10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2016

or

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 001-36103

TECOGEN INC.

(Exact name of Registrant as specified in its charter)

Delaware	04-3536131
(State or Other Jurisdiction of Incorporation or Organization)	(IRS Employer Identification No.)

45 First Avenue
Waltham, Massachusetts	02451
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s Telephone Number, Including Area Code: (781) 622-1120

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes ý   No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer o	Accelerated filer o
Non –accelerated filer o	Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes ¨   No ý

Title of each class	Outstanding, August 9, 2016
Common Stock, $0.001 par value	19,836,579

TECOGEN INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE PERIOD ENDED JUNE 30, 2016

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets - June 30, 2016 and December 31, 2015 (unaudited)	1
	Condensed Consolidated Statements of Operations - three and six months ended June 30, 2016 and 2015 (unaudited)	2
	Condensed Consolidated Statements of Cash Flows - six months ended June 30, 2016 and 2015 (unaudited)	3
	Notes to Condensed Consolidated Financial Statements (unaudited)	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	10
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	13
Item 4.	Controls and Procedures	13
PART II - OTHER INFORMATION
Item 6.	Exhibits	14
Signatures		15

References in this Form 10-Q to "we", "us", "our"', the "Company" and "Tecogen" refers to Tecogen Inc. and its consolidated subsidiary, unless otherwise noted.

TECOGEN INC.

PART I - FINANCIAL INFORMATION

Item 1 - Financial Statements

CONDENSED CONSOLIDATED BALANCE SHEETS

As of June 30, 2016 and December 31, 2015

(unaudited)

	June 30, 2016			December 31, 2015
ASSETS
Current assets:
Cash and cash equivalents	$	4,069,660		$	5,486,526
Short-term investments	—			294,802
Accounts receivable, net	6,241,054			5,286,863
Unbilled revenue	1,214,218			1,072,391
Inventory, net	4,940,315			5,683,043
Due from related party	391,443			1,177,261
Prepaid and other current assets	487,138			353,105
Total current assets	17,343,828			19,353,991
Property, plant and equipment, net	560,868			543,754
Intangible assets, net	1,046,812			1,044,611
Goodwill	40,870			40,870
Other assets	58,425			58,425
TOTAL ASSETS	$	19,050,803		$	21,041,651
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	2,618,285		$	3,311,809
Accrued expenses	1,036,782			1,066,860
Deferred revenue	808,832			996,941
Total current liabilities	4,463,899			5,375,610
Long-term liabilities:
Deferred revenue, net of current portion	296,085			273,162
Senior convertible promissory note, related party	3,124,061			2,951,011
Total liabilities	7,884,045			8,599,783
Commitments and contingencies (Note 6)
Stockholders’ equity:
Tecogen Inc. stockholders’ equity:
Common stock, $0.001 par value; 100,000,000 shares authorized; 19,161,579 and 18,478,990 issued and outstanding at June 30, 2016 and December 31, 2015	19,162			18,479
Additional paid-in capital	34,203,702			34,501,640
Accumulated deficit	(23,056,106		)	(21,682,437		)
Total Tecogen Inc. stockholders’ equity	11,166,758			12,837,682
Noncontrolling interest	—			(395,814		)
Total stockholders’ equity	11,166,758			12,441,868
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	19,050,803		$	21,041,651

The accompanying notes are an integral part of these consolidated financial statements.

1

TECOGEN INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the three and six months months ended June 30, 2016 and 2015

(unaudited)

	Three months ended June 30,						Six months ended June 30,
	2016			2015			2016			2015
Revenues
Products	$	2,408,860		$	3,345,571		$	4,675,008		$	6,883,446
Services	3,278,448			3,038,260			6,087,815			5,603,819
Total revenues	5,687,308			6,383,831			10,762,823			12,487,265
Cost of sales
Products	1,767,052			2,224,415			3,319,768			4,778,053
Services	1,817,362			2,018,526			3,620,817			3,343,347
Total cost of sales	3,584,414			4,242,941			6,940,585			8,121,400
Gross profit	2,102,894			2,140,890			3,822,238			4,365,865
Operating expenses
General and administrative	2,002,172			1,890,503			3,894,392			4,077,632
Selling	335,089			324,384			850,121			818,058
Research and development	151,663			228,318			370,621			404,481
Total operating expenses	2,488,924			2,443,205			5,115,134			5,300,171
Loss from operations	(386,030		)	(302,315		)	(1,292,896		)	(934,306		)
Other income (expense)
Interest and other income	2,770			685			5,661			9,788
Interest expense	(44,053		)	(30,351		)	(86,434		)	(60,410		)
Total other expense, net	(41,283		)	(29,666		)	(80,773		)	(50,622		)
Loss before income taxes	(427,313		)	(331,981		)	(1,373,669		)	(984,928		)
Consolidated net loss	(427,313		)	(331,981		)	(1,373,669		)	(984,928		)
Less: (Income) loss attributable to the noncontrolling interest	11,774			(30,858		)	64,962			4,625
Net loss attributable to Tecogen Inc.	$	(415,539	)	$	(362,839	)	$	(1,308,707	)	$	(980,303	)
Net loss per share - basic and diluted	$	(0.02	)	$	(0.02	)	$	(0.07	)	$	(0.06	)
Weighted average shares outstanding - basic and diluted	19,088,828			16,338,909			18,783,909			16,282,027

The accompanying notes are an integral part of these consolidated financial statements.

2

TECOGEN INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the six months ended June 30, 2016 and 2015

(unaudited)

	June 30,
	2016			2015
CASH FLOWS FROM OPERATING ACTIVITIES:
Consolidated net loss	$	(1,373,669	)	$	(984,928	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	131,941			138,828
Provision (recover) for inventory reserve	(40,000		)	23,000
Stock-based compensation	88,177			51,497
Non-cash interest expense	23,050			24,899
Loss (gain) on sale of assets	640			(5,073		)
Changes in operating assets and liabilities
(Increase) decrease in:
Short term investments	294,802			291,047
Accounts receivable	(954,191		)	237,989
Unbilled revenue	(141,827		)	(896,001		)
Inventory, net	782,728			280,480
Due from related party	785,818			(372,570		)
Prepaid expenses and other current assets	(134,033		)	(160,964		)
Other non-current assets	—			(5,100		)
Increase (decrease) in:
Accounts payable	(693,524		)	915,942
Accrued expenses	(30,078		)	331,447
Deferred revenue	(165,186		)	(712,759		)
Net cash used in operating activities	(1,425,352		)	(842,266		)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment	(100,925		)	(12,935		)
Proceeds from sale of assets	—			16,874
Purchases of intangible assets	(50,970		)	(95,086		)
Net cash used in investing activities	(151,895		)	(91,147		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds (payments) on demand notes payable and line of credit to related party	150,000			—
Payment of stock issuance costs	(8,544		)	—
Proceeds from sale of restricted common stock, net	—			996,874
Proceeds from the exercise of stock options	18,925			360,225
Net cash provided by financing activities	160,381			1,357,099
Net increase (decrease) in cash and cash equivalents	(1,416,866		)	423,686
Cash and cash equivalents, beginning of the period	5,486,526			1,186,033
Cash and cash equivalents, end of the period	$	4,069,660		$	1,609,719
Supplemental disclosures of cash flows information:
Cash paid for interest	$	72,199		$	60,410
Stock exchange for non-controlling interest in Ilios	330,852			—

The accompanying notes are an integral part of these consolidated financial statements. 

3

TECOGEN INC.

Notes to Interim Unaudited Condensed Consolidated Financial Statements for the three and six months ended June 30, 2016 and 2015

Note 1 – Description of business and summary of significant accounting policies

Description of business

Tecogen Inc., or the Company, was organized as a Delaware Corporation on November 15, 2000, and acquired the assets and liabilities of the Tecogen Products division of Thermo Power Corporation. The Company produces 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. The Company’s 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 the Company’s customers are located in regions with the highest utility rates, typically California, the Midwest and the Northeast. The Company's common stock is listed on the NASDAQ under the ticker symbol TGEN.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions for Form 10-Q and therefore do not include all information and notes necessary for a complete presentation of our financial position, results of operations and cash flows, in conformity with generally accepted accounting principles. We filed audited financial statements which included all information and notes necessary for such presentation for the two years ended December 31, 2015 in conjunction with our 2015 Annual Report on Form 10-K, or our Annual Report, filed with the Securities and Exchange Commission, or SEC, on March 30, 2016. This form 10-Q should be read in conjunction with our Annual Report.

The accompanying unaudited condensed consolidated balance sheets, statements of operations and statements of cash flows reflect all adjustments (consisting only of normal recurring items) which are, in the opinion of management, necessary for a fair presentation of financial position at June 30, 2016, and of operations and cash flows for the interim periods ended June 30, 2016 and 2015. The results of operations for the interim periods ended June 30, 2016 are not necessarily indicative of the results to be expected for the year.

The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiary Ilios Inc. or Ilios, whose business focus is on advanced heating systems for commercial and industrial applications. In May 2016, the Company completed an exchange of common stock with the shareholders of Ilios and effected a statutory merger. Ilios is no longer a separate subsidiary (see Note 4).

The Company’s operations are comprised of one business segment. Our business is to manufacture and support highly efficient CHP products based on engines fueled by natural gas.

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.

Revenue Recognition

Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price is fixed or determinable and collectability is reasonably assured. Generally, sales of cogeneration and chiller units and parts are recognized when shipped and services are recognized over the term of the service period. Payments received in advance of services being performed or as a deposit on equipment are recorded as deferred revenue.

The Company recognizes revenue in certain circumstances before delivery has occurred (commonly referred to as bill and hold transactions). In such circumstances, among other things, risk of ownership has passed to the buyer, the buyer has made a written fixed commitment to purchase the finished goods, the buyer has requested the finished goods be held for future delivery as scheduled and designated by them, and no additional performance obligations exist by the Company. For these transactions, the finished goods are segregated from inventory and normal billing and credit terms are granted. For the three months endedJune 30, 2016, revenues of $2,186,698 were recorded as bill and hold transactions. For the same period in 2015, no revenues were recorded as bill and hold transactions.

For those arrangements that include multiple deliverables, the Company first determines whether each service or deliverable meets the separation criteria of FASB ASC 605-25, Revenue Recognition—Multiple-Element Arrangements. In general, a deliverable (or a group of deliverables) meets the separation criteria if the deliverable has stand-alone value to the customer and if the arrangement includes a general right of return related to the delivered item and delivery or performance of the undelivered item(s) is considered probable and substantially in control of the Company. Each deliverable that meets the separation criteria is considered a separate ‘‘unit of accounting”. The Company allocates the total arrangement consideration to each unit of accounting

4

TECOGEN INC.

Notes to Interim Unaudited Condensed Consolidated Financial Statements for the three and six months ended June 30, 2016 and 2015

using the relative fair value method. The amount of arrangement consideration that is allocated to a delivered unit of accounting is limited to the amount that is not contingent upon the delivery of another unit of accounting.

When vendor-specific objective evidence or third-party evidence is not available, adopting the relative fair value method of allocation permits the Company to recognize revenue on specific elements as completed based on the estimated selling price. The Company generally uses internal pricing lists that determine sales prices to external customers in determining its best estimate of the selling price of the various deliverables in multiple-element arrangements. Changes in judgments made in estimating the selling price of the various deliverables could significantly affect the timing or amount of revenue recognition. The Company enters into sales arrangements with customers to sell its cogeneration and chiller units and related service contracts and occasionally installation services. Based on the fact that the Company sells each deliverable to other customers on a stand-alone basis, the Company has determined that each deliverable has a stand-alone value. Additionally, there are no rights of return relative to the delivered items; therefore, each deliverable is considered a separate unit of accounting.

After the arrangement consideration has been allocated to each unit of accounting, the Company applies the appropriate revenue recognition method for each unit of accounting based on the nature of the arrangement and the services included in each unit of accounting. Cogeneration and chiller units are recognized when shipped and services are recognized over the term of the applicable agreement, or as provided when on a time and materials basis.

In some cases, our customers may choose to have the Company engineer and install the system for them rather than simply purchase the cogeneration and/or chiller units. In this case, the Company accounts for revenue, or turnkey revenue, and costs using the percentage-of-completion method of accounting. Under the percentage-of-completion method of accounting, revenues are recognized by applying percentages of completion to the total estimated revenues for the respective contracts. Costs are recognized as incurred. The percentages of completion are determined by relating the actual cost of work performed to date to the current estimated total cost at completion of the respective contracts. When the estimate on a contract indicates a loss, the Company’s policy is to record the entire expected loss, regardless of the percentage of completion. During the three months ended June 30, 2016, a recovery of approximately $89,000 from a loss recorded in the three month period ended March 31, 2015 of approximately $155,000, and $0 in the same period in 2015. During the six months ended June 30, 2016 and 2015, a loss of approximately $66,000 and $0 was recorded, respectively. The loss recorded for six months ending June 30, 2016 was reduced due to a change in project scope. The excess of contract costs and profit recognized to date on the percentage-of-completion accounting method in excess of billings is recorded as unbilled revenue. Billings in excess of related costs and estimated profit is recorded as deferred revenue.

Accounts Receivable

Accounts receivable are stated at the amount management expects to collect from outstanding balances. An allowance for doubtful accounts is provided for those accounts receivable considered to be uncollectible based upon historical experience and management’s evaluation of outstanding accounts receivable at the end of the year. Bad debts are written off against the allowance when identified. At June 30, 2016 and December 31, 2015 the allowance for doubtful accounts was approximately $44,000 and $50,000, respectively.

Inventory

Raw materials, work in process, and finished goods inventories are stated at the lower of cost, as determined by the average cost method, or net realizable value. The Company periodically reviews inventory quantities on hand for excess and/or obsolete inventory based primarily on historical usage, as well as based on estimated forecast of product demand. Any reserves that result from this review are charged to cost of sales. At June 30, 2016 and December 31, 2015, inventory reserves were $253,000 and $293,000, respectively.

Property, Plant and Equipment

Property, plant and equipment are recorded at cost. Depreciation is provided using the straight-line method over the estimated useful lives of the asset, which range from three to fifteen years. Leasehold improvements are amortized using the straight-line method over the lesser of the estimated useful lives of the assets or the term of the related leases. Expenditures for maintenance and repairs are expensed currently, while renewals and betterments that materially extend the life of an asset are capitalized. For the three and six months endedJune 30, 2016 and 2015, depreciation expense was $39,543 and $43,956, and $83,171 and $87,409, respectively.

Intangible Assets

Intangible assets are amortized on a straight-line basis over the estimated economic life of the intangible asset. The Company reviews intangible assets for impairment when the circumstances warrant.

5

TECOGEN INC.

Notes to Interim Unaudited Condensed Consolidated Financial Statements for the three and six months ended June 30, 2016 and 2015

Goodwill

The Company tests its recorded goodwill for impairment in the fourth quarter, or more often if indicators of potential impairment exist, by determining if the carrying value of the Company's single reporting unit exceeds its estimated fair value. During the first six months of 2016, the Company determined that no interim impairment test was necessary.

Stock-Based Compensation

Stock-based compensation cost is measured at the grant date based on the estimated fair value of the award and is recognized as an expense in the consolidated statements of operations over the requisite service period. The fair value of stock options granted is estimated using the Black-Scholes option pricing valuation model. The Company recognizes compensation on a straight-line basis for each separately vesting portion of the option award. The determination of the fair value of share-based payment awards is affected by the Company’s stock price. The Company uses the simplified method for awards of stock-based compensation since it does not have the necessary historical exercise and forfeiture data to determine an expected life for stock options. (see Note 5)

Revenues by Product

The following table summarizes net revenue by product line and services for the three months ended June 30, 2016 and 2015 and six months endedJune 30, 2016 and 2015:

	Three months ended June 30,				Six months ended June 30,
	2016		2015		2016		2015
Products
Cogeneration	$	1,270,499	$	2,526,812	$	2,688,471	$	5,098,740
Chiller & Heat Pump	1,138,361		818,759		1,986,537		1,784,706
Total Product Revenue	2,408,860		3,345,571		4,675,008		6,883,446
Services
Service contracts	2,082,644		2,035,041		4,270,966		3,907,407
Installations	1,195,804		1,003,219		1,816,849		1,696,412
Total Service Revenue	3,278,448		3,038,260		6,087,815		5,603,819
Total Revenue	$	5,687,308	$	6,383,831	$	10,762,823	$	12,487,265

Reclassification

Certain prior period balances have been reclassified to conform with current period presentation. The interest expense includes the amortization of the deferred financing costs, and this has been adjusted in the comparable periods. The balance of deferred financing cost on the balance sheet under ASU 2015-03 is netted with the associated debt and is retrospectively shown for prior period balances.

Note 2 – Loss per common share

All shares issuable for both periods were anti-dilutive because of the reported net loss. Basic and diluted loss per share for the three months ended June 30,2016 and 2015, and six months ended June 30,2016 and 2015, respectively, were as follows: 

	Three months ended June 30,						Six months ended June 30,
	2016			2015			2016			2015
Net loss attributable to stockholders	$	(415,539	)	$	(362,839	)	$	(1,308,707	)	$	(980,303	)
Weighted average shares outstanding - Basic and diluted	19,088,828			16,338,909			18,783,909			16,282,027
Basic and diluted loss per share	$	(0.02	)	$	(0.02	)	$	(0.07	)	$	(0.06	)
Anti-dilutive shares underlying stock options outstanding	1,196,776			1,186,325			1,196,776			1,186,325
Anti-dilutive convertible debentures	889,830			555,556			889,830			555,556
Anti-dilutive warrants outstanding	1,150,000			—			1,150,000			—

6

TECOGEN INC.

Notes to Interim Unaudited Condensed Consolidated Financial Statements for the three and six months ended June 30, 2016 and 2015

Note 3 – Demand notes payable, convertible debentures and line of credit agreement to related parties

On December 23, 2013, the Company entered into a Senior Convertible Promissory Note or the Note, with Michaelson Capital Special Finance Fund LP or Michaelson, for the principal amount of $3,000,000 with interest at 4% per annum for a term of three years. In the event of default such interest rate shall accrue at 8% after the occurrence of the event of default and during continuance plus 2% after the occurrence and during the continuance of any other event of default. The Note is a senior unsecured obligation which pays interest only on a monthly basis in arrears at a rate of 4% per annum, unless earlier converted in accordance with the terms of the agreement prior to such date. Effective April 1, 2016, the Note was amended increasing the principal amount by $150,000 for a total of $3,150,000 and extending the maturity date. The principal amount, if not converted, is now due on the fifth anniversary of the Note, December 28, 2018. The Note is senior in right of payment to any unsecured indebtedness that is expressly subordinated in right of payment to the Note.

The principal balance of the Note, together with any unpaid interest, is convertible into shares of the Company's common stock at 282.49 shares of the Company's common stock per $1,000 principal amount of Note (equivalent to a conversion price of $3.54 per share) at the option of Michaelson. If at any time the common stock of the Company is (1) trading on a national securities exchange, (2) qualifies for unrestricted resale under federal securities laws and (3) the arithmetic average of the volume weighted average price of the Common Stock for twenty consecutive trading days preceding the Company's notice of mandatory conversion exceeds $150,000, the Company shall have the right to require conversion of all of the then outstanding principal balance together with unpaid interest of this Note into the Company's common stock based on the conversion price of $3.54 per share. The Company may prepay all of the outstanding principal and interest due and payable under this Note in full, at any time prior to the maturity date for an amount equal to 120% of the then outstanding principal and interest due and payable as of the date of such prepayment.

Upon change of control, as defined by the Note, at Michaelson's option, the obligations may be assumed, on the terms and conditions in this Note, through an assignment and assumption agreement, or the Company may prepay all of the then outstanding principal and unpaid interest under this Note in full at the optional 120% prepayment amount. This provision creates an embedded derivative in accordance with FASB ASC 815, Derivatives and Hedging. As such it is required to be bifurcated and accounted for separately from the Note. However, the Company has determined that the fair value of the embedded derivative is immaterial to the consolidated financial statements. Debt issuance costs are netted against the principal balance of the debt.

As per an amendment to the Note dated April 1, 2016, the conversion price was increased from $3.37 to $3.54 and the number of shares issuable upon conversion decreased from 890,207 at December 31, 2015 to 889,830 at April 1, 2016. The Company has determined that changes resulting from this modification were immaterial to the consolidated financial statements.

On June 15, 2015, the Company entered into a Non-Revolving Line of Credit Agreement, or the Agreement, with John N. Hatsopoulos, the Company's Co-Chief Executive Officer and a Company Director. Under the terms of the Agreement, Mr. Hatsopoulos has agreed to lend the Company up to an aggregate of $2,000,000, with a withdrawal limit of $250,000 per financial calendar quarter, at the written request of the Company. Any amounts borrowed by the Company pursuant to the Agreement will bear interest at 6% per year. Interest is due and payable quarterly in arrears. The term of the Agreement is from July 1, 2015 to July 1, 2017. Repayment of the principal amount borrowed pursuant to the Agreement will be due on July 1, 2017, or the Maturity Date. Prepayment of any amounts due under the Agreement may be made at any time without penalty. The Agreement terminates on the Maturity Date. The Company has not yet borrowed any amounts pursuant to the Agreement.

Note 4 - Stockholders' Equity and Ilios subsidiary

Beginning on April 11, 2016 through its conclusion on May 3, 2016, the Company entered into numerous private placement share exchange agreements ("Share Exchange Agreements") with shareholders of Ilios ("Exchanging Shareholders"), a majority owned subsidiary of the Company. Pursuant to the Share Exchange Agreements, the Exchanging Shareholders agreed to exchange every 7.86 of their restricted Ilios shares of common stock for 1 share of the Company's restricted common stock. In addition, the Company granted each Exchanging Shareholder registration rights of the Company's common stock they received in exchange for their Ilios shares. The Company issued a total of 670,464 shares of its common stock in exchange for Ilios shares of common stock. Pursuant to the Registration Rights Agreement, the Company filed a registration statement covering the resale of the shares.

Upon execution of the exchange agreements for 100% of the shares of Ilios, the Company no longer had a non-controlling interest in its subsidiary.. On April 30, 2016, Ilios was merged into the Company, and accounting for the noncontrolling interest in the subsidiary ended.

7

TECOGEN INC.

Notes to Interim Unaudited Condensed Consolidated Financial Statements for the three and six months ended June 30, 2016 and 2015

Note 5 - Stock-based compensation

Stock-Based Compensation

In 2006, the Company adopted the 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 of the Company. 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, 2016, or the 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, 2016 was 1,676,957.

Stock option activity for the six months endedJune 30, 2016 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, 2015	1,268,200		$1.20-$5.39	$	3.06	6.01 years	$	985,578
Granted	87,701		$0.79-$3.93	2.56
Exercised	(12,125	)	$1.20-$2.60	1.56
Canceled and forfeited	(150,125	)	$3.39-$4.50	3.39
Expired	—		—	—
Outstanding, June 30, 2016	1,193,651		$0.79-$5.39	$	3.00	5.19 years	$	2,517,999
Exercisable, June 30, 2016	941,826			$	2.54		$	2,412,166
Vested and expected to vest, June 30, 2016	1,193,651			$	3.00		$	2,517,999

Stock-Based Compensation - Ilios

In 2009, Ilios adopted the 2009 Stock Incentive Plan, or the 2009 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 of the Company. The maximum number of shares allowable for issuance under the 2009 Plan is 2,000,000 shares of common stock. The 2009 Plan had 1,325,000 available for grant as of March 31, 2016. At the time of the merger between Ilios and the Company, stock options vested with an acceleration of the unvested portion upon the change in control event, as defined in the Plan. These options were exchanged for options for Tecogen stock at the same ratio and price as the share exchange described in Note 4. The grant was for a total of 82,701 options. The impact of the option exchange was immaterial.

Consolidated stock-based compensation expense for the six months endedJune 30, 2016 and 2015 was $88,177 and $51,497, respectively. No tax benefit was recognized related to the stock-based compensation recorded during the periods.

Note 6 – Commitments and contingencies

Letters of Credit

On January 28, 2016, the letter of credit from Enterprise Bank and Trust Company required for collateral with an outstanding performance bond was closed as the Company had met the performance obligations of the bond.

Note 7 – Related party transactions

The Company has two affiliated companies, namely American DG Energy Inc., or American DG Energy, and EuroSite Power Inc. or EuroSite Power. These companies are affiliates because several of the major stockholders of those companies, have a significant ownership position in the Company. Neither American DG Energy nor EuroSite Power own any shares of the Company, and the Company does not own any shares of American DG Energy or EuroSite Power.

On December 23, 2013, the Company entered into a Senior Convertible Promissory Note with Michaelson Capital Special Finance Fund LP (see Note 3). This agreement came with board observation rights causing the related party status.

On June 15, 2015, the Company entered into a Non-Revolving Line of Credit Agreement with John N. Hatsopoulos, the Company's Co-Chief Executive Officer and a Company Director (see Note 3).

8

TECOGEN INC.

Notes to Interim Unaudited Condensed Consolidated Financial Statements for the three and six months ended June 30, 2016 and 2015

The Company provides office space and certain utilities to American DG Energy based on a monthly rate set at the beginning of each year. This sublease was signed on July 1, 2014 and subsequently amended. The lease will expire on July 1, 2017. The agreement contains an automatic monthly renewal at expiration. In addition, the Company pays certain operating expenses, including benefits and insurance, on behalf of American DG Energy. The Company is reimbursed for these costs.

Note 8 - Intangible assets other than goodwill

As of December 31, 2015 and June 30, 2016 the Company has the following amounts related to intangible assets:

	Product Certifications			Patents			Developed Technology			Trademarks		Total
Balance at December 31, 2015
Intangible assets	$	514,616		$	603,915		$	240,000		$	4,775	$	1,363,306
Less - accumulated amortization	(182,931		)	(91,764		)	(44,000		)	—		(318,695		)
	$	331,685		$	512,151		$	196,000		$	4,775	$	1,044,611
Balance at June 30, 2016
Intangible assets	$	514,616		$	650,311		240,000			9,350		$	1,414,277
Less - accumulated amortization	(208,433		)	(107,032		)	(52,000		)	—		(367,465		)
	$	306,183		$	543,279		$	188,000		$	9,350	$	1,046,812

The aggregate amortization expense of the Company's intangible assets for the three and six months endedJune 30, 2016 and 2015 was $24,480 and $28,136 and $48,770 and $51,419, respectively.

Note 9 - Joint ventures

Ultra Emissions Technologies Ltd.

On December 28, 2015, the Company entered into a joint venture agreement relating to the formation of a joint venture company (the “JV”) organized to develop and commercialize Tecogen’s patented technology (“Ultera^® Technology”) designed to reduce harmful emissions generated by engines using fossil fuels. The joint venture company, called Ultra Emissions Technologies Ltd., was organized under the laws of the Island of Jersey, Channel Islands.

The Company received a 50% equity interest in the JV in exchange for a fully paid-up worldwide license to use Tecogen’s Ultera emissions control technology in the field of mobile vehicles burning fossil fuels. The other half of the joint venture equity interests were purchased for $3,000,000 by a small group of offshore investors. Warrants to purchase additional equity securities in the JV were granted to all parties pro rata. If the venture is not successful, all licensed intellectual property rights will revert to Tecogen.

The JV is expected to have losses as it performs the necessary research and development with the Ultera technology. Using equity method accounting, these losses will not be included in Tecogen's financial statements since Tecogen does not guarantee obligations of the JV and is not otherwise obligated to provide further financial support of the JV. In August 2016, Tecogen exercised its warrants in the JV for a total investment of $2,000,000.

TTcogen LLC

On May 19, 2016, the Company along with Tedom a.s., a corporation incorporated in the Czech Republic and a European combined heat and power product manufacturer, ("Tedom") entered into a joint venture, where the Company will hold a 50% participating interest and the remaining 50% interest will be with Tedom. As part of the joint venture, the parties agreed to create a Delaware limited liability company, TTcogen LLC ("TTcogen"), to carry out the business of the venture. Tedom granted TTcogen the sole and exclusive right to market, sell, offer for sale, and distribute certain products as agreed to by the parties throughout the United States. The product offerings of the joint venture expand the current Tecogen product offerings to the MicroCHP of 35kW to large 4,000kW plants. Tecogen agreed to refer all appropriate sale leads to TTcogen regarding the products agreed to by the parties and Tecogen shall have the first right to repair and maintenance the products sold by TTcogen.

The TTcogen operations will be accounted for using equity method accounting. Any losses on the initial operation of the entity will not be consolidated in Tecogen's financial statements. Since Tecogen does not guarantee obligations of TTcogen, losses or liabilities of the joint venture are not recorded on the Company's financial statements. Using equity method accounting, as the venture becomes profitable with the expected growth, realized gains from profits will be added to the an investment asset account on the consolidated balance sheet.

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TECOGEN INC.

Notes to Interim Unaudited Condensed Consolidated Financial Statements for the three and six months ended June 30, 2016 and 2015

Note 10 - Subsequent Events

On August 2, 2016, Tecogen Inc. (the "Company") exercised 2,000,000 warrants (the "Ultratek Warrants"), in their joint venture Ultra Emissions Technologies Limited (the "JV"), at $1.00 per share, for an aggregate amount of $2 million. The funds used to exercise the Ultratek Warrants were acquired by the Company from the holders of certain Company warrants (the "Tecogen Warrant Holders"), when they partially exercised their Tecogen warrants (the "Tecogen Warrants"), in July of 2016. The Tecogen Warrant Holders exercised a total of 650,000 Tecogen Warrants with a $4.00 exercise price, resulting in an influx of $2.7 million to the Company, which the Company then used some of the proceeds to invest in their JV.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Forward-looking statements are made throughout this Management’s Discussion and Analysis of Financial Condition and Results of Operations. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words “believes,” “anticipates,” “plans,” “expects,” “seeks,” “estimates” and similar expressions are intended to identify forward-looking statements. Such forward-looking statements include, among other things, statements regarding our current and future cash requirements, our expectations regarding suppliers of cogeneration units, and statements regarding potential financing activities in the future. While the Company may elect to update forward-looking statements in the future, it specifically disclaims any obligation to do so, even if the Company’s estimates change, and readers should not rely on those forward-looking statements as representing the Company’s views as of any date subsequent to the date of the filing of this Quarterly Report. There are a number of important factors that could cause the actual results of the Company to differ materially from those indicated by such forward-looking statements, including those detailed under the heading “Risk Factors” in this Quarterly Report.

Overview

Tecogen Inc., or the Company, or Tecogen, designs, manufactures and sells industrial and commercial cogeneration systems that produce combinations of electricity, hot water and air conditioning using automotive engines that have been specially adapted to run on natural gas. In some cases, our customers may choose to have the Company engineer and install the system for them rather than simply purchase the cogeneration and/or chiller units, which we refer to as "turnkey" projects. Cogeneration systems are efficient because in addition to supplying mechanical energy to power electric generators or compressors – displacing utility supplied electricity – they provide opportunity for the facility to incorporate the engine’s waste heat into onsite processes such as space and portable water heating. We produce standardized, modular, small-scale products, with a limited number of product configurations that are adaptable to multiple applications. We refer to these combined heat and power products as CHP (electricity plus heat) and MCHP (mechanical power plus heat).

In addition to being a smaller reporting company, Tecogen is an emerging growth company as that term is defined in the Jumpstart Our Business Startups Act of 2012 (JOBS Act).

Results of Operations

Revenues

Revenues in the second quarter of 2016 were $5,687,308 compared to $6,383,831 for the same period in 2015, a decrease of $696,523 or 10.9%. Product revenues in the second quarter of 2016 were $2,408,860 compared to $3,345,571 for the same period in 2015, a decrease of $936,711 or 28.0% This decrease was the aggregate of a decrease in cogeneration sales of $1,256,313 and an increase in chiller and heat pump sales, which include the Ilios products, of $319,602. Service revenues in the second quarter of 2016 were $3,278,448 compared to $3,038,260 for the same period in 2015, an increase of $240,188 or 7.9%. This increase in the second quarter is the due to an increase in installation activity of $192,585 and an increase of $47,603 in service contracts.

Revenues in the first six months of 2016 were $10,762,823 compared to $12,487,265 for the same period in 2015, a decrease of $1,724,442 or 13.8%. Product revenues in the first six months of 2016 were $4,675,008 compared to $6,883,446 for the same period in 2015, a decrease of $2,208,438 or 32.1%. This decrease was the aggregate of a decrease in cogeneration sales of $2,410,269 and an increase in chiller and heat pump sales of $201,831. Service revenues in the first six months of 2016 were $6,087,815 compared to $5,603,819 for the same period in 2015, an increase of $483,996 or 8.6%. This increase in the first six months of 2016 is due to an increase in installation activity of $120,437 and an increase of $363,559 in the service contracts.

Cost of Sales

Cost of sales in the second quarter of 2016 was $3,584,414 compared to $4,242,941 for the same period in 2015a decrease of $658,527, or 15.5%. During the second quarter of 2016 our overall gross profit margin was 37.0% compared to 33.5% for the same period in 2015, an increase of 3.5%. Management expects growth in sales volume and product upgrades to continue to improve gross margins going forward.

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TECOGEN INC.

Cost of sales in the first six months of 2016 was $6,940,585 compared to $8,121,400 for the same period in 2015a decrease of $1,180,815, or 14.5%. During the first six months of 2016 our overall gross profit margin was 35.5% compared to 35.0% for the same period in 2015, an increase of 0.5%. Management expects growth in sales volume and product upgrades to continue to improve gross margins going forward.

Operating Expenses

General and administrative expenses consist of executive staff, accounting and legal expenses, office space, general insurance and other administrative expenses. General and administrative expenses in the second quarter ending June 30, 2016 were $2,002,172 compared to $1,890,503 for the same period in 2015, an increase of $111,669 or 5.9%. The majority of the increase was for the mergers and acquisition activities including equity compensation expense and were one time increases over the same period last year.

General and administrative expenses in the first six months of 2016 were $3,894,392 compared to $4,077,632 for the same period in 2015, a decrease of $183,240 or 4.5%. This decrease is the result of managements continued efforts to contain and reduce our administrative expenses.

Selling expenses consist of sales staff, commissions, marketing, travel and other selling related expenses. Selling expenses for the second quarter of 2016 were $335,089 compared to $324,384 for the same period in 2015, an increase of $10,705 or 3.3%. This small difference is the result of outside sales representative commissions.

Selling expenses for the first six months of 2016 were $850,121 compared to $818,058 for the same period in 2015, an increase of $32,063 or 3.9%. This small difference is the result of timing of commissions.

Research and development expenses consist of engineering and technical staff, materials, outside consulting and other related expenses. Research and development expenses in the second quarter ending June 30, 2016 were $151,663 compared to $228,318 for the same period in 2015, a decrease of $76,655 or 33.6%. This decrease was due to the completion of a product development cycle.

Research and development expenses for the first six months of 2016 were $370,621 compared to $404,481 for the same period in 2015, a decrease of $33,860 or 8.4%. This decrease was due to the timing of the completion of projects including product improvement programs.

Loss from Operations

Loss from operations for the second quarter of 2016 was $386,030 compared to $302,315 for the same period in 2015, an increase of $83,715. The increase in the loss was due to a reduction in gross profit resulting from lower revenues.

Loss from operations for the first six months of 2016 was $1,292,896 compared to $934,306 for the same period in 2015, an increase of $358,590. The increase in the loss was due to a reduction in gross profit resulting from lower revenues.

Other Income (Expense), net

Other expense, net for the three months endedJune 30, 2016 was $41,283 compared to $29,666 for the same period in 2015. Other income (expense) includes interest income and other income of $2,770, net of interest expense on notes payable of $44,053 for the second quarter of 2016. For the same period in 2015, interest and other income was $685 and interest expense was $30,351.

Other expense, net for the six months endedJune 30, 2016 was $80,773 compared to $50,622 for the same period in 2015. Other income (expense) includes interest income and other income of $5,661, net of interest expense on notes payable of $86,434 for the first six months of 2016. For the same period in 2015, interest and other income was $9,788 and interest expense was $60,410.

Provision for Income Taxes

The Company did not record any benefit or provision for income taxes for the three months ended June 30, 2016 and 2015, respectively. As of June 30, 2016 and 2015, the income tax benefits generated from the Company’s net losses have been fully reserved.

Noncontrolling Interest

The noncontrolling interest in the loss of Ilios was $11,774 for the three months endedJune 30, 2016 compared to income of $30,858 for the same period in 2015, an increase of $42,632 or 138.2%. The decrease was due to the losses realized by the noncontrolling interest in Ilios for the first month of the second quarter of 2016. The result of an exchange of Tecogen stock for the noncontrolling shareholders of Ilios reduced the noncontrolling interest to 0.0%.

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TECOGEN INC.

Net loss

Net loss attributable to Tecogen for the three months endedJune 30, 2016 was $415,539 compared to $362,839 for the same period in 2015, an increase of $328,404. The increase in net loss was the result of the reduction in gross profit resulting from lower in revenues as described above.

Net loss attributable to Tecogen for the six months endedJune 30, 2016 was $1,308,707 compared to $980,303 for the same period in 2015, an increase of $328,404. The increase in net loss was the result of the reduction in gross profit resulting from lower in revenues as described above.

Liquidity and Capital Resources

Consolidated working capital at June 30, 2016 was $12,879,929 compared to $13,978,381 at December 31, 2015, a decrease of $1,098,452. Included in working capital were cash and cash equivalents of $4,069,660 and $0 in short-term investments at June 30, 2016, compared to $5,486,526 in cash and cash equivalents and $294,802 in short-term investments at December 31, 2015, a decrease of $1,711,668. The decrease in working capital and cash was mainly due to the loss in the period net of non-cash items.

Cash used in operating activities for the six months endedJune 30, 2016 was $1,425,352 compared to $842,266 for the same period in 2015. Our accounts receivable balance increased to $6,241,054 at June 30, 2016 compared to $5,286,863 at December 31, 2015, using $954,191 of cash due to timing of billing, shipments, and collections. In addition, amounts due from related parties decreased by $785,818 providing cash due to timing of billing and collections. Our inventory decreased to $4,940,315 as of June 30, 2016 compared to $5,683,043 as of December 31, 2015, a decrease of $742,728. Although lowering inventory is a goal, management expects inventory to vary significantly based on production and customer delivery requirements.

As of June 30, 2016, the Company's backlog of product and installation projects, excluding service contracts, was $14 million, consisting of $6 million of purchase orders received by us and $8 million of projects in which the customer's internal approval process is complete, financial resources have been allocated and the customer has made a firm verbal commitment that the order is in the process of execution. Backlog at the beginning of any period is not necessarily indicative of future performance. Our presentation of backlog may differ from other companies in our industry.

Accounts payable decreased to $2,618,285 as of June 30, 2016 from $3,311,809 at December 31, 2015, using$693,524 in cash flow from operations. Accrued expenses decreased to $1,036,782 as of June 30, 2016 from $1,066,860 as of December 31, 2015, using$30,078 of cash from operations. The Company expects accounts payable and accrued expenses to fluctuate with changes in operations.

During the first six months of 2016 our investing activities used $151,895 of cash and included purchases of property and equipment of $100,925 and expenditures related to intangible assets of $50,970.

During the first six months of 2016 our financing activities included $150,000 in proceeds from the amendment of our debt, $18,925 in proceeds from the exercise of stock options, and the payment of expenses from the issuance of our common stock of $8,544. This includes the issuance of stock related to the acquisition of the noncontrolling interest in Ilios.

Significant Accounting Policies and Critical Estimates

The Company’s significant accounting policies are discussed in the Notes to the Condensed Consolidated Financial Statements above and in our Annual Report. The accounting policies and estimates that can have a significant impact upon the operating results, financial position and footnote disclosures of the Company are described in the above notes and in our Annual Report.

Seasonality

We expect that the majority of our heating systems sales will be in the winter and the majority of our chilling systems sales will be in the summer. Our cogeneration and chiller system sales are not generally affected by the seasons, although customer goals will be to have chillers installed and running in the spring. Our service team does experience higher demand in the warmer months when cooling is required. These units are generally shut down in the winter and started up again in the spring. This “busy season” for the service team generally runs from May through the end of September.

Off-Balance Sheet Arrangements

Currently, we do not have any off-balance sheet arrangements, including any outstanding derivative financial instruments, off-balance sheet guarantees, interest rate swap transactions or foreign currency contracts. We do not engage in trading activities involving non-exchange traded contracts.

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TECOGEN INC.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.

Item 4. Controls and Procedures.

Management’s Evaluation of Disclosure Controls and Procedures:

The Company maintains "disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, that are designed to provide reasonable assurance that information required to be disclosed by the Company in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to the Company's management, including our principal executive officers and principal financial and accounting officer, as appropriate, to allow timely decisions regarding required disclosure.

Our disclosure controls and procedures are designed to provide reasonable assurance that the control system’s objectives will be met. Our management, including our Co-Chief Executive Officers and Chief Financial Officer, after evaluating the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report, have concluded that our disclosure controls and procedures were not effective due to material weaknesses in financial reporting relating to lack of personnel with a sufficient level of accounting knowledge and a small number of employees dealing with general controls over information technology. Management will continue to evaluate the above weaknesses, and as the Company grows and resources become available, the Company plans to take the necessary steps in the future to remediate the weaknesses.

Changes in Internal Control over Financial Reporting:

The Company currently does not have personnel with a sufficient level of accounting experience and training in the selection, application and implementation of generally accepted accounting principles as it relates to complex transactions and financial reporting requirements. The Company also has a small number of employees dealing with general controls over information technology security and user access. This constitutes a material weakness in financial reporting.

In connection with the material weaknesses referred to in the foregoing paragraph, we will make changes in our internal controls over financial reporting as soon as the resources become available. During the period ended June 30, 2016, no changes have been made to the Company's process.

PART II - OTHER INFORMATION

Item 2. Unregistered Sales of Equity Securities.

On April 11, 2016, April 13, 2016, and May 2, 2016 the Company entered into a series of private placement share exchange agreements ("Share Exchange Agreements") with shareholders of Ilios Inc. ("Exchanging Shareholders"), a majority owned subsidiary of the Company ("Ilios"). Pursuant to the Share Exchange Agreements, the Exchanging Shareholders agreed to exchange every 7.86 of their restricted Ilios shares of common stock for 1 share of the Company's restricted common stock. In connection with this series of transactions, the Company issued a total of 670,464 shares of Company restricted common stock. In addition, the Company granted each Exchanging Shareholder the right to have the restricted Company common stock they received registered. This series of transactions were conducted as a series of private placement without registration under the Securities Act of 1933, as amended, or the Securities Act, and in reliance upon an exemption from registration pursuant to Section 4(a)(2) of the Securities Act and/or Regulation D promulgated thereunder.

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TECOGEN INC.

Item 6. Exhibits

Exhibit No.	Description of Exhibit
3.1	Amended and Restated Certificate of Incorporation.(a)
3.2	Amended and Restated Bylaws.(a)
4.1	Specimen Stock Certificate of Tecogen, Inc. (a)
4.2	Form of Restricted Stock Purchase Agreement.(b)
4.3	Form of Stock Option Agreement.(a)
4.6	Tecogen Ultratek Warrant signed August 2, 2016.(j)
10.8	Second Amendment to Lease between Atlantic-Waltham Investment II, LLC dated Jan 16, 2013.(a)
10.19	Form of Common Stock Purchase Agreement. (a)
10.21	Senior Convertible Promissory Note, dated December 23, 2013, by Tecogen Inc. in favor of Michaelson Capital Special Finance Fund LP. (a)
10.24	Facilities and Support Services Agreement between American DG Energy Inc. and Tecogen Inc., dated Aug 8, 2014.(c)
10.26+	Tecogen 2006 Stock Incentive Plan, as amended on January 24, 2014 with stockholder approval on July 15, 2014.(e)
10.27	Non-Revolving Line of Credit Agreement between the Company and John N. Hatsopoulos, dated June 15, 2015.(e)
10.28	Form of Common Stock Purchase Agreement dated August 3, 2015.(d)
10.29	Registration Rights Agreement dated August 3, 2015.(d)
10.30	First amendment to the Facilities and Support Services Agreement between American DG Energy Inc. and Tecogen Inc., dated Aug 7, 2015. (f)
10.35	Share Exchange Agreement for the Ilios private placements dated April 11, 2016 and April 13, 2016.(g)
10.36	Amendment No. 1 to the Senior Convertible Promissory Note effective April 1, 2016.(g)
10.37	Tedom Joint Venture Agreement dated May 19, 2016. (h)
10.38	Tedom Joint Venture LLC Agreement dated May 19, 2016. (h)
10.39	Form of a Warrant Amendment dated June 27, 2016.(i)
21.1	List of subsidiaries (a)
31.1*	Rule 13a-14(a) Certification of Co-Chief Executive Officer
31.2*	Rule 13a-14(a) Certification of Co-Chief Executive Officer
31.3*	Rule 13a-14(a) Certification of Chief Financial Officer
32.1*	Section 1350 Certifications of Co-Chief Executive Officers and Chief Financial Officer
101.INS** XBRL Instance Document
101.SCH** XBRL Taxonomy Extension Schema
100.CAL** XBRL Taxonomy Extension Calculation Linkbase
100.DEF** XBRL Taxonomy Extension Definition Linkbase
101.LAB** XBRL Taxonomy Extension Label Linkbase
101.PRE** XBRL Taxonomy Extension Presentation Linkbase

____________________________________________

* Filed herewith

** Furnished herewith

+ Compensatory plan or arrangement

^(a)  incorporated by reference from the Company's Registration Statement on Form S-1/A (Registration No. 333-193791), filed with the SEC on June 27, 2014.

^(b)  incorporated by reference from the Company's Registration Statement on Form S-1 (Registration No. 333-178697), originally filed with the SEC on December 22, 2011.

^(c)  incorporated by reference from the Company's 10-Q Report for the period ending June 30, 2014, originally filed with the SEC on August 14, 2014.

^(d)  incorporated by reference from the Company's form 8-K Report originally filed with the SEC on August 6, 2015.

^(e)  incorporated by reference from the Company's 10-Q Report for the period ending June 30, 2015, originally filed with the SEC on August 6, 2015.

^(f)  incorporated by reference from the Company's form 8-K Report originally filed with the SEC on August 13, 2015.

^(g)  incorporated by reference from the Company's form 8-K Reports originally filed with the SEC on April 15, 2016.

^(h)  incorporated by reference from the Company's form 8-K Reports originally filed with the SEC on May 24, 2016.

⁽ⁱ⁾  incorporated by reference from the Company's form 8-K Reports originally filed with the SEC on June 30, 2016.

^(j)  incorporated by reference from the Company's form 8-K Reports originally filed with the SEC on August 8, 2016.

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TECOGEN INC.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, on August 10, 2016.

TECOGEN INC.
(Registrant)
By:	/s/ John N. Hatsopoulos
Co-Chief Executive Officer
(Principal Executive Officer)
By:	/s/ Benjamin M. Locke
Co-Chief Executive Officer
(Principal Executive Officer)
By:	/s/ David A. Garrison
Chief Financial Officer, Treasurer and Secretary
(Principal Financial and Accounting Officer)

15

EX-31.1

EXHIBIT 31.1

TECOGEN INC.

CERTIFICATION REQUIRED BY EXCHANGE ACT RULES 13a-14(a) and 15d-14(a),

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, John N. Hatsopoulos, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Tecogen Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 10, 2016

/s/ John N. Hatsopoulos

John N. Hatsopoulos

Co-Chief Executive Officer

EX-31.2

EXHIBIT 31.2

TECOGEN INC.

CERTIFICATION REQUIRED BY EXCHANGE ACT RULES 13a-14(a) and 15d-14(a),

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Benjamin M. Locke, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Tecogen Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 10, 2016

/s/ Benjamin M. Locke

Benjamin M. Locke

Co-Chief Executive Officer

EX-31.3

EXHIBIT 31.3

TECOGEN INC.

CERTIFICATION REQUIRED BY EXCHANGE ACT RULES 13a-14(a) and 15d-14(a),

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, David A. Garrison, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Tecogen Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 10, 2016

/s/ David A. Garrison

David A. Garrison

Chief Financial Officer, Secretary and Treasurer

EX-32.1

EXHIBIT 32.1

TECOGEN INC.

CERTIFICATION REQUIRED BY EXCHANGE ACT RULES 13a-14(b) and 15d-14(b),

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Each of, John N. Hatsopoulos, Co-Chief Executive Officer, Benjamin M. Locke, Co-Chief Executive Officer, and David A. Garrison, Chief Financial Officer, of Tecogen Inc., or the Company, certify, pursuant to Section 1350, Chapter 63 of Title 18, United States Code that, to his knowledge:

1. The Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2016 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78 m or 78o(d)); and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 10, 2016

/s/ John N. Hatsopoulos

John N. Hatsopoulos

Co-Chief Executive Officer

/s/ Benjamin M. Locke

Benjamin M. Locke

Co-Chief Executive Officer

/s/ David A. Garrison

David A. Garrison

Chief Financial Officer, Secretary and Treasurer

XML

Document and Entity Information Document and Entity Information	6 Months Ended
	Jun. 30, 2016 shares
Document and Entity Information [Abstract]
Entity Registrant Name	TECOGEN INC.
Entity Central Index Key	0001537435
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Document Type	10-Q
Document Period End Date	Jun. 30, 2016
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q2
Amendment Flag	false
Entity Common Stock, Shares Outstanding	19,836,579

XML

Condensed Consolidated Balance Sheets - USD ($)	Jun. 30, 2016	Dec. 31, 2015
Current assets:
Cash and cash equivalents	$ 4,069,660	$ 5,486,526
Short-term investments	0	294,802
Accounts receivable, net	6,241,054	5,286,863
Unbilled revenue	1,214,218	1,072,391
Inventory, net	4,940,315	5,683,043
Due from related party	391,443	1,177,261
Prepaid and other current assets	487,138	353,105
Total current assets	17,343,828	19,353,991
Property, plant and equipment, net	560,868	543,754
Intangible assets, net	1,046,812	1,044,611
Goodwill	40,870	40,870
Other assets	58,425	58,425
TOTAL ASSETS	19,050,803	21,041,651
Current liabilities:
Accounts payable	2,618,285	3,311,809
Accrued expenses	1,036,782	1,066,860
Deferred revenue	808,832	996,941
Total current liabilities	4,463,899	5,375,610
Long-term liabilities:
Deferred revenue, net of current portion	296,085	273,162
Senior convertible promissory note, related party	3,124,061	2,951,011
Total liabilities	7,884,045	8,599,783
Commitments and contingencies
Tecogen Inc. shareholders’ equity:
Common stock, $0.001 par value; 100,000,000 shares authorized; 19,161,579 and 18,478,990 issued and outstanding at June 30, 2016 and December 31, 2015	19,162	18,479
Additional paid-in capital	34,203,702	34,501,640
Accumulated deficit	(23,056,106)	(21,682,437)
Total Tecogen Inc. stockholders’ equity	11,166,758	12,837,682
Noncontrolling interest	0	(395,814)
Total stockholders’ equity	11,166,758	12,441,868
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$ 19,050,803	$ 21,041,651

XML

Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Jun. 30, 2016	Dec. 31, 2015
Statement of Financial Position [Abstract]
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	19,161,579	18,478,990
Common stock, shares outstanding	19,161,579	18,478,990

XML

Condensed Consolidated Statements of Operations - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Mar. 31, 2015	Jun. 30, 2016	Jun. 30, 2015
Revenues
Products	$ 2,408,860	$ 3,345,571	$ 4,675,008	$ 6,883,446
Services	3,278,448	3,038,260	6,087,815	5,603,819
Total revenues	5,687,308	6,383,831	10,762,823	12,487,265
Cost of sales
Products	1,767,052	2,224,415	3,319,768	4,778,053
Services	1,817,362	2,018,526	3,620,817	3,343,347
Total cost of sales	3,584,414	4,242,941	6,940,585	8,121,400
Gross profit	2,102,894	2,140,890	3,822,238	4,365,865
Operating expenses
General and administrative	2,002,172	1,890,503	3,894,392	4,077,632
Selling	335,089	324,384	850,121	818,058
Research and development	151,663	228,318	370,621	404,481
Total operating expenses	2,488,924	2,443,205	5,115,134	5,300,171
Loss from operations	(386,030)	(302,315)	(1,292,896)	(934,306)
Other income (expense)
Interest and other income	2,770	685	5,661	9,788
Interest expense	(44,053)	(30,351)	(86,434)	(60,410)
Total other expense, net	(41,283)	(29,666)	(80,773)	(50,622)
Loss before income taxes	(427,313)	(331,981)	(1,373,669)	(984,928)
Consolidated net loss	(427,313)	(331,981)	(1,373,669)	(984,928)
Less: (Income) loss attributable to the noncontrolling interest	11,774	(30,858)	64,962	4,625
Net loss attributable to Tecogen Inc.	$ (415,539)	$ (362,839)	$ (1,308,707)	$ (980,303)
Net loss per share - basic and diluted	$ (0.02)	$ (0.02)	$ (0.07)	$ (0.06)
Weighted average shares outstanding - basic and diluted	19,088,828		18,783,909	16,282,027

XML

Condensed Consolidated Statements of Cash Flows - USD ($)	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
CASH FLOWS FROM OPERATING ACTIVITIES:
Consolidated net loss	$ (1,373,669)	$ (984,928)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	131,941	138,828
Provision (recover) for inventory reserve	(40,000)	23,000
Stock-based compensation	88,177	51,497
Non-cash interest expense	23,050	24,899
Loss (gain) on sale of assets	640	(5,073)
Changes in operating assets and liabilities
Short term investments	294,802	291,047
Accounts receivable	(954,191)	237,989
Unbilled revenue	(141,827)	(896,001)
Inventory, net	782,728	280,480
Due from related party	785,818	(372,570)
Prepaid expenses and other current assets	(134,033)	(160,964)
Other non-current assets	0	(5,100)
Increase (decrease) in:
Accounts payable	(693,524)	915,942
Accrued expenses	(30,078)	331,447
Deferred revenue	(165,186)	(712,759)
Net cash used in operating activities	(1,425,352)	(842,266)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment	(100,925)	(12,935)
Proceeds from sale of assets	0	16,874
Purchases of intangible assets	(50,970)	(95,086)
Net cash used in investing activities	(151,895)	(91,147)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds (payments) on demand notes payable and line of credit to related party	150,000
Payment of stock issuance costs	(8,544)	0
Proceeds from sale of restricted common stock, net	0	996,874
Proceeds from the exercise of stock options	18,925	360,225
Net cash provided by financing activities	160,381	1,357,099
Net increase (decrease) in cash and cash equivalents	(1,416,866)	423,686
Cash and cash equivalents, beginning of the period	5,486,526	1,186,033
Cash and cash equivalents, end of the period	4,069,660	1,609,719
Non-cash investing and financing activities:
Cash paid for interest	72,199	60,410
Stock exchange for non-controlling interest in Ilios	$ 330,852	$ 0

XML

Description of business and summary of significant accounting policies

6 Months Ended

Jun. 30, 2016

Accounting Policies [Abstract]

Description of business and summary of significant accounting policies

Description of business and summary of significant accounting policies

Description of business

Tecogen Inc., or the Company, was organized as a Delaware Corporation on November 15, 2000, and acquired the assets and liabilities of the Tecogen Products division of Thermo Power Corporation. The Company produces 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. The Company’s 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 the Company’s customers are located in regions with the highest utility rates, typically California, the Midwest and the Northeast. The Company's common stock is listed on the NASDAQ under the ticker symbol TGEN.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions for Form 10-Q and therefore do not include all information and notes necessary for a complete presentation of our financial position, results of operations and cash flows, in conformity with generally accepted accounting principles. We filed audited financial statements which included all information and notes necessary for such presentation for the two years ended December 31, 2015 in conjunction with our 2015 Annual Report on Form 10-K, or our Annual Report, filed with the Securities and Exchange Commission, or SEC, on March 30, 2016. This form 10-Q should be read in conjunction with our Annual Report.

The accompanying unaudited condensed consolidated balance sheets, statements of operations and statements of cash flows reflect all adjustments (consisting only of normal recurring items) which are, in the opinion of management, necessary for a fair presentation of financial position at June 30, 2016, and of operations and cash flows for the interim periods ended June 30, 2016 and 2015. The results of operations for the interim periods ended June 30, 2016 are not necessarily indicative of the results to be expected for the year.

The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiary Ilios Inc. or Ilios, whose business focus is on advanced heating systems for commercial and industrial applications. In May 2016, the Company completed an exchange of common stock with the shareholders of Ilios and effected a statutory merger. Ilios is no longer a separate subsidiary (see Note 4).

The Company’s operations are comprised of one business segment. Our business is to manufacture and support highly efficient CHP products based on engines fueled by natural gas.

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.

Revenue Recognition

Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price is fixed or determinable and collectability is reasonably assured. Generally, sales of cogeneration and chiller units and parts are recognized when shipped and services are recognized over the term of the service period. Payments received in advance of services being performed or as a deposit on equipment are recorded as deferred revenue.

The Company recognizes revenue in certain circumstances before delivery has occurred (commonly referred to as bill and hold transactions). In such circumstances, among other things, risk of ownership has passed to the buyer, the buyer has made a written fixed commitment to purchase the finished goods, the buyer has requested the finished goods be held for future delivery as scheduled and designated by them, and no additional performance obligations exist by the Company. For these transactions, the finished goods are segregated from inventory and normal billing and credit terms are granted. For the three months endedJune 30, 2016, revenues of $2,186,698 were recorded as bill and hold transactions. For the same period in 2015, no revenues were recorded as bill and hold transactions.

For those arrangements that include multiple deliverables, the Company first determines whether each service or deliverable meets the separation criteria of FASB ASC 605-25, Revenue Recognition—Multiple-Element Arrangements. In general, a deliverable (or a group of deliverables) meets the separation criteria if the deliverable has stand-alone value to the customer and if the arrangement includes a general right of return related to the delivered item and delivery or performance of the undelivered item(s) is considered probable and substantially in control of the Company. Each deliverable that meets the separation criteria is considered a separate ‘‘unit of accounting”. The Company allocates the total arrangement consideration to each unit of accounting using the relative fair value method. The amount of arrangement consideration that is allocated to a delivered unit of accounting is limited to the amount that is not contingent upon the delivery of another unit of accounting.

When vendor-specific objective evidence or third-party evidence is not available, adopting the relative fair value method of allocation permits the Company to recognize revenue on specific elements as completed based on the estimated selling price. The Company generally uses internal pricing lists that determine sales prices to external customers in determining its best estimate of the selling price of the various deliverables in multiple-element arrangements. Changes in judgments made in estimating the selling price of the various deliverables could significantly affect the timing or amount of revenue recognition. The Company enters into sales arrangements with customers to sell its cogeneration and chiller units and related service contracts and occasionally installation services. Based on the fact that the Company sells each deliverable to other customers on a stand-alone basis, the Company has determined that each deliverable has a stand-alone value. Additionally, there are no rights of return relative to the delivered items; therefore, each deliverable is considered a separate unit of accounting.

After the arrangement consideration has been allocated to each unit of accounting, the Company applies the appropriate revenue recognition method for each unit of accounting based on the nature of the arrangement and the services included in each unit of accounting. Cogeneration and chiller units are recognized when shipped and services are recognized over the term of the applicable agreement, or as provided when on a time and materials basis.

In some cases, our customers may choose to have the Company engineer and install the system for them rather than simply purchase the cogeneration and/or chiller units. In this case, the Company accounts for revenue, or turnkey revenue, and costs using the percentage-of-completion method of accounting. Under the percentage-of-completion method of accounting, revenues are recognized by applying percentages of completion to the total estimated revenues for the respective contracts. Costs are recognized as incurred. The percentages of completion are determined by relating the actual cost of work performed to date to the current estimated total cost at completion of the respective contracts. When the estimate on a contract indicates a loss, the Company’s policy is to record the entire expected loss, regardless of the percentage of completion. During the three months ended June 30, 2016, a recovery of approximately $89,000 from a loss recorded in the three month period ended March 31, 2015 of approximately $155,000, and $0 in the same period in 2015. During the six months ended June 30, 2016 and 2015, a loss of approximately $66,000 and $0 was recorded, respectively. The loss recorded for six months ending June 30, 2016 was reduced due to a change in project scope. The excess of contract costs and profit recognized to date on the percentage-of-completion accounting method in excess of billings is recorded as unbilled revenue. Billings in excess of related costs and estimated profit is recorded as deferred revenue.

Accounts Receivable

Accounts receivable are stated at the amount management expects to collect from outstanding balances. An allowance for doubtful accounts is provided for those accounts receivable considered to be uncollectible based upon historical experience and management’s evaluation of outstanding accounts receivable at the end of the year. Bad debts are written off against the allowance when identified. At June 30, 2016 and December 31, 2015 the allowance for doubtful accounts was approximately $44,000 and $50,000, respectively.

Inventory

Raw materials, work in process, and finished goods inventories are stated at the lower of cost, as determined by the average cost method, or net realizable value. The Company periodically reviews inventory quantities on hand for excess and/or obsolete inventory based primarily on historical usage, as well as based on estimated forecast of product demand. Any reserves that result from this review are charged to cost of sales. At June 30, 2016 and December 31, 2015, inventory reserves were $253,000 and $293,000, respectively.

Property, Plant and Equipment

Property, plant and equipment are recorded at cost. Depreciation is provided using the straight-line method over the estimated useful lives of the asset, which range from three to fifteen years. Leasehold improvements are amortized using the straight-line method over the lesser of the estimated useful lives of the assets or the term of the related leases. Expenditures for maintenance and repairs are expensed currently, while renewals and betterments that materially extend the life of an asset are capitalized. For the three and six months endedJune 30, 2016 and 2015, depreciation expense was $39,543 and $43,956, and $83,171 and $87,409, respectively.

Intangible Assets

Intangible assets are amortized on a straight-line basis over the estimated economic life of the intangible asset. The Company reviews intangible assets for impairment when the circumstances warrant.

Goodwill

The Company tests its recorded goodwill for impairment in the fourth quarter, or more often if indicators of potential impairment exist, by determining if the carrying value of the Company's single reporting unit exceeds its estimated fair value. During the first six months of 2016, the Company determined that no interim impairment test was necessary.

Stock-Based Compensation

Stock-based compensation cost is measured at the grant date based on the estimated fair value of the award and is recognized as an expense in the consolidated statements of operations over the requisite service period. The fair value of stock options granted is estimated using the Black-Scholes option pricing valuation model. The Company recognizes compensation on a straight-line basis for each separately vesting portion of the option award. The determination of the fair value of share-based payment awards is affected by the Company’s stock price. The Company uses the simplified method for awards of stock-based compensation since it does not have the necessary historical exercise and forfeiture data to determine an expected life for stock options. (see Note 5)

Revenues by Product

The following table summarizes net revenue by product line and services for the three months ended June 30, 2016 and 2015 and six months endedJune 30, 2016 and 2015:

	Three months ended June 30,				Six months ended June 30,
	2016		2015		2016		2015
Products
Cogeneration	$	1,270,499	$	2,526,812	$	2,688,471	$	5,098,740
Chiller & Heat Pump	1,138,361		818,759		1,986,537		1,784,706
Total Product Revenue	2,408,860		3,345,571		4,675,008		6,883,446
Services
Service contracts	2,082,644		2,035,041		4,270,966		3,907,407
Installations	1,195,804		1,003,219		1,816,849		1,696,412
Total Service Revenue	3,278,448		3,038,260		6,087,815		5,603,819
Total Revenue	$	5,687,308	$	6,383,831	$	10,762,823	$	12,487,265

Reclassification

Certain prior period balances have been reclassified to conform with current period presentation. The interest expense includes the amortization of the deferred financing costs, and this has been adjusted in the comparable periods. The balance of deferred financing cost on the balance sheet under ASU 2015-03 is netted with the associated debt and is retrospectively shown for prior period balances.

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Loss per common share

6 Months Ended

Jun. 30, 2016

Earnings Per Share [Abstract]

Loss per common share

Loss per common share

All shares issuable for both periods were anti-dilutive because of the reported net loss. Basic and diluted loss per share for the three months ended June 30,2016 and 2015, and six months ended June 30,2016 and 2015, respectively, were as follows: 

	Three months ended June 30,						Six months ended June 30,
	2016			2015			2016			2015
Net loss attributable to stockholders	$	(415,539	)	$	(362,839	)	$	(1,308,707	)	$	(980,303	)
Weighted average shares outstanding - Basic and diluted	19,088,828			16,338,909			18,783,909			16,282,027
Basic and diluted loss per share	$	(0.02	)	$	(0.02	)	$	(0.07	)	$	(0.06	)
Anti-dilutive shares underlying stock options outstanding	1,196,776			1,186,325			1,196,776			1,186,325
Anti-dilutive convertible debentures	889,830			555,556			889,830			555,556
Anti-dilutive warrants outstanding	1,150,000			—			1,150,000			—

XML

Demand note payable, convertible debentures and line of credit agreement to related parties

6 Months Ended

Jun. 30, 2016

Debt Disclosure [Abstract]

Demand note payable, convertible debentures and line of credit agreement to related parties

Demand notes payable, convertible debentures and line of credit agreement to related parties

On December 23, 2013, the Company entered into a Senior Convertible Promissory Note or the Note, with Michaelson Capital Special Finance Fund LP or Michaelson, for the principal amount of $3,000,000 with interest at 4% per annum for a term of three years. In the event of default such interest rate shall accrue at 8% after the occurrence of the event of default and during continuance plus 2% after the occurrence and during the continuance of any other event of default. The Note is a senior unsecured obligation which pays interest only on a monthly basis in arrears at a rate of 4% per annum, unless earlier converted in accordance with the terms of the agreement prior to such date. Effective April 1, 2016, the Note was amended increasing the principal amount by $150,000 for a total of $3,150,000 and extending the maturity date. The principal amount, if not converted, is now due on the fifth anniversary of the Note, December 28, 2018. The Note is senior in right of payment to any unsecured indebtedness that is expressly subordinated in right of payment to the Note.

The principal balance of the Note, together with any unpaid interest, is convertible into shares of the Company's common stock at 282.49 shares of the Company's common stock per $1,000 principal amount of Note (equivalent to a conversion price of $3.54 per share) at the option of Michaelson. If at any time the common stock of the Company is (1) trading on a national securities exchange, (2) qualifies for unrestricted resale under federal securities laws and (3) the arithmetic average of the volume weighted average price of the Common Stock for twenty consecutive trading days preceding the Company's notice of mandatory conversion exceeds $150,000, the Company shall have the right to require conversion of all of the then outstanding principal balance together with unpaid interest of this Note into the Company's common stock based on the conversion price of $3.54 per share. The Company may prepay all of the outstanding principal and interest due and payable under this Note in full, at any time prior to the maturity date for an amount equal to 120% of the then outstanding principal and interest due and payable as of the date of such prepayment.

Upon change of control, as defined by the Note, at Michaelson's option, the obligations may be assumed, on the terms and conditions in this Note, through an assignment and assumption agreement, or the Company may prepay all of the then outstanding principal and unpaid interest under this Note in full at the optional 120% prepayment amount. This provision creates an embedded derivative in accordance with FASB ASC 815, Derivatives and Hedging. As such it is required to be bifurcated and accounted for separately from the Note. However, the Company has determined that the fair value of the embedded derivative is immaterial to the consolidated financial statements. Debt issuance costs are netted against the principal balance of the debt.

As per an amendment to the Note dated April 1, 2016, the conversion price was increased from $3.37 to $3.54 and the number of shares issuable upon conversion decreased from 890,207 at December 31, 2015 to 889,830 at April 1, 2016. The Company has determined that changes resulting from this modification were immaterial to the consolidated financial statements.

On June 15, 2015, the Company entered into a Non-Revolving Line of Credit Agreement, or the Agreement, with John N. Hatsopoulos, the Company's Co-Chief Executive Officer and a Company Director. Under the terms of the Agreement, Mr. Hatsopoulos has agreed to lend the Company up to an aggregate of $2,000,000, with a withdrawal limit of $250,000 per financial calendar quarter, at the written request of the Company. Any amounts borrowed by the Company pursuant to the Agreement will bear interest at 6% per year. Interest is due and payable quarterly in arrears. The term of the Agreement is from July 1, 2015 to July 1, 2017. Repayment of the principal amount borrowed pursuant to the Agreement will be due on July 1, 2017, or the Maturity Date. Prepayment of any amounts due under the Agreement may be made at any time without penalty. The Agreement terminates on the Maturity Date. The Company has not yet borrowed any amounts pursuant to the Agreement.

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Stockholders' Equity and Ilios subsidiary

6 Months Ended

Jun. 30, 2016

Equity [Abstract]

Stockholder Equity and Ilios subsidiary

Stockholders' Equity and Ilios subsidiary

Beginning on April 11, 2016 through its conclusion on May 3, 2016, the Company entered into numerous private placement share exchange agreements ("Share Exchange Agreements") with shareholders of Ilios ("Exchanging Shareholders"), a majority owned subsidiary of the Company. Pursuant to the Share Exchange Agreements, the Exchanging Shareholders agreed to exchange every 7.86 of their restricted Ilios shares of common stock for 1 share of the Company's restricted common stock. In addition, the Company granted each Exchanging Shareholder registration rights of the Company's common stock they received in exchange for their Ilios shares. The Company issued a total of 670,464 shares of its common stock in exchange for Ilios shares of common stock. Pursuant to the Registration Rights Agreement, the Company filed a registration statement covering the resale of the shares.

Upon execution of the exchange agreements for 100% of the shares of Ilios, the Company no longer had a non-controlling interest in its subsidiary.. On April 30, 2016, Ilios was merged into the Company, and accounting for the noncontrolling interest in the subsidiary ended.

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Stock-based compensation

6 Months Ended

Jun. 30, 2016

Equity [Abstract]

Stock-based compensation

Stock-based compensation

Stock-Based Compensation

In 2006, the Company adopted the 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 of the Company. 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, 2016, or the 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, 2016 was 1,676,957.

Stock option activity for the six months endedJune 30, 2016 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, 2015	1,268,200		$1.20-$5.39	$	3.06	6.01 years	$	985,578
Granted	87,701		$0.79-$3.93	2.56
Exercised	(12,125	)	$1.20-$2.60	1.56
Canceled and forfeited	(150,125	)	$3.39-$4.50	3.39
Expired	—		—	—
Outstanding, June 30, 2016	1,193,651		$0.79-$5.39	$	3.00	5.19 years	$	2,517,999
Exercisable, June 30, 2016	941,826			$	2.54		$	2,412,166
Vested and expected to vest, June 30, 2016	1,193,651			$	3.00		$	2,517,999

Stock-Based Compensation - Ilios

In 2009, Ilios adopted the 2009 Stock Incentive Plan, or the 2009 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 of the Company. The maximum number of shares allowable for issuance under the 2009 Plan is 2,000,000 shares of common stock. The 2009 Plan had 1,325,000 available for grant as of March 31, 2016. At the time of the merger between Ilios and the Company, stock options vested with an acceleration of the unvested portion upon the change in control event, as defined in the Plan. These options were exchanged for options for Tecogen stock at the same ratio and price as the share exchange described in Note 4. The grant was for a total of 82,701 options. The impact of the option exchange was immaterial.

Consolidated stock-based compensation expense for the six months endedJune 30, 2016 and 2015 was $88,177 and $51,497, respectively. No tax benefit was recognized related to the stock-based compensation recorded during the periods.

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Commitments and contingencies

6 Months Ended

Jun. 30, 2016

Commitments and Contingencies Disclosure [Abstract]

Commitments and contingencies

Commitments and contingencies

Letters of Credit

On January 28, 2016, the letter of credit from Enterprise Bank and Trust Company required for collateral with an outstanding performance bond was closed as the Company had met the performance obligations of the bond.

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Related party transactions

6 Months Ended

Jun. 30, 2016

Related Party Transactions [Abstract]

Related party transactions

Related party transactions

The Company has two affiliated companies, namely American DG Energy Inc., or American DG Energy, and EuroSite Power Inc. or EuroSite Power. These companies are affiliates because several of the major stockholders of those companies, have a significant ownership position in the Company. Neither American DG Energy nor EuroSite Power own any shares of the Company, and the Company does not own any shares of American DG Energy or EuroSite Power.

On December 23, 2013, the Company entered into a Senior Convertible Promissory Note with Michaelson Capital Special Finance Fund LP (see Note 3). This agreement came with board observation rights causing the related party status.

On June 15, 2015, the Company entered into a Non-Revolving Line of Credit Agreement with John N. Hatsopoulos, the Company's Co-Chief Executive Officer and a Company Director (see Note 3).

The Company provides office space and certain utilities to American DG Energy based on a monthly rate set at the beginning of each year. This sublease was signed on July 1, 2014 and subsequently amended. The lease will expire on July 1, 2017. The agreement contains an automatic monthly renewal at expiration. In addition, the Company pays certain operating expenses, including benefits and insurance, on behalf of American DG Energy. The Company is reimbursed for these costs.

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Intangible assets other than goodwill

6 Months Ended

Jun. 30, 2016

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible assets other than goodwill

Intangible assets other than goodwill

As of December 31, 2015 and June 30, 2016 the Company has the following amounts related to intangible assets:

	Product Certifications			Patents			Developed Technology			Trademarks		Total
Balance at December 31, 2015
Intangible assets	$	514,616		$	603,915		$	240,000		$	4,775	$	1,363,306
Less - accumulated amortization	(182,931		)	(91,764		)	(44,000		)	—		(318,695		)
	$	331,685		$	512,151		$	196,000		$	4,775	$	1,044,611
Balance at June 30, 2016
Intangible assets	$	514,616		$	650,311		240,000			9,350		$	1,414,277
Less - accumulated amortization	(208,433		)	(107,032		)	(52,000		)	—		(367,465		)
	$	306,183		$	543,279		$	188,000		$	9,350	$	1,046,812

The aggregate amortization expense of the Company's intangible assets for the three and six months endedJune 30, 2016 and 2015 was $24,480 and $28,136 and $48,770 and $51,419, respectively.

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Joint Venture

6 Months Ended

Jun. 30, 2016

Equity Method Investments and Joint Ventures [Abstract]

Joint Venture

Joint ventures

Ultra Emissions Technologies Ltd.

On December 28, 2015, the Company entered into a joint venture agreement relating to the formation of a joint venture company (the “JV”) organized to develop and commercialize Tecogen’s patented technology (“Ultera^® Technology”) designed to reduce harmful emissions generated by engines using fossil fuels. The joint venture company, called Ultra Emissions Technologies Ltd., was organized under the laws of the Island of Jersey, Channel Islands.

The Company received a 50% equity interest in the JV in exchange for a fully paid-up worldwide license to use Tecogen’s Ultera emissions control technology in the field of mobile vehicles burning fossil fuels. The other half of the joint venture equity interests were purchased for $3,000,000 by a small group of offshore investors. Warrants to purchase additional equity securities in the JV were granted to all parties pro rata. If the venture is not successful, all licensed intellectual property rights will revert to Tecogen.

The JV is expected to have losses as it performs the necessary research and development with the Ultera technology. Using equity method accounting, these losses will not be included in Tecogen's financial statements since Tecogen does not guarantee obligations of the JV and is not otherwise obligated to provide further financial support of the JV. In August 2016, Tecogen exercised its warrants in the JV for a total investment of $2,000,000.

TTcogen LLC

On May 19, 2016, the Company along with Tedom a.s., a corporation incorporated in the Czech Republic and a European combined heat and power product manufacturer, ("Tedom") entered into a joint venture, where the Company will hold a 50% participating interest and the remaining 50% interest will be with Tedom. As part of the joint venture, the parties agreed to create a Delaware limited liability company, TTcogen LLC ("TTcogen"), to carry out the business of the venture. Tedom granted TTcogen the sole and exclusive right to market, sell, offer for sale, and distribute certain products as agreed to by the parties throughout the United States. The product offerings of the joint venture expand the current Tecogen product offerings to the MicroCHP of 35kW to large 4,000kW plants. Tecogen agreed to refer all appropriate sale leads to TTcogen regarding the products agreed to by the parties and Tecogen shall have the first right to repair and maintenance the products sold by TTcogen.

The TTcogen operations will be accounted for using equity method accounting. Any losses on the initial operation of the entity will not be consolidated in Tecogen's financial statements. Since Tecogen does not guarantee obligations of TTcogen, losses or liabilities of the joint venture are not recorded on the Company's financial statements. Using equity method accounting, as the venture becomes profitable with the expected growth, realized gains from profits will be added to the an investment asset account on the consolidated balance sheet.

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Subsequent Events

6 Months Ended

Jun. 30, 2016

Subsequent Events [Abstract]

Subsequent Events

Subsequent Events

On August 2, 2016, Tecogen Inc. (the "Company") exercised 2,000,000 warrants (the "Ultratek Warrants"), in their joint venture Ultra Emissions Technologies Limited (the "JV"), at $1.00 per share, for an aggregate amount of $2 million. The funds used to exercise the Ultratek Warrants were acquired by the Company from the holders of certain Company warrants (the "Tecogen Warrant Holders"), when they partially exercised their Tecogen warrants (the "Tecogen Warrants"), in July of 2016. The Tecogen Warrant Holders exercised a total of 650,000 Tecogen Warrants with a $4.00 exercise price, resulting in an influx of $2.7 million to the Company, which the Company then used some of the proceeds to invest in their JV.

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Description of business and summary of significant accounting policies (Policies)

6 Months Ended

Jun. 30, 2016

Accounting Policies [Abstract]

Principles of Consolidation and Basis of Presentation

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions for Form 10-Q and therefore do not include all information and notes necessary for a complete presentation of our financial position, results of operations and cash flows, in conformity with generally accepted accounting principles. We filed audited financial statements which included all information and notes necessary for such presentation for the two years ended December 31, 2015 in conjunction with our 2015 Annual Report on Form 10-K, or our Annual Report, filed with the Securities and Exchange Commission, or SEC, on March 30, 2016. This form 10-Q should be read in conjunction with our Annual Report.

The accompanying unaudited condensed consolidated balance sheets, statements of operations and statements of cash flows reflect all adjustments (consisting only of normal recurring items) which are, in the opinion of management, necessary for a fair presentation of financial position at June 30, 2016, and of operations and cash flows for the interim periods ended June 30, 2016 and 2015. The results of operations for the interim periods ended June 30, 2016 are not necessarily indicative of the results to be expected for the year.

The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiary Ilios Inc. or Ilios, whose business focus is on advanced heating systems for commercial and industrial applications. In May 2016, the Company completed an exchange of common stock with the shareholders of Ilios and effected a statutory merger. Ilios is no longer a separate subsidiary (see Note 4).

The Company’s operations are comprised of one business segment. Our business is to manufacture and support highly efficient CHP products based on engines fueled by natural gas.

Use of Estimates

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

Revenue Recognition

Revenue Recognition

Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price is fixed or determinable and collectability is reasonably assured. Generally, sales of cogeneration and chiller units and parts are recognized when shipped and services are recognized over the term of the service period. Payments received in advance of services being performed or as a deposit on equipment are recorded as deferred revenue.

The Company recognizes revenue in certain circumstances before delivery has occurred (commonly referred to as bill and hold transactions). In such circumstances, among other things, risk of ownership has passed to the buyer, the buyer has made a written fixed commitment to purchase the finished goods, the buyer has requested the finished goods be held for future delivery as scheduled and designated by them, and no additional performance obligations exist by the Company. For these transactions, the finished goods are segregated from inventory and normal billing and credit terms are granted. For the three months endedJune 30, 2016, revenues of $2,186,698 were recorded as bill and hold transactions. For the same period in 2015, no revenues were recorded as bill and hold transactions.

For those arrangements that include multiple deliverables, the Company first determines whether each service or deliverable meets the separation criteria of FASB ASC 605-25, Revenue Recognition—Multiple-Element Arrangements. In general, a deliverable (or a group of deliverables) meets the separation criteria if the deliverable has stand-alone value to the customer and if the arrangement includes a general right of return related to the delivered item and delivery or performance of the undelivered item(s) is considered probable and substantially in control of the Company. Each deliverable that meets the separation criteria is considered a separate ‘‘unit of accounting”. The Company allocates the total arrangement consideration to each unit of accounting using the relative fair value method. The amount of arrangement consideration that is allocated to a delivered unit of accounting is limited to the amount that is not contingent upon the delivery of another unit of accounting.

When vendor-specific objective evidence or third-party evidence is not available, adopting the relative fair value method of allocation permits the Company to recognize revenue on specific elements as completed based on the estimated selling price. The Company generally uses internal pricing lists that determine sales prices to external customers in determining its best estimate of the selling price of the various deliverables in multiple-element arrangements. Changes in judgments made in estimating the selling price of the various deliverables could significantly affect the timing or amount of revenue recognition. The Company enters into sales arrangements with customers to sell its cogeneration and chiller units and related service contracts and occasionally installation services. Based on the fact that the Company sells each deliverable to other customers on a stand-alone basis, the Company has determined that each deliverable has a stand-alone value. Additionally, there are no rights of return relative to the delivered items; therefore, each deliverable is considered a separate unit of accounting.

After the arrangement consideration has been allocated to each unit of accounting, the Company applies the appropriate revenue recognition method for each unit of accounting based on the nature of the arrangement and the services included in each unit of accounting. Cogeneration and chiller units are recognized when shipped and services are recognized over the term of the applicable agreement, or as provided when on a time and materials basis.

In some cases, our customers may choose to have the Company engineer and install the system for them rather than simply purchase the cogeneration and/or chiller units. In this case, the Company accounts for revenue, or turnkey revenue, and costs using the percentage-of-completion method of accounting. Under the percentage-of-completion method of accounting, revenues are recognized by applying percentages of completion to the total estimated revenues for the respective contracts. Costs are recognized as incurred. The percentages of completion are determined by relating the actual cost of work performed to date to the current estimated total cost at completion of the respective contracts. When the estimate on a contract indicates a loss, the Company’s policy is to record the entire expected loss, regardless of the percentage of completion. During the three months ended June 30, 2016, a recovery of approximately $89,000 from a loss recorded in the three month period ended March 31, 2015 of approximately $155,000, and $0 in the same period in 2015. During the six months ended June 30, 2016 and 2015, a loss of approximately $66,000 and $0 was recorded, respectively. The loss recorded for six months ending June 30, 2016 was reduced due to a change in project scope. The excess of contract costs and profit recognized to date on the percentage-of-completion accounting method in excess of billings is recorded as unbilled revenue. Billings in excess of related costs and estimated profit is recorded as deferred revenue.

Accounts Receivable

Accounts Receivable

Accounts receivable are stated at the amount management expects to collect from outstanding balances. An allowance for doubtful accounts is provided for those accounts receivable considered to be uncollectible based upon historical experience and management’s evaluation of outstanding accounts receivable at the end of the year. Bad debts are written off against the allowance when identified. At June 30, 2016 and December 31, 2015 the allowance for doubtful accounts was approximately $44,000 and $50,000, respectively.

Inventory

Inventory

Raw materials, work in process, and finished goods inventories are stated at the lower of cost, as determined by the average cost method, or net realizable value. The Company periodically reviews inventory quantities on hand for excess and/or obsolete inventory based primarily on historical usage, as well as based on estimated forecast of product demand. Any reserves that result from this review are charged to cost of sales. At June 30, 2016 and December 31, 2015, inventory reserves were $253,000 and $293,000, respectively.

Property, Plant and Equipment

Property, Plant and Equipment

Property, plant and equipment are recorded at cost. Depreciation is provided using the straight-line method over the estimated useful lives of the asset, which range from three to fifteen years. Leasehold improvements are amortized using the straight-line method over the lesser of the estimated useful lives of the assets or the term of the related leases. Expenditures for maintenance and repairs are expensed currently, while renewals and betterments that materially extend the life of an asset are capitalized. For the three and six months endedJune 30, 2016 and 2015, depreciation expense was $39,543 and $43,956, and $83,171 and $87,409, respectively.

Intangible Assets

Intangible Assets

Intangible assets are amortized on a straight-line basis over the estimated economic life of the intangible asset. The Company reviews intangible assets for impairment when the circumstances warrant.

Goodwill

Goodwill

The Company tests its recorded goodwill for impairment in the fourth quarter, or more often if indicators of potential impairment exist, by determining if the carrying value of the Company's single reporting unit exceeds its estimated fair value. During the first six months of 2016, the Company determined that no interim impairment test was necessary.

Stock-Based Compensation

Stock-Based Compensation

Stock-based compensation cost is measured at the grant date based on the estimated fair value of the award and is recognized as an expense in the consolidated statements of operations over the requisite service period. The fair value of stock options granted is estimated using the Black-Scholes option pricing valuation model. The Company recognizes compensation on a straight-line basis for each separately vesting portion of the option award. The determination of the fair value of share-based payment awards is affected by the Company’s stock price. The Company uses the simplified method for awards of stock-based compensation since it does not have the necessary historical exercise and forfeiture data to determine an expected life for stock options. (see Note 5)

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Description of business and summary of significant accounting policies (Tables)

6 Months Ended

Jun. 30, 2016

Accounting Policies [Abstract]

Net Revenue by Product Line and Services

The following table summarizes net revenue by product line and services for the three months ended June 30, 2016 and 2015 and six months endedJune 30, 2016 and 2015:

	Three months ended June 30,				Six months ended June 30,
	2016		2015		2016		2015
Products
Cogeneration	$	1,270,499	$	2,526,812	$	2,688,471	$	5,098,740
Chiller & Heat Pump	1,138,361		818,759		1,986,537		1,784,706
Total Product Revenue	2,408,860		3,345,571		4,675,008		6,883,446
Services
Service contracts	2,082,644		2,035,041		4,270,966		3,907,407
Installations	1,195,804		1,003,219		1,816,849		1,696,412
Total Service Revenue	3,278,448		3,038,260		6,087,815		5,603,819
Total Revenue	$	5,687,308	$	6,383,831	$	10,762,823	$	12,487,265

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Loss per common share (Tables)

6 Months Ended

Jun. 30, 2016

Earnings Per Share [Abstract]

Schedule of Loss Per Common Share, Basic and Diluted

Basic and diluted loss per share for the three months ended June 30,2016 and 2015, and six months ended June 30,2016 and 2015, respectively, were as follows: 

	Three months ended June 30,						Six months ended June 30,
	2016			2015			2016			2015
Net loss attributable to stockholders	$	(415,539	)	$	(362,839	)	$	(1,308,707	)	$	(980,303	)
Weighted average shares outstanding - Basic and diluted	19,088,828			16,338,909			18,783,909			16,282,027
Basic and diluted loss per share	$	(0.02	)	$	(0.02	)	$	(0.07	)	$	(0.06	)
Anti-dilutive shares underlying stock options outstanding	1,196,776			1,186,325			1,196,776			1,186,325
Anti-dilutive convertible debentures	889,830			555,556			889,830			555,556
Anti-dilutive warrants outstanding	1,150,000			—			1,150,000			—

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Stock-based compensation (Tables)

6 Months Ended

Jun. 30, 2016

Tecogen

Share-based Compensation Arrangement by Share-based Payment Award [Line Items]

Schedule of Stock Option Activity

Stock option activity for the six months endedJune 30, 2016 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, 2015	1,268,200		$1.20-$5.39	$	3.06	6.01 years	$	985,578
Granted	87,701		$0.79-$3.93	2.56
Exercised	(12,125	)	$1.20-$2.60	1.56
Canceled and forfeited	(150,125	)	$3.39-$4.50	3.39
Expired	—		—	—
Outstanding, June 30, 2016	1,193,651		$0.79-$5.39	$	3.00	5.19 years	$	2,517,999
Exercisable, June 30, 2016	941,826			$	2.54		$	2,412,166
Vested and expected to vest, June 30, 2016	1,193,651			$	3.00		$	2,517,999

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Intangible assets other than goodwill (Tables)

6 Months Ended

Jun. 30, 2016

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Finite-Lived Intangible Assets [Table Text Block]

As of December 31, 2015 and June 30, 2016 the Company has the following amounts related to intangible assets:

	Product Certifications			Patents			Developed Technology			Trademarks		Total
Balance at December 31, 2015
Intangible assets	$	514,616		$	603,915		$	240,000		$	4,775	$	1,363,306
Less - accumulated amortization	(182,931		)	(91,764		)	(44,000		)	—		(318,695		)
	$	331,685		$	512,151		$	196,000		$	4,775	$	1,044,611
Balance at June 30, 2016
Intangible assets	$	514,616		$	650,311		240,000			9,350		$	1,414,277
Less - accumulated amortization	(208,433		)	(107,032		)	(52,000		)	—		(367,465		)
	$	306,183		$	543,279		$	188,000		$	9,350	$	1,046,812

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Description of business and summary of significant accounting policies - Additional Information (Details)	3 Months Ended			6 Months Ended
	Jun. 30, 2016 USD ($)	Jun. 30, 2015 USD ($)	Mar. 31, 2015 USD ($)	Jun. 30, 2016 USD ($) segment	Jun. 30, 2015 USD ($)	Dec. 31, 2015 USD ($)
Debt Instrument [Line Items]
Number of Operating Segments | segment				1
Revenues, Bill And Hold				$ 2,186,698	$ 0
Recovery from previously recorded loss	$ 89,000
Loss on Contracts		$ 0	$ 155,000	66,000	$ 0
Allowance for Doubtful Accounts Receivable, Current	44,000			44,000		$ 50,000
Inventory Valuation Reserves	$ 253,000			$ 253,000		$ 293,000

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Description of business and summary of significant accounting policies - Property, Plant and Equipment (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Property, Plant and Equipment [Line Items]
Depreciation	$ 39,543	$ 43,956	$ 83,171	$ 87,409
Minimum
Property, Plant and Equipment [Line Items]
Property, plant and equipment, estimated useful lives			3 years
Maximum
Property, Plant and Equipment [Line Items]
Property, plant and equipment, estimated useful lives			15 years

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Description of business and summary of significant accounting policies - Revenue by Product Line and Services (Details) - USD ($)	3 Months Ended			6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Mar. 31, 2015	Jun. 30, 2016	Jun. 30, 2015
Revenue by Producks and Services [Line Items]
Products	$ 2,408,860	$ 3,345,571	$ 3,345,571	$ 4,675,008	$ 6,883,446
Services	3,278,448	3,038,260	3,038,260	6,087,815	5,603,819
Total revenues	5,687,308	6,383,831	$ 6,383,831	10,762,823	12,487,265
Cogeneration
Revenue by Producks and Services [Line Items]
Products	1,270,499	2,526,812		2,688,471	5,098,740
Chiller & Heat Pump
Revenue by Producks and Services [Line Items]
Products	1,138,361	818,759		1,986,537	1,784,706
Service Contracts
Revenue by Producks and Services [Line Items]
Services	2,082,644	2,035,041		4,270,966	3,907,407
Installations
Revenue by Producks and Services [Line Items]
Services	$ 1,195,804	$ 1,003,219		$ 1,816,849	$ 1,696,412

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Loss per common share - Schedule of Loss Per Common Share, Basic and Diluted (Details) - USD ($)	3 Months Ended			6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Mar. 31, 2015	Jun. 30, 2016	Jun. 30, 2015
Earnings Per Share [Abstract]
Net loss attributable to stockholders	$ (415,539)	$ (362,839)	$ (362,839)	$ (1,308,707)	$ (980,303)
Weighted average shares outstanding - Basic and diluted	19,088,828	16,338,909		18,783,909	16,282,027
Basic and diluted loss per share (usd per share)	$ (0.02)	$ (0.02)	$ (0.02)	$ (0.07)	$ (0.06)
Stock Options
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities (shares)	1,196,776	1,186,325		1,196,776	1,186,325
Convertible Debenture
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities (shares)	889,830	555,556		889,830	555,556
Warrant
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities (shares)	1,150,000	0		1,150,000	0

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Demand note payable, convertible debentures and line of credit agreement to related parties (Details)		3 Months Ended	6 Months Ended	12 Months Ended
	Apr. 01, 2016 USD ($) $ / shares shares	Dec. 31, 2013	Jun. 30, 2016 USD ($)	Dec. 31, 2015 shares	Mar. 31, 2016 $ / shares	Jun. 15, 2015 USD ($)	Dec. 23, 2013 USD ($)
Convertible debentures | Michaelson Capital Special Finance Fund LP.
Debt Instrument [Line Items]
Convertible debentures, related party, current	$ 3,150,000						$ 3,000,000
Related party debt, stated interest rate		4.00%
Debt Instrument, Term		3 years
Debt Instrument, Convertible, Accrue Rate After Occurrence and During Continuance		8.00%
Debt Instrument, Convertible, Accrue Rate After Occurrence and During Continuance, Other Default		2.00%
Increase to related party convertible debenture	$ 150,000
Debt conversion, amount converted			$ 1,000
Conversion price in usd per share | $ / shares	$ 3.54				$ 3.37
Debt Instrument, Convertible, Threshold Consecutive Trading Days			20 days
Debt Instrument, Convertible, If-converted Value in Excess of Principal			$ 150,000
Debt Instrument, Repurchase, Percentage of Principal and Interest			120.00%
Convertible debentures | Michaelson Capital Special Finance Fund LP. | Common Stock
Debt Instrument [Line Items]
Debt conversion, number of shares issued | shares	282.49
Common stock issuable upon conversion (shares) | shares				890,207
Convertible debentures | Management
Debt Instrument [Line Items]
Related party debt, stated interest rate			6.00%
Line of Credit | Chief Executive Officer (John N. Hatsopoulos)
Debt Instrument [Line Items]
Line of Credit Facility, Maximum Borrowing Capacity						$ 2,000,000
Line Of Credit Facility, Maximum Withdrawal Limit Per Financial Calendar Quarter						$ 250,000

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Stockholders' Equity and Ilios subsidiary (Details)		1 Months Ended
	Apr. 13, 2016	May 03, 2016 shares	Apr. 30, 2016
Class of Stock [Line Items]
Conversion ratio of restricted Ilios shares to Company common shares	7.86
Private Placement | Common Stock
Class of Stock [Line Items]
Shares issued in exchange for Ilios shares (shares)		670,464
Business Acquisition, Percentage of Voting Interests Acquired			100.00%

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Stock-based compensation - Stock-Based Compensation (Details) - USD ($)	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation	$ 88,177	$ 51,497
Tecogen
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Granted (shares)	87,701
Tecogen | Amended Plan | Stock Options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares of common stock reserved for future issuance	3,838,750
Number of shares remaining available for future issuance	1,676,957
Tecogen | 2009 Plan | Stock Options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Granted (shares)	82,701
Ilois | 2009 Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares remaining available for future issuance	1,325,000
Maximum number of shares allowable for issuance	2,000,000

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Stock-based compensation - Stock Option Activity (Details) - Tecogen - USD ($)	6 Months Ended	12 Months Ended
	Jun. 30, 2016	Dec. 31, 2015
Stock Options Outstanding [Roll Forward]
Beginning (shares)	1,268,200
Granted (shares)	87,701
Exercised (shares)	(12,125)
Canceled and forfeited (shares)	(150,125)
Expired (shares)	0
Ending (shares)	1,193,651	1,268,200
Exercisable (shares)	941,826
Vested and expected to vest (shares)	1,193,651
Exercise Price Per Share [Abstract]
Exercise Price Per Share, Outstanding, Maximum (dollars per share)		$ 5.39
Weighted Average Exercise Price [Roll Forward]
Beginning (usd per share)	$ 3.06
Granted (usd per share)	2.56
Exercised (usd per share)	1.56
Canceled and forfeited (usd per share)	3.39
Expired (usd per share)	0.00
Ending (usd per share)	3.00	$ 3.06
Exercisable (usd per share)	2.54
Vested and expected to vest (usd per share)	$ 3.00
Weighted Average Remaining Life	5 years 2 months 8 days	6 years 5 days
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Additional Disclosures [Abstract]
Outstanding, Aggregate Intrinsic Value	$ 2,517,999	$ 985,578
Exercisable, Aggregate Intrinsic Value	2,412,166
Vested and expected to vest, Aggregate Intrinsic Value	$ 2,517,999
Minimum
Exercise Price Per Share [Abstract]
Exercise Price Per Share, Outstanding, Minimum (per share)	$ 0.79	$ 1.20
Exercise Price Per Share, Granted (dollars per share)	0.79
Exercise Price Per Share, Exercised (dollars per share)	1.20
Exercise Price Per Share, Cancelled and Forfeited (dollars per share)	3.39
Maximum
Exercise Price Per Share [Abstract]
Exercise Price Per Share, Granted (dollars per share)	3.93
Exercise Price Per Share, Exercised (dollars per share)	2.60
Exercise Price Per Share, Cancelled and Forfeited (dollars per share)	4.50
Exercise Price Per Share, Outstanding, Maximum (dollars per share)	$ 5.39

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Related party transactions (Details)	6 Months Ended
	Jun. 30, 2016 company
Related Party Transactions [Abstract]
Number of affiliated companies	2

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Intangible assets other than goodwill (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Goodwill and Intangible Assets Disclosure [Abstract]
Amortization of Intangible Assets	$ 24,480	$ 28,136	$ 48,770	$ 51,419

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Intangible assets other than goodwill -Amounts related to intangible assets (Details) - USD ($)	Jun. 30, 2016	Dec. 31, 2015
Finite-Lived Intangible Assets [Line Items]
Intangible assets	$ 1,414,277	$ 1,363,306
Less - accumulated amortization	(367,465)	(318,695)
Intangible assets, net	1,046,812	1,044,611
Product Certifications
Finite-Lived Intangible Assets [Line Items]
Intangible assets	514,616	514,616
Less - accumulated amortization	(208,433)	(182,931)
Intangible assets, net	306,183	331,685
Patents
Finite-Lived Intangible Assets [Line Items]
Intangible assets	650,311	603,915
Less - accumulated amortization	(107,032)	(91,764)
Intangible assets, net	543,279	512,151
Developed Technology
Finite-Lived Intangible Assets [Line Items]
Intangible assets	240,000	240,000
Less - accumulated amortization	(52,000)	(44,000)
Intangible assets, net	188,000	196,000
Trademarks
Finite-Lived Intangible Assets [Line Items]
Intangible assets	9,350	4,775
Intangible assets, net	$ 9,350	$ 4,775

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Joint Venture (Details) - USD ($)	Aug. 02, 2016	May 19, 2016	Dec. 28, 2015
Ultra Emissions Technology Ltd.
Schedule of Equity Method Investments [Line Items]
Equity interest in joint venture (percent)			50.00%
Ultra Emissions Technology Ltd. | Offshore Investors
Schedule of Equity Method Investments [Line Items]
Investment by other party to joint venture			$ 3,000,000
Ultra Emissions Technology Ltd. | Subsequent Event
Schedule of Equity Method Investments [Line Items]
Warrants exercised for investment in joint venture	$ 2,000,000
TTcogen, LLC
Schedule of Equity Method Investments [Line Items]
Equity interest in joint venture (percent)		50.00%
Co-venturer | TTcogen, LLC
Schedule of Equity Method Investments [Line Items]
Equity interest in joint venture (percent)		50.00%

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Subsequent Events (Details) - Subsequent Event - USD ($)		1 Months Ended
	Aug. 02, 2016	Jul. 31, 2016
Subsequent Event [Line Items]
Warrant exercise price (per share)		$ 4.00
Proceeds from warrant exercises		$ 2,700,000
Warrant
Subsequent Event [Line Items]
Warrants exercised (shares)		650,000
Ultra Emissions Technology Ltd.
Subsequent Event [Line Items]
Warrants exercised for investment in joint venture	$ 2,000,000
Ultra Emissions Technology Ltd. | Warrant
Subsequent Event [Line Items]
Warrants exercised (shares)	2,000,000
Warrant exercise price (per share)	$ 1.00

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Label	Element	Value
Proceeds from (Repayments of) Related Party Debt	us-gaap_ProceedsFromRepaymentsOfRelatedPartyDebt	$ 0