Here is a pasting of the company's report on the annual meeting:
SUMMARY:
Annual Meeting of Stockholders of Irvine Sensors Corporation
Wednesday, March 7, 2001
Business Meeting
Stockholders elected the following individuals to the
seven-member Board:
Dr. Mel R. Brashears, Marc Dumont, Maurice C. (Michael) Inman, Jr.,
Dr. Thomas
M. Kelly, Robert G. Richards, Wolfgang Seidel, and Vincent F.
Sollitto, Jr.
In an organizational meeting following the Annual Meeting, the new
Board
elected Dr. Brashears as Chairman.
Stockholders also approved an amendment to the Company's
Certificate of
Incorporation to increase the authorized number of shares of the
Company's
common stock, approved adoption of the Company's 2001 Stock Option
Plan and
ratified the continuing appointment of Grant Thornton LLP as the
Company's
independent accountants.
Company Presentation
Following the Business Meeting, Robert G. Richards, President and
Chief
Executive Officer, led a presentation of the Company's status and
expectations. He opened this presentation by reviewing the Company's
commercial product incubation model, which although unchanged in
concept over
the last several years, had undergone significant changes in
management,
prioritization and execution recently. The most visible of these
changes was
the addition of Mel Brashears, Bernhard Baumgartner, Stephen Crisham,
and
others to the operating management team and the emerging priority of
the
Internet router opportunity being undertaken by iNetWorks
Corporation, the
Company's most recently-formed subsidiary. Mr. Richards then
introduced
Dr. Brashears to elaborate on iNetWorks.
iNetWorks(TM) Corporation
Dr. Brashears discussed iNetWorks in the context of the growing
demand for
Internet traffic, estimated by some sources to be doubling every 6 to
9 months. The equipment to route all this traffic is provided by a
limited
number of industry giants, chief among whom is Cisco Systems, which
held an
approximate 88% market share in the latest available third party
market
estimates. The second largest market share was held by Juniper
Networks, with
approximately 9%, followed by Nortel with approximately 3% and Lucent
with a
below 1% share.
This aggregate market partitioning, however, conceals the fact
that the
fastest growing market segment in terms of revenues is for very high
performance routers. In 1999, this super high end or Terabit router
market
was not separately tracked. During 2000, analysts focused on this
Terabit
segment, identifying that it had grown to almost half of a $7B annual
market
and forecasting that it is expected to grow to over three-fourths of
a
$24B marketplace in 2004. Such growth would represent a compound
annual
growth rate of greater than 50%. In this Terabit segment, Juniper's
penetration has achieved an approximate 30% market share, simply
because it
introduced a faster, next generation router before Cisco did. The
Juniper
success is illustrative of the possible market response that could be
achieved
by being first to market with substantial improvements in speed,
throughput
and resulting economics in the Terabit market segment.
Dr. Brashears then elaborated on the confluence of technologies
that offer
a unique opportunity to iNetWorks to pursue such a goal. Several
years ago,
the U. S. Government had recognized the electron mobility limitations
of
conventional switching electronics and had fostered various
development
programs for superconducting switches to penetrate this barrier.
Furthermore,
medical applications had incorporated advances resulting from space
programs
into commercially available refrigeration units to reliably achieve
superconductivity in the field. However, the physical volume that
these units
could economically cool to such temperatures was quite limited.
Irvine
Sensors' proprietary chip-stacking technologies provided the missing
link,
i.e. the ability to stack a large number of superconducting switches
into
packages small enough to be cooled by the commercially available
refrigeration
units.
Next, Dr. Brashears discussed the scope and breadth of the
program that is
required to pursue this objective. He identified fifteen different
potential
suppliers that are representative of the type of relationships that
must be
integrated to achieve a commercially successful router. One of
these, the BBN
Technologies subsidiary of Verizon Communications, has already
entered into an
equity partnership with iNetWorks, under which iNetWorks has gained
access to
BBNT's proprietary intellectual property in this field.
Dr. Brashears finished his presentation by highlighting some of
the
operating features that could be achieved with a successful
development of the
iNetWorks SuperRouter(TM). He remarked that a success might trigger
a
phenomenon akin to what happened as a result of the breakthrough
improvements
in operating speed of computer microprocessors starting in the late
1980s and
early 1990s. These speed improvements allowed functionality that
previously
had been embedded in computer hardware to be handled by software,
ushering in
the era of highly powerful applications software available today.
The
improvements in speed and throughput being pursued by iNetWorks could
offer a
comparable potential to network routers, allowing upgrades to be
achieved at
the software level rather than the hardware approach presently
utilized.
Commercial Products Group
After Dr. Brashears' presentation, Mr. Richards introduced
Bernhard
Baumgartner who, as General Manager of the Commercial Products Group,
is
responsible for the Company's commercial subsidiaries other than
iNetWorks,
plus its in-house commercial chip-stacking unit. Mr. Baumgartner
then gave a
brief summary of the status and prospects for these units.
Novalog, Inc. was profitable for the second consecutive year in
fiscal
2000, and is expected to continue that trend in fiscal 2001. Palm,
Inc.
remains its largest customer. Revenue growth is expected through an
improved
supply chain, as well as next generation and new product
developments. Prior
to the meeting, Novalog was demonstrating one area of possible future
product
development - - - Infrared Financial Messaging (IrFM), a new
technology
recently introduced by the Infrared Data Association (IrDA(R)), along
with
Visa International, Palm, VeriFone, Novalog, CrossCheck and Personal
Solutions
at the January 2001 Consumer Electronics Show (CES). Ron Brown,
IrDA's
Executive Director, showed IRSN stockholders a proof-of-concept
demonstration
as to how financial information such as credit, debit or checking
data can be
sent via an IrDA interface from devices like Palm(R) handhelds to a
Point-of-Sales (POS) terminal and back to the Palm after confirmation
of the
transaction. IrDA expects this "electronic wallet" approach to set
the stage
for future development of digital payment systems.
MicroSensors, Inc. (MSI) is undergoing an organizational
restructuring.
Former CEO John Murray resigned in late January to pursue other
opportunities,
and Mr. Baumgartner is acting CEO for this subsidiary. MSI's first
standard
part, the Universal Capacitive Readout(TM) chip (UCR), has been
successfully
developed and has been sampled by over 150 potential customers.
However, the
design-in evaluation cycle is proving to be longer than expected as
the
end-user is often 2-3 tiers down the distribution channel. Best
estimates
currently available are that first limited production sales of the
UCR could
occur during the second half of calendar 2001.
The sensor element of MSI's Silicon MicroRing(TM) Gyro has been
operational for some time, but development of its requisite control
electronics is not yet complete. Silicon from the first chip "turn"
of a
control ASIC will be in evaluation shortly, and after successful
demonstration
of such an ASIC, the technical focus will then turn to integrating
the two
components. Given timely success at these stages, the first
prototypes of the
integrated micro gyro could be available late this calendar year.
This is
consistent with prior estimates of market penetration by late 2002.
However,
to achieve that goal, MSI must also secure strategic partners,
particularly
for the large market applications. To that end, MSI is aggressively
pursuing
potential partners and customers. MEMS gyro competition is now
intensifying,
and the market window is narrowing, as companies such as Bosch are
getting
ready to roll out their own product.
While Silicon Film Technologies, Inc. experienced significant
delays due
to complex development issues, they successfully demonstrated
EFS-1(TM) units
at the Photo Marketing Association (PMA) 2001 Convention and Trade
Show in
February (Orlando, FL). The EFS-1 was one of the winners of the
Digital
Imaging Marketing Association (DIMA) Innovative Digital Product
Awards at the
show. Currently, the EFS-1 is undergoing final characterization
prior to
pre-launch qualification and production. This pre-launch process may
uncover
some technical bugs that will require "tweaking," but fundamental
changes and
more lengthy delays of the long-awaited product launch are not
expected.
Silicon Film has inventory in place for the first production run of
EFS-1
units, and shipping of first orders may take place as early as late
May or
early June. In anticipation of this event, product pre-launch
reservations
through the Silicon Film web site continue to grow. Silicon Film
demonstrated
the performance of the EFS-1 to stockholders before the meeting by
capturing
real-time photos of attendees.
RedHawk Vision Inc. has released its first two software products.
The
Macintosh(R) Version 1.0 of Video Pics(TM) (plug-in filter for Adobe
Premiere(R)) was released October 2000, and Video Pics for both
Windows(R) and
Macintosh Version 1.1 was released February 2001. The company
validated Video
Pics' image quality at recent PMA trade shows. Currently, RedHawk
Vision is
pursuing distribution and Internet photo finishing partners, has
additional
patents pending, and a standalone product is under development.
Their first
strategic partner is ShutterPort.com, and negotiations with Adobe are
in
progress to sell Video Pics via the online Adobe Store. An agreement
is also
being negotiated with an Internet photo finisher. While the first
version of
the standalone product targets professionals, prosumers, and still
image
end-users, the consumer standalone product represents the largest
potential
dollar volume market.
The Microelectronics Products Division (MPD) has developed and
patented
several standard products for the growing stacked circuits market.
This
quarter, four potential major customers have begun qualifying MPD
components
for possible use in their products. If affirmative decisions are
secured from
one or more of these opportunities, MPD could experience its first
significant
revenues this year, possibly breaking into profitability by the 4th
calendar
quarter. MPD recently added two marketing professionals to its staff
and has
over one dozen "qualified prospects," representing multi-million
dollar
revenue potential. Their road map is growth from existing stacked
products,
transition to the micro Ball Grid Array (BGA) market, and in the
long-term,
exploitation of the Neo-Stack(TM).
After Mr. Baumgartner's presentation, Mr. Richards made some
comments
about the historical core of the Company, the Advanced Technology
Division
(ATD). He pointed out the importance of maintaining this funded "R&D
engine"
so that the Company's prospects for future commercial products could
be
continually replenished. He noted that ATD has been modestly
increasing its
backlog and has been having more success competing for larger
government
contract awards. The Company's goal is to grow ATD to a level where
its
internal subsidy can be reduced and eventually eliminated. He
pointed out
that one of the concrete results of the Company's strategic planning
was to
focus ATD's R&D proposals in areas with significant potential for
commercial
exploitation. As one example, Mr. Richards remarked on the 3-D
Imaging
technology contract award. This technology employs the natural time
differences involved in laser reflections from solid objects to build
up a
high-resolution 3-dimensional image from a series of low-resolution
2-dimensional pictures. In addition to the military sensor
applications, the
possible application of this technology to commercial security and
even
entertainment markets is intriguing. Mr. Richards pointed out that
ATD is
also pursuing additional R&D contracts to support development efforts
on the
iNetWorks' SuperRouter. An example of such an effort, the
SuperMemory(TM)
contract, was announced by the Company on the day of the meeting.
Mr. Richards then commented on the Company's financial
expectations for
fiscal 2001. Consolidated revenues are expected to increase this
fiscal year,
primarily through growth at Novalog and initial contributions from
Silicon
Film and MPD. However, bottom line results will be strongly
dependent on the
manner in which iNetWorks is financed. The Company believes that
iNetWorks
represents an unmatched return opportunity for Irvine Sensors'
stockholders.
To that end, the Company intends to pursue the best development deals
it can
secure. Such deals may involve a substantial infusion of equity
investment at
either the parent or sub level, or both, and corresponding
development
expenses that will significantly impact the consolidated bottom line.
While
profitability is the ultimate goal, developmental expenses in
iNetWorks, and
to a lesser extent in other consolidated subsidiaries, are very
likely to
offset any profits achieved by other units in 2001 and 2002. Unless
iNetWorks
is financed through development contracts, a result that may not be
in
stockholders' best interests over the long haul, significant
consolidated
losses are, therefore, likely over the next two years.
Question and Answers
After the Company's presentation, there was an extensive question
and
answer period that lasted until no further questions were raised from
the
floor. The following is not intended to be a complete recital of
those
questions and answers, but simply a partial summary of some of the
topics that
were the subject of extended discussion.
Investor Communications
The initial topic discussed was the Company's plans to improve
its
communications with stockholders and the investment community. Mr.
Richards
indicated that the Company intends to resurrect its former policy of
a
quarterly message from the CEO, contemporaneous with the release of
required
quarterly financial information in the 10-Q. The Company plans to
re-institute this practice with the next 10-Q. Instead of a mailing,
which
was the previous practice, this message will be posted on the
Company's web
site. In response to a question regarding analyst coverage, Mr.
Stuart, the
Company's Chief Financial Officer, pointed out that the Company
probably would
have to achieve status roughly equivalent to that of a Nasdaq
National Market
System company before it could expect to achieve "street" analyst
coverage.
The principal criterion that the Company presently lacks in that
respect is
its stock price. Many street analysts require a sustained price in
excess of
$5 per share to institute coverage.
Financings
There was a discussion about the Company's practice of financing
through
private placements rather than rights offerings to existing
stockholders. The
cost and time of conducting a rights offering for the 20,000
stockholders of
Irvine Sensors -- in effect a public offering -- were discussed.
Questions
were raised as to the vulnerability of the stock to "shorting" during
private
financings. It was pointed out that similar vulnerability existed in
public
offerings, and potentially for much longer periods of time. The
Company's
present preference is for private placements until a period of less
volatility
in the Company's stock price is foreseeable. When asked if other
factors
might influence this preference, it was noted that the financing of
iNetWorks,
because of its scale and desired valuation, could materially change
market
perspectives and might expand financing options available to the
Company.
Future Product Developments
Questions were raised about various other product development
activities
of the Company that had been mentioned in prior press releases or
disclosures
at one time or another. One such potential product that evoked
extended
discussion was the "smart band-aid" that potentially utilizes the
Company's
chip thinning and related technologies for future bio-medical
monitors. The
Company's strategic planning activity has identified this potential
as one of
the most promising for future exploitation and preliminary business
plans are
in preparation. There was also discussion of the "wearable computer"
initiative previously started under Government contract. Although
the
progress against this initiative was slowed by cancellation of the
Boeing
prime contract, the Government's interest in this goal continues and
is
expected to emerge under other programs. In the meantime, the
progress made
on the Neo-Stacking(TM) technology under the original contract was
instrumental in establishing a technology base usable by the
iNetWorks
initiative. There was also discussion of the Company's Silicon
Brain(TM)
initiative that is driving the evolution of much of the Company's
technology
and is expected to be a source of a wide variety of potential future
products.
John Carson, the Company's Chief Technical Officer, noted that the
Company
continues to make progress against this initiative and is
increasingly
attracting Government sponsorship to the concept. However, in the
context of
all these discussions, it was also noted that kicking off any new
initiatives
in the near term would be dependent upon financing and further
progress on the
initiatives already underway.
Except for historical information contained herein, the matters
set forth
in this summary report are forward-looking statements that are
dependent on
risks and uncertainties including such factors, among others, as the
market
risks associated with new products, the impact of competitive
technologies and
the pace at which new markets develop. Further information on Irvine
Sensors
Corporation and all its subsidiaries is contained in publicly filed
disclosures available through the SEC's EDGAR database (www.sec.gov)
or from
the Company's Investor Relations.
SOURCE Irvine Sensors Corporation
-0- 03/18/2001
/PRNewswire -- March 18/
/Web site: irvine-sensors.com
(IRSN) |
