THE CLEANTECH INVESTOR FORUM 2011 Infrared Applications Inc. Session 1 The Four Seasons Hotel Palo Alto, California March 7 & 8, 2011

Infrared Applications Inc. “Turn off the Lights, Turn on the Security” Gary L. Bane & Gary E. Ball March 7, 2011 Presentation On line:

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: 21 st 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 Requirements 1.Detect security threat 2.Verify 3.Provide actionable intelligence 4.Operational communication 5.Update the event 6.Document the incident 7.No false alarms 8.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

HarmAlarm Architecture US 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 alarm1/100 Camera B false alarm1/100 Occurring in common area 1/100 Independent Size matching1/100 3 D “single look” combined probability 1 in 10 7 Tracked over time 1/10 False Alarm probability 1 in 100 Million If Camera A was a single camera security system the false alarm rate would be 1 in 100 HarmAlarm 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 R2 R1 Known Set-up value Cameras Position & target Location Range 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 angle o )/ (Sin (180 o – {camera B angle o } – {camera A angle o }) R2 = (Distance Between Cameras) x Sin (camera A angle o )/ (Sin (180 o – {camera B angle o } – {camera A angle o }) Color coding is matched to HarmAlarm Geometry relationships

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 Base Synergism: 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 Information Situation 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

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) Total Production Development OEM Income Product (Sell or Lease) Wireless fees Cash Flow ,050 Accumulative ,050 Profit Margins: Hardware 15% & Wireless 70%

Summary

Point of Convergence The Market factors have changed since 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, 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?

Disclaimer The 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.