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American DG Energy, Inc. (NYSEMKT:ADGE)

Q2 2013 Earnings Conference Call

August 13, 2013 10:00 AM ET

Executives

Anthony Loumidis - Chief Financial Officer, Treasurer

John Hatsopoulos - Chief Executive Officer

Charlie Maxwell - Chairman

Barry Sanders – President, Chief Operating Officer

Analysts

Ralph Wanger - RW Investments

Jesse Herrick - Scarsdale Equities

Operator

Good morning, and welcome to the American DG Energy Second Quarter 2013 Earnings Conference Call. All participants will be in listen-only mode. (Operator Instructions) After today’s presentation, there will be an opportunity to ask questions. (Operator Instructions) Please note that this event is being recorded.

Now, I would like to turn the conference over to Anthony Loumidis. Mr. Loumidis, please go ahead.

Anthony Loumidis

Yes, good morning everybody, and welcome to our second quarter earnings conference call. On the call today, we have Charlie Maxwell, our Chairman; John Hatsopoulos, our Chief Executive Officer; and Barry Sanders, our President and Chief Operating Officer.

After my introductory comments, John and Barry will give their perspectives on the quarter and the business environment. We will then open the lines to take your questions. Please be aware that a copy of the press release with our financial results is available on our website at www.americandg.com in the Investors section under the heading News Releases.

As usual, we need to briefly cover our Safe Harbor statement whereby various remarks that we may make about 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.

I would like to remind you that we may make forward-looking statements about our future financial performance that involve risks and uncertainties. These risks and uncertainties could cause our results to differ materially from our current expectations. We encourage you to look at the company’s filings with the SEC to get a more complete picture of our business, including the risks and uncertainties just mentioned.

While we may like to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so even if our estimates change. Therefore, you should not rely on these forward-looking statements as we are presenting our views as of any date subsequent to today. Also during the call, we will be referring to certain financial measures not prepared in accordance with Generally Accepted Accounting Principles or GAAP. A reconciliation of the non-GAAP financial measures used on this call to the most directly comparable GAAP measures is available in the press release announced in the Investors section of our website under the heading News Releases.

So, with that, I would like to turn the call over to John.

John Hatsopoulos

Anthony, thank you very much, before I say a few words and pass the mic on to Barry to give you an update, I wanted to thank David Talbot who is the Director of Investments of McKinley Capital Management for sending me such a wonderful email congratulating us on the 53% growth. I don’t know David, if you are on the phone or not but even if you listen to it later on, again, thank you. It’s always a pleasure to hear from investors that are happy with our results.

With that, I would like to say that this is extremely exciting period for us as Barry would tell you we grew better than 50% on energy and something like 48% total growth, and in a period where 99 out of 100 American companies even though grow or grow at 1% or 2% or 3%, for us to have that kind of a growth it’s spectacular especially because of the environment that we are in.

And most of you don’t realize, because you shouldn’t realize that a lot of people even though they can make a big return on our equipment, they are hesitant to pull the trigger; somehow we are in a period that the world is so out of balance that people are petrified to make any decisions positive, negative, or otherwise. In spite of it, the returns of American DG as such allows us to have this kind of growth.

With that, I would like to tell you that we are in a period right now, the 6 months of the end of the year assuming we install the equipment that we have in our backlog and our goal is to do so, and I stress the word goal because one ever knows what happens as, we found out from the Hurricane in New York. But, assuming that we do, we should be cash flow positive for the second half of this year, which is extremely exciting for us, for the future of the company for two reasons, not only because our business is to make money but also we are capital intensive and by being cash flow positive, and I’m talking about the United States, about American DG U.S., we hope and I stress the word hope to be able to borrow money rather than selling equity, it doesn’t mean we will never sell equity again, I never say never about anything like this, butat least it will allow us to borrow money at fairly good terms to support our growth. And again, I want to tell you I have personally approached a lot of investment bankers and such institutions. And even now, they are willing to loan us money, unfortunately the terms of borrowing money up to now have not been favorable to us. But, as we become cash flow positive, our hope is that these terms become much more positive and then we can finance our growth with the bulk of it in debt, and always small amount of equities here and there.

With that I would like to ask Barry to give you a few updates.

Barry Sanders

Thank you, John and once again, I would like to welcome all our listeners from various parts around the world. It is typical for a call [conference] [ph].

As John just mentioned, for the quarter we booked $1,769,000 in revenue or almost $1.8 million of revenue, that’s the largest revenue in the history of the company for second quarter. That was at roughly 48% growth from a year ago. We track and we have typically talked primarily though about our energy revenue, and our energy revenue grew 53% from a year ago.

For any new listeners that are participating in today’s call, just a brief remainder, the company sells energy as an alternative to selling energy equipment. And so, we bill our customers’ monthly for the energy that’s produced off our various pieces of equipment. Equipment ranges from CHP or combined heat and power, co-generation, boilers, chillers that make air conditioning or cooling, heat pumps that make hot water. And that energy we can sell to our clients typically on 15-year contracts on a monthly basis, and that energy -- on these utility bills is what we tend to track.

Now, this high growth really comes from a variety of areas, but primarily comes from the fact that we actually produced 55% more energy this quarter than a year ago, and actually it’s interesting that the price of natural gas that our customers’ paid or thermal that our customer’s paid dropped about 2% and electricity dropped about 4%. So, actually our customers’ costs actually went down and that’s the price we indexed too, and despite that we still have a 53% growth.

The growth really came from a handful of areas, primarily from more systems actively running this year than a year ago. Secondly, the newer systems that we added tend to be larger. I know a lot of folks are focused on units with a company, and we’re trying to get people understand that units are not always the best metric because we have a lot of earlier 60 kilowatt units and a lot of our newer systems are 100 kilowatt units. Obviously, a 100 kilowatt unit produces a lot more energy, and so we’re going to over time keep using the kilowatt hour metric to monitor how the progress of the business goes.

The third area is related to our operations team. As we’ve been discussing on each of our quarterly calls, we’ve instituted a variety of programs to monitor our fleet, keep our metering working well and basically monitor how we service and keep our equipment running. Keeping our equipment operating and running and working efficiently really can pay off and as you can tell from this quarter made a difference.

I do want to point out one item though. A lot of folks know about our subsidiary EuroSite Power. But EuroSite Power only contributed around $190,000 worth of revenue for the quarter. And so though it obviously added to it, we still would’ve had over a 36% growth of the quarter of energy without EuroSite Power. So, EuroSite Power certainly adds to it but the American operations is growing on its own right as well.

Our gross profit continues to be strong. We have profit margin of 34% without depreciation for the quarter. And those of you who actually can see the numbers, we actually had a negative gross profit a year ago and this year, we had over $300,000 positive gross margin and gross profit. And so clearly that’s heading in the right direction and we want to grow that as well.

At the end of the period, we had about $11 million of cash available to us. The metric for the U.S., as we come up with the metric of cash inflows and outflows and basically it monitors our actual cash and removes non-cash items like depreciation and stock options, another type things that sort of varies the specifics and how the company is producing. We actually had a negative cash outflow of about $138,000 and so I echo John statement a moment ago from a cash flow positive perspective, when backlog is up and running, it’s clear based this on that math alone that we should be able to meet our goal. It is our goal to be cash flow positive from operations.

Getting more into some details specifically on the operations, as we mentioned our energy production grew 55%, almost 25 million, again, that’s a 25 million kilowatt hours for the quarter. Again, that’s a record for our second quarter for the business that came from really three areas, selling electricity, a little bit of heat for [sterilizing] (ph) domestic hot water water, it’s from cooling as well.

If you look at, we’ve provided in our recent press release that went up this morning other than more detail as we now growing across 25 million kilowatt hours, it’s actually a substantial amount of energy now. We actually went to start hearing with our investors, our various market segments of where that energy comes from that we are selling. And we really have four big markets that are very strong for us. Our housing provide about 25% of that energy sold, healthcare and healthcare for us is assisted living nursing homes and hospitals that kind of provides 23% of that energy sold of the production.

The hotel or hospitality space was 19%, fitness was included YMCAs, Jewish Committee Centers and Health Clubs was again about 19%. Education which for us is primarily universities was around 9% and then mix of others were around 5%. So there is nice mix of customers for us. We ended the quarter with 104 systems operating and a backlog of 37 systems for a total of 141 systems basically under agreements.

I do want to focus a bit on our backlog. I know that important issue certainly for us and our investors as well. And as best as I can without meaning specific issues with specific customers where we are within a number of core projects. A lot of our core projects are in New York City as John just mentioned a moment ago really that area got devastated by Hurricane Sandy.

But, we are making some good progress on a number of these projects. We have one major project that has five systems that we are in the process of installing that we now finally have approval from the building department to move the site from a basement location to a secondary location. And we are just awaiting it’s a [collab] (ph) – we are just waiting for the collab to approve that new location.

We have another customer where we have 6 systems to be installed that the building department did approve our design change. We did get their approval recently and we are actively onsite putting on the final touches and if everything is going positively and there is certainly no storms we believe those six systems should be up and running next month if everything goes well.

We have another customer that has the number of units that they did just sell the property recently not that long ago. And we are just awaiting meeting with the new customer to make sure everything we are doing bodes well their plan. We have a number of systems to be installed in a couple of universities. We are going to the university systems that’s actually about 7 systems in total for that education marketplace. Then we are working with the universities to get through their elements.

On the sales side, we are really selling through two vehicles, we talked in the past our strategy of selling to elephants or our large customers. That’s continuing. And continuing in really two core markets, the housing market and the hotel market that we are working with some very large REITs in that real estate space to get into that portfolio and we do – though its taking a while, we do see some light at the end of the tunnel and hopefully by the end of this year, we hope would have announced some of those efforts.

But in parallel, we have actually did a little bit of a shift and we talked about that last quarter of doing -- we are calling small box, going after the more individual in some more properties. They don’t have the bigger tail to them but certainly we think on the closing basis and based on the marketplace. There is some need there as well and we have been very active in that. And we think the turnaround in those kind of efforts in the sales should be a little bit quicker.

One element that we done on both – on the small box side is, last month we are actually invited to attend the YMCA group had their – every three years they have their grand assembly. And we are actually invited to exhibit at that event and really it was a terrific event for the company. We met easily over 100 new opportunities that the team have actively and aggressively pursuing. We are doing a lot of efforts like that in smaller marketplaces just to expand that the sales effort is to pick up that effort related to that in September we are attending a lodging conference, I’m an actually a speaker there. We are again, trying to get that outreach as broadly as we can.

On the marketing side, we continue to do a lot of different things from applications to events. On the publication side, the articles in the publications ranging from Green Lodging News and they are doing condo, way to design and build. We did actually a number of events in the U.S. including things at [leading age Max] (ph)which is a major New England healthcare group.

And I also remind everyone in my usual call to get active with us follow us on Twitter, Facebook, LinkedIn, we are about to have you as a friend on those. We have also have been creating some videos, these are testimonials of customers, they can be found either on our websites that can be (inaudible) or out there on YouTube. These have been very, very helpful on the customer side and we like our investors to see them as well. The free ones that are on YouTube or at website. We have a healthcare one of our nursing home, we have a fitness one of YMCA and we have a hotel one obviously on a hotel. So we really hit the core markets and they are available for all of you.

Some folks have asked us, can you give a little more detail on EuroSite Power? I want to start putting in what’s going on in Europe. The team has been very active. Again, I’m going to follow the same process of operations, installation and sales.

On operations the systems that are installed overall or running very well. We have a few different types of systems in our fleet already. And those systems seem to be performing overall pretty well.

On the installation base, the team have aggressively trying to finish off the remainder of that backlog and certainly by other than the deal we announced a month ago by the end of this calendar year, it looks like all of those to be up and running. So we are making good progress with that.

On the sales side, very similar to the U.S., our big three markets are hotels, healthcare and fitness. So there is a little bit of social housing we have been introduced to and we think that actually has great opportunity for us. Unfortunately August is a quite month in Europe as most of us know. And so therefore, we are expecting a bit of an exciting September so we hope all that comes to fruition. This is what we have been told

And last but not least in that, I think John mentioned there is a little bit as well. We will be speaking to investor conference next month. It’s called the Gateway conference, it’s sponsored by a group called Liolios. It’s on Tuesday, September 10. And we are anticipating a little over 250 buy and sell side institutions ranging from analyst brokers and portfolio managers, they can access this part of our outreach effort.

And with that John, that’s the summary on the quarter.

John Hatsopoulos

Well, Barry, thank you very much.

Before we open this to questions, I would like point out something that Barry has been saying now since the beginning of our little company. We can make money without government grants. Last year, we got – if I remember correctly, we got grants of $260,000 for the same quarter June ending 2012. This year, we got zero. And as a matter of fact we are – we believe now I could be wrong that we are the only green energy that can survive without government subsidies and as a matter of fact we don’t want government subsidies. We wish they would stop subsidizing companies in solar and wind that end up going bankrupt and wasting the taxpayers’ money.

With that Anthony maybe you should open it for discussion.

Anthony Loumidis

Can we please go to the Q&A session?

Question-and-Answer Session

Operator

Yes certainly. We will now begin the question-and-answer session. (Operator Instructions) And the first question comes from Ralph Wanger with RW Investments.

Ralph Wanger - RW Investments

Hi, John. You have (inaudible) some shares in the European companies?

John Hatsopoulos

Yes, we did.

Ralph Wanger - RW Investments

And what was your strategic thinking behind that, what was the purpose of that?

John Hatsopoulos

Well, I’m glad you asked that because I should have addressed it. The European venture is growing frankly, I don’t know mathematically or not, is growing faster than the American venture. The market is smaller than the United States, but it’s more profitable because of the high prices of natural gas.

The problem we have with the stock, not the company, is that everybody that owns the stock is somebody that knows me and trust me. And therefore, nobody is selling any stock, there are a lot of people that try and buy stock and nothing happened. As a matter of fact, I put in a bid just to find out a while back to find out if there are any sellers. And after a week or so of coming - bidding there, I think and Anthony knows the exact number, I bought 5,300 shares or 5,400 or something like this, and there were no shares and I think probably I bought them from the market makers rather than anything else.

So, we wanted to have a stock that shows the future growth and opportunity in the stock, and we thought that the value of EuroSite is not represented in American DG. As you know, after we left which by the way I was delighted, the Russell 3000, our stock because of short, because of whoever was doing this, our stock went down in spite of our success not only in the U.S. but also in the beginning of the success in Europe.

The value of EuroSite was almost negative, so we distributed, we owned and Anthony again should correct me, 79% of the company and we distributed another maybe 10% of our holdings to our shareholders, and we hope we will create an active market so the people that own the stock can see their stock trade on top of it, and even more important and not that you shareholders are not very important is our employees.

We created the Thermo Electron with a loan of $50,000, a company that is of public pieces right now worth between $25 million and $30 million. We did it by giving options to all employees. We never paid people top dollar, but we gave a lot of options to the employees. And we had the most loyal as you probably know employee base in the United States, maybe not the most but one of the most loyal.

And it’s very important for our employees, that’s why by the way we made EuroSite a separate company so that our European employees can see the success or failure, hopefully success, with the price of the stock. If the stock doesn’t trade, we don’t have anything. So, we distributed the shares with the hope that once you receive, and I don’t know when the x-date is, the delivery date, Anthony, when is it?

Anthony Loumidis

August 15.

John Hatsopoulos

August 15, there is going to be some activity in the stock. I know there are a lot of people that want to buy the stock obviously, they don’t want to pay a hell of a premium on it. So, we are hoping that this is going to create some activity, and as our European partners announce new successes, the stock would behave. Does that answer your question?

Ralph Wanger - RW Investments

Yes, it does. The second question, does your new kid Charlie Maxwell, do anything useful for you?

John Hatsopoulos

Well, that new kid is on the line and Charlie, would you like to answer it? You are the gangster on our group. Charlie?

Charlie Maxwell

I love the question, it was a good one. And these issues really can be discussed because it is at the moment Ralph a ceremonial post. But, John and I and Barry are working out a schedule of operational activities that I will be picking up as we run into September. And I hope to remain an operational man for all the days of my future tenure.

Ralph Wanger - RW Investments

Good luck, kid, you will need it.

John Hatsopoulos

Well, Ralph, Charlie and I have set-up a program that he will go and visit facilities. He will introduce Barry to various friends that he has in the industry. And from the beginning of time, he has been advising us on energy. As a matter of fact if I can brag a little bit for Charlie’s sake for the past 20 years I made a lot of money listening to Charlie and investing in energy recommendations that Charlie has given me.

So, hopefully this is one of the recommendations that Charlie will give to his friends.

Ralph Wanger - RW Investments

Bravo, he will do great job for you. He knows more about energy than anybody else in the country.

John Hatsopoulos

Thank you very much, Charles. Ralph, you really made my day by being on the call. I didn’t know, I know that I saw you in Chicago about I don’t know, about a year and a half ago. But, I didn’t know that you were interested and involved in our company. Thank you very much.

Ralph Wanger - RW Investments

That’s helpful. Thanks John.

Operator

Thank you. And the next question comes from [Thomas Laurie] [ph] a Private Investor.

Unidentified Participant

Hey, guys.

John Hatsopoulos

Hi, Tom. How are you doing?

Unidentified Participant

Hey, good John. Thank you. Hey, Barry, I appreciate the update on the system installations, very helpful obviously that’s been I think for some of us a little source of frustration out of this greater order backlog and the storm was disruptive and it’s taken maybe a little while longer to get these systems going.

So, I just would like a little more color if I can, you said one customer had 6 systems, which you – you said you hope to – would like to see installed by the end of next month. What about – then you said there was a major project with 5 systems, is that in New York City and is there a timetable for installation on that one?

Barry Sanders

Yes, I have time tables for obvious reasons. I have been reluctant to put dates on all of these because these things have taken longer – trust me, it is very painful to our investors the pain here is three times. Before I enter the question, I will add, we have brought on a consultants and expeditors on all these issues. I don’t want anyone to think we have just sort of sitting back waiting for things to sort of swing in the wind. We have been anything but so we have been – I have to say we have been sort of an aggressive.

So the 6 systems, again, if everything goes smoothly definitely September, the 5 systems probably main October, but again, there is a lot of things that need to happen to make that happen. The university stuff, other than universities are just slow because you literally fresh because we are dealing with therms, they are very thingy between period and so we literally work when the kids aren’t there. And even you think great, (inaudible) progress to the summer but they are summer school.

And so what we believe all the 7 university projects will be done by the end of certainly the – end of November. But again, I don’t want to use the go on those, but we have very precise schedules on all of these projects. We have very precise schedule, I’m just a little reluctant based on recent trying to give too much color on that.

Unidentified Participant

I understand. I know it’s been frustrating. I know you guys have done a tremendous amount of work on that.

Barry Sanders

Well, one more thing. So if everyone go so much cleaner --

Unidentified Participant

Right.

Barry Sanders

-- everyone sort of just slow.

Unidentified Participant

You mentioned one other customer that had a number of units, I believe while you said the building had been sold is there any chance that contract gets voided out and that the new owner building doesn’t take the systems or is that not possible, is there an out clause for transaction like that?

Barry Sanders

The contract is black and white. It’s clearly, it’s assignable in all those pieces, in America one never knows what people will do to be (inaudible), but we don't anticipate any major problems, but until we sat down face to face with them, we don't know for sure. The customer that actually sold the building is actually an existing customer. We have other projects with them. They are a good customer. They’ve been helpful. These are just people we don't know, we obviously, it was part of the sale but until we really talk to them face to face and know specifically their plans, I don’t want to comment.

Unidentified Participant

All right. Got you.

John Hatsopoulos

Okay, interestingly, it’s not important to this call. The new owners of these buildings, one of them happens to be the (inaudible), but I’m not going to mention their names.

Unidentified Participant

I hope, that’s not [Phil Buckner].

John Hatsopoulos

No. [Phil Buckner] now is the hero, he is back in Boston. He pitched the first page.

Unidentified Participant

Where he might drop the system off the roof, yes, exactly --

Barry Sanders

He is like, I get it, yes.

Unidentified Participant

All right. Hey, thank you. Appreciate the update John and Barry, that’s very, very helpful. Thank you.

John Hatsopoulos

Thank you, Tom. Thank you very much.

Barry Sanders

Yes, thanks for the call Tom.

Operator

Thank you. (Operator Instructions) And our next question comes from Jesse Herrick from Scarsdale Equities.

John Hatsopoulos

Hi, Jesse. How are you?

Jesse Herrick -Scarsdale Equities

Doing great. Yourself?

John Hatsopoulos

Well, I will tell you. I came from the Bahamas last night and it was a 106, the temperature, the heat index, and I came here and I had to put a heater in my house and it was something like 59 degrees in Lincoln. So, I’m still in a state of shock.

Jesse Herrick -Scarsdale Equities

John, seriously you started talking about the Bahamas. I will stop Jimmy badly for you. So, all my questions are pretty much answered expect for one related to the growth that you saw this quarter. Clearly, that was exceptional growth and attributable to a variety of different things from system size -- the average system size, the seasonality, and I imagine that just given, now that you guys have more of a track record probably running the systems more efficiently, more effectively, I was wondering is there any way that you guys can kind of quantify which factors are the most important just from the modeling perspective going forward. It would be nice to know if you guys can attribute to certain amounts of seasonality or if it’s really just too difficult to say with all the different factors in there?

Barry Sanders

Yes, seasonality is definitely not part of it, just only because the comparison was quarter-to-quarter as we – I don’t know, I think you have listened to some of these, but we have said in previous calls for example and again as we’ve said this before that the first quarter is always our largest energy because of spacing. And so -- and then, if you look -- and I don't have the number in front of me, I apologize but that was clearly -- and that was all that, that was the historic largest record of energy produced ever.

Jesse Herrick -Scarsdale Equities

And that was a strong quarter?

Barry Sanders

Yes, exactly. And so, this is by – (inaudible), we really blew away from a year ago, but again it’s the same season. It is really a combination of the three, I really -- we didn’t look at it pretty carefully. I can’t say one was more dominating than others, it wasn’t, its clearly going to be and we’re going to have this for a while that our newer systems produce more energy than our earlier systems. Anyone who does the mathematics of our early systems, and just divide systems by revenue are going to underplay future revenue from future systems. For a couple of reasons; one, systems are larger, and two, quite openly we are whole lot smarter in our selection process.

For example these systems I just mentioned with the previous caller the Tom Warren in New York, most of them tend to be 100 kilowatt systems that are going to be running probably 7000 to 8000 in hours. Well, this creates a lot more energy on a per system basis that maybe something we signed five years ago on a 60 kilowatt basis.

The team is doing a better job and how we operate the fleet and these are American DG Energy employees who monitored what’s going on, going to the field, all fighting for up time. So, it’s bit of all of that.

Jesse Herrick -Scarsdale Equities

Okay. Well, just that --

John Hatsopoulos

By the way, I want to apologize that when we had the last conference call, Tom Warren, had asked me a similar question and I told him, remember that the second quarter is one of our weakest quarter and obviously I was wrong which gives you an idea of how bad my predictions are.

Jesse Herrick - Scarsdale Equities

Okay, well, that’s -- keep that in mind. Well, probably, I think that’s pretty much, probably had some more questions as I start taking through the model but I appreciate you guys and congratulations on a great quarter.

John Hatsopoulos

Thank you.

Operator

Thank you. The next question comes from [Jay Goldman][ph] a Private Investor.

Unidentified Participant

Hi, guys. I’d like to add my congratulations for a really good quarter. I got one editorial two questions, coincidentally I’m involved in another company which Charlie Maxwell was involved. It’s been an enormous trust for the company to have Charlie sit on the Board, so Charlie if you are still listening, I want to thank you for both situations and thin you are on the board. And thank you, Charlie.

Charlie Maxwell

Yes.

Unidentified Participant

Two questions, one, John, you mentioned about the financing and consultants to several institutions and what they had offered wasn’t quite acceptable at this point. What do you think is going to happen down the road as you look at the interest rate on sort of one side of the ledger and the enhanced improvement in the bottom line of the company, on the other side of the ledger. What do you see as the inhibiting factor today of not moving forward on some form of bank financing?

John Hatsopoulos

Well, that’s a wonderful question and gives me a chance to stand on my soap box. Two years ago, I went to a team and I won’t mention who it is but you can guess that use to raise all the convertibles and debt of several in that chart. And it was at that time, it was Lehman Brothers and now they’ve gone to another firm. And I asked them if they would loan us some money even through a convertible or through pure debt. And they said oh, sure. We know you. We feel very comfortable with you. It would be glad to do that.

So, I got on a high and but he said how much you want, I said I don't know about $10 million, so he started laughing. I said, what do you mean, why are you laughing, what’s so funny? He said, if you are talking about $100 million or more, we’re here for you. $10 million, there is no way, we will even consider it. We don’t have the stuff to money to $10 million worth of debt. So, he said when you need $100 million, come back to us and we’ll be there for you.

This is something that has happened in separate view in this country. Small debt unless the government loans it to you and you can find some people in the government that are wishing to take chances just doesn’t exist. We’re growing, we’ll need more and more [carpets] (ph) and barricades and makes your order say 10, 20, 30 whatever it is, buildings. Then we’ll need that type of money.

I remember a fact, Charlie, who’s on the phone, has been pushing me to start considering bringing amounts of money. Problem is you borrow $100 million even at 6% that’s $600,000 a year of interest. And so, the money is there, we need to want big amounts of money, not small amounts of money which sounds peculiar but it happens to be the fact.

The real estate fiasco has damaged the opportunity to loan money to people. Interestingly enough, the practice we are agreeing that help us. I said, that we don’t get any subsidies. We don't because our 100 unit has almost zero emissions. And but it might help us borrowing some money. Unfortunately the government goes for the weird technologies that they will make money but anyways.

Unidentified Participant

Okay. But let me just sort of put it through my value system here. Am I hearing that the amounts of money that you need is not sufficient enough from your perspective to justify the interest rate relative to the bottom line in the company and that’s what I’m hearing, do you have anything on the back in your mind that says --

Barry Sanders

Jay hold on.

Unidentified Participant

When the company --

Charlie Maxwell

Jay.

Unidentified Participant

Yes.

Charlie Maxwell

What John saying is not bad at all but what he saying is that if we need $50 million and we have to borrow a $100 million, we have to keep the other $50 million paying --

Unidentified Participant

Right.

Charlie Maxwell

At normal interest rates purely, it maybe for two years before we need it. So, he is not saying that we are -- that the rates are too high. He is just saying that we can’t use that much that fast therefore we would like to take it in smaller time [hindrance] (ph).

John Hatsopoulos

Thank you, Charlie. Yes, go ahead. I’m sorry Charlie.

Charlie Maxwell

Go ahead John. I didn’t mean to interrupt you. Go ahead.

John Hatsopoulos

No, no, all I wanted to say is, we’re getting there. We are getting there and believe it or not. Barry and Anthony don't even know it. I could have called from Bank of America which used to be in the beginnings of thermal electron, Bank of Boston is that I have luncheon with them on their own. They called me. I didn’t call them. To me, sometime and I don’t know, I read my assistant has made the date to meet with them and talk to them.

Unidentified Participant

Okay.

John Hatsopoulos

So, all of our sudden, we’re starting to be interesting as our growth continues.

Unidentified Participant

Okay. Okay, thank you, John. And Barry, let me ask you one quick question, on the geographic marketing for the company, you’re very localized in New England New York which might be sort of enough of where the company is right now. What’s in the back of you mind Barry in terms of expanding the presence of the company outside that geographic area?

Barry Sanders

Yes, well. First of all, kind to the first statement but I’ll answer the second one. You’re correct in one sense. Clearly, our installer operations has been all Northeast and basically from Virginia to Maine. So, that’s an absolute true statement. But from a marketing and even a sales perspective, we’re clearly broader. It’s been more recent to be fair as a simple example and maybe not a great example is, this YMCA event that we attended. YMCA is all round the country. This event only attracts the executive directors and board members. We’re following leads from and doing this by memory from Tacoma, Washington down to Phoenix, Arizona, bunch in California, a few in Florida, a couple believe it not Indianapolis. I think it’s, what’s the old movie if they build that would come, we’re five of the customers.

The lighting conference where I’m speaking and we’re attending next month. I will show you there are hotel groups there. This is by the major -- significant, anyone can look it up, this is the major deal making hotel event where the brands and the owners get together to do business. They grow big properties all over the place, higher the conversation actually Charlie – the friend of Charlie actually who set it up talking about Hawaii and Puerto Rico for sites and so --

Unidentified Participant

Okay.

Barry Sanders

So from a sales and marketing perspective, the cavalry is ahead of the troops. The troops are operating, there is other ones who are bringing in the money right now and operating the systems but the sales side the effort that, we should mention on this call clearly for you and your colleague, that grew the local, it’s a stepping stone to much larger national group. [Inaudible] in my back pocket if he wants to close the first part.

Unidentified Participant

Okay. So low hanging fruit on a broader maybe national basis was not a prohibitive fact I feel?

Barry Sanders

Absolutely not. If you want it – if it’s a good project we can get a good return on it, we are going to do it. The technology may change. You still see the mix and again the great respect of those folks focused on units, the type of units and the size of the units will be all over the place which is no problem for us operationally but the deals will be different. It will be more e-farms, more boilers, more chillers versus more CHP. But, that’s okay, if that’s the cut.

What we learned is this YMCA, YMCA needs a boiler, its in Indianapolis and we can get it to your pay back and keep them laying out the capital everybody wins.

Unidentified Participant

Okay. All right. Thank you very much. Congratulations guys wonderful, wonderful report for this quarter. Good feel.

John Hatsopoulos

Thank you, thank you very much.

Operator

Thank you. And as there are no more questions at the present time. I would like to turn the call back over to management for any closing remarks.

John Hatsopoulos

Well, I think that we are delighted with the questions actually. This is one of the best telephone calls we have had because we got some very good questions that could give a little more guidance to people. With that thank you everybody. And feel free to call anyone of us especially Barry and I and Anthony of course on any questions you might have in the future. Thank you.

Anthony Loumidis

Thanks a lot everybody. This concludes today’s conference call. Bye-bye

Operator

Thank you for the presentation. You may now disconnect.

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