Creations of the mind 1 © Metis Partners 2012

2 © Metis Partners 2011

© Metis Partners IP assets under the skin of every business – need to look for them……… … to understand what you have and don’t have - compare to competitors

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Universities / Inventors: commercialisation platformsUniversities / Inventors: commercialisation platforms Large Co : IP sale & leaseback - Ocean Tomo Europe Out-licensing into non-competing marketsLarge Co : IP sale & leaseback - Ocean Tomo Europe Out-licensing into non-competing markets Outright IP sale IP (patents) assertion SME:min £1m turnover – Metis way!!SME:min £1m turnover – Metis way!! 7 © Metis Partners 2011 IP Monetisation alternatives

Patents & software Competitive Advantage

 Brands – always UNDERVALUED!  Patents  UK & Community trade marks / designs  Customer databases (sold and valued)  Software products  Software systems  Process (manufacturing) information  Know-how (and negative know-how)  R&D and tax credits WHY else?... recovery £££ value in selling IP assets © Metis Partners 2012

IP valuation ….. like men vs women we all see things differently! © Metis Partners

11 © Metis Partners 2011 VALUATION – Funders TRUST “in situ” valuation...WHY? Not “black box” hypothetical valuationNot “black box” hypothetical valuation Linked to current turnover / revenues of businessLinked to current turnover / revenues of business Relies on a “rating” of IP assetsRelies on a “rating” of IP assets Incorporates distressed / insolvency sale value £Incorporates distressed / insolvency sale value £ reasonable royalty rate based on IP asset rating – high vs lowreasonable royalty rate based on IP asset rating – high vs low

IP Asset value indicators – funders Low Value – Recognition of critical know-how in businessLow Value – Recognition of critical know-how in business Medium Value – protection of key know-how /TS behind competitive advantageMedium Value – protection of key know-how /TS behind competitive advantage High Value – JVs / collaboration, sharing know-howHigh Value – JVs / collaboration, sharing know-how e.g manufacturing case study Low Value – unregistered TM/logo useLow Value – unregistered TM/logo use Medium Value – TM’s awards and broadened reputationMedium Value – TM’s ® & awards and broadened reputation High Value – expanding online or into new markets / channelsHigh Value – expanding online or into new markets / channels e.g. musical instrument case study Trade secrets Know -How and Key People Brand & Reputation © Metis Partners

Low Value – patents, software, TM’sLow Value – patents, software, TM’s ® Medium Value – key patents & software protectionMedium Value – key patents & software protection High Value – out-licensing non core & IP assertion / infringementHigh Value – out-licensing non core & IP assertion / infringement e.g recruitment case study Low Value – image enhancing customersLow Value – image enhancing customers Medium Value – customer loyalty & stickinessMedium Value – customer loyalty & stickiness High Value – customer reliance or tribal knowledge to / from customersHigh Value – customer reliance or tribal knowledge to / from customers e.g. restaurant case study Registered Intellectual Property Critical Customer Relationships © Metis Partners IP Asset value indicators (2) – funders

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Balance sheetTrade Co £000 PPE215 Current assets50 Total assets265 Equity & liabilities Total equity245 Current liabilities20 Total equity & liabilities 265 Off B/S IP assets – brand, patents, software etc. IP valuation “transaction price” £150k £1m t/o business 15 © Metis Partners 2010 IP asset rating – royalty rate 9%

Balance sheetTrade Co £000 PPE200 Current assets50 Total assets265 Equity & liabilities Total equity245 Current liabilities20 Total equity & liabilities 265 Balance sheetIPCo £000 Intangible assets150 Current assets20 Total assets170 Equity & liabilities Total equity150 Current liabilities20 Total equity & liabilities 170 On B/S IP asset security for funders IP valuation “transaction price” £150k £1m t/o - transaction IP valuation £150k 16 © Metis Partners 2010

Balance sheetTrading Co £000 PPE215 Current assets (incl. new IP debtor OR cash) 200 Total assets415 Equity & liabilities Total equity395 Current liabilities20 Total equity & liabilities 415 Balance sheetNEW IPCo £000 Intangible assets150 Current assets20 Total assets170 Equity & liabilities Total equity150 Current liabilities20 Total equity & liabilities 170 IP Licence – bank lend against 2.5 times annual (royalty) revenues £130k pa x 2.5 = £300k NOT against transaction valuation £150k New IP asset cashflow valuation £300k 17 © Metis Partners 2012 IP asset rating / value improvement work – 13% royalty rate

Benefits  Security over critical IP assets now on B/S of IPCo  Visibility of dedicated cash flow to repay debt  Company focus on cash flow value of IP assets  Attract private investors/partners Observations  Identify IP assets considered critical to the business  IP often not secured nor valued by bank / investors  Intangibles can be worth as much or more than trading business  Identify buyers for IP assets in advance – M&A / competitors / partners / customers © Metis Partners 2012 Bank / Investor benefits

Restructuring options – bank benefits © Metis Partners  New & improved security – more control over business/management  Hive off – no shadow director issues for bank  Conditions precedent & subsequent – bank have REAL influence  IP asset package & disposal - neat and quick (weeks not months)  Enhanced recovery – accelerated disposal / pre-insolvency Stephen Robertson Tel: (+44)