TECOGEN INC. Form 8-K Summary
Business Context and Reporting Period
This Current Report on Form 8-K was filed on December 17, 2018, covering events occurring on December 14, 2018. The filing details a material definitive agreement involving Tecogen Inc. (the "Corporation"), its subsidiary American DG Energy Inc. ("ADGE"), and TTCogen LLC (collectively, the "Borrowers") with their lender, Webster Business Credit Corporation.
Key Financial Metrics and Transaction Details
The filing does not provide standard financial statements, revenue, profit, or cash flow metrics. Instead, it reports on specific transactional financial impacts:
- Asset Sale Proceeds: ADGE sold all equity interests in a newly formed subsidiary ("Newco") to an unrelated third party for $2 million.
- Debt Application: The $2 million proceeds were deposited into ADGE's account with the Lender and applied directly against the outstanding balance under the Credit Agreement dated May 4, 2018.
- Liquidity Impact: The transaction increased the amount available to the Borrowers under the Credit Agreement by reducing the outstanding balance and lowering the availability reserve requirement.
Material Changes and Agreements
The Corporation entered into Amendment No. 1 and Waiver No. 1 to its Credit Agreement. Key changes include:
- Waivers Granted: The Lender waived restrictions to permit the formation and sale of Newco and waived a default regarding the requirement to maintain certain Minimum Availability.
- New Obligations: The Corporation entered into a Billing and Asset Management Agreement and an Operation and Maintenance Service Agreement. Under these terms, the Corporation will manage on-site utilities transferred to Newco, guarantee minimum collections, and receive 50% of collections in excess of agreed minimums.
- Use of Funds: A substantial portion of the increased availability under the Credit Agreement will be used to complete construction of the on-site utilities managed by the Corporation.
- Verify the full text of Amendment No. 1 and Waiver No. 1 filed as Exhibit 99.01 to understand specific covenants and restrictions.
- Confirm the current outstanding balance of the Credit Agreement post-application of the $2 million proceeds.
- Assess the financial viability of the on-site utilities to ensure the Corporation can meet its guarantee of minimum collections.
- Review the construction timeline and budget for the on-site utilities to evaluate the utilization of the increased credit availability.
Outlook, Risks, and Management Commentary
Management commentary is limited to the description of the transaction's purpose: to facilitate the sale of Newco and secure funding for ongoing construction projects. The filing notes that the Corporation now guarantees payment of certain minimum collections from the transferred utilities, introducing a contingent liability tied to the performance of these assets. No specific forward-looking guidance or risk factors beyond the transaction details are provided in this filing.