Greetings, and welcome to the Tecogen Second Quarter 2020 Earnings Conference. At this time, all participants are in a listen-only mode. A 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, Mr. Jack Whiting, General Counsel and Secretary. Thank you. You may begin.

Good morning, this is Jack Whiting I’m General Counsel and Secretary at Tecogen. Now please note, this call is being recorded and will be archived on the investor section of our website at Tecogen.com for two weeks until August 27, 2020. A copy of the press release regarding our second quarter 2020 earnings is available in the investor section of our website. I would like to direct your attention to our Safe Harbor statement included in the earnings press release and presentation, various remarks that we may make about the company’s future expectations plans and prospects constitute forward looking statements for purposes of the Safe Harbor provision under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward looking statements as a result of various important factors, including those discussed in the company’s most recent annual report on form 10-K and quarterly reports on Form 10-Q under the caption risk factors, which are on file with the Securities and Exchange Commission available in the investor section for our website under the heading SEC filings. While we may elect to update forward looking statements at some point in the future, we specifically disclaim any obligation to do so. Therefore we should not rely on any forward looking statements as representing our views as of any date subsequent to today. During this call, we will refer to certain financial measures, not prepared in accordance with generally accepted accounting principles or GAAP. Reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures is provided in the press release regarding our second quarter 2020 earnings and an investor section of our website. I will now turn the call over to Benjamin Locke.

Thank you, Jack. So as agenda on Slide 4 indicates I will start off with a brief company overview followed by a summary of the company’s performance and results for the second quarter of 2020, which I have noted here. Product sales are up, operating expenses are down. We generated 2.7 million in cash in the quarter. And our cash balance at the end of the quarter was 2.86 million. We will then of course take questions afterwards. Before I go into detail on the numbers, more details I would like to provide a short overview of Tecogen business as shown on Slide 5. Tecogen is in the business of selling and maintaining clean and efficient energy systems that reduce Greenhouse gas emissions, provide significant operational savings and provide resiliency to grid outages. We are a leader in distributed generation technology due to our longevity and our extensive technical experience. Our air conditioning and cooling products have the highest efficiency of any other equivalently sized system. Our proprietary Altera emissions technology ensures the cleanest emissions possible, meaning even the most stringent air quality standards such as those in southern California. Our flagship and verdict cogeneration product is designed to transition from grid tie to offer it operations seamlessly, providing power to a facility indefinitely until grid power is restored. equal. Tecogen has deployed hundreds of these systems that can operate as micro grids independent of grid operation recently being ranked number three in terms of number of operational micro grids in 2019. We are well positioned as our country than the rest of the world looks towards a low carbon future. Our high operational efficiencies enabled significant carbon savings when compared to traditional sources. And lastly we have successfully expanded the Altera emissions technology across a range of engine sizes…

Thank you. [Operator Instructions] Our first question comes from the line of Amit Dayal with H.C. Wainwright. Please proceed with your question.

Thank you. Good morning everyone. Going through sort of your discussion from last quarter about exposure to the New York market free rent. How are you seeing sort of improvements in that region for you. Has backlog picked up from there, any color on how that market is recovering would be helpful, thank you.

Sure, with regard to New York recovering with regard to the pandemic or New York regarding their policies and the like?

Well I mean as much as you could cover, I was trying to focus on the pandemic but if there is additional color that would be helpful to me.

Sure. Yes, I understand I will cover both Amit. We were able to maintain our services in for our sites in New York for the most part throughout the pandemic with the exception of as I mentioned some facilities closed up the hotels and the like, but as I said, most, a lot of our portfolio of services is multi unit residential. And those if anything maintain their populations, right? Cause people were staying at home. We are starting to see that start loosen up a little bit. Sites are starting to open back up again in New York. So I think I’m encouraged by that. I will tell you where I see the opportunity here Amit, is I think what this has done is created a burden on a lot of facilities, a cash burden on facilities for their operation and in there lies an opportunity for you know our ADG our energy production model albeit with our partners. As you know, we have got our project finance partners, but there is certainly opportunity now to come in with these OSUs, these prepaid savings plans where they don’t have to put any money down and they can get their energy or their hot water, their cooling. It doesn’t have to be Cogeneration. They could replace their chiller. You know, they may have to replace the $0.5 million worth of chillers, and they don’t have a $0.5 billion, but we, with our project partners have set up financial arrangements, not just for cogen, but for our chiller systems where they can get installed at zero cost to them and they can at the ease of their capital burdens. So we are starting to see the market take up a little bit, certainly construction is happening again. Construction projects are starting to resume, not just in New York, but Massachusetts and other places. And New York as a whole is starting to come back to business. And as I said, I think there might be an opportunity in this for sort of a resurgence or another effort at these energy production platforms. So I’m happy to clarify any part of that if you like.

Yes. Along those lines, have you started to add or bring anything into the pipeline from this opportunity or are you still a little bit away from being able to that?

Sure. No we are. Our pipeline has new projects in New York, just to be not too subtle about it, you know, in our backlog, our projects that are new, that are going to occur in New York and they are for inverted, and they are in for the same drivers that have driven our product in New York all these years. Even though there is not the incentive in there, it is the energy savings, of course. Now in New York, particularly this Local Law 97, that sets requirements for a Greenhouse gas reduction, you know carbon reductions for buildings by certain timelines. Our cogen systems and our chiller systems is one of the biggest banks for your buck in terms of Greenhouse gas savings for the building. Because as I mentioned in our slide, our efficiencies are so high as compared to heating and cooling and powering a building from the grid that you are going to get Greenhouse gas reductions by putting in our equipment. So that is an opportunity for us as well. And then of course the resiliency piece, every time there is an outage there was some threats of outages or this past quarter. We mobilize our guys and make sure it all boils up top off and people feel good knowing that they have a piece of equipment that can keep the lights on, should the grid go down. So I think the key fundamental drivers in New York are still there. The incent is not there anymore, but again, I think the savings that we show and in particular, the avoided penalties of carbon taxes still make it a very good proposition for us.

Thank you for that Ben. Just maybe one more from my side, on both the operating costs, and I know you have brought that down and you are still within range or what you sort of guide for in terms of gross margins. So on both these fronts, should we expect similar levels of performance within the mandate of the year or should we anticipate some variance relative to what you look at?

So I will answer that Amit, with regards to our margins. As we saw product margins went up, I want to keep our margins, our product margins up there. I think we can even get a little bit higher. We have got a lot of goals to do that with our supplier agents, et cetera. Our service margins are certainly going to improve. This past quarter, the margins took a hit because again COVID related things became very inefficient and then it became very difficult, not difficult, but more challenging a work environment. But our service margins are certainly going to increase and I absolutely think we are going to keep chipping away at our G&A a little bit more. So I think you are going to see improvements Amit next quarter, and the rest of the year, on our margins and on our OpEx.

That is all I have Ben. I appreciate all your answers. Thank you.

Great. Thanks Amit.

Thank you. Our next question comes from Alex Blanton with Clear Harbor Asset Management. Please proceed with your question.

Hi. Just a few housekeeping questions at the beginning and then some more questions, later. But I was wondering why you were only going to keep this call archived for two weeks. There is no cost to archiving it. Why don’t you keep that for year?

I will tell you that offline, but maybe you get your next question.

Okay. Then, also, I would suggest in the future get the release out before the market opens. I think it came out about 10.That is just a common practice to give people a chance to review it.

Yes. Alex, our PR company had a glitch this morning, with a one off. We usually get them out right at 9 O’clock, and we will continue to get them off at 9 O’clock. We just had a glitch this morning. Sorry about that.

Is that why that - I can’t find the slides on the website either?

Perhaps I will get with you offline afterwards, Alex to make sure you have that.

I don’t think they posted. I would also suggest that you post a transcript of the call. Do you do that?

Yes. Alex, we will do that. And I will take all that up with you. Can we talk about the quarter?

Sure. Okay. First, I want to talk about Local Law 97. Could you explain more about that? Might be a good idea to actually put out something from the company right there. A memorandum something under the -.

Alex it is not one of those things. I think it is so defining to our company that it is worth spending that time and effort but I will describe it to you. Basically it sets a timeline for you get your energy profile, your Greenhouse gas profile of your building down over the next five to 10 to 15-years in order for New York to reach their carbon reduction goals. And so each building, it looks at that timeline and make determinations and how they can reduce their carbon footprint or they will be penalized with the tax, related to that.

How it is going to be penalized, is there a time pressure on this at all? Or how does it work?

It scales, Alex, it scales over the next five to 10-years. I don’t think heavy duty fines and levy start kicking until maybe five-years down the road a little bit. I think you can reach some of your goals before then. I don’t have the exact in front of me. But sufficed to say what we do of course, I mean, you can only put in so many LED light bulbs, right, to move the needle in terms of your footprint. So switching on the chillers over to gas and using heat recovery that have a 90% efficient system in there instead of your electrics. That moves the needle. And using cogen, any piece of equipment that is going to be very, very high efficiency is going to move the needle. So therein lies the opportunity. And Alex I will say on this too, this is all still being felt out a little bit. I mean, this Local Law 97, the administration could change it could go away.

When did it passed?

It passed about two years ago, I believe, I don’t want to narrow myself down on that. But it is starting to be understood New York certainly is setting up committees to understand how they are going to implement it. building owners are trying to understand it, energy policy firms are trying to understand it, we are trying to understand it. I think we have got a pretty good grasp on regardless of the nuances of it. The bottom line is we are going to reduce the CO2 footprint. I mean, that is what the bottom line is. As long as your equipment is properly installed and running and using heat recovery, et cetera. You are going to reduce that building’s Greenhouse gas footprint and that is the takeaway that we really try to get through to the customers.

Along those lines. If we assume that Joe Biden gets elected, he has talked about a $2 trillion infrastructure program and part of that is reducing carbon footprint. And I think there was a number of mentioned 50 million buildings needed to be modernized. Have you looked into that at all? What kind of plans are there and how would they affect you?

Yes Alex, there is a lot of opportunity there. Of course it follows the same rubric of our cogeneration systems is, you know, we are not going to put these things in places where they can’t be efficient. You know, if you can’t use the heat recovery that then you are not going to get that 90% efficiency. So you still have to segment your market into those verticals that we know well, you know, multiunit residential, hospitals, et cetera. Places that use hot water, although that is indeed widened because of the TECOCHILL. Now we can get into more industrial processes, you know, manufacturing, et cetera where they need chilled water systems or even with our TECOCHILL you know these refrigerated ammonia systems. So indeed there is opportunities, but again, you can’t just put them everywhere because you have to make sure that you are following your prescription to get the maximum efficiency out of the equipment. And Alex I will ask if you won’t mind jumping back into the queue I want to make sure I give a few more folks the opportunity to ask some questions and then I can circle back to you if that is okay.

Okay. Thank you.

Thank you. Our next question comes from Joe Vidich from Manalapan Oracle Capital. Please proceed with your question.

Hi Ben. Anyway, congratulations on getting through this quarter. I know it was a pretty rough one, but you guys did pretty well. I guess my first question is, if you could just talk a little bit more about the Mitsubishi Caterpillar forklift JV and just kind of curious if there is, you know, given the travel restrictions, if there would be the ability to ship the equipment to Japan.

Yes. Maybe, you know Mitsubishi has got their own kind of problems I’m sure over there, we are trying to be respectful not to push this particular program in front of them when, I’m sure they have their own priorities. But with that said, of course, Bob is keeping in touch with them where they know what we are doing, and we know we want to get back on track. We want to get that engine certified. But, you know, Joe, there is other opportunities too that we are looking at. And I didn’t really want to talk too much about the emissions right now, because we didn’t have much in the way of update, but that is not to say that there will be more activity later in the year. So, I’m going to just hold off, giving any more updates on that, except to say that Mitsubishi and us are in communication. We both know we want to get this engine certified, but we don’t want to rush them to do something because we think that might, we just don’t want to you know damage the partnership, which is a very good partnership right now.

Okay. That makes sense. I was wondering, you know with regard to the ADGE division, could you talk a little bit more about, you know, your go-to-market strategy and who are your project finance partners? How are they selling your systems? It seems like there is a lot of momentum in this space. You know, whether it be schools that are with tight budgets or hospitals with tight budgets. It just seems like there is some big opportunities there and just wondering if we could just talk a little bit more about your go-to-market strategy?

Sure, yes, it is a good question. And as I said, we have got a four or five project finance partners that we have worked with and probably another eight or nine of them that are begging us to find projects to work with. The problem isn’t the money, honestly. Between all of our project finance partners, I’m sure I can find any amount of money I needed to fund a site. The trick is to find the sites that will deliver the earnings that they need to meet their hurdle rates. And it is not as simple as a solar farm or a fuel cell where you can just kind of drop it down and didn’t need too much analysis that it is going to use electrons. As I said, for our site you have to make sure they are going to use all the heat. You have to make sure that that equipment is entirely using it and again, it runs and meets all your hurdle rates for return to these project finance folks, because if they don’t, then I’m in trouble sometimes. So, anyways, I think I’m not worried about the ability to project funds. There is plenty of project finance out there. And some of the companies we are working with are actively looking for projects themselves, and that that is good. So they have got their own business development folks. And they are talking with my business development folks and our engineers and we go hunting together that way for good sites. That is really the exception. Most of the project finance partners we work with are kind of waiting for us to bring something to them. They are not out there doing, looking for a cogeneration sites, maybe they can find a site for…

Right. One other question with regard to this, and that is you mentioned Local Law 97 in New York City. I’m just curious if there are any other policies that are being put in place around the country that are of similar nature, or if there is incentives anywhere in the U.S. that you see on the horizon or currently?

Sure, of course nationally the ITC, the Investment Tax Credit, if there is that, but for most of the incentives are state-to-state. And they are typically efficiency incentives. As you know, the utilities, Eversource and Con Ed, the big utilities get reimbursed for efficiency measures. I mean, that is their measuring stick is how much efficiency they can bring to their customer base, to the rate payers. And so that is who we are, we show up, and hey where efficiency, so rebate and the incentives come from the utilities oftentimes, because they are the ones that need to put these energy saving measures in place to meet their own guidelines. The amount of those incentives can sometimes be prescribed, X dollars per KW, sometimes they can be custom. And more often they are not, we find ourselves in the custom incentive world because we are doing something that is kind of customized. We are not putting in a solar panel or replacing a light bulb with an LED. We are putting in a highly efficient natural gas chiller plant that displacing the electric plant. So a little bit more nuanced how you calculate those savings, but it is there and the energy company understands and appreciates that. And I think that is one of the reasons why we are getting more success with our chillers, it is starting to become more broadly understood, how these chillers systems can not only reduce Greenhouse gas benefits, but have other efficiencies and help the utilities meet their goals. So I think I covered your question, but if I missed the part of it, Joe I can circle back to it.

No. that is great. Ben that is great. I appreciate. That is all I have. Thank thanks very much.

Sure. You are welcome.

Thank you. Our next question comes from Michael Zuk with Oppenheimer. Please proceed with your question

Good morning, Ben.

Hi Mike, nice to hear from you.

Two part question. First of all, any new developments or opportunities in indoor farming? And secondly, how is the Florida operation doing?

Sure. Yes, good questions. Yes, we indeed, are seeing still continued opportunities in indoor growing. I think I might have talked about this before that whole industry is a little bit - and I don’t want to tell him but there was a lot of work in that in 2018 and then 2019 started to slow a little bit. But that sufficed to say that the ones that are still around, the indoor growing companies that we are dealing with, are the ones that were smart enough to understand that they need to be aware of operational cost and not first cost. And they were aware that it was going to be a more competitive environment and indeed here we are today in the middle of 2020. It is a much more competitive environment for indoor growing. So the come and go customers maybe aren’t there anymore. But importantly, the customers that are still there for indoor growing are the ones that already have our stuff and they are looking at phase two, and maybe phase three and then their design consultant is designing another one. So the customers that we still have are the ones that are going to be in it for the long haul. And in many cases are ones that already have our equipment, they are repeat customers. So I think the markets still strong it is not as kind of crazy exuberance as it was in 2018. I think, if you read anything on the indoor cannabis growing, it is slowed down a little bit, but the ones that are remaining are the ones that are going to be our long-term customers. And I think ultimately, that is a good thing.

And then follow-up how we do it in Florida?

Yes, Florida. Right. Good, Florida is a great market for us. As I said before, maybe not perfect for cogen, but absolutely for our chiller systems. And we are looking at a number of opportunities and we will be seeing press releases, of course normally see press releases, but I think we are seeing good opportunity in Florida. Of course having our service center down there is very important, so that people in customers know that they will have someone there they can come in and make sure the equipment is running. So, yes, and the sparks that is still very strong down there. It is a gas is extremely inexpensive, electricity, maybe in the super expensive. But keep those gas prices down you have a very good opportunity. And then the resilience piece of course comes on top of that. Every time a storm comes through, you know, people get worried about their power and their chilling. And even if we don’t put it in a cogen system, if we put an entire chiller plant on gas, instead of electric, as I said before, they can downsize their backup generator capacity so they can keep their hotel running during an outage because they have their chillers running on natural gas. So yes, Florida is still a real good market for us and, I’m hoping you will see more press releases related to that in the coming months.

And then a follow-up question regarding technology. What is the difference in operations between using natural gas as our fuel source and hydrogen as a fuel source.

I’m going to let Bob take that one because that is right in his wheel house.

Well, you can run an engine on hydrogen and it will perform fine. You have got to makes some changes. Hydrogen has some issues with metal [annulment] (Ph) and so forth. We have not had too much experience with it. I know one customer was doing some experimental operation with hydrogen, but I think most engines, know the path you have to tank to operate on them. Having said that, if you do use hydrogen that changes the emissions story quite a bit, there will be no CO2 coming out of the engine. There will be NOX of course, and that, and you will still need to account for that, but I don’t see hydrogen as a real fuel for us for a long time, because if this hydrogen available it will be from renewables, it will be going towards transportation. Transportations where it really has an impact. Even store it on a vehicle and drive long distance on it. And you basically have no pollution and there is so little of it available and it is so costly to produce. You can’t mine it, you have to produce it with electricity. That is where it is going to find its application and stationary stuff like ours really doesn’t show the benefits that it does on a truck or a car that has a very low efficiency engine to begin with. You know, so that is where I see it going. I hope that answers the question.

Well, my whole purpose of the question was that Williams companies is getting into hydrogen and hydrochem distribution and particularly targeting the Northeast, which is basically in our backyard. And I was wondering if there were opportunities that was the rationale for the question.

It could be, but I’m not really seeing that right away. And I think that the pipelines - they are going to stay natural gas because all the appliances, you know, all the water heaters and stoves and everything are all set up for a certain type of burner that would operate with natural gas. And I think that would be quite a difficult thing to do in parallel with the existing pipelines.

Got you. And one final question, are we considering any type of a joint venture or an outsourcing of the Ilios technology?

Not right now, Mike it is not something that I think that we have found a good use of our efforts on. I think the success we are having with our chillers, I think is what I really want to be focusing my attention on. I don’t have any particularly strategic initiative to sell the Ilios platform that would require some time and effort but perhaps once things stabilize, we can consider, but it is not something that is in the top of our priorities right now.

Well I appreciate your comments. And look forward to a productive third quarter.

Thanks Mike, I appreciate it.

Thank you. Our next question comes from Alex Blanton with Clear Harbor Asset Management. Please proceed with your question.

Alex before you ask your question, I have got some answers for you. So the PowerPoint is available on our website, it is in the webcast section. And so I will send the link after this call to you to make sure you have it. The transcript will be available 48 hours after the call. And again; I will make sure that you get that as well.

Thank you. Is that going to be on the website the transcript? So other people could read it.

Yes.

Yes okay. Yes I had a hard time finding these slides. They weren’t evident they weren’t with the webcast part at all.

It is now Alex, I will send you the link.

Okay. Thank you. The Canadian operation, it seems to me that they would be restricted by COVID since Canada has a very low infection rate. And in fact, won’t let anybody from the U.S. So how is that going? Is that a better operating environment right now?

Hi Alex, this is [Paul] (Ph). I think I know a little bit more than Ben about this. Most of my businesses Toronto area was somewhat same as the U.S. in the days, few months ago, they were the construction projects where we are told to stop. If our folks entered the country to do work, they would have to quarantine for two weeks and so forth. So as it turned out the projects we were involved with were exempt from the construction restrictions, as many were in New York if they were related to certain types of construction projects. And I guess the requirement that we have to go into the country and all that, and quarantine that also was waived as well. So it really wasn’t a lot different than the U.S. in my opinion, saying in terms of what Toronto did, I don’t know about other provinces and so forth, but they were very much like a U.S. city. And, but at the end of the day, we were operating fine. You know, the construction projects went on. Our guys were able - our guys, we have two people working there now that are Canadian citizens. They had no restrictions, they are working fine.

Okay, great. And also is there a market for better ventilation as a result of COVID, or this would be a renovation, retrofit type thing where buildings would retrofit their cooling system to provide better ventilation? Is there any kind of a market like that developing?

Perhaps, I think the prevailing theory is you want more air move following from your building. You want to keep those HCFs or whatever they are cubic feet of air moving through your building. And I think what they have advised some people to do is on their air conditioning. Some air conditioning systems bring in outside air, some air conditioning systems recalculate inside air and then the larger systems do a little bit of both. So I think they are, they are advising some of these air conditioning systems to adjust themselves to maybe be a little bit less efficient, but bringing more outside air to keeps that air flow going. Now, whether that is going to lead people to do an overall redesign of their chiller plant toward the technology that might bring in more air or something reactive like that. I have not seen that, but again, we are still only, you know, I’m not sure if people have reacted that far head on it. But I don’t see anything directly relating to us. It is just notionally I understand that there is a need for people to bring in more outside air and get more airflow going.

Do you have any assignment? Do you have any buzz on, when you might turn profitable on a sustainable basis?

Yes, well, Alex, I want to be profitable now. Unfortunately, the world got dealt a terrible blow here. Not just myself, and not just the people around me and not just our company, everyone and thankfully, we didn’t get hit as hard as some of these other industries that absolutely got decimated. So I think we are fortunate that we made the progress that we did. My goal is still I would like to be profitable by the end of the year, that is my goal, I’m striving towards that. And then each quarter after that, that will be my goal each quarter. To get up every morning and then get profitable the next quarter after that. So as much as I can control the things around me that is what we are striving for. And I think we will get there. I mean, this was a pretty good quarter Alex, I know it is hard to see with those negative numbers in there. But without COVID those service numbers are right back up. Right. Without COVID those energy production numbers or maybe not back up to 2019. But they are back up there. And maybe that EBITDA number isn’t negative anymore. But I didn’t want to play the games that maybes, because we are here where we are now with COVID and we had to deal with the hand result. But absolutely and I can’t say this enough those hits we took in service are barring any resurgence of the pandemic are going to go away. And we will see those service revenues come right back up where they should be. We will see the margins come back up where there should be, maybe the energy production won’t come back where it improve a little bit. And so as long as we keep that order flow for our products going, we will be in good shape.

Okay. Thank you very much.

Thank you, Alex.

Thank you. It appears we have no additional questions at this time, so I would like to pass the floor back over to management for any additional closing comments.

Well, thank you all for listening to our call. And as always, we will be sending any more updates as they happen. Stay safe.

Ladies and gentlemen this does conclude today’s teleconference and webcast. We thank you for your participation and you may disconnect your lines at this time.