API IR Presentation 11-16-06[1]

8/14/2019 API IR Presentation 11-16-06[1]

1/38

Investor Relations Presentation


2/38

2

Forward Looking Statement

This presentation contains forward-looking statements.All forward-looking statements involve risks anduncertainties, including, without limitation, the risksdetailed in the Companys filings and reports with the

Securities and Exchange Commission. Such statementsare only predictions, and actual events or results maydiffer materially from those projected.


3/38

3

Significant Milestones

Sep. 1989: Acquired Silicon Detector Corp. Mar. 2000: New board appointed

July 2002: Acquired Silicon Sensors LLC

Feb. 2003: Acquired Texas Optoelectronics, Inc.

Mar. 2004: Completed 1st year of profitability

Oct. 2004: Secured $5M in convertible debt

Dec. 2004: Acquired Photonic Detectors, Inc.

Mar. 2005: Completed 2nd year of profitability

May 2005: Acquired Picometrix, Inc

March 2006 Second $5M in Convertible debt


4/38

4

API Overview

Custom OptoelectronicSolutions

Photodiodes: Silicon and InGaAs LED assemblies

High-Speed OpticalReceivers

Terahertz Systems


5/38

5

Growth Drivers

Custom Optoelectronic Solutions Defense & homeland security

Medical

Optical Receivers Telecom 10 Gb/s & 40 Gb/s

Defense

Terahertz

Non-destructive testing (NDT)

Defense & homeland security


6/38

6

Core Competencies

Vertical integration from wafer fabrication tofinished device, subsystem or system

Components

Subsystems

Systems

Wafer

Fabrication

Component

PackagingMaterial Growth


7/38

7

Global Markets Served

Homeland

Security

NDT

Telecom/IT

Military

Medical

Industrial

Current Emerging


8/38

8

Sales by Market

Q1 FY06 % Q1 FY07 % Q2 FY06 Q2 FY06 Q2 FY07 Q2 FY07 FY07 YTD FY07 YTD

TELECOMMUNICATIONS 504,717 9.9% 743,385 13.1% 920,000$ 17.8% 1,761,000$ 30.0% 2,504,385 21.7%

INDUSTRIAL SENSING/NDT 2,163,451 42.6% 2,411,732 42.5% 2,049,000$ 39.6% 2,403,000$ 40.9% 4,814,732 41.7%

MILITARY/AEROSPACE 1,213,466 23.9% 1,868,532 33.0% 1,225,000$ 23.7% 1,138,000$ 19.4% 3,006,532 26.0%

MEDICAL 697,498 13.7% 633,891 11.2% 446,000$ 8.6% 481,000$ 8.2% 1,114,891 9.7%

HOME LAND SECURITY 498,295 9.8% 10,748 0.2% 533,000$ 10.3% 95,000$ 1.6% 105,748 0.9%

TOTAL 5,077,427 100.0% 5,668,288 100.0% 5,173,000$ 100% 5,878,000$ 100% 11,546,288 100%


9/38

9

Custom Optoelectronic Solutions

Specializing in the design and fabricationof Silicon and InGaAs detectors

Custom solutions optimized for customerapplications

Supplying assemblies and subsystems

Serviceable market size: $250M


10/38

10

Custom Optoelectronic Solutions

growth opportunities

Military Market

Smart munitions

Developing Sensor Technology

High Reliability Medical Applications High sensitivity photodiodes (APDs)

Custom packaging and hybridization

Improving gross margins through consolidationmature stage 3


11/38

11

Military Market Focus

APPLICATIONS Satellite PositioningLaser range finders

Missile guidance

Heads-up displaysOptical proximity fuse


12/38

12

API Products Medical Market

Hybrid Assembly used in

bacteriology system

LED Array

9 Element Pd Array


13/38

13

Key Customers for Custom

Optoelectronic Solutions
http://www.raytheon.com/static/node2634.html


14/38

14

High-Speed Optical Receivers

(HSOR)

Uses for HSOR:

10 & 40Gb/s receiver fiber optic transmission

(OEM Line Cards, Transponders, and Routers)

High performance, market leading T&M equipment

(Data analyzers, oscilloscopes, BER testers, network analyzers)

Munitions and guidance systems

(Defense Towed Decoy, SATCOM, Communication)

Entering stage 3 with sales and marketing build up


15/38

15

HSOR Features/Value Proposition

Best performance PIN and APD Photodiodes Highest Speeds

Top in class in sensitivity

Most stable over temperature

Vertically integrated to optimize receiver solutions forcustomers (packaging & amplification) using standard

semiconductor PIN & APD

Ability to develop new PIN & APD semiconductors,

based off of patented standard products


16/38

16

Telecommunication Product Chain

OEM Transmission

(Cisco, Alcatel, Siemens,etc.)

Test &

Measurement(R&D and QC)

TransponderMfg.

Service Providers (Carriers)(over 100 e.g. AT&T, Verizon, BT, Deutsche Telekom, etc.)

Component Mfg. (API)


17/38

17

Telecom Infra-structure

BusinessEnterprise

Metro Core

New YorkSan Francisco

ConsumerEnterprise

Triple Play Voice, Data& HDTV

Metro Access BusinessEnterprise


18/38

18

10Gb/s &40Gb/s Equipment OEMs

!"#$%&'()*+(,-&) .(/-&('0$12(-$3'&,$4-)25( 12(-$)2,-$%&'()*+(,-&)

6"7$8999:#7;""$99

3+&-"/&-'?$;5202/@ 1'?A,'B/&-?-C

DEFE1G$


19/38

19

What is Terahertz?

Terahertz is the last underutilized frontier of the EM Spectrum.

Advances in femtosecond lasers and fiber optic coupled packagedsemiconductor devices have enabled practical T-Ray instrumentation.

Beginning of Stage 2, market and product development

TH U i C bi i


20/38

20

THz Unique Combination

of Properties

Image through material (like X-ray and better than microwaves) Spatial resolution similar to that of the human eye (~100 um)

Precise depth resolution (~5 um)

Non-invasive chemical composition or spectroscopic

features of hidden objects Better than X-ray Microwaves cannot

Better than chemical sensors which are invasive

Safe, not harmful to operators or inspected material

(unlike X-rays)


21/38

21

T-Ray Applications

Application R&D Homeland Security and defense People/Packages

for concealed weapons including Weapons

Explosives

Biological

Chemical

Manufacturing Non-Destructive Quality Control Automotive/Aerospace

Food and consumer products Pharmaceuticals

Petrochemical


22/38

22

Terahertz Markets

Non-Destructive Testing (NDT) Applications include industrial quality control, process

monitoring

World process control market > $75B in 2002*

API estimates THz sensors for NDT > $300M/year

Markets application include moisture, corrosive,voids, bond strength measurements and chemicalcomposition (both existence and distribution).

*Source: Robert W. Baird & Co

**Source: Morgan Keegan & Company, Inc.


23/38

23

Market analysis

(Beta gauge replacement)

Applications: mass (thickness, density, basisweight, particulate matter)

Radioactive: Licensed, Problems with loss,

disposal, monitoring $124,604K sold in 2005 (4153 units)

$137,951K sold in 2004 (4598 units)

If we reach 5% market penetration; $20M market (200 units / yr)

Data from Census Bureau report ma334t05


24/38

24

Chemical Plant Inspection

21,000 Chemical plants on Chinas rivers

15,000 Chemical plants in the U.S.

If 2% needed 2 imaging systems for corrosion

under insulation Total Addressable Market: $120M (in US)

If we get 10% per year

$12M per year (60 units / yr)

Non Destructive Quality


25/38

25

Non Destructive Quality

Control Scanning

Corrosion


26/38

26

Aerospace Market

NASA Return to Flight Program

Columbia Advisory InvestigationBoard (CAIB) required improvedNDT inspection of critical parts

Main culprit: Voids in foam

insulation on external fuel tank Picometrix THz solution selected

above other methods duringtechnology discovery phase

1.25 mm resolution 300 x 600 mm 4x faster than other techniques

O li NDE


27/38

27

On-line NDE:

PharmaceuticalProduce Drug

(API)

Reaction

Monitor

!!!!

Crystallization

Crystallization

Monitor

Drying

Drying, Head

Space Monitor

Granulation

Particle Size, Coating

Level

Blending

Blend

Uniformity

Pfizer

Tableting

Uniformity,

Hardness, Coating,

etc.

Milling

NDE Ph l M k


28/38

28

NDE in Pharmaceutical MarketDetermining Tablet Inconsistencies of Active Ingredient

Tablet 1 Tablet 2 Tablet 3 Tablet 4 Tablet 5

Batch 1

Batch 2

Batch 3

Images provided by leading pharmaceutical manufacturer

TH H l d S i A li i


29/38

29

THz Homeland Security Application:

Security Screening Market

Development Programs Airport baggage screening in conjunction

with L-3 for TSAs Manhattan II program

Personnel screening

Remote explosive detection Portal screening

Sheet explosive

Gun

Knife

Block Explosive

Development feasibility study of


30/38

30

Development feasibility study of

personnel scanning

Remote explosive detection Portal screening

Program Management Model for


31/38

31

Program Management Model for

Technology Readiness Level

THz is level TRL 5

for DHS and DoD

P d F


32/38

32

Patented Features

Fiber optic coupled sensors are small and freelypositionable up to 30 m

Single sensor can measure multiple parameters

Ruggedized compact form factor

Robust, permanent alignment

Multiple sensors possible


33/38

C lid I S


34/38

34

Consolidate Income StatementSeptember 29,

2006

September 25,

2005

September 29,

2006

September 25,

2005

Total Revenues 5,877,776$ 5,193,466$ 11,546,065$ 10,270,892$

Total Cost of Sales 2,997,150 3,077,141 6,188,710 5,999,248

Gross Margin 2,880,626 2,116,325 5,357,354 4,271,64449.0% 40.7% 46.4% 41.6%

Other Operating Expenses

Research & Development 1,018,987 802,406 1,987,903 1,246,564

General & Administrative 1,900,319 1,455,451 3,579,769 2,809,272

Sales & Marketing 452,231 506,229 983,565 829,332

Total Other Operating Expenses 3,371,537 2,764,086 6,551,237 4,885,168

Net Operating Loss (490,911) (647,761) (1,193,883) (613,524)

Other (Income) & Expense

Other (Income)/Expense (5,411) (138) (4,540) 6,994

Interest Income (58,702) (5,084) (116,413) (14,697)

Other Expense - Wafer Fab 88,344 - 120,897 -

Interest Expense-Related Party 54,899 51,196 111,870 100,177

Interest Expense - Warrant discount 345,899 789,859 640,360 891,173

Interest Expense 207,655 139,770 411,148 262,203

Other (Income)/Expense 632,684 975,603 1,163,322 1,245,850

Net Loss (1,123,595)$ (1,623,364)$ (2,357,205)$ (1,859,374)$

Net earnings per share (0.06)$ (0.09)$ (0.12)$ (0.11)$Diluted earnings per share anti-dilutive anti-dilutive anti-dilutive anti-dilutive

Weighted Number of shares outstanding 19,026,000 17,252,000 19,003,000 16,192,000

Fully diluted number of shares outstanding 22,479,710 19,783,000 22,456,822 18,723,000

Three Months ended Six Months Ended


35/38

35

Consolidate Proforma

September 29, 2006 September 25, 2005 September 29, 2006 September 25, 2005

Net Income (Loss) (1,124,000)$ (1,624,000)$ (2,357,000)$ (1,859,000)$

Add Back:

Interest Expense - Convertible notes 129,000 59,000 249,000 179,000

Interest expense - Warrant (Fair Value) 346,000 790,000 640,000 891,000

Amortization - prepaid finance expense 33,000 57,000 66,000 120,000

Amortization - PICO intangibles/patents 349,000 319,000 698,000 497,000Stock Option Compensation Expense 66,000 - 183,000 -Other Expense - Wafer Fabrication 88,000 - 121,000 -

Subtotal - Add backs 1,011,000 1,225,000 1,957,000 1,687,000Pro Forma Net Income (113,000)$ (399,000)$ (400,000)$ (172,000)$

Net earnings per share (0.01)$ (0.02)$ (0.02)$ (0.01)$

Diluted earnings per share anti dilutive anti dilutive anti dilutive anti dilutive

Weighted Number of shares outstanding 19,026,000 17,252,000 19,003,000 16,192,000

Fully diluted number of shares outstanding 22,479,710 19,783,000 22,456,822 18,723,000

Six months endedThree months ended

l d d


36/38

36

Consolidated EBITDA

September 29, 2006 September 25, 2005 September 29, 2006 September 25, 2005

Net Income (Loss) (1,124,000)$ (1,624,000)$ (2,357,000)$ (1,859,000)$

Add Back:Net Interest expense (income) 204,000 186,000 407,000 348,000

Interest expense - Warrant (Fair Value) 346,000 790,000 640,000 891,000Depreciation Expense 241,000 207,000 478,000 365,000Amortization - Intangibles/patents 382,000 360,000 763,000 593,000Amortization - prepaid finance expense 33,000 57,000 66,000 120,000

Subtotal - Add backs 1,206,000 1,600,000 2,354,000 2,317,000EBITDA 82,000$ (24,000)$ (3,000)$ 458,000$

Three months ended Six months ended


37/38

37

Gross Margin Percent

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

FY2004 FY2005 FY2006 FY2007 YTD

Gross Margin


38/38

Thank you

Richard Kurtz, CEO & [email protected]

Robin Risser, [email protected]

AMEX Symbol: API

www.advancedphotonix.com

API IR Presentation 11-16-06[1]

Documents

Transcript of API IR Presentation 11-16-06[1]