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, 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 our views as of any date subsequent to the date of the filing of this Form 10-Q.

Current wording

The following discussion and analysis and other parts of this report should be read in conjunction with our consolidated financial statements and the accompanying notes thereto included in this report and is qualified in its entirety by the foregoing and by more detailed financial information appearing elsewhere in this report. See “Item 1 - Financial Statements.” In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed in the “Cautionary Note Concerning Forward Looking Statements” above. While we may elect to update forward-looking statements in the future, except as required by law, 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 our views as of any date subsequent to the date of the filing of this report.

Previous wording

On July 21, 2025, we closed on a firm commitment underwitten public offering of 3,985,000 shares of common stock,$0.001 par value per share ("Common Stock"), including an additional 485,000 shares of common stock to cover over-allotments, at a price to the public of $5.00 per share, pursuant to an underwriting agreement, dated July 18, 2025, between us and Roth Capital Partners, LLC, as sole underwriter and manager for the offering. The net proceeds of the offering, after deducting underwriting discounts and commissions and estimated offering expenses were approximately $18,160,750. See "Note 14. Subsequent Events" to the Notes to the Condensed Consolidated Financial Statements.

Current wording

On July 21, 2025, we closed on the sale of an aggregate of 3,985,000 shares of common stock, $0.001 par value per share ("Common Stock"), including an additional 485,000 shares of common stock to cover over-allotments, at a price to the public of $5.00 per share (before deduction of underwriting discounts and commissions), in a firm commitment underwritten public offering pursuant to an underwriting agreement, dated July 18, 2025 ("Underwriting Agreement"), between the Company and Roth Capital Partners, LLC ("Roth"), as sole underwriter and manager for the offering ("Offering"). The net proceeds from the Offering, after deducting underwriting discounts and commissions and offering expenses were approximately $18,105,100. See "Note 1. Description of Business and Basis of Presentation" of the Notes to Condensed Consolidated Statements for additional detail on the net Offering proceeds.

Previous wording

We intend to use the net proceeds of the offering for continued product development, increased sales and marketing activities, sales, marketing, additional human resources, capital expenditures, and other costs and expenses we may incur in connection with the anticipated expansion into the data center market, and for general working capital and corporate purposes. See "Note 14. Subsequent Events" to the Notes to the Condensed Consolidated Financial Statements.

Current wording

We have used and intend to use the net proceeds of the offering for continued product development, increased sales and marketing activities, sales, marketing, additional human resources, capital expenditures, repayment of related party promissory notes and other costs and expenses we may incur in connection with the anticipated expansion into the data center market, and for general working capital and corporate purposes.

Previous wording

On April 30, 2025, we announced that shares our shares of common stock had been approved for listing on the NYSE American LLC ("NYSE American"), stock exchange. On May 6, 2025, our common stock began trading on the NYSE American under our current symbol "TGEN."

Current wording

On April 30, 2025, we announced that our common stock had been approved for listing on the NYSE American LLC ("NYSE American") stock exchange. On May 6, 2025, our common stock began trading on the NYSE American under our current symbol "TGEN."

Previous wording

On February 28, 2025, we entered into a Sales and Marketing Agreement with Vertiv Corporation (“Vertiv”) relating to sales of Tecogen DTx chillers for data center cooling applications (the “Vertiv Agreement”). The Vertiv Agreement has a term of two years and provides that Vertiv will establish a budget for marketing activities and use commercially reasonable efforts to sell our DTx chillers for cooling applications in data centers. The Vertiv Agreement also provides the basis for the negotiation of a definitive supply agreement between us and Vertiv. We have agreed to provide Vertiv with reasonable discounts for purchases of significant volumes of our chillers, and Vertiv has agreed to use commercially reasonable efforts to assist us in securing favorable terms for engineering components and supplies for manufacturing our chillers. Pursuant to the Vertiv Agreement we have granted Vertiv the exclusive right to market and sell our DTx chillers for data center cooling applications outside the United States, and the non-exclusive right to market and sell our DTx chillers within the United States. We have also agreed to grant Vertiv the exclusive right to market and sell our DTx chillers for data center cooling applications in the United States if Vertiv achieves and maintains agreed sales levels of DTx chillers. The foregoing description of the Vertiv Agreement is not complete and is qualified in its entirety by reference to the full text thereof, a copy of which was filed as Exhibit 99.01 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on February 28, 2025.

Current wording

On February 28, 2025, we entered into a Sales and Marketing Agreement with Vertiv Corporation (“Vertiv”) relating to sales of Tecogen DTx chillers for data center cooling applications (“Vertiv Agreement”). The Vertiv Agreement has a term of two years and provides that Vertiv will engage in establishing a budget for marketing activities and use commercially reasonable efforts to sell our DTx chillers for cooling applications in data centers. The Vertiv Agreement also provides the basis for the negotiation of a definitive supply agreement between us and Vertiv. We have agreed to provide Vertiv with reasonable discounts for purchases of significant volumes of our chillers, and Vertiv has agreed to use commercially reasonable efforts to assist us in securing favorable terms for engineering components and supplies for manufacturing our chillers. Pursuant to the Vertiv Agreement we have granted Vertiv the exclusive right to market and sell our DTx chillers for data center cooling applications outside the United States, and the non-exclusive right to market and sell our DTx chillers for such applications within the United States. We have also agreed to grant Vertiv the exclusive right to market and sell our DTx chillers for data center cooling applications in the United States if Vertiv achieves and maintains agreed sales levels of DTx chillers. The foregoing description of the Vertiv Agreement is not complete and is qualified in its entirety by reference to the full text thereof, a copy of which was filed as Exhibit 99.01 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on February 28, 2025.

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 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.

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 shortfalls 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 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.

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 annual service price increases in 2023 through 2025 and will continue to implement price increases to offset material price increases in excess of inflation and have also been making engineering improvements to increase service intervals and 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 rooftop 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." Initial shipments of the hybrid-drive air-cooled chiller were delivered to customers in the second quarter of 2025.

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 rooftop 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 from 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." Initial shipments of the hybrid-drive air-cooled chiller were delivered to customers in the second quarter of 2025.

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 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 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. Energy prices for natural gas may be affected by the wars in Ukraine and the Middle East and 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. We have seen higher electricity prices since much of the electricity production in the United States is generated from fossil fuels. If electricity prices 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

The majority of our vendors are domestic. Although we have some exposure to Chinese and European suppliers, we do not anticipate any increases in tariffs to materially affect our operations.

Current wording

The majority of our vendors are domestic. Although we have some exposure to Chinese and European suppliers, we do not anticipate increases in tariffs to materially affect our operations.

Previous 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.

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, the terms of the promissory note, dated October 10, 2023, was extended 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

On January 14, 2025, we agreed to permit Mr. Lewis to either receive repayment of his note in cash or, at his discretion, convert the balance of the promissory note into shares of our common stock. In the event of such a conversion, the number of shares of we will be required to issue will be determined by dividing the balance due under the promissory note by the average closing price per share of our shares during the thirty-day period prior to the date of conversion.

Current wording

On January 14, 2025, we agreed to permit Mr. Lewis to either receive repayment of his note in cash or, at his discretion, convert the balance of the promissory note into shares of our common stock. In the event of such a conversion, the number of shares we were required to issue is determined by dividing the balance due under the promissory note by the average closing price per share of our shares during the thirty-day period prior to the date of conversion.

Previous wording

On February 18, 2025, we amended the promissory notes with Mr. Hatsopoulos to extend the maturity dates for both promissory notes to July 31, 2026. We also agreed to permit Mr. Hatsopoulos to either receive repayment of his notes in cash, or at his discretion, convert the balance(s) due of one or both of the promissory notes into shares of our common stock. In the event of such a conversion, the number of shares we will be required to issue will be determined by dividing the balance(s) due under the promissory note(s) by the average closing price per share of our shares during the thirty-day period prior to the date of conversion.

Current wording

On February 18, 2025, we amended the promissory notes with Mr. Hatsopoulos to extend the maturity dates for both promissory notes to July 31, 2026. We also agreed to permit Mr. Hatsopoulos to either receive repayment of his notes in cash, or at his discretion, convert the balance(s) due of one or both of the promissory notes into shares of our common stock. In the event of such a conversion, the number of shares we were required to issue is determined by dividing the balance(s) due under the promissory note(s) by the average closing price per share of our shares during the thirty-day period prior to the date of conversion. Both of the promissory notes with Mr. Hatsopoulos were reclassed to long-term liabilities due to the February 18, 2025 amendment.

Previous wording

Total revenues for the three months ended June 30, 2025 were $7,294,820 compared to $4,727,787 for the same period in 2024, an increase of $2,567,033 or 54.3% year over year.

Current wording

Total revenues for the three months ended September 30, 2025 were $7,183,121 compared to $5,630,130 for the same period in 2024, an increase of $1,552,991 or 27.6% year over year.

Previous wording

Products revenues in the six months ended June 30, 2025, were $5,689,132 compared to $1,611,071 for the same period in 2024, an increase of $4,078,061, or 253.1%. The increase in revenue during the six months ended June 30, 2025 is due to an increase in chiller sales of $2,733,029, which included the initial deliveries of our hybrid-drive air-cooled chiller, an increase in cogeneration sales of $1,253,302, and an increase in engineered accessory sales of $91,730. Products revenue in the six months ended June 30, 2024, were impacted due to the relocation of our manufacturing operations in April 2024, which significantly reduced our production capacity. 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, 2025, were $2,983,795 compared to $1,391,016 for the same period in 2024, an increase of $1,592,779, or 114.5%. The increase in revenue during the three months ended September 30, 2025 is due to an increase in chiller sales of $2,196,749, which included deliveries of our hybrid-drive air-cooled chiller, an increase in engineered accessory sales of $175,416, partially offset by a $779,386 decrease in cogeneration sales. Products revenue in the three months ended September 30, 2024, were negatively impacted by the relocation of our manufacturing operations in April 2024, which significantly reduced our production capacity during that period. 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, 2025 were $3,965,168, compared to $4,126,517 for the same period in 2024, a decrease of $161,349, or 3.9%. The decrease in revenue during the three months ended June 30, 2025 is due to a $152,049 decrease in revenues from the acquired Aegis maintenance contracts and a $9,300 decrease in revenues from existing service contracts.

Current wording

Service revenues in the three months ended September 30, 2025 were $3,943,510, compared to $3,850,551 for the same period in 2024, an increase of $92,959, or 2.4%. The increase in revenue during the three months ended September 30, 2025 is due to a $163,180 increase in revenues from existing service contracts, offset partially by a $70,221 decrease in revenues from the acquired Aegis maintenance contracts.

Previous wording

Energy Production revenues in the three months ended June 30, 2025 were $174,329, compared to $481,597 for the same period in 2024, a decrease of $307,268, or 63.8%. The decrease in Energy Production revenue is due to the expiration of several energy production contracts in late 2024 and the temporary shutdown of a few energy production sites for repairs in the three months ended June 30, 2025.

Current wording

Energy Production revenues in the three months ended September 30, 2025 were $255,816, compared to $388,563 for the same period in 2024, a decrease of $132,747, or 34.2%. The decrease in Energy Production revenue is due to the expiration of several energy production contracts in late 2024 and the temporary shutdown of a few energy production sites for repairs in the three months ended September 30, 2025.

Previous wording

Cost of sales in the three months ended June 30, 2025, was $4,832,328 compared to $2,648,632 for the same period in 2024, an increase of $2,183,696, or 82.4%. 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 June 30, 2025, our gross margin decreased to 33.8% compared to 44.0% for the same period in 2024, a 10.2% percentage point decrease due to increased labor and material costs incurred in both Products and Services.

Current wording

Cost of sales in the three months ended September 30, 2025, was $4,999,555 compared to $3,149,216 for the same period in 2024, an increase of $1,850,339, or 58.8%. 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 September 30, 2025, our gross margin decreased to 30.4% compared to 44.1% for the same period in 2024, a 13.7% percentage point decrease due to increased labor and material costs incurred in both Products and Services.

Previous wording

Cost of sales for Products in the three months ended June 30, 2025, was $2,232,155 compared to $171,982 for the same period in 2024, an increase of $2,060,173, or 1,197.9% due to increased sales of Products and higher material and labor costs. Products revenue and cost of sales in the three months ended June 30, 2024, were impacted due to the relocation of our manufacturing operations in April 2024, which significantly reduced our production capacity. During the three months ended June 30, 2025, our Products gross margin was 29.3% compared to (43.7)% for the same period in 2024, a 73.0% percentage point increase. The increase in margin is due to increased revenues in 2025.

Current wording

Cost of sales for Products in the three months ended September 30, 2025, was $1,885,377 compared to $797,209 for the same period in 2024, an increase of $1,088,168, or 136.5% due to increased sales of Products and higher material and labor costs. Products revenue and cost of sales in the three months ended September 30, 2024, were impacted due to the relocation of our manufacturing operations in April 2024, which significantly reduced our production capacity. During the three months ended September 30, 2025, our Products gross margin was 36.8% compared to 42.7% for the same period in 2024, a 5.9% percentage point decrease. The decrease in margin is due to increased labor and material costs in 2025.

Previous wording

Cost of sales for Services in the three months ended June 30, 2025, was $2,469,737 compared to $2,191,815 for the same period in 2024, an increase of $277,922, or 12.7%, due to increased labor and material costs. During the three months ended June 30, 2025, our Services gross margin decreased to 37.7% compared to 46.9% in the same period in 2024, a 9.2% percentage point decrease. The decrease in gross margin percent is due to increased labor and material costs incurred in 2025.

Current wording

Cost of sales for Services in the three months ended September 30, 2025, was $2,946,438 compared to $2,139,042 for the same period in 2024, an increase of $807,396, or 37.7%, due to increased labor and material costs. During the three months ended September 30, 2025, our Services gross margin decreased to 25.3% compared to 44.4% in the same period in 2024, a 19.1% percentage point decrease. The decrease in gross margin percent is due to increased labor and material costs incurred in 2025 to replace engines as we test improvements in our technology to improve engine life and service margins.

Previous wording

Cost of sales for Energy Production in the three months ended June 30, 2025, was $130,436 compared to $284,835 for the same period in 2024, a decrease of $154,399, or 54.2%. During the three months ended June 30, 2025, our Energy Production gross margin decreased to 25.2% compared to 40.9% for the same period in 2024, a 15.7% percentage point decrease. The decrease in the energy production gross margin is due to increased repair costs incurred to restart energy production sites which were shut down for repairs in the three months ended June 30, 2025, compared to the same period in 2024.

Current wording

Cost of sales for Energy Production in the three months ended September 30, 2025, was $167,740 compared to $212,965 for the same period in 2024, a decrease of $45,225, or 21.2%. During the three months ended September 30, 2025, our Energy Production gross margin decreased to 34.4% compared to 45.2% for the same period in 2024, a 10.8% percentage point decrease. The decrease in the energy production gross margin is due to increased repair costs incurred to restart energy production sites which were shut down for repairs in the three months ended September 30, 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 three months ended June 30, 2025 were $3,091,175 compared to $2,897,993 for the same period in 2024, an increase of $193,182 or 6.7%, due to a $174,976 increase in payroll, benefits and recruitment costs, a $66,604 increase in professional fees, a $62,690 increase in depreciation and amortization, and a $44,818 increase in travel and vehicles expense, offset partially by a $61,565 decrease in facility costs, due to the transition to our new facility in 2024, relocation cost of $83,055 incurred in 2024, and a $15,985 decrease in insurance premiums.

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, 2025 were $3,411,762 compared to $2,681,558 for the same period in 2024, an increase of $730,204 or 27.2%, due to a $239,088 increase in payroll, benefits and recruitment costs, a $97,882 increase in travel and vehicles expense, a $89,287 increase in insurance premiums, a $79,648 increase in operating supplies, a $75,161 increase in depreciation and amortization, a $65,581 increase in stock-based compensation expense, a $22,566 increase in franchise taxes, and a $20,229 increase in professional fees.

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, 2025, were $514,735 compared to $405,277 for the same period in 2024, an increase of $109,458 or 27.0%, due to a $115,811 increase in sales commission, offset partially by a $29,197 reduction in payroll and related benefit costs.

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, 2025, were $572,869 compared to $442,812 for the same period in 2024, an increase of $130,057 or 29.4% due to a $69,024 increase in sales commission and a $36,699 increase in marketing and trade show 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 June 30, 2025, were $268,724 compared to $246,489 for the same period in 2024, an increase of $22,235 or 9.0%, due to a $32,665 increase and payroll and related benefit costs, offset partially by a $11,459 decrease in patent related legal fees.

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, 2025, were $297,926 compared to $233,809 for the same period in 2024, an increase of $64,117, or 27.4%, due to a $37,468 increase in payroll and related benefit costs, a $20,630 increase in product certification costs, and a $9,015 increase in stock-based compensation.

Previous wording

The gain on asset dispositions for the three months ended June 30, 2025, was $280 compared to a loss on asset dispositions of $3,363 for the three months ended June 30, 2024.

Current wording

The loss on asset dispositions for the three months ended September 30, 2025, was $1,713 compared to a gain on asset dispositions of $4,042 for the nine months ended September 30, 2024.

Previous wording

Other expense, net for the six months ended June 30, 2025, was $109,851 compared to other expense net of $52,141 for the same period in 2024, an increase of $57,710, due to a $33,940 increase in interest due to borrowings under our related party notes and lease financing and a $23,770 increase in currency exchange losses in the six months ended June 30, 2025.

Current wording

Other expense, net for the three months ended September 30, 2025, was $15,434 compared to other expense net of $22,707 for the same period in 2024, an increase of $7,273 in other expense, due to a $18,110 increase in interest expense due to borrowings under our related party notes and lease financing and an increase of $74,995 in unrealized losses on marketable securities, offset partially by an $92,592 increase in interest income resulting from increased cash on deposit and a $7,786 increase in currency exchange gains in the three months ended September 30, 2025.

Previous wording

The provision for state income taxes for the three months ended June 30, 2025 and 2024 was $16,762 and $37, respectively, and represents estimated income tax payments, net of refunds, to various states.

Current wording

The provision for state income taxes for the three months ended September 30, 2025 was $2,928 and represents estimated income tax payments, net of refunds, to various states. There was no provision for state income taxes for the three months ended September 30, 2024.

Previous wording

The loss attributable to the non-controlling interest was $9,050 for the three months ended June 30, 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 $28,320. The loss in the three months ended June 30, 2025, is attributable to the expiration of an Energy Production contract at one of the Energy Production sites and the temporary shutdown of a site for repairs.

Current wording

The income attributable to the non-controlling interest was $11,881 for the three months ended September 30, 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 $34,478. The decrease in income attributable to the non-controlling interest in the three months ended September 30, 2025, is due to the expiration of an Energy Production contract at one of the Energy Production sites and the temporary shutdown of a site for repairs.

Previous wording

The net loss attributable to Tecogen for the three months ended June 30, 2025, was a net loss of $1,464,105 compared to a net loss of $1,538,796 for the same period in 2024, a decrease of $74,691, or 4.9%. The decrease in the net loss is due to increased revenue and gross profit from our Products and Services segments, offset partially by a $321,232 increase in operating expenses.

Current wording

The net loss attributable to Tecogen for the three months ended September 30, 2025, was a net loss of $2,130,947 compared to a net loss of $930,408 for the same period in 2024, an increase of $1,200,539, or 129.0%. The increase in the net loss is due to lower Services segment gross profit, due to increased labor and material costs and a $930,133 increase in operating expenses. The decrease in gross margin is due to increased labor and material costs incurred in 2025 to replace engines as we test improvements in our technology to improve engine life and service margins.

Previous wording

Total revenues for the six months ended June 30, 2025 were $14,572,590 compared to $10,913,883 for the same period in 2024, an increase of $3,658,707 or 33.5% year over year.

Current wording

Total revenues for the nine months ended September 30, 2025 were $21,755,712 compared to $16,544,014 for the same period in 2024, an increase of $5,211,698 or 31.5% year over year.

Previous wording

Products revenues in the three months ended June 30, 2025, were $3,155,323 compared to $119,673 for the same period in 2024, an increase of $3,035,650, or 2,536.6%. The increase in revenue during the three months ended June 30, 2025 is due to an increase in chiller sales of $2,015,893, which included the initial deliveries of our hybrid-drive air-cooled chiller, an increase in cogeneration sales of $947,162, and an increase in engineered accessory sales of $72,595. Products revenue in the three months ended June 30, 2024, were impacted due to the relocation of our manufacturing operations in April 2024, which significantly reduced our production capacity. 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, 2025, were $8,672,927 compared to $3,002,087 for the same period in 2024, an increase of $5,670,840, or 188.9%. The increase in revenue during the nine months ended September 30, 2025 is due to an increase in chiller sales of $4,929,778, which included the initial deliveries of our hybrid-drive air-cooled chiller, an increase in cogeneration sales of $473,916, and an increase in engineered accessory sales of $267,146. Products revenue in the nine months ended September 30, 2024, were negatively impacted due to the relocation of our manufacturing operations in April 2024, which significantly reduced our production capacity during that period. 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 six months ended June 30, 2025, were $8,210,190, compared to $8,140,827 for the same period in 2024, an increase of $69,363, or 0.9%. The increase in revenue during the six months ended June 30, 2025, is due to a $287,882 increase in revenues from existing service contracts, offset by a $218,519 reduction in revenue from the acquired Aegis maintenance contracts.

Current wording

Service revenues in the nine months ended September 30, 2025, were $12,153,700, compared to $11,991,378 for the same period in 2024, an increase of $162,322, or 1.4%. The increase in revenue during the nine months ended September 30, 2025, is due to a $451,063 increase in revenues from existing service contracts, offset by a $288,741 reduction in revenue from the acquired Aegis maintenance contracts.

Previous wording

Energy Production revenues in the six months ended June 30, 2025, were $673,268, compared to $1,161,985 for the same period in 2024, a decrease of $488,717, or 42.1%. The decrease in Energy Production revenue is due to the expiration of several energy production contracts in late 2024 and the temporary shutdown of a few energy production sites for repairs in the six months ended June 30, 2025.

Current wording

Energy Production revenues in the nine months ended September 30, 2025, were $929,085, compared to $1,550,549 for the same period in 2024, a decrease of $621,464, or 40.1%. The decrease in Energy Production revenue is due to the expiration of several energy production contracts in late 2024 and the temporary shutdown of a few energy production sites for repairs in the nine months ended September 30, 2025.

Previous wording

Cost of sales in the six months ended June 30, 2025, was $8,889,058 compared to $6,259,072 for the same period in 2024, an increase of $2,629,986, or 42.0%. 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 six months ended June 30, 2025, our gross margin decreased to 39.0% compared to 42.7% for the same period in 2024, a 3.7% percentage point decrease due to higher services labor and material costs.

Current wording

Cost of sales in the nine months ended September 30, 2025, was $13,888,613 compared to $9,408,288 for the same period in 2024, an increase of $4,480,325, or 47.6%. 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 nine months ended September 30, 2025, our gross margin decreased to 36.2% compared to 43.1% for the same period in 2024, a 6.9% percentage point decrease due to higher Services labor and material costs.

Previous wording

Cost of sales for Products in the six months ended June 30, 2025, was $3,719,905 compared to $1,221,525 for the same period in 2024, an increase of $2,498,380, or 204.5% due to increased sales of Products and higher labor and material costs. During the six months ended June 30, 2025, our Products gross margin was 34.6% compared to 24.2% for the same period in 2024, a 10.4% percentage point increase. The increase in margin is due to increased revenues in 2025.

Current wording

Cost of sales for Products in the nine months ended September 30, 2025, was $5,605,282 compared to $2,018,734 for the same period in 2024, an increase of $3,586,548, or 177.7% due to increased sales of Products and higher labor and material costs. During the nine months ended September 30, 2025, our Products gross margin was 35.4% compared to 32.8% for the same period in 2024, a 2.6% percentage point increase. The increase in margin is due to increased revenues in 2025.

Previous wording

Cost of sales for Services in the six months ended June 30, 2025 was $4,728,635 compared to $4,284,072 for the same period in 2024, an increase of 444,563, or 10.4%, due to increased labor and material costs. During the six months ended June 30, 2025, our Services gross margin decreased to 42.4% compared to 47.4% in the same period in 2024, a 5.0% percentage point decrease. The decrease in gross margin percent is due to increased labor and material costs incurred in 2025.

Current wording

Cost of sales for Services in the nine months ended September 30, 2025 was $7,675,073 compared to $6,423,114 for the same period in 2024, an increase of $1,251,959, or 19.5%, due to increased labor and material costs. During the nine months ended September 30, 2025, our Services gross margin decreased to 36.8% compared to 46.4% in the same period in 2024, a 9.6% percentage point decrease. The decrease in gross margin percent is due to increased labor and material costs incurred in 2025 to replace engines as we test improvements in our technology to improve engine life and service margins.

Previous wording

Cost of sales for Energy Production in the six months ended June 30, 2025, was $440,518 compared to $753,475 for the same period in 2024, a decrease of $312,957, or 41.5%. During the six months ended June 30, 2025, our Energy Production gross margin decreased to 34.6% compared to 35.2% for the same period in 2024, a 0.6% percentage point decrease. The decrease in the energy production gross margin is due to lower revenue and increased repair costs incurred to restart energy production sites which were shut down for repairs in the six months ended June 30, 2025, compared to the same period in 2024.

Current wording

Cost of sales for Energy Production in the nine months ended September 30, 2025, was $608,258 compared to $966,440 for the same period in 2024, a decrease of $358,182, or 37.1%. During the nine months ended September 30, 2025, our Energy Production gross margin decreased to 34.5% compared to 37.7% for the same period in 2024, a 3.2% percentage point decrease. The decrease in the energy production gross margin is due to lower revenue and increased repair costs incurred to restart energy production sites which were shut down for repairs in the nine months ended September 30, 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 six months ended June 30, 2025, were $6,019,310 compared to $5,746,559 for the same period in 2024, an increase of $272,751 or 4.7%, due to a $442,589 increase in payroll, benefits and recruitment costs, a $106,741 increase in depreciation and amortization, and a $100,770 increase in travel and vehicles expense, offset partially by a $198,292 decrease in facility costs, due to the transition to our new facility in 2024, a $94,063 reduction in credit losses, due to the recovery of $75,000 recognized in 2025 and relocation costs of $83,055 incurred in 2024, a $58,688 reduction in professional fees and a $29,321 decrease in insurance premiums.

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, 2025, were $9,431,073 compared to $8,428,119 for the same period in 2024, an increase of $1,002,954 or 11.9%, due to a $454,413 increase in payroll and related benefits, a $227,264 increase in recruitment costs, a $181,902 increase in depreciation and amortization, a $198,652 increase in travel and vehicle expense, a $150,305 increase in operating supply costs, a $60,058 increase in stock-based compensation expense, and, a $59,965 increase in insurance premiums, offset partially by a $190,636 decrease in facility costs, due to the transition to our new facility in 2024, a $80,700 reduction in credit losses, due to the recovery of $75,000 recognized in 2025, relocation costs of $83,055 incurred in 2024 and a $38,459 reduction in professional fees.

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, 2025, were $1,109,216 compared to $934,946 for the same period in 2024, an increase of $174,270 or 18.6%, due to a $235,310 increase in sales commission, offset partially by a $80,855 reduction in payroll and related benefit costs.

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, 2025, were $1,682,085 compared to $1,377,758 for the same period in 2024, an increase of $304,327 or 22.1%, due to a $304,334 increase in sales commission.

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, 2025, were $561,392 compared to $501,185 for the same period in 2024, an increase of $60,207 or 12.0%, due to a $75,571 increase and payroll and related benefit 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 nine months ended September 30, 2025, were $859,318 compared to $734,994 for the same period in 2024, an increase of $124,324 or 16.9%, due to a $113,039 increase in payroll and related benefit costs and a $20,525 increase in consulting costs.