Hawkes Ocean Sports, Inc - Investment Deck

Investment Opportunity Hawkes Ocean Sports, Inc.

h4p://www.hawkesoceansports.com

•  Vision – Harness the human drive for adventure and explora@on by extending the capabili@es delivered with our “fron@er breaking” winged submersible craF.

•  Approach – Provide an unparalleled underwater tour experience that enhances the luxury resort and cruise ship industries’ porIolio of unique customer ac@vi@es.

•  Introduc1on – A new tourism offering found in the crosshairs of the $40 bn ‘Experien@al’ tourism’ and $3 bn worldwide ‘Dive & Snorkeling’ tourism marketplace.

•  Leverage – Two decades of R&D, $10MM+ sales-‐based funding and six (6) genera@ons of winged submersible craF.

•  Customers – Virgin, venture capitalist Tom Perkins & adventurer Steve Fosse4.

•  Innova1on – Disrup@ve technology & new genera@on of manned submersible craF.

•  The Cra9 – Ini@ally going to market with the 6th genera@on ‘Merlin’ scuba sub.

•  Founded – By world renowned submersible pioneer Graham Hawkes.

.: Hawkes Ocean Sports -‐ Overview

2 Contact: [email protected] Investment principals only

3

1995 – Winged prototype

2003 – Prototype

2007 – Built for Steve Fosse>

2008 – First unit built for Tom Perkins

1). Deep Flight 1

3). Deep Flight Aviator

4). Deep Flight Challenger

5). Deep Flight Super Falcon

.: Six GeneraHons of Winged Submersible Flight

6). Deep Flight Merlin 2010 – First unit built for Richard Branson

2). Wet Flight 1998 – Scuba sub prototype Prototypes: Commercial

Offerings:

Contact: [email protected] Investment principals only

Scuba Diving

4

.: In the Cross-‐hairs of Two Large and Growing Industries

Luxury & ExperienHal Travel

Big: •  60+ million new divers WW since 2000 •  HOS es@mates there are 35M hardcore divers •  HOS model assumes capturing only 1.5% •  Approx spend $4K per capita, per year

Growing: •  In 2009 China had 1M+ new Explorer Divers •  CAGR es@mated at 6%

Global: •  Avg 8.5M Explorer Divers P.A •  5.8M new cer@fied Open Water divers per year •  800K cer@fied dive instructors worldwide •  WW Dive & Snorkel travel business $3 bn

Established Channel: •  33K Dive stores & tour opera@ons worldwide •  Est. 8K dive focused hotels/resorts worldwide

•  Luxury travel represents 3% of total travelers and 20% of the global GDP

•  Avg. Spend per trip is $10-‐20K

•  ‘Experien@al’ Travel is a $40 bn market

•  Luxury & Experien@al fastest growers

• GDP $5,751 bn in 2010 worldwide

•  $1, 241 bn capital investments WW

•  Projected CAGR over > 10 yrs is 4.4%

•  236M people employed worldwide

Sources: PADI and DEMA Sources: Cap Gemini, wEc.org & Mintel


.: MulHple ‘Tiers of Experience’ Within the HOS Business Model

Year 6 ProjecHons:

Tourists Merlin Rides *547,000

increasing increasing

Price $USD Experience Submersible Pilot Training

Pre-‐Owned Fleet Sales

New Submersible Sales

Dive Operators

Adventurers

Experience Value

Underwater Enthusiast

Totals

600

22

44

Category Offering

• 547,000 Merlin rides represents approx 1.55% of the worldwide diver base (es@mated at 35M). This amount does not factor future non diver interest.


.: Business Approach / Overview

6

Private Submersible Sales

HQ Owned & Operated Ocean Experience Center and Flight School

Franchised Ocean Experience Centers

HOS has its origins in the sales of high-‐performance manned submersibles to high net worth individuals, and it is both a current part of our business and a key part of our long-‐term growth strategy. The ocean experience centers and the successive orders of engagement they offer, including flight school, are designed to funnel those individuals capable of private submersible ownership towards an ul@mate purchase of such craF. We also intend to deploy our franchise fleet, aFer 3 years of opera@on, for sale to dive operators, who can use those craF to supplement their exis@ng business on dive tours. High-‐margin and with favorable cash flow through pre-‐payments, the private submersible business will be a key component of HOS value crea@on.

KEY POINTS

Yacht Market AssumpHons: •  Sales Est. 2% of the WW Yacht market base of 6000 (super/mega) •  Yacht Market CAGR 10% •  120 sales per annum opportunity •  30% market share = 36 sales P.A.

HOS will mul@ply its rate of revenue growth and lower its end-‐user marke@ng costs through the development and deployment of franchise opera@ons at leading resorts areas and on cruise ships, to complement and supplement our wholly-‐owned opera@ons. Franchisees will lease Merlin submersibles and related accessories from HOS, and pay for marke@ng and the pilots, which are trained and cer@fied by HOS. The franchisee provides the loca@on and is responsible for marke@ng the experiences in their local market. HOS receives 30% of the overall top-‐line revenues from @cket sales, plus addi@onal fees for marke@ng, training, and fleet usage. Over @me, HOS expects to be able to command ini@al exclusivity payments from franchisees for key opera@ng regions. .

Hawkes Ocean Sports will establish wholly-‐owned ocean experience center in a leading tourism area with a strong dive component. Ini@al sites under considera@on include Florida, Catalina Island and the Caribbean. This center is a cri@cal component for building all aspects of our business, from the offering of tourism experiences to flight school and pilot training. This will serve as a model and market center for new poten@al franchisees and as a showroom for our fleet and private submersible sales. This center will also be used as the site for training all HOS staff deployed as pilots for our franchise partners, and will, ul@mately, be the center of cer@fica@on as we establish the submersible equivalent of PADI/NAUI.

DesHnaHon Resort AssumpHons: •  There are numerous underwater hotels in development or shortly being launching in: Dubai, Istanbul, Fiji, Florida, Bora Bora, USA and Australia. •  We es@mate that there are over 15,000 luxury – ocean based – des@na@on Resorts worldwide. • HOS Resort footprint represents approx 0.27% of the total market opportunity


.: Business Approach / Overview, ConHnued

7

Franchise Cruise Ships & Marine Parks

World Wide Owned & Operated Experience Centers

Used Fleet Sales & Dive Operators

Two other viable markets come in the form of luxury cruise and marine parks. The HOS approach mirrors the one described on the previous slide covering the Franchise Experience Centers. Our scaling towards the cruise industry is very conserva@vely modeled at 10 ships total by Yr5. With Marine Parks we are very ac@vely exploring deployment, with several leading en@@es within the marine tourism sector at the Great Barrier reef in Australia.

The owned & operated business line is tac@cally and strategically necessary for our business. Tac1cal Business Reasoning – Provides a territory driven base of opera@ons to deploy from. Enabling quicker response and be4er customer care while driving a focused environment to drive services, sales, establish territory brand and drive local revenue.

Strategic Business Reasoning – Upon sale of the Franchise business unit in Yr5, HOS will have established key footholds -‐ around the world -‐ from which to drive private market sales and services business and allows local training for future operators u@lizing HOS craF.

By Yr3, it is an@cipated that a new genera@on of submersible craF will be ready for deployment. This will subsequently create a need for a used fleet sales strategy. With this, HOS predicts a sizable demand coming from the Scuba Dive Tour industry with operators seeking to add the Merlin within their experience offering. We envision this triggering other valuable components to our business model

KEY POINTS

Used fleet & Dive AssumpHons: •  Secondary revenue source •  Opens a lower price structure for personal ownership. Part of ramp up strategy to Yr6, model. •  Becomes a guerilla marke@ng resource by targe@ng a wider audience and thus demand. •  Boosts training demand . •  Further establishes HOS as the defacto winged flight cer@fica@on authority

O&O AssumpHons: •  HOS Projec@ng 1 new loca@on established per annum •  Capped at 5 loca@ons •  Key sales and territory center •  Will enable market dominance


.: HOS Business Vision and Approach Timeline

Private Ownership Sub Sales Franchise Resorts & Hotels Franchise Cruise Ships & Marine Parks Flight School & Flagship O&O O&O 5 loca@ons worldwide Used Fleet sub sales of genera@on 1 craF to dive operators

Year 6. Onwards

A B

Tom Perkin Venture Capitalist Super Falcon

Steve Fosset Adventurer

Challenger Sub

Merlin

Private Ownership Submersible Sales

Franchise Business Line -‐ Resorts & Hotels

Franchise Business Line -‐ Cruise Ships & Marine Parks

Flight School & First Owned & Operated Tour Facility

Public Company

C

HOS Launch

Owned and Operated Loca@ons ( 5 planned)

PO SS

Private Ownership Submersible

Market

Used Fleet Sales (Gen 1)

Business Lines -‐ Deployment Phasing: Cash Out Windows: Sale of Established Franchise Business

Planned (op@onal) stock buy back

Public Offering

B

C

A

Cer@fica@on Authority

Timing TBD

Global Footprint Base


Planned dividends distribu@on to investors

.: Merlin Scuba Submersible – Safety is our #1 Priority

Crah Safety

Environmental Safety

•  Posi@ve Buoyancy •  Prevents reef & underwater collisions

•  Ba4ery Power System •  Zero fuel pollu@on •  Low noise emissions •  Zero marine life ecosystem impact

•  Posi@ve Buoyancy •  in power failure craF glides to surface

•  State-‐of-‐the-‐Art Safety Control System •  Computer Controlled Ascent/Descent

•  Pilots trained to high level of safety standards •  Pilots follow PADI scuba procedures •  Specialized training on craF handling

•  Oxygen tanks (80 Cu Ft) housed inside cockpit •  Passengers not confined by equipment

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Safety by Design

Christened the Necker Nymph, as the first was successfully deployed Merlin, at Necker Island -‐ March, 2010.


Sir Richard Branson at Necker Nymph unveiling

.: Franchise ImplementaHon, Overview

LAUNCH

Business Appraisal

Agreement Executed.

Site Viability Study. Proposal Generated.

120 Days

LOCATION STRATEGY

PRE-‐LAUNCH

ONSITE DELIVERY

Solu@on Development

Service Planning

CraF Build Begin. Program Mgr Assigned. Resort Program Ini@ated.

Experience Program Dev. Mktg Program Dev.

Mktg Ini@ated. Onsite Build.

Pilot/Divers Onsite. CraF Delivered. Onsite Training. Local Media Push.

Experience Tours Ini@ated.


An Attractive Business & Investment Opportunity

Competitive conduct:

•  All compe@tors restricted by old technology • Winged flight IP gives HOS significant edge •  Few compe@tors looking at global offering •  Innova@on difficult and requires knowledge • HOS craF represent 6 genera@ons over 20 years

External factors:

•  Strong diving and adventure tourism base •  Consumer becoming more sophis@cated thus tradi@onal adventure tours no longer fulfilling

• High end resorts and cruise ship industry looking for new ways to promote their unique value

Industry structure and economics: •  Small number of real compe@tors •  Industry opportunity very profitable •  Market poten@al growing rapidly worldwide •  Tradi@onal pleasure craF industry slow movers

•  Many of which are restricted to territory

Consumer demand: •  Consumers seeking new & s@mula@ng experiences • Demand consistently growing • Demand not being met byexis@ng operators • Demand is a global realiza@on – Timing is now!

.: Submersible Tourism Market: Forces at Work


=

Emerging/Receding Player

High

High

Low

Low

Challenger

Contender Market Leader Niche Player

Market PenetraHon

Quality of Experience

Hawkes Ocean Sports

Atlan@s Submarines Deep Ocean

Expedi@on

Sub Aviator Systems

Stanley Submarines

.: CompeHHve Landscape, 2010

12

UboatWorx

Scuba CraF

SEAmagine

Nemo -‐ 100 Kemp Marine

DMS

US Submarines


Risks MiHgate Precau@ons

.: Risks and PrecauHons

Slow ini@al growth

Strong compe@@ve response from known global brand

Exis@ng sub compe@tors mimic business model

Customer and/or consumer apprehension of tour safety

Accident or injury early on in business rollout

•  Drive HOS name and brand •  Leverage customer success •  Focus on innova@on via R&D

•  U@lize mgmt team know how •  Clear and targeted marke@ng

•  Leverage O&O as sales plaIorm

•  Technology patents filed •  Winged flight IP proprietary

•  Excel in safety and pilot training

•  Partner with dive body leader •  Drive safety mgmt prac@ce

•  Market safety approach & record

•  Have dive body conduct inquiry •  Focus on safety prac@ce/procedures •  Act quickly to inquiry results with PR


.: CompeHHve Response Strategy

Compe@tor ‘X’ Scenario Hawkes Ocean Sports Result

Defendable Business

Enforce patent protec@on strategy of proprietary technology

A4empts to copy submersibles and business model

Known pleasure craF brand enters field leveraging name and reach

Build and market experience brand leveraging pilot training & craF safety

Greater awareness generated with an increase in demand

Extensive experience building and managing franchise business

Highly experienced management team & talent acquisi@on strategy No advantage

Delays market entry and increases costs

Deploys partner and/or acquisi@on strategy to strengthen key offering

20yrs of design innova@on in winged submersible IP with on going R&D

HOS leverages unique submersible craF & patented technology

Contact: [email protected] Investment principals only 14

.: Hawkes Ocean Sports: Financials


All numbers in $000s

.: Hawkes Ocean Sports: Investment

Investment Requirements:

Q4 2010: $1.5MM Angel Round. Conver@ble into Series A with 20% discount Q3 2011: $10MM Series A

Use of Funds:

Angel Round: Establish O&O in USA and Great Barrier Reef Build of x2 addi@onal Merlin submersibles Build pilot/diver training school at USA based O&O Market franchise opportunity Recruit key management team

Series A: Secure human capital (sales/mktg, opera@ons & pilot/divers) Develop core fleet of submersibles for deployment Ramp up targeted sales & marke@ng Build dedicated R&D team Establish worldwide HQ


.: Management Team

17

Joseph Oliver President & CEO

Graham Hawkes CTO

*Michael Hamill CFO

Patrick Corr GM O&O and Training

•  Start-‐up CEO & Co Founder, DIDMO AB – award winning mobile developer •  VP Digital Services, Ascent Media Group -‐ Liberty Media •  VP Marke@ng & Bus Dev, Proximity Group -‐ Acquired by Apple •  Director of Product & Market Dev, Loudeye Technology -‐ Acquired by Nokia •  Marine Engineer & Ships Diver, Royal Navy

•  Inventor of 300+ manned submersibles, including Wasp, DeepRover, Deepflight •  Founder, Precision Remotes (weapons plaIorm systems used by US Army) •  Founder, Hawkes Ocean Technologies (currently working with DARPA & US Navy) •  Recipient of the Discovery, Rolex, Smithsonian & Explorers Club Awards •  Full Bio can be found on website – h4p://www.hawkesoceansports.com

•  Managing Director, Grand View NaHonal Investment Bank •  Vice Chair, Execu@ve Commi4ee, Culver City Chamber of Commerce •  Senior Vice President, Worldwide Finance,iXL •  Audit Staff, Arthur Andersen

•  Senior Vice President, Training & Safety, Bristow Group, Inc. •  Founder and CEO – Helicopter Adventures Inc. (Acquired by Bristow Group) •  Commissioned Officer – Irish Army •  Chairman, numerous Avia@on Bodies incl, Helicopter AssociaHon InternaHonal


* Joining company upon comple@on of Conver@ble Note Financing

.: Board of Directors &BoardAdvisors

18

Jonathan Epstein Chairman of the Board

•  President and CEO, Hawkes Remotes, Inc •  CEO, Double Fusion •  Agent, United Talent Agency •  EVP & General Manager, Media Division, IGN/GameSpy

Dennis Phillips Board Director

•  COO, Found Animals FoundaHon •  CFO, Media Services, Ascent Media Group •  EVP, Worldwide Finance, iXL •  Divisional CFO, Walt Disney

Mukul Krishna Board Advisor

•  Global Director, Frost & Sullivan •  Program Manager, & Industry Analyst Frost & Sullivan •  MBA, Thunderbird


Other Board Directors Board Advisors •  Graham Hawkes •  Karen Hawkes •  Joseph Oliver

•  Michael Kleeman Chair of the American Red Cross Board Director – Marine Mammals Center Senior Fellow, UCSD , IGGC

.: Press Coverage

19

.: Recent press & media coverage on Deep Flight crah

Hawkes Submersibles have generated popular akenHon via some of the worlds most recognized media outlets


Contact Joseph Oliver

President & CEO Hawkes Ocean Sports, Inc.

h4p://www.hawkesoceansports.com

[email protected] +1 650 520 2959

Hawkes Ocean Sports, Inc - Investment Deck

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