Tecogen Inc.
03/19/2026 | Press release | Distributed by Public on 03/19/2026 13:47
Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)
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 audited 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. In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. 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 discussion and analysis. 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. Our historical results are not necessarily indicative of the results that may be expected for any period in the future.
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 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.
Although we may, from time to time, have one or a few customers who may represent more than 10% of our product revenue for a given year, we are not dependent on the recurrence of revenue from those customers. Our product revenue is such that customers may make a large purchase once and may not ever make a purchase again. Our equipment is built to last 30 or more years. Therefore, our product revenue model is not dependent on recurring sales transactions from the same customer. Our service revenue does lend itself to recurring revenue from particular customers.
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
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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 installation service related revenue has decreased and is likely to continue to remain low due to our strategy to focus on higher margin segments of our business. Our service margins are generally predictable as we service hundreds of long-term contracts with relatively low dollar, high volume sales.
During the years ended December 31, 2025 and 2024, our revenues were negatively impacted due to supply chain issues, customer order delays or deferrals and, service delays due to customer facility closures.
Our product revenue is derived from the sale of the various cogeneration modules, such as the InVerde, InVerde e+, the Tecopower, and Tecochill products. In 2019, we also reintroduced our TecoFrost refrigeration line. The sales cycle varies between 6 months to a year or more. Therefore, our product revenue can be difficult to predict and the expected margin can vary. In most cases we work with consulting engineers who specify our product in new and retrofit applications.
Our cogeneration, heat pump, and chiller modules are built to order and revenue is recognized upon shipment. The lead time to build and deliver a unit depends on its customized configuration and is approximately 12 to 14 weeks for a chiller and 6 to 8 weeks for a cogeneration system or heat pump, from time of purchase order. As revenue is recognized upon shipment, our work-in-process is an important factor in understanding our financial condition in any given quarter.
Our operations are comprised of three business segments, as follows:
•Products segment - designs, manufactures and sells industrial and commercial cogeneration systems;
•Services segment - provides maintenance services for Tecogen supplied products at customer sites; and,
•Energy Production segment - sells energy in the form of electricity, heat, hot water, and cooling to our customers under long-term sales agreements.
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, between the Company and Roth Capital Partners, LLC, 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
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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 ("SEC") on February 28, 2025.
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 Aegismaintenance agreements, we agreed to purchase certain assets, and related matters ("Acquisition"). On April 1, 2023, the Acquisition closed. Under the Agreement, we agreed to acquire from Aegis and assume Aegis' rights and obligations arising on or after April 1, 2023 under maintenance agreements pursuant to which Aegis provided maintenance services for approximately 200 cogeneration systems, and acquired certain vehicles and inventory used by Aegis in connection with the performance of such maintenance services, and following closing, hired eight (8) Aegis employees to provide services with respect to such maintenance agreements. At closing, we acquired eight (8) Aegis vehicles for consideration consisting of $170,000 in cash. Also, we issued credits against outstanding accounts receivable due from Aegis in the amount of $300,000 for the acquisition of inventory that Aegis used to provide maintenance services.
On February 1, 2024, Tecogen and Aegis amended the Agreement to add eighteen (18) additional maintenance service agreements (the "First Amendment"). The First 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 May 1, 2024, Tecogen and Aegis amended the Agreement to add thirty-one (31) additional maintenance contracts (the "Second Amendment"). The Second Amendment includes an undertaking by Aegis to use commercially reasonable efforts to support and assist our execution of maintenance service agreements for an additional forty-eight (48) cogeneration units sold to customers by Aegis.
See Note 5. "Aegis Contract and Related Asset Acquisition" of the Notes to the 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 impacted during the second and third quarters of 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 has had a material impact on anti-fossil fuel sentiment and the regulatory environment that is more 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 any short fall in power from the utility.
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 chiller. Using the inverter design from our InVerde e+ cogeneration module, the system can simultaneously take two inputs, one from the grid or a renewable energy source and one from our natural gas engine. This allows a customer to seek the optimum blend of operational cost savings and greenhouse gas benefits while providing added resiliency from two power sources. We introduced the Tecochill Hybrid-Drive Air-Cooled Chiller at the AHR Expo in February 2023 and received an order on February 8, 2024 for three hybrid-drive air-cooled chillers for a utility company in Florida which were shipped in the second and third quarter of 2025. In
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March 2024, the US Patent and Trademark Office granted patent 11,936,327: "Hybrid Power System With Electric Generator and Auxiliary Power Source."
Impact of Geopolitical Tensions
We have no operations or customers in Russia, the Ukraine, or in the Middle East, including the recent military action in Iran. The higher energy prices for natural gas as a result of the war may affect the performance of our Energy Production Segment and the cost differential between grid generated energy and natural gas sourced energy using our cogeneration equipment. However, we have also seen higher electricity prices as much of the electricity production in the United States is generated from fossil fuels. If the electricity prices continue to rise, the economic savings generated by our products are likely to increase. In addition to the direct result of changes in natural gas and electricity prices, the war in Ukraine and the conflict in the Middle East may result in higher cybersecurity risks, increased or ongoing supply chain challenges, and volatility related to the trading prices of commodities.
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, we extended the maturity date the of the promissory note dated October 10, 2023 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 be 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 reclassified to long-term liabilities due to the February 18, 2025 amendment.
The promissory notes were repaid in full or converted to shares of our common stock in the year ended December 31, 2025. 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. The preparation of these financial statements requires us to make judgments, assumptions and estimates that affect the reported amounts of assets, liabilities, sales and expenses, and related disclosure of contingent assets and liabilities. These judgments, assumptions and estimates are made or applied within the context of accounting policies related to the nature of the transaction. Note 2. "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. 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. Estimates and assumptions about future events and their effects cannot be determined with certainty. We base our estimates on historical experience and on various other assumptions believed to be applicable and reasonable under the circumstances. These estimates may change as new events occur, as additional information is obtained and as our operating environment changes. These changes have historically been minor and have been included in the consolidated financial statements as soon as they became known. In addition, management is periodically faced with uncertainties, the outcomes of which are not within its control and will not be known for prolonged periods of time. These uncertainties are discussed in "Item 1A, Risk Factors" above.
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Management believes that the following are critical accounting estimates:
Revenue Recognition
Revenue is recognized when performance obligations under the terms of a contract with our customer are satisfied. This generally occurs with the transfer of control of our products, services and energy production. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods or providing services or energy to customers.
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. We use an observable selling price to determine standalone selling prices where available and either a combination of an adjusted market assessment approach, an expected cost plus a margin approach, and/or a residual approach to determine the standalone selling prices for separate performance obligations as a basis for allocating contract consideration when an observable selling price is not available.
Accounts Receivable
Accounts receivable are stated at the amount management expects to collect from outstanding balances. The allowance for credit losses is estimated based on historical experience, aging of the receivable, the counterparty's ability to pay, condition of the general economy and industry, and combined with management's estimate of current conditions, reasonable and supportable forecasts of future losses to determine estimated credit losses in ourevaluation of outstanding accounts receivable at the end of the year. The allowance for credit losses reflects managements evaluation of our outstanding accounts receivable at the end of the year and our best estimate of probable losses inherent in the accounts receivable balance. Accounts receivable deemed uncollectible are charged against the allowance for credit losses when identified.
Inventory
Raw materials, work in process, and finished goods inventories are stated at the lower of cost, as determined by the average cost method, or net realizable value. We periodically review inventory quantities on hand for excess and/or obsolete inventory based primarily on historical usage, as well as based on estimated forecast of product demand. 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 three to fifteen years. Leasehold improvements are amortized using the straight-line method over the lesser of the estimated useful lives of the assets or the term of the related leases. Expenditures for maintenance and repairs are expensed, while renewals and betterments that materially extend the life of an asset are capitalized.
We review our property, plant and equipment for potential impairment whenever events or changes in business circumstances indicate that the carrying value of the assets may not be fully recoverable or that the useful lives of the assets are no longer appropriate. We evaluate the recoverability of our long-lived assets when impairment is indicated by comparing the net book value of the asset group to the estimated future undiscounted cash flows attributable to such assets. If the sum of the projected undiscounted cash flows (excluding interest charges) is less than the carrying value of the assets, the assets will be written down to the estimated fair value and such loss is recognized in income from continuing operations in the period in which the determination is made. If impairment is indicated, the asset is written down to its estimated fair value.
Business Combinations
In accordance with applicable accounting standards, we estimate the fair value of assets acquired and liabilities assumed as of the acquisition date of each business combination. Any excess purchase price over the fair value of the net tangible and intangible assets acquired is allocated to goodwill. We may make certain estimates and assumptions when determining the fair values of assets acquired and liabilities assumed, including intangible assets. Critical estimates in valuing certain intangible assets include but are not limited to future expected cash flows from energy production sites or customer maintenance contracts, estimated operating costs, as well as discount rates. At the acquisition date, we will also record acquisition related liabilities, if applicable, for any contingent consideration or deferred payments to the seller and pre-acquisition deferred maintenance contingencies identified at service contract acquisition. 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. 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. Contingent consideration liabilities and deferred payments to sellers are recorded as current liabilities and other long-term liabilities in the consolidated balance sheets based on the expected timing of settlement.
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Management's estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. Any changes to provisional amounts identified during the measurement period are recognized in the reporting period in which the adjustment amounts are determined. Transaction costs associated with business combinations are expensed as incurred.
Contract Assets and Liabilities
The favorable contract asset and unfavorable contract liability included in the intangible assets and liabilities of the consolidated balance sheets represent the fair value of customer energy production contracts (both positive for favorable contracts and negative for unfavorable contracts) which were acquired by us.
The determination of fair value requires development of an estimate of the price at which an orderly transaction to sell the asset or to transfer the liability would take place between market participants at the measurement date under current market conditions. Contracts are considered to be assets or liabilities by virtue of the rights and obligations inherent in the contract terms. Typically, contracts with terms considered to be at market are considered to have no fair value as, in order to be entitled to the rights under the contract, performance must occur for which a market rate of return is earned due to the at market terms. The fair value of a contract is primarily a measurement of its off-market terms. The obligation to perform under a contract with terms that are unfavorable to market results in a liability to the extent its terms are off-market. The resulting liability is an estimate of the price that would need to be paid to a willing market participant to assume the obligations under the contract in order for them to receive a market rate of return for their remaining performance obligation under the contract. The opposite holds true in instances where the terms of a contract are considered to be favorable to market. In that case an asset would exist as an estimate of the price that would be received from a willing market participant in order to be entitled to the rights under the contract.
In determining the estimate of fair value of 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.
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. ASC 350 "Intangibles-Goodwill and Other" (ASC 350) permits entities to make a qualitative assessment of whether it is more likely than not that a reporting unit's fair value is less than its carrying amount before applying the two-step goodwill impairment test. Circumstances that are considered as part of the qualitative assessment and could trigger the two-step impairment test include, but are not limited to: a significant adverse change in the business climate; a significant adverse legal judgment; adverse cash flow trends; an adverse action or assessment by a government agency; unanticipated competition; decline in our stock price; and a significant restructuring charge within a reporting unit. We define reporting units at the business segment level. For purposes of testing goodwill for impairment, goodwill has been allocated to our reporting units to the extent it relates to each reporting unit.
At a minimum, we perform a quantitative goodwill impairment test in the fourth quarter of the year. In the fourth quarter of 2025, 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. 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 resulted in an impairment at December 31, 2025. See Note 6. "Sale of Energy Producing Assets".
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").
The discount rate, profitability assumptions, and terminal growth rate of the Energy Production unit were the material assumptions utilized in the discounted cash flow model used to estimate its fair value. The discount rate reflects an estimate of our weighted-average cost of capital.
The discounted cash flow analysis requires estimates, assumptions and judgments about future events. Our analysis uses our internally generated long-range plan. The long-range plan reflects management's judgment and assumptions about future events.
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In the fourth quarter of 2025, we performed a quantitative goodwill impairment test for the Aegis maintenance service contracts reporting unit acquired in 2023 and 2024. 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. 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 estimated fair value of that reporting unit, including goodwill, exceeded the carrying value and resulted in no impairment at December 31, 2025. See Note 5. "Aegis Contract and Related Asset Acquisition".
The impairment analysis considers actual run hours and system uptime in forecasting future run hours and hourly billing rates, forecasted costs incurred to maintain the systems, assumes system downtime due to extensive repairs, contract attrition and assumes improvements in our service operations and system maintenance procedures to optimize the long-term profitability of the various maintenance service contracts.
The discount rate, profitability assumptions, and terminal growth rate of the Aegis Contract unit were the material assumptions utilized in the discounted cash flow model used to estimate its fair value. The discount rate reflects an estimate of our weighted-average cost of capital.
The discounted cash flow analysis requires estimates, assumptions and judgments about future events. Our analysis uses our internally generated long-range plan. The long-range plan reflects management's judgment and assumptions about future events.
We believe the assumptions used in our goodwill impairment analysis are appropriate and result in a reasonable estimate of the fair value of the reporting unit. 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. If our assumptions regarding future performance are not achieved, we may be required to record additional goodwill impairment charges in future periods.
Results of Operations
Year Ended December 31, 2025 Compared to Year Ended December 31, 2024
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, 2025 and 2024:
| Years ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Revenues | 100.0 | % | 100.0 | % | |||||||
| Cost of Sales | 63.7 | 56.4 | |||||||||
| Gross Profit | 36.3 | 43.6 | |||||||||
| Operating expenses: | |||||||||||
| General and administrative | 49.9 | 50.2 | |||||||||
| Selling | 8.4 | 8.3 | |||||||||
| Research and development | 4.3 | 4.3 | |||||||||
| Loss (gain) on sale of assets | - | (0.1) | |||||||||
| Goodwill impairment | 4.1 | 1.0 | |||||||||
| Total operating expenses | 66.7 | 63.7 | |||||||||
| Loss from operations | (30.5) | (20.0) | |||||||||
| Total other expense, net | 0.1 | (0.5) | |||||||||
| Consolidated net loss | (30.5) | (20.7) | |||||||||
| Loss (income) attributable to the noncontrolling interest | - | (0.4) | |||||||||
| Net loss attributable to Tecogen Inc. | (30.5) | % | (21.0) | % | |||||||
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The following table presents revenue by segment and the change from the prior year for the years ended December 31, 2025 and 2024:
| Years Ended | ||||||||||||||||||||||||||
| Revenues | December 31, 2025 | December 31, 2024 | Increase (Decrease) $ | Increase (Decrease) % | ||||||||||||||||||||||
| Product: | ||||||||||||||||||||||||||
| Cogeneration | $ | 3,073,582 | $ | 2,677,930 | $ | 395,652 | 14.8 | % | ||||||||||||||||||
| Chillers | 5,658,183 | 1,647,374 | 4,010,809 | 243.5 | % | |||||||||||||||||||||
| Engineered Accessories | 401,685 | 118,692 | 282,993 | 238.4 | % | |||||||||||||||||||||
| Total product revenue | 9,133,450 | 4,443,996 | 4,689,454 | 105.5 | % | |||||||||||||||||||||
| Services | 16,616,523 | 16,074,870 | 541,653 | 3.4 | % | |||||||||||||||||||||
| Energy production | 1,323,737 | 2,100,670 | (776,933) | (37.0) | % | |||||||||||||||||||||
| Total Revenue | $ | 27,073,710 | $ | 22,619,536 | $ | 4,454,174 | 19.7 | % | ||||||||||||||||||
Revenues
Revenues in 2025 were $27,073,710 compared to $22,619,536 in 2024, an increase of $4,454,174 or 19.7% due to increased Products and Services revenues.
Products
Product revenues in 2025 were $9,133,450 compared to $4,443,996 in 2024, an increase of $4,689,454 or 105.5%. The increase in Products revenue in 2025 compared to 2024 is due to a $4,010,809 increase in chiller sales, $282,993 increase in engineered accessories sales and a $395,652 increase in cogeneration sales, due to increased unit volume. 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.
Services
Revenues derived from our service centers in 2025 were $16,616,523 compared to $16,074,870 for the same period in 2024, an increase of $541,653 or 3.4%. The increase in Services revenue in 2025 is due to a $815,522, or 6.1% increase in service contract revenues from existing contracts, offset partially by a $273,869, or 10.3%, decrease in revenue from the acquired Aegis Maintenance contracts.
Our service operation revenues grow with the sales 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 for the year ended December 31, 2025 were $1,323,737 compared to $2,100,670 for 2024, a decrease of $776,933, or 37.0%. The decrease in Energy Production revenue for the year ended December 31, 2025 is due to the expiration of several energy production contracts in late 2024, decreased run hours at certain energy production sites due to temporary shutdowns for repairs and the guarantee shortfall of $84,854 recognized in 2025.
Cost of Sales
Cost of sales for the year ended December 31, 2025 was $17,249,202 compared to $12,749,363 in 2024, an increase of $4,499,839 or 35.3%. The increase in cost of sales is due to increased Products revenue volume and increased Services costs. Our overall gross margin was 36.3% in 2025 compared to 43.6% in 2024, a decrease of 7.3%. The decrease in gross margin for the year ended December 31, 2025 is due to the significant increase in our Services segment material and labor costs.
Products
Costs of sales for products the year ended December 31, 2025 was $6,097,501 compared to $3,014,655 in 2024, an increase of $3,082,846, or 102.3%, due to increased chillers Products revenue and increases in material and labor costs in 2025. Our products gross margin was 33.2% in 2025 compared to 32.2% in 2024, an increase of 1.0%, due to increased engineering accessories sales in 2025, which are higher margin sales.
Services
TECOGEN INC.
Cost of sales for services for the year ended December 31, 2025 was $10,202,774 compared to $8,432,876 in 2024, an increase of $1,769,898, or 21.0%, due to increased labor and material costs as a consequence of acquiring the Aegis customer maintenance contracts and increased material usage at existing sites. Our services gross margin was 38.6% in 2025 compared to 47.5% in 2024, a decrease of 8.9%, due to increased labor and material costs incurred to replace engines at certain sites as we test improvements to our engine technology to improve engine performance, extend engine life and improved service margins.
Energy Production
Cost of sales for energy production for the year ended December 31, 2025 was $948,927 compared to $1,301,832 in 2024, a decrease of $352,905, of 27.1%. Energy production gross margin was 28.3% in 2025 compared to 38.0% in 2024, a decrease of 9.7%. 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 during a portion of the year ended December 31, 2025, compared to the same period in 2024 and the guarantee shortfall of $84,854 recognized in 2025.
Operating Expenses
Operating expenses increased in 2025 to $18,069,338 compared to $14,404,260 in 2024, an increase of $3,665,078 or 25.4%.
| Years Ended | Increase (Decrease) | |||||||||||||||||||||||||
| December 31, 2025 | December 31, 2024 | $ | % | |||||||||||||||||||||||
| Operating Expenses | ||||||||||||||||||||||||||
| General and administrative | 13,522,035 | 11,356,406 | $ | 2,165,629 | 19.1 | % | ||||||||||||||||||||
| Selling | 2,267,247 | 1,880,903 | 386,344 | 20.5 | % | |||||||||||||||||||||
| Research and development | 1,166,744 | 961,837 | 204,907 | 21.3 | % | |||||||||||||||||||||
| Loss (gain) on sale of assets | 183 | (12,181) | 12,364 | (101.5) | % | |||||||||||||||||||||
| Goodwill impairment | 1,098,124 | 217,295 | 880,829 | 405.4 | % | |||||||||||||||||||||
| Long-lived asset impairment | 15,005 | - | 15,005 | - | % | |||||||||||||||||||||
| Total | $ | 18,069,338 | $ | 14,404,260 | $ | 3,665,078 | 25.4 | % | ||||||||||||||||||
General and administrative expenses increased $2,165,629, or 19.1%, to $13,522,035 in the year ended December 31, 2025 compared to $11,356,406 in 2024, due to a $490,192 increase in payroll and a $433,113 increase in employee benefits, a $264,638 increase in recruitment costs, a $274,191 increase in depreciation and amortization, a $224,331 increase in travel and vehicle expense, a $422,073 increase in freight costs, a $139,423 increase in stock-based compensation costs, a $123,049 increase in business insurance premiums, a $157,298 increase in operating supply costs, a $94,972 increase in filing fees and other taxes, offset partially by a $115,036 decrease in facility costs, due to the transition to our new facility in 2024, a $83,052 reduction in credit losses, due to the accounts receivable recovery of $75,000 recognized in 2025, a decrease in relocation costs of $83,055 incurred in 2024 and the $78,531 litigation provision reversal recognized in 2025.
Selling expenses increased in the year ended December 31, 2025 to $2,267,247 compared to $1,880,903 in 2024, an increase of $386,344, or 20.5%, due to a $296,573 increase in sales commissions on higher Products sales and a $70,439 increase in advertising and trade show expense targeted to the data center market..
Research and development expenses increased in the year ended December 31, 2025 to $1,166,744 compared to $961,837, an increase of $204,907 due to a $224,736 increase in payroll costs and related benefits, partially offset by a $14,800 decrease in outside consulting fees.
Loss on the sale of assets was $183 in 2025 compared to a gain on the sale of assets of $12,181 in 2024.
During the year ended December 31, 2025 we recognized goodwill and long-lived impairment of $1,113,129 on our Energy Production sites compared to $217,295 in 2024.
Loss from Operations
Loss from operations for the year ended December 31, 2025 was $8,244,830 compared to a loss of $4,534,087 in 2024, an increase in the loss from operations of $3,710,743, or 81.8%. The increase in the net loss from operations is due to an increase in operating expenses of $2,756,880, an increase in the goodwill and long-lived asset impairment of $895,834 and the decrease in Services segment gross margin.
Other Income (Expense), net
TECOGEN INC.
Other income, net, for the year ended December 31, 2025 was $16,102 compared to other expense, net of $117,118 for the same period in 2024, an increase in income of $133,220, due to a $200,288 increase in interest income resulting from increased cash on deposit in interest-bearing accounts, offset by a $59,985 increase in interest expense on borrowings under our related party notes and lease financing and a $21,763 increase in currency exchange losses.
Provision for State Income Taxes
The provision for state income taxes for the years ended December 31, 2025 and 2024 were $20,615 and $22,565, 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. The non-controlling interest share of ADGNY profits and losses was a loss of $588 for the year ended December 31, 2025 compared to income of $86,468 in 2024. The decrease in the income attributable to the non-controlling interest in the year ended December 31, 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 in 2025.
Net Loss Attributable to Tecogen Inc
Net loss for the year ended December 31, 2025 was $8,248,755 compared to a net loss of $4,760,238 for 2024, an increase of $3,488,517, or 73.3%. The increase in the net loss is due to an increase in operating expenses of $2,756,880, an increase in the goodwill and long-lived asset impairment of $895,834 and the decrease in Services segment gross margin, partially offset by increased interest income.
Net Income (Loss) Per Share
Net loss per share for the year ended December 31, 2025 was a loss of $0.30 compared to a loss of $0.19 per share for the same period in 2024. The basic and diluted weighted average shares outstanding for the year ended December 31, 2025 were 27,233,143 and 27,233,143, respectively. For the year ended December 31, 2024, basic and diluted shares weighted average shares outstanding were 24,861,190 and 24,861,190, respectively.
Liquidity and Capital Resources
Sources of Liquidity
During the year ended December 31, 2025, we incurred a loss from operations of $8,244,830 compared to a loss of $4,534,087 in the same period in 2024. For the year ended December 31, 2025 we used $9,911,674 in cash from operations compared to $4,060,547 in cash generated from operations in 2024, a decrease of $13,972,221 in net cash generated by operating activities. As of December 31, 2025, we had cash and cash equivalents of $12,430,287 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 December 31, 2025, of $55,888,649.
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, between the Company and Roth Capital Partners, LLC, 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.
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, 2025 | December 31, 2024 | ||||||||||||
| Operating activities | $ | (9,911,674) | 4,060,547 | |||||||||||
| Investing activities | (464,130) | (1,014,737) | ||||||||||||
| Financing activities | 17,400,858 | 1,008,153 | ||||||||||||
| Change in cash and cash equivalents | $ | 7,025,054 | $ | 4,053,963 | ||||||||||
Consolidated working capital at December 31, 2025 was $19,618,132, compared to $5,329,650 at December 31, 2024, an increase of $14,288,482 or 268.1% due to the July 21, 2025 equity financing Included in working capital were cash and cash
TECOGEN INC.
equivalents of $12,430,287 at December 31, 2025, compared to $5,405,233 at December 31, 2024, an increase of $7,025,054 or 130.0%, due to July 21, 2025 equity financing proceeds which netted to $18,105,100.
Net cash provided by or used in operating activities
For the year ended December 31, 2025 we used $9,911,674 in cash from operations compared to $4,060,547 in cash generated from operations in 2024, a decrease of $13,972,221 in net cash generated by operating activities. Our accounts receivable balance decreased by $1,682,596 at December 31, 2025 compared to December 31, 2024 and our unbilled revenues decreased by $260,879 at December 31, 2025 compared to December 31, 2024. Our inventory increased by $1,426,182 as of December 31, 2025 compared to December 31, 2024 and other non-current assets decreased by $464,576 as of December 31, 2025 as compared to December 31, 2024.
Accounts payable decreased by $761,131 from December 31, 2024 to December 31, 2025 due to our increased liquidity in the fourth quarter of 2025. Accrued expenses increased by $76,736 as of December 31, 2025 compared to December 31, 2024 due to timing of operating expenses. Deferred revenues decreased by $3,070,219 as of December 31, 2025 as compared to December 31, 2024, due to application of advance customer deposits collected in 2024 for Products shipments in 2025.
Net cash used in investing activities
For the year ended December 31, 2025 we used $464,130, in cash from investing activities. We used $400,781 of cash for purchases of property and equipment, and distributed $67,639 to the 49% non-controlling interest holders of American DG New York LLC and received $4,290 in proceeds from the disposition of assets, including insurance proceeds. Cash used in asset acquisition are mainly for costs incurred in 2025 for initial improvements required to the North Billerica, Massachusetts leased premises which are estimated to range between $1,150,000 and $1,200,000.
For the year ended December 31, 2024 we used $1,014,737 in cash from investing activities. We used $969,163 of cash for purchases of property and equipment, and distributed $96,974 to the 49% non-controlling interest holders of American DG New York LLC and received $51,400 in proceeds from the disposition of assets, including insurance proceeds. Cash used in asset acquisition are mainly for costs incurred in 2024 for initial improvements required to the North Billerica, Massachusetts leased premises.
Net cash provided by financing activities
Cash flows from financing activities for the year ended December 31, 2025 were $17,400,858, During the year ended December 31, 2025, we received $18,105,100 in net proceeds from our follow on equity public offering and received $696,779 of proceeds from the exercise of stock options, we used $1,076,956 to retire a related party note and we used $324,065 of cash in payment of finance lease principal.
During the year ended December 31, 2024, we received proceeds of $1,000,000 under the related party promissory notes and used $62,847 of cash in payment of finance lease principal. and received $71,000 of proceeds from the exercise of stock options (see Note 11."Related Party Notes").
Backlog
Our total product and installation backlog as of December 31, 2025 was $2,522,231 compared to $12,336,248 as of December 31, 2024. Our backlog at December 31, 2024 included an order for several chillers which were shipped in 2025 and orders for several cogeneration systems that shipped in the first quarter of 2025 to customers seeking tax credits under the Inflation Reduction Act of 2022.
Liquidity
At December 31, 2025 and 2024, we had cash and cash equivalents of $12,430,287 and $5,405,233, respectively, an increase of $7,025,054 or 130.0%. During the year ended December 31, 2025, 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.
Based on our current operating plan, we believe existing resources, including cash and cash flows from operations will be sufficient to meet our working capital requirements for the next twelve months. In order to grow our business, 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. There can be no assurance that we will be able to raise such additional financing or upon terms that are acceptable to us or at all.
TECOGEN INC.
Repayment of 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, we extended the maturity date the of the promissory note dated October 10, 2023 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 be issued 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 reclassified to long-term liabilities due to the February 18, 2025 amendment.
The promissory notes were repaid in full or converted to shares of our common stock in the year ended December 31, 2025. 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 February 28, 2031 and our eleven leased service centers through January 2031. Future minimum lease commitments under non-cancellable operating leases as of December 31, 2025, were $1,543,129.
We are also obligated under finance leases for thirty-five vehicles through October 31, 2029. Future minimum finance lease payments as of December 31, 2025, were $1,272,550.
See Note 14."Leases".
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. 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. This chiller "busy season" for the service team generally runs from May through the end of September. Chillers in indoor cultivation and other process cooling applications run year round.
Tecogen Inc. published this content on March 19, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on March 19, 2026 at 19:47 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]