MAGNETIC REFRIGERATOR

A major evolution in refrigeration！

WHO WE ARE?

Liu QuFinance DirectorPhD of Economics in Nottingham University 5-year working experience in Finance Department in MEGS Cost optimisation

Mei ChewSales DirectorMBA & PhD in Mechanical Engineering in Loughborough University Lead bench to manufacturing line Main client contact

Philip KeenanManaging DirectorMBA in Birmingham University International consultancy Experience Lead development of

WHO WE ARE?

Ozak EsuCommercial and Marketing DirectorMBA, PhD in Electrical Engineering in Loughborough University Part-time marketing and sales advisor Business to business marketing

Jingjing LiuR&D DirectorPhD in Materials Engineering in Nottingham University Multi-disciplinary research background Product and technology development in

Executive Summary

Looking to secure funding of £500K for the next 5 years

Mr. COOL A research and development company in Magnetic Refrigeration

Short-term goals

Updating existing refrigerators

Build market-ready prototype

Long-term goals Explore further applications of the novel material

Operations Research and DevelopmentLicensing

Non-disclosure license agreement with two magneticmaterial manufacturers

Exclusive licensing (territorial) to two global leaders in refrigerator manufacturing (commercial/domestic)

2005: Research conducted into the development of new material

2009:Breakthrough – Development of a novel magnetic material

History

Patent Process

Provisional UK Patent

Application

International (PCT)

Application

National Application

Examination of National

Filing

Granted Patents

12 months

> 3 months

18 months

Theory

Benefits Green technology Noise-less technology Lower energy consumption Much cheaper cooling system Long lifetime (current and anticipated)

Before

19th Century

1879:

1st fridge invented

1927:

1st household fridge

1960s-2013:

Air-compressing

fridge

FROM NOW!

Operations

Maintain our patent

Develop a full-scale market-ready prototype

• Integration with refrigerator manufacturer’s product

Secure exclusive licensee

• Collaboration with major fridge manufacturer

The Industry

IBISWorld Global Industry Report (http://clients1.ibisworld.co.uk/reports/gl/industry/productsandmarkets.aspx?entid=930)

Global Household Appliance Manufacture Location 2013South East Asia - 44.1%

Europe - 36.2%

North America - 9.1%

India & Central Asia - 3.5%

South America - 3.3%

North Asia - 1.8%

Australia/Oceania - 1.2%

Africa & Middle East - 0.9%

Global Industry Revenue 2012 = £143.6 billion

The Industry Leaders

2,507

2,597

3,222

3,518

8,212

8,568

9,196

9,995

11,897

14,907

2,436

2,563

2,939

3,090

5,698

7,679

7,030

9,436

11,706

12,796

Indesit Company

Miele

Arcelik

Groupe SEB

Gree Electric Appliances

BSH Bosch and Simens Hausgerate

GD Midea Holding Co.

Electrolux

Whirlpool

Haier electronics

Global Net Sales in million GBP

2010 2011

China

Europe

Global Powers of Consumer Products (Top 10 Household Appliance Manufacturers) 2013, page 31 Published by: Deloittehttps://www.deloitte.com/assets/Dcom-Global/Local%20Assets/Documents/Consumer%20Business/dttl_cb_GlobalPowersOfConsumerProducts2013_031913.pdf

North America

India

Australia

The Market

IBISWorld Global Industry Report (http://clients1.ibisworld.co.uk/reports/gl/industry/productsandmarkets.aspx?entid=930)Euromonitor International (http://www.euromonitor.com/refrigeration-appliances-in-germany/report)Statista (http://www.statista.com/topics/1068/home-appliances/)Harvard Business School “Case Study: Haier” (http://hbr.org/product/haier-taking-a-chinese-company-global-in-2011/an/712408-PDF-ENG)TV Veopar Journal, April,2012 (http://www.adi-media.com/PDF/TVJ/annual_issue/009-Refrigerators.pdf)The Economic Times (http://articles.economictimes.indiatimes.com/keyword/refrigerator)John Lewis (http://www.johnlewis.com/electricals/fridges-freezers/freezers/c80000512?_requestid=1881966)Sears (http://www.sears.com/appliances-refrigerators/c-1020022?adCell=W3)

Deciding Factors Willingness to invest in innovation Significant share of market in patent active areas In-house manufacturing capacity and access to retail distribution channels Proximity to the potential “raw material” manufacturer

Godrej 10.8%

Samsung14%

Other 16.2%

LG Electronic

18%Haier 21%

India Whirlpool 20%

8.4 million units

Other 38%

Haier37%

China BSH Refrigeration 25%

61.89 million units

Other 66%

Indesit12%

Europe BSH 22%

34.24 million units

Other 68.4%

Electrolux20.6%Australia Whirlpool

11% 1.66 million units

GE

17.2%

Other 17.2%

Electrolux22.8%North America Whirlpool

42.8% 21.89 million units

Industry Outlook

The Industry is mature however, innovation in energy efficiency and design are forecasted to lead to growth

Demand Trends (2013-2018) Rising environmental concern Rising energy cost Attractive Design (Increased longevity of food preservation) Increasing consumer interest in interior design Purchase by replacement deferral consumers

Economic Trend(Threatening from 2018): Rising steel and aluminium costs

0

1

2

3

4

5

2014 2015 2016 2017 2018 2019

Gro

wth

%

Year

Revenue Outlook For Global Household Appliance ManufactureYear

Revenue (£million)

Growth %

2014 149,210.95 4.1

2015 155,098.52 3.9

2016 161,311.76 4

2017 168,020.36 4.2

2018 175,252.98 4.3

2019 180,887.01 3.2

Existing refrigerators Research Groups

The Competition

Strategy

Strategy: Rapid Exploitation Patent gives Mr. Cool a head-start and competitive advantage Secure licence agreement with major/dominant market share holders within the

industry (Market concentration is low) High-level of knowledge management within Mr. Cool for potential modifications

Mr. Cool’s operational competitive priorities are; Innovation and Time

• Emerging technology (Challenging existing

concept)

• Compatibility with manufacturer’s current process

Potential Barriers to Acceptance

Operations Model

ConsumersTerritorial Licence

Profits

Profits• Upfront Payment (one-off)

• Royalty (2%)

• Upfront Payment (one-off)• Royalty (2%)

Link supplier with

manufacturer

Link supplier with

manufacturer

Investors

5 times more

Investment

Financial Analysis Equity investment: £ 500 000

Funding source: Research Councils UK

Royalty on one license: 2%

Markets:

Bosch (in Europe & China)

Whirlpool (in India, North America & Australia)

Material Manufacturers:

VACUUMSCHMELZE GmbH & Co. KG.(Germany)

Clime Magnet Manufactory Co. Ltd (China)

Accrual basis of accounting

*Upfront payments have not been included in financial projections as negotiations withsuppliers and manufacturers are ongoing

Cost Breakdown

£21.38

£10

£50

£15

£75

£104

Fixed expenses in 2013 (£ 000s)Establishment Costs (Office and labequipment rent)

Sundry Costs

Patent Fees (inc Examination,Translationand Agent fees)

Annual patent renewal fees

R&D Costs(inc. Prototype development,Outsourced manufacturer fee)

Admin Costs (Management Salaries andPension)

*Management salaries will increase by 5% each year from 2016 onwards

Financial Overview (1)

-1,000

0

1,000

2,000

3,000

4,000

5,000

2013 2014 2015 2016 2017 2018

£ 0

00s

Year

Profit & Loss (2013-2018)

Net Income

Costs

Profit

First licensing

deal

Financial Overview (2)

0

1000

2000

3000

4000

5000

2013 2014 2015 2016 2017 2018

£ 0

00

Year

Net income (2013-2018)

China

India

Australia

European region

North America

5% of the fridge markets; 5% increase on the sales units each year Bosch in China & Europe, Whirlpool in North America, India & AustraliaMaterials suppliers VACUUMSCHMELZE in Germany & Clime Magnet in China

Cash Flow (2013-2018)

0

40000

80000

120000

160000

200000

240000

0

2000

4000

6000

8000

10000

12000

2012 2013 2014 2015 2016 2017 2018 2019

Sale

s (0

00

s)

Y/E

cash

(£

00

0s)

Year

Y/E cash balance Total Sales

First licensing

deal

Finance Summary£ 000s 2013 2014 2015 2016 2017 2018

Total Net Income 200 200 3,397 3,567 3,746 3,932

Total Fixed Expenses 275 200 200 205 210 216

Profit Before Interest & Tax (75) 0 3,197 3,362 3,535 3,716

Dividends 0 0 0 300 350 400

Net Profit (100) 0 2,268 2,353 2,475 2,601

Y/E cash balance 400 400 2,668 4,721 6,846 9,047

First

DividendFirst

licensing deal

Funding needs: £ 500,000

Discount rate: 10%

Share of equity being offered: 7%

Exit Strategy

Potential sale of business after 10 years (to an investment company or refrigerator manufacturers)

License (Non-Disclosure Agreement) with magnetic material manufacturers

Exclusive license to selected manufacturers for 5 years

Continue with modification to add life to the patent

Potential license extension with manufacturers after 5 years

Summary

Developed a novel magnetic material Patented

Investment of £500K for the next 5 years. Market-Ready Prototype Production Patent Renewal Administration and Establishment Costs

Magnetic refrigeration – Updating existing fridges Innovative Efficient Environmental-Friendly

Thank you for listening

Any Questions?