Good day, and welcome to the Ideal Power Inc. Second Quarter 2015 Earnings Conference Call. Today’s conference is being recorded. At this time, I would like to turn the call over to Mr. Matt Hayden, Chairman of MZ North America. Please go ahead, sir.

Thank you, Amber. Good afternoon, everyone. I’d like to thank you for taking the time to join us today for Ideal Power’s second quarter conference call. Your hosts are Mr. Dan Brdar, Chairman and CEO as well as Mr. Tim Burns, Chief Financial Officer. Dan will provide a business update, including recent orders, partner announcements and product updates, while Tim will discuss the financial results. A press release detailing the results crossed the wire this afternoon at 4 P.M. Eastern and is also available in the company’s Web site idealpower.com. Following management’s prepared comments, we will open the floor to questions for those of you who are dialing in and also to those participants joining via webcast, where you can see a question prompt button on your webcast screen. Before we begin the formal presentation, I’d like to remind everyone that some statements made on the call and webcast, including those regarding future financial results and industry prospects are forward-looking and maybe subject to a number of risks and uncertainties that could cause actual results to differ materially than those described in the conference call. Please refer to the company’s SEC filings for a list of all associated risks. In addition, we encourage you to visit the company’s Web site for supporting industry information as we update it frequently. Thank you very much. At this time, I’d like to turn the call over to Dan. Dan the floor is yours.

Thank you, Matt, and thanks, everyone, for joining us today. The past three months have been extremely productive for Ideal Power on a number of front, so we have a lot of information to cover on the call today. During the prepared remarks I’ll provide an update on the markets we serve, our product evolution, customer base and pipeline in addition to our technology development. Tim Burns, our Chief Financial Officer will then discuss the quarterly and year-to-date financials. After Tim’s comments I’ll provide additional color on the outlook for the balance of 2015 and how you can measure our progress. In prior calls I summarized our strategy and the disruptive nature of our technology platform for the benefit of our new shareholders. Given that our commercialization strategy is well underway, I’ll keep this very brief and ask those of you who want to learn more of our technology, products and commercialization strategy to visit our Web site and review prior conference call transcripts. Ideal Power has developed and patented a completely new approach to power conversion. Our Power Packet Switching Architecture is a technology platform that has broad applicability to many types of power conversion markets. Ideal Power’s PPSA technology offers the ability to perform power conversion with transformer-less isolation. In practical terms, this means our PPSA technology can provide power conversion with electrical isolation that is typically one-fifth the size and weight of a conventional power converter at higher efficiency, higher reliability and at lower cost than conventional power conversion systems. In addition we're targeting very large markets. Many which have not seen potentially disrupted technology innovation in a long time. Power Conversion is estimated at more than $50 billion per year projected to grow $70 billion a year by 2020. Power conversion is used not just in…

Thank you, Dan. I will run through the second quarter and year-to-date financial results. Total revenue for the second quarter, which consisted entirely of product revenues, was $1.2 million. Total revenue for the first six months of 2015 which also consist entirely of product revenue was $2.4 million. This compares to product revenue of $444,000 and $553,000 for the second quarter in first six months of 2014, an increase of 170% and 334% respectively. Our second quarter revenue consisted of sales of our 30 kilowatt battery converter as well as our grid resilient 30 kilowatt two-port and multi-port power conversion systems and initial sales of our 125 kilowatt products. Although flat on consecutive quarter basis, we are very pleased with our revenue results for first two quarters this year as order flow and its associated revenue from new market such as energy storages typically lumpy rather than linier quarter-over-quarter growth. Our revenues in the first six months of 2015 grew substantially in comparison to prior year period and were more than twice total product revenue for all of 2014. Total cost of revenue in second quarter was $1.1 million yielding gross margin of positive 12% compared to negative gross margin in the second quarter last year. Gross margins in second quarter were impacted by new product introductions at initially low volumes including cost related to our new certified grid resilient 30 kilowatt Power Conversion Systems as well as cost related to our 125 kilowatt product. While we go to the small down take in Q1 to introduction of new products, the positive gross margins generated in the first half of this year show that even at relatively low volumes we have a business model with significant leverage. Gross margins excluding the impact of new product introductions would have been in…

Thanks Tim. We're looking forward to put the balances of ’15 has in stored, our existing and new customers and partners are successfully introducing their energy store solutions building their pipeline of business and we’re focused on supporting their success by delivering innovative flexible power conversion products. We meaningfully expanded our channel partners including several with a global reach by Gexpro, LG Chem, KACO, and now Son and Battery. While each partner will move at their own pace, we're laying the foundation and channels to market for long-term growth. As our business ramps further we're looking for further improvement in gross margins with a target in the mid-30s. Accompanying this will of course be a growth in our top line with an increasing amount of our revenue coming from a new 125 kilowatt product family as Tim mentioned. In order to protect our technology and build on the strength of our intellectual property we continue to aggressively pursue patterns around our core technology and its application. As I mentioned previously was 30 times granted and more than 100 pattern applications pending at the pattern office, we’ll see our domestic and international pattern portfolio of growth significantly to broaden our global pattern coverage for the PPSA technology and its use. The next generation of our PPSA technology continues to make good progress and were pleased with the developments on the bi-directional switch development and now have two horses so to speak in the race. We're excited about the potential of the bi-directional IGPT and the BTRAN has to offer for both long-term cost and performance of our PPSA technology and the markets that we can pursue and the broader power conversions space because of them. In future calls we’ll update you on our development efforts on the BTRAN and the by…

Thank you. [Operator Instructions] And we will go first to Eric Stine of Craig-Hallum.

So just first on KACO it seems pretty telling that they are choosing to go with you rather than do this on their own. Just wondering -- so sounds like they've not ordered yet, but any maybe details on what their pipeline looks like or any visibility in the wind, this potentially is a revenue driver?

They have to go through a product certifications, so they are going be buying initial products from us, putting it in their own enclosure. So we’ll receive the first orders probably I’d say it's probably going to be fourth quarter event, just because the time it takes to get through that process and they've got quite a bit of activity in terms of projects that they’re already getting inbounds from and things that they already had in the queue that they were trying to figure out how to participate in, or some of the PJM storage kind of projects that are going in the east coast so it looks like there is a potential would be a pretty significant activity for us in 2016 with the order flow staring little bit later this year.

Okay. I guess all I'll stay tuned on that maybe turning to what you disclosed I guess for the first time on the call Solar Battery maybe limited what you can say since you've just signed it, but any details on what they are commercial plans are, I guess that would be first but then also are they a potential -- is residential a potential opportunity, I know it's smaller than your 30 kilowatt product but I believe they just -- they just drop their supplier, their power conversion supplier for that market. So any details there would be helpful?

Solar Battery’s initial focus is going to be starting with the 30 kilowatt, they’ve spend quality bit of time studying what the market is, particularly the commercial and industrial space. Their initial look at North America was trying to do residential which is where they have been very successful in Europe particularly in Germany. But if they really look at the economics here they decided that commercial industrials are much better opportunity. We think that the residential market will come, it's really a question of the battery cost getting significantly lower than where they are today. As we get further down that path and see the battery cost continue to decline. There is nothing that would prevent us from bringing out a residential product if we thought that the market conditions warranted it and we’d be happy to do it with some batteries, since we know they are looking for battery solution. But right now all the focus for them and what they’re going to do North America is really starting that commercial industrial market and we think we can build on that relationship from there.

And is this something where given their presence they’ve got a pretty substantial pipeline as well or is it more they got that in Europe and they need to build it here?

Now from what we understand with their plans they have already been building a pipeline of projects, we have been working with them on integrating the system and getting the agreement in place. In fact they actually -- some people who went through the Inter Solar North America conference actually saw the Sonar Battery boost and when they asked people to open up the system they had on display they saw our power converter sitting in there. So I think some people kind of knew it was coming, but they’ve been actually working on this offering and the project pipeline for quite a while.

Maybe just on the bi-directional switch lot of progress on the development side, can you just talk about, I know that you're going to target you said applications outside the energy storage and micro grid, kind of what successor are you having or does the market fully appreciate what product will be or is that more of a process given those are mature markets?

Because it is a more mature market that we’ll be taking some of these developments to, it’s a process and one of the first things that we need to do is first demonstrate the PPSA technology outside of just renewable energy. Anything that we do on the bi-directional switching whether it is the BTRAN or the bi-directional IGBT is going to enhance our core power conversion technology in any market we go after because they will just drive efficiency, it’ll drive power density and it’ll drive cost. So the first logical step here is to show that our core PPSA technology really is a power conversion technology in platform that has brought applicability, it's not just limited to solar and storage and that’s what we have going on now. And then as we develop the bi-directional switches, we’ll flow that to all of our products and all the applications just because it enhances the performance.

And then I guess one last one just clarification for Tim, so on the positive gross margin, I mean is it safe to say that where you're at right now and how it looks going forward that you expect to be positive from on out?

Yes that is correct. So there will be quarter-to-quarter variability and in gross margin as we launch products but we’re at volume levels now where we would expect to have positive gross margins going forward.

And we will go next to Craig Irwin with ROTH Capital Partners.

Dan your prepared remarks were very thorough, but when we step back and we look at the progress is very clear that you're executing, you're delivering multiple customers, multiple partnerships, when we [indiscernible], they had good things to say, as did everybody else you're already doing business with. So when we look beyond the battery storage market, when we look at things like motor drives and some of the other continues control applications of the bi-directional IGBT technology some of the previous in market are already multibillion dollar market today rather than markets that need to grow to materialize as an opportunity for you. Can you share with us how you're prioritizing development for some of these more mature three different markets, what we should look for in the next six months as you selectively chose your partners there and maybe work on prototypes or preliminary products for them to evaluate? And how should we think about this as a priority relative to what you’ve been doing to-date in the energy storage markets?

One of the things that’s really unique and an advance of our technology is whatever development we do on the core applications really has broad leverage. So for example the demonstration that we’re doing outside of renewable energy that we’re about to get started here, where really as not sort of clean sheet of paper product, it's taking our existing product and making some modifications really leveraging a lot of the development that’s been done. The way we’re approaching this is we’re looking for those power conversion markets where we can to a large really leverage the products we’ve already developed, add features, capability maybe change what the port configurations look like, improve the firmware that’s on them, the software control codes to leverage the capability of the hardware and look for those markets that really haven't had lot of innovation. So the approach would be to do a demonstrations so we can generate real data on how the product operates and the technology operates in some of these traditional power conversion applications and as with the -- having that data in hand, we really start to seek after partners, that we can go work with. And in the case of these more mature markets those relationships are much more likely to be a licensing relationship rather than us trying to bring a new product into a market that’s going to have lot of entrenched players. So if, for example if we were thinking about motor drives, rather than try and enter a market that’s dominated by folks like Rockwell Automation and Siemens and others with data demonstrating how our technology can work as a motor drive, it’s the ability to go get their interest to potentially license this technology for their own products because these are all markets that haven't seen the lot of innovation for a long time, where there would be a real interest if we can share all the capabilities of technology. That’s answer to your question?

Yes it does, yes it does. Can you maybe share with us how many partners you’re already working with on potential broader market applications?

We are not doing much with them yet because we believe they really have that conversation in a way that’s credible, we got to have actual operating data to show them and the demonstration that we're actually going to do is going to be our product compared against a mature offering from another company. So that’s why we should be able to have comparative data to show the capability of the GPS based technology.

Great, thank you for that. So my second question was related to ability to bring on line, capacity to ramp deliveries. Now I know that your focus first and foremost on getting things right with the customers and delivering the quality that's necessary to be a long-term participant in this market. How do you see your current ability to bring on line additional capacity maybe sooner than you've been thinking previously? Is it something maybe that you're considering what sort of capital might it take and any other consideration you could share with us will be very helpful?

Sure. Our current contract manufacture has the ability to actually ramp their capacity pretty easily. We can go to about 500 units of our 30 kilowatt product a months with existing contract manufacture. We actually have been engaged and -- actually being pursued by a couple of very large contract manufactures that see the opportunity coming in storage. They'll be getting a lot of feedback themselves about us and our product and uniqueness of it and want to work with us. So we’re going to continue to develop those relationship and have additional contract manufactures ready to actually step in as we see the need, but for now the ability to actually ramp production with existing contract manufacture, it’s all there. To go to a new contract manufacture doesn’t take much in wave capital for us. We don’t have a lot of investment that needs be made because while the technology itself is very novel, the way that the product is built and the parts that are used to build it, used just very conventional kind of parts and processes that the major contract manufactures are already familiar with. So it don’t thing we to have invest in are just in test cages for just final check out of the product before ships which will be pretty minimal.

Great and then last question if I may. My conversations with people at their InterSolar -- really a lot of people were interested in what you could do to accelerate the growth of the company. Many people were asking whether you’d make a difference if you doubled your headcount, if this would possibly accelerate the penetrations of your product into the different markets that you are looking at -- [indiscernible] to be maybe serve some of the other market that you weighted on or there is other potential expenditure that might accelerate the attraction of your products in new markets. So just something you're considering and if you can frame this out for us that would be helpful.

Yeah right. Probably the biggest thing we see pace in growth of the market right now is just a fact that storage itself is new. So the people they’re anxious. They are actually closing end customers. They've got an education process they’re going to read in pieces. The rate of order 12, we can accelerate the rate that brings new product to market if we were to go increase the size of our engineering team but as we have looked through where is that makes to incremental spend where we’ve landed is, we think about what adds the most value that company. We really land on this meet to actually develop our alternative approach for the bi-directional switching the BTRAN. We think that is the best return on investment in terms of what will ultimately move the value of the company, make us an extremely attractive partner for others that are going coming into this space both near-term and long term, so when TIM was talking about bring on an additional semiconductor fabricator, or some additional based on some strategic discussions that we had in the management team what the board have decided that’s what really makes the most sense for us in terms of where we would be spending from that money.

Great. Congratulations on the progress and thanks for taking my question.

And we'll go next to Richard Kain, Private Investor.

Couple of less sophisticated questions, how many employees do you guys have right now?

25.

And I these are naïve questions, but I just don’t understand now that your that are getting into the licensing aspect of this business, which is really the ultimate way you want to succeed. How there is exclusivity work, is there any exclusivity as you saw in licensing agreements and well just comment on that if you can?

Yes. I personally will do whatever takes to avoid exclusivity because what we've what's seen happen particularly with small companies when you do a license deal with a large player exclusivity can basically become a way of block your technology coming to market, so if anyway we were to get exclusivity, it would mean that there were some pretty high hurdles that they would have to meet to maintain that. So my purpose would be just to do whatever we can do to avoid it, it's just not good thing for smaller companies.

Agreed. Another question with regard to when you do licensing how do you protect your patents, how do you protect your secret devices or whatever, is there any anyone you can really control that kind of thing?

Well part of it is picking your partners very carefully in terms of who you work with, what do those agreement say what's the venue in which there agreements actually aren’t held if you have to go the core we also take things to protect some of the technology itself for example before we shipped our first unit to China we took a steps to actually encrypt our control algorithms. So that nobody can go through and look at the codes and see how the device operate. So I think it’s a matter of keeping something that are about your technology that are really trade secrets that your team knows but not everybody else that you are working with those and encrypting some things where you can encrypt them and being very careful about your partners and how good of a license agreement you actually put in place.

And one of the kind of relating question how did you monitor how much they utilized if you are going to get royalty, how do you monitor what they are using at your products and how do how much they owe you?

Yes. Typically on license agreement you yet have auto rights, you have to take some steps that are proactive and you are identifying them upfront so that you have the ability to either verify yourself or verifying through an independent firm that you are actually getting paid everything you showed, but it's pretty common in licensing dash, they put those mechanisms in.

I assumed they would, but I’m just kind of naïve about that kind of stuff. Thank you very much and once again congratulations. Just amazing how far you guys have come in such a short period of time.

Thank you, Richard. Appreciated.

[Operator Instructions] We will go next to Michael Sheen with [Indiscernible].

Yes. Thank you. Good afternoon. A couple of questions could you take me through the number you use the traditionally is 8,000 megawatt hours and that's a first question translates that to megawatt I think I can deal with megawatt, megawatt hours and energy storage is something I'm not quite sure I can fully understand and the second question is my memory is that the 125 you expect 125 kw units to be certified by August and in the call I wasn’t clear if that was it were that is in the and the certification pipeline. Could you give me some background on that? And again thanks for all those hard work and what you guys are doing that's wonderful I think its great stuff. Thank you.

Well. Thank you very much. The 8,000 megawatt hours that was first to the announcement that [indiscernible] one of our battery partners made, the way they have design their system the typical system has four hours of storage so 8,000 megawatt hours will be equivalent to 2,000 megawatts, pre-orders as they call them. There is pre-significant potential if you think about our 125 kilowatt unit take 2,000 divided by a 125, -- I'm sorry 2 million. As it related to the search application for the 125, actually our target is September we’re on target were doing our own testing in our lab here to get ready for sending it to the certifying agency because we have order that are tide to actually hitting that milestone it’s the top priority of our engineering team, so we’ll keep you apprised, but right now we’re on track and team’s making sure that everything performs the way it needs to so that the first recipient of the certified 125 kilowatt product are incentivized to come back and order more.

And I would like to turn it back to Tim and Dan for any webcast questions that we might have.

Yes. We do have three questions and investors have sent them prior to call. The first as an EOS [ph] Partner what percentage in EOS is 8,000 megawatt hours of qualified preorders the Aurora 1,000/4,000 containerized DC battery system available in 2016 will translate into orders for Ideal Powers PCS. And how many third year 125 kilowatt PCS units would this equate to.

Yes. This goes a little bit back to the earlier question, but first I want to make sure that everybody is just aware of it and that is that EOS critically called this pre-orders they’ve expressed an interest, what gets converted to actual customer orders and when will probably be some very different numbers, some of the battery folks and there is others out there that we can think off, really want to make sure that everybody stands the magnitude of the opportunity. That being said if we were to look at the 125 kilowatt product which really seems to be the primary point of interest from EOS and the project that they are pursuing. As we discussed if you take the 8,000 megawatt hours, assume it’s a four hour storage solution, which is what it typically provides, that means its 2,000 megawatts of opportunity which would be 16,000, 125 kilowatt units if we were to get them all and if they will happen on time. So it's a very large opportunity even if only a small percentage of it materializes. So that’s part of why you see us working very closely with EOS because we think they got a great low cost battery solution that has the potential to capture some pretty significant market-share.

The second question also relate to EOS, since EOS seems to be targeting utility market, I was wondering if there is limits to use of Ideal Power’s PCS to only those EOS projects that are deemed commercial or industrial?

At this point it's too soon to tell about the specific project configurations for what EOS is pursuing. For opportunities where there may be several megawatts at a time that are being installed we probably don’t have a large enough product for it. But what we do see not just with the EOS but with several folks that are pursuing large industrial and small utility scale insulations is there is a desire to use four of our 125 kilowatt units as sort of half megawatt building block. There is a real interest in having redundancy on the power conversion side, typically because the window of opportunity to earn your revenue and storage related projects is very small. So you can’t have one power conversion system and have an outage of some kind because you literally miss the revenue for the entire month. So the opportunity for redundancy is driving a little different configuration than if this were for example a one solar project. And then as the market segment develops and if we see the need for a larger product using our technology we always bring one out, ones it's clear what the project size of it tend to look like over the longer-term, but for now we think we’ve got a good fit for lot of the projects that you're doing and we’re working closely with them to make sure that we’re participating in the business that they capture.

And the third question is there are working prototype up and running employing the new bi-directional IGBT?

Not yet, since what we ultimately want to test is a device that’s made from a manufacturing process at the semiconductor fabricator that’s representative of how we’ll make these devices at scale because the manufacturing process itself has a huge impact on the performance of the device. So we’re working closely with the semiconductor fabricators to help identify the process steps, work out what impacts the potential performance of the device. Making good progress there, so as we continue to work closely with them, we’ll also may have some prototypes that we’ll be able to report on the data and let everybody know how well that performance correlates with the simulations that have been done by third-parties. Operator do we have any other questions that have come in from any of our listeners?

There are no further questions in the phone queue at this time. I like to turn the conference back over to you management for any additional or closing remarks.

Well I just want to thank everybody for joining us on the call. We really appreciate everybody support and we looking forward to speaking with you again soon to keep you updated on our progress. Thank you.

That concludes today’s call. Thank you everyone for your participation.