Tecogen Inc

Greetings. Welcome to TECOGEN's second quarter 2023 conference call. At this time, all participants are in listen-only mode. The question and answer session will follow the formal presentation. If you'd like to ask a question at that time, please press star 1 from your telephone keypad, and a confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. If anyone should require operator assistance during the conference, please press star zero from your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Jack Whiting, General Counsel for TECAGEN. Mr. Whiting, you may now begin.

Good morning. This is Jack Whiting, General Counsel and Secretary of TECAGEN. Please note this call is being recorded and will be archived on the investor section of our website at tecagen.com. The press release regarding our second quarter 2023 earnings and the presentation provided this morning are available in the investor section of our website. I'd like to direct your attention to our safe harbor statement included in the earnings press release 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 provisions 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 Exchange Commission and available in the Investors section of 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, you 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. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures is provided in the press release regarding our second quarter 2023 earnings and in the investor section of our website. I'll now turn the call over to Abhinav Rangesh.

Thank you, Jack. Before I proceed, I'll just introduce everyone that is on the call with me today. Firstly, I'm Abhinayan Rangesh, the CEO of TicoGen. You also have with me Bob Tanora, who's our Chief Operating Officer and President. And you have Roger Deschêne, who's our Chief Accounting Officer. Firstly, welcome to our TicoGen second quarter 2023 earnings call. In the last couple of calls, I laid out our objectives and plan. In order of importance, the focus on cash flow followed by revenue and marketing, and lastly, margin and cost. I'll start by giving an update on where we are with regards to meeting these objectives. Roger will then take us through the financials, and then I will wrap up with our next steps. We saw tremendous growth toward the above objectives. Revenue has grown 25% since Q1 23 and 5% since Q2 22. We generated cash from operations and finished the quarter with $1.87 million in cash. We started the quarter with $1.6 million in cash. Our current cash position is presently approximately $1.2 million, but over the next 30 days we expect to collect more than $3 million in customer deposits in addition to our regular receivables. Our backlog has steadily increased and presently sits at $11.3 million. This backlog is predominantly CEA or indoor agriculture. As you may have seen from our press releases, we established some new sales relationships with companies that are selling complementary products in the same industry. We also received favorable write-ups and have begun advertising in the Vertical Farm Daily publication, which has helped increase our exposure to the CEA facility owners. We expect to take a similar targeted approach in other market segments, such as ice rinks and process cooling, where our equipment offers tremendous savings. We expect to turn this strong backlog into product shipments and reduce inventory levels in Q3 and Q4, further freeing up cash. We also completed the Aegis service contract acquisition and saw an increase in our services revenue of 29.6% quarter to quarter. The sites performed well, and the service technicians we took on as part of the transaction are well on their way to being integrated with our team. One thing to note is that the total present value of the consideration to be paid to AGES is accounted for as a liability on the balance sheet and amortized on the P&L over the life of the agreement. Roger will explain this further when he goes over the financials. Lastly, the air-cooled chiller marketing continues to progress with customer interest. Although we have not yet received purchase orders, we are specified on multiple projects and expect to start seeing orders for this product soon. We presently plan to focus on shipping our current backlog first before shipping air-cooled chillers. Now that our order backlog is increasing, our next steps are to start increasing margin so that we can move towards profitability. I'll talk more about what we are doing to increase margins after Roger reviews the financials. I'd like to do a quick recap of our products and our business before we go over financials. We have three value propositions for end customers. The first is power generation and resiliency. This is electrical cogeneration for energy savings and in some cases for backup power in the event of a blackout. We use a natural gas engine to generate electricity and use the engine heat to produce hot water for the building. We are twice as efficient as an equivalent fossil fuel power plant as we are able to use the heat so have a much lower greenhouse gas footprint. The second is our clean cooling products. These products generate chilled water and hot water simultaneously. In applications that require climate control, such as healthcare, CEA, et cetera, we are the cheapest source of producing cooling and humidity control. Typically, the highest cooling load occurs in the summertime when natural gas prices are lowest. So we also offer customers substantial energy savings. In addition to energy savings, our chillers require little to no electricity to operate. so are ideal for applications where utilities are unable to supply sufficient power. As with electrical cogeneration, our greenhouse gas footprint is cleaner than an equivalent electric chiller and boiler combination, since most fossil fuel power plants are not utilizing the waste heat. Both our electrical cogeneration and clean cooling products benefit from up to a 40% investment tax credit that reduces the payback substantially. Our last value proposition to customers is our long-term service contracts. Our service centers provide end-to-end maintenance and allow customers to maximize their energy savings. Our typical maintenance contracts run for longer than 10 years, and we optionally provide ancillary services to maintain balance of plant. This is an area that our strategy will focus heavily on. We plan to increase the range of services that we offer to customers and also increase the number of sites that we service. We have three revenue segments. Our product revenue consists of sales of cogeneration units, microgrid systems, and chillers to a range of markets and customers. Our services revenue primarily consists of our contracted operations and maintenance services. Our energy production revenue stream is from energy sales, including sales of electricity and thermal energy produced by our equipment onsite at customer facilities. At this point, I'll hand over to Roger to review the financials.

Our top line revenue was $6.7 million in the second quarter of 2023, which compares to $6.4 million in the second quarter of 2022, an increase of 5%, which is due primarily to increased services revenue. Our net loss for the second quarter of 2023 was $780,000, or 3 cents per share. which compares to a net loss of $856,000, or 3 cents per share, in the second quarter of 2022. Our gross profit increased 4.8% in the second quarter of 2023 to $2.8 million from $2.7 million in Q2 2022, and this is due to increased revenue. Operating expenses increased 2.7% in the second quarter of 2023 to $3.6 million from $3.5 million in the second quarter of 2022. This is due primarily to incremental costs which resulted from the AGES acquisition, which increased operating expenses by approximately $190,000 in the aggregate. and expense increases were predominantly payroll and related employee benefits, business insurance, and depreciation and amortization. Moving to slide nine. For the second quarter of 2023, the EBITDA loss was $583,000, and the adjusted EBITDA loss was $592,000. As mentioned earlier, the depreciation and amortization expense increased in the 2023 period which is due to the addition of several vehicles and the amortization of the customer contract intangible asset recognized as part of the AGIS acquisition. The combination of these two additions to our assets increased depreciation and amortization by approximately $66,000 in the second quarter of 2023. In terms of performance by segment, Our overall products margin increased to 33.8% in the second quarter of 2023 from 33% in the comparable quarter in 2022. Our chiller margin has recovered to just above 37%. Our induction system cogeneration margin, although better than the first quarter of 2023, are below our expectations. Abhinav will talk more about our plans to improve margins in the next slide. Services revenue increased 29.6% quarter over quarter. Existing contract revenue increased 9%, and the balance of the increase for our services revenue was from the recently acquired Aegis service contracts. Our service margin was lower, which decreased to 47.5% for 51.7%, which is due in part to engine replacements as supply chains have eased up somewhat for engine components. We expect services margin to be temporary lower for the balance of the remainder of this year, but anticipate they will recover to previous levels ranging in the low to mid-50 percentage by the early part of next year. I'll now hand the call back over to Abhinav.

Thank you, Roger. The AGS transaction has been successful and has increased our recurring revenue. Our sales backlog is also increasing, so our next focus needs to be on margin. As mentioned last quarter, we have implemented better metrics to track business performance. This is going to allow us to catch cost excursions quickly. Our approach to increasing margin is also going to have to come from multiple avenues. With regards to product margin, we will be increasing prices for some of our products. We are in the process of analyzing which parts can be common across our product lines to minimize inventory variation and also improve our purchasing power. We are also looking at places where we can reduce product complexity to further increase margins. With regards to service margin, we have raised prices on contract renewals and will continue to do so. Utility rates have increased substantially in many of the regions we operate in, and we believe we can raise our service prices commensurate with utility rate increases. We are also quoting billable work to customers to service items that are required for our equipment to interface with the building. For example, items such as pumps and heat exchangers will not only increase runtime benefiting the customer's savings, but is also an added source of high margin revenue for the company. We are also working on increasing service intervals by increasing oil reservoirs so engines can run longer between preventative maintenance intervals. This will allow us to have more revenue per technician. We also continue to look for ways to extend life of critical components like cylinder heads. We're also attempting to reduce wear and tear by improving runtime algorithms. At this point, in summary, I would like to reiterate the areas that we're focused on. We're going to be freeing up cash to stabilize the business, continue to grow the revenue and backlog, And lastly, we're going to be focused on increasing margins for both service and products. I think TicoGen is at a turning point. The company has impressive technology and a business model that generates consistent cash flow over the long term. However, in order to grow significantly, we need to make some major changes. With our new marketing efforts, including finding new sales partnerships, advertising and writing articles in targeted publications and social media, the potential for higher utility rates nationwide resulting in improved savings, and continued improvement of the products, I'm confident that TECOGEN has a promising future. Any questions?

Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question today, please press star 1 from your telephone keypad, and a confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Once again, that's star one to ask a question. Thank you, and we'll pause a few moments to assemble the queue. Once again, that is star one to ask a question at this time. Thank you, and our first question is from the line of Peter Sidoti of Sidoti & Company. Please proceed with your questions.

Hi, I'm new to the story, but I have a couple of quick questions. One, can you tell me, how do you sell your product? And if it's a direct sales force, are you increasing the sales force at this point in time?

Hi, nice to meet you, Peter. So we have an internal sales force, but a large focus right now for the company is actually using external partners and reps. So some of our chillers are sold through traditional HVAC reps where we have multiple reps all over the country. With the chillers, we also, as I mentioned earlier in the call, we are establishing some relationships with companies that have similar products. For example, they're doing controls in indoor agriculture or they're doing modular chiller plants. So they're already looking at projects and they're developing projects and we basically sell our equipment to them and they integrate it as part of their broader offering. We feel that is an avenue that actually could help the company grow substantially because there are multiple sectors where there are these project developers or partners who have other complementary products that could actually fit very well with our offering. With the cogeneration product line, in the past there has been a direct outreach to end customers and sales directly, but more recently a lot of it has been coming through various project developers who have been working with our equipment and they design projects around our equipment. Lastly, the area that does sometimes bring projects are the engineering community, where we do, this is where sometimes our sales force will go work with various engineers all over the country, teach them about our products, the energy savings that exist. And then engineers at this point, when they come across customer projects that might have a potential for either a cogeneration system or an engine-driven chiller, will design it into the spec of the project. And then at this point, typically it'll go out to bid and various contractors will bid on it. So there are multiple avenues. We try as much as possible to use external sources to do the project development just because that's likely to help us grow faster as a company without having to build up a very large internal sales force. Can you talk about your competitors? Sure. So we, in terms of the I'll start with the chiller side of things, and then I'll talk about the electrical cogeneration. The chiller side of the product range, we compete against traditional electrical chillers in some cases, where you're dealing with the Daikins, the trains, some of the large chiller manufacturers. Typically, when you end up with a project where you have this combination of heating and cooling required at the same time. As long as the customer is not averse to going with GAF, we find that there's actually no real direct competition just because our savings are so much larger. Like an electrical chiller is typically a cost on the customer, whereas our system will typically reduce their overall energy expense. So that ends up being a, there's no direct competitor in that space. especially in some of these markets such as CEA. With regards to the electrical cogeneration, you have various competitors at various size ranges. At the very small size range, so we typically operate between 75 kilowatts and one megawatt. Below that size range, we used to have, there's some Japanese companies and some European companies that compete in that space. In the size range that we typically operate in, there are competitors that, you know, you have some German companies that operate in that size range. There's 2G. There's a couple of different European engine-based systems. The place where we shine and where our market, where we really have an advantage over a lot of these other entities is when you're dealing with an urban environment. A lot of those systems tend to be noisier, much harder to integrate with the utility grid. Because we have an inverter-based technology, we also have an induction-based technology, which allows you to integrate with the utility much, much easier compared to some of these other systems. And then we're also designed, you know, our systems were designed from day one to be much quieter than a competing offering. And they're also designed to be able to be taken apart and put in tight spaces. So again, we have a very, very strong advantage against some of these European engines. And then when you get above the one megawatt range, you start to get into the GE, Janbaker, and the Caterpillar, and the much, much larger systems. And although they are competitors because they're operating with similar equipment, we typically are unlikely to do projects that are much larger than one megawatt or one and a half megawatts. and they're unlikely to come in into our size range, so they're not direct competitors. Aegis, which was a direct competitor of ours for a very long time, but that's sort of the reason why we took on 200 of their service contracts and right now are basically manufacturing units and they're basically designing projects around our equipment. So we've actually formed a very strong partnership with them So they're no longer a direct competitor. In fact, they're an ally at this point. So hopefully that answers your competitive landscape question. Thank you very much.

Thank you. Our next question is coming from the line of Samir Joshi with HC Wainwright. Please proceed with your questions.

Hey, good morning. Thanks for taking my question. and congratulations on the good progress, especially on the services side of the business. Looking forward into the second half, are you seeing similar levels of services revenues or how should we look at projecting it out over the next two to six quarters?

using a similar level of service revenue, I'd be just a little more conservative than where we are right now, because there is always some fluctuation quarter to quarter. I expect to have similar revenues, but you're gonna see some quarters where, as I mentioned in the thing, we are doing billable work for clients as well. So that one might fluctuate a little bit. But I think between 3.8 and 4.1 is probably a reasonable number. to use as a services revenue for the next two to six quarters?

Thanks, that's helpful. The backlog is also nicely increasing sequentially. Let me ask you this way. Over what period would this backlog be delivered? Is it two or three quarters or is it more than 12 months?

I would say there's always gonna be some projects that ship in the 12 month range. I would just say we are shooting for sequential improvement in revenue quarter to quarter. We're not trying to ship all of this backlog in one shot just because The systems of the company also need to improve to catch up to, as we try to improve margin, as we try to do a lot of these other things. So I think assuming product numbers similar to where we were before we saw the dip in revenue is not an unreasonable assumption. Probably numbers, again, similar to where you had some of your model from your last I don't think are that unreasonable in terms of product numbers. And also some of this, as I said, we're waiting on customer deposits on some of these items. Given the large amount of these are CEA projects, we're also going to be a little careful before we, although we have purchase orders on pretty much all of these numbers here, we just Until we get customer deposits, we're just going to be a little more careful about shipping projects as well. So I expect to have similar numbers to where we are pre-dips in terms of product revenue before we saw a decline. And I think over the next two or three quarters, of course, we're going to try and grow the product number sequentially every quarter. Understood.

Yeah, and you mentioned these advances on orders. Will you remind us, is it like 20 or 30% or what is the advance that you receive from customers?

So our standard terms and conditions on our website, basically we look to have 40% down minimum. And that's usually our guideline to the sales team. Okay, got it.

And then in terms of the air-cooled product, how is that? I mean, I know you mentioned it briefly, but how is that pipeline looking? What is the potential size of individual orders? And again, over what period do you expect to start delivering and getting some revenues from that?

So my... At the current point, I'm expecting that we're going to start shipping product for that only probably sometime in 2024. Exactly when is still to be decided. Partially because we have a strong product backlog right now of our existing products. And a lot of what we have right now is the larger water cool chillers that we have that have good margin. These are all, like everything that's in our backlog right now, it's well tested, it's a strong product that we can ship to the marketplace. I'd rather in the short run just focus on getting our financial numbers to improve and build up an overall backlog, continue to improve the backlog further. The air-cooled chiller, We're starting to go through testing right now. We are specified, as I said, in at least two or three projects. It's hard to tell actually exactly how many projects will come through in what period of time. I think what I would say here is just keep a lookout. As soon as we start seeing borders on this, we'll put some press releases out with regards to the air-cooled chiller. Understood.

Thanks for that color. And then just a couple of quick ones. Is the energy production revenue lower just seasonally or has there been any change in the number of deployments?

So the decline between Q1 and Q2 is primarily because of seasonality, right? You see a... Typically in the winter months, you're gonna see the number in the 500 range, 500,000 or so. In the summer month, it's gonna be high 200s, low 300s, maybe 350, something like that. Again, because your thermal load reduces. With regards to overall decline, we have seen a little bit, and there are some contracts that do expire, but what you're seeing right now really, it's primarily seasonality. We had a couple of one or two sites that were down for maintenance to make some upgrades and things like that, but nothing major. At this point, the difference that you're seeing between say Q1 and Q2 is really just seasonality.

And then last one from me, the selling costs are just marginally lower sequentially despite the sales being higher, what level should we expect for selling costs again over the next four quarters?

I would use the historical numbers because this is just, it's hard. The selling cost typically also includes, if we sell product through HVAC manufacturer's reps, any commission for them would be built into the selling cost. So that does fluctuate quarter to quarter. Part of the reason that our selling cost is lower is some of that has been sales to people that are buying and reselling. So we're not paying a commission, they're just marking up the unit. So the selling cost, I would just take an average over the past and use that as your thing for the moment. If it fundamentally changes, I'll give updated guidance, but at that point, that's probably your closest with regards to modeling it. Understood.

Thanks once again, and congrats on all the progress. Good luck.

Thank you, Samir.

Our next question is from the line of Alex Blanton with Clear Harbor Asset Management. Please proceed with your question. Good morning.

I got on a little late, so I missed the first part of the call. So forgive me if I asked something repetitive. But I was looking at the progress update in your presentation. And I see that the code environment agriculture is a very large part of your backlog. And the rest is mainly multifamily residential. What has happened to commercial structures?

Oh, sorry. Did you have a further question, Alex?

Well, yes. I assume there's some of that in the other category, but things like hotels and, other commercial structures don't seem to be in the backlog much anymore. Is that because you've changed your focus or what?

Yeah. So let me unpack that a little more for you. That's a very, very good question. Some of this is, as you know, right, we had a decline in revenue. And to recover the revenue, we needed to partially approach markets that had a faster turnaround in terms of product design to close cycle. The other thing was what we wanted to do was focus on areas that we had a very big advantage compared to other technologies. And controlled environment is one of those. And then as I laid out earlier in the call, right, we want to increase our marketing channels through sales partnerships. And what we ended up doing was really taking a very focused approach on CEA. because we felt that this is a market that moves relatively quickly, we have a big advantage, and that we had some potential avenues with sales relationships that could really result in sales pretty quickly. So what we ended up doing was establishing two new sales relationships, one with BioTherm and the other one with Accelerated Growth Solutions. BioTherm has been designing indoor HVAC solutions for greenhouses and CEA facilities for 20 years. Long before cannabis came along, they were doing cucumbers, tomatoes, those kind of facilities. And Accelerated Growth Solutions is primarily focused on cannabis, but they do HVAC.

What is that second one?

Accelerated Growth Solutions. So they're actually, they're listed on our last press release. You'll see the full name and you can Google them. But they, again, they do a lot of work in the cannabis space, and they build modular chiller plants. They design various climate control solutions. So both of these, we felt, could be very good relationships for Kikagen. where they basically buy our equipment, integrate it as part of a broader offering to end customers, and they handle that integration. And they basically mark it up as part of the bigger project. And then on top of that, what we also felt with regards to marketing into the CEA sector was we've been getting favorable press coverage in some of the publications in that space. We also started advertising in that space.

What is that press coverage?

Where is that? So there's a magazine called Vertical Farm Daily, and then there's also MMJ Daily. So it's sort of a very targeted newsletter that they only target controlled environment agriculture or vertical farms. One of them is really targeted towards cannabis. So they did an article on us.

Um, vertical farm daily. Is that it?

That is correct. Yeah. Um, I can, I can email.

Yeah, thank you.

Yeah, please do. Yeah. Um, so we started after getting that first article in, we realized that it maybe made sense to start advertising in that, in that magazine as well. So we started advertising in there and they've done a couple of subsequent articles as well on the back of that. Um, so. that is leading to better exposure in that industry altogether. And the combination of that combined with some of these sales partners has resulted in better penetration into the CEA market. The reason you're not seeing a broad spectrum of sales in other areas is partially because there are a bunch of projects that are there that are close to making it, but they haven't yet made it into the backlog. We're still working. Some of those sectors just take a little longer to close. They'll eventually happen. But we also felt, from the sales standpoint, we were better off focusing our resources on a few key markets. We're going to take the same approach in a couple of other markets, such as ice rinks, maybe some process cooling as well, and see how that goes. But it was very much a choice on our part to stay focused in a couple of key markets to really try and turn that into sales.

That sounds very good. What was that second publication you mentioned? You mentioned Vertical Farm Daily, and then there was another one.

MMJ Daily. MJ Daily, okay. MM, so there's two M's, MMJ Daily. Oh, MMJ, okay.

Yeah, thank you very much. Now, this focus... seems to be having an effect on the backlog, since your backlog was up to 11 million. Would you expect that to continue? I mean, what kind of acceleration are we going to get in revenue? Because obviously you need to get to profitability at some point, and that's a function of volume.

That is correct. And I think we are going to see definitely an acceleration in revenue. We've already seen an increase as a result of the service side of it. So our baseline revenue has already gone up. As I said on the last call, my expectation is to try and sequentially improve revenue every quarter going forward. In the meanwhile, we're going to stay focused on also trying to improve margin because some of that is a function of we took a lot of price increases as a result of COVID and all of that from our suppliers. We've raised our prices in turn. We're going to do a little bit more price increases, but we're also going to focus on what we can do better with our products ourselves to improve margin. Same with the service, right? Because the two together are what's going to take us to profitability. Looking out into next year, I mean, there are a lot of projects in the pipeline right now. It's hard to tell where the backlog will be, but we're going to take as focused an approach as we can. We're getting a lot of customer interest, especially with the tax credit being present. It makes the payback very lucrative in a lot of places in the country. So we're going to take advantage of that. But the thing is, the tax credit is not directly driving projects, just because I think People typically make the decision to go with this technology or not. Another tax credit is a bonus, but it's not necessarily the core driver in a lot of cases. Just from what we're seeing right now, we are getting a lot of interest. I'm hoping that the backlog will increase, but at this point, what we're doing is just focusing on seeing what marketing approaches work, testing a few different things. We're going to do it in each of the different segments where we have an advantage and then take it one step at a time.

Thank you very much. I wanted to say I found the press release a little sparse. I think it would really be good if the kind of detail that you just provided and what's in the progress update in the presentation, more of that in the press release because It basically just had numbers and not much about the future. So that's just a suggestion. Thank you very much.

Thank you, Alec. That's a great suggestion. I think we'll incorporate it in the next press release.

Okay.

Thanks.

The next question is from the line of Michael Zuck, a private investor. Please proceed with your question.

Good morning to you.

Good morning, Michael.

I have a question with regard. We have an existing chiller fleet. Where are we on an analysis of potential upgrades from our current chiller fleet to the new electric chiller? Have you done an analysis to see what the potential market is for an upgrade on the existing fleet?

Yes, we have. That's a great question. There are two places that we look to with regards to replacements. There's a whole set of water-cooled chillers that are existing right now that might be operating on the old R22 refrigerant that are a great fit. As the refrigerant prices get higher, especially because R22 has been phased out, although you can still get refrigerant, you can still operate an existing chiller, we target some of those chillers first because they have a great especially if the customer has been happy with it, they have a great potential to be replaced with a like-for-like water-cooled chiller. With regards to the air-cooled chiller, we have definitely gone through our existing pipeline, I mean, our existing chillers that have been some of the older model RT chiller that we had in the past and have identified a bunch of different potential replacements. and have started to talk to them. In terms of exact numbers, I would rather not put numbers or just give any guidance in that space right now, but we have definitely gone through a lot of those chillers and identified them, have started talking to a lot of those customers to see whether they'd be an interest in replacement. So that's definitely part of the space that we're using for marketing.

And as a follow-up, when you replace an old chiller with a new chiller, does the tax credit apply?

It does. It does apply.

And then let's talk about geography. I know that our northeast geography is pretty much centered in the corridor from basically Boston to New York City and northern New Jersey. But we also have some small

efforts in Florida what are we doing in Florida to expand our efforts because it seems that Florida would be a natural growth market for the company so again very great question what we are doing so we actually you know have sold on some of this there's a little bit of this backlog that actually is in Florida there's a bunch of new projects that are being built or designed in Florida that have our equipment specified in there. We are going to a lot of the smaller gas companies in Florida and talking to them to see if we can forge a partnership to see if there might be a way for them to incentivize gas chillers to a lot of their customers. And then we're also trying to get as many showcase-type projects over there. And then eventually we'll also expand our service presence over there so we can further increase the number of the fleet of units that we can put in Florida and support in Florida. So it's definitely an area. We're also looking at other parts of the country where, in particular, where cannabis is going to be licensed and it's going to be where facilities are going to be built. So they may not necessarily be Florida, but they'll be in other states in the country where cannabis is going to be legalized.

From a marketing standpoint, what is the most important factor to marketing going forward? Is it the cost of electricity versus the cost of gas? Is it a regulatory issue where conversion to electric units over alternative units is mandated by local authorities? I mean, how do we rank where our sales efforts should be? from a standpoint of cost opportunity?

So at least where the way the sales team and I are approaching it is very much by market segment rather than necessarily pure economic drivers or resiliency. Primarily because even having gone through some of our existing sales to identify what the drivers were, there's a whole range of drivers from resiliency to economic savings. It's a bit of everything. And if, especially if you look at places like New York, Boston, where traditionally utility rates have been the driver, some of those areas are becoming slightly more anti-gas. Doesn't mean projects aren't happening. I mean, we still continue to sell units into New York, especially go-gen units, but it's likely that it's going to be a bit of all of those drivers, right? So what we are really looking at is market segments where customers can use all of the byproduct from our picket bin. So either all the electricity and hot water, all the chilled water and hot water, where in those cases, pretty much whatever the utility rate is, the customer is going to save money. And those tend to be controlled environment, agriculture, things like process cooling, hospitals, ice rinks. So those are the areas that we're just really approaching it by market segment, not necessarily by pure drivers of either economics or resiliency, because I think all of those factors play into effect in different ways for each of the different customers.

And then a final question. Do we have a White paper available on our website that discusses the resiliency opportunities of our systems versus competitive systems. Because I know that resiliency now is becoming a critical issue when you have rolling outages in many parts of the country.

You know, I am not sure on that. I'm going to have Bob maybe answer. Bob's written most of our white papers.

Yeah, I'm trying to think if I have one specifically on that. It touches on that and some of the existing ones, but not specifically to that issue.

You wrote a great one on the environmental benefits. Right.

I wrote one on the resiliency is part of it, but it was mostly about the The economic drive is the financial benefit of our products. But I don't think I have one specifically about resiliency.

Well, Bob, I'll give you a challenge in your spare time. Let's come up with a resiliency commentary because I think it's on a lot of people's minds today.

Yeah. Yeah. No, it's a good point.

Where it will fit well, actually, is with that air-cooled chiller because that's the whole point. That's part of the whole design approach is that that chiller can run during an outage and you can go back and forth between the electrical side and the gas side. So that might be a way to introduce it. Anyway, thanks for the comment, Mike. Good to hear from you.

And I just want to comment that it looks like we're on a solid track going forward. And I like your game plan of incremental increases on a quarterly basis. If you can deliver that over a series of quarters, I think the company has real potential to finally flourish. And with that, keep up the good work.

Thank you, Mike. Thank you for the support.

At this time, we've reached the end of the question and answer session, and I'll turn the call over to Abhinav Rangesh for closing remarks.

Thank you, everyone, for your time today. And if there are any further questions, feel free to email me. You have my contact information. And also, it's at the bottom of the press release, so I'm happy to answer any further questions or anything else that comes up. Thank you very much.

This will conclude today's conference. You may disconnect your lines at this time and log off the webcast. And we thank you for your participation.