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On April 10, 2015 Capstone issued a press release announcing that it had flattened its organizational structure to lower operating costs. The new organizational structure resulted in the elimination of three senior management level positions and in time will save the Company an estimated $2 million annually in salaries, equity, benefits, bonuses, and travel costs after the payment of associated employee severances.

Mr. Gleason held one of the three executive positions that were eliminated in the decision to flatten the organization. He was not personally named in the press release or subsequent current report on Form 8-K because the federal securities laws did not require us to disclose his departure. As a result, Jeff Foster and Tony Lorentz who reported to Mr. Gleason were promoted in the restructuring process and now report directly to the CEO. 

Mr. Jeff Foster joined Capstone on April 22, 2013 as Director, Program Management. Prior to coming to Capstone, Mr. Foster most recently served as Director, Defense Surveillance Radar and head of the Program Management Office (PMO) for the Radar, Reconnaissance, and Acoustics Business Area at Exelis Inc. (formally a part of ITT Corporation.) Mr. Foster has spent more than 26 years in program management, business development, logistics, operations, and Six Sigma with substantive domestic & international experience. Mr. Foster holds a Master of Business Administration (MBA) from The Foster School of Business at the University of Washington in Seattle, is a graduate of the ITT Leadership Development program at Ashridge University in the United Kingdom, is a Certified Six Sigma Black Belt, is a certified Project Management Professional (PMP)® from the Project Management Institute, and is a U.S. Navy veteran.

Mr. Tony Lorentz joined Capstone on November 26, 2012. Mr. Lorentz most recently served as the Director of Product Integrity for Capstone. Previous to that, Mr. Lorentz spent 18 years at Parker Hannifin Aerospace leading product development and engineering test laboratory teams. He brings extensive experience in engineering design and testing and structured product development for commercialization and technology advancement of products. Mr. Lorentz holds a Bachelor of Science Degree in Aerospace Engineering from Embry Riddle Aeronautical University.

Capstone has a C30 and C65 product that can be used in various electric vehicle applications. Wrightspeed recently announced it is developing a new 80kW “Fulcrum” turbine at the ACT Expo in Dallas, Texas. Capstone has been working collaboratively with Wrightspeed and founder Ian Wright for several years to develop a microturbine-based electric vehicle solution.

As of this date, we have not been formally notified by Wrightspeed of a decision to stop working with Capstone in light of them developing their own 80kW product. A Capstone C30 powered Isuzu vehicle was displayed by Wrightspeed at the ACT Expo May 4-7, 2015 in Dallas, Texas. The two vehicles that FedEx is currently testing and using for demonstration purposes are still utilizing the Capstone C30 turbines products to the best of our knowledge.

According to recent conversations with Mr. Wright all three turbines are operating satisfactorily, and the next 25 units for FedEx were delayed due to non-Capstone related Wrightspeed power train issues. Capstone is taking Wrightspeed’s “Fulcrum” turbine announcement seriously, but because of the potential legal implications that may surround this new development, Capstone will not be making any further formal statements on this matter until clarification occurs.

Wrightspeed recently announced at the ACT Expo in Dallas, Texas that it is developing a new 80kW “Fulcrum” turbine. Capstone has been working collaboratively with Wrightspeed and its founder, Ian Wright, for several years to develop a microturbine-based electric vehicle solution.  Capstone had no prior knowledge of the 80kW “Fulcrum” turbine and is not certain as to the maturity of the design. In addition, we are not aware of any patent applications or CARB certification requests for this new product.

Capstone and Wrightspeed have collaborated on engineering and design projects over the last few years. The contracts governing those projects give both parties rights and obligations and have strict language on what Capstone and Wrightspeed can and cannot do in relation to a microturbine-based electric vehicle solution. Capstone is taking Wrightspeed’s “Fulcrum” turbine announcement seriously, but because of the potential legal implications that may surround this new development, Capstone will not be making any further formal statements on this matter until clarification occurs.

Capstone does not publically announce scheduled earnings release dates until the completion of our quarter-end or year-end external review and audit processes have been thoroughly conducted. However, based upon the recently completed March quarter being our corporate fiscal year-end, it will most likely be mid-June when we report earnings.

Capstone is expanding its market share in a tough natural resource market and getting asked to bid multiple megawatt projects that serve larger load regimes. In Mexico, we are capitalizing on the opportunities that resulted from the Mexican energy reform, which has established reduced electricity and gas prices. One of our Mexican distributors, Industrias Energetícas, recently secured two of the largest orders in Capstone history in participation with the Los Ramones pipeline project in eastern Mexico. Additional phases of the pipeline should be awarded later this year.

With these types of wins, Mexico is certainly poised to be one of our top markets throughout fiscal 2016.  Furthermore, we are actively pursuing several other large projects for flare gas reduction in South America, Europe, the Middle East and Africa.

No, Capstone has never done a reverse split since going public in 2000.

Capstone filed a new shelf registration statement on Form S-3 as part of its normal course of business because the Company’s previous shelf was set to expire.

In recent years, the capital markets have experienced extraordinary volatility, and as a result, companies may find it challenging to raise capital for any number of reasons, even as the markets begin to recover. An effective shelf registration statement allows for certain types of future offerings that allow companies to take advantage of an open "market window" on short notice, and quickly and cost-effectively raise capital for acquisitions, research and development, growth or to simply fund company operations. The key to the success of each of these approaches is maintaining an effective shelf registration statement. 

The roadmap from today’s approximately 20% gross margin to our terminal rate of 35% is made up of the exact same initiatives that have taken Capstone from  negative 24% gross margin in FY07 to today’s levels. The initiatives include reducing direct material costs, lower warranty and FPP spending, improving manufacturing efficiency, reducing scrap levels, lowering freight and logistics costs, additional use of tier one suppliers, long term purchase agreements, annual price increases, increasing revenue, and a growing aftermarket service business with robust parts and service margins. 

In FY06 Capstone had approximately 243 employees doing $24 million in annual revenue. Today Capstone has approximately 236 employees doing approximately five times the volume while operating on a single shift. 

Capstone builds products based on quarterly customer demand and end user project requirements. Production slots are determined prior to each quarter to limit excess inventory and finished goods. High order backlog does not lead to lost customers because Capstone can increase capacity or move around production slots to meet customers’ delivery requirements.

Capstone has two plants in California operating at approximately 35% of total capacity. Both plants operate single shifts five days per week but can flex to six or seven days a week or a second shift if demand requires.

Capstone has been in contact with Nasdaq representatives and continues to have a dialog on potential remedies. If Capstone fails to meet the full eligibility requirements for the Nasdaq Global Market and is not granted an extension from Nasdaq representatives, then Capstone can file an application to transfer from the Nasdaq Global Market to the Nasdaq Capital Market. This transfer would give Capstone an additional 180 days to trade above the minimum $1.00 threshold.

A reverse stock split would be considered as the final remedy if required. However, a reverse stock split requires stockholder approval and would need to be approved at the annual meeting or at a special meeting of stockholders.