TECOGEN INC

Previous wording

In April, 2024, Tecogen moved it's manufacturing operations and corporate offices from 45 First Ave, Waltham, MA to 76 Treble Cove Road, North Billerica, MA. As a result of the move, product revenues were impacted during the second quarter of 2024. The factory move also necessitated construction activities to install equipment test cells and comply with local regulations. The Company will be able to resume manufacturing operations during the third quarter of 2024.

Current wording

In April, 2024, Tecogen moved its manufacturing operations and corporate offices from 45 First Ave, Waltham, MA to 76 Treble Cove Road, Building 1, North Billerica, MA. As a result of the move, product revenues were impacted during the second and third quarters of 2024. The factory move also necessitated construction activities to install equipment test cells and comply with local regulations. We resumed manufacturing operations during the later-half of the third quarter of 2024.

Previous wording

As more load is added to the utility grid in the form of data centers, EV charging, customers are facing power constraints. Tecogen believes that these power constrained customers, in particular data centers and industrial facilities represent a significant opportunity for growth. The customer need is driven by ability to expand an existing facility or open a new facility quickly while taking advantage of utility bills savings long term. Our chiller products can reduce the electrical capacity needed on-site by 30% or more. Our InVerde product can provide on-site power generation by using an inverter based system that operates at 480V. This allows customers to eliminate long lead times associated with electrical switch gear and bridge any short fall in power from the utility.

Current wording

As more load is added to the utility grid in the form of data centers, EV charging, and other demands for power, customers are facing power constraints. Tecogen believes that these power constrained customers, in particular data centers and industrial facilities represent a significant opportunity for growth. The customer need is driven by ability to expand an existing facility or open a new facility quickly while taking advantage of utility expense savings long term. Our chiller products can reduce the electrical capacity needed on-site by 30% or more. Our InVerde product can provide on-site power generation which allows customers to eliminate long lead times associated with electrical switch gear and bridge any short fall in power from the utility.

Previous wording

Supply chains were adversely impacted during Covid resulting in significant delays or lack of availability of critical components such as engines. This has continued to have long term impact on product and service margin. The direct impact has been certain costs increasing faster than inflation. The indirect impact is from increased engine related costs in the service segment as replacements were deferred or overhauled components were used due to lack of parts. We have instituted a service price increase and have also been making engineering improvements to increase service intervals to increase margins.

Current wording

Supply chains were adversely impacted during Covid, resulting in significant delays or lack of availability of critical components such as engines. This has continued to have long term impact on product and service margin. The direct impact has been certain costs increasing faster than inflation. The indirect impact is from increased engine related costs in the service segment as replacements were deferred or overhauled components were used due to lack of parts. We have instituted a service price increase and have also been making engineering improvements to increase service intervals to increase gross margins.

Previous wording

During the third quarter of 2021 we began development of the Tecochill Hybrid-Drive Air-Cooled Chiller. We recognized that there were many applications where the customer wanted an easy to install roof top chiller. Using the inverter design from our InVerde e+ cogeneration module, the system can simultaneously take two inputs, one from the grid or a renewable energy source and one from our natural gas engine. This allows a customer to seek the optimum blend of operational cost savings and greenhouse gas benefits while providing added resiliency from two power sources. We introduced the Tecochill Hybrid-Drive Air-Cooled Chiller at the AHR Expo in February 2023 and received an order on February 8, 2024 for three hybrid-drive air-cooled chillers for a utility in Florida. A patent application based on this concept has been filed with the US Patent and Trademark Office.

Current wording

During the third quarter of 2021 we began development of the Tecochill Hybrid-Drive Air-Cooled Chiller. We recognized that there were many applications where the customer wanted an easy to install roof top chiller. Using the inverter design from our InVerde e+ cogeneration module, the system can simultaneously take two inputs, one from the grid or a renewable energy source and one from our natural gas engine. This allows a customer to seek the optimum blend of operational cost savings and greenhouse gas benefits while providing added resiliency from two power sources. We introduced the Tecochill Hybrid-Drive Air-Cooled Chiller at the AHR Expo in February 2023 and received an order on February 8, 2024 for three hybrid-drive air-cooled chillers for a utility company in Florida. A patent application based on this concept was issued by the US Patent and Trademark Office in March 2024.

Previous wording

On July 20, 2022, we announced our intention to focus on opportunities for the use of our cogeneration equipment in low carbon Controlled Environment Agriculture ("CEA"). We believe that CEA offers an exciting opportunity to apply our expertise in clean cooling, power generation, and greenhouse gas reduction to address critical issues affecting food and energy security. We propose to address this challenge by developing a highly efficient energy solution for CEA grown produce using our cogeneration products in conjunction with solar energy generation, energy storage, and other technologies.

Current wording

On July 20, 2022, we announced our intention to focus on opportunities for the use of our cogeneration equipment in low carbon Controlled Environment Agriculture ("CEA"). We believe that CEA offers an exciting opportunity to apply our expertise in clean cooling, power generation, and greenhouse gas reduction to address critical issues affecting food and energy security.

Previous wording

On October 9, 2023, we entered into note subscription agreements with each of John N. Hatsopoulos, a director and principal shareholder of registrant, and Earl R. Lewis, III, a director of registrant, pursuant to which Mr. Hatsopoulos agreed to provide financing to us of up to $1 million, and Mr. Lewis agreed to provide financing to us of $500,000, and potentially, an additional $500,000 at his discretion. On October 10, 2023, we issued a promissory note and borrowed $500,000 from Mr. Hatsopoulos. The loan bears interest at 5.12% per annum. On July 23, 2024, we borrowed an additional $500,000 from Mr. Hatsopoulos, and executed a promissory note with a maturity of one year and interest at 5.06% per annum. See Note 11. Related Party Notes of the Notes to the Consolidated Financial Statements.

Current wording

On October 9, 2023, we entered into note subscription agreements with each of John N. Hatsopoulos, a director and principal shareholder of Tecogen, and Earl R. Lewis, III, a director of Tecogen, pursuant to which Mr. Hatsopoulos agreed to provide financing to us of up to $1 million, and Mr. Lewis agreed to provide financing to us of $500,000, and potentially, an additional $500,000 at his discretion. On October 10, 2023, we issued a promissory note and borrowed $500,000 from Mr. Hatsopoulos, which matures on October 10, 2025. The loan bears interest at 5.12% per annum. On July 23, 2024, we borrowed an additional $500,000 from Mr. Hatsopoulos, and executed a promissory note with a maturity of one year and interest at 5.06% per annum. On September 18, 2024, we issued a promissory note and borrowed $500,000 from Mr. Lewis. The loan matures on September 18, 2025 and bears interest at 4.57% per annum. See Note 11."Related Party Notes" of the Notes to the Consolidated Financial Statements.

Previous wording

With the acquisition of American DG Energy Inc. ("ADGE") in May 2017, we added an additional source of revenue. Through ADGE, we install, own, operate and maintain complete distributed generation electricity systems, or DG systems or energy systems, and other complementary systems at customer sites, and sell electricity, hot water, heat and cooling energy under long-term contracts at prices guaranteed to the customer to be below conventional utility rates. Each month we obtain readings from our energy meters to determine the amount of energy produced for each customer. We use a contractually defined formula to multiply these readings by the appropriate published price of energy (electricity, natural gas or oil) from each customer's local energy utility, to derive the value of our monthly energy sale, which includes a negotiated discount. Our revenues per customer on a monthly basis vary based on the amount of energy produced by our energy systems and the published price of energy (electricity, natural gas or oil) from our customer's local energy utility that month.

Current wording

With the acquisition of American DG Energy Inc. ("ADGE") in May 2017, we added an additional source of revenue. Through ADGE, we install, own, operate and maintain complete distributed generation electricity systems and other complementary systems at customer sites, and sell electricity, hot water, heat and cooling energy under long-term contracts at prices guaranteed to the customer to be below conventional utility rates. Each month we obtain readings from our energy meters to determine the amount of energy produced for each customer. We use a contractually defined formula to multiply these readings by the appropriate published price of energy (electricity, natural gas or oil) from each customer's local energy utility, to derive the value of our monthly energy sale, which includes a negotiated discount. Our revenues per customer on a monthly basis vary based on the amount of energy produced by our energy systems and the published price of energy (electricity, natural gas or oil) from our customer's local energy utility that month.

Previous wording

Total revenues for the three months ended June 30, 2024 were $4,727,787 compared to $6,748,758 for the same period in 2023, a decrease of $2,020,971 or 29.9% year over year.

Current wording

Total revenues for the three months ended September 30, 2024 were $5,630,130 compared to $7,112,530 for the same period in 2023, a decrease of $1,482,400 or 20.8% year over year.

Previous wording

Products revenues in the three months ended June 30, 2024 were $119,673 compared to $2,445,631 for the same period in 2023, a decrease of $2,325,958, or 95.1%. The decrease in revenue during the three months ended June 30, 2024 is due to the relocation of our manufacturing operations to our new facility in April 2024, which significantly reduced our production capacity, resulting in a decrease in chiller sales of $1,687,981, a $307,641 decrease in cogeneration sales, and a decrease in engineered accessory sales of $330,336. Our Products sales mix, as well as product revenue, can vary significantly from period to period as our products are high dollar, low volume sales.

Current wording

Products revenues in the three months ended September 30, 2024 were $1,391,016 compared to $2,938,789 for the same period in 2023, a decrease of $1,547,773, or 52.7%. The decrease in revenue during the three months ended September 30, 2024 is due in part to the relocation of our manufacturing operations to our new facility in April 2024, which significantly reduced our production capacity and caused certain customer order delays, resulting in a decrease in chiller sales of $1,897,186 and a $46,348 decrease in engineered accessory sales, offset partially by a $395,761 increase in cogeneration sales. Our Products sales mix, as well as product revenue, can vary significantly from period to period as our products are high dollar, low volume sales.

Previous wording

Our service operation revenues grow with the sale of installed systems, since the majority of our product sales are accompanied by a service contract or time and materials agreements and by the acquisition of maintenance contracts. As a result, our “fleet” of units being serviced by our service department grows with product sales.

Current wording

Our service operation revenues grow with the sale of installed systems because the majority of our product sales are accompanied by a service contract or time and materials agreements, and by the acquisition of maintenance contracts. As a result, our “fleet” of units being serviced by our service department grows with product sales.

Previous wording

Energy Production revenues in the three months ended June 30, 2024 were $481,597, compared to $350,156 for the same period in 2023, an increase of $131,441, or 37.5%. The increase in Energy Production revenue is due to increased run hours at certain energy production sites.

Current wording

Energy Production revenues in the three months ended September 30, 2024 were $388,563, compared to $331,141 for the same period in 2023, an increase of $57,422, or 17.3%. The increase in Energy Production revenue is due to increased run hours at certain energy production sites.

Previous wording

Cost of sales in the three months ended June 30, 2024 was $2,648,632 compared to $3,914,332 for the same period in 2023, a decrease of $1,265,700, or 32.3%. The decrease in cost of sales is due to decreased Product sales, offset by increased service contract maintenance costs due to higher labor and material costs to replace engines at certain sites in 2024, and increased energy production costs. During the three months ended June 30, 2024 our gross margin increased to 44.0% compared to 42.0% for the same period in 2023, a 2.0% percentage point increase due to higher service contract revenue.

Current wording

Cost of sales in the three months ended September 30, 2024 was $3,149,216 compared to $4,186,509 for the same period in 2023, a decrease of $1,037,293, or 24.8%. The decrease in cost of sales is due to decreased Product sales and lower service contract maintenance costs. During the three months ended September 30, 2024 our gross margin increased to 44.1% compared to 41.1% for the same period in 2023, a 3.0% increase due to higher service contract margins.

Previous wording

Cost of sales for Products in the three months ended June 30, 2024 was $171,982 compared to $1,618,456 for the same period in 2023, a decrease of $1,446,474, or 89.4% due to decreased sales of Products. During the three months ended June 30, 2024, our Products gross margin was negative 43.7% compared to 33.8% for the same period in 2023, a 77.5% percentage point decrease. The decrease in margin was a function of minimal Products revenue, warranty costs and unabsorbed labor costs in the three months ended June 30, 2024.

Current wording

Cost of sales for Products in the three months ended September 30, 2024 was $797,209 compared to $1,669,747 for the same period in 2023, a decrease of $872,538, or 52.3% due to decreased sales of Products. During the three months ended September 30, 2024, our Products gross margin was 42.7% compared to 43.2% for the same period in 2023, a 0.5% decrease. The decrease in margin was a function of unabsorbed labor costs in the three months ended September 30, 2024.

Previous wording

Cost of sales for Services in the three months ended June 30, 2024 was $2,191,815 compared to $2,075,869 for the same period in 2023, an increase of $115,946, or 5.6%, due to increased labor and material costs as a consequence of increased revenue from the Aegis customer maintenance contracts acquisition. During the three months ended June 30, 2024, our Services gross margin decreased to 46.9% compared to 47.5% in the same period in 2023, a 0.6% percentage point decrease. The decrease in margin is due to higher costs incurred to replace engines at certain sites in 2024.

Current wording

Cost of sales for Services in the three months ended September 30, 2024 was $2,139,042 compared to $2,346,384 for the same period in 2023, a decrease of $207,342, or 8.8%, due to decreased labor and material costs incurred to service the acquired Aegis customer maintenance contracts. During the three months ended September 30, 2024, our Services gross margin increased to 44.4% compared to 38.9% in the same period in 2023, a 5.5% increase. The increase in margin is due to the performance of the Aegis acquired sites and lower costs incurred to replace engines at certain sites compared to 2023.

Previous wording

Cost of sales for Energy Production in the three months ended June 30, 2024 was $284,835 compared to $220,007 for the same period in 2023, an increase of $64,828, or 29.5%. During the three months ended June 30, 2024 our Energy Production gross margin increased to 40.9% compared to 37.2% for the same period in 2023, a 3.7% percentage point increase. The increase in the energy production gross margin is due to increased run hours at certain of our Energy Production sites in the three months ended June 30, 2024 compared to the same period in 2023 and lower maintenance costs.

Current wording

Cost of sales for Energy Production in the three months ended September 30, 2024 was $212,965 compared to $170,378 for the same period in 2023, an increase of $42,587, or 25.0%. During the three months ended September 30, 2024 our Energy Production gross margin decreased to 45.2% compared to 48.5% for the same period in 2023, a 3.3% decrease. The decrease in the energy production gross margin is due to increased fuel costs at certain of our Energy Production sites in the three months ended September 30, 2024 compared to the same period in 2023.

Previous wording

General and administrative expenses consist of executive staff, accounting and legal expenses, office space, general insurance and other administrative expenses. General and administrative expenses for the three months ended June 30, 2024 were $2,897,993 compared to $2,917,283 for the same period in 2023, a decrease of $19,290 or 0.7%, due to a $70,263 decrease in depreciation and amortization costs, a $66,641 decrease in consulting costs, a $72,766 decrease in business insurance costs, and a $39,195 decrease in the provision for credit losses, offset partially by a $146,369 increase in payroll and related expenses, a $68,527 increase in facility costs due to the transition to our new facility, and $83,055 of relocation costs.

Current wording

General and administrative expenses consist of executive staff, accounting and legal expenses, office space, general insurance and other administrative expenses. General and administrative expenses for the three months ended September 30, 2024 were $2,681,558 compared to $2,708,817 for the same period in 2023, a decrease of $27,259 or 1.0%, due to a $53,198 decrease in depreciation and amortization costs, a $28,407 decrease in stock-based compensation, offset partially by $47,734 increase in payroll and related expenses.

Previous wording

Selling expenses consist of sales staff, commissions, marketing, travel and other selling related expenses. Selling expenses for the three months ended June 30, 2024 were $405,277 compared to $480,786 for the same period in 2023, a decrease of $75,509 or 15.7%, due to a $64,218 decrease in sales commission and a $20,280 decrease in payroll and related benefits.

Current wording

Selling expenses consist of sales staff, commissions, marketing, travel and other selling related expenses. Selling expenses for the three months ended September 30, 2024 were $442,812 compared to $425,465 for the same period in 2023, an increase of $17,347 or 4.1%, due to a $37,424 increase in payroll and related benefits, offset partially by a $28,046 decrease in sales commissions.

Previous wording

Research and development expenses consist of engineering and technical staff, materials, outside consulting and other related expenses. Research and development expenses for the three months ended June 30, 2024 were $246,489 compared to $236,556 for the same period in 2023, an increase of $9,933 or 4.2%.

Current wording

Research and development expenses consist of engineering and technical staff, materials, outside consulting and other related expenses. Research and development expenses for the three months ended September 30, 2024 were $233,809 compared to $160,033 for the same period in 2023, an increase of $73,776 or 46.1%, due to a $37,201 increase in payroll and related benefits and a $42,135 increase in depreciation and amortization costs.

Previous wording

The loss on asset dispositions for three months ended June 30, 2024 was $3,363 compared to a gain on asset dispositions of $19,950.

Current wording

The gain on asset dispositions for three months ended September 30, 2024 was $4,042. There were no asset dispositions during the three months ended September 30, 2023.

Previous wording

Our loss from operations for the three months ended June 30, 2024 was $1,473,967 compared to a loss from operations of $780,249 for the same period in 2023, an increase of $693,718. The increase in the loss from operations is due to lower Products revenues and decreased gross profit, offset partially by a $61,553 decrease in operating expenses.

Current wording

Our loss from operations for the three months ended September 30, 2024 was $873,223 compared to a loss from operations of $368,294 for the same period in 2023, an increase of $504,929. The increase in the loss from operations is due to lower Products revenues and decreased gross profit, offset partially by a $59,822 decrease in operating expenses.

Previous wording

Other expense net for the three months ended June 30, 2024 was $36,472 compared to other income net of $14,579 for the same period in 2023, a decrease of $51,051, due to unrealized loses on marketable securities of $37,497 recognized in the three months ended June 30, 2024, compared to an unrealized gain on marketable securities of $37,497 recognized in 2023 and to a $16,012 increase in interest due to borrowings under our related party note and lease financing, offset partially by a $39,955 increase in currency exchange gains.

Current wording

Other expense net for the three months ended September 30, 2024 was $22,707 compared to other expense net of $78,933 for the same period in 2023, a decrease of $56,226, due to unrealized gains on marketable securities of $18,749 recognized in the three months ended September 30, 2024, compared to an unrealized losses on marketable securities of $56,246 recognized in 2023, offset partially by a $16,646 increase in interest due to borrowings under our related party note and lease financing and by a $2,123 increase in currency exchange losses.

Previous wording

Income attributable to the non-controlling interest was $28,320 for the three months ended June 30, 2024 which represents the non-controlling interest portion of American DG Energy's 51% owned subsidiary, American DG New York, LLC. For the same period in 2023, income attributable to the non-controlling interest was $4,826.

Current wording

Income attributable to the non-controlling interest was $34,478 for the three months ended September 30, 2024 which represents the non-controlling interest portion of American DG Energy's 51% owned subsidiary, American DG New York, LLC. For the same period in 2023, income attributable to the non-controlling interest was $34,346.

Previous wording

Net Income (loss) Attributable to Tecogen Inc.

Current wording

Net Income (loss) Attributable to Tecogen

Previous wording

The net loss attributable to Tecogen for the three months ended June 30, 2024 was a net loss of $1,538,796 compared to a net loss of $780,110 for the same period in 2023, an increase of $758,686, or 97.3%. The increase in the net loss is due to lower Products revenue and gross profit, offset partially by a $61,553 decrease in operating expenses.

Current wording

The net loss attributable to Tecogen for the three months ended September 30, 2024 was a net loss of $930,408 compared to a net loss of $481,573 for the same period in 2023, an increase of $448,835, or 93.2%. The increase in the net loss is due to lower Products revenue and gross profit and by a $59,822 increase in operating expenses.

Previous wording

Total revenues for the six months ended June 30, 2024 were $10,913,883 compared to $12,128,576 for the same period in 2023, a decrease of $1,214,693 or 10.0% year over year.

Current wording

Total revenues for the nine months ended September 30, 2024 were $16,544,014 compared to $19,241,106 for the same period in 2023, a decrease of $2,697,092 or 14.0% year over year.

Previous wording

Products revenues in the six months ended June 30, 2024 were $1,611,071 compared to $4,155,767 for the same period in 2023, a decrease of $2,544,696, or 61.2%. The decrease in revenue during the six months ended June 30, 2024 is due to the relocation of our manufacturing operations to our new facility in April 2024, which significantly reduced our production capacity and customer order delays, resulting in a decrease in chiller sales of $2,099,854, a $367,737 decrease in engineered accessory sales and a $77,105 decrease in cogeneration sales. Our Products sales mix, as well as product revenue, can vary significantly from period to period as our products are high dollar, low volume sales.

Current wording

Products revenues in the nine months ended September 30, 2024 were $3,002,087 compared to $7,094,556 for the same period in 2023, a decrease of $4,092,469, or 57.7%. The decrease in revenue during the nine months ended September 30, 2024 is due to the relocation of our manufacturing operations to our new facility in April 2024, which significantly reduced our production capacity and caused certain customer order delays, resulting in a decrease in chiller sales of $3,997,040 and a $414,085 decrease in engineered accessory sales, offset partially by a $318,656 increase in cogeneration sales. Our Products sales mix, as well as product revenue, can vary significantly from period to period as our products are high dollar, low volume sales.

Previous wording

Service revenues in the three months ended June 30, 2024 were $4,126,517, compared to $3,952,971 for the same period in 2023, an increase of $173,546, or 4.4%. The increase in revenue during the three months ended June 30, 2024 is due to the addition of $23,972 in revenue from the acquired Aegis maintenance contracts, $67,884 of revenue representing our share of the excess cash flows above the minimum threshold for the bi-annual period ended June 30, 2024 and a $81,690 increase in service contract revenues from existing contracts.

Current wording

Service revenues in the nine months ended September 30, 2024 were $11,991,378, compared to $10,931,744 for the same period in 2023, an increase of $1,059,634, or 9.7%. The increase in revenue during the nine months ended September 30, 2024 is due to the addition of $717,363 in revenue from the acquired Aegis maintenance contracts, $67,884 of revenue representing our share of the excess cash flows above the minimum threshold for the bi-annual period ended June 30, 2024 and a $274,387, or 0.7%, increase in service contract revenues from existing contracts.

Previous wording

Our service operation revenues grow with the sale of installed systems, since the majority of our product sales are accompanied by a service contract or time and materials agreements and by the acquisition of maintenance contracts. As a result, our “fleet” of units being serviced by our service department grows with product sales.

Current wording

Our service operation revenues grow with the sale of installed systems because the majority of our product sales are accompanied by a service contract or time and materials agreements, and by the acquisition of maintenance contracts. As a result, our “fleet” of units being serviced by our service department grows with product sales.

Previous wording

Energy Production revenues in the six months ended June 30, 2024 were $1,161,985, compared to $883,665 for the same period in 2023, an increase of 278,320, or 31.5%. The increase in Energy Production revenue is due to increased run hours at certain energy production sites.

Current wording

Energy Production revenues in the nine months ended September 30, 2024 were $1,550,549, compared to $1,214,806 for the same period in 2023, an increase of $335,743, or 27.6%. The increase in Energy Production revenue is due to increased run hours at certain energy production sites.

Previous wording

Cost of sales in the six months ended June 30, 2024 was $6,259,072 compared to $7,202,241 for the same period in 2023, a decrease of $943,169, or 13.1%. The decrease in cost of sales is due to decreased Products revenue, offset partially by increased service contract maintenance costs due to higher labor and material to replace engines at certain sites in 2024, and increased energy production costs. During the six months ended June 30, 2024 our gross margin increased to 42.7% compared to 40.6% for the same period in 2023, a 2.1% percentage point increase due to higher service contract revenue.

Current wording

Cost of sales in the nine months ended September 30, 2024 was $9,408,288 compared to $11,388,750 for the same period in 2023, a decrease of $1,980,462, or 17.4%. The decrease in cost of sales is due to decreased Products sales, offset partially by increased service contract maintenance costs due to higher labor and material to replace engines at certain sites in 2024, and increased energy production costs. During the nine months ended September 30, 2024 our gross margin increased to 43.1% compared to 40.8% for the same period in 2023, a 2.3% increase due to higher service contract revenue.

Previous wording

Cost of sales for Products in the six months ended June 30, 2024 was $1,221,525 compared to $2,831,024 for the same period in 2023, a decrease of $1,609,499, or 56.9% due to decreased sales of Products. During the six months ended June 30, 2024, our Products gross margin was 24.2% compared to 31.9% for the same period in 2023, a 7.7% percentage point decrease. The decrease in margin was function of minimal Products revenue, warranty costs and unabsorbed labor costs in the three months ended June 30, 2024.

Current wording

Cost of sales for Products in the nine months ended September 30, 2024 was $2,018,734 compared to $4,500,771 for the same period in 2023, a decrease of $2,482,037, or 55.1% due to decreased sales of Products. During the nine months ended September 30, 2024, our Products gross margin was 32.8% compared to 36.6% for the same period in 2023, a 3.8% decrease. The decrease in margin was function of minimal Products revenue, warranty costs and unabsorbed labor costs in the nine months ended September 30, 2024.

Previous wording

Cost of sales for Services in the six months ended June 30, 2024 was $4,284,072 compared to $3,813,471 for the same period in 2023, an increase of $470,601, or 12.3%, due to increased labor and material costs as a consequence of the Aegis customer maintenance contracts acquisition. During the six months ended June 30, 2024, our Services gross margin increased to 47.4% compared to 46.2% in the same period in 2023, a 1.2% percentage point increase. The increase in margin is due to lower costs incurred to replace engines at certain sites in 2024.

Current wording

Cost of sales for Services in the nine months ended September 30, 2024 was $6,423,114 compared to $6,159,855 for the same period in 2023, an increase of $263,259, or 4.3%, due to increased labor and material costs as a consequence of the Aegis customer maintenance contracts acquisition. During the nine months ended September 30, 2024, our Services gross margin increased to 46.4% compared to 43.7% in the same period in 2023, a 2.7% increase. The increase in margin is due to decreased cost incurred to service the acquired Aegis customer maintenance, offset by labor and material costs incurred to replace engines at certain sites in 2024.

Previous wording

Cost of sales for Energy Production in the six months ended June 30, 2024 was $753,475 compared to $557,746 for the same period in 2023, an increase of $195,729, or 35.1%. During the six months ended June 30, 2024 our Energy Production gross margin decreased to 35.2% compared to 36.9% for the same period in 2023, a 1.7% percentage point decrease. The decrease in the energy production gross margin is due to increased gas and maintenance costs at certain of our Energy Production sites in the six months ended June 30, 2024 compared to the same period in 2023.

Current wording

Cost of sales for Energy Production in the nine months ended September 30, 2024 was $966,440 compared to $728,124 for the same period in 2023, an increase of $238,316, or 32.7%. During the nine months ended September 30, 2024 our Energy Production gross margin decreased to 37.7% compared to 40.1% for the same period in 2023, a 2.4% decrease. The decrease in the energy production gross margin is due to increased fuel and maintenance costs at certain of our Energy Production sites in the nine months ended September 30, 2024 compared to the same period in 2023.

Previous wording

General and administrative expenses consist of executive staff, accounting and legal expenses, office space, general insurance and other administrative expenses. General and administrative expenses for the six months ended June 30, 2024 were $5,746,559 compared to $5,709,766 for the same period in 2023, an increase of $36,793 or 0.6%, due to a $180,354 increase in facility costs due to the transition to our new facility, a $164,120 increase in payroll and related benefits and $83,055 of relocation costs, offset partially by a $93,787 decrease in consulting costs, an $82,702 decrease in operating supplies, a $72,544 decrease in depreciation and amortization expense, a $70,603 reduction in travel expenses, a $59,476 decrease in business insurance costs, and a $24,937 decrease in the provision for credit losses.

Current wording

General and administrative expenses consist of executive staff, accounting and legal expenses, office space, general insurance and other administrative expenses. General and administrative expenses for the nine months ended September 30, 2024 were $8,428,119 compared to $8,418,581 for the same period in 2023, an increase of $9,538 or 0.1%, due to a $211,854 increase in payroll and related benefits, $161,828 increase in facility costs due to the transition to our new facility, $83,055 of relocation costs, and a $79,830 increase in general office expenses, offset partially by a $125,742 decrease in depreciation and amortization expense, a $114,961 decrease in consulting costs, a $161,367 decrease in operating supplies, a $72,373 reduction in travel expenses, and a $52,586 decrease in business insurance costs.

Previous wording

Selling expenses consist of sales staff, commissions, marketing, travel and other selling related expenses. Selling expenses for the six months ended June 30, 2024 were $934,946 compared to $1,000,856 for the same period in 2023, a decrease of $65,910 or 6.6%, due to a $72,213 decrease in trade show expense and a $27,855 decrease in payroll and related benefits, offset partially by a $25,872 increase in sales commissions.

Current wording

Selling expenses consist of sales staff, commissions, marketing, travel and other selling related expenses. Selling expenses for the nine months ended September 30, 2024 were $1,377,758 compared to $1,426,321 for the same period in 2023, a decrease of $48,563 or 3.4%, due to a $72,683 decrease in trade show expense, offset partially by a $25,252 increase in sales commissions.

Previous wording

Research and development expenses consist of engineering and technical staff, materials, outside consulting and other related expenses. Research and development expenses for the six months ended June 30, 2024 were $501,185 compared to $465,658 for the same period in 2023, an increase of $35,527 or 7.6%, due to a $94,994 increase in depreciation and amortization, offset partially by a $67,748 decreased in payroll and related benefits.

Current wording

Research and development expenses consist of engineering and technical staff, materials, outside consulting and other related expenses. Research and development expenses for the nine months ended September 30, 2024 were $734,994 compared to $625,691 for the same period in 2023, an increase of $109,303 or 17.5%, due to a $137,129 increase in depreciation and amortization, offset partially by a $67,457 decreased in payroll and related benefits.

Previous wording

The gain on asset dispositions for six months ended June 30, 2024 of $4,028 compared to $19,950 for the same period in 2023, represents the excess of insurance proceeds received over the net book value of assets for auto claims filed during the period or the excess of proceeds received over the book value on the sale of vehicles.

Current wording

The gain on asset dispositions for the nine months ended September 30, 2024 of $8,070 compared to $19,950 for the same period in 2023, represents the excess of insurance proceeds received over the net book value of assets for auto claims filed during the respective periods or the excess of proceeds received over the book value on the sale of vehicles.

Previous wording

Our loss from operations for the six months ended June 30, 2024 was $2,523,851 compared to a loss from operations of $2,229,995 for the same period in 2023, an increase of $293,856, or 13.2%. The increase in the loss from operations is due to lower Products revenues and gross profit.

Current wording

Our loss from operations for the nine months ended September 30, 2024 was $3,397,075 compared to a loss from operations of $2,598,287 for the same period in 2023, an increase of $798,788, or 30.7%. The increase in the loss from operations is due to lower Products revenues and gross profit.

Previous wording

Other expense net for the six months ended June 30, 2024 was $52,141 compared to other income net of $14,994 for the same period in 2023, an increase in other expense of $67,135, due to unrealized loss of $18,749 recognized in the six months ended June 30, 2024 compared to an unrealized gain of $37,497 recognized in 2023 and a $34,267 increase in interest due to borrowings under our related party note and lease financing, offset partially by a $23,378 increase in currency exchange gains recognized in the six months ended June 30, 2024.

Current wording

Other expense net for the nine months ended September 30, 2024 was $74,847 compared to other expense net of $63,940 for the same period in 2023, an increase in other expense of $10,907, due to unrealized loss of $18,749 recognized in the nine months ended September 30, 2023, a $50,913 increase in interest due to borrowings under our related party note and lease financing, offset partially by a $21,257 decrease in currency exchange losses recognized in the nine months ended September 30, 2024.

Previous wording

The provision for state income taxes for the six months ended June 30, 2024 and 2023 was $22,100 and $32,252, respectively, and represents estimated income tax payments, net of refunds, to various states.

Current wording

The provision for state income taxes for the nine months ended September 30, 2024 and 2023 was $22,100 and $32,252, respectively, and represents estimated income tax payments, net of refunds, to various states. Non-controlling Interest