Commercialization of an Acoustic Camera Ed Belcher Bill Hanot Joe Burch Sound Metrics Corp.

14 Nov 2006 DIDSON Dual-Frequency Identification Sonar

14 Nov ft Shark A 2.4m (7.9 ft) shark swims in the Oceanopolis Aquarium in Brest, France. The data were collected with the DIDSON Diver Held model held over the top of the aquarium tank wall. Courtesy of Jean-Yves Cueff, NEOTEK.

14 Nov 2006 Deck of Sunken Ship Changing the tilt of DIDSON, captures the deck or railing of a sunken ship and fish above the deck. Taken with Diver- Held DIDSON Diver: Dave Elliott, NOAA

14 Nov 2006 Disclaimer This is a discussion on our commercialization process. I am not endorsing this process for everyone.

14 Nov 2006 Before the Beginning At APL we mostly made systems that satisfied the sponsor but did not generate much interest outside the sponsor’s specific application. We thought our lens-based sonars could be commercialized. We tried to license the technology to an existing company. Companies were not interested. One, company, said it would accept a license only if we first found a buyer for 40 systems. After 15 DIDSONs were sold from APL to a variety of users, we decided to try to form our own company. We had no promise of purchase from anyone. We thought if we started small and only sold 3 to 6 sonars, we could at least pay off our start-up loans.

14 Nov 2006 The Steps We Took Stated our intentions to the APL chain of command Learned specific steps from UW Office of Technology Licensing. Obtained permission to work outside the UW in a area of potential conflict of interest. (forms and permissions from Department Head, Director, Dean of COFS, and a Vice Provost. Incorporated Sound Metrics Completed negotiations for an exclusive license with the UW OTL Teamed with Ocean Marine Industries, Chesapeake, VA Mortgaged equity in our homes and established lines of credit

14 Nov 2006 The Steps We Took Started operations in my basement

14 Nov 2006 The Steps We Took Plowed revenues back into the company to build more sonars. No SMC salaries were paid in 2003 Ed retired in Dec 03, Joe resigned May 04, Bill resigned Sept 04 From March 2003 to July 2005, we operated in the basement of my house.

14 Nov 2006 The Steps We Took In July 2005, we moved to a suite (1,900 sqft) in an office building at Bothell Way NE

14 Nov 2006 The Steps We Took

14 Nov 2006 The Steps We Took DIDSON status through Nov 1, 2006: over 100 shipped and 7 demo/rental units are in operation Our start-up loans are paid off We are getting a salary Number of Employees: 3 full-time and 2 part-time.

14 Nov 2006 Teaming with an Experienced Partner Ocean Marine Industries, Chesapeake, VA, is valuable for selling our products and as a business consultant We value their experience: –Obtaining and tracking customers and closing deals –Processing Government Contracts, POs –Expediting payments They are paid by commission

14 Nov 2006 Commodity Jurisdiction APL asked the Department of State for a commodity jurisdiction for DIDSON DoS responded and put DIDSON on the U.S. Munitions List To ship outside of U.S.A (Canada is an exception) we needed an Export License Ocean Marine worked hard for over 2.0 years to get us off the USML. We are now off, and go through the DoC. Try hard to avoid getting your product on the USML.

14 Nov 2006 Out-Sourcing, a Type of Leasing How do we make sonars with only 3 full-time and 2 part-time people? We chose to work with a number of companies with needed talent and equipment rather than do all the work in-house. –Machining Parts –Circuit Board Assemblies –Array Fabrication and Potting –Cable Assemblies –Payroll –Books Checked and Taxes Prepared by Certified Public Accountant –Specialists that do needed tasks outside of our expertise –Sales and Contracts with Customers –Rent office and work space There is risk in this approach. You cannot easily control the schedules and priorities of outside help. So far, we have not been severely burned.