limits.

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Consolidated Balance Sheets to the total amounts presented in the Consolidated Statements of Cash Flows:

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Restricted cash represents amounts deposited with the Registry of the Court in connection with ongoing litigation, which are held as security pending resolution of the matter and are not available for operational use. See Note 12 - Commitments and Contingencies for more information on the ongoing litigation.

Fair Value of Financial Instruments The carrying value of certain financial instruments, including cash equivalents, accounts receivable, accounts payable, revolving credit facility and notes payable approximate fair market value based on their short-term nature. Refer to Note 9 – Fair Value Measurements, for disclosure regarding the fair value of other financial instruments.

Accounts Receivable and Allowance for Credit Losses Accounts receivable are presented on the Consolidated Balance Sheets, net of estimated credit losses. The Company applies the aging method by pooling receivables based on levels of delinquency and applying historical loss rates on what has been historically uncollectible by aging categories. The historical loss rate is adjusted for current conditions and reasonable and supportable forecasts of future losses, as necessary. Additionally, the allowance for credit loss calculation includes subjective adjustments for qualitative 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. Refer to Note 4 – Customer Concentrations and Accounts Receivable for disclosure regarding the change in allowance for expected credit loss.

Inventories The Company values inventories at the lower of cost (determined on a first in, first out (“FIFO”) basis) or net realizable value. The composition of inventory is routinely evaluated to identify slow-moving, excess, obsolete or otherwise impaired items, which are assessed for potential write-down, including consideration of engineering changes to the Company's products. Inventories expected to be used beyond one year are classified as long-term.

Depreciation and Amortization Depreciation and amortization are recognized using the straight-line method over estimated useful lives ranging from two to ten years. Leasehold improvements are amortized over the shorter of the remaining lease term or the estimated useful life of the asset. Finite-lived intangible assets are amortized on a straight-line basis over their estimated useful lives. Refer to Note 8 – Intangible Assets for amortization information.

Long-Lived Assets The Company reviews the recoverability of long-lived assets, including intangible assets with finite lives, whenever events or changes in circumstances indicate that the carrying value of such assets may not be

recoverable. If the expected future cash flows from the use of such assets (undiscounted and without interest charges) are less than the carrying value, the Company may be required to record a write-down, which is determined based on the difference between the carrying value of the assets and their estimated fair value.

Residual Assets The Company estimates the residual asset as the amount expected to be derived from the underlying asset following the end of the lease term. In a sales-type lease, the unguaranteed residual asset is recognized on a discounted basis upon lease commencement. Residual values are evaluated for impairment quarterly, and impairments are recognized as incurred.

Deferred Revenue Deferred revenue consists of deferred product, service revenue and customer deposits, and is recognized when earned in accordance with the Company's revenue recognition policy. The Company has the right to retain all or part of customer deposits under certain conditions.

Temporary Equity Common or preferred shares that are conditionally redeemable upon the occurrence of events not solely within the Company's control are classified outside of permanent equity as temporary equity ("mezzanine equity"). This classification conveys that such securities may not be permanently part of equity and could result in a future demand for cash or other assets. Where redemption of such shares becomes probable, the Company adjusts the carrying value to reflect the maximum redemption value at the end of the reporting period.

Revenue The Company derives its revenues primarily from the sale of microturbine products, accessories, parts, equipment rentals, and services.

Revenue is recognized in accordance with the following five-step model under ASC 606:

Microturbine Products Revenue from microturbine product sales is recognized at the point in time when control transfers to the customer in accordance with contractual terms, which is generally upon shipment. The Company occasionally enters into bill-and-hold arrangements, which are recognized as revenue only when all required criteria are met: (i) the reason for the arrangement is substantive; (ii) the product is segregated from other inventory; (iii) the product is ready for shipment; and (iv) the Company cannot redirect the product to another customer.

Customer deposits representing advance payments are typically received for a substantial portion of contract value prior to shipment and are not considered a significant financing component, as they are generally received less than one year before the related performance obligations are satisfied. Standard payment terms are 0 to 60 days, with extensions beyond 60 days granted only on a limited basis.

Accessories and Parts Revenue from accessories and parts is recognized at the point in time when control transfers to the customer, generally upon shipment.

Warranty Services The Company provides standard (assurance) warranties which do not represent separate performance obligations and are reflected as product liability. Shipping and handling costs billed to customers are included in revenue; costs associated with outbound freight after control transfers are recorded as fulfillment costs in cost of goods sold. Sales and usage-based taxes are excluded from revenue.

Factory Protection Plan (“FPP”), Long Term Maintenance Agreements (“LTMA”) and Service Cost Reimbursement The Company is transitioning from its Factory Protection Plan to Long-Term Maintenance Agreements. Both programs are designed to minimize product downtime and provide predictable maintenance costs. Revenue related to the obligation to provide replacement parts is recognized over the term of the contract aligned to monthly service periods. LTMA contracts typically range from four to twelve years and are cancellable at any time. Related costs are accrued when a customer submits a qualifying claim, based on the Company's best estimate of the probable obligation.

LTMA contracts cover critical components including engine, fuel, and electronic components, and include an annual escalator but exclude freight and labor reimbursement. Advance payments received at contract inception are classified as deferred revenue and recognized on a straight-line basis over the contract term. These advance payments are not considered a significant financing component.

Remaining FPP contracts may include labor reimbursements for work performed by Authorized Service Providers ("ASPs"). These reimbursements are accounted for under ASC 460 and recognized as contra revenue under ASC 606. The labor reimbursement is treated as a distinct performance obligation, with a portion of the transaction price allocated based on relative standalone selling price ("SSP"). A liability is recognized at contract inception for the labor component, with income recognized on a straight-line basis and reimbursement costs expensed as incurred.

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.

Unsatisfied Performance Obligations The Company has elected the practical expedient to disclose unsatisfied performance obligations only for contracts with an original expected duration greater than one year. The majority of product sales have lead times of less than one year and are therefore excluded. Service contracts, while often exceeding one year in duration, are cancellable without significant penalty; accordingly, their enforceable duration is considered one year or less, and they are also excluded from this disclosure.

Practical Expedients For contracts with a duration of one year or less, the Company expenses incremental costs to obtain a contract as incurred. Such costs are recorded within sales and marketing expenses in the Consolidated Statements of Operations.

Warranty The Company accrues estimated warranty costs at the time revenue is recognized. Warranty terms vary by product and geography and generally extend up to 24 months from the delivery date. Key factors in the warranty estimate include product failure rates, anticipated operating hours, and estimated repair or replacement costs. These estimates are updated each period as new information becomes available. The Company may also accrue costs for reliability repairs on out-of-warranty products when, in management's judgment, a specific remediation plan makes such accrual prudent. Warranty liabilities are assessed quarterly and adjusted as necessary, including when product improvements alter historical failure rates.

Research and Development (“R&D”) The Company accounts for grant distributions and development funding as offsets to R&D expenses and both are recorded as the related costs are incurred in the Company’s statement of operations. There were no offsets to R&D during Fiscal 2026 and 2025.

Income Taxes Deferred income tax assets and liabilities are computed for differences between the consolidated financial statement and income tax basis of assets and liabilities. Such deferred income tax asset and liability computations are based on enacted tax laws and rates applicable to periods in which the differences are expected to reverse. Valuation allowances are established, when necessary, to reduce deferred income tax assets to the amounts expected to be realized.

ASC Topic 740-10, Income Taxes (“ASC 740”), clarifies the accounting for uncertainty in income taxes recognized in the financial statements in accordance with U.S. GAAP. Income tax positions must meet a more-likely-than-not recognition threshold to be recognized. Income tax positions that previously failed to meet the more-likely-than-not threshold are recognized in the first subsequent financial reporting period in which that threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not threshold are derecognized in the first subsequent financial reporting period in which that threshold is no longer met. The Company’s policy is to recognize interest and penalties accrued on any unrecognized tax benefits as interest and other expense, net in the Consolidated Statements of Operations.

Contingencies The Company records an estimated loss from a loss contingency when information available prior to issuance of its financial statements indicates that it is probable that an asset has been impaired or a liability has been incurred at the Balance Sheet date and the amount of the loss can be reasonably estimated.

Risk Concentrations Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and accounts receivable. At March 31, 2026, the majority of our cash balances were held at financial institutions located in California. The accounts at these institutions are insured by the Federal Deposit Insurance Corporation up to certain limits. Balances that exceed the insurance coverage aggregate to approximately $27.7 million as of March 31, 2026. The Company places its cash with high credit quality institutions. The Company performs ongoing credit evaluations of its customers and maintains an allowance for potential credit losses. See Note 4 – Customer Concentrations and Accounts Receivable for further detail.

Certain components of the Company’s products are available from a limited number of suppliers. An interruption in supply could cause a delay in manufacturing, which would affect operating results adversely.

Estimates and Assumptions The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Significant estimates include accounting for accounts receivable allowances for credit losses, stock-based compensation, inventory write-downs, valuation of equity and long-lived assets including intangible assets with finite lives, product warranties, income taxes, and other contingencies. Actual results could differ from those estimates.

Net Income (Loss) Per Common Share The Company has both common stock and non-voting common stock outstanding. The non-voting common stock has the same economic rights as the common stock; accordingly, earnings per share (“EPS”) is presented on a combined basis. Basic net income (loss) per share is computed using the weighted-average number of common and non-voting common shares outstanding during the period. Diluted net income (loss) per share reflects the potential dilution from common stock equivalents, including stock options, restricted stock units, and warrants, as their inclusion would be anti-dilutive. The carrying value adjustments related to the redeemable noncontrolling interests in the consolidated Operating Subsidiary, including remeasurement of the Preferred Units to their redemption value, are reflected in the calculation of net income (loss) attributable to common stockholders for purposes of computing earnings per share. As a result, for the years ended March 31, 2026, and 2025 basic and diluted weighted-average shares outstanding were the same.

Stock-Based Compensation Stock-based awards exchanged for services are accounted for under the fair value method. Accordingly, stock-based compensation cost is measured at the grant date based on the estimated fair value of the award. The expense for awards is recognized over the requisite service period (generally the vesting period of the award). The Company has elected to treat awards with only service conditions and with graded vesting as one award. Consequently,

the total compensation expense is recognized straight-line over the entire vesting period, so long as the compensation cost recognized at any date at least equals the portion of the grant date fair value of the award that is vested at that date. The Company has elected to account for forfeitures as they occur.

Leases As lessee, the Company classifies lease arrangements as operating or financing leases and records a right-of-use asset and corresponding lease liability on the Consolidated Balance Sheet, measured by discounting fixed lease payments over the lease term at the rate implicit in the lease or the Company's incremental borrowing rate. For operating leases, interest on the lease liability and amortization of the right-of-use asset result in straight-line rent expense over the lease term. The Company has elected to (i) combine lease and non-lease components and (ii) exclude short-term leases with initial terms of twelve months or less from balance sheet recognition, with rent expense recorded on a straight-line basis.

As lessor, financing receivables arising from sales-type leases are recorded separately on the Consolidated Balance Sheets. Lease terms generally range from one to eight years, with most terms between one and two years. Certain agreements provide the lessee with an option to purchase the underlying asset at end of term, including occasional bargain purchase options.

Segment Reporting The Company determines its reporting units in accordance with ASC Topic 280, Segment Reporting. The Company's chief operating decision maker ("CODM") is the Chief Executive Officer. Based on how the CODM evaluates performance and allocates resources, the Company is considered to operate as a single reportable segment, encompassing the development, manufacture, and sale of turbine generator sets and related parts, services, and rentals.

Impact of Recently Issued Accounting Standards

Adopted

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes: Improvements to Income Tax Disclosures (Topic 740). The standard requires enhanced annual disclosures primarily related to the rate reconciliation and income taxes paid, intended to improve the transparency and decision usefulness of income tax disclosures. The Company adopted this standard for the fiscal year ended March 31, 2026, on a prospective basis. The adoption resulted in enhanced disclosures within Note 18 – Income Taxes. The adoption did not have an impact on the Company's consolidated financial position, results of operations, or cash flows. Prior-period amounts were not recast and continue to be presented in accordance with the accounting standards in effect for those periods.

In March 2024, the FASB issued ASU No. 2024-01, Compensation—Stock Compensation (Topic 718): Scope Application of Profits Interest and Similar Awards. The amendments clarify the scope of Topic 718 as it relates to profits interest and similar awards. The Company adopted this guidance for the fiscal year ended March 31, 2026. The Company evaluated the impact of this guidance on its stock-based compensation arrangements, including profit unit arrangements associated with noncontrolling interests, and determined that the adoption did not have a material impact on its consolidated financial statements.

Not Yet Adopted

In November 2024, the FASB issued ASU No. 2024-03, Income Statement (Subtopic 220-40): Disaggregation of Income Statement Expenses, as subsequently clarified by ASU No. 2025-01. The amendments require disaggregated disclosure of certain income statement expense line items. The guidance is effective for fiscal years beginning after December 15, 2026, and interim periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact of this guidance on its consolidated financial statements and related disclosures.

In July 2025, the FASB issued ASU No. 2025-05, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. The amendments provide an optional practical expedient for estimating expected credit losses on current accounts receivable and contract assets arising from revenue transactions. The guidance is effective for fiscal years beginning after December 15, 2025. Early adoption is permitted. The Company is currently evaluating the impact of this guidance on its consolidated financial statements and related disclosures.

In 2025, the FASB issued ASU No. 2025-12, Codification Improvements. The amendments include clarifications related to diluted earnings per share when a loss from continuing operations exists, disclosure requirements for lease receivables arising from sales-type or direct financing leases, and permissible methods for accounting for treasury stock retirements. The guidance is effective for fiscal years beginning after December 15, 2026. The Company is currently evaluating the impact of this guidance on its consolidated financial statements and related disclosures.

In April 2026, the FASB issued ASU 2026-01, Equity (Topic 505): Initial Measurement of Paid-in-Kind Dividends on Equity-Classified Preferred Stock. The new guidance requires an entity to initially measure paid-in-kind (“PIK”) dividends on equity-classified preferred stock based on the dividend rate stated in the underlying preferred stock agreement. The Company has issued Redeemable Series A Convertible Preferred Stock that accrues PIK dividends. The guidance will apply to the Company’s measurement of such dividends upon adoption. The guidance is effective for the Company for annual reporting periods beginning after December 15, 2026, and interim periods within those annual periods. Early adoption is permitted. The Company is currently evaluating the impact that adoption of this guidance will have on its consolidated financial statements.