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Operator

Good day, everyone, and welcome to the Advanced Photonix 2015 Third Quarter Earnings Conference Call. Today's conference is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to Mr. Jeff Anderson, Advanced Photonix CFO. Please go ahead, sir.

Jeffrey Anderson

Thank you, Laura. Before we get started, I want to remind listeners that this conference call will contain forward-looking statements, which involve known and unknown risks and uncertainties about the company's business and the economy and other factors that may cause actual results to differ materially from our expected achievements and anticipated results, including unforeseen technological obstacles, which may prevent or slow the development and/or manufacture of new products; problems with the integration of acquired companies and technology; and possible inability to achieve expected synergies; and limited or slower-than-anticipated customer acceptance of new products, which have been and are being developed by the company. Please see our press release of today and our periodic reports filed with the SEC for a fuller statement of such risk factors. Given these uncertainties, listeners are cautioned not to place undue reliance on any forward-looking statement contained in this conference call. The forward-looking information given during the conference call represents management's expectations and beliefs as at the date hereof. The continued availability of this teleconference on the Internet or through other media consolidation of the non-GAAP financial measures to the company’s GAAP based financial statements are included in the company’s third quarter earnings, press release today and are available on our website at www.advancedphotonix.com On today's call, I will briefly review a few financial highlights from our third quarter 2015 fiscal year. And then I'll turn the call over to Rob Risser, COO, for an update on business activities. We'll pass the call on to Richard Kurtz, CEO, for closing remarks. Our revenues for the quarter ended December 26, 2014 were $5.8 million, a decrease of 22% or $1.6 million from revenues of $7.4 million for the quarter ended December 27, 2013. On a year-to-date basis, our revenues were $21.3 million, a decrease of $807,000 or 4% from revenues of $22.1 million for the 9 months ended December 27, 2013. Sequentially, revenues decreased 25% or $2 million from the quarter ended September 26, 2014. We experienced revenue increases in our Mil/Aero and Medical markets for the quarter and revenue increases in our Mil/Aero and Telecom market for the 9 months ending December 26, 2014, when compared to the prior year periods. The Test and Measurement market revenue was approximately $3.8 million and $13 million in the third quarter and the first nine months of fiscal 2015 respectively, a decrease of $1.4 million over each of the related prior year periods. In the third quarter of fiscal 2015, Comtest customers significantly reduced the purchases relative to the last year comparable quarter and the second quarter of fiscal 2015 as major carriers pushed out capital spending in their infrastructure to direct some of the cash savings to finance significant merger and acquisition activity. These conditions appear to have also dampened the outlook for our March quarter. Telecommunication revenues in the third quarter and nine months of fiscal 2015 were $771,000 and $5.2 million, respectively, a decrease of 54% from the prior year three months and an increase of 11% for the prior year nine month period. The lower three month revenue was primarily due to major carriers pushing out 100 gig capital spend in their infrastructures to direct some of the cash savings to finance significant merger and acquisition activity. From our second quarter of fiscal 2015 to the third quarter of fiscal 2015 we saw a $1.2 million drop in telecom sales, due mostly because of the timing and deliveries for 100 gig customers. We expect the 100 gig market to rebound starting late in our March quarter. These conditions have caused us to lower our outlook for the March quarter and as noted later for the full year. Military/Aerospace market revenues in third quarter and the first nine months of fiscal 2015 were $905,000 and $2.4 million, respectively, an increase of 106% from the comparable prior year third quarter and an 8% decrease over the prior year nine month activity. The third quarter improved by 9% over the second quarter of 2015. This is predominantly due to long lived Optosolutions military missile programs that we have ramped up recently relative to prior periods. Medical revenues in the third quarter and first nine months of fiscal 2015 were $306,000 and $749,000, respectively, a $178,000 increase and $163,000 decrease from prior year periods. These fluctuations in revenue are mainly due to the timing of shipments related to one customer. Given the pause in government spending experienced in the quarter that delayed expected Terahertz contract awards in the current capital spending approach in major carriers, we have revised our forecast in fiscal year 2015 revenues to be down by approximately 5% relative to the prior year. The proposed merger is expected to provide the liquidity needs for us to execute our growth plans over the next year. If the merger is not approved by our stockholders or does not proceed in a timely closing and projected revenue increases do not occur as forecast, then we may need to seek additional funding sources to meet our obligations. Gross profit for the third quarter of fiscal 2015 was $1.9 million similar to the third quarter of fiscal 2014, as the effect of the drop in volume in the current year’s quarter was offset by the absence of $652,000 in restructuring cost incurred in last year’s third quarter. Year-to-date gross profit was $7.4 million down from $7.6 million in the first nine months of fiscal 2014. The lower gross profit dollars have been driven by the decline in Terahertz contract revenue. Gross profit percentage was 32% for the third quarter of fiscal 2015 compared to 25% in the third quarter of fiscal 2014, and 34% in the second quarter of fiscal 2015. The fiscal 2015 third quarter gross margin rate improved year-over-year, given the absence of the silicon allocation shutdown cost incurred in fiscal 2014, but declined sequentially given the large decline in HSOR volume in the quarter. Total operating expenses for the quarter and first nine months of fiscal 2015 were $2.6 million and $8.5 million, a decrease of $624,000 and $1.5 million respectively over the comparable fiscal 2014 periods. Total operating expenses for the third quarter of fiscal 2015 decreased by $321,000, when compared to the second quarter of fiscal 2015 operating expenses. Operating expenses in all categories have been trending below our breakeven point. The non-cash expense in the stock options and restricted stock grants, included in operating expenses was $15,000 and $52,000 for the 6 and 9 month period ended December 26, 2014 compared to $40,000 and $110,000 for the 3 and 9 month periods ended December 27, 2013. And stock awards have been limited over the past year. In the other income or expense section we did experience a change in the warrant liability that caused income of $140,000 for the current quarter and $231,000 for the nine months ended December 26, 2014, which is in contrast of expense of $124,000 and $213,000 in the prior year three and nine month periods. We realized a net loss for the third quarter of fiscal 2015 of $701,000 or $0.02 per share as compared to a net loss of $1,618,000 or $0.05 per share in the third quarter of fiscal 2014. For the nine months ended in December 2014 we realized a net loss of $1,337,000 or $0.04 per share relative to net loss of $3,121,000 or $0.10 per share in the prior year. The improvement is the result of reduced operating expenses and favorable warrant liability adjustments for the comparable periods. On a non-GAAP basis for the nine months ended in December this year we experienced a $0.02 loss versus a $0.04 loss last year, again largely due to operating expense reductions achieved in the current year. At December 26, 2014 we had cash and cash equivalents of $110,000 a decrease of $10,000 from the March 31, 2014 balance, the lower balance for the nine month period is attributable to cash used in operating activities of $1.2 million. Cash used in investing activities of $348,000 and cash provided by financing activities of $1.5 million. Given the minimal cash on hand we are dependent on our line of credit with Silicon Valley Bank in order to maintain our liquidity and compliance with our debt covenants so that lenders do not demand payment on our existing debt outstanding. As of December 26, 2014 we were in compliance with the required liquidity and adjusted EBITDA covenant with our lenders; however we experienced a $2.1 million reduction in HSOR revenues in the third quarter relative to the second quarter which is more than anticipated in the November 2014 when we last reset our covenants with our major lenders. As a result, we sought and on February 05, 2015 obtained further covenant relief from our vendors by reducing our growing six month adjusted EBITDA requirement for January through June 2015 through a negative $1,250,000, $1 of adjusted EBITDA required in July 2015 and $100,000 each month thereafter until maturity with up to $150,000 in transaction cost carved out of a calculation. The party has also agreed to reduce the minimum liquidity ratio to $1.3 to $1 from January 2015 until the maturity of each party’s respective debt. The proposed merger is expected to provide liquidity needed for us to execute our growth plans after the merger. If the merger is not approved by our stockholder or it doesn’t know how to proceed in timely closing and the projected revenue increases do not occur as forecast, then we may need to seek additional funding sources to meet our obligations which would include the alternatives of raising our capital, restructuring and existing debt or exploring strategic options which could include the sale of a portion for all of our product lines. I would now like to turn the call over to our COO, Rob Risser.

Robin Risser

Thank you, Jeff. Good afternoon, everyone, and thank you for joining us on the call today. We have a lot to discuss this afternoon. I’ll briefly take a look in the rear view mirror and summarize last quarter’s operating results by product platform, then turn forward to look at what lies ahead and then finally I’ll comment on some of the key aspects of our recently announced proposed merger with Luna innovations. This is more fully discussed in the form S-4 and showing proxy statement filed earlier today. Our third quarter showed an adjusted EBITDA loss of $436,000 reversing the positive EBITDA of the first half of the year. Year-to-date adjusted EBITDA has a loss of $95,000. With positive results posted in both our Optosolutions and High-Speed Optical Receiver products platforms year-to-date offset by investment and negative EBTIDA and our Terahertz product platform. As we indicated in our second quarter earnings call, our HSOR product platform slowed down significantly in our third quarter in both the transmission and Comtest markets. This slowdown resulted from delayed infrastructure capital expenditures by Verizon and AT&T due to unusually large acquisitions including the most recent purchase of wireless spectrum from the FCC and a delayed 100 gig product ramp from a large Chinese customer. In addition, while our Terahertz product platform is continuing to gain traction in the process and quality control markets, it finished behind plan for the quarter and year-to-date due to slower customer adoption than anticipated and the delay of a large F-35 government contract expected to start in our third quarter which slipped through our fourth quarter. We see the HSOR product platform improving during the second half of our fourth quarter on the strength of our two recently announced successful 100 gig negotiations with our European and Chinese customers. Our Optosolutions product platform holding steady in Q4 with continued strength in the military market offsetting weakness in the high [ph] end implement market. And our Terahertz product platform improving as a result of the start of our recently announced F-35 development contract. Looking forward we see stable performance in our Optosolutions product platform as we enter fiscal 2016. The return to growth in our High-Speed Optical Receiver products platform and continued progress towards market adoption of our Terahertz product platform, supported by application development funded by product sales and development contracts. HSOR growth would be driven by the continued 100-gig infrastructure investment in the long haul. The acceleration of carrier 100-gig investment in the metro infrastructure build out, the ramping of the 100-gig Comtest market as data centers begin investing in 4 by 25 gigabit per second modulation speed to support cloud computing. And finally, our hands free into the growing Fiber-to-the-Home and curved market, especially in China. The High-Speed Optical Receiver market is growing and it requires significant investment in product development to satisfy the evolving market opportunities for ever increasing bandwidth necessary to deliver High definition video anytime, anywhere. In that regard, we plan several new product releases in fiscal 2016 including the next generation 100-gig coherent receiver which is generation 1.2, target at the 100-git metro and long haul markets. The next generation of our proprietary Broadway’s linked Comtest product, the PT28B targeted at 100-gig datacenter market, and the introduction of our proprietary Avalanche Photodiodes to the 2.5 gigabyte and 10 gigabyte per second Fiber-to-the-Home market. We will attend three large tradeshows in our fourth quarter, Photonic’s West, the International Converting Exposition or ICE and the Optical Fiber Conference or OFC. Our Optosolutions product platform will be exhibiting this week at the Photonics West show in San Francisco, California. And among other products we’ll be demonstrating their Tunable Light Source technology platform at the show. Our Terahertz products will also exhibited at our Photonics West targeting the laboratory and research market. This week we will also be exhibiting our Terahertz process control products with our value added resellers in Orlando, Florida at ICE. March 24th through the 26th we will be exhibiting our High-Speed Optical Receiver product platform at OFC in Los Angeles. In conjunction with OFC we will also be sponsoring the Executive Forum held on Monday before the conference for our sixth consecutive year. As we had reiterated in past updates, investment in new product development is critical to building shareholder value by achieving top line growth leading to bottom line profitability eventually. This is highlighted by the fact that revenue from products introduced in the last two years accounted for more 35% of revenue in the quarter and 41% year to-date. We continue to focus product development primarily in High-Speed Optical Receiver products and Terahertz’s applications. In summary, our third quarter revenue and adjusted EBITDA experienced a setback during the quarter due primarily to the slowdown in our High-Speed Optical Receiver product platform. Year to-date adjusted EBITDA is negative $95,000 with positive contributions from our Optosolutions and HSOR product platforms, providing resources to support technology and market development in our Terahertz’s product platform. We see the fourth quarter improving relative to the third quarter based on an improving HSOR CapEx environment and improved Terahertz’s revenues due to the start of the F-35 development contract. I’d like now to turn my attention to summarizing the recent purposed merger with Luna technologies. We’re excited about the anticipated positive impact for the combined company, its employees and our shareholders. I would encourage each of you to read the S-4 file today providing the details of the proposed merger. I will summarize few of the highlights of the proposed merger. Luna is Virginia-based Company traded on NASDAQ with corporate headquarters in Roanoke, Virginia. Manufacturing 40 mile south in Blacksburg near Virginia Tech and technology development located 120 miles north in Charlottesville located near the University of Virginia. It proposed by shareholders of both companies API shareholders will own 44% of the outstanding stock of the combined company’s outstanding shares based upon the agreed upon exchange ratio of 0.31782 shares of Luna common stock per each share of API common stock. Exchange ratio was result of extensive negotiations supported by evaluation analysis performed by B. Riley. As close of business on January 30, the date both Boards approved the proposed merger, API’s closing stock price was $0.33 per share and Luna’s was $1.68 per share. We agreed upon exchange ratio represented in equivalent API share price of $0.53 per share representing a 60% premium market at the close of business on January 30. The merger is structured to be a tax pre-exchange of API’s common stock for Luna’s common stock and upon shareholder approval of each company, API will become a wholly-owned subsidiary of Luna technologies. The combined company Board of Directors will consist of seven directors, six independent directors and the CEO of Luna, My Chung. The six independent directors will consist of three of Luna’s existing independent directors, with their current Chairman remaining the Chairman of the combined company. And three independent directors selected by API, including existing Director, Don Pastor and two new independent directors with strong industry background relevant to API’s markets. The new independent directors will be Gary Spiegel and Ed Coringrato. All existing API directors other than Don Pastor will not be involved in the combined entity as directors. Currently the Luna Board of Directors compensation is composed entirely of stock and stock options. Operationally, Steve Williamson and I will continue with API in our current capacities as CTO and COO respectively. The current Luna C suite of officers will continue in their respective positions and our CEO and CFO will not be part of the merged company once closed. We’re excited about the future potential of the combined company that will have approximately [$15] [ph] million trailing annual revenue with a strong balance sheet with significant cash coming from Luna’s balance sheet. An optical technology based product that served the telecommunication markets and the Non-Destructive Testing market. With this strong balance sheet combined with a significant savings that will be realized from the elimination of public company costs it will enable continued investment in our combined organic growth platforms of HSOR, Terahertz and Luna’s temperature and strain sensing instrumentation products. I’d now like to turn the call over to Rick. Rick?

Richard Kurtz

Thank you, Rob, and good afternoon everyone and thank you for joining us on the call today. Jeff has already reviewed the third quarter with you, and you heard that we have been hurt by external market conditions in both HSOR and Terahertz’s product lines. Rob has reviewed the overview of the proposed merger and the fourth quarter outlook. So I’m not going to dwell on the third quarter as I know that most of you are more interesting in hearing potential merger between API and Luna. Before I comment on that, I would like to review some past history. API went public in 1990 with technology that was design to provide a solid-state replacement for photomultiplier tubes. Total annual revenue from these initial products never reached the market potential that was originally envisioned, at its peak reaching $7 million a year, clearly an insufficient number to support a public company. So in 2005, a new board management team started to grow the business through acquisition and within five years nearly doubled stabilizing it in at $40 million a year, still too small to just by being public given the increasing regulatory burdens in the expense of public company status. We also need the growth driver business that would help API grow organically at a much faster rate than its existing product platform Optosolutions. The opportunity to acquire that type of business came with Picometrix and its HSOR product and recent Terahertz’s technology. We believe that the diversification of our product offering will provide help to stabilize our revenue base and provide a base for internal growth. Overall this proved are providing API with the growth from $21 million to $30 million in revenue after the merger of Picometrix. At the same time we’ve been severely whipped aside by market conditions, supply chain constraints, financial meltdowns and global economic conditions that have that were hard to predict. API includes significant losses in prior years and must continue to grow revenues to become profitable. At the time we have not have the necessary capital reserves to offset the revenue drops we experienced. This has created the cycle of seeking capital in a form of debt or equity over the past several years. The proposed mergers should help us overcome some of these historical problems most immediately and dramatically promises significant short term cost savings. The expense of being public company has increased dramatically and for API is now over $1 million annually. Merging with another company that is also public should results in a dramatic decrease in these aggregated costs. In addition the merger promises to achieve significant savings in the aggregate compensation cost incurred by the two companies. One CEO and CFO are expected to eliminate and the aggregate board cost substantially reduced. At the operational level the combined company is expected to realize over time meaningful selling and purchasing, manufacturing, sales and marketing expenses. Merging with the company that has a strong balance sheet should especially be helpful to API which has struggled to finance its own growth and the fact that Luna has complemented technology should permit cross-selling to provide other ways to leverage the existing customer base of each company. These are some of the principle reasons. The management of API is existed about the transaction and while we urged our shareholders to vote in favor of the merger. On behalf of the team we appreciate your continued support. And we now like to open up this call for your questions.

Operator

Thank you, sir. [Operator Instructions] And our first question will come from Randy Knutson. Please go ahead.

Randy Knutson

Good afternoon.

Robin Risser

Good afternoon, Randy.

Richard Kurtz

Hi, Randy.

Randy Knutson

Let me ask you about HSOR first, I know, we just announced two contracts, one with the European customer and one with the Chinese customer. I think I know probably who both of those are, but yes, there was talk about the problems that AT&T, Verizon had experienced and I’m wondering do we see anything on the horizon developing any customers that are going to be primarily U.S. based in HSOR?

Robin Risser

Hi, Randy, this is Rob. We have seen the HSOR product platform start gaining traction and beginning to return to normal. So we don’t – we think that those influences on deferred CapEx is starting to loosen up, and we see that primarily through our European OEM, and then – which was one of the product announcements that we had. And the other one is a significant ramps that’s going up and we’ll begin our first shipments in March with the China based OEM. So actually we’re entering fiscal 2016 with the largest commitment we’ve had in our 100-gig platform in the history of the company. So it’s picking back up again.

Randy Knutson

Very good. Let me just ask you about the two new directors. If I could direct this to Rob, Rob did you know either of these two people at some earlier point in time, I mean, how were they gathered and selected, [indiscernible] on that?

Robin Risser

Well, the comp -- the governance committee basically is charged with the responsibility of getting directors. And each one of the directors gave some input and some suggestions for directors as well as outside investors. Gary Spiegel who is one of those directors both Steve Williamson and I have known for over 20 years and maybe longer than that. I don’t want to count that time frame. And so Gary is well versed in the industries that we’re in and the technologies that we’re in. He was the previously the Vice President of sales of Newport Corporation and then became the Senior Vice President of Business Development in the latter part of his career with Newport. So he helped grow Newport dramatically from the company that was when we first did a business deal with them to where Newport is now. Ed Coringrato is the former CEO of CyOptics. CyOptics was the Company that really kind of was where the remnants of the failed Alcatel-Lucent component business when the telecom meltdown occurred and of course there were lots of the tack-on acquisitions. Ed helped grow that company in the telecommunications and data communications market and eventually that CyOptics was sold to Avago a little more than a year ago. And so, Ed knows our business quite well in the telecommunications space. And so we enthusiastically have endorsed both of those candidates.

Randy Knutson

And then, did one of those individuals to your knowledge have any connection to the company known as Filtertek?

Robin Risser

No. Not to the best my knowledge. I don’t think either of them had any association with Filtertek.

Randy Knutson

Can you comment at all further on what the directors are going to be paid at Luna? I know you mentioned stock options. Are they going to paid any kind of a salary that you can comment on and maybe that’s [indiscernible]?

Robin Risser

In the S-4 I know that – in the S-4 it’s indicated that Luna would continue its Board of Directors compensation policies that it currently has. And those policies are that I believe there is $15,000 a year in compensation that could be taken in cash plus $120,000 stock options that granted on the election of each three-year term for a board member which kind of translated that vests over three years, which I believe translates into 40,000 options to purchase stock a year. I do know that Luna’s Board of Directors have all opted not to take their $15,000 in any cash, they’ve all taken those in restricted stock unit. And per the S-4 that is indicated that would continue to happen.

Randy Knutson

And then looking back in time, I know Rick mention the fact and any of you can answer this or none of you may want to take it. Rick mentioned the fact that API has been whipsawed side by a variety of factors over the years. The market crash and problems in – I know in Asia with a supplier at one point in time. I’m just wondering how much the current board salaries and fees have impacted or whipsawed us over the years?

Richard Kurtz

I think from my perspective Randy I guess this is what I would say that the current Board of Directors fees haven’t had that much of an impact. It’s been the drops in revenues that we’ve experienced. We’re not talking about just a couple. We’re talking whipsaws of $4 million, $5 million in revenue from year-to-year occasionally. So those are the major, much more major effects to our bottom line and our capital more importantly.

Randy Knutson

And then I guess the last question I have is what consideration if any was given in coming to the shareholders and asking for approval of the merger to for the independent - the group that appointed the three perspective directors. Why was Don Pastor included when – the shareholders in the last vote clearly indicated they didn’t want him on the Board of Directors? And so that seem kind of to me as a slap in the face. And I just wonder why that will even occur, but maybe you don’t want to comment on that?

Robin Risser

Randy, this is Rob. As far as the first part of your question, could you repeat that for a second for me, just so I recall what was.

Randy Knutson

Yes. Well, I’m just wondering, the shareholders obviously voted not to continue at least and majority of the shareholders voted not to continue Don Pastor as a director at the last annual meeting, is my recollection. And I’m just wondering in light of that why he would be considered as a potential director going forward and trying to get shareholders to approve that?

Robin Risser

Well, I think that overall we’d got what we saw was good continuity for the board to move forward. Don has got very good grasp of what’s going on at API. And all three of the directors together have got good operating experience on various sectors they were operating in. So I believe that was rationale for a pretty good solid slate of directors on our side. Their side with their existing directors, they are primarily the accounting and finance side of things. And as a result we felt like the operational we would offer a good slate of directors on the operational side of things. I think you also had asked if I recall now a little bit on whether or not what was the motivation or whether or not there was anything in it for the existing API Board of Directors. But the existing API Board of Directors there is no nothing in the deal for any of the existing Board of Directors on a go forward basis at all.

Randy Knutson

Other than what’s already included in prior agreement such as the merger language that may provide stock options if I've read that correct?

Robin Risser

No. I think that if they have stock options it would allow those to continue. If they have API stock options those would continue at the appropriate exchange ratio and at approximately vesting period. But there would be no new – nothing new granted.

Randy Knutson

I guess just in conclusion, I’d like to hope that we’re at the point where it's darkest before the dawn and I’m looking forward to the merger and I’m going to advocate people supporting the merger as quickly as we can get it done. It sounds like a cash situation if nothing else, it just cries out for us to do it, because I do think API has wonderful technology and I want to thank you all for your hard work and thank you.

Robin Risser

Yes. Thanks, Randy, and thank for the supportiveness.

Randy Knutson

Thank you.

Operator

And our next question will come from Ally Prescott [ph].

Unidentified Analyst

Hi. I just want to say that I support you 100% and I know all the trials and tribulations to you and a lot of small technology companies have gone through, because of the excesses of Wall Street and the craziness of the trading and the whole shebang that we had to go through. But I do not appreciate these attorneys talking about suing you because of all these stupid reasons that it feel like ambulance chases, jumping on board trying to get the shareholders all excited on Yahoo! and turn against the company. I think it's to our advantage to approve this and get it done I think we’re very fortunate to have this merger with the good sound company like this with similar technology and I look forward to the future. And thank you all for your effort, okay.

Robin Risser

Thank you so much Ally. We appreciate it very much.

Unidentified Analyst

Okay. Thank you. Bye.

Robin Risser

Bye.

Operator

And next, we have a question from Rich Burrel.

Unidentified Analyst

Hi, guys. I appreciate Mrs. Prescott's sentiments. I guess I’d say that I’d been a long-term investor here for 10 years. With that, I think what’s important is shareholder value otherwise we wouldn’t put our hard-earned money into the company. Over the last 10 years we’ve had one profitable quarter, so we know there is lot other tech companies out there that have had the same trials and tribulations. So why is it that API still has not been able to make the cost equal to revenues?

Robin Risser

Well, this is Rob, Rich. I believe that you have to get, if you take a look at the G&A cost that we have, those are pretty high cost to overcome and with revenue fluctuation that occur from time to time, usually you’re kind of in a negative position as you’re trying to build for growth. And so really we’re pretty small to be public company. So we need to cut the operating costs further and we need to be able to continue to get to a critical mass to revenue. Hopefully since we’ll be somewhere in the $50 million range immediately in revenue with substantial reductions in operating cost which I believe in the S-4 total somewhere over $2 million in savings fairly quickly. I think this gets us much closer to profitability. Now, there are lot of abnormal costs that actually I think the cost savings get closer to $3 million in the S-4, so if you get a chance I’d encourage you to read that. So profitability from our perspective since we have had a significant amount of non-cash expenses that get amortized in to the financial statements, we’re currently using adjusted EBITDA as our measure of profitability at this stage. As we get bigger and those non-cash expenses start become fairly insignificant portion of the operating results, hopefully at that point in time we can use the measure of GAAP profitability.

Unidentified Analyst

Okay. Let see. Why [Indiscernible] company some money to help you kind of bridge some gaps there. And now they’ve decided to leave. Did they give you any indication as to why that relationship was not founded good for them?

Robin Risser

No. I don’t know where you under the impression they’ve decided to leave. B. Riley’s been a good partner for ours and there are significant shareholders as well. So they have raise when we need it capital last two times when we were doing shelf and firm B. Riley has done a firm underwriting for us last two common stock, our capital raises at favorable terms given the market environment, we were adding both of those raises. And they continue to be in investor in it. So I do know that it’s a difficult environment for Microcaps to be in with the overhead of a public company. So hopefully this is moving us towards margin as forward to try to move out the Microcap arena sooner rather than later.

Unidentified Analyst

Can I get some comparisons kind of as we all do? We’ve taken a company like Dynatronics which is a medical technology company, and pretty much on the NASDAQ and pretty much in I would say, same board issues as far as there are about $27 million cap a year type company. And looking to their administration costs and so forth, there are lower amount only because they have fewer people as far as that’s the helm of the company. I guess that’s one of the things I hear on stock message for the – splurge, we had some high cost here at the company, do you seen the restructuring going forward?

Robin Risser

In the S-4 there is information about the anticipated cost reductions which total just shy of $3 million. So on page 103 I believe its S-4 that was filed today. And part of that is obviously the elimination of additional executives and spread over a larger base, revenue base. So I believe that we’re anticipating some significant cost reductions as a result of this merger.

Unidentified Analyst

Okay. That’s good. As far as the merger goes when did you guys really –who cannot be funded who and when is that process starts it initial phases?

Robin Risser

I would say, it’s a long kind of a dating process that’s goes on in various different stages, but it is detailed, excuse my phrase in at nausiam [ph] in the S-4 on the beginning of the first contacts, who contacted who, this conversation has been going on for the better part of a couple of years or 18 months or so. So I would encourage you that it will be interesting reading for you. That background or I think it begins on page 66 of the S-4. It’s a big document but you’ll be interested in reading that and the shareholders definitely should read that. And my explanation here would end up being an hour.

Unidentified Analyst

Sure, no okay I mean that’s why you are publishing information that’s not for our reading.

Richard Kurtz

Yes, I mean it’s a legitimate question and this you’ll find it good reading.

Unidentified Analyst

Okay, one last question. I guess anybody can answer this. Is stock price important to you?

Richard Kurtz

Well I don’t want a million shares; stock prices are the utmost importance to me.

Robin Risser

And to all of us in the management team and the board of directors, and that stock price is important.

Richard Kurtz

Okay that’s what I wanted to hear. I mean that’s the only reason why we are here and our money for the next, some people say we married the stock, unfortunately to our ten year investments it’s been to a detriment to our own accounts. All we can do is hope that you guys are not leading us astray with too much hope and well hanging fruit stories and more and that what you are doing here is going to be beneficial to us reach our investors. If not, then I would imagine that like anybody we will part ways. I think I must stay a little longer, but not sure how much longer that will be.

Unidentified Analyst

Yes, thanks Rich.

Richard Kurtz

Yes thanks for being an investor and – we all hope and are optimistic that this is going to help raise the stock price.

Unidentified Analyst

All right, thank you.

Richard Kurtz

Thanks.

Operator

[Operator Instructions] And we have a question from Frank Tiso [ph].

Unidentified Analyst

Hi guys.

Richard Kurtz

Hi, Frank.

Unidentified Analyst

I think as I just have a question first of all I’ve known you guys for a long time myself and that’s the choice we decide and I’m not here to greet anybody else we may [Indiscernible] but obviously we have to do it from the best interest for our shareholders. My question is what I’ve gone through this a few times, what is the new capacity of our Rick, Rob and/or Jeff what have you guys [Indiscernible] that?

Richard Kurtz

Okay, Rob if you asked that earlier, I’m no longer with the company and Bob and Steve are going to be with the company.

Unidentified Analyst

Okay. I think if you heard earlier, that more than work just popped on. I mean I just want to put that up there and I guess Rick, my question to you is and I’m, not here to protect anybody but Rick here [Indiscernible] objectively if there is anything, any changes you would make or you look that you kind of regret or you could tell the shareholders that you could share the difference.

Richard Kurtz

There’s a lot of things that you can always second guess, it kind of I’m -- backing right.

Unidentified Analyst

Yes, I agree 100%.

Richard Kurtz

All I can say is that every time we made a decision we had the shareholders in mind.

Unidentified Analyst

Okay. All right, my final thing it thinks that you guys are still contributing and putting money into the future and like I said we have to decide it’s not Rick or anybody probably stuck around with this company [Indiscernible] I’m sticking with you guys when you go it there. My only other question was Rob, are you ready for this?

Robin Risser

Yes, I’m ready for this. I’m definitely ready for this, yes.

Unidentified Analyst

Okay, further…

Richard Kurtz

We are looking forward to this. We have operated in an environment that demands that is growing and demands investment. So we’ve got a stable product platform in our Optosolutions. But once that’s in challenging growth markets but very stable. We’ve got in our High-Speed Optical Receiver as a product platform that’s in with a lot of growth potential not just in the markets that we are in, but the markets that we are entering with products that we’ve and technologies that we’ve had. And in Terahertz that’s a product platform that is trying to cross the chasm.

Unidentified Analyst

It’s I think you can, I also think you can do, yes.

Richard Kurtz

Yes, we do too. But all of those things require investment in the future and we have been operating in an environment where we’ve been trying to be very close to the west on that investment. So I believe that this will allow us to continue the focus on those areas and capitalize on our growth opportunities where in the past even with our capital raise with the stock price that it had been, that had melted down to it’s very difficult. We raised about as much money as you could raise and we do not like to dilute shareholders with those.

Unidentified Analyst

Yes. You know that…

Richard Kurtz

So we’re excited about this and excited about been part of a bigger entity that can help commercialize and accelerate the investment in this stock.

Unidentified Analyst

Okay. The one thing I would say – in the future I mean I think this is so I’ve been investing with a lot of companies and a lot of them have done fantastic, like I said we can’t all be 100% on these at all, but the one thing I did notice in this company and which is what I was saying hope and [Indiscernible] in a fee but every quarter we over -- and under deliver and I think the key to this is to even look at our company as large as I mean the largest company in the world Apple. They can seriously do that and I think we did the opposite. We need to really have realistic goals and objectives and to not over [Indiscernible] and I think that will be the key to us succeeding in the future.

Richard Kurtz

Thanks, Frank.

Operator

And the next we have a follow up question from Randy Knutson

Randy Knutson

Oh I’m sorry I didn’t ask you gentlemen anything at all about Terahertz and I wanted to just follow up with a couple of quick questions about Terahertz if I could. I wanted to know what is there an available market for the single point gauge out there that we’re actively looking at?

Richard Kurtz

Yes it was really driven by a lucky market margin kind of contract with the Air force. And they were the ones that wanted to hand help single point gauge. And so as we sell they were after a contract they were very excited to move to the next step and now we’re going to be taking that instrument out to the Photonix West show and demonstrating it out there. So now while looking at the research market that Rob was referring to but also maybe up that the QC market a little bit where somebody can use it as an instrument offline. So we’re exploring what markets we can get there, we are talking to some of our existing distributors to see if they have interest in trying to go up market that force. So it’s really a different sales channel than the process control market where we really need to have borrowers, value and research and corporate our sensor into a complete line. So this is, this is kind of interesting for us and new. And we have already received a couple of purchase orders. Singaporean sensor and the Nokia’s [ph] site.

Randy Knutson

Great, yes and as I understand on the F-35 or is it somewhere beyond the F-35?

Richard Kurtz

F-35, yes.

Randy Knutson

And so what opportunities are there, are there any additional new areas that you are tight process can roll with T-Gauge anything beyond paper, plastic the things we already know about any new industry that you can mention today that we are going to be getting into?

Richard Kurtz

Probably don’t want to mention anything in a public forum right now.

Randy Knutson

Okay.

Richard Kurtz

[Indiscernible].

Randy Knutson

Got you. And then the eternal light machine that I guess that’s coming out of your API Canada, if I’m….

Richard Kurtz

Yes, that’s coming out of the Optosolutions Group. They are actually going to have three different products there, what it basically is, is it’s using our multiple LEDs and a configuration to replicate different spectrums.

Randy Knutson

And what the heck do you do with that?

Richard Kurtz

It would be programmable so we can have a couple of different applications. The ones that come to mind right for me is forensics where they use different lights for different florescence, capabilities. There’s also the capability for replicating sunlight and art museums where sunlight can damage paintings due to a lot of new applications, of new markets I’ll say that have been knocking on the door and we’ve been talking to even talk about medical applications where you’re trying to illuminate internally to a body past during surgery to look for specific cells. So it was actually driven by a couple of customers in that way. So this is a technology that was in an early development stage at Silonex when we purchased Silonex. And right now we moved that technology further along and we are demonstrating this now to try to understand what markets would be most receptive to it. So it’s still a technology development and market exploration stage at this point.

Randy Knutson

Great. And then I guess last thing if you could have your representatives send pictures or anything that’s appropriate from your Photonics West booth, I mean that’s always good to show people and on behalf to…

Richard Kurtz

Okay. And why wouldn’t we do that.

Randy Knutson

Thank you both

Operator

And looks like we have another follow up from Rick [Indiscernible].

Unidentified Analyst

Hi guys, you mentioned the S-4 and I was just looking to see if Edgar or on your website it is imposed to yet, I didn’t say it was posted through….

Richard Kurtz

No it’s not AFC speed [Indiscernible] and you have already the Luna.

Unidentified Analyst

Okay.

Richard Kurtz

Because it’s their S-4 not our S-4

Unidentified Analyst

Okay. Appreciate the information. Thank you.

Richard Kurtz

No problems Rich.

Robin Risser

Thanks, Rich.

Operator

And this concludes our question-and-answer session. I would like to turn the call back over to management for closing remarks.

Richard Kurtz

Well I don’t have anything other to add and I just like to thank everybody for taking the time to listen to our report today. Again, management of API is excited about the transaction and we urge our shareholders to both favor the merger. So have a great week and thank you again.

Operator

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.