Hello, welcome to the Tecogen Year-end 2022 conference call. If anyone should require operator assistance, please press star zero on your telephone keypad. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Jack Whiting, General Counsel and Secretary. Please go ahead, sir. Good morning. This is Jack Whiting, General Counsel and Secretary of Tecogen. Please note this call is being recorded and will be archived on the investors section of our website at tecogen.com for two weeks. The press release regarding our fourth quarter and year-end 2022 earnings, and the presentation provided this morning are available in the investors section of our website. I'd like to direct your attention to our Safe Harbor statement included in the earnings press release and presentation. Various remarks that we 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 and Exchange Commission and available in the investors section of our website under the heading SEC Filings. While we may like 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 fourth quarter 2022 and our year-end earnings, and in the investors section of our website. I'll now turn the call over to Abinand Rangesh. Good morning, everyone. This is Abinand Rangesh, the CEO of Tecogen. I also have with me, Bob Panora, our Chief Operating Officer and President of the company, and Roger Deschenes who's our Chief Accounting Officer. Before we begin, I'd like to first thank Benjamin Locke for his valuable contributions to Tecogen. I have now been CEO for just over one and a half months. The management team and I have spent this time talking to customers and partners and analyzed the business in detail. After we report results, I will be covering my vision for Tecogen, the markets for our products, the product positioning compared to the competition, the go-to-market strategy, and the details of how we plan to turn the business around. I also have some pretty exciting news to cover today as we just recently signed a material agreement for a significant number of service contracts. I will talk more about that at a later section of the presentation. Before we go into the numbers, as a quick recap, 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 with a small component of installation activity. Our energy production revenue stream is from energy sales, including sales of electricity and thermal energy produced by our equipment on-site at customer facilities. At this point I would like to introduce Roger Deschenes, our Chief Accounting Officer, to go over the financial results for Q4 and the full year 2022. Roger has been with Tecogen since 2020 and is an instrumental part of our finance team. Over to you, Roger. Thank you, Abinand, and good morning to everybody. The fourth quarter was a disappointing quarter where we saw a reduction in revenue of 37%, which resulted in a net loss of $0.06 per share and a net loss of just over $1.4 million. Our operational expenses were 13.7% higher quarter-over-quarter, or approximately $450,000. This increase was primarily due to the impairment of long-lived assets, an increase in the reserve for bad debt, the litigation provision, and increased R&D costs associated with the development of our air-cooled chiller. Our product margin was 32% for the quarter. The decrease was primarily due to the mix of products sold in the fourth quarter and higher material costs. Our overall gross margin increased to 53%, which is due to a higher proportion of revenue coming from our service activities. We'll talk more about margins in our segment review. For the full year 2022, revenue increased 2.5%. Our product revenue increased by almost $1 million compared to fiscal year 2021. Overall margins were 3% lower than fiscal year 2021, the increase in operating expenses of 4.8% or approximately $600,000, which we might add was below the rate of inflation, resulted in a net loss of $2.4 million for the year. We are beginning to see material costs stabilize, with the price increases instituted in the second half of 2022, we are expecting an increase in our gross profit margin for product sales in 2023. Moving on to Adjusted EBITDA and the EBITDA calculations. For the quarter, the EBITDA was a loss of $1.3 million, and the Adjusted EBITDA was a loss of $1.1 million in the fourth quarter. The 2021 EBITDA and Adjusted EBITDA numbers were favorably impacted by the Employee Retention Credit. For the full year, the EBITDA loss was $2 million, and Adjusted EBITDA loss was $1.7 million. Again, the full year 2021 EBITDA and Adjusted EBITDA calculations were favorably impacted by the Employee Retention Credit. We'll cover now the performance by segment. For the quarter, our products revenue decreased 73% in the fourth quarter, with the largest decrease seen in chiller revenues. Our service revenues saw a 2% increase in the O&M revenue. The energy production revenue increased 29% quarter to quarter, with a corresponding increase in margin from 31% to 48%. This increase was predominantly due to increases in utility rates and seasonality. Overall, for the quarter, our gross margin increased 53%. Again, this is because of a change in our sales mix to a higher percentage of service contract revenue. For the full year, we saw an increase in product revenue of 10%, majority of that was due to a 62% increase in cogeneration revenue. Service revenue declined 10%, which is primarily due to the no low margin installation activity in 2022, as we are no longer providing installation services. Our O&M service revenue increased 4% year-over-year. Lastly, for 2022, energy production revenues increased 3% year-over-year. Overall, our gross profit margin was 44% in fiscal year 2022, which compares to 47% in 2021. The decrease was primarily due to a lower product margin. Again, this has been driven by the higher material cost or higher material prices we've experienced in the current year. As I've mentioned earlier, the material prices are beginning to stabilize, and we believe, our price increases and stabilization of the material cost, will combine and will improve our product margins as we move forward in 2023. I'll now hand the call back to Abinand. Thank you, Roger. Before I talk about my vision and strategy, I know some of you are concerned about cash as well as where we are on backlog. Our year-end backlog was $6.6 million, but has now increased to $7.5 million. We're also seeing orders in the pipeline actually increase which again, I'll show you in more detail a little further down in the presentation. The backlog right now mostly comprises of multi-family, residential, and controlled environment agriculture. There are also a mix of other segments within this backlog. We also have no debt at this point, and our current cash position is higher than it was at year-end and is continuing to improve. There are more plans that we have to actually improve the cash position, which I will cover in more detail shortly. Our primary mission is to provide customers with energy savings and resiliency with a cleaner environmental footprint. In many of the markets we operate in, we provide a means for customers to cut greenhouse gas footprint by up to 50% while simultaneously reducing energy costs by more than 50%. I briefly wanna cover the value propositions that we offer to end customers as this is the basis on which we're building our strategy going forward. The first is power generation and resiliency. This is provided by our electrical cogeneration products, where we provide energy savings, and in some cases, backup power in the event of a blackout. We use a natural gas engine to generate electricity and then use that engine heat to produce hot water in the building. We are twice as efficient as an equivalent fossil fuel power plant as we are able to use the heat, so we 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, controlled environment, process cooling, we are the cheapest source of producing cooling and humidity control. Since typically the highest cooling load occurs in summertime when natural gas prices are the lowest, we 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 electrical power. This is becoming more of a driver as more and more of our grid becomes renewable, fueled and peak power is now there's insufficient power in lots of the parts of the country. As with electrical cogeneration, our greenhouse gas footprint is cleaner than an equivalent chiller, electric chiller and a boiler since fossil fuel power plants are not utilizing the waste heat. Both our electrical cogeneration systems and clean cooling products benefit from a 40% investment tax credit that reduces the payback substantially. Our last value proposition to customers is our long-term service and asset management services. 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 also provide ancillary services to maintain the balance of plant. This is an area that our strategy will focus heavily on. By increasing the aMount of our fixed costs that's covered by recurring revenue streams, we reduce the reliance on product revenue that might fluctuate quarter to quarter, but might have much larger movements to our overall growth. I will talk more about exactly how we're gonna do this and the agreement that we just signed. As part of developing a strategy for Tecogen, we first analyzed the status of our business today. As you can see on the chart, we basically got two axes that we're comparing here. The first is on the Y axis, we've got the demand for our products and services. On the X axis, we've got substitutes and barriers to competition. I usually like to look at businesses in this format because barriers to competition typically allows you to have to control your relative pricing power against competitors. The demand for the products and services is what will allow us to have increased sales growth. What we have done right now is plotted our existing products and services on this matrix based on where we see, where they stand. The goal is to move them to the top right-hand quadrant. Firstly, I'll talk about the Tecogen service segment. The Tecogen service segment has very strong barriers to competition and has strong pricing power as a result, as you would have seen with our margin, this quarter and previous quarters. Part of that is because we have proprietary technology, and also establishing a service network with the spread and density of ours is difficult to replicate by competitors. We also have the capability to offer 24/7 service, so we're able to have some key advantages in applications such as process cooling that require very high uptime and require service to be provided any time of the year. Our service revenue presently grows at approximately 7% a year. The growth rate of service is presently limited by the rate of new units that we're adding to the fleet. Adding more capability for complementary products and management services for energy asset owners is likely to increase this growth rate substantially. The multi-state nature of our service network with the ability to dispatch and manage complex systems also gives us a significant advantage. There is an opportunity to service other cogeneration and similar engine platforms using our same service network. Although the product side of the business has significant competitive advantages, it is predominantly a return on investment-based sale. I believe that the way to increase the demand for our products and services is really gonna come down to changing how we distribute our products. In particular, we need to focus on some key market niches, make our products easier to sell and install, and then establish a strong distribution network that is wider than we presently have. The core of our strategy isn't a huge change in direction, but more of putting the systems in place that will help us scale. As I mentioned earlier, the baseline of our strategy is based on first increasing the recurring revenue stream that we have so that more of our fixed cost is covered. The second area will come down to the sales and distribution systems, and then building the backlog for our air-cooled chiller. Of course, the very first step, which I'm sure many of you have concerns with, is, you know, stabilizing the existing business and freeing up cash. We will be instituting tight control, you know, cost control measures, and some of this has already gone into place. We are expecting some retirements within the next quarter and have already made some headcount reductions to reduce operating expenses. Part of our operating expenses were actually a little higher in 2022 because we were expecting these retirements, so we had to have additional personnel that were being trained concurrently with the existing staff that were retiring. Our inventory levels, in particular, finished goods, are also presently too high. We have implemented better forecasting measures and expect to reduce working capital by $1 million or more. We are also owed more than $1.8 million in rebates, which we expect to collect over the next 12 months. Of course, as you can see from the slide there, I mentioned that we're in the process of assuming service agreements for over 202 cogeneration units. I'm very pleased to say that we actually signed this agreement last night, and you will see in the filing that we just released, the 8-K that we released, the agreement is actually included in there. This will increase our service revenues by $600,000-$700,000 a quarter and will provide us a long-term recurring revenue stream. This transaction is done in conjunction with a partner of ours that owns a competing cogeneration company. The partner of ours is a much larger utility company that has other services that we see as exactly complementary to ours. We see this relationship as a much bigger, both from a sales standpoint as well as a product standpoint, and allows us to do certain things such as provide financing to end customers as well as installation services through some of their arms. I'm not in a position right now to mention the name of the utility that this agreement is with, but you will be seeing a press release probably in the next few days as soon as their communications team have approved our press release. You will see that go out, and you'll be able to see who that entity is. Basically, as a first phase, as I mentioned, we're gonna stabilize the business by cutting the burn rate and freeing up cash and increasing the baseline of recurring revenue. Gives us the time that we need to put in the systems in place that will allow us to scale the product revenue. We made a decision to use sales channel partners rather than increase our internal resources, mainly because our sales cycle exceeds one year or more. If we were to hire an internal sales force to scale up revenue, the fixed cost would rise faster than the revenue would come in. Using external sales partners also has the potential to give us a much broader geographical reach. For external partners and developers to sell our products, it needs to be very easy to sell. The faster projects are installed, the more interest there will be for follow-on projects. Therefore, the other key area we're focusing our efforts on is how to make our products easier to install. This can act as a significant limitation to sales and repeat business as presale and post-sale support places a bandwidth constraint on our team internally. The complexity also makes it harder for sales partners to be trained in generating, you know, projects quickly. In order for developers to be self-sufficient, our products, installation document, pricing, and selection tools need to be more user-friendly. We've already designed our air-cooled chiller so it is easy to install and are planning on rolling out similar product improvements to our other products. The other area that will change the trajectory for Tecogen is building up the backlog for the air-cooled chiller. We have had significant interest since our product launch and are working on getting the first few orders. I'll be tracking the backlog for this product closely and will be updating investors over the next two or three quarters. More generally, we will also be tracking the overall size of our sales pipeline to get an indication of how our strategy is progressing. Since there is a 12-18 month time lag between sales efforts and product shipment, the size of the pipeline is a near-term indicator of progress. Lastly, once we have successfully reached full-scale production with the air-cooled chiller in early 2024, we plan on expanding the product range to similar products such as heat pumps. In addition, we are also planning on expanding our service offering to take on asset management and other types of chiller service. To have the highest chance of success, we plan to focus our efforts on markets that have the largest advantage compared to competing alternatives. This chart on the right shows the market segments where we've had the most success over the last few years. As you can see, I've highlighted the healthcare and hospital field, indoor growing, education, and multi-unit residential. Over the upcoming slides, I'm gonna talk a little more about the products that we've sold into these markets and why they've had an advantage and similar market segments that we could expand into. Typically, we see more chiller sales into hospitals and indoor agriculture. Multi-unit and education typically tends to have more of our cogeneration, although some of the larger education facilities have seen some pretty significant chiller sales. Looking at the competitive landscape for cogeneration, I'd like to discuss why we've had success for our cogeneration products. The biggest advantage our products have over competing systems is that they're designed to be a perfect fit for urban environments. They fit in tight spaces, are quiet, and are easier to interconnect than some of the competitors' larger industrial cogeneration systems. Not only will we focus on typical multi-unit residential applications, we also plan to find other high-rise buildings that might have a load for cogeneration systems. In particular, even if there's only a wintertime load, such as in office buildings, with the current utility rates and the investment tax credit, many of our projects would actually have a significantly short payback even if they only run half of the year. We plan to eventually expand our geography from the East Coast into the Mid-Atlantic and the Midwest. Looking at our chiller products, our biggest advantages come when there's a simultaneous chilled water and hot water load. This typically occurs when temperature and humidity is being controlled at the same time. This is found in applications such as process cooling, healthcare, and indoor agriculture. In addition, if there's an electrical supply constraint, such as in cannabis applications or in the case of hospitals where the power could be used for more profitable sources such as MRI machines, our chillers are the best fit for these applications. The benefits are further improved with our hybrid chiller, where the lifetime ownership cost is roughly half that of an equivalent electric chiller, even when including capital recovery. The mention about the electrical capacity is actually gonna become a much larger driver over the next few years, just because the utility grid is very, very constrained right now, electrical capacity needs are becoming more significant. The other advantage with an electrical capacity requirement is projects can move much faster because utilities are typically unable to provide enough power. If we are able to provide a system that reduces electrical load, this is a very fast turnaround. We're likely to see more projects in that space over the next few years. I also wanted to look at the addressable market size. We basically looked primarily at some of the areas that we have a strong service presence in. We looked at the number of facilities in each of these segments, and then we identified how many of these would have a hot water load, would have all the requirements for our projects. What is very clear from this is that the addressable market is still very large in the geographies that we're operating in. The utility rates are going up in our core markets. I think, with improvements to our sales and distribution system, I do believe that this company has a significant potential for long-term growth. Having now established that there is a market, the products have a competitive advantage, we now come to implementing a distribution system. We analyzed our existing sales network, and we talked to some of our most successful sales partners. From that, a few areas that we needed to address emerged. The first is that to make a product sell, it has to be as easy as possible for these partners to take to end customers. We need to put in the requisite support system on our end to make sure that this happens. Without this, there's frustration on both sides, so this is an area, as I mentioned earlier, we are working on. The second is to make sure the product has a clear market niche, especially as we are onboarding new sales channel partners. They need to know where to look for projects, what kind of facilities that they should be targeting their efforts on. Once they're up to speed and have done a few projects, they can broaden their focus. Having a few key areas that they start with makes it much more likely that they will be successful. The last area is that our products have a longer sales cycle compared to other electrical chillers. The reason for that, of course, is a lot of our products are going into existing buildings and also require an ROI-based sale. If we are to have sales channel partners that build a business around our products, we need them to be compensated and have the right incentive structure that makes them that compensates them for the longer product sales cycle. This is an area that we're working on. Our most effective sales channel partners to date have been product champions within larger firms and entrepreneurial project developers. One of the reasons that they've been successful is that they've been able to make sales direct to building owners. Most of our projects are in existing buildings, so the decision maker is typically the building owner. Many manufacturers' rep firms and many of our existing rep firms are structured to sell to engineers and contractors. In this current environment, where many cities are favoring electrification and many engineers are favoring electrification, there's an increased risk that a sale will fall through unless the building owner makes an active choice. The utility rates in many of these regions have risen substantially. As a result, the payback periods have come down substantially. In addition, there's a 40% investment tax credit. Our products have a very, very attractive value proposition to end owners. As a result, we are looking for sales channel partners that have the ability to make this sale to the end owners. That doesn't mean that some of the traditional [HVAC] reps are not gonna be part of the our sales distribution network, 'cause there's still some projects that come from new builds. We need to expand the range of partners that can develop projects and sell directly to end owners. Ideally, the partner will also have some sector-specific expertise and maybe some regional relationships with utilities. We're presently experimenting with incentive structures based on preliminary discussions with partners. We believe with the right structure, we will attract entrepreneurial sales channel partners who build a business around our products. As I'll show you on the next page, some of these changes are already having an effect in reinvigorating some of these partners. What I tried to do here is to show the sales pipeline, 'cause as I mentioned, you know, our products have a 12-18 month sales cycle. A way to measure if the strategy is working is to really look at how big is the sales pipeline to start with, and how fast is that sales pipeline growing. What I did here was I looked back to November 2022 and then presently where we are in March. We're only halfway through March, the decline in March really only represents half a month. Looking at what the value of new projects added to our sales pipeline. This is not the backlog, this is purely potential projects that were added to the pipeline. Looking at what has happened since end of January onwards, what we are seeing. Some of this significant increase in the sales pipeline is really driven by our new product launch at AHR 2023. In addition, the sales team and I have been, you know, meeting with lots of our partners and a large portion of this is also driven by some of those meetings, some of those projects being reinvigorated. We are, as you can see, at even halfway through March, we are still above the baseline that we were in November and December. We're starting to see an increase on this, and I will be tracking these numbers pretty closely over the next few quarters to see if the overall size of the pipeline is increasing substantially. Then finally, I would like to update investors on our new poduct, our Hybrid Air-Cooled Chiller. We launched this at AHR 2023, which is the largest North American HVAC trade show. We had tremendous interest and are currently working on obtaining the first orders for this product. A key priority for us is to start increasing the backlog of our air-cooled chiller. This will establish demand for the product and allow us to grow the company long term. We're gonna be starting testing very soon, and we also expect to start rolling this out to customer sites later this year to start doing beta testing while we work through various conditions. In the meanwhile, this should not stop us from increasing the backlog of this product. I hope to be able to make some announcements with some orders for this product over the upcoming quarter, a quarter and half. By the end of this year, we expect to be entering full-scale production so that we can expand our range of products, product offerings to customers, especially those that have a need for a solution that does not require a cooling tower. At this point, I would like to just recap our strategy. The first step is to free up cash and stabilize the business. As I mentioned, we would like to grow the service division, and in an effort to do that, we have signed this contract to assume 202 service units for 202 cogeneration systems. This will add a significant amount to our service revenue and will also allow us to receive cash much faster than we do on the product segment. We want to make the products easier to install and sell. We need to put in a sales distribution system via the right channel partners and developers. Of course, we need to build up the backlog for the Air-Cooled Chiller. At this time, I would like to open the floor for any questions. Thank you. We'll now be conducting a question and answer session. If you'd like to be placed in the question queue, please press star one at this time. If you'd like to remove your question from the queue, you may press star two. One moment please, while we poll for questions. Our first question today is coming from Sameer Joshi from H.C. Wainwright. Your line is now live. Hey, guys, thanks for taking my questions. Abinand, congratulations on the new position and good luck. My first question is just a clarification on the definition of pipeline. Are these amounts that you have bid on or there is a potential partner and you are in conversation before putting a bid? Can you just explain what that is? Firstly, thank you, Sameer, and that's a very, very good question. Typically we have various stages in our sales system. What happens is when we have seen a project, we have received utility bills and, or we have quoted a project, then it goes into our pipeline, and we estimate the number of units that we will need. Then we basically price that accordingly. That's really what this number is. This means that we've talked to the customer. We have usually provided a quote to the customer. Of course, there is a conversion ratio between this and what turns out at the end sale. This is why, you know, we don't report this normally, but given that we're in a position now where we are making some changes to our sales network, I wanted to be able to give investors an idea that, look, the size of the overall pipeline compared to where we were before is increasing. That's really what I'm defining as the pipeline. Does that answer your question or do you need me to? Yes. Yes. Yeah. No, no, I think it does. And we look forward to that data going forward. In terms of the time or like a time life cycle of a project once you receive an order and actual installation, is there any difference between the... I know it can be six to 18 months, but is there any difference between the chillers and cogen, and what do you expect that timeline to be for the air-cooled systems? Typically, this is where it gets a little more nuanced. When you have a project that's based on a ROI, those projects typically can run anywhere between 12-18 months from quoting a customer, going back and forth, getting the project specified, to getting an order and for it to make it into our backlog, to shipment. Those kind of projects can have a pretty long timescale. What ends up happening is we get also projects where there's a capacity constraint. We have a project, for example, where the customer wants to go live, they need cooling, and then they find that the utility is unable to give them enough power for the cooling. Those projects can move, you know, in the 6 to 12 month timescale. Mm-hmm. Those things can move pretty fast. Those ones are ones that you may not necessarily, they might come out of. You know, you didn't even know that it was there, and then it'll suddenly come through and it'll turn into an order. Those ones are a little harder to predict in terms of life cycle. The advantage with those kind of projects is they end up being quite large, at least for us, because they might end up being like a four chiller project, just because for a customer to need sufficient power, and not be able to get it from the utility, it has to be a large enough delta that a solution like ours makes a meaningful difference. In that sense, that can swing the needle quite a lot. With regards to the air-cooled chiller, part of our plan right now is to really build up the backlog for this chiller so that we have almost a lot of 2024's production sold by this year. Right. Whether that's possible or not, that remains to be seen. Right now, some of the competing electrical chillers are having 50-plus lead, you know, week lead times. As long as we can beat that number and get some of these existing, the first few sites out there, we believe that the backlog will scale up over the course of this year. Again, this is something that we just have to see over the course of the year, how sales go for this product and actually getting it in there. In terms of the pipeline for that product, we've already been reaching out to customers. We've had significant conversations. We don't have anything in the backlog yet with that product. As soon as we do, I'll definitely be issuing a press release with regards to that. Yeah. On page 22, the increase in February and March, we see is mostly from the air-cooled chiller, I'm guessing. Actually, no. It's only a small portion. Oh. That's the air-cooled chiller. There's actually across the board. This is across the board. We've seen a lot of different items that are in there. Okay. Yeah. This is across the board. It's reinvigorating a lot of our partners and some newer ones as well. Good to see this. I just have a few questions on the actual results. You did touch on inventory being high. Was that mainly because of some expected shipments that were not that did not materialize? Or was it more work in progress? Or like how should we look at the buildup in inventory? Yeah. That's a very, very good question. The first one is, right, there were some shipments that were built based on receiving certain orders that either got delayed or did not materialize. There was a buildup of finished goods that was basically built to forecast and didn't necessarily happen. We will sell those. It's not a problem on those. There was also a buildup, an overall buildup of inventory that resulted from just having to maintain a higher safety stock last year because we were seeing so many supply chain issues that we had a higher safety stock level. The last thing, of course, is just inflation itself, right? You're gonna see an increase in inventory values just because of the value of t he material that's being bought going up. It's a mix of all those things. We definitely think that the number can be lower going forward. Got it. In that context, the price increases that have been implemented and may be implemented in the future, how should they reflect in the gross margins going forward? Meaning, you're already marking this inventory, up marketing to market prices, I'm guessing. How does that impact your margins going forward? One thing just on the margin. Q4, the margin was particularly low just because of the product mix that was shipped. It was a product, one of our cogeneration products that we had essentially fixed pricing for a certain period of time with a customer, and that resulted in a sort of lower than normal margin. The other products are going to see a much, you know, You're gonna start seeing recovery towards where the margins were in, you know, in 2021 over the course of this year. The inventory, you know, I'm gonna just ask Roger to address a little bit in terms of how we value inventory. Sure. Abinand, as we do at the end of each year, we take a look at our inventory in terms of the usage of our vendor, our parts and such over a period of 4 years. As we, you know, in terms of mark to market, we'll look at that four year period and see if there's any usage or no usage. Based on the level of usage of inventory and the level of inventory we have in hand, we will book either an obsolescence or an excess reserve for that inventory. Understood. Thanks for that color. Then just a few questions on the strategy going forward, in terms of increasing the sales channel partners. How are you, like, have you identified these partners? Are these partners that you have worked in the past and are engaging into a more formal relationship going forward? How should we visualize this? There's a handful of partners that we have worked with in the past that are likely to be very, very good, that can be scaled up substantially. How much business they're doing with us right now can be scaled up substantially. One partner in particular is the one that we actually acquired these service contracts from. They already have a sales team in place. They can do installation activities. They have the knowledge to be able to do it. We have a couple of other partners in other geographies that we have been working with. You know, we needed to really look at that relationship and see why we weren't seeing as much business or why the pipeline was relatively small. That's where we focused our efforts on. Had a look at how it worked from their side of the relationship, what we could be doing differently to allow them to sell better, and have been making those changes. We have two or three partners that are existing, and then we have a few prospective partners that we're sort of courting right now, but that's gonna be a little longer term. It made more sense to start with the ones that we already had some relationship with that had the potential to do a lot more with us, and then change what we needed to do to basically get them to increase the activity that they were doing for us. Got it. Then just last question from me. For the same purpose of reaching more or getting increasing sales, basically, does your existing service network, the contracts that you already have, could that be used as a sales channel for adjacent sales or up sales? Exactly. That's exactly part of the strategy here. The way I see the sales, I mean, sorry, the service network is that it does two things. One, it allows us to cover a larger portion of the fixed cost, right? 'Cause that's a big portion that we need to cover. 'Cause the more we cover, with capital goods, the sales cycle is long. It fluctuates. You could see big swings one way or the other. The more you've covered the baseline with recurring revenue, the less risk there is from swings in product revenue. With an increase in the number of partners selling out there, in theory, the backlog will be large enough that you shouldn't have an issue with always covering all of your costs. That just takes a little bit of time to get there. In the meanwhile, yes, the first piece of the service side is to increase the amount of fixed cost that's covered. The second piece of the service network is what else can we be doing with the service network to, one, make it grow faster, and number two, identify opportunities that we could either be selling product or increasing the service capabilities that we do on-site. What I'm being told by various customers is that there are areas that we could be helping them on the service side. There are energy asset managers that are saying that maybe we can do a little more for them on using our service network. There's other areas that the service network can pick up. The other piece that we are working on is how do we get essentially the service network that's seeing all these buildings, are there other opportunities for upselling product as well? Those are areas that we. One of the key things there is we don't wanna put all of these measures in at the same time. We wanna do a few of this, see how the results go, then correct accordingly, then, you know, gradually roll out more of these features. Thanks for taking my questions, Abinand. Have a good one. No problem. Thank you, Samir. Thank you for your support, as always. Thank you. As a reminder, that's star one to be placed into question queue. Our next question today is coming from Michael Zuk, a private investor. Your line is now live. Good morning to you. I have two questions. First of all, with regard to the new air-cooled chiller, is that electric-powered or is natural gas-powered? It's actually both. It's a hybrid chiller, so it actually can take in power from either the electrical grid or the engine. The way it's set up to operate is that in the event, you know, you could basically blend both power sources. If you have a hot water load, it's probably best to use the natural gas engine because that's typically your lowest cost of operation and lowest greenhouse gas footprint. In areas where you don't have a hot water load, you may wanna run on the electrical grid or on the engine, depending on time of day. Of course, there might be periods where you wanna maintain the engine, you can still keep running on the electrical grid. Or vice versa, where you might have a power outage and you might wanna run on the engine. That's kind of why it has multiple modes of operation. Hopefully in a lot of these critical cooling applications where the back resiliency as well as the dual source thing, plays a big factor, it could be a big driver or sales. As a follow-up question, given the political situation in the New York area and in the New England states with regard to the fact that they don't like fossil fuels, they don't like natural gas, and I understand New York City has a moratorium on natural gas hookups, how does that impact our ability to sell units that are gas-powered? That is actually a great question. That was one of the first things I did, was to go and talk to a lot of end customers to see how they felt about this product and our existing products. What we are seeing is actually that end owners are still quite pro-gas. The engineering community has gone very much into electrification mode, and to a certain extent, this hybrid chiller received a lot of favorable attention from engineers because they could see the benefits of doing both. They could still meet their electrification goals while still having a way for operating on, you know, reducing the providing savings for end customers. The other thing that we're seeing purely from the number of leads, number of projects, we're not yet seeing a decline in the New York area from potential projects. A lot of this again is being driven by that owner direct approach. The other piece was I looked more broadly at this to say, okay, what happens if this gets much worse, right? Let's say that electrification becomes a huge issue, and then there's a time lag between how perception versus the grid becoming unreliable enough that they have to use other sources. What happens with that? I sort of modeled what would happen if basically lost 50% of our sales from the New York area. Looking at the broader market, there's still a substantial area in the U.S. where now utility rates have gone up enough that the economic savings are there. Right now with the investment tax credit, there's substantial opportunity elsewhere in the U.S. There's a lot of places that we're seeing now that are having electrical capacity constraints, especially on cannabis projects where they would use our products. It is a risk, but right now we're not seeing it. Part of the way we're mitigating it is going around, you know, going to end owners directly who seem to be favorable for this thing. The gas moratorium, really, there was a temporary gas moratorium, but we're not seeing that right now in any of the projects in New York. There were certain areas that had a moratorium, but that has been lifted. We haven't had issues with regards to that recently. Also, majority of that gas hookup issues is really for new buildings. Existing buildings have not had this, you know, they don't have to meet some of those requirements. Again, we're not seeing as much of a impact on that as you would think. There's a follow-up question. With the new chiller technology, does that open opportunities for some of our Microgrid management systems? I see the new chiller as really a way to as a thermal microgrid. Yeah, it definitely allows you to manage a lot of different. Cause the new chiller is not producing any electricity, right? But it is a way to manage time of day utility requirements. But and basically take advantage of different utility rates at different times of day. What I would like to do here is I'm gonna ask Bob Panora to maybe add a couple of things on the various modes of operation and how we might. Oh, yeah. Sure. Operate the system. Hi, Mike. How are you doing? Our thinking when we developed the air-cooled chiller was that the benefit, there's a great benefit if people can operate on either electric mode or gas mode. There's time of day, but there's also long-term benefit. The big fallacy about electrification is that the electric grid, you're replacing a 90% efficient water heater with a electric water heater that's basically powered by the grid, which is 30%- 40% efficient. What the people who are proponents of electrification are really saying is that 20 years from now, the grid is gonna be much cleaner, therefore put in the electric equipment now that can take advantage of that. Of course, the next 20 years, it's gonna make things worse because the grid isn't that clean. The hybrid chiller can actually shift with time so that five, 10, 20 years from now, as the grid gets cleaner, it can shift its operation to be more electric and less gas. That gives the, excuse me, the buyer now, you know, the feeling that, "Oh, I can manage this so that I'm a good citizen. I'm as clean as I can be. For the next 10, 15 years, I'm much cleaner than the grid." Then Further out in time, if the grid becomes cleaner, I can shift the operation. It gives the ability of the owner to sort of play with that. The, the other piece of it, of course, is that the market for chillers that can operate during an outage is becoming stronger, and it's much more broad-based around the country than just New England or New York. You know, what's happening in various places is the grid is, you know, becoming less reliable for various reasons and so forth. Having that capability of managing your source of your energy is good for time of day. Electric rates in many areas of the country go up dramatically during the day, and you can operate on electricity at night. The, the other thing is a long-term shift in the grid deficiency can be managed so that you're always on the curve of doing the right thing. You get the benefit of the gas right now, and it actually is better than the grid. Does that answer your question, Mike? Do you understand the concept there? Absolutely. One last question. Given the unreliability of the grid and what's going on in California, are we emphasizing some product introductions or system introductions in California? 'Cause it's a huge potential market. We have been talking to a couple of the utilities over there, in particular, to see how we might do more in California, in particular with this air-cooled chillers. Yes. I mean, it seems that, you know, the reliability issue in California is really coming to the forefront. It seems to me that there's an opportunity for us if we can offer reliable backup systems or even, you know, ordinary systems. Exactly. This is something that we're continuing we're talking to utilities on. But in terms of the rollout for this product, the way we are approaching it is our first priority is some existing customers who have a potential to either add additional cooling or to have, replace some of their older chillers with this chiller. Because the reason for that, of course, is that they know us. We have a good relationship with them. We wanted to start with some of those. In addition, we wanted to have the first few, essentially the first round of them be as close to a service center and closer to the factory as possible, just again, to really make sure the launch is successful. The second phase is really going after some of the working with some of the utilities to roll out on a broader level because we believe that, you know, that, you might have seen last year we had a press release by GTI, which they're basically testing the chiller. Once their testing is done or they validate our testing, they'll basically put their seal of approval, and then the gas utilities can maybe help us find more projects to use this chiller. At that phase, we might really look at California as part of this. At early stage, I think we still have a large enough pipeline of both existing potential projects, as well as other projects that are nearer to our East Coast service centers that we wanna focus on just to really make sure that this product rolls out any early stage bugs that come up are taken care of before we roll broader, especially to the West Coast of the country. Now, one final question. I know that we've had a indoor agricultural commitment in Canada. What's the status on going forward on expanding that opportunity? Again, great question. A couple of things on that space. There's a couple of things in that are very close in the U.S. for food crops that like customers that we're gonna be selling, you know, machines to. I will be making more announcements on that over the next, you know, few weeks, month, something like that. The second piece is we have identified a grower partner that we might be able to partner with on a broader relationship, that we might have a bigger structure there. I'm not yet in a position to be able to expand on that relationship yet because we're still in discussions, but I hope to be able to talk further about exactly how that'll work shortly. In this particular presentation, I didn't necessarily go into that space just because I wanted to talk more about the core business. This is still very much being worked on, both from the customer standpoint as well as how we might do more in that space. I just wanna go on record. I found this was a very informative call, and I'm looking forward to continuing updates. Thanks for your help. Thank you so much, Mike. Thank you for your long-term support of Tecogen shareholder. Thank you. We reach end of our question and answer session. I'd like to turn the floor back over to management for any further closing comments. Well, thank you, Kevin, for that. Thank you all for attending our conference call. Myself and the rest of the management team are available to speak at your convenience. You know, please reach out. You have my email address. It's on the earnings release. Happy to talk further and discuss any of these details. The rest of the team here is also available. I have a very strong team supporting me here, and I think over the next, you know, few quarters, I hope to really be able to share some of the improvements that we've made to the company and, you know, hopefully we'll be able to unlock the value for the shareholders. Thank you, and good day. Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation.