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Archive for the ‘Distressed Intellectual Property’ Category

Successful “Date Certain M&A” of Business Unit and its Assets and Intellectual Property

Posted in Board Of Intellectual Capital, Distressed Intellectual Property, Distressed IP, Gerbsman Partners, Investments, Strategy, Venture Capital, tagged , , , , , , on August 13, 2009| Leave a Comment »

Steven R. Gerbsman, Principal of Gerbsman Partners, Kenneth Hardesty, Merle McCreery and Dennis Sholl, members of Gerbsman Partners Board of Intellectual Capital, announced today their success in maximizing stakeholder value for a venture capital backed online marketing solutions company, specializing in lead generation and customer acquisition.

Gerbsman Partners provided Crisis Management leadership, facilitated the sale of the business unit, associated Intellectual Property and assets and recovered receivables. Due to market conditions, the senior lender and the board of directors made the strategic decision to maximize the value of the business unit and Intellectual Property.

Gerbsman Partners provided leadership to the company with

  • Crisis Management and technology expertise in developing the strategic action plans for maximizing value of the business unit, Intellectual Property and assets;
  • Proven domain expertise in maximizing the value of the business unit and Intellectual Property through a targeted and proprietary “Date Certain M&A Process”;
  • The ability to “Manage the Process” among potential Acquirers, Lawyers, Creditors Management and Advisors;
  • The proven ability to “Drive” toward successful closure for all parties at interest.

About Gerbsman Partners

Gerbsman Partners focuses on maximizing enterprise value for stakeholders and shareholders in under-performing, under-capitalized and under-valued companies and their Intellectual Property. Since 2001, Gerbsman Partners has been involved in maximizing value for 56 Technology, Life Science and Medical Device companies and their Intellectual Property and has restructured/terminated over $770 million of real estate executory contracts and equipment lease/sub-debt obligations. Since inception in 1980, Gerbsman Partners has been involved in over $2.2 billion of financings, restructurings and M&A transactions.

Gerbsman Partners has offices and strategic alliances in Boston, New York, Washington, DC, Alexandria, VA, San Francisco, Europe and Israel.

For additional information please visit www.gerbsmanpartners.com

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Successful “Date Certain M&A” of Pegasus Biologics Inc., its Assets and Intellectual Property

Posted in Board Of Intellectual Capital, boic, Community, Distressed Intellectual Property, Distressed IP, Economy, Gerbsman Partners, Intellectual capital, Investments, Strategy, Technology, Venture Capital, tagged , , , , , , , on July 15, 2009| 1 Comment »

Steven R. Gerbsman, Principal of Gerbsman Partners, Kenneth Hardesty and Dennis Sholl, members of Gerbsman Partners Board of Intellectual Capital, announced today their success in maximizing stakeholder value at Pegasus Biologics Inc., a venture capital backed medical device company. Pegasus Biologics focuses on the development of advanced biologic solutions. Applications range from the repair, augmentation, reinforcement and reconstruction of soft tissues to advanced wound management.

Gerbsman Partners provided Crisis Management leadership, facilitated the sale of the business unit, associated Intellectual Property and assets and recovered receivables. Due to market conditions, the senior lender and the board of directors made the strategic decision to maximize the value of the business unit and Intellectual Property. The senior lender recovered 100% of its principal.

Gerbsman Partners provided leadership to the company with:

  • Crisis Management and medical device expertise in developing the strategic action plans for maximizing value of the business unit, Intellectual Property and assets;
  • Proven domain expertise in maximizing the value of the business unit and Intellectual Property through a targeted and proprietary “Date Certain M&A Process”;
  • The ability to “Manage the Process” among potential Acquirers, Lawyers, Creditors Management and Advisors;
  • The proven ability to “Drive” toward successful closure for all parties at interest.

About Gerbsman Partners

Gerbsman Partners focuses on maximizing enterprise value for stakeholders and shareholders in under-performing, under-capitalized and under-valued companies and their Intellectual Property. Since 2001, Gerbsman Partners has been involved in maximizing value for 55 Technology, Life Science and Medical Device companies and their Intellectual Property and has restructured/terminated over $770 million of real estate executory contracts and equipment lease/sub-debt obligations. Since inception in 1980, Gerbsman Partners has been involved in over $2.2 billion of financings, restructurings and M&A transactions.

Gerbsman Partners has offices and strategic alliances in Boston, New York, Washington, DC, San Francisco, Europe and Israel.

For additional information please visit www.gerbsmanpartners.com.

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Date Certain M&A of Active Response Group, Inc., its Assets and Intellectual Property by its secured senior lender- Hercules Technology Growth Capital

Posted in Board Of Intellectual Capital, boic, Business models, Distressed Intellectual Property, Distressed IP, Gerbsman Partners, Intellectual capital, Investments, Strategy, Technology, Venture Capital, tagged , , , , , , , , , , , , , , , , , , , , , , , , , , on July 6, 2009| 1 Comment »

SALE OF ASSETS OF ACTIVE RESPONSE GROUP INC.
Gerbsman Partners (www.gerbsmanpartners.com) has been retained by Hercules Technology Growth Capital (“Hercules”), the senior secured lender to Active Response Group, Inc., (“ARG”), (www.activeresponsegroup.com) to solicit interest for the acquisition of all or substantially all of ARG’s assets, including its Intellectual Property (“IP”), in whole or in part (collectively, the “ARG Assets”).

Please be advised that the ARG Assets are being offered for sale pursuant to Section 9-610 of the Uniform Commercial Code. Purchasers of the ARG Assets will receive all of ARG’s right, title, and interest in the purchased portion of Hercules’ collateral, which consists of substantially all of ARG’s assets, as provided in the Uniform Commercial Code.

The sale is being conducted with the cooperation of Hercules and ARG. ARG has advised Hercules that it will use its best efforts to make its employees available to assist purchasers with due diligence and assist with a prompt and efficient transition at mutually convenient time.

IMPORTANT LEGAL NOTICE:

The information in this memorandum does not constitute the whole or any part of an offer or a contract.

The information contained in this memorandum relating to the ARG Assets has been supplied by third parties and obtained from a variety of sources. It has not been independently investigated or verified by Hercules or Gerbsman Partners or their respective agents.

Potential purchasers should not rely on any information contained in this memorandum or provided by Hercules or Gerbsman Partners (or their respective staff, agents, and attorneys) in connection herewith, whether transmitted orally or in writing (the “information”), as a statement, opinion, or representation of fact. Please further note that all information provided herein relating to the operations of ARG’s business and its market positions relates to periods on or prior to March 31, 2009. Interested parties should satisfy themselves through independent investigations as they or their legal and financial advisors see fit.

Hercules and Gerbsman Partners, and their respective staff, agents, and attorneys, (i) disclaim any and all implied warranties concerning the truth, accuracy, and completeness of any information provided in connection herewith and (ii) do not accept liability for the information, including that contained in this memorandum, whether that liability arises by reasons of Hercules’s or Gerbsman Partners’ negligence or otherwise.

Any sale of the ARG Assets will be made on an “as-is,” “where-is,” and “with all faults” basis, without any warranties, representations, or guarantees, either express or implied, of any kind, nature, or type whatsoever from, or on behalf of, Hercules and Gerbsman Partners. Without limiting the generality of the foregoing, Hercules and Gerbsman Partners, and their respective staff, agents, and attorneys, hereby expressly disclaim any and all implied warranties concerning the condition of the ARG Assets and any portions thereof, including, but not limited to, environmental conditions, compliance with any government regulations or requirements, the implied warranties of habitability, merchantability, or fitness for a particular purpose.

This memorandum contains confidential information and is not to be supplied to any person without Hercules or Gerbsman Partners’ prior consent.

SUMMARY OF HISTORICAL INFORMATION[1]

ARG is an online marketing solutions company specializing in lead generation and customer acquisition. ARG leverages deep vertical knowledge, a database of 20 million consumer records and a proprietary technology platform to deliver qualified leads and closed transactions to advertisers on a pay for performance basis. ARG employs a ‘wide-net’, promotional approach to generate consumer registrations from over 400 proprietary websites. These registrations are converted into qualified leads and sales. At its apex, the company generated over 1.5 million consumer registrations each month.

The company is well-positioned to capitalize on several industry trends – the migration of direct marketers from offline to online; the increased emphasis on accountability and ROI which has fueled the growth of the pay for performance space; and the increased focus on targeting and segmentation.

ARG is a privately held company. ARG (founded in 2000 as eWOMP, Inc.) is headquartered in New York, New York, with Technology offices in Boulder Colorado. To date, ARG has secured over $5 million in equity financing. $2.6 in a Series A secured by eWOMP with the remainder funded by the Company’s CEO, CFO, Board of Directors and a group of sophisticated private investors. The company also raised over $10MM in venture debt financing from Hercules Technology Growth Capital.

Target Market:
Per the IAB, lead generation is the fastest growing segment of the online advertising industry. Lead generation is estimated to grow to $3.7 billion by 2011, up from $1.8 billion in 2007.

Customers:
ARG’s clients range across a broad set of industries, covering over 80 distinct product and service categories. ARG operates a performance driven marketplace and its customer base is vertically agnostic, which allows it to maximize revenue across its strong client base of direct clients, agencies and networks, such as ValueClick, AOL, Q Interactive, IAC, Pfizer, Glaxo Smith Kline, R.J. Reynolds, and Netflix. The accounts receivable base of ARG is diverse, as no client represents over 10% of its accounts receivable balance.

Proprietary Lead Generation Technology – Intellectual Property
ARG’s internally developed software platform, Active Marketing Platform (“AMP”) is a scalable technology solution that enables the company to execute its business model with tremendous efficiency. ARG’s technology dynamically optimizes ROI by measuring the difference between attracting customers to ARG’s sites and the revenue generated from media sources – at a granular level – enabling real time media decisions. The company’s technology is customizable for individual clients to meet specific needs in order strike the optimal balance between quantity and quality. The company’s platform was designed with an open architecture to be both flexible and expandable. An example of the expandability of the platform is a recent development of a module that powers call centers. This enables ARG to utilize an outsourced call center, but maintain operational visibility and manage risk.

ARG technology platform is differentiated from its competitors such as Web Clients, World Avenue, Q Interactive in that AMP takes a consumer centric approach focused on maximizing the value of every customer interaction by serving the optimal ‘basket of offers’ to a distinct consumer based on user-generated, behavioral and attributed data. This data fuels a genetic algorithm that gets smarter over time to maximize the number of times a registrant opts in to an offer.

ARG is further differentiated by its ability to quickly deploy multiple lead generation websites with different and unique branding elements, extend into a call center environment and maximize media dollars spent/minimize risk based on performance at a granular level. ARG has developed several proprietary tools that enables dialing-up or dialing down media sources based on quality and ROI metrics. This ability to ‘feed the winners and starve the losers’ on the fly, yields higher revenue per registrant, produces higher quality for advertisers and results in lower fraud.

THE FOLLOWING FINANCIAL DATA IS PRESENTED FOR INFORMATIONAL PURPOSES ONLY. PAST PERFORMANCE MAY NOT BE INDICATIVE OF FUTURE RESULTS. THIS INFORMATION SHOULD NOT BE RELIED UPON TO MAKE FUTURE PERFORMANCE PROJECTIONS OF ANY KIND.

Summary

· Strong Historical Growth

· Attractive Industry – Fastest growing segment of the online advertising market, well-positioned to capitalize on major shifts in marketing strategies and media budgets

· Best in Class Technology – AMP platform provides a turn key lead generation and transactional marketing solution, which can also be extended to power call center operations

· Proprietary Data Base of over 20 million fully profiled consumers with over 2 billion data points

· Diversified Client Base with Low Concentration

· Excellent Relationships with Media Publishers and Advertisers – long-standing relationships with key players such as Value Click, Advertising.com, Q Interactive and other leading companies

· Opportunity for Future Growth and Margin Improvement – company has made moves to reduce fixed costs and improve marginal profitability making the company poised to scale.

The reasons why the ARG’s assets are attractive are:

ARG has historically experienced strong growth and has been among the leaders in the lead generation space. However, recent working capital constraints and an overly leveraged balance sheet have created the opportunity for all or a portion of ARG’s assets to be sold. The acquisition of these assets can enable the purchaser to realize significant short and long term value from the ARG assets as ARG maintains the ability to quickly scale within the context of sufficient working capital and a stronger balance sheet.

Robust Growth: Since inception, the Company has grown very impressively, with revenues increasing from $1 million to $32 million between 2004 and 2008.

Market Position: The Company is one of the five major players in the online lead generation space in terms of market size and presence. While ARG is the youngest of the five, it has the critical mass, superior technology and operational expertise to be highly successful in the marketplace, which is not true of its smaller competitors.

Proprietary Technology Platform That Can Be Bolted On or Run On a Standalone Basis: The Company’s proprietary technology platform (AMP) provides superior functionality relative to competitive solutions. The platform’s robustness handles extreme traffic loads, offer volatility, and “tech stress” created by many high-volume clients with many different consumer registration profiles simultaneously. Employing sophisticated advertising targeting and dynamic registration path optimization, the AMP possesses integrated additional functionality and analytical tools that support e-commerce, market research and affiliate marketing activities. Furthermore, the platform is capable of accommodating new non-Web communication devices (such as cell phone messaging) as consumer penetration and acceptance of added mobile functionality increases.

Extensive and Diversified Creative Library: To date ARG has developed thousands of websites and customer acquisition creative assets. AMP’s flexible architecture allows for rapid implementation or augmentation of brand and creative design allowing ARG’s creative inventory to be rapidly transplanted to complement existing or newly developed brands or lead generation properties and initiatives.

Diversified Client Base: The Company has over 400 clients engaged in a wide variety of consumer-oriented industries. This allows the Company to maximize the revenue and profitability of the leads it generates by delivering them to the most appropriate client based on expected yield as determined by AMP. In addition, by establishing a diverse customer base, the Company can avoid fluctuation in its revenues caused by adverse changes effecting any particular client industry category.

Agency Approvals: The Company is in compliance with the Interactive Advertising Bureau’s (IAB) newly established standards, which defines online lead generation best practices for US-based advertisers and publishers. The Company is a member of the IAB and sits on its lead generation committee, and it is also a member of the Online Lead Generation Association (OLGA) and the Direct Marketing Association (DMA).

Strong Regulatory Positioning: The Company invested hundreds of thousands of dollars in 2007 to completely overhaul its privacy policies and consumer disclosures to be ahead of the regulatory curve. Since the lead generation space continues to attract regulatory scrutiny, the Company is well-positioned to be operationally unaffected and to benefit, from a competitive standpoint, if any new regulations are initiated with respect to the lead generation business.

Hercules is seeking a buyer of the ARG’s Assets, in whole or in part. Interested parties may bid on all or any part of ARG’s core technology, creative library and customer contracts, enabling the purchaser to leverage ARG’s core technology, creative library, client and vendor relationships and to obtain new sales, enhance revenue streams or accentuate or augment lead generation and performance marketing business unit.

The Bidding Process for interested buyers:

Interested and qualified parties will be expected to sign a nondisclosure agreement (attached hereto as Exhibit A) to have access to key members of the management and intellectual capital teams and the due diligence “war room” documentation (the “Due Diligence Access”). Each interested party, as a consequence of the Due Diligence Access granted to it, shall be deemed to acknowledge and represent (i) that it is bound by the bidding procedures described herein; (ii) that it has an opportunity to inspect and examine the ARG Assets and to review all pertinent documents and information with respect thereto; (iii) that it is not relying upon any written or oral statements, representations, or warranties of Hercules, Gerbsman Partners, or ARG, or their respective staff, agents, or attorneys; and (iv) all such documents and reports have been provided solely for the convenience of the interested party, and Hercules, ARG, and Gerbsman Partners (and their respective, staff, agents, or attorneys) do not make any representations as to the accuracy or completeness of the same.

Following an initial round of due diligence, interested parties will be invited to participate with a sealed bid, for the acquisition of ARG’s Assets. Sealed bids must be submitted so that it is actually received by Gerbsman Partners no later than July 23, 2009 at 3:00 p.m. (Eastern Time) (the “Bid Deadline”) at ARG’s office, located at 104 W 27th St, 2nd Floor, New York, NY 10011. Please email all bids to steve@gerbsmanpartners.com and sharvey@herculestech.com

Bids should identify those assets being tendered for in a specific and identifiable way.

Any person or other entity making a bid must be prepared to provide independent confirmation that they possess the financial resources to complete the purchase where applicable. All bids must be accompanied by a refundable deposit check in the amount of $200,000 (payable to Hercules Technology Growth Capital, Inc.). The winning bidder will be notified within 48 hours of the Bid Deadline. Non-successful bidders will have their deposit returned to them. Hercules reserves the right to, in its sole discretion, accept or reject any bid, or withdraw any or all assets from sale.

Hercules will require the successful bidder to close within a 7-day period. Any or all of the assets of ARG will be sold on an “as is,” “where is” basis, with no representation or warranties whatsoever.

All sales, transfer, and recording taxes, stamp taxes, or similar taxes, if any, relating to the sale of the ARG Assets shall be the sole responsibility of the successful bidder and shall be paid to Hercules at the closing of each transaction.

For additional information, please see below and/or contact:

Steven R. Gerbsman
Gerbsman Partners
415 456 –0628
steve@gerbsmanpartners.com

[1] All information provided herein relating to the operations of ARG’s business and the market positions relates to periods on or prior to March 31, 2009. Interested parties should satisfy themselves through independent investigations as they or their legal and financial advisors see fit.

[2] The biographical information concerning the current management of ARG is included for information purposes only. Although this sale is being conducted with ARG’s cooperation, this sale is strictly an asset sale offered by Hercules as ARG’s senior lender pursuant to Article 9 of the Uniform Commercial Code. HERCULES HAS NO ARRANGEMENT PURSUANT TO WHICH BUYER OF THE ARG ASSETS COULD BE ASSURED OF THE FUTURE SERVICES OF ANY ARG OFFICERS OR EMPLOYEES.

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The Geography of Recession

Posted in Board Of Intellectual Capital, Community, Distressed Intellectual Property, Distressed IP, Economy, Gerbsman Partners, Intellectual capital, Investments, Market research, Technology, Venture Capital, tagged , , , , , , , , , , , , , , , , , , , , , , , , , on June 10, 2009| Leave a Comment »

Here is an analysis by John Mauldin at InvestorInsight. It was originally published as a special series at Stratfor.

John Mauldin is president of Millennium Wave Advisors, LLC, a registered investment advisor. All material presented herein is believed to be reliable but we cannot attest to its accuracy. Investment recommendations may change and readers are urged to check with their investment counselors before making any investment decisions. Opinions expressed in these reports may change without prior notice. John Mauldin and/or the staff at Millennium Wave Advisors, LLC may or may not have investments in any funds cited above. Mauldin can be reached at 800-829-7273.

This information is not to be construed as an offer to sell or the solicitation of an offer to buy any securities.

“Dear Friends: One of the first things you learn about analyzing a company is how to dissect a balance sheet. What assets and liabilities can be deployed by a company to create equity over time? I’ve enclosed a fascinating variant on this process. Take a look at how STRATFOR has analyzed the “geographic balance sheets” of the US, Russia, China, and Europe to understand why different countries’ economies have suffered to varying degrees from the current economic crisis.

As investors, it’s precisely this type of outside-the-box thinking that can provide us profitable opportunities, and it’s precisely this type of outside-the-box thinking that makes STRATFOR such an important part of my investment decision making. The key to investment profits is thinking differently and thinking earlier than the next guy. STRATFOR’s work exemplifies both these traits.

I’ve arranged for a special deal on a STRATFOR Membership for my readers, which you can click here to take advantage of.  Many of you are invested in alternative strategies, but I want to make sure that you also employ alternative thinking strategies. So take a look at these different “country balance sheets” as you formulate your plans.
Your Mapping It Out Analyst, John Mauldin

The Geography of Recession

The global recession is the biggest development in the global system in the year to date. In the United States, it has become almost dogma that the recession is the worst since the Great Depression. But this is only one of a wealth of misperceptions about whom the downturn is hurting most, and why.As one can see in the chart, the U.S. recession at this point is only the worst since 1982, not the 1930s, and it pales in comparison to what is occurring in the rest of the world.

(Figures for China have not been included, in part because of the unreliability of Chinese statistics, but also because the country’s financial system is so radically different from the rest of the world as to make such comparisons misleading. For more, click here.)

But didn’t the recession begin in the United States? That it did, but the American system is far more stable, durable and flexible than most of the other global economies, in large part thanks to the country’s geography. To understand how place shapes economics, we need to take a giant step back from the gloom and doom of the current moment and examine the long-term picture of why different regions follow different economic paths.

The United States and the Free Market

The most important aspect of the United States is not simply its sheer size, but the size of its usable land. Russia and China may both be similar-sized in absolute terms, but the vast majority of Russian and Chinese land is useless for agriculture, habitation or development. In contrast, courtesy of the Midwest, the United States boasts the world’s largest contiguous mass of arable land — and that mass does not include the hardly inconsequential chunks of usable territory on both the West and East coasts. Second is the American maritime transport system. The Mississippi River, linked as it is to the Red, Missouri, Ohio and Tennessee rivers, comprises the largest interconnected network of navigable rivers in the world. In the San Francisco Bay, Chesapeake Bay and Long Island Sound/New York Bay, the United States has three of the world’s largest and best natural harbors. The series of barrier islands a few miles off the shores of Texas and the East Coast form a water-based highway — an Intercoastal Waterway — that shields American coastal shipping from all but the worst that the elements can throw at ships and ports.

The real beauty is that the two overlap with near perfect symmetry. The Intercoastal Waterway and most of the bays link up with agricultural regions and their own local river systems (such as the series of rivers that descend from the Appalachians to the East Coast), while the Greater Mississippi river network is the circulatory system of the Midwest. Even without the addition of canals, it is possible for ships to reach nearly any part of the Midwest from nearly any part of the Gulf or East coasts. The result is not just a massive ability to grow a massive amount of crops — and not just the ability to easily and cheaply move the crops to local, regional and global markets — but also the ability to use that same transport network for any other economic purpose without having to worry about food supplies.

The implications of such a confluence are deep and sustained. Where most countries need to scrape together capital to build roads and rail to establish the very foundation of an economy, transport capability, geography granted the United States a near-perfect system at no cost. That frees up U.S. capital for other pursuits and almost condemns the United States to be capital-rich. Any additional infrastructure the United States constructs is icing on the cake. (The cake itself is free — and, incidentally, the United States had so much free capital that it was able to go on to build one of the best road-and-rail networks anyway, resulting in even greater economic advantages over competitors.)

Third, geography has also ensured that the United States has very little local competition. To the north, Canada is both much colder and much more mountainous than the United States. Canada’s only navigable maritime network — the Great Lakes-St. Lawrence Seaway —is shared with the United States, and most of its usable land is hard by the American border. Often this makes it more economically advantageous for Canadian provinces to integrate with their neighbor to the south than with their co-nationals to the east and west.

Similarly, Mexico has only small chunks of land, separated by deserts and mountains, that are useful for much more than subsistence agriculture; most of Mexican territory is either too dry, too tropical or too mountainous. And Mexico completely lacks any meaningful river system for maritime transport. Add in a largely desert border, and Mexico as a country is not a meaningful threat to American security (which hardly means that there are not serious and ongoing concerns in the American-Mexican relationship).

With geography empowering the United States and hindering Canada and Mexico, the United States does not need to maintain a large standing military force to counter either. The Canadian border is almost completely unguarded, and the Mexican border is no more than a fence in most locations — a far cry from the sort of military standoffs that have marked more adversarial borders in human history. Not only are Canada and Mexico not major threats, but the U.S. transport network allows the United States the luxury of being able to quickly move a smaller force to deal with occasional problems rather than requiring it to station large static forces on its borders.Like the transport network, this also helps the U.S. focus its resources on other things.”

John F. Mauldin
johnmauldin@investorsinsight.com

Read more here.

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Date Certain M&A of Pegasus Biologics, Inc.

Posted in Board Of Intellectual Capital, Distressed Intellectual Property, Distressed IP, Investments, Market research, Super computing, Venture Capital, tagged , , , , , , , , , , , , , , , , , , , , , , , , on June 1, 2009| Leave a Comment »

Gerbsman Partners www.gerbsmanpartners.com has been retained by Pegasus Biologics, Inc. www.pegasusbio.com to solicit interest for the acquisition of all, or substantially all, Pegasus Biologics Inc.’s (“Pegasus”) assets.

Pegasus Biologics, headquartered in Irvine, California, is an emerging growth regenerative medicine company focused on the manufacturing and commercialization of advanced bio-surgical solutions for soft tissue repair and regeneration.

IMPORTANT LEGAL NOTICE
The information in this memorandum does not constitute the whole or any part of an offer or a contract.

The information contained in this memorandum relating to Pegasus Biologics’ Assets has been supplied by Pegasus. It has not been independently investigated or verified by Gerbsman Partners or their respective agents.

Potential purchasers should not rely on any information contained in this memorandum or provided by Gerbsman Partners (or their respective staff, agents, and attorneys) in connection herewith, whether transmitted orally or in writing as a statement, opinion, or representation of fact. Interested parties should satisfy themselves through independent investigations as they or their legal and financial advisors see fit.

Gerbsman Partners, and their respective staff, agents, and attorneys, (i) disclaim any and all implied warranties concerning the truth, accuracy, and completeness of any information provided in connection herewith and (ii) do not accept liability for the information, including that contained in this memorandum, whether that liability arises by reasons of Pegasus’ or Gerbsman Partners’ negligence or otherwise.

Any sale of the Pegasus Biologics’ Assets will be made on an “as-is,” “where-is,” and “with all faults” basis, without any warranties, representations, or guarantees, either express or implied, of any kind, nature, or type whatsoever from, or on behalf of Pegasus Biologics and Gerbsman Partners. Without limiting the generality of the foregoing, Pegasus and Gerbsman Partners and their respective staff, agents, and attorneys,  hereby expressly disclaim any and all implied warranties concerning the condition of the Pegasus Biologics’ Assets and any portions thereof, including, but not limited to, environmental conditions, compliance with any government regulations or requirements, the implied warranties of habitability, merchantability, or fitness for a particular purpose.

This memorandum contains confidential information and is not to be supplied to any person without Gerbsman Partners’ prior consent. This memorandum and the information contained herein are subject to the non-disclosure agreement attached hereto as Exhibit A.

Pegasus believes its assets are attractive for a number of reasons

·       Privately-held regenerative medicine, medical device company – capitalized in Jan 2005.

·       $31.8MM raised through Three Arch Partners, Onset Ventures, Frazier Healthcare Partners, Affinity Capital and others.

·       Has developed and is commercializing a revolutionary bioscaffold comprised of highly organized collagen, sourced from equine pericardium that encourages the healing process by addressing the demands of a challenging biological environment.

·       Core product technology is based on a proprietary processing and sterilization method resulting in a sterile, structurally sound, biologically conductive scaffold that complements soft tissue repair and adds strength to the repair over time. .

·       Known as “flexible crosslinking”, the technology maintains the native collagen architecture, which supports cellular ingrowth and resists enzymatic degradation – ideal for both soft tissue reinforcement as well as chronic wounds.

·       Has obtained exclusive worldwide licenses for the processing and sterilization of biological tissue for use in orthopedic, oral/dental, spinal and neurological, abdominal and thoracic, breast and wound applications.

·       Technology has 6 issued US patents, 5 pending US patent applications and associated International filings.

·       A revenue model consistent with other medical devices that are invoiced at the time of application (surgery).  Current ASP holding at $2200 with attractive gross margins
·       To date, over 10,000 patients have been treated with Pegasus’ products in various orthopaedic and chronic, complex wound applications

·       Received four FDA 510(k) approvals:  For Unite® Biomatrix as a collagen wound dressing (Sept. 26, 2007), for Orthadapt® as a surgical mesh for the repair, reinforcement and augmentation of soft tissues repaired by sutures or suture anchors during tendon repair surgery (Aug 5, 2005 and May 4, 2007), for Duradapt ® as a dural substitute under an IDE, and for Orthadapt® PR (Peek Reinforced), also for the repair, reinforcement and augmentation of soft tissues repaired by sutures or suture anchors during tendon repair surgery (May 5, 2009).

·       Received 1 FDA Investigational Device Exemption (IDE) to evaluate the safety and procedural success of a product called Duradapt® (a version of Orthadapt) for the repair/replacement of cranial dura mater.

·       Inventory of 4000 units valued at $667K based on cost of goods.

Revenue Summary–

Pegasus has been generating revenue since mid 2006 with both Orthadapt and Unite products.  Total revenue summary is as follows:
·     2006 – $2,958,113
·     2007 – $7,323,429
·     2008 – $9,147,515
·     Q1, 2009 – $2,479,987
Pegasus Key Accounts –
·     UCSD Medical Center – San Diego, CA
·     Alexian Brothers Hospital – Arlington Heights, IL
·     Wellstar Cobb Hospital – Marietta, GA
·     Westchester General Hospital – Miami, FL
·     Memorial Hospital of Rhode Island – Pawtucket, RI

Pegasus Biologics Company Profile

Founded in June, 2004, Pegasus is a California based, revenue stage medical device company.  Over the last 4 years, the company has raised $32MM in equity and debt from leading capital venture firms such as Onset Ventures, Frazier Healthcare Partners, Three Arch Partners and Affinity Capital.

Pegasus is becoming recognized as a global leader in bio-surgical solutions for soft tissue repair.  With thousands of successful clinical outcomes, current applications range from the repair, reinforcement and reconstruction of tendons to limb preservation and advanced wound management.

Impact of Technology on the Market
With the growing demand for advanced biologics, Pegasus is well positioned for the future.  An estimated 850,000 orthopedic soft tissue repairs and over 365,000 chronic complex wounds performed annually worldwide support this theory, and the high failure rates of tendon repair reported in the literature indicate an unmet clinical need.  The OrthADAPT® Bioimplant and Unite® Biomatrix collagen-based products are both FDA cleared and CE Marked.

Pegasus Biologics has obtained exclusive worldwide licenses for the revolutionary bio-platform technology developed for the processing and sterilization of biological tissue for use in orthopedic, oral/dental, spinal and neurological, abdominal and thoracic, breast and wound applications.

Pegasus Biologics’ Assets
Pegasus Biologics has developed a portfolio of assets critical to the repair and reinforcement of soft tissues and the treatment of chronic, complex wounds. These assets fall into a variety of categories, including:
·       Patents
·       Product
·       Product designs and prototype
·       Software and control algorithms
·       Manufacturing equipment and fixtures
·       One (1) prospective, multi-center, clinical trial under an FDA investigational device exemption. (Dura)
·       Three (3)  prospective, multi-center clinical studies for marketing purposes (Achilles tendon, arthroscopic rotator cuff, wound)
·       One (1) retrospective study for marketing purposes (open rotator cuff)
·       Current FDA regulatory clearances and CE marks
·       Data from human clinical trials/studies
·       Intellectual capital and expertise
·       Trademarks
·       Domain names

The assets of Pegasus Biologics will be sold in whole or in part (collectively, the “Pegasus Assets”).  The sale of these assets is being conducted with the cooperation of Pegasus. Pegasus and its employees may be available to assist purchasers with due diligence.  Notwithstanding the foregoing, Pegasus Biologics should not be contacted directly without the prior consent of Gerbsman Partners.

The Bidding Process for Interested Buyers
Interested and qualified parties will be expected to sign a nondisclosure agreement (attached hereto as Exhibit A) to have access to key members of the management and intellectual capital teams and the due diligence “war room” documentation (the “Due Diligence Access”). Each interested party, as a consequence of the Due Diligence Access granted to it, shall be deemed to acknowledge and represent (i) that it is bound by the bidding procedures described herein; (ii) that it has an opportunity to inspect and examine the Pegasus Biologics’ Assets and to review all pertinent documents and information with respect thereto; (iii) that it is not relying upon any written or oral statements, representations, or warranties of Gerbsman Partners, or their respective staff, agents, or attorneys; and (iv) all such documents and reports have been provided solely for the convenience of the interested party, and Gerbsman Partners (and their respective, staff, agents, or attorneys) do not make any representations as to the accuracy or completeness of the same.

Following an initial round of due diligence, interested parties will be invited to participate with a sealed bid, for the acquisition of the Pegasus Biologics’ Assets. Sealed bids must be submitted so that the bid is actually received by Gerbsman Partners no later than Friday, June 26, 2009 at 3:00 p.m. Pacific Standard Time (the “Bid Deadline”) at Pegasus’ office, located at 6 Jenner Dr, Suite 150 Irvine, CA. 92618.  Please also email steve@gerbsmanpartners.com with any bid.

Bids should identify those assets being tendered for in a specific and identifiable way. The attached Pegasus fixed asset list may not be complete and Bidders interested in the Pegasus Biologics Equipment must submit a separate bid for such assets. Be specific as to the assets desired.

Any person or other entity making a bid must be prepared to provide independent confirmation that they possess the financial resources to complete the purchase where applicable. All bids must be accompanied by a refundable deposit check in the amount of $200,000 (payable to Pegasus Biologics, Inc.). The winning bidder will be notified within 3 business days after the Bid Deadline. Non-successful bidders will have their deposit returned to them. Pegasus Biologics reserves the right to, in its sole discretion, accept or reject any bid, or withdraw any or all assets from sale.

Pegasus will require the successful bidder to close within 7 business days.  Any or all of the assets of Pegasus will be sold on an “as is, where is” basis, with no representation or warranties whatsoever.

All sales, transfer, and recording taxes, stamp taxes, or similar taxes, if any, relating to the sale of the Pegasus Biologics Assets shall be the sole responsibility of the successful bidder and shall be paid to Pegasus at the closing of each transaction.

For additional information, please see below and/or contact:

Steven R. Gerbsman
steve@gerbsmanpartners.com

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