Greetings, and welcome to the Tecogen Second Quarter 2018 Results Call. At this time all participants are in a listen only mode, a brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ms. Bonnie Brown, Chief Accounting Officer. Thank you. You may begin.

Thank you, Michelle. Good morning, and thank you all for joining our second quarter 2018 earnings call. On the call with me today are Benjamin Locke, our CEO; and Robert Panora, President and Chief Operating Officer. Before I begin, I’d like to read our safe harbor statement. This conference call and any accompanying documents containing forward-looking statements, which may describe strategies, goals, outlooks or other non-historical matters or projected revenues, income, returns or other financial measures that may include words such as belief, expect, anticipate, intent, plan, estimate, project, target, potential, will, should, could, likely or may and similar expressions intended to identify forward-looking statements. These statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause our actual results to differ materially from those expressed or implied by such forward-looking statements. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Forward-looking statements speak only as of the date on which they are made, and we undertake no obligation to update or revise any forward-looking statements. In addition to those factors described in our annual report on Form 10-K and our quarterly reports on Form 10-Q under risk factors, among the factors that could cause actual results to differ materially from past and projected future results are the following: fluctuations in demand for our products and services; competing technological developments; issues relating to research and development; the availability of incentives, rebates and tax benefits relating to our products and services; changes in the regulatory environment relating to our products and services; integration of acquired business operations; and the ability to obtain financing on favorable terms to fund existing operations and anticipated growth. In addition to GAAP financial measures, this presentation includes certain non-GAAP financial measures, including adjusted EBITDA, which excludes certain expenses as described in the presentation. We use adjusted EBITDA as an internal measure of business operating performance, and believe that the presentation of non-GAAP financial measures provides a meaningful perspective of the underlying operating performance in our current business and enables investors to better understand and evaluate our historical and prospective operating performance by eliminating items that vary from period to period without correlation to our core operating performance and highlights trends in our business that may not otherwise be apparent when relying solely on GAAP financial measures. I’ll now turn the call over to Ben for a business update.

Thank you, Bonnie. So as the agenda indicates on Slide 4, I’ll start by reviewing the company’s performance and financial results for the quarter along with recent achievements and accomplishments. Bob will then give an overview of our emissions technology development followed by Bonnie with more detail on the financials. I will then have some final remarks before we take questions. As always, I’d like to remind investors who may be new to our company about Tecogen’s core business model shown on Slide 5: heat, power and cooling that is cheaper, cleaner and more reliable. Our proprietary technology for improving efficiency, emissions and grid resiliency is truly disruptive to the traditional methods of heating, cooling and powering buildings and infrastructure. Turning to Slide 6. The second quarter of 2018 saw revenues of $8.5 million, an 11% increase over the second quarter of 2017. This brings our trailing four quarter revenues to $37.4 million, an almost 33% increase year-over-year. Resulting trailing four quarters gross profit was $14.1 million. Trailing four quarters adjusted EBITDA, which is more representative of cash flows, was a little over $800,000 only slightly lower than the previous year. As shown in the chart our previous eight quarters of EBITDA positive operations demonstrate the sustained step to profitability on an annualized basis. ADG Energy production revenues came in at approximately $1.5 million for the quarter generating approximately $669,000 of profit. Moving onto Slide 7. In addition to the 11.4% increase in revenues we achieved total gross margin of 37.4% helped by strong product margins of almost 40% and hindered slightly by lower installation margins for the quarter, which impacted service margins. Our operating expenses for the quarter were also higher by 17% quarter-over-quarter, while a number of factors drive our operational expenses notable increases are in our R&D…

Good morning and thank you, Ben. My discussion today will cover our initiatives pertaining to the emission system technologies that I’ve reported on regularly. I will first review progress regarding our research program to develop a low-emissions fork truck. As discussed in our Q1 earnings call, the program was just about complete. The Ultera fork truck performed very well in our testing, and we’re about to host a meeting with the manufacturing partner for detailed design review and demonstration. That meeting has taken place and went very well, and the follow-up has been positive, which I’ll discuss more momentarily. Secondly, I will provide the status of our automotive program, which is underway with a subcontractor. And then lastly, I will update miscellaneous items in the emissions area, and I will comment about the UL certification just mentioned by Ben, as I believe this to be an important bellwether for distributed generation and its relationship to the electric grid. So let’s begin with the fork truck. The funding program, which lasted 16 months, was completed in June with our final report submission to our sponsor, the Propane Education & Research Council, PERC. The report details the modifications made to a fork truck supplied by a prominent manufacturer, and of course, the impact of the Ultera device on the emissions. They're very complimentary of our efforts and results, and I believe they recognize that our system is highly effective, practical and very much needed to preserve their long-term market presence. I've discussed the market performance in some detail. I won't do so today except to say regulations are getting tighter, especially in California. Owners need to maintain fleet emissions profiles within targets, and manufacturers are required to meet stricter standards for what they can sell. But even without the regulatory drivers, preserving…

Thank you, Bob. Moving on to the second quarter as results. Slide 13 contains some of the highlights of the year-on-year financial results. Total revenues for the quarter increased by 11.4% compared to Q2 2017 on a trailing four quarters basis, total revenue growth was 33%, reaching record revenue level of $37.4 million compared to $28.2 million for the same trailing four quarters period a year ago. Total service revenue grew 21% for the quarter, compared to Q2 2017 and continued steady growth delivering more than half of our product and service revenue for the quarter. Long-term service contract and part sales decreased slightly by 2.6% on a year-over-year basis and continue to provide its reliable annuity like revenue stream. Energy production revenue from our ADG sites contributed $1.5 million to our revenue for the quarter. This revenue stream adds an important second source of annuity like revenue and cash flows with its long term contracts. Product gross margin was 39.9% for Q2 2018, compared to 36.9% for Q2 2017, an 8% improvement in product gross margin year over year. Service margin with 33.6% for Q2 2018, compared to 37.6% for Q2 2017. Installation projects, which carry a lower margin than service maintenance contracts, were a higher percentage of the product mix as compared to the same period last year, bringing the overall service margin down on a comparative basis. Energy production activities from the ADG fleet provided a 44.3% gross margin and $669,000 in gross profit, bringing our overall consolidated gross margin to 37.4% and consolidated gross profit to $3.2 million for Q2 2018 compared to 39.3% and $3 million for Q2 2017, an increase of $173,000 or 5.8% in gross profit year-over-year. Net loss attributable to Tecogen for the quarter was $754,000 compared to a comprehensive loss of…

Thanks, Bonnie. So as we look forward to the rest of 2018, I'd like to reiterate some of the trends in market forces that favor Tecogen's clean, reliable distributed generation systems. As utility continues to trend away from a central generation model to a distributed generation, more sophisticated controls and operational flexibility is needed to help maintain overall grid stability. Our InVerde e+ system now has the required certification needed to provide these grid support services and in conjunction with our microgrid capabilities and near-zero emissions, provides far more reliable, consistent and robust power to an electricity market that is already huge and growing each year. While solar and fuel cells continue to have their place in the DG market, reliable, inexpensive natural gas is the most cost-effective way to displace traditional centralized electric generation. As I mentioned, we are uncovering many high-value applications for our gas engine cooling technology and expect to grow that segment of our business substantially in the coming quarters. And of course, our emissions technology continues to make progress towards larger market applications such as fork trucks and eventually gasoline vehicles.We anticipate more compelling results in our emissions program in the coming months, and we'll share developments as they occur. I am very happy with how Tecogen is positioning itself for the coming years. Our fundamental business is strong and growing. Our product advantages are well understood and embraced by the industry. And our emissions technology offers tremendous upside and value creation for our shareholders. It is a great time to be a Tecogen shareholder, and I hope to continue our tremendous achievements throughout the rest of the year. With that, I'd like to turn it over to the operator for questions.

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Craig Irwin with ROTH Capital Partners. Please proceed with your question.

Good morning and thanks for taking my question. First of all, I should say congratulations for that $20 million-plus backlog. That's a big achievement there. So the question I wanted to ask you guys is chillers seem to be gaining momentum for you. Can you maybe give us a little bit more detail about the attributes of the product? What's differentiated versus other chillers available in the market? Because there's many, many other options for people to choose. Why are they choosing Tecogen? And is there an opportunity maybe to diversify this offering and catch more wind in the sails?

Yes, a great question. Indeed, we're finding a niche with this stuff. So there's electric chilling, of course, which is kind of ubiquitous. These air source and water source electric units that are out there, tremendous, billion-dollar industry out there. Our Tecochill is obviously different because we're using natural gas to run it instead of electricity, and of course, that's the whole value proposition as your electric meter's turning that much less, albeit with a gas chiller instead of electric chiller. There has been – there are other ways to chill with natural gas, but typically, it's something called absorption chilling. And what that typically does is either fires natural gas into absorption chiller and at a very low efficiency, we'll get you some chilled water. A lot of time, very large cogeneration systems like a megawatt or 2-megawatt system will take all that heat and put it in the absorber to make chilled water. Now those – these absorption chillers are, again, very inefficient, and it's kind of the installation of last resort to use that hot water. That often gets confused with our Tecochill. That's why I went to the effort of explaining that to you. Our Tecochills are different than these absorption chillers. These are direct natural gas-fired engines driving the compressor. And then after that, it looks just like an electric chiller. From the neck down, the evaporator, the condensers, all of the footprint, all the connections are very much the same as an electric chiller. It's just that we have our engine and our natural gas feedstock in front of it. So at very high COP, much, much higher than these absorption chillers, so very efficient. Again, You get the hot water by-product, which only adds to the value proposition. And most importantly, Craig, we're…

No, that captures it really well. Thank you for that. If I could ask a second one, I wanted to ask about the Ultera emissions technology. You guys have been vocal out there, presenting papers and working with a variety of interesting customers there. Can you maybe outline for us briefly sort of what you're looking at as items you expect to accomplish over the next handful of quarters related to the commercial prove-out and commercial launch of this technology and potential time line for us to either see direct product revenues or license revenues related to Ultera?

Yes, I'll take that. It's Bob Panora. My anticipation in the next few quarters is we really want to get a commercial agreement with our fork truck friends. And that will mean that the technology has passed an important milestone as far as others we might be engaged with. And as I said, the propane industry was very instrumental in getting us funding and helping us introduce to these different fork truck manufacturers. I think that's going to be an opening. And I've talked to them, I know this to be true, is that if we have a success in this not-a-huge market of fork trucks that we would be introduced to the larger market of natural gas and propane-powered vehicles, which are in a larger class, I think, of stuff. And so I think that's – this will be an important wedge for us to get into the commercial aspect of the technologies, which is really what we want. And I think the pathway is an easier one when you go through these gradual steps of the fork truck applications to the larger applications that are easier than, say, jumping into automotive. So I think there's a very good chance that'll be what the short term what you see in this program.

And I will just add a little bit on it. Absolutely correct that the notion of taking this very compelling emissions in our results from AVL that we did last year and everything, and go running to an automobile manufacturer and hoping to develop the technology that way, that's a hope, but it's a long road to hope to go through the automotive industry. I think we've kind of found that out ourselves. So much more pragmatic, and I think demonstrating approach is incrementally, we got these fork trucks of the technology development to develop this fork truck prototype and to get it deployed is very similar, if not exactly similar to the development will be doing for gasoline vehicles. So it's accomplishing the same thing. As we talked, I believe, in the previous call, you can envision the rollout of the Ultera emissions for vehicles, perhaps, not in the billions of billions of cars, but perhaps in a very segmented part of the market that we can address, for example, trucks. Natural gas trucks are getting retrofitted all the time for different customers. A very natural fit would be for us to deploy our Ultera emissions on a vehicle that's otherwise getting retrofitted as a natural gas vehicle, and then there you are. Now you've got a small fleet that's been deployed and out there and accomplished. And I think, pragmatically, that's a better way to get this out there than try to do the end run to directly to an automobile or OEM manufacturer.

Great. Thank you for that. I’ll go ahead and hop back in the queue. Congrats again, on the backlog momentum.

Thank you. Our next question comes from the line of Michael Zuk with Oppenheimer & Company. Please proceed with your question.

Good morning, Ben and Bob. I have a question regarding the accomplishments in our indoor farming. How many systems have we installed? And what's the number of systems under contract? And how's the backlog looking?

Sure. Roger, I don't have the exact number of indoor growing facilities at my fingertips. I know it's probably greater than seven and it could be as high as 10 or 12. I promise you, I'll send you that later. I think I made mention of it last quarter what the count was but didn't add to it. But suffice to say, we've got plenty more in the backlog in the Q. I believe I mentioned in the press release that we have a backlog number for specifically are these chillers. And I'll tell you, the chiller sales are important for a number of reasons, Roger, which I'm sure you understand. But it's a very transactional sale, meaning that people do this all the time. People have hemmed and hawed about cogen systems, but people don't hem and haw about cooling because they have to have it. And so they can't just ignore it. They buy coolers, people write checks all the time. It's a part of the natural course of business for industry to work with engineering companies to get their HVAC and cooling solutions in place. So we're part of that now, but importantly, we're part of a much more thoughtful process than – I don't want to say unthoughtful process, but more of a cogeneration is, "Well, I want it, but do I need it." These are transactional things. They're going to occur. These chillers sales happen quickly. We are making a concerted effort to stay in front of it, to keep inventory. So if somebody says, "I need it in two weeks because my chiller went down," well, we can accommodate that. So the growth of this segment, not just indoor growing, but just as the industry starts looking more to natural gas chilling, I think we're really on the coattails of a very strong wave here. So I think I hope I answered most of your question. Roger, I'm sorry I don't have the exact numbers of the growth facilities, but I can get that back to you afterwards.

And then as a follow-up, is there a particular geography that is amenable to the gas chilling systems?

Sure. Yes, a very good question. Yes. The old metric of high electric rates and low gas rates applies, the spark spread as we call it. But because of the chiller and because you actually can measure the chiller value against the incremental cost of putting an electric chiller in, meaning that they would've had to spend some money anyways, means that you're not as prone to that spark spread as you were, say, for cogen, meaning that in areas that the electric rate is maybe not as compelling – maybe $0.09 or $0.10, but as long as you got a good, solid gas rate, it makes a lot of sense particularly for our markets like hospitals and health care, we can use the hot water derivative. And again, for the growth facilities as I mentioned, they use that hot water even for heating the plants or for more likely dehumidification. So when you're able to have cheap natural gas and use both the chilling and the heat recovery, your geographical adjustable market is expanded beyond just cogen. So that's the long way of saying, you're up and down the East Coast certainly, Roger. You're up and down the West Coast. But some of these states with kind of middling electric rates start to come more into play, particularly as the electric chillers kind of – the gas chillers do something else, too. It reduces how much backup power you need. And again, these growing facilities are realizing this, and I think that you have to understand, Mike, that they are concerned about resiliency as well. So any type of way that they can cut their power consumption, if they do want to put in CHP or they do want to put in natural gas generators, you've already probably halved their electric load, and therefore, halved the amount of CapEx they're going to need to do it. So Mike, I think it's a great market, we're pretty happy that we've got as far as we can, the indoor growing is a start. I think what the indoor growing really did for us, and I'll stop here, is allow us to explore how business is done with these engineering companies for a much more transactional process of equipment sale, being cogen which sometimes tends to be a little more reflective if they go forward.

Well, again, congratulations on real progress and look forward to the next quarter.

Our next question comes from the line of Roger Liddell with Clear Harbor Asset Management. Please proceed with your question.

Good morning. A couple of things that you didn't touch on, and I take it, it's because they are of less immediate impact than what you were discussing on the call. With the recent change in Florida's regulation for the health care facilities, is there – how should I think about the opportunity in Florida? And can you exploit it?

Yes. It is a great opportunity, Roger. It was a tragedy, of course, what happened there. When critical care facilities lose their ability to cool, it's – very bad things can happen. So indeed, it's an opportunity for our Tecochills and for appropriately scaled-size facilities, and as you know, we don't deal with 50-unit facilities. These are appropriately sized facilities, absolutely something that is needed by now. We're starting up – I believe we mentioned last quarter, but I'll say it again for those who might have missed it. Our 10th service center is going to be in Florida, and in fact, we stood up that was something that was a little slow to happen earlier in the year. But we have our 10th service center located in Florida specifically for that reason, Roger. We've got a good population of engines already there, a mixture of cogeneration, a mixture of heat pumps and some cogen that warranted us having an individual down there. And as these things go, I think I've said in previous calls, it starts with a service tech servicing the local population of engines. And then you get another service tech as the population grows, and then those people become a little bit salesman-ish. And then next thing you know, you've got your next kind of localized business segment. So that's exactly what we're expecting from Florida. And it's not just Florida. It's the surrounding states as well, Southeastern United States. But even more importantly, that's really the touchtone for the Caribbean. As I start to carefully think about how some of our products might fit, say, in Puerto Rico or some of these other areas, Florida and our service people that we set up there, it's going to be increasingly important.

Following up on that specific point. In your prepared remarks, you were speaking of the circulating refrigerant technology. You're still servicing them. They're still alive. And this – in fact, the embers could be blown back into a flame pretty quickly. If Tecochills were difficult – I think it's 120-ton to 240-ton sizes that may have in quotes priced to you, outer sized you out of a reasonable market, could the circulating refrigerant technology tap those, I take it, smaller facilities?

Yes, absolutely, Roger. In fact, one of the real beauties of this product, and you're right, we've got these things out there and we've got the manuals done. And believe me, a new product launch is not easy. So having an existing product that you just had – you said rolling off the manuals, and you already got service techs trained, makes it much more practical to do. And the nature of this, the technology, without going too much down the detail of it, is it's very incremental. You could attack a very large industrial site and just hit a couple of their electric pumps, circulating refrigerants in that particular cooling area of the building. And then a few weeks later, a few months later, you could do different part. So you could incrementally deploy this throughout many different type of HVAC systems in a building to allow them to incrementally see the savings, incrementally feel comfortable with gas cooling instead of the electric cooling. And I think Bob wants to add a little bit more on to that.

Yes. So the sizes – I was a little confused when you said about the sizes, Roger. You mentioned 120, I think, 240. The Tecochill is 400 tons and then 350 then 200 and 150. And if you operate them as refrigeration, low temps, they go down in capacity because that’s how the rules work. So those sizes of Tecochills, we actually have a smaller air cool version. Now on the refrigeration side, the industrial refrigeration product that we’re thinking about rolling out, that would be about 150-horsepower of engine. And depending on the temperature of the refrigerator, it could be about 200 tons or it can be down to 80 or 90 tons if it was making zero-degree ice-cold storage like for ice cream and stuff like that. So maybe I didn’t answer your question. If I didn’t, just tell me what…

I think what you’re saying is the actual tonnage is related to the temperature that you’re cooling to.

Right. And the horsepower is what you’re selling. You’re selling a 150-horsepower or 120 kilowatts whether it converts to electric reduction in the cooling system. In the old – and the size that we did in the early 2000s and earlier, typically, they would buy six of them or four of them or two of them, and they’d line them up in a storage warehouse and they all feed into header that was distributing ammonia into the cold storage place. So that’s how they’re deployed. So you don’t need a lot of sizes. You just need a little space to gang them up.

Okay. That’s useful. I hope in the future call, there’ll be enough development there for you to update us on it. My last question is, I’m trying to understand whether there is an opportunity with utilities themselves, the electrics, my wording would be the utilities used to be intolerant of DG. This was an enemy. It was competition. Then grudging acceptance. And taking your wording at least some utilities are so much supportive, maybe welcoming, but I would need to hear you say that if that were true.

Yes, I think – go ahead Roger, keep going.

Well, no, that’s good enough. Can you just…

Yes, yes, what I was going to say is that Bob has certainly been in this environment far longer than I have and have seen all phases of the utility, the good, the bad and the ugly. My experience has been, I’ve seen utility making far more progressive overtures to embracing this DG. So long as they can help, right? I mean, if it helps them, and I think this smart inverter certification is evidence of that, then they want to be part of the solution, not part of the problem. Would you agree with that, Bob?

Yes, that’s absolutely the case. The – in general, utilities, I don’t know in every state, but like California, for example, the regulations do not permit the utility from owning generation assets. You can’t – they can’t – they couldn’t own a Tecogen product if they wanted to. I should say SoCal Gas has a pilot program where they have been allowed to do that, but it’s still experimental program. It’s not really representative of how the big electric utilities can take action. They cannot. They can’t own our products. Now I don’t know if that’s the case everywhere, but I think it’s a case in a lot of places. The utilities are prohibited from being owners of it. But they are now going to be apparently interacting with us as if they were acting with a power station owned by an entity or somebody where they can say, turn on, turn off, increase this, decrease that. I mean, that’s to come. And I think that’s a great opportunity for us to become part of the club, if you will. No longer an outsider.

Well, I noted last week southern company, Georgia Power recorded yet another write-off on their attempt to build the plant Vogtle units. That it’s – the latest hit last week was $1.2 billion. And I suspect there’s a lot more to come. Georgia may wind up being an interesting market. That’s all I have. Thank you.

Thank you, Roger.

Thank you. Our next question comes from the line of Amit Dayal with H.C. Wainwright. Please proceed with your question.

Thank you. Good morning, Ben.

Good morning, Amit.

In regards to your comments a little earlier about potentially being closed, maybe closing some kind of a deal with a forklift opportunity, could you add a little bit more color to that? I mean, is it something that’s imminent? I mean, you guys have been testing it for a few quarters now. It looks like progress is being made. Is this going to potentially convert into an order?

Yes. Well, I mean, the whole goal, of course, with the demonstrated fork truck and, of course, not just demonstrated with our refrigerator taped on the roof of this fork truck with all our control. I mean, the whole goal was to show that this is a practical – not only would work but to be a practical inclusion into the truck itself, and look and drive like a normal fork truck, and most importantly, perform like a normal fork truck. So that has been – that part of it took some time, and that was a part, I think, that was most – certainly very impressed by the manufacturer is not only do we get the results that we did, but I think Bob has shown in the previous earnings call how nicely it fit within the fork truck design. It’s modular, and the actual geometry of getting these things in there was significant. So what is the next step? And when are we going to get a deal? I think what we want to do now is we get this additional positive feedback. We’re going to – and it’s very – this is very late-breaking stuff. So I think we’re going to formalize that and do some type of demonstration, Bob, right? And Amit, when is it going to lead to an actual deal or structure deal? I can’t say for certain, except to say, I see it being a lot more sooner rather than later. I’m not talking two or three year development program here. I see us very quickly in a few months and quarters’ time being able to get these things deployed with the help of this fork truck manufacturing on part of their fleet.

Yes, and they’re very serious folks. They’re not guys who do things lightly on a whim. They’re very serious. And so coming back to us and saying, yes, we’re going to – we talked to our engine people. We have some ideas how to incorporate this thing to the engine controls with real stuff and so forth, which is what they’re talking about, which I didn’t talk about in detail. But they’re very serious. So I am hopeful that they’re not doing this lightly. They’re very serious.

And then with the traction you guys have seen with chillers, are you doing anything different on the distribution side to – the demand is in the momentum you have and all the other politics existing here?

Yes, to make sure I understand your question, Amit. You’re talking about how we sell and move our product out of the factory. Is that – did I get that right?

I’m just trying to see if you are adding any additional channel and your leverage to take advantage of the acceptance that you’re seeing in the market.

Yes, absolutely. And our team is – the HVAC industry, Amit, is very, very large, as you know, and structured. And it’s structured with manufacturers and manufacturer representatives and engineers and ultimately, customers, but very well structured and very connected. We are working – what we’ve done now with the Tecochill, the success we’ve had and is working within that and kind of embedded HVAC industry with these engineers and with these installers to introduce a product which is slightly different but from their perspective, not heck of a lot. I mean, it’s a chiller. I mean, and I know how to install chillers they say. And so it’s new want. And it’s got natural gas, but I think it’s an industry that’s very mature and sophisticated, as I said before. They do transactions all the time. So being in that business, that part of business and expanding that segment of our business as we look to maybe do another gas engine chiller product makes me feel very happy that – because I will take those type of sales, whether it’s engineering, I talk to people and there’s no disputing the economics, there’s no disputing the efficiencies, et cetera, we’re going win more times than not because, fundamentally, we have that stronger economic – certainly have the stronger emissions. So I’m feeling pretty confident about that. And again, I’ll tell about our partners. We have a partner in New Jersey, for example. It’s a great engineering company, D&B Engineering. And they’ve been helping us sell our chillers for years with fantastic result. They know our stuff up and down. They’ve been part of the HVAC industry for decades. It’s partners like that, that are allowing us to be successful. And I think that’s the biggest thing I’ve learned over these past few years as we’ve increased the sales of Tecochill is that’s the way business is done in this HVAC industry. And I think that’s a good place for us to be. Certainly, it’s a good place for us to expand.

Thank you. That’s all I have. Appreciate it.

Thanks, Amit.

Thank you. Our final question comes from the line of Alex Blanton with Clear Harbor Asset Management. Please proceed with your question.

Okay. Thank you. Hi. I’ll be fast. I might have missed this, but the backlog increased in the last two weeks, up 60%. What is the reason for that? And is that because you just didn’t have any shipments that period? Or can we look for that level to continue?

Yes. The backlog number that we showed was at the end of the second quarter. So at 6/30 was that…

That was $14.2 million, but you said $21.3 million, so I don’t know.

Yes. So Alex, the backlog – we showed two backlog numbers traditionally. We show the backlog at the end of the quarter, and then we show the backlog within a few days of this call. So the backlog at the end of the quarter was at lower number and the backlog of just a few days ago was $21.3 million. So it’s just really over the past few days.

Yes. What’s the reason for the increase? That’s my question. What are the orders you got that pushed back on $7 million [ph]?

Yes. Well, we received, in that time between the end of the second quarter, and when we took that backlog snapshot, obviously, $6 million or whatever that $8 million worth of new orders, and I won’t go into details but they are. It’s a mix of cogeneration. It’s a mix of chillers. It’s a mix of installation services. But that accounts, but those all occurred between when the second quarter ended and when we took that snapshot just a few days ago.

Yes. Is this kind of an unusual thing and then you can just deliver these and it’s going to go back down by the end of the quarter? What’s going to happen here?

Yes. Well, I think that’s kind of why we do it the way to do. It’s showing the backlog at the end of the quarter kind of shows everything that shipped out, right, because the backlog went from this to that because a lot of things moved out. And that’s why we show the backlog of just a few days ago to say, you know what, since the end of the quarter, just in that short period of time, we’ve grown the business, projected for us over this. Now this was a good little bump-up. We had a good month of orders come through, and that’s good, but that is the way it works out.

My question is, is this a spike and it’s going to back down as you deliver these? What – you probably have a pretty good idea of what orders are going to be coming in because you’ve been working on them, doing sales stuff. So can we look for $20 million in backlog by the end of this quarter? Or will it be back down to $15 million?

Well, by its nature, as we deliver products, yes, of course, backlog will go down. If we deliver $1 million worth of product tomorrow, that backlog is going to go from $21 million to $20 million. But if I get another $1 million of orders and it goes – so you understand how it works so the question…

I’m asking what it looks like. What is the forecast look like?

Alex, this is Bob Panora. Can you hear me?

Yes.

I just want to make something clear that may not be clear. As that graph ends on August 12 – 14, it doesn’t look that because it says July on the…

What’s the [indiscernible] three months? That’s my question.

Alex, I’ve not been in the habit of giving guidance of actual future sales contributions to the backlog. I don’t think that will set a good precedence. But what I will say is we give updates as large projects come in. We try to deliver press releases. I do want to issue a press release every time we deliver little thing. But certainly, some of these larger products would have moved the needle on backlog. You typically come with a press release, maybe not immediately, but when we are comfortable with the customer and customer with the – uncomfortable with a product, we’ll put a press release out.

Okay. Then finally, on Slide 14, there’s a backlog graph. Is that the same backlog that we’re talking about?

Yes, it is.

It says product installation services, and you don’t have installation services in the backlog.

No, Alex. If you recall, that indeed, our backlog is three components or two components. It’s products and those products could be CHP or chillers; and installation. And the example I’ve used in the past is a product equipment-wise, I might ship a bunch of equipment that’s worth $1.5 million, and that’s the equipment value. But if I were to ship that same equipment but I’m going to install it as well, if there’s an installation component, that project value could be $1.5 million, right, because the installation part is a portion of it. So that backlog is product and installation. What it does not include are the service revenue and the energy revenue we get from the ADG asset.

Okay. Service revenue’s not included, but installation is included. Okay. So this is the same backlog. I don’t think I’ve never seen it weekly before like this. That’s a very good graph.

Yes. I would thank Bonnie for that. She’s able to show it quite clearly. Yes.

Thank you. We have reached the end of our question-and-answer session. I would like to turn the call back over to Benjamin Locke for any closing remarks.

All right. Well, thank you all once again for participating in this call. Again, we’re very happy with our results, and I think we have a lot of good things in front of us and we look forward to sharing with you as we do these things. Thank you.

Thank you. This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.