ARKA LightsHigh Performance LED Technology

Higher lumen intensity with a longer lifeenabled by novel thermal dissipation technology.

Replacement of current high lumen incandescent bulbs with LED equivalents without light quality/output compromises.

Offer a novel thermal dissipation technologymodule that can be used in different LED productfamilies

1

Week 5 Canvas

FOCUS

Revenue Model

Arka Lights

•Thermal Management Module

OEMs

•LED, Drivers, Lens

Distributors

Contractor

Project/Owner

•Institutions, Commercial,

Industrial, High end Residential,

Other Components

Architect/

Designer/ Engineer

We plan to sell high performance thermal management modules for use by OEMs in their fixtures/lamps

Product Variations

• The thermal management module has to be packaged to fit different form factors.

• Currently, emphasis is being placed on PAR38 for the prototype. – Feedback from OEM discussions

suggests that this is a good firstproduct target

– Expansion to other form factors can be readily achieved

• Opportunity exists because:– Heat Pipe solutions are not widely

used in LED lighting because of:• Perceived high cost• Difficulty in defining as a modular

component

CompetitorsNuventix active cooling

- piezoelectric diaphragm

Solais active cooling- microchip cooling fan

LSG (Lighting Science Group)

passive cooling- cast aluminum heat sink

Example of Sales Material

• Thermal Management Solutions have multiple product form factors/features to fit into different LED luminaires and fixtures.

Nuventix Active Cooling Solutions

Key Financial Metrics

Price per module (defined by amount of heat transfer i.e 5W, 10W, 20W solution and size)

Cost per module is beyond just $/unit, other key factors include:

Flexibility of proposed solutionScalability of solution (Platformability of the module)

Time to market (design, test, commercialize)

Product Pricing

• Pricing is primarily dependent upon:

– how much performance benefit we can offer

– Ease (from a design/incorporation perspective) for the customer to ‘plug&play’ into their lamp design

• Feedback from OEMs suggests:

– For ~15% to 20% improvement in performance, OEMs will be willing to pay ~$1.50 to $5.00 per unit depending upon design flexibility and solution scalability

COST PER UNIT• Thermal Management Module Components (Pricing

for 500 units):– Enhanced boiling vapor chamber

• Material – Aluminum casing $0.20• Manufacturing (Casting & finishing) - $0.25• Enhanced surface (stamping) - $ 0.50

– Tubes and fins• Material – Aluminum tubing & fins $0.35• Manufacturing – $0.20

– Assembly• Cost $ 1.25

– Total Cost for each module $2.75

• OEM price point– Between $4 - $5

Proforma Profit and Loss Statement

Three Year StatementYear 1 Year 2 Year 3

Net Sales of Product $1,250,000 $2,250,000 $4,000,000# of units $250,000 $500,000 $1,000,000

$ per unit 5 4.5 4

Cost of Goods Sold - # of units $250,000 $500,000 $1,000,000

Cost per module ($/unit) 2.75 2.5 2

Packaging and Shipping ($/unit) 0.25 0.25 0.25

Cost of Goods Sold $750,000 $1,375,000 $2,250,000Gross Profit $500,000 $875,000 $1,750,000

Operating Expenses $120,000 $130,000 $140,000Administration + Rent + Utilities $60,000 $66,000 $72,000Personnel Costs $600,000 $650,000 $750,000Legal (Corporate and Patent) $40,000 $50,000 $60,000Certifications $100,000 $50,000 $50,000Software licenses + Consulting expenses $100,000 $50,000 $50,000Total Operating Expenses $900,000 $866,000 $982,000

Operating Profit -$400,000 $9,000 $768,000Other Income (Consulting, Prototyping) $0 $0 $0Total Income Before Tax -$400,000 $9,000 $768,000Tax ReserveNet Income (Loss) -$400,000 $9,000 $768,000

Life Time Value

• ~26 different categories of lighting each with several different types of lamps

• Large OEMs carry entire line of luminaires & replacement lamps – Customers like ‘one-stop-shopping’

• Assumption that our product module will find application across multiple products in each category

• Actual details that permit numerical calculations are TBD and will be completed after initial prototyping/costing.

Risks

• The solution needs customization for every customer/application i.e non-scalable.

• The solution has limitations in how/where it can be used.

• Standards get defined that preclude the use of heat pipe solutions.

• Heat management is no longer critical in LED lighting products as breakthroughs are achieved in LED power conversion efficiency.

Interviews - Key Learning

• NYPA incentive systems are available to institutional customers. They are essentially loans that incentivize the adoption of energy efficient solutions.

• Institutional consumers are very receptive to trade publications in their field of work and are more inclined to act on information in articles than advertising.

• OEMs continue to express interest in exploring our product as an alternative solution to existing products if we can deliver on our value proposition at competitive prices.

• Generic prices for Heat Pipes range from $0.80 to $5depending on the volume and type of heat pipe.

Appendix

Prototype Development (Progress)STEPS OPERATION STATUS

1 Demonstrate that enhanced surface is superior (from a heat transfer perspective) to straight copper

2 Demonstrate that the heat transfer performance of the enhanced-surface heat pipe exceeds that of conventional heat pipes

Fabrication :

Testing : In progress

3 Assemble an LED chip onto an enhanced heat pipe (a) for the same driving current, the

junction temp of the LED is lower in the case of the enhanced heat pipe

(b) for the same junction temp, the enhanced heat pipe-based LED produces more light

In progress

Demand Creation – Product Factors

• Demonstration of superior thermal management at competitive cost (compared to existing solutions)

• Availability of form-specific product variants

• Availability of product specific modules

• Ease-of-use

Marketing

• Consumers (institutional buyers) showed a preference for conferences and trade shows in their specific field (facilities management, building contractors etc) and trade magazine articles over new product salespersons.

• OEMS can be readily approached through a sales team.

• Additional marketing efforts can be made through trade publications, shows and websites.

Marketing to date

• Four OEMs have been approached as a part of this program.

• Initial responses from all have been enthusiastic. – Demonstration of proof-of-concept is gating factor

to active engagement

• Follow up discussions will be conducted after prototype demonstration and supporting test data is collected.

Customer Acquisition Cost

• Cost of demand creation:Development team : 4 FTE * $100K = $400K/yearSales and Marketing: 1.5 FTE * $130K = $200K/yrOperations: 0.2 * people cost = 0.2*$600K = $120K/year

• Other costs (certifications, consulting, legal etc.) = $180K/year

• Total cost/year = ~$900K.

• Time to first revenues = 18 months– Sales cycle after first customer ~9-12 mths

• Customer Acquisition costs include cost of relevant prototype development and certification costs.

Replace or Extend Revenue Channel

• This technology has the potential to replace the current revenue channel.

• However, given the number of producers, variants and cost options, this might extend (augment) the revenue channel.

Cost of Channel

• The thermal module will be designed to adhere to certain form factor specifications.

• Cost of channel will depend upon the type of product being sold (prototyping, sourcing and routing product through Arka Lighting, or, Arka Lighting creating a manufacturing/assembling unit).

• Channel might be:– Supplier (Heat Pipe) – Arka Lights – OEMs – Distribution

Network

– Arka Lights (Manufacturers Heat Pipes)– OEMs –Distribution Network