UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
 
FORM 10-Q
☑
þQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For the quarterly period ended September 30, 2017
or
March 31, 2024
☐
oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


Commission file number 001-36103
logo201509a06.jpgClean Energy Solutions.jpg
TECOGEN INC. (OTCQX:TGEN)
(Exact name of Registrant as specified in its charter)
Delaware04-3536131
Delaware04-3536131
(State or Other Jurisdiction of Incorporation or Organization)(IRS Employer Identification No.)
76 Treble Cove Road
North Billerica, Massachusetts 01862
45 First Avenue
Waltham, Massachusetts02451
(Address of Principal Executive Offices)(Offices and Zip Code)
45 First Avenue
Waltham, MA 02451
(Former Address of Principal Executive Offices and Zip Code)
Registrant’s Telephone Number, Including Area Code: (781) 622-1120
(781) 466-6402
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and "emerging growth company" in Rule 12b-2 of the Exchange Act:Act.
Large accelerated filer     ☐Accelerated filer         o
Large accelerated filer o
Accelerated filer o
Non –accelerated filer o
Smaller reporting company x
Emerging Growth company x
Non–Accelerated Filer     ☒Smaller reporting company     ☒
Emerging growth company     ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes ¨☐ No ý

As of March 31, 2024, 24,850,261 shares of common stock, $.001 par value per share, of the registrant were issued and outstanding.

Title of each classOutstanding, October 31, 2017
Common Stock, $0.001 par value24,724,392

TECOGEN INC.





QUARTERLY REPORT ON FORM 10-Q
FOR THE PERIOD ENDED SEPTEMBER 30, 2017MARCH 31, 2024
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
1
1
2
3
34
65
1619
2127
2127
PART II - OTHER INFORMATION
2127
2228
28
28
28
28
2429
2630


References in this Form 10-Q to "we", "us", "our"', the "Company" and "Tecogen" refers to Tecogen Inc. and its consolidated subsidiaries, unless otherwise noted.


TECOGEN INC.





PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements


CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
 March 31, 2024December 31, 2023
ASSETS
Current assets:
Cash and cash equivalents$1,510,435 $1,351,270 
Accounts receivable, net6,533,130 6,781,484 
Inventories, net10,021,002 10,553,419 
Unbilled revenue1,258,532 1,258,532 
Prepaid and other current assets409,573 360,639 
Total current assets19,732,672 20,305,344 
Long-term assets:
Property, plant and equipment, net1,147,069 1,162,577 
Right of use assets2,176,264 943,283 
Intangible assets, net2,533,112 2,436,230 
Goodwill2,646,194 2,743,424 
Other assets223,232 201,771 
TOTAL ASSETS$28,458,543 $27,792,629 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Related party notes$511,905 $505,505 
Accounts payable4,013,899 4,514,415 
Accrued expenses2,682,656 2,504,629 
Deferred revenue, current2,462,570 1,647,206 
Lease obligations, current469,762 289,473 
Acquisition liabilities, current929,411 845,363 
Unfavorable contract liability, current162,822 176,207 
Total current liabilities11,233,025 10,482,798 
Long-term liabilities:
Deferred revenue, net of current portion345,427 369,611 
Lease obligations, net of current portion1,725,276 683,307 
Acquisition liabilities, net of current portion1,156,835 1,181,779 
Unfavorable contract liability, net of current portion388,766 422,839 
Total liabilities14,849,329 13,140,334 
Commitments and contingencies
Stockholders’ equity:
Tecogen Inc. shareholders’ equity:
Common stock, $0.001 par value; 100,000,000 shares authorized; 24,850,261 issued and outstanding at March 31, 2024 and December 31, 202324,850 24,850 
Additional paid-in capital57,645,937 57,601,402 
Accumulated deficit(43,984,623)(42,879,656)
Total Tecogen Inc. stockholders’ equity13,686,164 14,746,596 
Non-controlling interest(76,950)(94,301)
Total stockholders’ equity13,609,214 14,652,295 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY$28,458,543 $27,792,629 
 September 30, 2017
 December 31, 2016
ASSETS   
Current assets: 
  
Cash and cash equivalents$2,077,047
 $3,721,765
Accounts receivable, net11,094,287
 8,630,418
Unbilled revenue3,063,089
 2,269,645
Inventory, net6,118,835
 4,774,264
Due from related party496,655
 260,988
Prepaid and other current assets742,701
 401,876
Total current assets23,592,614
 20,058,956
Property, plant and equipment, net15,502,974
 517,143
Intangible assets, net2,430,178
 1,065,967
Excess of cost over fair value of net assets acquired12,602,409
 —
Goodwill40,870
 40,870
Other assets2,462,870
 2,058,425
TOTAL ASSETS$56,631,915
 $23,741,361
    
LIABILITIES AND STOCKHOLDERS’ EQUITY 
  
Current liabilities: 
  
Accounts payable$5,356,449
 $3,367,481
Accrued expenses1,676,307
 1,378,258
Deferred revenue1,477,124
 876,765
Loan due to related party850,000
 —
Interest payable, related party39,403
 —
Total current liabilities9,399,283
 5,622,504
Long-term liabilities: 
  
Deferred revenue, net of current portion386,494
 459,275
Senior convertible promissory note, related party3,149,086
 3,148,509
Unfavorable contract liability10,358,283
 —
Total liabilities23,293,146
 9,230,288
Commitments and contingencies (Note 9)

 

    
Stockholders’ equity: 
  
Tecogen Inc. stockholders’ equity: 
  
Common stock, $0.001 par value; 100,000,000 shares authorized; 24,724,392 and 19,981,912 issued and outstanding at September 30, 2017 and December 31, 2016, respectively24,724
 19,982
Additional paid-in capital56,081,026
 37,334,773
Accumulated other comprehensive loss-investment securities(184,998) —
Accumulated deficit(23,065,226) (22,843,682)
Total Tecogen Inc. stockholders’ equity32,855,526
 14,511,073
Noncontrolling interest483,243
 —
Total stockholders’ equity33,338,769
 14,511,073
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY$56,631,915
 $23,741,361

The accompanying notes are an integral part of these consolidated financial statements.
1
TECOGEN INC.





CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(unaudited)
Three Months Ended
Three Months Ended
Three Months Ended
Three Months Ended
September 30, 2017 September 30, 2016
Revenues   
Revenues
Revenues
Products
Products
Products$2,425,616
 $2,850,901
Services4,519,467
 3,765,554
Services
Services
Energy production
Energy production
Energy production1,556,115
 —
Total revenues8,501,198
 6,616,455
Total revenues
Total revenues
Cost of sales
Cost of sales
Cost of sales   
Products1,538,515
 1,715,462
Products
Products
Services
Services
Services2,981,454
 2,126,175
Energy production723,198
 —
Energy production
Energy production
Total cost of sales
Total cost of sales
Total cost of sales5,243,167
 3,841,637
Gross profit3,258,031
 2,774,818
Operating expenses   
Gross profit
Gross profit
Operating expenses:
Operating expenses:
Operating expenses:
General and administrative
General and administrative
General and administrative2,427,352
 2,003,838
Selling503,415
 367,412
Selling
Selling
Research and development241,725
 154,075
Research and development
Research and development
Gain on disposition of assets
Gain on disposition of assets
Gain on disposition of assets
Total operating expenses3,172,492
 2,525,325
Income from operations85,539
 249,493
Total operating expenses
Total operating expenses
Loss from operations
Loss from operations
Loss from operations
Other income (expense)   
Interest and other income14,849
 3,914
Other income (expense)
Other income (expense)
Other income (expense), net
Other income (expense), net
Other income (expense), net
Interest expense(45,242) (45,539)
Total other expense, net(30,393) (41,625)
Consolidated net income55,146
 207,868
Income attributable to the noncontrolling interest(27,935) —
Net income attributable to Tecogen Inc.27,211
 207,868
Other comprehensive income - unrealized gain on securities39,361
 —
Comprehensive income$66,572
 $207,868
Interest expense
Interest expense
   
Net income per share - basic$0.00
 $0.01
Net income per share - diluted$0.00
 $0.01
Unrealized gain on investment securities
Unrealized gain on investment securities
Unrealized gain on investment securities
Total other income (expense), net
Total other income (expense), net
Total other income (expense), net
Loss before provision for state income taxes
Loss before provision for state income taxes
Loss before provision for state income taxes
Provision for state income taxes
Provision for state income taxes
Provision for state income taxes
Consolidated net loss
Consolidated net loss
Consolidated net loss
Income attributable to the non-controlling interest
Income attributable to the non-controlling interest
Income attributable to the non-controlling interest
Loss attributable to Tecogen Inc.
Loss attributable to Tecogen Inc.
Loss attributable to Tecogen Inc.
Net loss per share - basic
Net loss per share - basic
Net loss per share - basic
Weighted average shares outstanding - basic24,720,613
 19,640,812
Weighted average shares outstanding - basic
Weighted average shares outstanding - basic
Net loss per share - diluted
Net loss per share - diluted
Net loss per share - diluted
Weighted average shares outstanding - diluted24,930,624
 20,229,120
Weighted average shares outstanding - diluted
Weighted average shares outstanding - diluted
 
The accompanying notes are an integral part of these consolidated financial statements.


2
TECOGEN INC.





CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSSSTOCKHOLDERS' EQUITY
For the Three Months Ended March 31, 2024 and 2023
(unaudited)

 Nine Months Ended
 September 30, 2017 September 30, 2016
Revenues   
Products$8,349,159
 $7,525,909
Services12,259,037
 9,853,369
    Energy production2,330,307
 —
Total revenues22,938,503
 17,379,278
Cost of sales   
Products5,261,245
 5,035,230
Services7,464,193
 5,746,992
    Energy production1,053,741
 —
Total cost of sales13,779,179
 10,782,222
Gross profit9,159,324
 6,597,056
Operating expenses   
General and administrative7,042,500
 5,898,230
Selling1,558,378
 1,217,533
Research and development641,064
 524,696
Total operating expenses9,241,942
 7,640,459
Loss from operations(82,618) (1,043,403)
Other income (expense)   
Interest and other income21,033
 9,575
Interest expense(115,026) (131,973)
Total other expense, net(93,993) (122,398)
Consolidated net loss(176,611) (1,165,801)
(Income) loss attributable to the noncontrolling interest(44,933) 64,962
Net loss attributable to Tecogen Inc.(221,544) (1,100,839)
Other comprehensive loss - unrealized loss on securities(184,998) —
Comprehensive loss$(406,542) $(1,100,839)
    
Net loss per share - basic and diluted$(0.01) $(0.06)
Weighted average shares outstanding - basic and diluted22,643,406
 19,071,497



Tecogen Inc. Stockholders
Three Months ended March 31, 2024Common Stock SharesCommon
Stock
0.001
Par Value		Additional
Paid-In
Capital		Accumulated
Deficit		Non-controlling
Interest		Total
Balance at December 31, 202324,850,261 $24,850 $57,601,402 $(42,879,656)$(94,301)14,652,295 
Stock-based compensation expense— — 44,535 — — 44,535 
Net income (loss)— — — (1,104,967)17,351 (1,087,616)
Balance at March 31, 202424,850,261 $24,850 $57,645,937 $(43,984,623)$(76,950)$13,609,214 
Three Months ended March 31, 2023Common Stock SharesCommon
Stock
0.001
Par Value		Additional
Paid-In
Capital		Accumulated
Deficit		Non-controlling
Interest		Total
Balance at December 31, 202224,850,261 $24,850 $57,351,008 $(38,281,548)$(106,560)$18,987,750 
Stock-based compensation expense— — 77,348 — — 77,348 
Net income (loss)— — — (1,490,029)18,060 (1,471,969)
Balance at March 31, 202324,850,261 $24,850 $57,428,356 $(39,771,577)$(88,500)$17,593,129 

The accompanying notes are an integral part of these consolidated financial statements.
3

TECOGEN INC.





CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Three Months Ended
 March 31, 2024March 31, 2023
CASH FLOWS FROM OPERATING ACTIVITIES:
Consolidated net loss$(1,087,616)(1,471,969)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization140,137 105,920 
Provision for credit losses14,258 — 
Stock-based compensation44,535 77,348 
Unrealized gain on investment securities(18,749)— 
Gain on disposition of assets(7,391)— 
Non-cash interest expense6,400 — 
Changes in operating assets and liabilities
(Increase) decrease in:
Accounts receivable234,095 (44,238)
Employee retention credit— 667,121 
Inventory532,418 (1,380,052)
Unbilled revenue— 16,428 
Prepaid assets and other current assets(48,933)136,170 
Other assets194,283 161,931 
Increase (decrease) in:
Accounts payable(500,516)905,509 
Accrued expenses and other current liabilities167,789 (143,923)
Deferred revenue791,181 852,600 
Other liabilities(213,675)(167,711)
Net cash provided by (used in) operating activities248,216 (284,866)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment(104,952)— 
Proceeds from disposition of assets33,013 — 
Net cash used in investing activities(71,939)— 
CASH FLOWS FROM FINANCING ACTIVITIES:
     Finance lease principal payments(17,112)— 
Net cash used in financing activities(17,112)— 
Net increase (decrease) in cash and cash equivalents159,165 (284,866)
Cash and cash equivalents, beginning of the period1,351,270 1,913,969 
Cash and cash equivalents, end of the period$1,510,435 $1,629,103 
Supplemental disclosure of cash flow information:
Cash paid for interest$11,855 $— 
Cash paid for taxes$425 $22,638 
Non-cash investing activities
Aegis Contract and Related Asset Acquisition:
Contingent consideration$92,409 $— 
 Nine Months Ended
 September 30, 2017 September 30, 2016
CASH FLOWS FROM OPERATING ACTIVITIES:   
Consolidated net loss$(176,611) $(1,165,801)
Adjustments to reconcile net loss to net cash used in operating activities:   
Depreciation and amortization, net402,939
 198,766
Provision (recovery) of inventory reserve43,609
 (90,000)
Stock-based compensation138,329
 117,065
Non-cash interest expense577
 37,923
Loss on sale of assets2,909
 640
Provision (recovery) for losses on accounts receivable8,000
 (6,000)
Changes in operating assets and liabilities, net of effects of acquisitions   
(Increase) decrease in:   
Short term investments—
 294,802
Accounts receivable(1,908,655) (2,664,462)
Unbilled revenue(776,365) (1,024,276)
Inventory, net(1,279,847) 714,896
Due from related party(236,971) 744,266
Prepaid expenses and other current assets(18,673) (100,398)
Other non-current assets(32,251) —
Increase (decrease) in:   
Accounts payable1,641,206
 (279,196)
Accrued expenses and other current liabilities(233,824) 122,809
Deferred revenue407,379
 184,103
Interest payable, related party21,378
 —
Net cash used in operating activities(1,996,871) (2,914,863)
CASH FLOWS FROM INVESTING ACTIVITIES:   
Purchases of property and equipment(315,205) (130,499)
Purchases of intangible assets(34,551) (71,223)
Cash acquired in acquisition971,454
 —
Cash paid for investment in Ultra Emissions Technologies Ltd—
 (2,000,000)
Payment of stock issuance costs(367,101) —
Distributions to noncontrolling interest(31,362) —
Net cash provided by (used in) investing activities223,235
 (2,201,722)
CASH FLOWS FROM FINANCING ACTIVITIES:   
Proceeds from demand notes payable, related party—
 150,000
Payment of stock issuance costs—
 (28,548)
Proceeds from debt issuance costs—
 (2,034)
Proceeds from the exercise of stock options128,918
 312,698
Proceeds from exercise of warrants—
 2,700,000
Net cash provided by financing activities128,918
 3,132,116
Net decrease in cash and cash equivalents(1,644,718) (1,984,469)
Cash and cash equivalents, beginning of the period3,721,765
 5,486,526
Cash and cash equivalents, end of the period$2,077,047
 $3,502,057
    
TECOGEN INC.

Supplemental disclosures of cash flows information: 
  
Cash paid for interest$95,550
 $94,049
Exchange of stock for non-controlling interest in Ilios$—
 $330,852
Issuance of stock to acquire American DG Energy$18,745,007
 $—
Issuance of Tecogen stock options in exchange for American DG Energy options$114,896
 $—


The accompanying notes are an integral part of these consolidated financial statements. 
4
TECOGEN INC.
Notes to Unaudited Condensed Consolidated Financial Statements





Note 1.Description of Business and Basis of Presentation
Description of businessBusiness
Tecogen Inc. (together with its subsidiaries "we", "our", "us" or "Tecogen"), a Delaware Corporation, was incorporated on September 15, 2000, and acquired the Company, we, our or us producesassets and liabilities of the Tecogen Products division of Thermo Power Corporation. We produce commercial and industrial, natural-gas-fueled engine-driven, combined heat and power (CHP) products that reduce energy costs, decrease greenhouse gas emissions and alleviate congestion on the national power grid. The Company’sOur products supply electric power or mechanical power for cooling, while heat from the engine is recovered and purposefully used at a facility. The Company also installs, owns, operates and maintains complete energy systems and other complementary systems at customer sites and sells electricity, hot water, heat and cooling energy under long-term contracts at prices guaranteed to the customer to be below conventional utility rates.
The majority of the Company’sour customers are located in regions with the highest utility rates, typically California, the Midwest and the Northeast. The Company's common stock is listed on NASDAQ
Our operations are comprised of three business segments. Our Products segment designs, manufactures and sells industrial and commercial cogeneration systems. Our Services segment provides operation and maintenance services to customers for our products. Our Energy Production segment sells energy in the form of electricity, heat, hot water and cooling to our customers under the ticker symbol TGEN.long-term sales agreements.
On May 18, 2017, the Company acquired 100% of the outstanding common stock of American DG Energy Inc., formerly a related entity, in a stock-for-stock merger (see Note 3. "Acquisition of American DG Energy Inc.").
Basis of PresentationLiquidity, Going Concern and Management's Plans
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting
principles assuming that we will continue as a going concern, which contemplates the realization of assets and the settlement of obligations in the normal course of business. As of March 31, 2024, our cash and cash equivalents were $1,510,435, compared to $1,351,270 at December 31, 2023, an increase of $159,165. For the three months ended March 31, 2024 we generated $248,216 in cash from operations and a net operating loss of $1,049,885, due to a decrease in Products revenue and gross margin, a decrease in Services gross margin percentage due to higher labor and material costs and an increase in operating expenses. Working capital at March 31, 2024 was $8,499,647, compared to $9,822,546 at December 31, 2023, a decrease of $1,322,899 and our accumulated deficit was $43,984,623.

As a result of the above factors, management has performed an analysis to evaluate the entity’s ability to continue as a going concern for one year after the financial statements issuance date. Management’s analysis includes forecasting future revenues, expenditures and cash flows, taking into consideration past performance as well as key initiatives recently undertaken. Our forecasts are dependent on our ability to maintain margins based on the Company's ability to close on new and expanded business, leverage existing working capital, and effectively manage expenses. New and expanded business includes the sale and shipment of newly developed hybrid-drive air-cooled chillers and the acquisition of additional maintenance contracts in February 2024. Our backlog at March 31, 2024 was $5,554,599. We may also be required to borrow funds under note subscription agreements with related parties (see Note 11. "Related Party Notes").Based on management's analysis, we believe that cash flows from operations and the note agreements will be sufficient to fund operations over the next twelve months. There can, however, be no assurance we will be able to do so. Based on our analysis, the consolidated financial statements do not include any adjustments to the carrying amounts and classification of assets, liabilities, and reported expenses that may be necessary if we were unable to continue as a going concern.
Our common stock is quoted on OTC Markets Group, Inc.'s OTCQX Best Market tier and trades under the symbol "TGEN."
Basis of Presentation
    The financial statements have been prepared in accordance with accounting standards set by the Financial Accounting Standards Board, or FASB. The FASB sets generally accepted accounting principles, or GAAP, to ensure financial condition, results of operations, and cash flows are consistently reported. References to GAAP issued by the FASB in these footnotes are to the FASB Accounting Standards Codification, or ASC. We adopted the presentation requirements for interimnoncontrolling interests required by ASC 810 Consolidation. Under ASC 810, earnings or losses attributed to the noncontrolling interests are reported as part of the consolidated earnings and not a separate component of income or expense.
The accompanying consolidated financial informationstatements include our accounts and the accounts of the entities in which we have a controlling financial interest. Those entities include our wholly-owned subsidiary, American DG Energy Inc. ("ADGE"), Tecogen CHP Solutions, Inc., and a joint venture, American DG New York, LLC, or ADGNY, in which ADGE holds a 51.0% interest. As the controlling partner, all major decisions in respect of ADGNY are made by ADGE in accordance with the instructionsjoint venture agreement. The interests in the individual underlying energy system projects in ADGNY vary between ADGE and its joint venture partner. The noncontrolling interest and distributions are determined based on economic ownership. The economic ownership is calculated by the amount invested by us and the noncontrolling partner in each site. Each quarter, we calculate a year-to-date profit/loss for each site that is part of ADGNY and the noncontrolling interest percent of economic ownership in
5
TECOGEN INC.
Notes to Form 10-QCondensed Consolidated Financial Statements

each site is applied to determine the noncontrolling interest share in the profit/loss. The same methodology is used to determine quarterly distributions of available cash to the noncontrolling interest partner. On our balance sheet, noncontrolling interest represents the joint venture partner’s investment in ADGNY, plus its share of after-tax profits less any cash distributions. ADGE owned a controlling 51.0% legal and Article 8economic interest in ADGNY as of Regulation S-X. Accordingly, they do not include all of the informationMarch 31, 2024 and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included.December 31, 2023. Operating results for the ninethree months ended September 30, 2017March 31, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017.2024. All intercompany transactions have been eliminated in consolidation.
The condensed consolidated balance sheet at December 31, 20162023 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.
For further information, refer to the consolidated financial statements and footnotes thereto included in Tecogen Inc.'s Annual Report on Form 10-K and American DG Energy Inc.'sTecogen's Annual Report on Form 10-K for the year ended December 31, 2016.
There have been no significant changes in accounting principles, practices or methods for making estimates.
The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and entities in which it has a controlling financial interest. Those entities include the Company's wholly-owned subsidiaries American DG Energy Inc. and Ilios Inc. and a joint venture, American DG New York, LLC, in which American DG Energy Inc. holds a 51.0% interest. Investments in partnerships and companies in which the Company does not have a controlling financial interest but where we have significant influence are accounted for under the equity method. Any intercompany transactions have been eliminated in consolidation.
The Company’s operations are comprised of two business segments. Our Products and Services segment designs, manufactures and sells industrial and commercial cogeneration systems as described above. Our Energy Production segment sells energy in the form of electricity, heat, hot water and cooling to our customers under long-term sales agreements.
Reclassification
Certain prior period amounts have been reclassified to conform with current year presentation.2023.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Income Taxes
The provisions for income taxes in the accompanying unaudited consolidated statements of operations differ from that which would be expected by applying the federal statutory tax rate primarily due to losses for which no benefit is recognized.
Significant NewBusiness Combinations
In accordance with applicable accounting standards, we estimate the fair value of assets acquired and liabilities assumed as of the acquisition date of each business combination. Any excess purchase price over the fair value of the net tangible and intangible assets acquired is allocated to goodwill. We may make certain estimates and assumptions when determining the fair values of assets acquired and liabilities assumed, including intangible assets. Critical estimates in valuing certain intangible assets include but are not limited to future expected cash flows from energy production sites or customer maintenance contracts, estimated operating costs, as well as discount rates. At the acquisition date, we will also record acquisition related liabilities, if applicable, for any contingent consideration or deferred payments to the seller. Contingent consideration is recorded at fair value on the acquisition date based on our expectation of achieving the contractually defined revenue targets. The fair value of the contingent consideration liabilities is remeasured each reporting period after the acquisition date and any changes in the estimated fair value are reflected as gains or losses in general and administrative expense in the consolidated statement of operations. Contingent consideration liabilities and deferred payments to sellers are recorded as current liabilities and other long-term liabilities in the consolidated balance sheets based on the expected timing of settlement.
Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. Any changes to provisional amounts identified during the measurement period are recognized in the reporting period in which the adjustment amounts are determined. Transaction costs associated with business combinations are expensed as incurred.
Segment Information
Our operations are comprised of three business segments. Our Products segment designs, manufactures and sells industrial and commercial cogeneration systems. Our Services segment installs and maintains our cogeneration systems. Our Energy Production segment sells energy in the form of electricity, heat, hot water and cooling to our customers under long-term sales agreements.

Recently Issued Accounting Standards or Updates Not Yet Effective
Revenue RecognitionSegment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures. In May 2014,November 2023, the Financial Accounting Standards Board ("FASB") issued an accountingASU 2023-07, Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures. The new standard requires enhanced disclosures about a public entity's reportable segments including more detailed information about a reportable segment's expenses. The amendments in this update apply to all public entities that are required to report segment information, and include those entities that have a single reportable segment. The amendments in this update are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. We are currently evaluating the impact on our consolidated financial statements and related to revenue from contracts with customers, which, along with amendments issued in 2015 and 2016, will supersededisclosures.
6
TECOGEN INC.
Notes to Unaudited Condensed Consolidated Financial Statements




nearly all current U.S. GAAP guidance onIncome Taxes (Topic 740) - Improvements to Income Tax Disclosures. In December 2023, the Financial Accounting Standards Board issued ASU 2023-09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures. ASU 2023-09 provides more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. The amendments in this topic and eliminate industry-specific guidance. The underlying principle is to recognize revenue when promised goods or servicesupdate are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. This accounting standard update, as amended, will be effective for the Companyannual periods beginning in the first quarter of fiscal 2018. The new revenue standard may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized in retained earnings as of the date ofafter December 15, 2024. Early adoption ("modified retrospective basis"). The Company expects to adopt this accounting standard update on a modified retrospective basis in the first quarter of fiscal 2018, and has engaged an outside expert to assist with the evaluation ofis permitted. We are currently evaluating the impact of this accounting standard update on itsour consolidated financial statements and its implementation.related disclosures.
Leases
Note 2. Revenue
Revenue is recognized when performance obligations under the terms of a contract with our customer are satisfied; generally this occurs with the transfer of control of our products, services and energy production. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods or providing services or energy to customers.
Shipping and handling fees billed to customers in a sales transaction are recorded in revenue and shipping and handling costs incurred are recorded in cost of sales. We have elected to exclude from revenue any value-added sales and other taxes which we collect concurrent with revenue-producing activities. These accounting policy elections are consistent with the manner in which we historically recorded shipping and handling fees and value-added taxes. Incremental costs incurred by us to obtain a contract with a customer are negligible, if any, and are expensed ratably in proportion to the related revenue recognized.
Disaggregated Revenue    
In February 2016,general, our business segmentation is aligned according to the FASB issued an accounting standard updatenature and economic characteristics of our products and customer relationships and provides meaningful disaggregation of each business segment's results of operations.
The following table further disaggregates our revenue by major source by segment for the three months ended March 31, 2024 and 2023.

Three Months Ended
RevenuesMarch 31, 2024March 31, 2023
Products:
Cogeneration$774,229 $543,693 
Chiller657,061 1,068,934 
Engineered Accessories60,108 97,509 
Total Products Revenue1,491,398 1,710,136 
Services4,014,310 3,136,173 
Energy production680,389 533,509 
Total revenues$6,186,097 $5,379,818 
Products Segment
Products. Our Product revenues include cogeneration systems that supply electricity and hot water, chillers that provide air-conditioning and hot water and engineered accessories, which consist of ancillary products and parts necessary to install a cogeneration unit including integration into the customers’ existing electrical and mechanical systems. We refer to the package of engineered accessories and engineering and design services necessary for the customers' installation of a cogeneration unit as light installation services.
We transfer control and generally recognize a sale when we ship a product from our manufacturing facility at which point the customer takes ownership of the product. Payment terms on product sales are generally 30 days.
We recognize revenue in certain circumstances before delivery to the customer has occurred (commonly referred to as bill and hold transactions). We recognize revenue related to leases requiring lesseessuch transactions once, among other things, the customer has made a written fixed commitment to purchase the product(s) under normal billing and credit terms, the customer has requested the product(s) be held for future delivery as scheduled and designated by them, risk of ownership has been assumed by the customer, and the product(s) are tagged as sold and segregated for storage awaiting further direction from the customer. Due to the infrequent nature and duration of bill and hold arrangements, the value associated with custodial storage services is deemed immaterial in the context of the contract and in total, and accordingly, none of the transaction price is allocated to such service.
Depending on the product and terms of the arrangement, we may defer the recognition of a portion of the transaction price received because we have to satisfy a future obligation (e.g., product start-up service). Amounts allocated to product start-up services are recognized as revenue when the start-up service has been completed. We use an observable selling price to determine standalone selling prices where available and either a combination of an adjusted market assessment approach, an
7
TECOGEN INC.
Notes to Condensed Consolidated Financial Statements

expected cost plus a margin approach, and/or a residual approach to determine the standalone selling prices for separate performance obligations as a basis for allocating contract consideration when an observable selling price is not available. Amounts received but not recognized pending completion of performance are recognized as contract liabilities and are recorded as deferred revenue along with deposits by customers.
Services Segment
Maintenance Services. Maintenance services are provided under either long-term maintenance contracts or time and material maintenance contracts. Revenue under time and material maintenance contracts is recognized when the maintenance service is completed. Revenue under long-term maintenance contracts is recognized either ratably over the term of the contract where the contract price is fixed or when the periodic maintenance activities are completed and the invoiced cost to the customer is based on run hours or kilowatts produced in a given period. We use an output method to measure progress towards completion of our performance obligation which results in the recognition of revenue on the basis of a direct measurement of the value to the customer of the services transferred to date relative to the remaining services promised under the contract. We use the practical expedient at ASC 606-10-55-18 of recognizing revenue in an amount equal to the amount we have the right to invoice the customer under the contract.
Revenues resulting from the Aegis acquisition (see Note 7. Aegis Contract and Related Asset Acquisitions) have been included in our revenue from the Services segment since April 1, 2023. Payment terms for maintenance services are generally 30 days.
Energy Production Segment
Energy Production. Revenue from energy contracts is recognized when electricity, heat, hot and/or chilled water is produced by our owned on-site cogeneration systems. Each month we bill the customer and recognize revenue for the various forms of energy delivered, based on meter readings which capture the quantity of the various forms of energy delivered in a given month under a contractually defined formula which takes into account the current month's cost of energy from the local power utility.
As the various forms of energy delivered by us under energy production contracts are simultaneously delivered and consumed by the customer, our performance obligation under these contracts is considered to be satisfied over time. We use an output method to measure progress towards completion of our performance obligation which results in the recognition of revenue on the basis of a direct measurement of the value to the customer of the services transferred to date relative to the remaining services promised under the contract. We use the practical expedient at ASC 606-10-55-18 of recognizing revenue in an amount equal to that amount to which we have the right to invoice the customer under the contract. Payment terms on invoices under these contracts are generally 30 days.
Contract Balances
    The timing of revenue recognition, billings and cash collections result in billed accounts receivable, unbilled revenue (contract assets) and deferred revenue, consisting of customer deposits and billings in excess of revenue recognized (contract liabilities) on the condensed consolidated balance sheets.
    We did not recognize any revenue during the three months ended March 31, 2024 that was included in unbilled revenue as of March 31, 2024.
    Revenue recognized during the three ended months March 31, 2024 that was included in deferred revenue at the beginning of the period was approximately $413,107.
Remaining Performance Obligations
Remaining performance obligations related to ASC 606 represent the aggregate transaction price allocated to performance obligations with an original contract term of greater than one year, excluding certain maintenance contracts and all energy production contracts where a direct measurement of the value to the customer is used as a method of measuring progress towards completion of our performance obligation. Exclusion of these remaining performance obligations is due in part to the inability to quantify values based on unknown future levels of delivery and in some cases rates used to invoice customers. Remaining performance obligations therefore consist of unsatisfied or partially satisfied performance obligations related to fixed price maintenance contracts and installation contracts.
As of March 31, 2024, the aggregate amount of the transaction price allocated to remaining performance obligations was approximately $2,807,997. We expect to recognize operating and financing lease liabilities on the balance sheet, as well as corresponding right-of-use assets. The new lease standard also makes some changes to lessor accounting and aligns key aspectsrevenue of approximately 74.3% of the lessor accounting model withremaining performance obligations over the revenue recognition standard. In addition, disclosures will be required to enable users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. The accounting standard update will be effective for the Company beginningnext 24 months, 62.0% recognized in the first quarter of fiscal 2019 on a modified retrospective basis,12 months and early adoption is permitted. The Company is currently evaluating12.3% recognized over the impact of this accounting standard update on its consolidated financial statements.subsequent 12 months and the balance thereafter.
8

TECOGEN INC.
Notes to Condensed Consolidated Financial Statements

Note 2.3. Income (Loss) Per Common Share
Basic and diluted income (loss) per share for the three and nine months ended September 30, 2017March 31, 2024 and 2016,2023, respectively, were as follows: 
Three Months Ended
March 31, 2024March 31, 2023
Numerator:
Net loss available to stockholders$(1,104,967)$(1,490,029)
Denominator:
Weighted average shares outstanding - Basic24,850,261 24,850,261 
Effect of dilutive securities:
Stock options— — 
Weighted average shares outstanding - Diluted24,850,261 24,850,261 
Basic loss per share$(0.04)$(0.06)
Diluted loss per share$(0.04)$(0.06)
Anti-dilutive shares underlying stock options outstanding2,081,772 1,744,351 

Note 4.Inventories, net
  Three months ended September 30, Nine months ended September 30,
  2017 2016 2017 2016
Net income (loss) attributable to stockholders $27,211
 $207,868
 $(221,544) $(1,100,839)
Weighted average shares outstanding - Basic 24,720,613
 19,640,812
 22,643,406
 19,071,497
Basic income (loss) per share $0.00
 $0.01
 $(0.01) $(0.06)
Weighted average shares outstanding - Diluted 24,930,624
 20,229,120
 22,643,406
 19,071,497
Diluted income (loss) per share $0.00 $0.01 $(0.01) $(0.06)
Anti-dilutive shares underlying stock options outstanding 

 

 235,736
 1,130,158
Anti-dilutive convertible debentures 

 

 889,830
 889,830
Anti-dilutive warrants outstanding 
 
 250,000
 250,000
Inventories at March 31, 2024 and December 31, 2023 consisted of the following:


March 31, 2024December 31, 2023
Raw materials, net$8,545,175 $8,803,054 
Work-in-process460,760 798,522 
Finished goods, net1,015,067 951,843 
Total inventories, net$10,021,002 $10,553,419 


Note 3. Acquisition of American DG Energy Inc.

On May 18, 2017, we completed our acquisition, by means of a stock-for-stock merger, of 100% of the outstanding common shares of American DG Energy Inc. (“American DG Energy" or "ADGE”), a company which installs, owns, operates and maintains complete distributed generation of electricity systems, or DG systems or energy systems, and other complementary systems at customer sites and sells electricity, hot water, heat and cooling energy under long-term contracts at prices guaranteed to the customer to be below conventional utility rates, by means of a merger of one of our wholly owned subsidiaries with and into ADGE such that ADGE became a wholly owned subsidiary of Tecogen. We acquired ADGE to, among other reasons, expand our product offerings and benefit directly from the long-term contracted revenue streams generated by these installations. We gained control of ADGE on May 18, 2017 by issuing common stock to the prior stockholders of ADGE.

We have included the financial results of ADGE in our condensed consolidated financial statements from the date of acquisition. For the three and nine months ended September 30, 2017, ADGE contributed $1,556,115 and $2,330,307 to our total revenues and $832,917 and $1,276,566 to our gross profit, respectively.

Acquisition related costs included in general and administrative expenses totaled $37,445 and $374,042, respectively for the three and nine months ended September 30, 2017. Stock issuance related costs totaling $367,101 were netted against additional paid in capital during the nine months ended September 30, 2017.

The merger is intended to qualify for federal income tax purposes as a tax-free reorganization under the provisions of Section 368(a) of the Internal Revenue Code of 1986. Subject to the terms and conditions of the merger agreement, at the
TECOGEN INC.
Notes to Unaudited Condensed Consolidated Financial Statements


closing of the merger, each outstanding share of ADGE common stock was converted into the right to receive approximately 0.092 shares of common stock of Tecogen (the "Exchange Ratio").

Also in connection with the merger, Tecogen, at the effective time of the merger, assumed the (a) outstanding stock options of ADGE and (b) outstanding warrants to purchase common stock of ADGE, each as adjusted pursuant to the Exchange Ratio and subject to the terms of the merger agreement.
The fair value of the 4,662,937 shares of common stock issued as part of the consideration for the acquisition was determined based on the closing market price of Tecogen’s stock on the date of acquisition. Additionally, as there is no required service condition in the assumed equity-based awards, 100% of the estimated fair value of the replacement equity-based awards at the date of the merger is considered attributable to pre-combination service and accordingly is included in the consideration.
The following table summarizes the consideration paid for ADGE and the amounts of the assets acquired and liabilities assumed recognized at the acquisition date, as well as the fair value at the acquisition date of the noncontrolling interest in American DG New York, LLC, a consolidated subsidiary of ADGE.
Consideration 
  Tecogen common stock - 4,662,937 shares $18,745,007
  Assumed fully vested equity awards 114,896

 $18,859,903

 
Recognized amounts of identifiable assets acquired and liabilities assumed 
  Financial assets $1,551,590
  Inventory 108,333
  Prepaid and other current assets 358,628
  Property, plant and equipment 15,430,250
  Investment securities 519,568
  Identifiable intangibles assets 1,456,166
  Financial liabilities (1,857,859)
  Unfavorable contract liability (10,838,571)
  Other liabilities (939)
    Total identifiable net assets 6,727,166
Noncontrolling interest in American DG New York, LLC (469,672)
Excess of cost over fair value of net assets acquired 12,602,409

 $18,859,903
Amounts recognized in respect of inventory, property, plant and equipment, identifiable intangible assets, unfavorable contract liability and noncontrolling interest are provisional, pending completion of the necessary valuations and analysis.
Excess of cost over fair value of net assets acquired of $12.6 million arising from the acquisition is primarily attributable to the going concern element of ADGE’s business, including its assembled workforce and the long-term contractual nature of its business, as well as expected cost synergies from the merger related primarily to the elimination of administrative overhead and duplicative personnel. None of the excess purchase price over net assets acquired recognized is expected to be deductible for income tax purposes.
Identified intangible assets and the unfavorable contract liability, both of which relate to existing customer contracts, and the estimated amortization are more fully described in Note 5, "Intangible Assets and Liabilities Other Than Goodwill and Excess of Cost Over Fair Value of Net Assets Acquired".
The fair value of the noncontrolling interest in American DG New York, LLC, a consolidated subsidiary of ADGE, was estimated using the income approach. This fair value measurement is based on significant inputs that are not observable in the market and thus represents a fair value measurement categorized within level 3 of the fair value hierarchy described in ASC Section 820-10-35. Key assumptions include a discount rate of 5.61% and the run out of existing contracts at current levels of profitability.
TECOGEN INC.
Notes to Unaudited Condensed Consolidated Financial Statements


Unaudited Pro Forma Financial Information
The unaudited pro forma financial information in the table below summarizes the combined results of operations for Tecogen and ADGE as though the companies were combined as of the beginning of fiscal 2016. The pro forma financial information for all periods presented also includes the business combination accounting effects resulting from the acquisition including amortization charges and credits from acquired intangible assets and liabilities (certain of which are preliminary), and depreciation adjustments related to fair value as though the aforementioned companies were combined as of the beginning of fiscal 2016. The pro forma financial information as presented below is for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of fiscal 2016.

  Nine months ended September 30,
  2017 2016
Total revenues $25,030,586
 $21,240,102
Net income (loss) (998,323) (2,236,396)
Basic earnings (loss) per share (0.04) (0.09)
Diluted earnings (loss) per share (0.04) (0.09)

     One-time acquisition-related expenses related to the merger incurred during the three-month and nine-month periods ended September 30, 2017 are not included in the unaudited pro forma financial information as they are not expected to have a continuing impact on the consolidated results.
The unaudited pro forma financial information does not include the revenues or results of operations of a subsidiary previously owned and consolidated by American DG Energy as that subsidiary was disposed of in 2016 prior to the acquisition by Tecogen and was considered to be a discontinued operation by American DG Energy. Additionally, the unaudited pro forma financial information does not include a gain recognized on deconsolidation of that same subsidiary by American DG Energy and an amount of interest cost related to American DG Energy's long-term debt which was extinguished contemporaneously with the disposition of the subsidiary.

Note 4.5. Property, Plant and Equipment, net


Property, plant and equipment at September 30, 2017March 31, 2024 and December 31, 20162023 consisted of the following:
Estimated Useful
Life (in Years)		 September 30, 2017 December 31, 2016
Estimated Useful
Life (in Years)		Estimated Useful
Life (in Years)		March 31, 2024December 31, 2023
Energy systems1 - 15 years $12,823,745
 $—
Machinery and equipment5 - 7 years 1,127,264
 1,009,893
Furniture and fixtures5 years 103,971
 141,874
Computer software3 - 5 years 196,417
 102,415
Leasehold improvements* 440,519
 437,341
5,487,435
Less - accumulated depreciation and amortization
Property, plant and equipment, net
  14,691,916
 1,691,523
Less - accumulated depreciation and amortization  (2,017,401) (1,174,380)
  12,674,515
 517,143
Construction in progress 2,828,459
 —
 $15,502,974
 $517,143
* Lesser of estimated useful life of asset or lease term

Depreciation and amortization expense on property and equipment for the three and nine months ended September 30, 2017March 31, 2024 and 20162023 was $425,911$94,838 and $751,960, and $42,084 and $125,255,$117,492, respectively.
9
TECOGEN INC.
Notes to Unaudited Condensed Consolidated Financial Statements




Note 5.6. Intangible Assets and Liabilities Other Than Goodwill and Excess of Cost Over Fair Value of Net Assets Acquired


As of September 30, 2017March 31, 2024 and December 31, 2016 the Company2023 we had the following amounts related to intangible assets and liabilities other than goodwill and excess of cost over fair value of net assets acquired:goodwill:
 September 30, 2017 December 31, 2016
March 31, 2024March 31, 2024December 31, 2023
Intangible assets Cost Accumulated Amortization Total Cost Accumulated Amortization TotalIntangible assetsCostAccumulated AmortizationTotalCostAccumulated AmortizationTotal
Product certifications $602,202
 $(272,503) $329,699
 $544,651
 $(233,992) $310,659
Patents 656,105
 (146,983) 509,122
 681,155
 (123,012) 558,143
Developed technology 240,000
 (72,000) 168,000
 240,000
 (60,000) 180,000
Trademarks 19,215
 —
 19,215
 17,165
 —
 17,165
In Process R&D
Favorable contract asset 1,456,166
 (52,024) 1,404,142
 —
 —
 —
 $2,973,688
 $(543,510) $2,430,178
 $1,482,971
 $(417,004) $1,065,967
Customer contracts
$
            
Intangible liability            
Intangible liability
Intangible liability
Unfavorable contract liability $10,838,571
 $(480,288) $10,358,283
 $—
 $—
 $—
Unfavorable contract liability
Unfavorable contract liability
The aggregate amortization expense related to intangible assets and liabilities exclusive of contract related intangibles for the ninethree months ended September 30, 2017March 31, 2024 and 20162023 was $74,482$92,756 and $73,511, respectively.$49,361. The net credit to cost of sales related to the amortization of the contract related intangible assetsasset and liabilitiesliability for the ninethree months ended September 30, 2017March 31, 2024 and 20162023 was $428,264$47,459 and $-0-, respectively.$60,933, respectively


Contract Assets and Liabilities

Non-Contracted Related Intangibles
The favorable contract asset and unfavorable contract liability in the foregoing table represent the estimated fair value of American DG Energy's customer contracts (both positive for favorable contracts and negative for unfavorable contracts) which were acquired by us in May 2017. The customer contract asset includes the Companymaintenance contracts acquired by us on May 18, 2017April 1, 2023 and February 1, 2024, as part of the Aegis acquisition (see Note 3. "Acquisition of American DG Energy Inc.7. "Aegis Contract and Related Asset Acquisition."). These contracts are long-term and provide customers with an alternative source of electrical power in addition to that provided by the local power utility, at rates that are lower than local utilities. This alternative electrical power is typically produced by ADGE owned, operated and maintained natural gas powered systems installed at the customers' sites, with ADGE bearing all costs of operation and maintenance. In addition to the alternative source of electrical power provided by ADGE’s systems, customers can opt to add and take advantage of the heat generated in the electrical production process in the form of hot water and/or space heating. Pricing to the customer for electrical power produced and supplied by ADGE under the contracts is under a fixed formula which requires the customer to pay for the kilowatts of electrical power provided at a fixed percentage discount to the local utility’s electric rate for that period. As a result, as utility rates for electrical power change, the amount ADGE is able to charge the customer under the contract also changes. There has been a sharp decrease in electric rates over the past several years, subsequent to the vast majority of customer contract dates, causing the billable value of the electrical power generated by ADGE’s systems to decrease, resulting in a deterioration of expected profitability. As of the date of acquisition, utility electric rates were significantly below the level anticipated at the time the fixed percentage discounts contained in the vast majority of ADGE’s customer contracts were contracted for, thus these contract terms, although they produce cash flow, were considered to be off market in the vast majority of ADGE’s customer contracts. Additionally, the demand and volume of kilowatts produced and billed for vary by contract and by period and in certain instances have been significantly below what was originally expected such that had it been known at the time the contract(s) were negotiated, it would have influenced ADGE’s determination of the level of the fixed percentage discount in those contracts.

The determination of fair value requires development of an estimate of the price at which an orderly transaction to sell the asset or to transfer the liability would take place between market participants at the measurement date under current market conditions. Contracts are considered to be assets or liabilities by virtue of the rights and obligations inherent in the contract terms. Typically, contracts with terms considered to be at market are considered to have no fair value as in order to be entitled to the rights under the contract performance must occur for which a market rate of return is earned due to the at market terms. The fair value of a contract is primarily a measurement of its off market terms. The obligation to perform under a contract with terms that are unfavorable to market results in a liability to the extent its terms are off market. The resulting liability is an estimate of the price that would need to be paid to a willing market participant to assume the obligations under the contract in order for them to receive a market rate of return for their remaining performance obligation under the contract. The exact
TECOGEN INC.
Notes to Unaudited Condensed Consolidated Financial Statements


opposite holds true in instances where the terms of a contract are considered to be favorable to market. In that case an asset would exist as an estimate of the price that would be received from a willing market participant in order to be entitled to the rights under the contract.

In determining the estimate of fair value of ADGE’s customer contracts, the measure of at market, and thus the baseline to measure the amount related to any of the off market terms or conditions with respect to the contracts, was considered best determined, given the nature of the services provided under the contracts, by utilizing a benchmark level of margin, in this case 35% of revenue which is consistent with the average return on revenue of US investor owned public utilities. It is believed that a market participant would have utilized a similar margin in arriving at a buy price for the contract(s).

Amortization of intangibles including contract related amounts is calculated using the straight linestraight-line method over the remaining useful life or contract term.term, which range from approximately 1-11 years, and is charged against cost of sales and general & administrative expenses in the accompanying consolidated statement of operations. Aggregate future amortization over the next five years and thereafter as of March 31, 2024 is estimated to be as follows:
Non-contract Related IntangiblesContract Related IntangiblesTotal
Year 1$183,995 $1,883 $185,878 
Year 2168,489 67,329 235,818 
Year 3162,381 102,012 264,393 
Year 4138,362 109,678 248,040 
Year 520,621 113,122 133,743 
Thereafter20,620 866,136 886,756 
Total$694,468 1,260,160 $1,954,628 

Note 7.Aegis Contract and Related Asset Acquisitions
On March 15, 2023, we entered into an agreement ("Agreement") with Aegis Energy Services, LLC (“Aegis”) pursuant to which Aegis agreed to assign to us and we agreed to assume certain Aegis maintenance agreements and agreed to purchase certain assets from Aegis, and related matters (“Acquisition”). On April 1, 2023, the Acquisition closed. Under the Agreement, we agreed to acquire from Aegis and assume Aegis’ rights and obligations arising on or after April 1, 2023, under
10
TECOGEN INC.
Notes to Condensed Consolidated Financial Statements

Year 1 $(993,749)
Year 2 (911,514)
Year 3 (847,307)
Year 4 (858,084)
Year 5 (840,273)


Note 6. Goodwillmaintenance agreements pursuant to which Aegis provided maintenance services to third parties for approximately 200 cogeneration systems and Excesswe agreed to acquire from Aegis certain vehicles and inventory used by Aegis in connection with the performance of Cost Over Fair Valueits maintenance services. At closing, we acquired eight (8) Aegis vehicles for consideration consisting of Net Assets Acquired

Changes$170,000 in cash. Also, we issued credits against outstanding accounts receivable due from Aegis in the carrying amount of $300,000 for the acquisition of inventory that Aegis used to provide maintenance services. At closing, we hired eight (8) Aegis employees who, following the closing, have agreed to continue to provide maintenance services relating to the cogeneration systems covered by the maintenance agreements assumed pursuant to the Agreement. Following the closing and for a period of up to seven (7) years, we agreed to pay Aegis a percentage of the revenue collected for maintenance services provided pursuant to the maintenance agreements acquired from Aegis. The Agreement contained certain indemnification provisions and agreements on the part of Aegis and for each party to cooperate with each other and provide certain transitional assistance. We acquired the Aegis maintenance agreements to expand our Service portfolio and to benefit from the long-term contract revenue stream generated by these agreements.
On February 1, 2024, Tecogen and Aegis amended the Agreement to add eighteen (18) additional maintenance contracts (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. No additional maintenance service agreements have been executed as of March 31, 2024.
We have determined that the assignment and assumption of the Aegis maintenance agreements, in combination with the related asset acquisition and the retention of the former Aegis employees, constitutes a business and should be accounted for as a business combination under the acquisition method. As of the acquisition date, we recognized, separately from goodwill, and excess of cost over fair value of netthe identifiable assets acquired
were and the liabilities assumed, at fair value. We have applied an interpretation of the guidance in ASC 805, Business Combinations, that allows an entity to combine multiple acquisitions as follows:
  Goodwill Excess of cost over fair value of net assets acquired
Balance at December 31, 2016 $40,870
 $—
Acquisitions —
 12,602,409
Balance at September 30, 2017 $40,870
 $12,602,409

Excessone single transaction due to the April 1, 2023 and February 1, 2024 acquisitions being executed in contemplation of cost over fairone another to achieve the same commercial objective for the Company. As a result, we have adjusted the initial accounting for the April 1, 2023 acquisition for the value of net assets acquired at September 30, 2017 has notfrom the February 1, 2024 acquisition.
We have included the financial results of the Aegis maintenance agreements in our consolidated financial statements from April 1, 2023, and from February 1, 2024, the closing or acquisition dates for the acquisitions.
The following table summarizes the consideration paid for the Aegis acquisitions and the fair value of assets acquired and contract-related liabilities assumed as of yet been allocated to the respective segmentsacquisition date for each acquisition date along with the combined accounting result:
April 1, 2023February 1, 2024Total
Consideration Paid:
Cash$170,000 $— $170,000 
Accounts receivable credit issued300,000 — 300,000 
Account payable due to Aegis91,048 — 91,048 
Contingent consideration1,256,656 92,409 1,349,065 
Total fair value of consideration transferred1,817,704 92,409 1,910,113 
Identifiable assets acquired and liabilities assumed:
Assets acquired
Property, plant and equipment170,000 — 170,000 
Inventory391,048 — 391,048 
Identifiable intangible asset - customer contracts1,772,659 189,639 1,962,298 
2,333,707 189,639 2,523,346 
Acquired contract-related liabilities assumed
Deferred maintenance reserve(853,271)— (853,271)
Net identifiable assets acquired1,480,436 189,639 1,670,075 
Excess of cost over fair value of net assets acquired (Goodwill)$337,268 $(97,230)$240,038 



Initial Acquisition - April 1, 2023
11
TECOGEN INC.
Notes to Condensed Consolidated Financial Statements

The amounts initially recognized for inventory, identifiable intangible assets, contingent consideration and deferred maintenance reserves were provisional pending completion of the necessary valuations and analysis. ASC 805 establishes a measurement period to provide companies with a reasonable amount of time to obtain the information necessary to identify and measure various items in a business combination and cannot extend beyond one year from the acquisition date. As of December 31, 2023, we have completed our analysis and valuation.
As of March 31, 2024, we recorded no adjustments to the fair value of the contingent consideration and deferred maintenance reserves given the probability of achieving the revenue estimates and the actual and expected maintenance costs were were consistent with our initial valuation.

Second Acquisition - February 1, 2024
Note 7. Stock-Based CompensationThe amounts initially recognized for identifiable intangible assets and contingent consideration are provisional pending completion of the necessary valuations and analysis. ASC 805 establishes a measurement period to provide companies with a reasonable amount of time to obtain the information necessary to identify and measure various items in a business combination and cannot extend beyond one year from the acquisition date. As of March 31, 2024, we have not completed our analysis and valuation for the second maintenance service agreement acquisition.

Acquisition Valuation
The fair value of the identifiable intangible asset was estimated using the income approach. The excess cash flow was discounted to present value using an appropriate rate of return to estimate the market value of the customer identifiable intangible asset and the risks associated with the future revenue forecasts due to potential changes in customer energy requirements or changes in the economic viability of these CHP sites which depend on the spread between natural gas fuel and electricity prices, all of which are not within our control. Key assumptions to value the customer identifiable intangible asset included the discount rate of 15%, profitability assumptions, revenue assumptions, and anticipated existing contract run out were the material assumptions utilized in the discounted cash flow model used to estimate fair value. The discount rate reflects an estimate of our weighted-average cost of capital.
On the date of acquisition, the fair value of the contingent consideration and the deferred maintenance reserve were calculated under the income approach using a weighted average cost of capital of 15%, discounting the future cash flows to present value, and are subsequently remeasured to fair value at each reporting date until the fair value contingencies are resolved. Fair value adjustments which may be determined at subsequent reporting dates will be recorded in our consolidated statements of operations and will not impact the goodwill balance after the measurement period.
The contingent consideration is payable within forty-five (45) days following the end of each calendar quarter through the earlier of the expiration or termination of the relevant maintenance agreements, or the seventh (7th) anniversary of the acquisition date. The consideration is equal to the product of the revenues collected in a calendar quarter multiplied by an applicable percentage. The agreement stipulates quarterly aggregate revenue targets and an applicable percentage, and provides for a higher applicable percentage if revenues exceed the target revenues. The applicable percentage ranges from 5% to 10% over the agreement term. The deferred maintenance reserve represents costs, which are expected to be incurred over a three-year period from the date of acquisition to repair customer equipment which had not been sufficiently maintained prior to our acquisition of the maintenance service agreements.
The purchase price of the acquisition was allocated to the tangible and intangible assets acquired and liabilities assumed and recognized at their fair value based on widely accepted valuation techniques in accordance with ASC 820, "Fair Value Measurement," as of the acquisition date. The process for estimating fair value requires the use of significant assumptions and estimates of future cash flows and developing appropriate discount rates. The excess of the purchase price over fair value of the net identified assets acquired and liabilities assumed was recorded as goodwill. Goodwill is primarily attributable to the going concern element of the Aegis business, including its assembled workforce and the long-term nature of the customer maintenance agreements, as well as anticipated cost synergies due primarily to the elimination of administrative overhead. Goodwill resulting from the Aegis acquisition is not expected to be deductible for income tax purposes.
Acquisition-related costs which consisted on recurring internal resources were de minimus and such costs were expensed as incurred (ASC 805-50-30-1).
The following table summarizes the contract-related liabilities assumed as of March 31, 2024 and December 31, 2023:

12
TECOGEN INC.
Notes to Condensed Consolidated Financial Statements

March 31, 2024December 31, 2023
Acquisition liabilities, current
Contingent consideration$237,928 $200,639 
Deferred maintenance reserve691,483 644,724 
929,411 845,363 
Acquisition liabilities, long-term
Contingent consideration1,016,558 994,743 
Deferred maintenance reserve140,277 187,036 
$1,156,835 $1,181,779 

Revenues and gross profit from the Aegis maintenance contracts were $758,762 and $485,044, respectively, for the three months ended March 31, 2024 and are included in our Services segment.
We are unable to provide the pro forma information required under ASC 805-10-50-2(h) as the disclosure is impracticable since the required pre-acquisition historical information could not be obtained from Aegis.

Note 8.Sale of Energy Producing Assets
    During the first quarter of 2019 we recognized two individual sales of energy producing assets for a total of eight power purchase agreements, including the associated energy production contracts, for total consideration of $7 million.
    In connection with these assets sales, we entered into agreements with the purchaser to maintain and operate the assets over the remaining periods of the associated energy production contracts (through August 2033 and January 2034, respectively) in exchange for monthly maintenance and operating fees. These agreements contain provisions whereby we have guaranteed to the purchaser a minimum level or threshold of cash flows from the associated energy production contracts. Actual results are compared to the minimum threshold bi-annually and we are contractually obligated to reimburse any shortfall to the purchaser. To the extent actual cash flow results exceed the minimum threshold, we are entitled to fifty percent of such excess under the agreements. Based upon an analysis of these energy producing assets' expected future performance, as of March 31, 2024, we do not expect to make any material payments under the guarantee.
At March 31, 2024, we were due $25,633 under the energy production contracts, representing 50% of the excess cash flows above the minimum threshold for the bi-annual period ended December 31, 2023. We expect to receive these funds in the second quarter of 2024.
    The foregoing agreements also contain provisions whereby we have agreed to make whole the purchaser in the event the counterparty to the energy production contract(s) defaults on or otherwise terminates before the stated expiration of the energy production contract. Should we be required to make whole the purchaser under such provisions, we would be entitled to seek recovery from the counterparty to the energy production contract(s) under a similar provision contained in those contracts in respect of early termination.
    We are also responsible under the agreements for site decommissioning costs, if any, in excess of certain threshold amounts by site. Decommissioning of site assets is performed when, if and as requested by the counterparty to the energy production contract upon termination of the energy production contract.    
Note 9.Leases
    Our leases principally consist of operating leases related to our corporate office, field offices, and our research, manufacturing, and storage facilities.
At lease inception, we determine if an arrangement constitutes a lease and whether that lease meets the classification criteria of a finance or operating lease. Some of our lease agreements contain lease components (e.g. minimum rent payments) and non-lease components (e.g. maintenance, labor charges, etc.). We account for each component separately based on the estimated standalone price of each component.
Operating Leases
Operating leases are included in Right-of-use assets, Lease obligations, current and Long-term liabilities - Lease obligations, net of current portion, on the condensed consolidated balance sheets. These assets and liabilities are recognized at the commencement date based on the present value of remaining lease payments over the lease term and using an incremental
13
TECOGEN INC.
Notes to Condensed Consolidated Financial Statements

borrowing rate consistent with the lease terms or implicit rates when readily determinable. For those leases where it is reasonably certain at the commencement date that we will exercise the option to extend the lease, then the lease term will include the lease extension term. Short-term operating leases, which have an initial term of 12 months or less, are not recorded on the balance sheet.
On March 31, 2023, we entered into two lease agreements for two adjoining buildings, located in North Billerica, Massachusetts, containing approximately 26,412 square feet of manufacturing, storage and office space to serve as our headquarters and manufacturing facilities. The lease agreements provide for initial lease terms of five (5) years with two successive options to renew for additional terms of five (5) years. Both leases commence on January 1, 2024 and require payment of the base rent, real estate taxes, common maintenance expenses and aggregate deposits of $38,200. Our costs for initial improvements required to the leased premises is estimated to range between $500,000 and $750,000. The estimated straight-line monthly rent expense for the initial term of the lease is approximately $26,962 per month. In accordance with ASC 842-20-30-1, we recorded the lease liability and right-of-use asset using the discount rate for the lease upon the lease commencement date, January 1, 2024. On January 1, 2024 we extended our lease for the 2,800 square foot Valley Stream, NY service center for an additional three (3) years through December 31, 2026, with an option to renew for an additional term of three (3) years. The straight-line base monthly rent for the extension is $4,560 per month. On February 1, 2024 we entered into a lease agreement for 2,063 square feet of office and storage space in East Syracuse, New York for an initial lease term of three (3) years, expiring on January 31, 2027, with an option for an additional lease term of two (2) years. The straight-line base monthly rent for the initial lease term is $1,891 per month.
The lease on our former headquarters located in Waltham, Massachusetts which consists of approximately 43,000 square feet of manufacturing, storage and office space, expired on April 30, 2024. The base monthly rent in 2024 was $44,254.
Lease expense for operating leases, which principally consists of fixed payments for base rent, is recognized on a straight-line basis over the lease term. Operating lease expense for the three months ended March 31, 2024 and 2023 was $271,562 and $189,715, respectively.
Supplemental information related to operating leases for the three months ended March 31, 2024 and 2023 was as follows:
March 31, 2024March 31, 2023
Cash paid for amounts included in the measurement of operating lease liabilities$269,836 $184,072 
Right-of-use assets obtained in exchange for operating lease liabilities$1,429,977 $— 
Weighted-average remaining lease term - operating leases4.7 Years3.6 Years
Weighted-average discount rate - operating leases7.5 %6.0 %

Supplemental balance sheet information related to operating leases as of March 31, 2024 and December 31, 2023 was as follows:
March 31, 2024December 31, 2023
Operating leases
Right-of-use assets$1,986,087 $743,096 
Operating lease liability, current$438,334 $248,933 
Operating lease liability, long-term1,573,793 523,660 
Total operating lease liability$2,012,127 $772,593 

Finance Leases
Finance leases are included in Right-of-use assets, Lease obligations, current and Long-term liabilities - Lease obligations, net of current portion, on the condensed consolidated balance sheets. These assets and liabilities are recognized at the commencement date based on the present value of remaining lease payments over the lease term and using an incremental borrowing rate consistent with the lease terms or implicit rates, when readily determinable. For those leases where it is reasonably certain at the commencement date that we will exercise the option to extend the lease, then the lease term will include the lease extension term. Effective December 19, 2023, we entered into a master finance lease agreement for motor vehicles and acquired five (5) service vehicles.
14
TECOGEN INC.
Notes to Condensed Consolidated Financial Statements


Supplemental information for finance leases for the year ended December 31, 2023 is as follows:
December 31, 2023
Right-of-use assets obtained in exchange for finance lease liabilities$200,187 
Weighted-average remaining lease term - finance leases5.0 years
Weighted-average discount rate - finance leases10.4 %

Supplemental balance sheet information related to finance leases as of March 31, 2024 and December 31, 2023 is as follows:
March 31, 2024December 31, 2023
Finance leases
Right-of-use assets - motor vehicles$190,177 $200,187 
Finance lease liability, current$31,428 $40,540 
Finance lease liability, long-term151,483 159,647 
Total finance lease liability$182,911 $200,187 

Future minimum lease commitments under non-cancellable operating and finance leases as of March 31, 2024 were as follows:
Operating LeasesFinance LeasesTotal
Year 1$563,175 $48,931 $612,106 
Year 2498,686 48,931 547,617 
Year 3472,862 48,931 521,793 
Year 4421,503 48,931 470,434 
Year 5302,960 36,699 339,659 
Thereafter103,230 — 103,230 
Total lease payments2,362,416 232,423 2,594,839 
Less: imputed interest350,289 49,512 399,801 
Total$2,012,127 $182,911 $2,195,038 

Note 10.Stock-Based Compensation
Stock-Based Compensation
The CompanyWe adopted thea 2006 Stock Option and Incentive Plan, or the Plan, under which the Board of Directors may grant incentive or non-qualified stock options and stock grants to key employees, directors, advisors and consultants of the Company.consultants. The Plan was amended at various dates by the Board of Directors to increase the reserved shares of common stock issuable under the Amended Plan to 3,838,750 as of September 30,March 31, 2024, and in June 2017 orstockholders approved an amendment to extend the Amended Plan.termination date of the Plan to January 1, 2026.
Stock options vest based upon the terms within the individual option grants, with an acceleration of the unvested portion of such options upon a change in control event, as defined in the Amended Plan. The options are not transferable except by will or domestic relations order. The option price per share under the Amended Plan cannot be less than the fair market value of the underlying shares on the date of the grant. The number of shares remaining available for future issuance under the Amended Plan as of September 30, 2017March 31, 2024 was 2,250,536.1,008,368.
During the three months ended March 31, 2024, we did not grant any options to purchase shares of common stock under the Amended Plan.
We adopted the 2022 Stock Incentive Plan (the "2022 Plan"), under which the Board of Directors may grant incentive or non-qualified stock options and stock grants to key employees, directors, advisors and consultants. We have reserved
15
TECOGEN INC.
Notes to Unaudited Condensed Consolidated Financial Statements



3,800,000 shares of our common stock for issuance pursuant to awards under the 2022 Plan. The adoption of the 2022 Plan was approved by our shareholders on June 9, 2022.
Under the 2022 Plan, stock options vest based upon the terms within the individual option grants, with an acceleration of the unvested portion of such options upon a change in control event, as defined in the 2022 Plan. The options are not transferable except by will or domestic relations order. The option price per share under the 2022 Plan cannot be less than the fair market value of the underlying shares on the date of the grant. The number of shares remaining available for future issuance under the Plan as of March 31, 2024 was 3,068,750.
During the three months ended March 31, 2024, we did not grant any options to purchase shares of common stock under the 2022 Plan.
Stock option activity for the ninethree months ended September 30, 2017March 31, 2024 was as follows: 
Common Stock OptionsNumber of
Options		Exercise
Price
Per
Share		Weighted Average Exercise PriceWeighted
Average
Remaining
Life		Aggregate
Intrinsic
Value
Outstanding, December 31, 20233,638,122 $0.71 -$10.33 $1.49 6.70 years$127,811 
Granted— 
Exercised— 
Canceled and forfeited(801,350)$0.74 -$10.33 $2.73 
Outstanding, March 31 20242,836,772 $0.71 -$6.74 $1.14 7.06 years$— 
Exercisable, March 31, 20241,643,022 $1.28 $— 
Vested and expected to vest, March 31, 20242,657,710 $1.16  $— 
Common Stock Options
Number of
Options
 
Exercise
Price
Per
Share
 
Weighted
Average
Exercise
Price
 
Weighted
Average
Remaining
Life
 
Aggregate
Intrinsic
Value
Outstanding, December 31, 20161,117,918
 $0.79-$5.39 $3.10
 5.00 years $1,415,150
Granted45,000
 $3.22-$3.72 3.35
    
Assumed in merger156,124
 $3.15-$30.33—
10.35
    
Exercised(79,543) $0.79-$2.00 1.62
    
Canceled and forfeited(106,112) $2.60-$30.33 9.67
    
Outstanding, September 30, 20171,133,387
  $0.79-$25.11 $3.62
 5.25 years $484,535
Exercisable, September 30, 2017883,631
   $3.42
   $201,957
Vested and expected to vest, September 30, 20171,095,925
   $3.59
   $605,063
Consolidated stock-based compensation expense for the ninethree months ended September 30, 2017March 31, 2024 and 20162023 was $138,329$44,535 and $117,065,$77,348, respectively. No tax benefit was recognized related to the stock-based compensation recorded during the periods.period.
At March 31, 2024, the total compensation cost related to unvested stock option awards not yet recognized is $362,187 and this amount will be recognized over a weighted average period of 2.44 years.

Note 8. Fair Value Measurements
Note 11.Related Party Notes

On October 9, 2023, we entered into note subscription agreements with each of John N. Hatsopoulos, a director and principal shareholder of registrant, and Earl R. Lewis, III, a director of registrant, pursuant to which Mr. Hatsopoulos agreed to provide financing to us of up to $1 million, and Mr. Lewis agreed to provide financing to us of $500,000, and potentially, an additional $500,000 at his discretion. We have the right to determine the amount of the loans at the time of a draw down, subject to the conditions in our agreements with each of Mr. Hatsopoulos and Mr. Lewis discussed below. The loans and terms of the loan agreements were unanimously approved by our board of directors.
The loans bear interest on the outstanding principal at the Internal Revenue Service’s Applicable Federal Rate to be determined at the time we issue a promissory note in connection with a loan drawdown. The principal amount and accrued interest of each loan is repayable one year from the date of issuance of the applicable promissory note. A note may be prepaid by us at any time. The principal amount of each loan and accrued interest is subject to mandatory prepayment in the event of a change of control of the registrant. The promissory notes are subject to customary events of default and are transferable provided the conditions to transfer set forth in the promissory notes are satisfied by the noteholder. The proceeds of the loans are expected to be used for general working capital purposes.
On October 10, 2023, we issued a promissory note and borrowed $500,000 from Mr. Hatsopoulos. The loan bears interest at 5.12% per annum. At March 31, 2024 our obligation to Mr. Hatsopoulos under the promissory note, inclusive of $11,905 of accrued and unpaid interest, was $511,905. 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, and agreeing to accept payment in cash or Tecogen Inc. common stock.

Note 12.Fair Value Measurements
The fair value topic of the FASB Accounting Standards Codification defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The accounting guidance also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs, where available, and minimize the use of unobservable inputs when measuring fair value. There are three levels of inputs that may be used to measure fair value:
16
TECOGEN INC.
Notes to Condensed Consolidated Financial Statements

Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities. The CompanyWe currently doesdo not have any Level 1 financial assets or liabilities.
Level 2 - Observable inputs other than quoted prices included in Level 1. Level 2 inputs include quoted prices for identical assets or liabilities in non-active markets, quoted prices for similar assets or liabilities in active markets and inputs other than quoted prices that are observable for substantially the full term of the asset or liability. We have Level 2 financial assets as provided below.
Level 3 - Unobservable inputs reflecting management’s own assumptions about the input used in pricing the asset or liability. We have Level 3 liabilities as provided below.

Available-for-sale equity securities
The following table presentstables present the asset reported in "other assets" in the consolidated balance sheet measured at its fair value on a recurring basis as of September 30, 2017March 31, 2024 and 2023 by level within the fair value hierarchy.
September 30, 2017  Quoted prices in active markets for identical assets Significant other observable inputs Significant unobservable inputs  
Total Level 1 Level 2 Level 3 Total gains (losses)
Quoted prices in active markets for identical assets
Quoted prices in active markets for identical assets
Quoted prices in active markets for identical assets
Total
Total
Total
March 31, 2024
March 31, 2024
March 31, 2024
Recurring fair value measurements
Recurring fair value measurements
Recurring fair value measurements         
Available-for-sale equity securities         
Available-for-sale equity securities
Available-for-sale equity securities
EuroSite Power Inc.
EuroSite Power Inc.
EuroSite Power Inc.$334,570
 $—
 $—
 $334,570
 $(184,998)
Total recurring fair value measurements$334,570
 $—
 $—
 $334,570
 $(184,998)
Total recurring fair value measurements
Total recurring fair value measurements
March 31, 2023
March 31, 2023
March 31, 2023
Recurring fair value measurements
Recurring fair value measurements
Recurring fair value measurements
Available-for-sale equity securities
Available-for-sale equity securities
Available-for-sale equity securities
EuroSite Power Inc.
EuroSite Power Inc.
EuroSite Power Inc.
Total recurring fair value measurements
Total recurring fair value measurements
Total recurring fair value measurements
      
The Company utilizes    We utilize a Level 32 category fair value measurement to value its investment in EuroSite Power, Inc. as an available-for-salea marketable equity security at period end. That measurement is determined by management based onequal to the lowestquoted market closing sales price in a 15 day trading period prior toat period end.

TECOGEN INC.
Notes to Unaudited Condensed Consolidated Financial Statements


Since this security is not actively traded we classify it as Level 2.
The following table summarizes changes in level 3Level 2 assets which are comprised of available-for-salemarketable equity securities for the period:three months ended March 31, 2024 and 2023:
Fair value at December 31, 2023$93,744 
Unrealized gains18,749 
Fair value at March 31, 2024$112,493 
Fair value at December 31, 2022$93,744 
Unrealized gains— 
Fair value at March 31, 2023$93,744 
Fair value at acquisition on May 18, 2017$519,568
     Unrealized loss recognized in other comprehensive loss(184,998)
Fair value at September 30, 2017$334,570


Contingent Contract Consideration
Note 9. CommitmentsWe utilize a Level 3 category fair value measurement to value the contingent contract consideration liability at period end since there are no quoted prices for this liability in non-active markets, there are no quoted prices for similar liabilities in active markets and Contingencies
there are no inputs that are observable for substantially the full term of the the liability. The Company guarantees certain obligationscontingent contract consideration calculation requires management to make estimates and assumptions that affect the reported amount of a former subsidiarythe liability. The contingent contract consideration is payable each calendar quarter through the earlier of American DG Energy, EuroSite Power Inc. These guarantees include a payment performance guarantee in respectthe expiration or termination of collateralized equipment financing loans, with a remaining principal amount outstanding subjectthe relevant maintenance agreements, or the seventh (7th) anniversary of the acquisition date. The consideration is equal to the guarantee at September 30, 2017 of approximately $301,000 due ratably in equal installments through September 2021, and certain guarantees of performance in respect of certain customer contracts. Based on current conditions, the Company does not believe there to be any amounts probable of payment by the Company under anyproduct of the guarantees and has estimated the value associated with the non-contingent aspect of the guarantees is approximately $10,000 which is recorded as liability in the accompanying financial statements.
Legal Proceedings
Tecogen is not currently a party to any material litigation arising from its operations, and it is not aware of any pending or threatened litigation against it relating to its operations that could have a material adverse effect on its business, operating results or financial condition. However, it is or has been a party to a claim in the Superior Court of the Commonwealth of Massachusetts and named as a defendantrevenues collected in a case in the United States District Court for the District of Massachusetts, described below, related to the Merger.calendar quarter multiplied by an applicable percentage. The agreement
Massachusetts Superior Court Action
17
On or about February 6, 2017, ADGE, John Hatsopoulos, George N. Hatsopoulos, Charles T. Maxwell, Deanna M. Petersen, Christine Klaskin, John Rowe, Joan Giacinti, Elias Samaras, Tecogen, and Merger Sub were served with a Verified Complaint by William C. May ("May"), individually and on behalf of the other shareholders of ADGE as a class. The action was commenced in the Business Litigation Session of the Superior Court of the Commonwealth of Massachusetts, Civil Action No. 17-0390. The complaint alleged class action claims arising out of the proposed Merger. On May 31, 2017, May voluntarily dismissed the action and consolidated his claims with the pending federal action in the United States District Court for the District of Massachusetts. If the complaint in the federal court is dismissed, it is possible that May or another plaintiff will recommence an action in state court with similar claims to those asserted by May.
United States District Court Action
On or about February 15, 2017, a lawsuit was filed in the United States District Court for the District of Massachusetts by Lee Vardakas (“Vardakas”), individually and on behalf of other stockholders of ADGE, naming ADGE, John N. Hatsopoulos, George N. Hatsopoulos, Benjamin Locke, Charles T. Maxwell, Deanne M. Petersen, Christine M. Klaskin, John Rowe, Joan Giacinti, Elias Samaras, Tecogen., Merger Sub., and Cassel Salpeter and Co., LLC, as defendants. The action is captioned Vardakas v. American DG Energy, Inc., Case No. 17-CV-10247(LTS). At the time Vardakas commenced the action, his complaint challenged the proposed Merger between Tecogen and ADGE.
On May 18, 2017, ADGE’s and Tecogen’s shareholders approved the Merger.
Following the consummation of the Merger (and the appointment of May, from the Massachusetts Superior Court Action, as lead plaintiff), Vardakas filed an Amended Class Action Complaint (the “Amended Complaint”). The Amended Complaint discontinued the claims against Cassel Salpeter & Co., LLC but asserted against the remaining defendants claims under Section 14(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and SEC Rule 14a-9; claims against certain defendants for control person liability under § 20(a) of the Exchange Act (collectively, the “Federal Securities Law Claims”); and common law claims for breach of fiduciary duty and aiding and abetting (the “State Law Claims”). The Federal Securities Law Claims allege, in substance, that defendants made material nondisclosure in the proxy statement about the process leading to the Merger and about the fairness opinion relied upon by ADGE’s Board of Directors in recommending the Merger to shareholders. The State Law Claims assert, in substance, that defendants breached their fiduciary duties in negotiating and approving the Merger, which, plaintiff claims, deprived ADGE’s nonaffiliated shareholders of fair value for their shares.
On July 19, 2017, defendants moved to dismiss the Amended Complaint. In their motion papers, defendants contend that the Federal Securities Law Claims are not sufficiently pleaded and fail to state a viable claim. Defendants also assert that
TECOGEN INC.
Notes to Unaudited Condensed Consolidated Financial Statements



stipulates quarterly aggregate revenue targets and an applicable percentage, and provides for a higher applicable percentage if revenues exceed the Federal Securities Law Claims are dismissed,target revenues. The applicable percentage ranges from 5% to 10% over the district court must also dismissagreement term. On the State Law Claims because it would lack subject matter jurisdiction. The parties are awaiting a decision fromdate of acquisition, the court.
The Company believes that the lawsuit is without merit and intends to defend vigorously. The Amended Complaint does not specify the amount of damages claimed and the likelihood of an unfavorable outcome is not reasonably estimable.
Note 10. Related Party Transactions
The Company has two affiliated companies, namely Ultra Emissions Technologies Ltd, and TTcogen LLC. These companies are related because either severalfair value of the major stockholderscontingent consideration was calculated using a weighted average cost of those companies have a significant ownership position incapital of 15%, discounting the Company or they are joint ventures between Tecogen and other parties.future cash flows to present value.
In January of 2017, prior to its acquisition of American DG Energy, the Company purchased a large quantity of used equipment from American DG Energy for approximately $985,000. Tecogen plans to sell this equipment to specific customers in the coming quarters.
Quoted prices in active markets for identical assetsSignificant other observable inputsSignificant unobservable inputs
TotalLevel 1Level 2Level 3Total gains (losses)
March 31, 2024
Recurring fair value measurements
Contingent contract consideration
Current$237,928 $— $— $237,928 $— 
Long-term1,016,558 — — 1,016,558 — 
Total recurring fair value measurements$1,254,486 $— $— $1,254,486 $— 
In connection with the acquisition of American DG Energy, the Company assumed a loan from John N. Hatsopoulos, the Company's Co-Chief Executive Officer and a Company Director. The loan is in the amount of $850,000 and bears interest at 6%, payable quarterly, and matures and becomes due and payable on May 25, 2018.
Ultra Emissions Technologies Ltd.
Note 13.Segments
On December 28, 2015, the Company entered into a joint venture agreement relating to the formation of a joint venture company (the “JV”) organized to develop and commercialize Tecogen’s patented technology (“Ultera® Technology”) designed to reduce harmful emissions generated by engines using fossil fuels. The joint venture company, called Ultra Emissions Technologies Limited, was organized under the laws of the Island of Jersey, Channel Islands.
The Company received a 50% equity interest in the JV in exchange for a fully paid-up worldwide license to use Tecogen’s Ultera emissions control technology in the field of mobile vehicles burning fossil fuels. The other half of the joint venture equity interests were purchased for $3,000,000 by a small group of offshore investors. Warrants to purchase additional equity securities in the JV were granted to all parties pro rata. If the venture is not successful, all licensed intellectual property rights will revert to Tecogen.

On August 2, 2016, Tecogen exercised 2,000,000 warrants (the "Ultratek Warrants"), in the JV, at $1.00 per share, for an aggregate amount of $2 million. The funds used to exercise the Ultratek Warrants were acquired by the Company from the holders of certain Company warrants (the "Tecogen Warrant Holders"), when they partially exercised their Tecogen warrants (the "Tecogen Warrants"), in July of 2016. The Tecogen Warrant Holders exercised a total of 675,000 Tecogen Warrants with a $4.00 exercise price, resulting in cash proceeds of $2,700,000 to the Company, which the Company then used in part to invest in the JV. An additional $8,500,000 was raised from other outside investors for a total equity investment in the JV to date of $13,500,000. Due to this investment, Tecogen's ownership has decreased to 43%.

The JV is expected to have losses as it performs the necessary research and development with the Ultera technology. The Company accounts for its interest in the JV using the equity method.  Income and losses will be recorded consistent with an agreement between the JV shareholders as to how income and losses will be allocated.  These allocations are consistent with the allocation of cash distributions and liquidating distributions of the JV.  The shareholder agreement calls for Tecogen's investment to be returned before any other shareholder if the venture does not achieve commercialization.  As a result, as of September 30, 2017, Tecogen has not recorded any of the losses of the JV as the cumulative losses of the JV have not exceeded the other owners' investments to date.    As of September 30, 2017, $94,777 is due to Tecogen from Ultratek.
TTcogen LLC
On May 19, 2016, the Company along with Tedom a.s., a corporation incorporated in the Czech Republic and a European combined heat and power product manufacture ("Tedom"), entered into a joint venture, where the Company will hold a 50% participating interest and the remaining 50% interest will be with Tedom. As part of the joint venture, the parties agreed to create a Delaware limited liability company, TTcogen LLC ("TTcogen"), to carry out the business of the venture. Tedom granted TTcogen the sole and exclusive right to market, sell, offer for sale, and distribute certain products as agreed to by the parties throughout the United States. The product offerings of the joint venture expand the current Tecogen product offerings to the MicroCHP of 35kW to large 4,000kW plants. Tecogen agreed to refer all appropriate sale leads to TTcogen regarding the products agreed to by the parties and Tecogen shall have the first right to repair and maintain the products sold by TTcogen.

The Company accounts for its interest in TTcogen's operations using equity method accounting. Any initial operating losses of TTcogen are to be borne and funded by Tedom. To the extent any such losses are borne and funded solely by Tedom, the
TECOGEN INC.
Notes to Unaudited Condensed Consolidated Financial Statements


Company will not recognize any portion of such losses given the Company does not guarantee the obligations of the joint venture nor is it committed to provide funding to the joint venture. As of period ending September 30, 2017, $391,618 is due to Tecogen from TTcogen.

On September 22, 2017, the Company provided written notice to Tedom and Tedom USA Inc., a Delaware subsidiary of Tedom (“Tedom USA”) in exercise of its rights under the Join Venture Agreement dated May 19, 2016 ("JVA") and its corresponding LLC Operating Agreement ("LLC Operating Agreement"), of the immediate termination of the JVA and LLC Operating Agreement. This notice begins the dissolution process under the LLC Operating Agreement. The termination notice was the result of a material and incurable breach of certain provisions thereunder by Tedom and/or Tedom USA. The Company intends to work together with Tedom to come to an amicable decision to create a new path forward for TTcogen and the relationship between the Company and Tedom and/or facilitate an amicable wind up of TTcogen's affairs as provided for in the LLC Operating Agreement and in accordance with the terms therewith.

Note 11. Segments
As of September 30, 2017, the Company wasMarch 31, 2024, we were organized into twothree operating divisionssegments through which senior management evaluates the Company’sour business. These divisions,segments, as described in more detail in Note 1, are organized around the products and services provided to customers and represent the Company’sour reportable segments. Prior to the acquisition of ADGE (see Note 3. “Acquisition of American DG Energy Inc.”), the Company’s operations were comprised of a single segment.TheThe following table presents information by reportable segment for the three months ended September 30, 2017March 31, 2024 and 2016 and the nine months ended September 30, 2017 and 2016:2023:
ProductsServicesEnergy ProductionCorporate, other and elimination (1)Total
Three Months Ended March 31, 2024
Revenue - external customers$1,491,398 $4,014,310 $680,389 $— $6,186,097 
Intersegment revenue— 117,348 — (117,348)$— 
Total revenue$1,491,398 $4,131,658 $680,389 $(117,348)$6,186,097 
Gross profit$441,855 $1,922,053 $211,749 $— $2,575,657 
Identifiable assets$9,793,634 $12,207,675 $3,295,316 $3,161,918 $28,458,543 
Three Months Ended March 31, 2023
Revenue - external customers$1,710,136 $3,136,173 $533,509 $— $5,379,818 
Intersegment revenue— 88,214 — (88,214)— 
Total revenue$1,710,136 $3,224,387 $533,509 $(88,214)$5,379,818 
Gross profit$497,567 $1,398,572 $195,770 $— $2,091,909 
Identifiable assets$12,023,164 $9,750,153 $3,433,439 $3,036,675 $28,243,431 
(1) Corporate, intersegment revenue, other and elimination includes various corporate assets.
Note 14.Subsequent Events
    Products and Services Energy Production Corporate, other and elimination (1) Total
 Three months ended September 30, 2017        
          
 Revenue - external customers $6,945,083
 $1,556,115
 $—
 $8,501,198
 Intersegment revenue 250,525
 —
 (250,525) —
    Total revenue 7,195,608
 1,556,115
 (250,525) 8,501,198
 Gross profit 2,425,114
 832,917
 —
 3,258,031
 Identifiable assets 19,179,530
 16,028,115
 21,424,270
 56,631,915
          
 Three months ended September 30, 2016        
          
 Revenue - external customers $6,616,455
 $—
 $—
 $6,616,455
 Intersegment revenue —
 —
 —
 —
    Total revenue 6,616,455
 —
 —
 6,616,455
 Gross profit 2,774,818
 —
 —
 2,774,818
 Identifiable assets 15,112,139
 —
 8,078,531
 23,190,670
          
 Nine months ended September 30, 2017        
          
 Revenue - external customers $20,608,196
 $2,330,307
 $—
 $22,938,503
 Intersegment revenue 442,343
 —
 (442,343) —
    Total revenue 21,050,539
 2,330,307
 (442,343) 22,938,503
 Gross profit 7,882,758
 1,276,566
 —
 9,159,324
 Identifiable assets 19,179,530
 16,028,115
 21,424,270
 56,631,915
          
 Nine months ended September 30, 2016        
          
 Revenue - external customers $17,379,278
 $—
 $—
 $17,379,278
 Intersegment revenue —
 —
 —
 —
    Total revenue 17,379,278
 —
 —
 17,379,278
 Gross profit 6,597,056
 —
 —
 6,597,056
 Identifiable assets 15,112,139
 —
 8,078,531
 23,190,670
          
 (1) Corporate, intersegment revenue, other and elimination includes various corporate assets. Excess of cost over fair value of net assets acquired at September 30, 2017 has not as of yet been allocated to the respective segments pending completion of the necessary analysis.
 
TECOGEN INC.
Notes to Unaudited Condensed Consolidated Financial Statements


Note 12. Subsequent Events
By unanimous written consent on October 24, 2017, the shareholders of Tecogen Inc.'s (the "Company") joint venture, Ultra Emissions Technologies S.ar.L, ("Ultratek"), voted to dissolve Ultratek, thus terminating the joint venture agreement dated December 28, 2015 and the license agreement between the Company and Ultratek, dated December 28, 2015. This joint venture agreement and license agreement is described in its entirety on the Company's Form 8-K that was filed with the Securities and Exchange Commission on December 31, 2015.

Pursuant to the unanimous shareholder consent dissolving Ultratek, the Company will be receiving its full $2,000,000 investment into Ultratek back upon the completion of the liquidation process. Further, upon termination of the license agreement all intellectual property immediately reverts back to the Company. The Company has also agreed to purchase all of the assets of Ultratek upon dissolution, including new intellectual property that Ultratek developed, for a total purchase price of $400,000.

The Company has    We have evaluated subsequent events through the date of this filing, and, except as described below, have determined that no additionalmaterial subsequent events occurred that would require recognition in the consolidated financial statements or disclosure in the notes thereto.
On May 1, 2024, Tecogen and Aegis amended the Agreement to add thirty-one (31) additional maintenance contracts (the "Amendment"). The Amendment ("Second Amendment") includes an undertaking by Aegis to use commercially reasonable efforts to support and assist our execution of maintenance service agreements for an additional forty-eight (48) cogeneration units sold to customers by Aegis.

18
TECOGEN INC.
Notes to Condensed Consolidated Financial Statements



Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Forward-looking statements are made throughout thisThis Management’s Discussion and Analysis of Financial Condition and Results of Operations.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. Without limiting the foregoing, theForward-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 “believes,such as “future,” “anticipates,” “plans,“believes,” “estimates,” “expects,” “seeks,“intends,” “estimates”“plans,” “predicts,” “will,” “would,” “could,” “can,” “may,” and similar expressionsterms. Forward-looking statements are intended to identifynot 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, statements regardingdemand for our currentproducts and future cash requirements,services, the availability of incentives, rebates, and tax benefits relating to our expectations regarding suppliers of cogeneration units, and statements regarding potential financing activitiesproducts, changes in the future.regulatory environment relating to our products, competing technological developments, and the availability of financing to fund our operations and growth. Factors that might cause such differences include, but are not limited to, those discussed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2023 (“2023 Form 10-K”), as supplemented, and Part II, Item 1A of this Form 10-Q, in each case under the heading “Risk Factors.” The following discussion should be read in conjunction with the 2023 Form 10-K filed with the Securities and Exchange Commission (“SEC”) and the condensed consolidated financial statements and accompanying notes included in Part I, Item 1 of this Form 10-Q. Each of the terms “Tecogen,” “we,” “our,” and “us” as used herein refer collectively to Tecogen Inc. and our wholly owned subsidiaries, unless otherwise stated. While the Companywe may elect to update forward-looking statements in the future, itwe specifically disclaimsdisclaim any obligation to do so, even if the Company’sour estimates change, and readersyou should not rely on those forward-looking statements as representing the Company’sours views as of any date subsequent to the date of the filing of this Quarterly Report. There are a numberForm 10-Q.

Recent Developments
Assumption of important factorsAegis Energy Services Maintenance Agreements
On March 15, 2023, we entered into an agreement ("Agreement") with Aegis Energy Services, LLC (“Aegis”) pursuant to which Aegis agreed to assign to us and we agreed to assume certain Aegis maintenance agreements, we agreed to purchase certain assets, and related matters (“Acquisition”). On April 1, 2023, the Acquisition closed. Under the Agreement, we agreed to acquire from Aegis and assume Aegis' rights and obligations arising on or after April 1, 2023 under maintenance agreements pursuant to which Aegis provided maintenance services for approximately 200 cogeneration systems, and acquired certain vehicles and inventory used by Aegis in connection with the performance of such maintenance services, and, following closing hired eight (8) Aegis employees to provide services with respect to such maintenance agreements. At closing, we acquired eight (8) Aegis vehicles for consideration consisting of $170,000 in cash. Also, we issued credits against outstanding accounts receivable due from Aegis in the amount of $300,000 for the acquisition of inventory that could causeAegis used to provide maintenance services.
On February 1, 2024, Tecogen and Aegis amended the actual resultsAgreement 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. See Note 7. Aegis Contract and Related Asset Acquisitions of the CompanyNotes to differ materiallythe Consolidated Financial Statements.    
On May 1, 2024, Tecogen and Aegis amended the Agreement to add thirty-one (31) additional maintenance contracts (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 forty-eight (48) cogeneration units sold to customers by Aegis.
Tecochill Hybrid-Drive Air-Cooled Chiller Development
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 those indicatedour InVerde e+ cogeneration module, the system can simultaneously take two inputs, one from the grid or a renewable energy source and one from our natural gas engine. This allows a customer to seek the optimum blend of operational cost savings and greenhouse gas benefits while providing added resiliency from two power sources. We introduced the Tecochill Hybrid-Drive Air-Cooled Chiller at the AHR Expo in February 2023 and received an order on February 8, 2024 for three hybrid-drive air-cooled chillers for a utility in Florida. A patent application based on this concept has been filed with the US Patent and Trademark Office.
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TECOGEN INC.
Controlled Environment Agriculture
On July 20, 2022, we announced our intention to focus on opportunities for low carbon Controlled Environment Agriculture ("CEA"). We believe that CEA offers an exciting opportunity to apply our expertise in clean cooling, power generation, and greenhouse gas reduction to address critical issues affecting food and energy security. We propose to address this challenge by such forward-looking statements, including those detailed underdeveloping a highly efficient energy solution for CEA grown produce using our cogeneration products in conjunction with solar energy generation, energy storage, and other technologies.
CEA facilities enable multiple crop cycles (15 to 20 cycles) in one year compared to one or two crop cycles in conventional farming. In addition, growing produce close to the heading “Risk Factors”point of sale reduces food spoilage during transportation. Food crops grown in this Quarterly Report.greenhouses typically have lower yields per square foot than in CEA facilities, and the push to situate facilities close to consumers in cities requires minimizing land area and maximizing yield per square foot. Yields are increased in CEA facilities by supplementing or replacing natural light with grow lights in a climate-controlled environment - which requires significant energy use.

In recent years our cogeneration equipment has been used in numerous cannabis cultivation facilities because our systems reduce the facility's need for power, significantly reduce operating costs and the facility GHG footprint, and offer resiliency to grid outages. Our experience providing clean energy solutions to cannabis cultivation facilities has given us significant insight into requirements relating to energy-intensive indoor agriculture applications that we expect to be transferable to CEA facilities for food production.
Related Party Notes
On October 9, 2023, we entered into note subscription agreements with each of John N. Hatsopoulos, a director and principal shareholder of registrant, and Earl R. Lewis, III, a director of registrant, pursuant to which Mr. Hatsopoulos agreed to provide financing to us of up to $1 million, and Mr. Lewis agreed to provide financing to us of $500,000, and potentially, an additional $500,000 at his discretion. On October 10, 2023, we issued a promissory note and borrowed $500,000 from Mr. Hatsopoulos. The loan bears interest at 5.12% per annum. See Note 11. Related Party Notes of the Notes to the Consolidated Financial Statements.    
Impact of the Geopolitical Tensions
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.
Overview

Tecogen Inc., or the Company, or Tecogen designs, manufactures, markets, and sells industrial and commercialmaintains high efficiency, ultra-clean cogeneration systems that produce combinations of electricity, hot water and air conditioning using automotive engines that have been specially adapted to run onproducts. These include natural gas. In some cases, our customers may choose to have the Company engineer and install the system for them rather than simply purchase the cogeneration and/or chiller units, which we refer to as "turnkey" projects. Cogeneration systems are efficient because in addition to supplying mechanical energy to power electric generators or compressors – displacing utility supplied electricity – they provide opportunity for the facility to incorporate the engine’s waste heat into onsite processes such as space and portable water heating. We produce standardized, modular, small-scale products, with a limited number of product configurations that are adaptable to multiple applications. We refer to thesegas engine driven combined heat and power (CHP) systems, chillers and heat pumps for multi-family residential, commercial, recreational and industrial use. We are known for products that provide customers with substantial energy savings, resiliency from utility power outages and for significantly reducing a customer’s carbon footprint. Our products are sold with our patented Ultera® technology which nearly eliminates all criteria pollutants such as CHP (electricity plus heat)NOx and MCHP (mechanical power plus heat)CO. Our systems are greater than 88% efficient compared to typical electrical grid efficiencies of 40% to 50%. As a result, our greenhouse gas (GHG) emissions per KwH are typically half that of the electrical grid. Our systems generate electricity and hot water or in the case of our Tecochill product, both chilled water and hot water. These result in savings of energy related costs of up to 60% for our customers. Our products are expected to run on Renewable Natural Gas (RNG) as it is introduced into the US gas pipeline infrastructure.

Our products are sold directly to end-users by our in-house sales team and by established sales agents and representatives. We have agreements in place with distributors and sales representatives. Our existing customers include hospitals and nursing homes, colleges and universities, health clubs and spas, hotels and motels, office and retail buildings, food and beverage processors, multi-unit residential buildings, laundries, ice rinks, swimming pools, factories, municipal buildings, military installations and indoor growing facilities. To date we have shipped over 3,200 units, some of which have been operating for almost 35 years.
With the acquisition of American DG Energy Inc., or American DG or ADGE, on ("ADGE") in May 18, 2017, we now alsoadded an additional source of revenue. Through ADGE, we install, own, operate and maintain complete distributed generation electricity systems, or DG systems or energy systems, and other complementary systems at customer sites, and sell energy in the form of electricity, heat, hot water, heat and cooling to our customersenergy under long-term energy sales agreements (with a standard term of 10 to 15 years). Our typical sales model is to own and install energy systems in our customers’ buildings and sell the energy produced by those systems backcontracts at prices guaranteed to the customers at a cost set by a negotiated formula in our customer contracts.to be below conventional utility rates. Each month we obtain
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TECOGEN INC.
readings from our energy meters to determine the amount of energy produced for each customer. We use a contractually defined formula to multiply these readings by the appropriate published price of energy (electricity, natural gas or oil) from each customer's local energy utility, to derive the value of our monthly energy sale, which includes a negotiated discount. Our revenues per customer on a monthly basis vary based on the amount of energy produced by our energy systems and the published price of energy (electricity, natural gas or oil) from our customers’customer's local energy utility that month. Our revenues commence as new energy systems become operational. As of September 30, 2017, we had 93 energy systems operational.

The Company’sOur operations are comprised of twothree business segments. Our Products and Services segment ("Segment 1")
designs, manufactures and sells industrial and commercial cogeneration systems as described above.systems. Our Services segment provides O&M services for our products under long term service contracts. Our Energy Production segment ("Segment 2") sells energy in the form of electricity, heat, hot water and cooling to our customers under long-term sales agreements.



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TECOGEN INC.

In addition to being a smaller reporting company, Tecogen is an emerging growth company as that term is defined in the Jumpstart Our Business Startups Act of 2012 (JOBS Act).

Results of Operations

Third
First Quarter of 20172024 Compared to ThirdFirst Quarter of 20162023


The following table sets forth for the periods indicated, the percentage of net sales represented by certain items reflected in our condensed consolidated statements of operations:

Three Months Ended
March 31, 2024March 31, 2023
Revenues100.0 %100.0%
Cost of sales58.4 %61.1%
Gross profit41.6 %38.9%
Operating expenses
General and administrative46.0 %51.9%
Selling8.6 %9.7%
Research and development4.1 %4.3%
Total operating expenses58.6 %65.8%
Loss from operations(17.0)%(26.9)%
Total other expense, net(0.3)%— %
Loss before income taxes(17.2)%(26.9)%
Provision for state income taxes0.4 %0.4 %
Consolidated net loss(17.6)%(27.4)%
Income attributable to the non-controlling interest(0.3)%(0.3)%
Net loss attributable to Tecogen, Inc.(17.9)%(27.7)%

Revenues


The following table presents revenue for the periods indicated, by segment and the change from the prior year:
Three Months Ended
March 31, 2024March 31, 2023Increase (Decrease) $Increase (Decrease) %
REVENUE:
Products
Cogeneration$774,229 $543,693 $230,53642.4 %
Chiller657,061 1,068,934 (411,873)(38.5)%
Engineered accessories60,108 97,509 (37,401)(38.4)%
Total product revenues1,491,398 1,710,136 (218,738)(12.8)%
Services4,014,310 3,136,173 878,13728.0 %
Energy production680,389 533,509 146,88027.5 %
Total revenues$6,186,097 $5,379,818 $806,27915.0 %

Total revenues infor the third quarter of 2017three months ended March 31, 2024 were $8,501,198$6,186,097 compared to $6,616,455$5,379,818 for the same period in 2016,2023, an increase of $1,884,743$806,279 or 28.5%.15.0% year over year.


Segment 1 - Product and Services


Product
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TECOGEN INC.
Products
    Products revenues in the third quarter of 2017three months ended March 31, 2024 were $2,425,616$1,491,398 compared to $2,850,901$1,710,136 for the same period in 2016,2023, a decrease of $425,285$218,738, or 14.9%12.8%. ThisThe decrease wasin revenue during the aggregate ofthree months ended March 31, 2024 is due to a decrease in cogenerationchiller sales of $797,528$411,873 and ana decrease in engineered accessory sales of $37,401, offset partially by a $230,536 increase in chiller and heat pumpcogeneration sales. Our Products sales of $372,243.mix, as well as product revenue, can vary significantly from period to period as our products are high dollar, low volume sales.
Services
    Service revenues in the third quarter of 2017three months ended March 31, 2024 were $4,519,467$4,014,310, compared to $3,765,554$3,136,173 for the same period in 2016,2023, an increase of $753,913$878,137, or 20.0%28.0%. ThisThe increase in revenue during the third quarterthree months ended March 31, 2024 is due primarily to the addition of $758,252 in revenue from the acquired Aegis maintenance contracts and a $119,885 increase in service contract revenues from existing contracts.
Our service operation revenues grow with the sale of installed systems, since the majority of our product sales are accompanied by a service contract or time and materials agreements. As a result, our “fleet” of units being serviced by our service department grows with product sales.
    Energy Production
    Energy Production revenues in the three months ended March 31, 2024 were $680,389, compared to $533,509 for the same period in 2023, an increase of $146,880, or 27.5%. The increase in Energy Production revenue is due to an increase in installation activity of $757,554 and a decrease of $3,641 in service contract revenues.

Segment 2 - Energy Production

Energyincreased run hours at certain energy production revenues in the third quarter of 2017 were $1,556,115, which represents energy revenues earned for the entire quarter as American DG Energy was acquired during Q2 2017.

sites.
Cost of Sales

Cost of sales in the third quarter of 2017three months ended March 31, 2024 was $5,243,167$3,610,440 compared to $3,841,637$3,287,909 for the same period in 2016,2023, an increase of $1,401,530,$322,531, or 36.5%9.8%.
Segment 1 - Product and Services

Cost The increase in cost of sales for productis due to increased service contract maintenance costs due to higher labor and services inmaterial costs, and increased energy production costs. During the third quarter of 2017 was $4,519,969three months ended March 31, 2024 our gross margin increased to 41.6% compared to $3,841,63738.9% for the same period in 2016, an2023, a 2.7% percentage point increase due to higher service contract revenue.
    Products
Cost of $678,332 or 17.7%. Duringsales for Products in the third quarter our overall gross marginthree months ended March 31, 2024 was 34.9%$1,049,543 compared to 41.9%$1,212,568 for the same period in 2016,2023, a decrease of 16.7%. This decrease is$163,025, or 13.4% due to decreased sales of Products, offset partially by higher material costs. During the three months ended March 31, 2024, our Products gross margin was 29.6% compared to 29.1% for the same period in 2023, a change0.5% percentage point increase. The increase in product mix.margin is primarily a function of price increases instituted in 2023.

Segment 2 - Energy Production

Services
Cost of sales for energy productionServices in the third quarter of 2017three months ended March 31, 2024 was $723,198 which represents the cost associated with energy revenues earned during the quarter. During this period our gross margin for energy production was 53.5%.

Operating Expenses

General and administrative expenses consist of executive staff, accounting and legal expenses, office space, general insurance and other administrative expenses. General and administrative expenses in the quarter ending September 30, 2017 were $2,427,352$2,092,257 compared to $2,003,838$1,737,602 for the same period in 2016,2023, an increase of $423,514$354,655, or 21.1%. The increase was20.4%, due to increased labor and material costs fromas a consequence of the addition of American DG Energy's operations.Aegis customer maintenance contracts acquisition. During the three months ended March 31, 2024, our Services gross margin increased to 47.9% compared to 44.6% in the same period in 2023, a 3.3% percentage point increase. The increase in margin is primarily due to lower costs incurred to replace engines at certain sites in 2024.

    Energy Production     
Selling expenses consist    Cost of sales staff, commissions, marketing, travel and other selling related expenses. Selling expenses for Energy Production in the third quarter of 2017 were $503,415three months ended March 31, 2024 was $468,640 compared to $367,412$337,739 for the same period in 2016,2023, an increase of $136,003$130,901, or 37.0%38.8%. This difference is dueDuring the three months ended March 31, 2024 our Energy Production gross margin decreased to a larger sales force and increased public relations and trade show costs.

Research and development expenses consist of engineering and technical staff, materials, outside consulting and other related expenses. Research and development expenses in the quarter ending September 30, 2017 were $241,72531.1% compared to $154,07536.7% for the same period in 2016, an increase of $87,650 or 56.9%. This increase was2023, a 5.6% percentage point decrease. The decrease in the energy production gross margin is due to increased gas and maintenance costs at certain of our Energy Production sites in the Company's cost sharing in connection with a research and development grant, which pertainsthree months ended March 31, 2024 compared to the potential commercialization ofsame period in 2023.
Operating Expenses
Operating expenses increased $83,887, or 2.4%, to $3,625,542 in the Company's Ultera emissions technology for certain non-stationary applications.three months ended March 31, 2024 compared to $3,541,655 in the same period in 2023.
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TECOGEN INC.

Three Months Ended
Operating ExpensesMarch 31, 2024March 31, 2023Increase (Decrease) $Increase (Decrease) %
General and administrative$2,848,568 $2,792,483 $56,085 2.0 %
Selling529,669 520,070 9,599 1.8 %
Research and development254,696 229,102 25,594 11.2 %
Gain on disposition of assets(7,391)— (7,391)100.0 %
Total$3,625,542 $3,541,655 $83,887 2.4 %

Income from Operations

Income from operations for the third quarter of 2017 was $85,539 compared to $249,493 for the same period in 2016, a decrease of $163,954. The decrease was a result of lower margins due to change in product mix. Income for the third quarter of 2017 included one-time merger related expenses of $37,445 and depreciation and amortization expense on the energy producing sites of $160,061.

Other Income (Expense), net

Other expense, net for the three months ended September 30, 2017 was $30,393 compared to $41,625 for the same period in 2016. Other income (expense) includes interest and other income of $14,849, and interest expense on notes payable of $45,242 for the third quarter of 2017. For the same period in 2016, interest and other income was $3,914 and interest expense was $45,539.

Noncontrolling Interest

The income attributable to the noncontrolling interest was $27,935 for the three months ended September 30, 2017 which represents the noncontrolling interest portion of American DG Energy's 51% owned subsidiary, ADGNY, LLC.

Net Income Attributable to Tecogen Inc.

Net income attributable to Tecogen for the three months ended September 30, 2017 was $27,211 compared to $207,868 for the same period in 2016, a decrease of $180,657, year over year. The decrease was the result of a change in product mix.

Other Comprehensive Income

The unrealized gain on securities of $39,361 for the third quarter of 2017 represents a market fluctuation impacting the fair value of American DG Energy's remaining common stock ownership in its former partially owned subsidiary, EuroSite Power Inc. as of September 30, 2017.

First Nine Months of 2017 Compared to First Nine Months of 2016

Revenues

Total revenues for the first nine months of 2017 were $22,938,503 compared to $17,379,278 for the same period in 2016, an increase of $5,559,225 or 32.0%.

Segment 1 - Product and Services

Product revenues in the first nine months of 2017 were $8,349,159 compared to $7,525,909 for the same period in 2016, an increase of $823,250 or 10.9%. This increase was the net of an increase in cogeneration sales of $648,863 and an increase in chiller and heat pump sales of $174,387. Service revenues for the first nine months of 2017 were $12,259,037 compared to $9,853,369 for the same period in 2016, an increase of $2,405,668 or 24.4%. This increase in the first nine months of 2017 is due to an increase in installation activity of $2,095,758 and an increase of $309,910 in service contract revenues.

Segment 2 - Energy Production

Energy production revenues in the first nine months of 2017 were $2,330,307, which represents energy revenues earned from May 19, 2017, the date after acquisition of American DG Energy through September 30, 2017.

Cost of Sales

Cost of sales for the first nine months of 2017 was $13,779,179 compared to $10,782,222 for the same period in 2016, an increase of $2,996,957, or 27.8%.
TECOGEN INC.


    
Segment 1 - Product and Services

Cost of sales for product and services in the first nine months of 2017 was $12,725,438 compared to $10,782,222 for the same period in 2016, an increase of $1,943,216 or 18.0%. During the first nine months of 2017, our product and services gross margin was 38.3% compared to 38.0% for the same period in 2016, a 0.8% improvement. The increase in margin was a result of material cost savings in production and ongoing product development. Product gross margin for the first nine months of 2017 was 37.0% compared to 33.1% for the same period in 2016, a 11.8% improvement. Service gross margin for the first nine months of 2017 was 39.1% compared to 41.7%, a decrease of 6.2% due to normal fluctuations in cost.
Segment 2 - Energy Production

Cost of sales for energy production in the first nine months of 2017 was $1,053,741 which represents the cost associated with energy revenues earned from May 19, 2017, the date after acquisition of American DG Energy through September 30, 2017; this represents approximately 42% of the second quarter's revenue plus the entire third quarter's revenue for American DG Energy. During this period our gross margin for energy production was 54.8%; higher than expected, due to seasonality and a retroactive rate change which reduced fuel costs.

Operating Expenses

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 ninethree months ended September 30, 2017March 31, 2024 were $7,042,500$2,848,568 compared to $5,898,230$2,792,483 for the same period in 2016,2023, an increase of $1,144,270$56,085 or 19.4%. The2.0%, due primarily to a $111,827 increase was mainlyin facility costs, due to the transition to our new facility, offset partially by a combination of costs incurred$67,271 reduction in connection with the merger and related litigation as well as increased costs from the addition of American DG Energy's operations.travel expenses.

Selling expenses consist of sales staff, commissions, marketing, travel and other selling related expenses. Selling expenses for the ninethree months ended September 30, 2017March 31, 2024 were $1,558,378$529,669 compared to $1,217,533$520,070 for the same period in 2016,2023, an increase of $340,845$9,599 or 28.0%. This difference is1.8%, due to the mix of in-housea $90,090 increase in sales versus representation commissions and increased public relations andcommission, offset partially by a $74,853 reduction in trade show costs.expense.

Research and development expenses consist of engineering and technical staff, materials, outside consulting and other related expenses. Research and development expenses for the ninethree months ended September 30, 2017March 31, 2024 were $641,064$254,696 compared to $524,696$229,102 for the same period in 2016,2023, an increase of $116,368$25,594 or 22.2%11.2%. This increase was due to
The gain on asset dispositions for three months ended March 31, 2024 of $7,391 represents the Company's cost sharing in connection with a research and development grant in process.excess of insurance proceeds received over the net book value of assets for auto claims filed during the period.

LossIncome (loss) from Operations

Loss    Our loss from operations for the ninethree months ended September 30, 2017March 31, 2024 was $82,618$1,049,885 compared to a loss from operations of $1,043,403$1,449,746 for the same period in 2016, an improvement2023, a decrease of $960,785.$399,861. The improvement wasdecrease is due primarily to higher Service and Energy Production Segment revenues and increased product and services revenues, as well as the addition of our energy production revenue stream. The loss for the nine months ended September 30, 2017 included one-time merger related expenses of $156,298 and depreciation and amortization expense of $402,939.

gross profit, offset partially by a $83,887 increase in operating expenses.
Other Income (Expense), net

Other expense net for the ninethree months ended September 30, 2017March 31, 2024 was $93,993$15,668 compared to $122,398other income net of $415 for the same period in 2016. Other2023, a decrease of $16,083, due to a $18,255 increase in interest due to borrowings under our related party note and lease financing and a $16,577 increase in currency exchange losses, offset partially by an increase of $18,749 in unrealized income (expense) includes interest and otheron marketable securities recognized in the three months ended March 31, 2024.
Provision for State Income Taxes
    The provision for state income of $21,033, and interest expense on notes payable of $115,026taxes for the ninethree months ended September 30, 2017. For the same period in 2016, interestMarch 31, 2024 and other2023 was $22,063 and $22,638, respectively, and represents estimated income was $9,575 and interest expense was $131,973.tax payments, net of refunds, to various states.

NoncontrollingNon-controlling Interest

The income    Income attributable to the noncontrollingnon-controlling interest was $44,933$17,351 for the ninethree months ended September 30, 2017March 31, 2024 which represents the noncontrollingnon-controlling interest portion of American DG Energy's 51% owned subsidiary, ADGNY,American DG New York, LLC. For the same period in 2016, the loss2023, income attributable to the noncontrollingnon-controlling interest was $64,962 which was the result of Tecogen's ownership in its former partially owned subsidiary Ilios Inc.

TECOGEN INC.

$18,060.
Net LossIncome (loss) Attributable to Tecogen Inc.

Net    The net loss attributable to Tecogen for the ninethree months ended September 30, 2017March 31, 2024 was $221,544a net loss of $1,104,967 compared to a net loss of $1,100,839$1,490,029 for the same period in 2016, an improvement2023, a decrease of $879,295.$385,062, or 25.8%. The improvement wasdecrease in the result of the Company's merger with American DG Energy in additionnet loss is due to 10.9% growth in productincreased revenue and 24.4% growthgross profit from our Service and Energy Production Segments, offset partially by a $83,887 increase in services revenue.operating expenses.


Other Comprehensive Loss


The unrealized loss on securities of $184,998 for the nine months ended September 30, 2017 represents the market fluctuation impacting the fair value of American DG Energy's remaining common stock ownership in its former partially owned subsidiary, EuroSite Power Inc. as of September 30, 2017.
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TECOGEN INC.

Liquidity and Capital Resources


Sources of Liquidity
During the three months ended March 31, 2024, we incurred a loss from operations of $1,049,885 compared to a net loss from operations of $1,449,746 in the same period in 2023. Cash flows from operations increased $533,082 during the three months ended March 31, 2024 compared to the same period in 2023. As of March 31, 2024, we had cash and cash equivalents of $1,510,435 compared to cash and cash equivalents of $1,351,270 as of December 31, 2023, an increase of $159,165 or 11.8%, and an accumulated deficit as of March 31, 2024, of $43,984,623. In addition to cash from operations, we have relied upon a loan in the amount of $500,000 from a related party to help fund operations. The loan becomes due on October 10, 2025. (See “Note 11 to the Condensed Consolidated Financial Statements” and “Liquidity,” below.) In view of the foregoing, we may need to raise additional cash through one or more equity or debt financings to continue to fund our operations and expand our business. There is no assurance we will be able to raise such financing or upon terms that are acceptable to us. (See also“Note 2 to the Condensed Consolidated Financial Statements” and in our Condensed Consolidated Financial Statements for the year ended December 31, 2023, included in our 2023 Form 10-K.) If adequate financing is not available when needed, we may be required to implement cost-cutting strategies, delay production, curtail research and development efforts, or implement other measures, which may adversely affect our results of operations and financial conditions and the price of our stock.

Cash Flows

The following table presents a summary of our net cash flows from operating, investing and financing activities:

Three Months Ended
Cash Provided by (Used in)March 31, 2024March 31, 2023Increase (Decrease)
Operating activities$248,216 $(284,866)$533,082 
Investing activities(71,939)— (71,939)
Financing activities(17,112)— (17,112)
Cash Provided by (Used in)$159,165 $(284,866)$444,031 

Consolidated working capital at September 30, 2017March 31, 2024 was $14,193,331$8,499,647 compared to $14,436,452$9,822,546 at December 31, 2016,2023, a decrease of $243,121.$1,322,899, or 13.5%. Included in working capital were cash and cash equivalents of $2,077,047$1,510,435 at September 30, 2017,March 31, 2024, compared to $3,721,765 in cash and cash equivalents$1,351,270 at December 31, 2016, a decrease2023, an increase of $1,644,718. The decrease in working capital and cash was the result of longer collection periods and pre-buying for production.

$159,165, or 11.8%.
Cash used inFlows from Operating Activities
    Cash provided by operating activities for the ninethree months ended September 30, 2017March 31, 2024 was $1,996,871$248,216 compared to $2,914,863$284,866 of cash used by operating activities for the same period in 2016.2023, an increase of $533,082, or 187.1% Our accounts receivable balance increased to $11,094,287and unbilled revenue balances were $6,533,130 and $1,258,532, respectively, at September 30, 2017March 31, 2024 compared to $8,630,418$6,781,484 and $1,258,532 at December 31, 2016, using $1,908,6552023, providing $234,095 of cash. During the three months ended March 31, 2023 we collected the majority of the outstanding Employee Retention Credit receivables, providing $667,121 of cash from operations.
Accounts payable decreased to $4,013,899 as of March 31, 2024 from $4,514,415 at December 31, 2023, using $500,516 in cash flow from operations. The decrease in accounts payable was due to timing of billing, shipments, and collections. In addition, amounts due from related parties increased by $236,971 using cash due to timing of billing and collections. Our inventorydecreased material purchases. Deferred revenue increased to $6,118,835$2,462,570 as of September 30, 2017March 31, 2023 compared to $4,774,264$1,647,206 as of December 31, 2016, an increase of $1,344,571. This increase is2023, due to increased product sales as well ascustomer deposits, providing $791,181 of cash from operations. We expect accounts payable and deferred revenue to fluctuate with routine changes in operations.
Cash Flows from Investing Activities
During the three months ended March 31, 2024 we used $104,952 of cash to purchase property, plant and equipment and received $33,013 in proceeds from the disposition of assets, including insurance proceeds. During the three months ended March 31, 2023 there were no cash flows from investing activities.
Cash Flows from Financing Activities
During the three months ended March 31, 2024 we used equipment$17,112 of cash in payment of finance lease principal. There were no cash flows from American DG. Although lowering inventory is a goal, management expects inventory to vary significantly based on production and customer delivery requirements.financing activities in the three months ended March 31, 2023.


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TECOGEN INC.
Backlog
As of September 30, 2017, the Company'sMarch 31, 2024, our backlog of product and installation projects, excluding service contracts, was $14.5 million,$5,554,599, consisting of $11.5 million$5,122,266 of purchase orders received by us and $3.0$432,333 of projects in which the customer's internal approval process is complete, financial resources have been allocated and the customer has made a firm verbal commitment that the order is in the process of execution. As of March 31, 2023, our backlog of product and installation projects, excluding service contracts, was $7,053,160 consisting of $5,157,056 of purchase orders received by us and $1,896,104 million 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.

Liquidity
Accounts payable increased to $5,356,449 asAt March 31, 2024, we had cash and cash equivalents of September 30, 2017$1,510,435, a increase of $159,165 or 11.8% from $3,367,481the cash and cash equivalents balance at December 31, 2016,2023. During the three months ended March 31, 2024, our revenues were negatively impacted due to customer order delays or deferrals; 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.
Based on our current operating plan, we believe existing resources, including $369,913cash and cash flows from operations will be sufficient to meet our working capital requirements for the next twelve months. In order to grow our business and fund the development of our hybrid-drive air-cooled chiller and the relocation of our primary facility, we expect that our cash requirements will increase and we may need to raise additional capital through a debt or equity financing to meet our need for capital to fund operations and future growth.
On October 9, 2023, we entered into an agreement with each of John N. Hatsopoulos, a director and principal shareholder of registrant, and Earl R. Lewis, III, a director, pursuant to which Mr. Hatsopoulos agreed to provide financing to us of up to $1 million, and Mr. Lewis agreed to provide financing to us of $500,000, and potentially an additional $500,000 at his discretion. On October 10, 2023, we issued a promissory note and borrowed $500,000 from Mr. Hatsopoulos. The note, as amended on March 21, 2024, is due and repayable two years from the ADGE acquisition, providing $1,641,206,date of issuance and bears interest at 5.12% per annum payable in full at maturity. The loan is required to be repaid in the event of a change of control of the company and upon the occurrence of an event of default under the note, including upon a failure to pay the principal and interest when due, or the commencement of voluntary or involuntary bankruptcy or insolvency proceeding. The proceeds of the loans are expected to be used for general working capital purpose.
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, to October 10, 2025, and agreeing to accept payment in cash flow from operations. Accrued expenses increased to $1,676,307 as of September 30, 2017, including $531,617 from the ADGE acquisition, from $1,378,258 as of December 31, 2016, providing $233,824 of cash from operations. The Company expects accounts payable and accrued expenses to fluctuate with routine changes in operations.or Tecogen Inc. common stock.

During the first nine months of 2017, our investing activities provided $223,235 of cash and included the acquisition of American DG Energy cash through merger of $971,454, offset by purchases of property and equipment of $315,205, expenditures related to intangible assets of $34,551 and cash paid for certain expenses associated with the merger of $367,101.

During the first nine months of 2017, our financing activities included $128,918 in proceeds from the exercise of stock options.


Significant Accounting Policies and Critical Estimates

The Company’s, and it's now wholly-owned subsidiary, American DG Energy Inc.'sOur significant accounting policies are discussed in the Notes to their respectiveour Consolidated Financial Statements in theirour Annual ReportsReport on Form 10-K.10-K for the year ended December 31, 2023. The accounting policies and estimates that can have a significant impact upon theour operating results, financial position and footnote disclosures of the Company are described in the above notes and in the respective Annual Reports.Report.


Significant New Accounting Standards or Updates Not Yet Effective
The Company's critical accounting policies have remained consistent as discussed in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on March 25, 2024.
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.
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TECOGEN INC.

Seasonality

We expect that the majority of our heating systems sales will be in the winter and theThe majority of our chilling systems sales will be insold are operational during the summer. Unreasonable weather may therefore have an effect onDemand for our revenues throughout the year. Our cogeneration and chiller system sales are not generally affected by the seasons, although customer goals will be to have chillers installed and running in the spring. Our service team does experienceis higher demand in the warmer months when cooling is required. TheseChiller units are generally shut down in the winter and started up again in the spring. This “busy season”The chiller "busy season' for the service team generally runs from May through the end of September.

Our cogeneration sales are not generally affected by seasonality.
Off-Balance Sheet Arrangements

Currently, we do not have any material off-balance sheet arrangements, including any outstanding derivative financial instruments, off-balance sheet guarantees, interest rate swap transactions or foreign currency contracts. We do not engage in trading activities involving non-exchange traded contracts.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable.
Item 4. Controls and Procedures.
Management’s Evaluation of Disclosure Controls and Procedures:
The Company maintains "disclosureAs of the end of the period covered by this Report, our Chief Executive Officer and Chief Financial Officer ("Certifying Officer") conducted evaluations of our disclosure controls and procedures,” as such term isprocedures. As defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended or("Securities Exchange Act"), the Exchange Act,term "disclosure controls and procedures" means controls and procedures of an issuer that are designed to provide reasonable assurance thatensure the information required to be disclosed by the Companyissuer in the reports that we fileit files or submitsubmits under the Exchange ActSection 13(a) or 15(d) is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange CommissionCommission's ("SEC") rules and forms,forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that such information required to be disclosed by an issuer in the reports that it files or submits under Section 13(a) or 15(d) of the Securities Exchange Act is accumulated and communicated to the Company'sissuer's management, including our principal executive officers and principal financial and accounting officer, as appropriate,the Certifying Officer, to allow timely decisions regarding required disclosure.
Our disclosure controls and procedures are designed to provide reasonable assurance that the control system’s objectives will be met. Our management, including our Co-ChiefChief Executive OfficersOfficer and Chief AccountingFinancial Officer, after evaluating the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report, haveReport, has concluded that our disclosure controls and procedures were not effective due to a material weaknessesweakness with respect to a small number of individuals dealing with general controls over information technology and inadequate controls over revenue recognition with respect to the Company's recently acquired subsidiary, American DG Energy Inc.technology. Management will continue to evaluate the above weaknesses. The Company isweaknesses and we are taking certain steps to remediate the weaknesses as resources become available.
Changes in Internal Control over Financial Reporting:
During the second and third quarters of 2017 andThere were no changes in connection with the acquisition of American DG Energy Inc. the Company augmented its capabilities with respect to application and implementation of generally accepted accounting principles as it relates to complex transactions and the relatedour internal controls over financial reporting requirements through modifications(as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act) during the period covered by this Report that have materially affected, or are reasonably likely to materially affect, our internal controls over financial management including a new Chief Accounting Officer. Such modifications also included securing timely access to and involvement of individuals with a high level of training and expertise with respect to complex accounting and financial reporting matters.reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Massachusetts Superior Court Action
On or about February 6, 2017, ADGE, John Hatsopoulos, George N. Hatsopoulos, Charles T. Maxwell, Deanna M. Petersen, Christine Klaskin, John Rowe, Joan Giacinti, Elias Samaras, Tecogen, and Merger SubNovember 23, 2022, we were served with a Verified Complaint by William C. May ("May"), individually andsuit filed against us on behalf of the other shareholders of ADGE as a class. The action was commencedAugust 24, 2022 in the Business Litigation Session of theOntario Superior Court of the Commonwealth of Massachusetts, Civil Action No. 17-0390.Justice by The complaint alleged class action claims arising outCorporation of the proposed Merger, as described in Note 3. On May 31, 2017, May voluntarily dismissed the actionTown of Milton, Milton Energy Generation Solutions Inc. and consolidated his claims with the pending federal actionMilton Hydro Distribution Inc ("Plaintiffs"), all of whom are municipal corporations incorporated in the United States District CourtProvince of Ontario. The plaintiffs sued for the District of Massachusetts. If the complaintdamages in the federal court is dismissed, it is possibleamount of CDN $1,000,000, pre-judgment and post-judgment interest, legal fees, alleging breach of contract, breach of warranty, negligent misrepresentations and nuisance. Plaintiffs allege that Mayon or another plaintiff will recommence an action in state court with similar claimsabout July 10, 2022, a Tecogen cogenerator installed by us at the plaintiffs' facility caught fire, causing damage to those assertedthe cogenerator and the plaintiff's facility. We have filed a response denying liability and are represented by May.Canadian counsel. For the year ended December 31, 2022, we reserved $150,000 for anticipated damages which may not be covered by our insurance and continue to maintain the reserve at March 31, 2024.
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TECOGEN INC.

United States District Court Action
On or about February 15, 2017, a lawsuit was filed in the United States District Court for the District of Massachusetts by Lee Vardakas (“Vardakas”), individually and on behalf of other stockholders of ADGE, naming ADGE, John N. Hatsopoulos, George N. Hatsopoulos, Benjamin Locke, Charles T. Maxwell, Deanne M. Petersen, Christine M. Klaskin, John Rowe, Joan Giacinti, Elias Samaras, Tecogen., Merger Sub., and Cassel Salpeter and Co., LLC, as defendants. The action is captioned Vardakas v. American DG Energy, Inc., Case No. 17-CV-10247(LTS). At the time Vardakas commenced the action, his complaint challenged the proposed Merger between Tecogen and ADGE.
On May 18, 2017, ADGE’s and Tecogen’s shareholders approved the Merger.
Following the consummation of the Merger (and the appointment of May, from the Massachusetts Superior Court Action, as lead plaintiff), Vardakas filed an Amended Class Action Complaint (the “Amended Complaint”). The Amended Complaint discontinued the claims against Cassel Salpeter & Co., LLC but asserted against the remaining defendants claims under Section 14(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and SEC Rule 14a-9; claims against certain defendants for control person liability under § 20(a) of the Exchange Act (collectively, the “Federal Securities Law Claims”); and common law claims for breach of fiduciary duty and aiding and abetting (the “State Law Claims”). The Federal Securities Law Claims allege, in substance, that defendants made material nondisclosure in the proxy statement about the process leading to the Merger and about the fairness opinion relied upon by ADGE’s Board of Directors in recommending the Merger to shareholders. The State Law Claims assert, in substance, that defendants breached their fiduciary duties in negotiating and approving the Merger, which, plaintiff claims, deprived ADGE’s non-affiliated shareholders of fair value for their shares.
On July 19, 2017, defendants moved to dismiss the Amended Complaint. In their motion papers, defendants contend that the Federal Securities Law Claims are not sufficiently pleaded and fail to state a viable claim. Defendants also assert that if the Federal Securities Law Claims are dismissed, the district court must also dismiss the State Law Claims because it would lack subject matter jurisdiction. The parties are awaiting a decision from the court.
The Company believes that the lawsuit is without merit and intends to defend vigorously. The Amended Complaint does not specify the amount of damages claimed and the likelihood of an unfavorable outcome is not reasonably estimable.
Except as set forth above, as of the date of this filing the Company is currently not a party to any legal or administrative proceedings material to the Company's financial statements and is not aware of any pending or threatened legal or administrative proceeding that is material to the Company's financial statement.

Item 1A. Risk Factors
Our business, operations and the Company face many risks. In connection with the Company's acquisition of ADGE on May 18, 2017, there were changes to these risk. To reflect this change, the Company is amending its list of risk factors discussed in its Annual Report on Form 10-K for the fiscal year ended December 31, 2016 by adding the risk factors listed below. In addition to the risk factors and other information set forth in this report,risks described below, you should carefully consider the factors discussed under “Risk"Item1A - Risk Factors” in our Annual Report on Form 10-K for our fiscal year ended December 31, 2016. The risks described below may not be the only risks we face as a result of acquiring ADGE. Additional risks that we do not yet know of, or that we currently think are immaterial, may also impair our business operations or financial results. If any of the events or circumstances described in the following risks occur, our business, financial condition or results of operations could suffer and the trading price of our common stock could decline. Investors and prospective investors should consider the following risks and the information contained under the heading ''Cautionary Note Concerning Forward-Looking Statements'' before deciding whether to invest in our securities.

In addition to the risk factors and other information set forth in this report, you should carefully consider the factors discussed under “Risk Factors” in our Annual Report on2023 ("2023 Form 10-K for our fiscal year ended December 31, 2016.10-K") The risks discussed in our Annual Report on2023 Form 10-K could materially affect our business, financial condition and future results. The risks described in our Annual Report on2023 Form 10-K and below are not the only risks facing us.we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition or operating results.

We incurred a net loss from operations of $1,049,885 during the three months ended March 31, 2024, compared to a net loss from operations of $1,449,746 in the same period in 2023. We have a history of incurring losses from our operations and there can be no assurance we will be able to increase our revenues, manage our expenses and cash flows, and become profitable in the future.
1. Through ADGE,We incurred a net loss from operations of $1,049,885 during the three months ended March 31, 2024, compared to a net loss from operations of $1,449,746 in the three months ended March 31, 2023. Historically, we mayhave incurred net losses from operations, including a net loss of $4,598,103 in the year ended December 31, 2023, and, as of March 31, 2024, we had an accumulated deficit of $43,984,623. Our business is capital intensive and, because our products are built to order with customized configurations, the lead time to build and deliver a unit can be exposed to substantial liability claims if we fail to fulfill our obligations to our customers or our on-site equipment malfunctions.

Through ADGE, we enter into contracts with large commercial and not-for-profit customers under which we assume responsibility for meeting a portion of the customers' building energy demand and equipment installation.significant. We may be exposed
TECOGEN INC.

required to substantial liability claims ifpurchase key components long before we fail to fulfillcan deliver a unit and receive payment. Changes in customer orders or lack of demand may also impact our obligations to customers or if the equipment malfunctions.profitability. There can be no assurance that we will not be vulnerable to claims by customers and by third parties that are beyond any contractual protections that we are able to negotiate. As a result, liability claims could cause us significant financial harm.

2. Expiring ADGE customer contracts may lead to decreases in revenue and increases in expenses.

This decrease in energy revenue will be due to less energy billing. Expiring customer contracts can also lead to an increase in expenses because we will have to remove the equipment at the customer location. We will remove the equipment at our own expense and are obligated to do so at the end of the customer contract. Each year, a portion of our customers contracts expire and need to be renewed or replaced. We may not be able to renew or extend contracts with existing customers or obtain replacement contracts at attractive rates or for the same term as the expiring contracts.

3. ADGE revenue from energy billing is partly dependent on the weather and increased temperatures could reduce our revenue.

In warmer months the customers are not using as much thermal energy as they do not have as much of a demand to heat their locations. Due to the demand being lower in warmer months we may not be able to bill for thermal energy and in turn may have a decrease in revenue.

4. The reduction, elimination or expiration of government subsidies and economic incentives for applications of our equipment could reduce demand for our equipment and harm our business.

The market for cogeneration equipment depends in part on the availability and size of government and economic incentives that vary by geographic market. Because our customers’ sales are typically into geographic areas with such incentives, elimination or expiration of government subsidies and economic incentives for cogeneration equipment may negatively affect the competitiveness of equipment relative to other sources of electricity, heating, and cooling equipment, and could harm or halt the growth of the cogeneration industry and our business. In particular, the Company depends on the New York State Energy Development Authority CHP Program (PON 2568) and the New Jersey Smart Start Combined Heat and Power Incentive.
These government incentives expire, phase out over time, terminate upon the exhaustion of the allocated funding, require renewal by the applicable authority or are being changed by governments due to changing market circumstances or changes to national, state or local energy policy.
Competing sources of electricity, heating, and cooling equipment may successfully lobby for changes in the relevant legislation in their markets that are harmful to the cogeneration industry. Reductions in, or eliminations or expirations of, governmental incentives in regions that we focus our sales efforts could result in decreased demand for and lower revenue from cogeneration equipment there, which would adversely affect the Company. In addition, our ability to successfully penetrate new geographic markets may depend on new geographic areas adopting and maintaining incentives to promote cogeneration, to the extent such incentives are not currently in place. Additionally, electric utility companies may establish pricing structures or interconnection requirements that could adversely affectincrease our sales and be harmfulachieve and sustain profitability in the future. Our cash flows from operations are insufficient to cogeneration.fund our business and, currently, we are reliant upon financing provided by a related party to help fund our operations. (See “Note 11 to the Condensed Consolidated Financial Statements” and “Liquidity and Capital Resources-Liquidity.”)

Item 2. Unregistered Sales of equity Securities and Use of Proceeds

None.

Item 3. Defaults in Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Securities Trading Plans of Directors and Executive Officers
During the three months ended March 31, 2024, none of the Company’s directors or officers, as defined in Section 16 of the Securities Exchange Act of 1934, adopted or terminated any contract, instruction or written plan for the purchase or sale of Company securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement” as defined under Item 408(a) of Regulation S-K.
28

TECOGEN INC.

Item 6. Exhibits
Exhibit No.Description of Exhibit
2.110.1
2.2
Amendment 1 to the Agreement and PlanRegarding the Assignment of Merger,Certain Maintenance Agreements dated as of March 23, 2017, by and among registrant, American DG15, 2023 with Aegis Energy Inc. and Tecogen.ADGE Acquisition Corp.(r)
3.1
Amended and Restated Certificate of Incorporation.(a)
3.2
Amended and Restated Bylaws.(a)
4.1
Specimen Stock Certificate of Tecogen, Inc. (a)
4.2
Form of Restricted Stock Purchase Agreement.(b)
4.3+
Form of Stock Option Agreement.(a)
4.5
Warrant to Subscribe for Shares between Ultra Emissions Technology, Ltd and registrant.(m)
4.6
Tecogen Ultratek Warrant signed August 2, 2016.(j)
10.1
Form of Line of Credit Agreement Between American DG Energy and Mr. John Hatsopoulos, dated December 22, 2016.(p)
10.8
Second Amendment to Lease between Atlantic-Waltham Investment II,Services, LLC, dated Jan 16, 2013.(a)
10.21
Senior Convertible Promissory Note, dated December 23, 2013, by Tecogen Inc. in favor of Michaelson Capital Special Finance Fund LP. (a)
10.26
Tecogen 2006 Stock Incentive Plan, as amended on January 24, 2014 with stockholder approval on July 15, 2014.(e)
10.27
Non-Revolving Line of Credit Agreement between the Company and John N. Hatsopoulos, dated June 15, 2015.(e)
10.31
Joint Venture Shareholder Agreement between Tecogen Inc. and Ultra Emissions Technology Limited, dated December 28, 2015. (n)
10.32
License Agreement between Tecogen Inc. and Ultra Emissions Technology Limited, dated December 28, 2015. (n)
10.33
Form of Subscription Agreement between Tecogen and the several investors purchasing shares of Tecogen Common Stock and Warrants, dated December 28, 2015. (n)
10.34
Form of Warrants issued pursuant to the Subscription Agreement described in Exhibit 10.33 hereto. (n)
10.35
Form of Share Exchange Agreement between Tecogen and certain shareholders of Ilios Inc., dated April 11, 2016 and April 13, 2016. (o)
10.36
Amendment No. 1 to the Senior Convertible Promissory Note effective April 1, 2016.(g)
10.37
Tedom Joint Venture Agreement dated May 19, 2016. (h)
10.38
Tedom Joint Venture LLC Agreement dated May 19, 2016. (h)
10.39
Form of a Warrant Amendment dated June 27, 2016.(i)
10.40+
Employment Agreement dated December 1, 2016 between registrant and David A. Garrison. (l)
31.1*
Rule 13a-14(a) Certification of Co-Chief Executive Officer
31.2*
Rule 13a-14(a) Certification of Co-Chief Executive Officer
31.3*
Rule 13a-14(a) Certification of Chief Accounting Officer
32.1*
Section 1350 Certifications of Co-Chief Executive Officers and Chief Accounting Officer
101.INS**XBRL Instance Document
101.SCH**XBRL Taxonomy Extension Schema
100.CAL**XBRL Taxonomy Extension Calculation Linkbase
100.DEF**XBRL Taxonomy Extension Definition Linkbase
101.LAB**XBRL Taxonomy Extension Label Linkbase
101.PRE**XBRL Taxonomy Extension Presentation Linkbase

*Filed herewith
**Furnished herewith
+Compensatory plan or arrangement
(a)
incorporated by reference fromto Exhibit 99.01 to the Company's Registration Statementregistrant's Current Report on Form S-1/A (Registration No. 333-193791), filed with the SEC on June 27, 2014.
TECOGEN INC.

(b)
incorporated by reference from the Company's Registration Statement on Form S-1 (Registration No. 333-178697), originally filed with the SEC on December 22, 2011.
(c)
incorporated by reference from the Company's 10-Q Report for the period ending June 30, 2014, originally filed with the SEC on August 14, 2014.
(d)
incorporated by reference from the Company's form 8-K Report originally filed with the SEC on August 6, 2015.
(e)
incorporated by reference from the Company's 10-Q Report for the period ending June 30, 2015, originally filed with the SEC on August 6, 2015.
(f)
incorporated by reference from the Company's form 8-K Report originally filed with the SEC on August 13, 2015.
(g)
incorporated by reference from the Company's form 8-K Reports originally filed with the SEC on April 15, 2015.
(h)
incorporated by reference from the Company's form 8-K Reports originally filed with the SEC on May 24, 2016.
3, 2024.
31.1*
(i)Certification of Chief Executive Officer Pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
incorporated by reference from
32.1**
Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. 1350, as adopted Pursuant to Section 906 of the Company's form 8-K Reports originally filed with the SEC on June 30, 2016.
Sarbanes-Oxley Act of 2002
(j)
incorporated by reference from the Company's form 8-K Reports originally filed with the SEC on August 8, 2016.
(k)
101.INS**		incorporated by reference from the Company's Registration Statement on Form S-4 (Registration No. 333-215231),
as amended, originally filed with the SEC on December 21, 2016.
XBRL Instance Document
(l)
101.SCH**		incorporated by reference from the Company's form 8-K Reports originally filed with the SEC on December 2, 2016.
XBRL Taxonomy Extension Schema
(m)
100.CAL**		Incorporated by reference to the registrant's Annual Report on Form 10-K, as filed with the SEC on March 29, 2016.
XBRL Taxonomy Extension Calculation Linkbase
(n)
100.DEF**		Incorporated by reference from the Company's form 8-K Reports originally filed with the SEC on December 31, 2015.
XBRL Taxonomy Extension Definition Linkbase
(o)
101.LAB**		Incorporated by reference from the Company's form 8-K Reports originally filed with the SEC on April 15, 2016.
XBRL Taxonomy Extension Label Linkbase
(p)
101.PRE**		Incorporated by reference from American DG Energy's form 8-K Reports originally filed with the SEC on December 28, 2016.XBRL Taxonomy Extension Presentation Linkbase
(q)
incorporated by reference from the Company's form 8-K Reports originally filed with the SEC on November 2, 2016.
(r)
incorporated by reference from the Company's form 8-K Reports originally filed with the SEC on March 24, 2017.


*    Filed herewith

**    Furnished herewith

+    Compensatory plan or arrangement






29

TECOGEN INC.



SIGNATURES
 
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, on November 9, 2017.
undersigned.
TECOGEN INC.
(Registrant)
TECOGEN INC.
Dated: May 9, 2024By:/s/ Abinand Rangesh
(Registrant)Abinand Rangesh
Chief Executive and Financial Officer
By:/s/ John N. Hatsopoulos
Co-Chief Executive Officer
(Principal Executive and Financial Officer)
By:/s/ Benjamin M. Locke
Co-Chief Executive Officer
(Principal Executive Officer)
By:/s/ Bonnie J. Brown
Chief Accounting Officer, Treasurer and Secretary
(Principal Accounting Officer)


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