Pacific Royalties: Introduction

Michael North
Michael NorthPresident um America-China Bridge
Pacific Royalties
opening the door to capital
for growing companies
ROYALTY FINANCING
EQUITY RETENTION • INCREASING INCOME
the business, personal and
community benefits
of revenue share investing
helping good companies
to become great companies
employment, families,
community, economy
profitable investment for
the future
Royalty Finance:
The Investor perspective
Investing is the art
of making money with
money.
Today’s investors have
two broad types of
investment available:
Equity
or
Debt
Equity = Ownership
Debt = Obligation
Both equity and debt bring special
challenges to the investor,
and to the company.
Sometimes, the risk and reward are
not in harmony
for either.
There is a third way.
Royalties
A simple share of revenues
paid by the company to
investors
Royalties = Sharing
Estimating future revenues is easier
than projecting future profits.
Royalties are much easier
for investors to understand.
Royalties have been used throughout
history for specific purposes:
publishing, music, film rights
oil, gas, gold and commodities income
bridges, roads and utilities
real estate, rents
They are in wide use today,
worldwide.
Revenue Royalties
developed by Arthur Lipper
What’s new?
Uses royalties for the first time as a
general-purpose finance vehicle
for any kind of company
Equity and debt still have
important roles.
Royalties offer a fresh option;
design is based on years of analysis
of investor and company needs.
The company agrees to pay a percentage
of its revenues to the investor.
Whether the company is making or
reporting a profit or not,
royalties always get paid, first priority.
How Royalties Work:
Answers to Common Questions
In the U.S. patent:
1. Royalties can be secured by the transfer
or pledge of assets
or by the guarantee of others.
2. Royalties can be paid by the issuer daily,
monthly, quarterly or annually.
royalties are paid
whenever the issuer receives revenue.
3. Royalties are not a debt.
At the end of the contract, the amount paid
to the company for the royalty
does not have to be repaid.
4. Royalties are financial assets, like stocks,
bonds or property ownership,
and can be sold by one investor to another.
5. When existing royalties are sold,
they would likely sell at a higher price
than originally paid
if the company has shown rising revenues.
6. Royalty contracts can be grouped
and sold together as a Royalty Income Fund.
Case Study from
rexroyalties.com
complimentary financial model
website
Minimum information to enter:
1. Total investment; 2. Maturity; 3. Royalty Rate(s);
4. Compound Annual Growth Rate(s)
1
2
3 4
Optional information, to provide deeper analysis:
1. Price-Earnings Ratio;
2. Current Net After-Tax Income;
3.Comparable or Benchmark Investment Return
1
2
3
Results: Basic Projected Revenues, 20 Years
Results: Table Shows Projected Royalty Distributions,
Yields, Internal Rate of Return, Market Cap
Chart Shows Current Yield of the Royalty,
Compared to Benchmark Return
Chart Shows Royalty Distributions and Revenues,
and Return as Percentage of Original Cost
Royalty Finance
The Company Perspective --
the Issuer of a Royalty Contract
Creating a growing business
is one of life’s great
accomplishments: a successful
business benefits many people.
The owner needs access to capital to grow
and compete in today’s fast-moving
markets.
But he also wants to retain
as much control as possible.
So the owner does not like
to sell his shares.
Royalties may be better than
debt or equity.
They offer more flexibility and freedom
for the company owner
and management.
Why?
Questions and Answers
1.Royalties do not transfer ownership.
2. Royalty holders do not have a vote
like shareholders,
the ability or desire to influence
the company’s management.
3. Royalties are paid automatically, as a cost
of doing business.
They do not appear as a negative (debt)
on the balance sheet.
Exchange Traded Royalties
(ETRs) perspective:
New companies create fresh economic
activity and employment.
All of society benefits from
entrepreneurial success.
Majority of new, high-skill jobs
come from new companies.
A private royalty contract is not liquid -- cannot be
converted easily to cash.
The investor needs to be compensated for
this lack of liquidity.
This means a higher percentage of revenues
must be paid by the company:
therefore, higher costs.
A Royalties Exchange
would facilitate Exchange Traded Royalties (ETRs):
with liquidity needed by the investor
Converting private contracts into publicly
listed contracts:
The Royalties Exchange would
establish standards
to make ETRS more useful to investors
and to companies.
This solves:
1. the liquidity problem for the investor; and
2. it reduces the percentage of revenues
the company
must pay to attract investors
A Royalties Exchange
would create significant economic benefit
for the local and regional economy
where it was located.
Capital made available to regional and
national firms
on attractive terms.
A Royalties Exchange could attract listings
from issuers around the world.
The creation and operation of the Exchange
would require advanced technical and
financial expertise.
Individuals and organizations with these skills
would become a strategic asset of the
city and region where the Exchange
Is created.
The Exchange will generate
international recognition,
revenues and profits.
All businesses where the Exchange
is located
will benefit as a result.
The Royalties Exchange would be similar to a
Mainstream Stock Exchange
(New York, London, Shanghai)
But it would supply specialized services
for royalty holders and issuers.
The Exchange would be a physical place
(traders come to a public facility to place orders;
investors and press meetings)
as well as a virtual, electronic space
(trades take place from computer to computer)
open 24/7 worldwide.
Business Model
Sources of Income:
The Exchange generates income for itself and
allied professional organizations in several ways:
1. listing fees paid by issuers
2. membership fees and dues
3. a share of the commission paid by those
buying and selling royalty contracts
4. fees from investors for the collection and
distribution of royalty payments
5. fees paid by listed issuers for the distribution of
information to the royalty owners
Opening Resources:
Arthur Lipper, international expert on royalties
San Diego
assisted by Michael North
Honolulu
supported by
the international Pacific Royalties team
See http://www.pacificroyalties.com
for details
First Steps
setting up basic legal structures
attracting strong local companies for private royalty finance
setting up Royalties Income Fund
for up to 20 local and regional companies
Next Steps
forming partnership with existing NASD securities exchange
registration of the Royalties Exchange by
Securities & Exchange Commission
attracting participation from international financial community
conducting continuing education worldwide
Pacific RoyaltiesPacific Royalties
1 von 52

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Pacific Royalties: Introduction

  • 1. Pacific Royalties opening the door to capital for growing companies
  • 2. ROYALTY FINANCING EQUITY RETENTION • INCREASING INCOME
  • 3. the business, personal and community benefits of revenue share investing helping good companies to become great companies employment, families, community, economy profitable investment for the future
  • 5. Investing is the art of making money with money.
  • 6. Today’s investors have two broad types of investment available: Equity or Debt
  • 7. Equity = Ownership Debt = Obligation
  • 8. Both equity and debt bring special challenges to the investor, and to the company. Sometimes, the risk and reward are not in harmony for either.
  • 9. There is a third way.
  • 10. Royalties A simple share of revenues paid by the company to investors
  • 12. Estimating future revenues is easier than projecting future profits. Royalties are much easier for investors to understand.
  • 13. Royalties have been used throughout history for specific purposes: publishing, music, film rights oil, gas, gold and commodities income bridges, roads and utilities real estate, rents They are in wide use today, worldwide.
  • 14. Revenue Royalties developed by Arthur Lipper What’s new? Uses royalties for the first time as a general-purpose finance vehicle for any kind of company
  • 15. Equity and debt still have important roles. Royalties offer a fresh option; design is based on years of analysis of investor and company needs.
  • 16. The company agrees to pay a percentage of its revenues to the investor. Whether the company is making or reporting a profit or not, royalties always get paid, first priority.
  • 17. How Royalties Work: Answers to Common Questions
  • 18. In the U.S. patent: 1. Royalties can be secured by the transfer or pledge of assets or by the guarantee of others. 2. Royalties can be paid by the issuer daily, monthly, quarterly or annually. royalties are paid whenever the issuer receives revenue.
  • 19. 3. Royalties are not a debt. At the end of the contract, the amount paid to the company for the royalty does not have to be repaid. 4. Royalties are financial assets, like stocks, bonds or property ownership, and can be sold by one investor to another.
  • 20. 5. When existing royalties are sold, they would likely sell at a higher price than originally paid if the company has shown rising revenues. 6. Royalty contracts can be grouped and sold together as a Royalty Income Fund.
  • 22. Minimum information to enter: 1. Total investment; 2. Maturity; 3. Royalty Rate(s); 4. Compound Annual Growth Rate(s) 1 2 3 4
  • 23. Optional information, to provide deeper analysis: 1. Price-Earnings Ratio; 2. Current Net After-Tax Income; 3.Comparable or Benchmark Investment Return 1 2 3
  • 24. Results: Basic Projected Revenues, 20 Years
  • 25. Results: Table Shows Projected Royalty Distributions, Yields, Internal Rate of Return, Market Cap
  • 26. Chart Shows Current Yield of the Royalty, Compared to Benchmark Return
  • 27. Chart Shows Royalty Distributions and Revenues, and Return as Percentage of Original Cost
  • 28. Royalty Finance The Company Perspective -- the Issuer of a Royalty Contract
  • 29. Creating a growing business is one of life’s great accomplishments: a successful business benefits many people.
  • 30. The owner needs access to capital to grow and compete in today’s fast-moving markets. But he also wants to retain as much control as possible. So the owner does not like to sell his shares.
  • 31. Royalties may be better than debt or equity. They offer more flexibility and freedom for the company owner and management.
  • 33. 1.Royalties do not transfer ownership. 2. Royalty holders do not have a vote like shareholders, the ability or desire to influence the company’s management.
  • 34. 3. Royalties are paid automatically, as a cost of doing business. They do not appear as a negative (debt) on the balance sheet.
  • 36. New companies create fresh economic activity and employment. All of society benefits from entrepreneurial success. Majority of new, high-skill jobs come from new companies.
  • 37. A private royalty contract is not liquid -- cannot be converted easily to cash. The investor needs to be compensated for this lack of liquidity. This means a higher percentage of revenues must be paid by the company: therefore, higher costs.
  • 38. A Royalties Exchange would facilitate Exchange Traded Royalties (ETRs): with liquidity needed by the investor
  • 39. Converting private contracts into publicly listed contracts: The Royalties Exchange would establish standards to make ETRS more useful to investors and to companies. This solves: 1. the liquidity problem for the investor; and 2. it reduces the percentage of revenues the company must pay to attract investors
  • 40. A Royalties Exchange would create significant economic benefit for the local and regional economy where it was located.
  • 41. Capital made available to regional and national firms on attractive terms. A Royalties Exchange could attract listings from issuers around the world.
  • 42. The creation and operation of the Exchange would require advanced technical and financial expertise. Individuals and organizations with these skills would become a strategic asset of the city and region where the Exchange Is created.
  • 43. The Exchange will generate international recognition, revenues and profits. All businesses where the Exchange is located will benefit as a result.
  • 44. The Royalties Exchange would be similar to a Mainstream Stock Exchange (New York, London, Shanghai) But it would supply specialized services for royalty holders and issuers.
  • 45. The Exchange would be a physical place (traders come to a public facility to place orders; investors and press meetings) as well as a virtual, electronic space (trades take place from computer to computer) open 24/7 worldwide.
  • 46. Business Model Sources of Income: The Exchange generates income for itself and allied professional organizations in several ways:
  • 47. 1. listing fees paid by issuers 2. membership fees and dues 3. a share of the commission paid by those buying and selling royalty contracts
  • 48. 4. fees from investors for the collection and distribution of royalty payments 5. fees paid by listed issuers for the distribution of information to the royalty owners
  • 49. Opening Resources: Arthur Lipper, international expert on royalties San Diego assisted by Michael North Honolulu supported by the international Pacific Royalties team See http://www.pacificroyalties.com for details
  • 50. First Steps setting up basic legal structures attracting strong local companies for private royalty finance setting up Royalties Income Fund for up to 20 local and regional companies
  • 51. Next Steps forming partnership with existing NASD securities exchange registration of the Royalties Exchange by Securities & Exchange Commission attracting participation from international financial community conducting continuing education worldwide