GlobeNewswire Inc | Nov 12, 2020 09:00AM EST

November 12, 2020

Continued Improvement in Margin and OPEX

WALTHAM, MA, Nov. 12, 2020 (GLOBE NEWSWIRE) -- via NewMediaWire--Tecogen Inc. (OTCQX: TGEN), a leading manufacturer of clean energy products, reported revenues of $7.20 million for the quarter ended September30, 2020 compared to $8.67 million for the same period in 2019, a 17.0% decrease. Product revenues decreased 30% to $2.66 million compared to $3.79 million in the same period in 2019.Gross profit for the third quarter of 2020 was $2.79 million compared to $2.83 million in the third quarter of 2019. Gross margin improved to 39% for the third quarter of 2020 compared to 33% for the same period in 2019.Net loss was $232 thousand for the third quarter of 2020, compared to $586 thousand for the same period in 2019.

Key Takeaways:

-- Gross margin increased to 38.7% for Q3 2020 versus 32.7% for Q3 2019 -- Operating expenses decreased by $375 thousand (11.1%) to $2.99 million for the third quarter of 2020 compared to $3.37 million in the same period of 2019 -- Net loss per share was $0.01 for the third quarter of 2020 and $0.02 for the third quarter of 2019 -- Cash flows provided by operations of $1.57 million year to date compared to cash flows used by operations of $3.23 million for the same period in 2019 -- Cash and cash equivalents at the end of the third quarter 2020 of $1.65 million compared to $780 thousand on September 30, 2019, an increase of 117%.

Adjusted EBITDA(1)was negative $67 thousand for the third quarter of 2020 compared to negative $422 thousand for the third quarter of 2019. (Adjusted EBITDA is defined as net income or loss attributable to Tecogen, adjusted for interest, income taxes, depreciation and amortization, stock-based compensation expense, unrealized gain or loss on equity securities, goodwill impairment charges and other non-cash non-recurring charges due to the abandonment of certain intangible assets. See table following the statements of operations for a reconciliation from net loss to Adjusted EBITDA as well as important disclosures about the company's use of Adjusted EBITDA).

On April 17, 2020, the Company obtained a Paycheck Protection Program ("PPP") loan of $1,874,200 pursuant to the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act"). The proceeds were used for payroll, rent and utilities and, on November 10, 2020, an application was submitted for forgiveness of the full amount of the loan.

During the third quarter we continued to experience challenges to our business and our customers as a result of the COVID-19 pandemic, commented Benjamin Locke, Tecogen's Chief Executive Officer. Our product sales in the third quarter declined primarily due to the impact of COVID-19 related delays on projects and customer purchase decision timing. Installation revenue and Energy Production revenue also decreased as we experienced COVID-19 related disruption.On the positive side, we saw record revenues from our maintenance services, and we are cautiously optimistic that our product revenues will improve for the rest of the year. We have used the slowdown in activity to focus on improving efficiencies and reducing operating expenses, and I am encouraged we are seeing results with our improved product and service margins.

Sales & Operations Highlights

-- Current sales backlog of equipment and installations as of September30, 2020 is $10.7 million, comprised of $8.1 million of products and $2.5 million of installation services -- Executed license agreement with Origin Engines relating to the use of Ultera emissions reduction technology on engines sold by Origin in certain markets -- Signed a Joint Sales and Marketing Agreement with a natural gas company in Canada to pursue opportunities focused on advanced natural gas cooling solutions for commercial and industrial customers -- Received order for Tecogen's proprietary Ultera emission reduction system for use by the Eastern Municipal Water District (EMWD) at its facility in Winchester, California -- Sale of Tecofrost gas engine refrigeration compressor to a food processing facility in Connecticut

Conference Call Scheduled for Today at 11:00 am ET

Tecogen will host a conference call today to discuss thethirdquarter results beginning at 11:00 am eastern time. To listen to the call dial(877) 407-7186 within the U.S. and Canada, or (201) 689-8052 from other international locations. Participants should ask to be joined to the Tecogen Third Quarter 2020 earnings call. Please begin dialing 10 minutes before the scheduled starting time. This earnings press release will be available on the Company website atwww.Tecogen.comin the "News and Events" section under "About Us." The earnings conference call will be webcast live. To view the associated slides, register for and listen to the webcast, goto https://ir.tecogen.com/news-events. Following the call, the recording will be archived for 14 days.

The earnings conference call will be recorded and available for playback one hour after the end of the call.To listen to the playback, dial(877) 660-6853 within the U.S. and Canada, or(201) 612-7415 from other international locations and use Conference Call ID#: 13672659.

About Tecogen

Tecogen Inc.designs, manufactures, sells, installs, and maintains high efficiency, ultra-clean, cogeneration products including engine-driven combined heat and power, air conditioning systems, and high-efficiency water heaters for residential, commercial, recreational and industrial use. The company provides cost effective, environmentally friendly and reliable products for energy production that, through patented technology, nearly eliminate criteria pollutants and significantly reduce a customers carbon footprint.

In business for over 35 years, Tecogen has shipped more than 3,000 units, supported by an established network of engineering, sales, and service personnel across the United States. For more information, please visitwww.tecogen.comor contact us for a freeSite Assessment.

Tecogen, InVerde e+, Ilios, Tecochill, Tecopower, Tecofrost and Ultera are registered trademarks of Tecogen Inc.

Forward Looking Statements

This press release and accompanying documents contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements.Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. For example, statements in this press release regarding the potential future impact of the COVID-19 pandemic on the Companys business and results of operations are forward-looking statements.Forward-looking statements can also be identified by words such as future, anticipates, believes, estimates, expects, intends, plans, predicts, will, would, could, can, may, and similar terms. Forward-looking statements are not guarantees of future performance and the Companys actual results may differ significantly from the results discussed in the forward-looking statements. Such forward-looking statements include, among other things, the impact of the coronavirus pandemic on demand for our products or services, the availability of incentives, rebates and tax benefits relating to our products, changes in the regulatory environment relating to our products, competing technological developments, and the availability of financing to fund our operations and growth.Factors that might cause such differences include, but are not limited to, those discussed in Part I, Item 1A of the Companys Annual Report on Form 10-K for the year ended December31, 2019, as supplemented, and Part II, Item 1A of the Companys Form 10-Q for the quarter ended September 30, 2020 (Third Quarter Form 10-Q), in each case under the heading Risk Factors. The following discussion should be read in conjunction with the Third Quarter Form 10-Q filed with the Securities and Exchange Commission (SEC) and the unaudited condensed consolidated financial statements and accompanying notes included in Part I, Item 1 of the Third Quarter Form 10-Q.Any forward-looking statement in this release speaks only as of the date on which it is made. Except as required by law, the company assumes no obligation to update or revise any forward-looking statements.

In addition to GAAP financial measures, this press release includes certain non-GAAP financial measures, including Adjusted EBITDA which excludes certain expenses as described in the presentation.We use Adjusted EBITDA as an internal measure of business operating performance and believe that the presentation of non-GAAP financial measures provides a meaningful perspective of the underlying operating performance of our current business and enables investors to better understand and evaluate our historical and prospective operating performance by eliminating items that vary from period to period without correlation to our core operating performance and highlights trends in our business that may not otherwise be apparent when relying solely on GAAP financial measures.

Tecogen Media & Investor Relations Contact Information:

Benjamin LockeP: 781-466-6402E: Benjamin.Locke@tecogen.com

TECOGEN INC.CONDENSED CONSOLIDATED BALANCE SHEETS(unaudited)

September 30, December 31, 2020 2019ASSETS Current assets: Cash and cash equivalents $ 1,647,471 $ 877,676 Accounts receivable, net 8,885,455 14,569,397 Unbilled revenue 5,370,422 5,421,811 Inventory, net 7,142,799 6,405,229 Prepaid and other current assets 517,924 635,034 Total current assets 23,564,071 27,909,147 Property, plant and equipment, net 2,998,014 3,465,948 Right of use assets 1,763,795 2,173,951 Intangible assets, net 1,441,518 1,593,781 Goodwill 5,281,867 5,281,867 Other assets 198,500 691,941 TOTAL ASSETS $ 35,247,765 $ 41,116,635 LIABILITIES AND STOCKHOLDERS? EQUITY Current liabilities: Revolving line of credit, bank $ ? $ 2,402,384 Note payable, current portion 209,618 ? Accounts payable 3,815,875 5,271,756 Accrued expenses 2,650,873 2,599,366 Deferred revenue 1,328,657 2,635,619 Lease obligations, current 519,318 536,443 Total current liabilities 8,524,341 13,445,568 Long-term liabilities: Deferred revenue, net of current portion 125,556 145,464 Note payable, net of current portion 1,664,582 ? Lease obligations, long-term 1,344,682 1,637,508 Unfavorable contract liability, net 2,205,301 2,534,818 Total liabilities 13,864,462 17,763,358 Commitments and contingencies (Note 11) Stockholders? equity: Tecogen Inc. stockholders? equity: Common stock, $0.001 par value; 100,000,000shares authorized; 24,850,261 and 24,849,261 24,850 24,849 issued and outstanding at September 30, 2020and December 31, 2019, respectivelyAdditional paid-in capital 56,753,845 56,622,285 Accumulated deficit (35,467,309 ) (33,379,114 )Total Tecogen Inc. stockholders? equity 21,311,386 23,268,020 Noncontrolling interest 71,917 85,257 Total stockholders? equity 21,383,303 23,353,277 TOTAL LIABILITIES AND STOCKHOLDERS? EQUITY $ 35,247,765 $ 41,116,635

TECOGEN INC.CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(unaudited)

Three Months Ended September 30, September 30, 2020 2019Revenues Products $ 2,659,635 $ 3,790,291 Services 4,171,377 4,248,584 Energy production 368,695 631,602 Total revenues 7,199,707 8,670,477 Cost of sales Products 1,593,500 2,515,605 Services 2,621,855 3,029,702 Energy production 197,608 293,929 Total cost of sales 4,412,963 5,839,236 Gross profit 2,786,744 2,831,241 Operating expenses General and administrative 2,318,789 2,333,887 Selling 563,857 669,720 Research and development 111,253 365,817 Total operating expenses 2,993,899 3,369,424 Loss from operations (207,155 ) (538,183 )Other income (expense) Interest income (12 ) 192 Interest expense (4,845 ) (18,516 )Total other income (expense), net (4,857 ) (18,324 )Loss before provision for state income taxes (212,012 ) (556,507 )Provision for state income taxes 9,397 7,881 Consolidated net loss (221,409 ) (564,388 )Income attributable to the noncontrolling (10,511 ) (21,861 )interestNet loss attributable to Tecogen Inc. $ (231,920 ) $ (586,249 ) Net loss per share - basic and diluted $ (0.01 ) $ (0.02 )Weighted average shares outstanding - basic 24,850,261 24,843,177 and diluted

Non-GAAP financial disclosure(1) Net loss attributable to Tecogen Inc. $ (231,920 ) $ (586,249 )Interest expense, net 4,857 18,324 Income taxes 9,397 7,881 Depreciation & amortization, net 100,304 95,616 EBITDA (117,362 ) (464,428 )Stock based compensation 50,582 42,671 Adjusted EBITDA $ (66,780 ) $ (421,757 )

TECOGEN INC.CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(unaudited)

Nine Months Ended September 30, September 30, 2020 2019Revenues Products $ 8,752,908 $ 9,260,265 Services 12,448,671 13,003,529 Energy production 1,395,886 2,450,710 Total revenues 22,597,465 24,714,504 Cost of sales Products 5,298,750 6,005,819 Services 7,925,925 8,034,410 Energy production 887,888 1,458,360 Total cost of sales 14,112,563 15,498,589 Gross profit 8,484,902 9,215,915 Operating expenses General and administrative 7,645,729 7,672,550 Selling 2,022,027 2,067,674 Research and development 641,616 1,083,444 Gain on sale of assets ? (1,081,049 )Goodwill impairment ? 3,693,198 Total operating expenses 10,309,372 13,435,817 Loss from operations (1,824,470 ) (4,219,902 )Other income (expense) Interest income 11,953 790 Interest expense (121,084 ) (63,547 )Unrealized loss on investment securities (98,403 ) (19,680 )Total other expense, net (207,534 ) (82,437 )Loss before provision for state income taxes (2,032,004 ) (4,302,339 )Provision for state income taxes 27,791 15,667 Consolidated net loss (2,059,795 ) (4,318,006 )(Income) loss attributable to the (28,400 ) 94,551 noncontrolling interestNet loss attributable to Tecogen Inc. $ (2,088,195 ) (4,223,455 ) Net loss per share - basic and diluted $ (0.08 ) $ (0.17 )Weighted average shares outstanding - basic 24,850,257 24,838,367 and diluted

Non-GAAP financial disclosure(1) Net loss attributable to Tecogen Inc. $ (2,088,195 ) $ (4,223,455 )Interest & other expense, net 109,131 62,757 Income taxes 27,791 15,667 Depreciation & amortization, net 293,941 362,848 EBITDA (1,657,332 ) (3,782,183 )Stock based compensation 132,312 120,604 Unrealized loss on marketable securities 98,403 19,680 Non-cash abandonment of intangible assets 179,944 ? Goodwill impairment ? 3,693,198 Adjusted EBITDA $ (1,246,673 ) $ 51,299

TECOGEN INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(unaudited)

Nine Months Ended September 30, September 30, 2020 2019CASH FLOWS FROM OPERATING ACTIVITIES: Consolidated net loss $ (2,059,795 ) $ (4,318,006 )Adjustments to reconcile net loss to net cash provided by (used in) operating activities:Depreciation, accretion and amortization, net 293,941 362,848 Stock-based compensation 132,312 120,604 Goodwill impairment ? 3,693,198 Gain on sale of assets ? (1,081,049 )Provision for losses on accounts receivable ? 29,849 Unrealized loss on marketable securities 98,403 19,680 Abandonment of intangible assets 179,944 ? Non-cash interest expense 51,190 36,252 Changes in operating assets and liabilities, net of effects of acquisitions(Increase) decrease in: Accounts receivable 5,683,941 1,097,220 Unbilled revenue 51,389 (763,604 )Inventory (737,570 ) (165,375 )Due from related party ? 9,405 Prepaid expenses and other current assets 117,109 (19,586 )Other non-current assets 692,484 (235,695 )Increase (decrease) in: Accounts payable (1,455,881 ) (665,587 )Accrued expenses and other current liabilities 145,848 (203,262 )Deferred revenue (1,619,696 ) (1,142,575 )Net cash provided by (used in) operating 1,573,619 (3,225,683 )activitiesCASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (59,952 ) (73,642 )Proceeds from sale of assets ? 5,000,000 Purchases of intangible assets (123,252 ) (64,656 )Payment of stock issuance costs (1,951 ) (1,011 )Distributions to noncontrolling interest (41,740 ) (48,127 )Net cash provided by (used in) investing (226,895 ) 4,812,564 activitiesCASH FLOWS FROM FINANCING ACTIVITIES: Payments on revolving line of credit, net (2,452,329 ) (1,105,111 )Proceeds from note payable 1,874,200 ? Proceeds from the exercise of stock options 1,200 26,418 Net cash used in financing activities (576,929 ) (1,078,693 )Change in cash and cash equivalents 769,795 508,188 Cash and cash equivalents, beginning of the 877,676 272,552 periodCash and cash equivalents, end of the period $ 1,647,471 $ 780,740 Supplemental disclosures of cash flows information:Cash paid for interest $ 62,007 $ 24,729 Cash paid for taxes $ 27,791 $ 29,205

(1)Non-GAAP Financial MeasuresIn addition to reporting net income, a U.S. generally accepted accounting principles (GAAP) measure, this news release contains information about Adjusted EBITDA (net income (loss) attributable to Tecogen Inc adjusted for interest, income taxes, depreciation and amortization, stock based compensation expense, unrealized gain or loss on investment securities, goodwill impairment charges and other non-cash non-recurring charges due to abandonment of certain intangible assets), which is a non-GAAP measure.The Company believes Adjusted EBITDA allows investors to view its performance in a manner similar to the methods used by management and provides additional insight into its operating results.Adjusted EBITDA is not calculated through the application of GAAP.Accordingly, it should not be considered as a substitute for the GAAP measure of net income and, therefore, should not be used in isolation of, but in conjunction with, the GAAP measure.The use of any non-GAAP measure may produce results that vary from the GAAP measure and may not be comparable to a similarly defined non-GAAP measure used by other companies.