Tecogen Inc.
11/13/2025 | Press release | Distributed by Public on 11/13/2025 08:02
Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)
Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis and other parts of this report should be read in conjunction with our consolidated financial statements and the accompanying notes thereto included in this report and is qualified in its entirety by the foregoing and by more detailed financial information appearing elsewhere in this report. See "Item 1 - Financial Statements." In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed in the "Cautionary Note Concerning Forward Looking Statements" above. While we may elect to update forward-looking statements in the future, except as required by law, we specifically disclaim any obligation to do so, even if our estimates change, and you should not rely on those forward-looking statements as representing our views as of any date subsequent to the date of the filing of this report.
Recent Developments
Recent Equity Financing
On July 21, 2025, we closed on the sale of an aggregate of 3,985,000 shares of common stock, $0.001 par value per share ("Common Stock"), including an additional 485,000 shares of common stock to cover over-allotments, at a price to the public of $5.00 per share (before deduction of underwriting discounts and commissions), in a firm commitment underwritten public offering pursuant to an underwriting agreement, dated July 18, 2025 ("Underwriting Agreement"), between the Company and Roth Capital Partners, LLC ("Roth"), as sole underwriter and manager for the offering ("Offering"). The net proceeds from the Offering, after deducting underwriting discounts and commissions and offering expenses were approximately $18,105,100. See "Note 1. Description of Business and Basis of Presentation" of the Notes to Condensed Consolidated Statements for additional detail on the net Offering proceeds.
We have used and intend to use the net proceeds of the offering for continued product development, increased sales and marketing activities, sales, marketing, additional human resources, capital expenditures, repayment of related party promissory notes and other costs and expenses we may incur in connection with the anticipated expansion into the data center market, and for general working capital and corporate purposes.
Uplist to NYSE American Stock Exchange
On April 30, 2025, we announced that our common stock had been approved for listing on the NYSE American LLC ("NYSE American") stock exchange. On May 6, 2025, our common stock began trading on the NYSE American under our current symbol "TGEN."
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 ("Vertiv Agreement"). The Vertiv Agreement has a term of two years and provides that Vertiv will engage in establishing a budget for marketing activities and use commercially reasonable efforts to sell our DTx chillers for cooling applications in data centers. The Vertiv Agreement also provides the basis for the negotiation of a definitive supply agreement between us and Vertiv. We have agreed to provide Vertiv with reasonable discounts for purchases of significant volumes of our chillers, and Vertiv has agreed to use commercially reasonable efforts to assist us in securing favorable terms for engineering components and supplies for manufacturing our chillers. Pursuant to the Vertiv Agreement we have granted Vertiv the exclusive right to market and sell our DTx chillers for data center cooling applications outside the United States, and the non-exclusive right to market and sell our DTx chillers for such applications within the United States. We have also agreed to grant Vertiv the exclusive right to market and sell our DTx chillers for data center cooling applications in the United States if Vertiv achieves and maintains agreed sales levels of DTx chillers. The foregoing description of the Vertiv Agreement is not complete and is qualified in its entirety by reference to the full text thereof, a copy of which was filed as Exhibit 99.01 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on February 28, 2025.
Assumption of Aegis Energy Services Maintenance Agreements
On March 15, 2023, we entered into an agreement ("Assumption Agreement") with Aegis Energy Services, LLC ("Aegis"), pursuant to which Aegis agreed to assign to us and we agreed to assume certain Aegis maintenance agreements, we agreed to purchase certain assets from Aegis, and related matters ("Acquisition"). On April 1, 2023, the Acquisition closed. Under the Assumption Agreement, we agreed to acquire from Aegis and assume Aegis' rights and obligations arising on or after April 1, 2023, under maintenance agreements pursuant to which Aegis provided maintenance services to third parties for approximately 200 cogeneration systems and we agreed to acquire from Aegis certain vehicles and inventory used by Aegis in connection with the performance of its maintenance services. At closing, we acquired eight (8) Aegis vehicles for consideration consisting of $170,000 in cash. Also, we issued credits against outstanding accounts receivable due from Aegis in the amount
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of $300,000 for the acquisition of inventory that Aegis used to provide maintenance services. At closing, we hired eight (8) Aegis employees who, following the closing, have agreed to continue to provide maintenance services relating to the cogeneration systems covered by the maintenance agreements assumed pursuant to the Assumption Agreement. Following the closing and for a period of up to seven (7) years, we agreed to pay Aegis a percentage of the revenue collected for maintenance services provided pursuant to the maintenance agreements acquired from Aegis. Further, prior to December 31, 2023, we had the right to acquire and assume additional Aegis' maintenance agreements for cogeneration systems on substantially similar terms and conditions. The Assumption Agreement contained certain indemnification provisions and agreements on the part of Aegis and for each party to cooperate with each other and provide certain transitional assistance. We acquired the Aegis maintenance agreements to expand our Service portfolio and to benefit from the long-term contract revenue stream generated by these agreements.
On February 1, 2024, Tecogen and Aegis amended the Assumption Agreement to add eighteen (18) additional maintenance contracts assumed by us ("February 2024 Amendment") which 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 May 1, 2024, Tecogen and Aegis amended the Assumption Agreement to add thirty-one (31) additional maintenance contracts assumed by us ("May 2024 Amendment") which includes an undertaking by Aegis to use commercially reasonable efforts to support and assist our execution of maintenance service agreements for an additional forty-eight (48) cogeneration units sold to customers by Aegis.
See "Note 7. Aegis Contract and Related Asset Acquisitions" of the Notes to the Condensed Consolidated Financial Statements.
Facilities Relocation
In April, 2024, we moved our manufacturing operations and corporate offices from 45 First Avenue, Waltham, Massachusetts to 76 Treble Cove Road, Building 1, North Billerica, Massachusetts. As a result of the relocation, product revenues were negatively impacted during 2024. The factory relocation also necessitated construction activities to install equipment test cells and comply with local regulations. We resumed manufacturing operations during the latter-half of the third quarter of 2024.
Impact of Anti-fossil Fuel Sentiment
In some key markets such as New York City, the regulatory push to eliminate fossil fuels from buildings has impacted cogeneration unit sales. We believe that as regulations take into account scope 2 emissions and products like our hybrid chiller that can choose the cleanest fuel source will have a significant advantage in decarbonization efforts. The political environment following the 2024 elections in the United States may have a material impact on anti-fossil fuel sentiment and the regulatory environment that may be favorable to our business. We have also diversified our sales activities to reduce our reliance on markets like New York City.
Impact of Utility Power Constraints, Data Center Construction
As more load is added to the utility grid in the form of data centers, EV charging, and other demands for power, customers are facing power constraints. Tecogen believes that these power constrained customers, in particular data centers and industrial facilities, represent a significant opportunity for growth. The customer need is driven by the ability to expand an existing facility or open a new facility quickly while taking advantage of utility expense savings long term. Our chiller products can reduce the electrical capacity needed on-site by 30% or more. Our InVerde product can provide on-site power generation which allows customers to eliminate long lead times associated with electrical switch gear and bridge shortfalls in power from the utility.
Residual Impacts of Covid-19 Pandemic
Supply chains were adversely impacted during Covid, resulting in significant delays or lack of availability of critical components such as engines. This has continued to have long term impact on product and service margins. The direct impact has been certain costs increasing faster than inflation. The indirect impact is from increased engine related costs in the service segment as replacements were deferred or overhauled components were used due to lack of parts. We have instituted annual service price increases in 2023 through 2025 and will continue to implement price increases to offset material price increases in excess of inflation and have also been making engineering improvements to increase service intervals and 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 rooftop chiller. Using the inverter design from our InVerde e+ cogeneration module, the system can simultaneously take two inputs, one from the grid or a
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renewable energy source and one from our natural gas engine. This allows a customer to seek the optimum blend of operational cost savings and greenhouse gas benefits while providing added resiliency from two power sources. We introduced the Tecochill Hybrid-Drive Air-Cooled Chiller at the AHR Expo in February 2023 and received an order on February 8, 2024 for three hybrid-drive air-cooled chillers from 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." Initial shipments of the hybrid-drive air-cooled chiller were delivered to customers in the second quarter of 2025.
Controlled Environment Agriculture
On July 20, 2022, we announced our intention to focus on opportunities for the use of our cogeneration equipment in 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. Food crops grown in greenhouses typically have lower yields per square foot than in CEA facilities where yields are increased by supplementing or replacing natural light with grow lights in a climate-controlled environment, requiring significant energy use. In recent years, our cogeneration equipment has been used in numerous cannabis cultivation facilities because our systems reduce the facility's need for power, significantly reduce operating costs and the facility GHG footprint, and offer resiliency to grid outages. Our experience providing clean energy solutions to cannabis cultivation facilities has given us significant insight into requirements relating to energy-intensive indoor agriculture applications that we expect to be transferable to CEA facilities for food production.
Impact of Geopolitical Tensions
We have no operations or customers in Russia, the Ukraine, or in the Middle East. Energy prices for natural gas may be affected by the wars in Ukraine and the Middle East and may affect the performance of our Energy Production Segment and the cost differential between grid generated energy and natural gas sourced energy using our cogeneration equipment. We have seen higher electricity prices since much of the electricity production in the United States is generated from fossil fuels. If electricity prices rise, the economic savings generated by our products are likely to increase. In addition to the direct result of changes in natural gas and electricity prices, the war in Ukraine and the conflict in the Middle East may result in higher cybersecurity risks, increased or ongoing supply chain challenges, and volatility related to the trading prices of commodities.
Impact of Tariffs
The majority of our vendors are domestic. Although we have some exposure to Chinese and European suppliers, we do not anticipate increases in tariffs to materially affect our operations.
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 the Company, pursuant to which Mr. 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. On July 23, 2024, we borrowed an additional $500,000 from Mr. Hatsopoulos, and issued a one-year promissory note with interest accruing at 5.06% per annum. On March 21, 2024, the terms of the promissory note, dated October 10, 2023, was extended by one-year, making the maturity date October 10, 2025. On September 18, 2024, we borrowed $500,000 from Mr. Lewis and issued him a one-year promissory note with interest accruing at 4.57% per annum.
On January 14, 2025, we agreed to permit Mr. Lewis to either receive repayment of his note in cash or, at his discretion, convert the balance of the promissory note into shares of our common stock. In the event of such a conversion, the number of shares we were required to issue is determined by dividing the balance due under the promissory note by the average closing price per share of our shares during the thirty-day period prior to the date of conversion.
On February 18, 2025, we amended the promissory notes with Mr. Hatsopoulos to extend the maturity dates for both promissory notes to July 31, 2026. We also agreed to permit Mr. Hatsopoulos to either receive repayment of his notes in cash, or at his discretion, convert the balance(s) due of one or both of the promissory notes into shares of our common stock. In the event of such a conversion, the number of shares we were required to issue is determined by dividing the balance(s) due under the promissory note(s) by the average closing price per share of our shares during the thirty-day period prior to the date of conversion. Both of the promissory notes with Mr. Hatsopoulos were reclassed to long-term liabilities due to the February 18, 2025 amendment.
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 the principal and interest when due, or the commencement of voluntary or involuntary bankruptcy or insolvency proceeding.
The loans and terms of the loan agreements were unanimously approved by our Board of Directors.
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The loans bear interest on the outstanding principal at the Internal Revenue Service's Applicable Federal Rate to be determined at the time we issue a promissory note in connection with a loan draw-down. The notes may be prepaid by us at any time. The principal amount of each loan and accrued interest is subject to mandatory prepayment in the event of a change of control of the registrant. The promissory notes are subject to customary events of default and are transferable provided the conditions to transfer set forth in the promissory notes are satisfied by the noteholder. The proceeds of the loans have been used for general working capital purposes and to fund the initial improvements required at our North Billerica facility.
On May 1, 2025, Mr. Lewis elected to convert the promissory note we issued to him in connection with his loan to us in the principal amount of $500,000 together with $14,148 of accrued and unpaid interest into 240,256 shares of our common stock at a per share price of $2.14. The number of shares was determined by dividing the balance due under the promissory note by the average closing price per share of our shares during the thirty-day period prior to the date of conversion. At September 30, 2025 our obligation to Mr. Lewis under the promissory note was retired.
On September 3, 2025 and September 4, 2025, we paid $548,675 and $528,281, respectively, to Mr. Hatsopoulos in repayment of his loans to us in the aggregate principal amount of $1,000,000 together with $76,956 of accrued and unpaid interest. At September 30, 2025, our obligation to Mr. Hatsopoulos under the promissory notes were retired.
See "Note 11. Related Party Notes " of the Notes to Condensed Consolidated Financial Statements.
Overview
Tecogen designs, manufactures, markets, and maintains high efficiency, ultra-clean cogeneration products. These include natural gas engine driven combined heat and power (CHP) systems, chillers and heat pumps for multi-family residential, commercial, recreational and industrial use. We are known for products that provide customers with substantial energy savings, resiliency from utility power outages and for significantly reducing a customer's carbon footprint. Our products are sold with our patented Ultera® technology which nearly eliminates all criteria pollutants such as NOx and CO. Our systems are greater than 88% efficient compared to typical electrical grid efficiencies of 40% to 50%. As a result, our greenhouse gas (GHG) emissions per KwH are typically half that of the electrical grid. Our systems generate electricity and hot water or in the case of our Tecochill product, both chilled water and hot water. These result in savings of energy related costs of up to 60% for our customers. Our products are expected to run on Renewable Natural Gas (RNG) as it is introduced into the US gas pipeline infrastructure.
Our products are sold directly to end-users by our in-house sales team and by established sales agents and representatives. We have agreements in place with distributors and sales representatives. Our existing customers include hospitals and nursing homes, colleges and universities, health clubs and spas, hotels and motels, office and retail buildings, food and beverage processors, multi-unit residential buildings, laundries, ice rinks, swimming pools, factories, municipal buildings, military installations and indoor growing facilities. To date we have shipped over 3,200 units, some of which have been operating for almost 35 years.
With the acquisition of American DG Energy Inc. ("ADGE") in May 2017, we added an additional source of revenue. Through ADGE, we install, own, operate and maintain complete distributed generation electricity systems, or DG systems or energy systems, and other complementary systems at customer sites, and sell electricity, hot water, heat and cooling energy under long-term contracts at prices guaranteed to the customer to be below conventional utility rates. Each month we obtain readings from our energy meters to determine the amount of energy produced for each customer. We use a contractually defined formula to multiply these readings by the appropriate published price of energy (electricity, natural gas or oil) from each customer's local energy utility to derive the value of our monthly energy sale, which includes a negotiated discount. Our revenues per customer on a monthly basis vary based on the amount of energy produced by our energy systems and the published price of energy (electricity, natural gas or oil) from our customer's local energy utility that month.
Our operations are comprised of three business segments. Our Products segment designs, manufactures and sells industrial and commercial cogeneration systems. Our Services segment provides operations and maintenance services ("O&M") 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.
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Results of Operations
Third Quarter Ended September 30, 2025 Compared to the Third Quarter Ended September 30, 2024
The following table sets forth for the periods indicated, the percentage of net sales represented by certain items reflected in our condensed consolidated statements of operations:
| Three Months Ended | ||||||||||||||
| September 30, 2025 | September 30, 2024 | |||||||||||||
| Revenues | 100.0 | % | 100.0 | % | ||||||||||
| Cost of sales | 69.6 | % | 55.9 | % | ||||||||||
| Gross profit | 30.4 | % | 44.1 | % | ||||||||||
| Operating expenses | ||||||||||||||
| General and administrative | 47.6 | % | 47.6 | % | ||||||||||
| Selling | 7.2 | % | 7.9 | % | ||||||||||
| Research and development | 4.1 | % | 4.2 | % | ||||||||||
| (Gain) loss on disposition of assets | - | % | (0.1) | % | ||||||||||
| Total operating expenses | 58.9 | % | 59.6 | % | ||||||||||
| Loss from operations | (28.5) | % | (15.5) | % | ||||||||||
| Total other income (expense), net | (0.2) | % | (0.4) | % | ||||||||||
| Loss before provision for state income taxes | (28.7) | % | (15.9) | % | ||||||||||
| Provision for state income taxes | - | % | - | % | ||||||||||
| Consolidated net loss | (28.7) | % | (15.9) | % | ||||||||||
| (Income) loss attributable to the noncontrolling interest | (0.2) | % | (0.6) | % | ||||||||||
| Net loss attributable to Tecogen Inc. | (28.9) | % | (16.5) | % | ||||||||||
Revenues
The following table presents revenue for the periods indicated, by segment and the change from the prior year:
| Three Months Ended | |||||||||||||||||||||||
| September 30, 2025 | September 30, 2024 | Increase (Decrease) $ | Increase (Decrease) % | ||||||||||||||||||||
| Revenues: | |||||||||||||||||||||||
| Products | |||||||||||||||||||||||
| Cogeneration | 515,067 | $ | 1,294,453 | $ | (779,386) | (60.2) | % | ||||||||||||||||
| Chiller | 2,234,728 | 37,979 | 2,196,749 | 5,784.1 | % | ||||||||||||||||||
| Engineered accessories | 234,000 | 58,584 | 175,416 | 299.4 | % | ||||||||||||||||||
| Total product revenues | 2,983,795 | 1,391,016 | 1,592,779 | 114.5 | % | ||||||||||||||||||
| Services | 3,943,510 | 3,850,551 | 92,959 | 2.4 | % | ||||||||||||||||||
| Energy production | 255,816 | 388,563 | (132,747) | (34.2) | % | ||||||||||||||||||
| Total revenues | $ | 7,183,121 | $ | 5,630,130 | $ | 1,552,991 | 27.6 | % | |||||||||||||||
Total revenues for the three months ended September 30, 2025 were $7,183,121 compared to $5,630,130 for the same period in 2024, an increase of $1,552,991 or 27.6% year over year.
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Products
Products revenues in the three months ended September 30, 2025, were $2,983,795 compared to $1,391,016 for the same period in 2024, an increase of $1,592,779, or 114.5%. The increase in revenue during the three months ended September 30, 2025 is due to an increase in chiller sales of $2,196,749, which included deliveries of our hybrid-drive air-cooled chiller, an increase in engineered accessory sales of $175,416, partially offset by a $779,386 decrease in cogeneration sales. Products revenue in the three months ended September 30, 2024, were negatively impacted by the relocation of our manufacturing operations in April 2024, which significantly reduced our production capacity during that period. Our Products sales mix, as well as product revenue, can vary significantly from period to period as our products are high dollar, low volume sales.
Services
Service revenues in the three months ended September 30, 2025 were $3,943,510, compared to $3,850,551 for the same period in 2024, an increase of $92,959, or 2.4%. The increase in revenue during the three months ended September 30, 2025 is due to a $163,180 increase in revenues from existing service contracts, offset partially by a $70,221 decrease in revenues from the acquired Aegis maintenance contracts.
Our service operation revenues grow with the sale of installed systems, since the majority of our product sales are accompanied by a service contract or time and materials agreements. As a result, our "fleet" of units being serviced by our service department grows with product sales.
Energy Production
Energy Production revenues in the three months ended September 30, 2025 were $255,816, compared to $388,563 for the same period in 2024, a decrease of $132,747, or 34.2%. The decrease in Energy Production revenue is due to the expiration of several energy production contracts in late 2024 and the temporary shutdown of a few energy production sites for repairs in the three months ended September 30, 2025.
Cost of Sales
Cost of sales in the three months ended September 30, 2025, was $4,999,555 compared to $3,149,216 for the same period in 2024, an increase of $1,850,339, or 58.8%. The increase in cost of sales is due to increased product shipments and increased service contract maintenance costs due to higher labor and material costs. During the three months ended September 30, 2025, our gross margin decreased to 30.4% compared to 44.1% for the same period in 2024, a 13.7% percentage point decrease due to increased labor and material costs incurred in both Products and Services.
Products
Cost of sales for Products in the three months ended September 30, 2025, was $1,885,377 compared to $797,209 for the same period in 2024, an increase of $1,088,168, or 136.5% due to increased sales of Products and higher material and labor costs. Products revenue and cost of sales in the three months ended September 30, 2024, were impacted due to the relocation of our manufacturing operations in April 2024, which significantly reduced our production capacity. During the three months ended September 30, 2025, our Products gross margin was 36.8% compared to 42.7% for the same period in 2024, a 5.9% percentage point decrease. The decrease in margin is due to increased labor and material costs in 2025.
Services
Cost of sales for Services in the three months ended September 30, 2025, was $2,946,438 compared to $2,139,042 for the same period in 2024, an increase of $807,396, or 37.7%, due to increased labor and material costs. During the three months ended September 30, 2025, our Services gross margin decreased to 25.3% compared to 44.4% in the same period in 2024, a 19.1% percentage point decrease. The decrease in gross margin percent is due to increased labor and material costs incurred in 2025 to replace engines as we test improvements in our technology to improve engine life and service margins.
Energy Production
Cost of sales for Energy Production in the three months ended September 30, 2025, was $167,740 compared to $212,965 for the same period in 2024, a decrease of $45,225, or 21.2%. During the three months ended September 30, 2025, our Energy Production gross margin decreased to 34.4% compared to 45.2% for the same period in 2024, a 10.8% percentage point decrease. The decrease in the energy production gross margin is due to increased repair costs incurred to restart energy production sites which were shut down for repairs in the three months ended September 30, 2025, compared to the same period in 2024.
Operating Expenses
Operating expenses increased $930,133, or 27.7% to $4,284,270 in the three months ended September 30, 2025 compared to $3,354,137 in the same period in 2024.
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| Three Months Ended | |||||||||||||||||||||||
| Operating Expenses | September 30, 2025 | September 30, 2024 | Increase (Decrease) $ | Increase (Decrease) % | |||||||||||||||||||
| General and administrative | 3,411,762 | 2,681,558 | $ | 730,204 | 27.2 | % | |||||||||||||||||
| Selling | 572,869 | 442,812 | 130,057 | 29.4 | % | ||||||||||||||||||
| Research and development | 297,926 | 233,809 | 64,117 | 27.4 | % | ||||||||||||||||||
| (Gain) loss on disposition of assets | 1,713 | (4,042) | 5,755 | (142.4) | % | ||||||||||||||||||
| Total | $ | 4,284,270 | $ | 3,354,137 | $ | 930,133 | 27.7 | % | |||||||||||||||
General and administrative expenses consist of executive staff, accounting and legal expenses, office space, general insurance and other administrative expenses. General and administrative expenses for the three months ended September 30, 2025 were $3,411,762 compared to $2,681,558 for the same period in 2024, an increase of $730,204 or 27.2%, due to a $239,088 increase in payroll, benefits and recruitment costs, a $97,882 increase in travel and vehicles expense, a $89,287 increase in insurance premiums, a $79,648 increase in operating supplies, a $75,161 increase in depreciation and amortization, a $65,581 increase in stock-based compensation expense, a $22,566 increase in franchise taxes, and a $20,229 increase in professional fees.
Selling expenses consist of sales staff, commissions, marketing, travel and other selling related expenses. Selling expenses for the three months ended September 30, 2025, were $572,869 compared to $442,812 for the same period in 2024, an increase of $130,057 or 29.4% due to a $69,024 increase in sales commission and a $36,699 increase in marketing and trade show costs.
Research and development expenses consist of engineering and technical staff, materials, outside consulting and other related expenses. Research and development expenses for the three months ended September 30, 2025, were $297,926 compared to $233,809 for the same period in 2024, an increase of $64,117, or 27.4%, due to a $37,468 increase in payroll and related benefit costs, a $20,630 increase in product certification costs, and a $9,015 increase in stock-based compensation.
The loss on asset dispositions for the three months ended September 30, 2025, was $1,713 compared to a gain on asset dispositions of $4,042 for the nine months ended September 30, 2024.
Income (loss) from Operations
Our loss from operations for the three months ended September 30, 2025, was $2,100,704 compared to a loss from operations of $873,223 for the same period in 2024, an increase of $1,227,481, or 140.6%. The increase in our loss from operations is due to lower Services segment gross profit due to increased labor and material cost and a $930,133 increase in operating expenses. The decrease in gross margin is due to increased labor and material costs incurred in 2025 to replace engines as we test improvements in our technology to improve engine life and service margins.
Other Income (Expense), net
Other expense, net for the three months ended September 30, 2025, was $15,434 compared to other expense net of $22,707 for the same period in 2024, an increase of $7,273 in other expense, due to a $18,110 increase in interest expense due to borrowings under our related party notes and lease financing and an increase of $74,995 in unrealized losses on marketable securities, offset partially by an $92,592 increase in interest income resulting from increased cash on deposit and a $7,786 increase in currency exchange gains in the three months ended September 30, 2025.
Provision for State Income Taxes
The provision for state income taxes for the three months ended September 30, 2025 was $2,928 and represents estimated income tax payments, net of refunds, to various states. There was no provision for state income taxes for the three months ended September 30, 2024.
Non-controlling Interest
The income attributable to the non-controlling interest was $11,881 for the three months ended September 30, 2025, which represents the non-controlling interest portion of American DG Energy's 51% owned subsidiary, American DG New York, LLC. For the same period in 2024, income attributable to the non-controlling interest was $34,478. The decrease in income attributable to the non-controlling interest in the three months ended September 30, 2025, is due to the expiration of an Energy Production contract at one of the Energy Production sites and the temporary shutdown of a site for repairs.
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Net Income (loss) Attributable to Tecogen Inc.
The net loss attributable to Tecogen for the three months ended September 30, 2025, was a net loss of $2,130,947 compared to a net loss of $930,408 for the same period in 2024, an increase of $1,200,539, or 129.0%. The increase in the net loss is due to lower Services segment gross profit, due to increased labor and material costs and a $930,133 increase in operating expenses. The decrease in gross margin is due to increased labor and material costs incurred in 2025 to replace engines as we test improvements in our technology to improve engine life and service margins.
Nine Months Ended September 30, 2025 Compared to the Nine Months Ended September 30, 2024
The following table sets forth for the periods indicated, the percentage of net sales represented by certain items reflected in our condensed consolidated statements of operations:
| Nine Months Ended | |||||||||||
| September 30, 2025 | September 30, 2024 | ||||||||||
| Revenues | 100.0% | 100.0% | |||||||||
| Cost of sales | 63.8% | 56.9% | |||||||||
| Gross profit | 36.2% | 43.1% | |||||||||
| Operating expenses | |||||||||||
| General and administrative | 43.4% | 50.9% | |||||||||
| Selling | 7.7% | 8.3% | |||||||||
| Research and development | 3.9% | 4.4% | |||||||||
| (Gain) loss on disposition of assets | -% | -% | |||||||||
| Total operating expenses | 55.0% | 63.7% | |||||||||
| Loss from operations | (18.8) | % | (20.5) | % | |||||||
| Total other income (expense), net | (0.6) | % | (0.5) | % | |||||||
| Loss before provision for state income taxes | (19.4) | % | (21.0) | % | |||||||
| Provision for state income taxes | 0.1 | % | 0.1 | % | |||||||
| Consolidated net loss | (19.5) | % | (21.1) | % | |||||||
| (Income) loss attributable to the noncontrolling interest | - | % | (0.5) | % | |||||||
| Net loss attributable to Tecogen, Inc. | (19.5) | % | (21.6) | % | |||||||
Revenues
The following table presents revenue for the periods indicated, by segment and the change from the prior year:
| Nine Months Ended | |||||||||||||||||||||||
| September 30, 2025 | September 30, 2024 | Increase (Decrease) $ | Increase (Decrease) % | ||||||||||||||||||||
| Revenues: | |||||||||||||||||||||||
| Products | |||||||||||||||||||||||
| Cogeneration | $ | 2,662,271 | $ | 2,188,355 | $ | 473,916 | 21.7 | % | |||||||||||||||
| Chiller | 5,624,818 | 695,040 | 4,929,778 | 709.3 | % | ||||||||||||||||||
| Engineered accessories | 385,838 | 118,692 | 267,146 | 225.1 | % | ||||||||||||||||||
| Total product revenues | 8,672,927 | 3,002,087 | 5,670,840 | 188.9 | % | ||||||||||||||||||
| Services | 12,153,700 | 11,991,378 | 162,322 | 1.4 | % | ||||||||||||||||||
| Energy production | 929,085 | 1,550,549 | (621,464) | (40.1) | % | ||||||||||||||||||
| Total revenues | $ | 21,755,712 | $ | 16,544,014 | $ | 5,211,698 | 31.5 | % | |||||||||||||||
Total revenues for the nine months ended September 30, 2025 were $21,755,712 compared to $16,544,014 for the same period in 2024, an increase of $5,211,698 or 31.5% year over year.
TECOGEN INC.
Products
Products revenues in the nine months ended September 30, 2025, were $8,672,927 compared to $3,002,087 for the same period in 2024, an increase of $5,670,840, or 188.9%. The increase in revenue during the nine months ended September 30, 2025 is due to an increase in chiller sales of $4,929,778, which included the initial deliveries of our hybrid-drive air-cooled chiller, an increase in cogeneration sales of $473,916, and an increase in engineered accessory sales of $267,146. Products revenue in the nine months ended September 30, 2024, were negatively impacted due to the relocation of our manufacturing operations in April 2024, which significantly reduced our production capacity during that period. Our Products sales mix, as well as product revenue, can vary significantly from period to period as our products are high dollar, low volume sales.
Services
Service revenues in the nine months ended September 30, 2025, were $12,153,700, compared to $11,991,378 for the same period in 2024, an increase of $162,322, or 1.4%. The increase in revenue during the nine months ended September 30, 2025, is due to a $451,063 increase in revenues from existing service contracts, offset by a $288,741 reduction in revenue from the acquired Aegis maintenance contracts.
Our service operation revenues grow with the sale of installed systems, since the majority of our product sales are accompanied by a service contract or time and materials agreements. As a result, our "fleet" of units being serviced by our service department grows with product sales.
Energy Production
Energy Production revenues in the nine months ended September 30, 2025, were $929,085, compared to $1,550,549 for the same period in 2024, a decrease of $621,464, or 40.1%. The decrease in Energy Production revenue is due to the expiration of several energy production contracts in late 2024 and the temporary shutdown of a few energy production sites for repairs in the nine months ended September 30, 2025.
Cost of Sales
Cost of sales in the nine months ended September 30, 2025, was $13,888,613 compared to $9,408,288 for the same period in 2024, an increase of $4,480,325, or 47.6%. The increase in cost of sales is due to increased product shipments and increased service contract maintenance costs due to higher labor and material costs. During the nine months ended September 30, 2025, our gross margin decreased to 36.2% compared to 43.1% for the same period in 2024, a 6.9% percentage point decrease due to higher Services labor and material costs.
Products
Cost of sales for Products in the nine months ended September 30, 2025, was $5,605,282 compared to $2,018,734 for the same period in 2024, an increase of $3,586,548, or 177.7% due to increased sales of Products and higher labor and material costs. During the nine months ended September 30, 2025, our Products gross margin was 35.4% compared to 32.8% for the same period in 2024, a 2.6% percentage point increase. The increase in margin is due to increased revenues in 2025.
Services
Cost of sales for Services in the nine months ended September 30, 2025 was $7,675,073 compared to $6,423,114 for the same period in 2024, an increase of $1,251,959, or 19.5%, due to increased labor and material costs. During the nine months ended September 30, 2025, our Services gross margin decreased to 36.8% compared to 46.4% in the same period in 2024, a 9.6% percentage point decrease. The decrease in gross margin percent is due to increased labor and material costs incurred in 2025 to replace engines as we test improvements in our technology to improve engine life and service margins.
Energy Production
Cost of sales for Energy Production in the nine months ended September 30, 2025, was $608,258 compared to $966,440 for the same period in 2024, a decrease of $358,182, or 37.1%. During the nine months ended September 30, 2025, our Energy Production gross margin decreased to 34.5% compared to 37.7% for the same period in 2024, a 3.2% percentage point decrease. The decrease in the energy production gross margin is due to lower revenue and increased repair costs incurred to restart energy production sites which were shut down for repairs in the nine months ended September 30, 2025, compared to the same period in 2024.
Operating Expenses
Operating expenses increased $1,441,108, or 13.7%, to $11,973,909 in the nine months ended September 30, 2025, compared to $10,532,801 in the same period in 2024.
TECOGEN INC.
| Nine Months Ended | |||||||||||||||||||||||
| Operating Expenses | September 30, 2025 | September 30, 2024 | Increase (Decrease) $ | Increase (Decrease) % | |||||||||||||||||||
| General and administrative | $ | 9,431,073 | $ | 8,428,119 | $ | 1,002,954 | 11.9 | % | |||||||||||||||
| Selling | 1,682,085 | 1,377,758 | 304,327 | 22.1 | % | ||||||||||||||||||
| Research and development | 859,318 | 734,994 | 124,324 | 16.9 | % | ||||||||||||||||||
| (Gain) loss on disposition of assets | 1,433 | $ | (8,070) | 9,503 | (117.8) | % | |||||||||||||||||
| Total | $ | 11,973,909 | $ | 10,532,801 | $ | 1,441,108 | 13.7 | % | |||||||||||||||
General and administrative expenses consist of executive staff, accounting and legal expenses, office space, general insurance and other administrative expenses. General and administrative expenses for the nine months ended September 30, 2025, were $9,431,073 compared to $8,428,119 for the same period in 2024, an increase of $1,002,954 or 11.9%, due to a $454,413 increase in payroll and related benefits, a $227,264 increase in recruitment costs, a $181,902 increase in depreciation and amortization, a $198,652 increase in travel and vehicle expense, a $150,305 increase in operating supply costs, a $60,058 increase in stock-based compensation expense, and, a $59,965 increase in insurance premiums, offset partially by a $190,636 decrease in facility costs, due to the transition to our new facility in 2024, a $80,700 reduction in credit losses, due to the recovery of $75,000 recognized in 2025, relocation costs of $83,055 incurred in 2024 and a $38,459 reduction in professional fees.
Selling expenses consist of sales staff, commissions, marketing, travel and other selling related expenses. Selling expenses for the nine months ended September 30, 2025, were $1,682,085 compared to $1,377,758 for the same period in 2024, an increase of $304,327 or 22.1%, due to a $304,334 increase in sales commission.
Research and development expenses consist of engineering and technical staff, materials, outside consulting and other related expenses. Research and development expenses for the nine months ended September 30, 2025, were $859,318 compared to $734,994 for the same period in 2024, an increase of $124,324 or 16.9%, due to a $113,039 increase in payroll and related benefit costs and a $20,525 increase in consulting costs.
The loss on asset dispositions for the nine months ended September 30, 2025 was $1,433 compared to gain on asset dispositions of $8,070 for the nine months ended September 30, 2024.
Income (loss) from Operations
Our loss from operations for the nine months ended September 30, 2025, was $4,106,810 compared to a loss from operations of $3,397,075 for the same period in 2024, an increase of $709,735, or 20.9%. The increase in our loss from operations is due to lower Services segment gross profit, due to increased labor and material costs and a $1,441,108 increase in operating expenses. The decrease in gross margin percent is due to increased labor and material costs incurred in 2025 to replace engines as we test improvements in our technology to improve engine life and service margins.
Other Income (Expense), net
Other expense, net for the nine months ended September 30, 2025, was $125,285 compared to other expense net of $74,847 for the same period in 2024, an increase of $50,438, due to a $52,050 increase in interest due to borrowings under our related party notes and lease financing, a $74,995 increase in unrealized losses on marketable securities, and, a $12,711 increase in currency exchange losses, offset partially by a $89,319 increase in interest income resulting from increased cash on deposit in the nine months ended September 30, 2025.
Provision for State Income Taxes
The provision for state income taxes for the nine months ended September 30, 2025 and 2024 was $20,615 and $22,100, respectively, and represents estimated income tax payments, net of refunds, to various states.
Non-controlling Interest
The income attributable to the non-controlling interest was $2,264 for the nine months ended September 30, 2025, which represents the non-controlling interest portion of American DG Energy's 51% owned subsidiary, American DG New York, LLC. For the same period in 2024, income attributable to the non-controlling interest was $80,149. The decrease in the income attributable to the non-controlling interest in the nine months ended September 30, 2025, is due to the expiration of a contract at one of the Energy Production sites and the temporary shutdown of a site for repairs.
TECOGEN INC.
Net Income (loss) Attributable to Tecogen Inc.
The net loss attributable to Tecogen Inc., for the nine months ended September 30, 2025, was a net loss of $4,254,974 compared to a net loss of $3,574,171 for the same period in 2024, an increase of $680,803, or 19.0%. The increase in the net loss is due to lower Services segment gross profit, due to increased labor and material costs and a $1,441,108 increase in operating expenses. The decrease in gross margin percent is due to increased labor and material costs incurred in 2025 to replace engines as we test improvements in our technology to improve engine life and service margins.
Liquidity and Capital Resources
Sources of Liquidity
During the nine months ended September 30, 2025, we incurred a loss from operations of $4,106,810 compared to a net loss from operations of $3,397,075 in the same period in 2024. Cash flows from operations decreased $7,219,424 during the nine months ended September 30, 2025, compared to the same period in 2024. As of September 30, 2025, we had cash and cash equivalents of $15,253,975 compared to cash and cash equivalents of $5,405,233 as of December 31, 2024, an increase of $9,848,742 or 182.2%, and an accumulated deficit as of September 30, 2025, of $51,894,868.
Recent Equity Financing
On July 21, 2025, we closed on the sale of an aggregate of 3,985,000 shares of common stock, $0.001 par value per share ("Common Stock"), including an additional 485,000 shares of common stock to cover over-allotments, at a price to the public of $5.00 per share (before deduction of underwriting discounts and commissions), in a firm commitment underwritten public offering pursuant to an underwriting agreement, dated July 18, 2025 ("Underwriting Agreement"), between the Company and Roth Capital Partners, LLC ("Roth"), as sole underwriter and manager for the offering ("Offering"). The net proceeds from the Offering, after deducting underwriting discounts and commissions and offering expenses were approximately $18,105,100. See "Note 1. Description of Business and Basis of Presentation " of the Notes to Condensed Consolidated Statements for additional detail on the net Offering proceeds.
Cash Flows
The following table presents a summary of our net cash flows from operating, investing and financing activities:
| Nine Months Ended | ||||||||||||||||||||
| Cash Provided by (Used in) | September 30, 2025 | September 30, 2024 | Increase (Decrease) | |||||||||||||||||
| Operating activities | $ | (7,336,419) | $ | (116,995) | $ | (7,219,424) | ||||||||||||||
| Investing activities | (394,972) | (895,652) | 500,680 | |||||||||||||||||
| Financing activities | 17,580,133 | 943,615 | 16,636,518 | |||||||||||||||||
| Change in cash and cash equivalents | $ | 9,848,742 | $ | (69,032) | $ | 9,917,774 | ||||||||||||||
Consolidated working capital at September 30, 2025, was $20,257,614 compared to $5,329,650 at December 31, 2024, an increase of $14,927,964, or 280.1%. Included in working capital were cash and cash equivalents of $15,253,975 at September 30, 2025, compared to $5,405,233 at December 31, 2024, an increase of $9,848,742, or 182.2%.
Cash Flows from Operating Activities
Cash used by operating activities for the nine months ended September 30, 2025, was $7,336,419 compared to cash of $116,995 used by operating activities for the same period in 2024, an increase of $7,219,424 in cash used in the current period. Our accounts receivable and unbilled revenue balances were $6,220,441 and $126,738, respectively, at September 30, 2025, compared to $6,026,545 and $398,898 at December 31, 2024, using $129,147 of cash.
Accounts payable decreased to $3,417,293 as of September 30, 2025, from $4,142,678 at December 31, 2024, using $725,386 in cash flow from operations. The decrease in accounts payable is due to payment of vendors balances which had aged. Deferred revenue decreased to $4,882,806 as of September 30, 2025, compared to $7,867,082 as of December 31, 2024, due to the application of customer deposits against accounts receivables as products ship, using $2,984,276 of cash from operations. We expect accounts payable and deferred revenue to fluctuate with routine changes in operations.
Cash Flows from Investing Activities
TECOGEN INC.
During the nine months ended September 30, 2025, we used $353,296 of cash to purchase property, plant and equipment, primarily for improvements required at the North Billerica facility, and distributed $42,956 to the 49% non-controlling interest holder of American DG New York LLC. During the nine months ended September 30, 2024, we used $838,932 of cash for improvements required to the North Billerica facility, distributed $96,975 to the 49% non-controlling interest holders and received $40,255 in proceeds from the disposition of assets, including insurance proceeds.
Cash Flows from Financing Activities
During the nine months ended September 30, 2025, we received $18,105,100 in net proceeds from the follow on public offering and received $658,403 of proceeds from the exercise of stock options, we used $1,076,956 to retire a related party note and we used $106,414 of cash in payment of finance lease principal. During the nine months ended September 30, 2024, we received proceeds of $1,000,000 under the related party promissory notes and used $56,385 of cash in payment of finance lease principal.
Backlog
As of September 30, 2025, our backlog of product and installation projects, excluding service contracts, was $4,024,779, consisting of $3,002,768 of purchase orders received by us. As of September 30, 2024, our backlog of product and installation projects, excluding service contracts, was $5,023,267 consisting of $3,759,305 of purchase orders received by us and $1,263,962 of projects in which the customer's internal approval process is complete, financial resources have been allocated, and the customer has made a firm verbal commitment that the order is in the process of execution. Backlog at the beginning of any period is not necessarily indicative of future performance. Our presentation of backlog may differ from other companies in our industry.
Liquidity
At September 30, 2025, we had cash and cash equivalents of $15,253,975, an increase of $9,848,742 or 182.2% from the cash and cash equivalents balance at December 31, 2024 due to the follow-on public offering. See"Recent Equity Financing,"above.
Significant Accounting Policies and Critical Estimates
Our significant accounting policies are discussed in the Notes to our Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2024. The accounting policies and estimates that can have a significant impact upon our operating results, financial position and footnote disclosures are described in the above notes and in the Annual Report.
Significant New Accounting Standards or Updates Not Yet Effective
The Company's critical accounting policies have remained consistent with the policies disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on March 18, 2025.
See Note 1, Description of Business and Basis of Presentation, to the Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q.
Seasonality
The majority of our chilling systems sold are operational during the summer. Demand for our service team is higher in the warmer months when cooling is required. Chiller units are generally shut down in the winter and started up again in the spring. The chiller "busy season' for the service team generally runs from May through the end of September. Our cogeneration sales are not generally affected by seasonality.
Off-Balance Sheet Arrangements
Currently, we do not have any material off-balance sheet arrangements, including any outstanding derivative financial instruments, off-balance sheet guarantees, interest rate swap transactions or foreign currency contracts. We do not engage in trading activities involving non-exchange traded contracts.
Tecogen Inc. published this content on November 13, 2025, and is solely responsible for the information contained herein. Distributed via Edgar on November 13, 2025 at 14:02 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]