Business Plan Presentation Mobius Microsystems Inc E. Jefferson Ave. #140 Detroit, MI Deloitte & Touche Business Plan Competition Columbus, Ohio May 16 th, 2003

2 2 Overview Pain and Solution Technology and Product Management Team Industry and Market Competition Marketing and Sales Strategy Financials FINANCIALSMANAGEMENTMARKETCOMPETITIONSTRATEGYTECHNOLOGYPAIN&SOLUTION

3 3 The Problem: Disparate Systems Electronic products currently require assembly of many discrete components Printed Circuit Board Digital Microprocessor Memory Mixed-Signal Circuits Mechanical Sensor Crystal Oscillator Analog Circuits FINANCIALSMANAGEMENTMARKETCOMPETITIONSTRATEGYTECHNOLOGYPAIN&SOLUTION

4 4 The Pain These systems are: Expensive: package costs Large: package sizes Power-hungry: signal across board requires 10x power Limited in functionality: size and power constraints FINANCIALSMANAGEMENTMARKETCOMPETITIONSTRATEGYTECHNOLOGYPAIN&SOLUTION

5 5 PCB The Solution: Mobius Microsystems Microsystems are intelligent miniaturized systems comprising sensing, processing, and actuating functions integrated onto a single chip. They are smaller, cheaper, lower power, simpler, more reliable, and more functional. Printed Circuit Board Digital Microprocessor Memory Mixed-Signal Circuits Mechanical Sensor Crystal Oscillator Analog Circuits FINANCIALSMANAGEMENTMARKETCOMPETITIONSTRATEGYTECHNOLOGYPAIN&SOLUTION

6 6 The Solution: Mobius Microsystems The vision for our products: Enable electronic system developers to produce less expensive, smaller, more functional, and more reliable products that consume less power. The vision for our customers: Reap orders of magnitude improvements in the products they build and lead their industries in end-product performance, functionality, and value. FINANCIALSMANAGEMENTMARKETCOMPETITIONSTRATEGYTECHNOLOGYPAIN&SOLUTION

7 7 PCB Starting with the Clock Printed Circuit Board Digital Microprocessor Memory Mixed-Signal Circuits Mechanical Sensor Crystal Oscillator Analog Circuits FINANCIALSMANAGEMENTMARKETCOMPETITIONSTRATEGYTECHNOLOGYPAIN&SOLUTION

8 8 The Clock is as Fundamental as Power Every single synchronous semiconductor produced requires a clock to operate Clock frequency signal drives processor inside f clk Pocket PC FINANCIALSMANAGEMENTMARKETCOMPETITIONSTRATEGYTECHNOLOGYPAIN&SOLUTION

9 9 State of the Art vs. Mobius “DMC” Mobius“Digital Monolithic Clock” Existing Clock Solutions Crystal-based Large off-chip component Fixed frequency Power-hungry Expensive Mobius DMC MEMS-based Microscopic on-chip Tunable frequency Low-power Inexpensive vs. Crystal Electronics 4 Mobius DMCs State of the Art vs. FINANCIALSMANAGEMENTMARKETCOMPETITIONSTRATEGYTECHNOLOGYPAIN&SOLUTION

10 The Mobius DMC in Action… Example: iPAQ PDAUsing Current TechnologyUsing Mobius’ Technology Clock Hardware Costs~$1.00~$0.45 Clock Space Requirements323mm 2 on circuit board0.09mm 2 on semiconductor Clock Power Requirements32mW4mW Tuning RangeFixed (w/o add. electronics)62.5MHz to 1GHz What Mobius can do for Compaq Reduce total cost Increase functionality Increase battery life COMPAQ Pocket PC FINANCIALSMANAGEMENTMARKETCOMPETITIONSTRATEGYTECHNOLOGYPAIN&SOLUTION

11 Packaged Semiconductor Semiconductor Design Blueprint Semiconductor Intellectual Property Manufacturing handled by customer Low COGS Like a software company Successful business model: ARM, MIPS, Parthus Mobius’ DMC IP FINANCIALSMANAGEMENTMARKETCOMPETITIONSTRATEGYTECHNOLOGYPAIN&SOLUTION

12 Management Team Michael S. McCorquodale, CEO and CTO Invented technology while electrical engineering Doctoral Fellow, U of Michigan Commercial semiconductor experience with Hughes Space and Communications Jeffrey G. Wilkins, COO MBA 2003, U of Michigan Business development and start-up experience, Huntington Bank and Velocys Inc Christopher A. Cooke, VP Business Development MBA 2003, OSU Fisher College of Business 9 years high-tech sales and marketing experience with CheckFree, Metatec, Digital River James E. Vincke, CFO M.S.E., MBA, U of Michigan 23 years in start-up, executive management, Mechanical Dynamics Inc Fund raising, acquisitions, international expansion, rapid growth FINANCIALSMANAGEMENTMARKETCOMPETITIONSTRATEGYTECHNOLOGYPAIN&SOLUTION

13 Industry and Market Overview Semiconductor industry: $141B (2002) –CAGR: 8% –Cyclical, mature SoC Market: $32B (2002) –Growing 25% to 30% –Leading innovators: Motorola, Intel, Sony FINANCIALSMANAGEMENTMARKETCOMPETITIONSTRATEGYTECHNOLOGYPAIN&SOLUTION

14 System-on-Chip Explained SoC’s combine a processing core, memory, and logic on a single chip Microprocessor Core Communications Clock Sensor Analog Front End Memory Other Subsystems Printed Circuit Board (PCB) FINANCIALSMANAGEMENTMARKETCOMPETITIONSTRATEGYTECHNOLOGYPAIN&SOLUTION SoC SoC with microprocessor, memory, and communications Clock Sensor Analog Front End Other Subsystems PCB

15 Why SoC? SoC’s Market Dynamics and Needs Broad range of end products and markets Medium to high volume Fast design cycles to meet product windows Every SoC uses some IP Comfort with IP and IP companies Fabrication facilities (TSMC, IBM) FINANCIALSMANAGEMENTMARKETCOMPETITIONSTRATEGYTECHNOLOGYPAIN&SOLUTION

16 First Addressable Market Clock generation for SoC SoC: $32 Billion or $20/unit) 1.6 Billion units/yr Each unit now requires at least $1 for clock generation Mobius’ DMC average selling price of $0.45/unit –1.6 Billion units x $0.45 per DMC = First addressable market size: $720 Million In Revenue FINANCIALSMANAGEMENTMARKETCOMPETITIONSTRATEGYTECHNOLOGYPAIN&SOLUTION

17 Competition Competitive landscape: 3 kinds of competitors Discrete Clock Manufacturers –Epson Integrated Clock Manufacturers –Altera Hybrid Clock Manufacturers –Toyocom + Texas Instruments Currently there is NO solution for clock generation that is able to meet all of the needs of the market. FINANCIALSMANAGEMENTMARKETCOMPETITIONSTRATEGYTECHNOLOGYPAIN&SOLUTION

18 Mobius’ Competitive Advantage Patent-protected intellectual property portfolio Microsystems development trade secrets → 6 to 18 month design cycle advantage Industrial membership and “first-look” licensing rights from only Microsystems Engineering Research Center in U.S. FINANCIALSMANAGEMENTMARKETCOMPETITIONSTRATEGYTECHNOLOGYPAIN&SOLUTION

19 Marketing and Sales Strategy Goal: De-facto standard in clock generation for SoC Step 1: Create awareness and “buzz” –Existing relationships –Conferences, tradeshows, competitions Step 2: Direct and indirect sales effort –Founders, contracted technical sales representatives, and channel partners –Start with specific existing relationships FINANCIALSMANAGEMENTMARKETCOMPETITIONSTRATEGYTECHNOLOGYPAIN&SOLUTION

20 Direct Sales Effort for Design Win IP Partnership Effort Marketing and Sales Tactics FINANCIALSMANAGEMENTMARKETCOMPETITIONSTRATEGYTECHNOLOGYPAIN&SOLUTION Compaq Pocket PC End Customer Intel Packaged SoC with Mobius DMC End customer with better product NEW Pocket PC Compaq: Better products Intel: More profit per chip TSMC: Higher utilization TSMC Fabrication Influence Compaq

21 Business System Revenue Model Design License –Tiered $100,000 to $300,000 (low to high volume) Royalty –Tiered $0.50 to $0.15 per unit (low to high volume) Annual Support & Maintenance Contract –15% of initial license annually Services –Design services for customers FINANCIALSMANAGEMENTMARKETCOMPETITIONSTRATEGYTECHNOLOGYPAIN&SOLUTION

22 Financials Revenue, Net Income, and Cash Flow from Operations FINANCIALSMANAGEMENTMARKETCOMPETITIONSTRATEGYTECHNOLOGYPAIN&SOLUTION

23 Investment Opportunities FINANCIALSMANAGEMENTMARKETCOMPETITIONSTRATEGYTECHNOLOGYPAIN&SOLUTION Founder’s Round 1 st Round2 nd Round Size $110k$500k Time Q1/03Q3/ Uses Commercialization Hire Marketing and Sales Director and Microsystems Engineer Establish IP Partnerships Hire Sales Person in Munich, Germany Continue to Develop Engineering and Sales Team Milestone Secure First Sale5 Reference Customers 3 International Reference Customers

24 Why Invest? $720 million first addressable market Truly compelling, protected IP Committed and experienced management team Small investment required for high return potential

25 PCB Follow-On Technologies Printed Circuit Board Digital Microprocessor Memory Mixed-Signal Circuits Mechanical Sensor Crystal Oscillator Analog Circuits FINANCIALSMANAGEMENTMARKETCOMPETITIONSTRATEGYTECHNOLOGYPAIN&SOLUTION

26 Follow-On Technologies Mobius 16-bit Microsystem The most highly integrated microsystem developed to date Winner of the industry reviewed DAC/ISSCC International Design Competition Specific Technologies for Commercialization DMC Mobius initial technology Analog Front End (AFE) Converts wide variety of sensor signals (i.e. pressure, temp, etc.) to digital format 16-bit Low-power Microprocessor Core Ideal for portable applications FINANCIALSMANAGEMENTMARKETCOMPETITIONSTRATEGYTECHNOLOGYPAIN&SOLUTION Die micrograph of the fabricated microsystem (Manufactured by TSMC)

27 Direct Sales Effort for Design Win IP Sales Channel IP Partnership Effort IP Partnership Effort Marketing and Sales Tactics FINANCIALSMANAGEMENTMARKETCOMPETITIONSTRATEGYTECHNOLOGYPAIN&SOLUTION Compaq Pocket PC End Customer Intel Packaged SoC with Mobius DMC End customer with better product NEW Pocket PC Compaq: Better products Intel: More profit per chip TSMC: Higher utilization Cadence: Stronger relationships Cadence TSMC Fabrication Design Support Influence Compaq

28 Investment Opportunity After first sale, $2.5M pre-money valuation $500K ~ 17% ownership 4x revenue exit in 2007 = 27x ROI

29 Existing Relationships Semiconductor Chip and Fabrication Companies National Semiconductor: Funded Michael’s DMC research IBM Micro: Prototyped technology through collaborative research Motorola: Sensor Prod. Div. interested in Mobius clock for sensor chips Design Support (IP Sales Channel) Cadence GmbH: Interested in selling Mobius IP to customers they support ARM: Research colleagues interested in Mobius clock + ARM core Semiconductor Fabrication Companies (IP Partner and Sales Channel) Taiwan Semiconductor: Prototyped technology through collaborative research MOSIS: Prototyped technology through collaborative research FINANCIALSMANAGEMENTMARKETCOMPETITIONSTRATEGYTECHNOLOGYPAIN&SOLUTION

30 Electronic System Design Cycle Influence FINANCIALSMANAGEMENTMARKETCOMPETITIONSTRATEGYTECHNOLOGYPAIN&SOLUTION Production No re-design cost Mobius targets new designs only Prototype Concept Design Evaluation Clock design redundancy to encourage adoption System functionally independent of Mobius IP Reduces perceived customer risk

31 Initial Target Customer Profile IntelNationalMotorola SoC cost ≤ $10-20 System COGS ≤ $50 Volume ~ 1M units SoC Product ApplicationPDA Disk drive Cell phone System Design WinCompaqSeagateMotorola

32 Financials Financial Highlights Similar to software company First customer contract and revenue in 2003 Cash flow positive and profitable in 2005 Initial product R&D completed, only commercialization effort required for product sales introduction FINANCIALSMANAGEMENTMARKETCOMPETITIONSTRATEGYTECHNOLOGYPAIN&SOLUTION