Axiam, Inc.

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June 17, 2013 Issue

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As the Only Vendor Designing Repeatable Assembly Processes that Results in Optimal Engine Performance, Axiam, Inc. is providing a New Source of 7% in Fuel Consumption Savings and Significant Operating Cost Savings for Airlines and Engine Shops

About Axiam, Inc.:

www.axiam.com

Axiam offers the only repeatable, computer-driven engine core assembly process solutions available for the commercial aero, military aero and industrial markets. Axiam's assembly processes can be configured for any speed component assembly used in engine shops or at remote sites. Axiam's assembly processes control assembly variables while significantly reducing assembly time. As a result, shops gain cost savings, improved engine quality and improved performance. Its assembly processes bring guaranteed improvements in engine SFC, EGT Margin and Vibration. These improvements result in significant operating cost savings for each aircraft as well as a longer average wing time. Axiam’s repeatable assembly processes incorporate predictive applications software, custom tooling, proprietary procedures, training, on-going service and engineering support, and high-precision measurement. Assembly turn time, spares utilization and the machining of component parts are markedly reduced.

Donald Lohin

President

Mr. Lohin has served as Chairman, President and CEO of Axiam, Inc. since 2000, achieving a turnaround for this turbine engine core assembly processes company. Axiam’s products and services bring improved engine quality and performance while providing turn time and cost savings to the engine shop. Mr. Lohin brings broad experience in general management, sales & marketing and finance/operations as well as a record of successfully growing both public and private companies. As Chairman, President and CEO of Bio-Imaging Technologies, a public medical information company, he grew sales over 200% in two years. Previously, he was President of the Faxon Company, a $500 million private information services company, where he developed and implemented marketing and product strategies for growth. As COO at Wicat Systems, a public aerospace training and education company, Mr. Lohin achieved a turnaround in his first year to profitable growth, growing the stock valuation five-fold. Prior to Wicat Systems, Mr. Lohin served as CFO of Cullinet Software and served in sales and marketing roles with Mead Corp., Xerox Corp. and General Electric. He holds an M.B.A. from the University of Virginia and a B.S.E.E. from Lehigh University.

Clean Technology

Turbine Engine Assembly

Axiam, Inc.
58 Blackburn Center
Gloucester, MA 01930
978-281-3550

www.axiam.com

Axiam, Inc.

Print Version

Interview conducted by: Lynn Fosse, Senior Editor, CEOCFO Magazine, Published – June 17, 2013

CEOCFO: Mr. Lohin, would you tell us the vision at Axiam?

Mr. Lohin: Our vision is to provide a source of fuel savings for airlines and improved engine performance by using computer aided technologies to assemble aero and industrial engines.

CEOCFO: How does it work?

Mr. Lohin: What we do is measure each engine core part, collecting 8,000 data points per part with a measurement accuracy of better than 20 millionths inch. The integrated software generates optimal build models from this data. Axiam provides proprietary assembly procedures, tooling and software in order to enable the actual build to approximate the optimal build models for each engine core module. If the engine core build does not approximate the optimal build model, then the engine will vibrate and its performance will deteriorate when it is on wing. This deteriorating performance may cause the engine to be eventually removed prematurely from the aircraft for overhaul which increases the airlines operating costs. We are the only vendor that designs repeatable assembly processes which results in efficiency and reliability in the engine shop and consistently optimal engine performance for the customer.

CEOCFO: How were engines put together before your software and technology?

Mr. Lohin: Engine shops around the world typically use a methodology that was developed in the nineteen fifties to assemble turbine engines. That methodology relies heavily on the expertise of each individual mechanic. That expertise varies from mechanic to mechanic. Mechanics use this traditional, “trial and error” methodology and are unable to achieve repeatability. The engine core consists of rotors, shafts, bearings/seals, casings and blades. The mechanics will take the presumed rotor discs’ high points and offset them alternatively by 180 degrees to build a rotor. The mating of rotors to the shaft or other rotors, the building of bearings/seals, and the assembly of the casing are built through guesswork. The blades are distributed about the theoretical centerline of each disc without regard to the unbalance of each assembled rotor. Once a rotor is built and balanced it is not until the engine is fully assembled that it enters the test cell to measure vibration and performance. This is an expensive methodology if the engine does not meet the minimum requirements in the test cell and needs to be removed, disassembled and rebuilt prior to re-entering the test cell again. In contrast, Axiam uses computer technology and high-precision measurement to build about the actual centerline of rotation of the engine core which reliably enables an optimal build on the first pass saving the needless expense of the traditional methodology.

CEOCFO: Are you building the engines at your location?

Mr. Lohin: No, we sell our assembly processes directly to engine shops or airlines for placement into engine shops.

CEOCFO: Is the software basically self explanatory or is there interpretations still needed by the mechanic?

Mr. Lohin: The user interface for the software is easy to use. The mathematics embedded in our software was developed by MIT mathematicians. The optimal build models in the software are integrated for the engine core modules. The models become the target for the engine core build. There are no interpretations for operators of Axiam’s software. Once a rotor is built in our proprietary tooling, it is placed upon the Axiam measurement gauge and measured to verify that it approximates the optimal build as indicated by the predictive software models. Axiam’s assembly optimization processes contain SmartStack Software, ShaftMate Software, BearingStack Software, SmartCase Software and SuperStack Software to develop the predictive software models for the engine core so that their centerlines overlap.

CEOCFO: Is there much or any competition for what you have developed?

Mr. Lohin: Our competition comes from that trial-and-error engine manual methodology that we talked about earlier. Probably 95% of engine shops use that methodology. Only Axiam provides repeatable engine core assembly processes. Therefore, the benefits from using an Axiam assembly process are compared to the results from using the engine manual procedures and tooling.

CEOCFO: Is the industry aware?

Mr. Lohin: No. Axiam has been in business since 1983 but has evolved its products over the years. Years ago, the company sold measurement gauges alone and then added some stacking software for turbine compressors. Today we offer assembly processes that build the entire engine core for use in engine shops around the globe. Very few customers, or potential customers, understand that our offering has expanded to include the entire engine core in order to improve engine quality and performance.

CEOCFO: What is the business strategy to show them?

Mr. Lohin: Our strategy is to appeal separately to airlines and engine shops. In contracts with airlines, Axiam would make the capital investment and receive payment in the form of a percentage of fuel savings compared to a pre-Axiam baseline. We will be launching soon a social media strategy to try to reach airlines directly to inform them of the available fuel consumption savings. We recently formed a marketing partnership with Flight Sciences International, a Santa Barbara company, which develops fuel consumption programs for all aspects of an airline’s operations. Together, we deliver a cost-effective new source of 7% in fuel consumption savings for airlines, on average.

CEOCFO: When you speak with someone about your approach do they understand easily and is there an ‘aha’ moment?

Mr. Lohin: Due to the complexity, our offering must be explained simply and directly. The use of computer technology is now making a greater penetration in the aerospace and industrial turbine marketplace as the pressure for cost savings and performance intensifies. Engine manufacturers have entered the engine aftermarket and aggressively promoted their “trial-and-error” assembly methodology and equipment.

CEOCFO: What gives you the confidence that you can break through all the barriers?

Mr. Lohin: Axiam’s assembly processes provide our customers with desired results: airlines receive engines with improved quality, reliability, longer wing time and improved performance; engine shops improve their engine turn time and shop efficiency. Each bolsters its competitive advantage while improving its cash flow. Eventually prospective customers will learn of this new source of fuel savings. I think that computer-aided assembly processes will gain greater acceptance in time as highly visible airlines and engine shops experience the benefits.

CEOCFO: Are you funded for the big push you are making?

Mr. Lohin: Yes. We should be able to fund this initiative with internally generated cash flow.

CEOCFO: Why should the business and investment community pay attention and why is Axiam an exceptional company?

Mr. Lohin: We are exceptional in that we are trying to win market share against much larger companies by utilizing technology effectively in a market niche. It will be interesting to see how much market penetration can be made against competitors who bundle several products and services. This is an interesting business situation that many entrepreneurs encounter and from that aspect, it is something worth watching.

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“A cost-effective new source of 7% in fuel consumption savings for airlines.”- Donald W. Lohin

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