TECOGEN INC.

Previous wording

This Management’s Discussion and Analysis of Financial Condition and Results of Operations and other parts of this Quarterly Report on Form 10-Q (“Form 10-Q”) contain forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that involve risks and uncertainties. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. Forward-looking statements can also be identified by words such as “future,” “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “will,” “would,” “could,” “can,” “may,” and similar terms. Forward-looking statements are not guarantees of future performance and our actual results may differ significantly from the results discussed in the forward-looking statements. Such forward-looking statements include, among other things, demand for our products and services, the availability of incentives, rebates, and tax benefits relating to our products, changes in the regulatory environment relating to our products, competing technological developments, and the availability of financing to fund our operations and growth. Factors that might cause such differences include, but are not limited to, those discussed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2023 (“2023 Form 10-K”), as supplemented, and Part II, Item 1A of this Form 10-Q, in each case under the heading “Risk Factors.” The following discussion should be read in conjunction with the 2023 Form 10-K filed with the Securities and Exchange Commission (“SEC”) and the condensed consolidated financial statements and accompanying notes included in Part I, Item 1 of this Form 10-Q. Each of the terms “Tecogen,” “we,” “our,” and “us” as used herein refer collectively to Tecogen Inc. and our wholly owned subsidiaries, unless otherwise stated. While we may elect to update forward-looking statements in the future, we specifically disclaim any obligation to do so, even if our estimates change, and you should not rely on those forward-looking statements as representing ours views as of any date subsequent to the date of the filing of this Form 10-Q.

Current wording

This Management’s Discussion and Analysis of Financial Condition and Results of Operations and other parts of this Quarterly Report on Form 10-Q (“Form 10-Q”) contain forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that involve risks and uncertainties. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. Forward-looking statements can also be identified by words such as “future,” “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “will,” “would,” “could,” “can,” “may,” and similar terms. Forward-looking statements are not guarantees of future performance and our actual results may differ significantly from the results discussed in the forward-looking statements. Such forward-looking statements include, among other things, demand for our products and services, the availability of incentives, rebates, and tax benefits relating to our products, changes in the regulatory environment relating to our products, competing technological developments, and the availability of financing to fund our operations and growth. Factors that might cause such differences include, but are not limited to, those discussed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2024 (“2024 Form 10-K”), as supplemented, and Part II, Item 1A of this Form 10-Q, in each case under the heading “Risk Factors.” The following discussion should be read in conjunction with the 2024 Form 10-K filed with the Securities and Exchange Commission (“SEC”) and the condensed consolidated financial statements and accompanying notes included in Part I, Item 1 of this Form 10-Q. Each of the terms "we,” “our,” “us,” "Tecogen," or "Company" as used herein refer collectively to Tecogen Inc. and our wholly owned subsidiaries, unless otherwise stated. While we may elect to update forward-looking statements in the future, we specifically disclaim any obligation to do so, even if our estimates change, and you should not rely on those forward-looking statements as representing ours views as of any date subsequent to the date of the filing of this Form 10-Q.

Previous wording

See Note 7. "Aegis Contract and Related Asset Acquisitions "of the Notes to the Consolidated Financial Statements.

Current wording

See Note 7. Aegis Contract and Related Asset Acquisitions of the Notes to the Condensed Consolidated Financial Statements.

Previous 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.

Current wording

In April, 2024, we moved our manufacturing operations and corporate offices from 45 First Avenue, Waltham, Massachusetts to 76 Treble Cove Road, Building 1, North Billerica, Massachusetts. As a result of the relocation, product revenues were negatively impacted during 2024. The factory relocation also necessitated construction activities to install equipment test cells and comply with local regulations. We resumed manufacturing operations during the latter-half of the third quarter of 2024.

Previous wording

In some key markets such as New York City, the regulatory push to eliminate fossil fuels from buildings has impacted cogeneration unit sales. The Company believes that as regulations take into account scope 2 emissions, products like our hybrid chiller that can choose the cleanest fuel source will have a significant advantage in decarbonization efforts.

Current wording

In some key markets such as New York City, the regulatory push to eliminate fossil fuels from buildings has impacted cogeneration unit sales. We believe that as regulations take into account scope 2 emissions and products like our hybrid chiller that can choose the cleanest fuel source will have a significant advantage in decarbonization efforts. The political environment following the 2024 elections in the United States may have a material impact on anti-fossil fuel sentiment and the regulatory environment that may be favorable to our business. We have also diversified our sales activities to reduce our reliance on markets like New York City.

Previous wording

Impact of Utility Power Constraints and Data Center Construction

Current wording

Impact of Utility Power Constraints, Data Center Construction

Previous 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.

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 the 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

Residual Impacts of Covid

Current wording

Residual Impacts of Covid-19 Pandemic

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 gross 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 margins. 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 company in Florida. A patent application based on this concept was issued by the US Patent and Trademark Office in March 2024.

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. In March 2024, the US Patent and Trademark Office granted patent 11,936,327: "Hybrid Power System With Electric Generator and Auxiliary Power Source." We anticipate initial shipment of the hybrid-drive air-cooled chiller in the second quarter of 2025.

Previous wording

In recent years our cogeneration equipment has been used in numerous cannabis cultivation facilities because our systems reduce the facility's need for power, significantly reduce operating costs and the facility GHG footprint, and offer resiliency to grid outages. Our experience providing clean energy solutions to cannabis cultivation facilities has given us significant insight into requirements relating to energy-intensive indoor agriculture applications that we expect to be transferable to CEA facilities for food production.

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. Food crops grown in greenhouses typically have lower yields per square foot than in CEA facilities where yields are increased by supplementing or replacing natural light with grow lights in a climate-controlled environment, requiring significant energy use. In recent years, our cogeneration equipment has been used in numerous cannabis cultivation facilities because our systems reduce the facility's need for power, significantly reduce operating costs and the facility GHG footprint, and offer resiliency to grid outages. Our experience providing clean energy solutions to cannabis cultivation facilities has given us significant insight into requirements relating to energy-intensive indoor agriculture applications that we expect to be transferable to CEA facilities for food production.

Previous wording

We have no operations or customers in Russia, the Ukraine or in the Middle East. The higher energy prices for natural gas as a result of the war may affect the performance of our Energy Production Segment and the cost differential between grid generated energy and natural gas sourced energy using our cogeneration equipment. However, we have also seen higher electricity prices as much of the electricity production in the United States is generated from fossil fuels. If the electricity prices continue to rise, the economic savings generated by our products are likely to increase. In addition to the direct result of changes in natural gas and electricity prices, the war in Ukraine and the conflict in the Middle East may result in higher cybersecurity risks, increased or ongoing supply chain challenges, and volatility related to the trading prices of commodities.

Current wording

We have no operations or customers in Russia, the Ukraine, or in the Middle East. The higher energy prices for natural gas as a result of the wars in Ukraine and the Middle East may affect the performance of our Energy Production Segment and the cost differential between grid generated energy and natural gas sourced energy using our cogeneration equipment. However, we have also seen higher electricity prices as much of the electricity production in the United States is generated from fossil fuels. If the electricity prices continue to rise, the economic savings generated by our products are likely to increase. In addition to the direct result of changes in natural gas and electricity prices, the war in Ukraine and the conflict in the Middle East may result in higher cybersecurity risks, increased or ongoing supply chain challenges, and volatility related to the trading prices of commodities.

Previous 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.

Current wording

On October 9, 2023, we entered into note subscription agreements with each of John N. Hatsopoulos and Earl R. Lewis, III, each a director and shareholder of the Company, pursuant to which Mr. Hatsopoulos agreed to provide financing to us of up to $1,000,000, 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 borrowed $500,000 from Mr. Hatsopoulos and issued him a one-year promissory note with interest accruing at 5.12% per annum. On July 23, 2024, we borrowed an additional $500,000 from Mr. Hatsopoulos, and issued a one-year promissory note with interest accruing at 5.06% per annum. On March 21, 2024, Mr. Hatsopoulos amended the terms of the promissory note, dated October 10, 2023, extending the maturity date by one-year, making the maturity date October 10, 2025. On September 18, 2024, we borrowed $500,000 from Mr. Lewis and issued him a one-year promissory note with interest accruing at 4.57% per annum.

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 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, 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.

Previous wording

Our operations are comprised of three business segments. Our Products segment designs, manufactures and sells industrial and commercial cogeneration systems. Our Services segment provides O&M services for our products under long term service contracts. Our Energy Production segment sells energy in the form of electricity, heat, hot water and cooling to our customers under long-term sales agreements.

Current wording

Our operations are comprised of three business segments. Our Products segment designs, manufactures and sells industrial and commercial cogeneration systems. Our Services segment provides operations and maintenance services ("O&M") for our products under long term service contracts. Our Energy Production segment sells energy in the form of electricity, heat, hot water and cooling to our customers under long-term sales agreements.

Previous 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.

Current wording

Total revenues for the three months ended March 31, 2025 were $7,277,770 compared to $6,186,097 for the same period in 2024, an increase of $1,091,673 or 17.6% year over year.

Previous 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.

Current wording

Products revenues in the three months ended March 31, 2025 were $2,533,809 compared to $1,491,398 for the same period in 2024, an increase of $1,042,411, or 69.9%. The increase in revenue during the three months ended March 31, 2025 is due to an increase in chiller sales of $717,136, an increase in cogeneration sales of $306,140, and an increase in engineered accessory sales of $19,135. 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 September 30, 2024 were $3,850,551, compared to $3,842,600 for the same period in 2023, an increase of $7,951, or 0.2%. The increase in revenue during the three months ended September 30, 2024 is due to an increase in existing service contract revenues of $73,322, or 2.3%, offset partially by a $65,371, or 10.8%, decrease in revenue from the acquired Aegis maintenance contracts. Overall service contract revenues were impacted due to maintenance delays which caused certain sites to cease operating the serviced equipment.

Current wording

Service revenues in the three months ended March 31, 2025 were $4,245,022, compared to $4,014,310 for the same period in 2024, an increase of $230,712, or 5.7%. The increase in revenue during the three months ended March 31, 2025 is due to a $297,182 increase in revenues from existing service contracts, offset by a $66,470 reduction in revenue from the acquired Aegis maintenance contracts.

Previous 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.

Current 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. As a result, our “fleet” of units being serviced by our service department grows with product sales.

Previous 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.

Current wording

Cost of sales in the three months ended March 31, 2025 was $4,056,730 compared to $3,610,440 for the same period in 2024, an increase of $446,290, or 12.4%. The increase in cost of sales is due to increased product shipments and increased service contract maintenance costs due to higher labor and material costs. During the three months ended March 31, 2025 our gross margin increased to 44.3% compared to 41.6% for the same period in 2024, a 2.7% percentage point increase due to higher service contract revenue.

Previous 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.

Current wording

Cost of sales for Products in the three months ended March 31, 2025 was $1,487,750 compared to $1,049,543 for the same period in 2024, an increase of $438,207, or 41.8% due to increased sales of Products and higher material and labor costs. During the three months ended March 31, 2025, our Products gross margin was 41.3% compared to 29.6% for the same period in 2024, a 11.7% percentage point increase. The increase in margin is a function of price increases instituted in 2024.

Previous 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.

Current wording

Cost of sales for Services in the three months ended March 31, 2025 was $2,258,898 compared to $2,092,257 for the same period in 2024, an increase of $166,641, or 8.0%, due to increased labor and material costs. During the three months ended March 31, 2025, our Services gross margin decreased to 46.8% compared to 47.9% in the same period in 2024, a 1.1% percentage point decrease. The decrease in gross margin percent is due to increased labor and material costs incurred in 2025.

Previous 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.

Current wording

Cost of sales for Energy Production in the three months ended March 31, 2025 was $310,082 compared to $468,640 for the same period in 2024, a decrease of $158,558, or 33.8%. During the three months ended March 31, 2025 our Energy Production gross margin increased to 37.9% compared to 31.1% for the same period in 2024, a 6.8% percentage point increase. The increase in the energy production gross margin is due to decreased gas and maintenance costs due to the expiration of our energy production contracts at certain of our Energy Production sites in the three months ended March 31, 2025 compared to the same period in 2024.

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 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.

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 March 31, 2025 were $2,928,135 compared to $2,848,568 for the same period in 2024, an increase of $79,567 or 2.8%, due to a $267,613 increase in payroll, benefits and recruitment costs and a $55,951 increase in travel and vehicles expense, offset partially by a $137,727 decrease in facility costs, due to the transition to our new facility in 2024, a $89,258 reduction in credit losses, due to the recovery of $75,000 recognized in 2025 and a reduction in a litigation reserve of $79,006 due to the settlement of the litigation.

Previous 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.

Current wording

Selling expenses consist of sales staff, commissions, marketing, travel and other selling related expenses. Selling expenses for the three months ended March 31, 2025 were $594,481 compared to $529,669 for the same period in 2024, an increase of $64,812 or 12.2%, due to a $119,499 increase in sales commission, offset partially by a $51,657 reduction in payroll and related benefit costs.

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 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.

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 March 31, 2025 were $292,668 compared to $254,696 for the same period in 2024, an increase of $37,972 or 14.9%, due to a $42,905 increase and payroll and related benefit costs.

Previous 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.

Current wording

The gain on asset dispositions for the three months ended March 31, 2024 of $7,391 represents the excess of insurance proceeds received over the net book value of assets for auto claims filed during the period.

Previous 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.

Current wording

Our loss from operations for the three months ended March 31, 2025 was $594,244 compared to a loss from operations of $1,049,885 for the same period in 2024, a decrease of $455,641. The decrease is due to higher Products and Services segment revenues and increased gross profit, offset partially by a $189,742 increase in operating expenses.

Previous 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.

Current wording

Other expense, net for the three months ended March 31, 2025 was $65,320 compared to other expense net of $15,668 for the same period in 2024, an increase of $49,652, due to a $13,656 increase in interest due to borrowings under our related party note and lease financing and a decrease of $37,498 in unrealized income on marketable securities in the three months ended March 31, 2025.

Previous 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

Current wording

The provision for state income taxes for the three months ended March 31, 2025 and 2024 was $925 and $22,063, respectively, and represents estimated income tax payments, net of refunds, to various states.

Previous 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.

Current wording

The loss attributable to the non-controlling interest was $567 for the three months ended March 31, 2025 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 2024, income attributable to the non-controlling interest was $17,351. The loss in the three months ended March 31, 2025 is attributable to the expiration of an Energy Production contract at one of the Energy Production sites.

Previous wording

Net Income (loss) Attributable to Tecogen

Current wording

Net Income (loss) Attributable to Tecogen Inc.

Previous 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.

Current wording

The net loss attributable to Tecogen for the three months ended March 31, 2025 was a net loss of $659,922 compared to a net loss of $1,104,967 for the same period in 2024, a decrease of $445,045, or 40.3%. The decrease in the net loss is due to increased revenue and gross profit from our Products and Services segments, offset partially by a $189,742 increase in operating expenses.

Previous wording

During the nine months ended September 30, 2024, we incurred a loss from operations of $3,397,075 compared to a loss from operations of $2,598,287 in the same period in 2023. Cash flows from operations increased $903,255 during the nine months ended September 30, 2024 compared to the same period in 2023. As of September 30, 2024, we had cash and cash equivalents of $1,282,238 compared to cash and cash equivalents of $1,351,270 as of December 31, 2023, a decrease of $69,032 or 5.1%, and an accumulated deficit as of September 30, 2024, of $46,453,827. In addition to cash from operations, we have relied upon loans aggregating to $1,500,000 from related parties to help fund operations. The initial loan of $500,000 from Mr. Hatsopoulos is due on October 10, 2025. 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 with a maturity of one year (See “Note 11. Related Party Notes"to the Condensed Consolidated Financial Statements included in this Form 10-Q for the quarter ended September 30, 2024("Form 10-Q" or "Report")and “Liquidity and Capital Resources,” below.) On October 30, 2024, our Board of Directors authorized management to proceed with an equity offering consisting of a private placement to existing shareholders in an amount of up to $2 million, consisting of one share of common stock, with a warrant to purchase one share of common stock, exercisable within two years. There is no assurance we will be able to raise such financing or upon terms that are acceptable to us. (See also “Note 2. Revenue"to the Condensed Consolidated Financial Statements included in this Form 10-Q and"Note 2. Revenue" to our Condensed Consolidated Financial Statements for the year ended December 31, 2023, included in our 2023 Form 10-K.) If our cash flows from operations are insufficient to fund our business we must continue to rely upon financing provided by related parties to help fund our operations and we may need to raise additional capital through a debt or equity financing to meet our need for capital to fund operations and future growth.

Current wording

During the three months ended March 31, 2025, we incurred a loss from operations of $594,244 compared to a net loss from operations of $1,049,885 in the same period in 2024. Cash flows from operations decreased $1,421,619 during the three months ended March 31, 2025 compared to the same period in 2024. As of March 31, 2025, we had cash and cash equivalents of $4,066,793 compared to cash and cash equivalents of $5,405,233 as of December 31, 2024, a decrease of $1,338,440 or 24.8%, and an accumulated deficit as of March 31, 2025, of $48,299,816. In addition to cash from operations, we have relied upon loans from related parties to help fund our operations. See Note 11. Related Party Notes of the Notes to the Condensed Consolidated Financial Statements and "Recent Developments - Related Party Notes,"above.

Previous wording

Consolidated working capital at September 30, 2024 was $6,328,441 compared to $9,822,546 at December 31, 2023, a decrease of $3,494,105, or 35.6%. Included in working capital were cash and cash equivalents of $1,282,238 at September 30, 2024, compared to $1,351,270 at December 31, 2023, a decrease of $69,032, or 5.1%.

Current wording

Consolidated working capital at March 31, 2025 was $5,667,549 compared to $5,329,650 at December 31, 2024, an increase of $337,899, or 6.3%. Included in working capital were cash and cash equivalents of $4,066,793 at March 31, 2025, compared to $5,405,233 at December 31, 2024, a decrease of $1,338,440, or 24.8%.

Previous wording

Cash used in operating activities for the nine months ended September 30, 2024 was $116,995 compared to $1,020,250 of cash used by operating activities for the same period in 2023, a decrease in cash used of $903,255, or 88.5% Our accounts receivable and unbilled revenue balances were $5,448,364 and $1,139,532, respectively, at September 30, 2024 compared to $6,781,484 and $1,258,532 at December 31, 2023, providing $1,303,300 of cash. During the nine months ended September 30, 2023 we collected the majority of the outstanding Employee Retention Credit receivables, providing $667,121 of cash from operations.

Current wording

Cash used by operating activities for the three months ended March 31, 2025 was $1,173,403 compared to cash generated of $248,216 by operating activities for the same period in 2024, a decrease of $1,421,619. Our accounts receivable and unbilled revenue balances were $5,849,511 and $126,738, respectively, at March 31, 2025 compared to $6,026,545 and $398,898 at December 31, 2024, generating $524,194 of cash.

Previous wording

Accounts payable increased to $4,838,395 as of September 30, 2024 from $4,514,415 at December 31, 2023, providing $323,980 in cash flow from operations. The increase in accounts payable was due to extending our supplier payments. Deferred revenue increased to $2,598,302 as of September 30, 2024 compared to $2,016,817 as of December 31, 2023, due to increased customer deposits, providing $581,485 of cash from operations. We expect accounts payable and deferred revenue to fluctuate with routine changes in operations.

Current wording

Accounts payable increased to $4,346,918 as of March 31, 2025 from $4,142,678 at December 31, 2024, providing $204,237 in cash flow from operations. The increase in accounts payable was due to increased material procurement in anticipation of future Products shipments. Deferred revenue decreased to $6,826,058 as of March 31, 2025 compared to $7,867,082 as of December 31, 2024, due to the application of customer deposits against accounts receivables as Products ship, using $1,041,023 of cash from operations. We expect accounts payable and deferred revenue to fluctuate with routine changes in operations.

Previous wording

During the nine months ended September 30, 2024 we used $895,652 in cash from investing activities. We used $838,932 of cash to purchase property, plant and equipment, received $40,255 in proceeds from the disposition of assets, including insurance proceeds and distributed $96,975 to the 49% non-controlling interest holders of American DG New York LLC. Cash used in asset acquisition are for costs incurred during the nine months ended September 30, 2024 for initial improvements required to the North Billerica, Massachusetts leased premises which are estimated to range between $850,000 and $1,000,000.

Current wording

During the three months ended March 31, 2025 we used $132,020 of cash to purchase property, plant and equipment, primarily for improvements required at the North Billerica facility, and distributed $32,889 to the 49% non-controlling interest holders of American DG New York LLC. During the three months ended March 31, 2024 we used $104,952 of cash for improvements required to the North Billerica facility and received $33,013 in proceeds from the disposition of assets, including insurance proceeds.

Previous wording

During the nine months ended September 30, 2024 we received proceeds of $1,000,000 under the related party promissory notes and used $56,385 of cash in payment of finance lease principal. There were no cash flows from financing activities in the three months ended September 30, 2023.

Current wording

During the three months ended March 31, 2025 we used $38,628 of cash in payment of finance lease principal and received $38,500 of proceeds from the exercise of stock options. During the three months ended March 31, 2024 we used $17,112 of cash in payment of finance lease principal.

Previous wording

As of September 30, 2024, our backlog of product and installation projects, excluding service contracts, was $5,023,267, consisting of $3,759,305 of purchase orders received by us and $1,263,962 of projects in which the customer's internal approval process is complete, financial resources have been allocated and the customer has made a firm verbal commitment that the order is in the process of execution. As of September 30, 2023, our backlog of product and installation projects, excluding service contracts, was $7,515,922 consisting of $6,515,323 of purchase orders received by us and $1,000,599 of projects in which the customer's internal approval process is complete, financial resources have been allocated and the customer has made a firm verbal commitment that the order is in the process of execution. Backlog at the beginning of any period is not necessarily indicative of future performance. Our presentation of backlog may differ from other companies in our industry.

Current wording

As of March 31, 2025, our backlog of product and installation projects, excluding service contracts, was $9,522,015, consisting of $9,091,587 of purchase orders received by us and $430,428 of projects in which the customer's internal approval process is complete, financial resources have been allocated and the customer has made a firm verbal commitment that the order is in the process of execution. As of March 31, 2024, our backlog of product and installation projects, excluding service contracts, was $5,554,599 consisting of $5,122,266 of purchase orders received by us and $432,333 of projects in which the customer's internal approval process is complete, financial resources have been allocated and the customer has made a firm verbal commitment that the order is in the process of execution. Backlog at the beginning of any period is not necessarily indicative of future performance. Our presentation of backlog may differ from other companies in our industry.

Previous wording

At September 30, 2024, we had cash and cash equivalents of $1,282,238, a decrease of $69,032 or 5.1% from the cash and cash equivalents balance at December 31, 2023. During the nine months ended September 30, 2024, our revenues were negatively impacted due to the relocation of our manufacturing operations to our new facility in April 2024, which significantly reduced our production capacity, caused certain customer order delays or deferrals for our products; service delays due to customer facility closures, in some cases for extended periods and a reduction in our energy production revenues due to business closures and increased remote work and learning environments.

Current wording

At March 31, 2025, we had cash and cash equivalents of $4,066,793, a decrease of $1,338,440 or 24.8% from the cash and cash equivalents balance at December 31, 2024.