TECOGEN INC.

Previous 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, between the Company and Roth Capital Partners, LLC, 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.

Current wording

On July 21, 2025, we closed on the sale of an aggregate of 3,985,000 shares of our common stock, $.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, between the Company and Roth Capital Partners, LLC, 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.

Previous wording

Impact of Utility Power Constraints, Data Center Construction

Current wording

Impact of Utility Power Constraints and Data Center Construction

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 and products like our hybrid chiller that can choose the cleanest fuel source will have a significant advantage in decarbonization efforts. The political environment following the 2024 elections in the United States may have a material impact on anti-fossil fuel sentiment and the regulatory environment that may be favorable to our business. We have also diversified our sales activities to reduce our reliance on markets like New York City.

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

We have no operations or customers in Russia, the Ukraine, or in the Middle East. However, disruptions in global energy supplies and volatility in global energy prices may continue to result in higher energy prices for natural gas as a result of these conflicts 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 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, including the recent military actions in Iran, may result in higher cybersecurity risks, increased or ongoing supply chain challenges, and volatility related to the trading prices of commodities. We are continuing to evaluate the macroeconomic environment and our ability to mitigate the impact on our business, consolidated results of operations, and financial condition.

Current wording

We have no operations or customers in Russia, the Ukraine, or in the Middle East, including Iran. The higher energy prices for natural gas as a result of these conflicts 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 conflicts in the Middle East, including the conflict in Iran, 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 any increases in tariffs to materially affect our operations. On July 23, 2026, President Trump imposed a broad tariff on countries around the world and the European Union, replacing expiring 10.0% global tariffs with new tariffs of 10-12.5% on imported commodities. We do not anticipate that these tariff increases will materially affect our operations.

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 (“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.

Current wording

On February 28, 2025, to begin marketing our product solutions to data centers, we signed a global partnership agreement with Vertiv Corporation(“Vertiv”)for the marketing and sale of our products for data center cooling applications in the U.S. and abroad. We agreed to provide Vertiv with reasonable discounts for purchases of significant volumes of our chillers, and Vertiv 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 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. 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.Vertiv is a global provider of critical digital infrastructure and continuity solutions, including for data and communications centers.

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 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 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 (which can be blended as desired). In some cases, if data centers can shed load on demand from electric utilities, they are likely to reduce the time it takes to get power from electric utilities. See Flexible Data Centers: A Faster, More Affordable Path to Power December 2025.

Previous wording

Total revenues for the three months ended March 31, 2026 were $6,335,769 compared to $7,277,770 for the same period in 2025, a decrease of $942,001 or 12.9% year over year.

Current wording

Total revenues for the three months ended June 30, 2026 were $5,746,136 compared to $7,294,820 for the same period in 2025, a decrease of $1,548,684 or 21.2% year over year.

Previous wording

Service revenues in the three months ended March 31, 2026 were $4,636,394, compared to $4,245,022 for the same period in 2025, an increase of $391,372, or 9.2%. The increase in revenue during the three months ended March 31, 2026 is due to a $412,001 increase in revenues from existing service contracts, offset by a $20,629 reduction in revenue from the acquired Aegis maintenance contracts.

Current wording

Service revenues in the three months ended June 30, 2026 were $4,375,253, compared to $3,965,168 for the same period in 2025, an increase of $410,085, or 10.3%. The increase in revenue during the three months ended June 30, 2026 is due to a $247,989 increase in revenues from the acquired Aegis maintenance contracts and a $162,096 increase in revenues from existing service contracts.

Previous wording

Energy Production revenues in the three months ended March 31, 2026 were $524,075, compared to $498,939 for the same period in 2025, an increase of $25,136, or 5.0%. The increase in Energy Production revenue is due to an increase in run hours at certain sites in the three months ended March 31, 2026.

Current wording

Energy Production revenues in the three months ended June 30, 2026 were $236,111, compared to $174,329 for the same period in 2025, an increase of $61,782, or 35.4%. The increase in Energy Production revenue is due to improved site operations in the three months ended June 30, 2026.

Previous wording

Cost of sales in the three months ended March 31, 2026 was $3,746,107 compared to $4,056,730 for the same period in 2025, a decrease of $310,623, or 7.7%. The decrease in cost of sales is due to decreased Products shipments, offset by increased service contract maintenance costs due to higher labor and material costs three months ended March 31, 2026. During the three months ended March 31, 2026 our gross margin decreased to 40.9% compared to 44.3% for the same period in 2025, a 3.4% percentage point decrease due to higher service contract costs.

Current wording

Cost of sales in the three months ended June 30, 2026, was $3,572,234 compared to $4,832,328 for the same period in 2025, a decrease of $1,260,094, or 26.1%. The decrease in cost of sales is due to decreased product shipments, partially offset by increased service contract maintenance costs due to higher labor and material costs. During the three months ended June 30, 2026, our gross margin increased to 37.8% compared to 33.8% for the same period in 2025, a 4.0% percentage point increase due to higher Products margins.

Previous wording

Cost of sales for Products in the three months ended March 31, 2026 was $647,348 compared to $1,487,750 for the same period in 2025, a decrease of $840,402, or 56.5% due to decreased sales of Products. During the three months ended March 31, 2026, our Products gross margin was 44.9% compared to 41.3% for the same period in 2025, a 3.6% percentage point increase. The increase in margin is a function of price increases instituted in 2026.

Current wording

Cost of sales for Products in the three months ended June 30, 2026, was $584,755 compared to $2,232,155 for the same period in 2025, a decrease of $1,647,400, or 73.8% due to decreased sales of Products. During the three months ended June 30, 2026, our Products gross margin was 48.5% compared to 29.3% for the same period in 2025, a 19.2% percentage point increase. The increase in gross margin percentage is due to price increases instituted in 2026.

Previous wording

Cost of sales for Services in the three months ended March 31, 2026 was $2,700,169 compared to $2,258,898 for the same period in 2025, an increase of $441,271, or 19.5%, due to increased labor and material costs. During the three months ended March 31, 2026, our Services gross margin decreased to 41.8% compared to 46.8% in the same period in 2025, a 5.0% percentage point decrease. The decrease in gross margin percent is due to increased labor and material costs incurred in 2026.

Current wording

Cost of sales for Services in the three months ended June 30, 2026, was $2,772,569 compared to $2,469,737 for the same period in 2025, an increase of $302,832, or 12.3%, due to increased labor and material costs. During the three months ended June 30, 2026, our Services gross margin decreased to 36.6% compared to 37.7% in the same period in 2025, a 1.1% percentage point decrease. The decrease in gross margin percent is due to increased labor and material costs incurred in 2026.

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 March 31, 2026 were $363,823 compared to $292,668 for the same period in 2025, an increase of $71,155 or 24.3%, due to a $26,230 increase in payroll costs and other spending increases incurred to continue to improve and refine the hybrid-drive air-cooled chiller.

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 June 30, 2026, were $320,224 compared to $268,724 for the same period in 2025, an increase of $51,500 or 19.2%, due to a $43,223 increase in payroll costs and other spending increases incurred to continue to improve and refine the hybrid-drive air-cooled chiller.

Previous wording

The loss on asset dispositions for the three months ended March 31, 2026 was $2,344.

Current wording

The loss on asset dispositions for the three months ended June 30, 2026, was $2,950 compared to a gain on asset dispositions of $280 for the three months ended June 30, 2025.

Previous wording

Our loss from operations for the three months ended March 31, 2026 was $2,135,909 compared to a loss from operations of $594,244 for the same period in 2025, an increase of $1,541,665. The increase in the loss from operations is due to lower Products segment revenues and gross profit, lower Services segment gross profit and by a $910,287 increase in operating expenses.

Current wording

Our loss from operations for the three months ended June 30, 2026, was $2,150,162 compared to a loss from operations of $1,411,862 for the same period in 2025, an increase of $738,300, or 52.3%. The increase in the loss from operations is due to lower Products segment revenues and gross profit and a $449,710 increase in operating expenses.

Previous wording

The provision for state income taxes for the three months ended March 31, 2026 and 2025 was $10,900 and $925, 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 June 30, 2026 and 2025 was $361 and $16,762, respectively, and represents estimated income tax payments, net of refunds, to various states.

Previous wording

The income attributable to the non-controlling interest was $1,918 for the three months ended March 31, 2026 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 2025, loss attributable to the non-controlling interest was $567. The loss in the three months ended March 31, 2025 is attributable to the expiration of an Energy Production contract at one of the Energy Production sites.

Current wording

The income attributable to the noncontrolling interest was $5,185 for the three months ended June 30, 2026, which represents the noncontrolling interest portion of American DG Energy's 51% owned subsidiary, American DG New York, LLC. For the same period in 2025, the loss attributable to the noncontrolling interest was $9,050. 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.

Previous wording

The net loss attributable to Tecogen for the three months ended March 31, 2026 was a net loss of $2,120,573 compared to a net loss of $659,922 for the same period in 2025, an increase of $1,460,651, or 221.3%. The increase in the loss is due to lower Products segment revenues and gross profit, lower Services segment gross profit and by a $910,287 increase in operating expenses.

Current wording

The net loss attributable to Tecogen for the three months ended June 30, 2026, was a net loss of $2,148,603 compared to a net loss of $1,464,105 for the same period in 2025, an increase of $684,498, or 46.8%. The increase in the net loss is due to lower Products segment revenues and gross profit and a $449,710 increase in operating expenses.

Previous wording

Products revenues in the three months ended March 31, 2026 were $1,175,300 compared to $2,533,809 for the same period in 2025, a decrease of $1,358,509, or 53.6%. The decrease in revenue during the three months ended March 31, 2026 is due to a decrease in cogeneration sales of $724,128, a decrease in chiller sales of $593,608, and a decrease in engineered accessory sales of $40,773. Cogeneration sales in the three months ended March 31, 2025 were higher due to the shipment of several cogeneration systems to customers seeking tax credits under the Inflation Reduction Act of 2022. 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 six months ended June 30, 2026, were $2,310,072 compared to $5,689,132 for the same period in 2025, a decrease of $3,379,060, or 59.4%. The decrease in revenue during the six months ended June 30, 2026 is due to a decrease in chiller sales of $1,925,262 and a decrease in cogeneration sales of $1,541,243, partially offset by an increase in engineered accessory sales of $87,445. Cogeneration sales in the six months ended June 30, 2025 were higher due to the shipment of several cogeneration systems to customers seeking tax credits under the Inflation Reduction Act of 2022. 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

General and administrative expenses consist of executive staff, accounting and legal expenses, office space, general insurance and other administrative expenses. General and administrative expenses for the three months ended March 31, 2026 were $3,718,472 compared to $2,928,135 for the same period in 2025, an increase of $790,337 or 27.0%, due to a $170,008 increase in payroll and benefits, a $147,065 increase in operating supply costs, a $102,409 increase in credit losses due to the $75,000 credit loss recovery recognized in 2025, an $80,647 increase in depreciation and amortization costs, a $73,942 increase in stock-based compensation expense, a $48,845 increase in facility costs, a $48,228 increase in travel costs, a $39,156 increase in business insurance costs and the litigation reserve settlement of $79,006 recognized in the three months ended March 31, 2025.

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 six months ended June 30, 2026, were $7,229,320 compared to $6,019,310 for the same period in 2025, an increase of $1,210,010 or 20.1%, due to a $374,974 increase in payroll and benefits, a $75,553 increase in operating supply costs, a $131,604 increase in credit losses due to the $75,000 credit loss recovery recognized in 2025, an $151,094 increase in depreciation and amortization costs, a $157,720 increase in stock-based compensation expense, a $91,226 increase in facility costs, a $52,254 increase in travel costs, a $90,259 increase in business insurance costs and the litigation reserve settlement of $79,006 recognized in the six months ended June 30, 2025.

Previous wording

Selling expenses consist of sales staff, commissions, marketing, travel and other selling related expenses. Selling expenses for the three months ended March 31, 2026 were $640,932 compared to $594,481 for the same period in 2025, an increase of $46,451 or 7.8%, due to increased advertising and trade show spend of $57,086 targeted to the data center market.

Current wording

Selling expenses consist of sales staff, commissions, marketing, travel and other selling related expenses. Selling expenses for the six months ended June 30, 2026, were $1,130,973 compared to $1,109,216 for the same period in 2025, an increase of $21,757 or 2.0%, due to increased advertising and trade show spend targeted to the data center market.

Previous wording

Other income, net for the three months ended March 31, 2026 was $28,154 compared to other expense net of $65,320 for the same period in 2025, an increase of $93,474, due to increased interest income earned on invested cash balances of $80,708, and a decrease of $18,749 in unrealized losses on marketable securities, offset by a $4,065 increase in foreign exchange losses and a $1,918 increase in interest due to borrowings under our vehicle leases during the three months ended March 31, 2026.

Current wording

Other income, net for the six months ended June 30, 2026, was $35,258 compared to other expense net of $109,851 for the same period in 2025, an increase of $145,109, due to a $142,943 increase in interest income earned on invested cash balances and a $18,749 decrease in unrealized loss on marketable securities, offset partially by a $13,689 increase in currency exchange losses and by a $3,010 increase in interest expense due to borrowings under our lease financing arrangement in the six months ended June 30, 2026.

Previous wording

During the three months ended March 31, 2026, we incurred a loss from operations of $2,135,909 compared to a net loss from operations of $594,244 in the same period in 2025. Cash flows from operations decreased $1,934,718 during the three months ended March 31, 2026 compared to the same period in 2025. As of March 31, 2026, we had cash and cash equivalents of $9,332,650 compared to cash and cash equivalents of $12,430,287 as of December 31, 2025, a decrease of $3,097,637 or 24.9%, and an accumulated deficit as of March 31, 2026, of $58,009,222.

Current wording

During the six months ended June 30, 2026, we incurred a net loss from operations of $4,286,070 compared to a net loss from operations of $2,006,106 in the same period in 2025. Cash flows used in operations increased $1,685,946 during the six months ended June 30, 2026, compared to the same period in 2025, due to the loss from operations. As of June 30, 2026, we had cash and cash equivalents of $6,782,573 compared to cash and cash equivalents of $12,430,287 as of December 31, 2025, a decrease of $5,647,714 or 45.4%, and an accumulated deficit as of June 30, 2026, of $60,157,825.

Previous wording

Consolidated working capital at March 31, 2026 was $17,750,669 compared to $19,618,132 at December 31, 2025 a decrease of $1,867,463, or 9.5%. Included in working capital were cash and cash equivalents of $9,332,650 at March 31, 2026, compared to $12,430,287 at December 31, 2025, a decrease of $3,097,637, or 24.9%.

Current wording

Consolidated working capital at June 30, 2026, was $15,812,847 compared to $19,618,132 at December 31, 2025, a decrease of $3,805,285, or 19.4%, due to the loss from operations. Included in working capital were cash and cash equivalents of $6,782,573 at June 30, 2026, compared to $12,430,287 at December 31, 2025, a decrease of $5,647,714, or 45.4%.

Previous wording

Cash used by operating activities for the three months ended March 31, 2026 was $3,108,121 compared to cash used in operating activities of $1,173,403 for the same period in 2025, an increase in cash used in operating activities of $1,934,718. Our accounts receivable and unbilled revenue balances were $5,056,943 and $138,020, respectively, at March 31, 2026 compared to $4,280,991 and $138,020 at December 31, 2025, using $803,359 of cash.

Current wording

Cash used by operating activities for the six months ended June 30, 2026, was $5,461,566 compared to cash used of $3,775,620 by operating activities for the same period in 2025, an increase in cash used of $1,685,946. Our accounts receivable and unbilled revenue balances were $4,199,469 and $138,020, respectively, at June 30, 2026, compared to $4,280,991 and $138,020 at December 31, 2025, using $24,920 of cash.

Previous wording

Accounts payable increased to $3,612,215 as of March 31, 2026 from $3,381,545 at December 31, 2025, providing $230,669 in cash flow from operations. The increase in accounts payable was due to increased material procurement in anticipation of future Products shipments. Deferred revenue decreased to $4,194,904 as of March 31, 2026 compared to $4,796,863 as of December 31, 2025, due to the application of customer deposits against accounts receivables as Products ship, using $601,959 of cash from operations. We expect accounts payable and deferred revenue to fluctuate with routine changes in operations.

Current wording

Accounts payable decreased to $3,069,563 as of June 30, 2026, from $3,381,545 at December 31, 2025, using $311,983 in cash flow from operations. The decrease in accounts payable is due to a reduction in dated payable liabilities. Deferred revenue decreased to $4,176,508 as of June 30, 2026, compared to $4,796,863 as of December 31, 2025, due to the application of customer deposits against accounts receivables due to Products shipments, using $620,355 of cash from operations. Our inventories increased in the six months ended June 30, 2026 using $1,077,960 in cash. We expect accounts payable and deferred revenue to fluctuate with routine changes in operations.

Previous wording

During the three months ended March 31, 2026 we used $46,118 of cash to purchase property, plant and equipment, primarily for improvements required at the North Billerica facility and received $96,464 of proceeds from the liquidation of our investment in Aivita Group Inc., formerly EuroSite Power Inc. During the three months ended March 31, 2025 we used $132,020 of cash for improvements required to the North Billerica facility and distributed $32,889 to the 49% non-controlling interest holders of American DG New York LLC

Current wording

During the six months ended June 30, 2026, we used $119,387 of cash to purchase property, plant and equipment, primarily for improvements required at the North Billerica facility, received $96,464 of proceeds from the liquidation of our investment in Aivita Group Inc., formerly EuroSite Power Inc. and received $4,709 in proceeds from the disposition of assets. During the six months ended June 30, 2025 we used $277,989 of cash for improvements required at the North Billerica facility and distributed $42,956 to the 49% non-controlling interest holders of American DG New York LLC and received $280 in proceeds from the disposition of assets, including insurance proceeds.

Previous wording

During the three months ended March 31, 2026 we used $94,362 of cash in payment of finance lease principal and received $54,500 of proceeds from the exercise of stock options. During the three months ended March 31, 2025 we used $38,628 of cash in payment of finance lease principal and received $38,500 of proceeds from the exercise of stock opions.

Current wording

During six months ended June 30, 2026, we used $232,397 of cash in payment of finance lease principal and received $64,463 of proceeds from the exercise of stock options. During the six months ended June 30, 2025, we used $63,010 of cash in payment of finance lease principal and received $394,926 of proceeds from the exercise of stock options.

Previous wording

As of March 31, 2026, our backlog of product and installation projects, excluding service contracts, was $8,201,626, consisting of $2,046,462 of purchase orders received by us and $6,155,164 of projects in which the customer's internal approval process is complete, financial resources have been allocated and the customer has made a firm verbal commitment that the order is in the process of execution. As of March 31, 2025, our backlog of product and installation projects, excluding service

Current wording

As of June 30, 2026, our backlog of product, excluding service contracts, was $6,945,252, consisting of $5,172,502 of purchase orders received by us and $1,772,750 of projects in which the customer's internal approval process is complete, financial resources have been allocated, and the customer has made a firm verbal commitment that the order is in the process of execution.

Previous wording

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

Current wording

As of June 30, 2025, our backlog of product and installation projects, excluding service contracts, was $6,215,443 consisting of $6,215,443 of purchase orders received by us. Backlog at the beginning of any period is not necessarily indicative of future performance. Our presentation of backlog may differ from other companies in our industry.

Previous wording

At March 31, 2026, we had cash and cash equivalents of $9,332,650, a decrease of $3,097,637 or 24.9% from the cash and cash equivalents balance at December 31, 2025. The decrease in cash during the three months ended March 31, 2026 is due to increased spending at our Services segment, manufacturing costs incurred to increase our production capacity, research and development costs incurred to continue to improve and refine the hybrid-drive air-cooled chiller and increases in our accounts receivable and inventories.

Current wording

At June 30, 2026, we had cash and cash equivalents of $6,782,573, a decrease of $5,647,714 or 45.4% from the cash and cash equivalents balance at December 31, 2025. The decrease in cash during the six months ended June 30, 2026 is due to increased spending at our Services segment, manufacturing costs incurred to increase our production capacity, research and development costs incurred to continue to improve and refine the hybrid-drive air-cooled chiller and an increase in our inventories.

Previous wording

Based on our current operating plan, we believe existing resources, including cash and cash equivalents and the cash flows from operations will be sufficient to meet our working capital requirements for the next twelve months. In order to grow our business, fund the continued development of our hybrid-drive air-cooled chiller, and respond to opportunities in the data center market, we expect that our cash requirements will increase and we may need to raise additional capital through one or more debt equity financings to meet our need for capital to fund operations and future growth. There can be no assurance that we will be able to raise such additional financing or upon terms that are acceptable to us or at all.

Current wording

Based on our current operating plan, we believe existing resources, including cash and cash equivalents and the cash flows from operations will be sufficient to meet our working capital requirements for the next twelve months. We relied upon the cash from the July 2025 equity raise to fund our operating activities in six months ended June 30, 2026, which were negatively impacted by lower Products revenue, increased spending at our Services segment and other cost increases incurred in anticipation of increased future Products segment data center orders and revenue. In order to grow our business, fund the continued development of our hybrid-drive air-cooled chiller, and respond to opportunities in the data center market, we expect that our cash requirements will increase and we may need to raise additional capital through one or more debt or equity financings to meet our need for capital to fund operations and future growth. There can be no assurance that we will be able to raise such additional financing or upon terms that are acceptable to us or at all.

Previous wording

See Note 1, Description of Business and Basis of Presentation, to the Condensed Consolidated Financial Statements included elsewhere in this report.

Current wording

See Note 1, Description of Business and Basis of Presentation, to the Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q.