TECH COAST ANGELS
Infrared
Inc.
Infrared Applications
Applications Inc.
Market Strategy
July 2010
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The Security Age: The 21st Century
Opportunity Crucible:
Technology, Security, and Userdriven needs
TECH COAST ANGELS
• IAI, is a wholly owned subsidiary corporation of
Infrared Systems International. OTC: BB)
• IAI owns all rights to ISSM
• Present security systems are plagued with high
false alarm rates that result in high cost requiring
operator intervention.
• For the first time: a truly automatic security
system is ready for market.
Infrared Security System & Method (ISSM)
• Based upon emerging and mature technologies
• Patent protected: Image processing, system architecture, and wireless concept.
• Wireless: connectivity and distributed architecture for command/control
• Latest in “un-cooled” Infrared detector technology
• Applications: Industrial Infrastructure, military, homeland defense, and private sector
• Huge multi-faceted opportunity
• US Patent Number: 7,738,008, June 15, 2010
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The Opportunity
 Infrared Applications Inc. was formed in 1992 to develop Infrared Imaging Systems for commercial
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applications. The
benefits
fromLSthese systems is to enhance Security & Safety in the public sector.
 Our initial commercial product, Enhanced Vision System, has produced over 800 systems for
Gulfstream aircraft and FedEx operations world wide. The FAA views EVS as a major part of their
NexGen vision for aviation.
Our latest technological advancement, an Infrared Security System, has incorporated a powerful
blend of wireless technology & Infrared imaging to provide a system that features redundancy,
connectivity, independent verification, and seamless operation for a broad spectrum of security
applications.
 The customer sees for the first time a security system that works as advertised without excessive
operator intervention. This is achieved by inherent low false alarms rates, a product of our patented
proprietary design and the integration of congruent and complementary technologies.
 Our claim of superior performance is supported by our patent protected unique approach, that
has been reviewed and verified by experts in many different technical fields.
 IAI is a privately held corporation consisting of 40 shares. IAI has profit obligations to
approximately 1200 shareholders from Infrared Systems International, March 2010.
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Our Selected Target Markets
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Target Market, Small business
• Small to medium size manufactures, distributors, and wholesale warehouses
• Conservative factoring in the USA: > 10 million systems
• Market will grow as concept gains market support
Target Market, Residential homes
• > 10,000,000 homes employ “portal’ security
• ISSM greatly expands:
– Threat detection
– Threat definition
– Threat avoidance
Additional Markets (future)
• Homeland Defense & Military
– License Corporations who pursue these markets as “core business”
• Civilian Authority responsible for security
– Recipients of Homeland defense grants, a core business for many.
• Government Agencies
–
Specialized protection, dedicated security & response, contracted provider business
• Private Utilities – Petrol-chemical, distribution, transmission, hydro-electric, storage etc.
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ISSM Concept
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 ISSM provides physical security defined by the end-user.
 The secured area is continuously monitored by our ISSM patented system.
99% of false alarms are eliminated at detection.
 The customer establishes the threat criteria through an Internet set up.
Typical criteria employed: time window, human or vehicle intrusion, secured
region, and behavioral characteristics.
 A security alarm is called when the threat criteria has been satisfied.
 The image that caused the breach is stored in the ISSM system. The image is
enhanced for higher definition and clarity.
 The information is relayed to the command & control. The simplest form is a
still frame image of the cause of the security breach (e.g. a man entering the
perimeter of the secured property)
 The simplest command & control is a handset cell-phone with an image
displayed in possession of the security authority.
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Infrared Security System & Method
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Security Systems
are common
• All businesses or homes have some form of security.
• Effective Security is expensive, dedicated TV monitors and human operators are the cost drivers.
• Affordable Security systems provide limited functionality. Often used for post mortem analysis,
little real time prevention.
• ISSM provides an effective capability at an affordable price suitable for a real time response.
Target Markets
Small to medium businesses. They cannot afford the expensive systems, but they have a
defined need and the resources to buy.
Home Security. Present security systems do not provide adequate warning or threat definition.
Environmental Issue
With conservation a national issue and our dependence on imported oil increasing, ISSM may find
additional support from government and conservation advocates. Energy savings in some
applications is significant.
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Marketing - Sales - Support
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Marketing and sales ------- a strong retail sales initiative
• Marketing – Execute a sales representation agreement with a wireless carrier to launch the sales
campaign. Our back up position would be to use conventional retailers with large nationwide sales
base.
• Sales – With the wireless carrier sales will be by leasing of the equipment with cost recovery through
the monthly fees. Our financial projections assume leasing.
• Retail outlets will provide training and demonstrations for walk up customers.
• Support – The leased agreement includes installation and internet command and control for set-up
and monitoring. The internet provides the user a menu of options including threat criterion.
• Response Option - A contract for security response is included as an option in the lease agreement.
The Retail Sales outlet needs to provide a full, one stop service. At a single location the customer can
purchase all of their security needs. Satellite TV providers are potential candidates to perform
installation and set-ups for ISSM. Similar technology and installations.
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Must JustifyTEthe
Risk
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• Supports core business
• Builds new core markets
• Fits retail operations &
merchandising strategy
• Captures lead role from Security
Response Providers
• Expands into Server Operations
Benefits Accrued
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Major sales
Cash flow
Lease model used and understood
Accessibility to capital markets
OEM opportunities
Good citizen image
Market for small business
alone is estimated at 10
million system units.
Wireless Operator view of
Target Market Opportunity
100%
Value Added
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• Validate market size
• Add value elements
• Pursue foreign market
growth
• Security Response
Provider role
• Let IAI take the risk
• Limit investment
• Seed Investment
• Demonstration &
Proof of Principle
• Control of the
business through
License agreement
• Strong enough to
capture full market
• Can defend market
Revenue & Control
• Installations
• Internet C&C
• Security Response
• Server Operator
• OEM relationship
0%
Benefits Delivered
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IAI “Pull Through” Strategy
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(Investor Group Perspective)
The Chasm
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Innovator
Plan from
Demo to
Market
Early Majority
Late Majority
Creating Market Value
Needs proof & Don’t sell to soon!
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Technology is unique and patented
Ride the bow wave of wireless growth
Vertical growth options (wireless)
Retailers market infrastructure
Value added services
Laggards
The Vehicle to Liquidity
Buy Out
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Buyers needs control
The buyers may be either a Security Response
provider or a wireless/server operator
Leasing is a common practice for both
Cash plus equity is desired.
IAI may segment as major markets evolve.
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The not so Obvious
There is room at the Top for only one
100%
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Value
Added
• Exploit the competition between industries
(wireless & Response Providers), and within the
preferred Wireless industry.
• Retain Value after licensing
• Exclude niche markets for value enhancement
Business Model: IAI does not sell segments, We
license market applications for our IP.
• Private business license market
• Home security Compete the major players
– Mature with strong competition
– Be the market “discriminator”
• OEM field units
– Manufacture and sell as OEM (retained)
• Niche applications
– Aviation Security business, (retained)
– Sport sea craft docking security, (retained)
• Homeland Defense (retained)
0%
Benefits
Delivered/Retained
The complexity of ISSM serves
our self-interests.
•
Licensees lack over-all expertise
•
Majors have core businesses and
little interest in “others”
•
“Others” are billion dollar
businesses, timely exclusions.
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IAI intends to make ISSM a
success and IAI an even bigger
success.
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Competition for Licensing
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• Majors – Our future are with the major corporations in the wireless industry.
They have the most to gain in their saturating markets.
• Home Market – Develop competition, Five year exclusive, DOJ constraints.
• Unwanted Interest will come from the existing security response providers.
This group controls the security business in the small business and home sector.
They guard their market, and litigation is far to common.
• Market Inertia – The existing Security Response group have the most to lose by
our success. Half of our target market has little or no security now, no threat.
This lucrative market can be used to jump start our sales without serious
competition
• Threat from Innovators – How strong is our patent? Very strong. Can the
competition circumvent? Yes, we don’t know how, but they will. The solution is
to engage the market at full speed, dominate a segment, and use this position to
protect and defend our rights.
• Long Term Solution – Link up with a Major for a full market exploitation and to
defend the business segments as required.
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IAI Options - Investor Benefit
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Licensing is IAI first choice
Microsoft, Goggle, channel providers
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Sprint, Verizon, T-Mobile, SBC, cingular, potential bidders
Product leasing and monthly service provider is core business to the major carrier
These companies are expanding into niche businesses searching for new markets
Early discussions with Sprint in 2008 were preliminary and confidential.
IPO
• An IPO does not satisfy the need for an in-place strong partner, but could be the way to attract
competition.
• If an retail agreement can be signed with a major retailer, Best Buy, Sears, Radio Shack, Wal-Mart,
etc., the IPO would gain legs.
• If no acceptable offers are available, the IPO could be a good way to create value, buy time, and
protect our position, deferring the long term. With the Patent, time is in our favor.
Early Investor’s Risk/Reward Opportunity
• Do we need or want Angel investment? High risk, very high reward
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Experienced Staff
IAI Development Team for IPO
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Internal Leadership
• Former President of Infrared Systems International. (ISI)
• Legal, CPA, and staff support available
Strategy Partners, ISS core technologies
• Wireless/Chip manufacturer TBD
• Software, tentative selection
• Infrared Camera Supplier, multiple candidates
Consultants
• Marketing, IP, Scientific
Associate Suppliers, Vendors
* (if not Strategic Partner, vendors for IR Camera supplier)
Board of Directors IAI
• Gary Ball, & 3 carry over Board members from ISI
• Additional open positions available for Investor, wireless & OEMs
External Affiliates
• On-going discussions with major wireless transporters and equipment suppliers.
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Risk Assessment & Mitigation
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•Technical Issues (over-all low)
• Security System Algorithm risk
• Wireless connectivity issues
• System Architecture options
low, coding
low, mitigation
low - medium
•Business Issues (medium)
• Can we maintain control with partners?
• Can we protect our position?
• Deep pocket attacks?
medium
medium
medium
•Regulatory Issues
• ITAR and FCC compliance
low
•Capital requirements
• Up front capital, who for what?
• Expansion Capital, (if needed)
unknown
medium-low, Capital Market
•Competition
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From existing companies
•Patent Protection, Infringement
very low
low, nothing on the market
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ISS Value-Added Inventory
ISI Intellectual Property & Development Team Value
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R&D
• Product technologies exist
• Integration of existing elements
Proprietary Technology
• Protected by patent ISSM: 7,738,008
• Patent will be augmented & expanded
• System architecture & connectivity
• Need to protect foreign markets?
Proprietary Process
• Patent granted, from 2006 file to 2026
• NDA used to cover business concepts and
non-patentable ideas
• Management has used need-to-know
partitioning of IP for protection
• Competitive systems cannot avoid
infringement.
Manufacturing Capability
• 90% of components in production at
modest production rates.
• OEM custom design to drive the cost for a
1,000,000 units a year market (future)
Market Presence
• Our retail solution through licensing is the first step
• Competition within the wireless industry
• Augment short falls
Market Themes
• Wireless operators have great Madison Avenue skills
• Government & Homeland security PR
• Energy Conservation Initiatives
Distribution
• E.g., SPRINT has 1800 retail outlets, many other
candidates.
Sales
• Major media campaign
• Sales force will need training
Installation Service
• Provided at POS
Support Service
• Security Specialist to assist end-user in set-up
• Provide full alert options
• Commission Sales of Security Response Providers
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Long Term The Future for IAI
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Our Philosophy
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“Riding the Bull”
The rider knows the out come.
The longer he stays on top of the bull, the greater the reward
Strengths
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A patent protected unique product, very difficult to circumvent.
A strong but thin development team
A clear definition of success, and a flexible strategy for an evolving market
Leasing, retained value, retain control, alternate strategies and contingencies.
Limitations
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We need a strong retailer (Core Strategy)
We need a major corporate partner to protect our position.
IPO/Buyout
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IAI is positioned for a private buyout or go the IPO route
Development status, no unanswered technical issues
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ISS is fabricated from current in production modern hardware
Software algorithms have been reduced to scientific equations
Algorithms coding is the long pole in the tent
Demonstration System, nine (9) months from full turn on
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Forward-Looking Statements
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This summary contains forward-looking information that is subject to certain risks and uncertainties
that could cause actual results to differ materially from those projected. Statements that are not
historical facts, including statements about strategies, plans and expectations about new and existing
products, services, technologies, opportunities, industry growth, demand for and acceptance of new
and existing products, and returns on investments in products and markets, are forward-looking
statements that involve risks and uncertainties that could significantly impact the company. These
risks include, but are not limited to, the projected market for IAI’s products and potential return.
Factors which could cause actual expectations to differ materially from these projections include the
actual market acceptance of the product, the cost of the product, unforeseen difficulties in the
construction of the product, and the competitive environment within the industry. When infrared
systems international uses words such as “believe,” “expect,” “anticipate” or similar words, it is
making forward-looking statements.
Certain articles, studies and reports that management relied on in preparing the projections also
make forward-looking statements. These articles, studies and reports base their forward-looking
statements on a number of different factors and assumptions, all of which are beyond management’s
control. All of these assumptions are subject to a high degree of uncertainty. One or more of these
assumptions may turn out to be incorrect. Accordingly, actual developments may differ materially
from the projections contained in these articles, studies and reports.
For all of the above reasons, you should not rely on these forward-looking statements in deciding
whether to invest in infrared Applications Inc.
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