Alexander Blanton: Are there city regulations established to prohibit the use of gas for this purpose?
Abinand Rangesh: At this point…
Alexander Blanton: Or is it just the funding?
Abinand Rangesh: It’s really in this case – so there is some regulation with regards to prohibiting gas in city buildings. There’s multiple different…
Alexander Blanton: City buildings or privately owned?
Abinand Rangesh: So there any – so there’s two pieces that New York City has passed with the local law. One is a – for city buildings, there’s an earlier date in which any renovation cannot include an addition, I think, of new gas. And then for non-city buildings, again, a renovation over a certain size, limits what you can do with gas. So there’s more to it than that, but this is really driven by the funding itself.
Alexander Blanton: Okay. Well, we can talk more offline about that. You’re moving the factory to where? Is there – has there been an announcement of this by the company?
Abinand Rangesh: Yes. So we did include it both last year in our 10 – like all our 10-K. I have mentioned that in previous calls, we are moving up – just 20 minutes up the road to Billerica. So it’s – our lease in our current facility is expiring at the end of March. And we – the new location is better set up for our operations. It’s – the factory is better laid out, allows us to do better chiller production and will allow us to reduce our rent.
Alexander Blanton: Okay. Fine. And finally, the adjusted EPS without these charges for the fourth quarter, what was it?
Abinand Rangesh: What it’d be? I’d have to get back to you on that one, Alex. Right off the top of my head, I don’t know. But hang on, I can probably do it, because on the adjusted EBITDA, it was $505,000.
Alexander Blanton: Right. But I was looking for EPS. Okay. Thank you.
Abinand Rangesh: Yes. Yes – if you do it? Yes, yes. It’s going to be around $0.03.
Alexander Blanton: $0.03. Okay. Thank you. But it’s $0.03 loss, I mean.
Abinand Rangesh: Yes. $0.03 loss, yes.
Alexander Blanton: Okay. Thank you.
Operator: Thank you. [Operator Instructions] Our next questions come from the line of [Michael Zuk]. Please proceed with your questions.
Unidentified Analyst: Good morning everybody. A couple of technical questions, I guess, to our Chief Financial Officer. I noticed that we had a state tax liability that virtually doubled in 2023. We didn’t earn any money. How come we’re – state taxes are doubling?
Roger Deschenes: Yes, that has to do with the State of New York, and it’s really a franchise-based tax. So it’s not so much based on your profitability, but it’s based on your asset base in the state. And they actually raised the rate significantly in 2023.
Unidentified Analyst: Well, it seems like it’s an impediment to do business in New York. What can I say? Also, on the balance sheet under the liabilities section, there is a current acquisition liability of $845,000 and an unfavorable contract liability of the current year of $176,000. Are those amounts payable this year? Is that a cash item?
Roger Deschenes: For the Tecogen speaker line, could you please check if you self-muted yourself?
Unidentified Analyst: Hello? Can you hear me now? Hello?
Roger Deschenes: We could hear you, Michael. I just can’t hear the speaker line right now. Are you self-muted?
Unidentified Analyst: I shouldn’t be, and I’m not on speakerphone.
Abinand Rangesh: Michael, can you hear me?
Unidentified Analyst: I can hear you. Can you hear me?
Abinand Rangesh: Yes, I can hear you. I think we’re good.
Unidentified Analyst: Okay.
Roger Deschenes: Can you hear me now? This is Roger, Michael.
Abinand Rangesh: We are good. We can hear both lines.
Unidentified Analyst: Okay, on the liabilities and stockholder equity line, there’s an acquisition liability current and an unfavorable contract liability current. Are those cash items due this year?
Roger Deschenes: Okay. So the first one, the acquisition liability current, Mike, that has to do with – as I was mentioning, when we acquired the Aegis contracts, we reviewed the fleet of engines and noted that there were some delays and actually some engines that weren’t operating. So under the accounting rules, we’re permitted to record a liability as of the date of acquisition. So in some cases – so the – in terms of the cash flow on that, there will be some money spent this year for those to replace some of those engines. It won’t – it’s not $845,000. It’s probably more on the line of about $250,000. And then the unfavorable contract liability, that has to do with the acquisition of – or the merger with ADG back in 2017.
And at that time, calculation was done, you’re looking at the contracts and there was a termination that the expected profit from the contract wasn’t up to what we had expected it to be. So again, under the purchase accounting rules, you’re permitted to record a liability at that time. This liability, Michael, is really just a – it’s a non-cash charge. I mean, it’s a non-cash benefit actually because we debit the liability and we credit our amortization expense. So there’s no cash being issued to relieve that liability.
Unidentified Analyst: And so then under the long-term liabilities, there’s the same entry except it’s much larger numbers. Are those amortized over a period of years? Or how does that work?
Roger Deschenes: Okay. So then the other – I’m sorry, the other aspect of the acquisition liabilities I didn’t discuss also has to do with – we recorded a contingent liability. So the payment for the Aegis acquisition is being paid over a period of seven years and it’s based on revenue times a percentage, depending upon whatever revenue levels are achieved. So at the time of acquisition, we record the anticipated, call it, a royalty, that will be paid over seven years, using a discounted cash flow model and record what we anticipate to pay in one year’s time as a current liability and then anything past the one year to the seven-year period, we recorded that as a long-term liability. So the acquisition liabilities over time will be paid in cash. And the unfavorable contract liabilities, again, are just a non-cash – the liability will be reduced in a non-cash method.
