Description of business and basis of presentation |
9 Months Ended |
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Sep. 30, 2024 | |
| Accounting Policies [Abstract] | |
| Description of business and basis of presentation |
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 condensed 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 September 30, 2024, our cash and cash equivalents were $1,282,238, compared to $1,351,270 at December 31, 2023, a decrease of $69,032. For the nine months ended September 30, 2024 we used $116,995 in cash from operations and had a net operating loss of $3,397,075, due to a decrease in Products revenue and gross margin and an increase in operating expenses. Our Service gross margin percentage for the nine months ended September 30, 2024 of 46.4% is below our historical Service gross margins which ranged between 53.0% to 55.0%. Working capital at September 30, 2024 was $6,328,441, compared to $9,822,546 at December 31, 2023, a decrease of $3,494,105 and our accumulated deficit was $46,453,827.
As a result of the above factors, management has performed an analysis to evaluate our ability to continue as a going concern for one year after the financial statements issuance date. 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, the acquisition of additional maintenance contracts in February 2024 and May 2024 (see Note 7. "Aegis Contract and Related Asset Acquisitions"), and the expansion of markets served by our chiller products into the data center market, which is currently experiencing power constraints. Our backlog at September 30, 2024 was $5,023,267. We have drawn $1,500,000 under the note subscription agreements with related parties (see Note 11. "Related Party Notes"). On October 30, 2024, our Board of Directors authorized management to proceed with an equity offering consisting of a private placement to existing shareholders in an amount of up to $2 million, consisting of one share of common stock, with a warrant to purchase one share of common stock for each share purchased, exercisable within two years. Based on management's analysis, we believe that cash flows from operations, the note agreements and anticipated proceeds from the private placement offering 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 forecast, 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 condensed 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 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 September 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 September 30, 2024 and the results of operations and cash flows for the three and nine months ended September 30, 2024 and 2023. The financial data and other information disclosed in these notes for the three and nine months ended September 30, 2024 and 2023 are also unaudited. The operating results for the nine months ended September 30, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024. Certain reclassifications of prior year amounts have been made to conform to the present year presentations. 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 condensed consolidated statements of operations differ from that which would be expected by applying the federal statutory tax rate due to losses for which no benefit is recognized.
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