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.

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…

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.…

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…

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

Good afternoon.

Good afternoon, Randy.

Hi, Randy.

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?

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.

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?

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.

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

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

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]?

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.

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?

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.

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?

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.

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?

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.

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?

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.

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.

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

Thank you.

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

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.

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

Okay. Thank you. Bye.

Bye.

And next, we have a question from Rich Burrel.

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?

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.

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?

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.

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?

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.

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?

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.

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

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

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

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

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

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.

Yes, thanks Rich.

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

All right, thank you.

Thanks.

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

Hi guys.

Hi, Frank.

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?

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.

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.

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

Yes, I agree 100%.

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

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?

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

Okay, further…

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.

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

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.

Yes. You know that…

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.

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.

Thanks, Frank.

And the next we have a follow up question from 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?

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.

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

F-35, yes.

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?

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

Okay.

[Indiscernible].

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

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.

And what the heck do you do with that?

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.

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…

Okay. And why wouldn’t we do that.

Thank you both

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

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….

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

Okay.

Because it’s their S-4 not our S-4

Okay. Appreciate the information. Thank you.

No problems Rich.

Thanks, Rich.

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

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.

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