TECOGEN INC.

Previous wording

You should read the following Management's Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) together with our consolidated financial statements and related notes thereto appearing elsewhere in this report. Some of the information contained in this MD&A or set forth elsewhere in this report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. You should review the “Risk Factors” in this report for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following MD&A. Except as required by federal securities law or other disclosure requirements applicable to us, we assume no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future. Our historical results are not necessarily indicative of the results that may be expected for any period in the future.

Current wording

The following discussion and analysis and other parts of this report should be read in conjunction with our audited 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. In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. You should review the “Risk Factors” in this report for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. 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. Our historical results are not necessarily indicative of the results that may be expected for any period in the future.

Previous wording

During the years ended December 31, 2024 and 2023, our revenues were negatively impacted due to supply chain issues, customer order delays or deferrals; service delays due to customer facility closures and reduced manufacturing capacity due to our plant relocation in 2024.

Current wording

During the years ended December 31, 2025 and 2024, our revenues were negatively impacted due to supply chain issues, customer order delays or deferrals and, service delays due to customer facility closures.

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 is filed as Exhibit 99.01 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on February 28, 2025, and incorporated by reference as Exhibit 10.30 hereto.

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 ("SEC") on February 28, 2025.

Previous wording

On February 1, 2024, Tecogen and Aegis amended the Agreement to add eighteen (18) additional maintenance service agreements (the "Amendment"). The Amendment includes an undertaking by Aegis to use commercially reasonable efforts to support and assist our execution of maintenance service agreements for an additional thirty-six (36) cogeneration units sold to customers by Aegis.

Current wording

On February 1, 2024, Tecogen and Aegis amended the Agreement to add eighteen (18) additional maintenance service agreements (the "First Amendment"). The First Amendment includes an undertaking by Aegis to use commercially reasonable efforts to support and assist our execution of maintenance service agreements for an additional thirty-six (36) cogeneration units sold to customers by Aegis.

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. We believe that as regulations take into account scope 2 emissions (site versus source emissions), 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.

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 has had a material impact on anti-fossil fuel sentiment and the regulatory environment that is more favorable to our business. We have also diversified our sales activities to reduce our reliance on markets like New York City.

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. In March 2024, the US Patent and Trademark Office granted patent 11,936,327: "Hybrid Power System With Electric Generator and Auxiliary Power Source."

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 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 which were shipped in the second and third quarter of 2025. In

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, including the recent military action in Iran. 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.

Previous wording

On October 9, 2023, we entered into note subscription agreements with each of John N. Hatsopoulos and Earl R. Lewis, III, both directors and shareholders of Tecogen, 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, John H. 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, we extended the maturity date the of the promissory note dated October 10, 2023 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 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 be 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 balances 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 reclassified to long-term liabilities due to the February 18, 2025 amendment.

Previous wording

Accounts receivable are stated at the amount management expects to collect from outstanding balances. The allowance for credit losses is estimated based on historical experience, aging of the receivable, the counterparty’s ability to pay, condition of general economy and industry, andcombined with management's estimate of current conditions, reasonable and supportable forecasts of future losses to determine estimated credit losses in our evaluation of outstanding accounts receivable at the end of the year. The allowance for credit losses reflects managements evaluation of our outstanding accounts receivable at the end of the year and our best estimate of probable losses inherent in the accounts receivable balance. Accounts receivable deemed uncollectible are charged against the allowance for credit losses when identified.

Current wording

Accounts receivable are stated at the amount management expects to collect from outstanding balances. The allowance for credit losses is estimated based on historical experience, aging of the receivable, the counterparty’s ability to pay, condition of the general economy and industry, andcombined with management's estimate of current conditions, reasonable and supportable forecasts of future losses to determine estimated credit losses in our evaluation of outstanding accounts receivable at the end of the year. The allowance for credit losses reflects managements evaluation of our outstanding accounts receivable at the end of the year and our best estimate of probable losses inherent in the accounts receivable balance. Accounts receivable deemed uncollectible are charged against the allowance for credit losses when identified.

Previous wording

Property, plant and equipment are recorded at cost. Depreciation is provided using the straight-line method over the estimated useful life of the asset, which range from P3Y to P15Y years. Leasehold improvements are amortized using the straight-line method over the lesser of the estimated useful lives of the assets or the term of the related leases. Expenditures for maintenance and repairs are expensed, while renewals and betterments that materially extend the life of an asset are capitalized.

Current wording

Property, plant and equipment are recorded at cost. Depreciation is provided using the straight-line method over the estimated useful life of the asset, which range from three to fifteen years. Leasehold improvements are amortized using the straight-line method over the lesser of the estimated useful lives of the assets or the term of the related leases. Expenditures for maintenance and repairs are expensed, while renewals and betterments that materially extend the life of an asset are capitalized.

Previous wording

At a minimum, we perform a quantitative goodwill impairment test in the fourth quarter of the year. In the fourth quarter of 2024, we performed a quantitative goodwill impairment test for our energy production reporting unit acquired in 2017. We used a discounted cash flow approach to develop the estimated fair value of that reporting unit. Management judgment is required in developing the assumptions for the discounted cash flow model. An impairment would be recorded if the carrying amount of a reporting unit including goodwill exceeded the estimated fair value. Based on the aforementioned analysis, the carrying amount of that reporting unit, including goodwill, exceeded the estimated fair value and resulted in an impairment at December 31, 2024. See Note 6. "Sale of Energy Producing Assets and Goodwill Impairment".

Current wording

At a minimum, we perform a quantitative goodwill impairment test in the fourth quarter of the year. In the fourth quarter of 2025, we performed a quantitative goodwill impairment test for our energy production reporting unit acquired in 2017. We used a discounted cash flow approach to develop the estimated fair value of that reporting unit. Management judgment is required in developing the assumptions for the discounted cash flow model. An impairment would be recorded if the carrying amount of a reporting unit including goodwill exceeded the estimated fair value. Based on the aforementioned analysis, the carrying amount of that reporting unit, including goodwill, exceeded the estimated fair value and resulted in an impairment at December 31, 2025. See Note 6. "Sale of Energy Producing Assets".

Previous wording

The impairment analysis recognizes the shortening of remaining contract terms with customers without replacement and without further growth, as well as less than expected cost savings, offset by profitability from our initiatives to optimize the long-term profitability of our various site operations and a price peak of the our common stock on the date of the business combination to which the goodwill relates (see also Note 6."Sale of Energy Producing Assets and Goodwill Impairment").

Current wording

The impairment analysis recognizes the shortening of remaining contract terms with customers without replacement and without further growth, as well as less than expected cost savings, offset by profitability from our initiatives to optimize the long-term profitability of our various site operations and a price peak of the our common stock on the date of the business combination to which the goodwill relates (see also Note 6."Sale of Energy Producing Assets").

Previous wording

In the fourth quarter of 2024, we performed a quantitative goodwill impairment test for the Aegis maintenance service contracts reporting unit acquired in 2023 and 2024. We used a discounted cash flow approach to develop the estimated fair value of that reporting unit. Management judgment is required in developing the assumptions for the discounted cash flow model. An impairment would be recorded if the carrying amount of a reporting unit including goodwill exceeded the estimated fair value. Based on the aforementioned analysis, the estimated fair value of that reporting unit, including goodwill, exceeded the carrying value and resulting in no impairment at December 31, 2024. See Note 5. "Aegis Contract and Related Asset Acquisition".

Current wording

In the fourth quarter of 2025, we performed a quantitative goodwill impairment test for the Aegis maintenance service contracts reporting unit acquired in 2023 and 2024. We used a discounted cash flow approach to develop the estimated fair value of that reporting unit. Management judgment is required in developing the assumptions for the discounted cash flow model. An impairment would be recorded if the carrying amount of a reporting unit including goodwill exceeded the estimated fair value. Based on the aforementioned analysis, the estimated fair value of that reporting unit, including goodwill, exceeded the carrying value and resulted in no impairment at December 31, 2025. See Note 5. "Aegis Contract and Related Asset Acquisition".

Previous wording

Product revenues in 2024 were $4,443,996 compared to $8,859,946 in 2023, a decrease of $4,415,950 or 49.8%. The decrease in Products revenue in 2024 compared to 2023 is due to a $3,656,604 decrease in chiller sales, $675,609 decrease in engineered accessories sales and a $83,737 decrease in cogeneration sales, due to decreased unit volume. Our product mix, as well as product revenue, can vary significantly from period to period as our products are high dollar, low volume sales in which revenue is recognized upon shipment. The relocation to our new facility in April 2024 constrained our manufacturing capacity, which impacted product revenues during the second and third quarters of 2024.

Current wording

Product revenues in 2025 were $9,133,450 compared to $4,443,996 in 2024, an increase of $4,689,454 or 105.5%. The increase in Products revenue in 2025 compared to 2024 is due to a $4,010,809 increase in chiller sales, $282,993 increase in engineered accessories sales and a $395,652 increase in cogeneration sales, due to increased unit volume. Our product mix, as well as product revenue, can vary significantly from period to period as our products are high dollar, low volume sales in which revenue is recognized upon shipment. The relocation to our new facility in April 2024 constrained our manufacturing capacity, which impacted product revenues during the second and third quarters of 2024.

Previous wording

Revenues derived from our service centers in 2024 were $16,074,870 compared to $14,523,054 for the same period in 2023, an increase of $1,551,816 or 10.7%. The increase in Services revenue in 2024 is due to an increase in revenue from the acquired Aegis Maintenance contracts of $786,160, or 41.7%, and a $765,656, or 6.1%, increase in service contract revenues from existing contracts.

Current wording

Revenues derived from our service centers in 2025 were $16,616,523 compared to $16,074,870 for the same period in 2024, an increase of $541,653 or 3.4%. The increase in Services revenue in 2025 is due to a $815,522, or 6.1% increase in service contract revenues from existing contracts, offset partially by a $273,869, or 10.3%, decrease in revenue from the acquired Aegis Maintenance contracts.

Previous wording

Cost of sales in 2024 was $12,749,363 compared to $14,937,801 in 2023, a decrease of $2,188,438 or 14.7%. The decrease in cost of sales is due to decreased Products revenue volume. Our overall gross margin was 43.6% in 2024 compared to 40.6% in 2023, an increase of 3.0%.

Current wording

Cost of sales for the year ended December 31, 2025 was $17,249,202 compared to $12,749,363 in 2024, an increase of $4,499,839 or 35.3%. The increase in cost of sales is due to increased Products revenue volume and increased Services costs. Our overall gross margin was 36.3% in 2025 compared to 43.6% in 2024, a decrease of 7.3%. The decrease in gross margin for the year ended December 31, 2025 is due to the significant increase in our Services segment material and labor costs.

Previous wording

Costs of sales for products in 2024 was $3,014,655 compared to $5,923,096 in 2023, a decrease of $2,908,441, or 49.1%, due to decreased product revenue volume and a decrease in the provision for obsolete inventory in 2024. Our products gross margin was 32.2% in 2024 compared to 33.1% in 2023, a decrease of 0.9%, due to decreased engineering accessories sales in 2024, which are higher margin sales.

Current wording

Costs of sales for products the year ended December 31, 2025 was $6,097,501 compared to $3,014,655 in 2024, an increase of $3,082,846, or 102.3%, due to increased chillers Products revenue and increases in material and labor costs in 2025. Our products gross margin was 33.2% in 2025 compared to 32.2% in 2024, an increase of 1.0%, due to increased engineering accessories sales in 2025, which are higher margin sales.

Previous wording

Cost of sales for services in 2024 was $8,432,876 compared to $7,909,202 in 2023, an increase of $523,674, or 6.6%, due to increased labor and material costs as a consequence of acquiring the Aegis customer maintenance contracts and increased material usage at existing sites, offset by a decrease in the provision for obsolete inventory in 2024. Our services gross margin was 47.5% in 2024 compared to 45.5% in 2023, an increase of 2.0%, due to decreased labor and material costs incurred to replace engines at certain sites and a decrease in the provision for obsolete inventory.

Current wording

Cost of sales for services for the year ended December 31, 2025 was $10,202,774 compared to $8,432,876 in 2024, an increase of $1,769,898, or 21.0%, due to increased labor and material costs as a consequence of acquiring the Aegis customer maintenance contracts and increased material usage at existing sites. Our services gross margin was 38.6% in 2025 compared to 47.5% in 2024, a decrease of 8.9%, due to increased labor and material costs incurred to replace engines at certain sites as we test improvements to our engine technology to improve engine performance, extend engine life and improved service margins.

Previous wording

Research and development expenses increased in the year ended December 31, 2024 to $961,837 compared to $840,011, an increase of $121,826 due to a $151,193 increase in depreciation and amortization, offset by a $56,924 decrease in payroll costs and related benefits.

Current wording

Research and development expenses increased in the year ended December 31, 2025 to $1,166,744 compared to $961,837, an increase of $204,907 due to a $224,736 increase in payroll costs and related benefits, partially offset by a $14,800 decrease in outside consulting fees.

Previous wording

Gain on the sale of assets was $12,181 in 2024 compared to a gain on the sale of assets of $36,207 in 2023.

Current wording

Loss on the sale of assets was $183 in 2025 compared to a gain on the sale of assets of $12,181 in 2024.

Previous wording

During the year ended December 31, 2024 we recognized goodwill impairment of $217,295 on our Energy Production sites compared to $0 in 2023.

Current wording

During the year ended December 31, 2025 we recognized goodwill and long-lived impairment of $1,113,129 on our Energy Production sites compared to $217,295 in 2024.

Previous wording

Loss from operations for the year ended December 31, 2024 was $4,534,087 compared to a loss of $4,413,612 in 2023, an increase in the loss from operations of $120,475. The increase in the net loss from operations is due to a $331,445 decrease in gross margin due to lower Products revenue and goodwill impairment of $217,295, offset partially by a $428,265 decrease in operating expenses.

Current wording

Loss from operations for the year ended December 31, 2025 was $8,244,830 compared to a loss of $4,534,087 in 2024, an increase in the loss from operations of $3,710,743, or 81.8%. The increase in the net loss from operations is due to an increase in operating expenses of $2,756,880, an increase in the goodwill and long-lived asset impairment of $895,834 and the decrease in Services segment gross margin.

Previous wording

Other expense, net, for the year ended December 31, 2024 was $117,118 compared to $77,053 for the same period in 2023, an increase of $40,065, due to a $74,254 increase in interest expense on borrowings under our related party notes and lease financing, partially offet by a decrease in interest income and other expense of $26,814 compared to $61,003 in 2023, due to a $35,759 decrease in currency exchange losses for the year ended December 31, 2024.

Current wording

Other income, net, for the year ended December 31, 2025 was $16,102 compared to other expense, net of $117,118 for the same period in 2024, an increase in income of $133,220, due to a $200,288 increase in interest income resulting from increased cash on deposit in interest-bearing accounts, offset by a $59,985 increase in interest expense on borrowings under our related party notes and lease financing and a $21,763 increase in currency exchange losses.

Previous wording

The provision for state income taxes for the years ended December 31, 2024 and 2023 was $22,565 and $32,491, respectively, and represents estimated income tax payments, net of refunds, to various states.

Current wording

The provision for state income taxes for the years ended December 31, 2025 and 2024 were $20,615 and $22,565, respectively, and represents estimated income tax payments, net of refunds, to various states.

Previous wording

We have income and losses attributable to the non-controlling interest we have in American DG Energy's 51% owned subsidiary, ADGNY, LLC. The non-controlling interest share of ADGNY profits and losses was income of $86,468 for the year ended December 31, 2024 compared to income of $74,952 in 2023.

Current wording

We have income and losses attributable to the non-controlling interest we have in American DG Energy's 51% owned subsidiary, ADGNY, LLC. The non-controlling interest share of ADGNY profits and losses was a loss of $588 for the year ended December 31, 2025 compared to income of $86,468 in 2024. The decrease in the income attributable to the non-controlling interest in the year ended December 31, 2025, is due to the expiration of a contract at one of the Energy Production sites and the temporary shutdown of a site for repairs in 2025.

Previous wording

Net loss for the year ended December 31, 2024 was $4,760,238 compared to a net loss of $4,598,108 for 2023, an increase of $162,130. The increase in the net loss is due to a $331,445 decrease in gross margin due to lower Products revenue and goodwill impairment of $217,295, offset partially by a $428,265 decrease in operating expenses.

Current wording

Net loss for the year ended December 31, 2025 was $8,248,755 compared to a net loss of $4,760,238 for 2024, an increase of $3,488,517, or 73.3%. The increase in the net loss is due to an increase in operating expenses of $2,756,880, an increase in the goodwill and long-lived asset impairment of $895,834 and the decrease in Services segment gross margin, partially offset by increased interest income.

Previous wording

Net loss per share for the year ended December 31, 2024 was a loss of $0.19 compared to a loss of $0.19 per share for the same period in 2023. The basic and diluted weighted average shares outstanding for the year ended December 31, 2024 were 24,861,190 and 24,861,190, respectively. For the year ended December 31, 2023, basic and diluted shares were 24,850,261 and 24,850,261, respectively.

Current wording

Net loss per share for the year ended December 31, 2025 was a loss of $0.30 compared to a loss of $0.19 per share for the same period in 2024. The basic and diluted weighted average shares outstanding for the year ended December 31, 2025 were 27,233,143 and 27,233,143, respectively. For the year ended December 31, 2024, basic and diluted shares weighted average shares outstanding were 24,861,190 and 24,861,190, respectively.

Previous wording

For the year ended December 31, 2024 we generated $4,060,547 in cash from operations compared to $817,810 in cash used from operations in 2023, an increase of $4,878,357 in net cash generated by operating activities. Our accounts receivable balance decreased by $608,929 at December 31, 2024 compared to December 31, 2023 and our unbilled revenues decreased by $859,634 at December 31, 2024 compared to December 31, 2023. Our inventory decreased by $848,884 as of December 31, 2024 compared to December 31, 2023 and other non-current assets increased by $510,723 as of December 31, 2024 as compared to December 31, 2023.

Current wording

For the year ended December 31, 2025 we used $9,911,674 in cash from operations compared to $4,060,547 in cash generated from operations in 2024, a decrease of $13,972,221 in net cash generated by operating activities. Our accounts receivable balance decreased by $1,682,596 at December 31, 2025 compared to December 31, 2024 and our unbilled revenues decreased by $260,879 at December 31, 2025 compared to December 31, 2024. Our inventory increased by $1,426,182 as of December 31, 2025 compared to December 31, 2024 and other non-current assets decreased by $464,576 as of December 31, 2025 as compared to December 31, 2024.

Previous wording

Accounts payable decreased by $371,736 from December 31, 2023 to December 31, 2024 due to our increased liquidity in in the fourth quarter of 2024. Accrued expenses increased by $386,257 as of December 31, 2024 compared to December 31, 2023 due to timing of operating expenses. Deferred revenues increased by $5,850,265 as of December 31, 2024 as compared to December 31, 2023, due to advance customer deposits collected in 2024 for Products that will ship in 2025.

Current wording

Accounts payable decreased by $761,131 from December 31, 2024 to December 31, 2025 due to our increased liquidity in the fourth quarter of 2025. Accrued expenses increased by $76,736 as of December 31, 2025 compared to December 31, 2024 due to timing of operating expenses. Deferred revenues decreased by $3,070,219 as of December 31, 2025 as compared to December 31, 2024, due to application of advance customer deposits collected in 2024 for Products shipments in 2025.

Previous wording

For the year ended December 31, 2023 we used $244,889 in cash from investing activities. We used $170,000 of cash to acquire certain assets as part of the Aegis acquisition, used $46,851 of cash for purchases of property and equipment, and distributed $62,693 to the 49% non-controlling interest holders of American DG New York LLC and received $34,655 in proceeds from the disposition of assets, including insurance proceeds.

Current wording

For the year ended December 31, 2025 we used $464,130, in cash from investing activities. We used $400,781 of cash for purchases of property and equipment, and distributed $67,639 to the 49% non-controlling interest holders of American DG New York LLC and received $4,290 in proceeds from the disposition of assets, including insurance proceeds. Cash used in asset acquisition are mainly for costs incurred in 2025 for initial improvements required to the North Billerica, Massachusetts leased premises which are estimated to range between $1,150,000 and $1,200,000.

Previous wording

For the year ended December 31, 2024 we used $1,014,737, in cash from investing activities. We used $969,163 of cash for purchases of property and equipment, and distributed $96,974 to the 49% non-controlling interest holders of American DG New York LLC and received $51,400 in proceeds from the disposition of assets, including insurance proceeds. Cash used in asset acquisition are mainly for costs incurred in 2024 for initial improvements required to the North Billerica, Massachusetts leased premises which are estimated to range between $900,000 and $1,000,000.

Current wording

For the year ended December 31, 2024 we used $1,014,737 in cash from investing activities. We used $969,163 of cash for purchases of property and equipment, and distributed $96,974 to the 49% non-controlling interest holders of American DG New York LLC and received $51,400 in proceeds from the disposition of assets, including insurance proceeds. Cash used in asset acquisition are mainly for costs incurred in 2024 for initial improvements required to the North Billerica, Massachusetts leased premises.

Previous wording

Cash flows from financing activities for the year ended December 31, 2024 were $1,008,153, consisting of borrowings under our related party notes with John N. Hatsopoulos and Earl R. Lewis of $1,000,000.00 (see Note 11."Related Party Notes"), $71,000 of proceeds from the exercise of stock options and used $62,847 of cash in payment of finance lease principal. Cash flows from financing activities for the year ended December 31, 2023 were $500,000 borrowed under our related party note with John N. Hatsopoulos.

Current wording

During the year ended December 31, 2024, we received proceeds of $1,000,000 under the related party promissory notes and used $62,847 of cash in payment of finance lease principal. and received $71,000 of proceeds from the exercise of stock options (see Note 11."Related Party Notes").

Previous wording

At December 31, 2024 and 2023, we had cash and cash equivalents of $5,405,233 and $1,351,270, an increase of $4,053,963 or 300.0%. During the year ended December 31, 2024, our revenues were negatively impacted due to customer order delays or deferrals; the relocation to our new facility in April 2024 which impacted product revenues during the second and third quarters of 2024; 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 December 31, 2025 and 2024, we had cash and cash equivalents of $12,430,287 and $5,405,233, respectively, an increase of $7,025,054 or 130.0%. During the year ended December 31, 2025, our revenues were negatively impacted due to customer order delays or deferrals; the relocation to our new facility in April 2024 which impacted product revenues during the second and third quarters of 2024; 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.

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 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 at his discretion an additional $500,000. On October 10, 2023, we borrowed $500,000 from Mr. Hatsopoulos and issued 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 executed a one-year promissory note with interest accruing at 5.06% per annum. On March 21, 2024, John H. 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 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, we extended the maturity date the of the promissory note dated October 10, 2023 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 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 be issued 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 balances of one or both of the promissory 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 common stock 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 reclassified to long-term liabilities due to the February 18, 2025 amendment.

Previous wording

We are obligated under operating leases for our North Billerica, Massachusetts headquarters through December 31, 2028 and our eleven leased service centers through January 2031. Future minimum lease commitments under non-cancellable operating leases as of December 31, 2024, were $1,772,171. See Note 14."Leases".

Current wording

We are obligated under operating leases for our North Billerica, Massachusetts headquarters through February 28, 2031 and our eleven leased service centers through January 2031. Future minimum lease commitments under non-cancellable operating leases as of December 31, 2025, were $1,543,129.

Previous wording

We are also obligated under finance leases for ten vehicles through October 31, 2029. Future minimum finance lease payments as of December 31, 2024, were $410,881.

Current wording

We are also obligated under finance leases for thirty-five vehicles through October 31, 2029. Future minimum finance lease payments as of December 31, 2025, were $1,272,550.