THE CLEANTECH INVESTOR FORUM 2011

Infrared Applications Inc. Session 1

The Four Seasons HotelPalo Alto, CaliforniaMarch 7 & 8, 2011

Infrared Applications Inc.“Turn off the Lights, Turn on the Security”

Gary L. Bane & Gary E. BallMarch 7, 2011

Presentation On line: http://HarmAlarm.com

Agenda• Physical Security Market The need• The next Generation in Physical Security Surveillance

Systems: HarmAlarm– Evolutionary (existing visual systems)– Revolutionary (advanced technology growth)– Green Value (energy conservation)– The Future: 21st Century – The Security Age

• Enterprise Value– Increase Revenues– Lower Operating costs– Increase functionality– New Applications (new markets)

• Summary

Defining Issue

State of Security Status• Control rooms are costly, energy

consuming, and understaffed for video volume

• Most security systems operate in a record only mode.

• Technology until now has failed to find the solutions desired.

Industry Security Requirements1. Detect security threat2. Verify 3. Provide actionable intelligence4. Operational communication5. Update the event 6. Document the incident 7. No false alarms8. Affordability

HarmAlarm: Next Generation

Defined by the concept & claims of US Patent 7,738,008, June 2010• A surveillance field is formed by the common fields-of-view of two independent

imaging sources.• Objects common to the surveillance field are detected:

– They are computed as physical objects in linear dimensions (SqFt)– They are located at precise coordinates (x,y,z)– And they are continuously tracked over time.

• When objects are tracked, real time data is available:– This data supports higher order threat detection criteria (behavioral).– Also, the simultaneous detection, independent validation, & tracking

eliminates false alarms• The elimination of false alarms:

– Makes HarmAlarm the first truly automatic physical security system in the Security industry.

– Detection Response/Alarm, the benefit is:

Improve the effectiveness of control rooms and provide record-only Security systems a real time capability

HarmAlarmTM

I-6

Connectivity: Commercial Wireless, Fiber-optics, MMW/MW, LAN, or Land Lines

`

Remote Alarm

Surveillance Area

Mainframe

Internet Set-up

First Responder

Secure ZoneCommon Principle

HarmAlarm ArchitectureUS Patent No. 7,738,008, June 2010

Key elements• Two imaging sensors form a

Secured area, defined by overlapping fields-of-views

• 3 D real time scientific equations for target detection & classification

• Connectivity: – Optimized for each application

• Host computers:– Remote: mainframe,– Site: desk top or Cloud based

• IP Protocol – End-user set up– Menu driven

• Threat Criteria:– Menu specific, End-user defined

• Remote threat notification– Response team– Safety alert– Embedded Applications

Immediate Markets

Retrofit Plan Add a second camera, (if needed), and install HarmAlarm 3 D processing

• Manned security Control rooms: Benefits– Improve the control rooms effectiveness

• Directs the detected threat to the operator• Increases the number of Cameras to Operator ratio while improving coverage

– Layer Security for critical applications (redundancy)– Downsize or eliminate Control Rooms

• TV monitors & recorders• Air conditioning• Electrical power consumption

• Record-only systems: Benefit: – A real time threat detection capability

• Alerts workers, safety• Provides the End-user an option to add a response capability • Direct response becomes affordable, when false alarms are contained/eliminated.

• Build relationships for the future– 1,000 plus existing physical security integrators and service providers– Most will need technical assistance to implement HarmAlarm– Integrators become our “feet on the ground” for HarmAlarm growth

Revolutionary

• HarmAlarm’s preferred embodiment is: – Infrared Imagers with wireless connectivity.

• Why?– Infrared imaging provides stable target signatures. – Infrared enhances target tracking

• Especially in multi-target environments

• Precise target signature and uniqueness • Maintains all objects in the track file

– The track file:• Needed for advanced behavioral threat recognition

• Infrared technology ensures the lowest false alarms rate.

False Alarm Improvement

• Camera A false alarm 1/100• Camera B false alarm 1/100• Occurring in common area 1/100• Independent Size matching 1/100• 3 D “single look” combined probability 1 in 107

• Tracked over time 1/10 False Alarm probability 1 in 100 MillionIf Camera A was a single camera security system

the false alarm rate would be 1 in 100HarmAlarm versus single camera 1,000,000:1

Advanced Threat Detection

• Lying-in-wait (home, parking lots, etc.)• Stalking (a two object relationship over time)• Loitering (peeping tom)• Man-down (many causes)• Crowd recognition (gathering targets)• Profiling for signs of anxiety (retail theft, airports, etc.)• Child-at-risk (child unattended)• Animal threat (situation unique) • Perimeter enhancement (home evasion) • Agriculture (threat: human &

natural)• Natural events (fire, wind, water, slides, etc.)

Threats defined at site (End-user specific)

Example

Camera A ------ Camera B

Geometric Relationships

Location Camera A

Location Camera B

Target Location

Distance Between Cameras

R2R1

Known Set-up valueCameras Position & target LocationRange computations, R1 & R2

HarmAlarm Slant Range

Calculations, for R1 & R2

• R1 & R2 calculations require information from both cameras

• Both cameras, the 3 D solution is patent protected

• HarmAlarm is not a flat earth extrapolation (competitors)

• HarmAlarm equations are closed form scientific updated at video frame rates.

• Powerful “best estimating” algorithms based upon target signature properties.

Equations shown have been simplified from their spherical trigonometry form.

• R1 = (Distance Between Cameras) x Sin (camera B angleo)/ (Sin (180o – {camera B angleo} – {camera A angleo})

• R2 = (Distance Between Cameras) x Sin (camera A angleo)/ (Sin (180o – {camera B angleo} – {camera A angleo})

Color coding is matched to HarmAlarm Geometry relationships

Camera A ------ Camera B

Camera A ------ Camera B

Camera A ------ Camera B

Camera A ------ Camera B Partially obscured

The Future

21 Century: The Security Age

Personnel

Physical

Cyber-space Common

Data Base

Shared Data BaseSynergism: Where the sum exceeds the parts

Shared communications Common Data Base– Identification, from all sources– Verification, by all sources– Correlation, linking of events

1. Multi-discipline Threat Detection,Tracking actions over time Recognized by combined systems

2. Threat Alert notification Multi-discipline alert

3. Responder InformationSituation awareness Identify threat elements Updated in real time simultaneous broadcast

Consolidation of Enterprise Security Vendor support: Currently overlapping, redundant, holes, and confusing Simplify: Authority and responsibility with a single authority

Green Benefits

Green Applications

• History

• “Turn off the light” application, specific

• Make control rooms more efficient, general

The Past

• Old practices, formed when energy was cheap and abundant. • Wasting energy is an economic and environmental problem. • A major use of electrical energy is for lighting. • One of the common uses of night time illumination is for security. • Security experts define “light to be the enemy of darkness and the

ally of safety”.

• Our Expert:– Bad things happen when there is no light. – Evil exists under the cloak of darkness. – If you want safety, you must have light.

But, How true are his statements?

Military Legacy

• In the 1970’s US military recognized an army with “night vision” had a significant advantage on the battlefield.

• Gerard Erasmus: – "In the valley of the blind, the one-eyed man is King." Our version is, – “In field of Security, the night vision system is King”.

• In the early 90’s Infrared Technology was designated by the US Government as a “dual use” technology

• This opened the door for commercial applications. • The US Government still controls the technology but commercial

applications have been sanctioned and approved.– Aviation– Medicine– And now, Security

Commercial Car Lot Application

• 70,000+ cars lots in the USA. • They operate and deploy strong illumination. • It is estimated they consume greater 500 KMWHs per day. • ~40% of the power is consumed after the close of business. • Millions of dollars per day with a large carbon footprint.  • Car theft rings are sophisticated.

– They targeted certain car models – To be dissembled, crated, and shipped to foreign markets

within hours of the theft. – The car thief is not just stealing, they are filling an order.

• When a car lot is lighted, the total time from entering, locating the car, and departing is less than 5 minutes for a professional thief.

• We would like to increase the response window to > 10 minutes

Darkness: The new Ally of Security

• HarmAlarm places the scene in total darkness. – Darkness slows down the actions and movements of the thief. – The search takes longer.  

• The thief is identified when he enters the surveillance field. – Early detection– Actions are slowed down– The time window is lengthen – The opportunity for apprehension is increased.  

• Infrared technical performance is superior to visual cameras, stable signature.

• The stable IR signature makes a positive unambiguous identification possible, Inherent Thermal Contrast (ITC).

• Better performance, lower cost of ownership, and Green Benefits

Enterprise Value

Enterprise Value

• Reduces Operating costs– Lowering operating costs will increase market size

• Increase Revenues from:– Retrofits to existing security systems– Expansion of existing market or market share– New Applications, leading to new markets

• Revenue Sources– Sale or Lease of HarmAlarm components– Wireless service monthly fees– Response provider services (potential)

• Five year forecast

Five Year Cash Flow(Based upon 7.6 million units)

Cash Flow (Millions of Dollars)

2012 2013 2014 2015 2016 TotalProduction -60 -125 -190 -190 -190 -755Development

OEM -10 -10 -20 Income Product (Sell or Lease) 55 140 210 215 220 840 Wireless fees 18.2 75.2 207.5 285.1 399 985

Cash Flow 3.2 80.2 227.5 310.1 429 1,050 Accumulative 3.2 83.4 310.9 621 1,050 Profit Margins: Hardware 15% & Wireless 70%

Summary

Point of Convergence

The Market factors have changed since 2004.

• Security and safety requirements want a real time capability, – End-users desire for a threat response and threat negation– Safety, minimize collateral damage, instructions and real time guidance– A growing realization real time is more cost effective than post mortem

• Infrared technology has matured since 2004 performance and cost, – Costs have decreased by a factor of 7, – Another factor of 3-4 is predicted by 2013 (US government initiative)

• Wireless capability has grown and matured, – Video applications are here (3G, 4G, and androids) & – Cloud computing potential?

• Internet IP Protocol, has become standard practice• Growth in handsets, custom applications

– Embedded response action plan in the handsets, real time updated

The HarmAlarm provides the architecture, road map and direction.

Summary

• Protected by US Patent 7,738,008, issued June 15, 2010.• HarmAlarm

– The next generation in Physical Security Systems.– Based upon closed form 3-dimensional processing – Detects, verifies, and sounds a threat alert all in real time.– Eliminates false alarms

• HarmAlarm, the world’s first automatic physical security system• The Long Term Future direction:

– Integrate HarmAlarm with Personnel and Cyber-space security to create a Total Security solution.

– Who?, what?, when?, where?, and by whose authorization? Are all questions to be answered by Total Security.

Our Strategy• Formation of the right Team (relationships)

– Understanding of the Physical Security Market– Knowledgeable of key technologies

• Visual/Infrared imaging advances, • Wireless: cloud computing, video bandwidth 3G – 4G & • Chipset volume production, handsets, cameras, wireless• Custom handset production, embedded applications.

– A long term relationship

• Segregate HarmAlarm into stand-alone business units • Profit Centers:

– Green Applications (conservation)

– Upgrade visual wavelength systems (existing Physical Security systems) – Home Security (extension of threat warning)– Military (mobile threat perimeter security system)– OEM Volume Production Base (HarmAlarm components)– Others?

DisclaimerThe Infrared Applications Inc. (IAI) Business Plan 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 products and potential returns. 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 Applications Inc. 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. The management of Infrared Applications Inc. makes no assertion over the correctness of the material contained in the Business Plan, and interested parties must rely on their own independent research and due diligence to reach their independent conclusions.