Overview

Axis Technologies, Inc. is a company that markets energy-saving daylight dimming/daylight harvesting ballasts for the commercial light sector. ATI has spent well over four years developing their energy-saving products and have dubbed the Company as "The Future of Fluorescent Lighting." The Underwriters Laboratory has approved ATI's proprietary dimming/daylight harvesting ballast system in both the United States and Canada. The costs of the ballasts are priced to be very competitive, and ATI's ballast is the only product available that can be marketed as a daylight harvesting system replacement to a standard ballast. To date, ATI has sold, or has potential orders for about 500,000 units of their dimming/daylight harvesting ballast system.

ATI's target market is small to large commercial users of fluorescent lighting; examples would include office buildings, wholesale and retail buildings, hospitals, schools, and government buildings. Through its development of the dimming ballast, Axis has emerged as one of the leading competitors in the dimming/daylight harvesting ballast industry. ATI's proprietary ballast is designed specifically for energy-efficiency and not architectural dimming, which leans heavily towards more aesthetics than any real reduction in both usage and costs.

With recent political developments including the raging debate of global warming, businesses have begun to move to conserve energy. This puts ATI in a very dynamic position in that their product offers the best in energy reduction. The tax deductions included in the Energy Act have also spurred businesses to act to take advantage. State and local governments have also begun to act before federal guidelines are even created to become more energy efficient.
 

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Investment Highlights

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Products

Axis Ballast System

A ballast is an electronic component that regulates voltage in lighting. Axis Technologies Group, Inc. has developed an innovative new ballast with the aim of expanding daylight harvesting into mainstream lighting fluorescent applications. The patented Axis Daylight Harvesting Dimming Ballast is a new technology that transforms the ballast, a once standard lighting industry staple, into a dynamic energy saving system that can reduce lighting energy costs by up to 70%. The Axis Ballast utilizes an individual photo sensor to automatically adjust the amount of electrical current flowing to the light fixture and then dims or increases lighting in conjunction with the amount of available sunlight.

Saving Energy is easy with the Daylight Harvesting Axis Technologies Fluorescent Ballast. When windows or skylights provide natural daylight to a room, the Axis Ballast uses integrated automatic controls to reduce your energy and daytime peak demand load.

The Axis Ballast automatically responds to daylight, reducing electric light only when the room grows brighter, and then increasing electric light only when the room grows dimmer. The light levels never drop below the minimum designed levels. Cloud passing over? No problem; the Axis Ballast’s continuous control response is immediate!

The Axis Ballast was designed to be simple and effective. It offers:

- Easy Installation, No Maintenance.
- No Commissioning.
- Reliable, Seamless, Energy Savings.
- Integrated Controls; no External Controls Required.

The automatic energy savings come without distraction to room occupants. How? Simply because the change in daylight ambient light level is far more significant in the room then the change in the electric light, allowing the dimming and brightening to go unnoticed.

The Axis Ballast is great for the environment! Reducing your energy reduces the need for more power plants, and reduces the pollutants from power plants. Greenhouse gases such as carbon dioxide, sulfor dioxide, and nitrogen oxides can be reduced significantly by reducing the amount of electricity produced from power plants. The Axis Ballast helps you qualify for LEED environmental compliance.

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Features and Benefits

One of the many unique features of the Axis system is the use of design light level (DLL) in calibrating the system. A calculation using the DLL generated a dip switch setting that is then used to control the level of light throughout the whole room. This setting can be applied on the ground before the overhead installation commences. The overall effect of the Axis ballast can be summarized in the following benefits:
 

The Axis ballast system is innovative and relatively new to the market. To offset reliability concerns ATI has contracted with a reputable manufacturing firm that specializes in the manufacture of precision electronic components. This manufacturer meets the standards of ISO 9002, which outlines a stringent set of manufacturing guidelines that include process controls, product inspection and testing, record keeping, corrective actions, handling, storage, and delivery. In addition to the manufacturing contract, ATI has set out to meet and/or exceed all the industry recognized standards:

 

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Competition
 

Indirect Competitors
 

In the dimming ballast industry, ATI is joined by both major competitors and small start ups like itself. One of ATI's biggest rivals, in terms of size, is Lutron Electronics, a global leader in commercial and residential lighting. While Lutron has a definite market reach advantage, the Company also suffers from inferior technology. Lutron's proprietary dimming ballasts do not have integral daylight harvesting functionality as of yet and the ballasts rely on external dimming controls. While this does provide an increase in energy savings, it does not come close to savings offered up by ATI's system.
 

Another major competitor of ATI is Universal Ballast. Presently Universal markets a sizeable product line as it relates to dimming ballasts. Similarly to Lutron, Universal does not add integral daylight harvesting technology to its own dimming ballasts, keeping any real energy reductions under 30%. While ATI does not have the market reach of Universal, the Company appears to possess a better technology that offers dramatic reductions in energy usage and should be able to gain market share.
 

Direct Competitors
 

While both Lutron and Universal Ballast both pose a strategic competition to Axis, ATI's more immediate competition rests with Just Right Light Ballast, a company that also markets a dimming/daylight harvesting ballast. Just Right Light's ballast system closely resembles that of ATI with similar integral controls, but suffers in performance. In an independent side by side comparison test at DFW International Airport, the ATI ballast reduced energy 21% more than the Just Right Light ballast.
 

Competitive Advantage
 

Most of ATI's competitors require a full room or a designated area to be hard-wired to a central controller, which then provides the dimming capability for the entire area. Companies like Lutron have end-users actually install a complex multi-adjustment photocontrol, so complex that researchers have found that it is often disabled due to occupant complaints. These systems are quite expensive with costs quickly exceeding a hundred dollars per fixture to install. ATI's product has lower acquisition and install costs, requires no maintenance or calibration, is highly reliable, and the ballast system is covered by a five-year warranty.

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Ballast Industry Analysis

The global ballast market as of 2005 is expected to grow at an annual rate of 12.1% through 2010, as reported by the Darnell Group (a leading research organization on the industry of lighting). This market includes electronic ballast, magnetic ballast systems, self-ballasted lighting systems, halogen, and high-intensity-discharge systems. ATI’s market focuses primarily on the electronic fluorescent ballast systems. Recent regulatory rules governing the ballast industry have banned the sale of inefficient magnetic ballasts as of 2005 in both North America and Europe. This has caused many commercial entities to look towards electronic ballasts due to the cost savings of the system as opposed to newer technologies, like LED-based systems. While the LED technology can become a leap forward in the lighting technology, it still faces many challenges. The color of light, product cost, and energy efficiency are still well behind fluorescent currently.
With the advent of newer technologies, the long-term outlook on electronic ballasts will diminish, but it will more than meet annual growth rate increases over the next five years. With the political debate raging over energy conservation, companies will increasingly look towards inexpensive ways of both reducing energy usage and overall energy costs associated with lighting. Dimming/daylight harvesting ballast systems pose a good solution for companies looking for ways to meet energy efficiency regulations and/or qualify with new tax incentives being introduced at both the federal and state level.

The current global value of the electronic ballast industry, as described by the Darnell Group, is valued at over $10 billion. Emerging markets in Latin America and Asia continue to grow at exceptionally high rates as does demand for lighting systems. Though the overall industry could be threatened eventually by newer technologies, the absolute price comparisons of the systems make the electronic ballast market the leading competitor in intermediate and near-term forecasts. While energy efficiency is somewhat important to developing nations, ATI’s main market will be the United States and Europe where regulations are imposing the energy efficiency upon commercial entities. ATI has received strong interest from International customers attending the Lightfair trade show in the United States.
 

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Current and Future Opportunities
 

National Politically-Based Opportunities
 

The recent spike in energy costs and the turmoil in energy rich regions like Western Africa and the Middle East have created the impetus for companies to move towards energy efficiency. The federal and state governments have also entered the rush toward energy efficiency by increasing tax deductions for companies that make moves to become more energy efficient. The Energy Policy Act of 2005 offers business tax credits for those that work towards obtaining a 50% reduction in energy usage. The total tax credit is $1.80/ sq. ft. with $.60/ sq. ft. breakdowns across three sectors of the building, which includes lighting as a separate sector. There are several regulations to the cost savings and are outlined as: The builder (or designer in the case of publicly-owned buildings) can take the deduction in the year the property was placed in service. The building or system must be certified, with inspection and testing, as meeting the energy cost savings goal according to guidance issued by the IRS in consultation with the Department of Energy. In the case of certification, the individual must be qualified and not related to the person(s) they are inspecting. Also, there must be no financial stake in the company for the certification to be considered legitimate by the IRS.
 

For lighting systems, until the IRS issues a final rule, the law specifies that a deduction of $.30/ sq. ft. can be taken if the lighting system employs dual switching (ability to switch roughly half the lights off and still have fairly uniform light distribution) and reduces installed lighting power by at least 25%. As lighting power reductions climb from 25% to 40%, the deduction is increased proportionally, up to $.60 for a 40% power reduction. It should be noted that this prorated credit does not apply to warehouse lighting.
 

State and Local Opportunities
 

State governments have also begun to enter the market for energy efficiency. In late August 2006, the state of California announced plans to work with investor-owned utilities to increase energy efficiency in state-owned buildings. Under the program the state would implement, along with the utility companies, $17 million worth of energy saving programs throughout state-owned buildings. Approximately one thousand state owned buildings are being looked at as possible sites for energy efficiency programs. Governor Schwarzenegger went even further in his executive order called the Green Building Initiative. The initiative calls for public buildings to cut energy consumption 20% by 2015.

It also stresses the importance for private companies to follow suit. ATI possesses a market advantage in that Axis already has multiple installations in public buildings such as the Elk Grove Schools and the Unified Center Schools in Sacramento, California. These two areas have already showed the benefit of ATI's ballast system, and will reflect a good track record for ATI. Another benefit of the California initiative is what's known as the California Effect in politics. What happens in California, in regards to legislation, quickly follows in the rest of the nation opening up many more markets for the ballast system. Just recently Amendment 24, known as California 24, was passed. It requires that all buildings that have over 30,000 square feet, must have daylight harvesting functionality, giving ATI another possible market in which to increase sales. In addition, the State of California has allocated $1 billion dollars each year from 2006 - 2008 for various energy efficiency programs, including utility customer rebates for energy efficient product purchases. It is highly probable that funding will continue in 2009 and beyond.
 

Global Markets
 

Another possible long-term strategic opportunity facing ATI is entrance into the global market. Currently, ATI manufactures its ballast system in low-cost facilities in China, so it would not appear to be a difficult transition to switch to a global-based distribution. China has experienced record levels of growth and its cities are expanding at soaring rates.

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Financial Analysis
 

Revenue
 

Axis Technologies is projected to experience rapid growth with a CAGR of 71.5% from $12.9 million in 2007 to $191 million in 2012. This growth is primarily driven by the projects that the Company has already booked in its portfolio for 2006. The major portion of projected revenue is expected to be contributed by: the Energy Management Systems (EMS) project (21%), Lincoln, NE Public Schools project (23%) and various projects that involve Boeing, Naval facilities and schools (19%). Furthermore, due to benefits provided by ATI's products as discussed above the demand for these is expected to grow over the period. In addition to this, hosts of opportunities that are present in the market will enable the Company to capture a significant market share. The cost of goods sold as percentages of revenue is expected to become stable over the period.

Margins

The gross profit margin is expected to reach up to 58% in 2007. Over the next few years, however, it will likely maintain a steady trend. The net profit is anticipated to reach $3 million in FY 2007 with a strong net profit margin of 24%. It is expected to stay in the range of 16% -17% over the period 2008-10.

According to Beacon Equity Research (BER), an independant research firm, they expect the company to produce 2007 EBITDA numbers to reach $3.1 million with an expected EBITDA margin pf 24.3%. BER also anticipates that the EBITDA margins will stabilize around 25-26% over the next few years. The Company is expecting its EBIT to reach approximately $5 million with EBIT margin over 37% for the year 2007. BER projects EBIT margins will become stable around 39-41% over the period 2008-10.

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Recent News and Press Releases

Harrah's Casinos to Install Axis Ballast Systems (Nov 13, 2006)

Axis Technologies, Inc Rated 'Outperform,' Target Price $3.06 by Beacon Equity Research (Nov 13, 2006)

Kennebunk Schools Select Axis Technologies, Inc. Ballasts (Nov 13, 2006)

Axis Technologies Displays Product at AIA Tradeshow (Nov 10, 2006)

Axis Technologies Signs New Manufacturers Representatives (Nov 10, 2006)

Axis Ballasts Selected for Marion Gerrish Community Center (Nov 09, 2006)

Axis Technologies Receives Unprecedented Amount of Inquiries After Showcasing at Lightfair International (Nov 09, 2006)

 

Axis Receives Patent for Energy Saving Ballast System (Nov 03, 2006)

Axis Technologies, Inc. Now a Publicly Traded Company (Oct 30, 2006)

 

 

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Management

Kip Hirschbach (President/CEO):

Jim Erickson (VP/COO)

Brian Bowman (California Regional Manager)
 

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Contacts

Axis Technologies, Inc.
2055 S. Folsom Street
Lincoln, NE 68522
Phone: (866)458-9880
Fax: (866)458-9881

Web Site:
http://www.axistechnologyinc.com

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FORWARD LOOKING STATEMENTS

This report includes forward-looking statements that reflect Axis Technologies, Inc. current expectations about its future results, performance, prospects and opportunities. Axis Technologies, Inc. has tried to identify these forward-looking statements by using words and phrases such as "may," "will," "expects," "anticipates," "believes," "intends," "estimates," "plan," "should," "typical," "preliminary," "we are confident" or similar expressions. These forward-looking statements are based on information currently available and are subject to a number of risks, uncertainties and other factors that could cause Axis Technologies, Inc.'s actual results, performance, prospects or opportunities to differ materially from those expressed in, or implied by, these forward-looking statements. These risks, uncertainties and other factors include, without limitation, the Company's growth expectations and ongoing funding requirements, and specifically, the Company's growth prospects with scalable customers, and those outlined above. Other risks include the Company's limited operating history, the Company's history of operating losses, consumers' acceptance, the Company's use of licensed technologies, risk of increased competition, the potential need for additional financing, the terms and conditions of any financing that is consummated, the limited trading market for the Company's securities, the possible volatility of the Company's stock price, the concentration of ownership, and the potential fluctuation in the Company's operating results.

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Disclaimer

AllPennyStocks.com feature stock reports are intended to be stock ideas, NOT recommendations. Please do your own research before investing. It is crucial that you at least look at current SEC filings and read the latest press releases. Information contained in this report was extracted from current documents filed with the SEC, the company web site and other publicly available sources deemed reliable. For more information see our disclaimer section, a link of which can be found on our web site. This document contains forward-looking statements, particularly as related to the business plans of the Company, within the meaning of Section 27A of the Securities Act of 1933 and Sections 21E of the Securities Exchange Act of 1934, and are subject to the safe harbor created by these sections. Actual results may differ materially from the Company's expectations and estimates. This is an advertisement for Axis Technologies, Inc. The purpose of this advertisement, like any advertising, is to provide coverage and awareness for the company. The information provided in this advertisement is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation or which would subject us to any registration requirement within such jurisdiction or country.

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