Tecogen Inc.

05/13/2026 | Press release | Distributed by Public on 05/13/2026 08:47

Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with our unaudited condensed 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.
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 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.
Impact of Outlook Regarding Fossil Fuels
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.
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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 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. However, disruptions in global energy supplies and volatility in global energy prices may continue to result in higher energy prices for natural gas as a result of these conflicts 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 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, including the recent military actions in Iran, may result in higher cybersecurity risks, increased or ongoing supply chain challenges, and volatility related to the trading prices of commodities. We are continuing to evaluate the macroeconomic environment and our ability to mitigate the impact on our business, consolidated results of operations, and financial condition.
Impact of Tariffs
The majority of our vendors are domestic. Although we have some exposure to Chinese and European suppliers, we do not anticipate any increases in tariffs to materially affect our operations.
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
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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 and chiller systems. Our Services segment provides operations and maintenance services ("O&M") for our products under long term service contracts. Our Energy Production segment installs, operates, and maintains distributed generation electricity systems that we own, and sells energy in the form of electricity, heat, hot water and cooling to our customers under long-term sales contracts.
Results of Operations
First Quarter Ended March 31, 2026 Compared to the First Quarter Ended March 31, 2025
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
March 31, 2026 March 31, 2025
Revenues 100.0 % 100.0%
Cost of sales 59.1 % 55.7%
Gross profit 40.9 % 44.3%
Operating expenses
General and administrative 58.7 % 40.2%
Selling 10.1 % 8.2%
Research and development 5.7 % 4.0%
Total operating expenses 74.6 % 52.4%
Loss from operations (33.7) % (8.2) %
Total other expense, net 0.4 % (0.9) %
Loss before income taxes (33.3) % (9.1) %
Provision for state income taxes 0.2 % - %
Consolidated net loss (33.4) % (9.1) %
(Income) loss attributable to the noncontrolling interest - % - %
Net loss attributable to Tecogen, Inc. (33.5) % (9.1) %
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Revenues
The following table presents revenue for the periods indicated, by segment and the change from the prior year:
Three Months Ended
March 31, 2026 March 31, 2025 Increase (Decrease) $ Increase (Decrease) %
REVENUE:
Products
Cogeneration $ 356,241 $ 1,080,369 $ (724,128) (67.0) %
Chiller 780,589 1,374,197 (593,608) (43.2) %
Engineered accessories 38,470 79,243 (40,773) (51.5) %
Total product revenues 1,175,300 2,533,809 (1,358,509) (53.6) %
Services 4,636,394 4,245,022 391,372 9.2 %
Energy production 524,075 498,939 25,136 5.0 %
Total revenues $ 6,335,769 $ 7,277,770 $ (942,001) (12.9) %
Total revenues for the three months ended March 31, 2026 were $6,335,769 compared to $7,277,770 for the same period in 2025, a decrease of $942,001 or 12.9% year over year.
Products
Products revenues in the three months ended March 31, 2026 were $1,175,300 compared to $2,533,809 for the same period in 2025, a decrease of $1,358,509, or 53.6%. The decrease in revenue during the three months ended March 31, 2026 is due to a decrease in cogeneration sales of $724,128, a decrease in chiller sales of $593,608, and a decrease in engineered accessory sales of $40,773. Cogeneration sales in the three months ended March 31, 2025 were higher due to the shipment of several cogeneration systems to customers seeking tax credits under the Inflation Reduction Act of 2022. 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 March 31, 2026 were $4,636,394, compared to $4,245,022 for the same period in 2025, an increase of $391,372, or 9.2%. The increase in revenue during the three months ended March 31, 2026 is due to a $412,001 increase in revenues from existing service contracts, offset by a $20,629 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 three months ended March 31, 2026 were $524,075, compared to $498,939 for the same period in 2025, an increase of $25,136, or 5.0%. The increase in Energy Production revenue is due to an increase in run hours at certain sites in the three months ended March 31, 2026.
Cost of Sales
Cost of sales in the three months ended March 31, 2026 was $3,746,107 compared to $4,056,730 for the same period in 2025, a decrease of $310,623, or 7.7%. The decrease in cost of sales is due to decreased Products shipments, offset by increased service contract maintenance costs due to higher labor and material costs three months ended March 31, 2026. During the three months ended March 31, 2026 our gross margin decreased to 40.9% compared to 44.3% for the same period in 2025, a 3.4% percentage point decrease due to higher service contract costs.
Products
Cost of sales for Products in the three months ended March 31, 2026 was $647,348 compared to $1,487,750 for the same period in 2025, a decrease of $840,402, or 56.5% due to decreased sales of Products. During the three months ended March 31, 2026, our Products gross margin was 44.9% compared to 41.3% for the same period in 2025, a 3.6% percentage point increase. The increase in margin is a function of price increases instituted in 2026.
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Services
Cost of sales for Services in the three months ended March 31, 2026 was $2,700,169 compared to $2,258,898 for the same period in 2025, an increase of $441,271, or 19.5%, due to increased labor and material costs. During the three months ended March 31, 2026, our Services gross margin decreased to 41.8% compared to 46.8% in the same period in 2025, a 5.0% percentage point decrease. The decrease in gross margin percent is due to increased labor and material costs incurred in 2026.
Energy Production
Cost of sales for Energy Production in the three months ended March 31, 2026 was $398,590 compared to $310,082 for the same period in 2025, an increase of $88,508, or 28.5%. During the three months ended March 31, 2026 our Energy Production gross margin decreased to 23.9% compared to 37.9% for the same period in 2025, a 14.0% percentage point decrease. The decrease in the energy production gross margin is due to increased gas costs at certain of our Energy Production sites in the three months ended March 31, 2026 compared to the same period in 2025.
Operating Expenses
Operating expenses increased $910,287, or 23.9%, to $4,725,571 in the three months ended March 31, 2026 compared to $3,815,284 in the same period in 2025.
Three Months Ended
Operating Expenses March 31, 2026 March 31, 2025 Increase (Decrease) $ Increase (Decrease) %
General and administrative $ 3,718,472 $ 2,928,135 $ 790,337 27.0 %
Selling 640,932 594,481 46,451 7.8 %
Research and development 363,823 292,668 71,155 24.3 %
Loss on disposition of assets 2,344 - 2,344 100.0 %
Total $ 4,725,571 $ 3,815,284 $ 910,287 23.9 %
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 March 31, 2026 were $3,718,472 compared to $2,928,135 for the same period in 2025, an increase of $790,337 or 27.0%, due to a $170,008 increase in payroll and benefits, a $147,065 increase in operating supply costs, a $102,409 increase in credit losses due to the $75,000 credit loss recovery recognized in 2025, an $80,647 increase in depreciation and amortization costs, a $73,942 increase in stock-based compensation expense, a $48,845 increase in facility costs, a $48,228 increase in travel costs, a $39,156 increase in business insurance costs and the litigation reserve settlement of $79,006 recognized in the three months ended March 31, 2025.
Selling expenses consist of sales staff, commissions, marketing, travel and other selling related expenses. Selling expenses for the three months ended March 31, 2026 were $640,932 compared to $594,481 for the same period in 2025, an increase of $46,451 or 7.8%, due to increased advertising and trade show spend of $57,086 targeted to the data center market.
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 March 31, 2026 were $363,823 compared to $292,668 for the same period in 2025, an increase of $71,155 or 24.3%, due to a $26,230 increase in payroll costs and other spending increases incurred to continue to improve and refine the hybrid-drive air-cooled chiller.
The loss on asset dispositions for the three months ended March 31, 2026 was $2,344.
Income (loss) from Operations
Our loss from operations for the three months ended March 31, 2026 was $2,135,909 compared to a loss from operations of $594,244 for the same period in 2025, an increase of $1,541,665. The increase in the loss from operations is due to lower Products segment revenues and gross profit, lower Services segment gross profit and by a $910,287 increase in operating expenses.
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Other Income (Expense), net
Other income, net for the three months ended March 31, 2026 was $28,154 compared to other expense net of $65,320 for the same period in 2025, an increase of $93,474, due to increased interest income earned on invested cash balances of $80,708, and a decrease of $18,749 in unrealized losses on marketable securities, offset by a $4,065 increase in foreign exchange losses and a $1,918 increase in interest due to borrowings under our vehicle leases during the three months ended March 31, 2026.
Provision for State Income Taxes
The provision for state income taxes for the three months ended March 31, 2026 and 2025 was $10,900 and $925, 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 $1,918 for the three months ended March 31, 2026 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 2025, loss attributable to the non-controlling interest was $567. The loss in the three months ended March 31, 2025 is attributable to the expiration of an Energy Production contract at one of the Energy Production sites.
Net Income (loss) Attributable to Tecogen Inc.
The net loss attributable to Tecogen for the three months ended March 31, 2026 was a net loss of $2,120,573 compared to a net loss of $659,922 for the same period in 2025, an increase of $1,460,651, or 221.3%. The increase in the loss is due to lower Products segment revenues and gross profit, lower Services segment gross profit and by a $910,287 increase in operating expenses.
Liquidity and Capital Resources
Sources of Liquidity
During the three months ended March 31, 2026, we incurred a loss from operations of $2,135,909 compared to a net loss from operations of $594,244 in the same period in 2025. Cash flows from operations decreased $1,934,718 during the three months ended March 31, 2026 compared to the same period in 2025. As of March 31, 2026, we had cash and cash equivalents of $9,332,650 compared to cash and cash equivalents of $12,430,287 as of December 31, 2025, a decrease of $3,097,637 or 24.9%, and an accumulated deficit as of March 31, 2026, of $58,009,222.
Cash Flows
The following table presents a summary of our net cash flows from operating, investing and financing activities:
Three Months Ended
Cash Provided by (Used in) March 31, 2026 March 31, 2025 Increase (Decrease)
Operating activities $ (3,108,121) $ (1,173,403) $ (1,934,718)
Investing activities 50,346 (164,909) 215,255
Financing activities (39,862) (128) (39,734)
Cash Provided by (Used in) $ (3,097,637) $ (1,338,440) $ (1,759,197)
Consolidated working capital at March 31, 2026 was $17,750,669 compared to $19,618,132 at December 31, 2025 a decrease of $1,867,463, or 9.5%. Included in working capital were cash and cash equivalents of $9,332,650 at March 31, 2026, compared to $12,430,287 at December 31, 2025, a decrease of $3,097,637, or 24.9%.
Cash Flows from Operating Activities
Cash used by operating activities for the three months ended March 31, 2026 was $3,108,121 compared to cash used in operating activities of $1,173,403 for the same period in 2025, an increase in cash used in operating activities of $1,934,718. Our accounts receivable and unbilled revenue balances were $5,056,943 and $138,020, respectively, at March 31, 2026 compared to $4,280,991 and $138,020 at December 31, 2025, using $803,359 of cash.
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Accounts payable increased to $3,612,215 as of March 31, 2026 from $3,381,545 at December 31, 2025, providing $230,669 in cash flow from operations. The increase in accounts payable was due to increased material procurement in anticipation of future Products shipments. Deferred revenue decreased to $4,194,904 as of March 31, 2026 compared to $4,796,863 as of December 31, 2025, due to the application of customer deposits against accounts receivables as Products ship, using $601,959 of cash from operations. We expect accounts payable and deferred revenue to fluctuate with routine changes in operations.
Cash Flows from Investing Activities
During the three months ended March 31, 2026 we used $46,118 of cash to purchase property, plant and equipment, primarily for improvements required at the North Billerica facility and received $96,464 of proceeds from the liquidation of our investment in Aivita Group Inc., formerly EuroSite Power Inc. During the three months ended March 31, 2025 we used $132,020 of cash for improvements required to the North Billerica facility and distributed $32,889 to the 49% non-controlling interest holders of American DG New York LLC
Cash Flows from Financing Activities
During the three months ended March 31, 2026 we used $94,362 of cash in payment of finance lease principal and received $54,500 of proceeds from the exercise of stock options. During the three months ended March 31, 2025 we used $38,628 of cash in payment of finance lease principal and received $38,500 of proceeds from the exercise of stock opions.
Backlog
As of March 31, 2026, our backlog of product and installation projects, excluding service contracts, was $8,201,626, consisting of $2,046,462 of purchase orders received by us and $6,155,164 of projects in which the customer's internal approval process is complete, financial resources have been allocated and the customer has made a firm verbal commitment that the order is in the process of execution. As of March 31, 2025, our backlog of product and installation projects, excluding service
contracts, was $9,522,015 consisting of $9,091,587 of purchase orders received by us and $430,428 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 March 31, 2026, we had cash and cash equivalents of $9,332,650, a decrease of $3,097,637 or 24.9% from the cash and cash equivalents balance at December 31, 2025. The decrease in cash during the three months ended March 31, 2026 is due to increased spending at our Services segment, manufacturing costs incurred to increase our production capacity, research and development costs incurred to continue to improve and refine the hybrid-drive air-cooled chiller and increases in our accounts receivable and inventories.
Based on our current operating plan, we believe existing resources, including cash and cash equivalents and the 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 continued 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 one or more debt equity financings 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.
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, 2025. 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, 2025 filed with the SEC on March 19, 2026.
See Note 1, Description of Business and Basis of Presentation, to the Condensed Consolidated Financial Statements included elsewhere in this report.
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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 May 13, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on May 13, 2026 at 14:47 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]