UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q


☑						QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June 30, 2022~~March 31, 2023


☐						TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 001-36103

TECOGEN INC. (OTCQX:TGEN)

(Exact name of Registrant as specified in its charter)


Delaware			04-3536131
(State or Other Jurisdiction of Incorporation or Organization)			(IRS Employer Identification No.)


45 First Avenue
Waltham, Massachusetts 02451
(Address of Principal Executive Offices and Zip Code)


(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 every Interactive Data File required to be submitted 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 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:


Large accelerated filer o			Accelerated filer o
Non-accelerated filer ☒			Emerging Growth company ☐
Smaller reporting 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 ☒

As of ~~June 30, 2022,~~March 31, 2023, 24,850,261 shares of common stock, $.001 par value per share, of the registrant were issued and outstanding.

TECOGEN INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE PERIOD ENDED ~~JUNE 30, 2022~~MARCH 31, 2023

TABLE OF CONTENTS


PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements

	Condensed Consolidated Balance Sheets (Unaudited)
	~~June 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022	1

	Condensed Consolidated Statements of Operations (Unaudited)
	Three Months Ended ~~June 30,~~March 31, 2023 and 2022 ~~and 2021~~	2

	~~Condensed Consolidated Statements of Operations (Unaudited)~~
	~~Six Months Ended June 30, 2022 and 2021~~	3

	Condensed Consolidated Statements of Stockholders' Equity (Unaudited)
	~~Six~~Three Months Ended ~~June 30,~~March 31, 2023 and 2022 ~~and 2021~~	43

	Condensed Consolidated Statements of Cash Flows (Unaudited)
	~~Six~~Three Months Ended ~~June 30, 2022~~March 31, 202 3 and ~~2021~~202 2	54

	Notes to Unaudited Condensed Consolidated Financial Statements	65

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1816

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2823

Item 4.	Controls and Procedures	2824

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	2924

Item 1A.	Risk Factors	2924

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2924

Item 3.	Defaults in Senior Securities	2924

Item 4.	Mine Safety Disclosures	2924

Item 5.	Other Information	2924

Item 6.	Exhibits	3025

Signatures	Signature Page	3126

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)


		June 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	2,831,107	$	3,614,463	Cash and cash equivalents	$	1,629,103	$	1,913,969
Accounts receivable, net	Accounts receivable, net	8,880,828		8,482,286		Accounts receivable, net	6,758,360		6,714,122
Employee retention credit						Employee retention credit	46,148		713,269
Unbilled revenue	Unbilled revenue	2,141,132		3,258,189		Unbilled revenue	1,788,902		1,805,330
Employee retention credit receivable		713,269		1,276,021
Inventories, net	Inventories, net	8,203,093		7,764,989		Inventories, net	11,862,782		10,482,729

Prepaid and other current assets	Prepaid and other current assets	601,419		578,801		Prepaid and other current assets	265,019		401,189
Total current assets	Total current assets	23,370,848		24,974,749		Total current assets	22,350,314		22,030,608
Long-term assets:	Long-term assets:					Long-term assets:
Property, plant and equipment, net	Property, plant and equipment, net	1,710,644		1,782,944		Property, plant and equipment, net	1,290,228		1,407,720
Right of use assets	Right of use assets	1,561,757		1,869,210		Right of use assets	1,084,033		1,245,549
Intangible assets, net	Intangible assets, net	1,099,510		1,181,023		Intangible assets, net	947,885		997,594

Goodwill	Goodwill	2,406,156		2,406,156		Goodwill	2,406,156		2,406,156
Other assets	Other assets	184,809		148,140		Other assets	164,815		165,230
TOTAL ASSETS	TOTAL ASSETS	$	30,333,724	$	32,362,222	TOTAL ASSETS	$	28,243,431	$	28,252,857

LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY					LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:	Current liabilities:					Current liabilities:

Accounts payable	Accounts payable	3,260,479		3,508,354		Accounts payable	4,167,461		3,261,952
Accrued expenses	Accrued expenses	2,269,239		2,343,728		Accrued expenses	2,240,523		2,384,447
Deferred revenue		1,263,919		1,957,752
Deferred revenue, current						Deferred revenue, current	2,108,082		1,115,627
Lease obligations, current	Lease obligations, current	665,310		641,002		Lease obligations, current	646,805		687,589

Unfavorable contract liability, current	Unfavorable contract liability, current	274,501		330,032		Unfavorable contract liability, current	223,230		236,705
Total current liabilities	Total current liabilities	7,733,448		8,780,868		Total current liabilities	9,386,101		7,686,320
Long-term liabilities:	Long-term liabilities:					Long-term liabilities:

Deferred revenue, net of current portion	Deferred revenue, net of current portion	313,131		208,456		Deferred revenue, net of current portion	231,969		371,823
Lease obligations, net of current portion	Lease obligations, net of current portion	974,751		1,315,275		Lease obligations, net of current portion	496,526		623,452

Unfavorable contract liability, net of current portion	Unfavorable contract liability, net of current portion	769,721		929,474		Unfavorable contract liability, net of current portion	535,706		583,512
Total liabilities	Total liabilities	9,791,051		11,234,073		Total liabilities	10,650,302		9,265,107

Commitments and contingencies (Note 12)		0		0
Commitments and contingencies						Commitments and contingencies

Stockholders’ equity:	Stockholders’ equity:					Stockholders’ equity:
Tecogen Inc. stockholders’ equity:	Tecogen Inc. stockholders’ equity:					Tecogen Inc. stockholders’ equity:
Common stock, $0.001 par value; 100,000,000 shares authorized; 24,850,261 issued and outstanding at June 30, 2022 and December 31, 2021		24,850		24,850
Common stock, $0.001 par value; 100,000,000 shares authorized; 24,850,261 issued and outstanding at March 31, 2023 and December 31, 2022						Common stock, $0.001 par value; 100,000,000 shares authorized; 24,850,261 issued and outstanding at March 31, 2023 and December 31, 2022	24,850		24,850
Additional paid-in capital	Additional paid-in capital	57,202,459		57,016,859		Additional paid-in capital	57,428,356		57,351,008

Accumulated deficit	Accumulated deficit	(36,600,430)		(35,833,621)		Accumulated deficit	(39,771,577)		(38,281,548)
Total Tecogen Inc. stockholders’ equity	Total Tecogen Inc. stockholders’ equity	20,626,879		21,208,088		Total Tecogen Inc. stockholders’ equity	17,681,629		19,094,310
Non-controlling interest	Non-controlling interest	(84,206)		(79,939)		Non-controlling interest	(88,500)		(106,560)
Total stockholders’ equity	Total stockholders’ equity	20,542,673		21,128,149		Total stockholders’ equity	17,593,129		18,987,750
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	30,333,724	$	32,362,222	TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	28,243,431	$	28,252,857

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

TECOGEN INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)


		Three Months Ended				Three Months Ended
		June 30, 2022		June 30, 2021				March 31, 2023		March 31, 2022
Revenues	Revenues						Revenues
Products	Products	$	3,010,115	$	2,445,927		Products	$	1,710,136	$	3,939,481
Services	Services	3,050,191		3,328,314			Services	3,136,173		2,917,280
Energy production	Energy production	354,287		370,861			Energy production	533,509		581,562
Total revenues	Total revenues	6,414,593		6,145,102			Total revenues	5,379,818		7,438,323
Cost of sales	Cost of sales						Cost of sales
Products	Products	2,015,466		1,390,725			Products	1,212,568		2,644,756
Services	Services	1,473,586		1,679,386			Services	1,737,602		1,366,752
Energy production	Energy production	222,092		232,353			Energy production	337,739		336,027
Total cost of sales	Total cost of sales	3,711,144		3,302,464			Total cost of sales	3,287,909		4,347,535
Gross profit	Gross profit	2,703,449		2,842,638			Gross profit	2,091,909		3,090,788
Operating expenses	Operating expenses						Operating expenses
General and administrative	General and administrative	2,824,832		2,438,452			General and administrative	2,792,483		2,473,903
Selling	Selling	503,601		580,871			Selling	520,070		501,091
Research and development	Research and development	194,853		132,883			Research and development	229,102		140,135
Gain on disposition of assets	Gain on disposition of assets	(2,500)		—			Gain on disposition of assets	—		(33,945)

Gain on termination of unfavorable contract liability							Gain on termination of unfavorable contract liability	—		(71,375)
Total operating expenses	Total operating expenses	3,520,786		3,152,206			Total operating expenses	3,541,655		3,009,809
Loss from operations		(817,337)		(309,568)
Income (loss) from operations							Income (loss) from operations	(1,449,746)		80,979
Other income (expense)	Other income (expense)						Other income (expense)
Other income (expense), net	Other income (expense), net	(1,265)		(1,125)			Other income (expense), net	830		(14,150)
Interest expense	Interest expense	(12,733)		(5,088)			Interest expense	(415)		(828)
Employee retention credit		—		713,268

Unrealized gain on investment securities	Unrealized gain on investment securities	—		18,749			Unrealized gain on investment securities	—		37,497
Total other income (expense), net	Total other income (expense), net	(13,998)		725,804			Total other income (expense), net	415		22,519
Income (loss) before provision for state income taxes	Income (loss) before provision for state income taxes	(831,335)		416,236			Income (loss) before provision for state income taxes	(1,449,331)		103,498
Provision for state income taxes	Provision for state income taxes	6,500		7,933			Provision for state income taxes	22,638		3,930
Consolidated net income (loss)	Consolidated net income (loss)	(837,835)		408,303			Consolidated net income (loss)	(1,471,969)		99,568
Income attributable to the non-controlling interest	Income attributable to the non-controlling interest	(18,383)		(8,672)			Income attributable to the non-controlling interest	(18,060)		(10,159)
Net income (loss) attributable to Tecogen Inc.	Net income (loss) attributable to Tecogen Inc.	$	(856,218)	$	399,631		Net income (loss) attributable to Tecogen Inc.	$	(1,490,029)	$	89,409

Net income (loss) per share - basic	Net income (loss) per share - basic	$	(0.03)	$	0.02		Net income (loss) per share - basic	$	(0.06)	—
Net income (loss) per share - diluted	Net income (loss) per share - diluted	$	(0.03)	$	0.02		Net income (loss) per share - diluted	$	(0.06)	—
Weighted average shares outstanding - basic	Weighted average shares outstanding - basic	24,850,261		24,850,261			Weighted average shares outstanding - basic	24,850,261		24,850,261
Weighted average shares outstanding - diluted	Weighted average shares outstanding - diluted	24,850,261		25,125,210			Weighted average shares outstanding - diluted	24,850,261		25,028,616

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

TECOGEN INC.

CONDENSED CONSOLIDATED STATEMENTS OF ~~OPERATIONS~~

~~(unaudited)~~

Six Months Ended
June 30, 2022 June 30, 2021
Revenues
Products $ 6,949,596 $ 4,568,649
Services 5,967,471 6,609,458
Energy production 935,849 1,024,156
Total revenues 13,852,916 12,202,263
Cost of sales
Products 4,660,221 2,565,012
Services 2,840,338 3,216,989
Energy production 558,119 626,416
Total cost of sales 8,058,678 6,408,417
Gross profit 5,794,238 5,793,846
Operating expenses
General and administrative 5,298,735 4,892,305
Selling 1,004,692 1,091,074
Research and development 334,988 259,033
Gain on disposition of assets (36,445) —
Gain on termination of unfavorable contract liability (71,375) —
Total operating expenses 6,530,595 6,242,412
Loss from operations (736,357) (448,566)
Other income (expense)
Interest and other income (expense), net (15,416) (2,328)
Interest expense (13,561) (9,728)
Gain on extinguishment of debt — 1,887,859
Employee retention credit — 713,268
Gain on sale of investment securities — 6,046
Unrealized gain (loss) on investment securities 37,497 56,246
Total other income (expense), net 8,520 2,651,363
Income (loss) before provision for state income taxes (727,837) 2,202,797
Provision for state income taxes 10,430 15,991
Consolidated net income (loss) (738,267) 2,186,806
Income attributable to non-controlling interest (28,542) (20,468)
Net income (loss) attributable to Tecogen Inc. $ (766,809) $ 2,166,338
Net income (loss) per share - basic $ (0.03) $ 0.09
Net income (loss) per share - diluted $ (0.03) $ 0.09
Weighted average shares outstanding - basic 24,850,261 24,850,261
Weighted average shares outstanding - diluted 24,850,261 25,102,470

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

~~TECOGEN INC.~~

~~CONDENSED CONSOLIDATED STATEMENTS OF~~ STOCKHOLDERS' EQUITY

For the ~~For the~~ Three Months Ended March 31, 2023 and ~~Six Months June 30,~~ 2022 ~~and 2021~~

(unaudited)

Three months ended June 30, 2022 Common Stock Shares Common
Stock
0.001
Par Value Additional
Paid-In
Capital Accumulated
Deficit Non-controlling
Interest Total
Balance at March 31, 2022 24,850,261 $ 24,850 $ 57,112,566 $ (35,744,212) $ (85,420) $ 21,307,784
Stock based compensation expense 89,893 89,893
Distributions to non-controlling interest (17,169) (17,169)
Net loss (856,218) 18,383 (837,835)
Balance at June 30, 2022 24,850,261 $ 24,850 $ 57,202,459 $ (36,600,430) $ (84,206) $ 20,542,673
Six months ended June 30, 2022 Common Stock Shares Common
Stock
0.001
Par Value Additional
Paid-In
Capital Accumulated
Deficit Non-controlling
Interest Total
Balance at December 31, 2021 24,850,261 $ 24,850 $ 57,016,859 $ (35,833,621) $ (79,939) $ 21,128,149
Stock based compensation expense 185,600 185,600
Distributions to non-controlling interest (32,809) (32,809)
Net loss (766,809) 28,542 (738,267)
Balance at June 30, 2022 24,850,261 $ 24,850 $ 57,202,459 $ (36,600,430) $ (84,206) $ 20,542,673
Three months ended June 30, 2021 Common Stock Shares Common
Stock
0.001
Par Value Additional
Paid-In
Capital Accumulated
Deficit Non-controlling
Interest Total
Balance at March 31, 2021 24,850,261 $ 24,850 $ 56,853,513 $ (37,762,914) $ (48,703) $ 19,066,746
Stock based compensation expense — — 54,681 — — 54,681
Distributions to non-controlling interest — — — — (15,636) (15,636)
Net income — — — 399,631 8,672 408,303
Balance at June 30, 2021 24,850,261 $ 24,850 $ 56,908,194 $ (37,363,283) $ (55,667) $ 19,514,094
Six months ended June 30, 2021 Common Stock Shares Common
Stock
0.001
Par Value Additional
Paid-In
Capital Accumulated
Deficit Non-controlling
Interest Total
Balance at December 31, 2020 24,850,261 $ 24,850 $ 56,814,428 $ (39,529,621) $ (42,323) $ 17,267,334
Stock based compensation expense — — 93,766 — — 93,766
Distributions to non-controlling interest — — — — (33,812) (33,812)
Net income — — — 2,166,338 20,468 2,186,806
Balance at June 30, 2021 24,850,261 $ 24,850 $ 56,908,194 $ (37,363,283) $ (55,667) $ 19,514,094


	Tecogen Inc. Stockholders
Three Months ended March 31, 2023	Common Stock Shares	Common Stock 0.001 Par Value		Additional Paid-In Capital		Accumulated Deficit		Non-controlling Interest		Total
Balance at December 31, 2022	24,850,261	$	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, 2023	24,850,261	$	24,850	$	57,428,356	$	(39,771,577)	$	(88,500)	$	17,593,129

Three Months ended March 31, 2022	Common Stock Shares	Common Stock 0.001 Par Value		Additional Paid-In Capital		Accumulated Deficit		Non-controlling Interest		Total
Balance at December 31, 2021	24,850,261	$	24,850	$	57,016,859	$	(35,833,621)	$	(79,939)	$	21,128,149
Stock based compensation expense	—	—		95,707		—		—		95,707
Distributions to non-controlling interest	—	—		—		—		(15,640)		(15,640)
Net income	—	—		—		89,409		10,159		99,568
Balance at March 31, 2022	24,850,261	24,850		57,112,566		$	(35,744,212)	$	(85,420)	$	21,307,784

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

TECOGEN INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)


		Six Months Ended					Three Months Ended
		June 30, 2022		June 30, 2021			March 31, 2023		March 31, 2022
CASH FLOWS FROM OPERATING ACTIVITIES:	CASH FLOWS FROM OPERATING ACTIVITIES:					CASH FLOWS FROM OPERATING ACTIVITIES:
Consolidated net income (loss)	Consolidated net income (loss)	$	(738,267)	$	2,186,806	Consolidated net income (loss)	$	(1,471,969)	$	99,568
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:						Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization, net	Depreciation and amortization, net	217,718		241,470		Depreciation and amortization, net	105,920		107,061
Gain on extinguishment of debt		—		(1,887,859)

Employee retention credit		—		(713,268)

Stock-based compensation	Stock-based compensation	185,600		93,766		Stock-based compensation	77,348		95,707
Provision for doubtful accounts		46,000		—

Gain on disposition of assets	Gain on disposition of assets	(36,445)		—		Gain on disposition of assets	—		(33,945)
Gain on sale of investment securities		—		(6,046)

Unrealized gain on investment securities	Unrealized gain on investment securities	(37,497)		(56,246)		Unrealized gain on investment securities	—		(37,497)
Gain on termination of unfavorable contract liability	Gain on termination of unfavorable contract liability	(71,375)		—		Gain on termination of unfavorable contract liability	—		(71,375)
Impairment of intangible asset		—		7,400

Changes in operating assets and liabilities	Changes in operating assets and liabilities					Changes in operating assets and liabilities
(Increase) decrease in:	(Increase) decrease in:					(Increase) decrease in:
Accounts receivable	Accounts receivable	(444,541)		894,100		Accounts receivable	(44,238)		850,674
Employee retention credit receivable		562,752		—
Employee retention credit						Employee retention credit	667,121		—
Unbilled revenue	Unbilled revenue	1,117,057		367,750		Unbilled revenue	16,428		351,259
Inventory	Inventory	(438,102)		357,072		Inventory	(1,380,052)		8,252
Prepaid expenses and other current assets	Prepaid expenses and other current assets	(22,618)		(242,588)		Prepaid expenses and other current assets	136,170		2,014
Other assets	Other assets	308,282		(537,197)		Other assets	161,931		152,888
Increase (decrease) in:	Increase (decrease) in:					Increase (decrease) in:
Accounts payable	Accounts payable	(247,876)		(1,585,368)		Accounts payable	905,509		894,418
Accrued expenses and other current liabilities	Accrued expenses and other current liabilities	(74,490)		290,342		Accrued expenses and other current liabilities	(143,923)		134,795
Deferred revenue	Deferred revenue	(589,158)		(45,118)		Deferred revenue	852,600		(504,229)
Other liabilities	Other liabilities	(316,217)		531,335		Other liabilities	(167,711)		(155,119)
Net cash used in operating activities		(579,177)		(103,649)
Net cash provided by (used in) operating activities						Net cash provided by (used in) operating activities	(284,866)		1,894,471
CASH FLOWS FROM INVESTING ACTIVITIES:	CASH FLOWS FROM INVESTING ACTIVITIES:					CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment	Purchases of property and equipment	(209,034)		(47,504)		Purchases of property and equipment	—		(80,873)
Proceeds from the sale of investment securities		—		11,637

Purchases of intangible assets	Purchases of intangible assets	(29,505)		(5,682)		Purchases of intangible assets	—		(16,220)
Proceeds from disposition of assets	Proceeds from disposition of assets	67,169		—		Proceeds from disposition of assets	—		64,669

Distributions to non-controlling interest	Distributions to non-controlling interest	(32,809)		(33,812)		Distributions to non-controlling interest	—		(15,640)
Net cash used in investing activities	Net cash used in investing activities	(204,179)		(75,361)		Net cash used in investing activities	—		(48,064)
CASH FLOWS FROM FINANCING ACTIVITIES:	CASH FLOWS FROM FINANCING ACTIVITIES:					CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from note payable	Proceeds from note payable	—		1,874,269		Proceeds from note payable	—		—

Net cash provided by financing activities	Net cash provided by financing activities	—		1,874,269		Net cash provided by financing activities	—		—
Change in cash and cash equivalents	Change in cash and cash equivalents	(783,356)		1,695,259		Change in cash and cash equivalents	(284,866)		1,846,407
Cash and cash equivalents, beginning of the period	Cash and cash equivalents, beginning of the period	3,614,463		1,490,219		Cash and cash equivalents, beginning of the period	1,913,969		3,614,463
Cash and cash equivalents, end of the period	Cash and cash equivalents, end of the period	$	2,831,107	$	3,185,478	Cash and cash equivalents, end of the period	$	1,629,103	$	5,460,870

Supplemental disclosures of cash flows information:	Supplemental disclosures of cash flows information:					Supplemental disclosures of cash flows information:
Cash paid for interest	Cash paid for interest	$	12,733	$	—	Cash paid for interest	$	—	$	413
Cash paid for taxes	Cash paid for taxes	$	10,430	$	15,991	Cash paid for taxes	$	22,638	$	3,930

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

TECOGEN INC.

Notes to Condensed Consolidated Financial Statements

Note 1. Description of Business and Basis of Presentation

Description of Business

Tecogen Inc., (together with its subsidiaries, “we,” “our,” or ~~we, our~~“us,” or ~~us, produces commercial~~“Tecogen”) designs, manufactures, markets, and ~~industrial engine-driven,~~maintains high efficiency, ultra-clean cogeneration products. These include natural gas 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 ~~reduce~~provide customers with substantial energy ~~costs, decrease greenhouse gas emissions~~savings, resiliency from utility power outages and ~~alleviate congestion on the national power grid.~~for significantly reducing a customer’s carbon footprint. Our products ~~supply electric power or mechanical power~~are sold with our patented Ultera® emissions technology which nearly eliminates all criteria pollutants such as nitrogen oxide ("NOx") and carbon monoxide ("CO"). We developed Ultera® for ~~cooling, while heat from~~other applications including stationary engines and forklifts. We were incorporated in the ~~engine is recovered~~State of Delaware on September 15, 2000.

We have wholly-owned subsidiaries American DG Energy, Inc. ("ADGE") and ~~purposefully used at~~Tecogen CHP Solutions, Inc., and we own a ~~facility. We also install,~~51% interest in American DG New York, LLC ("ADGNY"), a joint venture. ADGE and ADGNY distribute, own, and operate ~~and maintain complete~~clean, on-site energy systems ~~and other complementary systems at customer sites and sell~~that produce electricity, hot water, heat and ~~cooling~~cooling. ADGE owns the equipment that it installs at a customer’s facility and sells the energy ~~under long-term contracts at prices guaranteed~~produced by its systems to the customer on a long-term contractual basis.

Our operations are comprised of three business segments:

•our Products segment, which designs, manufactures and sells industrial and commercial cogeneration systems;

•our Services segment, which provides operations and maintenance ("O&M") services and turn-key installation for our products under long term service contracts, and

•our Energy Production segment, which sells energy in the form of electricity, heat, hot water and cooling to ~~be below conventional utility rates.~~our customers under long-term energy sales agreements.

The majority of our customers are located in regions with the highest utility rates, typically California, the Midwest and the Northeast.

On July 20, 2022, we announced our intention to increase focus on opportunities relating to Controlled Environment Agriculture (CEA). Tecogen believes that CEA offers an exciting opportunity to apply the company’s expertise in clean cooling, power generation, and greenhouse gas reduction to address critical issues affecting food and energy security.

Our common stock is quoted on OTC Markets Group, Inc.'s OTCQX Best Market tier and trades under the symbol "TGEN."

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.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all the information 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. Operating results for the ~~six~~three months ended ~~June 30, 2022~~March 31, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2022.~~2023.

The condensed consolidated balance sheet at December 31, ~~2021~~2022 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's Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

The accompanying unaudited condensed consolidated financial statements include our accounts and the accounts of entities in which we have a controlling financial interest. Those entities include our wholly-owned subsidiaries American DG Energy Inc., Tecogen CHP Solutions, Inc., and a joint venture, American DG New York, LLC, in which American DG Energy Inc. holds a 51% interest. Investments in partnerships and companies in which we do 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.

Our operations are comprised of three business segments. Our Products segment designs, manufactures and sells industrial and commercial cogeneration systems as described above. 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 long-term sales agreements.

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

TECOGEN INC.

Notes to Condensed Consolidated Financial Statements

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.

Employee Retention Credit

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law providing numerous tax provisions and other stimulus measures, including an employee retention credit (“ERC”), which is a refundable tax credit against certain employment taxes. The Taxpayer Certainty and Disaster Tax Relief Act of 2020 and the American Rescue Plan Act of 2021 extended and expanded the availability of the ERC.

~~TECOGEN INC.~~

~~Notes to Condensed Consolidated Financial Statements~~

Section 2301(c)(2)(B) of the CARES Act permits an employer to use an alternative quarter to calculate gross receipts and the employer may determine if the decline in gross receipt tests is met for a calendar quarter in 2021 by comparing its gross receipts for the immediately preceding calendar quarter with those for the corresponding calendar quarter in 2019. Accordingly, for the first quarter of 2021, we elected to use our gross receipts for the fourth calendar quarter of 2020 compared to our gross receipts for the fourth calendar quarter of 2019. As a result of our election to use an alternative quarter, we qualified for the ERC in the first, second and third quarters of 2021 because our gross receipts decreased by more than 20% from the first, second and third quarters of 2019. As a result of averaging 100 or fewer full-time employees in 2019, all wages paid to employees in the first, second and third quarters of 2021, excluding the wages ~~that were~~ applied to the Paycheck Protection ~~Loan~~Program Second Draw Loan, were eligible for the ERC. ~~Wages used towards PPP loan forgiveness cannot be used as qualified wages for purposes of~~

During the ~~ERC.~~

Accounting Standards Codification 105, "Generally Accepted Accounting Principles," describes the decision-making framework when no guidance exists in US GAAP for a particular transaction. Specifically, ASC 105-10-05-2 instructs companies to look for guidance for a similar transaction within US GAAP and apply that guidance by analogy. As such, forms of government assistance, such as thethree months ended June 30, 2021, we recorded an ERC ~~provided to business entities would not be within the scope of ASC 958, but it may be applied by analogy under ASC 105-10-05-2. We accounted~~benefit for the ~~Employee Retention Credit as a government grant~~first and second quarters of 2021 of $713,269 and, in ~~accordance with Accounting Standards Update 2013-06,~~ ~~Not-for-Profit Entities (Topic 958) ("ASU 2013-06")~~ ~~by analogy under ASC 105-10-05-2.Under this standard, government grants are recognized when~~ the ~~conditions on which they depend are substantially met. The conditions for recognition of the~~three months ended September 30, 2021 we recorded an ERC ~~include, but are not limited to:~~

•~~An entity has been adversely affected by the COVID-19 pandemic~~

•~~We have not used qualifying payroll for both the Paycheck Protection Program and the ERC~~

•~~We incurred payroll costs to retain employees~~

•~~The process for filing~~benefit for the ~~credit is an administrative task and not a barrier to receiving the credits~~

~~A current receivable~~third quarter of 2021 of $562,752, respectively, in other income (expense), net in the ~~amount of $713,269 is included in~~ our condensed consolidated ~~balance sheet as~~statements of ~~June 30, 2022.~~operations. On April 14, 2022, we received $564,027 from the Internal Revenue Service representing the ERC claim for the third quarter of 2021 and $1,275 of accrued interest. We ~~are still awaiting payment~~received $667,121 from the Internal Revenue Service ~~for~~on January 12, 2023 in payment of the ERC ~~claims~~claimed from the first and second quarters of ~~2021.~~

2021 and $15,775 of accrued interest, which is reported in other income (expense) in our condensed consolidated statements of operations for the three months ended March 31, 2023. A current receivable in the amount of $46,148 is included in our condensed consolidated balance sheet as of March 31, 2023. We expect to receive the remaining balance in 2023.

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 general, our business segmentation is aligned according to the nature 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 ~~June 30, 2022~~March 31, 2023 and ~~2021.~~2022.

Three Months Ended June 30, 2022
Products Services Energy Production Total
Products $ 3,010,115 $ — $ — $ 3,010,115
Maintenance services — 3,050,191 — 3,050,191
Energy production — 0 354,287 354,287
Total revenue $ 3,010,115 $ 3,050,191 $ 354,287 $ 6,414,593


	Three Months Ended March 31, 2023
	Products		Services		Energy Production		Total
Products	$	1,710,136	$	—	$	—	$	1,710,136

Maintenance services	—		3,136,173		—		3,136,173
Energy production	—		—		533,509		533,509
Total revenue	$	1,710,136	$	3,136,173	$	533,509	$	5,379,818

TECOGEN INC.

Notes to Condensed Consolidated Financial Statements

Six Months Ended June 30, 2022
Products Services Energy Production Total
Products $ 6,949,596 $ — $ — $ 6,949,596
Installation services — 20,109 — 20,109
Maintenance services — 5,947,362 — 5,947,362
Energy production — 0 935,849 935,849
Total revenue $ 6,949,596 $ 5,967,471 $ 935,849 $ 13,852,916

Three Months Ended June 30, 2021
Products Services Energy Production Total
Products $ 2,445,927 $ — $ — $ 2,445,927
Installation services — 244,553 — 244,553
Maintenance services — 3,083,761 — 3,083,761
Energy production — 0 370,861 370,861
Total revenue $ 2,445,927 $ 3,328,314 $ 370,861 $ 6,145,102

Six Months Ended June 30, 2021
Products Services Energy Production Total
Products $ 4,568,649 $ — $ — $ 4,568,649
Installation services — 762,249 — 762,249
Maintenance services — 5,847,209 — 5,847,209
Energy production — — 1,024,156 1,024,156
Total revenue $ 4,568,649 $ 6,609,458 $ 1,024,156 $ 12,202,263


	Three Months Ended March 31, 2022
	Products		Services		Energy Production		Total
Products	$	3,939,481	$	—	$	—	$	3,939,481
Installation services	—		20,109		—		20,109
Maintenance services	—		2,897,171		—		2,897,171
Energy production	—		—		581,562		581,562
Total revenue	$	3,939,481	$	2,917,280	$	581,562	$	7,438,323

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 such 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 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.

~~TECOGEN INC.~~

~~Notes to Condensed Consolidated Financial Statements~~

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

~~Installation Services.~~ We provide installation services typically including all necessary engineering and design, labor, subcontract labor and service to install a cogeneration unit including integration into the customers’ existing electrical and mechanical systems.

Under complete turnkey installation service contracts revenue is recognized over time using the percentage-of-completion method determined on a cost to cost basis. Our performance obligation under such contracts is satisfied progressively over time as enhancements are made to customer owned and controlled properties. We measure progress towards satisfaction of the performance obligation based on an cost-based input method which we believe appropriately measures and is the most accurate depiction of the transfer of products and services to the customer under these contracts. When the financial metrics of a contract indicate a loss, our policy is to record the entire expected loss as soon as it is known. Contract costs and profit recognized to date under the percentage-of-completion method in excess of billings are recognized as contract assets and are recorded as unbilled revenue. Billings in excess of contract costs and profit are recognized as contract liabilities and are recorded as deferred revenue. Generally billings under complete turnkey installation contracts are made when contractually determined milestones of progress have been achieved, with payment terms generally being 30 days.

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 where 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. Payment terms for maintenance services are generally 30 days.

Installation Services. We provide both complete turnkey installation services which typically include all necessary engineering and design, labor, subcontract labor to install a cogeneration unit including integration into the customers’ existing electrical and mechanical systems. Under complete turnkey installation service contracts revenue is recognized over time using the percentage-of-completion method determined on a cost to cost basis. Our performance obligation under such contracts are satisfied progressively over time as enhancements are made to customer owned and controlled properties. We measure progress towards satisfaction of the performance obligation based on an input method based on cost which we believe is the most faithful depiction of the transfer of products and services to the customer under these contracts. When the financial metrics of a contract indicate a loss, our policy is to record the entire expected loss as soon as it is known. Contract costs and profit recognized to date under the percentage-of-completion method in excess of billings are recognized as contract assets and are recorded as unbilled revenue. Billings in excess of contract costs and profit are recognized as contract liabilities and are recorded as deferred revenue. Generally billings under complete turnkey installation contracts are made when contractually

TECOGEN INC.

Notes to Condensed Consolidated Financial Statements

determined milestones of progress have been achieved, with payment terms generally being 30 days. Our installation services revenue decreased significantly in three months March 31, 2023 and is likely to continue to remain low due to our strategy to focus on higher margin segments of our business.

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 ~~invoice~~bill the customer and recognize revenue for the various forms of energy delivered, based on ~~actual~~ 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 ~~the~~that amount ~~that~~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 ~~six~~three months ended ~~June 30, 2022~~March 31, 2023 that was included in unbilled revenue at the end of the period. Approximately $0$16,428 was billed in this period that had been recognized as revenue in previous periods.

Revenue recognized during the ~~six~~three ended months ~~June 30, 2022~~March 31, 2023 that was included in deferred revenue at the beginning of the period was approximately ~~$1,315,517.~~

~~TECOGEN INC.~~

~~Notes to Condensed Consolidated Financial Statements~~

$136,640.

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 ~~June 30, 2022,~~March 31, 2023, the aggregate amount of the transaction price allocated to remaining performance obligations was approximately ~~$0.8~~$2.3 million. We expect to recognize revenue of approximately ~~78.4%~~98.5% of the remaining performance obligations over the next 24 months, ~~61.8%~~90.1% recognized in the first 12 months and ~~16.6%~~8.4% recognized over the subsequent 12 months, and the remainder recognized thereafter.

TECOGEN INC.

Notes to Condensed Consolidated Financial Statements

Note 3. Income (Loss) Per Common Share

Basic and diluted income (loss) per share for the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively, were as follows:

Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Numerator:
Net income (loss) available to stockholders $ (856,218) $ 399,631 $ (766,809) $ 2,166,338
Denominator:
Weighted average shares outstanding - Basic 24,850,261 24,850,261 24,850,261 24,850,261
Effect of dilutive securities:
Stock options — 274,949 — 252,209
Weighted average shares outstanding - Diluted 24,850,261 25,125,210 24,850,261 25,102,470
Basic income (loss) per share $ (0.03) $ 0.02 $ (0.03) $ 0.09
Diluted income (loss) per share $ (0.03) $ 0.02 $ (0.03) $ 0.09
Anti-dilutive shares underlying stock options outstanding 925,396 985,296 925,396 777,296


	Three Months Ended
	March 31, 2023		March 31, 2022
Numerator:
Net income (loss) available to stockholders	$	(1,490,029)	$	89,409

Denominator:
Weighted average shares outstanding - Basic	24,850,261		24,850,261
Effect of dilutive securities:
Stock options	—		178,355
Weighted average shares outstanding - Diluted	24,850,261		25,028,616

Basic income (loss) per share	$	(0.06)	$	—
Diluted income (loss) per share	$	(0.06)	$	—

Anti-dilutive shares underlying stock options outstanding	1,744,351		928,271


Note 4.			Inventories, net

Inventories at ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 consisted of the following:


		June 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Raw materials		$	7,540,331	$	7,072,991
Less: reserves		(381,000)		(381,000)

Raw materials, net	Raw materials, net	$	7,159,331	$	6,691,991	Raw materials, net	$	9,354,413	$	9,001,491
Work-in-process	Work-in-process	401,601		549,802		Work-in-process	1,133,323		498,139
Finished goods	Finished goods	642,161		523,196		Finished goods	1,375,046		983,099
Total inventories, net	Total inventories, net	$	8,203,093	$	7,764,989	Total inventories, net	$	11,862,782	$	10,482,729

~~TECOGEN INC.~~

~~Notes to Condensed Consolidated Financial Statements~~

Note 5. Property, Plant and Equipment, net

Property, plant and equipment at ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 consisted of the following:


		Estimated Useful Life (in Years)	June 30, 2022		December 31, 2021			Estimated Useful Life (in Years)	March 31, 2023		December 31, 2022
Energy systems	Energy systems	1 - 15 years	$	3,478,824	$	3,556,488	Energy systems	1 - 15 years	$	2,810,232	$	2,810,232
Machinery and equipment	Machinery and equipment	5 - 7 years	1,613,029		1,463,153		Machinery and equipment	5 - 7 years	1,624,885		1,624,885
Furniture and fixtures	Furniture and fixtures	5 years	196,007		193,698		Furniture and fixtures	5 years	196,007		196,007
Computer software	Computer software	3 - 5 years	192,865		192,865		Computer software	3 - 5 years	192,865		192,865
Leasehold improvements	Leasehold improvements	*	466,789		466,789		Leasehold improvements	*	466,789		466,789
			5,947,514		5,872,993				5,290,778		5,290,778
Less - accumulated depreciation and amortization	Less - accumulated depreciation and amortization		(4,236,870)		(4,090,049)		Less - accumulated depreciation and amortization		(4,000,550)		(3,883,058)
			$	1,710,644	$	1,782,944			$	1,290,228	$	1,407,720

* Lesser of estimated useful life of asset or lease term

Depreciation and amortization expense on property and equipment for the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022 was $117,492 and ~~2021 was $123,818 and $250,610 and $145,458 and $306,014,~~$126,792, respectively. ~~During the six months ended June 30, 2022, we received proceeds of $67,169 from the disposition of certain assets, realizing a gain of $36,445.~~

TECOGEN INC.

Notes to Condensed Consolidated Financial Statements

Note 6. Intangible Assets and Liabilities Other Than Goodwill

As of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 we had the following amounts related to intangible assets and liabilities other than goodwill:


		June 30, 2022						December 31, 2021							March 31, 2023						December 31, 2022
Intangible assets	Intangible assets	Cost		Accumulated Amortization		Total		Cost		Accumulated Amortization		Total		Intangible assets	Cost		Accumulated Amortization		Total		Cost		Accumulated Amortization		Total
Product certifications	Product certifications	$	777,465	$	(559,162)	$	218,303	$	765,850	$	(532,676)	$	233,174	Product certifications	$	777,465	$	(597,499)	$	179,966	$	777,465	$	(584,863)	$	192,602
Patents	Patents	888,911		(360,300)		528,611		871,021		(314,997)		556,024		Patents	888,910		(427,515)		461,395		888,910		(405,140)		483,770
Developed technology	Developed technology	240,000		(148,000)		92,000		240,000		(140,000)		100,000		Developed technology	240,000		(160,000)		80,000		240,000		(156,000)		84,000
Trademarks	Trademarks	26,896		—		26,896		26,896		—		26,896		Trademarks	26,896		—		26,896		26,896		—		26,896
In Process R&D	In Process R&D	263,936		(47,131)		216,805		263,936		(28,279)		235,657		In Process R&D	263,936		(75,410)		188,526		263,936		(65,984)		197,952
Favorable contract asset	Favorable contract asset	384,465		(367,570)		16,895		384,465		(355,193)		29,272		Favorable contract asset	384,465		(373,363)		11,102		384,465		(372,091)		12,374

		$	2,581,673	$	(1,482,163)	$	1,099,510	$	2,552,168	$	(1,371,145)	$	1,181,023		$	2,581,672	$	(1,633,787)	$	947,885	$	2,581,672	$	(1,584,078)	$	997,594

Intangible liability	Intangible liability													Intangible liability
Unfavorable contract liability	Unfavorable contract liability	$	2,903,419	$	(1,859,197)	$	1,044,222	$	3,056,655	$	(1,797,149)	$	1,259,506	Unfavorable contract liability	$	2,618,168	$	(1,859,232)	$	758,936	$	2,618,168	$	(1,797,951)	$	820,217

The aggregate amortization expense related to intangible assets and liabilities exclusive of contract related intangibles for the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022 was $49,361 and ~~2021 was $50,469 and $100,491 and $51,187 and $94,077, respectively.~~$50,795. The net credit to cost of sales related to the amortization of the contract related intangible asset and liability for the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022 was $60,933 and 2021 was $62,857 and $133,383 and $79,569 and $158,622, respectively. During the six months ended June 30, 2021 we abandoned certain patent applications amounting to $7,400 and recorded an impairment charge in general and administrative expenses in the period.$70,526, respectively

Favorable/Unfavorable Contract Assets and Liabilities

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.

~~TECOGEN INC.~~

~~Notes to Condensed Consolidated Financial Statements~~

Amortization of intangibles including contract related amounts is calculated using the straight-line method over the remaining useful life or contract term. Aggregate future amortization over the next five years and thereafter as of ~~June 30, 2022~~March 31, 2023 is estimated to be as follows:

Non-contract Related Intangibles Contract Related Intangibles Total
Year 1 $ 200,712 $ (272,512) $ (71,800)
Year 2 192,689 (230,226) (37,537)
Year 3 180,127 (140,487) 39,640
Year 4 176,234 (100,629) 75,605
Year 5 172,622 (78,509) 94,113
Thereafter 147,209 (218,842) (71,633)
Total $ 1,069,593 (1,041,205) $ 28,388

~~We recognized a gain on termination of unfavorable contract liability of $71,375 in the six months ended June 30, 2022 due to the closing of certain energy production sites.~~


	Non-contract Related Intangibles		Contract Related Intangibles		Total
Year 1	$	198,951	$	(223,230)	$	(24,279)
Year 2	181,065		(146,940)		34,125
Year 3	177,295		(97,376)		79,919
Year 4	172,495		(62,692)		109,803
Year 5	136,158		(55,026)		81,132
Thereafter	55,025		(173,672)		(118,647)
Total	$	920,989	(758,936)		$	162,053


Note 7.			Sale of Energy Producing Assets and Goodwill Impairment

During the first quarter of 2019 we recognized 2two individual sales of energy producing assets, for a total of 8eight 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. In October 2021 the minimum guarantee with respect to one of the energy purchase agreements was modified by reducing the guaranteed minimum collections by $35,000 per year, the guaranteed minimum collection amount associated with one site that was sold by the customer. Actual results are

TECOGEN INC.

Notes to Condensed Consolidated Financial Statements

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 ~~June 30, 2022~~March 31, 2023, we do not expect to make any material payments under the guarantee.

At ~~June 30, 2022, our obligation~~March 31, 2023, we were due $22,229 under the energy production contracts, ~~was $3,911.~~representing outstanding accounts receivable balances that were due from the purchaser's customers which were past due at December 31, 2022 and have since been collected. We expect to receive these funds in the third quarter of 2023 when the bi-annnual reconciliation for the period ended June 30, 2023 is prepared.

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 8.			Leases

Our leases principally consist of operating leases related to our corporate office, field offices, and our research, manufacturing and storage facilities.

At inception, we determine if an arrangement contains 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 are included in Right-of-use assets, Lease obligations, current and Lease obligations, long term 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

~~TECOGEN INC.~~

~~Notes to Condensed Consolidated Financial Statements~~

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.

Lease expense for operating leases, which principally consist of fixed payments for base rent, is recognized on a straight-line basis over the lease term. Lease expense for the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022 was $189,715 and ~~2021 was $210,155~~ and ~~$407,074 and $198,943 and $394,216,~~$196,979, respectively.

Supplemental information related to leases for the ~~six~~three months ended ~~June 30, 2022~~March 31, 2023 was as follows:


		Six Months Ended June 30,							Three Months Ended
		2022			2021				March 31, 2023			March 31, 2022
Cash paid for amounts included in the measurement of operating lease liabilities	Cash paid for amounts included in the measurement of operating lease liabilities	$	365,509		$	352,579		Cash paid for amounts included in the measurement of operating lease liabilities	$	184,072		$	181,661
Right-of-use assets obtained in exchange for operating lease liabilities	Right-of-use assets obtained in exchange for operating lease liabilities	$	—		$	825,848		Right-of-use assets obtained in exchange for operating lease liabilities	$	—		$	—
Weighted-average remaining lease term - operating leases	Weighted-average remaining lease term - operating leases	3.70 years			4.30 years			Weighted-average remaining lease term - operating leases	3.60 years			3.80 years
Weighted-average discount rate - operating leases	Weighted-average discount rate - operating leases	6		%	6		%	Weighted-average discount rate - operating leases	6		%	6		%

Supplemental information related to operating leases as of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 was as follows:

June 30, 2022 December 31, 2021
Operating leases
Right-of-use assets $ 1,561,757 $ 1,869,210
Operating lease liability, current $ 665,310 $ 641,002
Operating lease liability, long-term 974,751 1,315,275
Total operating lease liability $ 1,640,061 $ 1,956,277

TECOGEN INC.

Notes to Condensed Consolidated Financial Statements


	March 31, 2023		December 31, 2022
Operating leases
Right-of-use assets	$	1,084,033	$	1,245,549

Operating lease liability, current	$	646,805	$	687,589
Operating lease liability, long-term	496,526		623,452
Total operating lease liability	$	1,143,331	$	1,311,041

Future minimum lease commitments under non-cancellable operating leases as of ~~June 30, 2022~~March 31, 2023 were as follows:


	Operating Leases
Year 1	$	~~368,272~~691,899
Year 2	~~743,118~~146,956
Year 3	~~250,659~~120,763
Year 4	~~105,426~~94,023
Year 5	~~98,783~~53,092
Thereafter	~~223,851~~157,648
Total lease payments	~~1,790,109~~1,264,381
Less: imputed interest	~~150,048~~121,050
Total	$	~~1,640,061~~1,143,331

The lease on our headquarters located in Waltham, Massachusetts which consists of approximately 43,000 square feet of manufacturing, storage and office space, expires on March 31, 2024. Currently, our monthly base rent is $44,254. On March 31, 2023, we entered into two lease agreements for two adjoining buildings, located in Billerica, Massachusetts, containing approximately 26,412 square feet of manufacturing, storage and offices space to serve as our headquarters and manufacturing facilities. Under the terms of the leases, which have 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, plus real estate taxes and common maintenance expenses. Our costs for initial improvements required to the leased premises is estimated to range between $1,000,000 and $1,250,000. The estimated straight-line rent expense for the initial term of the lease is approximately $24,800. In accordance with ASC 842-20-30-1, we will record the lease liability and right-of-use asset using the discount rate for the lease upon the lease commencement date.

Note 9. Stock-Based Compensation

Stock-Based Compensation

We adopted a 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. 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 ~~June 30, 2022,~~March 31, 2023, and in June 2017 stockholders approved an amendment to extend the termination date of the Plan to January 1, ~~2026 and ratified all of our option grants issued after January 1, 2016 (the "Amended Plan").~~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

~~TECOGEN INC.~~

~~Notes to Condensed Consolidated Financial Statements~~

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 ~~June 30, 2022~~March 31, 2023 was ~~66,518.~~150,893.

During the ~~six~~three months ended ~~June 30, 2022,~~March 31, 2023, we ~~granted nonqualified~~did not grant any options to purchase ~~an aggregate of 726,650~~ shares of common stock ~~at $1.10 per share to certain officers and employees. These options have a vesting schedule of two years and expire in ten years. The fair value of~~under the ~~options issued in 2022 was $304,550. The weighted-average grant date fair value of stock options granted during 2022 was $0.42 per share.~~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

TECOGEN INC.

Notes to 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.

During the six months ended June 30, 2022, we granted nonqualified options to purchase an aggregate of 125,000 shares of common stock at $1.20 per share to certain directors. These options have a vesting schedule of four years and expire in ten years. The fair value of the options issued in 2022 was $62,500. The weighted-average grant date fair value of stock options granted during 2022 was $0.50 per share. The number of shares remaining available for future issuance under the ~~2022~~ Plan as of ~~June 30,~~March 31, 2023 was 3,600,000.

During the three months ended March 31, 2023, we did not grant any options to purchase shares of common stock under the 2022 ~~was 3,675,000.~~Plan.

Stock option activity for the ~~six~~three months ended ~~June 30, 2022~~March 31, 2023 was as follows:


Common Stock Options	Common Stock Options	Number of Options	Exercise Price Per Share	Weighted Average Exercise Price		Weighted Average Remaining Life	Aggregate Intrinsic Value		Common Stock Options	Number of Options	Exercise Price Per Share	Weighted Average Exercise Price		Weighted Average Remaining Life	Aggregate Intrinsic Value
December 31, 2021		2,386,842	$0.71-$10.33	$	1.81	7.56 years	$	697,935
Outstanding, December 31, 2022									Outstanding, December 31, 2022	3,204,297	$0.71-$10.33	$	1.61	7.30 years	$	882,074
Granted	Granted	851,650	$1.10-$1.20	$	1.11				Granted	—

Exercised	Exercised	—							Exercised	—
Canceled and forfeited	Canceled and forfeited	(28,400)	$1.10-$4.50	$	1.53				Canceled and forfeited	(4,500)	$1.10-$1.13	$	1.11
Outstanding, June 30, 2022		3,210,092	$0.71-$10.33	$	1.63	7.73 years	$	617,001
Exercisable, June 30, 2022		1,303,217		$	2.47		$	249,903
Vested and expected to vest, June 30, 2022		2,924,061		$	1.68		$	561,936

Outstanding, March 31 2023									Outstanding, March 31 2023	3,199,797	$0.71-$10.33	$	1.61	7.05 years	$	741,404
Exercisable, March 31, 2023									Exercisable, March 31, 2023	1,768,222		$	2.08		$	375,744
Vested and expected to vest, March 31, 2023									Vested and expected to vest, March 31, 2023	2,985,061		$	1.65		$	686,555

Consolidated stock-based compensation expense for the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022 was $77,348 and ~~2021 was $89,893 and $185,600 and $54,681 and $93,766,~~$95,707, respectively. No tax benefit was recognized related to the stock-based compensation recorded during the period.

At ~~June 30, 2022~~March 31, 2023 the total compensation cost related to unvested stock option awards not yet recognized is ~~$640,245~~$421,659 and this amount will be recognized over a weighted average period of ~~1.71~~1.46 years.

Note 10. 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:

Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities. We currently do 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 and liabilities as provided below.

Level 3 - Unobservable inputs reflecting management’s own assumptions about the input used in pricing the asset or liability. We do not currently have any Level 3 financial assets or liabilities.

~~TECOGEN INC.~~

~~Notes to Condensed Consolidated Financial Statements~~

The following tables presents the asset reported in "other assets" in the consolidated balance sheet measured at its fair value on a recurring basis as of ~~June 30,~~March 31, 2023 and 2022 ~~and 2021~~ by level within the fair value hierarchy.

TECOGEN INC.

Notes to Condensed Consolidated Financial Statements


June 30, 2022				Quoted prices in active markets for identical assets		Significant other observable inputs		Significant unobservable inputs		Unrealized
March 31, 2023												March 31, 2023			Quoted prices in active markets for identical assets		Significant other observable inputs		Significant unobservable inputs		Unrealized
Description	Description	Total		Level 1		Level 2		Level 3		Gains		Description	Total		Level 1		Level 2		Level 3		Gains
Recurring fair value measurements	Recurring fair value measurements											Recurring fair value measurements
Marketable equity securities	Marketable equity securities											Marketable equity securities
EuroSite Power Inc.	EuroSite Power Inc.	$	112,492	$	—	$	112,492	$	—	$	37,497	EuroSite Power Inc.	$	93,744	$	—	$	93,744	$	—	$	—
Total recurring fair value measurements	Total recurring fair value measurements	$	112,492	$	—	$	112,492	$	—	$	37,497	Total recurring fair value measurements	$	93,744	$	—	$	93,744	$	—	$	—

June 30, 2021				Quoted prices in active markets for identical assets		Significant other observable inputs		Significant unobservable inputs		Unrealized
March 31, 2022												March 31, 2022			Quoted prices in active markets for identical assets		Significant other observable inputs		Significant unobservable inputs		Unrealized
Description	Description	Total		Level 1		Level 2		Level 3		Gains		Description	Total		Level 1		Level 2		Level 3		Gains
Recurring fair value measurements	Recurring fair value measurements											Recurring fair value measurements
Marketable equity securities	Marketable equity securities											Marketable equity securities
EuroSite Power Inc.	EuroSite Power Inc.	$	168,739	$	—	$	168,739	$	—	$	56,246	EuroSite Power Inc.	$	112,492	$	—	$	112,492	$	—	$	37,497
Total recurring fair value measurements	Total recurring fair value measurements	$	168,739	$	—	$	168,739	$	—	$	56,246	Total recurring fair value measurements	$	112,492	$	—	$	112,492	$	—	$	37,497

We utilize a Level 2 category fair value measurement to value ~~our~~its investment in EuroSite Power, Inc. as a marketable equity security at period end. That measurement is equal to the quoted market closing price at period end. Since this security is not actively traded we classify it as Level 2.

The following table summarizes changes in Level 2 assets which are comprised of marketable equity securities for the ~~six~~three months ended ~~June 30, 2022~~March 31, 2023 and ~~2021:~~2022:


Fair value at December 31, 2022	$	93,744
Unrealized gains	—
Fair value at March 31, 2023	$	93,744

Fair value at December 31, 2021	$	74,995
Unrealized gains	37,497
Fair value at ~~June 30,~~March 31, 2022	$	112,492


~~Fair value at December 31, 2020~~	$Note 11.	~~118,084~~ Segments
~~Sale of 93,187 shares~~	~~(5,591)~~
~~Unrealized gains~~	~~56,246~~
~~Fair value at June 30, 2021~~	$	~~168,739~~

~~Note 11.Notes Payable~~

~~Paycheck Protection Program Loan~~

On April 17, 2020, we obtained an unsecured loan through Webster Bank, N.A. in the amount of $1,874,200 in connection with the Paycheck Protection Program pursuant to the Coronavirus Aid, Relief, and Economic Security Act, as amended ("CARES Act”) administered by the United States Small Business Administration ("SBA").

~~TECOGEN INC.~~

~~Notes to Condensed Consolidated Financial Statements~~

On January 19, 2021, we received a letter dated January 12, 2021 from Webster Bank, NA confirming that the Paycheck Protection Program Loan issued to us pursuant to the CARES Act, in the original principal amount of $1,874,200 together with accrued interest of $13,659 was forgiven in full as of January 11, 2021. We have accounted for the loan forgiveness of $1,887,859 as debt extinguishment in accordance with Accounting Standards Update 2020-09, ~~Debt (Topic 470) ("ASU 2020-09")~~ and reported it as a separate component of other income (expense), net in the condensed consolidated statements of operations for the six months ended June 30, 2021. The loan forgiveness is nontaxable for both state and federal purposes and has been treated accordingly in our condensed consolidated financial statements.

~~Paycheck Protection Program Second Draw Loan~~

~~On February 5, 2021, we obtained a Paycheck Protection Program Second Draw unsecured loan through Webster Bank, N.A. in the amount of $1,874,269 pursuant to the CARES Act.~~

On September 20, 2021, we received a letter dated September 13, 2021 from Webster Bank, NA confirming that the Paycheck Protection Program Second Draw Loan issued to us pursuant to the CARES Act, in the original principal amount of $1,874,269 together with accrued interest of $11,386 was forgiven in full as of September 8, 2021. We have accounted for the loan forgiveness of $1,885,655 as debt extinguishment in accordance with Accounting Standards Update 2020-09, ~~Debt (Topic 470) ("ASU 2020-09")~~ and reported it as a separate component of other income (expense), net in the condensed consolidated statements of operations for the year ended December 31, 2021. The loan forgiveness is nontaxable for both state and federal purposes and has been treated accordingly in our condensed consolidated financial statements.

~~Note 12. Commitments and Contingencies~~

We guaranteed certain obligations of a former subsidiary of ADGE, EuroSite Power Inc. These guarantees include a payment performance guarantee in respect of collateralized equipment financing loans, with a remaining principal amount outstanding subject to the guarantee. In October 2021, the loan was paid in full. We have no further obligation to Eurosite Power Inc. under this guarantee.

~~Note 13. Segments~~

As of ~~June 30, 2022,~~March 31, 2023, we were organized into 3three operating segments through which senior management evaluates our business. These segments, as described in more detail in Note 1, are organized around the products and services provided to customers and represent our reportable segments. The following table presents information by reportable segment for the three ~~and six~~ months ended ~~June 30, 2022~~March 31, 2023 and ~~2021:~~2022:

1614

TECOGEN INC.

Notes to Condensed Consolidated Financial Statements


		Products		Services		Energy Production		Corporate, other and elimination (1)		Total			Products		Services		Energy Production		Corporate, other and elimination (1)		Total
Three months ended June 30, 2022
Three Months Ended March 31, 2023												Three Months Ended March 31, 2023

Revenue - external customers	Revenue - external customers	$	3,010,115	$	3,050,191	$	354,287	$	—	$	6,414,593	Revenue - external customers	$	1,710,136	$	3,136,173	$	533,509	$	—	$	5,379,818
Intersegment revenue	Intersegment revenue	—		62,415		—		(62,415)		—		Intersegment revenue	—		88,214		—		(88,214)		$	—
Total revenue	Total revenue	$	3,010,115	$	3,112,606	$	354,287	$	(62,415)	$	6,414,593	Total revenue	$	1,710,136	$	3,224,387	$	533,509	$	(88,214)	$	5,379,818
Gross profit	Gross profit	$	994,649	$	1,576,605	$	132,195	$	—	$	2,703,449	Gross profit	$	497,567	$	1,398,572	$	195,770	$	—	$	2,091,909
Identifiable assets	Identifiable assets	$	11,237,886	$	9,799,483	$	3,855,043	$	5,441,312	$	30,333,724	Identifiable assets	$	12,023,164	$	9,750,153	$	3,433,439	$	3,036,675	$	28,243,431

Six months ended June 30, 2022
Three Months Ended March 31, 2022												Three Months Ended March 31, 2022

Revenue - external customers	Revenue - external customers	$	6,949,596	$	5,967,471	$	935,849	$	—	$	13,852,916	Revenue - external customers	$	3,939,481	$	2,917,280	$	581,562	$	—	$	7,438,323
Intersegment revenue	Intersegment revenue	—		157,669		—		(157,669)		—		Intersegment revenue	—		95,253		—		(95,253)		—
Total revenue	Total revenue	$	6,949,596	$	6,125,140	$	935,849	$	(157,669)	$	13,852,916	Total revenue	$	3,939,481	$	3,012,533	$	581,562	$	(95,253)	$	7,438,323
Gross profit	Gross profit	$	2,289,375	$	3,127,133	$	377,730	$	—	$	5,794,238	Gross profit	$	1,294,726	$	1,550,527	$	245,535	$	—	$	3,090,788
Identifiable assets	Identifiable assets	$	11,237,886	$	9,799,483	$	3,855,043	$	5,441,312	$	30,333,724	Identifiable assets	$	10,204,104	$	9,827,069	$	3,978,145	$	8,754,653	$	32,763,971

Three months ended June 30, 2021

Revenue - external customers		$	2,445,927	$	3,328,314	$	370,861	$	—	$	6,145,102
Intersegment revenue		—		56,988		—		(56,988)		—
Total revenue		$	2,445,927	$	3,385,302	$	370,861	$	(56,988)	$	6,145,102
Gross profit		$	1,055,202	$	1,648,928	$	138,508	$	—	$	2,842,638
Identifiable assets		$	9,081,448	$	11,575,860	$	4,346,635	$	6,315,299	$	31,319,242

Six months ended June 30, 2021

Revenue - external customers		$	4,568,649	$	6,609,458	$	1,024,156	$	—	$	12,202,263
Intersegment revenue		—		188,504		—		(188,504)		—
Total revenue		$	4,568,649	$	6,797,962	$	1,024,156	$	(188,504)	$	12,202,263
Gross profit		$	2,003,637	$	3,392,469	$	397,740	$	—	$	5,793,846
Identifiable assets		$	9,081,448	$	11,575,860	$	4,346,635	$	6,315,299	$	31,319,242

(1) Corporate, intersegment revenue, other and elimination includes various corporate assets.

(1) Corporate, intersegment revenue, other and elimination includes various corporate assets.

~~Note 14.~~


Note 12.			Subsequent Events

We have evaluated ~~subsequent~~ events through the date of this filing, and, except as described below, have determined that no material subsequent events occurred that would require recognition in the consolidated financial statements or disclosure in the notes thereto.

On March 15, 2023, we entered into an Agreement with Aegis Energy Services, LLC (“Aegis”) regarding the assignment and assumption of certain maintenance agreements, the purchase and sale of certain assets, and related matters (the “Agreement”) pursuant to which we agreed to assume Aegis’ rights and obligations arising on or after April 1, 2023 under Maintenance Agreements for 202 cogeneration systems, and acquire certain vehicles and inventory used in connection with the performance of maintenance services. On April 1, 2023, we closed on the agreement with Aegis and acquired certain Aegis vehicles for $170,000, and hired eight (8) former Aegis employees who will continue to provide maintenance services relating to the cogeneration systems. As agreed, Aegis will provide transitional services relating to the assumed Maintenance Agreements. between the closing and June 30, 2023, we will acquire from Aegis inventory used to provide maintenance services in exchange for a credit of $300,000 to be used for purchases by Aegis of our cogeneration equipment on or before June 30, 2023. Following the closing, for a period of up to seven years, we will pay Aegis a portion of the revenue collected for maintenance services provided pursuant to the assumed Maintenance Agreements. We also have the right to assume Aegis’ remaining Maintenance Agreements for cogeneration systems on the same terms and conditions but effective December 31, 2023 to the extent that Aegis is permitted to assign such agreements to us in accordance with the terms of such agreements. Management is in the process of evaluating the accounting impact of the Aegis agreement.

TECOGEN INC.

~~Management's Discussion and Analysis~~Notes to Condensed Consolidated Financial Statements

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

This Management’s Discussion and Analysis of Financial Condition and Results of Operations and other parts of this Quarterly Report on Form 10-Q (“Form 10-Q”) contain forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that involve risks and uncertainties. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. For example, statements in this Form 10-Q regarding the potential future impact of the COVID-19 pandemic on our business and results of operations are forward-looking statements. Forward-looking statements can also be identified by words such as “future,” “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “will,” “would,” “could,” “can,” “may,” and similar terms. Forward-looking statements are not guarantees of future performance and our actual results may differ significantly from the results discussed in the forward-looking statements. Such forward-looking statements include, among other things, statements regarding the impact of the coronavirus pandemic on demand for our products and services, the availability of incentives, rebates, and tax benefits relating to our products, changes in the regulatory environment relating to our products, competing technological developments, and the availability of financing to fund our operations and growth. Factors that might cause such differences include, but are not limited to, those discussed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 (“~~2021~~20221 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 2021 Form 10-K filed with the Securities and Exchange Commission (“SEC”) and the condensed consolidated financial statements and accompanying notes included in Part I, Item 1 of this Form 10-Q. Each of the terms “Tecogen,” “we,” “our,” and “us” as used herein refer collectively to Tecogen Inc. and our wholly owned subsidiaries, unless otherwise stated. While we may elect to update forward-looking statements in the future, we specifically disclaim any obligation to do so, even if our estimates change, and you should not rely on those forward-looking statements as representing ours views as of any date subsequent to the date of the filing of this Form 10-Q.

Recent Developments

~~Employee Retention Credit~~Assumption of Aegis Energy Services Maintenance Agreements

On March ~~27, 2020,~~15, 2023, we entered into an Agreement with Aegis Energy Services, LLC (“Aegis”) regarding the ~~Coronavirus Aid, Relief,~~assignment and ~~Economic Security Act (“CARES Act”~~assumption of certain maintenance agreements, the purchase and sale of certain assets, and related matters (the “Agreement”) ~~was signed into law providing numerous tax provisions~~pursuant to which we agreed to assume Aegis’ rights and ~~other stimulus measures, including an employee retention~~obligations arising on or after April 1, 2023 under Maintenance Agreements for 202 cogeneration systems, and acquire certain vehicles and inventory used in connection with the performance of maintenance services. On April 1, 2023, we closed on the agreement with Aegis and acquired certain Aegis vehicles for $170,000, and hired eight (8) former Aegis employees who will continue to provide maintenance services relating to the cogeneration systems. As agreed, Aegis will provide transitional services relating to the assumed Maintenance Agreements between the closing and June 30, 2023, and we will acquire from Aegis inventory used to provide maintenance services in exchange for a credit ~~(“ERC”), which is~~of $300,000 to be used for purchases by Aegis of our cogeneration equipment on or before June 30, 2023. Following the closing, for a ~~refundable tax credit against certain employment taxes. The Taxpayer Certainty and Disaster Tax Relief Act~~period of ~~2020 and the American Rescue Plan Act of 2021 extended and expanded the availability~~up to seven years, we will pay Aegis a portion of the ~~ERC.~~revenue collected for maintenance services provided pursuant to the assumed Maintenance Agreements. We also have the right to assume Aegis’ remaining Maintenance Agreements for cogeneration systems on the same terms and conditions but effective December 31, 2023 to the extent that Aegis is permitted to assign such agreements to us in accordance with the terms of such agreements.

As a result of our election to use an alternative quarter, we qualified for the ERC in the first, second and third quarters of 2021 because our gross receipts decreased by more than 20% from the first, second and third quarters of 2019. As a result of averaging 100 or fewer full-time employees in 2019, all wages paid to employees in the first, second and third quarters of 2021 were eligible for the ERC. Wages used towards PPP loan forgiveness cannot be used as qualified wages for purposes of the ERC

A current receivable in the amount of $713,269 is included in our condensed consolidated balance sheet as of June 30, 2022. On April 14, 2022, we received $564,027 from the Internal Revenue Service representing the ERC claim forTecochill Hybrid-Drive Air-Cooled Chiller Development

TECOGEN INC.

During the third quarter of 2021 ~~and $1,275 of accrued interest. We are still awaiting payment from the Internal Revenue Service for the ERC claim from the first and second quarters of 2021.~~

~~Air Cooled Chiller Development~~

~~During Q3 2021~~ we began development of ~~a hybrid air-cooled chiller.~~the Tecochill Hybrid-Drive Air-Cooled Chiller. We recognized that there were many applications where the customer wanted an easy to install roof top chiller. Using the inverter design from our InVerde e+ cogeneration module, the system can simultaneously take two inputs, one from the grid or a renewable energy source and one from our natural gas engine. This allows a customer to seek the optimum blend of operational cost savings and greenhouse gas benefits while providing added resiliency from two power sources. We ~~expect to have a prototype completed by Q1~~introduced the Tecochill Hybrid-Drive Air-Cooled Chiller at the AHR Expo in February 2023 and expect to see incremental revenue in ~~2024.~~the fourth quarter of 2023. A patent application based on this concept has been filed with the US Patent and Trademark Office.

Controlled Environment Agriculture: NetZero Greens

On July 20, 2022, we announced our intention to increase our focus on opportunities relating to Controlled Environment Agriculture (CEA). Tecogen believes that CEA offers an exciting opportunity to apply the company’s expertise in clean cooling, power generation, and greenhouse gas reduction to address critical issues affecting food and energy security. 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 developing 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 point of sale reduces food spoilage during transportation. Food crops grown in 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.

~~TECOGEN INC.~~In recent years our cogeneration equipment has been used in numerous cannabis cultivation facilities because our systems significantly reduce operating costs, reduce 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.

~~Management's Discussion~~Employee Retention Credit

On March 27, 2020, the Coronavirus Aid, Relief, and ~~Analysis~~Economic Security Act (“CARES Act”) was signed into law providing numerous tax provisions and other stimulus measures, including an employee retention credit (“ERC”), which is a refundable tax credit against certain employment taxes. The Taxpayer Certainty and Disaster Tax Relief Act of 2020 and the American Rescue Plan Act of 2021 extended and expanded the availability of the ERC.

As a result of our election to use an alternative quarter, we qualified for the ERC in the first, second and third quarters of 2021 because our gross receipts decreased by more than 20% from the first, second and third quarters of 2019. As a result of averaging 100 or fewer full-time employees in 2019, all wages paid to employees in the first, second and third quarters of 2021, excluding the wages applied to the Paycheck Protection Program Second Draw Loan, were eligible for the ERC.

During the three months ended June 30, 2021, we recorded an ERC benefit for the first and second quarters of 2021 of $713,269 and, in the three months ended September 30, 2021 we recorded an ERC benefit for the third quarter of 2021 of $562,752, respectively, in other income (expense), net in the our condensed consolidated statements of operations. On April 14, 2022, we received $564,027 from the Internal Revenue Service representing the ERC claim for the third quarter of 2021 and $1,275 of accrued interest. We received $667,121 from the Internal Revenue Service on January 12, 2023 in payment of the ERC claimed from the first and second quarters of 2021 and $15,775 of accrued interest, which is reported in other income (expense) in our condensed consolidated statements of operations for the three months ended March 31, 2023. A current receivable in the amount of $46,148 is included in our condensed consolidated balance sheet as of March 31, 2023. We expect to receive the remaining balance in 2023.

COVID-19 Update

TECOGEN INC.

During the first quarter of fiscal 2020, a novel strain of coronavirus (“COVID-19”) began spreading rapidly throughout the world, prompting governments and businesses to take unprecedented measures in response. Such measures included restrictions on travel and business operations, temporary closures of businesses, and quarantines and shelter-in-place orders. The COVID-19 pandemic has significantly impacted supply chains, curtailed global economic activity, and caused significant volatility and disruption in global markets. The COVID-19 pandemic and the measures taken by U.S. Federal, state and local governments in response have materially adversely affected and could in the future materially impact our business, results of operations, financial condition and stock price. The impact of the pandemic remains uncertain and will depend on the growth in the number of infections, fatalities, the duration of the pandemic, steps taken to combat the pandemic, and the development and availability of effective treatments. We have made every effort to keep our employees who operate our business safe and minimize unnecessary risk of exposure to the virus.

Impact of the Russian Invasion of Ukraine

Presently, ~~the company has~~we have no operations or customers in Russia or the Ukraine. The higher energy prices for natural gas as a result of the war may affect the performance of our Energy Production ~~Segment.~~segment. 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 may result in higher cybersecurity risks, increased or ongoing supply chain challenges, and volatility related to the trading prices of commodities.

Overview

Tecogen designs, manufactures and sells industrial and commercial cogeneration systems that produce combinations of electricity, hot water and air conditioning using automotive engines that have been adapted to run on natural gas. In some cases, our customers may choose to have us 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 an opportunity for the facility to incorporate the engine’s waste heat into onsite processes, such as space and potable 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 these combined heat and power products as CHP (electricity plus heat) and Engine driven chillers (cooling plus ~~heat).~~heat ).

Our products are sold directly to end-users by our in-house marketing 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. We have an installed base of more than ~~3,000~~3,150 units. Our products have long useful lives with proper maintenance. Some of our units have been operating for over 35 years.

With the acquisition of American DG Energy Inc. ("ADGE") in May 2017, we added an additional source of revenue. Through ADGE, we install, own, operate and maintain complete distributed generation of electricity systems, or DG systems or energy systems, and other complementary systems at customer sites, and sell electricity, hot water, heat and cooling energy under long-term contracts at prices guaranteed to the customer to be below conventional utility rates. Each month we obtain readings from our energy meters to determine the amount of energy produced for each customer. We use a contractually defined formula to multiply these readings by the appropriate published price of energy (electricity, natural gas or oil) from each customer's local energy utility, to derive the value of our monthly energy sale, which includes a negotiated discount. Our revenues per customer on a monthly basis vary based on the amount of energy produced by our energy systems and the published price of energy (electricity, natural gas or oil) from our customer's local energy utility that month.

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

1918

TECOGEN INC.

~~Management's Discussion and Analysis~~

Results of Operations

~~Second~~First Quarter of ~~2022~~2023 Compared to ~~Second~~First Quarter of ~~2021~~2022

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					Three Months Ended
		June 30, 2022		June 30, 2021			March 31, 2023		March 31, 2022
Revenues	Revenues	100.0%		100.0%		Revenues	100.0	%	100.0	%
Cost of sales	Cost of sales	57.9%		53.7%		Cost of sales	61.1	%	58.4	%
Gross profit	Gross profit	42.1%		46.3%		Gross profit	38.9	%	41.6	%
Operating expenses	Operating expenses					Operating expenses
General and administrative	General and administrative	44.0%		39.7%		General and administrative	51.9	%	33.3	%
Selling	Selling	7.9%		9.5%		Selling	9.7	%	6.7	%
Research and development	Research and development	3.0%		2.2%		Research and development	4.3	%	1.9	%
Gain on disposition of assets		—%		—%

Total operating expenses	Total operating expenses	54.9%		51.3%		Total operating expenses	65.8	%	40.5	%
Income (loss) from operations	Income (loss) from operations	(12.7)	%	(5.0)	%	Income (loss) from operations	(26.9)	%	1.1	%
Total other income (expense), net	Total other income (expense), net	(0.2)	%	11.8	%	Total other income (expense), net	—	%	0.3	%
Income (loss) before income taxes						Income (loss) before income taxes	(26.9)	%	1.4	%
Provision for state income taxes						Provision for state income taxes	0.4	%	0.1	%
Consolidated net income (loss)	Consolidated net income (loss)	(13.1)	%	6.6	%	Consolidated net income (loss)	(27.4)	%	1.3	%
Income attributable to the non-controlling interest	Income attributable to the non-controlling interest	(0.3)	%	(0.1)	%	Income attributable to the non-controlling interest	(0.3)	%	(0.1)	%
Net income (loss) attributable to Tecogen, Inc.	Net income (loss) attributable to Tecogen, Inc.	(13.3)	%	6.5	%	Net income (loss) attributable to Tecogen, Inc.	(27.7)	%	1.2	%

Revenues

The following table presents revenue for the periods indicated, by segment and the change from the prior year:


		Three Months Ended									Three Months Ended March 31,
		June 30, 2022		June 30, 2021		Increase (Decrease) $		Increase (Decrease) %			2023		2022		Increase (Decrease) $		Increase (Decrease) %
REVENUES:	REVENUES:									REVENUES:
Products	Products									Products
Cogeneration	Cogeneration	$	953,864	$	1,050,316	$	(96,452)	(9.2)	%	Cogeneration	$	543,693	$	2,174,004	$	(1,630,311)	(75.0)	%
Chiller	Chiller	1,738,051		1,089,018		649,033		59.6	%	Chiller	1,068,934		1,607,408		(538,474)		(33.5)	%
Engineered accessories	Engineered accessories	318,200		306,593		11,607		3.8	%	Engineered accessories	97,509		158,069		(60,560)		(38.3)	%
Total Product revenues		3,010,115		2,445,927		564,188		23.1	%
Total product revenues										Total product revenues	1,710,136		3,939,481		(2,229,345)		(56.6)	%
Services	Services									Services
Maintenance services	Maintenance services	3,050,191		3,083,761		(33,570)		(1.1)	%	Maintenance services	3,136,173		2,897,171		239,002		8.2	%
Installation services	Installation services	—		244,553		(244,553)		(100.0)	%	Installation services	—		20,109		(20,109)		(100.0)	%
Total Service revenues		3,050,191		3,328,314		(278,123)		(8.4)	%
Products and Services		6,060,306		5,774,241		286,065		5.0	%
Energy Production revenues		354,287		370,861		(16,574)		(4.5)	%
Total service revenues										Total service revenues	3,136,173		2,917,280		218,893		7.5	%
Products and services										Products and services	4,846,309		6,856,761		(2,010,452)		(29.3)	%
Energy production revenues										Energy production revenues	533,509		581,562		(48,053)		(8.3)	%
Total revenues	Total revenues	$	6,414,593	$	6,145,102	$	269,491	4.4	%	Total revenues	$	5,379,818	$	7,438,323	$	(2,058,505)	(27.7)	%

Total revenues for the three months ended ~~June 30, 2022~~March 31, 2023 were ~~$6,414,593~~$5,379,818 compared to ~~$6,145,102~~$7,438,323 for the same period in ~~2021, an increase~~2022, a decrease of ~~$269,491~~$2,058,505 or ~~4.4%~~27.7% year over year.

2019

TECOGEN INC.

~~Management's Discussion and Analysis~~

~~Products~~

Products

Product revenues in the three months ended ~~June 30, 2022~~March 31, 2023 were ~~$3,010,115~~$1,710,136 compared to ~~$2,445,927~~$3,939,481 for the same period in ~~2021, an increase~~2022, a decrease of ~~$564,188,~~$2,229,345, or ~~23.1%~~56.6%. The ~~increase~~decrease in revenue during the three months ended ~~June 30, 2022~~March 31, 2023 is due primarily to ~~an increase~~a decrease in cogeneration sales of $1,630,311, a decrease in chiller sales of ~~$649,033~~ $538,474,and, ~~an increase~~a decrease in sales of engineered accessories of ~~$11,607, offset partially by a $96,452 decrease in cogeneration sales.~~$60,560. Our product sales 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 three months ended ~~June 30, 2022~~March 31, 2023 were ~~$3,050,191,~~$3,136,173, compared to ~~$3,328,314~~$2,917,280 for the same period in ~~2021, a decrease~~2022, an increase of ~~$278,123,~~$218,893, or ~~8.4%~~7.5%. The ~~decrease~~increase in revenue during the three months ended ~~June 30, 2022~~March 31, 2023 is due primarily to an increase of $239,002, or 8.2%, in service contract revenues, offset partially by a decrease in installation revenues of ~~$244,553 and, to a lesser extent, by a decrease of $33,570, or 1.1%, in service contract revenues.~~$20,109. While service contract revenue generally remains relatively constant, installation activity is likely to remain low due to our strategy of focusing on higher margin segments of our business.

Energy Production

Energy production revenues in the three months ended ~~June 30, 2022~~March 31, 2023 were ~~$354,287,~~$533,509, compared to ~~$370,861~~$581,562 for the same period in ~~2021,~~2022, a decrease of ~~$16,574,~~$48,053, or ~~4.5%~~8.3%. The decrease in energy production revenue is a consequence of certain energy production sites that have permanently ~~closed and seasonality.~~

closed.

Cost of Sales

Cost of sales in the three months ended ~~June 30, 2022~~March 31, 2023 was ~~$3,711,144~~$3,287,909 compared to ~~$3,302,464~~$4,347,535 for the same period in ~~2021, an increase~~2022, a decrease of ~~$408,680,~~$1,059,626, or ~~12.4%~~24.4%. The ~~increase~~decrease in cost of sales is due to ~~increased~~decreased product revenue volume, ~~and~~offset partially by the impact of inflation on material costs. During the three months ended ~~June 30, 2022~~March 31, 2023 our gross margin decreased to ~~42.1%~~38.9% compared to ~~46.3%~~41.6% for the same period in ~~2021,~~2022, a ~~4.2%~~2.7% percentage point decrease due to higher material costs.

Products

Cost of sales for products in the three months ended ~~June 30, 2022~~March 31, 2023 was ~~$2,015,466~~$1,212,568 compared to ~~$1,390,725~~$2,644,756 for the same period in ~~2021, an increase~~2022, a decrease of ~~$624,741,~~$1,432,188, or ~~44.9%~~54.2% due to ~~increased~~decreased product revenue volume, ~~and~~offset partially by higher material costs. During the three months ended ~~June 30, 2022,~~March 31, 2023, our products gross margin was ~~33.0%~~29.1% compared to ~~43.1%~~32.9% for the same period in ~~2021, an 10.1%~~2022, a 3.8% percentage point decrease. The decrease in margin is primarily a function of increased material costs.

Services

Cost of sales for services in the three months ended ~~June 30, 2022~~March 31, 2023 was ~~$1,473,586~~$1,737,602 compared to ~~$1,679,386~~$1,366,752 for the same period in ~~2021, a decrease~~2022, an increase of ~~$205,800,~~$370,850, or ~~12.3%~~27.1%. During the three months ended ~~June 30, 2022,~~March 31, 2023, our services gross margin ~~increased~~decreased to ~~51.7%~~44.6% compared to ~~49.5% for~~53.1% in the same period in ~~2021,~~2022, a ~~2.2%~~8.5% percentage point ~~increase~~decrease. The decrease in margin is primarily due to ~~lower installation revenues.~~

increased material and labor costs.

Energy Production

Cost of sales for energy production in the three months ended ~~June 30, 2022~~March 31, 2023 was ~~$222,092~~$337,739 compared to ~~$232,353~~$336,027 for the same period in ~~2021, a decrease~~2022, an increase of ~~$10,261,~~$1,712, or ~~4.4%~~0.5%. During the three months ended ~~June 30, 2022~~March 31, 2023 our energy production gross margin ~~was 37.4%~~decreased to 36.7% compared to ~~37.3%~~42.2% for the same period in ~~2021,~~2022, a ~~0.1%~~5.5% percentage point ~~increase.~~

~~Operating Expenses~~

~~Operating expenses increased $368,580, or 11.7%,~~decrease. The decrease in the energy production gross margin is due to ~~$3,520,786~~decreased runtime at our energy production sites in the three months ended ~~June 30, 2022~~March 31, 2023 compared to ~~$3,152,206~~the same period in 2022.

Operating Expenses

Operating expenses increased $531,846, or 17.7%, to $3,541,655 in the three months ended March 31, 2023 compared to $3,009,809 in the same period in ~~2021. The total operating expenses were higher primarily due to higher salary costs, taxes and costs related to the air-cooled chiller development.~~2022.

2120

TECOGEN INC.

~~Management's Discussion and Analysis~~


		Three Months Ended									Three Months Ended
Operating Expenses	Operating Expenses	June 30, 2022		June 30, 2021		Increase (Decrease) $		Increase (Decrease) %		Operating Expenses	March 31, 2023		March 31, 2022		Increase (Decrease) $		Increase (Decrease) %
General and Administrative		$	2,824,832	$	2,438,452	$	386,380	15.8	%
General and administrative										General and administrative	$	2,792,483	$	2,473,903	$	318,580	12.9	%
Selling	Selling	503,601		580,871		(77,270)		(13.3)	%	Selling	520,070		501,091		18,979		3.8	%
Research and Development		194,853		132,883		61,970		46.6	%
Research and development										Research and development	229,102		140,135		88,967		63.5	%
Gain on disposition of assets	Gain on disposition of assets	(2,500)		—		(2,500)				Gain on disposition of assets	—		(33,945)		33,945		(100.0)	%

Gain on termination of unfavorable contract liability										Gain on termination of unfavorable contract liability	—		(71,375)		71,375		(100.0)	%
Total	Total	$	3,520,786	$	3,152,206	$	368,580	11.7	%	Total	$	3,541,655	$	3,009,809	$	531,846	17.7	%

General and administrative expenses consist of executive staff, accounting and legal expenses, office space, general insurance and other administrative expenses. General and administrative expenses for the three months ended ~~June 30, 2022~~March 31, 2023 were ~~$2,824,832~~$2,792,483 compared to ~~$2,438,452~~$2,473,903 for the same period in ~~2021,~~2022, an increase of ~~$386,380~~$318,580 or ~~15.8%~~12.9%.

Selling expenses consist of sales staff, commissions, marketing, travel and other selling related expenses. Selling expenses for the three months ended ~~June 30, 2022~~March 31, 2023 were ~~$503,601~~$520,070 compared to ~~$580,871~~$501,091 for the same period in ~~2021, a decrease~~2022, an increase of ~~$77,270~~$18,979 or ~~13.3%~~3.8%.

Research and development expenses consist of engineering and technical staff, materials, outside consulting and other related expenses. Research and development expenses for the three months ended ~~June 30, 2022~~March 31, 2023 were ~~$194,853~~$229,102 compared to ~~$132,883~~$140,135 for the same period in ~~2021,~~2022, an increase of ~~$61,970~~$88,967 or ~~46.6%~~63.5%.

The gain on asset dispositions for three months ended March 31, 2022 of $33,945 represents the excess of insurance proceeds received over the net book value of assets for auto and property claims filed during the period.

~~Loss~~A gain of $71,375 was recognized in three months ended March 31, 2022 due to a reduction in the Unfavorable Contract Liability associated with the closing of certain energy production sites.

Income (loss) from Operations

~~Loss~~ Our loss from operations for the three months ended ~~June 30, 2022~~March 31, 2023 was ~~$817,337~~$1,449,746 compared to ~~a loss~~income from operations of ~~$309,568~~$80,979 for the same period in ~~2021, an increase~~2022, a decrease of ~~$507,769.~~$1,530,725. This ~~increase~~decrease is due primarily to the lower ~~gross profit margins~~revenue for our Products Segment, decreased margins and a ~~$368,580~~$531,846 increase in operating expenses.

Other Income (Expense), net

Other ~~expense,~~income, net for the three months ended ~~June 30, 2022~~March 31, 2023 was ~~$13,998~~$415 compared to other income, net of ~~$725,804~~$22,519 for the same period in ~~2021,~~2022, a decrease of ~~$739,802. The decrease in other income is~~$22,104, due primarily to the ~~Employee Retention Credit~~unrealized gain on investment securities of ~~$713,268~~$37,497, recognized in the three months ended ~~June 30, 2021.~~

March 31, 2022.

Provision for State Income Taxes

The provision for state income taxes for the three months ended ~~June 30,~~March 31, 2023 and 2022 was $22,638 and ~~2021 was $6,500 and $7,933,~~$3,930, respectively and represents estimated income tax payments, net of refunds, to various states.

Non-controlling Interest

Income attributable to the non-controlling interest was ~~$18,383~~$18,060 for the three months ended ~~June 30, 2022~~March 31, 2023 which represents the non-controlling interest portion of American DG Energy's 51% owned subsidiary, American DG New York, LLC. For the same period in ~~2021,~~2022, income attributable to the non-controlling interest was ~~$8,672.~~

$10,159.

Net Income ~~(Loss)~~(loss) Attributable to Tecogen ~~Inc~~

Inc.

The net ~~loss~~income attributable to Tecogen for the three months ended ~~June 30, 2022~~March 31, 2023 was ~~$856,218~~a net loss of $1,490,029 compared to a net income of ~~$399,631~~$89,409 for the same period in ~~2021,~~2022, a decrease of ~~$1,255,849,~~$1,579,438, or ~~314.3%~~1,766.5%. ~~The~~This decrease is due primarily to the ~~recognition of the Employee Retention Credit in the three months ended June 30, 2021,~~ lower ~~gross profit margins~~revenue for our Products Segment, decreased margins and ~~the~~a $531,846 increase in operating expenses.

TECOGEN INC.

~~Management's Discussion and Analysis~~

~~Six Months Ended June 30, 2022 compared to the Six Months Ended June 30, 2021~~

~~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:~~

Six Months Ended
June 30, 2022 June 30, 2021
Revenues 100.0% 100.0%
Cost of sales 58.2% 52.5%
Gross profit 41.8% 47.5%
Operating expenses
General and administrative 38.2% 40.1%
Selling 7.3% 8.9%
Research and development 2.4% 2.1%
Gain on disposition of assets (0.3) % —%
Gain on termination of unfavorable contract liability (0.5) % —%
Total operating expenses 47.1% 51.2%
Loss from operations (5.3) % (3.7) %
Total other income (expense), net 0.1 % 21.7%
Consolidated net income (loss) (5.3) % 17.9%
Income attributable to the noncontrolling interest (0.2) % (0.2) %
Net income (loss) attributable to Tecogen, Inc. (5.5) % 17.8%

~~Revenues~~

~~The following table presents revenue for the periods indicated, by segment and the change from the prior year:~~

Six Months Ended
June 30, 2022 June 30, 2021 Increase (Decrease) $ Increase (Decrease) %
REVENUES:
Products
Cogeneration $ 3,127,868 $ 1,096,961 $ 2,030,907 185.1 %
Chiller 3,345,459 2,546,311 799,148 31.4 %
Engineered accessories 476,269 925,377 (449,108) (48.5) %
Total Product revenues 6,949,596 4,568,649 2,380,947 52.1 %
Services
Maintenance services 5,947,362 5,847,209 100,153 1.7 %
Installation services 20,109 762,249 (742,140) (97.4) %
Total Service revenues 5,967,471 6,609,458 (641,987) (9.7) %
Products and Services 12,917,067 11,178,107 1,738,960 15.6 %
Energy Production revenues 935,849 1,024,156 (88,307) (8.6) %
Total revenues $ 13,852,916 $ 12,202,263 $ 1,650,653 13.5 %

~~Total revenues for the six months ended June 30, 2022 were $13,852,916 compared to $12,202,263 for the same period in 2021, an increase of $1,650,653 or 13.5% year over year.~~

~~TECOGEN INC.~~

~~Management's Discussion and Analysis~~

~~Products~~

Product revenues in the six months ended June 30, 2022 were $6,949,596 compared to $4,568,649 for the same period in 2021, an increase of $2,380,947, or 52.1%. The increase in revenue during the six months ended June 30, 2022 is due to an increase in cogeneration sales of $2,030,907 and an increase in chiller sales of $799,148, offset partially by a $449,108 decrease in sales of engineered accessories. Our product sales 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 six months ended June 30, 2022 were $5,967,471, compared to $6,609,458 for the same period in 2021, a decrease of $641,987, or 9.7%. The decrease in revenue during the six months ended June 30, 2022 is due primarily to a decrease in installation revenues of $742,140, offset partially by an increase of $100,153, or 1.7%, in service contract revenues. While service contract revenue generally remains relatively constant, installation activity is likely to remain low due to our strategy of focusing on higher margin segments of our business.

~~Energy Production~~

Energy production revenues in the six months ended June 30, 2022 were $935,849, compared to $1,024,156 for the same period in 2021, a decrease of $88,307, or 8.6%. The decrease in energy production revenue is a consequence of certain energy production sites that have permanently closed and seasonality.

~~Cost of Sales~~

Cost of sales in the six months ended June 30, 2022 was $8,058,678 compared to $6,408,417 for the same period in 2021, an increase of $1,650,261, or 25.8%. The increase in cost of sales is due to increased product revenue volume and the impact of inflation on material costs. During the six months ended June 30, 2022 our gross margin decreased to 41.8% compared to 47.5% for the same period in 2021, a 5.7% percentage point decrease due to higher material costs.

~~Products~~

Cost of sales for products in the six months ended June 30, 2022 was $4,660,221 compared to $2,565,012 for the same period in 2021, an increase of $2,095,209, or 81.7% due to increased product revenue volume and higher material costs. During the six months ended June 30, 2022, our products gross margin was 32.9% compared to 43.9% for the same period in 2021, an 11.0% percentage point decrease. The decrease in margin is primarily a function of increased material costs.

~~Services~~

Cost of sales for services in the six months ended June 30, 2022 was $2,840,338 compared to $3,216,989 for the same period in 2021, a decrease of $376,651, or 11.7%. During the six months ended June 30, 2022, our services gross margin increased to 52.4% compared to 51.3% for the same period in 2021, a 1.1% percentage point increase due to lower installation revenues.

~~Energy Production~~

Cost of sales for energy production in the six months ended June 30, 2022 was $558,119 compared to $626,416 for the same period in 2021, a decrease of $68,297, or 10.9%. During the six months ended June 30, 2022 our energy production gross margin was 40.4% compared to 38.8% for the same period in 2021, a 1.6% percentage point increase.

~~Operating Expenses~~

Operating expenses increased $288,183, or 4.6%, to $6,530,595 in the six months ended June 30, 2022 compared to $6,242,412 in the same period in 2021. The total operating expenses were higher primarily due to higher salary costs, taxes and costs related to the air-cooled chiller development.

~~TECOGEN INC.~~

~~Management's Discussion and Analysis~~

Six Months Ended
Operating Expenses June 30, 2022 June 30, 2021 Increase (Decrease) $ Increase (Decrease) %
General and Administrative $ 5,298,735 $ 4,892,305 $ 406,430 8.3 %
Selling 1,004,692 1,091,074 (86,382) (7.9) %
Research and Development 334,988 259,033 75,955 29.3 %
Gain on disposition of assets (36,445) — (36,445) — %
Gain on termination of unfavorable contract liability (71,375) — (71,375) — %
Total $ 6,530,595 $ 6,242,412 $ 288,183 4.6 %

General and administrative expenses consist of executive staff, accounting and legal expenses, office space, general insurance and other administrative expenses. General and administrative expenses for the six months ended June 30, 2022 were $5,298,735 compared to $4,892,305 for the same period in 2021, an increase of $406,430 or 8.3%.

Selling expenses consist of sales staff, commissions, marketing, travel and other selling related expenses. Selling expenses for the six months ended June 30, 2022 were $1,004,692 compared to $1,091,074 for the same period in 2021, a decrease of $86,382 or 7.9%.

Research and development expenses consist of engineering and technical staff, materials, outside consulting and other related expenses. Research and development expenses for the six months ended June 30, 2022 were $334,988 compared to $259,033 for the same period in 2021, an increase of $75,955 or 29.3%.

~~Loss from Operations~~

Loss from operations for the six months ended June 30, 2022 was $736,357 compared to a loss of $448,566 for the same period in 2021, an increase of $287,791. This increase is due primarily to lower gross profit margins for our Products Segment and a $288,183 increase in operating expenses.

~~Other Income (Expense), net~~

Other expense, net for the six months ended June 30, 2022 was $8,520 compared to other income of $2,651,363 for the same period in 2021, a decrease of $2,642,843. The decrease in other income is due primarily to the gain on extinguishment of debt of $1,887,859 as a result of the Paycheck Protection Program Loan forgiveness and the recognition of the Employee Retention Credit of $713,268 for the first and second calendar quarters of 2021 recognized in the six months ended June 30,

~~2021.~~

~~Provision for State Income Taxes~~

The provision for state income taxes for the six months ended June 30, 2022 and 2021 was $10,430 and $15,991, respectively and represents estimated income tax payments, net of refunds, to various states.

~~Non-controlling Interest~~

Income attributable to the non-controlling interest was $28,542 for the six months ended June 30, 2022 which represents the non-controlling interest portion of American DG Energy's 51% owned subsidiary, American DG New York, LLC. For the same period in 2021, income attributable to the non-controlling interest was $20,468.

~~Net Income (Loss) Attributable to Tecogen Inc~~

The net loss attributable to Tecogen for the six months ended June 30, 2022 was $766,809 compared to a net income of $2,166,338 for the same period in 2021, a decrease of $2,933,147, or 135.4%. The decrease is due primarily to the gain on extinguishment of debt of as a result of the Paycheck Protection Program Loan forgiveness and the recognition of the Employee Retention Credit in the six months ended June 30, 2021, lower gross profit margins for our Products Segment and the increase in operating expenses in the six months ended June 30, 2022.

~~TECOGEN INC.~~

~~Management's Discussion and Analysis~~

Liquidity and Capital Resources

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


		Six Months Ended							Three Months Ended
Cash Provided by (Used in)	Cash Provided by (Used in)	June 30, 2022		June 30, 2021		Increase (Decrease)		Cash Provided by (Used in)	March 31, 2023		March 31, 2022		Increase (Decrease)
Operating activities	Operating activities	$	(579,177)	$	(103,649)	$	(475,528)	Operating activities	$	(284,866)	$	1,894,471	$	(2,179,337)
Investing activities	Investing activities	(204,179)		(75,361)		(128,818)		Investing activities	—		(48,064)		48,064
Financing activities	Financing activities	—		1,874,269		(1,874,269)		Financing activities	—		—		—
Change in cash and cash equivalents		$	(783,356)	$	1,695,259	$	(2,478,615)
Cash Provided by (Used in)								Cash Provided by (Used in)	$	(284,866)	$	1,846,407	$	(2,131,273)

Consolidated working capital at ~~June 30, 2022~~March 31, 2023 was ~~$15,637,400~~$12,964,213 compared to ~~$16,193,881~~$14,344,288 at December 31, ~~2021,~~2022, a decrease of ~~$556,481.~~$1,380,075. Included in working capital were cash and cash equivalents of ~~$2,831,107~~$1,629,103 at ~~June 30, 2022,~~March 31, 2023, compared to ~~$3,614,463~~$1,913,969 at December 31, ~~2021,~~2022, a decrease of ~~$783,356,~~$284,866, or ~~21.7%~~14.9%.

Cash Flows from Operating Activities

Cash used by operating activities for the ~~six~~three months ended ~~June 30, 2022~~March 31, 2023 was ~~$579,177~~$284,866 compared to ~~$103,649~~$1,894,471 of cash ~~used~~provided by operating activities for the same period in ~~2021, an increase~~2022, a decrease of ~~$475,528,~~$2,179,337, or ~~458.8%.~~115.0% Our accounts receivable and unbilled revenue balances were ~~$8,880,828~~$6,758,360 and ~~$2,141,132,~~$1,788,902, respectively, at ~~June 30, 2022~~March 31, 2023 compared to ~~$8,482,286~~$6,714,122 and ~~$3,258,189~~$1,805,330 at December 31, ~~2021,~~2022, using ~~$444,541~~$44,238 of cash and providing ~~$1,117,057~~$16,428 of cash, respectively. ~~Inventories increased $438,102 during~~During the ~~six~~three months ended ~~June 30, 2022 due to increased safety stock.~~March 31, 2023 we collected the majority of the outstanding Employee Retention Credit receivables, providing $667,121 of cash from operations.

Accounts payable ~~decreased~~increased to ~~$3,260,479~~$4,167,461 as of ~~June 30, 2022~~March 31, 2023 from ~~$3,508,354~~$3,261,952 at December 31, ~~2021, using $247,876~~2022, providing $905,509 in cash flow from operations. The ~~decrease~~increase in accounts payable was due to ~~vendor payment timing.~~increased material purchases. Deferred revenue increased as of ~~June 30, 2022~~March 31, 2023 compared to December 31, ~~2021, using $589,158~~2022, due to increased customer deposits, providing $852,600 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 ~~six~~three months ended ~~June 30,~~March 31, 2023 there were no cash flows from investing activities. For the three months ended March 31, 2022 cash used in investing activities was $48,064. During the three months ended March 31, 2022 we used ~~$204,179 in cash from investing activities. We used $209,034~~$80,873 of cash to purchase property, plant and equipment, ~~$29,505~~$16,220 to ~~acquire~~acquired intangible assets and, distributed ~~$32,809~~$15,640 to the ~~49%~~ non-controlling interest holders of American DG New York LLC, partially offset by the receipt of ~~$67,169~~$64,669 in ~~insurance and other~~ proceeds from the disposition of assets. For the six months ended June 30, 2021 cash used in investing activities was $75,361. During the six months ended June 30, 2021 we used $47,504 of cash to purchase property, plant and equipment, $5,682 to acquired intangible assets, ~~and, distributed $33,812 to the non-controlling interest holders of American DG New York LLC, partially offset by receipt of $11,637 in proceeds from the sale of investment securities.~~

including insurance proceeds.

Cash Flows from Financing Activities

During the ~~six~~three months ended ~~June 30,~~March 31, 2023 and 2022 ~~our~~there we no cash flows from financing activities provided $0 compared to $1,874,269 for the same period in 2021. Financing activities for the six months ended June 30, 2021 included the proceeds of $1,874,269 received under the Paycheck Protection Program Second Draw.

activities.

Backlog

As of ~~June 30, 2022,~~March 31, 2023, our backlog of product and installation projects, excluding service contracts, was ~~$10.7~~$7.1 million, consisting of ~~$3.8~~$5.2 million of purchase orders received by us and ~~$6.9~~$1.9 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. As of March 31, 2022, our backlog of product and installation projects, excluding service contracts, was $9.4 million consisting of $6.4 million of purchase orders received by us and $2.9 million of projects in which the customer's internal approval process is complete. 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.

~~TECOGEN INC.~~

~~Management's Discussion and Analysis~~

~~Paycheck Protection Program Loan~~

On April 17, 2020, we obtained an unsecured loan in the principal amount of $1,874,200 from Webster Bank, NA ("Webster") under the Paycheck Protection Program adopted pursuant to the Coronavirus Aid, Relief and Economic Recovery Act, as amended ("CARES Act"). On January 19, 2021 we received confirmation from Webster that the Paycheck Protection Program Loan in the original principal amount of $1,874,200 together with accrued interest of $13,659 was forgiven in full effective as of January 11, 2021. The loan forgiveness of $1,887,859 was accounted for as a debt extinguishment and is reported as a separate component of other income (expense), net in the condensed consolidated statements of earnings for the six months ended June 30, 2021.

~~Paycheck Protection Program Second Draw Loan~~

On February 5, 2021, we obtained a Paycheck Protection Program Second Draw unsecured loan through Webster in the amount of $1,874,269 in connection with the Paycheck Protection Program pursuant to the CARES Act. On September 20, 2021, we received a letter dated September 13, 2021 from Webster Bank, NA confirming that the Paycheck Protection Program Second Draw Loan issued to us pursuant to the CARES Act, as amended, in the original principal amount of $1,874,269 together with accrued interest of $11,386 was forgiven in full as of September 8, 2021. The loan forgiveness of $1,885,655 was accounted for as debt extinguishment and is reported as a separate component of other income (expense), net in the condensed consolidated statements of earnings for the year ended December 31, 2021.

Employee Retention Credit

refundable tax credit against certain employment taxes. The Taxpayer Certainty and Disaster Tax Relief Act of 2020 and the American Rescue Plan Act of 2021 extended and expanded the availability of the ERC.

TECOGEN INC.

As a result of our election to use an alternative quarter, we qualified for the ERC in the first, second and third quarters of 2021 because our gross receipts decreased by more than 20% from the first, second and third quarters of 2019. As a result of averaging 100 or fewer full-time employees in 2019, all wages paid to employees in the first, second and third quarters of 2021, excluding the wages applied to the Paycheck Protection Program Second Draw Loan, were eligible for the ERC.

A current receivable in the amount of ~~$713,269~~$46,148 is included in our condensed consolidated balance sheet as of ~~June 30, 2022. On April 14, 2022, we received $564,027 from~~March 31, 2023. We expect to receive the Internal Revenue Service representing the ERC claim for the third quarter of 2021 and $1,275 of accrued interest. We are still awaiting payment from the Internal Revenue Service for the ERC claim from the first and second quarters of 2021.

remaining balance in 2023.

Liquidity

At ~~June 30, 2022,~~March 31, 2023, we had cash and cash equivalents of ~~$2,831,107,~~$1,629,103, a decrease of ~~$783,356~~$284,866 or ~~21.7%~~14.9% from the cash and cash equivalents balance at December 31, 2021. During the ~~six~~three months ended ~~June 30, 2022,~~March 31, 2023, our revenues continued to be negatively impacted due to COVID-19, resulting in 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 customer facility closures, in some cases for extended periods, a reduction in our energy production revenues due to business closures and increased remote work and learning environments. The extent to which the coronavirus will continue to impact our business, our financial results, and our cash flows will depend on future developments which are highly uncertain and cannot be predicted.

Based on our current operating plan, we believe existing resources, including cash and cash flows from operations, ~~together anticipated Employee Retention Credit~~ will be sufficient to meet our working capital requirements for the next twelve months. The funds made available to us through the Paycheck Protection Program and Employee Retention Credit have provided liquidity for our business, and there can be no assurance that additional financing on such favorable terms will be available to us in the future. We will need to generate sufficient cash from operations to finance the company during the periods beyond twelve months in the future. If sufficient funds from operating activities are not available to finance our business, we may need to raise additional capital through debt financing or an equity offering to meet our operating and capital needs.

~~TECOGEN INC.~~

~~Management's Discussion and Analysis~~

Significant Accounting Policies and Critical Estimates

Our significant accounting policies are discussed in the Notes to our Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022. The accounting policies and estimates that can have a significant impact upon our operating results, financial position and footnote disclosures are described in the above notes and in the Annual 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, ~~2021,~~2022, filed with the SEC on March ~~10, 2022.~~23, 2023.

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.

Seasonality

The majority of our chilling systems sold will be operational for the summer. Demand for our service team is higher in the warmer months when cooling is required. Chiller units are generally shut down in the winter and started up again in the spring. 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.

TECOGEN INC.

Item 4. Controls and Procedures.

Management’s Evaluation of Disclosure Controls and Procedures:

As of the end of the period covered by this Report, our Chief Executive Officer and Chief Financial Officer ("Certifying Officers") conducted evaluations of our disclosure controls and procedures. As defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended ("Securities Exchange Act"), the term "disclosure controls and procedures" means controls and procedures of an issuer that are designed to ensure the information required to be disclosed by the issuer in the reports that it files or submits under the Section 13(a) or 15(d) is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's ("SEC") rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that 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 issuer's management, including the Certifying Officers, 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 Chief Executive Officer and Chief Financial Officer, after evaluating the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Report, have concluded that our disclosure controls and procedures were not effective due to a material weakness with respect to a small number of individuals dealing with general controls over information technology. Management will continue to evaluate the above weaknesses and we are taking steps to remediate the weaknesses as resources become available.

Changes in Internal Control over Financial Reporting:

There were no changes in our internal controls over financial reporting (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 reporting.

~~TECOGEN INC.~~

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

AsOn November 23, 2022, we were served with a suit filed against us on August 24, 2022 in the Ontario Superior Court of Justice for damages in the ~~date~~amount of CDN $1,000,000, alleging that a Tecogen cogenerator installed by us at the ~~filing of this Report,~~plaintiffs facility caught fire, causing damage to the cogenerator and the plaintiff's facility. For the year ended December 31, 2022, we reserved $150,000 for anticipated costs which may not be covered by insurance. We are not a party to any other material pending legal ~~proceedings and know of no contemplated governmental proceeding involving us. However, from time to time, we may be involved in ordinary routine litigation incidental to our business.~~proceeding.

Item 1A. Risk Factors

In addition to the other information set forth in this report, you should carefully consider the factors discussed under "Item1A - Risk Factors” in our Annual Report on Form 10-K for our fiscal year ended December 31, ~~2021~~2022 ("~~2021~~2022 Form 10-K") The risks discussed in our 2021 Form 10-K could materially affect our business, financial condition and future results. The risks described in our ~~2021~~2022 Form 10-K are not the only risks 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.

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

None.

2924

TECOGEN INC.

Item 6. Exhibits


Exhibit No.			Description of Exhibit
10.1*			Lease, dated March 31, 2023, between Alibrandi Realty Associates, LLC and Tecogen Inc., Building 1
10.2*			Lease, dated March 31, 2023, between Alibrandi Realty Associates, LLC and Tecogen Inc., Building 3
31.1*			Certification of Chief Executive ~~Officer Pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002~~
31.2*			~~Certification of Chief Financial~~ Officer Pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
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 Sarbanes-Oxley Act of 2002

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

3025

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.


	TECOGEN INC.
	(Registrant)

Dated: ~~August 11, 2022~~	~~By:~~	~~/s/ Benjamin Locke~~
	~~Benjamin Locke~~
	~~Chief Executive Officer~~
	~~(Principal Executive Officer)~~

~~Dated: August 11, 2022~~May 10, 2023	By:	/s/ Abinand Rangesh
	Abinand Rangesh
	Chief Executive and Financial Officer
	(Principal Executive and Financial Officer)

3126


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Numerator:
Net income (loss) available to stockholders	$	(856,218)	$	399,631	$	(766,809)	$	2,166,338

Denominator:
Weighted average shares outstanding - Basic	24,850,261		24,850,261		24,850,261		24,850,261
Effect of dilutive securities:
Stock options	—		274,949		—		252,209
Weighted average shares outstanding - Diluted	24,850,261		25,125,210		24,850,261		25,102,470

Basic income (loss) per share	$	(0.03)	$	0.02	$	(0.03)	$	0.09
Diluted income (loss) per share	$	(0.03)	$	0.02	$	(0.03)	$	0.09

Anti-dilutive shares underlying stock options outstanding	925,396		985,296		925,396		777,296