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What changed in TECOGEN INC.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of TECOGEN INC.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+463 added−343 removedSource: 10-K (2025-03-18) vs 10-K (2024-03-25)

Top changes in TECOGEN INC.'s 2024 10-K

463 paragraphs added · 343 removed · 284 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

90 edited+55 added−24 removed63 unchanged
Biggest changeFor the year ended December 31, 2023 we used $823,315 in cash from operations and generated net operating losses of $4,413,612, due to due to lower Products sales, a decrease in gross margin due to higher products material costs and the increased provision for obsolete inventory and an increase in operating expenses due primarily to increased bad debt expense and a general increased in other administrative expenses.
Biggest changeAs of December 31, 2024, our cash and cash equivalents were $5,405,233, compared to $1,351,270 at December 31, 2023, an increase of $4,053,963. For the year ended December 31, 2024 we generated $4,060,547 in cash from operations and net operating losses of $4,534,087, due to a decrease in Products revenue and gross margin.
We also continue to leverage our resources with government and industry funding, which has yielded a number of successful developments, including the Ultera low-emissions technology, sponsored by the California Energy Commission and Southern California Gas Company.
Also, we continue to leverage our resources with government and industry funding, which has yielded a number of successful developments, including the Ultera low-emissions technology, sponsored by the California Energy Commission and Southern California Gas Company.
We have a total of approximately 21,000 square feet of manufacturing and warehouse space at the Billerica, Massachusetts facility. The lease agreements which commenced on January 1, 2024, provide for initial lease terms of five (5) years, expiring on December 31, 2028, with two successive options to renew for additional terms of five (5) years.
We have a total of approximately 21,000 square feet of manufacturing and warehouse space at the North Billerica, Massachusetts facility. The lease agreements which commenced on January 1, 2024, provide for initial lease terms of five (5) years, expiring on December 31, 2028, with two successive options to renew for additional terms of five (5) years.
On February 1, 2024, Tecogen and Aegis amended the Agreement to add eighteen (18) additional maintenance contracts (the "Amendment"). The Amendment includes an undertaking by Aegis to use commercially reasonable efforts to support and assist our execution of maintenance service agreements for an additional thirty-six (36) cogeneration units sold to customers by Aegis.
On February 1, 2024, Tecogen and Aegis amended the Agreement to add eighteen (18) additional maintenance service agreements (the "Amendment"). The Amendment includes an undertaking by Aegis to use commercially reasonable efforts to support and assist our execution of maintenance service agreements for an additional thirty-six (36) cogeneration units sold to customers by Aegis.
Government & Regulation Several kinds of federal, state and local government regulations affect our products and services, including but not exclusive to: • product safety certifications and interconnection requirements; • air pollution regulations which govern the emissions allowed in engine exhaust; • state and federal incentives for CHP technology; • various local building and permitting codes and third-party certifications; • electric utility pricing and related regulations; and • federal and state laws regarding the legalization of cannabis for medicinal and recreational use. 10 TECOGEN INC.
Government & Regulation Several kinds of federal, state and local government regulations affect our products and services, including but not exclusive to: • product safety certifications and interconnection requirements; 11 TECOGEN INC. • air pollution regulations which govern the emissions allowed in engine exhaust; • state and federal incentives for CHP technology; • various local building and permitting codes and third-party certifications; • electric utility pricing and related regulations; and • federal and state laws regarding the legalization of cannabis for medicinal and recreational use.
The improved performance, consisting of up to 90% reductions in NMOG and CO results from increased oxidation of NMOG and CO due to a lower temperature environment in the second stage catalyst. • 10,774,724: “Dual Stage Internal Combustion Engine Aftertreatment System Using Exhaust Gas Intercooling and Charger Driven Air Ejector.” This patent, granted in September 2020, relates to the use of turbo 8 TECOGEN INC. compressors and exhaust gas intercoolers in turbocharged engines to reduce the complexity and cost of Ultera emissions reduction systems. • 9,995,195: “Emissions control systems and methods for vehicles.” This patent, granted in June 2018, is a method for vehicle cold start to enhance the removal of CO and hydrocarbons emissions, which are extremely problematic for cold engines.
The improved performance, consisting of up to 90% reductions in NMOG and CO results from increased oxidation of NMOG and CO due to a lower temperature environment in the second stage catalyst. • 10,774,724: “Dual Stage Internal Combustion Engine Aftertreatment System Using Exhaust Gas Intercooling and Charger Driven Air Ejector.” This patent, granted in September 2020, relates to the use of turbo compressors and exhaust gas intercoolers in turbocharged engines to reduce the complexity and cost of Ultera emissions reduction systems. • 9,995,195: “Emissions control systems and methods for vehicles.” This patent, granted in June 2018, is a method for vehicle cold start to enhance the removal of CO and hydrocarbons emissions, which are extremely problematic for cold engines.
Overall, we compete with end users’ other options for electrical power, heating, and cooling on the basis of our technology’s ability to: • Provide a more efficient solution that provides operational savings for a facility's energy needs including cooling, electricity and hot water; • Provide power when a utility grid is not available or goes out of service; • Reduce emissions of criteria pollutants (NOx and CO) to near-zero levels and cut the emission of greenhouse gases such as carbon dioxide due to increased efficiencies compared to the electric grid; • Provide reliable on-site power generation, heating and cooling services.
Overall, we compete with end users’ other options for electrical power, heating, and cooling on the basis of our technology’s ability to: • Provide a more efficient solution that results in operational savings for a facility's energy needs including cooling, electricity and hot water; • Provide power when a utility grid is not available or goes out of service; • Reduce emissions of criteria pollutants (NOx and CO) to near-zero levels and cut the emission of greenhouse gases such as carbon dioxide due to increased efficiencies compared to the electric grid; • Provide reliable on-site power generation, heating and cooling services.
InVerde and Tecopower Our combined heat and power products that produce electricity and hot water compete with the utility grid, existing technologies such as other reciprocating engine and microturbine CHP systems, and other emerging distributed generation technologies including solar power, wind-powered systems, and fuel cells. Our products are highly competitive between 60KW and 1.5MW in electrical generation capacity.
InVerde and Tecopower Our combined heat and power products that produce electricity and hot water compete with the utility grid, existing technologies such as other reciprocating engines and microturbine CHP systems, and other emerging distributed generation technologies including solar power, wind-powered systems, and fuel cells. Our products are highly competitive between 60KW and 1.5MW in electrical generation capacity.
Our commercial product lines include: • the InVerde e+ ® and TecoPower ® cogeneration units; these systems supply electricity and hot water; • Tecochill ® air-conditioning and refrigeration chillers; these systems produce chilled water and hot water; • Tecochill ® hybrid-drive air-cooled chiller; gas engine-driven chillers that provide air conditioning and hot water; • Tecofrost ® gas engine-driven refrigeration compressors; these systems circulate refrigerant and provide hot water as a byproduct; and, • Ultera ® emissions control technology.
Our commercial product lines include: • the InVerde e+ ® and TecoPower ® cogeneration units that supply electricity and hot water; • Tecochill ® air-conditioning and refrigeration chillers that produce chilled water and hot water; • Tecochill ® hybrid-drive air-cooled chiller; gas engine-driven chillers that provide air conditioning and hot water; • Tecofrost ® gas engine-driven refrigeration compressors that circulate refrigerant and provide hot water as a byproduct; and, • Ultera ® emissions control technology.
To date we have shipped over 3,200 units, some of which have been operating for almost 35 years. We established a service center in Toronto, Canada in August 2020 to support our existing population of chillers and cogeneration units including 26 cogeneration units sold in this territory during 2020 to serve public housing facilities.
To date we have shipped over 3,200 units, some of which have been operating for almost 35 years. We established a service center in Toronto, Canada in August 2020 to support our existing fleet of chillers and cogeneration units including 26 cogeneration units sold in this territory during 2020 to serve public housing facilities.
During the years ended December 31, 2023 and December 31, 2022, no customer accounted for more than 10% of our revenues. We typically sell our chiller products through our manufacturing representatives with assistance from our internal sales team. Our combined heat and power products are typically sold direct to end customers by our internal sales team.
During the years ended December 31, 2024 and December 31, 2023, no customer accounted for more than 10% of our revenues. We typically sell our chiller products through our manufacturing representatives with assistance from our internal sales team. Our combined heat and power products are typically sold direct to end customers by our internal sales team.
Information contained on our website is not incorporated into this Annual Report on Form 10-K or our other securities filings with the SEC. The SEC maintains an internet website at www.sec.gov which contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.
Information contained on our website is not incorporated by reference into this Annual Report on Form 10-K or our other securities filings with the SEC. The SEC maintains an internet website at www.sec.gov which contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.
Recent Developments 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, and related matters (“Acquisition”). On April 1, 2023, the Acquisition closed.
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, and related matters (“Acquisition”). On April 1, 2023, the Acquisition closed.
Nine of our New Jersey service employees are represented by a collective bargaining agreement which expires on December 31, 2025 and thereafter renews annually unless terminated by either party by written notice within sixty days prior to the expiration date.
Eleven of our New Jersey service employees are represented by a collective bargaining agreement which expires on December 31, 2025 and thereafter renews annually unless terminated by either party by written notice within sixty days prior to the expiration date.
Markets and Customers Worldwide, stationary power generation applications vary from huge central stationary generating facilities (traditional electric utility providers) to back-up generators as small as 2 kW. Historically, power generation in most developed countries such as the United States has been part of a regulated central utility system utilizing high-temperature steam turbines powered 5 TECOGEN INC. by fossil-fuels.
Markets and Customers Worldwide, stationary power generation applications vary from huge central stationary generating facilities (traditional electric utility providers) to back-up generators as small as 2 kW. Historically, power generation in most developed countries such as the United States has been part of a regulated central utility system utilizing high-temperature steam turbines powered by fossil-fuels.
Engine-driven chillers are often used as replacements for aging electric chillers because they both occupy similar amounts of floor space and require similar maintenance schedules. This is also the case with refrigeration compressors. 6 TECOGEN INC.
Engine-driven chillers are often used as replacements for aging electric chillers because they both occupy similar amounts of floor space and require similar maintenance schedules. This is also the case with refrigeration compressors. 7 TECOGEN INC.
We have made, and will continue to make, the necessary research and development and capital expenditures to comply with these emissions standards. 11 TECOGEN INC. Human Capital Resources We believe our success in delivering energy efficient, ultra clean cogeneration systems, chillers and energy production services relies on our culture, values, and the creativity and commitment of our people.
We have made, and will continue to make, the necessary research and development and capital expenditures to comply with these emissions standards. Human Capital Resources We believe our success in delivering energy efficient, ultra clean cogeneration systems, chillers and energy production services relies on our culture, values, and the creativity and commitment of our people.
Reasons include fair compensation, a complete array of employee benefits to include: health, dental and life insurance; short-term and long-term disability insurance; HSA account funding; generous time off benefits; and the grant of options or awards to purchase shares of our common stock. Recently we instituted web-based training for all of our employees.
Reasons include fair compensation, a complete array of employee benefits to include: health, dental and life insurance; short-term and long-term disability insurance; HSA account funding; generous time off benefits; and the grant of options or awards to purchase shares of our common stock. We use web-based training for all of our employees.
Management’s analysis includes forecasting future revenues, expenditures and cash flows, taking into consideration past performance as well as key initiatives recently undertaken. Our forecasts are dependent on our ability to maintain margins based on the Company's ability to close on new and expanded business, leverage existing working capital, and effectively manage expenses.
Management’s analysis includes forecasting future revenues, expenditures and cash flows, taking into consideration past performance as well as key initiatives recently undertaken. Our forecasts are dependent on our ability to maintain margins based on the our ability to close on anticipated new business, leverage existing working capital, and effectively manage expenses.
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 our customers under long-term energy sales agreements.
Our business operations is comprised of three business segments: • Products Segment - designs, manufactures and sells industrial and commercial cogeneration systems; • Services Segment - provides operations and maintenance ("O&M") services for our products under long term service contracts; and • Energy Production Segment - installs, operates and maintains distributed generation electricity systems that we own and sell the energy generated by such systems in the form of electricity, heat, hot water and cooling to our customers under long-term energy sales agreements.
Competition The markets for our products are highly competitive, though we believe that we offer customers a suite of premier best-in-class clean energy and thermal solutions.
Competition The markets for our products are highly competitive, although we believe that we offer customers a suite of premier best-in-class clean energy and thermal solutions.
See "Business-Intellectual Property." Similarly, in the growing Microgrid segment, neither fuel cells nor microturbines can respond to changing energy loads when the system is disconnected from the utility grid. Engines such as those used in our equipment inherently have a fast-dynamic response to step load changes, which is why they are the primary choice for emergency generators.
Similarly, in the growing Microgrid segment, neither fuel cells nor microturbines can respond to changing energy loads when the system is disconnected from the utility grid. Engines such as those used in our equipment inherently have a fast-dynamic response to step load changes, which is why they are the primary choice for emergency generators.
The development of our business could be adversely affected by any slowdown or reversal in the utility deregulation process or by difficulties in negotiating back-up power supply agreements with electric providers in the areas where we seek to do business.
The development of our business could be adversely affected by any slowdown or reversal in the utility deregulation process or by difficulties in negotiating back-up power supply agreements with electric providers in the areas where we seek to do business. 12 TECOGEN INC.
Traditional customers for our InVerde and Tecopower products have a simultaneous need for electrical power and hot water. These include hospitals, nursing homes, schools, universities, health clubs, spas, hotels and motels, office and multi-unit residential buildings.
Typical customers for our InVerde and TecoPower cogeneration products have a simultaneous need for electrical power and hot water. These include hospitals, nursing homes, schools, universities, health clubs, spas, hotels and motels, office and multi-unit residential buildings.
A number of developments related primarily to the deregulation of the utility industry as well as significant technological advances have now broadened the range of power supply choices available to all types of customers.
Developments related primarily to the deregulation of the utility industry as well as significant technological advances have broadened the range of power supply choices available to all types of customers.
Although operating solar and wind powered systems produce no emissions, the main drawbacks to these renewable powered systems are their dependence on weather conditions, their reliance on backup utility grid-provided power, and high capital costs that can often make these systems uneconomical without government subsidies.
Although operating solar and wind powered systems produce no emissions, the main drawbacks to these renewable powered systems are their dependence on weather conditions, their need for energy storage systems or reliance on backup utility grid-provided power, and high capital costs that can often make these systems uneconomical without government subsidies.
We strive to maintain these contracts for many years, and work to maintain the integrity and performance of our equipment. Our products have a long history of reliable operation.
We strive to maintain product service contracts for many years and work to maintain the integrity and performance of our equipment. Our products have a long history of reliable operation.
Conversely our Tecochill product benefits customers who have a simultaneous need for cooling and hot water which is typical in sites such as hospitals, ice rinks, indoor agriculture and food processing. Our Tecofrost refrigeration compressors are applied primarily to industrial applications that include cold storage, wineries, dairies, ice rinks and food processing.
Our Tecochill chiller products benefit customers who have a simultaneous need for cooling and hot water which is typical in sites such as hospitals, ice rinks, indoor agriculture and food processing. Our Tecofrost refrigeration compressors are applied primarily to industrial applications that include cold storage, wineries, dairies, ice rinks and food processing.
As demand response programs become more economically attractive and air quality regulations continue to become more stringent, there could be increased demand for retrofitting standby generators with our Ultera ® emissions control technology, thus providing a cost-effective solution to keeping the installed base of standby generators operational and in compliance with regulatory requirements.
As demand response programs become more economically attractive and air quality regulations become more stringent, there could be increased demand for retrofitting standby generators with our Ultera emissions control technology to provide a cost-effective solution to keep the installed base of standby generators operational and in compliance with regulatory requirements.
The software allows our products to be integrated as a Microgrid, where multiple InVerde e+ ® units can be seamlessly isolated from the main utility grid in the event of an outage and re-connected to it afterward. We expect that our patents and license for Microgrid software will deter others from offering certain important functions.
The software allows our products to be integrated as a Microgrid, where multiple InVerde e+ units can be seamlessly isolated from the main utility grid in the event of an outage and re-connected to it afterward. We expect that our patents and license for Microgrid software will deter others from offering certain important functions. See "Business-Intellectual Property." 8 TECOGEN INC.
Energy Production Our Energy Production segment sells energy in the form of electricity, heat, hot water and cooling to our customers under long-term sales agreements which represented 7.0% of our consolidated revenues for the years ended December 31, 2023 and 2022. See Note 18. "Segments" of the Notes to the Consolidated Financial Statements.
Our Energy Production segment sells energy in the form of electricity, heat, hot water and cooling to our customers under long-term sales agreements which represented 9.3% of our consolidated revenues for the years ended December 31, 2024 and 2023. See Note 18. "Segments" of the Notes to the Consolidated Financial Statements.
Intellectual Property Currently, we hold twelve United States patents for our technologies: • 10,774,720: “NOx Reduction Using a Dual-Stage Catalyst System with Intercooling in Vehicle Gasoline Engines under Real Driving Condition.” This patent, granted in September 2020, improves the removal of Non-Methane Organic Gases (NMOG) and Carbon Monoxide (CO) from vehicle emissions.
Intellectual Property Currently, we hold thirteen United States patents for our technologies: • 10,774,720: “NOx Reduction Without Urea Using a Dual-Stage Catalyst System with Intercooling in Vehicle Gasoline Engines.” This patent, granted in September 2020, improves the removal of Non-Methane Organic Gases (NMOG) and Carbon Monoxide (CO) from vehicle emissions.
Our experience providing clean energy solutions to cannabis cultivation facilities has given us significant insight into requirements relating to energy-intensive indoor agriculture applications that we expect to be transferable to CEA facilities for food production. Impact of the Russian Invasion of Ukraine Presently, we have no operations or customers in Russia or the Ukraine.
Our experience providing clean energy solutions to cannabis cultivation facilities has given us significant insight into requirements relating to energy-intensive indoor agriculture applications that we expect to be transferable to CEA facilities for food production. Impact of Geopolitical Tensions We have no operations or customers in Russia, the Ukraine, or in the Middle East.
In such facilities, climate control is achieved by cooling the facility to remove humidity and then reheating to the required temperature. Using engine waste heat to perform the reheat while utilizing natural gas to generate the cooling provides significant economic and environmental benefits.
This is of particular advantage in facilities that control both temperature and humidity. In such facilities, climate control is achieved by cooling the facility to remove humidity and then reheating to the required temperature. Using engine waste heat to perform the reheat while utilizing natural gas to generate the cooling provides significant economic and environmental benefits.
Item 1. Business The Company Tecogen Inc. (together with its subsidiaries, “we,” “our,” or “us,” or “Tecogen”) designs, manufactures, markets, and maintains high efficiency, ultra-clean cogeneration products. These include natural gas engine driven combined heat and power (CHP) systems and chillers for multi-family residential, commercial, recreational and industrial use.
Item 1. Business The Company Tecogen Inc. (together with its subsidiaries, “we,” “our,” or “us,” or “Tecogen”) designs, manufactures, markets, and maintains high efficiency, ultra-clean cogeneration products including natural gas engine driven combined heat and power, chillers, air conditioning systems, and water heaters for multi-family residential, commercial, recreational and industrial use.
We anticipate that an inverter-based product with at least some of the features offered by our InVerde products will be introduced by others, but we believe that our competitors will face serious challenges in duplicating the InVerde. Product development time and costs would likely be significant, and we expect that our patent for the inverter-based CHP system, U.S.
We anticipate that an inverter-based product with at least some of the features offered by our InVerde products will be introduced by others, but we believe that our competitors will face serious challenges in duplicating the InVerde and that product development time and costs would likely be significant.
These poisons or contaminants are most commonly sulfur compounds. • 9,702,306: “Internal Combustion Engine Controller.” This patent granted in July of 2017 relates to the unique control methodology used in the InVerde e+ CHP unit that maximizes engine fuel economy under variable speed operation. • 9,470,126: "Assembly and method for reducing ammonia in exhaust of internal combustion engines." This patent, granted in October 2016, is related to the Ultera emission control system applicable to all our products. • 9,856,767: “Systems and methods for reducing emissions in exhaust of vehicles and producing electricity." This patent, filed in November 2015 and published in March 2016, relates to the development of the Ultera emission control system for vehicle applications. • 9,121,326: “Assembly and method for reducing nitrogen oxides, carbon monoxide and hydrocarbons in exhausts of internal combustion engines.” This patent, granted in September 2015, is related to the Ultera emission control system applicable to all our products. • 9,651,534: "Assembly and Method for reducing nitrogen oxides, carbon monoxide, hydrocarbons and hydrocarbon gas in exhausts of internal combustion engines and producing and electrical output." This patent granted in April 2017, is related to the Ultera emission control system applicable to all our products. • 8,578,704: “Assembly and method for reducing nitrogen oxides, carbon monoxide, and hydrocarbons in exhausts of internal combustion engines.” This patent, granted in November 2013, is for the Ultera emission control system applicable to all our products. • 7,243,017: “Method for controlling internal combustion engine emissions.” This patent, granted in July 2007, applies to the specific algorithms used in our engine controller for metering fuel usage to obtain the correct combustion mixture and is technology used by most of our engines. • 7,239,034: “Engine driven power inverter system with cogeneration.” This patent, granted in July 2007, pertains to the utilization of an engine-driven CHP module combined with an inverter and applies to our InVerde product specifically.
These poisons or contaminants are most commonly sulfur compounds. • 9,702,306: “Internal Combustion Engine Controller.” This patent granted in July of 2017 relates to the unique control methodology used in the InVerde e+ CHP unit that maximizes engine fuel economy under variable speed operation. • 9,470,126: "Assembly and method for reducing ammonia in exhaust of internal combustion engines." This patent, granted in October 2016, is related to the Ultera emission control system applicable to all our products. • 9,856,767: “Systems and methods for reducing emissions in exhaust of vehicles and producing electricity." This patent, filed in November 2015 and published in March 2016, relates to the development of the Ultera emission control system for vehicle applications. • 9,121,326: “Assembly and method for reducing nitrogen oxides, carbon monoxide and hydrocarbons in exhausts of internal combustion engines.” This patent, granted in September 2015, is related to the Ultera emission control system applicable to all our products. • 9,631,534: "Assembly and Method for reducing nitrogen oxides, carbon monoxide, hydrocarbons and hydrocarbon gas in exhausts of internal combustion engines and producing and electrical output." This patent granted in April 2017, is related to the Ultera emission control system applicable to all our products. • 8,578,704: “Assembly and method for reducing nitrogen oxides, carbon monoxide, and hydrocarbons in exhausts of internal combustion engines.” This patent, granted in November 2013, is for the Ultera emission control system applicable to all our products. • 7,243,017: “Method for controlling internal combustion engine emissions.” This patent, granted in July 2007, applies to the specific algorithms used in our engine controller for metering fuel usage to obtain the correct combustion mixture and is technology used by most of our engines. • 7,239,034: "Engine driven power inverter system with cogeneration." This patent granted in July 2007, pertains to the utilization of an engine-driven CHP module combined with an inverter and applies to our InVerde product specifically. • 11,936,327: "Hybrid Power System With Electric Generator and Auxiliary Power Source." This patent, granted in March 2024, pertains to joining two power sources to optimize power use from the grid or another source by way of a proprietary DC-DC voltage converter, inverter and controller circuits.
Services We provide long-term maintenance contracts, parts sales, and turnkey installation for our products through a network of eleven well-established field service centers in California, the Midwest, the Northeast, the Southeast and in Ontario, Canada. These centers are staffed by our full-time technicians, working from local leased facilities. The facilities provide office and warehouse space for inventory.
We provide service maintenance contracts, parts sales, and installation for our products through a network of eleven well-established field service centers in California, the Midwest, the Northeast, the Southeast and in Toronto, Canada. These centers are staffed by our full-time technicians, working from local leased facilities which provide office and warehouse space 5 TECOGEN INC. for inventory.
Management believes that this chiller will address a significant market segment that is currently not addressed by our existing Tecochill product. For the years ended December 31, 2023 and 2022, we spent $840,011 and $732,873, respectively, on research and development activities.
Management believes that this chiller will address a significant market segment that is currently not addressed by our existing Tecochill product. For the years ended December 31, 2024 and 2023, we spent $961,837 and $840,011, respectively, on research and development activities. 9 TECOGEN INC.
We estimate that our products can often reduce the customer’s operating costs (for the portion of the facility loads to which they are applied) by approximately 30% to 60%, which provides an excellent rate of return on the equipment’s capital cost in many areas of the country with high electricity rates.
Cogeneration and chiller products can often reduce the customer’s operating costs (for the portion of the facility loads to which they are applied) by approximately 30% to 60% based on management estimates, which provides an excellent rate of return on the equipment’s capital cost in many areas of the country with high electricity rates.
We developed Ultera® for other applications including stationary engines and forklifts. We were incorporated in the State of Delaware on September 15, 2000. We have wholly-owned subsidiaries American DG Energy, Inc. ("ADGE") and Tecogen CHP Solutions, Inc., and we own a 51% interest in American DG New York, LLC ("ADGNY"), a joint venture.
We were incorporated in the State of Delaware on September 15, 2000. We have wholly-owned subsidiaries American DG Energy, Inc. ("ADGE") and Tecogen CHP Solutions, Inc., and we own a 51% interest in American DG New York, LLC ("ADGNY"), a joint venture.
An inverter-based product with at least some of these features has been introduced by others, but we believe that they face serious challenges in duplicating all the unique features of the InVerde e+. Competitors' product development time and costs could be significant. We have exclusive license rights to Microgrid algorithms developed by the University of Wisconsin researchers.
An inverter-based product with at least some of these features has been introduced by others, but we believe that they face serious challenges in duplicating all the unique features of the InVerde e+. Competitors' product development time and costs could be significant.
In addition, the Center supported our research on emissions from gasoline vehicles from January of 2016 through October 2017. AVL researchers collaborated with our engineers on several peer reviewed papers published by technology association SAE International in 2017 and 2018. Certain components of our InVerde product were developed through a grant from the California Energy Commission.
In addition, the Center supported our research on emissions from gasoline vehicles from January of 2016 through October 2017. AVL researchers collaborated with our engineers on several peer reviewed papers published by technology association SAE International in 2017 and 2018.
Sales & Distribution Our products are sold directly to end-users by our sales team and by established independent sales agents and representatives. We have agreements with manufacturers' representatives and outside sales representatives who are compensated by commissions for designated territories and product lines.
Sales & Distribution Our products are sold directly to end-users by our sales team and by established independent sales agents and representatives. We have entered into agreements with manufacturers' representatives and outside sales representatives who are 6 TECOGEN INC. compensated on a commission basis for designated territories and product lines.
Employees As of December 31, 2023, we employed 92 full-time employees and 1 part-time employee, including 4 sales and marketing personnel, 63 service personnel, 17 manufacturing personnel and 9 finance and administrative personnel.
Employees As of December 31, 2024, we employed 91 full-time employees and 1 part-time employee, including 5 sales and marketing personnel, 61 service personnel, 17 manufacturing personnel and 9 finance and administrative personnel.
For multiple unit sites, the likelihood of a full system outage that would result in a high demand charge is dramatically reduced, consequently, these customers have a greater probability of capturing peak demand savings. Our products are sold directly to customers by our in-house marketing team, and by established independent sales agents and representatives.
M ultiple unit sites dramatically reduce the likelihood of a full system outage that would result in a high demand charge, giving customers with multiple units a greater probability of capturing peak demand savings. Our products are sold directly to customers by our in-house marketing team and by established independent sales agents and representatives. Ultera Low Emissions Technology .
Under the federal definition for CHP systems, all of our products, including our air-conditioning and cooling models (Tecochill and Tecofrost) qualify for the tax credit when heat recovery is incorporated into the system design. We aggressively market to potential customers where utility pricing aligns with our advantages.
Under the federal definition for CHP systems, all of our products, including our air-conditioning and cooling models (Tecochill and Tecofrost) qualify for the tax credit when heat recovery is incorporated into the system design.
The hybrid-drive air-cooled chiller will take simultaneous inputs from the electrical grid 7 TECOGEN INC. and the natural gas engine so that it can operate with the lowest cost and/or greenhouse gas footprint at any time based on changing conditions.
The hybrid-drive air-cooled chiller will take simultaneous inputs from the electrical grid and the natural gas engine so that it can operate with the lowest cost and/or greenhouse gas footprint at any time based on changing conditions. We anticipate initial delivery of our hybrid air cooled chiller in the first half of fiscal 2025.
Working capital at December 31, 2023 was $9,822,546, compared to $14,344,288 at December 31, 2022, a decrease of $4,521,742 and our accumulated deficit was $42,879,656. As a result of the above factors, management has performed an analysis to evaluate the entity’s ability to continue as a going concern for one year after the financial statements issuance date.
Working capital at December 31, 2024 was $5,329,650, compared to $9,822,546 at December 31, 2023, a decrease of $4,492,896, and our accumulated deficit was $47,639,894. As a result of the above factors, management has performed an analysis to evaluate our ability to continue as a going concern for one year after the financial statements issuance date.
The traditional markets for CHP systems are buildings with long hours of operation and with corresponding demand for electricity or cooling and heat.
This ultimately improves the grid’s reliability and reduces the need for costly upgrades. Traditional markets for CHP systems are buildings with long hours of operation and with corresponding demand for electricity or cooling and heat.
The expiration, termination, or invalidity of one or more of these patents may have a material adverse effect on our business. One other company has developed a product that seeks to compete with our inverter-based InVerde, although it does not offer all of the same benefits and features offered by our InVerde products.
One other company has developed a product that seeks to compete with our inverter-based InVerde, although it does not offer all of the same benefits and features offered by our InVerde products.
We have exclusive rights for engine-driven systems utilizing natural gas or diesel fuel in the application of power generation where the per-unit output is less than 500kW.
We have exclusive license rights to Microgrid algorithms developed by the University of Wisconsin researchers through July 26, 2027. We have exclusive rights for engine-driven systems utilizing natural gas or diesel fuel in the application of power generation where the per-unit output is less than 500kW.
Most of our service revenue is in the form of annual service contracts, which are typically of an all-inclusive “bumper-to-bumper” type, with billing amounts proportional to the equipment's achieved operating hours for the period. Customers are thus invoiced in level, predictable amounts without unforeseen add-ons for such items as unscheduled repairs or engine replacements.
Most of our service revenue is in the form of annual service contracts which typically provide all-inclusive “bumper-to-bumper” coverage, with service fees based on equipment operating hours for the relevant period. Customers are therefore invoiced in level, predictable amounts without unforeseen add-ons for unscheduled repairs or engine replacements.
We believe that adequate supplies exist to meet our near to medium term manufacturing needs. We have an on-going focus on developing and implementing new systems to simplify our manufacturing processes, product sourcing methods, and our supply chain.
We have an on-going focus on developing and implementing new systems to simplify our manufacturing processes, product sourcing methods, and our supply chain.
We now offer our Ultera emissions control technology as an option on all our products or as a stand-alone application for retrofitting other rich-burn spark-ignited reciprocating internal combustion engines such as the engine-generators described above. Our products are designed as compact modular units that are intended to be installed in multiples.
We offer our Ultera emissions control technology as standard on all our products or as a stand-alone application for retrofitting other rich-burn spark-ignited reciprocating internal combustion engines such as the engine-generators described above.
Branded Ultera®, the ultra-clean emissions technology repositions our engine driven products in the marketplace, making them comparable environmentally with other technologies such as fuel cells, but at a much lower cost and greater efficiency.
United States and foreign patents for the technology were granted beginning in October 2013 and additional domestic and foreign patents granted or applications are pending. Branded Ultera®, this ultra-clean emissions technology repositions our engine driven products in the marketplace, making them comparable environmentally with other technologies such as fuel cells, but at a much lower cost and greater efficiency.
Market drivers include the price of natural gas, local electricity rates, environmental regulations, and governmental energy policies, as well as customers’ desire to become more environmentally responsible. 2 TECOGEN INC. Our cooling and refrigeration products provide both cooling and make use of high grade waste heat. This is of particular advantage in facilities that control both temperature and humidity.
The factors that drive the demand for such products include the price of natural gas, local electricity rates, 4 TECOGEN INC. environmental regulations, and governmental energy policies, as well as customers’ desire to become more environmentally responsible. Our Tecochill and Tecofrost cooling and refrigeration products provide both cooling and make use of high-grade waste heat.
The lease for our headquarters located in Waltham, Massachusetts was extended on March 1, 2024 and expires on April 30, 2024. 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.
On March 31, 2023, we entered into two lease agreements for two adjacent buildings, located in North Billerica, Massachusetts, containing approximately 26,412 square feet of manufacturing, storage and office space to serve as our headquarters and manufacturing facilities. In April, 2024, we relocated our manufacturing operations and corporate offices to 76 Treble Cove Road, North Billerica, MA.
We introduced the Tecochill Hybrid-Drive Air-Cooled Chiller at the AHR Expo in February 2023 and received an order on February 8, 2024 for three hybrid-drive air-cooled chillers for a utility in Florida. A patent application based on this concept has been filed with the US Patent and Trademark Office. 1 TECOGEN INC.
We introduced the Tecochill Hybrid-Drive Air-Cooled Chiller at the AHR Expo in February 2023 and received an order on February 8, 2024 for three hybrid-drive air-cooled chillers for a utility company in Florida.
If the electricity prices continue to rise, the economic savings generated by our products are likely to increase. In addition to the direct result of changes in natural gas and electricity prices, the war in Ukraine may result in higher cybersecurity risks, increased or ongoing supply chain challenges, and volatility related to the trading prices of commodities.
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. Impact of Tariffs The majority of our vendors are domestic.
As of December 31, 2023, our Ultera CHP and fuel cell technologies are the only technologies that we know of which comply with California's air quality standards for CO and NOx, represented in the chart by the colored horizontal lines, shown as the world's strictest air quality standards on the lower right of the chart.
As of December 31, 2024, our Ultera CHP, and fuel cell technologies, are the only technologies we are aware of that comply with California's air quality standards for CO and NOx, the world's strictest air quality standards.
Our exclusive rights are for engine-driven systems utilizing natural gas or diesel fuel in the application of power generation where the per-unit output is less than 500 kW.
Patent 7,687,937, and titled “Control of Small Distributed Energy Resources”, granted in 2010 and expires on July 26, 2027. Our exclusive rights are for engine-driven systems utilizing natural gas or diesel fuel in the application of power generation where the per-unit output is less than 500 kW.
Our patents expire between 2024 and 2037. In addition, we have licensed specific rights to Microgrid software algorithms developed by University of Wisconsin researchers for which we pay royalties to the assignee, The Wisconsin Alumni Research Foundation (WARF). Pursuant to U.S. Patent 7,116,010, titled “Control of small distributed energy resources”, granted in 2006 and expires on March 27, 2024.
Our patents expire between 2025 and 2042. 10 TECOGEN INC. In addition, we have licensed specific rights to Microgrid software algorithms developed by University of Wisconsin researchers for which we pay royalties to the assignee, The Wisconsin Alumni Research Foundation (WARF). Pursuant to U.S.
Since 1995, we have had a remote monitoring system in place that connects to hundreds of units daily and reports their “availability,” which is the amount of time a unit is running or is ready to run. More than 80% of the units operate above 90% availability, with the average being 93.8%.
Since 1995, we have had a remote monitoring system in place that connects to hundreds of units daily and reports their “availability,” which is the amount of time a unit is running or is ready to run. In 2017, we improved our remote monitoring system capability through the introduction of a cloud-based system called CHPInsight.
Sourcing & Manufacturing We are focused on continuously strengthening our manufacturing processes and increasing operational efficiencies. Many of the components used in the manufacture of our highly-efficient clean energy equipment are readily fabricated from commonly available raw materials or are standard available parts sourced from multiple suppliers.
Many of the components used in the manufacture of our highly-efficient clean energy equipment are readily fabricated from commonly available raw materials or are standard available parts sourced from multiple suppliers. We believe that adequate supplies exist to meet our near to medium term manufacturing needs.
Trademarks We have registered the brand names of our equipment and logos used on our equipment. These registered and pending trademarks include Tecogen, Tecochill, Tecopower, Ultera, InVerde, InVerde e+ and the associated logos. We will continue to trademark our product names and symbols.
These registered and pending trademarks include Tecogen, Tecochill, Tecopower, Ultera, InVerde, InVerde e+ and the associated logos. We will continue to trademark our product names and symbols. We rely on treatment of our technology as trade secrets through confidentiality agreements, which our employees and vendors are required to sign.
As a result, our greenhouse gas (GHG) emissions are typically half that of the electrical grid. Our systems generate electricity and hot water or in the case of our Tecochill product, both chilled water and hot water. Our products are expected to run on Renewable Natural Gas (RNG) as it is introduced into the US gas pipeline infrastructure.
Our systems are greater than 88% efficient compared to typical electrical grid efficiencies of 40% to 50%. As a result, our greenhouse gas (GHG) emissions are typically half that of the electrical grid. Our systems generate electricity and hot water or in the case of our Tecochill product, both chilled water and hot water.
Our factory service agreements have directly impacted these positive results and represent an important long-term annuity-like stream of revenue for us. New equipment sold beginning in 2016 and select upgrades to the existing installed equipment fleet include industrial internet solution which enables us to collect, analyze, and manage valuable asset data continuously and in real-time.
The CHPInsight platform allows us to collect, analyze and manage data regarding equipment operation continuously and in real time, providing improved insight into the functionality of our CHP fleet. Our factory service agreements have directly impacted these positive results and represent an important long-term annuity-like stream of revenue for us.
We rely on treatment of our technology as trade secrets through confidentiality agreements, which our employees and vendors are required to sign. Also, we rely on non-disclosure agreements with others that have or may have access to confidential information to protect our trade secrets and proprietary knowledge.
Also, we rely on non-disclosure agreements with others that have or may have access to confidential information to protect our trade secrets and proprietary knowledge. Sourcing & Manufacturing We are focused on continuously strengthening our manufacturing processes and increasing operational efficiencies.
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 O&M services for our products under long term service contracts. Our Energy Production segment sells energy in the form of electricity, heat, hot water and cooling to our customers under long-term sales agreements.
See Note 11."Related Party Notes" of the Notes to the Consolidated Financial Statements. Overview of Our Business Our operations are comprised of three business segments. Our Products segment designs, manufactures and sells industrial and commercial cogeneration systems. Our Services segment provides O&M services for our products under long term service contracts.
See Note 5."Aegis Contract and Related Asset Acquisition" of the Notes to the Consolidated Financial Statements. 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.
We have instituted a service price increase and have also been making engineering improvements to increase service intervals to increase gross margins. 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.
Our patents for the Ultera low-emissions control technology applies to all our gas engine-driven products and may have applications to other rich-burn spark-ignited internal combustion engines. We have been granted patents for this technology in Europe, Australia, Brazil, Canada, Japan, Mexico, Korea and Singapore. Copyrights Our control software is protected by copyright laws or through an exclusive license agreement.
We have been granted patents for this technology in Europe, Australia, Brazil, Canada, Japan, Mexico, Korea and Singapore. Copyrights Our control software is protected by copyright laws or through an exclusive license agreement. Trademarks We have registered the brand names of our equipment and logos used on our equipment.
Overview of Our Business Products Our products offer customers energy savings, resiliency and a cleaner environmental footprint. Our cogeneration, chiller and heat pump systems use an engine to generate electricity or shaft work and recover the waste heat from the engine. Our systems are greater than 88% efficient compared to typical electrical grid efficiencies of 40% to 50%.
Our Energy Production segment sells energy in the form of electricity, heat, hot water and cooling to our customers under long-term sales agreements. Products Our products offer customers energy savings, resiliency and a cleaner environmental footprint. Our cogeneration, chiller, and heat pump systems use an engine to generate electricity or shaft work and recover the waste heat from the engine.
The majority of our customers are located in regions with the highest utility rates, typically California, the Midwest and the Northeast.
The majority of our customers are located in regions with the highest utility rates, typically California, the Midwest and the Northeast. We have shipped over 3,200 units, some of which have been operating for almost 35 years. Services.
Controlled Environment Agriculture On July 20, 2022, we announced our intention to focus on opportunities for low carbon Controlled Environment Agriculture ("CEA"). We believe that CEA offers an exciting opportunity to apply our expertise in clean cooling, power generation, and greenhouse gas reduction to address critical issues affecting food and energy security.
We believe that CEA offers an exciting opportunity to apply our expertise in clean cooling, power generation, and greenhouse gas reduction to address critical issues affecting food and energy security. CEA facilities enable multiple crop cycles (15 to 20 cycles) in one year compared to one or two crop cycles in conventional farming.
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.
In recent years, our cogeneration equipment has been used in numerous cannabis cultivation facilities because our systems reduce the facility's need for power, significantly reduce operating costs and the facility GHG footprint, and offer resiliency to grid outages.
We believe that if cogeneration were applied on a large scale, global fuel usage might be dramatically curtailed and the utility grid made far more resilient. Furthermore, with technology we have introduced, like the Ultera low-emissions technology, our products can now contribute to better air quality level while complying with the strictest air quality regulations in the United States.
Furthermore, with technology we have introduced, like the Ultera low-emissions technology, our products can now contribute to better air quality at the local level while complying with the strictest air quality regulations in the United States.
In addition, WARF reserved the right to grant non-profit research institutions and governmental agencies non-exclusive licenses to practice and use, for non-commercial research purposes, the technology developed by us that is based on the licensed software. 9 TECOGEN INC. We consider our patents and licensed intellectual property to be important in the operation of our business.
Such royalty payments have been in the range of $5,000 to $15,000 on an annual basis through the year ended December 31, 2024. In addition, WARF reserved the right to grant non-profit research institutions and governmental agencies non-exclusive licenses to practice and use, for non-commercial research purposes, the technology developed by us that is based on the licensed software.
In 2018, a group of natural gas engine-generators fitted with the Ultera system were successfully permitted in the Los Angeles region for unrestricted operation, the first natural gas engines to do so without operating time limits or other exemption.
Multiple Tecogen CHP modules fitted with the patented Ultera emissions control technology have been permitted under the current regulatory limits in the Los Angeles area for unrestricted operation, the first natural gas engines to do so without operating time limits or other exemption.
The higher energy prices for natural gas as a result of the war may affect the performance of our Energy Production Segment. However, we have also seen higher electricity prices as much of the electricity production in the United States is generated from fossil fuels.
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.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeManagement conducted an evaluation of our internal control over financial reporting and based on this evaluation, management concluded that the company’s internal control over financial reporting was not effective as of December 31, 2023. We have a small number of employees dealing with general controls over information technology security and user access. This constitutes a material weakness in financial reporting.
Biggest changeWe have a small number of employees dealing with general controls over information technology, security and user access. This constitutes a material weakness in financial reporting. Any failure to implement effective internal controls could harm our operating results or cause us to fail to meet our reporting obligations.
Our business exposes us to potential product liability claims, which are inherent in the manufacturing, marketing and sale of our products, and we may face substantial liability for damages resulting from the faulty design of products, manufacture of products or improper use of products by end users.
Our business exposes us to potential product liability claims, which are inherent in the manufacturing, marketing and sale of our products, and we may face substantial liability for damages resulting from the faulty design, manufacture, or improper use of products by end users.
Because our sales to customers are typically into geographic areas with such incentives, elimination, or expiration of government subsidies and economic incentives for cogeneration equipment may negatively affect the competitiveness of equipment relative to other sources of electricity, heating, and cooling equipment, and could harm or halt the growth of the cogeneration industry and our business.
Because our sales to customers are typically into geographic areas with such incentives, elimination, or expiration of government subsidies and economic incentives for cogeneration equipment may negatively affect the competitiveness of our equipment relative to other sources of electricity, heating, and cooling equipment, and could harm or halt the growth of the cogeneration industry and our business.
We directly or indirectly store, collect and transmit sensitive data, including intellectual property, confidential information, proprietary business information, customer or personal data. The secure processing of such data, maintenance, and transmission of such data is important to our operations.
We directly or indirectly store, collect and transmit sensitive data, including intellectual property, confidential information, proprietary business information, and customer or personal data. The secure processing of such data, maintenance, and transmission of such data is important to our operations.
If a security breach or other incident results in the unauthorized access to or use, disclosure, release, or other processing of confidential or proprietary information, we could incur liability and it may be necessary to notify persons, governmental authorities, supervisory bodies, the media and other parties pursuant to privacy and security laws.
If a security breach or other incident results in unauthorized access to, or use, disclosure, release, or other processing of confidential or proprietary information, we could incur liability, and it may be necessary to notify persons, governmental authorities, supervisory bodies, the media and other parties pursuant to privacy and security laws.
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.
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 our 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.
If major public health issues, including pandemics, arise, we could be adversely affected by more stringent employee travel restrictions, additional limitations in freight services, governmental actions limiting the movement of products between regions, delays in production ramps of new products, and disruptions in the operations of our manufacturing vendors and suppliers.
If major public health issues, including pandemics, arise, we could be adversely affected by more stringent employee travel restrictions, limitations in freight services, governmental actions limiting the movement of products between regions, delays in production ramps of new products, and disruptions in the operations of our manufacturing vendors and suppliers.
We experience significant fluctuations in revenues from quarter to quarter on our product sales which may make period to period comparisons difficult. We have low volume, high dollar sales for projects that are generally non-recurring, and therefore our sales have fluctuated significantly from period to period.
We experience significant fluctuations in revenues and product mix from quarter to quarter on our product sales which may make period to period comparisons difficult. We have low volume, high dollar sales for projects that are generally non-recurring, and therefore our sales have fluctuated significantly from period to period.
Any of these possible outcomes could result in an adverse reaction in the financial marketplace due to a loss in investor confidence in the reliability of our financial statements, which ultimately could harm our business and could negatively impact the market price of our common stock.
Any of these possible outcomes could result in an adverse reaction in the financial marketplace due to a loss in investor confidence in the reliability of our financial statements, which ultimately could harm our business and could negatively impact on the market price of our common stock.
Investor confidence and the price of our common stock may be adversely affected if we are unable to comply with Section 404 of the Sarbanes-Oxley Act of 2002.
Investor confidence and the price of our common stock may be adversely affected if we are unable to comply with Section 404 of the Sarbanes-Oxley Act.
Furthermore, any such debt financing is likely to include financial and other covenants that may impede our ability to react to changes in the economy or industry.
Furthermore, any debt financing is likely to include financial and other covenants that may impede our ability to react to changes in the economy or industry.
As a public company, we are subject to the rules adopted by the SEC pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, which require us to include in our annual report on Form 10-K our management’s report on, and assessment of the effectiveness of, our internal control over financial reporting (“management’s report”).
Also, as a public company, we are subject to rules adopted by the SEC pursuant to Section 404 of the Sarbanes-Oxley Act, which require us to include in our annual report on Form 10-K our management’s report on, and assessment of the effectiveness of, our internal control over financial reporting (“management’s report”).
If we experience a period of significant growth or expansion, it could place a substantial strain on our resources. If our cogeneration and chiller products penetrate the market rapidly, we may be unable to deliver large volumes of technically complex products or components to our customers on a timely basis and at a reasonable cost to us.
If we experience a period of significant growth or expansion, it could place a substantial strain on our resources. If our cogeneration and chiller products penetrate the market rapidly, we may be unable to deliver large volumes of products or components to our customers on a timely basis and at a reasonable cost to us.
Although we are seeking to increase and diversify our customer base and reduce our reliance upon sales to a small number of customers, we expect sales to such customers to continue to constitute a significant portion of our revenues in the near term given we actively pursue large contracts and projects.
Although we are seeking to increase and diversify our customer base and reduce our reliance upon sales to a small number of customers, we expect sales to such customers to continue to constitute a significant portion of our revenues in the near term because we actively pursue large contracts and projects.
Our contracts with our customer and suppliers may not contain limitation of liability and there can be no assurance that limitations of liability in our contracts are sufficient to protect us from liabilities, damages, or claims related to privacy, data protection, or data security.
Our contracts with our customers and suppliers may not contain limitation of liability and there can be no assurance that limitations of liability in our contracts are sufficient to protect us from liabilities, damages, or claims related to privacy, data protection, or data security.
However, the regional rates charged for both base load and peak electricity may decline periodically due to excess generating capacity or general economic recessions, and both the cost of natural gas and the cost of electricity for base load and peak load may be adversely affected by geopolitical disruptions such as Russian expansion into the Ukraine and political and other responses to such expansionist activity.
However, the regional rates charged for both base load and peak electricity may decline periodically due to excess generating capacity or general economic recessions, and both the cost of natural gas and the cost of electricity for base load and peak load may be adversely affected by market forces and geopolitical disruptions such as Russian expansion into the Ukraine and political and other responses to such activity.
Our products and on-site utility service could become less competitive if electric rates were to fall substantially in the future, although, historically, electric rates have not had any sustained decline in price.
Our products and on-site utility service could become less competitive if electric rates were to fall substantially in the future, although, historically, electric rates have not experienced any sustained decline in price.
In addition, increases in the cost of natural gas may increase the cost of power generation in comparison to the cost of power from the electric grid and may result in decreased revenue and adversely affect our results of operation. 15 TECOGEN INC.
In addition, increases in the cost of natural gas may increase the cost of power generation in comparison to the cost of power from the electric grid, and may result in decreased revenue and adversely affect our results of operation. 17 TECOGEN INC.
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.
These measures cannot provide absolute security, and losses or unauthorized access to or releases of confidential information may occur and could materially adversely affect our business, reputation, results of operations and financial condition.
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.
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. 20 TECOGEN INC.
There can be no assurance that we will successfully identify new product opportunities, develop and bring new or enhanced products to market in a timely manner, successfully lower costs, and achieve market acceptance of our products, or that products and technologies developed by others will not render our products or technologies obsolete or noncompetitive.
There can 18 TECOGEN INC. be no assurance that we will successfully identify new product opportunities, develop and bring new or enhanced products to market in a timely manner, successfully lower costs, and achieve market acceptance of our products, or that products and technologies developed by others will not render our products or technologies obsolete or noncompetitive.
Moreover, effective internal control over financial reporting, particularly that relating to revenue recognition, is necessary for us to produce reliable financial reports and is important in helping to prevent financial fraud.
Moreover, effective internal control over financial reporting, particularly that relate to revenue recognition, is necessary for us to produce reliable financial reports and is important in helping to prevent financial fraud.
Over the past several years electric rates have fluctuated, in some instances rates have decreased, subsequent to the vast majority of customer contract dates, causing the billable value of the electrical power generated by our systems to decrease which has an adverse effect on our results of operations.
Over the past several years electric rates have fluctuated, and in some instances rates have decreased, subsequent to customer contract dates, causing the billable value of the electrical power generated by our systems to decrease which has an adverse effect on our results of operations.
In addition, our operating expenses are based on anticipated sales levels, and a high 14 TECOGEN INC. percentage of our expenses are generally fixed in the short term. As a result of these factors, a small fluctuation in timing of sales can cause operating results to vary materially from period to period.
In addition, our operating expenses are based on anticipated sales levels, and a high percentage of our expenses are generally fixed in the short term. As a result of these factors, a small fluctuation in timing of sales can cause operating results to vary materially from period to period.
We may find it more difficult to raise additional equity capital if it should be needed for our business while the options, warrants and convertible securities are outstanding. Future sales of our shares by our existing stockholders may cause our stock price to fall.
We may find it more difficult to raise additional equity capital if it should be needed for our business while options, warrants, or convertible securities are outstanding. Future sales of our shares by our existing stockholders may cause our stock price to fall.
Additionally, the holdings of our directors and executive officers may increase in the future upon vesting or exercise of the options or other stock awards they may hold or in the future may be granted or if they otherwise acquire 19 TECOGEN INC. additional shares in the open market or otherwise.
Additionally, the holdings of our directors and executive officers may increase in the future upon vesting or exercise of the options or other stock awards they may hold or in the future may be granted or if they otherwise acquire additional shares in the open market or otherwise.
Material delays in introducing new products or product enhancements may cause customers to forego purchases of our products and purchase those of our competitors. Legal, Regulatory and Compliance Risks Our business is subject to product liability and warranty claims.
Material delays in introducing new products or product enhancements may cause customers to forego purchases of our products and purchase products offered by our competitors. Legal, Regulatory and Compliance Risks Our business is subject to product liability and warranty claims.
The certifying officers designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under their supervision, to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act is recorded, processed, summarized and reported, within the time periods specified by the SEC’s rules and forms, and is made known to management (including the certifying officer) by others within the company, including its subsidiaries.
Our certifying officer designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under his supervision, to ensure that information required to be disclosed by us in the reports we file or submit under the Securities Exchange Act is recorded, processed, summarized and reported, within the time periods specified by the SEC’s rules and forms, and is made known to management (including the certifying officer) by others within the company, including our subsidiaries.
In addition, an adverse outcome of litigation could cause our insurance premiums and retention amounts to increase in the future. Any of these consequences could have a material adverse effect on our business, 17 TECOGEN INC. financial condition and results of operations. For more information regarding litigation, see "Item 3.
In addition, an adverse outcome in any such litigation could cause our insurance premiums and retention amounts to increase in the future. Any of these consequences could have a material adverse effect on our business, financial condition and results of operations. For more information regarding litigation, see "Item 3.
Any such 22 TECOGEN INC. access, disclosure or other loss of information could result in legal claims, proceedings, liability under laws that protect the privacy of personal information of our employees or others, and any such event could disrupt our operations, damage our reputation, and cause loss of confidence in us.
Any such access, disclosure or other loss of information could result in legal claims, proceedings, liability under laws that protect the privacy of personal information of our employees or others, and any such event could disrupt our operations, damage our reputation, and cause a loss of confidence in us.
The loan is required to be repaid in the event of a change of control of the company and upon the occurrence of an event of default under the note, including upon a failure to pay when due the principal and interest when due, or the commencement of voluntary or involuntary bankruptcy or insolvency proceeding.
The loans are required to be repaid in the event of a change of control of the company and upon the occurrence of an event of default under the note, including upon a failure to pay when due the principal and interest when due, or the commencement of voluntary or involuntary bankruptcy or insolvency proceeding.
The loss of the services of key employees or an inability to attract, train and retain qualified and skilled employees, specifically engineering, operations, and business development personnel, could result in the loss of business or could otherwise negatively impact our ability to operate and grow our business successfully.
The loss of the services of key employees or an inability to attract, train and retain qualified and skilled employees, specifically engineering, operations, and business development personnel, could result in the loss of business or could otherwise negatively impact on our ability to operate and grow our business successfully. 26 TECOGEN INC.
The techniques used by cybercriminals change frequently and may not be recognized until launched and can originate from a wide variety of sources, as discussed above.
The techniques used by cybercriminals change frequently and may not be recognized until launched and can originate from a wide variety of sources.
Also, the exercise of options may result in additional dilution. The holders of outstanding options, warrants and convertible securities or derivatives, if any, have the opportunity to profit from a rise in the market price of our shares, if any, without assuming the risk of ownership, with a resulting dilution in the interests of other stockholders.
The holders of outstanding options, warrants and convertible securities or derivatives, if any, have the opportunity to profit from a rise in the market price of our shares, if any, without assuming the risk of ownership, with a resulting dilution in the interests of other stockholders.
The market price of shares of our common stock could be subject to wide fluctuations in response to many risk factors listed in this section, and others beyond our control, including: • results and timing of our product development; • results of the development of our competitors’ products; • regulatory actions with respect to our products or our competitors’ products; • actual or anticipated fluctuations in our financial condition and operating results; • actual or anticipated changes in our growth rate relative to our competitors; • actual or anticipated fluctuations in our competitors’ operating results or changes in their growth rate; • competition from existing products or new products that may emerge; • announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures, collaborations, or capital commitments; • issuance of new or updated research or reports by securities analysts; • fluctuations in the valuation of companies perceived by investors to be comparable to us; • share price and volume fluctuations attributable to inconsistent trading volume levels of our shares; • additions or departures of key management or personnel; • disputes or other developments related to proprietary rights, including patents, litigation matters, and our ability to obtain, maintain, defend or enforce proprietary rights relating to our products and technologies; • announcement or expectation of additional financing efforts; • sales of our Common Stock by us, our insiders, or our other stockholders; and • general economic and market conditions.
The market price of shares of our common stock could be subject to wide fluctuations in response to many risk factors listed in this section, and others beyond our control, including: • results and timing of our product development; • results of the development of our competitors’ products; • regulatory actions with respect to our products or our competitors’ products; • actual or anticipated fluctuations in our financial condition and operating results; • actual or anticipated changes in our growth rate relative to our competitors; 21 TECOGEN INC. • actual or anticipated fluctuations in our competitors’ operating results or changes in their growth rate; • competition from existing products or new products that may emerge; • announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures, collaborations, or capital commitments; • issuance of new or updated research or reports by securities analysts; • fluctuations in the valuation of companies perceived by investors to be comparable to us; • share price and volume fluctuations attributable to inconsistent trading volume levels of our shares; • additions or departures of key management or personnel; • disputes or other developments related to proprietary rights, including patents, litigation matters, and our ability to obtain, maintain, defend or enforce proprietary rights relating to our products and technologies; • announcement or expectation of additional financing efforts; • sales of our shares by us, our insiders, or our other stockholders; • political events, war, terrorism, public health issues, natural disasters and other circumstances; • lawsuits threatened or filed against us; and • general economic and market conditions.
Inadequate internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our common stock and may require us to incur additional costs to improve our internal control system. General Business Risks Our intellectual property may not be adequately protected.
Inadequate internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our common stock and may require us to incur additional costs to improve our internal control system.
We regularly evaluate the effectiveness of our disclosure controls and procedures and report our conclusions about the effectiveness of the disclosure controls quarterly in our Forms 10-Q and annually in our Forms 10-K.
We regularly evaluate the effectiveness of our disclosure controls and procedures and report our conclusions about the effectiveness of the disclosure controls quarterly in our Quarterly Reports on Form 10-Q and annually in our Annual Reports on Form 10-K.
The increase in personnel working remotely during and after the recent pandemic has increased the risk for our and our vendors and suppliers’ security breaches and incidents.
The increase in personnel working remotely during and after the Covid-19 pandemic has increased the risk of our and our vendors and suppliers’ security breaches and incidents.
There can be no assurance that we will not be vulnerable to claims by customers and by third parties that are beyond any contractual protections that we are able to negotiate. As a result, liability claims could cause us significant financial harm. We may be subject to litigation, which is expensive and could divert management attention.
There can be no assurance that we will not be vulnerable to claims by customers and by third parties that are beyond any contractual protections that we are able to negotiate. As a result, liability claims could cause us significant financial harm.
There can be no assurance that our efforts to reduce our risk through warranty disclaimers will effectively limit our liability. Any significant occurrence of warranty expense in excess of estimates could have a material adverse effect on our operating results, financial condition and cash flow.
There can be no assurance that our efforts to reduce our risk through warranty disclaimers will effectively limit our liability. Any significant occurrence of warranty expense in excess of estimates could have a material adverse effect on our operating results, financial condition and cash flow. Further, we have at times undertaken programs to enhance the performance of units previously sold.
We seek to protect our intellectual property rights through patents, trademarks, copyrights, trade secret laws, confidentiality agreements, and licensing arrangements, but we cannot ensure that we will be able to adequately protect our technology from misappropriation or infringement. We cannot ensure that our existing intellectual property rights will not be invalidated, circumvented, challenged, or rendered unenforceable.
General Business Risks Our intellectual property may not be adequately protected. We seek to protect our intellectual property rights through patents, trademarks, copyrights, trade secret laws, confidentiality agreements, and licensing arrangements, but we cannot ensure that we will be able to adequately protect our technology from misappropriation or infringement.
We have never ramped up our manufacturing capabilities to meet significant large-scale production requirements. If we were to commit to deliver large volumes of products, we may not be able to satisfy these commitments on a timely and cost-effective basis.
We have never ramped up our manufacturing capabilities to meet significant large-scale production requirements. If we were to commit to deliver large volumes of products, we may not be able to satisfy these commitments on a timely and cost-effective basis. We are dependent on a limited number of third-party suppliers for the supply of key components for our products.
The loss of any one or more of such customers or an inability to collect such accounts receivable could have a material adverse effect our business, financial condition and results of operations. Item 1B. Unresolved Staff Comments. None.
The loss of any one or more of such customers or an inability to collect resulting accounts receivables could have a material adverse effect our business, financial condition and results of operations.
As of the end of the period covered by this Annual Report, December 31, 2023, our principal executive officer and principal financial officer performed an evaluation of our disclosure controls and procedures and concluded that our controls were not effective to provide reasonable assurance that information required to be disclosed by us in reports that we file under 21 TECOGEN INC. the Securities Exchange Act, is recorded, processed, summarized and reported when required.
As of the end of the period covered by our Annual Report on Form 10-K for the year ended December 31, 2024, our certifying officer performed an evaluation of our disclosure controls and procedures and concluded that our controls were not effective to provide reasonable assurance that information required to be disclosed by us in reports that we file under the Securities Exchange Act, is recorded, processed, summarized and reported when required.
We performed a goodwill impairment test at December 31, 2023 and determined that the estimated fair value of the energy production business assets and the Aegis maintenance service contracts, based on a discounted cash flow analysis, exceeded the carrying value of the assets and did not recognize goodwill impairment relating to our energy production segment or service segment for the year ended December 31, 2023.
We performed a goodwill impairment test at December 31, 2024, and determined that the carrying value of our energy production business assets exceeded the estimated fair value of the energy production business assets based on a discounted cash flow analysis, and we recognized goodwill impairment relating to our energy production segment of $217,295 for the year ended December 31, 2024.
Our operating history is characterized by losses and there can be no assurance we will be able to increase our sales and sustain profitability in the future. We have historically incurred annual net losses, including a net loss of $4,598,108 in 2023.
Risks Relating to Our Business and Financial Condition Our operating history is characterized by losses and there can be no assurance we will be able to increase our sales and sustain profitability in the future. We have historically incurred annual net losses, including net loss of $4,760,238 in 2024.
Although we expect our customers to issue definitive purchase orders with respect to such backlog, there can be no assurance that such amounts will not be subject to modification in the event customers experience unexpected delays in obtaining permits, interconnection agreements or financing.
Our backlog as of December 31, 2024 was $12,336,248 compared to $7,388,145 as of December 31, 2023. Although we expect our customers to issue definitive purchase orders with respect to such backlog, there can be no assurance that such amounts will not be subject to modification in the event customers experience unexpected delays in obtaining permits, interconnection agreements, or financing.
Hatsopoulos when it becomes due unless Mr. Hatsopoulos is willing to extend the term of the loan or renegotiate the terms, of which there can be no assurance. Risks Relating to Ownership of our Common Stock Investment in our Common Stock is subject to price fluctuations and market volatility. Historically, valuations of many small companies have been highly volatile.
Lewis are willing to extend the terms of the loan or renegotiate the terms, or accept payment by conversion to our shares, of which there can be no assurance. Risks Relating to Ownership of our Common Stock Investment in our Common Stock is subject to price fluctuations and market volatility. Historically, valuations of many small companies have been highly volatile.
For example, we are eligible for the New Jersey Smart Start Combined Heat and Power Incentive. We may incorporate price reduction on equipment sold to customers based on the anticipated receipt of governmental economic incentive payments and apply and collect the incentives payments. If such incentives become unavailable to us our financial condition may be adversely affected.
We may incorporate price reductions on equipment sold to customers based on the anticipated receipt of governmental economic incentive payments and apply and collect the incentives payments. If such incentives become unavailable to us our financial condition may be adversely affected.
Our Chief Executive Officer and Chief Financial Officer (“certifying officers”) are responsible for establishing and maintaining our disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e) and 15d-15(e)).
Our Chief Executive Officer and Chief Financial Officer (“certifying officer”) is responsible for establishing and maintaining our disclosure controls and procedures (as defined in Securities Exchange Act Rule 13a-15(e) and Rule15d-15(e)). 23 TECOGEN INC.
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 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 may occur.
Our issuance of additional stock, convertible preferred stock, or convertible debt may result in dilution to the interests of shareholders and may also result in the reduction of your stock price. The sale of a substantial number of shares into the market, or even the perception that sales could occur, could depress the price of our common stock.
The sale of a substantial number of shares into the market, or even the perception that sales could occur, could depress the price of our common stock. Also, the exercise of options may result in additional dilution.
Our failure to do so could have a material adverse effect on our business and results of operations. Our products involve a lengthy sales cycle and we may not anticipate sales levels appropriately, which could impair our results of operations.
We can make no assurance that we will be able to achieve any such production cost reductions. Our failure to do so could have a material adverse effect on our business and results of operations. Our products involve a lengthy sales cycle and we may not anticipate sales levels appropriately, which could impair our results of operations.
Our competitors may successfully challenge the validity of our patents, design non-infringing products, or deliberately infringe our patents. There can be no assurance that other companies are not investigating or developing other similar technologies.
We cannot ensure that our existing intellectual property rights will not be invalidated, circumvented, challenged, or rendered unenforceable. 25 TECOGEN INC. Our competitors may successfully challenge the validity of our patents, design non-infringing products, or deliberately infringe our patents. There can be no assurance that other companies are not investigating or developing other similar technologies.
Because our directors and executive officers are among our largest stockholders, they can exert influence over our business and affairs and have actual or potential interests that may differ from other stockholders or investors. As of the date of this report, our directors and executive officers collectively beneficially own approximately 14.8% of our issued and outstanding shares.
Because our directors and executive officers are among our largest stockholders, they can exert influence over our business and affairs and have actual or potential interests that may differ from other stockholders or investors.
The reduction, elimination or expiration of government and economic incentives for applications of our equipment could reduce demand for our equipment and harm our business. The market for cogeneration equipment depends in part on the availability and size of government and economic incentives that vary by geographic market.
The market for cogeneration equipment depends in part on the availability and size of government and economic incentives that vary by geographic market.
Our share price may be volatile and in the past companies that have experienced volatility in the market price of their stock have been subject to an increased incidence of securities class action litigation. Securities litigation against us could result in substantial costs and divert our management’s attention from other business concerns, which could seriously harm our business.
Our share price may be volatile and in the past companies that have experienced volatility in the market price of their stock have been subject to an increased incidence of securities class action litigation.
Further, we have at times 16 TECOGEN INC. undertaken programs to enhance the performance of units previously sold. These enhancements have at times been provided at no cost or below our cost. If we choose to offer such programs again in the future, such actions could result in significant costs.
These enhancements have at times been provided at no cost or below our cost. If we offer such programs in the future, such actions could result in significant costs.
Changes in customer orders or lack of demand may also impact our profitability. There can be no assurance we will be able to increase our sales and achieve and sustain profitability in the future. We are dependent on a limited number of third-party suppliers for the supply of key components for our products.
We may be required to purchase key components long before we can deliver a unit and receive payment. Changes in customer orders or lack of demand may also impact our profitability. There can be no assurance we will be able to increase our sales and achieve and sustain profitability in the future.
In warmer months the customers do not use as much thermal energy because they do not have as much demand for heat at their locations. Due to lower demand in warmer months, we may not be able to bill for thermal energy and in turn may have a decrease in revenue.
In warmer months the customers do not use as much thermal energy because they do not have as much demand for heat at their locations. Due to lower demand in warmer months, our revenue from thermal energy billing during those periods.
Our financial condition and results of operations could suffer if there is an impairment of goodwill or intangible assets. As of December 31, 2023, our goodwill was $2,743,424, and our intangible assets were $2,436,230.
Our financial condition and results of operations could suffer if there is an impairment of goodwill or intangible assets.
Because we have not and do not intend to pay cash dividends, our stockholders receive no current income from holding our stock. We have paid no cash dividends on our capital stock to date and we currently intend to retain our future earnings, if any, to fund the development and growth of our business.
We have paid no cash dividends on our capital stock to date, and we currently intend to retain our future earnings, if any, to fund the operation and expansion of our business, and therefore do not anticipate paying any cash dividends in the foreseeable future.
Our ability to achieve cost reductions will depend on our ability to develop low-cost design enhancements, to obtain necessary tooling and favorable supplier contracts, and to increase sales volumes so we can achieve economies of scale. We can make no assurance that we will be able to achieve any such production cost reductions.
We may need to reduce the unit production cost of our products over time to maintain our ability to offer competitively priced products. Our ability to achieve cost reductions will depend on our ability to develop low-cost design enhancements, to obtain necessary tooling and favorable supplier contracts, and to increase sales volumes so we can achieve economies of scale.
We believe that our future success will depend upon our ability to continue to develop and provide innovative products and product enhancements that meet the increasingly sophisticated needs of our customers. However, this requires that we successfully anticipate and respond to technological changes in design and manufacturing processes in a cost-effective and timely manner.
Risks Related to Our Technologies If we are unable to maintain our technological expertise in design and manufacturing processes, we will not be able to successfully compete. We believe that our future success will depend upon our ability to continue to develop and provide innovative products and product enhancements that meet the increasingly sophisticated needs of our customers.
The development of new, technologically advanced products and enhancements is a complex and uncertain process requiring high levels of innovation, as well as the accurate anticipation of technological and market trends.
However, this requires that we successfully anticipate and respond to technological changes in design and manufacturing processes in a cost-effective and timely manner. The development of new, technologically advanced products and enhancements is a complex and uncertain process requiring high levels of innovation, as well as the accurate anticipation of technological and market trends.
Our bad debt expense increased to $902,432 in the year ended December 31, 2023, compared to a benefit of $70,987 in the year ended December 31, 2022, due to the write down of certain install receivables which were deemed uncollectible in the year ended December 31, 2023.
Our provision for credit losses decreased to $146,010 in the year ended December 31, 2024, compared to $902,432 in the year ended December 31, 2023, due to the write down of certain install receivables which were deemed uncollectible in the year ended December 31, 2023.
Our bad debt expense increased to $902,432 in the year ended December 31, 2023, compared to a benefit of $70,987 in the year ended December 31, 2022, due to the write down of certain install receivables which were deemed uncollectible in the year ended December 31, 2023.
Our provision for credit losses decreased to $146,010 in the year ended December 31, 2024, compared to $902,432 in the year ended December 31, 2023, due to the write down of certain install receivables which were deemed uncollectible in the year ended December 31, 2023.
The loss of one or more of these customers, or our inability to collect outstanding receivables from such customers could have a material adverse effect on our financial results. For the years ended December 31, 2023 and December 31, 2022, no customer represented more than 10% of revenues for the respective years.
We depend on a small number of customers for a substantial portion of our product revenues. The loss of one or more of these customers, or our inability to collect outstanding receivables from such customers could have a material adverse effect on our financial results.
Item 1A. Risk Factors Our business operations, financial condition, results of operations and stock price may be affected by a number of factors. In addition to the other information in this Form 10-K, the following factors and the information contained under the heading ''Cautionary Note Concerning Forward-Looking Statements'' should be considered in evaluating our company and our business.
In addition to the other information in this Annual Report on Form 10-K, the following factors and the information contained under the heading ''Cautionary Note Concerning Forward-Looking Statements'' should be considered in evaluating our company and our business. The risks described below may not be the only risks we face.
We received short-term debt financing from a director and principal shareholder to fund our business and ongoing operations. If we are unable to generate sufficient funds from operations or obtain additional financing, we may not be able to repay the loan when it becomes due. On October 9, 2023, we entered into an agreement with Mr.
If we are unable to generate sufficient funds from operations or obtain additional financing, we may not be able to repay the loans when they becomes due. On October 9, 2023, we entered into note subscription agreements with each of John N. Hatsopoulos and Earl R. Lewis, III, each a director and shareholder of Tecogen, pursuant to which Mr.
If any of the events or circumstances described in the following risks occur, our business, financial condition and results of operations could suffer and the trading price of our common stock could decline. Risks Relating to Our Business Strategy and Industry We may need to raise additional financing if cash generated from our operations is insufficient.
Additional risks that we do not yet know of, or that we currently think are immaterial, may also impair our business operations or financial results. If any of the events or circumstances described in the following risk factors occur, our business, financial condition and results of operations could suffer and the trading price of our common stock could decline.
We have experienced order delays and deferrals for our products due to business closures or the inability to obtain government issued permits to conduct product installations. Any of such events may result in customers modifying the equipment or the terms or timing of the expected installation, which may result in changes to the amount of backlog attributed to those projects.
We have experienced order delays and deferrals for our products due to business closures or the inability to obtain government issued permits to conduct product installations.
The amount of our backlog is subject to fluctuation due to our customers’ experiencing unexpected delays in financing, permitting or modifications in specifications of the equipment. Our total product and installation backlog as of December 31, 2023 was $7,388,145 compared to $6,722,138 as of December 31, 2022.
Our allowance for credit losses increased $145,940 to $295,932 in the year ended December 31, 2024, compared to the year ended December 31, 2023. The amount of our backlog is subject to fluctuation due to our customers’ experiencing unexpected delays in financing, permitting, or modifications in specifications of the equipment.
Our business is capital intensive and, because our products generally are built to order with customized configurations, the lead time to build and deliver a unit can be significant. We may be required to purchase key components long before we can deliver a unit and receive 13 TECOGEN INC. payment.
Our inability to obtain necessary capital or financing to fund these working capital needs may adversely affect our ability to expand our operations. 14 TECOGEN INC. Our business is capital intensive and, because our products are built to order with customized configurations, the lead time to build and deliver a unit can be significant.
These types of restrictions, fees, or charges could make it harder for customers to install our products or use them effectively, as well as increase costs to potential customers. This could make our systems less desirable, thereby adversely affecting our revenue and other operating results.
Utilities may charge additional fees to customers who install on-site CHP and rely on the grid for back-up power. These types of restrictions, fees, or charges could make it harder for customers to install our products or use them effectively, as well as increase costs to potential customers.
Based upon our operating and cash flow plan, we believe existing resources, including cash and cash flows from operations will be sufficient to meet our working capital needs for the next twelve months.
Based on management's analysis and our operating and cash flow plans, we believe that anticipated cash flows from operations will be sufficient to meet our current working capital needs and fund operations over the next twelve months. There can, however, be no assurance we will be able to do so.
To expedite development of our business, including with regard to equipment installation and service functions, we anticipate investigating and potentially pursuing future acquisitions of complementary businesses.
To expedite the development of our business, including with regard to equipment installation and service functions, we anticipate investigating and potentially pursuing future acquisitions of complementary businesses, and may engage in discussions with respect to possible acquisitions, sale of assets, business combinations, and joint ventures intended to complement or expand our business, some of which may be significant transactions for us.
Utilities or governmental entities on occasion have placed barriers to the installation of our products or their interconnection with the electric grid, and they may continue to do so. Utilities may charge additional fees to customers who install on-site CHP and rely on the grid for back-up power.
Utilities or governmental entities could hinder our entry into and growth in the marketplace, and we may not be able to effectively sell our products. Utilities or governmental entities on occasion have placed barriers to the installation of our products or their interconnection with the electric grid, and they may continue to do so.
In addition, attacks against us and our customers can escalate during periods of severe diplomatic or armed conflict. Credit and Liquidity Risks We are exposed to credit risks with respect to some of our customers.
Credit and Liquidity Risks We are exposed to credit risks with respect to some of our customers.
As of the end of the period covered by this report, our principal executive officers and our principal financial officer have concluded there is a material weakness in our disclosure controls and procedures and our internal control over financial reporting, which could harm our operating results or cause us to fail to meet our reporting obligations.
As of the end of the period covered by our Annual Report on Form 10-K for the year ended December 31, 2024, our principal executive officer and principal financial officer has concluded that there is a material weakness in our disclosure controls and procedures and our internal control over financial reporting.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeWe recognize the importance of developing, implementing, and maintaining effective cybersecurity measures to safeguard our IT systems and protect the confidentiality, integrity, and availability of our confidential and personal data, including with respect to our customers, suppliers, and employees, as well as our intellectual property. 23 TECOGEN INC.
Biggest changeWe recognize the importance of developing, implementing, and maintaining effective cybersecurity measures to safeguard our IT systems and protect the confidentiality, integrity, and availability of our confidential and personal data, including with respect to our customers, suppliers, and employees, as well as our intellectual property.
In the event of an incident, our incident response plan outlines the steps to be followed from incident detection to mitigation, recovery and notification, and involves notifying senior management, our legal department, and the board of directors and/or our audit committee, if appropriate, and mitigation and remediation steps by our third-party consultant.
In the event of a cybersecurity incident, our incident response plan outlines the steps to be followed from incident detection to mitigation, recovery and notification, and involves notifying senior management, our legal department, and the board of directors and/or our audit committee, if appropriate, and mitigation and remediation steps by our third-party consultant.
We monitor issues that are internally discovered or externally reported that may affect our business and have processes to assess those issues for potential cybersecurity impact or risk. We have integrated our cybersecurity risk management program into our broader enterprise risk management program.
We monitor issues that are internally discovered or externally reported that may affect our business and have processes to assess those issues for potential cybersecurity impact or risk. 27 TECOGEN INC. We have integrated our cybersecurity risk management program into our broader enterprise risk management program.
Table of Contents We maintain a cybersecurity risk management program to identify, assess, manage, mitigate, and respond to cybersecurity threats. Our cybersecurity risk management program incorporates various mechanisms to detect and monitor unusual network activity, as well as containment and incident response tools.
We maintain a cybersecurity risk management program to identify, assess, manage, mitigate, and respond to cybersecurity threats. Our cybersecurity risk management program incorporates various mechanisms to detect and monitor unusual network activity, as well as containment and incident response tools.
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Our cybersecurity risk management and strategy processes are jointly led by our embedded software engineer and Chief Executive Officer, in conjunction with a third-party consultant we have engaged to assist with cybersecurity risks assessment and monitoring.
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Our embedded software engineer is informed about and monitors the prevention, mitigation, detection, and remediation of cybersecurity incidents through their management of the cybersecurity risk management and strategy processes described above, including our incident response plan.
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Together with the General Counsel, Chief Executive Officer and outside consultant that comprise our cybersecurity management team, we collectively possess significant experience in evaluating, managing, and mitigating security and other risks, including cybersecurity risks. Our embedded software engineer possesses significant information systems experience.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe larger leased spaces have office space to accommodate administrative, sales and engineering personnel, and warehouse space to stock parts in support of our service contracts. As of December 31, 2023, the service centers that fit this larger category are based in Piscataway, New Jersey and 24 TECOGEN INC.
Biggest changeWe believe that our facilities are appropriate and adequate for our current needs. Service Centers Our eleven leased service centers can be categorized into two different sizes. The larger leased spaces have office space to accommodate administrative, sales and engineering personnel, and warehouse space to stock parts in support of our service contracts.
These centers are located in Los Angeles, California; Sterling Heights, Michigan; Newark, New York, East Windsor, Connecticut; East Syracuse, New York, Toronto, Ontario and Wellesley Chapel, Florida.
These centers are located in Easton, Massachusetts, Los Angeles, California, Sterling Heights, Michigan, Newark, New York, East Windsor, Connecticut, East Syracuse, New York, Toronto, Ontario and Wellesley Chapel, Florida.
A portion of the corporate headquarters in Waltham, Massachusetts and the new corporate headquarters in Billerica, Massachusetts are used in this manner to service Boston and New England. The smaller service centers are parts depots or warehouses for the stocking of parts in support of our service contracts.
A portion of the corporate headquarters in North Billerica, Massachusetts are used in this manner to service all of our satellite service centers. The smaller service centers are parts depots or warehouses for the stocking of parts in support of our service contracts.
Table of Contents Valley Stream and Buchanan, New York to service the Metro New York City and the Mid-Atlantic region. The San Francisco Bay area and Northern California is served by such a center in Hayward, California.
As of December 31, 2024, the service centers that fit this larger category are based in Piscataway, New Jersey and Valley Stream and Buchanan, New York to service the Metro New York City and the Mid-Atlantic region. The San Francisco Bay area and Northern California are served by such a center in Hayward, California.
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.
Facilities Relocation On March 31, 2023, we entered into two lease agreements for two adjacent buildings located in North Billerica, Massachusetts, 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.
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.
Both lease agreements commenced on January 1, 2024, and require payment of the base rent, real estate taxes, common maintenance expenses, and aggregate security deposits in the amount of $38,200. Our costs for initial improvements required to the leased premises is estimated to range between $900,000 and $1,000,000.
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, January 1, 2024. We believe that our facilities are appropriate and adequate for our current needs. Our eleven leased service centers can be broken into two different sizes.
The estimated straight-line monthly rent expense for the initial term of the lease is approximately $26,962 per month. In accordance with ASC 842-20-30-1, we recognized and recorded the lease liability and 28 TECOGEN INC. right-of-use asset using the discount rate for the lease upon the lease commencement date, January 1, 2024.
Item 2. Properties. Our headquarters is located in Waltham, Massachusetts, and consists of approximately 43,000 square feet of manufacturing, storage and office space. On March 1, 2024, we extended the Waltham lease which now expires on April 30, 2024. Currently, our monthly base rent for our Waltham, Massachusetts facility is $44,254.
Item 2. Properties. Our headquarters are located in North Billerica, Massachusetts, consisting of approximately 26,412 square feet of manufacturing, storage and office space, of which approximately 21,000 square feet is dedicated to manufacturing and warehousing.
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Our costs for initial improvements required to the leased premises is estimated to range between $500,000 and $750,000. The estimated straight-line monthly rent expense for the initial term of the lease is approximately $26,962 per month.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeFor the year ended December 31, 2022, we reserved $150,000 for anticipated damages which may not be covered by our insurance and continue to maintain the reserve at December 31, 2023. Item 4. Mine Safety Disclosures. Not applicable. PART II
Biggest changeFor the year ended December 31, 2022, we reserved $150,000 for anticipated damages which may not be covered by our insurance and maintained the reserve at December 31, 2024.
Item 3. Legal Proceedings. 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 Milton Hydro Distribution Inc (the "Plaintiffs"), all of whom are municipal corporations incorporated in the Province of Ontario.
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 Milton Hydro Distribution Inc. (the "Plaintiffs"), all of whom are municipal corporations incorporated in the Province of Ontario.
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 cogenerator and the plaintiff's facility. We have filed a response denying liability and are represented by Canadian counsel.
Plaintiffs allege that on or about July 10, 2022, a Tecogen cogeneration unit installed by us at the plaintiffs facility caught fire, causing damage to the cogeneration unit and the plaintiff's facility. We filed a response denying liability and are represented by Canadian counsel.
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.
The plaintiffs sued for damages in the amount of CDN $1,000,000, prejudgment and post-judgment interest, and legal fees, alleging breach of contract, breach of warranty, negligent misrepresentations and nuisance.
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Item 3. Legal Proceedings. Except as described below, we and our subsidiaries and our properties are not parties to any material pending legal proceedings, other than ordinary routine litigation incidental to our business.
Added
On January 13, 2025, Tecogen and our insurers entered into a Settlement Agreement and Full and Final Release from any and all claims, obligations and liabilities, arising from the July 10, 2022 fire in the amount of CDN $400,000, of which we were responsible for CDN $100,000.
Added
On February 7, 2025, we remitted CDN $100,000, or $70,994, representing payment in full of our liability relating to this matter. Item 4. Mine Safety Disclosures. Not applicable. PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe Plan was amended at various dates by the Board of Directors to increase the reserved shares of common stock issuable under the Plan to 3,838,750 as of December 31, 2023, and in June 2017 stockholders approved an amendment to extend the termination date of the Plan to January 1, 2026 and to ratify all of our option grants issued after January 1, 2016 (the “Amended Plan”).
Biggest changeOn November 1, 2016, the 2006 Plan was amended by the Board of Directors to increase the reserved shares of common stock issuable under the 2006 Plan to 3,838,750 and to extend the termination date of the 2006 Plan to January 1, 2026.
The options are not transferable except by will or domestic relations order. The option price per share under the 2022 Plan cannot be less than the fair market value of the underlying shares on the date of the grant.
The options are not transferable except by will or domestic relations order. The option price per share under the 2006 Plan cannot be less than the fair market value of the underlying shares on the date of the grant.
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.
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.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market for Our Shares Our common stock is quoted on the OTC Markets Group’s OTCQX Best Market tier and trades under the symbol TGEN. As of March 25, 2024, there were 57 holders of record of our common stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market for Our Shares Our common stock is quoted on the OTC Markets Group’s OTCQX Best Market tier and trades under the symbol TGEN. As of March 18, 2025, there were 57 holders of record of our common stock.
We adopted the 2022 Stock Incentive Plan (the "2022 Plan"), under which the Board of Directors may grant incentive or non-qualified stock options and stock grants to key employees, directors, advisors and consultants. We have reserved 3,800,000 shares of our common stock for issuance pursuant to awards under the 2022 Plan.
Under the plan, the Board of Directors may grant or award incentive stock options to employees and officers and non-qualified stock options, restricted stock grants, and common stock to our employees, officers, directors, and consultants. We have reserved 3,800,000 shares of our common stock for issuance pursuant to awards under the 2022 Plan.
Number of securities to be issued upon exercise of outstanding options, warrants and rights Weighted-average exercise price of outstanding options, warrants and rights Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in first column) Equity compensation plans approved by security holders 3,638,122 $ 1.49 3,312,568 Equity compensation plans not approved by security holders — — — Total 3,638,122 $ 1.49 3,312,568 Item 6. [Reserved].
Number of securities to be issued upon exercise of outstanding options, warrants and rights Weighted-average exercise price of outstanding options, warrants and rights Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in first column) Equity compensation plans approved by security holders 2,752,962 $ 1.14 4,058,168 Equity compensation plans not approved by security holders — — — Total 2,752,962 $ 1.14 4,058,168 Item 6. [Reserved].
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 December 31, 2023 and 2022 was 243,818 and 146,393, respectively.
The option price per share under the 2022 Plan cannot be less than the fair market value of the underlying shares on the date of the grant. The number of shares remaining available for future issuance under the 2022 Plan as of December 31, 2024 and 2023 were 2,950,000 and 3,068,750, respectively.
Equity Compensation Plan Information We adopted the 2006 Stock Option and Incentive Plan (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 our consultants.
Equity Compensation Plan Information We adopted our 2006 Stock Incentive Plan (as amended, the “2006 Plan”) in December 2005. Under the plan our board of directors may grant or award incentive stock options to our officers and employees and non-qualified stock grants and awards, and restricted stock to our employees, officers, directors, and consultants.
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.
Our stockholders approved the amendment in June 2017 and ratified all of our option grants after January 1, 2016. 29 TECOGEN INC. Table of Contents 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 2006 Plan.
The number of shares remaining available for future issuance under the 2022 Plan as of December 31, 2023 was 3,068,750. 25 TECOGEN INC. Table of Contents The following table provides information as of December 31, 2023, regarding Common Stock that may be issued under the Amended Plan and the 2022 Plan.
The following table provides information as of December 31, 2024, regarding Common Stock that may be issued under the 2006 Plan and the 2022 Plan.
Added
The number of shares remaining available for future issuance under the 2006 Plan as of December 31, 2024 and 2023 were 1,108,168 and 243,818, respectively. We adopted the 2022 Stock Incentive Plan (the "2022 Plan") on March 8, 2022, and it was approved by our stockholders on June 9, 2022.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeYears Ended Increase (Decrease) December 31, 2023 December 31, 2022 $ % Operating Expenses General and administrative 11,880,389 $ 10,909,251 $ 971,138 8.9 % Selling 1,931,037 1,811,085 119,952 6.6 % Research and development 840,011 732,873 107,138 14.6 % Gain on sale of assets (36,207) (41,931) 5,724 (13.7) % Long-lived asset impairment — 4,674 (4,674) (100.0) % Total $ 14,615,230 $ 13,415,952 $ 1,199,278 8.9 % General and administrative expenses increased $971,138 to $11,880,389 in the year ended December 31, 2023 compared to $10,909,251 in 2022 due primarily to a $974,420 increase in bad debt expense, due mainly to the write down of certain install receivables which were deemed uncollectible, a $139,364 increase in amortization and depreciation, due to the Aegis acquisition, a $164,415 increase in business insurance, partially offset by a $83,758 decrease in stock-based compensation, a $68,470 decrease in franchise taxes and the $150,000 litigation provision recorded in 2022.
Biggest changeYears Ended Increase (Decrease) December 31, 2024 December 31, 2023 $ % Operating Expenses General and administrative 11,356,406 11,880,389 $ (523,983) (4.4) % Selling 1,880,903 1,931,037 (50,134) (2.6) % Research and development 961,837 840,011 121,826 14.5 % Gain on sale of assets (12,181) (36,207) 24,026 (66.4) % Goodwill impairment 217,295 — 217,295 — % Total $ 14,404,260 $ 14,615,230 $ (210,970) (1.4) % General and administrative expenses decreased $523,983, or 4.4%, to $11,356,406 in the year ended December 31, 2024 compared to $11,880,389 in 2023 due to a $756,422 decrease in credit loss expense, due to the write down of certain install receivables which were deemed uncollectible in 2023, a $104,986 decrease in consulting costs, a $84,756 decrease in stock-based compensation and a $80,331 decrease in amortization and depreciation, offset partially by a $265,274 increase in payroll and related benefits, a $90,593 increase in facility costs due to the transition to our new facility and $83,055 of relocation costs.
The exact opposite holds true in instances where the terms of a contract are considered to be favorable to market. In that case an asset would exist as an estimate of the price that would be received from a willing market participant in order to be entitled to the rights under the contract.
The opposite holds true in instances where the terms of a contract are considered to be favorable to market. In that case an asset would exist as an estimate of the price that would be received from a willing market participant in order to be entitled to the rights under the contract.
The impairment analysis recognizes the shortening of remaining contract terms with customers without replacement and without further growth, as well as less than expected cost savings, offset by profitability from our initiatives to optimize the long-term profitability of our various site operations and a price peak of the Company's stock on the date of the business combination to which the goodwill relates (see also Note 6."Sale of Energy Producing Assets and Goodwill Impairment").
The impairment analysis recognizes the shortening of remaining contract terms with customers without replacement and without further growth, as well as less than expected cost savings, offset by profitability from our initiatives to optimize the long-term profitability of our various site operations and a price peak of the our common stock on the date of the business combination to which the goodwill relates (see also Note 6."Sale of Energy Producing Assets and Goodwill Impairment").
Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods or providing services or energy to customers. Determination of contract consideration allocatable to multiple performance obligations within a single contract requires employing stand-alone selling prices which may be based on observable selling prices, estimated selling prices or as a residual.
Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods or providing services or energy to customers. Determination of contract consideration allocable to multiple performance obligations within a single contract requires employing stand-alone selling prices which may be based on observable selling prices, estimated selling prices or as a residual.
In the fourth quarter of 2023, we performed a quantitative goodwill impairment test for our energy production reporting unit acquired in 2017. We used a discounted cash flow approach to develop the estimated fair value of that reporting unit. Management judgment is required in developing the assumptions for the discounted cash flow model.
In the fourth quarter of 2024, we performed a quantitative goodwill impairment test for our energy production reporting unit acquired in 2017. We used a discounted cash flow approach to develop the estimated fair value of that reporting unit. Management judgment is required in developing the assumptions for the discounted cash flow model.
In determining the estimate of fair value of customer energy production contracts, the measure of market, and thus the baseline to measure the amount related to any of the off-market terms or conditions with respect to the contracts, was considered best determined, given the nature of the services provided under the contracts, by utilizing a benchmark level of margin, in this case 35% of revenue which is consistent with the average return on revenue of US investor owned public utilities. 29 TECOGEN INC.
In determining the estimate of fair value of customer energy production contracts, the measure of market, and thus the baseline to measure the amount related to any of the off-market terms or conditions with respect to the contracts, was considered best determined, given the nature of the services provided under the contracts, by utilizing a benchmark level of margin, in this case 35% of revenue which is consistent with the average return on revenue of US investor owned public utilities.
However, given the economic environment and the uncertainties regarding the impact on our business, there can be no assurance that our estimates and assumptions, made for purposes of our goodwill impairment testing, will prove to be an accurate prediction of the future.
However, due to uncertainties regarding the impact of the economic environment on our business, there can be no assurance that our estimates and assumptions, made for purposes of our goodwill impairment testing, will prove to be an accurate prediction of the future.
On February 1, 2024, Tecogen and Aegis amended the Agreement to add eighteen (18) additional maintenance contracts (the "Amendment"). The Amendment includes an undertaking by Aegis to use commercially reasonable efforts to support and assist our execution of maintenance service agreements for an additional thirty-six (36) cogeneration units sold to customers by Aegis. See Note 5.
On February 1, 2024, Tecogen and Aegis amended the Agreement to add eighteen (18) additional maintenance service agreements (the "Amendment"). The Amendment includes an undertaking by Aegis to use commercially reasonable efforts to support and assist our execution of maintenance service agreements for an additional thirty-six (36) cogeneration units sold to customers by Aegis.
These aspects of these accounting policies are considered critical accounting policies. These policies may require management to make assumptions about matters that are highly uncertain at the time of the estimate or employ an estimate where alternative estimates could have also been employed, and may involve estimates that are reasonably likely to change with the passage of time.
These policies may require management to make assumptions about matters that are highly uncertain at the time of the estimate or employ an estimate where alternative estimates could have also been employed, and may involve estimates that are reasonably likely to change with the passage of time.
Table of Contents Goodwill Goodwill is not amortized; however, it is reviewed for impairment annually in the fourth quarter and/or when circumstances or other events indicate that impairment may have occurred.
Goodwill Goodwill is not amortized; however, it is reviewed for impairment annually in the fourth quarter and/or when circumstances or other events indicate that impairment may have occurred.
Results of Operations Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 The following table sets forth for the periods indicated, the percentages of the net sales represented by certain items reflected in our statements of operations for the years ended December 31, 2023 and 2022: 30 TECOGEN INC.
Results of Operations Year Ended December 31, 2024 Compared to Year Ended December 31, 2023 The following table sets forth for the periods indicated, the percentages of the net sales represented by certain items reflected in our statements of operations for the years ended December 31, 2024 and 2023: 36 TECOGEN INC.
For the last two fiscal years, more than half of our revenue was generated from long-term maintenance and energy production contracts, which provides us with a predictable revenue stream, especially during the summer months. We experience a slight surge of activity from May through September as our “chiller season” is in full swing. Our O&M service 26 TECOGEN INC.
For the last two fiscal years, more than half of our revenue was generated from long-term maintenance and energy production contracts, which provides us with a predictable revenue stream, especially during the summer months. We experience a slight surge of activity from May through September as our “chiller season” is in full swing.
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 agreements in place with distributors and sales representatives. Our existing customers include 30 TECOGEN INC. Table of Contents 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.
For the year ended December 31, 2022, basic and diluted shares were 24,850,261 and 24,850,261, respectively.
For the year ended December 31, 2023, basic and diluted shares were 24,850,261 and 24,850,261, respectively.
Table of Contents revenue which has grown from year to year since 2005, with our New York City/New Jersey and New England systems experiencing the majority of the growth, was positively impacted by the Aegis maintenance agreement acquisition in 2023.
Our O&M service revenue which has grown from year to year since 2005, with our New York City/New Jersey and New England systems experiencing the majority of the growth, was positively impacted by the Aegis maintenance agreement acquisition in 2023.
Any excess purchase price over the fair value of the net tangible and intangible assets acquired is allocated to goodwill. We may make certain estimates and assumptions when determining the fair values of assets acquired and liabilities assumed, including intangible assets.
Any excess purchase price over the fair value of the net tangible and intangible assets acquired is allocated to goodwill. We may make certain estimates and assumptions when determining the fair values of assets acquired and liabilities assumed, including intangible assets. Critical estimates in valuing 34 TECOGEN INC.
In order to grow our business and fund the development of our hybrid-drive air-cooled chiller and the relocation of our primary facility, we expect that our cash requirements will increase and we may need to raise additional capital through a debt or equity financing to meet our need for capital to fund operations and future growth.
In order to grow our business, fund the development of our hybrid-drive air-cooled chiller, and respond to opportunities in the data center market, we expect that our cash requirements will increase and we may need to raise additional capital through a debt or equity financing to meet our need for capital to fund operations and future growth.
Net Income (Loss) Per Share Net loss per share for the year ended December 31, 2023 was a loss of $0.19 compared to a loss of $0.10 per share for the same period in 2022. The basic and diluted weighted average shares outstanding for the year ended December 31, 2023 were 24,850,261 and 24,850,261, respectively.
Net Income (Loss) Per Share Net loss per share for the year ended December 31, 2024 was a loss of $0.19 compared to a loss of $0.19 per share for the same period in 2023. The basic and diluted weighted average shares outstanding for the year ended December 31, 2024 were 24,861,190 and 24,861,190, respectively.
The fair value of the contingent consideration liabilities is remeasured each reporting period after the acquisition date and any changes in the estimated fair value are reflected as gains or losses in general and administrative expense in the consolidated statement of operations.
The fair value of the contingent consideration and pre-acquisition deferred maintenance liabilities are remeasured each reporting period after the acquisition date and any changes in the estimated fair value are reflected as gains or losses in cost of goods sold or general and administrative expense in the consolidated statement of operations.
Critical Accounting Estimates Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States.
See Note 11."Related Party Notes" of the Notes to the Consolidated Financial Statements. Critical Accounting Estimates Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States.
Any reserves that result from this review are charged to cost of sales. 28 TECOGEN INC. Table of Contents Property, Plant and Equipment Property, plant and equipment are recorded at cost. Depreciation is provided using the straight-line method over the estimated useful life of the asset, which range from three to fifteen years.
Any reserves that result from this review are charged to cost of sales. Property, Plant and Equipment Property, plant and equipment are recorded at cost. Depreciation is provided using the straight-line method over the estimated useful life of the asset, which range from P3Y to P15Y years.
Our services gross margin was 45.5% in 2023 compared to 54.2% in 2022, a decrease of 8.7%, due to increased labor and material costs incurred to replace engines at certain sites and an increase in the provision for obsolete inventory.
Our services gross margin was 47.5% in 2024 compared to 45.5% in 2023, an increase of 2.0%, due to decreased labor and material costs incurred to replace engines at certain sites and a decrease in the provision for obsolete inventory.
Table of Contents Years ended December 31, 2023 2022 Revenues 100.0 % 100.0 % Cost of Sales 59.4 55.7 Gross Profit 40.6 44.3 Operating expenses: General and administrative 47.3 43.6 Selling 7.7 7.2 Research and development 3.3 2.9 Gain on sale of assets (0.1) (0.2) Long-lived asset impairment — — Total operating expenses 58.1 53.7 Loss from operations (17.6) (9.4) Total other expense, net (0.3) (0.1) Consolidated net loss (18.0) (9.6) Income attributable to the noncontrolling interest (0.3) (0.2) Net loss attributable to Tecogen Inc.
Table of Contents Years ended December 31, 2024 2023 Revenues 100.0 % 100.0 % Cost of Sales 56.4 59.4 Gross Profit 43.6 40.6 Operating expenses: General and administrative 50.2 47.3 Selling 8.3 7.7 Research and development 4.3 3.3 Gain on sale of assets (0.1) (0.1) Goodwill impairment 1.0 — Total operating expenses 63.7 58.1 Loss from operations (20.0) (17.6) Total other expense, net (0.5) (0.3) Consolidated net loss (20.7) (18.0) Income attributable to the noncontrolling interest (0.4) (0.3) Net loss attributable to Tecogen Inc.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. You should read the following Management's Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) together with our consolidated financial statements and related notes thereto appearing elsewhere in this report.
During the year ended December 31, 2023, our revenues were negatively impacted due to customer order delays or deferrals; service delays due to customer facility closures, in some cases for extended periods and a reduction in our energy production revenues, due to business closures and increased remote work and learning environments.
During the year ended December 31, 2024, our revenues were negatively impacted due to customer order delays or deferrals; the relocation to our new facility in April 2024 which impacted product revenues during the second and third quarters of 2024; service delays due to customer facility closures, in some cases for extended periods and a reduction in our energy production revenues, due to business closures and increased remote work and learning environments.
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.
Related Party Notes On October 9, 2023, we entered into note subscription agreements with each of John N. Hatsopoulos and Earl R. Lewis, III, each a director and shareholder of Tecogen, pursuant to which Mr. Hatsopoulos agreed to provide financing to us of up to $1 million, and Mr.
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.
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.
Recent Developments 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, and related matters (“Acquisition”). On April 1, 2023, the Acquisition closed.
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 31 TECOGEN INC. Table of Contents purchase certain assets, and related matters (“Acquisition”).
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.
Hatsopoulos agreed to provide financing to us of up to $1,000,000, and Mr. Lewis agreed to provide financing to us of $500,000, and potentially, an additional $500,000 at his discretion. On October 10, 2023, we borrowed $500,000 from Mr. Hatsopoulos and issued him a one-year promissory note with interest accruing at 5.12% per annum.
Risk Factors” of this Annual Report on Form 10-K for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
You should review the “Risk Factors” in this report for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following MD&A.
For the year ended December 31, 2023 we used $244,889, in cash from investing activities, consisting of $170,000 of cash to acquire certain assets as part of the Aegis acquisition, used $46,851 of cash for purchases of property and equipment, and distributed $62,693 to the 49% non-controlling interest holders of American DG New York LLC.
We used $170,000 of cash to acquire certain assets as part of the Aegis acquisition, used $46,851 of cash for purchases of property and equipment, and distributed $62,693 to the 49% non-controlling interest holders of American DG New York LLC and received $34,655 in proceeds from the disposition of assets, including insurance proceeds.
Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report on Form 10-K, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. You should review “Item 1A.
Some of the information contained in this MD&A or set forth elsewhere in this report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties.
Our experience providing clean energy solutions to cannabis cultivation facilities has given us significant insight into requirements relating to energy-intensive indoor agriculture applications that we expect to be transferable to CEA facilities for food production.
Our experience providing clean energy solutions to cannabis cultivation facilities has given us significant insight into requirements relating to energy-intensive indoor agriculture applications that we expect to be transferable to CEA facilities for food production. Impact of Geopolitical Tensions We have no operations or customers in Russia, the Ukraine, or in the Middle East.
An impairment would be recorded if the carrying amount of a reporting unit including goodwill exceeded the estimated fair value. Based on the aforementioned analysis, the carrying amount of that reporting unit, including goodwill, exceeded the estimated fair value and there was no impairment at December 31, 2023. See Note 6. "Sale of Energy Producing Assets and Goodwill Impairment".
An impairment would be recorded if the carrying amount of a reporting unit including goodwill exceeded the estimated fair value. Based on the aforementioned 35 TECOGEN INC. Table of Contents analysis, the carrying amount of that reporting unit, including goodwill, exceeded the estimated fair value and resulted in an impairment at December 31, 2024. See Note 6.
Loss from Operations Loss from operations for the year ended December 31, 2023 was $4,413,612 compared to a loss of $2,349,141 in 2022, an increase in the loss from operations of $2,064,471.
Loss from Operations Loss from operations for the year ended December 31, 2024 was $4,534,087 compared to a loss of $4,413,612 in 2023, an increase in the loss from operations of $120,475.
Services Cost of sales for services in 2023 was $7,909,202 compared to $5,525,493 in 2022, an increase of $2,383,709, or 43.1%, due primarily to increased labor and material costs as a consequence of acquiring the Aegis customer maintenance contracts, increased material usage at existing sites and an increase in the provision for obsolete inventory.
Services Cost of sales for services in 2024 was $8,432,876 compared to $7,909,202 in 2023, an increase of $523,674, or 6.6%, due to increased labor and material costs as a consequence of acquiring the Aegis customer maintenance contracts and increased material usage at existing sites, offset by a decrease in the provision for obsolete inventory in 2024.
Contingent consideration is recorded at fair value on the acquisition date based on our expectation of achieving the contractually defined revenue targets.
Contingent consideration and pre-acquisition deferred maintenance contingencies are recorded at fair value on the acquisition date based on our expectation of achieving the contractually defined revenue targets and actual and projected future costs.
"Summary of Significant Accounting Policies" of the Notes to our Consolidated Financial Statements describes the significant accounting policies used in the preparation of the consolidated financial statements. Certain aspects of certain accounting policies require management to make difficult, subjective or complex judgments that could have a material effect on our financial condition and results of operations.
Table of Contents Certain aspects of certain accounting policies require management to make difficult, subjective or complex judgments that could have a material effect on our financial condition and results of operations. These aspects of these accounting policies are considered critical accounting policies.
Our service team does experience higher demand in the warmer months when cooling is required. Chiller units for space conditioning applications are generally shut down in the winter and started up again in the spring. This chiller “busy season” for the service team generally runs from May through the end of September.
Our cogeneration sales are not generally affected by the seasons. Our service team experiences higher demand in the warmer months when cooling is required. Chiller units for space conditioning applications are generally shut down in the winter and started up again in the spring.
We introduced the Tecochill Hybrid-Drive Air-Cooled Chiller at the AHR Expo in February 2023 and received an order on February 8, 2024 for three hybrid-drive air-cooled chillers for a utility in Florida. A patent application based on this concept has been filed with the US Patent and Trademark Office.
We introduced the Tecochill Hybrid-Drive Air-Cooled Chiller at the AHR Expo in February 2023 and received an order on February 8, 2024 for three hybrid-drive air-cooled chillers for a utility company in Florida. In March 2024, the US Patent and Trademark Office granted patent 11,936,327: "Hybrid Power System With Electric Generator and Auxiliary Power Source." 32 TECOGEN INC.
Liquidity and Capital Resources The following table presents a summary of our net cash flows from operating, investing, and financing activities: Years End Cash Provided by (Used in) December 31, 2023 December 31, 2022 Operating activities $ (823,315) $ (1,351,929) Investing activities (244,889) (348,365) Financing activities 505,505 — Change in cash and cash equivalents $ (562,699) $ (1,700,294) Consolidated working capital at December 31, 2023 was $9,822,546, compared to $14,344,288 at December 31, 2022, a decrease of $4,521,742 or 31.5%.
Liquidity and Capital Resources The following table presents a summary of our net cash flows from operating, investing, and financing activities: Years End Cash Provided by (Used in) December 31, 2024 December 31, 2023 Operating activities $ 4,060,547 $ (817,810) Investing activities (1,014,737) (244,889) Financing activities 1,008,153 500,000 Change in cash and cash equivalents $ 4,053,963 $ (562,699) Consolidated working capital at December 31, 2024 was $5,329,650, compared to $9,822,546 at December 31, 2023, a decrease of $4,492,896 or 45.7%.
Future minimum finance lease payments as of December 31, 2023, were $200,187. Seasonality We expect that the majority of our heating systems sales will be operational for the winter and the majority of our chilling systems sales will be operational for the summer. Our cogeneration sales are not generally affected by the seasons.
We are also obligated under finance leases for ten vehicles through October 31, 2029. Future minimum finance lease payments as of December 31, 2024, were $410,881. Seasonality We expect that the majority of our heating systems sales will be operational for the winter and the majority of our chilling systems sales will be operational for the summer.
"Aegis Contract and Related Asset Acquisition" in the Notes to Consolidated Financial Statements. 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.
We have instituted a service price increase and have also been making engineering improvements to increase service intervals to increase gross margins. 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.
Cash flows from financing activities in 2023 were $505,505, consisting of borrowings under our related party note with John N. Hatsopoulos (see Note 11."Related Party Notes"). During 2022, there were no cash flows from financing activities. Our total product and installation backlog as of December 31, 2023 was $7,388,145 compared to $6,722,138 as of December 31, 2022.
Cash flows from financing activities for the year ended December 31, 2023 were $500,000 borrowed under our related party note with John N. Hatsopoulos. Our total product and installation backlog as of December 31, 2024 was $12,336,248 compared to $7,388,145 as of December 31, 2023.
Energy Production Cost of sales for energy production for the year ended December 31, 2023 was $1,105,503 compared to $996,990 in 2022, an increase of $108,513. Energy production gross margin was 37.1% in 2023 compared to 44.2% in 2022, a decrease of 7.1%, primarily due to increased fuel and maintenance costs.
Energy Production Cost of sales for energy production for the year ended December 31, 2024 was $1,301,832 compared to $1,105,503 in 2023, an increase of $196,329. Energy production gross margin was 38.0% in 2024 compared to 37.1% in 2023, an increase of 0.9%, due to higher fuel costs.
Controlled Environment Agriculture On July 20, 2022, we announced our intention to focus on opportunities for low carbon Controlled Environment Agriculture ("CEA"). We believe that CEA offers an exciting opportunity to apply our expertise in clean cooling, power generation, and greenhouse gas reduction to address critical issues affecting food and energy security.
We believe that CEA offers an exciting opportunity to apply our expertise in clean cooling, power generation, and greenhouse gas reduction to address critical issues affecting food and energy security. CEA facilities enable multiple crop cycles (15 to 20 cycles) in one year compared to one or two crop cycles in conventional farming.
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.
In recent years our cogeneration equipment has been used in numerous cannabis cultivation facilities because our systems reduce the facility's need for power, significantly reduce operating costs and the facility GHG footprint, and offer resiliency to grid outages.
The increase in revenue in 2023 is due primarily to the addition of $1,884,891 in revenue from the acquired Aegis maintenance contracts and a $577,502 or 4.8%, increase in service contract revenues from existing contracts. 31 TECOGEN INC.
The increase in Services revenue in 2024 is due to an increase in revenue from the acquired Aegis Maintenance contracts of $786,160, or 41.7%, and a $765,656, or 6.1%, increase in service contract revenues from existing contracts. 37 TECOGEN INC.
Critical estimates in valuing certain intangible assets include but are not limited to future expected cash flows from energy production sites or customer maintenance contracts, estimated operating costs, as well as discount rates. At the acquisition date, we will also record acquisition related liabilities, if applicable, for any contingent consideration or deferred payments to the seller.
Table of Contents certain intangible assets include but are not limited to future expected cash flows from energy production sites or customer maintenance contracts, estimated operating costs, as well as discount rates.
Our accounts receivable balance increased by $81,195 at December 31, 2023 compared to December 31, 2022 and our unbilled revenues decreased by $56,994 33 TECOGEN INC. Table of Contents in at December 31, 2023 compared to December 31, 2022.
Table of Contents receivable balance decreased by $608,929 at December 31, 2024 compared to December 31, 2023 and our unbilled revenues decreased by $859,634 at December 31, 2024 compared to December 31, 2023.
Backlog does not include maintenance contract service revenues or energy contract revenues. At December 31, 2023 and 2022, we had cash and cash equivalents of $1,351,270 and $1,913,969, a decrease of $562,699 or 29.4%.
Backlog includes a multi-year $2,000,000 prepaid service maintenance contract, but does not include energy contract revenues. At December 31, 2024 and 2023, we had cash and cash equivalents of $5,405,233 and $1,351,270, an increase of $4,053,963 or 300.0%.
Products Costs of sales for products in 2023 was $5,923,096 compared to $7,413,320 in 2022, a decrease of $1,490,224, or 20.1%, due to decreased product revenue volume, partially offset by increased provisions for obsolete inventory, higher material costs and increased product warranty costs.
Products Costs of sales for products in 2024 was $3,014,655 compared to $5,923,096 in 2023, a decrease of $2,908,441, or 49.1%, due to decreased product revenue volume and a decrease in the provision for obsolete inventory in 2024.
"Fair Value Measurements". Provision for State Income Taxes The provision for state income taxes for the years ended December 31, 2023 and 2022 was $32,491 and $16,352, respectively, and represents estimated income tax payments, net of refunds, to various states.
Provision for State Income Taxes The provision for state income taxes for the years ended December 31, 2024 and 2023 was $22,565 and $32,491, respectively, and represents estimated income tax payments, net of refunds, to various states. Noncontrolling Interest We have income and losses attributable to the non-controlling interest we have in American DG Energy's 51% owned subsidiary, ADGNY, LLC.
Our inventory increased by $82,525 as of December 31, 2023 compared to December 31, 2022 and other non-current assets decreased by $265,725 as of December 31, 2023 as compared to December 31, 2022. Accounts payable increased by $1,161,416 from December 31, 2022 to December 31, 2023 due to increased aging of our payables to conserve liquidity.
Our inventory decreased by $848,884 as of December 31, 2024 compared to December 31, 2023 and other non-current assets increased by $510,723 as of December 31, 2024 as compared to December 31, 2023. Accounts payable decreased by $371,736 from December 31, 2023 to December 31, 2024 due to our increased liquidity in in the fourth quarter of 2024.
Included in working capital were cash and cash equivalents of $1,351,270 at December 31, 2023, compared to $1,913,969 at December 31, 2022, a decrease of $562,699 or 29.4%. The decrease in consolidated working capital is primarily due to the increase in our net loss and increased liabilities recognized due to the Aegis contract acquisition.
The decrease in consolidated working capital is primarily due to the increase in our net loss and increased liabilities recognized due to the Aegis contract acquisition.
Future minimum lease commitments under non-cancellable operating leases as of December 31, 2023, were $772,593. See "Leases". Effective as of January 1, 2024, the future minimum lease commitments for the Billerica, Massachusetts location were $1,325,614. We are also obligated under finance leases for five vehicles through December 31, 2028.
See Note 11."Related Party Notes" of the Notes to the Consolidated Financial Statements. Obligations and Commitments We are obligated under operating leases for our North Billerica, Massachusetts headquarters through December 31, 2028 and our eleven leased service centers through January 2031. Future minimum lease commitments under non-cancellable operating leases as of December 31, 2024, were $1,772,171. See Note 14."Leases".
During the years ended December 31, 2023 and 2022, our revenues were negatively impacted due to customer order delays or deferrals; service delays due to customer facility closures, in some cases for extended periods; and a reduction in our energy production segment revenue due to business closures and increased remote work and learning environments.
During the years ended December 31, 2024 and 2023, our revenues were negatively impacted due to supply chain issues, customer order delays or deferrals; service delays due to customer facility closures and reduced manufacturing capacity due to our plant relocation in 2024.
(18.3) % (9.8) % The following table presents revenue by segment and the change from the prior year for the years ended December 31, 2023 and 2022: Years Ended Revenues December 31, 2023 December 31, 2022 Increase (Decrease) $ Increase (Decrease) % Product: Cogeneration $ 2,761,667 $ 5,279,569 $ (2,517,902) (47.7) % Chillers 5,303,978 5,034,633 269,345 5.3 % Engineered Accessories 794,301 841,897 (47,596) (5.7) % Total product revenue 8,859,946 11,156,099 (2,296,153) (20.6) % Services 14,523,054 12,060,661 2,462,393 20.4 % Energy production 1,756,419 1,785,854 (29,435) (1.6) % Total Revenue $ 25,139,419 $ 25,002,614 $ 136,805 0.5 % Revenues Revenues in 2023 were $25,139,419 compared to $25,002,614 in 2022, an increase of $136,805 or 0.5% due to increased Services revenues which were offset by decreased Products revenues.
(21.0) % (18.3) % The following table presents revenue by segment and the change from the prior year for the years ended December 31, 2024 and 2023: Years Ended Revenues December 31, 2024 December 31, 2023 Increase (Decrease) $ Increase (Decrease) % Product: Cogeneration $ 2,677,930 $ 2,761,667 $ (83,737) (3.0) % Chillers 1,647,374 5,303,978 (3,656,604) (68.9) % Engineered Accessories 118,692 794,301 (675,609) (85.1) % Total product revenue 4,443,996 8,859,946 (4,415,950) (49.8) % Services 16,074,870 14,523,054 1,551,816 10.7 % Energy production 2,100,670 1,756,419 344,251 19.6 % Total Revenue $ 22,619,536 $ 25,139,419 $ (2,519,883) (10.0) % Revenues Revenues in 2024 were $22,619,536 compared to $25,139,419 in 2023, a decrease of $2,519,883 or 10.0% due to decreased Products revenues.
Gains on the sale of assets was $36,207 in 2023 compared to a gain on the sale of assets of $41,931 in 2022. Impairment of long-lived assets decreased $4,674 in the year ended December 31, 2023 compared to 2022.
Gain on the sale of assets was $12,181 in 2024 compared to a gain on the sale of assets of $36,207 in 2023. During the year ended December 31, 2024 we recognized goodwill impairment of $217,295 on our Energy Production sites compared to $0 in 2023.
Net Loss Attributable to Tecogen Inc Net loss for the year ended December 31, 2023 was $4,598,108 compared to a net loss of $2,447,927 for the comparable period in 2022.
The non-controlling interest share of ADGNY profits and losses was income of $86,468 for the year ended December 31, 2024 compared to income of $74,952 in 2023. Net Loss Attributable to Tecogen Inc Net loss for the year ended December 31, 2024 was $4,760,238 compared to a net loss of $4,598,108 for 2023, an increase of $162,130.
The increase in cost of sales is due to increased Services revenue volume, the impact of inflation on our material costs, an increase in the provision for obsolete inventory and increased product warranty costs. Our overall gross margin was 40.6% in 2023 compared to 44.3% in 2022, a decrease of 3.7%.
Cost of Sales Cost of sales in 2024 was $12,749,363 compared to $14,937,801 in 2023, a decrease of $2,188,438 or 14.7%. The decrease in cost of sales is due to decreased Products revenue volume. Our overall gross margin was 43.6% in 2024 compared to 40.6% in 2023, an increase of 3.0%.
Accrued expenses from operations increased by $128,869 as of December 31, 2023 compared to December 31, 2022 due to higher operating expenses. Deferred revenues increased by $543,842 as of December 31, 2023 as compared to December 31, 2022, due to Aegis contract customer deposits collected in 2023 .
Accrued expenses increased by $386,257 as of December 31, 2024 compared to December 31, 2023 due to timing of operating expenses. Deferred revenues increased by $5,850,265 as of December 31, 2024 as compared to December 31, 2023, due to advance customer deposits collected in 2024 for Products that will ship in 2025.
For the year ended December 31, 2023 we used $823,315 in cash from operations compared to $1,351,929 in cash used from operations in 2022, a decrease of $528,614 in net cash used by operating activities.
For the year ended December 31, 2024 we generated $4,060,547 in cash from operations compared to $817,810 in cash used from operations in 2023, an increase of $4,878,357 in net cash generated by operating activities. Our accounts 39 TECOGEN INC.
Our product mix, as well as product revenue, can vary significantly from period to period as our products are high dollar, low volume sales in which revenue is recognized upon shipment. Services Revenues derived from our service centers, including installation activities, in 2023 were $14,523,054 compared to $12,060,661 for the same period in 2022, an increase of $2,462,393 or 20.4%.
Our product mix, as well as product revenue, can vary significantly from period to period as our products are high dollar, low volume sales in which revenue is recognized upon shipment. The relocation to our new facility in April 2024 constrained our manufacturing capacity, which impacted product revenues during the second and third quarters of 2024.
The increase in the net loss from operations is primarily due to lower Products sales, a $865,193 decrease in gross margin due to higher products material costs and the increased provision for obsolete inventory and a $1,199,278 increase in operating expenses.
The increase in the net loss from operations is due to a $331,445 decrease in gross margin due to lower Products revenue and goodwill impairment of $217,295, offset partially by a $428,265 decrease in operating expenses.
Energy Production Energy production revenues for the year ended December 31, 2023 were $1,756,419 compared to $1,785,854 for 2022, a decrease of $29,435, or 1.6%. Cost of Sales Cost of sales in 2023 was $14,937,801 compared to $13,935,803 in 2022, an increase of $1,001,998 or 7.2%.
Energy Production Energy production revenues for the year ended December 31, 2024 were $2,100,670 compared to $1,756,419 for 2023, an increase of $344,251, or 19.6%. The increase in Energy Production revenue is due to increased run hours at certain energy production sites.
Other Income (Expense), net Other expense, net, for the year ended December 31, 2023 was $77,053 compared to income of $32,219 for the same period in 2022, a decrease of $44,834, due to an increase in interest and other expense of $61,003 compared to $34,713 in 2022, and by a decrease in unrealized income on marketable securities of $18,749, which represents the market value fluctuation of marketable equity securities as discussed in Note 16.
Other Income (Expense), net Other expense, net, for the year ended December 31, 2024 was $117,118 compared to $77,053 for the same period in 2023, an increase of $40,065, due to a $74,254 increase in interest expense on borrowings under our related party notes and lease financing, partially offet by a decrease in interest income and other expense of $26,814 compared to $61,003 in 2023, due to a $35,759 decrease in currency exchange losses for the year ended December 31, 2024.
Table of Contents Research and development expenses increased in the year ended December 31, 2023 to $840,011 compared to $732,873, an increase of $107,138 due to costs incurred to develop the hybrid-drive air-cooled chiller, which included a $72,700 increase in payroll cost and a $29,250 increase in consulting costs.
Table of Contents Research and development expenses increased in the year ended December 31, 2024 to $961,837 compared to $840,011, an increase of $121,826 due to a $151,193 increase in depreciation and amortization, offset by a $56,924 decrease in payroll costs and related benefits.
Selling expenses increased in the year ended December 31, 2023 to $1,931,037 compared to $1,811,085 in 2022, an increase of $119,952 due primarily to a $101,826 increase in trade show expense. 32 TECOGEN INC.
Selling expenses decreased in the year ended December 31, 2024 to $1,880,903 compared to $1,931,037 in 2023, a decrease of $50,134, or 2.6%, due to a $49,827 decrease in sales commissions. 38 TECOGEN INC.
Operating Expenses Operating expenses increased in 2023 to $14,615,230 compared to $13,415,952 in 2022, an increase of $1,199,278 or 8.9%.
Operating Expenses Operating expenses decreased in 2024 to $14,404,260 compared to $14,615,230 in 2023, a decrease of $210,970 or 1.4%.
The increase in net loss in 2023 is primarily due to lower Products sales, a $865,193 decrease in gross margin due to higher products material costs and the increased provision for obsolete inventory and a $1,199,278 increase in operating expenses.
The increase in the net loss is due to a $331,445 decrease in gross margin due to lower Products revenue and goodwill impairment of $217,295, offset partially by a $428,265 decrease in operating expenses.
Our products gross margin was 33.1% in 2023 compared to 33.5% in 2022, a decrease of 0.4%, due primarily to the impact of inflation on our material costs and an increase in the provision for obsolete inventory.
Our products gross margin was 32.2% in 2024 compared to 33.1% in 2023, a decrease of 0.9%, due to decreased engineering accessories sales in 2024, which are higher margin sales.
Removed
We propose to address this challenge by developing a highly efficient energy solution for CEA grown produce using our cogeneration products in conjunction with solar energy generation, energy storage, and other technologies. 27 TECOGEN INC.
Added
Recent Developments Vertiv Sales and Marketing Agreement - Data Center Cooling Market On February 28, 2025, we entered into a Sales and Marketing Agreement with Vertiv Corporation (“Vertiv”) relating to sales of Tecogen DTx chillers for data center cooling applications (the “Vertiv Agreement”).
Removed
Table of Contents 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.
Added
The Vertiv Agreement has a term of two years and provides that Vertiv will establish a budget for marketing activities and use commercially reasonable efforts to sell our DTx chillers for cooling applications in data centers. The Vertiv Agreement also provides the basis for the negotiation of a definitive supply agreement between us and Vertiv.
Removed
Products Product revenues in 2023 were $8,859,946 compared to $11,156,099 in 2022, a decrease of $2,296,153 or 20.6%.
Added
We have agreed to provide Vertiv with reasonable discounts for purchases of significant volumes of our chillers, and Vertiv has agreed to use commercially reasonable efforts to assist us in securing favorable terms for engineering components and supplies for manufacturing our chillers.
Removed
The revenue decrease in 2023 compared to 2022 is due primarily to a decrease in cogeneration sales of $2,517,902, due to decreased unit volume and a $47,596 decrease in sales of engineered accessories, which are partially offset by an increase in chiller sales of $269,345.
Added
Pursuant to the Vertiv Agreement we have granted Vertiv the exclusive right to market and sell our DTx chillers for data center cooling applications outside the United States, and the non-exclusive right to market and sell our DTx chillers within the United States.

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