Good day, everyone, and welcome to Advanced Photonix's 2013 Second 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. Jim McDonald from Torrey Hills Capital. Please go ahead. James E. McDonald: Thank you. 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 Securities and Exchange Commission for a fuller statement of such risk factors. Given these uncertainties, listeners are cautioned not to place undue reliance on any forward-looking statements contained in this conference call. The forward-looking information given during this teleconference represents management's expectations and beliefs as of the date thereof. The continued availability of this teleconference on the Internet, or through other media, does not mean that the company is reaffirming or confirming its continued validity, except as may otherwise be required by law. The company expressly disclaims any obligation to update or alter any of the forward-looking statements made herein, as a result of any event occurrence after the date hereof. This conference also contains a presentation of non-GAAP financial measures, as defined in the SEC's Regulation G. Reconciliations of the non-GAAP financial measures to the company's GAAP-based financial statements are included in the company's second quarter earnings press release dated November 12, 2013, and are available on its website at www.advancedphotonix.com. On today's call, we'll hear first from Don Pastor, Chairman of the Board for Advanced Photonix; and then Jeff Anderson, CFO; who will pass the call on to Robin Risser, COO; and then Richard Kurtz, CEO, will make closing statements regarding the business of the company. So at this point, let's turn it over to Don. Donald C. Pastor: Thank you, Jim, and thanks to all of you for joining us this afternoon. I'd like to review just briefly a few of the board's actions since the last shareholder meeting, and then I'll turn the call over to Jeff for a financial update. As you all know, the last fiscal year was a very difficult year for API. Our shareholders were upset, and I believe they had every right to be. That message was clearly conveyed to us at the last shareholders meeting by the comments we received regarding the financial results. I want to assure you that the board was equally disappointed and has initiated a number of actions in conjunction with management to improve results. The board is taking an active role of oversight that, I believe, is paying dividends. When Rick and his team review our second quarter results, I hope you will agree that we are heading in the right direction. I believe we will continue to see improved results over the next 2 quarters. I think it is important that I convey to you the actions the board has taken over the last year to address the issues we faced and to clear up some misconceptions about the role of the board in representing the shareholders of this company. First, I want to clarify the role and responsibilities of the board. I have had shareholders ask me how many customers I have brought to the company and what I have done to help develop new technology. That is not the role of the board. The board's first responsibility is to protect the financial interest of the shareholders by making sure all the proper financial controls are in place, that financial results are disclosed in accordance with generally excepted accounting practices, and SEC regulations are being followed. The board works with management in setting the strategic direction of the company and to select, monitor and compensate the management team that has the responsibility of running the day-to-day affairs of the company, such as marketing and technology development. I would like to review some of the actions we have taken and the results of those actions. As the financial results last year started to deteriorate more severely than anticipated, the board assessed what the issues were and what actions management needed to take. It was our conclusion we needed to refocus our development programs, improve program monitoring, increase frequency of communication and evaluate strategic alternatives. The board believes in the management team and believes they know the business and are taking the corrective actions necessary to get the company moving in the right direction. If at any time this assessment changes, we are ready to take the necessary actions to protect the interest of our shareholders. The first step was to separate the role of CEO and Chairman of the Board. We believe this is in accordance with generally accepted good governance practice. But more importantly, it would allow the board to not only set the strategic direction of the company, but also monitor more of the day-to-day operating practices of the company. Since accepting the position of Chairman of the Board, I have been spending a lot more time in Ann Arbor and Camarillo, and am in almost daily contact with Rick and the management team. I would like to emphasize that I'm very happy with the support I have received from Rick, our ability to work together and the job he is doing. One of the first actions was to institute monthly management reviews of operations, development programs and sales opportunities. I believe this has been very successful and given us a much a better insight into the operational and marketing issues of the company. The end result is an improved ability to forecast revenue and income, and more importantly, to anticipate and address issues early on. I participate in all of these meetings and I have asked each of the other outside directors to be in attendance for at least one meeting per quarter. The second critical action was to more closely monitor the selection of development projects the company invested in. As I said at the shareholders' meetings, one of the biggest issues API has had was to try to do too much with too little. We need to generate cash. We have to select projects that have a high probability of success and have a shorter payback period. Again, I think we have been successful in doing this. We have refocused our R&D expenditures, while maintaining a strong pipeline of new products that have a high probability of success. It also became obvious that we have not properly communicated with our shareholders on the status of the company. Going forward, we plan to improve shareholder communication through various methods that could include nonearnings conference calls, newsletters or other forms of communications. Also, Rick has been directed to develop a succession plan for the company. API is a small company, so we cannot afford multiple layers of management. But at the same time, we need to have a qualified cadre of personnel to succeed current management if need be. We are also currently conducting a search for a new board member. This process is being run by the Nominating Committee. We have identified several potential candidates based on our own research and recommendations of shareholders, and we're vetting these individuals over the next couple of months. I hope this properly conveys the message that the board and management are committed to increasing shareholder value. We have taken actions and the results will speak for themselves. I will now turn the program over to Jeff Anderson, our CFO, to discuss the financial results.

Thank you, Don, and thanks to all of you for joining us this afternoon. I'd like to review just briefly a few financial highlights from our second quarter ending September 27, 2013, and then I'll turn the call over to Rob for an update on business activities. Our revenue for the second quarter, which ended on September 27, 2013, was $7.5 million, an increase of 35% or $1.9 million from the revenue of $5.6 million from last year's comparable quarter. Sequentially, revenues increased 6% or $458,000 from the first quarter of fiscal 2014. We experienced revenue increase in 3 of our 5 markets for the quarter when compared to the prior-year period. The test and measurement market revenue was approximately $4.7 million, an increase of $1.4 million over the related prior-year period. Approximately $945,000 of the growth was attributable to the March 2013 acquisition of the Silonex net operating assets by our newly formed Canadian subsidiary, Advanced Photonix Canada Inc., or APC, with additional revenue improvements coming from our Comtest products. Sequentially, revenue increased approximately 5% or $242,000 for the first quarter of -- from the first quarter of fiscal 2014 on the strength of Comtest product sales. Several telecommunication OEMs have begun using our Comtest products to incorporate into their own manufacturing test equipment, causing a near-term rise in demand. This is in addition to the traditional test and measurement OEMs that have introduced or plan to introduce new products for a high -- testing high-speed photonic components. Telecommunication transmission revenues in the second quarter were $1.7 million, an increase of 73% from the same quarter of the last fiscal year. These encouraging results have been due to the resolution of our vendor supply constraints in our 100G line side products and timing of orders and revenues on 40G line side products. Telecommunication revenue, on a consecutive quarterly basis, increased 35% or $440,000 from the first quarter of fiscal 2014. We have seen several carriers shift their capital spend to increase their bandwidth on their optical networks, which has improved both 40G and 100G sales. As we look forward, we expect the growth to shift to 100G sales, given the many advantages of coherent technology over prior long-haul transmission protocols. Military/Aerospace market revenues in the second quarter were $711,000, a decrease of 33% from the comparable prior year second quarter, as Terahertz development programs for the F-35 program have wound down since last year. Revenues decreased by $336,000 or 32% from the first quarter of fiscal 2014. The sequential decline is due to the timing of orders and shipments for several Optosolutions military programs, which we believe, stems from government sequestration affecting defense expenditures. Medical market revenues in the second quarter were $448,000, a $192,000 increase from last year's second quarter. Revenues grew sequentially by $112,000. Improvements in revenue are mainly due to the timing of shipments related to one customer. Homeland Security revenues were 0 for all comparable periods. Any future revenues will be dependent on placement of our products on the U.S. Government Qualified Products List. Gross profit for the second quarter of fiscal 2014 was $2.8 million compared to $2 million for the second quarter of fiscal 2013, an increase of $815,000 on a revenue improvement of $2 million. The higher gross profit dollars have been driven by the higher revenues from the APC acquisition, improving HSOR volumes and cost-reduction efforts. Gross profit percentage was 37% for the second quarter of fiscal 2014 compared to 35% in the second quarter of fiscal 2013 and 41% in the first quarter of fiscal 2014. The fiscal 2014 second quarter gross margin rate improved year-over-year, given higher factory utilization and cost-reduction efforts. The rate declined sequentially, given the shift in mix, as Terahertz revenues declined while HSOR revenues improved. Total operating expenses for the quarter were $3.3 million, an increase of $87,000 over the second quarter of fiscal 2013, completely due to the operating expenses assumed in the APC acquisition. Total operating expenses for the second quarter of fiscal 2014 decreased by $118,000 when compared to the first quarter of fiscal 2014, primarily given a reduction in engineering spend. Research, development and engineering expenses in the second quarter of fiscal 2014 decreased by $108,000 when compared to the second quarter of fiscal 2013 and decreased $258,000 sequentially, as we have reduced headcount and outside contractor spend, given the completion of several major projects. Sales and marketing expenses increased by $144,000 in the second quarter of fiscal 2014 when compared to the prior year second quarter and increased $53,000 sequentially, given the overheads assumed from the APC acquisition and commissions paid on higher revenues. General and administrative expenses in the second quarter increased $83,000 from last year's comparable quarter, given the overheads assumed in the APC acquisition and higher proxy legal expenses. The sequential increase of $78,000 was mainly related to the legal expense associated with the proxy. Amortization expense decreased $32,000 from last year's comparable quarter and was essentially flat sequentially. We utilized the cash flow method for amortization of our intangible assets, which means lower amortization as the assets near the end of their lives. The noncash expensing of stock option and restricted stock grants included in the operating expenses were -- was $39,000 for the 3-month period ended September 27, 2013. This is slightly less than the $45,000 in last year's comparable quarter, as stock awards have been limited over this past year. Interest expense remains similar to last quarter and is up $135,000 in the second quarter of fiscal 2014 relative to last year, given the increase in total debt associated with the PFG funding and the noncash amortization of the debt discount related to the initial value of warrants granted as part of the PFG funding. We enjoyed income of $107,000 for the quarter -- current quarter, from the change in fair value of warrant liability, primarily caused by the drop in the stock price in the end of June to the end of September. For the second quarter of fiscal 2014, we realized a net loss of $578,000 or $0.02 per share, as compared to a net loss of $1,287,000 or $0.04 per share in the second quarter of fiscal 2013 -- a reduction in the net loss of $709,000, given the higher sales and related gross margin fall through. On a non-GAAP basis, we achieved a $300,000 loss or $0.01 per share relative to a $943,000 or $0.03 per share loss in last year's second quarter, and the $0.01 loss in the first quarter of fiscal 2014. Given the cost reductions we have put into place recently, we now believe we can post a non-GAAP profit at revenues in the range of $8 million to $8.5 million, depending upon the Terahertz revenue mix. At September 27, 2013, we had cash and cash equivalents of $371,000, a decrease of $248,000 from the March 31, 2013, balance. In addition to the tax -- a cash decrease, we have drawn $1.3 million on our line of credit so far this year to fund our growth, pay off term debt, install some added factory capacity and maintain our patent filings. To provide us more near-term liquidity, on November 6, we agreed with the Michigan Economic Development Corporation to amend our notes, to increase the coupon rate 1% to 5% in exchange for the deferral of our monthly principal payments until the maturity of the notes in the December quarter next year. As of the quarter end, we had approximately $2.1 million of additional borrowing capacity under our line of credit before liquidity covenant restrictions. We believe cash on hand, cash from our line of credit and expected cash flow from operations driven by the higher future revenue levels, along with the deferral of the principal payments to the MEDC in the near-term, will provide us the needed liquidity over the next year. I would now like to turn the call over to our COO, Rob Risser. Robin F. Risser: Thank you, Jeff, and good afternoon, everyone. Thank you for joining us on this call today. We continue our growth in the second quarter in line with guidance we gave last quarter. Revenue was up 35% compared to last year's second quarter, and up 6% compared to last quarter. Revenue from products less than 2 years old was approximately 19% of our revenue in the second quarter, and this percentage is expected to almost double for the second half of the year, with the introduction of the new 100-gig transmission and Comtest products accounting for most of this increase. In addition, our adjusted EBITDA improved to a positive $20,000 on revenue of $7.5 million in the second quarter, compared to a negative $718,000 in last year's second quarter, an increase of $738,000. Revenue in the quarter met plan, and adjusted EBITDA was substantially ahead of plan for the quarter. Revenue on our high-speed optical receiver product platform was up 61% compared to the second quarter of last year, with transmission products up 73% and Comtest products up 47%. Late in the quarter, we began shipping 2 new products: a 100-gig receiver with variable optical attenuator, or VOA; and a Comtest product targeted at testing 32-gigabit-per-second fiber channel enterprise and access products. Demand for our high-speed optical receiver products has been robust for the first half of the fiscal year, and we forecast continued robust demand for the remainder of the fiscal year. As we indicated in our last quarter conference call, our team has implemented a successful continuous cost improvement program in our HSOR product platform. We have significantly cost reduced the labor and material content in these products through supply chain second sourcing, manufacturing engineering and engineering for manufacturing ability, operating efficiencies, new technology deployment, learning curve, economies of scale, selective manufacturing automation and rightsizing operating expenses. In addition, we will utilize low-cost Asian contract assembly for the fiscal year for a new telecom transmission product, a 10-gigabit per second APD-ROSA receiver, targeted at the long-haul Metro and fiber-to-the-home markets. The team is very focused and is continuing its relentless drive to lower costs and introduce next-generation products for the long-haul, Metro fiber-to-the-home and Comtest optical markets. We attended the European Conference on Optical Communication, or ECOC trade show, in London this past September. Deployment of 100-gig coherent technology in the long-haul DWDM market and adding 100-gig capacity in the Metro, access and enterprise markets over the next several years were the themes of the show. Our products and planned future product developments are targeting these areas of network infrastructure growth. In October, we successfully negotiated a $4.6 million to $6 million calendar year 2014 commitment from one of our large telecommunication OEM customers, as you may have seen in yesterday's press release. The new 100-gig product with VOA was an important product for these negotiations and provides a solid foundation for the long-haul DWDM market for our fourth quarter and the first 3 quarters of fiscal 2015. Our Optosolutions product platform revenue, excluding Advanced Photonix Canada, or APC, was up 16% compared to the second quarter of last year, on the strength of recurring revenue in the test and measurement and medical markets, offset by weaknesses in the military market. APC boosted revenues $945,000 compared to the second quarter of fiscal 2013, which had no APC revenues. The combined Optosolutions product platform was relatively flat compared to the first quarter, but up 52% compared to the second quarter of last year. Optosolutions combined revenue and adjusted EBITDA met plan for the quarter. The Optosolutions team in California and Canada completed consolidation and integration of APC in the second quarter. This included the engineering new product development team in Montréal and the transfer of manufacturing from Casco automotive in China to a new Chinese-based contract manufacturer. Our recent strategic -- per our recent strategic initiatives, the Optosolutions sales and marketing team was expanded in the second quarter, and is in the process of identifying growth markets and evaluating new product development opportunities for the engineering team in Montréal. In our Terahertz product platform this quarter, we continued our transition from product and application development. Funded substantially by government contracts, the product sales of T-Ray 5000 products directly to the established scientific market and through the value-added reseller channel to the emerging process and quality control markets. We expect fiscal 2014 revenue to be down approximately 20% from last year, as we transition to increased commercialization with product sales and reduced contract revenue. Second quarter revenue for our Terahertz product platform was down 32% compared to the first quarter, and 43% compared to the second quarter of last year, due primarily to the completion of a large military contract related to the F-35 Joint Strike Fighter. Despite that, our Terahertz revenue and adjusted EBITDA met plan for the quarter. In the second quarter, we continued to focus on developing, training and expanding our Terahertz value-added reseller channel, and visibility continued to improve as our VARs became more experienced in selling our Terahertz solutions. In addition, the engineering and manufacturing team continued its focused on hardening the T-Ray 5000, improving reliability, supporting end-user and value-added resellers on initial installations and transferring the T-Ray 5000 from engineering's preproduction line to manufacturings production line. The transfer is scheduled to be completed in the third quarter. This past quarter, our Terahertz team continued working closely with our VARs in the process and quality control markets, targeting the most difficult problems that either cannot be accomplished with traditional nuclear gauges or would require multiple gauges. Our VARs customers are typically updating the production line or installing a new production line, including the installation of process and quality-control sensors. These projects have a long sales cycle, an extensive capital appropriations approval process and a long installation horizon. The sales cycle typically runs 12 to 18 months from initial VAR contact to installation. In the case of a new sensor technology, the proof of concept stage typically precedes the capital appropriation approval process. Once our VARs have won the bid, they typically receive the purchase orders 4 months in advance of installation. They, in turn, issue purchase orders to us and expect delivery 2 months later. Our Terahertz team exhibited at the K 2013 show in Düsseldorf, Germany last month. The K show is held every 3 years and is the world's largest plastic, rubber and converting show in the world, lasting 8 days, with 3,100 exhibitors located in 17 exhibit halls and more than 250,000 attendees. We exhibited in our VARs booth, Thermo Fisher, and also had a separate location for business development, holding demonstrations for end-users, OEMs and prospective new VARs. The show was a success, generated in excess of 100 leads for our VAR and several new VAR OEM and end-user prospects and markets to develop. At the show, we also introduced the T-Ray 5000 to the Thermo Fisher European sales force and trained them. In summary, our second quarter was on plan and showed substantial improvement compared to the second quarter last year, and we have positive momentum in each of our product platforms going into our third quarter. I'd like to -- I'd now like to turn the call over to Rick. Rick? Richard D. Kurtz: Thank you, Rob, and good afternoon, everyone. And thank you for joining us on the call today. Our second quarter came in as expected, but we did see some headwind with the military and contract revenues from both the sequester and the government shutdown. As both Jeff and Rob outlined, revenues have started getting back to where they were 2 years ago with the telecom transmission revenue and the growth of the test and measurement revenues with the acquisition of Advanced Photonix Canada. We have a press release today announcing the approval to use the Underwriters Laboratory Mark on our Terahertz products. This is the first Terahertz system in the world to receive the UL Mark. API's Terahertz product line will be featured on the 21st Century business network. Our 10-minute segment will air in the coming weeks and be released over the Fox Business Network, CNBC, Bloomberg U.S. and Bloomberg international networks. We'll be getting a press release out once the dates have been finalized. The segments will have a field shot of our deployment or installation at our partner Appvion, formally called Appleton Paper. We believe that this exposure will help us communicate the features and benefits to industry of using our T-Gauge system, replacing current ionizing or potentially harmful technology for process control that can lead to greater cost savings. As mentioned by Rob, we had a very successful exhibition at the K show. We gave 4 plenary sessions on Terahertz and our T-Gauge system during the show. We met with numerous potential customers, value-added resellers or VARs, and uncovered new vertical market opportunities. We are encouraged with the growth of the opportunity funnel. Given this success, we decided that we would not attend the Transportation Security show, as mentioned in the prior earnings call, mainly due to the follow-up activity coming from the K show and supporting our existing industrial VAR partners and application development. Our test and measurement business continues to grow and we are expanding business with our CMs in China. We're taking our relationships with our CMs to a new level, and then we're moving some of our more manual assembly processes to them. With the new engineering team, our new Director of sales and East Coast Regional Sales Manager, we have strengthened our California operations. We're working on our marketing plans for the next trade shows, Photonics West and the Optical Fiber Conference in February and March of next year. As I mentioned earlier, the Military/Aerospace market is being challenged by the government sequester and debt-ceiling negotiation. As everyone knows, business does not like uncertainty. The government kicking the can down the road regarding the debt ceiling has delayed some capital projects. We have seen delays in SBIR contract proposals and awards based on the sequester. We'll have to keep a watchful eye on what happens in the coming months. We've met our first half year-over-year growth targets and are looking to continue that growth each of the next 2 quarters, but it will not be easy. To help offset some of the uncertainty in revenue growth, we're focusing on operational expense reduction. With the support of the board, we have started evaluating strategic alternatives to our current business model. While we cannot outline or discuss the plans under evaluation at this point, we should be able to share those plans with you in the coming months. On behalf of our team, we appreciate your continued support. I would now like to open the call up for your questions.

[Operator Instructions] Our first question comes from David Kang at B. Riley.

First of all, what was HSOR revenue during the quarter?

It comprises the telecom space and it's part of the test and measurement relative to the Comtest products. So it was roughly $2.9 million in total there.

Okay. Now for apples-to-apples, was it $2 million first quarter going to $2.9 million? Or it was $2 million last quarter so...

[indiscernible] to $2.9 million, David.

You broke up. Can you repeat that?

$1.9 million to $2.9 million.

Okay. And I assume most of that delta was, what, 100G-related products? Richard D. Kurtz: Large part. I think we had talked before that 73% growth occurred in the 100G, and 45% [ph] in the Comtest quarter-to-quarter.

Right, right, right. And then besides Alcatel, were there any other major telecom OEM customers? Robin F. Risser: There are other telecom OEM customers, but their contribution this past quarter was negligible compared to our largest customer.

So largest customer, can you disclose what the percentage was like? Was it 10%, 20%? Robin F. Risser: Well, the 100-gig, the largest customer is the dominant share of the 100-gig. The 40-gig, they're not the dominant share.

Got it, got it. And then that announcement that you've made about the 100G commitment from that customer, are you the primary customer? And can you disclose what kind of pricing you had to -- was it like a 10% to 15%? I guess, typically, 10% to 15%; Was it closer to 10% or 15%?

I'd say closer to the 15%. It depends on which products you've got. And with that particular customer, we have 3, 4 actual design wins, separate design wins with that customer. So each one has something slightly different. But let's just say, on average, it was closer to 15% than 10%.

Okay. And as you know, Rob, I mean, there aren't that many major OEMs doing 100G. So you got that European customer and your competitors have the other one. I mean, how sticky is it, I mean, for you to get into other major houses? Robin F. Risser: Dave, some of it is -- everybody's got different timing. The design windows have different timings, and some have different features that they want. So you have to time it up correctly and you have to have the particular nuance that they may need. So we have other customers. Of course, this particular customer is -- represents a leader in the 100-gig side.

Got it, got it. And then Jeff, what was your CapEx for the quarter? And what to expect going forward?

Our patent and CapEx spend was about $100,000 in the quarter, and we expect that to kind of continue. So we did $220,000 in the first half, with both of those expending kind of a similar pattern in the second half.

Got it, got it. And then Rick, you kind of telegraphed the decline in Terahertz second quarter and maybe even third quarter, but do you expect that to rebound in fourth quarter? Richard D. Kurtz: Yes. Again, it's a transition from the contract sales to the product sales. And again, we've made the transition from having, oh, god, I'll say high-value engineers doing a lot of the assembly to manufacturing people doing the assembly. And so one of the things that we're able to do, obviously, is we are able to be more competitive on our pricing but yet hold our margins. So some of that is also in the ASP being reduced to meet competitive requirements by holding our margin.

Got it. And then you talked about strategic alternatives. Obviously, you're not going to talk about that. But you also talked about refocusing on R&D. Can you just give us an example or your thinking -- what you're thinking there? Richard D. Kurtz: Well, there's a lot of vertical niches that require adoption of different sensor heads, we'll call them, and different ways to handle the signal from multiple sensor heads. So there's things that we're evaluating with potential VARs out there that would open up other niches, which would require some investment. Not so much in R, but in development.

Got it, got it. And then lastly, so you're still sticking with 35% growth in sales fiscal '14 over '13. Can you just go over some of the assumptions? Obviously, it's not going to come from Mil/Aero but, I guess, Comtest and HSOR. Just give us a little bit more granularity or assumptions behind that? Richard D. Kurtz: Yes. I think Rob addressed that, saying that the growth in HSOR is going to be strong in the second half with the 100G VOAs and the other Comtest products that we've got there. I think that we'll see -- we've got potential to see even more growth in the test and measurement area, specifically from the, we'll call it, the APC group, and the customers located out in China. And then, of course, there's always the opportunity for more industrial product sales with the Terahertz to the process control market.

Sure. And Rob, just lastly, just wanted to get some information on that, going back to that announcement from yesterday on the 100G commitment. So it says $4.6 million to $6 million. What was it in FY -- or no, that's not -- is that calendar '14, first of all? And if it's so -- calendar '14. Robin F. Risser: Dave, they always do things on calendar, yes.

Okay, so calendar '14 of like $5-million-plus. What was it this year, calendar '13? So just wanted to get... Robin F. Risser: Well, if you recall, they gave us a commitment similar to that. But with our supply chain disruptions, we were like at even, just slightly more than half of the commitment.

So it was about $3 million-ish? Robin F. Risser: Yes.

Okay. So we put $3 million to $6 million, so almost double there? Got it.

The next question comes from Edward Perry [ph], private investor.

First, I'm very glad to hear Don Pastor speak. We're all very lucky to have someone of his background and caliber functioning there at API, that's quite an accomplishment. He's performing almost a thankless task, but he's needed. So... Donald C. Pastor: Thank you very much.

Okay, some questions. Last conference call, you mentioned that only -- there was one other competitor with VOA capability. Is that still holding? Or is more on, jumping on? Richard D. Kurtz: Well, there are those that have announced. But as far as in the customers that count, there still is only one other competitor.

That's very good advantage for you people. Now the other thing. I see that you actually are ahead of EBITDA schedule for what you expected? Robin F. Risser: We are, yes.

Now you're institutional participation has really cratered. It went from about 27% in steel [ph] to, oh, god, it's less. It's only about 9% or 8% now. Do you foresee where your EBITDA will get to that point, where you could actually start promoting API again for the institutional purchases?

Ed, I think that's more of -- related to the volume of the stock. We were trading -- when it got quiet in the telecom space, we drifted down to only 30,000 shares a day on average. And it's just not enough liquidity for an institutional investor to come in on the stock. And so what we're focused on right now, with Torrey Hills Capital, was going out to the high net worth individuals, meeting with them, showing them what the company can do and getting -- trying to get the volume back up to the point where the institutionals would feel comfortable enough with liquidity in the stock to be able to take position. Because when they take a position, they want to be able to liquidate out without moving the stock too much. So it's really a process of getting more volume and then, later on, getting those. We do expect to see improvements in the adjusted EBITDA as we go forward here as the revenue grows. I think we've kind of crossed the threshold here. We're finally generating some cash flow on an adjusted EBITDA basis. And so I think that will also help some of the bigger guys who are looking for, maybe, more positive cash flow. But all in all, I think it's more so the volume of our stock that the keeps the entities out of our stock at this point in time.

Right, that does make sense. A question also on -- it sounds like the VAR process will be really a long-term evolution going forward. But what about the TSA? Where does that stand for the QPL? Robin F. Risser: Yes, it's a typical government response, a black hole right now. We've not heard anything. We've not gotten any updates even though we reach out and tried to contact them. Some of the players, obviously, have changed position, so the people that were originally on the programs are not on this particular aspect of the program today. So that's the reason that we really have to focus on the industrial market segment and continue there. Now there might be opportunities for more strategic relationships with other people out there that could help carry the ball a little bit farther. But right now, our focus needs to be what we can do, and we can apply the technology to our next industrial process control.

Okay, great. And one last question. It was -- it had been said that Huawei and China Telecom were both in the position of firming up at the end of this year for their prospects for next year. Have you seen anything coming from that? Richard D. Kurtz: Huawei and -- yes, ZTE and Huawei are the primary OEMs that supply the Chinese market. And China Mobile and China Telecom and China Unicom are the ones that deploy it. And we have seen some activity coming out of that area, but not substantial. Yes, there's been more murmurs than there has been action. But there is some action.

Our next question comes from Randy Knutson [ph], private investor.

Let me first start off with your press release today. It mentions this is the UL approval release. There's a mention in there that you're also close to receiving CE approval. What does CE stand for? Richard D. Kurtz: That's the European approval counterpart to Underwriter Laboratories.

Okay. So that... Richard D. Kurtz: So that gives you the same approval status in the European community.

And what does the C and E stand for, if you know? Richard D. Kurtz: Not off top of my head, Randy. Again, it's an approval that you've passed the certifications and testing, that it's a safe product. When you talk to U.S. companies, they typically are wanting you to have that type of mark from the Underwriter Laboratories, so that the insurance companies know that, that product won't pull up in their factories. So that's one of the reasons that it's very important for us to get that type of certification or approval.

No, I think that's a huge thing, and I commend you for doing that. That's great news. We've been talking about that for a while. And I guess, you've addressed the issue of this, the QPL list with Ed. But let me -- or Mr. Perry. But let me just ask, I'm unclear why we can't market the SAF-T-CHEK device to any number of other -- is there some reason why it's got to first go to get approved on the QPL list before we could start selling it to other governments or other people? Richard D. Kurtz: We went to the Transportation Security show a couple of years ago in the U.K. And it was education for us, because every single potential government entity or department, the first question they ask is, "Is this approved by the TSA?" And they're using that as kind of like the Good Housekeeping Standard Approval. And so as a result, until you really pass that, that threshold, nobody's really going to really step out on a limb and buy equipment. That being said, Randy, I think that we continue to look for people that have -- would be a good strategic partner out there for us that we could possibly work with in getting and pushing that approval process through.

Okay. And I think there was a lot of speculation, at least on my part, that the recent patent application that we saw relating to the -- your anomaly detection, or SAF-T-CHEK device, was an indication that maybe there is some movement underway but you're saying, really, we're still kind of in the same black hole with the TSA that we were before? Richard D. Kurtz: Yes. I mean, that was a trademark approval, basically, for the name SAF-T-CHEK, and not so much a patent. So from that aspect, we wanted to protect the branding identity for future use.

And then tell me a little bit about the interface between Camarillo and API Canada? It sounds like they're essentially now trying to perform the same function, to some degree. Is there any move underway that there's going to be some consolidation between those 2? I know you mentioned China as the place where the products are going to being built, if I understood correctly. Richard D. Kurtz: Yes. Again, the contract assembly partners that we have in China are one aspect. But the Canadian operation is just an engineering design office, okay? So there's really no production being done there. So again, they've got a particular skill set and familiarity with regards to product development and design that we are leveraging through our California operations for that new product and market development that Rob mentioned earlier relative to the new sales, Director of Sales and the new East Coast sales person, everything we're doing out there to help them grow their operation.

A question regarding Terahertz. You mentioned that your military expenditures are down, and I'm kind of curious why. I understand that the F-35, what's going on with the sequester. But I read about NATO deploying the F-35 to any number of other countries, and you mentioned this before. I just saw, for example, Norway has bought a bunch of F-35s. Are we going to be doing the same kind of inspection or paint deployment inspection that we were doing in the U.S.? Richard D. Kurtz: Well, that was the original process that we were doing. Now this is a pretty complicated process relative to the development program that we've worked with for the coding measurements. And so we've gone through what is referred to as a Phase 2E process. And right now, the next step would be for us to take the product that we've developed to date, and move it into what's referred to as NPI, or new product introduction, which is basically the commercialization phase. And that's one of the things that we're in dialogue with the government on, is how to get that product from a prototype platform to a commercialized platform. And that would include getting the UL Mark for the new sensor attachment, not just the PCU or the control unit. Robin F. Risser: And Randy, one other thing to piggyback on what Rick said. The manufacturing will occur domestically. So any of the allies that are going to order planes, those planes will go through the domestic manufacturing operations. So we'd use whatever product we had during the manufacturing process. And then ultimately, as they're deployed, which is pretty long cycle for deployment, there will be various different maintenance depots around the world, and we're anticipating that they would also need some instrumentation for those maintenance depot stations around the world. Richard D. Kurtz: That was one of the reasons that we signed up Shimadzu as the distributor for Japan, because Japan is one of those partners that is acquiring F-35s, and they have a very good relationship with the Japanese Department of Defense. And so they were doing that in anticipation that, ultimately, they would be handling that distribution for us in Japan.

It was a refreshing -- and I agree with Ed -- to hear Don Pastor's comments, and I appreciate those. But it seems to me that the proof is going to be in the pudding. I noticed in the general and administrative expenses that we had significantly greater legal expenses because of the proxy. And I'm assuming that's because the shareholders were up in arms, and I would tell you we still are up in arms until the board demonstrates to us that they're going to take a more shareholder-friendly view of the company. And I think that's the one thing. The technology there, no doubt, you guys are working countless hours, got great engineering staff, but the board's really been the problem from a number of our perspectives. And so I appreciated those comments. And so now the question, let's talk just for a moment about the Chuck Knoles lawsuit that's been filed. What's going to be the response of the company? Are we going to spend more money opposing that, or are we going to try to work out some solution? Richard D. Kurtz: It's in litigation. We can't comment on that.

Well, I just hope that in the scheme of this, you had a, 12 million votes cast in favor of Proxy Vote 6. And it seemed to me, the only people that voted against it were the directors, and that should tell you something right there. I mean, who is -- who would be battling this issue? Whose interests are being looked out for, I guess, is the way to phrase this. And so that's one just comment I'd like to make in light of Don Pastor's statements, which I do take as being refreshing, and I do appreciate him saying it. And then my last question is, is the board receiving additional compensation in some fashion that we don't know about? Are they getting something because the equity revenue package was soundly rejected by the shareholders? Is there something coming in through the back door that we need to know about? Richard D. Kurtz: No.

Nothing at all? Richard D. Kurtz: No.

Okay. So no incentives, no additional stock awards, no allowances that are -- we're -- that's good. I applaud you there, because the other thing I would say about the board to you, Don, is that we never see anybody making retail purchases or purchases on the open market. And clearly, if you have confidence in the company and where it's going, you demonstrate that by making purchases. So I hope we see that in the future from whoever's on the board.

This concludes our question-and-answer session. I'd like to turn the conference back over to Richard Kurtz for any closing remarks. Richard D. Kurtz: I don't have anything other to add, other than thank everybody for taking the time for listening to our report today, I appreciate it. And for our entire team, we appreciate your continued support of our company. We are very focused on growing our revenues, increasing both non-GAAP and EBITDA and translating that into GAAP profits. So have a great week, and thank you again.

Thank you again. That does conclude today's conference call. We appreciate your participation, and you may now disconnect.