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 September 30, 20222023

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

Commission file number 001-36103

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TECOGEN INC. (OTCQX:TGEN)
(Exact name of Registrant as specified in its charter)
Delaware04-3536131
(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 September 30, 2022,November 8, 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 SEPTEMBER 30, 20222023
TABLE OF CONTENTS
 
PART I - FINANCIAL INFORMATION

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)
September 30, 2022December 31, 2021 September 30, 2023December 31, 2022
ASSETSASSETSASSETS
Current assets:Current assets:  Current assets:  
Cash and cash equivalentsCash and cash equivalents$2,880,160 $3,614,463 Cash and cash equivalents$646,161 $1,913,969 
Accounts receivable, netAccounts receivable, net8,598,302 8,482,286 Accounts receivable, net7,694,571 6,714,122 
Unbilled revenueUnbilled revenue1,956,002 3,258,189 Unbilled revenue1,748,336 1,805,330 
Employee retention credit receivableEmployee retention credit receivable713,269 1,276,021 Employee retention credit receivable46,148 713,269 
Inventories, netInventories, net8,712,021 7,764,989 Inventories, net11,039,313 10,482,729 
Prepaid and other current assetsPrepaid and other current assets507,996 578,801 Prepaid and other current assets420,317 401,189 
Total current assetsTotal current assets23,367,750 24,974,749 Total current assets21,594,846 22,030,608 
Long-term assets:Long-term assets:Long-term assets:
Property, plant and equipment, netProperty, plant and equipment, net1,661,694 1,782,944 Property, plant and equipment, net1,254,656 1,407,720 
Right of use assetsRight of use assets1,404,034 1,869,210 Right of use assets754,957 1,245,549 
Intangible assets, netIntangible assets, net1,047,296 1,181,023 Intangible assets, net2,307,902 997,594 
GoodwillGoodwill2,406,156 2,406,156 Goodwill3,129,147 2,406,156 
Other assetsOther assets184,393 148,140 Other assets145,237 165,230 
TOTAL ASSETSTOTAL ASSETS$30,071,323 $32,362,222 TOTAL ASSETS$29,186,745 $28,252,857 
LIABILITIES AND STOCKHOLDERS’ EQUITYLIABILITIES AND STOCKHOLDERS’ EQUITY  LIABILITIES AND STOCKHOLDERS’ EQUITY  
Current liabilities:Current liabilities:  Current liabilities:  
Accounts payableAccounts payable$3,325,452 $3,508,354 Accounts payable$4,493,758 $3,261,952 
Accrued expensesAccrued expenses2,263,009 2,343,728 Accrued expenses2,632,607 2,384,447 
Deferred revenue1,282,971 1,957,752 
Deferred revenue, currentDeferred revenue, current1,655,737 1,115,627 
Lease obligations, currentLease obligations, current676,974 641,002 Lease obligations, current367,938 687,589 
Acquisition liabilities, currentAcquisition liabilities, current775,991 — 
Unfavorable contract liability, currentUnfavorable contract liability, current265,854 330,032 Unfavorable contract liability, current201,090 236,705 
Total current liabilitiesTotal current liabilities7,814,260 8,780,868 Total current liabilities10,127,121 7,686,320 
Long-term liabilities:Long-term liabilities:  Long-term liabilities:  
Deferred revenue, net of current portionDeferred revenue, net of current portion395,561 208,456 Deferred revenue, net of current portion290,226 371,823 
Lease obligations, net of current portionLease obligations, net of current portion796,696 1,315,275 Lease obligations, net of current portion429,737 623,452 
Acquisition liabilities, net of current portionAcquisition liabilities, net of current portion1,485,677 — 
Unfavorable contract liability, net of current portionUnfavorable contract liability, net of current portion706,667 929,474 Unfavorable contract liability, net of current portion448,695 583,512 
Total liabilitiesTotal liabilities9,713,184 11,234,073 Total liabilities12,781,456 9,265,107 
Commitments and contingencies (Note 12)Commitments and contingencies (Note 12)Commitments and contingencies (Note 12)
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 September 30, 2022 and December 31, 202124,850 24,850 
Common stock, $0.001 par value; 100,000,000 shares authorized; 24,850,261 issued and outstanding at September 30, 2023 and December 31, 2022Common stock, $0.001 par value; 100,000,000 shares authorized; 24,850,261 issued and outstanding at September 30, 2023 and December 31, 202224,850 24,850 
Additional paid-in capitalAdditional paid-in capital57,271,577 57,016,859 Additional paid-in capital57,525,719 57,351,008 
Accumulated deficitAccumulated deficit(36,857,142)(35,833,621)Accumulated deficit(41,033,259)(38,281,548)
Total Tecogen Inc. stockholders’ equityTotal Tecogen Inc. stockholders’ equity20,439,285 21,208,088 Total Tecogen Inc. stockholders’ equity16,517,310 19,094,310 
Non-controlling interestNon-controlling interest(81,146)(79,939)Non-controlling interest(112,021)(106,560)
Total stockholders’ equityTotal stockholders’ equity20,358,139 21,128,149 Total stockholders’ equity16,405,289 18,987,750 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITYTOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY$30,071,323 $32,362,222 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY$29,186,745 $28,252,857 

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

TECOGEN INC.




CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Three Months EndedThree Months Ended
September 30, 2022September 30, 2021 September 30, 2023September 30, 2022
RevenuesRevenuesRevenues
ProductsProducts$3,206,732 $1,871,332 Products$2,938,789 $3,206,732 
ServicesServices3,078,604 2,829,244 Services3,842,600 3,078,604 
Energy productionEnergy production332,774 315,292 Energy production331,141 332,774 
Total revenuesTotal revenues6,618,110 5,015,868 Total revenues7,112,530 6,618,110 
Cost of salesCost of salesCost of sales
ProductsProducts2,074,243 1,036,396 Products1,669,747 2,074,243 
ServicesServices1,482,355 1,467,019 Services2,346,384 1,482,355 
Energy productionEnergy production168,178 170,518 Energy production170,378 168,178 
Total cost of salesTotal cost of sales3,724,776 2,673,933 Total cost of sales4,186,509 3,724,776 
Gross profitGross profit2,893,334 2,341,935 Gross profit2,926,021 2,893,334 
Operating expensesOperating expensesOperating expenses
General and administrativeGeneral and administrative2,343,449 2,473,190 General and administrative2,708,817 2,343,449 
SellingSelling567,529 656,885 Selling425,465 567,529 
Research and developmentResearch and development202,138 122,031 Research and development160,033 202,138 
Gain on disposition of assetsGain on disposition of assets(5,486)— Gain on disposition of assets— (5,486)
Total operating expensesTotal operating expenses3,107,630 3,252,106 Total operating expenses3,294,315 3,107,630 
Loss from operationsLoss from operations(214,296)(910,171)Loss from operations(368,294)(214,296)
Other income (expense)Other income (expense)Other income (expense)
Other income (expense), net(7,140)(4,798)
Interest income and other income (expense), netInterest income and other income (expense), net(16,330)(7,140)
Interest expenseInterest expense(2,280)(3,855)Interest expense(6,357)(2,280)
Gain on extinguishment of debt— 1,885,655 
Employee retention credit— 562,253 
Unrealized loss on investment securitiesUnrealized loss on investment securities— (37,497)Unrealized loss on investment securities(56,246)— 
Total other income (expense), netTotal other income (expense), net(9,420)2,401,758 Total other income (expense), net(78,933)(9,420)
Income (loss) before provision for state income taxes(223,716)1,491,587 
Loss before provision for state income taxesLoss before provision for state income taxes(447,227)(223,716)
Provision for state income taxesProvision for state income taxes5,922 3,000 Provision for state income taxes— 5,922 
Consolidated net income (loss)(229,638)1,488,587 
Consolidated net lossConsolidated net loss(447,227)(229,638)
Income attributable to the non-controlling interestIncome attributable to the non-controlling interest(27,074)(21,890)Income attributable to the non-controlling interest(34,346)(27,074)
Net income (loss) attributable to Tecogen Inc.$(256,712)$1,466,697 
Net loss attributable to Tecogen Inc.Net loss attributable to Tecogen Inc.$(481,573)$(256,712)
Net income (loss) per share - basic$(0.01)$0.06 
Net income (loss) per share - diluted$(0.01)$0.06 
Net loss per share - basicNet loss per share - basic$(0.02)$(0.01)
Net loss per share - dilutedNet loss per share - diluted$(0.02)$(0.01)
Weighted average shares outstanding - basicWeighted average shares outstanding - basic24,850,261 24,850,261 Weighted average shares outstanding - basic24,850,261 24,850,261 
Weighted average shares outstanding - dilutedWeighted average shares outstanding - diluted24,850,261 25,154,905 Weighted average shares outstanding - diluted24,850,261 24,850,261 
 

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

2

TECOGEN INC.




CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Nine Months EndedNine Months Ended
September 30, 2022September 30, 2021 September 30, 2023September 30, 2022
RevenuesRevenuesRevenues
ProductsProducts$10,156,328 $6,439,981 Products$7,094,556 $10,156,328 
ServicesServices9,046,075 9,438,702 Services10,931,744 9,046,075 
Energy production Energy production1,268,623 1,339,448  Energy production1,214,806 1,268,623 
Total revenuesTotal revenues20,471,026 17,218,131 Total revenues19,241,106 20,471,026 
Cost of salesCost of salesCost of sales
ProductsProducts6,734,465 3,601,408 Products4,500,771 6,734,465 
ServicesServices4,322,693 4,684,008 Services6,159,855 4,322,693 
Energy production Energy production726,297 796,933  Energy production728,124 726,297 
Total cost of salesTotal cost of sales11,783,455 9,082,349 Total cost of sales11,388,750 11,783,455 
Gross profitGross profit8,687,571 8,135,782 Gross profit7,852,356 8,687,571 
Operating expensesOperating expensesOperating expenses
General and administrativeGeneral and administrative7,642,183 7,365,495 General and administrative8,418,581 7,642,183 
SellingSelling1,572,221 1,747,959 Selling1,426,321 1,572,221 
Research and developmentResearch and development537,126 381,064 Research and development625,691 537,126 
Gain on disposition of assetsGain on disposition of assets(41,931)— Gain on disposition of assets(19,950)(41,931)
Gain on termination of unfavorable contract liabilityGain on termination of unfavorable contract liability(71,375)— Gain on termination of unfavorable contract liability— (71,375)
Total operating expensesTotal operating expenses9,638,224 9,494,518 Total operating expenses10,450,643 9,638,224 
Loss from operationsLoss from operations(950,653)(1,358,736)Loss from operations(2,598,287)(950,653)
Other income (expense)Other income (expense)Other income (expense)
Interest and other income (expense), net(22,556)(7,127)
Interest income and other income (expense), netInterest income and other income (expense), net(36,562)(22,556)
Interest expenseInterest expense(15,841)(13,583)Interest expense(8,629)(15,841)
Gain on extinguishment of debt— 3,773,014 
Employee retention credit— 1,276,021 
Gain on sale of investment securities— 6,046 
Unrealized gain on investment securities37,497 18,749 
Total other income (expense), net(900)5,053,120 
Income (loss) before provision for state income taxes(951,553)3,694,384 
Provision for state income taxes16,352 18,991 
Consolidated net income (loss)(967,905)3,675,393 
Income attributable to non-controlling interest(55,616)(42,358)
Net income (loss) attributable to Tecogen Inc.$(1,023,521)$3,633,035 
Net income (loss) per share - basic$(0.04)$0.15 
Net income (loss) per share - diluted$(0.04)$0.14 
Unrealized gain (loss) on investment securitiesUnrealized gain (loss) on investment securities(18,749)37,497 
Total other income (expense), netTotal other income (expense), net(63,940)(900)
Loss before provision for state income taxesLoss before provision for state income taxes(2,662,227)(951,553)
Provision for state income taxesProvision for state income taxes32,252 16,352 
Consolidated net lossConsolidated net loss(2,694,479)(967,905)
Income attributable to non-controlling interestIncome attributable to non-controlling interest(57,232)(55,616)
Net loss attributable to Tecogen Inc.Net loss attributable to Tecogen Inc.$(2,751,711)$(1,023,521)
Net loss per share - basicNet loss per share - basic$(0.11)$(0.04)
Net loss per share - dilutedNet loss per share - diluted$(0.11)$(0.04)
Weighted average shares outstanding - basicWeighted average shares outstanding - basic24,850,261 24,850,261 Weighted average shares outstanding - basic24,850,261 24,850,261 
Weighted average shares outstanding - dilutedWeighted average shares outstanding - diluted24,850,261 25,131,165 Weighted average shares outstanding - diluted24,850,261 24,850,261 

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












3

TECOGEN INC.





CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the Three and Nine Months September 30, 20222023 and 20212022
(unaudited)



Three months ended September 30, 2022Common Stock SharesCommon
Stock
0.001
Par Value
Additional
Paid-In
Capital
Accumulated
Deficit
Non-controlling
Interest
Total
Balance at June 30, 202224,850,261 $24,850 $57,202,459 $(36,600,430)$(84,206)$20,542,673 
Stock based compensation expense69,118 69,118 
Distributions to non-controlling interest(24,014)(24,014)
Net income (loss)(256,712)27,074 (229,638)
Balance at September 30, 202224,850,261 $24,850 $57,271,577 $(36,857,142)$(81,146)$20,358,139 
Nine months ended September 30, 2022Common Stock SharesCommon
Stock
0.001
Par Value
Additional
Paid-In
Capital
Accumulated
Deficit
Non-controlling
Interest
Total
Balance at December 31, 202124,850,261 $24,850 $57,016,859 $(35,833,621)$(79,939)$21,128,149 
Stock based compensation expense254,718 254,718 
Distributions to non-controlling interest(56,823)(56,823)
Net income (loss)(1,023,521)55,616 (967,905)
Balance at September 30, 202224,850,261 $24,850 $57,271,577 $(36,857,142)$(81,146)$20,358,139 
Three months ended September 30, 2021Common Stock SharesCommon
Stock
0.001
Par Value
Additional
Paid-In
Capital
Accumulated
Deficit
Non-controlling
Interest
Total
Balance at June 30, 202124,850,261 $24,850 $56,908,194 $(37,363,283)$(55,667)$19,514,094 
Stock based compensation expense— — 56,889 — — 56,889 
Distributions to non-controlling interest— — — — (32,356)(32,356)
Net income— — — 1,466,697 21,890 1,488,587 
Balance at September 30, 202124,850,261 24,850 56,965,083 $(35,896,586)$(66,133)$21,027,214 
Nine months ended September 30, 2021Common Stock SharesCommon
Stock
0.001
Par Value
Additional
Paid-In
Capital
Accumulated
Deficit
Non-controlling
Interest
Total
Balance at December 31, 202024,850,261 $24,850 $56,814,428 $(39,529,621)$(42,323)$17,267,334 
Stock based compensation expense— — 150,655 — — 150,655 
Distributions to non-controlling interest— — — — (66,168)(66,168)
Net income— — — 3,633,035 42,358 3,675,393 
Balance at September 30, 202124,850,261 $24,850 $56,965,083 $(35,896,586)$(66,133)$21,027,214 


Three Months Ended September 30, 2023Common Stock SharesCommon
Stock
0.001
Par Value
Additional
Paid-In
Capital
Accumulated
Deficit
Non-controlling
Interest
Total
Balance at June 30, 202324,850,261 $24,850 $57,456,944 $(40,551,686)$(107,512)$16,822,596 
Stock-based compensation expense— — 68,775 — — 68,775 
Distributions to non-controlling interest— — — — (38,855)(38,855)
Net income (loss)— — — (481,573)34,346 (447,227)
Balance at September 30, 202324,850,261 $24,850 $57,525,719 $(41,033,259)$(112,021)$16,405,289 
Nine Months Ended September 30, 2023Common Stock SharesCommon
Stock
0.001
Par Value
Additional
Paid-In
Capital
Accumulated
Deficit
Non-controlling
Interest
Total
Balance at December 31, 202224,850,261 $24,850 $57,351,008 $(38,281,548)$(106,560)$18,987,750 
Stock-based compensation expense— — 174,711 — — 174,711 
Distributions to non-controlling interest— — — — (62,693)(62,693)
Net income (loss)— — — (2,751,711)57,232 (2,694,479)
Balance at September 30, 202324,850,261 $24,850 $57,525,719 $(41,033,259)$(112,021)$16,405,289 
Three Months Ended September 30, 2022Common Stock SharesCommon
Stock
0.001
Par Value
Additional
Paid-In
Capital
Accumulated
Deficit
Non-controlling
Interest
Total
Balance at June 30, 202224,850,261 $24,850 $57,202,459 $(36,600,430)$(84,206)20,542,673 
Stock-based compensation expense— — 69,118 — — 69,118 
Distributions to non-controlling interest— — — — (24,014)(24,014)
Net income (loss)— — — (256,712)27,074 (229,638)
Balance at September 30, 202224,850,261 $24,850 $57,271,577 $(36,857,142)$(81,146)$20,358,139 
Nine Months Ended September 30, 2022Common Stock SharesCommon
Stock
0.001
Par Value
Additional
Paid-In
Capital
Accumulated
Deficit
Non-controlling
Interest
Total
Balance at December 31, 202124,850,261 $24,850 $57,016,859 $(35,833,621)$(79,939)$21,128,149 
Stock-based compensation expense— — 254,718 — — 254,718 
Distributions to non-controlling interest— — — — (56,823)(56,823)
Net income (loss)— — — (1,023,521)55,616 (967,905)
Balance at September 30, 202224,850,261 $24,850 $57,271,577 $(36,857,142)$(81,146)$20,358,139 

The accompanying notes are an integral part of these condensed consolidated financial statements.
4

TECOGEN INC.




CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Nine Months EndedNine Months Ended
September 30, 2022September 30, 2021 September 30, 2023September 30, 2022
CASH FLOWS FROM OPERATING ACTIVITIES:CASH FLOWS FROM OPERATING ACTIVITIES:CASH FLOWS FROM OPERATING ACTIVITIES:
Consolidated net income (loss)$(967,905)$3,675,393 
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Consolidated net lossConsolidated net loss$(2,694,479)$(967,905)
Adjustments to reconcile net loss to net cash used in operating activities:Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization, netDepreciation and amortization, net324,968 357,636 Depreciation and amortization, net459,779 324,968 
Gain on extinguishment of debt— (3,773,014)
Employee retention credit— (1,276,021)
Stock-based compensationStock-based compensation254,718 150,655 Stock-based compensation174,711 254,718 
Provision for doubtful accounts(183,955)52,000 
Provision (release) for doubtful accountsProvision (release) for doubtful accounts44,000 (183,955)
Gain on disposition of assetsGain on disposition of assets(41,931)(9,787)Gain on disposition of assets(19,950)(41,931)
Gain on sale of investment securities— (6,046)
Unrealized gain on investment securities(37,497)(18,749)
Unrealized (gain) loss on investment securitiesUnrealized (gain) loss on investment securities18,749 (37,497)
Gain on termination of unfavorable contract liabilityGain 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 liabilitiesChanges in operating assets and liabilitiesChanges in operating assets and liabilities
(Increase) decrease in:(Increase) decrease in:(Increase) decrease in:
Accounts receivableAccounts receivable67,940 890,374 Accounts receivable(1,324,448)67,940 
Employee retention credit receivableEmployee retention credit receivable562,752 — Employee retention credit receivable667,121 562,752 
Unbilled revenueUnbilled revenue1,302,187 424,967 Unbilled revenue56,994 1,302,187 
Inventory(947,031)(753,447)
InventoriesInventories(165,537)(947,031)
Prepaid expenses and other current assetsPrepaid expenses and other current assets70,806 24,361 Prepaid expenses and other current assets(19,128)70,806 
Other assetsOther assets466,420 (387,847)Other assets491,836 466,420 
Increase (decrease) in:Increase (decrease) in:Increase (decrease) in:
Accounts payableAccounts payable(182,903)(636,156)Accounts payable1,140,759 (182,903)
Accrued expenses and other current liabilitiesAccrued expenses and other current liabilities(80,720)378,970 Accrued expenses and other current liabilities256,847 (80,720)
Deferred revenueDeferred revenue(487,676)691,867 Deferred revenue458,512 (487,676)
Other liabilitiesOther liabilities(482,608)379,440 Other liabilities(566,016)(482,608)
Net cash (used in) provided by operating activities(433,810)171,996 
Net cash used in operating activitiesNet cash used in operating activities(1,020,250)(433,810)
CASH FLOWS FROM INVESTING ACTIVITIES:CASH FLOWS FROM INVESTING ACTIVITIES:CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipmentPurchases of property and equipment(286,820)(84,160)Purchases of property and equipment(31,728)(286,820)
Proceeds from the sale of investment securities— 11,637 
Payment for business acquisitionPayment for business acquisition(170,000)— 
Purchases of intangible assetsPurchases of intangible assets(29,505)(56,349)Purchases of intangible assets— (29,505)
Proceeds from disposition of assetsProceeds from disposition of assets72,655 9,787 Proceeds from disposition of assets16,863 72,655 
Distributions to non-controlling interestDistributions to non-controlling interest(56,823)(66,168)Distributions to non-controlling interest(62,693)(56,823)
Net cash used in investing activitiesNet cash used in investing activities(300,493)(185,253)Net cash used in investing activities(247,558)(300,493)
CASH FLOWS FROM FINANCING ACTIVITIES:CASH FLOWS FROM FINANCING ACTIVITIES:CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from note payable— 1,874,269 
Net cash provided by financing activitiesNet cash provided by financing activities— 1,874,269 Net cash provided by financing activities— — 
Change in cash and cash equivalentsChange in cash and cash equivalents(734,303)1,861,012 Change in cash and cash equivalents(1,267,808)(734,303)
Cash and cash equivalents, beginning of the periodCash and cash equivalents, beginning of the period3,614,463 1,490,219 Cash and cash equivalents, beginning of the period1,913,969 3,614,463 
Cash and cash equivalents, end of the periodCash and cash equivalents, end of the period$2,880,160 $3,351,231 Cash and cash equivalents, end of the period$646,161 $2,880,160 
Supplemental disclosures of cash flows information:Supplemental disclosures of cash flows information:  Supplemental disclosures of cash flows information:  
Cash paid for interestCash paid for interest$14,597 $— Cash paid for interest$7,385 $14,597 
Cash paid for taxesCash paid for taxes$16,352 $18,991 Cash paid for taxes$32,252 $16,352 
Non-cash consideration issued for Aegis acquisition:Non-cash consideration issued for Aegis acquisition:
Accounts receivable credit Accounts receivable credit$300,000 $— 
Accounts payable assumed Accounts payable assumed91,048 — 
Contingent consideration Contingent consideration1,442,462 — 
Total fair value of non-cash considerationTotal fair value of non-cash consideration$1,833,510 $— 


The accompanying notes are an integral part of these condensed consolidated financial statements. 
5

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 reduceprovide customers with substantial energy costs, decrease greenhouse gas emissionssavings, 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 powerare 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 fromother applications including stationary engines and forklifts. We were incorporated in the engine is recoveredState of Delaware on September 15, 2000.
We have wholly-owned subsidiaries American DG Energy, Inc. ("ADGE") and purposefully used atTecogen 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 completeclean, on-site energy systems and other complementary systems at customer sites and sellthat produce electricity, hot water, heat and coolingcooling. ADGE and ADGNY own the equipment that is installed at customers' facilities and sell the energy under long-term contracts at prices guaranteedproduced 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 for our products under long term service contracts, and
our Energy Production segment, which installs, operates and maintains distributed generation electricity systems that we own and sells energy generated by such systems 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, Tecogenwe announced the establishment of NetZero Greens, a new business unit focusedour intention to increase focus on low carbonopportunities 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. However, we have not taken any formal steps to enter this business as of the date of the filing of this report.
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, we acquired 100% of the outstanding common stock of American DG Energy Inc., formerly a related entity, in a stock-for-stock merger.
On March 15, 2023, we entered into an agreement ("Agreement") with Aegis Energy Services, LLC (“Aegis”) pursuant to which Aegis agreed to assign to us and we agreed to assume certain Aegis maintenance agreements, we agreed to purchase certain assets, and related matters (“Acquisition”). On April 1, 2023, the Acquisition closed. Under the Agreement, we agreed to acquire from Aegis and assume Aegis rights and obligations arising on or after April 1, 2023, under maintenance agreements pursuant to which Aegis provided maintenance services for approximately 200 cogeneration systems, and acquired certain vehicles and inventory used by Aegis in connection with the performance of such maintenance services, and, following closing hired eight (8) Aegis employees to provide services with respect to such maintenance agreements. At closing, we acquired eight (8) Aegis vehicles for consideration consisting of $170,000 in cash. Also, we issued credits against outstanding accounts receivable due from Aegis in the amount of $300,000 for the acquisition of inventory that Aegis used to provide maintenance services. See Note 8. - Aegis Contract and Related Asset Acquisition.
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 nine months ended September 30, 20222023 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, 20212022 has been derived from the audited consolidated financial statements at that date included in our annual report of Form 10-K for the year ended December 31, 2022 ("2022 Form
6

TECOGEN INC.
Notes to Condensed Consolidated Financial Statements

10-K"), 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 installs, operates and maintains distributed generation electricity systems that we own and sells energy generated by such systems 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 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.
Liquidity
At September 30, 2023, we had cash and cash equivalents of $646,161, a decrease of $1,267,808 or 66.2% from the cash and cash equivalents balance at December 31, 2022. During the nine months ended September 30, 2023, our Products revenue was negatively impacted. Our Products have long sales cycles and the reduced business development activity in the aftermath of COVID-19 resulted in what we believe is a temporary reduction in Products revenue.
    Based on our current operating plan, we believe existing resources, including existing cash, cash flows from operations and the funds available to us under loans from certain related parties will be sufficient to meet our working capital requirements for the next twelve months. However, we may need to generate sufficient additional cash from operations to finance the company during the periods beyond twelve months.
On October 9, 2023, we entered into an agreement with each of John N. Hatsopoulos, a director and principal shareholder of registrant, and Earl R. Lewis, III, a director, pursuant to which Mr. Hatsopoulos agreed to provide financing to us of up to $1 million, and Mr. Lewis agreed to provide financing to us of $500,000, and potentially an additional $500,000 at his discretion. On October 10, 2023, we issued a promissory note and borrowed $500,000 from Mr. Hatsopoulos. The loan bears interest at 5.12% per annum and is repayable one year from the date of the issuance of the related promissory note. The proceeds of the loans are expected to be used for general working capital purposes.
If sufficient funds from operating activities are not available to finance our business and operations, we may need to raise additional capital through debt financing or an equity offering to meet our operating and capital needs. There can be no assurance we will be able to raise such additional debt or equity financing or upon terms that are acceptable to us.
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.


6

TECOGEN INC.
Notes to Condensed Consolidated Financial Statements

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.
    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 LoanProgram Second Draw Loan, were eligible for the ERC. Wages used towards PPP loan forgiveness cannot be used as qualified wages for purposes of
7

TECOGEN INC.
Notes to Condensed Consolidated Financial Statements

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 accountedbenefit for the Employee Retention Credit as a government grantfirst 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 thethree 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 filingbenefit for the credit is an administrative task and not a barrier to receiving the credits
    A current receivablethird 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 asstatements of September 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 paymentreceived $667,121 from the Internal Revenue Service foron January 12, 2023 representing a partial payment of the ERC claimsclaimed 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 nine months ended September 30, 2023. A current receivable in the amount of $46,148 is included in our condensed consolidated balance sheet as of September 30, 2023.
7

TECOGEN INC.
Notes to Condensed Consolidated Financial Statements

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 have recorded 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 tabletables further disaggregatesdisaggregate our revenue by major source by segment for the three and nine months ended September 30, 20222023 and 2021.2022.
Three Months Ended September 30, 2022Three Months Ended September 30, 2023
ProductsServicesEnergy ProductionTotalProductsServicesEnergy ProductionTotal
ProductsProducts$3,206,732 $— $— $3,206,732 Products$2,938,789 $— $— $2,938,789 
Installation services— — — — 
Maintenance servicesMaintenance services— 3,078,604 — 3,078,604 Maintenance services— 3,842,600 — 3,842,600 
Energy productionEnergy production— — 332,774 332,774 Energy production— — 331,141 331,141 
Total revenue Total revenue$3,206,732 $3,078,604 $332,774 $6,618,110  Total revenue$2,938,789 $3,842,600 $331,141 $7,112,530 

Nine Months Ended September 30, 2022Nine Months Ended September 30, 2023
ProductsServicesEnergy ProductionTotalProductsServicesEnergy ProductionTotal
ProductsProducts$10,156,328 $— $— $10,156,328 Products$7,094,556 $— $— $7,094,556 
Installation services— 20,109 — 20,109 
Maintenance servicesMaintenance services— 9,025,966 — 9,025,966 Maintenance services— 10,931,744 — 10,931,744 
Energy productionEnergy production— — 1,268,623 1,268,623 Energy production— — 1,214,806 1,214,806 
Total revenue Total revenue$10,156,328 $9,046,075 $1,268,623 $20,471,026  Total revenue$7,094,556 $10,931,744 $1,214,806 $19,241,106 

Three Months Ended September 30, 2021Three Months Ended September 30, 2022
ProductsServicesEnergy ProductionTotalProductsServicesEnergy ProductionTotal
ProductsProducts$1,871,332 $— $— $1,871,332 Products$3,206,732 $— $— $3,206,732 
Installation services— 63,076 — 63,076 
Maintenance servicesMaintenance services— 2,766,168 — 2,766,168 Maintenance services— 3,078,604 — 3,078,604 
Energy productionEnergy production— — 315,292 315,292 Energy production— — 332,774 332,774 
Total revenue Total revenue$1,871,332 $2,829,244 $315,292 $5,015,868  Total revenue$3,206,732 $3,078,604 $332,774 $6,618,110 

8

TECOGEN INC.
Notes to Condensed Consolidated Financial Statements

Nine Months Ended September 30, 2021Nine Months Ended September 30, 2022
ProductsServicesEnergy ProductionTotalProductsServicesEnergy ProductionTotal
ProductsProducts$6,439,981 $— $— $6,439,981 Products$10,156,328 $— $— $10,156,328 
Installation servicesInstallation services— 825,325 — 825,325 Installation services— 20,109 — 20,109 
Maintenance servicesMaintenance services— 8,613,377 — 8,613,377 Maintenance services— 9,025,966 — 9,025,966 
Energy productionEnergy production— — 1,339,448 1,339,448 Energy production— — 1,268,623 1,268,623 
Total revenue Total revenue$6,439,981 $9,438,702 $1,339,448 $17,218,131  Total revenue$10,156,328 $9,046,075 $1,268,623 $20,471,026 


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. 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 providePrior to January 1, 2023, we provided installation services typically includingwhich included 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 Since January 1, 2023, we have not provided material installation service contracts revenue is recognized over time using the percentage-of-completion method determined on a costservices and do not expect 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 a cost-based input method which we believe appropriately measures and is the most accurate depiction of the transfer of products andprovide material installation 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.
9

TECOGEN INC.
Notes to Condensed Consolidated Financial Statements

going forward.
    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 whereand 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.
Our acquisition of the Aegis maintenance contracts and related business closed on March 15, 2023 and since April 1, 2023, revenues resulting from the Aegis acquisition have been included in our revenue from the Services segment.
9

TECOGEN INC.
Notes to Condensed Consolidated Financial Statements

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 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 amount that 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 duringDuring the nine months ended September 30, 20222023, we did not recognize any revenue that was included in unbilled revenue at the end of the period. Approximately $1,302,727$16,428 was billed in this periodthe nine months ended September 30, 2023 that had been recognized as revenue in previous periods.

    Revenue recognized during the nine ended months ended September 30, 20222023 that was included in deferred revenue at the beginning of the period was approximately $1,620,128.$746,111.

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 September 30, 2022,2023, the aggregate amount of the transaction price allocated to remaining performance obligations was approximately $0.8 million.$1,945,963. We expect to recognize revenue of approximately 78.2%94.0% of the remaining performance obligations over the next 24 months, 53.0%85.1% recognized in the first 12 months and 25.2%8.9% recognized over the subsequent 12 months, and the remainder recognized thereafter.
10

TECOGEN INC.
Notes to Condensed Consolidated Financial Statements


Note 3. Income Per Common Share
    Basic and diluted income (loss)loss per share for the three and nine months ended September 30, 20222023 and 2021,2022, respectively, were as follows: 
Three Months Ended September 30,Nine Months Ended September 30,Three Months Ended September 30,Nine Months Ended September 30,
20222021202220212023202220232022
Numerator:Numerator:Numerator:
Net income (loss) available to stockholders$(256,712)$1,466,697 $(1,023,521)$3,633,035 
Net loss available to stockholdersNet loss available to stockholders$(481,573)$(256,712)$(2,751,711)$(1,023,521)
Denominator:Denominator:Denominator:
Weighted average shares outstanding - BasicWeighted average shares outstanding - Basic24,850,261 24,850,261 24,850,261 24,850,261 Weighted average shares outstanding - Basic24,850,261 24,850,261 24,850,261 24,850,261 
Effect of dilutive securities:Effect of dilutive securities:Effect of dilutive securities:
Stock optionsStock options— 304,644 — 280,904 Stock options— — — — 
Weighted average shares outstanding - DilutedWeighted average shares outstanding - Diluted24,850,261 25,154,905 24,850,261 25,131,165 Weighted average shares outstanding - Diluted24,850,261 24,850,261 24,850,261 24,850,261 
Basic income (loss) per share$(0.01)$0.06 $(0.04)$0.15 
Diluted income (loss) per share$(0.01)$0.06 $(0.04)$0.14 
Basic loss per shareBasic loss per share$(0.02)$(0.01)$(0.11)$(0.04)
Diluted loss per shareDiluted loss per share$(0.02)$(0.01)$(0.11)$(0.04)
Anti-dilutive shares underlying stock options outstandingAnti-dilutive shares underlying stock options outstanding971,001 777,296 836,001 777,296 Anti-dilutive shares underlying stock options outstanding1,829,051 971,001 1,829,051 836,001 


Note 4.Inventories, net
    Inventories at September 30, 20222023 and December 31, 20212022 consisted of the following:

September 30, 2022December 31, 2021September 30, 2023December 31, 2022
Raw materials$8,118,001 $7,072,991 
Less: reserves(335,121)(381,000)
Raw materials, netRaw materials, net$7,782,880 $6,691,991 Raw materials, net$9,545,184 $9,001,491 
Work-in-processWork-in-process341,485 549,802 Work-in-process706,731 498,139 
Finished goodsFinished goods587,656 523,196 Finished goods787,398 983,099 
Total inventories, netTotal inventories, net$8,712,021 $7,764,989 Total inventories, net$11,039,313 $10,482,729 


Note 5. Property, Plant and Equipment, net

Property, plant and equipment at September 30, 20222023 and December 31, 20212022 consisted of the following:
Estimated Useful
Life (in Years)
September 30, 2022December 31, 2021Estimated Useful
Life (in Years)
September 30, 2023December 31, 2022
Energy systemsEnergy systems1 - 15 years$3,478,824 $3,556,488 Energy systems1 - 15 years$2,810,232 $2,810,232 
Machinery and equipmentMachinery and equipment5 - 7 years1,596,827 1,463,153 Machinery and equipment5 - 7 years1,758,601 1,624,885 
Furniture and fixturesFurniture and fixtures5 years196,006 193,698 Furniture and fixtures5 years206,865 196,007 
Computer softwareComputer software3 - 5 years192,865 192,865 Computer software3 - 5 years192,865 192,865 
Leasehold improvementsLeasehold improvements*466,789 466,789 Leasehold improvements*466,789 466,789 
 5,931,311 5,872,993   5,435,352 5,290,778 
Less - accumulated depreciation and amortizationLess - accumulated depreciation and amortization (4,269,617)(4,090,049)Less - accumulated depreciation and amortization (4,180,696)(3,883,058)
 $1,661,694 $1,782,944  $1,254,656 $1,407,720 
* Lesser of estimated useful life of asset or lease term
11

TECOGEN INC.
Notes to Condensed Consolidated Financial Statements

    Depreciation and amortization expense on property and equipment for the three and nine months ended September 30, 2023 and 2022 was $112,783 and 2021 was$352,192 and $125,755 and $376,365, respectively. During the nine months ended September 30, 2023, we received proceeds of $16,863 from the disposition of certain assets and $144,181 and $450,195, respectively.reversed $8,687 of accrued decomissioning costs from a former ADG energy site, realizing a gain of $19,950. During the nine months ended September 30, 2022, we received proceeds of $72,655 from the disposition of certain assets, realizing a gain of $41,931 and disposed of machinery and equipment with a cost of $93,988 and no net book value.$41,931.


Note 6. Intangible Assets and Liabilities Other Than Goodwill

    As of September 30, 20222023 and December 31, 20212022 we had the following amounts related to intangible assets and liabilities other than goodwill:
September 30, 2022December 31, 2021September 30, 2023December 31, 2022
Intangible assetsIntangible assetsCostAccumulated AmortizationTotalCostAccumulated AmortizationTotalIntangible assetsCostAccumulated AmortizationTotalCostAccumulated AmortizationTotal
Product certificationsProduct certifications$777,465 $(572,230)$205,235 $765,850 $(532,676)$233,174 Product certifications$777,465 $(639,073)$138,392 $777,465 $(584,863)$192,602 
PatentsPatents888,911 (382,765)506,146 871,021 (314,997)556,024 Patents888,910 (474,882)414,028 888,910 (405,140)483,770 
Developed technologyDeveloped technology240,000 (152,000)88,000 240,000 (140,000)100,000 Developed technology240,000 (168,000)72,000 240,000 (156,000)84,000 
TrademarksTrademarks26,896 — 26,896 26,896 — 26,896 Trademarks26,896 — 26,896 26,896 — 26,896 
In Process R&DIn Process R&D263,936 (56,558)207,378 263,936 (28,279)235,657 In Process R&D263,936 (94,263)169,673 263,936 (65,984)197,952 
Favorable contract assetFavorable contract asset384,465 (370,824)13,641 384,465 (355,193)29,272 Favorable contract asset384,465 (375,213)9,252 384,465 (372,091)12,374 
Customer contractCustomer contract1,591,327 (113,666)1,477,661 — — — 
$2,581,673 $(1,534,377)$1,047,296 $2,552,168 $(1,371,145)$1,181,023 $4,172,999 $(1,865,097)$2,307,902 $2,581,672 $(1,584,078)$997,594 
Intangible liabilityIntangible liabilityIntangible liability
Unfavorable contract liabilityUnfavorable contract liability$2,903,419 $(1,930,898)$972,521 $3,056,655 $(1,797,149)$1,259,506 Unfavorable contract liability$2,618,168 $(1,968,383)$649,785 $2,618,168 $(1,797,951)$820,217 
The aggregate amortization expense related to intangible assets and liabilities exclusive of unfavorable contract related intangibles for the three and nine months ended September 30, 2023 and 2022 was $113,477 and 2021 was$280,671 and $49,885 and $150,376, and $51,229 and $145,306, respectively. The net credit to cost of sales related to the amortization of the unfavorable contract related intangible asset and liability for the three and nine months ended September 30, 2023 and 2022 was $54,576 and 2021 was$170,084 and $69,370 and $202,753, and $79,570 and $238,192, respectively. During the nine months ended September 30, 2021 we abandoned certain patent applications amounting to $7,400 and recorded an impairment charge in general and administrative expenses in the period.

Favorable/Unfavorable Contract Assets and Liabilities and Customer Contract Assets

    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 2017.2017 and include the customer relationship contract acquired by us in April 2023 as part of the Aegis acquisition. The American DG Energy's favorable and unfavorable contract contracts are being amortized on a straight-line basis over the contract term, which varies by customer contract. The Aegis customer relationship contract is being amortized on a straight-line basis over a period of seven (7) years which is consistent with the projected revenue recognition.

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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 September 30, 20222023 is estimated to be as follows:
Non-contract Related IntangiblesContract Related IntangiblesTotalNon-contract Related IntangiblesContract Related IntangiblesTotal
Year 1Year 1$201,568 $(265,854)$(64,286)Year 1$172,412 $26,242 $198,654 
Year 2Year 2187,551 (217,757)(30,206)Year 2178,779 111,624 290,403 
Year 3Year 3178,984 (120,464)58,520 Year 3174,763 153,964 328,727 
Year 4Year 4174,968 (90,035)84,933 Year 4172,340 167,176 339,516 
Year 5Year 5172,545 (78,261)94,284 Year 563,940 175,750 239,690 
ThereafterThereafter104,784 (200,150)(95,366)Thereafter41,111 193,120 234,231 
TotalTotal$1,020,400 (972,521)$47,879 Total$803,345 827,876 $1,631,221 

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TECOGEN INC.
Notes to Condensed Consolidated Financial Statements

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

Note 7.Sale of Energy Producing Assets and Goodwill Impairment
    During the first quarter of 2019 we recognized two individual sales of energy producing assets, for a total of eight power purchase agreements, including the associated energy production contracts for total consideration of $7 million.
    In connection with these assets sales, we entered into agreements with the purchaser to maintain and operate the assets over the remaining periods of the associated energy production contracts (through August 2033 and January 2034, respectively) in exchange for monthly maintenance and operating fees. These agreements contain provisions whereby we have guaranteed to the purchaser a minimum level or threshold of cash flows from the associated energy production contracts. 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 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 September 30, 20222023, we do not expect to make any material payments under the guarantee.
At September 30, 2022, our obligation2023, there were no amounts due under the energy production contracts was $7,236.contracts.
    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. ShouldIf we beare required to make whole the purchaser under such provisions, we wouldexpect to be entitledable to seek recoveryrecover 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.Aegis Contract and Related Asset Acquisition

On March 15, 2023, we entered into an agreement ("Agreement") with Aegis Energy Services, LLC (“Aegis”) pursuant to which Aegis agreed to assign to us and we agreed to assume certain Aegis maintenance agreements, we agreed to purchase certain assets from Aegis, and related matters (“Acquisition”). On April 1, 2023, the Acquisition closed. Under the Agreement, we agreed to acquire from Aegis and assume Aegis’ rights and obligations arising on or after April 1, 2023, under maintenance agreements pursuant to which Aegis provided maintenance services to third parties for approximately 200 cogeneration systems and we agreed to acquire from Aegis certain vehicles and inventory used by Aegis in connection with the performance of its maintenance services. At closing, we acquired eight (8) Aegis vehicles for consideration consisting of $170,000 in cash. Also, we issued credits against outstanding accounts receivable due from Aegis in the amount of $300,000 for the acquisition of inventory that Aegis used to provide maintenance services. At closing, we hired eight (8) Aegis
13

TECOGEN INC.
Notes to Condensed Consolidated Financial Statements

employees who, following the closing, have agreed to continue to provide maintenance services relating to the cogeneration systems covered by the maintenance agreements assumed pursuant to the Agreement. Following the closing and for a period of up to seven (7) years, we agreed to pay Aegis a percentage of the revenue collected for maintenance services provided pursuant to the maintenance agreements acquired from Aegis. Further, prior to December 31, 2023, we have the right to acquire and assume additional Aegis’ maintenance agreements for cogeneration systems on substantially similar terms and conditions. As of September 30, 2023, we have not acquired or assumed any additional maintenance agreements from Aegis. The Agreement contained certain indemnification provisions and agreements on the part of Aegis and for each party to cooperate with each other and provide certain transitional assistance. We acquired the Aegis maintenance agreements to expand our Service portfolio and to benefit from the long-term contract revenue stream generated by these agreements.
We have determined that the assignment and assumption of the Aegis maintenance agreements, in combination with the related asset acquisition and the retention of the former Aegis employees, constitutes a business and should be accounted for as a business combination under the acquisition method. As of the acquisition date, we recognized, separately from goodwill, the identifiable assets acquired and the liabilities assumed, at fair value.

We have included the financial results of the Aegis maintenance agreements in our consolidated financial statements from April 1, 2023, the closing or acquisition date.

The following table summarizes the consideration paid for the Aegis acquisition and the fair value of assets acquired and contract-related liabilities assumed as the acquisition date:

Consideration Paid:
Cash$170,000 
Accounts receivable credit issued300,000 
Account payable91,048 
Contingent consideration1,442,462 
Total fair value of consideration transferred2,003,510 
Identifiable assets acquired and liabilities assumed:
Assets acquired
Property, plant and equipment170,000 
Inventory391,048 
Identifiable intangible asset - customer contracts1,591,327 
2,152,375 
Acquired contract-related liabilities assumed
Deferred maintenance reserve(871,856)
(871,856)
Net identifiable assets acquired1,280,519 
Excess of cost over fair value of net assets acquired (Goodwill)$722,991 

The amounts recognized for inventory, identifiable intangible assets, contingent consideration and deferred maintenance reserves are provisional pending completion of the necessary valuations and analysis. ASC 805 establishes a measurement period to provide companies with a reasonable amount of time to obtain the information necessary to identify and measure various items in a business combination and cannot extend beyond one year from the acquisition date. During the three months ended September 30, 2023, we identified a $20,130 adjustment to decrease the accounts payable assumed and inventory acquired which had no impact on goodwill balance.
The fair value of the contingent consideration was estimated using the income approach. The excess cash flow was discounted to present value using an appropriate rate of return to estimate the market value of the customer identifiable intangible asset and the risks associated with the future revenue forecasts due to potential changes in customer energy requirements or changes in the economic viability of these CHP sites which depend on the spread between natural gas fuel and electricity prices, all of which are not within our control. Key assumptions to value the customer identifiable intangible asset included a discount rate of 15%, anticipated existing contract run out and forecasted revenue.
On the date of acquisition, the fair value of the contingent consideration and the deferred maintenance reserve were calculated using a weighted average cost of capital of 12%, discounting the future cash flows to present value and are subsequently remeasured to fair value at each reporting date until the fair value contingencies are resolved. Fair value adjustments which may be determined at subsequent reporting dates will be recorded in our consolidated statements of
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TECOGEN INC.
Notes to Condensed Consolidated Financial Statements

operations and will not impact the goodwill balance. As of September 30, 2023, we did not remeasure the contingent consideration and deferred maintenance reserves given the probability of achieving the revenue estimates and deferred maintenance costs were consistent with our initial valuation.
The contingent consideration is payable within forty-five (45) days following the end of each calendar quarter through the earlier of the expiration or termination of the relevant maintenance agreements, or the seventh (7th) anniversary of the acquisition date. The consideration is equal to the product of the revenues collected in a calendar quarter multiplied by an applicable percentage. The agreement stipulates quarterly aggregate revenue targets and an applicable percentage, and provides for a higher applicable percentage if revenues exceed the target revenues. The applicable percentage ranges from 5% to 10% over the agreement term. The deferred maintenance reserve represents costs, which are expected to be incurred over a three-year period from the date of acquisition, to repair customer equipment that had not been properly maintained prior to our acquisition of the maintenance service agreements.
Revenues and gross profit from the Aegis maintenance contracts since the acquisition date were $1,231,537 and $766,804, respectively, for the nine months ended September 30, 2023 and are included in our Services segment.
The purchase price of the acquisition was allocated to the tangible and intangible assets acquired and liabilities assumed and recognized at their fair value based on widely accepted valuation techniques in accordance with ASC 820, "Fair Value Measurement," as of the acquisition date. The process for estimating fair value requires the use of significant assumptions and estimates of future cash flows and developing appropriate discount rates. The excess of the purchase price over fair value of the net identified assets acquired and liabilities assumed was recorded as goodwill. Goodwill is primarily attributable to the going concern element of the Aegis business, including its assembled workforce and the long-term nature of the customer maintenance agreements, as well as anticipated cost synergies due primarily to the elimination of administrative overhead. Goodwill resulting from the Aegis acquisition is not expected to be deductible for income tax purposes.
Acquisition-related costs which consisted on recurring internal resources were de minimus and such costs were expensed as incurred (ASC 805-50-30-1).

The following table summarizes the contract-related liabilities assumed as of September 30, 2023:

September 30, 2023
Acquisition liabilities, current
Contingent consideration$205,246 
Deferred maintenance reserve570,745 
775,991 
Acquisition liabilities, long-term
Contingent consideration1,206,077 
Deferred maintenance reserve279,600 
$1,485,677 

Note 9.Leases
    Our leases principally consist of operating leases related to our corporate office, field offices, and our research, manufacturing, and storage facilities.
    At inception, we determine if an arrangement containsconstitutes 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 Long-term liabilities - Lease obligations, long termnet of current portion, on the condensed consolidated balance sheets. These assets and liabilities are recognized at the commencement date based on the present value of remaining lease payments over the lease term and using an incremental borrowing rate consistent with the lease terms or implicit rates, when readily determinable. For those leases where it is reasonably certain at the commencement date that we will exercise the option to extend the lease, then the lease term will include the lease extension term. Short-term operating leases, which have an initial term of 12 months or less, are not recorded on the balance sheet.
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TECOGEN INC.
Notes to Condensed Consolidated Financial Statements

    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 nine months ended September 30, 2023 and 2022 was $209,506 and 2021 was$616,062 and $201,578 and $608,652, and $197,651 and $591,867, respectively.
    Supplemental information related to leases for the nine months ended September 30, 2023 and 2022 wasis as follows:
Nine Months Ended September 30,
20222021
Cash paid for amounts included in the measurement of operating lease liabilities$549,402 $534,073 
Right-of-use assets obtained in exchange for operating lease liabilities$— $825,848 
Weighted-average remaining lease term - operating leases3.61 years4.10 years
Weighted-average discount rate - operating leases%%
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TECOGEN INC.
Notes to Condensed Consolidated Financial Statements

Nine Months Ended September 30,
20232022
Cash paid for amounts included in the measurement of operating lease liabilities$558,028 $549,402 
Right-of-use assets obtained in exchange for operating lease liabilities$— $— 
Weighted-average remaining lease term - operating leases3.90 years3.60 years
Weighted-average discount rate - operating leases%%
Supplemental information related to operating leases as of September 30, 20222023 and December 31, 2021 was2022 is as follows:
September 30, 2022December 31, 2021September 30, 2023December 31, 2022
Operating leasesOperating leasesOperating leases
Right-of-use assetsRight-of-use assets$1,404,034 $1,869,210 Right-of-use assets$754,957 $1,245,549 
Operating lease liability, currentOperating lease liability, current$676,974 $641,002 Operating lease liability, current$367,938 $687,589 
Operating lease liability, long-termOperating lease liability, long-term796,696 1,315,275 Operating lease liability, long-term429,737 623,452 
Total operating lease liabilityTotal operating lease liability$1,473,670 $1,956,277 Total operating lease liability$797,675 $1,311,041 
    Future minimum lease commitments under non-cancellable operating leases as of September 30, 20222023 were as follows:
 Operating Leases
Year 1$741,510398,741 
Year 2398,383127,092 
Year 3115,015119,902 
Year 4102,76861,044 
Year 561,04453,752 
Thereafter184,304130,553 
Total lease payments1,603,024891,084 
Less: imputed interest129,35493,409 
Total$1,473,670797,675 
The lease for 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 office space to serve as our headquarters and manufacturing facilities. The lease agreements provide for initial lease terms of five (5) years with two successive options to renew for additional terms of five (5) years. Both leases commence on January 1, 2024 and require payment of the base rent, real estate taxes, common maintenance expenses and aggregate deposits of $38,200. Our costs for initial improvements required to the leased premises is estimated to range between $1,000,000 and $1,250,000. The estimated straight-line monthly rent expense for the initial term of the lease is approximately $24,800 per month. 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 9.10. 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 reservednumber of shares of common stock issuable authorized to be issued
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TECOGEN INC.
Notes to Condensed Consolidated Financial Statements

under the Amended Plan to 3,838,750 as of September 30, 2022,2023, and in June 2017 stockholders approved an amendment to extend the termination date of the Plan to January 1, 2026 and ratified all of ourand approved option grants issued after January 1, 2016 (the "Amended("Amended 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 Amended Plan. The options are not transferable except by will or domestic relations order.by the laws of descent and distribution. The option price per share under the Amended Plan cannot be less than the fair market value of the underlying shares on the date of the grant. The number of shares remaining available for future issuance under the Amended Plan as of September 30, 20222023 was 210,793.191,193.
During the nine months ended September 30, 2022,2023, we granted nonqualifieddid not grant any options to purchase an aggregate of 761,650 shares of common stock at a weighted-average price of $1.11 per share to certain officers and employees. These options have a vesting schedule of two years and expire in ten years. The fair value ofunder the options issued in 2022 was $321,910. 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 reservedUnder the 2022 Plan, 3,800,000 shares of our shares of our common stock are authorized 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.
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TECOGEN INC.
Notes to Condensed Consolidated Financial Statements

The number of shares remaining available for future issuance under the Plan as of September 30, 2023 was 3,025,000.
    During the nine months ended September 30, 2022,2023, we granted nonqualifiednon-qualified options to purchase an aggregate of 175,000575,000 shares of our common stock at a weighted-average price of $1.14exercise prices ranging between $0.88 - $1.10 per share to certain directors, officers and a consultant.employees. These options have a vesting scheduleschedules of two or four years and expire in ten years. The fair value of the options issued in 20222023 was $84,600.$244,625. The weighted-average grant date fair value of stock options granted during 20222023 was $0.48$0.43 per share. The number of shares remaining available for future issuance under the 2022 Plan as of September 30, 2022 was 3,650,000.
Stock option activity for the nine months ended September 30, 20222023 was as follows: 
Common Stock OptionsCommon Stock OptionsNumber of
Options
Exercise
Price
Per
Share
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Life
Aggregate
Intrinsic
Value
Common Stock OptionsNumber of
Options
Exercise
Price
Per
Share
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Life
Aggregate
Intrinsic
Value
December 31, 20212,386,842 $0.71-$10.33$1.81 7.56 years$697,935 
Outstanding, December 31, 2022Outstanding, December 31, 20223,204,297 $0.71 $10.33 $1.61 7.30 years$882,074 
GrantedGranted936,650 $1.10-$1.20$1.11 Granted575,000 $0.88 $1.10 $0.93 
ExercisedExercised— Exercised— 
Canceled and forfeitedCanceled and forfeited(242,795)$0.71-$6.74$1.37 Canceled and forfeited(44,800)$2.86 
Outstanding, September 30, 20223,080,697  $0.71-$10.33$1.63 7.44 years$310,073 
Exercisable, September 30, 20221,366,947 $2.36 $157,123 
Vested and expected to vest, September 30, 20222,823,635 $1.68  $287,131 
Outstanding, September 30, 2023Outstanding, September 30, 20233,734,497 $1.10 $3.20 $1.49 7.14 years$188,529 
Exercisable, September 30, 2023Exercisable, September 30, 20231,931,322 $1.97 $112,578 
Vested and expected to vest, September 30, 2023Vested and expected to vest, September 30, 20233,462,521 $0.71 $10.33 $1.53  $177,136 
    Consolidated stock-based compensation expense for the three and nine months ended September 30, 2023 and 2022 was $68,775 and 2021 was$174,711 and $69,118 and $254,718, and $56,889 and $150,655, respectively. No tax benefit was recognized related to the stock-based compensation recorded during the period.
    At September 30, 20222023 the total compensation cost related to unvested stock option awards not yet recognized is $529,087$568,334 and this amount will be recognized over a weighted average period of 1.612.64 years.

Note 10.11. 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.
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TECOGEN INC.
Notes to Condensed Consolidated Financial Statements

 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.
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TECOGEN INC.
Notes to Condensed Consolidated Financial Statements

    The following tables presentspresent the asset reported in "other assets" in the consolidated balance sheet measured at its fair value on a recurring basis as of September 30, 20222023 and 20212022 by level within the fair value hierarchy.
September 30, 2023September 30, 2023Quoted prices in active markets for identical assetsSignificant other observable inputsSignificant unobservable inputsUnrealized
DescriptionDescriptionTotalLevel 1Level 2Level 3 Gains /(Losses)
Recurring fair value measurementsRecurring fair value measurements
Marketable equity securities Marketable equity securities
EuroSite Power Inc. EuroSite Power Inc.$74,995 $— $74,995 $— $(18,749)
Total recurring fair value measurementsTotal recurring fair value measurements$74,995 $— $74,995 $— $(18,749)
September 30, 2022September 30, 2022Quoted prices in active markets for identical assetsSignificant other observable inputsSignificant unobservable inputsUnrealizedSeptember 30, 2022Quoted prices in active markets for identical assetsSignificant other observable inputsSignificant unobservable inputsUnrealized
DescriptionDescriptionTotalLevel 1Level 2Level 3 GainsDescriptionTotalLevel 1Level 2Level 3Gains /(Losses)
Recurring fair value measurementsRecurring fair value measurementsRecurring fair value measurements
Marketable equity securitiesMarketable equity securitiesMarketable equity securities
EuroSite Power Inc.EuroSite Power Inc.$112,492 $— $112,492 $— $37,497 EuroSite Power Inc.$112,492 $— $112,492 $— $37,497 
Total recurring fair value measurementsTotal recurring fair value measurements$112,492 $— $112,492 $— $37,497 Total recurring fair value measurements$112,492 $— $112,492 $— $37,497 
September 30, 2021Quoted prices in active markets for identical assetsSignificant other observable inputsSignificant unobservable inputsUnrealized
DescriptionTotalLevel 1Level 2Level 3Gains
Recurring fair value measurements
Marketable equity securities
EuroSite Power Inc.$131,242 $— $131,242 $— $18,749 
Total recurring fair value measurements$131,242 $— $131,242 $— $18,749 
      
    We utilize a Level 2 category fair value measurement to value our 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 nine months ended September 30, 20222023 and 2021:2022:


Fair value at December 31, 2022$93,744 
Unrealized losses(18,749)
Fair value at September 30, 2023$74,995 
Fair value at December 31, 2021$74,995 
Unrealized gains37,497 
Fair value at September 30, 2022$112,492 
Fair value at December 31, 2020$118,084 
Sale of 93,187 shares(5,591)
Unrealized gains18,749 
Fair value at September 30, 2021$131,242 


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").
    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
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TECOGEN INC.
Notes to Condensed Consolidated Financial Statements

statements of operations for the nine months ended September 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 nine months ended September 30, 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,On November 23, 2022, we were served with a remaining principalsuit filed against us on August 24, 2022 in the Ontario Superior Court of Justice by The Corporation of the Town of Milton, Milton Energy Generation Solutions Inc. and Milton Hydro Distribution Inc (the "Plaintiffs"), all of whom are municipal corporations incorporated in the Province of Ontario. The plaintiffs sued for damages in the amount outstanding subjectof CDN $1,000,000, pre-judgment and post-judgment interest, legal fees, and any further relief the court
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TECOGEN INC.
Notes to Condensed Consolidated Financial Statements

may deem, alleging breach of contract, breach of warranty, negligent misrepresentations and nuisance. Plaintiffs allege that on or about July 10, 2022, a Tecogen cogenerator installed by us at the plaintiffs facility caught fire, causing damage to the guarantee. In October 2021,cogenerator and the loan was paid in full.plaintiff's facility. We have no further obligationfiled a response denying liability and are being represented by Canadian counsel. For the year ended December 31, 2022, we reserved $150,000 for anticipated damages which may not be covered by our insurance and continue to Eurosite Power Inc. under this guarantee.maintain the reserve at September 30, 2023.
Note 13. Segments
    As of September 30, 2022,2023, we were organized into three (3) 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 nine months ended September 30, 20222023 and 2021:2022:
ProductsServicesEnergy ProductionCorporate, other and elimination (1)Total
Three Months Ended September 30, 2023
Revenue - external customers$2,938,789 $3,842,600 $331,141 $— $7,112,530 
Intersegment revenue— 48,085 — (48,085)— 
   Total revenue$2,938,789 $3,890,685 $331,141 $(48,085)$7,112,530 
Gross profit$1,269,042 $1,496,216 $160,763 $— $2,926,021 
Identifiable assets$10,591,087 $13,270,545 $3,203,776 $2,121,337 $29,186,745 
Nine Months Ended September 30, 2023
Revenue - external customers$7,094,556 $10,931,744 $1,214,806 $— $19,241,106 
Intersegment revenue— 202,442 — (202,442)— 
   Total revenue$7,094,556 $11,134,186 $1,214,806 $(202,442)$19,241,106 
Gross profit$2,593,785 $4,771,889 $486,682 $— $7,852,356 
Identifiable assets$10,591,087 $13,270,545 $3,203,776 $2,121,337 $29,186,745 
Three Months Ended September 30, 2022
Revenue - external customers$3,206,732 $3,078,604 $332,774 $— $6,618,110 
Intersegment revenue— 41,390 — (41,390)— 
Total revenue$3,206,732 $3,119,994 $332,774 $(41,390)$6,618,110 
Gross profit$1,132,489 $1,596,249 $164,596 $— $2,893,334 
Identifiable assets$10,639,810 $10,308,988 $3,754,321 $5,368,204 $30,071,323 
Nine Months Ended September 30, 2022
Revenue - external customers$10,156,328 $9,046,075 $1,268,623 $— $20,471,026 
Intersegment revenue— 199,059 — (199,059)— 
Total revenue$10,156,328 $9,245,134 $1,268,623 $(199,059)$20,471,026 
Gross profit$3,421,863 $4,723,382 $542,326 $— $8,687,571 
Identifiable assets$10,639,810 $10,308,988 $3,754,321 $5,368,204 $30,071,323 
(1) Corporate, intersegment revenue, other and elimination includes various corporate assets.
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TECOGEN INC.
Notes to Condensed Consolidated Financial Statements

ProductsServicesEnergy ProductionCorporate, other and elimination (1)Total
Three months ended September 30, 2022
Revenue - external customers$3,206,732 $3,078,604 $332,774 $— $6,618,110 
Intersegment revenue— 41,390 — (41,390)— 
   Total revenue$3,206,732 $3,119,994 $332,774 $(41,390)$6,618,110 
Gross profit$1,132,489 $1,596,249 $164,596 $— $2,893,334 
Identifiable assets$10,639,810 $10,308,988 $3,754,321 $5,368,204 $30,071,323 
Nine months ended September 30, 2022
Revenue - external customers$10,156,328 $9,046,075 $1,268,623 $— $20,471,026 
Intersegment revenue— 199,059 — (199,059)— 
   Total revenue$10,156,328 $9,245,134 $1,268,623 $(199,059)$20,471,026 
Gross profit$3,421,863 $4,723,382 $542,326 $— $8,687,571 
Identifiable assets$10,639,810 $10,308,988 $3,754,321 $5,368,204 $30,071,323 
Three months ended September 30, 2021
Revenue - external customers$1,871,332 $2,829,244 $315,292 $— $5,015,868 
Intersegment revenue— 48,111 — (48,111)— 
Total revenue$1,871,332 $2,877,355 $315,292 $(48,111)$5,015,868 
Gross profit$834,936 $1,362,225 $144,774 $— $2,341,935 
Identifiable assets$10,549,992 $10,951,838 $4,273,936 $6,704,984 $32,480,750 
Nine months ended September 30, 2021
Revenue - external customers$6,439,981 $9,438,702 $1,339,448 $— $17,218,131 
Intersegment revenue— 236,155 — (236,155)— 
Total revenue$6,439,981 $9,674,857 $1,339,448 $(236,155)$17,218,131 
Gross profit$2,838,573 $4,754,694 $542,515 $— $8,135,782 
Identifiable assets$10,549,992 $10,951,838 $4,273,936 $6,704,984 $32,480,750 
(1) Corporate, intersegment revenue, other and elimination includes various corporate assets.
Note 14. Subsequent Events
    We have evaluated subsequent events through the date of the filing of this filingreport and, except as described below, have determined that no material subsequent events occurred that would require recognitiondisclosure in the unaudited consolidated financial statements for the period ended September 30, 2023 or disclosure in the financial notes thereto.
Related Party Loans
On October 9, 2023, we entered into an agreement with each of John N. Hatsopoulos, a director and principal shareholder of registrant, and Earl R. Lewis, III, a director of registrant, pursuant to which Mr. Hatsopoulos agreed to provide financing to us of up to $1 million, and Mr. Lewis agreed to provide financing to us of $500,000, and potentially, an additional $500,000 at his discretion. We have the right to determine the amount of the loans at the time of a draw down, subject to the conditions in our agreements with each of Mr. Hatsopoulos and Mr. Lewis discussed below. The loans and terms of the loan agreements were unanimously approved by our board of directors.
The loans bear interest on the outstanding principal at the Internal Revenue Service’s Applicable Federal Rate to be determined at the time we issue a promissory note in connection with a loan drawdown. The principal amount and accrued interest of each loan is repayable one year from the date of issuance of the applicable promissory note. A note may be prepaid by us at any time. The principal amount of each loan and accrued interest is subject to mandatory prepayment in the event of a change of control of the registrant. The promissory notes are subject to customary events of default and are transferable provided the conditions to transfer set forth in the promissory notes are satisfied by the noteholder. The proceeds of the loans are expected to be used for general working capital purposes.
On October 10, 2023, we issued a promissory note and borrowed $500,000 from Mr. Hatsopoulos. The loan bears interest at 5.12% per annum.

Proposed Reverse Stock Split

On October 9, 2023, our board of directors authorized us to seek shareholder approval at a special meeting of our shareholders of an amendment to our Amended and Restated Certificate of Incorporation (“certificate of incorporation”) that would enable us to effect a combination of our outstanding shares of common stock into a lesser number of shares, or a reverse stock split. We intend to seek stockholder approval for three alternative amendments to our certificate of incorporation and to effect the reverse stock split at the alternative ratios of 1 for 4, 1 for 5, or 1 for 6. The determination of the ratio, implementation, and timing of any reverse stock split will be subject to further approval by our board of directors following receipt of shareholder approval at a special meeting of our shareholders.

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TECOGEN INC.
Management's Discussion and Analysis


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, 20212022 (“20212022 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 20212022 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 ourours views as of any date subsequent to the date of the filing of this Form 10-Q.

Recent Developments

Controlled Environment Agriculture: NetZero GreensAcquisition and Assumption of Aegis Energy Services Maintenance Agreements
On March 15, 2023, we entered into an agreement ("Agreement") with Aegis Energy Services, LLC (“Aegis”) pursuant to which Aegis agreed to assign to us and we agreed to assume certain Aegis maintenance agreements, we agreed to purchase certain assets from Aegis, and related matters (“Acquisition”). On April 1, 2023, the Acquisition closed. Under the Agreement, we agreed to acquire from Aegis and assume Aegis’ rights and obligations arising on or after April 1, 2023, under maintenance agreements pursuant to which Aegis provided maintenance services to third parties for approximately 200 cogeneration systems and we agreed to acquire from Aegis certain vehicles and inventory used by Aegis in connection with the performance of its maintenance services. At closing, we acquired eight (8) Aegis vehicles for consideration consisting of $170,000 in cash. Also, we issued credits against outstanding accounts receivable due from Aegis in the amount of $300,000 for the acquisition of inventory that Aegis used to provide maintenance services. At closing, we hired eight (8) Aegis employees who, following the closing, have agreed to continue to provide maintenance services relating to the cogeneration systems covered by the maintenance agreements assumed pursuant to the Agreement. Following the closing and for a period of up to seven (7) years, we agreed to pay Aegis a percentage of the revenue collected for maintenance services provided pursuant to the maintenance agreements acquired from Aegis. Further, prior to December 31, 2023, we have the right to acquire and assume additional Aegis’ maintenance agreements for cogeneration systems on substantially similar terms and conditions. As of September 30, 2023, we have not acquired or assumed any additional maintenance agreements from Aegis. The Agreement contained certain indemnification provisions and agreements on the part of Aegis and for each party to cooperate with each other and provide certain transitional assistance. We acquired the Aegis maintenance agreements to expand our Service portfolio and to benefit from the long-term contract revenue stream generated by these agreements.

Tecochill Hybrid-Drive Air-Cooled Chiller Development
During the third quarter of 2021 we began development of the Tecochill Hybrid-Drive Air-Cooled Chiller. We recognized that there were many applications where the customer wanted an easy to install roof top chiller. Using the inverter design from our InVerde e+ cogeneration module, the system can simultaneously take two inputs, one from the grid or a renewable energy source and one from our natural gas engine. This allows a customer to seek the optimum blend of operational cost savings and greenhouse gas benefits while providing added resiliency from two power sources. We introduced the Tecochill Hybrid-Drive Air-Cooled Chiller at the AHR Expo in February 2023 and are expecting to start accepting orders for
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TECOGEN INC.
Management's Discussion and Analysis
the product in the fourth quarter 2023. A patent application based on this concept has been filed with the US Patent and Trademark Office.

Controlled Environment Agriculture
On July 20, 2022, Tecogenwe announced the establishment of NetZero Greens, a new business unit focusedour intention to increase our focus on low carbonopportunities 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 (GHG) reduction to address critical issues affecting food and energy security. Tecogen proposesIn recent years our chiller and cogeneration equipment have been used in numerous cannabis cultivation facilities because our systems significantly reduce operating costs, reduce the facility GHG footprint and offer resiliency to address this challenge by developing a highly efficient energy solution for CEA grown produce using Tecogen’s cogeneration products in conjunction with solar energy generation, energy storage, and other technologies.

grid outages.
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.

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. Tecogen’sOur experience providing clean energy solutions to cannabis cultivation facilities has given Tecogenus significant insight into requirements relating to energy-intensive indoor agriculture applications that we expect to be transferable to CEA facilities for food production. Further informationAlthough we have no current plans to develop CEA facilities ourselves, we are working with other companies that are providing HVAC solutions, modular chiller plants, and controls to integrate and expand our solutions for CEA. Although there can be foundno assurance, we expect customers using the exhaust gas CO2 from our engines to boost plant growth both in our CEA presentation on the investor relations section of our website.

food crop and cannabis facilities.
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.
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TECOGEN INC.
Management's Discussion and Analysis
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. Wages used towards PPP loan forgiveness cannot be used as qualified wages
During the three months ended June 30, 2021, we recorded an ERC benefit for purposesthe first and second quarters of the ERC
    A current receivable2021 of $713,269 and, in the amountthree months ended September 30, 2021 we recorded an ERC benefit for the third quarter of $713,269 is included2021 of $562,752, respectively, in other income (expense), net in the our condensed consolidated balance sheet asstatements of September 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 paymentreceived $667,121 from the Internal Revenue Service foron January 12, 2023 representing a partial payment of the ERC claimclaimed from the first and second quarters of 2021.

Air Cooled Chiller Development
    During2021 and $15,775 of accrued interest, which is reported in other income (expense) in our condensed consolidated statements of operations for the third quarter of 2021 we began development of a hybrid 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 the first quarter of 2023, and expect to see incremental revenue in 2024.nine months ended September 30, 2023. A patent application based on this concept has been filed with the US Patent and Trademark Office.

COVID-19 Update
    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 couldcurrent receivable in the future materially impactamount of $46,148 is included in our business, resultscondensed consolidated balance sheet as 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.

September 30, 2023.
Impact of the Russian Invasion of Ukraine and Recent Events in the Middle East

Presently, the company haswe have no operations or customers in Russia, the Ukraine or in the Ukraine.Middle East. The higher energy prices for natural gas as a result of the warinvasion of Ukraine and the conflict in the Middle East 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 and the conflict in the Middle East may result in higher cybersecurity risks, increased or ongoing supply chain challenges, and volatility related to the trading prices of commodities.
Overview

Overview
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TECOGEN INC.

Management's Discussion and Analysis
    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).

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TECOGEN INC.
Management's Discussion and Analysis
    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 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 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.systems. Our Services segment provides operation and maintenance services for our products under long term service contracts. Our Energy Production segment installs, operates and maintains distributed generation electricity systems that we own and sells energy generated by such systems in the form of electricity, heat, hot water and cooling to our customers under long-term sales agreements.


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Management's Discussion and Analysis
Results of Operations

Third Quarter of 20222023 Compared to Third Quarter of 20212022

    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 EndedThree Months Ended
September 30, 2022September 30, 2021September 30, 2023September 30, 2022
RevenuesRevenues100.0%100.0%Revenues100.0%100.0%
Cost of salesCost of sales56.3%53.3%Cost of sales58.9%56.3%
Gross profitGross profit43.7%46.7%Gross profit41.1%43.7%
Operating expensesOperating expensesOperating expenses
General and administrativeGeneral and administrative35.4%49.3%General and administrative38.1%35.4%
SellingSelling8.6%13.1%Selling6.0%8.6%
Research and developmentResearch and development3.1%2.4%Research and development2.3%3.1%
Gain on disposition of assetsGain on disposition of assets(0.1)%—%Gain on disposition of assets— %(0.1)%
Total operating expensesTotal operating expenses47.0 %64.8 %Total operating expenses46.3%47.0%
Loss from operationsLoss from operations(3.2)%(18.1)%Loss from operations(5.2)%(3.2)%
Total other income (expense), netTotal other income (expense), net(0.1)%47.9 %Total other income (expense), net(1.1)%(0.1)%
Consolidated net income (loss)(3.5)%29.7 %
Consolidated net lossConsolidated net loss(6.3)%(3.5)%
Income attributable to the non-controlling interestIncome attributable to the non-controlling interest(0.4)%(0.4)%Income attributable to the non-controlling interest(0.5)%(0.4)%
Net income (loss) attributable to Tecogen, Inc.(3.9)%29.2 %
Net loss attributable to Tecogen, Inc.Net loss attributable to Tecogen, Inc.(6.8)%(3.9)%

Revenues

    Total revenues for the three months ended September 30, 2022 were $6,618,110 compared to $5,015,868 for the same period in 2021, an increase of $1,602,242 or 31.9% year over year.

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

Three Months EndedThree Months Ended
September 30, 2022September 30, 2021Increase (Decrease) $Increase (Decrease) %September 30, 2023September 30, 2022Increase (Decrease) $Increase (Decrease) %
REVENUES:REVENUES:REVENUES:
ProductsProductsProducts
CogenerationCogeneration$1,547,761 $1,446,001 $101,7607.0 %Cogeneration$898,692 $1,547,761 $(649,069)(41.9)%
ChillerChiller1,642,478 383,100 1,259,378328.7 %Chiller1,935,165 1,642,478 292,68717.8 %
Engineered accessoriesEngineered accessories16,493 42,231 (25,738)(60.9)%Engineered accessories104,932 16,493 88,439536.2 %
Total Product revenues3,206,732 1,871,332 1,335,40071.4 %
Total productsTotal products2,938,789 3,206,732 (267,943)(8.4)%
ServicesServicesServices3,842,600 3,078,604 763,99624.8 %
Maintenance services3,078,604 2,766,168 312,43611.3 %
Installation services— 63,076 (63,076)(100.0)%
Total Service revenues3,078,604 2,829,244 249,3608.8 %
Products and Services6,285,336 4,700,576 1,584,76033.7 %
Energy Production revenues332,774 315,292 17,4825.5 %
Energy ProductionEnergy Production331,141 332,774 (1,633)(0.5)%
Total revenuesTotal revenues$6,618,110 $5,015,868 $1,602,24231.9 %Total revenues$7,112,530 $6,618,110 $494,4207.5 %

    Total revenues for the three months ended September 30, 2023 were $7,112,530 compared to $6,618,110 for the same period in 2022, an increase of $494,420 or 7.5% year over year.

    Products
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TECOGEN INC.
Management's Discussion and Analysis
    

Products

    Product revenues in the three months ended September 30, 20222023 were $3,206,732$2,938,789 compared to $1,871,332$3,206,732 for the same period in 2021, an increase2022, a decrease of $1,335,400,$267,943, or 71.4%8.4%. The increasedecrease in Products revenue during the three months ended September 30, 20222023 is due to a $649,069, or 41.9% decrease in cogeneration sales, offset partially by an increase in chiller sales of $1,259,378$292,687, or 17.8% and by an increase of $101,760 in cogeneration sales, offset partially by a decrease in sales of engineered accessories of $25,738.$88,439, or 536.2%. Our productProducts sales mix, as well as productProducts 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 September 30, 20222023 were $3,078,604,$3,842,600, compared to $2,829,244$3,078,604 for the same period in 2021,2022, an increase of $249,360,$763,996, or 8.8%24.8%. The increase in revenue during the three months ended September 30, 20222023 is due primarily due to anthe addition of $602,724 in revenue from the acquired Aegis maintenance contracts and a $161,272, or 5.2%, increase of $312,436, or 11.3%, in service contract revenues offset partially by a decrease in installation revenues of $63,076. 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.from existing contracts.

    Energy Production

    Energy productionProduction revenues in the three months ended September 30, 20222023 were $332,774,$331,141, compared to $315,292$332,774 for the same period in 2021, an increase of $17,482, or 5.5%. The increase in energy production revenue is due to increased runtimes

Cost of Sales

    Cost of sales in the three months ended September 30, 2022, was $3,724,776 compared to $2,673,933 for the same period in 2021, an increase of $1,050,843, or 39.3%. The increase in cost of sales is due to increased product revenue volume and the impact of inflation on material costs. During the three months ended September 30, 2022 our gross margin decreased to 43.7% compared to 46.7% for the same period in 2021, a 3.0% percentage point decrease due to higher material costs.

    Products

    Cost of sales for products in the three months ended September 30, 2022 was $2,074,243 compared to $1,036,396 for the same period in 2021, an increase of $1,037,847, or 100.1% due to increased product revenue volume and higher material costs. During the three months ended September 30, 2022, our products gross margin was 35.3% compared to 44.6% for the same period in 2021, an 9.3% 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 September 30, 2022 was $1,482,355 compared to $1,467,019 for the same period in 2021, an increase of $15,336, or 1.0%. During the three months ended September 30, 2022, our services gross margin increased to 51.8% compared to 48.1% for the same period in 2021, a 3.7% percentage point increase due to price increases on service contracts and lower installation revenues.

    Energy Production     

    Cost of sales for energy production in the three months ended September 30, 2022 was $168,178 compared to $170,518 for the same period in 2021, a decrease of $2,340,$1,633, or 1.4%. During the three months ended September 30, 2022 our energy production gross margin was 49.5% compared to 45.9% for the same period in 2021, a 3.6% percentage point increase.

Operating Expenses

    Operating expenses decreased $144,476, or 4.4%, to $3,107,630 in the three months ended September 30, 2022 compared to $3,252,106 in the same period in 2021. The total operating expenses were lower primarily due to a $281,955 reduction in the bad debt expense and lower sales commissions, partially offset by an increase in R&D expense associated with the air-cooled chiller development.
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TECOGEN INC.
Management's Discussion and Analysis
Three Months Ended
Operating ExpensesSeptember 30, 2022September 30, 2021Increase (Decrease) $Increase (Decrease) %
General and Administrative$2,343,449 $2,473,190 $(129,741)(5.2)%
Selling567,529 656,885 (89,356)(13.6)%
Research and Development202,138 122,031 80,107 65.6 %
Gain on disposition of assets(5,486)— (5,486)
Total$3,107,630 $3,252,106 $(144,476)(4.4)%

    General and administrative expenses consist of executive staff, accounting and legal expenses, office space, general insurance and other administrative expenses. General and administrative expenses for the three months ended September 30, 2022 were $2,343,449 compared to $2,473,190 for the same period in 2021, a decrease of $129,741 or 5.2% due primarily to a $281,995 decrease in bad debt expense in the three months ended September 30, 2022, partially offset by an increase in payroll costs, stock compensation costs and franchise taxes.

    Selling expenses consist of sales staff, commissions, marketing, travel and other selling related expenses. Selling expenses for the three months ended September 30, 2022 were $567,529 compared to $656,885 for the same period in 2021, a decrease of $89,356 or 13.6% due to lower payroll costs and reduced sales commissions.

    Research and development expenses consist of engineering and technical staff, materials, outside consulting and other related expenses. Research and development expenses for the three months ended September 30, 2022 were $202,138 compared to $122,031 for the same period in 2021, an increase of $80,107 or 65.6% due to increased payroll costs and costs incurred in the development of a hybrid air-cooled chiller.

Loss from Operations

    Loss from operations for the three months ended September 30, 2022 was $214,296 compared to a loss of $910,171 for the same period in 2021, a decrease of $695,875. The decrease in loss from operations is due primarily to higher revenues and a $144,476 decrease in operating expenses.

Other Income (Expense), net

    Other expense, net for the three months ended September 30, 2022 was $9,420 compared to other income of $2,401,758 for the same period in 2021, a decrease of $2,411,178. The decrease in other income is due primarily to the gain on extinguishment of debt of $1,885,655 as a result of the Paycheck Protection Program Second Draw Loan forgiveness and the recognition of the Employee Retention Credit of $562,253 for the third calendar quarter of 2021 recognized in the three months ended September 30, 2021.

Provision for State Income Taxes

    The provision for state income taxes for the three months ended September 30, 2022 and 2021 was $5,922 and $3,000, respectively, and represents estimated income tax payments, net of refunds, to various states.

Non-controlling Interest

    Income attributable to the non-controlling interest was $27,074 for the three months ended September 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 $21,890.

Net Income (Loss) Attributable to Tecogen Inc

    The net loss attributable to Tecogen for the three months ended September 30, 2022 was $256,712 compared to a net income of $1,466,697 for the same period in 2021, a decrease of $1,723,409, or 117.5%. The decrease in other income is due primarily to the gain on extinguishment of debt of $1,885,655 as a result of the Paycheck Protection Program Second Draw Loan forgiveness and the recognition of the Employee Retention Credit of $562,253 for the third calendar quarter of 2021
24

TECOGEN INC.
Management's Discussion and Analysis
recognized in the three months ended September 30, 2021, offset partially by higher gross profit for our Products and Services Segments and decreased operating expenses.


Nine Months Ended September 30, 2022 compared to the Nine Months Ended September 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:

Nine Months Ended
September 30, 2022September 30, 2021
Revenues100.0%100.0%
Cost of sales57.6%52.7%
Gross profit42.4%47.3%
Operating expenses
General and administrative37.3%42.8%
Selling7.7%10.2%
Research and development2.6%2.2%
Gain on disposition of assets(0.2)%—%
Gain on termination of unfavorable contract liability(0.3)%—%
Total operating expenses47.1 %55.1 %
Loss from operations(4.6)%(7.9)%
Total other income (expense), net— %29.3 %
Consolidated net income (loss)(4.7)%21.3 %
Income attributable to the non-controlling interest(0.3)%(0.2)%
Net income (loss) attributable to Tecogen, Inc.(5.0)%21.1 %

Revenues

Total revenues for the nine months ended September 30, 2022 were $20,471,026 compared to $17,218,131 for the same period in 2021, an increase of $3,252,895 or 18.9% year over year.

The following table presents revenue for the periods indicated, by segment and the change from the prior year:
25

TECOGEN INC.
Management's Discussion and Analysis
Nine Months Ended
September 30, 2022September 30, 2021Increase (Decrease) $Increase (Decrease) %
REVENUES:
Products
Cogeneration$4,675,629 $2,542,962 $2,132,667 83.9 %
Chiller4,987,937 2,929,411 2,058,526 70.3 %
Engineered accessories492,762 967,608 (474,846)(49.1)%
Total Product revenues10,156,328 6,439,981 3,716,347 57.7 %
Services
Maintenance services9,025,966 8,613,377 412,589 4.8 %
Installation services20,109 825,325 (805,216)(97.6)%
Total Service revenues9,046,075 9,438,702 (392,627)(4.2)%
Products and Services19,202,403 15,878,683 3,323,720 20.9 %
Energy Production revenues1,268,623 1,339,448 (70,825)(5.3)%
Total revenues$20,471,026 $17,218,131 $3,252,895 18.9 %

Products

    Product revenues in the nine months ended September 30, 2022 were $10,156,328 compared to $6,439,981 for the same period in 2021, an increase of $3,716,347, or 57.7%. The increase in revenue during the nine months ended September 30, 2022 is due to an increase in cogeneration sales of $2,132,667 and an increase in chiller sales of $2,058,526, offset partially by a $474,846 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 nine months ended September 30, 2022 were $9,046,075, compared to $9,438,702 for the same period in 2021, a decrease of $392,627, or 4.2%. The decrease in revenue during the nine months ended September 30, 2022 is due primarily to a decrease in installation revenues of $805,216, offset partially by an increase of $412,589, or 4.8%, 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 nine months ended September 30, 2022 were $1,268,623, compared to $1,339,448 for the same period in 2021, a decrease of $70,825, or 5.3%0.5%. 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 ninethree months ended September 30, 20222023 was $11,783,455$4,186,509 compared to $9,082,349$3,724,776 for the same period in 2021,2022, an increase of $2,701,106,$461,733, or 29.7%12.4%. The increase in cost of sales is due to increased productServices revenue volume and the impact of inflation on material costs. During the ninethree months ended September 30, 20222023 our gross margin decreased to 42.4%41.1% compared to 47.3%43.7% for the same period in 2021,2022, a 4.9%2.6% percentage point decrease.

    Products

    Cost of sales for Products in the three months ended September 30, 2023 was $1,669,747 compared to $2,074,243 for the same period in 2022, a decrease of $404,496, or 19.5% due to decreased product revenue volume. During the three months ended September 30, 2023, our Products gross margin was 43.2% compared to 35.3% for the same period in 2022, an 7.9% percentage point increase due to price increases instituted in 2023.

    Services

    Cost of sales for Services in the three months ended September 30, 2023 was $2,346,384 compared to $1,482,355 for the same period in 2022, an increase of $864,029, or 58.3%, due primarily to increased labor and material costs as a consequence of acquiring the Aegis customer maintenance contracts and increased material usage at existing sites. During the three months ended September 30, 2023, our Services gross margin decreased to 38.9% compared to 51.8% for the same period in 2022, a 12.9% percentage point decrease due to increased labor and material costs incurred to replace engines at certain sites.

    Energy Production     

    Cost of sales for Energy Production in the three months ended September 30, 2023 was $170,378 compared to $168,178 for the same period in 2022, a decrease of $2,200, or 1.3%. During the three months ended September 30, 2023 our Energy Production gross margin was 48.6% compared to 49.5% for the same period in 2022, a 0.9% percentage point decrease.

Operating Expenses

    Operating expenses increased $186,685, or 6.0%, to $3,294,315 in the three months ended September 30, 2023 compared to $3,107,630 in the same period in 2022. The total operating expenses were higher primarily due to additional costs resulting from the acquisition of Aegis contracts and related assets.
25

TECOGEN INC.
Management's Discussion and Analysis
Three Months Ended
Operating ExpensesSeptember 30, 2023September 30, 2022Increase (Decrease) $Increase (Decrease) %
General and administrative$2,708,817 $2,343,449 $365,368 15.6 %
Selling425,465 567,529 (142,064)(25.0)%
Research and development160,033 202,138 (42,105)(20.8)%
Gain on disposition of assets— $(5,486)5,486 (100.0)%
Total$3,294,315 $3,107,630 $186,685 6.0 %

    General and administrative expenses consist of executive staff, accounting and legal expenses, office space, general insurance and other administrative expenses. General and administrative expenses for the three months ended September 30, 2023 were $2,708,817 compared to $2,343,449 for the same period in 2022, an increase of $365,368 or 15.6%, due primarily to a $229,955 increase in bad debt expense, due to the settlement achieved in 2022 with a former customer, a $58,963 increase in depreciation and amortization expense, a $50,101 increase in travel expenses and a $20,272 increase in business insurance costs.

    Selling expenses consist of sales staff, commissions, marketing, travel and other selling related expenses. Selling expenses for the three months ended September 30, 2023 were $425,465 compared to $567,529 for the same period in 2022, a decrease of $142,064 or 25.0%, due primarily to a $120,788 decrease in sales commissions and an $19,341 decrease in payroll costs.

    Research and development expenses consist of engineering and technical staff, materials, outside consulting and other related expenses. Research and development expenses for the three months ended September 30, 2023 were $160,033 compared to $202,138 for the same period in 2022, a decrease of $42,105 or 20.8%.

Loss from Operations

    Loss from operations for the three months ended September 30, 2023 was $368,294 compared to a loss of $214,296 for the same period in 2022, an increase of $153,998. The increase is due primarily to increased Service material costs.

Other Income (Expense), net

    Other expense, net for the three months ended September 30, 2023 was $78,933 compared to other expense, net of $9,420 for the same period in 2022, an increase of $69,513. The increase in other expense is due primarily to the unrealized loss on marketable securities recognized in the three months ended September 30, 2023.

Provision for State Income Taxes

    The provision for state income taxes for the three months ended September 30, 2023 and 2022 was $0 and $5,922, respectively and represents estimated income tax payments, net of refunds, to various states.

Non-controlling Interest

    Income attributable to the non-controlling interest was $34,346 for the three months ended September 30, 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 2022, income attributable to the non-controlling interest was $27,074. The increase in income attributable to the non-controlling interest is due to increased revenue and lower costs at the energy production sites.

Net Loss Attributable to Tecogen Inc

    The net loss attributable to Tecogen for the three months ended September 30, 2023 was $481,573 compared to a net loss of $256,712 for the same period in 2022, an increase of $224,861, or 87.6%. The increase in the net loss is due primarily to increased operating expenses and an increase in other expense in the three months ended September 30, 2023.



26

TECOGEN INC.
Management's Discussion and Analysis
Nine Months Ended September 30, 2023 compared to the Nine Months Ended September 30, 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:

Nine Months Ended
September 30, 2023September 30, 2022
Revenues100.0%100.0%
Cost of sales59.2%57.6%
Gross profit40.8%42.4%
Operating expenses
General and administrative43.8%37.3%
Selling7.4%7.7%
Research and development3.3%2.6%
Gain on disposition of assets(0.1)%(0.2)%
Gain on termination of unfavorable contract liability— %(0.3)%
Total operating expenses54.3 %47.1 %
Loss from operations(13.5)%(4.7)%
Total other income (expense), net(0.3)%— %
Consolidated net loss(14.0)%(4.7)%
Income attributable to the non-controlling interest(0.3)%(0.3)%
Net loss attributable to Tecogen, Inc.(14.3)%(5.0)%

Revenues

The following table presents revenue for the periods indicated, by segment and the change from the prior year:
Nine Months Ended
September 30, 2023September 30, 2022Increase (Decrease) $Increase (Decrease) %
REVENUES:
Products
Cogeneration$1,869,699 $4,675,629 $(2,805,930)(60.0)%
Chiller4,692,080 4,987,937 (295,857)(5.9)%
Engineered accessories532,777 492,762 40,015 8.1 %
Total products7,094,556 10,156,328 (3,061,772)(30.1)%
Services
Maintenance services10,931,744 9,025,966 1,905,778 21.1 %
Installation services— 20,109 (20,109)(100.0)%
Total Services10,931,744 9,046,075 1,885,669 20.8 %
Energy Production1,214,806 1,268,623 (53,817)(4.2)%
Total revenues$19,241,106 $20,471,026 $(1,229,920)(6.0)%


    Total revenues for the nine months ended September 30, 2023 were $19,241,106 compared to $20,471,026 for the same period in 2022, a decrease of $1,229,920 or 6.0% year over year.


27

TECOGEN INC.
Management's Discussion and Analysis
    Products

    Products revenues in the nine months ended September 30, 2023 were $7,094,556 compared to $10,156,328 for the same period in 2022, a decrease of $3,061,772, or 30.1%. The decrease in Products revenue during the nine months ended September 30, 2023 is due to a decrease in cogeneration sales of $2,805,930, or 60.0%, and a decrease in chiller sales of $295,857, or 5.9%, offset partially by a $40,015, or 8.1%, increase in sales of engineered accessories. Our Products sales mix, as well as Products revenue, can vary significantly from period to period as our products are high dollar, low volume sales.

    Services

    Services revenues in the nine months ended September 30, 2023 were $10,931,744, compared to $9,046,075 for the same period in 2022, an increase of $1,885,669, or 20.8%. The increase in revenue during the nine months ended September 30, 2023 is due primarily to the addition of $1,225,497 in revenue from the acquired Aegis maintenance contracts and a $660,172 or 7.3%, increase in service contract revenues from existing contracts.

    Energy Production

    Energy Production revenues in the nine months ended September 30, 2023 were $1,214,806, compared to $1,268,623 for the same period in 2022, a decrease of $53,817, or 4.2%. The decrease in Energy Production revenue is a consequence of certain Energy Production sites that were down for maintenance and system upgrades in 2023 and seasonality.

Cost of Sales

    Cost of sales in the nine months ended September 30, 2023 was $11,388,750 compared to $11,783,455 for the same period in 2022, a decrease of $394,705, or 3.3%. The decrease in cost of sales is due to decreased Products revenue volume, offset partially by increased labor and material costs as a consequence of acquiring the Aegis customer maintenance contracts and increased material usage at existing Service sites. During the nine months ended September 30, 2023 our gross margin decreased to 40.8% compared to 42.4% for the same period in 2022, a 1.6% percentage point decrease due to higher labor and material costs.

    Products

    Cost of sales for productsProducts in the nine months ended September 30, 20222023 was $6,734,465$4,500,771 compared to $3,601,408$6,734,465 for the same period in 2021, an increase2022, a decrease of $3,133,057,$2,233,694, or 87.0%33.2% due to increased productdecreased Products revenue volume, andoffset partially by higher material costs. During the nine months ended September 30, 2022,2023, our Products Segment gross margin was 33.7%36.6% compared to 44.1%33.7% for the same period in 2021,2022, an 10.4%2.9% percentage point decrease. The decreaseincrease in margin is primarily a function of increased material costs.price increases instituted in 2023.

    Services

    Cost of sales for servicesServices in the nine months ended September 30, 20222023 was $4,322,693$6,159,855 compared to $4,684,008$4,322,693 for the same period in 2021,2022, an increase of $1,837,162, or 42.5%, due primarily to increased labor and material costs as a decreaseconsequence of $361,315, or 7.7%.acquiring the Aegis customer maintenance contracts and increased material usage at existing sites. During the nine months ended September 30, 2022,2023, our Services Segment gross margin increaseddecreased to 52.2%43.7% compared to 50.4%52.2% for the same period in 2021,2022, a 1.8%8.5% percentage point increasedecrease due to lower installation activity.increased labor and material costs incurred to replace engines at certain sites.

    Energy Production     

    Cost of sales for energy productionEnergy Production in the nine months ended September 30, 20222023 was $726,297$728,124 compared to $796,933$726,297 for the same period in 2021, a decrease2022, an increase of $70,636,$1,827, or 8.9%0.3%. During the nine months ended September 30, 20222023 our energy productionEnergy Production gross margin was 42.8%40.1% compared to 40.5%42.7% for the same period in 2021,2022, a 2.3%2.6% percentage point increase.decrease. The decrease in the Energy Production gross margin is due to decreased runtime at our Energy Production sites in the nine months ended September 30, 2023 compared to the same period in 2022.

Operating Expenses
    Operating expenses increased $143,706,$806,933, or 1.5%8.4%, to $9,638,224$10,450,643 in the nine months ended September 30, 20222023 compared to $9,494,518$9,643,710 in the same period in 2021.2022. The total operating expenses were higher primarily due to higher salary
28

TECOGEN INC.
Management's Discussion and Analysis
costs, taxesincreased travel expenses, higher insurance premiums and costs related to the air-cooled chiller development, offset partially by a reduction in bad debt expenseacquisition of Aegis contracts and lower sales commissions.related assets.
Nine Months Ended
Operating ExpensesSeptember 30, 2022September 30, 2021Increase (Decrease) $Increase (Decrease) %
General and Administrative$7,642,183 $7,365,495 $276,688 3.8 %
Selling1,572,221 1,747,959 (175,738)(10.1)%
Research and Development537,126 381,064 156,062 41.0 %
Gain on disposition of assets(41,931)— (41,931)— %
Gain on termination of unfavorable contract liability(71,375)— (71,375)— %
Total$9,638,224 $9,494,518 $143,706 1.5 %

Nine Months Ended
Operating ExpensesSeptember 30, 2023September 30, 2022Increase (Decrease) $Increase (Decrease) %
General and administrative$8,418,581 $7,642,183 $776,398 10.2 %
Selling1,426,321 1,572,221 (145,900)(9.3)%
Research and development625,691 537,126 88,565 16.5 %
Gain on disposition of assets(19,950)(36,445)16,495 (45.3)%
Gain on termination of unfavorable contract liability— (71,375)71,375 (100.0)%
Total$10,450,643 $9,643,710 $806,933 8.4 %

    General and administrative expenses consist of executive staff, accounting and legal expenses, office space, general insurance and other administrative expenses. General and administrative expenses for the nine months ended September 30, 20222023 were $7,642,183$8,418,581 compared to $7,365,495$7,642,183 for the same period in 2021,2022, an increase of $276,688$776,398 or 3.8%10.2%, due primarily to a $235,955 decrease$229,955 increase in bad debt expense.expense, due to the settlement achieved in 2022 with a former customer, a $206,912 increase in travel costs, a $182,012 increase in business insurance costs, a $125,123 increase in depreciation and amortization expense and, a $109,773 increase in consulting costs, offset partially by a $80,007 decrease in stock-based compensation.
    Selling expenses consist of sales staff, commissions, marketing, travel and other selling related expenses. Selling expenses for the nine months ended September 30, 20222023 were $1,572,221$1,426,321 compared to $1,747,959$1,572,221 for the same period in 2021,2022, a decrease of $175,738$145,900 or 10.1%9.3%, due primarily to lower payroll costs and reduceda $211,237 decrease in sales commissions.commissions, offset partially by $62,731 increase in trade show expense.
    Research and development expenses consist of engineering and technical staff, materials, outside consulting and other related expenses. Research and development expenses for the nine months ended September 30, 20222023 were $537,126$625,691 compared to $381,064$537,126 for the same period in 2021,2022, an increase of $156,062$88,565 or 41.0%16.5%, due to increased payroll costs and costs incurredcosts.
We recognized a gain on termination of unfavorable contract liability of $71,375 in the developmentnine months ended September 30, 2022 due to the closing of a hybrid air-cooled chiller.
27

TECOGEN INC.
Management's Discussion and Analysis
certain energy production sites. There were no energy production sites closed in the nine months ended September 30, 2023.

Loss from Operations

    Loss from operations for the nine months ended September 30, 20222023 was $950,653$2,598,287 compared to a loss of $1,358,736$950,653 for the same period in 2021, a decrease2022, an increase of $408,083.$1,647,634. The decreaseincrease in the loss from operations is due primarily to higherlower Products Segmentrevenue and gross profit in the nine months ended September 30, 2023 and a $143,706 decrease$806,933 increase in operating expenses.

Other Income (Expense), net

    Other expense, net for the nine months ended September 30, 20222023 was $900$63,940 compared to other incomeexpense of $5,053,120$900 for the same period in 2021, a decrease2022, an increase of $5,054,020. The decrease in other income is due primarily to the gain on extinguishment of debt of $3,773,014 as a result of the Paycheck Protection Program Loan forgiveness and the recognition of the Employee Retention Credit of $1,276,021 for the three calendar quarters of 2021 recognized$63,040. Other expense increased in the nine months ended September 30, 2021.2023
due primarily to a $56,246 increase in unrealized losses on investment securities.

Provision for State Income Taxes

    The provision for state income taxes for the nine months ended September 30, 2023 and 2022 was $32,252 and 2021 was $16,352, and $18,991, respectively and represents estimated income tax payments, net of refunds, to various states.

29

TECOGEN INC.
Management's Discussion and Analysis
Non-controlling Interest

    Income attributable to the non-controlling interest was $55,616$57,232 for the nine months ended September 30, 20222023 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 $42,358.$55,616.

Net Income (Loss) Attributable to Tecogen Inc

    The net loss attributable to Tecogen for the nine months ended September 30, 20222023 was $1,023,521$2,751,711 compared to a net incomeloss of $3,633,035$1,023,521 for the same period in 2021, a decrease2022, an increase of $4,656,556,$1,728,190, or 128.2%168.8%. The decreaseincrease in the net loss is due primarily to the gain on extinguishment of debt of as a result of the Paycheck Protection Program Loan forgivenesslower Products revenue and the recognition of the Employee Retention Creditgross profit and increased operating expenses in the nine months ended September 30, 2021, offset partially by higher gross profit margins for our Products Segment and the decrease in operating expenses.2023.

Liquidity and Capital Resources

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

Nine Months EndedNine Months Ended
Cash Provided by (Used in)Cash Provided by (Used in)September 30, 2022September 30, 2021Increase (Decrease)Cash Provided by (Used in)September 30, 2023September 30, 2022Increase (Decrease)
Operating activitiesOperating activities$(433,810)$171,996 $(605,806)Operating activities$(1,020,250)$(433,810)$(586,440)
Investing activitiesInvesting activities(300,493)(185,253)(115,240)Investing activities(247,558)(300,493)52,935 
Financing activitiesFinancing activities— 1,874,269 (1,874,269)Financing activities— — — 
Change in cash and cash equivalentsChange in cash and cash equivalents$(734,303)$1,861,012 $(2,595,315)Change in cash and cash equivalents$(1,267,808)$(734,303)$(533,505)

    Consolidated working capital at September 30, 20222023 was $15,553,490$11,467,725 compared to $16,193,881$14,344,288 at December 31, 2021,2022, a decrease of $640,391.$2,876,563, or 19.5%. Included in working capital were cash and cash equivalents of $2,880,160$646,161 at September 30, 2022,2023, compared to $3,614,463$1,913,969 at December 31, 2021,2022, a decrease of $734,303,$1,267,808, or 20.3%66.2%.

Cash Flows from Operating Activities

28

TECOGEN INC.
Management's Discussion and Analysis
Cash used byin operating activities for the nine months ended September 30, 20222023 was $433,810$1,020,250 compared to $171,996$433,810 of cash providedused by operating activities for the same period in 2021, a decrease2022, an increase of $605,806,$586,440, or 352.2%135.2%. Our accounts receivable and unbilled revenue balances were $8,598,302$7,694,571 and $1,956,002,$1,748,336, respectively, at September 30, 20222023 compared to $8,482,286$6,714,122 and $3,258,189$1,805,330 at December 31, 2021, providing $67,9402022, which reduced cash by $1,324,448 and $1,302,187 ofincreased cash by $56,994, respectively. Inventories increased $947,031$165,537 during the nine months ended September 30, 20222023 due to increased safety stock.acquiring inventory based on forecasted revenue. During the three months ended March 31, 2023 we collected the majority of the outstanding Employee Retention Credit receivables, providing $667,121 of cash from operations.
    Accounts payable decreasedincreased to $3,325,452$4,493,758 as of September 30, 20222023 from $3,508,354$3,261,952 at December 31, 2021, using $182,9032022, providing $1,140,759 in cash flow from operations. The decreaseincrease in accounts payable was due to vendor payment timing.increased inventory procured in the nine months ended September 30, 2023. Deferred revenue decreasedincreased as of September 30, 20222023 compared to December 31, 2021, using $487,6762022, providing $458,512 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 nine months ended September 30, 20222023 we used $300,493$247,558 in cash from investing activities. We used $170,000 of cash to acquire certain assets as part of the Aegis acquisition, used $31,728 of cash to purchase property, plant and equipment, and distributed $62,693 to the 49% non-controlling interest holders of American DG New York LLC, partially offset by the receipt of $16,863 in proceeds from the disposition of assets.
For the nine months ended September 30, 2022 cash used in investing activities was $300,493. During the nine months ended September 30, 2022 we used $286,820 of cash to purchase property, plant and equipment, $29,505 to acquire intangible assets, and distributed $56,823 to the 49% non-controlling interest holders of American DG New York LLC, partially offset by the receipt of $72,655 in insurance and other proceeds from the disposition of assets.
For the nine months ended September
30 2021 cash used in investing activities was $185,253. We used $84,160 of cash to purchase property, plant

TECOGEN INC.
Management's Discussion and equipment, $56,349 to acquire intangible assets and, distributed $66,168 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 and proceeds of $9,787 from the disposition of assets.Analysis

Cash Flows from Financing Activities

    During the nine months ended September 30, 2023 and 2022, ourthere were no cash flows from financing activities provided $0 compared to $1,874,269 for the same period in 2021. Financing activities for the nine months ended September 30, 2021 included the proceeds of $1,874,269 received under the Paycheck Protection Program Second Draw Loan.activities.

Backlog

As of September 30, 2022,2023, our backlog of product and installation projects, excluding service contracts, was $6.9 million,$7,515,922, consisting of $2.7 million$6,515,323 of purchase orders received by us and $4.2 million$1,000,599 of projects in which the customer's internal approval process is complete, financial resources have been allocated and the customer has made a firm verbal commitment that the order is in the process of execution. Backlog at the beginning of any period is not necessarily indicative of future performance. Our presentation of backlog may differ from other companies in our industry.

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 nine months ended September 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 nine months ended September 30, 2021.
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TECOGEN INC.
Management's Discussion and Analysis
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.
    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 is included in our condensed consolidated balance sheet as of September 30, 2022. 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 from the Internal Revenue Service for the ERC claim from the first and second quarters of 2021.Liquidity

Liquidity
    At September 30, 2022,2023, we had cash and cash equivalents of $2,880,160,$646,161, a decrease of $734,303$1,267,808 or 20.3%66.2% from the cash and cash equivalents balance at December 31, 2021.2022. During the nine months ended September 30, 2022,2023, our revenues continued to beProducts revenue was negatively impacted due toimpacted. Our Products have long sales cycles and the reduced business development activity in the aftermath of COVID-19 including supply chain disruption resultingresulted in customer order delays or deferrals; service delays due to parts shortages, in some cases for extended periods, andwhat we believe is a temporary 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.

Products revenue.
    Based on our current operating plan, we believe existing resources, including existing cash, and cash flows from operations together with anticipated Employee Retention Creditand the funds available to us under loans from certain related parties 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 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 willHowever, we may need to generate sufficient additional cash from operations to finance the company during the periods beyond twelve months inmonths.
On October 9, 2023, we entered into an agreement with each of John N. Hatsopoulos, a director and principal shareholder of registrant, and Earl R. Lewis, III, a director, pursuant to which Mr. Hatsopoulos agreed to provide financing to us of up to $1 million, and Mr. Lewis agreed to provide financing to us of $500,000, and potentially an additional $500,000 at his discretion. On October 10, 2023, we issued a promissory note and borrowed $500,000 from Mr. Hatsopoulos. The loan bears interest at 5.12% per annum and is repayable one year from the future. date of the issuance of the related promissory note. The proceeds of the loans are expected to be used for general working capital purposes.
If sufficient funds from operating activities are not available to finance our business and operations, we may need to raise additional capital through debt financing or an equity offering to meet our operating and capital needs.

There can be no assurance we will be able to raise such additional debt or equity financing or upon terms that are acceptable to us.

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.
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TECOGEN INC.
Management's Discussion and Analysis
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"busy season' for the service team generally runs from May through the end of September. Our cogeneration sales are not generally affected by seasonality.

Off-Balance Sheet Arrangements

    Currently, we do not have any material off-balance sheet arrangements, including any outstanding derivative financial instruments, off-balance sheet guarantees, interest rate swap transactions or foreign currency contracts. We do not engage in trading activities involving non-exchange traded contracts.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
    Not applicable.
Item 4. Controls and Procedures.
Management’s Evaluation of Disclosure Controls and Procedures:
    As of the end of the period covered by this Report, our Chief Executive Officer and Chief Financial Officer ("Certifying Officers"Officer") 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 areis 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.


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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
    As of the date of the filing of this Report,Except as set forth below, we are not a party to any material pending legal proceedingsproceedings.    
On November 23, 2022, we were served with a suit filed against us on August 24, 2022 in the Ontario Superior Court of Justice by The Corporation of the Town of Milton, Milton Energy Generation Solutions Inc. and knowMilton Hydro Distribution Inc (the "Plaintiffs"), all of no contemplated governmental proceeding involving us. However, from timewhom are municipal corporations incorporated in the Province of Ontario. The plaintiffs sued for damages in the amount of CDN $1,000,000, pre-judgment and post-judgment interest, legal fees, and any further relief the court may deem, alleging breach of contract, breach of warranty, negligent misrepresentations and nuisance. Plaintiffs allege that on or about July 10, 2022, a Tecogen cogenerator installed by us at the plaintiffs facility caught fire, causing damage to time,the cogenerator and the plaintiff's facility. We have filed a response denying liability and are being represented by Canadian counsel. For the year ended December 31, 2022, we reserved $150,000 for anticipated damages which may not be involved in ordinary routine litigation incidentalcovered by our insurance and continue to our business.maintain the reserve at September 30, 2023.
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” and elsewhere in our Annual Report on Form 10-K for our fiscal year ended December 31, 20212022 ("20212022 Form 10-K") The risks discussed in our 20212022 Form 10-K could materially affect our business, financial condition and future results. The risks described in our 20212022 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. The following material change to our risk factors since filing our 2022 Form 10-K is as follows:

Losses or unauthorized access to or releases of confidential information, including personal information, could subject us to significant reputational, financial, legal and operational consequences.
Our business requires us to use and store confidential information, including personal information, with respect to our customers and employees and also requires us to share confidential information with suppliers and other third parties. We rely on suppliers that are also exposed to ransomware and other malicious attacks that can disrupt business operations. Although we take steps to secure confidential information that is provided to or accessible by third parties working on our behalf, such measures may not always be effective and losses or unauthorized access to or releases of confidential information occur. Such incidents and other malicious attacks could materially adversely affect our business, reputation, results of operations and financial condition.
We have experienced malicious attacks and other attempts to gain unauthorized access to our systems, including the ransomware attack on our computer network which occurred on April 28, 2023 which required that we limit user access, remove the hard drives from two affected workstations from service and restore network files from systems backups. Our network returned to full operation on May 1, 2023. Since this incident, we have implemented changes to user access passwords, conducted a full audit of user accounts and implemented multi-factor authentication for network and workstation access. These attacks seek to compromise the confidentiality, integrity or availability of confidential information or disrupt normal business operations, and could, among other things, impair our ability to attract and retain customers for its products and services, impact our stock price, materially damage commercial relationships, and expose us to litigation or government investigations, which could result in penalties, fines or judgments against us. Globally, attacks are expected to continue accelerating in both frequency and sophistication with increasing use by actors of tools and techniques that are designed to circumvent controls, avoid detection, and remove or obfuscate forensic evidence, all of which hinders our ability to identify, investigate and recover from incidents. In addition, attacks against us and our customers can escalate during periods of severe diplomatic or armed conflict.
We have implemented systems and processes intended to secure our information technology systems and prevent unauthorized access to or loss of sensitive data, and mitigate the impact of unauthorized access, including through the use of encryption and authentication technologies and we continue to undertake regular reviews of our IT infrastructure and have investigated improved software and hardware cyber threat protection solutions. But these measures cannot provide absolute security, and losses or unauthorized access to or releases of confidential information occur and could materially adversely affect our business, reputation, results of operations and financial condition.
Item 2. Unregistered Sales of Equityequity Securities and Use of Proceeds

    None.

Item 3. Defaults in Senior Securities

    None.

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TECOGEN INC.
Item 4. Mine Safety Disclosures

    Not applicable.

Item 5. Other Information    

    None.
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TECOGEN INC.
Item 6. Exhibits
Exhibit No.Description of Exhibit
10.1
10.2
31.1*
31.2*
32.1**
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





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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: November 10, 2022By:/s/ Benjamin Locke
Benjamin Locke
Chief Executive Officer
(Principal Executive Officer)
Dated: November 10, 20229, 2023By:/s/ Abinand Rangesh
Abinand Rangesh
Chief Executive Officer and Chief Financial Officer
(Principal Executive Officer and Principal Financial Officer)

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