Angel Capital Summit March 22, 2012

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1 Angel Capital Summit March 22, 2012 For Additional Information Contact: Dr. Brian R. Murphy President & CEO m:

2 Disclaimer This business plan summary is being provided for informational purposes only. The delivery of the attached business plan summary does not constitute an offer to sell securities nor does it, nor is it intended to, constitute a solicitation of any kind of an offer to sell securities or to make an investment in the Company. Any proposed sale of securities can only be initiated by the Company through the delivery of a private placement memorandum expressly for such purpose. Financial projections are inherently speculative and there is a potential of substantial discrepancies between actual results and projected results. There are many factors and circumstances that could adversely affect operations, some of which may not even be known to management of the Company as of the date of this business plan summary. The projections contained herein are based upon assumptions which management determined in good faith and deem to be reasonable; however, the assumptions may not come true. The projections are subject to many risks, including the risks discussed in this business plan summary and the Company s business plan. The statements made in this business plan summary are made as of the date hereof; and, the delivery of this business plan summary shall not, under any circumstances, create any implication that there has been no change in the affairs of the Company since the date hereof and the Company makes no representations that the information contained herein is accurate in all material respects or correct as of the date hereof or any time subsequent to this date. No person has been authorized to give any information or to make any representations in connection with the delivery of this business plan summary other than those identified as authorized contacts in the business plan, and, if given or made, such other information and representations must not be relied upon as having been authorized by the Company or any of its affiliates. Any additional questions or inquiries regarding the Company should ldbe directed dto the Company. 2

3 Company Overview Product: SiC Wafers Customers: Device Manufacturers 3

4 Why Silicon Carbide? EV / HEV Solar Wind S l & Wi d Cellular & RF Hi h Power, High P Hi High h Effi Efficiency, i Hi High h TTemperature, t Hi High h FFrequency 4

5 Company Overview Founded in seasoned employees $2.6M funding to date Seeking $3M to complete $4M round This round moves the Company through h product approval 5

6 3C SiC is even better than today s widely used regular SiC Even Higher Power Even More Efficient Even Faster Switch hspeeds Reliable SiC Devices Premium product at comparable mfg. costs higher margins 6

7 Target Markets & Key Accounts Power Electronics Solar and Wind PFCs Smart Grid EV/HEC Motor Drives *Key accounts Microsemi* Infineon Semisouth High Frequency Cellular Base Stations TV transmission Stations Military Wireless and Radar IQE* NXP TriQuint* Eudyna LEDs High Brightness & High Efficiency Green gap Nichia OSRAM Philips/Lumileds 7

8 Industry Size $6,000 $5,000 $000,000 $4,000 $3,000 In $2,000 $1,000 $ LED Substrates $684 $752 $828 $910 $1,001 $1,102 $1,212 $1,333 RF Devices Substrates $26 $32 $39 $47 $58 $70 $86 $105 High Power Device Substrates $1,680 $1,913 $2,178 $2,480 $2,824 $3,215 $3,661 $4,168 Total Substrate SiC Market $2,390 $2,697 $3,045 $3,438 $3,883 $4,387 $4,958 $5,606 SiC Substrate TAM approaching $6 billion by

9 Established Customer Relationships SiC Systems will sell (B2B) to Device Manufacturers 9

10 Timeline to Commercial Factory Demand driven incremental ramp strategy Low capex expansion $200K per tool 4 month lead time Factory location driven by elect. rates and skilled workforce Sept. Tool #3 & 4 On Line Dec. Wafer Shipments April 30 wafer/month to Customers Jan. Factory Selected Oct. Factory Startup June Series 1 $4M Aug. Series 2 $5 MM 10

11 Risks Risks Mitigation Wafer polishing Growth rates Funding Competition Revenue Outsource to industry experts Methodical plan developed with early successes $1M local Colorado lead Broad patent application 25+ patentable ideas Partnership discussions in progress 11

12 18 Month Financial Projections $4 million financing moves technology to commercial readiness Monthly Expenses $400,000 $350,000 $300,000 $250,000 $200,000 $150,000 TOTAL CAPEX EXPENSE TOTAL FACILITY EXPENSE TOTAL G&A EXPENSE TOTAL "INDIRECT" LABOR EXPENSE TOTAL "DIRECT" LABOR EXPENSE TOTAL R&D / OPERATIONS EXPENSE h Position End of Mon nth $3,500,000 $3,000,000 $2,500,000 $2,000,000 $1,500,000 $100,000 Cas $1,000,000 $50,000 $500,000 $ $0 2 4 growth tools quadruple boule thickness customer JDAs 12

13 Exit Strategy Q Profitability Dow Acquires SiCrystal AG Infineon Sterling Operates as a Power Integrations Technologies AG Semiconductor Subsidiary of $30M investment in acquires SiCED for $11MM Rohm SemiSouth Laboratories Electronics (SiC devices) Devleopment GmbH Cree Acquires Anvil Instrinsic Semiconductors Semiconductor funded d for $45MM $10M 2015 Sales $23M 2016 Sales Fairchild acquires TranSiC AB for $17MM SKC Acquires Crysband of South Korea 13

14 Investment Structure Series 1 Commercial Readiness Q $4 million $1 million lead by Colorado VC Preferred stock $4.5 million pre money valuation Series 2 Commercial Launch Q $5 million For further information contact: Dr. Brian R. Murphy President & CEO m: b.murphy@sicsystems.com 14

15 3C SiC is even better than today s widely used regular SiC Even Higher Power Even More Efficient i Even Faster Switch Speeds Reliable SiC Devices Premium product at comparable mfg. costs higher margins 15

16 Appendices

17 Key Executives Brian R. Murphy, PhD, President & CEO 20 years entrepreneurial, managerial, research, and commercialization experience Co founder, Chairman, and CEO of PrimeStar Solar which he sold to General Electric in 2011 Negotiated corporate financings approaching $400 million and inventor on 6 patent applications Josh Robbins, PhD, Founder, Chief Technical Officer Inventor of patent pending HFCVD technology President CMD Research, process development engineer at Texas Instruments PhD Chemical Engineering from Colorado School of Mines and inventor on 2 patent applications Thad Briggs, Director of Engineering 20 years semiconductor process engineering and process integration experience with Texas Instruments BS Ceramic Engineering from University of Illinois and inventor on 6 patent applications Christian Robbins, VP Operations 11 years senior product and marketing management experience with P&L responsibility for a $650 million product line at Qwest MBA from Southern Methodist University and BA Economics from University of Colorado Laurie Marks, VP Business Development 15 years account, product, and sales team management experience MBA from St. Louis University and BA Communications from University of Colorado Additional Hires SiC Systems has developed a detailed bottoms up growth strategy which includes a staffing plan to enable the projected growth. Staff will be added as the business growth demands with an eye towards hiring individuals with the proven experience to meet the long term strategic direction of the Company. Please see the Company s detailed business plan for details on the timing of additional i hires. 17

History and Status of Current Process History

RFP Proof of concept completed in 2007 at CMD

all IP and equipment transferred Continued NSF

full scale prototype chambers in operation 200 mm

wafers and seeds produced Semi insulating n type

18 History and Status of Current Process History Initial ideas conceived in 2004 in response to Navy RFP Proof of concept completed in 2007 at CMD Research funded by NSF SiC Systems founded in 2007 all IP and equipment transferred Continued NSF support and angel investment Current Process Two full scale prototype chambers in operation 200 mm deposition capability demonstrated 3C SiC (110) wafers and seeds produced Semi insulating n type tested Low volume 3 and 4 substrates for characterization, evaluation, and seeds 18

of switching losses over silicon 10x increase in blocking

improvement in switching speed Junction threshold

w/si SiC Device Applications High voltage High power Fast

19 Why Silicon Carbide? Performance Advantages of SiC over Silicon 10x improvement of switching losses over silicon 10x increase in blocking voltage 4x improvement in thermal conductivity 10x improvement in switching speed Junction threshold temperature >600 C 1/10 th the Size w/sic Bulky & Expensive w/si SiC Device Applications High voltage High power Fast switching speeds Elevated temperatures Increased efficiency Reduced weight and volume Improved thermal management 19

20 State of the Art Sublimation Modified Lely Method used by all volume producers of SiC boules (Cree, Nippon Steel, Dow Corning, II VI, etc.) Ref: Complex Inefficient Expensive Method: entire unit heated until source material sublimes then crystallizes on seed crystal (~2400 ºC) Strength 30+ years of development Weaknesses High temperatures lead to additional cooling stresses Geometry difficult to scale heat and mass transfer limitations Source material charge limits boule length Micropipe and screw dislocation propogation Expensive high purity SiC less pure than SiC from HFCVD 20

21 Revolutionary Leap Frog Technology SiC Systems HFCVD (hot filament chemical vapor deposition) Enabling Features Uniform growth surface and gas phase heating straightforward boule diameter scaling Gas phase and substrate temperature are decoupled high 3C SiC growth rates High purity, low cost gaseous precursors improved doping control, semi insulating Chamber design and filament innovations continuous processing > 1 week Reactant gas inlet Filaments maintained at high temperatures (>2200 ºC) Uniform growth surface temperatures across diameter (<1500 C) Patent Pending: US 2009/ A1 21

22 18 Month Commercial Preparation Facility and Equipment 5,000 sq ft facility 4 HFCVD tools o 2 process optimization and integration o 2 boule production Growth Targets 100mm Growth rate improvements Continuous run time to 120 hours Overall yield to 80 % o Growth o Grinding/slicing o Polishing Production Targets 45 substrates/month 30 substrates/month to partners 200 total substrates to partners Epi ready, 100 mm, (110) orientation (111) orientation if requested 22

23 SiC Polytypes SiC and Polytypes SiC exists in many different structures and orientations 6H and 4H SiC (hexagonal) are the only commercially available polytypes SiC Systems produces 3C SiC (cubic) 3C advantages over 4H and 6H Lower defect density leads to enhanced device performance and reliability No spontaneous and piezoelectric polarization results in enhanced reliability, allows for planar normally OFF MOSFET designs, and increases efficiency offering a solution for green LEDs Enhanced electrical properties including isotropic (same in all directions) and superior electrical transport 23 23

4H and 6H SiC Defects Major Defects Micropipes, also know as killer

propagate through boule increasing in density with boule length

epitaxial layers Other Defects Stacking faults Mosaic structures Stress

24 4H and 6H SiC Defects Major Defects Micropipes, also know as killer defects are large open core screw dislocations Screw dislocations propagate through boule increasing in density with boule length (>10,000/cm 2 ) Screw dislocations also propagate along the c axis into epitaxial layers Other Defects Stacking faults Mosaic structures Stress fields Typical Micropipe Killer Defect Defects compromise yield, reliability, and device functionality 24

3C SiC Defects Major Defects Micropipes and threading screw dislocations i do not occur

defects are eliminated through annihilation as the boule grows (J.

47) SiC Systems growth technology allows boules to be grown on 3C SiC seeds further

25 3C SiC Defects Major Defects Micropipes and threading screw dislocations i do not occur Other Defects Anti phase boundaries and twin boundaries (stacking faults) Both of these defects are eliminated through annihilation as the boule grows (J. Optoelectronics and Adv. Mat., Vol. 16 (2004) p. 47) SiC Systems growth technology allows boules to be grown on 3C SiC seeds further reducing defect densities J. of Cryst. Growth, Vol , pg 1244 Mat. Res. Soc. Symp., Vol. 742, pg. 47 3C SiC has low defect density and no killer defects 25

26 Substrate Scaling Lely Method Commercial Wafer Availability Year Diameter (mm) Diameter (inch) * * Estimated commercial availability date Devices per wafer as wafer diameter HFCVD readily scalable to 200mm Lely method struggled to achieve 100mm Lely Method 15 years to scale from 25mm 100mm Wafer Areas Scaling with Diameter Diameter (mm) Area (mm 2 ) % more area than 25mm wafer , % 75 4, % 100 7, % , % 26

27 Technology Comparison Modified Lely Method Method Sublimation 1950 s Source Materials Boule Size Limitationsi i Expensive high purity powders Powder chargevolume limits boule length HFCVD hot filament chemical vapor deposition (2007 patent pending) Inexpensive high purity gas precursors Gas supply is not a growth limiteri Growth Temperature > 2200 C < 1500 C Scalability Limited by heat and mass transfer No known limits SiC Polytypes 4H and 6H 3C,4H, and 6H Residual Stress Levels High Moderate Doping Limited (solid phase)control Precise (gas phase) control Micropipe Defects Yes No Screw Dislocation Defects Yes No 27

SiC Substrate Competition Source: Yole Developpement, 2009 2019: 10 year market projection Rapid expansion by 4H and 6H SiC manufacturers brought on by high margins, increasing demand, and industry

28 SiC Substrate Competition Source: Yole Developpement, : 10 year market projection Rapid expansion by 4H and 6H SiC manufacturers brought on by high margins, increasing demand, and industry demand for a second source (Cree supplies wafers and makes device in direct competition with its wafer customers) 3C SiC wafers are not commercially available SiC Systems is believed to be only company that has developed 3C SiC capabilities 15 years of development required to advance from 25mm to 100mm wafers 150mm wafers have been promised for a number of years 28

29 Market Entry Year 1 Year 2 Year 3 3C SiC Schottky Diode Product Release Schedule Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Timeline to Market Entrance Development Epi process development at Epi supplier Unit Process development Loop integration/development Productization Product Development/Electrical characterization Learning Cycle Qualification Process qualification lots Qualification testing ti Year 1 Year 2 Year 3 3C SiC MOSFET Product Release Schedule Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Timeline to Market Entrance Development Epi process development at Epi supplier Unit Process development Loop integration/development Productization Product Development/Electrical characterization Learning Cycle 1 Product Development/Electrical characterization Learning Cycle 2 Product Development/Electrical characterization Learning Cycle 3 Qualification Yield and Reliability Improvement Activities Process qualification lots Qualification testing 29

Intellectual Property US 2009/0038541 SiC boule growth from gas

precursors Adjusting the distance between the substrate and filament

Published October 1 st Office Action December Advisory Action Jan.

30 Intellectual Property US 2009/ SiC boule growth from gas precursors SiC boule growth on a substrate (seed) from gas precursors Adjusting the distance between the substrate and filament Aug. 8 Provisional Filed Feb. 12 Patent Appl. Published October 1 st Office Action December Advisory Action Jan. 20 Claims Amended May 31 Final Amends Aug. 5 Patent Appl. Filed August Restriction Requirment November Final Office Action Jan. 4 USPTO Mtg. April 20 USPTO Comments July 15 Patent Granted Green dates are projected 30

31 Intellectual Property Strategy Thoughtful balance between patents and trade secrets 1 2 patent applications per quarter 25+ ideas in queue Formalized invention disclosures and patent review board Balanced U.S. and international patent protection (1) Idea (2) Notebook (3) IDL (4) PRB (5) Patent Application (6) Patent Granted 31

Military Applications Silicon Carbide Devices High Frequency Over the horizon UHF radar High power RF including electronic counter measures (ECM) and jamming High Power Enhancement mode FETs for high

32 Military Applications Silicon Carbide Devices High Frequency Over the horizon UHF radar High power RF including electronic counter measures (ECM) and jamming High Power Enhancement mode FETs for high temperature and high radiation environments Power switch modules with SiC MOSFETS and diodes for smaller, lighter systems with reduced cooing ships, aircraft, spacecraft High Temperature Turbine and jet engine sensors, actuators, and control electronics High Radiation Satellite and spacecraft electronics and sensors GaN on SiC Devices High Frequency RF/Microwave devices for applications from 2 20 GHz Radar, communications, missile guidance, and electronic warfare High Power Power transistor modules in unmanned aerial vehicles (UAVs) 32

NEXT-GENERATION POWER SEMICONDUCTORS: MARKETS MATERIALS, TECHNOLOGIES

NEXT-GENERATION POWER SEMICONDUCTORS: MARKETS MATERIALS, TECHNOLOGIES The emerging market for silicon carbide (SiC) and gallium nitride (GaN) power semiconductors is forecast to pass the $1 billion mark