Casey Stegman - Investor Relations, Stonegate Securities William Clough - President and Chief Executive Officer Daniel Ford - Chief Financial Officer

Eric Stine - Craig-Hallum Joe Maxa - Dougherty & Company Andrew D'Silva - Merriman Capital Evan Richert - Sidoti & Company Marco Rodriguez - Stonegate Securities Jim Kennedy - Marathon Capital Morgan Frank - Manchester Management

Good day, ladies and gentleman, and welcome to the CUI Global second quarter 2014 earnings conference call. (Operator Instructions) I would now like to introduce your host for today's conference, Casey Stegman.

Thank you, and good afternoon. Welcome to the CUI Global second quarter earnings conference call for 2014. We appreciate you joining us today. With me on the call is Mr. Bill Clough, Chief Executive Officer; and Dan Ford, Chief Financial Officer. The purpose of today's call is to review the company's financial results for the second quarter as well as provide you with some additional color on the business going forward. Following management remarks, the call will be opened up for questions. Many of you may have seen the company's release that was issued yesterday. If you haven't, it can be accessed at the company's website at www.cuiglobal.com. Today, during the course of the presentation, we will be directing your attention to a series of slides. Those slides can be accessed during the call from the link in the press release that went out earlier today or from the Investor Relations section of our website at www.cuiglobal.com. As a reminder, this call will contain certain forward-looking statements within the meaning of Section 27-A of the Securities Act of 1933 as amended and Section 21-E of the Securities and Exchange Act of 1934 as amended. Such statements are subject to risk and uncertainty that could cause actual results to vary materially from those projected in the forward-looking statements. The company may experience significant fluctuations in the future operating results due to a number of economic, competitive and other factors, among other things our reliance on third-party manufacturers and suppliers, the government agency budgetary and political constraints, new or increased competition, changes in market demand and performance or liability of our products. These factors and other could cause operating results to vary significantly from those in prior periods and those projected in forward-looking statements. Additional information with respect to these and other factors, which could materially affect the company and its operation, are included in certain forms the company has filed with the Securities and Exchange Commission. With that, I'd like to introduce Mr. Bill Clough, CEO of CUI.

Thank you, Casey, and thank you everyone for taking the time to join us on the call today. I'm going to start with a brief overview of the quarter, and then I'll hand the call over to Dan to go over the financials. When Dan is done with his remarks, I'll follow-up with some additional commentary on some of the more promising projects we are currently working on at CUI, and then we will open the call up for Q&A. First things first, however, I'd like to say that I was very pleased with our performance for the second quarter 2014, as we recorded $19.2 million in revenue, a 6% increase as compared to the same period last year. For the six months ended June 30, 2014, our revenues were $36.1 million, a 28% increase as compared to the $28.2 million in revenues for the same period in 2013. The 2014 year-to-date revenues included $5.7 million of revenues from Orbital during the first quarter. Our gross profit margin for the quarter increased from 39% to 40%. The gross profit margin for the six month period ending June 30, 2014, increased to 41% versus 39% in 2013. Adjusted EBITDA for the quarter was $1.3 million or $0.06 per share. The Power and Electro-Mechanical segment revenues were $13.6 million in Q2, which is an 8% increase as compared to $12.6 million in the prior-year comparable quarter. Within the Gas segment, we recognized $5.6 million in revenue. As I alluded to in our press release, we had a number of significant announcements during the second quarter. I will review these individually after a discussion of our financials. Each of these announcements were significant and each represents additional progress, as we continue to position CUI as a leader in developing new and innovative technologies. With all of that being said, let me turn the microphone over to Dan Ford our CFO, so that he can run through the numbers in a little more detail. Dan?

Thank you, Bill. I'd like to now give a financial overview for the second quarter 2014. As Bill has mentioned, the company's revenues were $19.2 million for the quarter, which is a 6% increase from revenues of $18.2 million in the second quarter 2013. The increase in revenues for the quarter is attributable to approximately $985,000 of growth within the Power and Electro-Mechanical segment. The year-to-date revenues of $36.1 million represent a 28% increase over the prior-year comparable period, exclusive of the $5.7 million addition from Orbital revenues during Q1 of 2014. The year-to-date increase was 8%. Cost revenues for the quarter was $11.5 million versus $11.1 million for the same quarter in 2013. The costs of revenues for the first six months of 2014 were $21.4 million versus $17.3 million in 2013. As a percentage of sales, the cost of revenue has remained consistent for both the quarter and year-to-date period in 59% to 60% range. At June 30, 2014, the Power and Electro-Mechanical segment held an unaudited backlog of orders totaling $14 million and the Gas segment held an unaudited backlog of orders totaling $23.7 million. EBITDA for the quarter was $868,000 or $0.04 per share versus $1.6 million or $0.08 per share for the same period in 2013. EBITDA for the six months ended June 30, 2014, was $1.6 million or $0.08 per share as compared to the $1.5 million or $0.10 per share during the 2013 comparable period. Adjusted EBITDA for the quarter was $1.3 million approximately $0.06 per share versus $1.8 million or $0.10 per share in the second quarter of 2013. With adjusted EBITDA for the six months ended June 30 at $2.2 million or $0.10 per share versus $1.8 million or $0.12 per share in 2013. Gross profit for the quarter was 40% or $7.7 million, up from 39% or $7 million in the prior-year comparable quarter. The gross profit for the six months 2014 was 41% or $14.7 million as compared to 39% or $10.9 million in 2013. Within operating segments, the Power and Electro-Mechanical segment generated quarterly and year-to-date gross profit margins of 39% and 40%, respectively, while the Gas segment generated 42% gross profit margin for the quarter ended and year-to-date period at June 30. Selling, general and administrative expenses increased to $6.5 million for the linked-quarter compared to $5.3 million for the same period in 2013. The increase is primarily associated with the ongoing activities to reach new customers, promote new product lines, new product introductions as well as the overall growth in expenses in relation to the revenue increases during the quarter and year-to-date. As a percentage of total revenue, selling, general and administrative expenses have increased in the first quarter to 34% as compared to 29% in the prior year. SG&A expenses for the six months ended were $12.7 million versus $9.2 million for six month of 2013. This increase is largely a result of the addition of SG&A activities from Orbital Gas Systems during the first quarter of 2014 totaling approximately $2 million, as it was acquired during 2013. Additional increases during the year-to-date period are consistent with those increases discussed for the quarterly period. SG&A as a percentage of total revenue increased slightly to 35% for the six months ended 2014 as compared to 33% in 2013. The company had positive cash flow from operating activities of approximately $49,000 during the six months ended versus cash flow provided by operating activities of approximately $603,000 for the same period in 2013. The change in cash from operations is primarily the result of increases in assets from operating activities offset by the net income earned before non-cash expenses. The company had a net loss of $66,000 for the quarter ended June 30 as compared to net profit of $437,000 or $0.02 a share for the prior-year quarter ended. For the first six months of 2014, the company had a net loss of $554,000 versus a net loss of $25,000 in the same period of 2013. The loss for Q2 2014 is largely attributable to the non-cash amortization expenses of approximately $800,000 associated with intangible assets acquired with Orbital Gas Systems in April 2013. Adjusted net income, which represents net income or loss plus the amortization expense of the intangible asset required with the Orbital acquisition plus the expense associated with stock options and notes and other stock compensation for service and compensation stock for the quarter, was approximately $1 million or $0.05 per share in 2014 as compared to approximately $1.4 million or $0.07 per share in 2013. Adjusted net income for the six months ended June 30, 2014, was $1.6 million versus $1 million in 2013. As of June 30, CUI Global held cash and cash equivalents of $15.2 million in short-term investments of approximately $12 million. At June 30, 2014, the company had 20,634,072 common shares outstanding. Now, I'll turn the call back to Bill.

Thank you, Dan. Before we begin taking questions, let me take a moment to update you on a couple of the larger projects we announced last year. We have now signed up 33 new distributors in Europe, Asia and North America. In addition, on May 8, we announced the fact that National Grid has selected our IRIS technology for use in remotely controlling its entire grid. That remain in cooperation with GE's Intelligent Platform Group, and was published on both GE's website and in their social network. Since that announcement we have continued discussions with GE and are now preparing a presentation of the IRIS technology for joint marketing and sales presentations with GE to such North American customers as Kinder-Morgan, Williams Pipeline, Spectra Energy and others. We believe that these agreements and our cooperation with GE's Intelligent Platform Group represent significant steps in our plan to develop a substantial distribution network for our groundbreaking technology, and specifically for sales targeting North American energy producers and transporters. GasPT sales remain steady as we have now received orders for 21 units in 2014, and we are continuing to make progress with our larger GasPT opportunities. In addition to the sales of the GasPT technologies, we have now completed a four months field trial of six units by Snam Rete Gas in Italy. Those trials went very well, with all six units passing the testing, which began at the end of March. In fact one the unit significantly outperformed the gas chromatograph, to which it was being compared, when that gas chromatograph unexpectedly shutdown for a five-hour period, during which the GasPT device kept accurate records of the gas flow and energy transferred. Snam Rete has informed us that the University of Milan, acting as a third-party independent monitoring field trials, expects to have their report completed in the next 30 days, at which time the results will be forwarded to the Italian Regulatory Body for review. We have meeting scheduled with Snam Rete and we are guardedly optimistic that we may see it move to actually ordering units by Snam Rete after that regulatory review. At this time, we do not know how long that review will take, but it is only review of the field trial results with no associated additional test. The VE technology has proven to be a strong product for us as well, and is now being considered by a number of large energy producers and transporters in both North America and Europe for implementation on their pipelines, both as sampling systems and as thermowell replacement. We have sold an additional 46 sampling systems and 39 thermowell applications, amounting to approximately $538,000 in revenue. Furthermore, we have had increase from numerous potential customers, including ConocoPhillips, Statoil and others. We continue to be quite confident of our ability to close those deals, as we are the only technology capable of providing the vortex elimination and rapid sampling time, which are unique features of the VE technology, allowing us to provide a safer, high-value solution to the natural gas operator. In conclusion, as I have before, let me emphasize our continued commitment to both our employees and our shareholders to grow CUI Global and its subsidiaries in an organized efficient manner, by introducing new products, attracting new markets, seizing opportunities and continue to pursue and partner with some of the largest, most recognized industry leaders in both the natural gas and electronics markets. We believe that partnerships with companies like National Grid, Ericsson, GE, Snam Rete and others, along with continued recruiting of distributors like Benchmark Engineering in Canada, Ives Equipment Corporation in U.S., [ph] Shen Wu in South Korea, [ph] RealFlow in Shanghai, Digi-Key and Future Electronics can only enhance the credibility of our products, the viability of our technologies and ultimately the value to our shareholders. Thanks to all of you for your continued support to the company. Now, let's open the floor up for questions.

(Operator Instructions) Our first question comes from the line of Eric Stine with Craig-Hallum. Eric Stine - Craig-Hallum: So I was wondering if we could start with IRIS, clearly making progress there with National Grid and also GE in North America. Any way that you can size the potential opportunity, you mentioned a number of pipeline companies that are thinking about this and GasPTi gets a lot of the focus, but IRIS seems like its pretty big opportunity as well?

The market is very large, and I can basically quantify, the easiest manner I can quantify it by just comparing two of the companies. National Grid, we've talked about in length has 70 of devices roughly. I think 69 actually are now operating, and they're quite happy with. National Grid is a 16,000 kilometer pipeline and they need a total of 390 devices to operate their entire system remotely. If you look at Kinder-Morgan by comparison, Kinder-Morgan has 82,000 miles of pipeline and over 3,900 different metering and compression station. So it's roughly 10 times the size of National Grid and needs roughly 10 times the systems to monitor its pipeline. So again, and that's one operator in North America, albeit the largest in North America, so one operator of over 200 operators. So the opportunity is quite large and I think that's kind of what attracted GE to take a real good look at it and to do what we're doing now, which is preparing joint presentations for some of the larger pipeline companies in North America. That answer your question? Eric Stine - Craig-Hallum: It does. And I mean just right now what Kinder-Morgan would be doing or what they would be looking to replace is basically doing this manually?

No. They have computer systems that monitor the pipeline and there is no doubt that they have systems that are working. The difference is, probably here as I understand it. These big companies retrofit their IT. They just do it, because their IT becomes obsolete. And what we would allow them to do in combination with GE's Intelligent Platform Group is upgrade to a system that, we've talked about in the past, is much more dynamic. It would allow them to in essence control valves, diagnose problems remotely as opposed to sending a technician out there every time they have an issue at a pump station or a meterings kit. And so again, it just gives them a faster, better, more efficient method of controlling their own pipeline. And I think the advantage that they will see, as National Grid has seen, is proprietary, they're not renting it from somebody or leasing it from somebody, it's based on their own server system, with their own passwords, with their own codes, with their own security, and literally accessible to as many iPads or smartphones or computers as they wish without licensing or other requirements that their current systems need. Eric Stine - Craig-Hallum: And maybe just sticking with IRIS, any update on the RFP that National Grid is working towards? Is that still something that potentially gets introduced in late '14 and is more of a 2015 opportunity for you?

I think that's the timing. I really think that's valid timing. What National Grid got tied up in is RIIO initiative that they had as we've talked about in the past. We've been told by them that they now resolved that, that they're actually moving forward. We've actually had at the very highest levels some really nice apologies and emails sent regarding that. And they tell us that they're expecting to get that RPF out anytime now. And the advantage we have now because of their recent announcement, the one we published is, even if they decide to give the civil work to what they call a Tier-1 contract to one of their big contractors, those contracts will be required to use our systems. So in essence we'll be providing them systems and allowing them to put them in, which is fine for us, because obviously the higher margin work is providing the systems. So we expect to see that some time in late '14 with the installations beginning in '15. Eric Stine - Craig-Hallum: Maybe just turning to VEProbe, you gave good details there about how that opportunity is developing. Can you just remind me is that also going to go through distributors or is that more direct through Orbital?

Both, distributors and direct. That technology is much more broadly applicable across the pipeline systems, and we are giving those to distributors as well. So we're doing both. Eric Stine - Craig-Hallum: Maybe last one for me, just turning to power supplies and component shift. I know second quarter is typically your strongest quarter, but this one was, I guess, I mean well-ahead of even last year. So any clarity, I mean was that driven by any new product or leases or things that moved that number and how should we think about that for the remainder of the year?

That's driven by a number of factors. One being, we introduced a little over 800 products in 2013 that are starting to take hold both through distribution and reaching customers on a direct level. And then we're continuing to see growth through our distribution channel at both Digi-Key and Future, which is going very, very well on both fronts. So those are kind of the biggest growth drivers. And then on top of that, we're winning other customers at the direct level as well, but those key items, the new product, and the distribution segment growth are the big drivers there. Eric Stine - Craig-Hallum: I mean typical seasonality for the remainder for the year should still be the expectation?

Yes. That's what we would expect to see as well.

Our next question comes from the line of Joe Maxa with Dougherty & Company. Joe Maxa - Dougherty & Company: Just want to clarify on the IRIS with National Grid. They're going to use your software for all 390 locations. You've talked before $150,000 roughly, if you install it. What should we be thinking about, if it does go to a Tier 1 contractor as far as the installation piece?

That doesn't include installation. The £100,000 is for the unit that we build for them, and that's the kiosk and that includes the GE hardware and our software. We build the entire kiosk. Installation is a separate component of that. That would be civil work, and we report that even separately. So now the £100,000 which is what you're talking about, what roughly now a $180,000, but £100,000 is just for the kiosk, and we would just still be building that. We'd be building the kiosk and delivering those if it were a Tier 1 contractor. To that contractor, we would be literally layering cement, digging and doing all the civil work that's involved in putting the project together. But that's not included in the £100,000. Joe Maxa - Dougherty & Company: And so you are going to get all those 300 plus, when that RFP comes out or when that gets issued. And I guess you already answered the questions, probably a 2015 timeframe.

And I'll tell you, I mean, you saw the press release from National Grid. So I mean the RFP hasn't come out, but it's our understanding that's going to come out with our system, designated as, the system of choice. Joe Maxa - Dougherty & Company: And do you have any type of -- I mean it sounds like there is really no competition, is that correct?

They're very happy with what they've seen. We've already set up their server system, so there is a nothing else on their server system, and really nothing else that they're looking at. Joe Maxa - Dougherty & Company: And then on the Snam Rete piece with the GasPT2, it sounds like you do have a potential competitor with the gas chromatographs that could win this or what does the competition look like for that project?

There is no competition. The gas chromatograph is simply the requirement of their regulatory, and see that our device be tested against the gas chromatograph. So the test involves six of our units throughout Italy, at different portions of their gas system, basically to get different gasses involved. And we set our device right next to a gas chromatograph and the two will compare, and that was just for testing purposes. The fact is what they want to do is put our device into a position, where there will be no gas chromatograph on these 1,500 off-takes, where there are no metering devices at all currently. What they don't want to do is put a gas chromatograph out there, because of the associated maintenance and the carrier gas and calibration gas and all the other issues. They want something very simple, very basic, that will provide their customers, I think we've talked about this, with two-a-day gas quality analysis. And that's what we can do for them. So there is no competition and they're still looking at no other technology, but the regulatory agency requires this test compared to a gas chromatograph. Joe Maxa - Dougherty & Company: So the options are use your products or use nothing?

They're using nothing now, which is not working. The regulatory is demanding they use something, and at this point they're only testing our devices. They did start out originally with I think four or five technologies they were looking at, really the same technologies we have seen repeatedly, and every one of them failed for some reason. They were too complicated. They weren't accurate enough, for whatever reasons they all failed. Ours is now the only system that's been taken to this final stage of field trial that have just been completed. So at this point, we're pretty confident about the fact that we're the only game in town that they've looked at. Joe Maxa - Dougherty & Company: And do you still anticipation as far as when they need to be install this by the middle of next year?

2015, that's the regulatory requirement. Correct. Joe Maxa - Dougherty & Company: And I wanted to ask on the Orbital side. You threw out a number, I missed it, on sales of the VE technology. Did you give a number of a dollar amount?

$538,000. Joe Maxa - Dougherty & Company: And that was a total of the VE?

For the quarter, correct. Joe Maxa - Dougherty & Company: So I was just wondering if that technology upgrade at National Grid, it sounds like that had some negative impact on the quarter on your sales. And you expect what that was over in Q2 and starting in Q3 or you're still going to have some lingering impact in the Q3 on that side?

They got set back a year project, so we'll certainly see some impact on that. Although, we have seen a dramatic increase in their biomethane skids, which are a big project for us. They're more traditional metering skids. But I think we're some 200% ahead of where we go would be this year in those skids. They're pretty big projects. I think they're somewhere around $500,000 or $600,000 a piece, the skids, and we've got I think seven or eight of them right now in process. So they're a very big project for us, as they're moving faster than they anticipated. But there are other projects like IRIS that they have not move forward on, that we're anticipating movement now towards the end of this year. Joe Maxa - Dougherty & Company: So would you expect your revenue in that segment excluding the gas product to drove in Q3 from Q2 and Q4?

I think, I would say it's going to be flat. They are still getting their act together and they're still a government agency, and things just take their time, so I would say to be conservative, that we'd be looking to flat throughout the rest of the year in that contract area. Joe Maxa - Dougherty & Company: And lastly, I'll just ask, any update on the much talked about GasPTi with GE?

We went through a third engine test last month. It went well and that we're still moving forward. Again, there's not much I can say, because of the NDA. But we're still working with them. They are still very positive about the technology, and at the moment I can't announce them at my will.

Our next question comes from the line of Andrew D'Silva with Merriman Capital. Andrew D'Silva - Merriman Capital: You guys said you placed orders for 21 GasPT devices during 2014. I thought last quarter you said you placed 33 units? And then also can you kind of let us get us a sense of what the number of actual revenue generating units was out of those 21 units that you mentioned?

Let me clarify that for you Andrew. That's a good question. The reporting that we did last time included, and I think we went round around about this included reported sales as inventory to distributors and reps. And to avoid any confusion, we have changed our reporting, what we've reported now is actual orders from end-users. People are buying the device and taking delivery. That's what we're reporting. So that 21 doesn't include any inventory for reps or any sell-throughs that we don't recognize until they sell. We took all of that out. We're just going to report it very cleanly, that these are the actual orders from end-users. And I can tell you that this quarter we installed six, which we recognize revenue on. Those six were analyzers-only, I believe. So the revenue was at the $20,000 MSRP. Of the 21, about 60% are GasPTi's that they've ordered, which are the larger units, the $55,000 units. And about 40% are the analyzer-only, which is the 20,000 units. But again, the 21 are actual end-user units, not the inventory units by reps, not any of the other units that seem to confuse the issue. So these are actual end-user orders. Does that answer your question? Andrew D'Silva - Merriman Capital: So these are test, kind of like the initial six that went out to Snam Rete?

Those six were included in that. There's four I think that are in with Dominion Energy. There are a number that went to National Grid. I think there is two or three that went to Scotia. So there is a fairly broad customer base, but yes, those are end-users that are actually taking delivery on the product and actually not holding inventory or anything else. Andrew D'Silva - Merriman Capital: And then as far as your dealer network goes, you're up to 33 now, almost near your goal of getting close to 40. I mean how are you seeing that evolve? Do you feel like adoption through your dealer networks, customer base could take place in a relatively short period of time or do you still think this is going to be a pretty long process with a lot of testing that takes place first, and maybe a year or so before we see an actual dealer uptick in revenues excluding Snam Rete?

I don't think so. I think that we're very close on a number of different areas. I can tell you that we're very close with Ives on a couple of different projects, probably the primary one being Dominion, which is looking to, now that they've tested it on their two-stroke compressors, are looking to purchase a good sum of units, if things works out right. We've got now some pretty good penetration by a Japanese distributor, we're about to sign in [indiscernible] and they have some pretty good forecasting done for us. And then we've signed now two Chinese distributors, [ph] RealFlow and one other, and that market could be again quite immense. But I do think that, for me to say it's going to be a short time, I don't know that. What I do know is, what almost every distributor I talked to has told me, and that is once one or two big companies like Snam Rete, like an ETP, like a Dominion adopts the technology that sales will become much faster and much easier. The problem with the industry, the fact with the industry is that no one wants to be the first to do anything new. There really is no reason. They've got a working technology, why change it and take that risk. But once that happens, I think we will see a much more dramatic and a much faster adoption. That's why we are pushing so hard with GE with Snam Rete with some of the others, Dominion, we're pushing very hard, because we feel that once that adoption occurs, you will see a fairly quick uptake of the device, because it is faster, it is cheaper, it is more efficient and it is less maintenance. I mean there is no two ways about all of that. It's just a matter of getting the industry to adopt it. Andrew D'Silva - Merriman Capital: And then just two more questions, with Snam Rete, what is the absolute last date to be able to commence a full scale install of GasPT2, and still be combined with the $80 million your bond that they have out, it doesn't expire in the middle of '15, and which would imply that the latest, they could actually start getting orders from you, would be either late this year or very early in 2015, correct?

We could supply them with 1,500 units. Probably it would take somewhere around 12 weeks to 15 weeks to supply those units. And the installation is quite simple. I mean the installation, and again, I think we have covered this before, is less than an hour. So you can install them very quickly, but my push to them has been, because we have been quite ecstatic about them that we want to have some advance notch, so we can start ramping up manufacturing. So I think that again, I'm guardedly optimistic, we're going to see some order starting this year and more importantly to me, we're going to see some order forecast, that I can actually publish, where they're going to tell us a rollout schedule. That's what I'm looking for more than anything else. But I think to answer your question, they could go into 2015, and still get up and done it in a timely fashion. But they are pushing up against a tough deadline, if they go much fast, January and February, but they could go into '15. Andrew D'Silva - Merriman Capital: And I guess, my last question, the Electro-Mechanical segment had a substantial uptick; last year kind of a similar second quarter uptick. Do you think that this is the natural lumpiness that we'll see in the rest of the years, quarters will be a little bit lower or is this kind of the new rate and we should model growth off of that?

Just kind of similar question that Eric asked earlier. No, its going to be consistent with what you've seen in the past is our expectation. Q2 was a fantastic quarter this year and it was last year as well. We are looking at Q3 being more consistent with prior year, and so that's, I would kind of maintain the model that you've probably built already.

Our next question comes from the line of Evan Richert with Sidoti & Company. Evan Richert - Sidoti & Company: A lot of my questions have been asked, but could you just touch on what the timeline would be for, how you're going to be marketing IRIS?

Yes. I could tell you, we are already marketing IRIS. I mean we are doing it in Europe and we're doing it throughout the continent. With our timeline with GE, is we have actually sat down with them in the Houston now twice. We have their marketing group and our marketing group putting together now our presentations, slide presentation. I believe that our next step is to meet again in Houston in the next couple of week, and go over that marketing presentation and then identify three or four different target customers. They are going to provide a couple, we are going to provide a couple, and really go after those three or four big companies. And frankly the companies we're looking at are Energy Transfer Partners, Spectra Energy, Kinder-Morgan and I think Williams Pipeline. They are the biggest in the country. And I think at that point, we are going to leverage our relationship with GE to get in the door. They are the ones who are going to get us in the door and then we're going to go in with their sales and marketing group. We expect to do that before the end of the year. In fact, it was scheduled to be at a partner's seminar with the GE in Orlando in October of this year. And I would hope to be having meeting scheduled around that October meeting. So we're planning to again roll this out as soon as we can get the joint presentations done and set up the way we and GE want it. Evan Richert - Sidoti & Company: And then, can you just clarify, is this the same unit at GE that would be responsible for purchases on the turbine side or is that separate?

Fully separate. This is an Intelligent Platform Group, which works with more of an IT based sales group. The turbine group is the GE Aero, which is under their Water and Power division. Evan Richert - Sidoti & Company: And then, as far as the turbine side goes, are you currently marketing with any other customers outside of GE or is that your main focus right now?

No. We're also in discussions with Siemens. And I think I've talked about this, we went into discussions with them, after they brought the Rolls-Royce Energy division. And we are still winning test results from devices that we're getting to Mitsubishi Heavy Industry. We have been certified as a preferred vendor for Mitsubishi and we're waiting to get those devices out the door and install. We understand that they're going to be going on two turbines in Thailand and as soon as those go out, I'll be making a press release to inform everybody. Evan Richert - Sidoti & Company: And then can you just talk on your outlook on, if you still see some cross-selling opportunity as far as IRIS and GasPT? And what would look like?

There's nothing about cross-selling opportunities. I think what happens when you start getting technology into the industry, and it starts getting traction, you just become more and more credible in the industry. So I think there will be cross-selling in the sense that, we have two technologies as they start to develop, one will support the other, because again, you get the creditability. We are not at this point though looking to put IRIS with the distributors of the GasPT or the VEProbe. The GasPT and VEProbe are generally much more applicable to a different division within the pipeline companies. They are hardware that actually does metering, that actually does sampling or that actually does the thermowell function as opposed to the IRIS technology, that's much more IT based, which in most pipeline companies, there's a different procurement system, different management team and really a different market to attack. So I don't think there is a so much cross-selling as just one will build creditability for the other. Evan Richert - Sidoti & Company: And then, as far as the pipeline customers go, I mean obviously you've had a number of them testing the GasPT for a while now. You're just kind of waiting for someone to make the first order, I guess, as how you've explained it. Is there anyone else out there that you're looking to target that hasn't really seen this yet or are you just kind of waiting for these same core group of pipelines to pushing order through?

We've attacked everybody that we're interested in at this point. And we're not just waiting, believe me, we're pushing as hard as we can at the various different levels. We have a number of different strategies, both with our distributors and directly, with our sales people and with management and others. That we're really working on getting one of these companies, bigger companies to adopt the technology. And again, we think that once that happens, it will simply be a matter of then almost dominos, where the technology will become quite the standard within the industry. But again, we have attack those people that we believe are most susceptible to this. On the other hand, there are some smaller sales being made. Obviously, we've had sales disclosure. We've had sales at both and we've had sales to [indiscernible]. So there are some smaller sales being made, but I think really our push right now is probably five or six big customers that we're really pushing to land, and that's where we think the creditability will come.

Our next question comes from the line of Marco Rodriguez with Stonegate Securities. Marco Rodriguez - Stonegate Securities: Most of my questions have been asked and answered, just a couple of real quick clarification items. On the GasPT unit sales, again for Q2 how many were actually booked unit wise for revenue?

Actually six more, six additional. Marco Rodriguez - Stonegate Securities: So it sounds, there was a total of 12 for the entire year, so six for Q1?

No. Seven for Q1. Seven for Q1, six for Q2. Marco Rodriguez - Stonegate Securities: How does that compare year-over-year?

Last year would have been not very many at all.

Yes. I think last year they were all testing it. I don't now -- well, I'm not sure because we did some for National Grid. I don't have that figure off the top, sorry. Marco Rodriguez - Stonegate Securities: And then on the VE Technology sales that you have in your presentation, the 118 sold, are those actually booked in the revenue in Q2?

Sorry, can you repeat that? Marco Rodriguez - Stonegate Securities: The VE Technology sales, you have in the presentation, 118 units, were those booked as revenue in Q2?

Yes. $538,000, correct. Marco Rodriguez - Stonegate Securities: And how does that compare sequentially from Q1?

I don't believe we had many sold at all in Q1. Again, we had bring them out that way, but the majority of them were Q2 sales.

Our next question comes from the line of Jim Kennedy with Marathon Capital. Jim Kennedy - Marathon Capital: I wanted to drilldown on a couple of items. Number one, on the distributor network, and correct my math if I'm wrong and maybe a suggestion as to what would be good going forward. You've got 33 distributors singed up. Bill, how many PTs do these folks usually take? I mean do they usually take one or two, are they required to take a couple to begin with?

They're required to take one or two depending on the size just for demonstration purposes. And then there is a requirement depending on the size of the territory that they're covering, for them to commit to a number of inventory units. And those are the ones that we're just not reporting at this point, because they're not revenue, they won't be revenue until they actually are selling. But it depends really on the size of the territory that they are involved in, and whether or not it's exclusive or non-exclusive agreement, the biggest one, for example, is the Benchmark, that's what we made first quarter, which was all of Canada and they were required to take I think 28 units as inventory. So again, it depends on the size of the area and whether or not it's an exclusive agreement or not. Jim Kennedy - Marathon Capital: I think probably a useful number, if you guys can get it from the distributors would be, how many units are actually in distributors hands and then how many of those units are in trials, in other words, versus sitting on the shelf at the distributor? I know when I visited Ives a little while ago that they were quite excited about, trying to get these things into the field, into trials. And it would be nice to know if we've got, say, 50 or 100 units out there. If 50 or 60 of the 100 are in trials that tells us something, and if only 10 are in trials that tells us something else.

We certainly could provide that number, I don't have it off the top, but that's something we'll definitely do, Jim. Jim Kennedy - Marathon Capital: Yes, just give us a little more insight into the pipeline. Secondly, I think I heard you correctly that with the National Grid installations, you're going to be on the GE Intelligent Platform. Did I heard you say correctly that that's going to be the hardware component, and you all are the software component? How big a portion of that software component are you for that system?

We are the entire software component. We actually built a ground-up software solution for managing the pipeline. It's the entire package from nuts to bolts. And we are using the GE Intelligent Platform to set up hardware, because they were the only ones who would in essence modify their source code and expand the RAM that we needed. But it is entirely our software. Jim Kennedy - Marathon Capital: And in terms of competitors when you go out there, I don't know if National Grid looked at anybody else, but when you get into these other opportunities, have you seen a head-to-head competitor yet with something similar or are you alone in terms of what this system can do on the GE platform?

We are alone in not only what it can do, but how does it, almost with -- not almost, with all of the other systems that are in use today by the oil and gas companies are proprietary systems that are leased from vendors who provide annual updates or who have to pay licensing fees to, who generally maintain the systems on their servers, they literally are set up much like a SAP or Oracle system, third-party provider. Ours is the only system out there right now that really allows the gas pipeline company to own its own system. We set it up on their server, it's proprietary, it's web-based, so they can get to through the internet as opposed to going through a third-party system, so it is quite unique in that manner. And that's really I think the advantage we have, and that the pipeline companies like that. They like to have their own proprietary system. They don't like to pay the fees associated with licensing. And if they add a technology expert or they add an engineer, they have to add another licensed position. They have to license each computer. Generally speaking, the only way they can access it is from a computer, whereas we allow them to use a tablet or even a smartphone. It's really up to them how they set it up. So again, in that sense, it is pretty unique and we haven't seen anything comparable to this one. Jim Kennedy - Marathon Capital: So given that National Grid is going to use you across their entire system, is that the likelihood of the other systems where they're going to want one system in place for their entire grid or system, or might we see a mix and match type of approach by some of these folks?

You could see that. I mean I think, for example, frankly one of the things we're targeting right now, you may have seen recently that Energy Transfer Partners, now they're building 300,000 mile addition to their pipeline. And we're actually targeting that 300,000 miles to roll this out and show them what it will do in that new pipeline. We're thinking the same thing with Buckeye Energy who has just announced an 800,000 mile increase in their pipeline. So it could be a mix and match. Although, we think once it's out there and they see how effective and dynamic it is, it's something that they'll tend to go to, but National Grid is doing it in mix and match right now. They have an old system that is quite antiquated. And frankly not very dynamic, on the one hand, and they have almost 70 sites that are hooked in our system, so it can be done. And I think, yes, you will see that happen. Jim Kennedy - Marathon Capital: Is this an ROI sale, Bill, or is it a combination of replacing obsoleted systems, is it a combination of needing new technology because of what's coming through the pipeline. What is the incentive for that operator to put this in?

Yes, twofold. One is -- and I think there is a whitepaper out that GE put out. It's publicly available whitepaper that talked about gas and natural gas operation for the next few years, until 2025. And what they have said is that the big requirement of natural gas system to become the energy of choice is really control of the asset. And control of the asset is what amounts to remote metering, remote flow control, really doing everything remotely and having very dynamic systems to be able to do that. And that really is where -- that's where the industry is going. And so, of course, part of that is, if you're going to do that, you've got to have the ability to maintain those systems. And right now, it's a guy in a truck with a toolkit, that goes out there and figures out what's wrong and replaces whatever is wrong. That's really antiquated, and National Grid has certainly seen that, and I think other pipeline companies will as well. What IRIS gives in the opportunity to do is truly, dynamically, remotely control those valves, really diagnose what the problems are, treat them in a reasonable efficient manner, where guys can go out during the work day with the proper tools, with the proper replacement parts, and fix whatever is wrong. So again, I think its part of the whole modernization of the system. So I think it's not so much a return on investment, as it is really just the natural obsolescence of computer and electronic systems generally, and new technology allowing people to do things they haven't been able to do before. And in the case of the gas companies, it is a change for them. Jim Kennedy - Marathon Capital: So, Bill, just to kind of switch gears very quickly. You had mentioned the cross-selling opportunities. Am I correct that at each of these pumping stations, in theory, there is a compressor?

Well, yes, at each pumping station there would be a compressor, correct. Jim Kennedy - Marathon Capital: And can I put the PT in front of that compressor? Does it make economic sense?

Yes, truly. In fact, that's what's Dominion is looking at right now, is that it makes it a much more efficient operation. And obviously, I think we are headed next to, is that PT then integrates with the IRIS system. And yes, the answer to your question is yes. In fact, one of the issues that Snam Rete is so impressed about is that we can, in fact interface directly with their flow computers, which will be able to make their billing automated, which currently is not. Currently their billing is done by a staff of, I don't know, 25 or 30 people, who are every month generating in essence hand-generated bills to 7,500 customers. The bottomline is, the fact that our GasPT device is a truly digital device that interfaces with the digital flowmeter, would allow them to automate that system. And yes, it would certainly make sense to have it at compressor station. Jim Kennedy - Marathon Capital: So we should think of the turbine market as separate from the compressor market for PT?

Yes, because the compressor includes non-turbine compressors. In fact, what Dominion is testing it on is these big two-stroke engines that they use for compression, but they are operated by natural gas, there is the same concerns that you would have with the turbine that they are getting improper gas mixture, improper fuel air mixture, and we allow them to operate much more efficiently. That's what Dominion is looking at. Jim Kennedy - Marathon Capital: Do you all think you could put a link on your website to that whitepaper you referenced?

I'll do that. Yes, I can do that. Jim Kennedy - Marathon Capital: And then switching gears again to Snam Rete. When you mentioned that you were required to compare, I guess, in contrast to PT with gas chromatograph, is your PT providing all of the information that they will need? I know the gas chromatograph typically provides more, but are you providing all of the information that they are going to need?

Yes, we are. Because realize, what they're using the device for is billing. So it's calculation of BTUs. So what we're providing is the corrected value. That's the big issue is what's the energy content of the gas, that's the component along with flow that helps in the BTUs. Jim Kennedy - Marathon Capital: And then are there any Italian manufacturers of gas chromatographs?

I don't believe so. That's a good question, but I don't think so. I think if you look at Emerson, Honeywell -- the big ones are Emerson, Honeywell, ABB, Siemens German, there's Japanese right, the big Japanese manufacturers. I don't think that -- no, there are no Italian manufacturers that I know.

Our next question comes from the line of Morgan Frank with Manchester Management. Morgan Frank - Manchester Management: My question has been answered.

Thanks Morgan.

And I am not showing any further questions at this time. This does conclude our Q&A session. Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program. And you may all disconnect. Everyone have a good day.