Good day and welcome to the Tecogen Third Quarter 2014 Financial Earnings Conference Call. All participants will be in listen-only mode. There will be an opportunity for you to ask questions after the end of today’s presentation. [Operator Instructions] For you information this conference is being recorded. As a reminder a recording of this conference call will be available for play back, approximately one hour after the end of the call and will remain available until Thursday, December 4, 2014 and you may access the recording by dialing 877-344-7529 from inside the United States, 855-669-9658 from Canada or area code 412-217-0088 from outside the United States enter the replay conference number 10055594 followed by the pound sign. Now I’d like to turn the conference call over to Mr. David Garrison, Chief Financial Officer. Mr. Garrison, the floor is your sir.

Thank you. I’d like to read the Safe Harbor statement. This presentation contains forward-looking statements as that term is used in the Federal Securitas Laws. Growth in revenue, gross margin and backlog obtaining profitability, achievement of our goals, adequacy and liquidity of capital resources, new product development, benefits from our cost reduction initiatives. These forward-looking statements maybe identified by such words as; expects objective, intent, targeted, plan, or other similar phrases. These forward-looking statements are subject to numerous assumptions, risks and uncertainties described in our 10-K or 10-Q or other recent filings with the Securities and Exchange Commission that may cause actual results to be materially different from any future results expressed or implied in such statements. Because of the risks and uncertainties we caution you not to place undue reliance on these statements which may speak only as of the date of this presentation. We undertake no obligation and specifically disclaim any obligation to release any revisions to any forward-looking statements to reflect events or circumstances after the date of this conference call. Thank you very much and I now turnover to John Hatsopoulos, our Co-CEO.

Ladies and gentlemen, thank you very much for participating in our conference call. I want to tell you I’ve never be more excited about any company that we got under our management. My brother and I and people like Bob Panora who has been with us for a little over 30 years where we have so much technology that we better not fall it out. We have a means of eliminating various poisonous emissions and we can use it not only for our own equipment, but for equipment of other uses. For example, if at the certain point we wanted to use our equipment for generators, we can make generators emission free. Theoretically and I stress the word theoretically we can even have automobiles. So, this job became so big that there is no way I could handle it myself and I was blessed with having the son of my favorite colleague at Thermo Electron, Ed Locke to join me. Ed Locke by the way told me that when I asked him to get out of retirement and come into our company to help me out, he said, no, he wouldn’t because his son is smarter than he is. And rather I’m going to ask Ben to tell you a few words about the company.

Thanks John. So as John mentioned I became co-CEO in October but prior to that I was General Manager of Tecogen for a little over a year, focused primarily on building our sales backlog and also more recently started to look at our operations in ways that Tecogen can make our operations more efficient. So I’m pleased to take on this larger role to help Tecogen grow substantially in the coming years. As John indicated my focus is going to be on operations and growing the business while he continues to shape our financial strategy. I believe the key to Tecogen’s continued success is really in our technology and our people. As General Manager for the past year I’ve been fortunate to work with an outstanding team of sales, engineering and manufacturing [specials] [ph] at Tecogen. Our corporate model remained clear, heat; power and cooling that are cleaner, cheaper and more reliable. Our technology is first rate. Our core business model is strong and we have the right people working hard to turn this technology into revenue. So looking back at 2014 today we’ve achieved several milestones that are supporting our growth plans. We have a dramatic increase in sales backlog from 3 million in 2013 to levels that are consistently between $12 million and $14 million today. Growth in our turnkey services were highlighted by several multiunit sales of cogeneration and tri-generation systems to well-known hotel chains, health facilities and multiunit dwells. We’ve had overwhelming success of the Ilios Heat pumps with the addition of a water sourced version and our current backlog of Ilios is at 11 units. We’ve had a resurgence in our chiller sales in the U.S., Mexico and Canada. And I think as John alluded to very excitedly is the emergence of our Ultra Emission System retrofit business with multiple customer announcements in the past quarter. So looking forward, as we’ve indicated in our earnings release, our goal is to finish the year demonstrating profitable operation in the fourth quarter. As Bob and Dave will describe in more detail, we underwent a pricing review of all product lines including service, to ensure that our margins are where we want them to be. With the addition of John Maloney as Manufacturing Manager, we also are conducting a thorough review of our manufacturing process, inventory controls and vendor relationships so that our costs are as lean and competitive as possible. So in summary, we’re positioning Tecogen for continued growth and profitability. Many of the pieces are falling in the place and I’m excited for 2015. With that I’ll turn it over to Dave, who will review our financials and Bob for an analysis of our results.

Thank you, Ben. The revenue for the third quarter was 4.2 million, an 8% decrease quarter-over-quarter but an increase of 44% for the same period last year. Two projects involving 8 units were delayed due to site conditions, installers orders were in place with delivery expected within 90 days. The units are completed and in storage and by accounting policy the revenues were not recognized. The gross profit for the quarter was 1.1 million, a 19% decrease quarter-over-quarter and flat from the same period last year. I will leave Mr. Bob to address the gross profit in his remarks. The operating expenses remained consistent at 2.5 million. SG&A expenses are expected to rise with the continued expansion of our sales force but otherwise remained stable. Our research and development expenses rose to 329,000 from 250,000 in the prior quarter and the same period last year, research projects are expected to yield growth in our product line in the short term, expansion of intellectual property is with the current projects as well. With the balance sheet, our cash balance of $3 million and working capital of $7 million is as adequate going forward. Management has no current plans for a public offering. Our cash receivable at 4.5 million and inventory at 4.9 million are adequate but are items that we hope to reduce going forward. Work to reduce the cash cycle and payment terms and lean manufacturing techniques is expected to increase returns in AR and inventory. At this point I’d like to turn over the discussion to President and COO, Bob Panora.

Thanks Dave and good afternoon to everyone and thank you for tuning in today. Overall as Ben and John have discussed we are pleased with most aspects of the business, the market remains strong, the economic drivers continue to be excellent and we’re having very good success with our emissions technology going into new markets. However, there are some noteworthy operational issues which I want to take a few moments to discuss. Let me begin with our product margin in the quarter. In the earnings release, it’s clear that we are below our target margins for the product business segment. This short coming is partly due to our vendor price increases but most of the shortfall is from a single large chiller order, a group of machines, multiple machines for a model that have been very popular back 10 years ago when prices of gas were low. Now, however like our other chiller models we have seen a significant upswing in demand due to the gas price and [indiscernible] that are in play today. So, in accepting this order, we understood that the product needed to be upgraded for the times that is it requires a high performance emission system for the engine which was not in the old version of it. It also needed an upgrade to a more climate friendly refrigerant. So, we elected to move forward with the sale knowing that the margin would be impacted by the upgrade effort. We feel this decision will pay off for us; we’ve secured a course of long term service contract with that customer. But we anticipate future orders of this model now that the utility rates are good again as they are today. Also impacting our margin was a warranty issue. In this quarter we had a significant cost…

Bob maybe you can mention, this is John, that you mentioned that you raised the prices and nobody blinked.

That’s right. We did raise the prices and we were happy to see that we didn’t get any negative reactions, it was time. So we are happy we went through that exercise. Now regarding service operations we went through our entire library of contracts and there are hundreds of them, same exercise we made price adjustments to contracts where we have the opportunity to do so and make sure that everything is up to snuff. We also reviewed the contract terms and conditions in that contracts, from that exercise we increased the price of our billable rate and we rewarded the terms in the scope section to be more clear. We also looked at the geographical distribution of customers in the New York City area, where most of our growth is. And we recognized that a new location in Brooklyn would really help us out and that is what makes us more efficient, customers get service more timely and that will be more locally and so forth. That facility is now up in running and the efficiency impact has been immediately apparent. Longer term of course we have more work to do training, material handling method and so forth and we are going to get on that in future. Lastly manufacturing, manufacturing has lacked somewhat, we need to improve cost and throughput right now. We got a lot of orders up for sale. Relative to the things we can do short-term first off we needed to increase staffing levels on the floor. We have done that, we have added six technicians to bring the total to 14. Secondly we needed more space and we are lucky to room to expand in this existing facility at relatively low cost and we are scoping it out now. Longer term John Maloney will be adapting as David has said [cellular] [ph] workstation, lean manufacturing methods and engaging more closely with our suppliers to improve constant quality and minimize lead time. And that concludes my summary of business operations and I would like to turn the call over to Ben to wrap-up before we go to Q&A.

Thanks Bob. So as I indicated at the beginning of the call I think as Dave and Bob have so ably described for you, we are really positioning Tecogen for this growth stage that we are going to be going into, gain the right people, the right managers, the right manufacturing all in place so we can handle this growth. I would like to give you a little bit of an idea of how we see the business evolving with this growth. We expect CHP systems to continue to be the core contributor to our sales, as they have always been for years. [Indiscernible] continue to rise across the country, concerns still exists about great reliability in conjunction. Our CHP systems continue to be a cost effective solution for dramatically reducing utility builds for large buildings while provide providing safeguard against blackouts. Our Turnkey installation segment will also continue to grow. As we have discussed in the past, Turnkey installations established a solid base for recurring service revenue in future years. Indeed many of the incentive programs with different states require the customer to sign long-term service agreements with the manufacturer. We also believe that our chiller business will continue to grow in 2015. Tecogen is the only natural gas alternative to electric chillers. The expansion of natural availability in North America has opened up more geographic regions that can offset expensive electricity for traditional chillers with cost effective natural gas chillers. With the emergence of Ilios as a strong revenue contributor in 2014, our goal is to substantially more sales of Ilios units both in North America and the beginnings of European sales. And lastly but most exciting is the commercialization of our ultra-emission system to market outside of our core products. We believe our Ultra Emission System to…

Well, before I want to make a statement. We’ve had the very unfortunate experience in my previous life where we had a technology that was unique and it was copied by various competitors and [indiscernible] take years before you get a conclusion and you run out of money. This time because of one of our executives we have a contract with an insurance policy with the [Laws] [ph] of London that if anybody copies us and we decide to sue them, [Laws] [ph] of London will undertake all the expenses to defend our technology. This is extremely important for us because if a patent is not a worth a damn, if you don’t have enough money to defend it. And last I want to ask my friend Alex Blanton how's hip. Alex is here. Alex?

We’re going to queue up the questions. So operator you can start the Q&A.

Yes sir. [Operator Instructions]. First we have Alex Blanton of Clear Harbor Asset Management.

I have the question about the announcement that you made October 28, a contract for a tri-generation system for a New Jersey Hotel and the contract value was $574,000 which strikes me quite high. I assume that it includes installation of the equipment, but the first question is, this support of two incentives from the New Jersey Smart Start Buildings program according to the release and what is the payback period including those incentives, how soon will the savings payback that investment? And the second question is how big is this hotel? How many rooms in fact is really question because I want to get a sense of the relationship between the contract value for your equipment in the number of hotel rooms that it will take care of and you see where I am going with this because if one hotel it would seem to the third part of the question is, if one hotel can get a significant benefit from this installation why not every hotel and so we can get an idea of the what the total market is if we know the cost per room.

Thanks for that question Alex, this is Ben. It is a very good question and not every hotel is alike and by the way the hotel that we referenced in that press release is around 250 rooms.

Okay.

What really makes and you might have noticed the press release even earlier of another large hotel in which we installed another tri-generation system that it consisted of cogeneration and chillers. Every hotel is different not just in the…

When that happened?

That was in earlier October that was in Jersey City. Every hotel is different not just in terms of the size of the rooms but how they heat and cool their building. What I mean to say is a hotel could be very large but just by nature of the way the boiler room is designed they can only fit one or two cogen units in whereas you can have another hotel that's the same number of rooms but the way the boiler system and the way the heating system are set up, it could accommodate more units. So, it’s difficult on a per room basis compare one hotel to the next, that’s I think answering part of your question. Now the other part of the question is the New Jersey Smart Start program incentive indeed gives a little bit more of incentive if you tie cogeneration into absorption chilling. Absorption chilling as the press release stated, uses the hot water from the cogeneration to produce chilled air and by doing so that eliminates the need for expensive electric chillers and that’s what the objective of the Smart Start program is. So the price of that job was indeed around what you said 500,000 or so a little bit more because of the joining of cogeneration with absorption chilling. So, I hope that answers all the aspects of your question.

Well, the question really was how long does it take to get your money back, the payback period?

Yes, the payback. So, I don’t have that exact one in front of me but I recall the payback on that was around 3 to 4 years and indeed paybacks the way these things work is there is tax incentives that are available and if the entity buying the equipment has a tax liability then there is additional tax savings that you can cut that payback down but on straight cash flow basis, the return was around 3 to 4 years on that [chiller].

That’s including the incentives, right?

Correct.

All right, but what would it be without the incentives?

I have to get back to you on that Alex because I don’t have the actual proposal in front of me.

Okay, and we’re talking about the New Jersey hotel you announced on October 28?

That’s right, that’s the we're talking about.

250 rooms, okay. Thank you very much.

Thank you Alex.

Next we have Carter Driscoll, MLV.

Hi Carter, how are you today?

Good, how are you guys? First question on the Ultra side of the business, obviously you guys have some aggressive way to go to market, can you talk about the way if you will go to market from direct versus distributor network obviously selling in the product and potentially a variety of different end markets maybe utilities displace, diesel, peaking boilers, how you plan to do so? You have to invest in direct sales force as well, how long you expect it will take before you feel that you have the infrastructure in place to impact their market and I have a couple of follow ups.

Hi, this is Bob Panora. Carter, what we’re doing right now is we are selling direct and what we’re doing is going to the potential customers that we feel are the easiest ones, the low hanging fruit if you will and we’re visiting water districts in Southern California and we’re also visiting folks who have cogeneration equipment that’s somewhat distressed because of emissions and those would be not our size range the way it's worked out is, it’s bigger megawatt type size engines and so those are the folks that are talking we’re doing it direct and we want to do with these water districts who might have a fleet of engines we want to get one into each one if you know what I mean, get a foothold and then we can sale more directly to them but that’s how it’s going right now.

My second question is you talked about the price increases you put through, I’m assuming it’s across pretty much entire customer base, can you talk, maybe magnitude or an average rate and how some of these [indiscernible] were rolling off or whether you renegotiated midterm and then maybe the same on kind of the service side, what types of adjustments made to those contracts [will offer] more granularity.

Sure, this is Ben I can answer that for you Carter. So, each one of our product lines were different in terms of when we did an evaluation of the cost of the materials and the cost of labor and of course everything that goes into it and so there wasn’t one number that we put across the board. We had a one product line that had a very small price increase. As Bob mentioned earlier we had a product line of chiller that we had made in some time now and turns up a lot of cost is on us, so that had a more substantial price increase. So, each one had a bit of a different tweak to it. In terms of the service, our service agreements have an escalator built into them and we make sure that we're adhering to that escalator cost as we go forward. Now with that said, if a service escalator from a contract that we put in place in 1985 continued, I mean they'll make it a fortune, that's not maybe not such a bad thing but at some point, the customer realizes that he kind of need to reset the escalator, you can’t perpetually go up a couple of percentage here. So we went through that exercise also and made sure that all the service contracts every single one of them as Bob said and there's a whole big pile of them were consistent with where we want them.

You also talked about maybe changing scope of the service agreements, could you elaborate there little bit?

Yes, I’ll take that. When we have a service contract our scope is the machine, the box, the blue box or the white box, and what happens is customers often ask us to do things that are outside of the scope of the contract. So that is a billable event where we charge extra for that, and so we made very clear what our scope is versus what is extra so there is now ambiguity, and we also made that billing rate go up from x dollars per hour to x plus something, that's significant.

Got you. And then maybe just my last question, I will get back in the queue, is obviously you had a very public announcement from current administration to push for the sustainability and environmental push by the Obama Administration obviously in conjunction with the announcement from China but are there any specific pieces of legislation both domestically outside of some of the more forward thinking states that you see that could really give a boost to the ultra-line?

Yes, there is a lot going on to be sure, Carter. And we are trying to follow all of it. And of course be very selective about what we actually voice our opinions on. You can spend a lot of time down in Washington spinning the wheels. I will talk about the state activity because there are state-to-state the regulator activity is different. For example I know in Massachusetts they are starting to adopt CONOx standard very similar to emission standard in California. And as I tell our customers in New York, New York doesn’t have requirements to CONOx today and they may not have it next year but I can tell you that at a some point it's going to come -- they do have requirements, it's just elevated. Another example is New Jersey that adopted these requirements and they have [indiscernible] but if unique to requirements you need an air front, I mean that’s the benefit of buying with Tecogen. So we try to stay involved on a state-by-state basis in terms of the emission regulations and how is that going to leverage our Ultra Emission System.

What happens to dovetail nicely with higher electricity rates and billing your end markets that’s targeting currently, is that correct?

That’s correct.

Next we have Michal Alan, investor.

No, its [Ernie Eloy] [ph] Michael Alan is not here at the moment. But any way I wanted to ask a question please two questions. How in the world can any company, any company have hurt their shareholders more than Tecogen did at their public offering? Give an example. September of 2013 I sent in suggestions and once you send in suggestions to company you are told you don’t know anything and why don't you sell your shares? When that company -- when your company Tecogen went public, when it went public there were approximately minimum of 5 million people of all of rest of the shareholders, nobody had their certificates.

Can I just. I think your question is more individual in its nature.

Excuse me, I put a $1 million in this company, I want to be heard as family. The question is we did not get our stock certificates until the stock went up, we didn’t get them for two to three weeks, two, three weeks later, nobody even knew that the company is going public. And that statement was you can go to…

Ernie you still there?

Sir it looks like we lost that connection.

We will get back in touch with Ernie after the call.

Looks like we have [indiscernible] of RW Investments.

I am good. Two marketing questions. On the emission systems are there any -- are you doing anything with sort of OEM sales to [covenants] [ph] caterpillar or somebody who.

We've had some discussions with one manufacturer and of course they are interested but, the route that we are taking because we are a small company and it's hard to walk right in the door of caterpillar and get them to jump. We are getting the attraction through the reps, I mean through the dealers in other words very big dealers in west coast, no of us now there and you want to build the excitement from that upwards where the dealers are requesting that. So that’s the approach we are taking Ralph.

And I would think that I hope you continue to grow New York at a terrific rate but I would think that the total market in California ought to be bigger than the New York area. How are you going to grab that?

They are both very, very big. Don’t underestimate New York it's huge.

Agreed, but California is a real big place to.

It is still. And we are very active there. So we just don’t talk about it as much.

Ralph you may have notice already I am not sure but we have our dedicated sales team out there. We have got a sales person who spends all of his time on the West Coast. There is a lot of systems already in place there so therefore we have a whole service team as well. So we are kind of in good hands on the West Coast, I agree with you that there is lot of opportunity there and a lot of room for growth just as there is on the East Coast.

Did you say what? It sounds like you’ve got one guy there is what you just said.

Well its one guy, he has got a team supporting him.

Well I would think you'd have a half dozen people in Southern California and the same amount in Northern California.

Yes, we’re actually counting bodies right now. I think we’ve got four sales type oriented people and then the support team behind them is another three or four people I think on a rough numbers.

That would be application engineer to meet with customers if you close dollars to $3 or $4.

Okay. Go get them.

Okay. Thanks Ralph we appreciate them.

Ralph, this is John Hatsopoulos, you have to understand that we’re hiring people as fast as we both can afford and can find the appropriate people. We had a management meeting last week and as a matter of fact, one of our major investors bought it to us to do it and I’m very grateful to him. I won’t mention his name, but he bought it to us and we came up with a lot of good results because of that management meeting, yet one conclusion was that we need to hire a minimum of four people right after the meeting and we’re in the process doing that. Unfortunately my track record anyway I don’t know if Bob and Ben have better, was less than 50% of the people that we hire and not performing the way we expect. So we have to make a very big effort to add these people but as I said we are in the process of hiring four people as a result of our little conference that we had.

You always have attrition hiring as technical sales force. I don’t think, but you just have to do it.

We’re doing it as I have said, we had eight top managers all together discussing and throwing ideas and at the end of the day we concluded probably what conclusion you did that we need more people. The market is huge as a matter of fact what Ben should have told you is that we just went to assure in Germany, I forget which country [indiscernible] and we work in a day that with people from every country and unfortunately we also have to physical the push the Chinese away who are trying to open up our devices and take pictures. I’ve never done this myself to attack a potential customer, but that’s what the Chinese were doing to us.

Yes, watch out.

We are, believe me that we keep getting request from the Chinese to move to China every other day, you won’t believe it, they keep guarantying that things have changed in China and now they have rules and this and that. If you believe I sell you a bridge in Brooklyn.

Right Bob that is really a good bridge.

Yes, sir and that will come from Roger Liddell with Clear Harbor Asset Management.

I want to focus on the opportunity in the Ultra System because what I’m looking at is the tremendous ability of already installed energy generators to operate times of grid stress and thereby having many billions of dollars of avoided cost of trying to make the grade itself more robust and in fact back fitting the grid or serving the load right at having the capacity at the point of load. A specific example ConEd is trying to differ or eliminate the need to build a whole transformer and switching center in the Brownsville part of Brooklyn, that’s a $1.1 billion project and that’s a lot of money and if they can find ways of knocking peak loads down then they can differ conceivably eliminate the need for that expenditure so there are big bucks here. So the question is, is the company in any negotiation with state regulators for incentive payments for allowing generation currently trapped at the 200 hour a year level and instead make them available in effect as demand -- price responsive to the grid stress issue?

I’ll take this, this is Bob Panora. So, the particular project we have is just underway. We were testing this generator to show that our Ultra system will work to bring emissions down such that customer who has a need a bunch of these has a need to run them over 200 hours a year because that’s the limit now in California, in that part of California. So obviously when we get the order, what's clear to me is that we have a possibility to take this technology to use exactly like you said Roger. We have talked to the regulators in Southern California about this and about treating us differently with this technology than they treat other engines so that they -- so customers get a break for doing the right thing and we’ve also talked to some [indiscernible] energy service companies in California, just loaded the concept about demand response programs, that would be were a big [indiscernible] energy service company would aggregate a bunch of devices like generators and get a payment from the [additive] [ph] folks so we are just starting to have those discussions.

Okay, and do you have any figures on the percentage of the amount of capacity that is natural gas and discuss with me is there any possibility for diesel generation is the two stage emission reduction technology applicable with modifications to diesel emissions?

No, it won’t work for diesel, it’s a spark ignited engine is that it will work for and gases fuel or gasoline I guess would work but it’s not diesel cycle.

But maybe you should finish this statement because we keep getting asked that [indiscernible] wo is the professor of thermodynamics at MIT believes that while it doesn’t work with diesel, it work either for propane or gasoline and that might make it, we don’t have that kind of staff or cash to move on but that’s where the future is going to effort is going to be in a while.

There was another part to your question Roger.

[Multiple Speakers] total available market just on the natural gas powered once.

Yes, you’re absolutely right more and more buildings that are looking for standby generators are not buying the diesel for all the emissions problems that are associated with it, they’re going to natural gas. But also because it doesn’t run out after 24 hours, that’s a big problem.

Well that will conclude the question-and-answer session. I would now like to turn the conference back over to management for any closing remarks, gentlemen?

Well, again I want to thank you all for participating in this call and hope that you’ll watch our company and as developments happen we’ll share them with you. Until then we’ll speak at our next earnings call next year. Thank you.

And we thank you sir to the rest of the management team for your time today. The conference call has now concluded. At this time you may disconnect your lines. Thank you and have a great day everyone.