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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
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☑ | | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2024
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☐ | | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission file number 001-36103
TECOGEN INC. (OTCQX:TGEN)
(Exact name of registrant as specified in its charter)
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Delaware | 04-3536131 |
(State or Other Jurisdiction of Incorporation or Organization) | (IRS Employer Identification No.) |
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76 Treble Cove Road, Bldg. 1 |
North Billerica, Massachusetts 01862 |
(Address of Principal Executive Offices and Zip Code) |
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(781) 466-6400 |
(Registrant's telephone number, including area code) |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ Accelerated filer o
Non–Accelerated Filer ☒ Smaller reporting company ☒
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).Yes ☐ No ý
As of June 30, 2024, 24,850,261 shares of common stock, $.001 par value per share, of the registrant were issued and outstanding.
QUARTERLY REPORT ON FORM 10-Q
FOR THE PERIOD ENDED JUNE 30, 2024
TABLE OF CONTENTS
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PART I - FINANCIAL INFORMATION |
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References in this Form 10-Q to "we", "us", "our"', the "Company" and "Tecogen" refers to Tecogen Inc. and its consolidated subsidiaries, unless otherwise noted.
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
| | | | | | | | | | | |
| June 30, 2024 | | December 31, 2023 |
ASSETS | | | |
Current assets: | | | |
Cash and cash equivalents | $ | 841,913 | | | $ | 1,351,270 | |
| | | |
Accounts receivable, net | 5,364,228 | | | 6,781,484 | |
Unbilled revenue | 1,258,532 | | | 1,258,532 | |
Inventories, net | 10,113,493 | | | 10,553,419 | |
| | | |
| | | |
Prepaid and other current assets | 486,424 | | | 360,639 | |
Total current assets | 18,064,590 | | | 20,305,344 | |
Long-term assets: | | | |
Property, plant and equipment, net | 1,503,204 | | | 1,162,577 | |
Right of use assets | 2,176,953 | | | 943,283 | |
Intangible assets, net | 2,698,656 | | | 2,436,230 | |
| | | |
Goodwill | 2,563,862 | | | 2,743,424 | |
| | | |
| | | |
Other assets | 147,695 | | | 201,771 | |
TOTAL ASSETS | $ | 27,154,960 | | | $ | 27,792,629 | |
| | | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | |
Current liabilities: | | | |
Related party notes | $ | 518,305 | | | $ | 505,505 | |
| | | |
| | | |
Accounts payable | 4,405,769 | | | 4,514,415 | |
Accrued expenses | 2,544,467 | | | 2,504,629 | |
Deferred revenue, current | 2,558,799 | | | 1,647,206 | |
Lease obligations, current | 475,253 | | | 289,473 | |
| | | |
Acquisition liabilities, current | 859,619 | | | 845,363 | |
Unfavorable contract liability, current | 147,643 | | | 176,207 | |
Total current liabilities | 11,509,855 | | | 10,482,798 | |
| | | |
Long-term liabilities: | | | |
| | | |
Deferred revenue, net of current portion | 264,284 | | | 369,611 | |
Lease obligations, net of current portion | 1,703,543 | | | 683,307 | |
Acquisition liabilities, net of current portion | 1,222,690 | | | 1,181,779 | |
Unfavorable contract liability, net of current portion | 359,041 | | | 422,839 | |
Total liabilities | 15,059,413 | | | 13,140,334 | |
| | | |
Commitments and contingencies | | | |
| | | |
| | | |
Stockholders’ equity: | | | |
Tecogen Inc. shareholders’ equity: | | | |
Common stock, $0.001 par value; 100,000,000 shares authorized; 24,850,261 issued and outstanding at June 30, 2024 and December 31, 2023 | 24,850 | | | 24,850 | |
Additional paid-in capital | 57,691,400 | | | 57,601,402 | |
| | | |
| | | |
Accumulated deficit | (45,523,419) | | | (42,879,656) | |
Total Tecogen Inc. stockholders’ equity | 12,192,831 | | | 14,746,596 | |
Non-controlling interest | (97,284) | | | (94,301) | |
Total stockholders’ equity | 12,095,547 | | | 14,652,295 | |
| | | |
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 27,154,960 | | | $ | 27,792,629 | |
The accompanying notes are an integral part of these consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
| | | | | | | | | | | | | | | |
| Three Months Ended | | |
| June 30, 2024 | | June 30, 2023 | | | | |
Revenues | | | | | | | |
Products | $ | 119,673 | | | $ | 2,445,631 | | | | | |
Services | 4,126,517 | | | 3,952,971 | | | | | |
Energy production | 481,597 | | | 350,156 | | | | | |
Total revenues | 4,727,787 | | | 6,748,758 | | | | | |
Cost of sales | | | | | | | |
Products | 171,982 | | | 1,618,456 | | | | | |
Services | 2,191,815 | | | 2,075,869 | | | | | |
Energy production | 284,835 | | | 220,007 | | | | | |
Total cost of sales | 2,648,632 | | | 3,914,332 | | | | | |
Gross profit | 2,079,155 | | | 2,834,426 | | | | | |
Operating expenses | | | | | | | |
General and administrative | 2,897,993 | | | 2,917,283 | | | | | |
Selling | 405,277 | | | 480,786 | | | | | |
Research and development | 246,489 | | | 236,556 | | | | | |
(Gain) loss on disposition of assets | 3,363 | | | (19,950) | | | | | |
| | | | | | | |
Total operating expenses | 3,553,122 | | | 3,614,675 | | | | | |
Loss from operations | (1,473,967) | | | (780,249) | | | | | |
Other income (expense) | | | | | | | |
Other income (expense), net | 18,894 | | | (21,061) | | | | | |
Interest expense | (17,869) | | | (1,857) | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Unrealized gain (loss) on investment securities | (37,497) | | | 37,497 | | | | | |
Total other income (expense), net | (36,472) | | | 14,579 | | | | | |
Loss before provision for state income taxes | (1,510,439) | | | (765,670) | | | | | |
Provision for state income taxes | 37 | | | 9,614 | | | | | |
Consolidated net loss | (1,510,476) | | | (775,284) | | | | | |
Income attributable to the non-controlling interest | (28,320) | | | (4,826) | | | | | |
Loss attributable to Tecogen Inc. | $ | (1,538,796) | | | $ | (780,110) | | | | | |
| | | | | | | |
Net loss per share - basic | $ | (0.06) | | | $ | (0.03) | | | | | |
Net loss per share - diluted | $ | (0.06) | | | $ | (0.03) | | | | | |
Weighted average shares outstanding - basic | 24,850,261 | | | 24,850,261 | | | | | |
Weighted average shares outstanding - diluted | 24,850,261 | | | 24,850,261 | | | | | |
The accompanying notes are an integral part of these consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
| | | | | | | | | | | | | | | |
| Six Months Ended | | |
| June 30, 2024 | | June 30, 2023 | | | | |
Revenues | | | | | | | |
Products | $ | 1,611,071 | | | $ | 4,155,767 | | | | | |
Services | 8,140,827 | | | 7,089,144 | | | | | |
Energy production | 1,161,985 | | | 883,665 | | | | | |
Total revenues | 10,913,883 | | | 12,128,576 | | | | | |
Cost of sales | | | | | | | |
Products | 1,221,525 | | | 2,831,024 | | | | | |
Services | 4,284,072 | | | 3,813,471 | | | | | |
Energy production | 753,475 | | | 557,746 | | | | | |
Total cost of sales | 6,259,072 | | | 7,202,241 | | | | | |
Gross profit | 4,654,811 | | | 4,926,335 | | | | | |
Operating expenses | | | | | | | |
General and administrative | 5,746,559 | | | 5,709,766 | | | | | |
Selling | 934,946 | | | 1,000,856 | | | | | |
Research and development | 501,185 | | | 465,658 | | | | | |
Gain on sale of assets | (4,028) | | | (19,950) | | | | | |
| | | | | | | |
Total operating expenses | 7,178,662 | | | 7,156,330 | | | | | |
Loss from operations | (2,523,851) | | | (2,229,995) | | | | | |
Other income (expense) | | | | | | | |
Interest and other income (expense), net | 3,147 | | | (20,231) | | | | | |
Interest expense | (36,539) | | | (2,272) | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Unrealized gain (loss) on investment securities | (18,749) | | | 37,497 | | | | | |
Total other income (expense), net | (52,141) | | | 14,994 | | | | | |
Loss before provision for state income taxes | (2,575,992) | | | (2,215,001) | | | | | |
Provision for state income taxes | 22,100 | | | 32,252 | | | | | |
Consolidated net loss | (2,598,092) | | | (2,247,253) | | | | | |
Income attributable to non-controlling interest | (45,671) | | | (22,886) | | | | | |
Net loss attributable to Tecogen Inc. | $ | (2,643,763) | | | $ | (2,270,139) | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Net income loss per share - basic | $ | (0.11) | | | $ | (0.09) | | | | | |
Net income loss per share - diluted | $ | (0.11) | | | $ | (0.09) | | | | | |
Weighted average shares outstanding - basic | 24,850,261 | | | 24,850,261 | | | | | |
Weighted average shares outstanding - diluted | 24,850,261 | | | 24,850,261 | | | | | |
The accompanying notes are an integral part of these consolidated financial statements.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
For the Three and Six Months Ended June 30, 2024 and 2023
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Tecogen Inc. Stockholders' Equity |
Three Months Ended June 30, 2024 | | Common Stock Shares | | Common Stock $0.001 Par Value | | Additional Paid-in-Capital | | Accumulated Deficit | | Non-controlling Interest | | Total | |
Balance at March 31, 2024 | | 24,850,261 | | | $ | 24,850 | | | $ | 57,645,936 | | | $ | (43,984,623) | | | $ | (76,950) | | | $ | 13,609,213 | | |
Stock-based compensation expense | | — | | | — | | | 45,464 | | | — | | | — | | | 45,464 | | |
Distributions to non-controlling interest | | — | | | — | | | — | | | — | | | (48,654) | | | (48,654) | | |
Net income (loss) | | — | | | — | | | — | | | (1,538,796) | | | $ | 28,320 | | | (1,510,476) | | |
Balance at June 30, 2024 | | 24,850,261 | | | $ | 24,850 | | | $ | 57,691,400 | | | $ | (45,523,419) | | | $ | (97,284) | | | $ | 12,095,547 | | |
| | | | | | | | | | | | | |
Six Months Ended June 30, 2024 | | Common Stock Shares | | Common Stock $0.001 Par Value | | Additional Paid-in-Capital | | Accumulated Deficit | | Non-controlling Interest | | Total | |
Balance at December 31, 2023 | | 24,850,261 | | $ | 24,850 | | | $ | 57,601,402 | | | $ | (42,879,656) | | | $ | (94,301) | | | $ | 14,652,295 | | |
Stock-based compensation expense | | — | | | — | | | 89,998 | | | — | | | — | | | 89,998 | | |
Distributions to non-controlling interest | | — | | | — | | | — | | | — | | | (48,654) | | | (48,654) | | |
Net income (loss) | | — | | | — | | | — | | | (2,643,763) | | | 45,671 | | | (2,598,092) | | |
Balance at June 30, 2024 | | 24,850,261 | | | $ | 24,850 | | | $ | 57,691,400 | | | $ | (45,523,419) | | | $ | (97,284) | | | $ | 12,095,547 | | |
| | | | | | | | | | | | | |
Three Months Ended June 30, 2023 | | Common Stock Shares | | Common Stock $0.001 Par Value | | Additional Paid-in-Capital | | Accumulated Deficit | | Non-controlling Interest | | Total | |
Balance at March 31, 2023 | | 24,850,261 | | | $ | 24,850 | | | $ | 57,428,356 | | | $ | (39,771,577) | | | $ | (88,500) | | | $ | 17,593,129 | | |
Stock-based compensation expense | | — | | | — | | | 28,589 | | | — | | | — | | | 28,589 | | |
Distributions to non-controlling interest | | — | | | — | | | — | | | — | | | (23,838) | | | (23,838) | | |
Net income (loss) | | — | | | — | | | — | | | (780,110) | | | 4,826 | | | (775,284) | | |
Balance at June 30, 2023 | | 24,850,261 | | | $ | 24,850 | | | $ | 57,456,945 | | | $ | (40,551,687) | | | $ | (107,512) | | | $ | 16,822,596 | | |
| | | | | | | | | | | | | |
Six Months Ended June 30, 2023 | | Common Stock Shares | | Common Stock $0.001 Par Value | | Additional Paid-in-Capital | | Accumulated Deficit | | Non-controlling Interest | | Total | |
Balance at December 31, 2022 | | 24,850,261 | | | $ | 24,850 | | | $ | 57,351,008 | | | $ | (38,281,548) | | | $ | (106,560) | | | 18,987,750 | | |
Stock-based compensation expense | | — | | | — | | | 105,937 | | | — | | | — | | | 105,937 | | |
Distributions to non-controlling interest | | — | | | — | | | — | | | — | | | (23,838) | | | (23,838) | | |
Net income (loss) | | — | | | — | | | — | | | (2,270,139) | | | 22,886 | | | (2,247,253) | | |
Balance at June 30, 2023 | | 24,850,261 | | | $ | 24,850 | | | $ | 57,456,945 | | | $ | (40,551,687) | | | $ | (107,512) | | | $ | 16,822,596 | | |
The accompanying notes are an integral part of these consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
| | | | | | | | | | | |
| Six Months Ended |
| June 30, 2024 | | June 30, 2023 |
CASH FLOWS FROM OPERATING ACTIVITIES: | | | |
Consolidated net loss | $ | (2,598,092) | | | $ | (2,247,253) | |
Adjustments to reconcile net loss to net cash provided by operating activities: | | | |
Depreciation and amortization | 281,498 | | | 291,095 | |
Provision for credit losses | 19,063 | | | 44,000 | |
| | | |
| | | |
Stock-based compensation | 89,998 | | | 105,937 | |
| | | |
| | | |
Unrealized (gain) loss on investment securities | 18,749 | | | (37,497) | |
Gain on disposition of assets | (4,028) | | | (19,950) | |
| | | |
| | | |
Non-cash interest expense | 12,800 | | | — | |
Changes in operating assets and liabilities | | | |
(Increase) decrease in: | | | |
Accounts receivable | 1,398,193 | | | 755,831 | |
Employee retention credit | — | | | 667,121 | |
Unbilled revenue | — | | | 56,994 | |
Inventory | 439,926 | | | (1,133,618) | |
| | | |
Prepaid assets and other current assets | (125,784) | | | (66,201) | |
Other assets | 576,926 | | | 325,688 | |
Increase (decrease) in: | | | |
Accounts payable | (108,646) | | | 839,784 | |
Accrued expenses and other current liabilities | 39,838 | | | 178,241 | |
Deferred revenue | 806,266 | | | 752,873 | |
Other liabilities | (756,410) | | | (359,369) | |
Net provided by operating activities | 90,297 | | | 153,676 | |
CASH FLOWS FROM INVESTING ACTIVITIES: | | | |
Purchases of property and equipment | (556,636) | | | (19,607) | |
Proceeds from disposition of assets | 36,213 | | | 16,863 | |
Payment for business acquisition | — | | | (170,000) | |
| | | |
| | | |
Distributions to non-controlling interest | (48,654) | | | (23,838) | |
| | | |
| | | |
Net cash used in investing activities | (569,077) | | | (196,582) | |
CASH FLOWS FROM FINANCING ACTIVITIES: | | | |
Finance lease principal payments | (30,577) | | | — | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
Net cash used in financing activities | (30,577) | | | — | |
Net decrease in cash and cash equivalents | (509,357) | | | (42,906) | |
Cash and cash equivalents, beginning of the period | 1,351,270 | | | 1,913,969 | |
Cash and cash equivalents, end of the period | $ | 841,913 | | | $ | 1,871,063 | |
| | | |
Supplemental disclosure of cash flow information: | | | |
Cash paid for interest | $ | 22,909 | | | $ | 1,443 | |
Cash paid for taxes | $ | 22,100 | | | $ | 32,252 | |
Non-cash investing activities: | | | |
Aegis Contract and Related Asset Acquisition: | | | |
Accounts receivable credit | $ | — | | | $ | 300,000 | |
Accounts payable assumed | — | | | 111,178 | |
Contingent consideration | 272,901 | | | 1,442,462 | |
Total | $ | 272,901 | | | $ | 1,853,640 | |
| | | |
| | | |
| | | |
| | | |
The accompanying notes are an integral part of these consolidated financial statements.
TECOGEN INC.
Notes to Condensed Consolidated Financial Statements
Note 1. Description of Business and Basis of Presentation
Description of Business
Tecogen Inc. (together with its subsidiaries "we", "our", "us" or "Tecogen"), a Delaware corporation, was incorporated on September 15, 2000, and acquired the assets and liabilities of the Tecogen Products division of Thermo Power Corporation. We produce commercial and industrial, natural-gas-fueled engine-driven, combined heat and power (CHP) products that reduce energy costs, decrease greenhouse gas emissions and alleviate congestion on the national power grid. Our products supply electric power or mechanical power for cooling, while heat from the engine is recovered and purposefully used at a facility. The majority of our customers are located in regions with the highest utility rates, typically California, the Midwest and the Northeast.
Our operations are comprised of three business segments. Our Products segment designs, manufactures and sells industrial and commercial cogeneration systems. Our Services segment provides operation and maintenance services to customers for our products. Our Energy Production segment sells energy in the form of electricity, heat, hot water and cooling to our customers under long-term sales agreements.
Our common stock is quoted on OTC Markets Group, Inc.'s OTCQX Best Market tier and trades under the symbol "TGEN."
Liquidity, Going Concern and Management's Plans
The consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting
principles assuming that we will continue as a going concern, which contemplates the realization of assets and the settlement of obligations in the normal course of business. As of June 30, 2024, our cash and cash equivalents were $841,913, compared to $1,351,270 at December 31, 2023, a decrease of $509,357. For the six months ended June 30, 2024 we generated $90,297 in cash from operations and a net operating loss of $2,523,851, due to a decrease in Products revenue and gross margin and a decrease in Services gross margin percentage due to higher labor and material costs to replace engines at certain sites in 2024. Our Service gross margin percentage for the six months ended June 30, 2024 of 47.4% is below our historical Service gross margins which ranged between 53.0% to 55.0%. Working capital at June 30, 2024 was $6,554,735, compared to $9,822,546 at December 31, 2023, a decrease of $3,267,811 and our accumulated deficit was $45,523,419.
As a result of the above factors, management has performed an analysis to evaluate the entity’s ability to continue as a going concern for one year after the financial statements issuance date. Management’s analysis includes forecasting future revenues, expenditures and cash flows, taking into consideration past performance as well as key initiatives recently undertaken. Our forecasts are dependent on our ability to maintain margins based on the our ability to close on new and expanded business, leverage existing working capital, and effectively manage expenses. New and expanded business includes the sale and shipment of newly developed hybrid-drive air-cooled chillers and the acquisition of additional maintenance contracts in February 2024 and May 2024 (see Note 7. "Aegis Contract and Related Asset Acquisitions"). Our backlog at June 30, 2024 was $5,121,551. We may also be required to borrow funds under note subscription agreements with related parties (see Note 11. "Related Party Notes"). Based on management's analysis, we believe that cash flows from operations and the note agreements will be sufficient to fund operations over the next twelve months. There can, however, be no assurance we will be able to do so. Based on our analysis, the consolidated financial statements do not include any adjustments to the carrying amounts and classification of assets, liabilities, and reported expenses that may be necessary if we were unable to continue as a going concern. If we do not achieve our revenue, expenditure or cash flows, 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.
Basis of Presentation
The financial statements have been prepared in accordance with accounting standards set by the Financial Accounting Standards Board, or FASB. The FASB sets generally accepted accounting principles, or GAAP, to ensure financial condition, results of operations, and cash flows are consistently reported. References to GAAP issued by the FASB in these footnotes are to the FASB Accounting Standards Codification, or ASC. We adopted the presentation requirements for noncontrolling interests required by ASC 810 Consolidation. Under ASC 810, earnings or losses attributed to the noncontrolling interests are reported as part of the consolidated earnings and not a separate component of income or expense.
The accompanying consolidated financial statements include our accounts and the accounts of the entities in which we have a controlling financial interest. Those entities include our wholly-owned subsidiary, American DG Energy Inc. ("ADGE"), Tecogen CHP Solutions, Inc., and a joint venture, American DG New York, LLC, or ADGNY, in which ADGE holds a 51.0% interest. As the controlling partner, all major decisions in respect of ADGNY are made by ADGE in accordance with the joint venture agreement. The interests in the individual underlying energy system projects in ADGNY vary between ADGE and its joint venture partner. The noncontrolling interest and distributions are determined based on economic ownership. The economic
TECOGEN INC.
Notes to Condensed Consolidated Financial Statements
ownership is calculated by the amount invested by us and the noncontrolling partner in each site. Each quarter, we calculate a year-to-date profit/loss for each site that is part of ADGNY and the noncontrolling interest percent of economic ownership in each site is applied to determine the noncontrolling interest share in the profit/loss. The same methodology is used to determine quarterly distributions of available cash to the noncontrolling interest partner. On our balance sheet, noncontrolling interest represents the joint venture partner’s investment in ADGNY, plus its share of after-tax profits less any cash distributions. ADGE owned a controlling 51.0% legal and economic interest in ADGNY as of June 30, 2024 and December 31, 2023.
The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the annual audited financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of our financial position as of June 30, 2024 and the results of operations and cash flows for the three and six months ended June 30, 2024 and 2023. The financial data and other information disclosed in these notes for the three and six months ended June 30, 2024 and 2023 are also unaudited. The operating results for the six months ended June 30, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024. All intercompany transactions have been eliminated in consolidation.
The condensed consolidated balance sheet at December 31, 2023 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.
For further information, refer to the consolidated financial statements and footnotes thereto included in Tecogen's Annual Report on Form 10-K for the year ended December 31, 2023.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Income Taxes
The provisions for income taxes in the accompanying unaudited consolidated statements of operations differ from that which would be expected by applying the federal statutory tax rate primarily due to losses for which no benefit is recognized.
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. Contingent consideration is recorded at fair value on the acquisition date based on our expectation of achieving the contractually defined revenue targets. The fair value of the contingent consideration liabilities is remeasured each reporting period after the acquisition date and any changes in the estimated fair value are reflected as gains or losses in general and administrative expense in the consolidated statement of operations. Contingent consideration liabilities and deferred payments to sellers are recorded as current liabilities and long-term liabilities in the consolidated balance sheets based on the expected timing of settlement.
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.
Segment Information
Our operations are comprised of three (3) business segments. Our Products segment designs, manufactures and sells industrial and commercial cogeneration systems. Our Services segment installs and maintains our cogeneration systems. Our Energy Production segment sells energy in the form of electricity, heat, hot water and cooling to our customers under long-term sales agreements.
TECOGEN INC.
Notes to Condensed Consolidated Financial Statements
Recently Issued Accounting Standards
Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures. In November 2023, the Financial Accounting Standards Board issued ASU 2023-07, Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures. The new standard requires enhanced disclosures about a public entity's reportable segments including more detailed information about a reportable segment's expenses. The amendments in this update apply to all public entities that are required to report segment information, and include those entities that have a single reportable segment. The amendments in this update are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. We are currently evaluating the impact on our consolidated financial statements and related disclosures.
Income Taxes (Topic 740) - Improvements to Income Tax Disclosures. In December 2023, the Financial Accounting Standards Board issued ASU 2023-09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures. ASU 2023-09 provides more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. The amendments in this update are effective for annual periods beginning after December 15, 2024. Early adoption is permitted. We are currently evaluating the impact on our consolidated financial statements and related disclosures.
Note 2. Revenue
Revenue is recognized when performance obligations under the terms of a contract with our customer are satisfied; generally this occurs with the transfer of control of our products, services and energy production. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods or providing services or energy to customers.
Shipping and handling fees billed to customers in a sales transaction are recorded in revenue and shipping and handling costs incurred are recorded in cost of sales. We have elected to exclude from revenue any value-added sales and other taxes which we collect concurrent with revenue-producing activities. These accounting policy elections are consistent with the manner in which we historically recorded shipping and handling fees and value-added taxes. Incremental costs incurred by us to obtain a contract with a customer are negligible, if any, and are expensed ratably in proportion to the related revenue recognized.
Disaggregated Revenue
In general, our business segmentation is aligned according to the nature and economic characteristics of our products and customer relationships and provides meaningful disaggregation of each business segment's results of operations. The following table further disaggregates our revenue by major source by segment for the three and six months ended June 30, 2024 and 2023.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Six Months Ended |
| | June 30, 2024 | | June 30, 2023 | | June 30, 2024 | | June 30, 2023 |
Products: | | | | | | | | |
Cogeneration | | $ | 119,673 | | | $ | 427,314 | | | $ | 893,902 | | | $ | 971,007 | |
Chiller | | — | | | 1,687,981 | | | 657,061 | | | 2,756,915 | |
Engineered Accessories | | — | | | 330,336 | | | 60,108 | | | 427,845 | |
Total Products Revenue | | 119,673 | | | 2,445,631 | | | 1,611,071 | | | 4,155,767 | |
| | | | | | | | |
Services | | 4,126,517 | | | 3,952,971 | | | 8,140,827 | | | 7,089,144 | |
Energy production | | 481,597 | | | 350,156 | | | 1,161,985 | | | 883,665 | |
Total revenues | | $ | 4,727,787 | | | $ | 6,748,758 | | | $ | 10,913,883 | | | $ | 12,128,576 | |
TECOGEN INC.
Notes to Condensed Consolidated Financial Statements
Products Segment
Products. Our Product revenues include cogeneration systems that supply electricity and hot water, chillers that provide air-conditioning and hot water and engineered accessories, which consist of ancillary products and parts necessary to install a cogeneration unit including integration into the customers’ existing electrical and mechanical systems. We refer to the package of engineered accessories and engineering and design services necessary for the customers' installation of a cogeneration unit as light installation services.
We transfer control and generally recognize a sale when we ship a product from our manufacturing facility at which point the customer takes ownership of the product. Payment terms on product sales are generally 30 days. We recognize revenue in certain circumstances before delivery to the customer has occurred (commonly referred to as bill and hold transactions). We recognize revenue related to such transactions once, among other things, the customer has made a written fixed commitment to purchase the product(s) under normal billing and credit terms, the customer has requested the product(s) be held for future delivery as scheduled and designated by them, risk of ownership has been assumed by the customer, and the product(s) are tagged as sold and segregated for storage awaiting further direction from the customer. Due to the infrequent nature and duration of bill and hold arrangements, the value associated with custodial storage services is deemed immaterial in the context of the contract and in total, and, accordingly, none of the transaction price is allocated to such service.
Depending on the product and terms of the arrangement, we may defer the recognition of a portion of the transaction price received because we have to satisfy a future obligation (e.g., product start-up service). Amounts allocated to product start-up services are recognized as revenue when the start-up service has been completed. We use an observable selling price to determine standalone selling prices where available and either a combination of an adjusted market assessment approach, an expected cost plus a margin approach, and/or a residual approach to determine the standalone selling prices for separate performance obligations as a basis for allocating contract consideration when an observable selling price is not available. Amounts received but not recognized pending completion of performance are recognized as contract liabilities and are recorded as deferred revenue along with deposits by customers.
Services Segment
Maintenance Services. Maintenance services are provided under either long-term maintenance contracts or time and material maintenance contracts. Revenue under time and material maintenance contracts is recognized when the maintenance service is completed. Revenue under long-term maintenance contracts is recognized either ratably over the term of the contract where the contract price is fixed or when the periodic maintenance activities are completed and the invoiced cost to the customer is based on run hours or kilowatts produced in a given period. We use an output method to measure progress towards completion of our performance obligation which results in the recognition of revenue on the basis of a direct measurement of the value to the customer of the services transferred to date relative to the remaining services promised under the contract. We use the practical expedient at ASC 606-10-55-18 of recognizing revenue in an amount equal to the amount we have the right to invoice the customer under the contract. Revenues resulting from the Aegis acquisition (see Note 7. Aegis Contract and Related Asset Acquisitions) have been included in our revenue from the Services segment since April 1, 2023. Payment terms for maintenance services are generally 30 days.
Energy Production Segment
Energy Production. Revenue from energy contracts is recognized when electricity, heat, hot and/or chilled water is produced by our owned on-site cogeneration systems. Each month we bill the customer and recognize revenue for the various forms of energy delivered, based on meter readings which capture the quantity of the various forms of energy delivered in a given month under a contractually defined formula which takes into account the current month's cost of energy from the local power utility.
As the various forms of energy delivered by us under energy production contracts are simultaneously delivered and consumed by the customer, our performance obligation under these contracts is considered to be satisfied over time. We use an output method to measure progress towards completion of our performance obligation which results in the recognition of revenue on the basis of a direct measurement of the value to the customer of the services transferred to date relative to the remaining services promised under the contract. We use the practical expedient at ASC 606-10-55-18 of recognizing revenue in an amount equal to that amount to which we have the right to invoice the customer under the contract. Payment terms on invoices under these contracts are generally 30 days.
TECOGEN INC.
Notes to Condensed Consolidated Financial Statements
Contract Balances
The timing of revenue recognition, billings and cash collections result in billed accounts receivable, unbilled revenue (contract assets) and deferred revenue, consisting of customer deposits and billings in excess of revenue recognized (contract liabilities) on the condensed consolidated balance sheets.
We did not recognize any revenue during the six months ended June 30, 2024 that was included in unbilled revenue as of June 30, 2024.
Revenue recognized during the six months ended June 30, 2024 that was included in deferred revenue at the beginning of the period was approximately $443,939.
Remaining Performance Obligations
Remaining performance obligations related to ASC 606 represent the aggregate transaction price allocated to performance obligations with an original contract term of greater than one year, excluding certain maintenance contracts and all energy production contracts where a direct measurement of the value to the customer is used as a method of measuring progress towards completion of our performance obligation. Exclusion of these remaining performance obligations is due in part to the inability to quantify values based on unknown future levels of delivery and in some cases rates used to invoice customers. Remaining performance obligations therefore consist of unsatisfied or partially satisfied performance obligations related to fixed price maintenance contracts and installation contracts.
As of June 30, 2024, the aggregate amount of the transaction price allocated to remaining performance obligations was approximately $2,823,083. We expect to recognize revenue of approximately 74.7% of the remaining performance obligations over the next 24 months, 65.3% recognized in the first 12 months and 9.4% recognized over the subsequent 12 months and the balance thereafter.
Note 3. Income (Loss) Per Common Share
Basic and diluted income (loss) per share for the three and six months ended June 30, 2024 and 2023, respectively, were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Six Months Ended | | |
| | June 30, 2024 | | June 30, 2023 | | June 30, 2024 | | June 30, 2023 | | | | |
Numerator: | | | | | | | | | | | | |
Net loss available to stockholders | | $ | (1,538,796) | | | $ | (780,110) | | | $ | (2,643,763) | | | $ | (2,270,139) | | | | | |
| | | | | | | | | | | | |
Denominator: | | | | | | | | | | | | |
Weighted average shares outstanding - Basic | | 24,850,261 | | | 24,850,261 | | | 24,850,261 | | | 24,850,261 | | | | | |
Effect of dilutive securities: | | | | | | | | | | | | |
Stock options | | — | | | — | | | — | | | — | | | | | |
Weighted average shares outstanding - Diluted | | 24,850,261 | | | 24,850,261 | | | 24,850,261 | | | 24,850,261 | | | | | |
| | | | | | | | | | | | |
Basic loss per share | | $ | (0.06) | | | $ | (0.03) | | | $ | (0.11) | | | $ | (0.09) | | | | | |
Diluted loss per share | | $ | (0.06) | | | $ | (0.03) | | | $ | (0.11) | | | $ | (0.09) | | | | | |
| | | | | | | | | | | | |
Anti-dilutive shares underlying stock options outstanding | | 1,911,532 | | | 1,831,851 | | | 1,911,532 | | | 1,831,851 | | | | | |
Inventories at June 30, 2024 and December 31, 2023 consisted of the following:
| | | | | | | | | | | |
| June 30, 2024 | | December 31, 2023 |
| | | |
| | | |
Raw materials, net | $ | 8,828,544 | | | $ | 8,803,054 | |
Work-in-process | 702,309 | | | 798,522 | |
Finished goods, net | 582,640 | | | 951,843 | |
Total inventories, net | $ | 10,113,493 | | | $ | 10,553,419 | |
TECOGEN INC.
Notes to Condensed Consolidated Financial Statements
Note 5. Property, Plant and Equipment, net
Property, plant and equipment at June 30, 2024 and December 31, 2023 consisted of the following:
| | | | | | | | | | | | | | | | | |
| Estimated Useful Life (in Years) | | June 30, 2024 | | December 31, 2023 |
Energy systems | 1 - 15 years | | $ | 2,810,232 | | | $ | 2,810,232 | |
Machinery and equipment | 5 - 7 years | | 1,626,060 | | | 1,744,596 | |
Furniture and fixtures | 5 years | | 222,755 | | | 212,963 | |
Computer software | 3 - 5 years | | 192,865 | | | 192,865 | |
Leasehold improvements | * | | 469,474 | | | 466,789 | |
Construction in progress | | | 539,410 | | | — | |
| | | 5,860,796 | | | 5,427,445 | |
Less - accumulated depreciation and amortization | | | (4,357,592) | | | (4,264,868) | |
Property, plant and equipment, net | | | $ | 1,503,204 | | | $ | 1,162,577 | |
| | | | | |
| | | | | |
* Lesser of estimated useful life of asset or lease term
Depreciation and amortization expense on property and equipment for the three and six months ended June 30, 2024 and 2023 was $110,873 and $205,711 and $161,701 and $279,193, respectively. Construction in progress are costs incurred during the three months ended June 30, 2024 for initial improvements required to the North Billerica, Massachusetts leased premises which are estimated to range between $500,000 and $750,000.
Note 6. Intangible Assets and Liabilities Other Than Goodwill
As of June 30, 2024 and December 31, 2023 we had the following amounts related to intangible assets and liabilities other than goodwill:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | June 30, 2024 | | December 31, 2023 |
Intangible assets | | Cost | | Accumulated Amortization | | Total | | Cost | | Accumulated Amortization | | Total |
Product certifications | | $ | 777,465 | | | $ | (691,323) | | | $ | 86,142 | | | $ | 777,465 | | | $ | (658,676) | | | $ | 118,789 | |
Patents | | 888,910 | | | (540,656) | | | 348,254 | | | 888,910 | | | (496,807) | | | 392,103 | |
Developed technology | | 240,000 | | | (180,000) | | | 60,000 | | | 240,000 | | | (172,000) | | | 68,000 | |
Trademarks | | 26,896 | | | — | | | 26,896 | | | 26,896 | | | — | | | 26,896 | |
In Process R&D | | 263,936 | | | (122,542) | | | 141,394 | | | 263,936 | | | (103,689) | | | 160,247 | |
Favorable contract asset | | 384,465 | | | (377,989) | | | 6,476 | | | 384,465 | | | (376,138) | | | 8,327 | |
Customer contracts | | 2,225,123 | | | (195,629) | | | 2,029,494 | | | 1,772,659 | | | (110,791) | | | 1,661,868 | |
| | $ | 4,806,795 | | | $ | (2,108,139) | | | $ | 2,698,656 | | | $ | 4,354,331 | | | $ | (1,918,101) | | | $ | 2,436,230 | |
| | | | | | | | | | | | |
Intangible liability | | | | | | | | | | | | |
Unfavorable contract liability | | $ | 2,618,168 | | | $ | (2,111,484) | | | $ | 506,684 | | | $ | 2,618,168 | | | $ | (2,019,122) | | | $ | 599,046 | |
The aggregate amortization expense related to intangible assets exclusive of contract related intangibles for the three and six months ended June 30, 2024 and 2023 was $52,204 and $105,199 and $61,000 and $110,361. The net aggregate amortization expense (credit) related to the amortization of the contract related intangible assets and liabilities for the three and six months ended June 30, 2024 and 2023 was $175 and $(7,523) and $2,258 and $(58,675) respectively
Contract and Non-Contracted Related Intangibles
The favorable contract asset and unfavorable contract liability in the foregoing table represent the estimated fair value of American DG Energy's customer contracts (both positive for favorable contracts and negative for unfavorable contracts) which were acquired by us in May 2017. The customer contract asset includes the maintenance contracts acquired by us on
TECOGEN INC.
Notes to Condensed Consolidated Financial Statements
April 1, 2023, February 1, 2024 and May 1, 2024, as part of the Aegis acquisition (see Note 7. "Aegis Contract and Related Asset Acquisition.")
Amortization of intangibles including contract related amounts is calculated using the straight-line method over the remaining useful life or contract term, which range from approximately 1-11 years, and is charged against cost of sales and general & administrative expenses in the accompanying consolidated statement of operations. Aggregate future amortization over the next five years and thereafter as of June 30, 2024 is estimated to be as follows:
| | | | | | | | | | | | | | | | | | | | |
| | Non-contract Related Intangibles | | Contract Related Intangibles | | Total |
Year 1 | | $ | 170,409 | | | $ | 44,847 | | | $ | 215,256 | |
Year 2 | | 164,011 | | | 107,604 | | | 271,615 | |
Year 3 | | 162,304 | | | 126,948 | | | 289,252 | |
Year 4 | | 96,534 | | | 136,329 | | | 232,863 | |
Year 5 | | 22,282 | | | 137,208 | | | 159,490 | |
Thereafter | | 20,250 | | | 976,350 | | | 996,600 | |
Total | | $ | 635,790 | | | 1,529,286 | | | $ | 2,165,076 | |
| | | | | |
Note 7. | Aegis Contract and Related Asset Acquisitions |
On March 15, 2023, we entered into an agreement ("Agreement") with Aegis Energy Services, LLC (“Aegis”) pursuant to which Aegis agreed to assign to us and we agreed to assume certain Aegis maintenance agreements and agreed to purchase certain assets from Aegis, and related matters (“Acquisition”). On April 1, 2023, the Acquisition closed. Under the Agreement, we agreed to acquire from Aegis and assume Aegis’ rights and obligations arising on or after April 1, 2023, under maintenance agreements pursuant to which Aegis provided maintenance services to third parties for approximately 200 cogeneration systems and we agreed to acquire from Aegis certain vehicles and inventory used by Aegis in connection with the performance of its maintenance services. At closing, we acquired eight (8) Aegis vehicles for consideration consisting of $170,000 in cash. Also, we issued credits against outstanding accounts receivable due from Aegis in the amount of $300,000 for the acquisition of inventory that Aegis used to provide maintenance services. At closing, we hired eight (8) Aegis employees who, following the closing, have agreed to continue to provide maintenance services relating to the cogeneration systems covered by the maintenance agreements assumed pursuant to the Agreement. Following the closing and for a period of up to seven (7) years, we agreed to pay Aegis a percentage of the revenue collected for maintenance services provided pursuant to the maintenance agreements acquired from Aegis. The Agreement contained certain indemnification provisions and agreements on the part of Aegis and for each party to cooperate with each other and provide certain transitional assistance. We acquired the Aegis maintenance agreements to expand our Service portfolio and to benefit from the long-term contract revenue stream generated by these agreements.
On February 1, 2024, Tecogen and Aegis amended the Agreement to add eighteen (18) additional maintenance contracts (the "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. No additional maintenance service agreements contemplated in the Amendment have been executed as of June 30, 2024.
On May 1, 2024, Tecogen and Aegis amended the Agreement to add thirty-one (31) additional maintenance contracts (the "Second 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. No additional maintenance service agreements contemplated in the Second Amendment have been executed as of June 30, 2024.
We have determined that the assignment and assumption of the Aegis maintenance agreements, in combination with the related asset acquisition and the retention of the former Aegis employees, constitutes a business and should be accounted for as a business combination under the acquisition method. As of the acquisition date, we recognized, separately from goodwill, the identifiable assets acquired and the liabilities assumed, at fair value. We have applied an interpretation of the guidance in ASC 805, Business Combinations, that allows an entity to combine multiple acquisitions as one single transaction due to the April 1, 2023, February 1, 2024 and May 1, 2024 acquisitions being executed in contemplation of one another to achieve the same commercial objective for the Company. As a result, we have adjusted the initial accounting for the April 1, 2023 acquisition for the value of net assets acquired from the February 1, 2024 and May 1, 2024 acquisitions.
We have included the financial results of the Aegis maintenance agreements in our consolidated financial statements from April 1, 2023, from February 1, 2024 and from May 1, 2024, the closing or acquisition dates for the acquisitions.
TECOGEN INC.
Notes to Condensed Consolidated Financial Statements
The following table summarizes the consideration paid for the Aegis acquisitions and the fair value of assets acquired and contract-related liabilities assumed as of the respective acquisition dates for each acquisition along with the combined accounting result:
| | | | | | | | | | | | | | | | | | | | | | | |
| April 1, 2023 | | February 1, 2024 | | May 1, 2024 | | Total |
Consideration Paid: | | | | | | | |
Cash | $ | 170,000 | | | $ | — | | | $ | — | | | $ | 170,000 | |
Accounts receivable credit issued | 300,000 | | | — | | | — | | | 300,000 | |
Account payable due to Aegis | 91,048 | | | — | | | — | | | 91,048 | |
Contingent consideration | 1,256,656 | | | 101,641 | | | 171,260 | | | 1,529,557 | |
Total fair value of consideration transferred | 1,817,704 | | | 101,641 | | | 171,260 | | | 2,090,605 | |
| | | | | | | |
Identifiable assets acquired and liabilities assumed: | | | | | | | |
Assets acquired | | | | | | | |
Property, plant and equipment | 170,000 | | | — | | | — | | | 170,000 | |
Inventory | 391,048 | | | — | | | — | | | 391,048 | |
Identifiable intangible asset - customer contracts | 1,772,659 | | | 184,587 | | | 267,877 | | | 2,225,123 | |
| 2,333,707 | | | 184,587 | | | 267,877 | | | 2,786,171 | |
Acquired contract-related liabilities assumed | | | | | | | |
Deferred maintenance reserve | (853,271) | | | — | | | — | | | (853,271) | |
| (853,271) | | | — | | | — | | | (853,271) | |
Net identifiable assets acquired | 1,480,436 | | | 184,587 | | | 267,877 | | | 1,932,900 | |
Excess of cost over fair value of net assets acquired (Goodwill) | $ | 337,268 | | | $ | (82,946) | | | $ | (96,617) | | | $ | 157,705 | |
Initial Acquisition - April 1, 2023
The amounts initially recognized for inventory, identifiable intangible assets, contingent consideration and deferred maintenance reserves were provisional pending completion of the necessary valuations and analysis. ASC 805 establishes a measurement period to provide companies with a reasonable amount of time to obtain the information necessary to identify and measure various items in a business combination and cannot extend beyond one year from the acquisition date. As of December 31, 2023, we have completed our analysis and valuation.
As of June 30, 2024, we recorded no adjustments to the fair value of the contingent consideration and deferred maintenance reserves given the probability of achieving the revenue estimates and the actual and expected maintenance costs were consistent with our initial valuation.
Second Acquisition - February 1, 2024
The amounts initially recognized for identifiable intangible assets and contingent consideration are provisional, pending completion of the necessary valuations and analysis. ASC 805 establishes a measurement period to provide companies with a reasonable amount of time to obtain the information necessary to identify and measure various items in a business combination and cannot extend beyond one year from the acquisition date. During the three months ended June 30, 2024, we identified a $9,232 adjustment to increase the contingent consideration liability and a $5,052 adjustment reducing the customer contracts intangible asset. As of June 30, 2024, we have not completed our analysis and valuation for the second maintenance service agreement acquisition.
Third Acquisition - May 1, 2024
The amounts initially recognized for identifiable intangible assets and contingent consideration are provisional pending completion of the necessary valuations and analysis. ASC 805 establishes a measurement period to provide companies with a reasonable amount of time to obtain the information necessary to identify and measure various items in a business combination and cannot extend beyond one year from the acquisition date. As of June 30, 2024, we have not completed our analysis and valuation for the third maintenance service agreement acquisition.
TECOGEN INC.
Notes to Condensed Consolidated Financial Statements
Acquisition Valuation
The fair value of the identifiable intangible asset was estimated using the income approach. The excess cash flow was discounted to present value using an appropriate rate of return to estimate the market value of the customer identifiable intangible asset and the risks associated with the future revenue forecasts due to potential changes in customer energy requirements or changes in the economic viability of these CHP sites which depend on the spread between natural gas fuel and electricity prices, all of which are not within our control. Key assumptions to value the customer identifiable intangible asset included the discount rate of 15%, profitability assumptions, revenue assumptions, and anticipated existing contract run out were the material assumptions utilized in the discounted cash flow model used to estimate fair value. The discount rate reflects an estimate of our weighted-average cost of capital.
On the date of acquisition, the fair value of the contingent consideration and the deferred maintenance reserve were calculated under the income approach using a weighted average cost of capital of 15%, discounting the future cash flows to present value, and are subsequently remeasured to fair value at each reporting date until the fair value contingencies are resolved. Fair value adjustments which may be determined at subsequent reporting dates will be recorded in our consolidated statements of operations and will not impact the goodwill balance after the measurement period.
The contingent consideration is payable within forty-five (45) days following the end of each calendar quarter through the earlier of the expiration or termination of the relevant maintenance agreements, or the seventh (7th) anniversary of the acquisition date. The consideration is equal to the product of the revenues collected in a calendar quarter multiplied by an applicable percentage. The agreement stipulates quarterly aggregate revenue targets and an applicable percentage, and provides for a higher applicable percentage if revenues exceed the target revenues. The applicable percentage ranges from 5% to 10% over the agreement term. The deferred maintenance reserve represents costs, which are expected to be incurred over a three-year period from the date of acquisition to repair customer equipment which had not been sufficiently maintained prior to our acquisition of the maintenance service agreements.
The purchase price of the acquisition was allocated to the tangible and intangible assets acquired and liabilities assumed and recognized at their fair value based on widely accepted valuation techniques in accordance with ASC 820, "Fair Value Measurement," as of the acquisition date. The process for estimating fair value requires the use of significant assumptions and estimates of future cash flows and developing appropriate discount rates. The excess of the purchase price over fair value of the net identified assets acquired and liabilities assumed was recorded as goodwill. Goodwill is primarily attributable to the going concern element of the Aegis business, including its assembled workforce and the long-term nature of the customer maintenance agreements, as well as anticipated cost synergies due primarily to the elimination of administrative overhead. Goodwill resulting from the Aegis acquisition is not expected to be deductible for income tax purposes.
Acquisition-related costs which consisted on recurring internal resources were de minimus and such costs were expensed as incurred (ASC 805-50-30-1).
The following table summarizes the contract-related liabilities assumed as of June 30, 2024 and December 31, 2023:
| | | | | | | | | | | | | | |
| | June 30, 2024 | | December 31, 2023 |
Acquisition liabilities, current | | | | |
Contingent consideration | | $ | 269,368 | | | $ | 200,639 | |
Deferred maintenance reserve | | 590,251 | | | 644,724 | |
| | 859,619 | | | 845,363 | |
Acquisition liabilities, long-term | | | | |
Contingent consideration | | 1,129,172 | | | 994,743 | |
Deferred maintenance reserve | | 93,518 | | | 187,036 | |
| | $ | 1,222,690 | | | $ | 1,181,779 | |
Revenues and gross profit from the Aegis maintenance contracts were $652,785 and $471,835 and $1,411,547 and $956,879, respectively, for the three and six months ended June 30, 2024. Revenue and gross profit for the three months ended June 30, 2023 were $628,813 and $411,106. The revenue and gross profit are included in our Services segment since the date of the acquisition.
TECOGEN INC.
Notes to Condensed Consolidated Financial Statements
We are unable to provide the pro forma information required under ASC 805-10-50-2(h) as the disclosure is impracticable since the required pre-acquisition historical information could not be obtained from Aegis.
| | | | | |
Note 8. | Sale of Energy Producing Assets |
During the first quarter of 2019 we recognized two individual sales of energy producing assets for a total of eight power purchase agreements, including the associated energy production contracts, for total consideration of $7 million.
In connection with these assets sales, we entered into agreements with the purchaser to maintain and operate the assets over the remaining periods of the associated energy production contracts (through August 2033 and January 2034, respectively) in exchange for monthly maintenance and operating fees. These agreements contain provisions whereby we have guaranteed to the purchaser a minimum level or threshold of cash flows from the associated energy production contracts. Actual results are compared to the minimum threshold bi-annually and we are contractually obligated to reimburse any shortfall to the purchaser. To the extent actual cash flow results exceed the minimum threshold, we are entitled to fifty percent of such excess under the agreements. Based upon an analysis of these energy producing assets' expected future performance, as of June 30, 2024, we do not expect to make any material payments under the guarantee.
At June 30, 2024, we were due $93,517 under the energy production contracts, representing fifty percent of the excess cash flows above the minimum threshold for the bi-annual period ended December 31, 2023 and the bi-annual period ended June 30, 2024. We expect to receive these funds in the third quarter of 2024.
The foregoing agreements also contain provisions whereby we have agreed to make whole the purchaser in the event the counterparty to the energy production contract(s) defaults on or otherwise terminates before the stated expiration of the energy production contract. Should we be required to make whole the purchaser under such provisions, we would be entitled to seek recovery from the counterparty to the energy production contract(s) under a similar provision contained in those contracts in respect of early termination.
We are also responsible under the agreements for site decommissioning costs, if any, in excess of certain threshold amounts by site. Decommissioning of site assets is performed when, if and as requested by the counterparty to the energy production contract upon termination of the energy production contract.
Our leases principally consist of operating leases related to our corporate office, field offices, and our research, manufacturing, and storage facilities.
At lease inception, we determine if an arrangement constitutes a lease and whether that lease meets the classification criteria of a finance or operating lease. Some of our lease agreements contain lease components (e.g. minimum rent payments) and non-lease components (e.g. maintenance, labor charges, etc.). We account for each component separately based on the estimated standalone price of each component.
Operating Leases
Operating leases are included in Right-of-use assets, Lease obligations, current and Long-term liabilities - Lease obligations, net of current portion, on the condensed consolidated balance sheets. These assets and liabilities are recognized at the commencement date based on the present value of remaining lease payments over the lease term and using an incremental borrowing rate consistent with the lease terms or implicit rates when readily determinable. For those leases where it is reasonably certain at the commencement date that we will exercise the option to extend the lease, then the lease term will include the lease extension term. Short-term operating leases, which have an initial term of 12 months or less, are not recorded on the balance sheet.
On March 31, 2023, we entered into two lease agreements for two adjoining buildings, located in North Billerica, Massachusetts, containing approximately 26,412 square feet of manufacturing, storage and office space to serve as our headquarters and manufacturing facilities. The lease agreements provide for initial lease terms of five (5) years with two successive options to renew for additional terms of five (5) years. Both leases commence on January 1, 2024 and require payment of the base rent, real estate taxes, common maintenance expenses and aggregate deposits of $38,200. Our costs for initial improvements required to the leased premises is estimated to range between $500,000 and $750,000. The estimated straight-line monthly rent expense for the initial term of the lease is approximately $26,962 per month. In accordance with ASC 842-20-30-1, we recorded the lease liability and right-of-use asset using the discount rate for the lease upon the lease commencement date, January 1, 2024.
On January 1, 2024 we extended our lease for the 2,800 square foot Valley Stream, NY service center for an additional three (3) years through December 31, 2026, with an option to renew for an additional term of three (3) years. The straight-line
TECOGEN INC.
Notes to Condensed Consolidated Financial Statements
base monthly rent for the extension is $4,560 per month. On February 1, 2024 we entered into a lease agreement for 2,063 square feet of office and storage space in East Syracuse, New York for an initial lease term of three (3) years, expiring on January 31, 2027, with an option for an additional lease term of two (2) years. The straight-line base monthly rent for the initial lease term is $1,891 per month. On June 17, 2024, we extended our lease for 1,751 square foot Hayward, CA service center for an additional three (3) years through July 31, 2027. The straight-line monthly rent for the extension is $3,662 per month.
The lease on our former headquarters located in Waltham, Massachusetts which consists of approximately 43,000 square feet of manufacturing, storage and office space, expired on April 30, 2024. The base monthly rent in 2024 was $44,254.
Lease expense for operating leases, which principally consists of fixed payments for base rent, is recognized on a straight-line basis over the lease term. Operating lease expense for the three and six months ended June 30, 2024 and 2023 was $195,651 and $467,213 and $216,841 and $406,556, respectively.
Supplemental information related to operating leases for the six months ended June 30, 2024 and 2023 is as follows:
| | | | | | | | | | | | | | |
| | Six Months Ended June 30, |
| | 2024 | | 2023 |
Cash paid for amounts included in the measurement of operating lease liabilities | | $ | 451,881 | | | $ | 371,264 | |
Right-of-use assets obtained in exchange for operating lease liabilities | | $ | 1,547,800 | | | $ | — | |
Weighted-average remaining lease term - operating leases | | 4.5 Years | | 3.7 Years |
Weighted-average discount rate - operating leases | | 7.5 | % | | 6.0 | % |
| | | | |
Supplemental balance sheet information related to operating leases as of June 30, 2024 and December 31, 2023 was as follows:
| | | | | | | | | | | | | | |
| | June 30, 2024 | | December 31, 2023 |
Operating leases | | | | |
Right-of-use assets | | $ | 1,952,681 | | | $ | 743,096 | |
| | | | |
Operating lease liability, current | | $ | 421,467 | | | $ | 248,933 | |
Operating lease liability, long-term | | 1,560,437 | | | 523,660 | |
Total operating lease liability | | $ | 1,981,904 | | | $ | 772,593 | |
Finance Leases
Finance leases are included in Right-of-use assets, Lease obligations, current and Long-term liabilities - Lease obligations, net of current portion, on the condensed consolidated balance sheets. These assets and liabilities are recognized at the commencement date based on the present value of remaining lease payments over the lease term and using an incremental borrowing rate consistent with the lease terms or implicit rates, when readily determinable. For those leases where it is reasonably certain at the commencement date that we will exercise the option to extend the lease, then the lease term will include the lease extension term. Effective December 19, 2023, we entered into a master finance lease agreement for motor vehicles and acquired five (5) service vehicles. On May 21, 2024 we entered into a lease for a waste oil boiler.
Supplemental information for finance leases for the six months ended June 30, 2024 and 2023 was as follows:
| | | | | | | | | | | | | | |
| | June 30, 2024 | | June 30, 2023 |
Right-of-use assets obtained in exchange for finance lease liabilities | $ | 27,282 | | | $ | — | |
Weighted-average remaining lease term - finance leases | 0.8 Years | | 0.0 Years |
Weighted-average discount rate - finance leases | — | % | | — | % |
Supplemental balance sheet information related to finance leases as of June 30, 2024 and December 31, 2023 is as follows:
TECOGEN INC.
Notes to Condensed Consolidated Financial Statements
| | | | | | | | | | | | | | |
| | June 30, 2024 | | December 31, 2023 |
Finance leases | | | | |
Right-of-use assets - motor vehicles | | $ | 196,990 | | | $ | 200,187 | |
Right-of-use assets - boiler | | 27,282 | | | — | |
Total finance lease assets | | $ | 224,272 | | | $ | 200,187 | |
| | | | |
Finance lease liability, current | | $ | 53,786 | | | $ | 40,540 | |
Finance lease liability, long-term | | 143,106 | | | 159,647 | |
Total finance lease liability | | $ | 196,892 | | | $ | 200,187 | |
Future minimum lease commitments under non-cancellable operating and finance leases as of June 30, 2024 were as follows:
| | | | | | | | | | | | | | | | | | | | |
| | Operating Leases | | Finance Leases | | Total |
Year 1 | | $ | 548,724 | | | $ | 70,468 | | | $ | 619,192 | |
Year 2 | | 544,398 | | | 48,931 | | | 593,329 | |
Year 3 | | 497,410 | | | 48,931 | | | 546,341 | |
Year 4 | | 423,484 | | | 48,931 | | | 472,415 | |
Year 5 | | 210,096 | | | 24,466 | | | 234,562 | |
Thereafter | | 89,343 | | | — | | | 89,343 | |
Total lease payments | | 2,313,455 | | | 241,727 | | | 2,555,182 | |
Less: imputed interest | | 331,551 | | | 44,835 | | | 376,386 | |
Total | | $ | 1,981,904 | | | $ | 196,892 | | | $ | 2,178,796 | |
| | | | | |
Note 10. | Stock-Based Compensation |
Stock-Based Compensation
We adopted a 2006 Stock Option and Incentive Plan, or the Plan, under which the Board of Directors may grant incentive or non-qualified stock options and stock grants to key employees, directors, advisors and consultants. The Plan was amended at various dates by the Board of Directors to increase the reserved shares of common stock issuable under the Plan to 3,838,750 as of June 30, 2024, and in June 2017 stockholders approved an amendment to extend the termination date of the Plan to January 1, 2026 ("Amended Plan").
Stock options vest based upon the terms within the individual option grants, with an acceleration of the unvested portion of such options upon a change in control event, as defined in the Amended Plan. The options are not transferable except by will or domestic relations order. The option price per share under the Amended Plan cannot be less than the fair market value of the underlying shares on the date of the grant. The number of shares remaining available for future issuance under the Amended Plan as of June 30, 2024 was 1,021,768.
During the six months ended June 30, 2024, we did not grant any options to purchase shares of common stock or issue any stock grants under the Amended Plan.
We adopted the 2022 Stock Incentive Plan (the "2022 Plan"), under which the Board of Directors may grant incentive or non-qualified stock options and stock grants to key employees, directors, advisors and consultants. We have reserved 3,800,000 shares of our common stock for issuance pursuant to awards under the 2022 Plan. The adoption of the 2022 Plan was approved by our shareholders on June 9, 2022.
Under the 2022 Plan, stock options vest based upon the terms within the individual option grants, with an acceleration of the unvested portion of such options upon a change in control event, as defined in the 2022 Plan. The options are not transferable except by will or domestic relations order. The option price per share under the 2022 Plan cannot be less than the fair market value of the underlying shares on the date of the grant. The number of shares remaining available for future issuance under the Plan as of June 30, 2024 was 2,943,750.
TECOGEN INC.
Notes to Condensed Consolidated Financial Statements
During the six months ended June 30, 2024, we granted non-qualified options to purchase an aggregate of 125,000 shares of common stock under the 2022 Plan at $0.77 per share to certain non-employee directors.
Stock option activity for the six months ended June 30, 2024 was as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Common Stock Options | Number of Options | | Exercise Price Per Share | | Weighted Average Exercise Price | | Weighted Average Remaining Life | | Aggregate Intrinsic Value |
Outstanding, December 31, 2023 | 3,638,122 | | | $ | 0.71 | | - | $ | 10.33 | | | $ | 1.49 | | | 6.70 years | | $ | 127,811 | |
Granted | 125,000 | | | $0.77 | | $ | 0.77 | | | | | |
| | | | | | | | | | | |
Exercised | — | | | | | | | | | | | |
Canceled and forfeited | (816,590) | | | $ | 0.74 | | - | $ | 10.33 | | | $ | 2.73 | | | | | |
| | | | | | | | | | | |
Outstanding, June 30, 2024 | 2,946,532 | | | $ | 0.71 | | - | $ | 6.74 | | | $ | 1.12 | | | 6.95 years | | $ | 46,675 | |
Exercisable, June 30, 2024 | 1,686,532 | | | | | | | $ | 1.27 | | | | | $ | 29,525 | |
Vested and expected to vest, June 30, 2024 | 2,651,282 | | | | | | | $ | 1.15 | | | | | $ | 44,103 | |
Consolidated stock-based compensation expense for the three and six months ended June 30, 2024 and 2023 was $45,464 and $89,998 and $28,589 and $105,937, respectively. No tax benefit was recognized related to the stock-based compensation recorded during the period.
At June 30, 2024, the total compensation cost related to unvested stock option awards not yet recognized is $361,450 and this amount will be recognized over a weighted average period of 2.43 years.
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Note 11. | Related Party Notes |
On October 9, 2023, we entered into note subscription agreements with each of John N. Hatsopoulos, a director and principal shareholder of registrant, and Earl R. Lewis, III, a director of registrant, pursuant to which Mr. Hatsopoulos agreed to provide financing to us of up to $1 million, and Mr. Lewis agreed to provide financing to us of $500,000, and potentially, an additional $500,000 at his discretion. We have the right to determine the amount of the loans at the time of a draw down, subject to the conditions in our agreements with each of Mr. Hatsopoulos and Mr. Lewis discussed below. The loans and terms of the loan agreements were unanimously approved by our board of directors.
The loans bear interest on the outstanding principal at the Internal Revenue Service’s Applicable Federal Rate to be determined at the time we issue a promissory note in connection with a loan drawdown. The principal amount and accrued interest of each loan is repayable one year from the date of issuance of the applicable promissory note. A note may be prepaid by us at any time. The principal amount of each loan and accrued interest is subject to mandatory prepayment in the event of a change of control of the registrant. The promissory notes are subject to customary events of default and are transferable provided the conditions to transfer set forth in the promissory notes are satisfied by the noteholder. The proceeds of the loans are expected to be used for general working capital purposes.
On October 10, 2023, we issued a promissory note and borrowed $500,000 from Mr. Hatsopoulos. The loan bears interest at 5.12% per annum. At June 30, 2024 our obligation to Mr. Hatsopoulos under the promissory note, inclusive of $11,905 of accrued and unpaid interest, was $518,305. On March 21, 2024, John H. Hatsopoulos amended the terms of the promissory note, dated October 10, 2023, extending the maturity date by one year, making the maturity date October 10, 2025, and agreeing to accept payment in cash or Tecogen Inc. common stock. On July 23, 2024, we borrowed an additional $500,000 from Mr. Hatsopoulos, and executed a promissory note with a maturity of one year and interest at 5.06% per annum.
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Note 12. | Fair Value Measurements |
The fair value topic of the FASB Accounting Standards Codification defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The accounting guidance also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs, where available, and minimize the use of unobservable inputs when measuring fair value. There are three levels of inputs that may be used to measure fair value:
Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities. We currently do not have any Level 1 financial assets or liabilities.
Level 2 - Observable inputs other than quoted prices included in Level 1. Level 2 inputs include quoted prices for identical assets or liabilities in non-active markets, quoted prices for similar assets or liabilities in active markets and inputs other than quoted prices that are observable for substantially the full term of the asset or liability. We have Level 2 financial assets as provided below.
TECOGEN INC.
Notes to Condensed Consolidated Financial Statements
Level 3 - Unobservable inputs reflecting management’s own assumptions about the input used in pricing the asset or liability. We have Level 3 liabilities as provided below.
Available-for-sale equity securities
The following tables present the asset reported in "other assets" in the consolidated balance sheet measured at its fair value on a recurring basis as of June 30, 2024 and 2023 by level within the fair value hierarchy.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Quoted prices in active markets for identical assets | | Significant other observable inputs | | Significant unobservable inputs | | | | |
| | Total | | Level 1 | | Level 2 | | Level 3 | | Gains (losses) | | |
June 30, 2024 | | | | | | | | | | | | |
Recurring fair value measurements | | | | | | | | | | | | |
Marketable equity securities | | | | | | | | | | | | |
EuroSite Power Inc. | | $ | 74,995 | | | $ | — | | | $ | 74,995 | | | $ | — | | | $ | (18,749) | | | |
Total recurring fair value measurements | | $ | 74,995 | | | $ | — | | | $ | 74,995 | | | $ | — | | | $ | (18,749) | | | |
| | | | | | | | | | | | |
June 30, 2023 | | | | | | | | | | | | |
Recurring fair value measurements | | | | | | | | | | | | |
Marketable equity securities | | | | | | | | | | | | |
EuroSite Power Inc. | | $ | 131,241 | | | $ | — | | | $ | 131,241 | | | $ | — | | | $ | 37,497 | | | |
Total recurring fair value measurements | | $ | 131,241 | | | $ | — | | | $ | 131,241 | | | $ | — | | | $ | 37,497 | | | |
We utilize a Level 2 category fair value measurement to value its investment in EuroSite Power, Inc. as a marketable equity security at period end. That measurement is equal to the quoted market closing price at period end. Since this security is not actively traded we classify it as Level 2.
The following table summarizes changes in Level 2 assets which are comprised of marketable equity securities for the six months ended June 30, 2024 and 2023:
| | | | | | | | |
Fair value at December 31, 2023 | | $ | 93,744 | |
Unrealized losses | | (18,749) | |
Fair value at June 30, 2024 | | $ | 74,995 | |
| | |
Fair value at December 31, 2022 | | $ | 93,744 | |
Unrealized gains | | 37,497 | |
Fair value at June 30, 2023 | | $ | 131,241 | |
Contingent Contract Consideration
We utilize a Level 3 category fair value measurement to value the contingent contract consideration liability at period end since there are no quoted prices for this liability in non-active markets, there are no quoted prices for similar liabilities in active markets and there are no inputs that are observable for substantially the full term of the the liability. The contingent contract consideration calculation requires management to make estimates and assumptions that affect the reported amount of the liability. The contingent contract consideration is payable each calendar quarter through the earlier of the expiration or termination of the relevant maintenance agreements, or the seventh (7th) anniversary of the acquisition date. The consideration is equal to the product of the revenues collected in a calendar quarter multiplied by an applicable percentage. The agreement stipulates quarterly aggregate revenue targets and an applicable percentage, and provides for a higher applicable percentage if revenues exceed the target revenues. The applicable percentage ranges from 5% to 10% over the agreement term. On the date of acquisition, the fair value of the contingent consideration was calculated using a weighted average cost of capital of 15%, discounting the future cash flows to present value.
TECOGEN INC.
Notes to Condensed Consolidated Financial Statements
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Quoted prices in active markets for identical assets | | Significant other observable inputs | | Significant unobservable inputs | | |
| | Total | | Level 1 | | Level 2 | | Level 3 | | Total gains (losses) |
June 30, 2024 | | | | | | | | | | |
Recurring fair value measurements | | | | | | | | | | |
Contingent contract consideration | | | | | | | | | | |
Current | | $ | 269,368 | | | $ | — | | | $ | — | | | $ | 269,368 | | | $ | — | |
Long-term | | 1,129,172 | | | — | | | — | | | 1,129,172 | | | — | |
Total recurring fair value measurements | | $ | 1,398,540 | | | $ | — | | | $ | — | | | $ | 1,398,540 | | | $ | — | |
| | | | | | | | | | |
June 30, 2023 | | | | | | | | | | |
Recurring fair value measurements | | | | | | | | | | |
Contingent contract consideration | | | | | | | | | | |
Current | | $ | 164,357 | | | $ | — | | | $ | — | | | $ | 164,357 | | | $ | — | |
Long-term | | 1,278,105 | | | — | | | — | | | 1,278,105 | | | — | |
Total recurring fair value measurements | | $ | 1,442,462 | | | $ | — | | | $ | — | | | $ | 1,442,462 | | | $ | — | |
| | | | | | | | | | |
As of June 30, 2024, we were organized into three operating segments through which senior management evaluates our business. These segments, as described in more detail in Note 1, are organized around the products and services provided to customers and represent our reportable segments. The following table presents information by reportable segment for the three and six months ended June 30, 2024 and 2023:
TECOGEN INC.
Notes to Condensed Consolidated Financial Statements
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Products | | Services | | Energy Production | | Corporate, other and elimination (1) | | Total |
Three Months Ended June 30, 2024 | | | | | | |
Revenue - external customers | | $ | 119,673 | | | $ | 4,126,517 | | | $ | 481,597 | | | $ | — | | | $ | 4,727,787 | |
Intersegment revenue | | — | | | 81,852 | | | — | | | (81,852) | | | $ | — | |
Total revenue | | $ | 119,673 | | | $ | 4,208,369 | | | $ | 481,597 | | | $ | (81,852) | | | $ | 4,727,787 | |
Gross profit | | $ | (52,309) | | | $ | 1,934,702 | | | $ | 196,762 | | | $ | — | | | $ | 2,079,155 | |
Identifiable assets | | $ | 8,801,555 | | | $ | 12,798,442 | | | $ | 3,150,322 | | | $ | 2,404,641 | | | $ | 27,154,960 | |
| | | | | | | | | | |
Six Months Ended June 30, 2024 | | | | | | |
| | | | | | | | | | |
Revenue - external customers | | $ | 1,611,071 | | | $ | 8,140,827 | | | $ | 1,161,985 | | | $ | — | | | $ | 10,913,883 | |
Intersegment revenue | | — | | | 199,200 | | | — | | | (199,200) | | | $ | — | |
| | | | | | | | | | |
Gross profit | | $ | 389,546 | | | $ | 3,856,755 | | | $ | 408,510 | | | $ | — | | | $ | 4,654,811 | |
Identifiable assets | | $ | 8,801,555 | | | $ | 12,798,442 | | | $ | 3,150,322 | | | $ | 2,404,641 | | | $ | 27,154,960 | |