DEF 14A 1 adgedef14a20170427.htm MERGER PROXY STATEMENT Document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
SCHEDULE 14A
 
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No.  )
 
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AMERICAN DG ENERGY INC.
(Name of Registrant as Specified in its Charter)
 
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

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Registration No. 333-215231


JOINT PROXY STATEMENT/PROSPECTUS
To: The Stockholders of Tecogen Inc. and American DG Energy Inc.
Tecogen Inc., or Tecogen, American DG Energy Inc., or ADGE, and Tecogen.ADGE Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of Tecogen formed for the purpose of effecting the merger described herein, or Merger Sub, have entered into an Agreement and Plan of Merger dated as of November 1, 2016, as amended on March 23, 2017 by Amendment No. 1 to the Agreement and Plan of Merger, or the Merger Agreement, pursuant to which Merger Sub will merge with and into ADGE, or the Merger. Following the Merger, ADGE will be the surviving entity in its Merger with Merger Sub and will become a wholly-owned subsidiary of Tecogen. The Tecogen Board of Directors and the ADGE Board of Directors have unanimously approved the Merger Agreement and the transactions contemplated by the Merger Agreement. A copy of the Merger Agreement is attached as Annex A to this joint proxy statement/prospectus.
This document is a prospectus relating to the proposed issuance by Tecogen of shares of its common stock to ADGE stockholders pursuant to the Merger Agreement. If the Merger is completed, each share of ADGE common stock issued and outstanding immediately prior to the merger effective time will be exchanged for the right to receive 0.092 of a share, or the Exchange Ratio, of Tecogen common stock. The Exchange Ratio is fixed and will not be adjusted to reflect stock price changes prior to the closing of the Merger. No fractional shares will be issued in the Merger, and cash will be paid in lieu thereof. Tecogen common stock is listed and traded on the Nasdaq Capital Market under the ticker symbol “TGEN” and ADGE common stock is listed and traded on the NYSE MKT under the ticker symbol “ADGE.” Based on the closing price of Tecogen common stock on the Nasdaq Capital Market on November 1, 2016 of $4.03, the last trading day before public announcement of the Merger, the Exchange Ratio represented approximately $0.37 in Tecogen common stock for each share of ADGE common stock. Tecogen stockholders will continue to own their existing Tecogen shares of common stock following the consummation of the Merger. Based on the closing price of Tecogen common stock on the Nasdaq Capital Market of $3.85 on March 17, 2017, the last practicable date before the date of this joint proxy statement/prospectus, the Exchange Ratio represented approximately $0.35 in Tecogen common stock for each share of ADGE common stock. We urge you to obtain current market quotations for Tecogen common stock and ADGE common stock.
Based on the number of shares of ADGE common stock outstanding on the record date for the stockholder meetings related to the Merger, Tecogen expects to issue approximately 4,662,937 shares of Tecogen common stock to ADGE stockholders in the Merger, and expects to reserve approximately 165,324 additional shares of Tecogen common stock for issuance in connection with outstanding ADGE equity awards, restricted stock grants and 270,689 for issuance upon exercise of outstanding warrants to purchase common stock that Tecogen will assume in connection with the Merger. Upon completion of the Merger, Tecogen estimates that current Tecogen stockholders will own approximately 81% of Tecogen's issued and outstanding common stock and former ADGE stockholders will own approximately 19% of Tecogen's issued and outstanding common stock.
This document is also a joint proxy statement of Tecogen and ADGE for soliciting proxies for their respective special meetings of stockholders. At Tecogen’s special meeting of stockholders, Tecogen common stockholders will be asked to consider and vote on a proposal to approve the issuance of Tecogen common stock pursuant to the Merger Agreement, or the Tecogen Share Issuance Proposal.
The Tecogen special meeting of stockholders will be held on May 18, 2017, at 11:00 a.m., local time, at Tecogen’s principal executive offices at 45 First Avenue, Waltham, MA 02451.
The Tecogen Board of Directors unanimously recommends that Tecogen stockholders vote “FOR” the Tecogen Share Issuance Proposal.
The ADGE special meeting of stockholders will be held on May 18, 2017, at 1 p.m., local time, at ADGE’s principal executive offices at 45 First Avenue, Waltham, MA 02451. At ADGE’s special meeting of stockholders, ADGE common stockholders will be asked to consider and vote on a proposal to adopt the Merger Agreement and approve the Merger, or the ADGE Merger Approval Proposal.
The ADGE Board of Directors unanimously recommends that ADGE common stockholders vote “FOR” the ADGE Merger Approval Proposal.




This joint proxy statement/prospectus contains important information about Tecogen, ADGE, the Merger, the Merger Agreement and the matters to be considered and voted upon by Tecogen stockholders and by ADGE stockholders as part of the special meetings. We encourage you to read this joint proxy statement/prospectus carefully before voting, including the section entitled “Risk Factors” beginning on page 33.
YOUR VOTE IS IMPORTANT. We cannot complete the Merger and the merger consideration will not be issued to ADGE stockholders unless (i) Tecogen's stockholders approve the stock issuance and (ii) ADGE's stockholders adopt the Merger Agreement and approve the Merger. Adoption of the Merger Agreement requires the affirmative vote of holders of at least a majority of the outstanding shares of ADGE common stock entitled to vote thereon. Whether or not you plan to attend Tecogen’s special meeting or ADGE’s special meeting, as applicable, please authorize a proxy to vote your shares as promptly as possible. To authorize a proxy, please complete, sign, date and mail your proxy in the pre-addressed postage-paid envelope provided or authorize your proxy by one of the other methods specified in this joint proxy statement/prospectus or the accompanying notices. If your shares of common stock are held in “street name” by your broker or other nominee, only your broker or other nominee can vote your shares and the vote cannot be cast unless you provide instructions to your broker or other nominee on how to vote or you obtain a legal proxy from your broker or other nominee. You should follow the directions provided by your broker or other nominee regarding how to instruct your broker or other nominee to vote your shares. You may revoke your proxy at any time before it is voted. Please review this joint proxy statement/prospectus for more complete information regarding the merger and the special meetings.
We look forward to the successful combination of Tecogen and ADGE.
Sincerely,


John N. Hatsopoulos
Co-Chief Executive Officer
American DG Energy Inc.
Sincerely,


Benjamin Locke
Co-Chief Executive Officer
Tecogen Inc.
Neither the Securities and Exchange Commission nor any state securities regulatory authority has approved or disapproved of the merger or the securities to be issued under this joint proxy statement/prospectus or has passed upon the adequacy or accuracy of the disclosure in this joint proxy statement/prospectus. Any representation to the contrary is a criminal offense.
This joint proxy statement/prospectus is dated April 24, 2017, and is first being mailed to the Tecogen and ADGE common stockholders on or about April 27, 2017.




AMERICAN DG ENERGY INC.
45 First Avenue
Waltham, Massachusetts 02451
(781) 522-6000
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON May 18, 2017
To the Stockholders of American DG Energy Inc.:
We are pleased to invite you to attend a special meeting of the stockholders of American DG Energy Inc., or ADGE, a Delaware corporation, which will be held at our corporate headquarters at 45 First Avenue, Waltham, Massachusetts, on May 18, 2017, commencing at 1 p.m., local time, or such other date, time and place to which such meeting may be adjourned or postponed, to consider and vote upon the following:
1) to adopt the Agreement and Plan of Merger dated as of November 1, 2016, as amended on March 23, 2017 by Amendment No. 1 to the Agreement and Plan of Merger, or the Merger Agreement, by and among ADGE, Tecogen Inc., a Delaware corporation, or Tecogen, and Tecogen.ADGE Acquisition Corp., a Delaware corporation formed for the purpose of effecting the merger and a wholly-owned subsidiary of Tecogen, or the Merger Sub, pursuant to which Merger Sub will merge with and into ADGE, or the Merger, with ADGE continuing as the surviving entity, and approve the Merger. This proposal is referred to as the ADGE Merger Approval Proposal; and
2) to transact any other business as may properly be brought before the ADGE special meeting or any adjournments or postponements thereof.
This joint proxy statement/prospectus contains important information about the matters to be voted upon at the ADGE special meeting. We encourage you to read this joint proxy statement/prospectus carefully before voting, including the section entitled “Risk Factors” beginning on page 33.
The ADGE Board of Directors has carefully considered the terms of the Merger Agreement and has unanimously (i) approved the Merger Agreement and the transactions contemplated by the Merger Agreement, (ii) determined and declared that the Merger and the other transactions contemplated by the Merger are advisable, fair to and in the best interest of ADGE, and (iii) directed that the foregoing proposal be submitted for consideration at the ADGE special meeting. The ADGE Board of Directors unanimously recommends that the ADGE stockholders vote “FOR” the ADGE Merger Approval Proposal. The Merger cannot be completed without the approval by ADGE stockholders of the ADGE Merger Approval Proposal.
The ADGE Board of Directors has fixed the close of business on April 24, 2017 as the record date for the determination of ADGE common stockholders entitled to receive notice of, and to vote at, ADGE’s special meeting and any postponements or adjournments of the special meeting.
The ADGE Merger Approval Proposal requires the affirmative vote of a majority of the outstanding shares of ADGE common stock entitled to vote on the proposal, assuming that a quorum is present at the special meeting.
A complete list of ADGE stockholders of record entitled to vote at the ADGE special meeting will be available for ten days before the ADGE special meeting at the principal executive offices of ADGE for inspection by stockholders during ordinary business hours for any purpose germane to the ADGE special meeting.
YOUR VOTE IS IMPORTANT
Whether or not you plan to attend the special meeting, please authorize a proxy to vote your shares as promptly as possible. To authorize a proxy, complete, sign, date and mail your proxy card in the pre-addressed postage-paid envelope provided or, if the option is available to you, call the toll free telephone number listed on your proxy card or use the Internet as described in the instructions on the enclosed proxy card to authorize your proxy. If your shares of ADGE common stock are held in “street name” by your broker or other nominee, only your broker or other nominee can vote your shares of ADGE common stock and the vote cannot be cast unless you provide instructions to your broker or other nominee on how to vote or obtain a legal proxy from your broker or other nominee. You should follow the directions provided by your broker or other nominee regarding how to instruct your broker or other nominee to vote your shares of ADGE common stock. You may revoke your proxy at any time before it is voted. Please review the joint proxy statement/prospectus accompanying this notice for more complete information regarding the Merger, the Merger Agreement, the ADGE Merger Approval Proposal and ADGE’s special meeting.
By Order of the Board of Directors
/s/ John N. Hatsopoulos
John N. Hatsopoulos
Co-Chief Executive Officer




IF YOU RETURN A SIGNED PROXY CARD WITHOUT AN INDICATION OF HOW YOU WISH TO VOTE, YOUR SHARES WILL BE VOTED IN FAVOR OF THE PROPOSAL.





ABOUT THIS JOINT PROXY STATEMENT/PROSPECTUS
This joint proxy statement/prospectus, which forms part of a registration statement on Form S-4 as amended (Registration No. 333-215231) filed with the SEC by Tecogen, constitutes a prospectus of Tecogen under the Securities Act of 1933, as amended, or the Securities Act, with respect to the shares of Tecogen common stock to be issued to ADGE stockholders pursuant to the Merger Agreement. This joint proxy statement/prospectus also constitutes a proxy statement under the Securities Exchange Act of 1934, as amended, or the Exchange Act, with respect to the Tecogen special meeting and the ADGE special meeting. It also includes a notice of meeting with respect to each of the Tecogen and the ADGE special meetings.
You should rely only on the information contained in this joint proxy statement/prospectus. No one has been authorized to provide you with information that is different from that contained in this joint proxy statement/prospectus. This joint proxy statement/prospectus is dated April 24, 2017. You should not assume that the information contained in this joint proxy statement/prospectus is accurate as of any date other than the date of this document unless stated otherwise. Neither our mailing of this joint proxy statement/prospectus to Tecogen stockholders or ADGE stockholders nor the issuance by Tecogen of common stock in connection with the Merger will create any implication to the contrary.
This joint proxy statement/prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, or the solicitation of a proxy, in any jurisdiction in which or from any person to whom it is unlawful to make any such offer or solicitation in such jurisdiction. Information contained in this joint proxy statement/prospectus regarding Tecogen has been provided by Tecogen, and information contained in this joint proxy statement/prospectus regarding ADGE has been provided by ADGE.





TABLE OF CONTENTS
 
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QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE SPECIAL MEETINGS
The following questions and answers are intended to briefly address some commonly asked questions regarding the Merger, the Merger Agreement and the Tecogen and ADGE special meetings of stockholders including the proposals to be considered at each meeting. Please refer to the section entitled “Summary” in this joint proxy statement/prospectus and the more detailed information contained elsewhere in this joint proxy statement/prospectus, including the Annexes, financial statements and the other documents to which this joint this joint proxy statement/prospectus refers which you should read carefully and in their entirety because the information in this section does not provide all the information that might be important to you.
Questions and Answers about the Merger
Q: What is the proposed transaction?
A: On November 1, 2016, Tecogen, Inc., a Delaware corporation, or Tecogen, and Tecogen.ADGE Acquisition Corp., a Delaware corporation and wholly-owned subsidiary of Tecogen formed for the purpose of effecting the merger, or Merger Sub, and American DG Energy, Inc., a Delaware corporation, or ADGE, entered into an Agreement and Plan of Merger and, as of March 23, 2017, entered into Amendment No. 1 to the Agreement and Plan of Merger, or the Merger Agreement. Pursuant to the Merger Agreement, Merger Sub will be merged with and into ADGE, or the Merger, with ADGE continuing as the surviving company in the Merger. Following the Merger, ADGE will be a wholly-owned subsidiary of Tecogen. The Merger Agreement sets forth the terms and conditions of Tecogen's proposed acquisition of ADGE. See “The Merger" and "The Merger Agreement.” In this joint proxy statement/prospectus, references to the Merger Agreement relating to the period prior to its amendment are to the original Agreement and Plan of Merger, and references to the Merger Agreement relating to the period from and after its amendment are to the Agreement and Plan of Merger as amended by Amendment No. 1.
Q: Why is Tecogen proposing the Merger?
A: The Tecogen Board of Directors believes that the Merger will create value for the existing Tecogen stockholders. It believes that the Merger is important for competitive reasons and will also enhance Tecogen’s financial stability and growth prospects, as described more fully in "The Merger - Tecogen's Reasons for the Merger; Recommendation by the Tecogen Board of Directors."
Q: Why is ADGE proposing the Merger?
A: ADGE believes that the shares of Tecogen common stock to be received by ADGE stockholders will enhance the value of the equity interest of ADGE stockholders by participation in the growth of Tecogen. In addition to competitive, financial and investment advantages of the Merger, the ADGE Board of Directors also believes the Merger will eliminate inefficient organizational complexities as described more fully in "The Merger - ADGE's Reasons for the Merger; Recommendation by the ADGE Board of Directors."
Q: If I am an ADGE stockholder, what will I receive in the proposed transaction?
A: If the Merger is completed, each share of ADGE common stock issued and outstanding immediately prior to the effective time of the Merger will be exchanged for the right to receive 0.092 of a share of Tecogen common stock, or the Exchange Ratio, as set forth in the Merger Agreement. No fractional shares of Tecogen common stock will be issued in the Merger. Instead, ADGE stockholders will be paid cash (without interest) in lieu of any fractional share interest to which they would otherwise be entitled. See “The Merger Agreement - Consideration to be Received in the Merger.”
Q: What happens if the market price of Tecogen common stock or ADGE common stock changes before the closing of the Merger?
A: No change will be made to the Exchange Ratio due to a change in the market price of Tecogen common stock or ADGE common stock before the Merger. Because the Exchange Ratio is fixed, the value of the consideration to be received by ADGE stockholders in the Merger will not depend on the market price of shares of Tecogen common stock at the time of the Merger. See “The Merger Agreement - Consideration to be Received in the Merger Agreement.”
Q: If I am a Tecogen stockholder, how will I be affected by the Merger and the issuance of shares of Tecogen common stock to ADGE stockholders in the Merger?
A: After the Merger, each Tecogen stockholder will continue to own the shares of Tecogen common stock that the stockholder held immediately prior to the Merger effective time. As a result, each Tecogen stockholder will own shares of common stock in a larger company with more assets. Because Tecogen will be issuing new shares of Tecogen common stock to ADGE stockholders in the Merger, each outstanding share of Tecogen common stock immediately prior to the Merger effective time will represent a smaller percentage of the aggregate number of shares of the combined company outstanding after the Merger. Upon completion of the Merger, Tecogen estimates that Tecogen stockholders will own approximately 81% of the issued and outstanding shares of Tecogen common stock and former ADGE stockholders will own approximately 19% of the issued and outstanding shares of Tecogen common stock after giving effect to various assumptions regarding share issuances by Tecogen prior to the Merger effective time. See “Risk Factors - Risks Relating to the Merger.”
Q: Who will be the Board of Directors and management of Tecogen if the Merger is completed?
A: It is not anticipated that the Board of Directors of Tecogen will change.
Concurrent with the closing, Tecogen’s Chief Financial Officer will be replaced with ADGE's Chief Financial Officer. None of the other executive officers of Tecogen are expected to change.
Q: Do stockholders have appraisal rights in connection with the Merger?
A: No. Under the Delaware General Corporation Law, or the DGCL, neither Tecogen nor ADGE stockholders are entitled to exercise the right of objecting stockholders to receive payment of the fair value of their shares. See “The Merger - No Appraisal Rights.”
Q: What conditions must be satisfied to complete the Merger?
A: The Merger Agreement contains a number of closing conditions, including the approval by Tecogen stockholders of the issuance of the shares of Tecogen common stock pursuant to the Merger Agreement; the adoption of the Merger Agreement and approval of the Merger by ADGE stockholders; the absence of any law or order prohibiting, restraining, enjoining, or making illegal the consummation of the Merger or the other transactions contemplated by the Merger Agreement; the Tecogen registration statement of which this joint proxy statement/prospectus is a part shall have become effective and no stop order suspending the effectiveness of the registration statement shall have been issued; and the shares of Tecogen common stock to be issued in connection with the Merger shall have been approved for listing on the Nasdaq Capital Market, subject only to official notice of issuance. For further information about the conditions that must be satisfied or waived prior to completion of the Merger, see “The Merger Agreement - Conditions to Completion of the Merger.
Q: What are the anticipated material United States federal income tax consequences of the proposed Merger?
A: The Merger is intended to qualify as a reorganization, within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended, or the Internal Revenue Code. Assuming the Merger qualifies as a reorganization, a U.S. holder of ADGE common stock generally will not recognize any gain or loss upon receipt of Tecogen common stock in exchange for ADGE common stock in the Merger.
Tax matters are very complicated and the tax consequences of the Merger to each ADGE stockholder may depend on such stockholder’s particular facts and circumstances. ADGE stockholders are urged to consult their tax advisors to understand fully the tax consequences of the Merger. See “Material U.S. Federal Income Tax Consequences of the Merger.”
Q: When is the proposed transaction expected to close?
A: The closing of the Merger will take place after both ADGE and Tecogen stockholder meetings have taken place, assuming that the requisite stockholder approvals have been obtained and the other conditions to closing have been satisfied or waived or such other date as agreed to by ADGE and Tecogen in writing. See “The Merger Agreement - Conditions to Completion of the Merger.”
Q: Are there risks associated with the Merger that I should consider in deciding how to vote?
A: Yes. You should read and carefully consider the risk factors set forth in the section hereof entitled “Risk Factors.”
Q: What happens if the Merger is not completed?
A: If the Tecogen Share Issuance Proposal or the ADGE Merger Approval Proposal is not approved by the respective Tecogen and ADGE stockholders or if the Merger is not completed for any other reason, ADGE stockholders will not receive the Merger consideration for their shares of ADGE common stock.
Q. May the Merger Agreement be terminated?
A: Yes. Prior to the approval of the Tecogen Share Issuance Proposal and the ADGE Merger Approval Proposal by stockholders of Tecogen and ADGE, respectively, the Merger Agreement and Merger may be abandoned by either ADGE or Tecogen pursuant to a resolution of the respective board of directors of such company to withdraw or fail to make when required under the Merger Agreement or fail to include in this joint proxy statement/prospectus for the Merger, a recommendation that the stockholders of such company approve the proposals discussed herein. The Merger Agreement does not provide for the payment by one party to the other of a breakup or termination fee in the event of such a termination.
Also, ADGE may terminate the Merger Agreement, prior to the approval of the Tecogen Share Issuance Proposal and the ADGE Merger Approval Proposal by the stockholders of Tecogen and ADGE, respectively, in the event the ADGE board approves, recommends or declares advisable, or proposes publicly to approve, recommend or declare advisable a competing proposal or offer by a third party to purchase 20% or more of the assets or outstanding capital stock, other equity securities, or voting power, of ADGE, or any merger, business combination, consolidation, share exchange, recapitalization or similar transaction as a result of which the holders of ADGE's common stock immediately prior to the transaction do not thereafter own at least 80% of the outstanding voting power of the surviving or resulting entity.
Further, the Merger Agreement provides that at any time before the closing of the Merger, either ADGE's or Tecogen's board of directors may terminate the Merger Agreement if such board (or a committee of such board) has determined in good faith, after consultation with its financial advisors and legal counsel, that there is a reasonable probability the failure to take such action would cause the board of ADGE or Tecogen, as the case may be, to violate its fiduciary duties to its stockholders under applicable law.
Q: How will I receive the Merger consideration to which I am entitled?
A: ADGE stockholders holding physical share certificates of ADGE common stock, promptly after the Merger effective time, will receive from the exchange agent a letter of transmittal and instructions for effecting the surrender of the certificates representing such shares. See “The Merger Agreement -- Consideration to be Received in the Merger.
Q: Will my rights as a stockholder of Tecogen or ADGE change as a result of the Merger?
A: The rights of Tecogen stockholders will be unchanged as a result of the Merger. Because the governing documents of Tecogen and ADGE are substantially the same, the rights of ADGE stockholders will not be changed in any material respect as a result of the Merger. At the Merger effective time, the existing charter and bylaws of Tecogen will remain unchanged. For more information regarding stockholder rights, see “Comparison of Rights of Tecogen Stockholders and ADGE Stockholders.”
Q: Where will my shares of Tecogen common stock be listed?
A: The shares of Tecogen common stock are currently listed on the Nasdaq Capital Market under the symbol “TGEN.” Tecogen will apply to have the new shares of Tecogen common stock issued as consideration in the Merger listed on the Nasdaq Capital Market prior to the Merger effective time, subject to official notice of issuance.
Q: If I am an ADGE stockholder that holds certificated shares of ADGE common stock, do I need to do anything now with my common stock certificates?
A: No, not at the present time.
Q: If I am a Tecogen stockholder, do I need to do anything with respect to my common stock certificates or book-entry shares?
A: No, you are not required to take any action with respect to your Tecogen shares.
Questions and Answers About the Special Meetings
Q: What am I being asked to vote on at the special meeting?
A: ADGE stockholders are being asked to consider and vote to adopt the Merger Agreement and approve the Merger, or the ADGE Merger Approval Proposal, and Tecogen stockholders are being asked to consider and vote to approve the issuance of shares of common stock of Tecogen upon closing of the Merger, or the Tecogen Share Issuance Proposal.
Tecogen and ADGE will hold separate special meetings to obtain the approval of the foregoing proposals. This joint proxy statement/prospectus contains important information about the proposals and the special meetings, which you should read carefully. The enclosed voting materials allow you to vote your shares without attending your respective meeting.
Your vote is important. Please authorize a proxy to vote your shares as promptly as possible.
Q: When and where will the Tecogen special meeting be held?
A: The Tecogen special meeting will be held on May 18, 2017, beginning at 11:00 a.m., local time, at Tecogen’s principal executive offices at 45 First Avenue, Waltham, MA 02451, or such other date, time and place to which such meeting may be adjourned or postponed. See “The Tecogen Special Meeting - Date, Time, Place and Purpose of Tecogen’s Special Meeting.”
Q: When and where will the ADGE special meeting be held?
A: The ADGE special meeting will be held on May 18, 2017, beginning at 1 p.m., local time, at ADGE’s principal executive offices at 45 First Avenue, Waltham, MA 02451, or such other date, time and place to which such meeting may be adjourned or postponed. See “The ADGE Special Meeting - Date, Time, Place and Purpose of ADGE’s Special Meeting.”
Q: Who can vote at the Tecogen special meeting?
A: All holders of record of Tecogen common stock as of the close of business on April 24, 2017, the record date for determining Tecogen stockholders entitled to notice of and to vote at the Tecogen special meeting, are entitled to receive notice of and to vote at the Tecogen special meeting.
As of the record date, there were 20,043,052 shares of Tecogen common stock issued and outstanding and entitled to vote at the Tecogen special meeting, held by approximately 66 holders of record. Each share of Tecogen common stock is entitled to one vote on each proposal presented at the Tecogen special meeting. See “The Tecogen Special Meeting - Record Date; Who Can Vote at Tecogen’s Special Meeting.”
Q: Who can vote at the ADGE special meeting?
A: All holders of record of ADGE common stock as of the close of business on April 24, 2017, the record date for determining ADGE stockholders entitled to notice of and to vote at the ADGE special meeting, are entitled to receive notice of and to vote at the ADGE special meeting.
As of the record date, there were 50,684,095 shares of ADGE common stock issued and outstanding and entitled to vote at the ADGE special meeting, held by approximately 100 holders of record. Each share of ADGE common stock is entitled to one vote on each proposal presented at the ADGE special meeting. See “The ADGE Special Meeting - Record Date; Who Can Vote at ADGE’s Special Meeting.”
Q: What constitutes a quorum for the Tecogen special meeting?
A: At the Tecogen special meeting, the presence of holders of a majority in voting power of the shares of the capital stock of the corporation issued and outstanding and entitled to vote at the meeting, present in person, or represented by proxy, shall constitute a quorum for the transaction of business. Abstentions will be counted in determining whether a quorum is present at the Tecogen special meeting. Failures to vote, which include failure to provide instructions to your broker or other nominee if your shares are held in "street name," will not be counted in determining whether a quorum is present. See “The Tecogen Special Meeting - Vote Required for Approval; Quorum.”
Q: What constitutes a quorum for the ADGE special meeting?
A: At the ADGE special meeting, the presence of the holders of a majority in voting power of the shares of the capital stock of the corporation issued and outstanding and entitled to vote at the meeting, present in person, or represented by proxy, shall constitute a quorum for the transaction of business. Abstentions will be counted in determining whether a quorum is present at the ADGE special meeting. Failures to vote, which include failure to provide instructions to your broker or other nominee if your shares are held in "street name," will not be counted in determining whether a quorum is present. See “The ADGE Special Meeting - Vote Required for Approval; Quorum.”
Q: What vote is required to approve each proposal at the Tecogen special meeting?
A: The Tecogen Share Issuance Proposal requires the affirmative vote of a majority of the votes cast by the holders of all of the shares of Tecogen common stock present in person or represented by proxy at the special meeting at which a quorum is present. This means the number of shares voted “FOR” the Tecogen Share Issuance Proposal must exceed the number of shares voted “AGAINST” the Tecogen Share Issuance Proposal. Abstentions and failures to vote are not considered votes cast for the foregoing purpose, and will have no effect on the vote for this proposal. See “The Tecogen special meeting - Vote Required for Approval; Quorum.”
Q: What vote is required to approve each proposal at the ADGE special meeting?
A: The ADGE Merger Approval Proposal requires the affirmative vote of a majority of the outstanding shares of ADGE common stock entitled to vote on such proposal, assuming that a quorum is present at the ADGE special meeting. Abstentions and failures to vote will have the same effect as a vote against the ADGE Merger Approval Proposal. See “The ADGE special meeting - Vote Required for Approval; Quorum.”
Q: How do I vote?
A: If you are a stockholder of record of Tecogen as of the record date for the Tecogen special meeting or a stockholder of record of ADGE as of the record date for the ADGE special meeting, you may vote in person by attending your special meeting or, to ensure your shares are represented at the meeting, you may authorize a proxy by:
accessing the Internet website specified on your proxy card;
calling the toll-free number specified on your proxy card; or
signing and returning the enclosed proxy card in the postage-paid envelope provided.
If you hold shares of common stock of Tecogen or ADGE in the name of a broker, bank or nominee, please follow the voting instructions provided by your broker, bank or nominee to ensure that your shares are represented at the applicable special meeting. If you are a Tecogen stockholder, see “The Tecogen Special Meeting - Manner of Voting.” If you are an ADGE stockholder, see “The ADGE Special Meeting - Manner of Voting.”
Q: If my shares of Tecogen common stock are held in “street name” by my broker or other nominee, will my broker or other nominee vote my shares of Tecogen common stock for me? What happens if I abstain or my broker does not vote my shares?
A: Your shares will NOT be voted unless you instruct your broker or other nominee how to vote your shares of Tecogen common stock held in street name. In accordance with the rules of the New York Stock Exchange, banks, brokerage firms and other nominees who hold shares of common stock in street name for their customers are precluded from exercising their voting discretion with respect to non-routine matters, such as the Tecogen Share Issuance Proposal. If you hold your shares in a stock brokerage account or if your shares are held by a bank or other nominee (that is, in street name), you must provide your broker or other nominee with instructions on how to vote your shares in accordance with the information and procedures provided to you by your broker, bank or nominee. If you do not provide instructions with your proxy, your bank, broker or other nominee, your broker will not vote your shares which will not have an effect on the Tecogen Share Issuance Proposal. You should instruct your broker to vote your shares in accordance with directions you provide.
You may not vote shares of Tecogen common stock held in street name by returning a proxy card directly to Tecogen or by voting in person at the Tecogen special meeting unless you provide a “legal proxy,” which you must obtain from your broker or other nominee.
Q: If my shares of ADGE common stock are held in “street name” by my broker or other nominee, will my broker or other nominee vote my shares of ADGE common stock for me? What happens if I abstain or my broker does not vote my shares?
A: Your shares will NOT be voted unless you instruct your broker or other nominee how to vote your shares of ADGE common stock held in street name. In accordance with the rules of the New York Stock Exchange, banks, brokerage firms and other nominees who hold shares of common stock in street name for their customers are precluded from exercising their voting discretion with respect to non-routine matters, such as the ADGE Merger Approval Proposal. If you hold your shares in a stock brokerage account or if your shares are held by a bank or other nominee (that is, in street name), you must provide your broker or other nominee with instructions on how to vote your shares in accordance with the information and procedures provided to you by your broker, bank or nominee. If you do not provide instructions with your proxy, your bank, broker or other nominee, your broker will not vote your shares which will have the effect of a vote “against” the proposal. You should instruct your broker to vote your shares in accordance with directions you provide.
You may not vote shares of ADGE common stock held in street name by returning a proxy card directly to ADGE or by voting in person at the ADGE special meeting unless you provide a “legal proxy,” which you must obtain from your broker or other nominee.
Q: How does the Tecogen Board of Directors recommend that Tecogen stockholders vote on the Tecogen Share Issuance Proposal?
A: The Tecogen Board of Directors has carefully considered the terms of the Merger Agreement and has unanimously approved the Merger Agreement and the transactions contemplated by the Merger Agreement, including the issuance of the shares of Tecogen common stock in the Merger.
The Tecogen Board of Directors unanimously recommends that Tecogen stockholders vote “FOR” the Tecogen Share Issuance Proposal. The Merger cannot be completed without the approval by the Tecogen stockholders of the Tecogen Share Issuance Proposal. See “The Tecogen Special Meeting - Recommendation of the Tecogen Board.”
Q: How does the ADGE Board of Directors recommend that ADGE stockholders vote on the ADGE Merger Approval Proposal?
A: The ADGE Board of Directors has carefully considered the terms of the Merger Agreement and has unanimously (i) approved the Merger Agreement and the transactions contemplated by the Merger Agreement, (ii) determined and declared that the Merger and the other transactions contemplated by the Merger are advisable, fair to and in the best interest of ADGE, and (iii) directed that the ADGE Merger Approval Proposal be submitted for consideration at the ADGE special meeting.
The ADGE Board of Directors unanimously recommends that ADGE stockholders vote “FOR” the ADGE Merger Approval Proposal. The Merger cannot be completed without the approval by ADGE stockholders of the ADGE Merger Approval Proposal. See “The ADGE Special Meeting - Recommendation of the ADGE Board.”
Q: What do I need to do now?
A: After you have carefully read this joint proxy statement/prospectus, please complete, sign and date your proxy card or voting instruction form and return it in the enclosed pre-addressed postage-paid envelope or, by authorizing your proxy by one of the other methods specified in your proxy card or voting instruction form as promptly as possible so that your shares of Tecogen common stock or ADGE common stock will be represented and voted at the Tecogen special meeting or the ADGE special meeting, as applicable.
Please refer to your proxy card, which is included with this joint proxy statement/prospectus, or the voting instruction form forwarded by your broker or other nominee to see which voting options are available to you.
The method by which you authorize your proxy will in no way limit your right to vote at the Tecogen special meeting or the ADGE special meeting if you later decide to attend the meeting in person. However, if your shares of Tecogen common stock or ADGE common stock are held in the name of a broker or other nominee, you must obtain a “legal proxy,” executed in your favor, from your broker or other nominee, to be able to vote in person at the Tecogen special meeting or the ADGE special meeting, as applicable. Obtaining a legal proxy may take several days.
Q: How will my proxy be voted?
A: All shares of Tecogen common stock entitled to vote and which are represented by properly completed proxies received prior to the Tecogen special meeting, which are not revoked, will be voted at the Tecogen special meeting as instructed on the proxies. If you properly submit a proxy card, but do not indicate how your shares of Tecogen common stock should be voted on a matter, the shares of Tecogen common stock represented by your proxy card will be voted as the Tecogen Board of Directors unanimously recommends and therefore “FOR” the Tecogen Share Issuance Proposal. Failures to vote, which include failures to provide instructions to your broker or other nominee if your shares are held in "street name,", your shares of Tecogen common stock will NOT be voted at the Tecogen special meeting and will not have an effect on the Tecogen Share Issuance Proposal. See “The Tecogen Special Meeting - Manner of Voting.”
All shares of ADGE common stock entitled to vote and which are represented by properly completed proxies received prior to the ADGE special meeting, which are not revoked, will be voted at the ADGE special meeting as instructed on the proxies. If you properly submit a proxy card, but do not indicate how your shares of ADGE common stock should be voted on a matter, the shares of ADGE common stock represented by your proxy card will be voted as the ADGE Board of Directors unanimously recommends and therefore “FOR” the ADGE Merger Approval Proposal. Failures to vote, which include failures to provide instructions to your broker or other nominee if your shares are held in “street name,” your shares of ADGE common stock will NOT be voted at the ADGE special meeting and will have the same effect as a vote “AGAINST” the ADGE Merger Approval Proposal. See “The ADGE Special Meeting - Manner of Voting.”
Q: Can I change my vote after I have returned a proxy or voting instruction card?
A: Yes. You may revoke your proxy or change your vote at any time before your proxy is voted at the Tecogen special meeting or the ADGE special meeting, as applicable. If you are a holder of record, you can do this in any of the three following ways:
by sending a written notice to the Secretary of Tecogen or the Secretary of ADGE, as applicable, at the applicable address set forth below, in time to be received before the Tecogen special meeting or the ADGE special meeting, as applicable, stating that you would like to revoke your proxy;
by completing, signing and dating another proxy card and returning it by mail in time to be received before the Tecogen special meeting or the ADGE special meeting, as applicable, or by completing a later dated proxy over the Internet or by telephone, in which case your later dated proxy will be recorded and your earlier proxy revoked; or
if you are a holder of record, you can attend the Tecogen special meeting or the ADGE special meeting, as applicable, and vote in person, which will automatically cancel any proxy previously given, or you may revoke your proxy in person, but your attendance alone at the special meeting will not revoke any proxy that you have previously given.
If you choose either of the first two methods, you must submit your notice of revocation or your new proxy to the Corporate Secretary of Tecogen or the Corporate Secretary of ADGE, as appropriate, no later than the beginning of the applicable special meeting. If your shares are held in street name by your broker or nominee, you should contact them to change your vote. If you are a Tecogen stockholder see “The Tecogen Special Meeting - Revocation of Proxies or Voting Instructions.” If you are an ADGE stockholder see “The ADGE Special Meeting - Revocation of Proxies or Voting Instructions.”
Q: What should I do if I receive more than one set of voting materials for Tecogen’s special meeting and/or ADGE’s special meeting?
A: You may receive more than one set of voting materials for Tecogen’s special meeting and/or ADGE’s special meeting, including multiple copies of this joint proxy statement/prospectus and multiple proxy cards or voting instruction cards. For example, if you hold your shares of Tecogen common stock and/or ADGE common stock in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold shares of Tecogen common stock and/or ADGE common stock. If you are a holder of record and your shares of Tecogen common stock or ADGE common stock are registered in more than one name, you may receive more than one proxy card. Please complete, sign, date and return each proxy card and voting instruction card that you receive or, please authorize your proxy by telephone, or over the Internet.
Q: What happens if I am a stockholder of both Tecogen and ADGE?
A: You will receive separate proxy cards for each of Tecogen and ADGE and you must complete, sign and date each proxy card and return each proxy card in the appropriate pre-addressed postage-paid envelope or, by authorizing a proxy by one of the other methods specified in your proxy card or voting instruction card for each of Tecogen and ADGE.
Q: Do I need identification to attend Tecogen or the ADGE special meeting in person?
A: Yes. Please bring proper identification, together with proof that you are a record owner of Tecogen or ADGE common stock, as the case may be. If your shares are held in street name, please bring acceptable proof of ownership, such as a letter from your broker or an account statement showing that you beneficially owned shares of Tecogen or ADGE common stock, as applicable, on the applicable record date.
Q: Who can help answer my questions?
A: If you have questions about the Merger or the other matters to be voted on at the special meetings or desire additional copies of this joint proxy statement/prospectus or additional proxy or voting instruction cards, please contact:
Tecogen common stockholders:
Tecogen Inc.
Attention: Investor Relations
45 First Avenue
Waltham, MA 02451
(781) 466-6413
www.tecogen.com
ADGE common stockholders:
American DG Energy Inc.
Attention: Investor Relations
45 First Avenue
Waltham, MA 02451
(781) 522-6000
www.americandg.com

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SUMMARY
The following summary highlights some of the information contained elsewhere in this joint proxy statement/prospectus and may not contain all the information that is important to you. For a more complete description of the Merger Agreement and the transactions contemplated by the Merger Agreement, Tecogen and ADGE encourage you to carefully read this entire joint proxy statement/prospectus, including the attached Annexes. We also encourage you to read the information incorporated by reference into this joint proxy statement/prospectus, which includes important business and financial information filed with the SEC regarding Tecogen and ADGE. You may obtain the information incorporated by reference into this joint proxy statement/prospectus without charge by following the instructions described under “Where You Can Find More Information.”
The Companies
Tecogen Inc.
Tecogen designs, manufactures, sells, and services systems that produce electricity, hot water, and air conditioning for commercial installations and buildings and industrial processes. Tecogen’s systems, powered by natural gas engines, drive electricity generators or compressors, which reduce the amount of electricity purchased from local utilities. Because Tecogen’s systems are designed to capture waste engine heat, they tend to be more energy efficient since otherwise-wasted energy can be used for water heating, space heating and/or air conditioning. The relative costs of natural gas and electricity at a proposed system site determine whether a system is economically efficient as well as energy efficient. This type of cogeneration technology is referred to as combined heat and power, or CHP.
Tecogen manufactures three types of CHP products:
Cogeneration units that supply electricity and hot water;
Chillers that provide air-conditioning and hot water; and
High-efficiency water heaters.
All of Tecogen’s products are standardized, modular, small-scale CHP products that reduce energy costs, carbon emissions, and dependence on the electric grid. Market drivers include the price of natural gas, local electricity costs, and governmental energy policies, as well as customers’ desire to become more socially responsible. Traditional customers for our cogeneration and chiller systems include hospitals and nursing homes, colleges and universities, health clubs and spas, hotels and motels, office and retail buildings, food and beverage processors, multi-unit residential buildings, laundries, ice rinks, swimming pools, factories, municipal buildings, and military installations; however, the economic feasibility of using our systems is not limited to these customer types. Tecogen has shipped approximately 2,500 units, some of which have been operating for almost 25 years. As of December 31, 2016, Tecogen employed 83 full-time employees and three part-time employees, including seven sales and marketing personnel and 35 service personnel.
Tecogen was incorporated in the State of Delaware on September 15, 2000. Its offices are located at 45 First Avenue, Waltham, Massachusetts 02451, and its telephone number is 781-466-6400. Tecogen's Internet address is www.tecogen.com. That website address is a textual reference only and the information on the website is not incorporated by reference herein.
American DG Energy Inc.
ADGE distributes, owns and operates clean, on-site energy systems that produce electricity, hot water, heat and cooling. ADGE’s business model is to own the equipment that it installs at customers' facilities and to sell the energy produced by these systems to the customer on a long-term contractual basis. ADGE calls this business the ADGE “On-Site Utility”. ADGE installs, owns, operates and maintains complete distributed generation, or DG systems or energy systems, and other complementary systems at customer sites and sell electricity, hot water, heat and cooling energy under long-term contracts at prices guaranteed to the customer to be below conventional utility rates. As of December 31, 2016, ADGE had 92 installed energy systems, representing an aggregate of approximately 5,445 kilowatts, or kW, 41.6 million British thermal units, or MMBtu's, of heat and hot water and 4,500 tons of cooling, kW is a measure of electricity generated, MMBtu is a measure of heat generated and a ton is a measure of cooling generated.
ADGE offers natural gas powered cogeneration systems that are highly reliable and energy efficient. Its cogeneration systems produce electricity from an internal combustion engine driving a generator, and the heat from the engine and exhaust is recovered and typically used to produce heat and hot water for use at the site. ADGE also distributes and operates water chiller systems for building cooling applications that operate in a similar manner, except that the engine's power drives a large air-conditioning compressor while recovering heat for hot water. Cogeneration systems reduce the amount of electricity that the customer must purchase from the local utility and produce valuable heat and hot water for the site to use as required. By simultaneously providing electricity, hot water and heat, cogeneration systems also have a significant, positive impact on the environment by reducing the carbon, or CO2, produced by offsetting the traditional energy supplied by the electric grid and conventional hot water boilers.

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Distributed Generation of electricity, or DG, often referred to as cogeneration systems, or combined heat and power systems, or CHP, is an attractive option for reducing energy costs and increasing the reliability of available energy. DG has been successfully implemented by others in large industrial installations over 10 Megawatts, or MW, where the market has been growing for several years, and is increasingly being accepted in smaller size units because of technology improvements, increased energy costs and better economics. ADGE believes that its target market (users of up to 1 MW) has been barely penetrated and that the reduced reliability of the utility grid, increasing cost pressures experienced by energy users, advances in new, low cost technologies and DG-favorable legislation and regulation at the state and federal level will drive our near-term growth and penetration into our target market. ADGE maintains a website at www.americandg.com, but that website address is a textual reference only and the information on the website is not incorporated by reference herein.
ADGE was incorporated as a Delaware corporation on July 24, 2001. Its offices are located at 45 First Avenue4, Waltham, Massachusetts 02451 and its telephone number is (781) 522-6000. ADGE's internet address is www.americandg.com. That website address is a textual reference only and the information on the website is not incorporated by reference herein.
Tecogen.ADGE Acquisition Corp.
Tecogen.ADGE Acquisition Corp., or Merger Sub, is a recently organized Delaware corporation formed for the purpose of effecting the Merger. Upon completion of the Merger, Merger Sub will be merged with and into ADGE with ADGE surviving the Merger as a wholly-owned subsidiary of Tecogen. Merger Sub has not conducted any activities other than those incidental to its formation and the matters contemplated by the Merger Agreement.
The Merger and the Merger Agreement
Subject to the terms and conditions of the Merger Agreement, at the Merger effective time, Merger Sub will merge with and into ADGE. ADGE will be the surviving entity in the Merger and, following completion of the Merger, ADGE will become a wholly-owned subsidiary of Tecogen.
Upon completion of the Merger, each share of ADGE common stock issued and outstanding immediately prior to the Merger effective time will be exchanged for the right to receive 0.092 of a share of Tecogen common stock, or the Exchange Ratio. The Exchange Ratio is fixed and will not be adjusted to reflect stock price changes prior to the closing of the Merger. No fractional shares will be issued in the Merger, and cash will be paid in lieu thereof. See “The Merger Agreement - Consideration to be Received in the Merger .” Tecogen common stock is listed and traded on the Nasdaq Capital Market, and ADGE common stock is listed and traded on the NYSE MKT under the ticker symbols “TGEN” and “ADGE,” respectively. Based on the closing price of Tecogen common stock on the Nasdaq National Market of $4.03 on November 1, 2016, the last trading day before public announcement of the Merger, the Exchange Ratio represented approximately $0.37 in Tecogen common stock for each share of ADGE common stock. Based on the closing price of Tecogen common stock on the Nasdaq Capital Market of $3.85 on March 17, 2017, the last practicable date before the date of this joint proxy statement/prospectus, the Exchange Ratio represented approximately $0.35 in Tecogen common stock for each share of ADGE common stock. Tecogen stockholders will continue to own their existing Tecogen shares of common stock following the consummation of the Merger. See “Comparative Tecogen and ADGE Market Price and Distribution Information” below. The value of the Merger consideration will fluctuate with changes in the market price of Tecogen and ADGE common stock. We urge you to obtain current market quotations of Tecogen common stock and ADGE common stock.
Each option to acquire shares of ADGE common stock, and each restricted stock award relating to ADGE common stock, granted before the Merger closing date under ADGE’s equity plans to an employee or a non-employee director, or a participant, will remain in effect and will be exercisable for or relate to shares of Tecogen common stock based on the Exchange Ratio (with similar adjustment to the exercise price per share of each stock option). All restricted stock awards and all stock options will become 100% vested. All outstanding warrants to purchase ADGE common stock will remain in effect and be exercisable for or relate to shares of Tecogen common stock based on the Exchange Ratio (with similar adjustments to the exercise price).
For a description of the treatment of all outstanding ADGE equity awards, see “The Merger Agreement - Consideration to be Received in the Merger - Treatment of Stock Options and Restricted Stock Awards.”
A copy of the Merger Agreement is attached as Annex A to this joint proxy statement/prospectus and is incorporated herein by reference. We encourage you to carefully read the Merger Agreement in its entirety as it is the principal document governing the Merger.
Directors Following the Merger
The Board of Directors of Tecogen is not expected to change as a result of the Merger.

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Recommendation of the Tecogen Board of Directors
The Tecogen Board of Directors has carefully considered the terms of the Merger Agreement and has unanimously (i) approved the Merger Agreement and the transactions contemplated by the Merger Agreement, and (ii) directed that the Tecogen Share Issuance Proposal be submitted for consideration at the Tecogen special meeting.
The Tecogen Board of Directors unanimously recommends that Tecogen stockholders vote “FOR” the Tecogen Share Issuance Proposal. The Merger cannot be completed without the approval by Tecogen stockholders of the Tecogen Share Issuance Proposal.
Recommendation of ADGE Board of Directors
The ADGE Board of Directors has carefully considered the terms of the Merger Agreement and has unanimously (i) approved the Merger Agreement and the transactions contemplated by the Merger Agreement, (ii) determined and declared that the Merger and the other transactions contemplated by the Merger are advisable, fair to and in the best interest of ADGE, and (iii) directed that the ADGE Merger Approval Proposal be submitted for consideration at the ADGE special meeting.
The ADGE Board of Directors unanimously recommends that ADGE stockholders vote “FOR” the ADGE Merger Approval Proposal. The Merger cannot be completed without the approval by ADGE stockholders of the ADGE Merger Approval Proposal.
Summary of the Risk Factors Related to the Merger
You should consider carefully all of the risk factors and other information included or otherwise incorporated by reference in this joint proxy statement/prospectus before deciding how to vote. Certain of the risks related to the Merger and the related transactions are described under “Risk Factors.” The principal risks relating to the Merger include the following:
Completion of the Merger is subject to conditions to closing and if these conditions are not satisfied or waived, the Merger will not be completed. Failure to complete the Merger could have material adverse effects on Tecogen and ADGE.
The Exchange Ratio is fixed and will not be adjusted in the event of any change in either Tecogen’s or ADGE’s stock price.
Failure to complete the Merger could negatively impact the stock prices and future business and financial results of Tecogen and ADGE.
The pendency of the Merger could adversely affect the business and operations of Tecogen and ADGE.
The ownership percentage of Tecogen and ADGE common stockholders will be diluted by the Merger.
Certain of Tecogen’s and ADGE’s respective directors and executive officers have interests in the transactions contemplated by the Merger Agreement that are different from, or in addition to, the interests of Tecogen’s and ADGE’s stockholders generally.
If the Merger is approved, the date on which ADGE common stockholders will receive the Merger consideration is uncertain.
See "Risk Factors," "The Merger - Interests of Tecogen's Directors and Executive Officers in the Merger," "The Merger - Interests of ADGE's Directors and Executive Officers in the Merger" and "The Merger Agreement - Conditions to Completion of the Merger."
The Special Meetings
Tecogen
Holders of shares of Tecogen common stock at the close of business on April 24, 2017, or the Tecogen record date, are entitled to notice of, and to vote at, the Tecogen special meeting. On the Tecogen record date, there were 20,043,052 shares of Tecogen common stock outstanding and entitled to vote at the Tecogen special meeting, held by approximately 66 holders of record. Each share of Tecogen common stock is entitled to one vote.
At the Tecogen special meeting, holders of a majority in voting power of the shares of the capital stock of the corporation issued and outstanding and entitled to vote at the meeting, present in person, or represented by proxy, shall constitute a quorum for the transaction of business. Abstentions will be counted in determining whether a quorum is present at the Tecogen special meeting.
At the Tecogen special meeting, Tecogen stockholders will be asked to consider and vote on the Tecogen Share Issuance Proposal. The Tecogen Share Issuance Proposal requires the affirmative vote of a majority of the votes cast by the holders of the shares of Tecogen common stock present in person or represented by proxy at the special meeting, assuming a quorum is present at the special meeting.
Your vote is very important. You are encouraged to authorize your proxy to vote your shares as promptly as possible. If you are a stockholder of record and you properly sign, date and return a proxy card, but do not indicate how your shares of Tecogen stock should be voted on a matter, the shares of Tecogen stock represented by your proxy cannot be voted. If you are a “street name” holder and you do not provide voting instructions to your broker or other nominee, your shares of Tecogen stock will NOT be voted at the Tecogen special meeting and will have no effect on the Tecogen Share Issuance Proposal.

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ADGE
Holders of shares of ADGE common stock at the close of business on April 24, 2017, or the ADGE record date, are entitled to notice of, and to vote at, the ADGE special meeting. On the ADGE record date, there were 50684095 shares of ADGE common stock outstanding and entitled to vote at the ADGE special meeting, held by approximately 100 holders of record. Each share of ADGE common stock is entitled to one vote on each proposal to be voted on at the ADGE special meeting.
At the ADGE special meeting, holders of a majority in voting power of the shares of the capital stock of the corporation issued and outstanding and entitled to vote at the meeting, present in person, or represented by proxy, shall constitute a quorum for the transaction of business. Abstentions will be counted in determining whether a quorum is present at the ADGE special meeting.
At the ADGE special meeting, ADGE stockholders will be asked to consider and vote on the ADGE Merger Approval Proposal. The ADGE Merger Approval Proposal requires the affirmative vote of a majority of the outstanding shares of ADGE common stock entitled to vote on such proposal, assuming a quorum is present at the special meeting.
Your vote is very important. You are encouraged to authorize your proxy to vote your shares as promptly as possible. If you are a stockholder of record and you properly sign, date and return a proxy card, but do not indicate how your shares of ADGE stock should be voted on a matter, the shares of ADGE stock represented by your proxy will be voted in favor of the ADGE Merger Approval Proposal. If you are a “street name” holder and you do not provide voting instructions to your broker or other nominee, your shares of ADGE stock will NOT be voted at the ADGE special meeting and will have the same effect as a vote “AGAINST” the ADGE Merger Approval Proposal.
Opinion of Tecogen’s Financial Advisor Regarding the Merger
In connection with the Merger, at the meeting of the Tecogen Board of Directors on November 1, 2016, Tecogen’s financial advisor, Scarsdale Equities LLC, or Scarsdale, delivered to the Tecogen Board of Directors its oral opinion, later confirmed by delivery of a written opinion dated November 10, 2016, that, based upon and subject to the various assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of review undertaken by Scarsdale as set forth in its written opinion, the Exchange Ratio of 0.092 of a share of Tecogen common stock for each share of ADGE common stock pursuant to the Merger Agreement was fair, from a financial point of view, to Tecogen.
The full text of the written opinion of Scarsdale is attached to this proxy statement/prospectus as Annex B and is incorporated herein by reference. The summary of the opinion of Scarsdale in this proxy statement/prospectus is qualified in its entirety by reference to the full text of the opinion and you should read the opinion in its entirety for a discussion of the assumptions made, procedures followed, matters considered and qualifications and limitations upon the review undertaken by Scarsdale in rendering its opinion. Scarsdale’s opinion addresses only the fairness from a financial point of view of the exchange ratio pursuant to the Merger Agreement to Tecogen as of the date of such opinion and does not address any other aspect of the Merger. The opinion did not in any manner address the prices at which Tecogen common stock will trade following consummation of the Merger or at any time. Scarsdale’s opinion does not constitute a recommendation to any holder of Tecogen common stock or ADGE common stock as to how to vote at the special meetings to be held in connection with the Merger or whether to take any other action with respect to the Merger. See “The Merger - Opinion of Tecogen’s Financial Advisor.”
Opinion of Financial Advisor to the ADGE Special Committee
At the meeting of the ADGE Special Committee on October 31, 2016, the financial advisor to the ADGE Special Committee, Cassel Salpeter & Co., LLC, or Cassel Salpeter, delivered its oral opinion to the ADGE Special Committee, which was later confirmed by delivery of a written opinion dated October 31, 2016, that, as of such date, and based upon and subject to the factors, assumptions and limitations set forth therein, the Exchange Ratio of 0.092 of a share of Tecogen common for each share of ADGE common stock in the Merger pursuant to the Merger Agreement was fair from a financial point of view to the holders ADGE common stock other than John Hatsopoulos, George Hatsopoulos and their respective affiliates (the “Unaffiliated Holders”).
The full text of the written opinion of Cassel Salpeter, dated October 31, 2016, which sets forth assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached to this proxy statement as Annex C. The summary of the Cassel Salpeter opinion provided in this proxy statement is qualified in its entirety by reference to the full text of the written opinion. Cassel Salpeter provided its opinion for the information and assistance of the ADGE Special Committee and, with the consent of the ADGE Special Committee, ADGE’s Board of Directors in connection with the ADGE Special Committee’s and, as applicable, the ADGE Board of Directors’ consideration of the Merger. The Cassel Salpeter opinion is not a recommendation as to how any holder of ADGE’s common stock should vote with respect to the transaction contemplated by the Merger Agreement or any other matter. See “The Merger - Opinion of Financial Advisor to the ADGE Special Committee.”

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Stock Ownership of Directors and Executive Officers of Tecogen
At the close of business on Tecogen's record date, Tecogen’s directors and executive officers held and were entitled to vote 3,604,558 shares of Tecogen common stock, collectively representing 17.98% of the shares of Tecogen common stock issued and outstanding and entitled to vote on that date. John N. Hatsopoulos, Co-CEO and a director of Tecogen, owns 3,252,395 shares or 16.28% of the issued and outstanding shares of Tecogen common stock. The Tecogen Share Issuance Proposal requires the affirmative vote of a majority of the votes cast by the holders of all of the shares of Tecogen common stock present in person or represented by proxy at the special meeting at which a quorum is present. Tecogen’s directors and executive officers have indicated that they expect to vote “FOR” the Tecogen Share Issuance Proposal. See “The Tecogen Special Meeting - Vote Required for Approval; Quorum.”
Tecogen is not aware of any agreement between any shareholders of the company to vote their stock as a group.
For a discussion of the interests of Tecogen's directors and executive officers in the Merger, see "The Merger - Interests of Tecogen's Directors and Executive Officers in the Merger."
Stock Ownership of Directors and Executive Officers of ADGE
At the close of business on the ADGE record date, ADGE’s directors and executive officers held and were entitled to vote 4,468,413 shares of ADGE common stock, collectively representing 8.82% of the shares of ADGE common stock issued and outstanding and entitled to vote on that date. John N. Hatsopoulos, co-CEO and a director of ADGE, beneficially owns 514,546 shares or 1.02% of the issued and outstanding shares of ADGE common stock. The ADGE Merger Approval Proposal requires the affirmative vote of a majority of the issued and outstanding shares of common stock of ADGE to be approved. ADGE’s directors and executive officers have indicated that they expect to vote “FOR” the ADGE Merger Approval Proposal. See “The ADGE Special Meeting - Vote Required for Approval; Quorum.”
For a discussion of the interests of ADGE's directors and executive officers in the Merger, see "The Merger - Interests of ADGE's Directors and Executive Officers in the Merger."
Interests of Tecogen’s Directors and Executive Officers in the Merger
In considering the recommendation of Tecogen’s Board of Directors to approve the Tecogen Share Issuance Proposal, Tecogen’s stockholders should be aware that Tecogen's directors and executive officers have interests in the Merger that are different from, or in addition to, the interests of Tecogen stockholders generally as summarized below.
Board and Executive Officers
The following Tecogen directors and executive officers also serve as directors and/or officers of ADGE:
John Hatsopoulos serves as Tecogen's and ADGE's co-chief executive officer and director;
Benjamin Locke serves as Tecogen's and ADGE's co-chief executive officer and director; and
Charles Maxwell serves as a director of Tecogen and ADGE.
Following the Merger, the directors of ADGE are expected to resign. The directors and executive officers of Tecogen are expected to remain the same except that it is expected that Bonnie Brown, the current Chief Financial Officer of ADGE , will also serve as the Principal Accounting Officer of Tecogen in place of the current Tecogen Chief Financial Officer. The current Tecogen CFO, David Garrison, will resign from Tecogen. See "Directors and Executive Officers of Tecogen", “Directors and Executive Officers of ADGE,” Executive Compensation of Tecogen" and "Executive Compensation of ADGE."
Stock Ownership
The following directors and executive officers of Tecogen own shares of ADGE common stock pre-Merger which are convertible, in accordance with the Exchange Ratio, upon consummation of the Merger into shares of Tecogen common stock (without giving effect to the exercise of outstanding options to acquire common stock) as follows:
John Hatsopoulos owns 514,546 shares of ADGE common stock convertible to 47,338 shares of Tecogen common stock;
Benjamin Locke owns 15,418 shares of ADGE common stock convertible to 1,418 shares of Tecogen common stock; and
Charles Maxwell owns 1,275,232 shares of ADGE common stock convertible to 117,321 shares of Tecogen common stock.

6


Stock Options
The following table indicates as of March 17, 2017, the directors and executive officers of Tecogen who own stock options to purchase ADGE common stock pre-Merger which will become, upon consummation of the Merger, vested options to acquire shares of Tecogen common stock, with adjustments to the number of shares to reflect the Exchange Ratio, as follows:
Name
Vested/unvested Options to Acquire ADGE common stock pre-Merger
Vested Options to Acquire Tecogen common stock post-Merger
Charles Maxwell
200,000/0
18,400
Benjamin Locke
287,500/262,500
50,600
See "The Merger - Interests of ADGE’s Directors and Executive Officers in the Merger" for further information, including information with respect to the adjustment of the exercise prices of the options.
Indemnification
Each of the current directors and executive officers of Tecogen and ADGE will be entitled pursuant to the Merger Agreement to continued indemnification by Tecogen and the purchase of a "tail" or "runoff" insurance policy of directors' and officers' liability insurance after the Merger.
The Tecogen Board of Directors was aware of and considered these interests, among other matters, in evaluating and negotiating the Merger Agreement and the Merger, approving the Merger Agreement, and recommending that Tecogen stockholders approve the Tecogen Share Issuance Proposal.
Interests of ADGE’s Directors and Executive Officers in the Merger
In considering the recommendation of ADGE’s Board of Directors to approve the ADGE Merger Approval Proposal, ADGE’s stockholders should be aware that ADGE’s directors and executive officers have financial interests in the Merger that are different from, or in addition to, the interests of ADGE stockholders generally as set forth below.
Board and Executive Officers
The following ADGE directors and executive officers also serve as directors and/or officers of Tecogen:
John Hatsopoulos serves as ADGE's and Tecogen's co-chief executive officer and director;
Benjamin Locke serves as ADGE's and Tecogen's co-chief executive officer and director; and
Charles Maxwell serves as a director of ADGE and Tecogen.
Following the Merger, the directors of ADGE are expected to resign. The directors and executive officers of Tecogen are expected to remain the same except that it is expected that Bonnie Brown, the current Chief Financial Officer of ADGE , will also serve as the Principal Accounting Officer of Tecogen in place of the current Tecogen Chief Financial Officer. See "Directors and Executive Officers of ADGE", “Directors and Executive Officers of Tecogen,"” "Executive Compensation of ADGE," "Executive Compensation of Tecogen," "Executive Compensation of Tecogen" and "Executive Compensation of ADGE."
Stock Options
The following table indicates as of March 17, 2017, the ADGE director and/or executive officer who owns vested and unvested options to acquire ADGE common stock pre-Merger which will become, upon consummation of the Merger, vested options to acquire shares of Tecogen common stock, with adjustments to the number of shares to reflect the Exchange Ratio, as follows:
Name
Vested/unvested Options to Acquire ADGE common stock pre-Merger
Vested Options to Acquire Tecogen common stock post-Merger
Bonnie Brown
25,000/75,000
9,200
Christine Klaskin
0/100,000
9,200
Benjamin Locke
287,500/262,500
50,600
Charles Maxwell
200,000/0
18,400
Deanna Petersen
0/100,000
9,200
John Rowe
70,000/30,000
9,200
Elias Samaras
0/100,000
9,200
See "The Merger - Interests of ADGE’s Directors and Executive Officers in the Merger - Treatment of Outstanding Equity Awards" for further information, including information with respect to the adjustment of the exercise prices of the options.




Indemnification
In addition, the Merger Agreement provides for the continued indemnification of current directors and executive officers of ADGE and Tecogen and the purchase of a “tail” or "runoff" insurance policy of directors’ and officers’ liability insurance after the Merger. See “The Merger - Interests of ADGE’s Directors and Executive Officers in the Merger.”
The ADGE Board of Directors was aware of and considered these interests, among other matters, in evaluating and negotiating the Merger Agreement and the Merger, approving the Merger Agreement and recommending that ADGE stockholders approve the ADGE Merger Approval Proposal.
Listing of Tecogen Common Shares
Approval of the listing on the Nasdaq Capital Market of the shares of Tecogen common stock to be issued as consideration for the Merger, subject to official notice of issuance, is a condition precedent to each party’s obligation to complete the Merger. Tecogen has agreed to use its reasonable best efforts to cause such shares of Tecogen common stock to be approved for listing on the Nasdaq Capital Market prior to the Merger effective time, subject to official notice of issuance. See “The Merger - Listing of Tecogen Common Stock.”
No Appraisal Rights
No appraisal, dissenters or similar rights will be available in connection with the Merger or other transactions contemplated by the Merger Agreement. See “The Merger - No Appraisal Rights.”
Expected Timing of the Merger
Tecogen and ADGE currently expect to complete the Merger as soon as practicable following the special meetings of Tecogen and ADGE stockholders, subject to receipt of required stockholder approvals and the satisfaction or waiver of other closing conditions.
Conditions to Completion of the Merger
As more fully described elsewhere in this joint proxy statement/prospectus and in the Merger Agreement, the completion of the Merger depends on a number of conditions being satisfied or, where legally permissible, waived. These conditions include, among others:
adoption of the Merger Agreement and approval of the Merger by ADGE common stockholders;
approval of the issuance of the shares of common stock of Tecogen in the Merger contemplated by the Merger Agreement by Tecogen common stockholders;
the absence of any law or order by any governmental entity prohibiting, restraining, enjoining or making illegal the consummation of the Merger or the other transactions contemplated by the Merger Agreement;
the Form S-4 of which this joint proxy statement/prospectus is a part shall have been declared effective and no stop order suspending the effectiveness of the Form S-4 shall have been issued by the SEC and shall remain in effect and no proceeding to that effect shall have been commenced; and
the shares of Tecogen common stock to be issued in connection with the Merger shall have been approved for listing on the Nasdaq Capital Market, subject only to official notice of issuance.
Neither Tecogen nor ADGE can give any assurance as to when or if all of the conditions to the completion of the Merger will be satisfied or waived, or that the Merger will occur. See “The Merger Agreement - Conditions to Completion of the Merger.”
Regulatory Approvals Required for the Merger
Neither Tecogen nor ADGE is aware of any regulatory approvals that are expected to prevent the consummation of the Merger other than approval of the listing on Nasdaq of the Tecogen shares to be issued in the Merger. See “The Merger Agreement - Other Covenants and Agreements."
No Deal Protection Devices; Termination of the Merger Agreement
The Merger Agreement does not contain any so-called “deal protection devices” such as a no-shop provision or a termination fee. Prior to obtaining ADGE stockholder approval, ADGE may withdraw or modify its recommendation to ADGE stockholders with respect to the Merger, terminate the Merger Agreement and enter into an agreement with respect to a competing acquisition proposal with a third party. In addition, Tecogen and ADGE may mutually agree to terminate the Merger Agreement at any time prior to the Merger effective date, regardless of whether Tecogen or ADGE stockholder approval has been obtained. See “The Merger Agreement - Termination of the Merger Agreement by Either Tecogen or ADGE.




Expenses; No Termination Fees
Generally, all fees and expenses incurred in connection with the Merger and the transactions contemplated by the Merger Agreement will be paid by the party incurring those expenses. See “The Merger Agreement - Termination of the Merger Agreement by Either Tecogen or ADGE.”
Certain United States Federal Income Tax Consequences of the Merger
The Merger is intended to qualify as a reorganization, within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended, which we refer to as the Internal Revenue Code. Assuming the Merger qualifies as a reorganization, a U.S. holder of ADGE common stock generally will not recognize any gain or loss upon receipt of Tecogen common stock in exchange for ADGE common stock in the Merger.
Tax matters are very complicated and the tax consequences of the Merger to each ADGE stockholder may depend on such stockholder’s particular facts and circumstances. ADGE stockholders are urged to consult their tax advisors to understand fully the tax consequences of the Merger. For more information see “Material U.S. Federal Income Tax Consequences of the Merger.”
Accounting Treatment of the Merger
In accordance with U.S. generally accepted accounting principles, or GAAP, Tecogen will account for the Merger as a business combination with Tecogen treated as the acquirer of ADGE for accounting purposes. Under business combination accounting rules, the assets acquired and liabilities assumed will be recorded as of the Merger effective time at their respective fair values, which may be more or less than the book value, and added to those of Tecogen. Any excess of purchase price over the fair values will be recorded as goodwill. Tecogen’s consolidated financial statements issued after the Merger will include ADGE assets acquired and retained by Tecogen in the Merger from the Merger effective time, but not for periods prior to the completion of the Merger. See “The Merger - Accounting Treatment.”
Litigation Relating to the Merger
Massachusetts Superior Court Action
On or about February 6, 2017, ADGE, John Hatsopoulos, George N. Hatsopoulos, Charles T. Maxwell, Deanna M. Petersen, Christine Klaskin, John Rowe, Joan Giacinti, Elias Samaras, Tecogen, and ADGE.Acquisition Corp., were served with a Verified Complaint by William C. May, individually and on behalf of the other shareholders of ADGE as a class. The action was commenced in the Business Litigation Section of the Superior Court of the Commonwealth of Massachusetts, Civil Action No. 17-0390. The complaint alleges the proposed Merger is subject to certain conflicts of interest; that ADGE's board failed to protect our stockholders by failing to conduct an auction or market check; that the Exchange Ratio undervalues ADGE's outstanding shares; that ADGE's directors breached their fiduciary duties in approving the Merger proposal; that Tecogen’s registration statement on Form S-4 contained material omissions; that Tecogen aided and abetted ADGE's board’s breaches of its fiduciary duties; and other claims. The plaintiff is seeking preliminary and permanent injunctions related to the Merger, rescissory damages, compensatory damages, accounting, and other relief.
United States District Court Action
On or about February 15, 2017, a lawsuit was filed in the United States District Court for the District of Massachusetts by Lee Vardakas (“Vardakas”), individually and on behalf of other shareholders of ADGE, naming ADGE, John N. Hatsopoulos, George N. Hatsopoulos, Benjamin Locke, Charles T. Maxwell, Deanne M. Petersen, Christine M. Klaskin, John Rowe, Joan Giacinti, Elias Samaras, Tecogen Inc., Tecogen.ADGE Acquisition Corp., and Cassel Salpeter & Co., LLC, as defendants. Among other things, the complaint alleges that (1) the merger is the result of a flawed and conflicted sales process and that the Exchange Ratio undervalues ADGE’s outstanding shares and (2) the registration statement on Form S-4 contains materially incomplete and misleading information concerning: (a) the financial analyses performed by ADGE’s financial advisor, (b) financial projections for ADGE and Tecogen, and (c) conflicts of interest in the sales process. The complaint asserts that defendants violated Section 14(a)(1) of the Securities Exchange Act of 1934, as amended (“Exchange Act”), and Rule 14a-9 thereunder, as a result of the alleged materially incomplete and misleading information; that the directors and officers of ADGE have control person liability for the alleged material misstatements and omissions pursuant to Section 20(a) of the Exchange Act; that the directors of ADGE breached their fiduciary duties to ADGE’s stockholders related to the merger, including that they failed to take steps to obtain the highest possible consideration for ADGE shareholders in the transaction; that Mr. John Hatsopoulos and Mr. George Hatsopoulos, acting in concert and as a group, as controlling shareholders of ADGE, violated their fiduciary duties to the shareholders of ADGE; and that Mr. George Hatsopoulos, Tecogen.ADGE Acquisition Corp., and ADGE’s financial advisor aided and abetted breaches of fiduciary duties by the directors and officers of ADGE.  Vardakas is seeking to certify a class action, a preliminary injunction, damages, costs and disbursements, including reasonable attorneys’ fees, and such other relief as the court deems just and proper. 




Comparison of Rights of Tecogen and ADGE Stockholders
ADGE stockholders will have substantially the same rights once they become Tecogen stockholders following the Merger due to similarity between the governing documents of Tecogen and ADGE. See “Comparison of Rights of Tecogen Stockholders and ADGE Stockholders.
Selected Historical Financial Information of Tecogen
The following selected historical financial information of Tecogen as of December 31, 2016 and 2015 and for each of the years in the two year period ended December 31, 2016 has been derived from Tecogen’s audited consolidated financial statements included elsewhere herein.
You should read this selected historical financial information together with the financial statements included elsewhere in this joint proxy statement/prospectus and their accompanying notes together with Tecogen's management’s discussion and analysis of operations and financial condition of Tecogen. See “Information About Tecogen -- Management's Discussion and Analysis of Financial Condition and Results of Operations of Tecogen.”
 
 
Years Ended December 31,
 
 
2016
 
2015
Statements of Operations Data:
 
 
 
 
Revenues
 
$
24,490,386

 
$
21,442,657

Cost of sales
 
15,189,708

 
13,809,431

Gross profit
 
9,300,678

 
7,633,226

Operating expenses
 
10,298,129

 
10,276,576

Loss from operations
 
(997,451
)
 
(2,643,350
)
Other expense, net
 
(163,794
)
 
(157,610
)
Consolidated net loss
 
(1,161,245
)
 
(2,800,960
)
Loss attributable to the noncontrolling interest
 
64,962

 
73,547

Net loss attributable to Tecogen Inc.
 
$
(1,096,283
)
 
$
(2,727,413
)
Net loss attributable to Tecogen Inc. per share - basic and diluted
 
$
(0.06
)
 
$
(0.16
)
Weighted average shares outstanding - basic and diluted
 
19,295,922

 
16,860,453


 
 
As of December 31,
 
 
2016
 
2015
Financial Position Data:
 
 
 
 
Cash and cash equivalents
 
$
3,721,765

 
$
5,486,526

Working capital (1)
 
14,436,452

 
14,027,370

Total Assets
 
23,741,361

 
21,090,640

Total current liabilities
 
5,622,504

 
5,375,610

Total non-current liabilities
 
3,607,784

 
3,273,162

Total shareholders' equity
 
14,511,073

 
12,441,868

 
 
 
 
 
(1) Tecogen defines working capital as total current assets minus total current liabilities




Selected Historical Financial Information of ADGE
The following selected historical financial information of ADGE as of December 31, 2016 and 2015 and for each of the years in the two year period ended December 31, 2016 has been derived from ADGE's audited consolidated financial statements included elsewhere herein.
You should read this selected historical financial information together with the financial statements included elsewhere in this joint proxy statement/prospectus and their accompanying notes together with management’s discussion and analysis of operations and financial condition of ADGE. See “Information About ADGE -- Management's Discussion and Analysis of Financial Condition and Results of Operations of ADGE.”
 
 
Years Ended December 31,
 
 
2016
 
2015
Statements of Operations Data:
 
 
 
 
Revenues
 
$
6,141,749

 
$
6,358,196

Cost of sales
 
6,012,757

 
6,411,568

Gross profit (loss)
 
128,992

 
(53,372
)
Operating expenses
 
2,568,693

 
3,386,362

Loss from operations
 
(2,439,701
)
 
(3,439,734
)
Other income (expense), net
 
2,285,470

 
(1,034,254
)
Loss from continuing operations
 
(214,803
)
 
(4,501,593
)
Loss from discontinued operations
 
(1,219,256
)
 
(1,384,122
)
Consolidated net loss
 
(1,434,059
)
 
(5,885,715
)
Loss attributable to the noncontrolling interest
 
675,612

 
455,312

Net loss attributable to ADGE Inc.
 
$
(758,447
)
 
$
(5,430,403
)
Income (loss) per share from continuing operations - basic and diluted
 
$
0.01

 
$
(0.09
)
Net loss per share - basic and diluted
 
$
(0.01
)
 
$
(0.11
)
Weighted average shares outstanding - basic and diluted
 
50,684,095

 
50,689,633


 
 
As of December 31,
 
 
2016
 
2015
Financial Position Data:
 
 
 
 
Cash and cash equivalents
 
$
338,627

 
$
4,999,709

Working capital (1)
 
1,715,740

 
6,210,765

Total Assets
 
19,105,058

 
34,022,378

Total current liabilities
 
920,507

 
2,291,735

Total non-current liabilities
 
850,000

 
20,615,334

Total shareholders' equity
 
17,334,551

 
11,115,309

 
 
 
 
 
(1)  ADGE defines working capital as total current assets minus total current liabilities



11


Summary Unaudited Pro Forma Condensed Combined Financial Information
The following table shows summary unaudited pro forma condensed combined financial information, which we refer to as the summary pro forma financial information, about the financial position and results of operations of Tecogen, after giving effect to the Merger, which were prepared using the acquisition method of accounting with Tecogen designated as the accounting acquirer of ADGE. See “Unaudited Pro Forma Condensed Combined Financial Information” for more information.
The summary pro forma financial information is presented for informational purposes only and are not necessarily indicative of what the combined company’s financial position actually would have been had the Merger been completed on date indicated or what the combined company's results of operations actually would have been had the Merger been completed as of the beginning of the periods indicated. In addition, the pro forma financial statements do not purport to project the future financial position or operating results of the combined company. The summary pro forma financial information includes adjustments which are preliminary and may be revised. There can be no assurance that such revisions will not result in material changes to the information presented.
The summary pro forma financial information has been derived from and should be read in conjunction with the consolidated financial statements and the related notes of Tecogen, including the notes thereto, appearing elsewhere in this joint proxy statement/prospectus. See “Unaudited Pro Forma Condensed Combined Financial Information.”
 
 
 
As of or for the Year Ended December 31, 2016
 
 
 
 
(Unaudited)
 
Pro Forma Condensed Combined Statement of Operation Data:
 
 
Net sales and gross revenues
 
$
29,645,932

 
 
Loss from continuing operations
 
(3,476,161
)
 
 
Net loss attributable to Tecogen Inc. shareholders
 
(2,735,587
)
 
 
Loss per share - basic and diluted
 
$
(0.11
)
 
Pro Forma Condensed Combined Balance Sheet Data:
 
 
 
 
Total assets
 
$
52,804,252

 
 
Total liabilities
 
20,065,694

 
 
Total equity
 
$
32,738,558

 


12


Unaudited Pro Forma Condensed Combined Financial Information
On November 1, 2016, Tecogen, Merger Sub and ADGE entered into the Merger Agreement, as amended. Subject to the terms and conditions of the Merger Agreement, Merger Sub will merge with and into ADGE with ADGE surviving as a wholly-owned subsidiary of Tecogen.
The following unaudited pro forma condensed combined financial statements, which we refer to as the pro forma financial statements, present the combination of the historical consolidated financial statements of Tecogen and ADGE, adjusted to give effect to the Merger.
The unaudited pro forma condensed combined balance sheet, which we refer to as the pro forma balance sheet, combines the audited historical consolidated balance sheets of Tecogen and ADGE as of December 31, 2016, giving effect to the Merger as if it had been consummated on December 31, 2016.
The unaudited pro forma condensed combined statement of operations, which we refer to as the pro forma statement of operations, for the fiscal year ended December 31, 2016 combines the audited historical consolidated statements of operations of Tecogen and ADGE for the fiscal year ended December 31, 2016 , giving effect to the Merger as if it had been consummated on January 1, 2016.
The historical consolidated financial information of Tecogen and ADGE has been adjusted in the pro forma financial statements to give effect to pro forma events that are (1) directly attributable to the Merger, (2) factually supportable, and (3) with respect to the pro forma statements of income, expected to have a continuing impact on the combined results. The pro forma financial statements should be read in conjunction with the accompanying notes to the pro forma financial statements. In addition, the pro forma financial statements were based on and should be read in conjunction with the following historical consolidated financial statements and accompanying notes of Tecogen and ADGE for the applicable periods:
Separate historical financial statements of Tecogen as of and for the year ended December 31, 2016 and the related notes included elsewhere herein; and
Separate historical financial statements of ADGE as of and for the year ended December 31, 2016 and the related notes included elsewhere herein.
The pro forma financial statements have been presented for informational purposes only and are not necessarily indicative of what the combined company’s financial position or results of operations actually would have been had the Merger been completed as of the dates indicated. In addition, the pro forma financial statements do not purport to project the future financial position or operating results of the combined company. Transactions between Tecogen and ADGE during the period presented in the pro forma financial statements have been eliminated as if Tecogen and ADGE were consolidated during the period.
The pro forma financial statements have been prepared using the acquisition method of accounting under existing U.S. GAAP, which requires that one of the two companies in a merger be designated as the acquirer for accounting purposes. Based on the evidence available, Tecogen has been designated as the acquirer in the Merger for accounting purposes. The acquisition accounting is dependent upon certain valuations and other studies that have yet to progress to a stage where there is sufficient information for a definitive measurement. Tecogen intends to complete the valuations and other studies upon completion of the Merger and will finalize the allocation of consideration as soon as practicable within the measurement period in accordance with ASC 805, but in no event later than one year following the effective date of the Merger. The assets and liabilities of ADGE have been measured based on various preliminary estimates using assumptions that Tecogen believes are reasonable based on information that is currently available. In addition, the proposed Merger has not yet received all necessary approvals from governmental authorities. Under the HSR Act and other relevant laws and regulations, there are significant limitations regarding the information Tecogen and ADGE can share with each other prior to the closing. Accordingly, the pro forma adjustments are preliminary and have been made solely for the purpose of providing pro forma financial statements prepared in accordance with the rules and regulations of the SEC. Differences between these preliminary estimates and the final acquisition accounting may occur and these differences could have a material impact on the accompanying pro forma financial statements and the combined company’s future results of operations and financial position.
The unaudited pro forma condensed combined financial statements set forth below primarily give effect to the following:
application of the acquisition method of accounting in connection with the Merger to reflect the aggregate purchase consideration;
the issuance of Tecogen common shares to the shareholders of ADGE as a portion of the merger consideration;
the assumption of equity awards for holders of ADGE’s outstanding equity awards; and
transaction costs in connection with the Merger.
Upon completion of the Merger, Tecogen will perform a detailed review of ADGE’s accounting policies. As a result of that review, Tecogen may identify differences between the accounting policies of the two companies that, when conformed, could have a material impact on the consolidated financial statements of the combined company. At this time, Tecogen is not aware of any significant accounting policy differences.

13


The pro forma financial statements do not reflect any cost or growth synergies that the combined company may achieve as a result of the Merger, or the costs to combine the operations of Tecogen and ADGE, or the costs necessary to achieve these cost or growth synergies.
Additional Events
Additionally, the historical consolidated financial information of Tecogen and ADGE has been adjusted in the pro forma financial statements to give effect to the extinguishment of indebtedness of ADGE through a series of exchange transactions which occurred during the year ended December 31, 2016. Those transactions resulted in the elimination of a significant majority of ADGE’s outstanding convertible indebtedness in exchange for a significant majority of ADGE’s interest in one of its previously consolidated subsidiaries. The operating results of that previously consolidated subsidiary are reflected as discontinued operations in ADGE’s historical financial statements. The historical consolidated financial information of Tecogen and ADGE has been adjusted in the pro forma financial statements to give effect to the exchange transactions as if they had occurred on January 1, 2016. The effects of those adjustments are separately identified in the unaudited pro forma condensed combined financial statements set forth below.

14


TECOGEN INC.
Pro Forma Condensed Combined Balance Sheet
As of December 31, 2016
(Unaudited)
 
Historical
 
Merger Related Pro Forma Adjustments
 
Notes
 
Tecogen Pro Forma Condensed Combined
 
Tecogen
 
ADGE
 
 
 
Assets
 
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
3,721,765

 
$
338,627

 
$

 
 
 
$
4,060,392

Accounts receivable, net
8,630,418

 
815,748

 

 
 
 
9,446,166

Unbilled revenue
2,269,645

 
18,797

 

 
 
 
2,288,442

Inventory, net
4,774,264

 
128,680

 

 
 
 
4,902,944

Due from related party
260,988

 
87,845

 
(167,726
)
 
5(a)
 
181,107

Assets held for sale

 
946,883

 

 
 
 
946,883

Prepaid and other current assets
401,876

 
299,667

 

 
 
 
701,543

     Total current assets
20,058,956

 
2,636,247

 
(167,726
)
 
 
 
22,527,477

Property, plant and equipment, net
517,143

 
15,831,160

 
(859,438
)
 
5(b)
 
15,488,865

Intangible assets, net
1,065,967

 

 
1,450,278

 
5(d)

 
2,516,245

Excess of cost over fair value of net assets acquired
40,870

 

 
9,534,719

 
3,4
 
9,575,589

Investment in Ultra Emissions Technologies Limited
2,000,000

 

 

 
 
 
2,000,000

Investment securities

 
637,651

 

 
 
 
637,651

Other assets
58,425

 

 

 
 
 
58,425

     Total assets
$
23,741,361

 
$
19,105,058

 
$
9,957,833

 
 
 
$
52,804,252

Liabilities and stockholders' equity
 
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
 
Accounts payable
$
3,367,481

 
$
270,078

 
$
(39,822
)
 
5(a)
 
$
3,597,737

Accrued expenses
1,378,258

 
522,525

 
370,000

 
5(c)
 
2,270,783

Due to related party

 
127,904

 
(127,904
)
 
5(a)
 

Deferred revenue
876,765

 

 

 
 
 
876,765

     Total current liabilities
5,622,504

 
920,507

 
202,274

 
 
 
6,745,285

Deferred revenue, net of current portion
459,275

 

 

 
 
 
459,275

Loan due to related party

 
850,000

 

 
 
 
850,000

Unfavorable contract liability

 

 
8,862,625

 
5(d)
 
8,862,625

Senior convertible promissory note, related party
3,148,509

 

 

 
 
 
3,148,509

     Total liabilities
9,230,288

 
1,770,507

 
9,064,899

 
 
 
20,065,694

Stockholders’ equity:
 
 
 
 
 
 
 
 
 
Tecogen Inc shareholders' equity
14,511,073

 

 
17,670,021

 
5(e)
 
32,181,094

American DG Energy Inc. shareholders' equity

 
17,356,319

 
(17,356,319
)
 
5(f)
 

Noncontrolling interest

 
(21,768
)
 
579,232

 
5(g)
 
557,464

     Total stockholders’ equity
14,511,073

 
17,334,551

 
892,934

 
 
 
32,738,558

     Total liabilities and stockholders' equity
$
23,741,361

 
$
19,105,058

 
$
9,957,833

 
 
 
$
52,804,252


The accompanying notes are an integral part of the unaudited pro forma condensed combined financial statements.


15


TECOGEN INC.
Pro Forma Condensed Combined Statement of Operations
For the Year Ended December 31, 2016
(Unaudited)
 
 
Historical
 
Merger Related Pro Forma Adjustments
 
Notes
 
Pro Forma Results of Acquisition of American DG
 
Exchange Transactions Pro Forma Adjustments
 
Notes
 
Tecogen Pro Forma Condensed Combined
 
 
Tecogen
 
ADGE
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net sales and gross revenues
 
$
24,490,386

 
$
6,141,749

 
$
(986,203
)
 
6(a)
 
$
29,645,932

 
$

 
 
 
$
29,645,932

Cost and expenses applicable to sales and revenues
 
15,189,708

 
6,012,757

 
(1,893,247
)
 
6(b)
 
19,309,218

 

 
 
 
19,309,218

Gross profit
 
9,300,678

 
128,992

 
907,044

 
 
 
10,336,714

 

 
 
 
10,336,714

Selling, general and administrative expenses
 
9,631,065

 
2,568,693

 
(528,327
)
 
6(c)
 
11,671,431

 

 
 
 
11,671,431

Research and development
 
667,064

 

 

 
 
 
667,064

 

 
 
 
667,064

Loss from operations
 
(997,451
)
 
(2,439,701
)
 
1,435,371

 
 
 
(2,001,781
)
 

 
 
 
(2,001,781
)
Interest and other income
 
11,988

 
21,837

 

 
 
 
33,825

 

 
 
 
33,825

Interest and other expenses
 
(175,782
)
 
(1,062,582
)
 

 
 
 
(1,238,364
)
 
534,501

 
8
 
(703,863
)
Gain on extinguishment of debt
 

 
182,887

 

 
 
 
182,887

 
(182,887
)
 
8
 

Gain on deconsolidation of subsidiary
 

 
3,887,098

 

 
 
 
3,887,098

 
(3,887,098
)
 
8
 

Held for sale fair value adjustment
 

 
(743,770
)
 

 
 
 
(743,770
)
 

 
 
 
(743,770
)
Loss from continuing operations before income taxes
 
(1,161,245
)
 
(154,231
)
 
1,435,371

 
 
 
119,895

 
(3,535,484
)
 
 
 
(3,415,589
)
Provision for income taxes on continuing operations
 

 
(60,572
)
 

 
 
 
(60,572
)
 

 
 
 
(60,572
)
Loss from continuing operations
 
(1,161,245
)
 
(214,803
)
 
1,435,371

 
 
 
59,323

 
(3,535,484
)
 
 
 
(3,476,161
)
Loss attributable to noncontrolling interest
 
64,962

 
675,612

 

 
 
 
740,574

 

 
 
 
740,574

Net income (loss) attributable to Tecogen Inc. shareholders
 
$
(1,096,283
)
 
$
460,809

 
$
1,435,371

 
 
 
$
799,897

 
$
(3,535,484
)
 
 
 
$
(2,735,587
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Per common share data (Note 7)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss) per share - basic
 
$
(0.06
)
 
 
 
 
 
 
 
$
0.03

 
 
 
 
 
$
(0.11
)
Net income (loss) per share - diluted
 
$
(0.06
)
 
 
 
 
 
 
 
$
0.03

 
 
 
 
 
$
(0.11
)
Weighted average shares outstanding - basic
 
19,295,922

 
 
 
 
 
 
 
23,958,859

 
 
 
 
 
23,958,859

Weighted average shares outstanding - diluted
 
19,295,922

 
 
 
 
 
 
 
23,958,859

 
 
 
 
 
23,958,859

The accompanying notes are an integral part of the unaudited pro forma condensed combined financial statements.




16


Notes to Unaudited Pro Forma Condensed Combined Financial Statements
Note 1. Description of the Transaction
Tecogen Inc. and ADGE have agreed to the strategic combination of Tecogen and ADGE under the terms of the Merger Agreement that is described in this joint proxy statement/prospectus. On November 1, 2016, Tecogen Inc. (NASDAQ: TGEN), a Delaware corporation ("Tecogen"), entered into an Agreement and Plan of Merger, as amended by Amendment No. 1 (the "Merger Agreement") by and among, Tecogen and American DG Energy Inc. (NYSE MKT: ADGE), a Delaware corporation ("ADGE"), and Tecogen.ADGE Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of Tecogen ("Merger Sub").
Under the terms of the Merger Agreement, Merger Sub will merge with and into ADGE, with ADGE becoming a wholly-owned subsidiary of Tecogen, and the surviving corporation of the transaction (the "Merger"). The Merger is intended to qualify for federal income tax purposes as a tax-free reorganization under the provisions of Section 368(a) of the Internal Revenue Code of 1986. Subject to the terms and conditions of the Merger Agreement and shareholder approval, at the closing of the Merger, each outstanding share of ADGE common stock will be converted into the right to receive approximately 0.092 shares of common stock of Tecogen (the "Exchange Ratio"). Consummation of the Merger is subject to customary closing conditions, including, among other things, approval by the stockholders of Tecogen and ADGE of the respective proposals described herein. The Merger Agreement does not contain any termination, prohibitions on termination, no-shop clause, or reimbursements of Merger related expenses. As part of the Merger Agreement, ADGE and Tecogen have made customary mutual representations and warranties.
Also in connection with the Merger, Tecogen will, at the effective time of the Merger, assume the (a) outstanding stock options of ADGE and (b) outstanding warrants to purchase common stock of ADGE, each as adjusted pursuant to the Exchange Ratio and subject to the terms of the Merger Agreement. All outstanding stock options and restricted stock units of ADGE will continue to exist with the right however to be exercised for Tecogen common stock at the effective time of the Merger.
Note 2. Basis of Pro Forma Presentation
The accompanying pro forma financial statements were prepared in accordance with Article 11 of Regulation S-X using the acquisition method of accounting in accordance with ASC 805, and are based on the historical consolidated financial information of Tecogen and ADGE. The historical consolidated financial information has been adjusted in the accompanying pro forma financial statements to give effect to pro forma events that are (i) directly attributable to the merger, (ii) factually supportable, and (iii) with respect to the unaudited pro forma condensed combined statements of operation, expected to have a continuing impact on the consolidated results.
U.S. GAAP requires that one of the two companies in the merger be designated as the acquirer for accounting purposes based on the evidence available. In identifying Tecogen as the acquiring entity for accounting purposes, the companies took into account the voting rights of all equity instruments, the intended corporate governance structure of the combined company, and the size of each of the companies. In assessing the size of each of the companies, the companies evaluated various metrics, including, but not limited to: assets, revenue, operating income (loss), EBITDA, adjusted EBITDA, market capitalization and enterprise value. No single factor was the sole determinant in the overall conclusion that Tecogen is the acquirer for accounting purposes; rather, all factors were considered in arriving at the conclusion. Under ASC 805, Tecogen, as the accounting acquirer, will account for the transaction by using Tecogen historical information and accounting policies and adding the assets and liabilities of ADGE as of the closing date at their respective fair values.
The acquisition method of accounting uses the fair value concepts defined in ASC 820, Fair Value Measurements and Disclosures (ASC 820). Fair value is defined in ASC 820 as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements can be highly subjective and it is possible the application of reasonable judgment could develop different assumptions resulting in a range of alternative estimates using the same facts and circumstances. The allocation of the estimated consideration is preliminary, pending finalization of various estimates and analyses. Since these pro forma financial statements have been prepared based on preliminary estimates of consideration and fair values attributable to the Merger, the actual amounts eventually recorded for the Merger, including goodwill, may differ materially from the information presented.

17


The initial allocation of the preliminary consideration in these pro forma financial statements is based upon an estimated preliminary consideration of approximately $18.0 million. This amount is based on approximately 4.7 million shares of common stock that Tecogen would expect to issue to holders of ADGE common stock in connection with the Merger, based on the number of shares of ADGE common stock outstanding as of March 17, 2017 and the ADGE Exchange Ratio of 0.092 provided in the Merger Agreement. The preliminary consideration has been prepared based on the share price of Tecogen common stock on March 17, 2017 (the latest practicable date prior to the date of this document), equal to $3.85 per share. The actual number of shares of Tecogen common stock issued to holders of ADGE common stock will be based upon the actual number of ADGE shares issued and outstanding immediately prior to the effective time of the Merger. Additional consideration, currently estimated at approximately $0.1 million is expected for equity-based awards of ADGE as all awards will vest immediately upon the close of the Merger under a preexisting provision and Tecogen is obligated in the Merger Agreement to be assumed by Tecogen. The Merger Agreement does not contain any provision that would adjust the Exchange Ratio based on the fluctuations in the market value of either the Tecogen common stock or ADGE common stock. As a result, the implied value of the Merger consideration to the Tecogen stockholders and ADGE stockholders will fluctuate between now and the closing date of the Merger.
One-time transaction-related expenses anticipated to be incurred prior to, or concurrent with, the closing are not included in the pro forma statements of operations. However, the impact of such transaction expenses is reflected in the pro forma balance sheet as an increase to accumulated deficit and an increase to accrued expenses and other current liabilities.
The pro forma statement of operations for the fiscal year ended December 31, 2016 combines the audited historical consolidated statements of operations of Tecogen and ADGE for the fiscal year ended December 31, 2016, giving effect to the Merger as if it had been consummated on January 1, 2016.
The pro forma balance sheet combines the unaudited historical consolidated balance sheets of Tecogen and ADGE as of December 31, 2016, giving effect to the Merger as if it had been consummated on December 31, 2016.
Note 3. Preliminary Consideration
The preliminary consideration is calculated as follows:
ADGE common shares outstanding as of March 17, 2017
 
50,684,095

ADGE Exchange Ratio
 
0.092

          Tecogen common shares issued in exchange
 
4,662,937

Tecogen closing share price on March 17, 2017
 
3.85

Fair value of Tecogen common shares issued in exchange
 
17,952,306

Fair value of ADGE vested equity awards
 
67,715

          Preliminary consideration
 
$
18,020,021

As there is no required service condition in the assumed equity-based awards, 100% of the fair value of the ADGE equity-based awards at the date of the Merger is considered attributable to pre-combination service and accordingly is included in the preliminary consideration.
The preliminary value of the consideration does not purport to represent the actual value of the total consideration that will be received by the ADGE stockholders when the Merger is completed. In accordance with U.S. GAAP, the fair value of the equity securities comprising the consideration will be measured on the closing date of the Merger at the then-current market price per share of Tecogen common stock. This requirement will likely result in a difference from the $3.85 per share on March 17, 2017, assumed in the calculation, and that difference may be material. For example, an increase or decrease of 30% in the price of Tecogen’s common stock on the closing date of the Merger from the price of Tecogen common stock assumed in these pro forma financial statements would change the value of the preliminary consideration by approximately $5.4 million, which would be reflected as a corresponding increase or decrease to goodwill. Based on Tecogen's annual historical stock price volatility of approximately 32%, a 30% change in Tecogen common share price is reasonably possible during the period between the date of this joint proxy statement/prospectus and the expected closing date of the Merger.
The purchase price was determined primarily based on the projected future cash flows of ADGE. Projected cash flows include an expectation of further and continued improvement under ADGE’s initiative (“initiative”) to increase the productivity of its existing sites' operations thereby optimizing margins and increasing cash flows. This initiative began in 2015, and as described elsewhere herein is comprised of several phases which include various analysis and evaluations followed by certain dependent actions aimed at optimizing the long-term profitability of each site’s operations. The positive results of ADGE’s initiative have only recently begun to be realized and are evidenced in its most recent annual results. Tecogen’s understanding of the operational and economic dynamics of these sites offers Tecogen the unique ability to evaluate the feasibility of the actions necessary and related profitability improvements. See "Information About ADGE -- Business of ADGE."

18


Notwithstanding contractual terms, in respect to pricing the energy generated by the ADGE sites that cause the contracts related to the majority of the sites to be unfavorable to the market due to decreased electrical utility rates (see Note 5(d)), projected future cash flows for ADGE are supportive of both the purchase price and the expected level of resultant goodwill. This incorporates the expectation of further and continued improvement under ADGE’s initiative and includes the elimination of certain duplicative personnel and administrative functions as well as other cost savings.
Note 4. Fair Value Estimate of Assets to be Acquired and Liabilities to be Assumed
The table below represents an allocation of the preliminary consideration to ADGE’s tangible and intangible assets acquired and liabilities assumed based on management’s preliminary estimate of their respective fair values as of December 31, 2016. The final consideration and determination of the allocation of that consideration may be materially different than the preliminary estimates used in these pro forma financial statements. Any consideration in excess of the fair value of assets acquired less liabilities assumed is recognized as goodwill. Goodwill is primarily attributable to the going concern element of ADGE’s business, including its assembled workforce and the long-term contractual nature of its business, as well as expected cost synergies from the merger related primarily to the elimination of administrative overhead and duplicative personnel.
 
 
ADGE
 
Fair Value Adjustment
 
Fair Value
 
Goodwill Calculation
 
Notes
Preliminary consideration
 
$

 
$

 
$
18,020,021

 
 
 
3
Noncontrolling interest
 
(21,768
)
 
579,232

 
557,464

 
 
 
5(g)
    Total
 
$
(21,768
)
 
$
579,232

 
$
18,577,485

 
$
18,577,485

 
 
Net properties
 
15,831,160

 
(859,438
)
 
14,971,722

 
 
 
5(b)
Intangibles
 

 
1,450,278

 
1,450,278

 
 
 
5(d)
All other assets (excluding goodwill) (i)
 
3,273,898

 

 
3,273,898

 
 
 
 
    Total assets (excluding goodwill)
 
$
19,105,058

 
$
590,840

 
$
19,695,898

 
 
 
 
Accrued expenses and other current liabilities
 
$
522,525

 
$
20,000

 
$
542,525

 
 
 
5(c)
Unfavorable contract liability
 

 
8,862,625

 
8,862,625

 
 
 
5(d)
All other liabilities (i)
 
1,247,982

 

 
1,247,982

 
 
 
 
    Total liabilities
 
$
1,770,507

 
$
8,882,625

 
$
10,653,132

 
 
 
 
Fair value of net assets (excluding goodwill)
 
 
 
 
 
 
 
9,042,766

 
 
Tecogen goodwill attributable to ADGE
 
 
 
 
 
 
 
$
9,534,719

 
3
 
 
 
 
 
 
 
 
 
 
 
(i) Management determined the carrying values approximated fair value.
 
 
 
 
Note 5. Adjustments to Pro Forma Balance Sheet
Explanations of the adjustments to the pro forma balance sheet are as follows:
(a) Represents elimination of amounts due to and amounts due from and between Tecogen and ADGE as if they were intercompany balances normally subject to elimination in consolidation.
(b) Represents the preliminary fair value and resulting adjustment to net property. The preliminary amounts assigned to net property and estimated weighted average useful lives are as follows:
 
 
Preliminary Fair Value
 
Estimated Weighted Average Useful Life (in years)
Energy systems
 
$
13,000,426

 
10.35
Computer equipment and software
 
17,268

 
1.15
Furniture and fixtures
 
21,035

 
1.25
Vehicles
 
28,000

 
2.75
Construction in process
 
1,904,993

 
NA
Total fair value of ADGE net property
 
$
14,971,722

 
 
Less: ADGE's historical net property
 
(15,831,160
)
 
 
Pro forma adjustment
 
$
(859,438
)
 
 
The preliminary fair values of the net property were estimated by asset group using a replacement-cost approach which considered the depreciated cost of a replacement equivalent and factors for functional obsolescence. The downward adjustment to the carrying value of ADGE’s net property considers recent innovation and economies inherent in Tecogen's current technologies and that equivalent capacity replacements are at a nominally lower cost than has historically been available. Newer component

19


parts used in site installations have been configured in a manner which both simplifies site design and reduces installation costs. Estimated design and installation costs included in the cost of a replacement equivalent are assumed to be marginally lower than has been historically experienced due to the experience and expertise gained from past design and installation efforts. These factors, combined, result in an estimated depreciated cost of a replacement equivalent or fair value nominally lower than the carrying value at December 31, 2016.
The preliminary estimate of the fair value of net property is lower than the carrying value of net property at December 31, 2016.  When ADGE identifies events or changes in circumstances which might represent an indicator of impairment, a test for impairment is performed using an undiscounted cash flow analysis to determine the recoverability of the carrying value of the property.  This undiscounted cash flow analysis may result in a different amount than a fair value analysis.
(c) Represents an estimate of the fair value of the liability related to the non-contingent aspect of the obligation under ADGE's guarantee of certain outstanding obligations and guarantees of performance under certain operating agreements of one of its former subsidiaries of $20,000 and an estimate of merger related costs of $350,000 to be incurred subsequent to December 31, 2016. The obligations guaranteed include: 1.) certain long term unsecured convertible indebtedness, with a remaining principal amount outstanding subject to the guarantee at December 31, 2016 of $300,000 with a maturity date of June 17, 2017, 2.) a payment performance guarantee in respect of collateralized equipment financing loans, with a remaining principal amount outstanding subject to the guarantee at December 31, 2016 of approximately $322,000 due ratably in equal installments through September 2021, and 3.) certain guarantees of performance in respect of certain customer contracts, which amounts are not quantifiable until performance under the guarantees with respect to a particular contract becomes probable of occurrence.
The aforementioned guarantees were issued by ADGE in order to secure the respective borrowings and contracts during periods when the former subsidiary, EuroSite Power, was considered to be a subsidiary of ADGE. The determination of the fair value of the liability related to these guarantees at December 31, 2016 considered the former subsidiary's current financial position, that no known situations were evident which may suggest performance under any of the guarantees was probable of occurrence, and that the issuances and existence of the guarantees represent non-contingent obligations to perform under the guarantees over the terms of the respective guarantees. The value ascribed to the liability related to the guarantees of the outstanding debt obligations of approximately $10,000 was calculated as a 1.5% premium on the outstanding balances of the debt with an equal amount of $10,000 subjectively ascribed to the obligations under the guarantees of performance in respect of customer contracts. The latter amount is subject to revision pending further analysis however, based on current understanding, the revised value ascribed should not differ materially.
The estimate of the future merger related costs of $350,000 is comprised of legal fees for both Tecogen's and ADGE's outside counsel, financial advisor fees for both Tecogen and ADGE as well as legal fees associated with each of the advisor's outside counsel, accounting, valuation and consulting fees associated with the merger as well as the cost related to professional opinions required and various printing and mailing costs.
(d) Represents the estimated fair value of ADGE's customer contracts. These contracts are long-term and provide customers with an alternative source of electrical power in addition to that provided by the local power utility, at rates that are lower than local utilities. This alternative electrical power is typically produced by ADGE owned, operated and maintained natural gas powered systems installed at the customers' sites, with ADGE bearing all costs of operation and maintenance. In addition to the alternative source of electrical power provided by ADGE’s systems, customers can opt to add and take advantage of the heat generated in the electrical production process in the form of hot water and/or space heating. Pricing to the customer for electrical power produced and supplied by ADGE under the contracts is under a fixed formula which requires the customer to pay for the kilowatts of electrical power provided at a fixed percentage discount to the local utility’s electric rate for that period. As a result, as utility rates for electrical power change, the amount ADGE is able to charge the customer under the contract also changes. There has been a sharp decrease in electric rates over the past several years, subsequent to the vast majority of customer contract dates, causing the billable value of the electrical power generated by ADGE’s systems to decrease, resulting in a deterioration of expected profitability. Current utility electric rates remain significantly below the level anticipated at the time the fixed percentage discounts contained in the vast majority of ADGE’s customer contracts were contracted for, thus these contract terms, although they produce cash flow, are considered to be off market in the vast majority of ADGE’s customer contracts. Additionally, the demand and volume of kilowatts produced and billed for vary by contract and by period and in certain instances have been significantly below what was originally expected such that had it been known at the time the contract(s) were negotiated, it would have influenced ADGE’s determination of the level of the fixed percentage discount in those contracts.
The determination of fair value requires development of an estimate of the price at which an orderly transaction to sell the asset or to transfer the liability would take place between market participants at the measurement date under current market conditions. Contracts are considered to be assets or liabilities by virtue of the rights and obligations inherent in the contract terms. Typically, contracts with terms considered to be at market are considered to have no fair value as in order to be entitled to the rights under the contract performance must occur for which a market rate of return is earned due to the at market terms. The fair value of a contract is primarily a measurement of its off market terms. The obligation to perform under a contract with terms that are unfavorable to market results in a liability to the extent its terms are off market. The resulting liability is an estimate of the

20


price that would need to be paid to a willing market participant to assume the obligations under the contract in order for them to receive a market rate of return for their remaining performance obligation under the contract. The exact opposite holds true in instances where the terms of a contract are considered to be favorable to market. In that case an asset would exist as an estimate of the price that would be received from a willing market participant in order to be entitled to the rights under the contract.
In determining the estimate of fair value of ADGE’s customer contracts, the measure of at market, and thus the baseline to measure the amount related to any of off market terms or conditions with respect to the contracts, was considered best determined, given the nature of the services provided under the contracts, by utilizing a benchmark level of margin contribution, in this case 35% on revenue. It is believed that a market participant would utilize a similar margin in arriving at a buy price for the contract(s). Specifically, in determining the estimate of fair value of ADGE’s customer contracts, the actual margin contribution percentages by contract for the twelve month period ended September 30, 2016 were individually compared to the benchmark 35% and any excess or shortfall quantified by contract. It is believed that utilization of a recent twelve month period appropriately considers variations in results due to seasonality while still reflecting an acceptable approximation of the impact of current electrical rates.
The annual excesses or shortfalls in margin contribution were discounted at a rate of 5.6% by year, by contract for the period October 1, 2016 through the end of the term of the contract in order to determine the present value of such excesses and shortfalls with such discounted amounts summed by contract and then summed in the aggregate with favorable amounts classified as intangible assets and unfavorable amounts classified as unfavorable contract liabilities.
The benchmark contribution margin of 35% was determined as the amount required to provide a return on revenue, based on current market conditions and current contract terms, consistent with the average return on revenue of US investor owned public utilities. Electrical utilities are ADGE’s primary competitors and potential market participants. It is believed that current market participants would require a return substantially consistent with that described in the foregoing for the remaining performance obligations under the contracts.
The discount rate of 5.6% recognizes the time value of money by including a risk free rate of 2.1% based on an average of 5 and 10 year US treasury bond yields, by including a rate of 2.5% for future inflation based on recent CPI factors, and an additional factor of 1.0% related to the risk of default by the customer under the contracts. It is believed that this rate appropriately considers those factors and values that a market participant would use in the process of discounting the annual differential between projected profitability and a market level of profitability, over the remaining term of a contract, in order to arrive at an amount to be paid to acquire a contract with terms favorable to market, or to be received to assume a contract with terms unfavorable to market.
The pro forma adjustment includes amounts related to contracts with terms favorable to the current market as well as contracts with terms unfavorable to the current market as follows:
Contracts with terms unfavorable to market - Unfavorable contract liability
 
$
8,862,625

Contracts with terms favorable to market - Intangible asset
 
(1,450,278
)
Fair value of contracts
 
$
7,412,347



21


Amortization of the aggregate fair value assigned to customer contracts is calculated using the straight line method by year and is estimated to be as follows:
Year 1
 
$
874,025

Year 2
 
844,933

Year 3
 
776,630

Year 4
 
731,889

Year 5
 
729,661

Year 6
 
712,572

Year 7
 
677,485

Year 8
 
640,297

Year 9
 
511,059

Year 10
 
320,207

Year 11
 
206,400

Year 12
 
151,376

Year 13
 
104,120

Year 14
 
83,826

Year 15
 
47,867

 
 
$
7,412,347

(e) Represents the preliminary consideration above in Note 3, less expected merger costs to be incurred and expensed subsequent to December 31, 2016 as follows:
Preliminary consideration
 
$
18,020,021

Less: Estimated merger costs
 
(350,000
)
Pro forma adjustment
 
$
17,670,021

(f) Represents elimination of ADGE's historical equity.
(g) Represents an estimate of the adjustment necessary to the historical noncontrolling interest to reflect the 49% common equity ownership interest in American DG New York, LLC, a partially owned subsidiary of ADGE, at fair value. The total fair value of American DG New York, LLC was estimated for purposes of these pro forma financial statements using a discounted cash flow analysis of the combined sites owned by American DG New York, LLC. That analysis utilized the expected cash flows of the sites over the expected terms of the contracts related to the sites, including expected extensions, discounted at a rate of 6% per annum, which is an estimate of the rate a market participant would use in valuing this entity on a stand-alone basis.
No deferred tax assets have been included as an adjustment in the pro forma balance sheet related to the foregoing fair value adjustments as it not considered more likely than not that any such deferred tax assets would be realizable.
Note 6. Adjustments to Pro Forma Income Statements
Explanations of the adjustments to the pro forma income statements are as follows:
(a) Represents elimination of sales and service revenue by Tecogen to ADGE as if they were intercompany transactions normally subject to elimination in consolidation.
(b) Represents amortization of the fair value of customer contracts in Note 5(d), elimination of purchase and operating cost from Tecogen recognized by ADGE (see Note 6(a)), and an adjustment to depreciation expense related to the fair value adjustment to net property (see Note 5(b)) as follows:
 
 
Year Ended
 
 
December 31, 2016
Amortization of the fair value of customer contracts
 
$
(874,025
)
Elimination of ADGE purchases and service costs from Tecogen
 
(986,203
)
Adjustment for depreciation for fair value adjustment to net property
 
(33,019
)
Pro forma adjustment
 
$
(1,893,247
)

22


The pro forma adjustment reducing historical depreciation expense was calculated by asset category as reflected in Note 5(b) above utilizing the estimated weighted average useful life applied to the pro forma adjustment to historical fixed asset costs by asset category.
(c) Represents the elimination of one-time transaction costs incurred and expensed during the year ended December 31, 2016 directly attributable to the Merger as such costs are not expected to have a continuing impact on combined results.
Note 7. Tecogen Earnings Per Share Information
The weighted average shares used in determining earnings or loss per share in the accompanying pro forma statement of operations are shown in the following table.
 
 
 
Tecogen Historical
 
Pro Forma Results of Acquisition of ADGE
 
Tecogen Pro Forma Condensed Combined
Year ended ended December 31, 2016:
 
 
 
 
 
 
 
Historical Tecogen weighted average shares outstanding
 
19,295,922

 
19,295,922

 
19,295,922

 
Tecogen shares issuable to the shareholders of ADGE in connection with the merger
 

 
4,662,937

 
4,662,937

 
Denominator for basic earnings (loss) per share
 
19,295,922

 
23,958,859

 
23,958,859

 
Common stock equivalents related to stock options
 

 

 

 
Common stock equivalents related to convertible debt
 

 

 

 
Denominator for diluted earnings (loss) per share
 
19,295,922

 
23,958,859

 
23,958,859

Common stock equivalents are anti-dilutive in a period of loss.
Note 8. Exchange Transactions
These adjustments to the pro forma statement of operations for the year ended December 31, 2016 are not related to or directly attributable to the merger of Tecogen and ADGE. Rather they relate to certain events and transactions which occurred with ADGE during the year ended December 31, 2016. Through a series of exchange transactions, ADGE extinguished a significant majority of its convertible indebtedness in exchange for a significant majority of ADGE's interest in one of its previously consolidated subsidiaries. The operating results of that previously consolidated subsidiary are reflected as discontinued operations in ADGE's historical financial statements. The historical financial statements of ADGE also include a gain related to the extinguishment of that convertible indebtedness as a result of the exchange transactions as well as the historical interest expense related to the indebtedness which was extinguished as a result of the exchange transactions. The pro forma statement of operations includes only amounts relating to the continuing operations of ADGE as required by Article 11 of regulation S-X. Additionally, during the period between the exchange transactions, ADGE ceased to be the primary beneficiary of the same consolidated subsidiary causing it to deconsolidate that subsidiary resulting in a gain on deconsolidation. These adjustments serve to eliminate the gains recognized in ADGE's historical financial statements that were a result of these transactions and events and the interest cost associated with the convertible indebtedness which was extinguished in order to reflect the continuing impact of that extinguishment as if the exchange transactions had occurred on January 1, 2016.
The amount of historical interest expense eliminated in the pro forma statement of operations for the year ended December 31, 2016 was calculated in a manner so as to leave only the remaining debts’ proportionate share of interest cost in the pro forma total of interest expense. Specifically, actual interest expense related to the entire issue of debt was apportioned between that which was extinguished and that which remained, by month, based on the respective principal amounts with the amount allocated to the debt which was extinguished being eliminated from the historical total.

23


Equivalent and Comparative Per Share Information
The following table sets forth, for the fiscal year ended December 31, 2016, selected per share information for shares of Tecogen common stock on a historical and pro forma combined basis and for shares of ADGE common stock on a historical and pro forma equivalent basis, each on an unaudited basis for the twelve months ended December 31, 2016 and after giving effect to the Merger. Tecogen will account for the Merger as a business combination with Tecogen treated as the acquirer of ADGE for accounting purposes. The data is derived from and should be read in conjunction with Tecogen and ADGE audited consolidated financial statements and related notes of Tecogen and ADGE and related notes, and the unaudited pro forma condensed combined financial information and related notes, which are included elsewhere in this joint proxy statement/prospectus.
The pro forma consolidated ADGE equivalent information shows the effect of the Merger from the perspective of an owner of shares of ADGE common stock and was calculated by multiplying the Tecogen pro forma combined per share amounts by the Exchange Ratio.
The unaudited pro forma combined per share data is presented for illustrative purposes only and is not necessarily indicative of the operating results or financial position that would have occurred if the transactions had been completed at the beginning of the earliest period presented, nor is it necessarily indicative of future operating results or financial position. The pro forma adjustments are estimates based upon information and assumptions available at the time of the filing of this joint proxy statement/prospectus.
The pro forma income from continuing operations per share includes the combined income (loss) from continuing operations of Tecogen and ADGE on a pro forma basis as if the Merger was completed on January 1, 2016.
 
 
Tecogen
 
ADGE
For the year ended December 31, 2016
 
Historical
 
Pro Forma Combined
 
Historical
 
Pro Forma Equivalent
Income (loss) from continuing operations attributable to common shareholders per share - basic
 
$
(0.06
)
 
$
(0.11
)
 
$
0.01

 
$
(0.01
)
Income (loss) from continuing operations attributable to common shareholders per share - diluted
 
(0.06
)
 
(0.11
)
 
$
0.01

 
(0.01
)
Dividends per common share
 

 
NA
 

 
NA
Book value per common share
 
$
0.73

 
$
1.33

 
$
0.34

 
$
0.12





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Comparative Tecogen and ADGE Market Price and Distribution Information
Tecogen and ADGE Recent Closing Prices
The following table sets forth the closing price per share of Tecogen common stock and the closing price per share of ADGE common stock on November 1, 2016, (the last business day preceding the public announcement of the execution and delivery of the Merger Agreement) and on April 19, 2017 (the latest practicable trading date prior to the mailing this joint proxy statement/prospectus). The table also presents the equivalent market value per share of ADGE common stock based on the Exchange Ratio of 0.092 shares of Tecogen common stock for each share of ADGE common stock. You are urged to obtain current market quotations for shares of Tecogen and ADGE common stock before making a decision with respect to the Merger. Tecogen common stock is listed on the Nasdaq Capital Market under the symbol “TGEN,” and ADGE common stock is listed on the NYSE MKT under the symbol “ADGE.”
 
 
Tecogen
Common Stock
 
ADGE Common Stock
Date
 
Historical
 
Historical
 
Equivalent Market Value Per Share
November 1, 2016
 
$4.03
 
$0.30
 
$0.37
April 19, 2017
 
$3.61
 
$0.32
 
$0.33
Because the market price of shares of Tecogen common stock is subject to fluctuation between the date of this joint proxy statement/prospectus and the Merger effective time, the market value of the shares of Tecogen common stock that ADGE stockholders may receive in the Merger may increase or decrease prior to and following the Merger. ADGE stockholders are urged to obtain current market quotations for Tecogen common stock.
Tecogen’s Market Price Data
The shares of Tecogen common stock are listed on the Nasdaq Capital Market under the symbol “TGEN.” This table sets forth, for the periods indicated, the high and low closing per share sales prices of Tecogen common stock, as reported on the Nasdaq Capital Market composite transaction reports. No distributions were made by Tecogen during the periods presented.
 
 
Price Per Tecogen Common Share
 
 
High
 
Low
2015
 
 
 
 
1st Quarter
 
$
5.65

 
$
4.55

2nd Quarter
 
5.19

 
3.90

3rd Quarter
 
4.40

 
2.80

4th Quarter
 
4.10

 
2.46

2016
 
 
 
 
1st Quarter
 
$
6.50

 
$
2.80

2nd Quarter
 
5.75

 
3.50

3rd Quarter
 
5.20

 
4.00

4th Quarter
 
4.80

 
3.75


25


ADGE’s Market Price Data
The shares of ADGE common stock are listed on the NYSE MKT under the symbol “ADGE.” This table sets forth, for the periods indicated, the high and low closing per share sales prices of ADGE common stock, as reported on the NYSE MKT composite transaction reports. No distributions were made by ADGE during the periods presented.
 
 
Price Per ADGE Common Share
 
 
High
 
Low
2015
 
 
 
 
1st Quarter
 
$
0.65

 
$
0.42

2nd Quarter
 
0.88

 
0.28

3rd Quarter
 
0.43

 
0.28

4th Quarter
 
0.58

 
0.32

2016
 
 
 
 
1st Quarter
 
$
0.42

 
$
0.30

2nd Quarter
 
0.41

 
0.23

3rd Quarter
 
0.33

 
0.22

4th Quarter
 
0.34

 
0.23



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RISK FACTORS
In addition to the other information included in this joint proxy statement/prospectus, including the matters addressed under “Cautionary Statement Concerning Forward-Looking Statements,” you should carefully consider the following risks before deciding how to vote your shares of Tecogen or ADGE common stock, as applicable.
In addition, you should read and consider the risks associated with each of Tecogen and ADGE, including regarding their respective businesses, operations, and related to each company, described herein or below, because these risks also may affect Tecogen following the Merger.
You should also read and consider the other information in this joint proxy statement/prospectus, including the information under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for each of Tecogen and ADGE contained herein for further risks.
RISKS RELATING TO THE PROPOSED MERGER
Tecogen and Tecogen.ADGE Acquisition Corp. (“Merger Sub”), a wholly owned subsidiary of Tecogen, entered into a Merger Agreement with ADGE, dated November 1, 2016, (the “Merger Agreement”). Pursuant to the Merger Agreement, Merger Sub is proposed to be merged with and into ADGE and ADGE will become the surviving corporation in the merger (the “Merger”). Tecogen’s and ADGE's obligations to effect the Merger are subject to certain conditions, including that the issuance of the shares of common stock of Tecogen in the Merger be approved by a vote of Tecogen's stockholders and the adoption of the Merger Agreement and approval of the Merger by ADGE's stockholders at separate special meetings of such stockholders. There is no assurance that such conditions will be satisfied or waived or that Tecogen’s or ADGE's stockholders will approve or adopt such proposals.
Tecogen’s obligations and the obligations of ADGE to complete the transaction are subject to satisfaction or waiver of a number of conditions. Tecogen’s and ADGE’s obligations to complete the transactions are each subject to, among other conditions: (i) approval of the issuance of the shares of common stock of Tecogen in the Merger as contemplated by the Merger Agreement by Tecogen's stockholders; (ii) adoption of the Merger Agreement and approval of the Merger by ADGE's stockholders, (iii) approval of the listing on the Nasdaq Capital Market of the shares of Tecogen common stock to be issued in the Merger, upon official notice of issuance, (iv) the effectiveness of Tecogen’s Form S-4 registration statement under the Securities Act, (v) the absence of any applicable law or order that prohibits completion of the transaction, (vi) the accuracy of the representations and warranties made in the Merger Agreement by Tecogen and ADGE, subject to certain materiality qualifications, and (vii) the performance in all material respects of the material obligations required to be performed by Tecogen and ADGE at or prior to the Merger effective time.
The satisfaction of the required conditions could delay the completion of the transaction for a significant period of time or prevent it from occurring. Any delay in completing the transaction could cause Tecogen or ADGE not to realize some or all of the benefits that Tecogen or ADGE expect to achieve if the transaction is successfully completed within its expected time frame. Further, there can be no assurance that the conditions to the closing of the transaction will be satisfied or waived or that the transaction will be completed.
The Exchange Ratio is fixed and will not be adjusted in the event of any change in either Tecogen’s or ADGE’s stock price.
Upon the closing of the Merger, each share of ADGE common stock will be converted into the right to receive 0.092 of a share of Tecogen common stock, with cash paid in lieu of fractional shares. This Exchange Ratio was fixed in the Merger Agreement and will not be adjusted for changes in the market price of either Tecogen common stock or ADGE common stock. Changes in the price of Tecogen common stock prior to the Merger will affect the market value of the Merger consideration that ADGE stockholders will receive on the date of the Merger. Stock price changes may result from a variety of factors (many of which are beyond either company’s control), including the following factors:
market reaction to the announcement of the Merger and Tecogen’s prospects following the Merger effective time;
changes in the business, operations, assets, liabilities, financial position and prospects of either company or in market assessments thereof;
changes in the operating performance of Tecogen, ADGE or similar companies;
changes in market valuations of similar companies;
market assessments of the likelihood that the Merger will be completed;
interest rates, general market and economic conditions and other factors generally affecting the price of Tecogen’s and ADGE’s common stock;
federal, state and local legislation, governmental regulation and legal developments in the businesses in which ADGE and Tecogen operate;
dissident stockholder activity;

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changes that affect Tecogen’s and ADGE’s industry, the U.S. or global economy, or capital, financial or securities markets generally; and
other factors beyond the control of either Tecogen or ADGE, including those described or referred to elsewhere in these “Risk Factors.”
The price of Tecogen common stock at the closing of the Merger may vary from its price on the date the Merger Agreement was executed, on the date of this joint proxy statement/prospectus and on the date of the Tecogen and the ADGE special meetings. As a result, the market value of the Merger consideration represented by the Exchange Ratio will also vary. For example, based on the range of closing prices of Tecogen common stock during the period from November 1, 2016, the last trading day before public announcement of the Merger, and March 17, 2017, the latest practicable date before the date of this joint proxy statement/prospectus, the Exchange Ratio represented approximately $0.35 in Tecogen common stock for each share of ADGE common stock.
Because the Merger will be completed after the date of the special meetings, at the time of your special meeting, you will not know the exact market value of Tecogen common stock that ADGE stockholders will receive upon completion of the Merger. As a result, you should consider the following two risks:
If the market price of Tecogen common stock declines between the date the Merger Agreement was signed or the date of the ADGE special meeting and the Merger effective time, ADGE stockholders will receive shares of Tecogen common stock that have a market value upon completion of the Merger that is less than the market value of such shares calculated pursuant to the Exchange Ratio on the date the Merger Agreement was signed or on the date of the ADGE special meeting, respectively.
If the market price of Tecogen common stock increases between the date the Merger Agreement was signed or the date of the Tecogen special meeting and the Merger effective time, ADGE stockholders will receive shares of Tecogen common stock that have a market value upon completion of the Merger that is greater than the market value of such shares calculated pursuant to the Exchange Ratio when the Merger Agreement was signed or the date of the Tecogen special meeting, respectively.
Under the Merger Agreement, and as a condition to the closing of the transaction, the Form S-4 registration statement, as amended, filed by Tecogen with the SEC relating to the registration of the shares of Tecogen to be issued in the Merger, of which this joint proxy statement/prospectus forms a part, is required to be declared effective by the SEC. If it is not declared effective by the SEC for any reason, or the SEC imposes a “stop order” or takes other administrative action with respect thereto, completion of the transaction may be jeopardized or the anticipated benefits of the transaction could be reduced.
On December 21, 2016, Tecogen filed a registration statement on Form S-4 under the Securities Act with the SEC to register the shares of Tecogen to be issued as consideration in the Merger and to include a joint proxy statement/prospectus pursuant to which Tecogen and ADGE are seeking required approvals of their respective stockholders of certain matters related to the Merger. The effectiveness of the Form S-4, as amended, is a condition to the ability of Tecogen and ADGE to solicit their respective stockholders to obtain required stockholder approvals and their ability to consummate the transaction. It is not a waivable condition. There can be no assurance that Tecogen’s Form S-4 registration statement, as amended, will be declared effective by the SEC, that Tecogen and ADGE will successfully close the transaction, or that they will realize the benefits of the proposed transaction.
The Merger Agreement contains a “go shop” provision permitting the board of ADGE to solicit competing offers for ADGE. Also, the agreement does not provide for a “breakup” fee in the event of a termination of the agreement by ADGE. Further, the Merger Agreement contains a “fiduciary out” provision permitting ADGE’s board to terminate the Merger Agreement; however, the Merger Agreement contains a provision that, upon such a termination, requires ADGE’s board of directors to negotiate in good faith with Tecogen amendments to the Merger Agreement that would obviate the need for such a termination. This provision could discourage a potential competing acquiror of ADGE.
The Merger Agreement contains a “go shop” provision which permits ADGE to initiate or solicit a competing acquisition proposal prior to approval of the issuance of the shares of Tecogen common stock to be issued in the Merger by Tecogen’s stockholders and the adoption of the Merger Agreement and approval of the Merger by ADGE’s stockholders. Also, the Merger Agreement does not provide for the payment of a break up or termination fee in the event ADGE terminates the Merger Agreement.
The Merger Agreement contains a “fiduciary out” provision the effect of which is that, before the closing of the Merger, ADGE’s board of directors may terminate the Merger Agreement if it (or a committee of the board) determines there is a reasonable probability the failure to take such action would cause ADGE’s board to violate its fiduciary duties to ADGE’s stockholders. However, before ADGE’s board (or its committee) withdraws, qualifies or modifies its recommendation of the transaction with Tecogen or terminates the Merger Agreement to enter into a third-party acquisition proposal, Tecogen has an opportunity to offer to modify the terms of the transaction.

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This provision could discourage a potential third-party acquiror that might have an interest in acquiring all or a significant portion of ADGE from considering or proposing that acquisition, even if it were prepared to pay consideration with a higher per share cash or market value than the market value proposed to be received or realized in the transaction, or might otherwise result in a potential third-party acquiror proposing to pay a lower price to ADGE stockholders than it might otherwise have proposed to pay.
Accordingly, if the Merger Agreement is terminated and ADGE decides to seek another business combination, it may not be able to negotiate or consummate a transaction with another party on terms comparable to, or better than, the terms of the Merger Agreement.
The unaudited pro forma condensed combined financial information in this joint proxy statement/prospectus is presented for illustrative purposes only and the operating results and financial condition of Tecogen following completion of the transactions contemplated by the Merger Agreement may differ and such differences may be material.
The unaudited pro forma condensed combined financial information in this joint proxy statement/prospectus is presented for illustrative purposes only and is not necessarily indicative of what Tecogen’s actual financial position or results of operations would have been had the transactions contemplated by the Merger Agreement been completed on the dates indicated. Further, Tecogen’s actual results and financial position following the completion of the Merger may differ materially and adversely from the unaudited pro forma condensed combined financial data that is included in this joint proxy statement/prospectus. The unaudited pro forma condensed combined financial information reflects adjustments based upon preliminary estimates of the fair value of assets to be acquired and liabilities to be assumed. The final acquisition accounting will be based upon the actual purchase price and the fair value of the assets and liabilities of Tecogen as of the Merger effective time. In addition, subsequent to the Merger closing date, there will be further refinements of the acquisition accounting as additional information becomes available. Accordingly, the final acquisition accounting may differ materially from the pro forma condensed combined financial information reflected in this document. See “Summary - Unaudited Pro Forma Condensed Combined Financial Information.”
Failure to complete the transaction could negatively impact Tecogen’s and ADGE’s stock prices and Tecogen’s and ADGE’s future business and financial results.
If the transaction is not completed for any reason, including as a result of ADGE’s stockholders failing to adopt the Merger Agreement or Tecogen's stockholders failing to approve the issuance of the Tecogen common stock in the Merger, Tecogen’s and ADGE’s ongoing businesses may be adversely affected and, without realizing any of the benefits of having completed the transaction, Tecogen and ADGE would be subject to a number of risks, including the following:
Tecogen and ADGE may experience negative reactions from the financial markets, including negative impacts on the stock prices and debt instruments of ADGE or Tecogen;
Tecogen and ADGE may experience negative reactions from their respective customers and employees;
Tecogen and ADGE will be required to pay certain costs relating to the transaction, whether or not the transaction is completed;
the Merger Agreement places certain restrictions on the conduct of Tecogen’s and ADGE’s businesses prior to completion of the transaction. Such restrictions, the waiver of which is subject to the consent of the other party (not to be unreasonably withheld, conditioned or delayed), may prevent Tecogen or ADGE from making certain acquisitions or taking other specified actions during the pendency of the transaction;
matters relating to the transaction (including integration planning) will require substantial commitments of time and resources by Tecogen’s and ADGE’s management, which would otherwise have been devoted to day-to-day operations and other opportunities that may have been beneficial to either Tecogen or ADGE as an independent company.
Further, Tecogen or ADGE could be subject to litigation related to any failure to complete the transaction or related to any proceeding commenced against Tecogen or ADGE to enforce performance of their respective obligations under the Merger Agreement. If the transaction is not completed, these risks may materialize and may adversely affect Tecogen’s and ADGE’s businesses, financial condition, financial results and stock prices.
The shares of Tecogen common stock to be received by ADGE’s stockholders as a result of the transaction will have rights different from the shares of ADGE’s common stock.
Upon completion of the transaction, ADGE’s stockholders will no longer be ADGE’s stockholders, but will instead become Tecogen stockholders, and their rights as stockholders will be governed by the terms of the Tecogen’s charter and the bylaws. With immaterial exceptions, the provisions of the ADGE and Tecogen charters and bylaws are substantially identical. See " Comparison of Rights of Tecogen's Stockholders and ADGE Stockholders."

29


Tecogen’s directors and executive officers have interests in the transaction that may be different from the interests of Tecogen’s stockholders.
Tecogen’s stockholders should be aware that Tecogen’s directors and executive officers have certain interests in the transaction that may be different from or in addition to the interests of Tecogen’s stockholders generally. These interests include the fact that certain of Tecogen’s directors and executive officers also serve as directors and executive officers of ADGE, the treatment in the transaction of ADGE’s stock options and restricted stock awards held by such directors and executive officers, and certain other rights held by such directors and executive officers, and the continued indemnification of such directors and executive officers by Tecogen.  Tecogen’s board was aware of these interests and considered them, among other things, in evaluating and approving the Merger Agreement and the transaction and in recommending that ADGE’s stockholders adopt the Merger Agreement and approve the Merger. See “Summary-Interests of Tecogen’s Directors and Executive Officers in the Merger” and “The Merger--Interests of Tecogen’s Directors and Executive Officers in the Merger.”
ADGE’s directors and executive officers have interests in the transaction that may be different from the interests of ADGE’s stockholders.
ADGE’s stockholders should be aware that ADGE’s directors and executive officers have certain interests in the transaction that may be different from or in addition to the interests of ADGE’s stockholders generally. These interests include the treatment in the transaction of ADGE’s stock options and restricted stock awards, and certain other rights held by ADGE’s directors and executive officers, and the continued indemnification of ADGE’s directors and executive officers by Tecogen.  ADGE’s board was aware of these interests and considered them, among other things, in evaluating and approving the Merger Agreement and the transaction and in recommending that ADGE’s stockholders adopt the Merger Agreement and approve the Merger. See “Summary - Interests of ADGE’s Directors and Executive Officers in the Merger” and “The Merger - Interests of ADGE’s Directors and Executive Officers in the Merger.”
The completion of the Merger is not conditioned on the receipt of an opinion of counsel to the effect that the transaction will qualify for the intended tax treatment, and neither ADGE nor Tecogen intends to request a ruling from the Internal Revenue Service regarding the United States federal income tax consequences of the transaction.
It is intended that, for United States federal income tax purposes, the Merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code (the “intended tax treatment”). However, the completion of the transaction is not conditioned on the transaction qualifying for the intended tax treatment or on the receipt of an opinion of counsel to that effect, and whether or not the transaction will qualify for the intended tax treatment depends on facts that will not be known until the transaction is completed. No assurance can be given that the transaction will qualify for the intended tax treatment. In addition, neither Tecogen nor ADGE intends to request a ruling from the Internal Revenue Service regarding the United States federal income tax consequences of the transaction. Accordingly, even if Tecogen and ADGE conclude that the transaction qualifies for the intended tax treatment, no assurance can be given that the Internal Revenue Service will not challenge that conclusion or that a court would not sustain such a challenge.
It will not be known at the time of the special meeting at which ADGE’s stockholders will be asked to vote on the adoption of the Merger Agreement and approve the Merger whether the requirements for the transaction to qualify for the intended tax treatment will be met.
Certain stockholders of ADGE have filed class action lawsuits seeking, among other things, to obtain a temporary and/or permanent injunction related to the proposed Merger.
On or about February 6, 2017, ADGE, John Hatsopoulos, George N. Hatsopoulos, Charles T. Maxwell, Deanna M. Petersen, Christine Klaskin, John Rowe, Joan Giacinti, Elias Samaras, Tecogen, and Tecogen.ADGE Acquisition Corp., were served with a Verified Complaint by William C. May, individually and on behalf of the other stockholders of ADGE as a class. The complaint alleges the proposed Merger is subject to certain conflicts of interest; that ADGE’s board failed to protect ADGE’s stockholders by failing to conduct an auction or market check; that the Exchange Ratio undervalues ADGE’s outstanding shares; that ADGE’s directors breached their fiduciary duties in approving the Merger proposal; that the registration statement on Form S-4 contained material omissions; that Tecogen aided and abetted breaches of fiduciary duties by the board of ADGE; and other claims. The plaintiff is seeking preliminary and permanent injunctions related to the Merger, rescissionary damages, compensatory damages, accounting, and other relief. If the court grants such relief or other relief to the plaintiff in such case, even if temporary, and Tecogen and ADGE may not be able to close the proposed transaction and realize the benefits of the proposed transaction. See “The Merger - Litigation Relating to the Merger.”
On or about February 15, 2017, a lawsuit was filed in the United States District Court for the District of Massachusetts by Lee Vardakas (“Vardakas”), individually and on behalf of other shareholders of ADGE, naming ADGE, John N. Hatsopoulos, George N. Hatsopoulos, Benjamin Locke, Charles T. Maxwell, Deanne M. Petersen, Christine M. Klaskin, John Rowe, Joan Giacinti, Elias Samaras, Tecogen Inc., Tecogen.ADGE Acquisition Corp., and Cassel Salpeter & Co., LLC, as defendants. Among other things, the complaint alleges that (1) the merger is the result of a flawed and conflicted sales process and that the Exchange

30


Ratio undervalues ADGE’s outstanding shares and (2) the registration statement on Form S-4 contains materially incomplete and misleading information concerning: (a) the financial analyses performed by ADGE’s financial advisor, (b) financial projections for ADGE and Tecogen, and (c) conflicts of interest in the sales process. The complaint asserts that defendants violated Section 14(a)(1) of the Securities Exchange Act of 1934, as amended (“Exchange Act”), and Rule 14a-9 thereunder, as a result of the alleged materially incomplete and misleading information; that the directors and officers of ADGE have control person liability for the alleged material misstatements and omissions pursuant to Section 20(a) of the Exchange Act; that the directors of ADGE breached their fiduciary duties to ADGE’s stockholders related to the merger, including that they failed to take steps to obtain the highest possible consideration for ADGE shareholders in the transaction; that Mr. John Hatsopoulos and Mr. George Hatsopoulos, acting in concert and as a group, as controlling shareholders of ADGE, violated their fiduciary duties to the shareholders of ADGE; and that Mr. George Hatsopoulos, Tecogen.ADGE Acquisition Corp., and ADGE’s financial advisor aided and abetted breaches of fiduciary duties by the directors and officers of ADGE.  Vardakas is seeking to certify a class action, a preliminary injunction, damages, costs and disbursements, including reasonable attorneys’ fees, and such other relief as the court deems just and proper.  If the court grants a temporary or permanent injunctive relief, or other relief to the plaintiff, Tecogen and ADGE may not be able to close the proposed transaction.

31


RISKS RELATING TO AN INVESTMENT IN TECOGEN COMMON STOCK FOLLOWING THE MERGER
The market price of Tecogen’s common stock after completion of the transaction will continue to fluctuate, and may be affected by factors different from those affecting shares of ADGE’s common stock currently.
Upon completion of the Merger, holders of ADGE’s common stock will become holders of shares of Tecogen’s common stock. The market price of Tecogen’s common stock may fluctuate significantly following consummation of the transaction and holders of ADGE’s common stock could lose the value of their investment in Tecogen common stock. The issuance of shares of Tecogen common stock in the Merger could on its own have the effect of depressing the market price for Tecogen common stock. In addition, many of ADGE’s stockholders may decide not to hold the shares of Tecogen common stock they receive as a result of the Merger. Other stockholders of ADGE, such as funds with limitations on their permitted holdings of stock in individual issuers, may be required to sell the shares of Tecogen common stock they receive as a result of the Merger. Such sales of Tecogen common stock may take place shortly following the completion of the transaction and could have the effect of depressing the market price for Tecogen common stock.
Moreover, general fluctuations in stock markets could have a material adverse effect on the market for, or liquidity of, the Tecogen common stock, regardless of Tecogen’s actual operating performance.
The business of Tecogen differs from that of ADGE’s in important respects, and, accordingly, the results of operations of Tecogen after the transaction, as well as the market price of Tecogen common stock, may be affected by factors different from those currently affecting the results of ADGE’s operations. Following the closing of the transaction, ADGE will be part of a larger company with other lines of business, so decisions affecting ADGE may be made in respect of the larger combined business as a whole rather than ADGE’s business individually.
After the transaction, ADGE's stockholders will have a significantly lower ownership and voting interest in Tecogen than they currently have in ADGE and will exercise less influence over management.
Based on the number of shares of ADGE's common stock outstanding as of March 17, 2017, and the number of shares of Tecogen common stock outstanding as of March 17, 2016, it is expected that, immediately after completion of the transaction, ADGE's former stockholders will own approximately 19% of the outstanding shares of Tecogen common stock. Consequently, ADGE's stockholders will have less influence over the management and policies of Tecogen than they currently have over ADGE's management and policies.
RISKS RELATING TO TECOGEN AND ITS OPERATIONS AFTER THE MERGER
Tecogen and ADGE may have difficulty attracting, motivating and retaining executives and other key employees in light of the transaction.
Tecogen’s success after the transaction will depend in part on the ability of Tecogen to retain key employees of ADGE. Competition for qualified personnel can be intense. Current and prospective employees of ADGE may experience uncertainty about the effect of the transaction, which may impair Tecogen’s and ADGE’s ability to attract, retain and motivate key management, sales, marketing, engineering, research and development, technical and other personnel prior to and following the transaction. Employee retention may be particularly challenging during the pendency of the transaction, as employees of ADGE may experience uncertainty about their future roles with the combined company.
If key employees of ADGE depart, the integration of the companies may be more difficult and/or the combined company’s business following the transaction may be harmed. Furthermore, Tecogen may have to incur significant costs in identifying, hiring and retaining replacements for departing employees and may lose significant expertise and talent relating to the business of ADGE, and Tecogen’s ability to realize the anticipated benefits of the transaction may be adversely affected. Accordingly, no assurance can be given that Tecogen will be able to attract or retain key employees of ADGE to the same extent that ADGE has been able to attract or retain employees in the past.
Tecogen’s and ADGE’s business relationships may be subject to disruption due to uncertainty associated with the transaction.
Parties with which Tecogen or ADGE do business may experience uncertainty associated with the transaction, including with respect to current or future business relationships with Tecogen, ADGE or the combined company. Tecogen’s and ADGE’s business relationships may be subject to disruption as customers, distributors, suppliers, vendors and others may attempt to negotiate changes in existing business relationships or consider entering into business relationships with parties other than Tecogen, ADGE or the combined company. These disruptions could have an adverse effect on the businesses, financial condition, results of operations or prospects of the combined company, including an adverse effect on Tecogen’s ability to realize the anticipated benefits of the transaction. In addition, the risk, and adverse effect, of such disruptions could be exacerbated by a delay in completion of the transaction or termination of the merger agreement.

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Although Tecogen expects that the transaction will result in synergies and other benefits to Tecogen, it may not realize those benefits because of difficulties related to integration, the realization of synergies, and other challenges.
Tecogen and ADGE have operated and, until completion of the transaction, will continue to operate, independently, and there can be no assurances that the respective businesses can be combined in a manner that allows for the achievement of substantial benefits. It is possible that there could be loss of Tecogen’s or ADGE’s key employees, the loss of customers, the disruption of either company’s or both companies’ ongoing businesses or unexpected issues, higher than expected costs and an overall post-completion process that takes longer than originally anticipated. Specifically, the following issues, among others, must be addressed in combining Tecogen’s and ADGE’s operations in order to realize the anticipated benefits of the transaction so the combined company performs as the parties hope:
combining the companies’ corporate functions;
combining Tecogen’s and ADGE’s businesses in a manner that permits Tecogen to achieve the synergies anticipated to result from the transaction, the failure of which would result in the anticipated benefits of the transaction not being realized in the time frame currently anticipated or at all;
maintaining existing agreements with customers, distributors, and vendors and avoiding delays in entering into new agreements with prospective customers, distributors, and vendors;
determining whether and how to address possible differences in corporate cultures and management philosophies;
integrating fully the companies’ administrative and technology infrastructures; and
effecting potential actions that may be required in connection with obtaining regulatory approvals.
In addition, at times the attention of certain members of either company’s or both companies’ management and resources may be focused on completion of the transaction and integration planning of the businesses of the two companies and diverted from day-to-day business operations, which may disrupt each company’s ongoing business and the business of the combined company.
The transaction may not be accretive, and may be dilutive, to Tecogen’s earnings per share, which may negatively affect the market price of Tecogen’s common stock.
Tecogen currently expects the transaction to be accretive to its adjusted earnings per share within 12 months after the completion of the transaction. This expectation, however, is based on preliminary estimates that may materially change. In addition, Tecogen could fail to realize all the benefits anticipated in the transaction or experience delays or inefficiencies in realizing such benefits. Such factors could, combined with the issuance of shares of Tecogen common stock in the Merger, result in the transaction being dilutive to Tecogen’s earnings per share, which could negatively affect the market price of shares of Tecogen’s common stock.
RISKS RELATING TO TECOGEN
We may be unable to fund our future operating requirements, which could force us to curtail our operations.
If the cash generated by operations is insufficient to fund our future operating requirements, we would need to raise additional funds through further public or private equity or debt financings depending upon prevailing market conditions. These financings may not be available to us, or if available, may be on terms that are not favorable to us and could result in significant dilution to our stockholders and reduction in the trading price of our stock. The state of worldwide capital markets could also impede our ability to raise additional capital on favorable terms or at all. If adequate capital were not available to us, we likely would be required to significantly curtail our operations or possibly even cease our operations.
If we experience a period of significant growth or expansion, it could place a substantial strain on our resources.
If our cogeneration and chiller products penetrate the market rapidly, we would be required to deliver even larger volumes of technically complex products or components to our customers on a timely basis and at a reasonable cost to us. We have never ramped up our manufacturing capabilities to meet significant large-scale production requirements. If we were to commit to deliver large volumes of products, we may not be able to satisfy these commitments on a timely and cost-effective basis.
Our operating history is characterized by net losses.
For each of our last five fiscal years and prior thereto, we have incurred annual operating losses. We do not expect this trend to continue. We believe we have adequate cash resources to reach the point of full year profitability. Even if we do achieve this annual profitability, we may be unable to increase our sales and sustain or increase our profitability in the future.

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We are dependent on a limited number of third-party suppliers for the supply of key components for our products.
We use third-party suppliers for components in all of our products. Our engine supplier, generator supplier for cogeneration products (other than the InVerde), and the compressor and vessel sets in our chillers, are all purchased from large multinational equipment manufacturers. The loss of one or more of our suppliers could materially, and adversely affect our business if we are unable to replace them. While alternate suppliers for the manufacture of our engine, generator and compressor have been identified, should the need arise, there can be no assurance that alternate suppliers will be available and able to manufacture our engine, generator or compressor on acceptable terms.
From time to time, shipments can be delayed because of industry-wide or other shortages of necessary materials and components from third-party suppliers, as well as shipping delays at points of importation. A supplier's failure to supply components in a timely manner, or to supply components that meet our quality, quantity, or cost requirements, or our inability to obtain substitute sources of these components on a timely basis or on terms acceptable to us, could impair our ability to deliver our products in accordance with contractual obligations.
The amount of Tecogen’s backlog is subject to fluctuation due to its customers’ experiencing unexpected delays in financing, permitting or modifications in specifications of the equipment.
Tecogen’s total product and installation backlog as of December 31, 2016 was $11.1 million compared to $11.6 million as of December 31, 2015. Although Tecogen expects its customers to issue definitive purchase orders with respect to such backlog, there can be no assurance that such amounts will not be subject to modification in the event customers experience unexpected delays in obtaining permits, interconnection agreements or financing. Any of such events may result in customers modifying the equipment or the terms or timing of the expected installation, which may result in changes to the amount of backlog attributed to those projects.
We expect significant competition for our products and services.
Many of our competitors and potential competitors are well established and have substantially greater financial, research and development, technical, manufacturing and marketing resources than we do. If these larger competitors decide to focus on the development of distributed power or cogeneration, they have the manufacturing, marketing and sales capabilities to complete research, development and commercialization of these products more quickly and effectively than we can. There can also be no assurance that current and future competitors will not develop new or enhanced technologies or more cost-effective systems, and therefore, there can be no assurance that we will be successful in this competitive environment.
If we are unable to maintain our technological expertise in design and manufacturing processes, we will not be able to successfully compete.
We believe that our future success will depend upon our ability to continue to develop and provide innovative products and product enhancements that meet the increasingly sophisticated needs of our customers.
However, this requires that we successfully anticipate and respond to technological changes in design and manufacturing processes in a cost-effective and timely manner. The development of new, technologically advanced products and enhancements is a complex and uncertain process requiring high levels of innovation, as well as the accurate anticipation of technological and market trends. There can be no assurance that we will successfully identify new product opportunities, develop and bring new or enhanced products to market in a timely manner, successfully lower costs, and achieve market acceptance of our products, or that products and technologies developed by others will not render our products or technologies obsolete or noncompetitive. 
The introduction of products embodying new technologies, and the shifting of customer demands or changing industry standards, could render our existing products obsolete and unmarketable. We may experience delays in releasing new products and product enhancements in the future. Material delays in introducing new products or product enhancements may cause customers to forego purchases of our products and purchase those of our competitors.
Our intellectual property may not be adequately protected.
We seek to protect our intellectual property rights through patents, trademarks, copyrights, trade secret laws, confidentiality agreements, and licensing arrangements, but we cannot ensure that we will be able to adequately protect our technology from misappropriation or infringement. We cannot ensure that our existing intellectual property rights will not be invalidated, circumvented, challenged, or rendered unenforceable.
Our competitors may successfully challenge the validity of our patents, design non-infringing products, or deliberately infringe our patents. There can be no assurance that other companies are not investigating or developing other similar technologies. In addition, our intellectual property rights may not provide a competitive advantage to us or ensure that our products and technology will be adequately covered by our patents and other intellectual property. Any of these factors or the expiration, termination, or invalidity of one or more of our patents may have a material adverse effect on our business.

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Others may assert that our technology infringes their intellectual property rights.
We may be subject to infringement claims in the future. The defense of any claims of infringement made against us by third parties could involve significant legal costs and require our management to divert time from our business operations. If we are unsuccessful in defending any claims of infringement, we may be forced to obtain licenses or to pay additional royalties to continue to use our technology. We may not be able to obtain any necessary licenses on commercially reasonable terms or at all. If we fail to obtain necessary licenses or other rights, or if these licenses are costly, our operating results would suffer either from reductions in revenues through our inability to serve customers or from increases in costs to license third-party technologies.
Our success is dependent upon attracting and retaining highly qualified personnel and the loss of key personnel could significantly hurt our business.
To achieve success, we must attract and retain highly qualified technical, operational and executive employees. The loss of the services of key employees or an inability to attract, train and retain qualified and skilled employees, specifically engineering, operations, and business development personnel, could result in the loss of business or could otherwise negatively impact our ability to operate and grow our business successfully.
Our business is subject to product liability and warranty claims.
Our business exposes us to potential product liability claims, which are inherent in the manufacturing, marketing and sale of our products, and we may face substantial liability for damages resulting from the faulty design or manufacture of products or improper use of products by end users. We currently maintain a moderate level of product liability insurance, but there can be no assurance that this insurance will provide sufficient coverage in the event of a claim. Also, we cannot predict whether we will be able to maintain such coverage on acceptable terms, if at all, or that a product liability claim would not harm our business or financial condition. In addition, negative publicity in connection with the faulty design or manufacture of our products would adversely affect our ability to market and sell our products.
We sell our products with warranties. There can be no assurance that the provision in our financial statements for estimated product warranty expense will be sufficient. We cannot ensure that our efforts to reduce our risk through warranty disclaimers will effectively limit our liability. Any significant occurrence of warranty expense in excess of estimates could have a material adverse effect on our operating results, financial condition and cash flow. Further, we have at times undertaken programs to enhance the performance of units previously sold. These enhancements have at times been provided at no cost or below our cost. If we choose to offer such programs again in the future, such actions could result in significant costs.
Utilities or governmental entities could hinder our entry into and growth in the marketplace, and we may not be able to effectively sell our products.
Utilities or governmental entities on occasion have placed barriers to the installation of our products or their interconnection with the electric grid, and they may continue to do so. Utilities may charge additional fees to customers who install on-site CHP and rely on the grid for back-up power. These types of restrictions, fees, or charges could make it harder for customers to install our products or use them effectively, as well as increasing the cost to our potential customers. This could make our systems less desirable, thereby adversely affecting our revenue and other operating results.
We may not achieve production cost reductions necessary to competitively price our products, which would adversely affect our sales.
We believe that we will need to reduce the unit production cost of our products over time to maintain our ability to offer competitively priced products. Our ability to achieve cost reductions will depend on our ability to develop low-cost design enhancements, to obtain necessary tooling and favorable supplier contracts, and to increase sales volumes so we can achieve economies of scale. We cannot assure you that we will be able to achieve any such production cost reductions. Our failure to do so could have a material adverse effect on our business and results of operations.
Our products involve a lengthy sales cycle and we may not anticipate sales levels appropriately, which could impair our results of operations.
The sale of our products typically involves a significant commitment of capital by customers, with the attendant delays frequently associated with large capital expenditures. For these and other reasons, the sales cycle associated with our products is typically lengthy and subject to a number of significant risks over which we have little or no control. We expect to plan our production and inventory levels based on internal forecasts of customer demand, which is highly unpredictable and can fluctuate substantially. If sales in any period fall significantly below anticipated levels, our financial condition, results of operations and cash flow would suffer. If demand in any period increases well above anticipated levels, we may have difficulties in responding, incur greater costs to respond, or be unable to fulfill the demand in sufficient time to retain the order, which would negatively impact our operations. In addition, our operating expenses are based on anticipated sales levels, and a high percentage of our expenses are generally fixed in the short term. As a result of these factors, a small fluctuation in timing of sales can cause operating results to vary materially from period to period.

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The economic viability of our projects depends on the price spread between fuel and electricity, and the variability of these prices creates a risk that our projects will not be economically viable and that potential customers will avoid such energy price risks.
The economic viability of our CHP products depends on the spread between natural gas fuel and electricity prices. Volatility in one component of the spread, such as the cost of natural gas and other fuels (e.g., propane or distillate oil), can be managed to some extent by means of futures contracts. However, the regional rates charged for both base load and peak electricity may decline periodically due to excess generating capacity or general economic recessions.
Our products could become less competitive if electric rates were to fall substantially in the future, noting that historically the rates have not had any sustained decline in price. Also, potential customers may perceive the unpredictable swings in natural gas and electricity prices as an increased risk of investing in on-site CHP, and may decide not to purchase CHP products.
We are exposed to credit risks with respect to some of our customers.
To the extent our customers do not advance us sufficient funds to finance our costs during the execution phase of our contracts, we are exposed to the risk that they will be unable to accept delivery or that they will be unable to make payment at the time of delivery.
We may make acquisitions or take other corporate strategic actions that could harm our financial performance.
To expedite development of our corporate infrastructure, particularly with regard to equipment installation and service functions, we anticipate the future acquisition of complementary businesses. Risks associated with such acquisitions include the disruption of our existing operations, loss of key personnel in the acquired companies, dilution through the issuance of additional securities, assumptions of existing liabilities, and commitment to further operating expenses. If any or all of these problems actually occur, acquisitions could negatively impact our financial performance and future stock value.
Investment in our Common Stock is subject to price fluctuations and market volatility.
Historically, valuations of many small companies have been highly volatile. The securities of many small companies have experienced significant price and trading volume fluctuations, unrelated to the operating performance or the prospects of such companies. The market price of shares of our Common Stock could be subject to wide fluctuations in response to many risk factors listed in this section, and others beyond our control, including:
results and timing of our product development;
results of the development of our competitors’ products;
regulatory actions with respect to our products or our competitors’ products;
actual or anticipated fluctuations in our financial condition and operating results;
actual or anticipated changes in our growth rate relative to our competitors;
actual or anticipated fluctuations in our competitors’ operating results or changes in their growth rate;
competition from existing products or new products that may emerge;
announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures, collaborations, or capital commitments;
issuance of new or updated research or reports by securities analysts;
fluctuations in the valuation of companies perceived by investors to be comparable to us;
share price and volume fluctuations attributable to inconsistent trading volume levels of our shares;
additions or departures of key management or personnel;
disputes or other developments related to proprietary rights, including patents, litigation matters, and our ability to obtain, maintain, defend or enforce proprietary rights relating to our products and technologies;
announcement or expectation of additional financing efforts;
sales of our Common Stock by us, our insiders, or our other stockholders; and
general economic and market conditions.
Furthermore, the stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. These fluctuations often have been unrelated or disproportionate to the operating performance of those companies. These broad market and industry fluctuations, as well as general economic, political, and market conditions such as recessions, interest rate changes, or international currency fluctuations, may negatively impact the market price of shares of our Common Stock. In addition, such fluctuations could subject us to securities class action litigation, which could result in substantial costs and divert our management’s attention from other business concerns, which could potentially harm our business.

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We experience significant fluctuations in revenues from quarter to quarter on our product sales.
We have low volume, high dollar sales for projects that are generally non-recurring, and therefore our sales have fluctuated significantly from period to period. For example, when compared to the previous quarter, our revenues in 2016 increased in each consecutive quarter. In 2015, our revenues increased during the first quarter, remained relatively flat in the second quarter, decreased in the third quarter, and slightly increased in the forth quarter. Fluctuations cannot be predicted because they are affected by the purchasing decisions and timing requirements of our customers, which are unpredictable.
We may be subject to litigation, which is expensive and could divert management attention.
Our share price may be volatile and in the past companies that have experienced volatility in the market price of their stock have been subject to an increased incidence of securities class action litigation. We may be the target of this type of litigation in the future. Securities litigation against us could result in substantial costs and divert our management’s attention from other business concerns, which could seriously harm our business.
If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our share price and trading volume could decline.
The trading market for our Common Stock will depend on the research and reports that securities or industry analysts publish about us or our business. We do not have any control over these analysts. There can be no assurance that analysts will cover us, or provide favorable coverage. If one or more analysts downgrade our stock or change their opinion of our stock, our share price would likely decline. In addition, if one or more analysts cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our share price or trading volume to decline.
Because our directors and executive officers are among our largest stockholders, they can exert influence over our business and affairs and have actual or potential interests that may depart from other stockholders or investors.
As of March 21, 2017, our directors and executive officers collectively beneficially own approximately 19.1% of our issued and outstanding common stock. Our directors and executive officers are entitled to cast an aggregate of approximately 3,522,833 votes on matters submitted to our stockholders for a vote or approximately 17.58% of the total number of votes entitled to be cast at a meeting of our stockholders. John Hatsopoulos, our co-Chief Executive Officer and a director, beneficially owns approximately 16.23% of our issued and outstanding common stock entitling him to cast an aggregate of approximately 3,252,395 votes on matters submitted to our stockholders for a vote or approximately 16.23% of the total number of votes entitled to be cast at a meeting of our stockholders. Additionally, the holdings of our directors and executive officers may increase in the future upon vesting or other maturation of exercise rights under any of the options or warrants they may hold or in the future be granted or if they otherwise acquire additional shares of our common stock. The interests of such persons may differ from the interests of our other stockholders. As a result, in addition to their board seats and offices, such persons will have influence over corporate actions requiring shareholder approval.
Such persons’ stock ownership may discourage a potential acquirer from making a tender offer or otherwise attempting to acquire us, which in turn could reduce our stock price or prevent our stockholders from realizing a premium over our stock price.
Current stockholdings may be diluted if we make future equity issuances or if outstanding warrants or options are exercised for shares of our common stock.
“Dilution” refers to the reduction in the voting effect and proportionate ownership interest of a given number of shares of common stock as the total number of shares increases. Our issuance of additional stock, convertible preferred stock and convertible debt may result in dilution to the interests of shareholders and may also result in the reduction of your stock price. The sale of a substantial number of shares into the market, or even the perception that sales could occur, could depress the price of the common stock. Also, the exercise of warrants and options may result in additional dilution.
As of December 31, 2016, an aggregate of 1,367,918 shares of common stock are issuable upon exercise of outstanding warrants and options. The holders of outstanding warrants (and other convertible securities or derivatives, if any are subsequently issued) have the opportunity to profit from a rise in the market price of our common stock, if any, without assuming the risk of ownership, with a resulting dilution in the interests of other stockholders. We may find it more difficult to raise additional equity capital if it should be needed for our business while the options, warrants and convertible securities are outstanding. At any time at which the holders of the options, warrants or convertible securities might be expected to exercise or convert them, we would probably be able to obtain additional capital on terms more favorable than that provided by those securities.
Future sales of common stock by our existing stockholders may cause our stock price to fall.
The market price of our common stock could decline as a result of sales by our existing stockholders of shares of common stock in the market or the perception that these sales could occur. These sales might also make it more difficult for us to sell equity securities at a time and price that we deem appropriate and thus inhibit our ability to raise additional capital when it is needed.

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Because we have not and do not intend to pay cash dividends, our stockholders receive no current income from holding our stock.
We have paid no cash dividends on our capital stock to date and we currently intend to retain our future earnings, if any, to fund the development and growth of our business. We currently expect to retain earnings for use in the operation and expansion of our business, and therefore do not anticipate paying any cash dividends in the foreseeable future. In addition, the terms of any future debt or credit facility may preclude us from paying any cash dividends. In addition, the Company’s outstanding convertible note provides that the Company shall not declare, pay or authorize any dividend without the prior consent of the note holder. As a result, capital appreciation, if any, of our common stock could be the sole source of gain for our stockholders for the foreseeable future.
Failure to comply with the Nasdaq Capital Market continued listing requirements could lead to the commencement of delisting proceedings in accordance the Nasdaq rules. Delisting could limit investors' ability to effect transactions in the Company's securities and subject the stock to additional trading restrictions.
The Company’s common stock is listed on the Nasdaq Capital Market, a national securities exchange. To maintain such listing, the Company is required to meet its continued listing requirements.  If the Company is unable to maintain the listing of its stock on Nasdaq or another exchange for failure to comply with the continued listing requirements, including timely filing of Exchange Act reports and compliance with Nasdaq’s corporate governance requirements, the Company and its security holders could face significant material adverse consequences including a limited availability of market quotations for its stock and a decreased ability to issue additional securities or obtain additional financing in the future.
Certain provisions of our charter and bylaws may discourage mergers and other transactions.
Certain provisions of our certificate of incorporation and bylaws may make it more difficult for someone to acquire control of us. These provisions may make it more difficult for stockholders to take certain corporate actions and could delay or prevent someone from acquiring our business. These provisions could limit the price that certain investors might be willing to pay for shares of our common stock. The ability to issue “blank check” preferred stock is a traditional anti-takeover measure. This provision may be beneficial to our management and the board of directors in a hostile tender offer, and may have an adverse impact on stockholders who may want to participate in such tender offer, or who may want to replace some or all of the members of the board of directors.
Our board of directors may issue additional shares of preferred stock without stockholder approval.
Our certificate of incorporation authorizes the issuance of up to 10,000,000 shares of preferred stock. Accordingly, our board of directors may, without shareholder approval, issue one or more new series of preferred stock with rights which could adversely affect the voting power or other rights of the holders of outstanding shares of common stock. In addition, the issuance of shares of preferred stock may have the effect of rendering more difficult or discouraging, an acquisition or change of control of us. Although we do not have any current plans to issue any shares of preferred stock, we may do so in the future.
Investor confidence in the price of our stock may be adversely affected if we are unable to comply with Section 404 of the Sarbanes-Oxley Act of 2002. As of December 31, 2016, our principal executive officers and principal financial and accounting officer have concluded there is a material weakness in our disclosure controls and procedures and our internal control over financial reporting, which could harm our operating results or cause us to fail to meet our reporting obligations.
As an SEC registrant, we are subject to the rules adopted by the SEC pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, which require us to include in our annual report on Form 10-K our management’s report on, an assessment of the effectiveness of, our internal control over financial reporting (“management’s report”). If we fail to achieve and maintain the adequacy of our internal control over financial reporting, there is a risk that we will not comply with all of the requirements imposed by Section 404. Moreover, effective internal control over financial reporting, particularly that relating to revenue recognition, is necessary for us to produce reliable financial reports and is important in helping to prevent financial fraud. Any of these possible outcomes could result in an adverse reaction in the financial marketplace due to a loss in investor confidence in the reliability of our financial statements, which ultimately could harm our business and could negatively impact the market price of our common stock. Investor confidence and the price of our common stock may be adversely affected if we are unable to comply with Section 404 of the Sarbanes-Oxley Act of 2002.
As of December 31, 2016, our principal executive officers and principal accounting officer performed an evaluation of disclosure controls and procedures and concluded that our controls were not effective to provide reasonable assurance that information required to be disclosed by our Company in reports that we file under the Exchange Act, is recorded, processed, summarized and reported as when required. Management conducted an evaluation of our internal control over financial reporting and based on this evaluation, management concluded that the company’s internal control over financial reporting was not effective as of December 31, 2016. The Company currently does not have personnel with a sufficient level of accounting knowledge, experience and training in the selection, application and implementation of generally acceptable accounting principles as it relates to complex transactions and financial reporting requirements. The Company also has a small number of employees dealing with

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general controls over information technology security and user access. This constitutes a material weakness in financial reporting. Any failure to implement effective internal controls could harm our operating results or cause us to fail to meet our reporting obligations. Inadequate internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our common stock, and may require us to incur additional costs to improve our internal control system.
In order to comply with public reporting requirements, we must continue to strengthen our financial systems and controls, and failure to do so could adversely affect our ability to provide timely and accurate financial statements.
Refinement of our internal controls and procedures will be required as we manage future growth successfully and operate effectively as a public company. Such refinement of our internal controls, as well as compliance with the Sarbanes-Oxley Act of 2002 and related requirements, will be costly and will place a significant burden on management.  We cannot assure you that measures already taken, or any future measures, will enable us to provide accurate and timely financial reports, particularly if we are unable to hire additional personnel in our accounting and financial department, or if we lose personnel in this area. Any failure to improve our internal controls or other problems with our financial systems or internal controls could result in delays or inaccuracies in reporting financial information, or non-compliance with SEC reporting and other regulatory requirements, any of which could adversely affect our business and stock price.
The JOBS Act allows us to postpone the date by which we must comply with certain laws and regulations and reduces the amount of information provided by us in reports filed with the SEC. We cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our Common Stock less attractive to investors.
We are and we will remain an “emerging growth company”, as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, until the earliest to occur of (i) the last day of the fiscal year during which our total annual gross revenues equal or exceed $1 billion (subject to adjustment for inflation), (ii) the last day of the fiscal year following the fifth anniversary of our initial public offering, (iii) the date on which we have, during the previous three-year period, issued more than $1 billion in non-convertible debt, or (iv) the date on which we are deemed a large accelerated filer under the Exchange Act.
For so long as we remain an emerging growth company we are not required to:
have an auditor report on our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act;
comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit ```firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (i.e., an auditor discussion and analysis);
submit certain executive compensation matters to shareholder non-binding advisory votes;
submit for shareholder approval golden parachute payments not previously approved; and
disclose certain executive compensation related items such as the correlation between executive compensation and financial performance and comparisons of the Chief Executive Officer’s compensation to median employee compensation, when such disclosure requirements are adopted.
In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, or the Securities Act, for complying with new or revised accounting standards. An emerging growth company can therefore delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. However, we have chosen to “opt out” of such extended transition period, and as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. Section 107 of the JOBS Act provides that our decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable.
We cannot predict if investors will find our Common Stock less attractive because we may rely on some of these exemptions. If some investors find our Common Stock less attractive as a result, there may be a less active trading market for our Common Stock and our stock price may be more volatile. If we avail ourselves of certain exemptions from various reporting requirements, our reduced disclosure may make it more difficult for investors and securities analysts to evaluate us and may result in less investor confidence.

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RISKS RELATING TO ADGE
ADGE has incurred losses, and these losses may continue.
ADGE has incurred losses in each of its fiscal years since inception. There is no assurance that profitability will be achieved in the near term, if at all in the future.
ADGE is dependent on a large customer. The loss of this customer could have an adverse effect on its financial results.
During the years ended December 31, 2016 and 2015, one of ADGE’s customers accounted for approximately 18.3% and 18.0% of revenue, respectively. Accounts receivable from this customer at December 31, 2016 and 2015 were 20.6% and 27.0%, respectively, of the total accounts receivable balance at each such year end. Although subject to a long-term contracts expiring through 2029, the loss of this customer could have a material adverse effect on ADGE’s financial condition and results of operations.
ADGE operates in highly competitive markets and may be unable to successfully compete against competitors having significantly greater resources and experience.
ADGE’s business may be limited by competition from energy services companies arising from the breakup of conventional regulated electric utilities. Such competitors, both in the equipment and energy services sectors, are likely to have far greater financial and other resources than ADGE, and could possess specialized market knowledge with existing channels of access to prospective customer locations. ADGE may be unable to successfully compete against those competitors.
ADGE’s ability to access capital for the repayment of debts and for future growth is limited as the financial markets can be unpredictable.
ADGE’s ability to access capital could be impacted by various factors including general market conditions or a slowdown in the economy, interest rates, the perception of its potential future earnings and cash distributions, any unwillingness on the part of lenders to make loans to ADGE and any deterioration in the financial position of lenders that might make them unable to meet their obligations to ADGE. ADGE can provide no assurance that capital will be available on favorable terms, if at all.
Because unfavorable utility regulations make the installation of ADGE’s systems more difficult or less economical, any slowdown in the utility deregulation process would be an impediment to the growth of ADGE’s business.
In the past, many electric utility companies have raised opposition to DG, a critical element of ADGE’s On-Site Utility business. Such resistance has generally taken the form of stringent standards for interconnection and the use of targeted rate structures as disincentives to combined generation of on-site power and heating or cooling services. A DG company's ability to obtain reliable and affordable back-up power through interconnection with the grid is essential to ADGE’s business model. Utility policies and regulations in most states are often not prepared to accommodate widespread on-site generation. These barriers erected by electric utility companies and unfavorable regulations, where applicable, make more difficult or uneconomic ADGE’s ability to connect to the electric grid at customer sites and are an impediment to the growth of ADGE’s business. The development of ADGE’s business could be adversely affected by any slowdown or reversal in the utility deregulation process or by difficulties in negotiating backup power supply agreements with electric providers in the areas where ADGE intend to do business.
The economic viability of ADGE’s projects depends on the price spread between fuel and electricity, and the variability of the prices of these components creates a risk that ADGE’s projects will be uneconomic.
The economic viability of DG projects is dependent upon the price spread between fuel costs and electricity prices. Volatility in one component of the spread, the cost of natural gas and other fuels (e.g., propane or distillate oil) can be managed to a greater or lesser extent by means of futures contracts. However, the regional rates charged for both base load and peak electricity services may decline periodically due to excess capacity arising from over-building of utility power plants or recessions in economic activity. Any sustained weakness in electricity prices could significantly limit the market for ADGE’s cogeneration, cooling equipment and On-Site Utility energy services and have a material adverse effect on ADGE’s business and financial performance.
ADGE may be exposed to substantial liability claims if ADGE fails to fulfill ADGE’s obligations to its customers.
ADGE enters into contracts with large commercial and not-for-profit customers under which it assumes responsibility for meeting a portion of the customers' building energy demand and equipment installation. ADGE may be exposed to substantial liability claims if ADGE fail to fulfill its obligations to its customers. There can be no assurance that ADGE will not be vulnerable to claims by customers and by third parties that are beyond any contractual protections that ADGE are able to negotiate. ADGE may be unable to obtain liability and other insurance on terms and at prices that are commercially acceptable to ADGE. As a result, liability claims could cause ADGE significant financial harm.

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Expiring customer contracts may lead to decreases in revenue and increases in expenses.
One of ADGE’s customer contracts has an expiration date in 2017 and three in 2018 which, if not extended, may lead to decreases in revenue. This decrease in revenue will be due to less energy billing. Expiring customer contracts can also lead to an increase in expenses because ADGE will have to remove the equipment at the customer location. ADGE will remove the equipment at its own expense and is obligated to do so at the end of the customer contract.
Each year, a portion of ADGE’s customer contracts expire and need to be renewed or replaced. ADGE may not be able to renew or extend contracts with its existing customers or obtain replacement contracts at attractive rates or for the same term as the expiring contracts.
ADGE may fail to make sales to certain prospective customers because of resistance from facilities management personnel to the outsourcing of their service function.
Any outsourcing of non-core activities by institutional or commercial entities will generally lead to reductions in permanent on-site staff employment. As a result, ADGE’s proposals to implement On-Site Utility contracts are likely to encounter strong initial resistance from the facilities’ managers whose jobs will be threatened by energy outsourcing. The growth of ADGE’s business will depend upon ADGE’s ability to overcome such barriers among prospective customers.
Future government regulations, such as increased emissions standards, safety standards and taxes, may adversely impact the economics of ADGE’s business.
The operation of DG equipment at ADGE’s customers' sites may be subject to future changes in federal, state and local laws and regulations (e.g., emissions, safety, taxes, etc.). Any such new or substantially altered rules and standards may adversely affect ADGE’s revenues, profits and general financial condition.
If ADGE cannot expand ADGE’s network of skilled technical support personnel, ADGE will be unable to grow ADGE’s business.
Each additional customer site for ADGE’s services requires the initial installation and subsequent maintenance and service of equipment to be provided by a team of technicians skilled in a broad range of technologies, including combustion, instrumentation, heat transfer, information processing, microprocessor controls, fluid systems and other elements of DG. If ADGE is unable to recruit, train, motivate, sub-contract, and retain such personnel in each of the regional markets where ADGE’s business operates ADGE will be unable to grow its business in those markets.
Future technology changes may render obsolete various elements of equipment comprising ADGE’s On-Site Utility installations.
ADGE must select equipment for ADGE’s DG projects so as to achieve attractive operating efficiencies, while avoiding excessive downtimes from the failure of unproven technologies. If ADGE is unable to achieve a proper balance between the cost, efficiency and reliability of equipment selected for its projects, ADGE’s growth and profitability will be adversely impacted.
ADGE will need to raise additional capital for its business, which will dilute existing stockholders.
In the event the Merger is not consummated, ADGE expects to require additional financings to implement its overall business plan. Equity financings will dilute the percentage ownership of ADGE’s existing stockholders. ADGE’s ability to raise an adequate amount of capital and the terms of any capital that it is able to raise will be dependent upon its progress in implementing demonstration projects and related marketing service development activities. If ADGE does not make adequate progress, ADGE may be unable to raise adequate funds, which will limit its ability to expand its business. If the terms of any equity financings are unfavorable, the dilutive impact on ADGE’s stockholders might be severe.
ADGE’s revenue from energy billing is partly dependent on the weather and increased temperatures could reduce ADGE’s revenue.
In warmer months the customers are not using as much thermal energy as they do not have as much of a demand to heat their locations. Due to the demand being lower in warmer months ADGE may not be able to bill for thermal energy and in turn may have a decrease in revenue.
Certain characteristics of specific sites may make it difficult to install and maintain ADGE’s equipment.
When entering into customer contracts there is a risk that the customer's site will not be well-suited for ADGE’s equipment. In certain situations, installing and maintaining ADGE’s equipment at a customer's site may cost more than anticipated, which could lead to an increase in expenses. This has the potential to lead to a decrease in revenue if the site is not capable of running properly.

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