TWST: American DG Energy recently reached an agreement to supply clean energy to several residential buildings in New York. The company has had a lot of new projects this year. Would you tell us about that one in New York and point out a few others you believe are significant and indicative of where American DG Energy is going?

Mr. Sanders: OK. We've previously announced to the marketplace and to the investor base that one of the strategies of the company is to focus on large customers, or what we call elephants. For us a large customer is a customer that owns multiple properties. We think it's a better way to leverage the business. We think it provides greater savings to our clients, and it's a nice match to grow our revenue. The project in New York is our largest single order we've ever had in the history of the company. The 14 systems will provide approximately $30 million worth of revenue, which is truly a substantial order for the company. It is an existing customer who really just went to the next step with us and was quite pleased with the work we had done in the past. For us, it's very traditional. We're putting combined heat and power systems into a number of their buildings. We're going to supply the baseload of electricity, heat and hot water into those buildings at a guaranteed discount rate over a long-term agreement. And so for them, they are securing supply of energy at a better price. And for us, we have a long-term cash flow customer.

Also during the second half of 2011, we closed some other exciting projects, such as our first heat pump project. The heat pump is a new technology for us, so now we offer three core technologies. The first, combines heat and power, produces clean electricity, heat and hot water. Our second product is a chilled-water device. It's a lower-cost cooling solution that we offer without a capital cost. The new heat pump provides lower-cost hot water, and it's a very highly efficient machine. In fact, the first sale with that technology was for a Jewish community center in upstate New York. We also continue to have success with hotels such as the DoubleTree hotels.

TWST: Please tell us about the new heat pump technology. What indicators do you have on the demand for that technology?

Mr. Sanders: What's exciting about the heat pump is that it's a very highly efficient device. A typical boiler, which makes hot water, is probably 60%, 65% efficient based on seasonal efficiencies. A heat pump basically does the same thing. However, at the right outdoor temperature and appropriate output temperature, it can actually have an efficiency of 180% because it's using the free energy of the air to produce hot water, and so it really gives us a product to add to our existing systems or to provide an alternative to a boiler. The second exciting element is that heat pumps love a warmer climate. It has allowed us to expand our marketplace into the southern U.S. This product is highly competitive in states like Florida, Texas, Arizona, Southern California.

TWST: Speaking of American DG Energy's marketplace, when you and I spoke in October of 2010, you had mentioned the possibility of expanding internationally, specifically into the European market. What is latest update on that front?

Mr. Sanders: Yes, we did. We created a subsidiary called EuroSite Power. EuroSite Power is basically a clone of American DG Energy (ADGE). It's a European company. It's based in the United Kingdom, and the sales effort has started in the United Kingdom and beyond. We've added a team in the U.K., all local. There's about five or six people currently on the team in sales, engineering, operations, and they're going to execute a similar business plan.

We really like the marketplace there. They have the same building infrastructure, which is very similar to ours. There's more of a knowledge base in the marketplace on energy and technology. Energy is a bigger problem there. And so the advantages of our business model, where we own and operate the technology, is really appreciated there. Plus, we have another revenue source that we don't have in the U.S. In the U.S., we can just sell the energy, which is the heat, hot water and cooling. In the United Kingdom, we can also sell carbon. That's an additional revenue source for us. We're actually very excited by the opportunity initially in the U.K., and then spreading into the rest of Europe.

TWST: Also the last time we spoke, you mentioned the market still was getting to know American DG Energy's story and understanding what the company does. At this point, do you believe the investment community has a better understanding of the company? And also, what additional information would you still like to get out there and share with our readers?

Mr. Sanders: I think the investment community is still learning about us. As we expand our customer base and as the company is maturing a little bit in the investor marketplace, people are getting to know us. Recently, I was actually invited to speak on a radio program that had a nationwide audience, called "The Big Biz Show" in San Diego. It was just to introduce the company, and the host said that during this segment they normally get four or five texts during the show. I think they had almost 30 text, e-mails midway through the show. So I see many people that are interested in our business model and in energy. I think when the investors learn about the business, they get quite excited. But we do have a ways to go to get the word out.

TWST: Who do you view as the primary competitors of American DG Energy, and what are the prime advantages you believe the company has over them?

Mr. Sanders: I think the competitive landscape hasn't changed much - there is not any. Our primary competition is educating customers on the business. That is why we have aggressively increased our marketing effort. We are now active online with communicating to a number of potential customers in many different formats to catch their attention.

In the United Kingdom, we do have some competitors. I actually think that's a positive thing. There's a knowledge base of the customer. This allows us to aggressively communicate the positive differences and superior advantages of what we do very efficiently. I think this will be quite successful.

In the U.S., it is a matter of communicating the value proposition that we offer. We focus on presenting the value proposition that - for some prospective customers, sounds too good to be true - is real and proven. Customers that are looking for either savings or cash flow can now find us.

TWST: What do you view as the company's most significant business challenge at the moment, and what strategies do you have in place to deal with that challenge?

Mr. Sanders: The big objective for 2012 will be to expand the business. In the second half of 2011, we started to expand our teams in both the U.S. and the U.K. We stepped up our marketing significantly. We have already seen some payoffs already toward the end of 2011 with some of those large orders. We see 2012 to have a potential to be a breakout year for the business.

TWST: Are there specific goals or metrics you want American DG Energy to hit that investors can track or look for in 2012?

Mr. Sanders: We don't give guidance. That's not the policy of the company at this stage. The best way for an investor to really measure our progress is to watch our orders going forward. When significant or material, we announce them directly such as the big order you referenced earlier. This is a way for an investor to really see what's happening. Again, what's exciting about our business and so unique is that we sign a deal and we put one system into a building. It is going to now provide revenue and profits for the business for the next 15 years. And so, obviously, a larger order of 14 systems has a significant impact on the business. That's how investors could really visualize our future.

TWST: How does the company's balance sheet look right now, and what is its ability to continue to fund expansion?

Mr. Sanders: Toward the middle of 2011, we raised a significant amount of capital through an investor. In the U.S. and the United Kingdom combined, we have almost $20 million in the combined balance sheet of the two companies. So we have a good base of capital to really expand the business. Beyond that, we think we have lots of options ranging from equity to debt, depending on the lowest cost to us at that time. Our long-term cash flow from our existing and future project assets ensures we have options. We think we have the basics all set.

TWST: American DG Energy came out with your new heat pump technology. Is there anything else the company has in development we could see launch in the next couple of years?

Mr. Sanders: The technology is relatively new. We also can offer a lower-emissions technology that can be added to the engines we deploy. For markets, let's say like California, which we have begun selling into, it really gives us a leg up. California is kind of the leader in the U.S. Please note that some people get confused between low carbon and low emissions. Emissions are actually more important in many ways because emissions cause pollution, which can be dangerous. We now have a system that can actually produce extraordinarily low outputs from an emissions perspective. It really gives us a unique position as we have a very low-emissions engine that we can put into our various products. That's just hit the marketplace toward the end of 2011, and you will see that it will be giving us some nice opportunities both in the U.S. and Europe.

TWST: Would you tell us about your professional background, and also what are some of the key strengths in American DG Energy's core management team?

Mr. Sanders: I am an Engineer with an MBA. I am experienced in creating businesses and growing them from scratch in some cases. My favorite business type has recurring revenue. I love the idea of waking up January 1 with an installed base of cash flow coming out of various customers, as opposed to, let's say, a product company where January 1, you wake up with, in essence, zero revenue, where you now have to go out and sell to somebody. We think that creates good cash flow for the business, and this cash flow inspires and comforts both customers and investors.

And from the team perspective, I think we have a nice mix of people who really understand operating a fleet of energy systems. What we've done is established an operations capability center that can monitor the fleet of energy systems 24/7. This keeps our systems running efficiently and improving our profit margins. This is a core competency that we have developed. As an example, we get both instant and daily reports on system operations, even to our BlackBerrys. With our focus on operations and enhanced sales team, we are a much stronger company today than the last time we spoke.

TWST: Thank you. (MES)

Barry J. Sanders

President & COO

American DG Energy Inc.

45 First Ave.

Waltham, MA 02451

(781) 522-6000

(781) 522-6050 - FAX