Special New York Small-cap Financial Expo Issue
Donny Deutsch Ad land's overachiever talks about TV, guts and what it means to be a CEO
FALL 2005 $7.00 www.valuerichonline.com
BECOME A CHARTER MEMBER OF An organization where money and ideas The company that brought you the VALUE RICH Small-cap
Financial Expo and aLUE RICH Magazine, is creating a trade organization that offers its exclusive network for non-stop direct connections between small-cap public companies and Wall Street .
aLUERICH.ORG really do connect. VALUE RICH .ORG, will offer members a potent combination of frequent expo-style events that bring Wall Street and small-cap public companies together under one roof; the highest quality financial industry publications and a members' database that exactly pinpoints the contacts public company leaders and investment bankers need.
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ValueRich.Org Coming Soon From the very outset, we have had one primary purpose at ValueRich: to help undervalued and underserved micro-cap and small-cap public companies raise capital, gain market awareness and access more sophisticated services so that they might better accomplish their public company requirements and grow. But in doing so, we are not just helping the public companies. Investment banking firms and private equity firms are deriving great benefits as well. This could not have been more evident than at our first ValueRich Small-cap Financial Expo in Palm Beach last March. Many of our investment banking participants and partners were quite pleased- you might say almost surprised- at the lucrative opportunities presented by the 100 micro-cap and small-cap companies who exhibited there. As a result, there has been very high interest by the investment banking community in our second Small-cap Financial Expo, at the Javits Center in New York, Sept. 14-15, 2005. At the time of this writing, 12 investment banking firms are participating as sponsors or host banks -including such well-known firms as Brean Murray, Morgan Joseph and Maxim Group. Exhibiting companies will be able to meet with multiple banks on Bankers Row. But perhaps more interestingly, investment bankers have told me that they view our expo as a real opportunity. They would normally spend months of travel time and hundreds of thousands of dollars to meet with the same number of companies that we bring under one roof for two full days. At our expo, the company management teams are totally accessible and ready to talk business. Our very fine publication, our absolutely unique expo-style financial events and our very professional sales, marketing and database division have combined to make ValueRich the only organization in the industry today that brings together America's pre-IPO and public companies, international investment banks and private equity firms, money managers and institutional investors as well as research and investment relations firms in a complete cycle of interaction. It is only a matter of adding a few key elements, and ValueRich will be able to more efficiently facilitate each industry group's activities with the other. That is why I am very proud to announce the NEXT STEP. In the coming year, we will be offering memberships in ValueRich .Org: a trade association. We are still formulating plans, but I promise you that ValueRich.Org will fully partner with each aspect of the industry to ensure that everyone will derive the most benefit from our Small-cap Financial Expos, our publications and our marketing and data divisions through new facilitating services. We will be increasing the frequency of our events and magazine, and we will be adding a formalized submission process so that public companies will have the opportunity for their business plans to be reviewed by member banks and private equity firms prior to meeting them at our expos. We will also begin work on e-commerce Web functions for members to access the membership database and other industry information. Once again, ValueRich.Org will be the only organization that serves the whole industry: public companies, investment banks, and industry service providers. Members will also receive significant discounts on all ValueRich events and products. If you do not already receive ValueRich magazine, please subscribe online so that you can stay informed as ValueRich .Org is launched. Also, check our Web site at www.valuerichonline.com for future events and offerings. Here's wishing a good show for everyone in New York.
Joseph C. Visconti President, ValueRich, Inc.
AP AUDEMARS PIGUET Le maitre de l 'horlogerie depuis 1875
Audemars Piguet Boutique 40 East 57'h Street • New York 212.688.6644 www.audemarspiguet.com JULES AUDEMARS TOURBILLON AND CHRONOGRAPH WATCH, HAND-WOUND MOVEMENT. CASE AND AP FOLDING CLASP IN 18-CARAT WHITE GOLD, TRANSPARENT SAPPHIRE CASEBACK.
ALSO AVAILABLE IN PINK GOLD.
Joseph C. Visconti Presid ent & CEO josep h@vrexpo. net
American Small-caps Rock Our World One of the fundamental turning points in my life w as the year I spent traveling and living in Europe as a young man. After about three months on the road, I grew t ravelweary, so alii needed was a friendly invitation from a Dutch guy to stay with him for a little wh ile and I ended up living and working in Hol land for about nine month s. I learned to speak passabl e Dutch, and generally had a great time. The Dutch are wonderful, outgoing people- until you meet their bu reaucrats. The process of applying for a work permit was maddening. I was bounced back and forth between five government agencies and I doubt if I ever would have obt ained the permit if I hadn't gone to the American Consulate to resolve the situation. Once I finally got my wo rk permit, I was entitled to full medical care, prescription drugs, insurance, three weeks of paid vacation in a state-subsidized hotel in Majorca and, if I got on a two - or three-year waiting list, a la rge subsidy toward the cost of an apartment. Sound like a good deal? Well yes, in some w ays. But I took home only about 50 percent of my check. And in order to get any of th ese benefits, I had to deal with -you guessed it, more bureaucrats. The longer I lived in Holland, the more I learned about the unintended detriment al effect s of socialism . Virtually every aspect of life in the Netherlands w as at th e end of a big bureaucratic tangl e. Entrepreneurs? Maybe if you inherited a family business, but try to start something from scratch and you 'd quickly come up again st lots of red tape and a lot of roadblocks. Their culture was one of "You can't do that." I witnessed very little small business except for flea markets. Since then , I have had a great appreciation of what it means to be an Am erican . I'm not talking about patriotism ; I'm talking about opportunity. We have opportunity flowing through our veins at birth. I found myself thinking about all of this again while interviewing Donny Deutsch, as w ell as reviewi ng t he Company Conn ect articles we have in this issue. Got a problem? There are entrepreneurs out there right now working on a solution for it. Entrepreneurs love problems. They see them as opportunities. Do you want a cleaner environment? We have a number of green co mpan ies featured in this issue. Do you want to live longer? We have Biotechs that are doing amazing thing s. Want to pay less for gas? Hey, have we got a new engine for you! All of these companies are exhibiting at the New York ValueRich Small -cap Financial Expo, by the way. I don't know if any research has been done on the subject, but I'd bet every family in Ame rica ha s at least on e sm all businessperson in it. Ours is the culture of "Anyth ing is possible." It's ou r gift to the world. Let's keep it that way.
David A. Willson Editor, ValueRich magazine
41VA LUERICH MAGAZI NE
David A. Willson Edito r-in- chief dw ill son@valuerichonlin e.co m
Art Director j cs@va lu ericho nline.com
Jennifer Wilson Editorial Ass ist ant jwilson@va luerich onlin e.com
New York Contributing Editor Th om as Wern er
Contributing Editors Liza Grant Sm ith Kath erin e Waldron Kayla Will so n Rita Sa mol s
Contributors Will Andrews Willi am Li e Leste r Rosen kra ntz Ro bert Warren
Advertising & Convention Sales Gregg Lowenstein Vice- Pres id ent of Sa les gregg l@va luericho nline.com
Ashley Sosner Direct or of Co rporat e Development ashl ey@va luericho nlin e.com
Dave Roeder Direct or of Busin ess Developm ent droed er@va lueri cho nline.com
Brandyce H. Stephenson Busin ess Deve lo pment Coordinator b ra ndy@va luerichonlin e.com
Dara Ryan Acco unt Executive drya n@va luerichonline.com
Lance McCoy Account Execut ive lance@va lueri cho nlin e.co m
Roxane E. West Di rect or of Glo bal Affairs
1-214-244-6400, 1-917-544-7009 Copyright 200S by ValueRich, Inc. All rig hts reserved. Reproduction without t he permission of the publisher is prohibited. The publisher and editors are not responsible for unsolicited material. Ret urn postage m ust accompany all manuscripts, photographs and d rawings. Every effort has been made to assu re that all information presented in t his issue is accurate, and neit her Va lueRich magazine or any of its staff is responsible for omissions or information that has been misrepresented to the magazine. ValueRich Magazine Issue 6 Fall 200S (ISSN pending) is published quarterly by ValueRich, Inc., 1804 N. Dixie Highway, Suite A, West Palm Beach, FL 33407. Periodicals postage pending at West Palm Beach, FL and add itional mailing offi ces. POSTMASTER: Send address changes t o ValueRich, 1804 N. Dixie Hig hway, Suit e A, West Pa lm Beach, FL 33407. 561-832-8878, Fax: 56 1-84 1-1S24 www.va lueri chonline.com
www. val uerichon I i ne .com
From the ultimate hi-fi to museum -quality furnishings this issue's collection of unique
stuff will have you saying, " I want one."
Bombay Sapphire By David Will son Equally vibrant in the country club or the nightclub
-we give you eight great Sapphire recipes
AUDEMARS PIGUET The Royal Family of Fine Timepieces
They are the oldest watchmaking company still
By Kayla Will son
their designs are anything but traditional.
See and be scene at this iconic boutique hotel.
A Kimpton Winter's Tale
ValueRich interviews Donny Deutsch
By Laura Tingo
Deutsch charms his CNBC talk show guests into
Kimpton is offering 30 new ways to spend the Holidays.
a corner, then springs the tough questions. It's
of the skills that made him a legendary ad man .
Fourth of July Italian Style 1-Bankers Securities celebrates the U.S.A.'s birthday with
a bash at the Villa d' Este hotel on Lake Como, Italy.
Maybach Tops the Luxury Ladder
By Will Andrews Maybach recently took top honors as the most
Rare classical instruments beat the markets for returns.
ranking America's top ultra-lu xury automobiles.
Morgan Roadster Back Better Than Ever By Will Andrews
Investing in a Mystery for Magical returns By William Lie and Kayl a Willson
highly regarded automobile maker in a survey
The Mosaic Hotel, Beverly Hills
owned and operate by an original family, but
great entertainment, but also demonstrates some
i.Deas iKarma: Replacing Rumor with Reputation Online
Morgan Motor Company has announced a one-
By Robert Warren
time-only North American special edition of it's
Finally, a Web site that tackles the fundamental
classic roadster. But it's not the same old car.
problem of the Internet ... How do you know who you're dealing with?
Photograp hy by Tim othy Whit e
ENCHANTING IN THE TRANQUILITY OF ITS SEASIDE SETTING, THE HYATI REGENCY HUNTINGTON BEACH stands sentry over Southern California's romantic Pacific coast. Beneath the gaze of a brilliant sun and the welcome of sea swept breezes, this is a place that both excites the senses and calms the soul. Every comfort is indulged ... richly appointed guestrooms with hypnotic vistas of tropical landscapes, lagoon pools and the endless horizon of the sea . . . the soothing and tranquil Pacific Waters Spa , reminiscent of a romantic turn of the century Spanish estate . . . culinary delights from eclectic surf f are to sophisticated California cuisine ... refined social and business gatheri ngs amongst dramatic vaulted ceilings , elegant iron works and lush courtyards.
--REGENCY HUNTINGTON BEACH RESORT
DARE TO DREAM AT HYATI REGENCY HUNTINGTON BEACH RESORT & SPA. 21500 Pacific Coast Highway • Huntington Beach , CA 92648 • (714) 698-1234 www.huntingtonbeach.hyatt.com
2005 Hyatt Corp.
2.Contents n.Side Story Back From the Brink
By Liza Grant Smith
One tough CEO puts up a fight worthy of Rocky to save his company from certain disaster.
n.Vest The Scoop on SPACs
By Liza Grant Smith
Study up on one of Wall Street's hottest new investment vehicles.
Don't Forget the 'Public' In Public Company By Lester Rosenkrantz
Investor relations programs are not lu xuries reserved for large organizations. They are a necessary part of running any public company.
By Liza Grant Smith
Meeting business leaders' sophisticated life insurance needs is a highly discriminating art .
. . . .~~~~~~~. . . Due to an ed itorial ove rsigh t we neglected to credit Thom as Werner for the image on our Summer 2005 cover. Thomas is also the photographer w ho shot our Winter 2005 cover with Jim Cramer and the Fall 2004 cover wit h Maria Bartiromo. For more information abo ut Thoma s, go to www.thoma swernerga liery.com
8 j VALUERICH MAGAZINE FALL 2005
www. va luericho nli ne .com
/r-nt « ;'76'/ ua)'fe miiONIATJIW110*1f.."T ~_.IIHi
PI\ODl!Cr OF ENGLAND
Wolfgang Meletzky was one of those engineers that wasn't satisfied unless he managed to create the perfection of nature through design. For him, the typical hi-fi stereo system gave a very poor imitation of live music. He reasoned, why couldn't an in-room system be devised that radiates sound from all sides, similar to nature. After years of acoustic research with The Institute for Aeronautics and Aerospace in Berlin and at MBL's factory in Germany, Meletzky developed and patented the Radialstrahler (omnidirectional) system, and MBL began manufacturing what was arguably the world 's finest stereo equipment. Now celebrating their 25th anniversary, the Berlin-based manufacturing company continues to push the R&D envelope and produce high fidelity components and complete systems that astound industry experts and discriminating music lovers. In the tradition of its founder, MBL makes systems that exhibit fanatical meticulousness in purity and fullness of sound, as well as shine with a highly idiosyncratic beauty. They manufacture and incorporate only the highest quality components, in elegant, vibration-dampening polished lacquer cases with brass pedestals and 24-carat gold plated switches. Shown here: The MBL small Reference System, finished in arctic silver, with 101 E loudspeakers ($46,900), 9008 amplifiers ($40,040), 601 OD preamp ($18,920), 1611 E Digital to Analog converter ($21 ,450), and the 1621 CD transport ($21 ,01 0) . MBL offers complete systems from $40,000 to well over $150,000. This is truly musical equipment you can build a room around. In the U.S. contact: Jeremy Bryan, V.P., MBL of America, email@example.com www.mbl-hifi.com 10 I VALUERIC H MAGAZINE FALL 2005
www. valuerichonline .com
Chameleon Keyboard This is one of those inventions where you slap yourself in the forehead and say, "Why didn't I think of that?!" Listen ... do you hear it? The sound of millions of foreheads being slapped around the globe, because the Optimus Keyboard has caused more of a stir on t he Internet than anything in a long time. It's probably still a year away f rom being available for purchase, and everyone wants one. Designed by Artemy Lebedev Studios in Moscow, Russia, the Optimus Keyboard concept replaces the lifeless printed keycaps of a typical keyboard with 124 tiny OLED displays making it possible for the keyboard to interact with software, user configurations, international languages and special key comb inations to dynamically display their actual functions- even as animations. Lebedev says it will actually be possible to make the keys display mosaic art in "keysaver" mode while not in use. No more Dingbat hunting . No more arcane key-combination charts and cardboard overlays. No more hit-or-miss experimenting to find the right foreign accent mark. The world will finally be liberated from the tyranny of touch -typing . Artemy Lebedev Studios has been four years in deve loping the concept and expects to have its first working model fini shed by this fall. It is expected to be slightly wider than today's standard keyboards, with durable polycarbonate key surfaces and the feel of an Apple Extended Keyboard II. It will also come with pre-programmed key sets for a variety of software. According to Lebedev, the Optimus will cost less tha n a good cell phone.
FALL 200S VALUER ICH MAGAZ INE I l l
www.jeremycole.net Jeremy Cole's designs are heavily influenced by the flora and fauna of his New Zealand homeland. Cole works with the organic clean lines of nature to turn otherwise classic forms into something contemporary and unique. Since the launch of the first series, entitled Aloe, of his debut Flora collection 6 months ago, Cole has received a lot of attention . The Aloe series is available in three design options - Blossom, Bud and Shoot as pendant lamps, wall hanging lamps, table lamps and standing lamps. They are constructed in a series of complex ceramic geometric forms that are inspired by the leaves of the Agave plant. The individually handcrafted lamps emit a warm gentle glow when illuminated, and are just as brilliant as sculptural form when unlit by day. Pricing is available on request.
12 1VALUERICH MAGAZINE
www. valuerichonline.co m
FALL ' 路 VALUERICH MAGAZ INE In
Nothing will stock a festive bar with as much beauty and intensity of color as this stunning rainbow collection of 4 1/ 2-inch -high Mosa ique tumblers from Baccarat. The purity and brilliance of their colors could be accomplished only in fine Baccarat crystal. Treat your guests to a full palette of dazzling drin ks or match your decor with a monochromatic collection. How about a Ruby holiday set? $295 each .
14 1 VALUERICH MAGAZINE FALL 2005
www. va luerichon line .com
Tropical Seat Wove Every Bermuda bungalow or Palm Beach mansion should have at least one iconic contemporary furnishing from the Tropical Modern design school. The Corallo Chair, designed by the Brazilian brothers Fernando and Humberto Campana in 2004 for the contemporary Italian design house Edra, was recently included in the MoMA Permanent Design Collection in New York. This is the second Edra Campana chair to land in the MoMA collection as an icon of contemporary styling. The two designs by the Brazilian brothers were formerly featured in the 1989 MoMA exhibition "Tropical Modern."This brings Edra's total MoMA collection contributions to three, including a sofa designed by Francesco Binfare in 2000. Corallo is a large freestanding seat constructed of irregular weaving of hand-bent steel wire with coral pink epoxy paint finish. 3,820 euros www.edra.com
FALL 2005 VALUERICH MAGAZINE 115
This is truly the ultimate California concept. Why worry about tuning your ride? It's all about the look, right? Take the Dodge Magnum, for instance. It's already sleek, low and has a big HEMI in it. So all you really need to do is give it some Flash! That's precisely what STRUT automotive collections do. They offer unique jewelry for your ride: grilles, vents and insignias handcrafted out of chromed 316L stainless steel to very high quality standards that will retain their superior appearance, even under harsh conditions. They'll even handcraft customized shields with monograms. Located in Southern California and available only through exclusive boutique automotive accessory shops, the STRUT collections for BMW, Land Rover, Lincoln, Cadillac Hummer and Chrysler-Dodge add distinctive style to the brands that cry out for Bling. Shown : The Dodge Magnum Atlanta Collection: front grille, lower grille and STRUT insignia- $3,700 www.strutwear.com
16 1VALUERICH MAGAZINE FALL 2005
of Fancy Giancarlo de Astis grew up in Mexico, the United States, Italy, Venezuela, Tunisia and Australia . He speaks English, Spanish, Italian and French fluently. He gave up a highpowered marketing career as a Hispanic and Asian market specialist in New York and Los Angeles to build furniture. Not just any funiture though . Furniture from the wild blue yonder, inspired by a flight over the Mojave Desert in 1995, where he first witnessed the awesome aircraft "bone yards." De Astis was inspired by the millions of creative man-hours already embedded in the shapes of thousands of aged airplanes glimmering under intense heat- all of them waiting for their irrevocable smelting. He selects from heaps of sliced metal parts that shine with the brilliance of their highly engineered design. The functionally fierce beauty of these aircraft parts is then integrated with wood, stone, glass, and metal for De Astis' creations. Ailerons, canopies, turbine blades and other parts are reborn as chairs, desks, lamps, and tables- bringing the romance of flight to the home, office and public spaces. Prices available on request.
FALL 2005 VALUERICH MAGAZINE 117
The Royal Family of Fine Timepieces You can't help but sense the tradition, complexity and excellence when you are adorned with an Audemars Piguet (AP) watch. Cutting-edge technologies and handcrafted creativity are an unbeatable mix for these classic self-winding timepieces. Whether you choose the limited series Dual Time Millenary Maserati watch, created to celebrate 90 years of manufacturing Maseratis, the Royal Oak Offshore Alinghi Polaris chronograph, inspired by the North Star, or other designs uniquely crafted for function and elegance, you 'll become part of the legacy of this 130-year-old company of watchmaking . And ladies, you are definitely not left out- your Lady Royal Oak watch may come with an 18-carat gold crown topped with a translucent cabochon-cut sapphire, surrounded by 32 brilliant-cut diamonds. This family-run business began in 1875 when two childhood f riends, Jules-Louis Audemars and Edward-Auguste Piguet, pooled resources to start a small watchmaking house in the heart of the Vallee de Joux in the Swiss Jura region . 18 1VALUERICH MAGAZINE FALL 2005
Audemars handled the technical management of the small company, while Piguet took charge of sales and marketing. The company has prospered, unaffected by two world wars and the Great Depression. Its resilience is due in part to the production of ladies' wristwatches and by creating an accessible line of watches. Even while a watchmaking crisis was affecting other companies in the 1970s, Audemars Piguet grew when it launched the world's first high-end sports watch in steel: the Royal Oak. In 1993, the Royal Oak Offshore watches, water-resistant to 100 meters and designed for extreme sports, were introduced. Today, Audemars Piguet watches continue to be unique and among the most complex handmade mechanical watches in the world. The great-grandchildren of the founders continue the tradition of excellence and innovation, and the Company continues to offer a rare combination of extremely complex mechanisms with exquisite designs. Over 20,000 watches were produced in 2004, and sales amounted to more than 240 million Swiss francs . www. valuerichonline.com
Here's a closer look at some of these magnificent timepieces:
Jules Audemars Equation of Time If you rise and set by the sun, this is the timepiece for you . The Equation ofTime watch shows daily sunrises and sunsets, a perpetual calendar, and astronomical moon cycles. In 2000, AP watchmakers perfected the Equation ofTime as a modern refinement of three celebrated antique AP models: the pocketwatch with an equation-of-time device (before 1900), the first model with a perpetual calendar lined up along the 12 o'clock-6 o'clock axis (1925), and the perpetual calendar pocketwatch with "running hand " equation-of-time display (1928) . Each watch may be adjusted according to the location chosen by its owner. Choose an 18-carat yellow, pink or white gold case for this technological wonder.
Jules Audemars Tourbillon and Chronograph
The latest newcomer to the Jules Audemars collection is the Tourbillon and Chronograph . The timepiece features a hand-wound caliber 2889 and is crafted in titanium , a material selected for its lightness and extreme resistance. Its exceptional movement ensures that the sweep second hand runs, stops and returns to zero without wobbling or hesitating. Opposite the 30-minute chronograph counter at 3 o'clock, caliber 2889 displays the small seconds at 9 o'clock. Audemars perfected and miniaturized the Tourbi llon in 1986 and placed it for the first time inside the case of an ultra-thin se lf-winding watch . All components are hand-finished, beveled, vertical polished and circulargrained; bridges are adorned with a "Cotes de Geneve" decorative pattern.
Dual Time Millenary Maserati Audemars Piguet has created a singular watch issued in a limited series to celebrate the 90th birthday of Maserati . The watch is inspired by the design and the spirit of their legendary automobiles. The revolutionary three-dimensional dial is composed of four independent parts, two of which are incl ined at different angles and directed toward its center, giving an overall raised effect. The analog date display and the two hourcircles are slightly out of line with their centers. And, of course, the Maserati gold trident symbol adds to this creative design . www.audemarspiguet.com
www. vrexpo .net
FALL 2005 VALUERI CH MAGAZINE 119
Royal Oak Collection Royal Oak and Lady Royal Oak In 1972, Audemars Piguet created its famous octagon-shaped watch, the Royal Oak, out of an unexpected material at the time, steel. The seamless integration of its case and bracelet created an innovative design like no other. Over the years, AP has manufactured several variations of this model, including the Lady Royal Oak Collection, which offers a gem-set gold version adorned with mother-of-pearl and diamonds.
Royal Oak Offshore Alinghi Polaris Chronograph The ultra-sporting version of the Royal Oak, the Royal Oak Offshore Alinghi Polaris Chronograph, was designed in the wake ofTeam Alinghi's winning the most prestigious yachting trophy of all time: the America's Cup. Audemars Piguet wanted to offer a timepiece tailored to the expectations of crewmembers and fans and thus devised a "flyback" chronograph equipped with a countdown timing device specifically for regatta starts. The central minute hand performs a complete rotation around the dial in 10 minutes. At the first gunshot, the person wearing the watch starts the chronograph. At the second gunshot, a second push-button is pressed, instantly resetting the chronograph. An aperture at 12 o'clock moves from black to red during the last minute prior to the start.
Royal Oak Lady Alinghi
The Royal Oak Lady Alinghi keeps the famous octagonal shape of t he Royal Oaks, but adds a surface emulating rippling seas and the beautiful red Alinghi logo at 6 o'clock. The watch comes in a white-lacquered presentation box, lined in white leather with white striated wooden support, reminiscent of a wooden deck on a lu xury yacht.
20 I VALUERICH MAG AZI NE FALL 2005
.alytic services and products provided by Standard & Poor's are the result of separate activities designed to preserve the independence and objectivity of each analytic process. mdard & Poor's has established policies and procedures to maintain the confidentiality of non-public information received during each analytic process.
A ALUERICH Interview With
The Big Idea with Donny Deutsch airs on CNBC Monday through Friday at 1 0:00 p.m. His new book, Often Wrong, Never in Doubt, Unleash the Business Rebel Within will be out in October.
22 1VALUERI CH MAGAZ INE FALL 2005
www. valuerichonl ine.com
Donny Deutsch has excelled in one of the toughest businesses there is- advertising. It's cutthroat, cliquish and irritatingly illogical. Not to mention that creative success often seems more a function of magic than a science. Very few people are good at it. Donny is one of the best. Now he has an interview show on CNBC. Never mind that it airs in one of the worst time-slots on cable, it has still developed a following . Donny is the prototypical New Yorker. He's equally a denizen of the street and the ivory towers- equally comfortable with rap moguls and tycoons. Most of all we like the way he has an uncanny awareness of what we'd like to find out from his guests. He can charm them into a corner, then spring the tough questions and get unguarded answers. It's great entertainment, but also demonstrates some of the skills that made him a legendary ad man. We thought we'd ask him about that.
VALUERICH : People seem bemused by the fact that you have made this connection between being a TV personality and an advertising executive .. . DONNY DEUTSCH: Which I find ironic. When you look at so many TV hosts, their backgrounds are comedians, DJs, artists or MCs. I'm somebody who for the last 20 years has been trying to analyze trends, get inside people's heads, watch where our culture is going- learn why things react the way they do. To me that is the ultimate training ground: to sit down and with newsmakers, politicians, celebrities, and dissect what exactly is going on -the hows and whys- how it affects capital markets, how bus iness intersects with everything else. I couldn't think of a better training ground . V R :The way you went about building your agency is also pretty amazing. DD: Yeah, I had a great head start. My dad started the place. It was called David Deutsch Associates. He started it in 1969 and built it into a creative boutique. I joined him in the early '80s and we were able to blow it out. We are, I think, the ninth -largest agency in the States now and we've always had a stellar reputation for a great creative product and real smart, integrated, strategic thinking . It's been a good ride. www.vrexpo .n et
VR: What is the difference between your agency today and what it was when it was a boutique agency? DD: Well, it was 30 people then, it's 1,000 people now. It's multiple offices. It's a different level blue-chip client, Johnson & Johnson and companies of that ilk versus small, more "boutiquie" accounts. That's the big difference. VR: Is the creative side of it handled any differently? DD: The interesting thing about creativity is, whether you're doing a print ad that runs in ValueRich magazine with a circulation of 20,000 or a print ad that runs in People magazine with a circulation of millions, it's the same creative process. And that same math goes for doing a TV commercial that runs on just a local cable access show versus something that runs on the Super Bowl. So, the creative process doesn't change as you scale the size of your business. What changes is the kind of services . You become a full-service agency and you offer direct marketing and advertising and sales promotion and all the other disciplines that go into an integrated marketing solution. VR: When you first took over, what kind of role did you play as an individual? DD: Initially I was kind of the idiot son , actua lly. That was my role. [Laughs] Basically, it took me a few years to get my feet wet. I've talked about this before. My dad actually fired me because I was kind of a screw-up in the beginning. I was going to go to law school, and then I real ly made a commitment to the business and we blew it out. I've been trained on both sides of the business. I went to Wharton undergrad, so obviously I have some business training, and I'm also a writer. So, I'm one of those few cats that I've come across in life that has both sides of the brain working. I have a real creative soul and great creative instincts and, I think obviously, a pretty sharp business head. Those two don't usually go hand in hand, but I've been fortunate ... VR: So, you were in a small boutique agency and you starting going after these big accounts. I've read some of the stories, we won't repeat them, of some of the stunts you've pulled to get in the door ... DD: The mind set is this : It's not about stunts- I have a book coming
Cover Stor out in October titled Often Wrong, Never in Doubt- it's about my business philosophy. One of the core philosophies in the book is a concept called "Why Not Me?" You know, self-entitlement. If you're in the widget business and you basically distribute to five stores, then you have to say to yourself, "Damn it, why am I not in 500 stores?" You've got to work back from that. So, in the math of my business, if we have million -dollar accounts, well, we should be pitching 1a-milliondollar accounts. It's part of it, as an agency and businessperson ... You fi rst have to own that mindset. VR: A lot of our readers are in that same position. They 're the officers of smaller public companies. Their stock might be trading at around $2. They're essentially entrepreneurial businesses. In fact, the CEO of the company might be the guy who started the business as a private company. Is there anything you would tell that person to help him get to the next level? DD: Yeah . I think number one is you have to dream. Number two: You've got to always stay true to your core competency. That doesn't mean you just do one thing, but as you build the business, and as you scale the business ... well, as I built my advertising business, I didn't go out and open up restaurants . What I did do was open up ancillary services to what I did, so I was growing horizontally and vertically. I also think you need a mortal enemy. You have to have someone who is much bigger than you, to look at and go, "Damn, we are going to get those guys:' There is another chapter in my book called "Hatred Is Good:' Not literally hating, but really more like having a target. And I don't mean a target as in "OK, this year we're going to do another 20 percent:' I recently watched a Wai-Mart documentary on CNBC and learned that in the late seventies, Wai-Mart was 5 percent of the size of K-mart. That's all you need to know. There are always mathematical changes. There is always a big guy falling and a new guy coming. You've got to have a FALL 2005 VALUERICH MAGAZINE
sky's-the-limit attitude. There is no substitute for grit and hard work. Plus you have to take risks. To me, the ultimate risk is to be completely risk-averse ... You can't be afraid to follow your gut. Those big leaps don't happen with just pure blocking and tackling. You need the blocking and tackling, but you need some of those Hail Marys also. VR: To go back to this entrepreneurial CEO, he may not be comfortable with making personal appearances, but frankly, that's what he has to do, because the CEO is essentially the company storyteller. DO: Sure. Look, you have to embody the brand of your business. There are some CEOs who have become brands themselves. You know who they are, the Donald Trumps of the world- and on a smaller scale, I have done a little of that. But even if you're not a showman, you're the living-flesh embodiment, the literal personification of that business. So, whether it's talking to the street or t alking to the media or talking internally to employees or at industry functions, your personification has got to be what that brand stands for. And in my business, who I am as a person, my personality traits- aggressive, challenging, thinking out of the box - are literally the personality of our agency also. It's not a matter of being an outspoken person or not an outspoken person. You've got to be true to who you are. You take a guy like Andy Grove. He is more of a low-key guy, but his business philosophy and who he was is what Intel became. I don't care about the size of the company, part of the job as CEO is that you are the personification of that company. I don't mean that as in a personality, but the traits you believe in, the value system you embody should be the same as the company, because the company is an organism also. VR: What about finding something inspirational ? What about pushing buttons with your audience? Isn't the goal in advertising to find the largest aggregate group of people who have enough in common where if you push a particular set of buttons, it will be very motivational? DO: Yeah, that's certainly a way of breaking it down. Once again, great marketing is understanding what is on people's minds and then 24 1VAlUERICH MAGAZINE FALL 2005
delivering your message accordingly. Your product may not be going for the large audience. It may be going for a niche audience. But the fundamental tenant of marketing is basically finding a hole, you know, finding market opportunity, understanding the consumer mindset and building your product and message accordingly. A sales solution is "Here's my product; now I'm going to sell it." A marketing solution is "There's an opportunity; now I am going to actually manufacture a concept and a marketing message according to the opportunity." That's the front part of marketing. Really great marketers, at the fundamental core of it, understand mindsets and understand where a society is going. So, for instance, if you're selling a car, it's not necessarily about looking at the marketplace
I don't care about the size of the company, part of the job as CEO is that you are the personification of that company ... the traits you believe in, the value system you embody should be the same as the company, because the company is an organism also. today, but saying: "OK, where are the megatrends going? What's coming up psychographically and ethnographically five to seven years from now?" And do you know what? More than ever, the mindset is going to be green : "We have these emerging tweeners, who will be in their 20s, and they're going to want to keep the planet healthy. And boy, why don't I market an entire brand as a green brand:' I'm just kind of pulling something out of the air, but it's really all about looking where the world is going and plugging in your product accordingly. Great brands and great marketing campaigns can almost cause movements. Take Nike, who in the early '80s came out with "Just Do It" and used the Beatles song Revolution. They weren't just capitalizing on the fitness craze, they were causing it at the same time. So, great marketers kind of look at trends and plug into them, and they push those trends along. V R: The Internet has changed
everything, hasn't it? DO: Sure. Well, yes and no. It's interesting : Every time a new type of media comes on in advertising, it's like "Oh my God, the world 's changing!" But the basic tenets of good marketing, which is good, simple, human ideas well told- really understanding an audience and giving it a relevant message- ha s not changed from the days of billboards and radio. It's just that now you have more intersects with the consumer, and the consumer has to be sliced and diced more. During the course of a day 20 years ago, people listened to the radio on their way to work, passed some billboards, read the newspaper, listened to the radio and watched TV. Now, in addition to those things, they're on the Internet several hours a day, they're reading text messages on their cell phones. So there's more fragmentation of the message, but the basic tenets of how to connect with people have not changed -just the distribution systems. The big megatrend in marketing is more and more customization . If you fast-forward 10 years from now, you and I could be in the same apartment building and might be watching the same TV show but getting a different ad because there will be that much more customization for one-on-one marketing. That's kind of where the world is going. You know, a little bit like what you saw in the scifi movie Minority Report- messages will become more and more targeted, and the definition of mass media will change much more to personal media. V R: Let's shift gears a little bit. I want to talk about your show. It's interesting to me that you are kind of in the same position today, starting on CNBC, as you were taking a boutique agency and starting to build it, aren't you? DO: Actually, I've thought that to myself as I am doing this. It's the same principles. I am starting out as a small show no one is aware of- The Little Engine That Could. And right off the bat, I say to myself, "I'm taking on Larry King :' Now, Larry King is brilliant, but I started to think, "I deserve that same level of guests." You have to think of yourself that way, even if the world isn't. Sure enough , six months into it, the ratings have more than doubled and the www. valuerichon line .com
show has a great buzz- a tremendous success out of the box. But I'm still not happy. Si x months into it, I'm going, "OK, where's the next level? " If you had told me in the beginning that six months into it I'd be beating what was in my time period by 50 percent, I'd have thought, " Boy, that's a home run." But now that I'm here, I'm thinking, "OK, What's next? It's sti ll not enough ." You have to try and do it fresher and better, and take some chances. So, it is the same math . Yeah, I think that is a very good insight. V R: How did it come about that you got the show? Did you pitch The Big Idea with Donny Deutsch to CNBC? DO: Well, it kind of grew organically. I was an interviewee a lot. CNBC, just like all of the other networks, would call me for opinions and commentary on marketing-related issues. One day they called me to substitute co-host on Kudlow & Cramer, and I did that. They thought I was pretty good. Then they said, "Hey, why don't we do some specials and see how you are? " We did five or si x specials on different subjects. Then they said: "Wow, we like this. Why don't we try to do a weekly on Sunday nights." After The McEnroe Show didn't work out, they said, "Why don't we try it nightly," and here we are. V R: So here you were, the CEO of one of the top advertising agencies in the country, and you're being asked by a cable network to become a performer. What kind of thought process did you go through? Were you ready to branch out from advertising? DO: First of all, I don't think of it as a performe r. I had sold the company in 2000 to lnterpublic. Although I am still chairman and CEO, I had scaled my responsibilities way, way back. I'm still part of the agency, but my day-to-day activity isn't what it was. So, I was looking for new challenges - I always am . And to me, this just was something that turned me on . And I'm having th e time of my life doing it. R: How do you get your guests? DO: It's no different from any other show. We have a staff of producers and bookers. It's an ongoing process: Who's available? What stories are we on? Somebody wants to do the show but we don't want them . Or we want somebody www. vrexpo .net
to do the show but they don't want to. It's an organic process that the Today show goes through, that The Tonight Show goes through, that the nightly news goes through . It's one of the big challenges of the business. And obviously, as a new kid on the block, it's hard initially. People have frankly been astounded at the level of guests we've gotten right out of the box, and I think one of the reasons is that I'm a CEO. I don't mean this obnoxiously, but I'm a very wealthy CEO, and I think celebrities, newsmakers
and politicians want to sit down with me as a peer. It's not some journalist sticking a microphone in their face. They say: "Hey, wait, this is a guy that I might be sitting at a dinner party with . Thi s is a guy I might learn something with :' So if you're Donald Trump, or P. Diddy, or Yoko Ono, or Senator Chuck Schumer- just to name a range of people - it's like "Yeah , this is a guy that I might be doing business with ." And that's why I think I've been able to get the interviews that I've gotten . When FALL 2005 VALUERIC H MAG AZ INE 125
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.搂 Sylvester Stallone sits down with me, he's sitting down with a peer. Because he looks at himself as a businessman, he looks at himself as a brand. And on t op of that, not only do you get better guests, but you also get a more intimate interview. Because it tends to very quickly go to a conversation of peers versus an interview. And I think that's been a real benchmark of my show. R: That seems to have been your talent right from the start- making the interview intimate. But at the same time, you don't pull any punches, do you? DO: You can do that as long as 26 1VALUERICH MAGAZINE FALL 2005
When Sylvester Stallone sits down with me, he's sitting down with a peer. Because he looks at himself as a businessman, he looks at himself as a brand. everything is done with respect and not in what I'll call a gossipy way. For example, I had Vince Vaughn on recently, and there has been all this press about him dating Jennifer Aniston, and instead of asking, "So, are you dating Jennifer?" I said, "I'm really more fascinated with how you're dealing with the press." So, you can get into the subject but take it
to a higher intellectual place. I find that people respond to intelligence. If you're coming at Jose Canseco about steroids or Donald Trump about his brand, and you are doing it from a smart place, people respond and people let you in. V R: There was recently a brouhaha over how you allegedly blindsided Bernard Goldberg on your show. What do you say about that? DO: Oh, please. What's amazing about that is that the biggest bullies are the biggest crybabies. Bernard Goldberg came on the show to promote his book, and we had a panel of various TV journalists, and this guy was such a jerk, and he came off so hateful, so reactionary on one side, that yeah, it did end up with everybody against him. It was what it was, and he dug his own grave. But the frightening part was the next day he went on this tirade. He goes on The O'Reilly Factor, he goes on Rush Limbaugh saying, "Look at what those people did to me!" You know what? If you can't take the punches, don't throw them . But that kind of stuff is good for the show, frankly. It gets attention and creates controversy. That always works . V R: Did you consciously load the panel with critics? DO: No, absolutely not. Linda Stasi from the New York Post? The last time I looked, the New York Post is a fairly conservative journalistic universe. It wasn't set up to go after him. It was set up to kind oftalk about "OK, let's look at the 100 people you chose who are ruining America and let's debate it . And why did you choose those people?" And anytime anyone challenged any of the people, he just went bananas. V R: You mentioned you had a book coming out in October. DO: I've got a new book, "Often Wrong, Never in Doubt." It's my business philosophy of growing a business, motivating people, and creating a creative environment. I think there are some good lessons in it for anybody, from someone who's selling vacuum cleaners door to door all the way up to the CEO of a Fortune 500 company. V R: We' ll definitely get a copy here at Va/ueRich when it comes out. Thank you for the interview, Donny. DO: I'm really flattered you wanted to do something on me. I appreciate it. VR www. valuerichonline.com
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28 1VALUERICH MAGAZINE FALL 2005
Top of the Luxury Ladder The New York-based Luxury Institute recently reported that Maybach took top honors as the most highly regarded ultra-luxury automobile maker in a surve r ica's top ultra-luxury automo iles.
www. vrexpo .ne t
By Will Andrews
FALL 2005 VALUERICH MAGAZINE 129
路.---t;__ The Luxury Institute is an in-depth research organization that focuses solely on the top 10 percent of America's wealthy. Households with a total net worth of $5 million to $25plus million participated in the study. The report, entitled The Luxury Automotive Brand Status Index, rated t he Aston Martin, Bentley, BMW, Ferrari, Lamborghini, Maserati, Maybach, Mercedes, Porsche and Rolls Royce b rands. Ultra-wealthy consumers were asked to rate each automaker based on four considerations: 1. Does the brand deliver superior quality? 2. Does it deliver uniqueness and exclusivity? 3. Is it used by people who are admired and respected? 4. Does it make the client feel special throughout the entire customer experience? The survey also asked respondents 30 I VALUERICH MAGAZINE FALL 2005
to rate each brand on price worthiness and note any change in status from the previous 12 months. "Maybach's ability to earn first or second place on all of the four pillars of a luxury brand allowed it to break through despite its relatively low awareness and newness;' said Milton Pedraza, CEO of the Luxury Institute. "It is clearly an impressive win for DaimlerChrysler Group, which launched the automobile in the hopes of capturing a solid share of the ultra-luxury car segment. Still, the resilience of Rolls Royce and Bentley, given the onslaught of models from new competitors such as Maybach, and from traditional competitors such as Ferrari, Maserati, and Aston Martin, is a testament to their ability to adapt while maintaining their heritage and brand identity." Maybach's top status is surprising, considering that the car was introduced in 2002. According to Pedraza, roughly half the respondents did not even
The Maybach 62 is the longest production automobile in the world. recognize the Maybach brand name. But those who did, rated the car so highly that it rose above Rolls and Bentley in the survey results. The introduction of the Maybach brand sprang from some of the most thorough research DaimlerChrysler Group has ever conducted. The research revealed a niche of potential customers who have made remarkable achievements in their lives and have the means to afford a remarkable automobile. While Rolls and Bentley's heritage rest firmly in bespoke carriage traditions, the Maybach was designed more like a luxurious private jet for the road . Its 543-horsepower, twin-turbocharged V-12 engine produces incredible torque and will accelerate the massive automobile from 0-60 mph in just over www.valuerichonline.com
The Maybach 62 uses its extra length to accommodate two fully reclining seats.
luxury seats in the rear cabin, unlike anything ever offered in an automobile. Traveling Salon
five seconds- in utter silence. The Maybach has a full array of braking, handling and safety technology to match. Mercedes-Benz loaded the car with the latest technology in electronic braking systems, an Airmatic DC air suspension, a state-of-the-art Electronic Stability Program (ESP) and a supplemental restraint system with 10 airbags. Maybachs come in two sizes, extra large and huge. The two models are the Maybach 57 and the Maybach 62. The numbers signify each model 's length in meters: 5.73 meters (225 .3 inches long on a 133.5-inch wheelbase) and 6.17 meters (242.5 inches long on a 150.7-inch wheelbase). The Maybach 62 is the longest production automobile in the world . It uses its extra length to accommodate two fully reclining www. vrexpo .net
Both models come fully equipped with separate front and rear climate control systems, a rear DVD audiovisual system with dual flat-screen monitors, a Bose速21-speaker, concert-quality surround sound system and a rear center console with refrigerator compartment. Interiors are outfitted with hand-fitted Grand Nappa leather, nubuck leather trim, Alcantara-trimmed headliner and pillars, deep-nap velour carpeting and a choice of three fine woods- cherry, amboyna or walnut. Maybach's designers have made unprecedented use of myriad ambient lights in the interior. Combined, they produce a pleasant, diffused illumination creating a more intimate and relaxing atmosphere for the passengers. But the most striking and innovative
interior lighting feature is the optional electro-transparent rear roof section in the Maybach 62. Previously, such EL membranes have been used only to light up small areas such as mobile telephone or clock displays. Switched on at the touch of a button, the entire roof emits a pleasant, diffused light over its surface. A sliding liner panel blocks out all light when desired. The Maybach essentially reinvents itself with every commission . With the factory-offered options, colors and interior materials alone, there are more than 2 million vehicle combinations possible. About the only way there will ever be two alike is if someone intentionally commissions them that way. In order to accomplish the resulting extensive handcrafting, each car takes about four months to build and deliver, with the facility completing no more than one or two cars per day. Each customer 's specific instructions FALL 2005 VALUERICH MAGAZINE131
are gathered by Maybach Relationship Managers in high-tech Maybach studios around the world . Customers view material samples to make their choices and visualize the final result on large screens in a computer simulation. The Maybach MRMs encourage their customers to visit Maybach Manufaktur in Sindelfingen, Germany, and see craftsmen building their car. After the car is delivered, the MRM remains the central liaison for sales, service and ongoing dialogue with customers. As part of a long-term sales strategy, the MRM keeps owners apprised of Maybach experiences -for example, invitation-only events for polo, horse racing and yachting . The New Maybach 57 S
Recently, at the Geneva Motor Show, Maybach introduced the new 57 S high32 1VALU ERICH MAGAZINE FALL 2005
performance model, expected to att ract a mix of affluent buyers who currently own exotic sports cars. In addition to flatter cornering and crisper steering response, the 57 Scan accelerate from 0 to 60 mph in less than five seconds and is capable of reaching a top speed of 172 mph. Unique exterior and interior appointments help identify this remarkable performance sedan . Designed and hand built by AMG, the 57 S twin-turbo, intercooled V12 powerplant displaces six liters, a half liter more than the standard engine. The AMG V12 produces a whopping 604 horsepower as well as 738 pound-feet of torque from as low as 2,000 rpm. The 57 S has revised ESP stability control and traction control programming to make the most of the additional horsepower and torque.
A hand-built 604 horsepower AMG V12 engine accelerates the Maybach 57 5 from 0-60 mph in less than five seconds.
The 57 S also has a new sport chassis that rides about a half inch lower, with firmer air suspension and stiffer shock absorbers as well as thicker stabilizer bars, giving the car high-performance handling without unduly compromising the car's whisper-smooth ride. The limited-edition Maybach 57 S comes in a choice of a unique black or silver paint and can be identified by new 11-spoke, 20-inch alloy wheels with 275/45 R 20 Michelin Pilot Sport tires, as well as a more aggressive grille, body-color headlight surrounds, chrome-trimmed fog lights, rectangular dual exhausts and 57 S badging on the trunk lid and front fenders. Its interior www.valuerichonline .com
The 57 S features carbon fiber or optional black poplar trim with black piano lacquer finish, and Nappa leather seats.
features a choice of black or ivory Grand Nappa leather seats embellished with dynamic black piping . The fine woods that usually set the tone for Maybach interiors are replaced by distinctive carbon fiber trim with a black piano lacquer finish. As an alternative to the carbon fiber trim , Maybach customers can also choose a black poplar wood trim , exclusive to the 57 S. The Business Maybach
Also new in 2005, is a Business Package. Maybach is the first production vehicle to offer a built-in dual-port GPRS router, located underneath the storage compartment in the trunk, with Bluetooth www. vrexpo .net
to provide mobile office functionality. The dual-port wireless Internet router also includes a Bluetooth PCMCIA card designed for laptop computers that lack an integrated Bluetooth interface. A color printer is also included . Using their own laptop computers, rear passengers can access the Internet or log into a corporate network with peak bandwidth of up to 80 kbps (average 40 kbps). The dual-port router optimizes Internet connection speed by opening multiple lines between the T-Mobile and AT&T GSM wireless networks or, optionally, other carriers whenever possible. The two GSM lines are completely separate from the two Motorola phones that are installed as standard equipment in every Maybach. The lower storage compartment between the rear seats houses both
a switch to activate the router and an additional 12-volt socket for convenient laptop battery charging. As a separate option, a Bluetooth wireless-capable Canon color printer can be integrated into the center console of the Maybach 62 model. An optional multi-purpose rear storage compartment is available for the back of each front seat. The Maybach 57 has a suggested retail price of $327,750, and the new 57 Sis expected to be priced around $360,000 when production begins early in 2006. The long-wheelbase Maybach 62 retails for $377,750. All prices include a $2,750 destination fee that covers shipment from Germany in a special container as well as transport from the port to the Maybach studio in an enclosed truck. VR www.maybachusa.com www.luxuryinstitute.com FALL 2005 VALUERICH MAGAZINE
With better balance, less weight and a 16 percent power increase, the venerable Morgan roadster has been re-released in a limited edition. 34 1VALUERICH MAGAZINE FALL 2005
The 35th Anniversary Plus 8 was the last edition, however. Morgan has updated the car with innovations derived from its current racing program in the new Aero 8. The much loved Morgan chassis has been married with Ford's latest lightweight, three-liter, 24-valve, 225 horsepower V6 Jaguar engine. This high-tech engine has been specially mapped to the Roadster chassis, placing it further back for balance. With better balance, less weight and a 16 percent increase in power, the last remaining dowdiness of the Plus 8 has faded into history. The new Morgan's craftsmanship is unmistakable in the glove leather cockpit. Roadster's performance figures challenge and the same impeccable, handmade most other sports cars in its class. coach construction that has always We're talking 0-60 mph in 4.9 seconds set Morgan apart from the crowd . and a top speed of 137 mph . In fact, anyone but the most ardent Other nice touches in the Roadster Morgan enthusiast would be hard update include air conditioning and pressed to distinguish the new Roadster dual airbags as standard equipment. from its illustrious predecessors. And Of course, the rest of the Morgan that's a good thing, because the 36experience hasn't changed a bit. year-old Plus 8 roadster had a rabidly Morgans are individually hand-built with enthusiastic following and was still ash wood and aluminum by the only generating six-month waiting lists remaining family-owned automobile for its 200-car-a-year production manufacturing company, a company schedule at the end of its run. with its roots firmly planted in the racing The car's phenomenal popularity tradition . No two cars are exactly alike is easily understandable. While I was because each piece of wood in the frame By Will Andrews working on a ValueRich feature article is meticulously tweaked for a perfect about the Aero 8 (Summer 2004), I fit. Each walnut-and-leather interior gan Motor Company has had the opportunity to visit a Morgan announced it will make 82 of its twoexhibits its own unique combination dealer on several occasions. This dealer of grains. And Morgan offe rs 35,000 seater Roadster models available in a sold a wide variety of luxury sports possible color choices and combinations. one-time-only North American special cars including Porsche, Maserati, Astin Every new Morgan purchaser is edition this fall. Orders will be taken Martin, Bentley, Mercedes and so assigned a chassis number and can follow between September and November on . But it was the little Morgan 35th the car's construction online. This is t ruly 2005 for cars to be delivered between Anniversary Plus 8 they had on the floor a coach-built bespoke automobile equal December 2005 and January 2006. that continually drew my attention. Its to anything out there, and yet the base The car is the successor to the iconic jewel -like finish, absolutely flawless price fo r the limited American edition Morgan Plus 8 spo rts car, which was construction and glove leather sporting Morgan Roadster is only $73,000. No finally phased-out last year in the wake interior was a feast for the eyes. The wonder Morgan's 12 American dealers of Morgan's release of the completely car exuded a thoroughbred quality, expect them to sell out fast. R modernized and redesigned Aero 8. with its wire wheels, low carriage and The new Roadster features the same perfectly balanced proportions. www.morgan-motor.co.uk classic lines as the venerable Plus 8,
Roadster Back Better Than Ever
FALL 2005 VALUERICH MAGAZINE I 35
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www. valuerichonline .com
By David Willson
the Equally Vibrant Country Club or the Nightclub Americans have become very familiar with the stylish blue bottle of Bombay Sapphire in recent years. This should come as no surprise. Bombay Sapphire is the best-selling imported gin brand in the United States. A world favorite, the super-premium gin was named "The Best Selling Spirit Brand in the World " in 2001 . During a period when interest in vodka has reached faddish proportions, Sapphire's rise in popularity is contrary to industry-wide flat gin sales. The explanation for Sapphire's remarkable popularity growth is directly attributable to its extraordinary blend of ten exotic botanical ingredients and unique distillation process. Together they create a spirit with a distinctively clean and dry taste that is ideal for the www.vrexpo .net
elegance of a classic martini and yet adds a delightfully subtle and vivacious spin on a full menu of contemporary cocktails . Fittingly, Sapphire's world -class taste begins with Bombay gathering botanical ingredients from all over the globe: almonds and lemon peel from Spain, coriander seeds from Morocco, juniper berries and orris (iris root) from Italy, licorice from China, cassia bark from Indochina, cubeb berries (a form of Asian pepper) from Java, grains of paradise (a spicy botanical similar to black pepper) from West Africa and finally the heavenly angelica root from Germany 's Sa xony region. Using very rare Carterhead stills, Bombay distills Sapphire through a delicate vapor-infusion process that combines the botanicals with the
spirit while it is still in vapor form . This unique process allows each of the ten botanical flavors to interact evenly in the marvelously comple x mix that makes Bombay Sapphire so unusual. Other gins are made by boil ing the botanicals with the spirit before di stillation . This results in a product that is usually overwhelmed by the strong pine and camphor flavor of the juniper berries that are the basis of all gins- an acquired taste, which is typically only enjoyed in "traditional" martinis and tonic drinks. But Bombay Sapphire's nutty, spicy, citrusy, musky, sweet, earthy, with a hint of violet nuances are vapor-mixed evenly with the pine of the juniper to create a delicate flavor that interacts delightfully with a variety of modern cocktail recipes. FALL 2005 VALUERICH MAGAZINE 137
Bombay Sapphire Here are a few great new cocktail experiences and some tasty new takes on classic recipes - Sapphire style.
Sapphire & Cranberry
1 part BOMBAY SAPPHIRE 3 parts cranberry juice
1 part BOMBAY SAPPHIRE 3 parts club soda 1/ 2 part fresh lime juice
Pour over ice in a glass.
Pour over ice in a glass. Garnish with a lime wedge. The citrus notes of BOMBAY SAPPHIRE enhance a refreshing taste.
Garnish with a lime wedge. BOMBAY SAPPHIRE has a crisp aroma and palate-lifting effect with cranberry juice.
1 1/ 2 oz. BOMBAY SAPPHIRE gin 1 oz. Cointreau 1 oz. cranberry juice 1/ 2 oz. lime juice
Sapphire Gimlet recipe:
2 parts BOMBAY SAPPHIRE 1 part ROSE'S lime cordial 1/ 2 part water (optional)
Mix ingredients with cracked ice in a shaker and strain into a chilled cocktail glass.Garnish with orange peel.
Shake ingredients with ice and strain into a chilled martini glass. Alternatively, pour over ice in a rocks glass. Garnish with a lime twist.Note the fragrant taste of BOMBAY SAPPHIRE and the dimension it brings to this sophisticated classic.
38 1VALUERICH MAGAZINE FALL 2005
Sapphire Appletini recipe:
3 parts BOMBAY SAPPHIRE 2 parts apple schnapps 1/ 2 part sweet and sour mix 1/ 2 part triple sec Chilled Martini
Thin apple slice
Pour ingredients into a shaker filled with ice, shake thoroughly and strain into a chilled martini gla ss. Garnish with thin apple slice. The botanicals in BOMBAY SAPPHIRE balance out the typically sugar- sweet nature of this cocktail.
3/ 4 shot BOMBAY SAPPHIRE 1/ 2 shot fresh lemon juice 1/ 2 shot sugar syrup Top -up with pommery champagne
shake the f irst three ingredients with ice and strain into glass, then top -up with champagne and lightly stir. Created by Harry MacEihone in 1925, named after the 75 field gun used by the French army during World War I.
Sapphire Madras recipe:
1 part BOMBAY SAPPHIRE 2 parts cranberry juice 1 part fresh orange juice
Pour over ice in a glass. Garnish with an orange slice. BOMBAY SAPPHIRE contributes to this cocktail rather than being overpowered by the mixers.
Sapphire & Grapefruit recipe:
1 part BOMBAY SAPPHIRE 3 parts fresh grapefruit
Lemon or grapefruit slice
Pour over ice in a glass. Garnish with a lime wedge. BOMBAY SAPPHIRE brings fuller flavor to a simple cocktail made with grapefruit juice.
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FALL 2005 VALUERICH MAGAZINE 139
This is the formula of The Mosaic Hotel Beverly Hills, a rare blend of luxury and intimacy for affordable prices, located just steps away from the world-renowned Rodeo Drive. Located at 125 South Spalding Drive in the heart of Beverly Hills, this boutique hotel is elegantly casual with the charm of a romant ic inn. The Mosaic Hotel, opened le ss than three years ago, is the first full-service hotel in Beverly Hills in years. The hotel's small setting of just 49 rooms provides a personalized experience for all of its guests. Each member of the staff is a concierge who will cater to your every need, whether you are visiting on business or pleasure (or a little bit of both). The Mosaic even has a guest services executive called the "tailor," whose job is to play the "game of know," anticipating guests' needs and creating surprises based on individual preferences. The lush tropical garden and lagoon pool area, with shade trees and birds of paradise, provides a serene ambiance, night or day, by sun or candlelight. Intimately set amid the courtyard pool and garden, the restaurant, serving regional Eu ropean cuisine, draws upon influences from around the 40 J VALUERICH MAGAZINE FALL 2005
www. valuericho nlin e.com
world . Dine by poolside candlelight or gaze at the lush tropical foliage while sipping a cocktail around the heated pool. If you are visiting on business, you are connected with complimentary wireless Internet access, available throughout the lobby and around the pool. All rooms feature oversized workspaces, eye-level laptop connections, and high-speed online access. You can also utilize the dedicated guest printer and in-house Business Center. The Internet can be accessed while sitting under a private terrace cabana . Luxuriate in your room with a full-size body pillow, Frette sheets, towels and robes, Bulgari toiletries, well-stocked mini-bar and NXTV, while music permeates from the in-room CD player. Comfortable and secluded, yet affordable and exciting. You never know what you may experience or who you may find on the streets of Beverly Hills- or sitting under the next cabana at The Mosaic. But chances are good you will have a story to tell.
www.mosaichotel.com 800.463.4466 (within the United States) or 800.537.8483 (from other countries) www. vrexpo .net
FALL 2005 VA ~ UERICH MAGAZINE 141
Winter's Tale By Laura Tingo The Kimpton Hotels story weaves a tale of character, personality and st yle that spans 15 top travel destinations, from San Francisco to Vancouver. Its plot is cente red on the Kimpton quality reputation of offering comfort able lifestyle hotels committed to the satisfaction and delight of one person- its guest. Travel industry experts and publications such as Conde Nast Traveler regularly recognize Kimpton Hotels as an indust ry leader. Kimpton's Hotel Monaco New Orleans was named one of only five American hotels to be honored on the magazine's list of the top 50 hotels in the world . Travel + Leisure ranks Kimpton Hotels among the Top North American Hotels and Greatest Hotels in the World. Kimpton caters to its exceptional clientele, who often seek storybook travels. One-of-a-kind specialty rooms and suites like the "Lion King Suite" in Chicago and the "John Lennon Suite" in Denver appeal to some of its more whimsical guests. Other accommodations are designed to pamper furry and tall guests- Pet-friendly rooms to welcome Fido, and Tall Rooms for taller-thannormal guests that mean no more feet hanging off the bed . Guests can even stretch thei r way to serenity with an in- room yoga "Om Away From Home" program . In addition, you won't have to go far to find a menu that pleases the d iscrim inatin g palate with exquisite cuisine prepared by talented chefs in Kimpton Hotels. Their stylish restaurants and trendsetting lounges are known to locals and visitors alike as hot spots not to be missed and experiences to be savored. Now winter travelers can deck the halls Kimpton-style by vis iting one of Kimpton's participating hotels for a festive, unique holiday experience available in a variety of holiday packages. Experience "Mount Vernon by Candlelight " at the Hotel George in Washington , D.C.; "Ski 'till it Hurts" at the Summit Lodge in Whistle r, British Columbia; be " Naughty or Nice" at the Argonaut Hotel in San Francisco; have a " Big Apple Holiday" at 70 Park Avenue Hotel in New York; spend the holidays with "Santa's Little Helpers" at Hotel Monaco Denver; and "Oh, the Places You 'll Shop" at three Kimpton Seattle hotel s. Select from any of 30 holiday packages offered by 27 Kimpton Hotels in 10 cities. To discover them all, visit www.kimptonhotels. com or call 1-800-KIMPTON. www. vrexpo.net
FALL 2005 VALUERICH MAGAZI NE j 43
One of the hottest July 4th festivities outside the U.S. is the annuaii-Bankers Securities bash at the Villa d' Este hotel on the shores of Lake Como in northern Italy. This year's 8th edition treated 150 international guests to a 6-star banquet, live music, dancing and a dazzling fireworks show. "We enjoy bringing management teams back to celebrate Independence Day with our European clients in this magnificent setting," said 1-Bankers CFO Shelley Gluck.
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a Mystery for
Magical Returns Rare Classical Instruments Beat the Market Everyone applauded loudly after hearing a beautiful piece of music played by the talented Irish violinist Catherine Leonard. Jan van Van Veelen had organized this gathering of friends and business relations for his house-warming party and was able to get this upcoming young talent to perform, through a business friend . Years ago, this same friend organized classical music gatherings for his international clientele. Frans Wolfkamp, who at the time was director of Holland Music Sessions, a summer class for young talented musicians, helped him
organize the performances. Wolfkamp, now working with UNESCO on the project "Music in Me" (www.musicinme.net), asked whether it was possible to find sponsors to buy rare classical violins or violas for talented young musicians. According to Wolfkamp, these instruments were too expensive for most people to afford, but without such instruments the musicians could not fully develop their talents. Too expensive meant $500,000 and up. "And by the way,"Wolfkamp explained, "buying such an instrument could be a very good investment- not only in the talent of the artists, but also financially."
Better With Age Dr. Joseph Nagyvary, a retired professor of biochemistry and biophysics at Te xas A&M University, has been interested in the physical mysteries of rare classical violins since he played a violin that once belonged to Albert Einstein years ago while he www.valuerichonline.com
was studying in Zurich . So inspired was he by that instrument, he created his own violin, the Nagyvarius, wh ich some consider the modern version of the top classical instruments of Stradivarius and Guarnerius. Nagyvary 's violins, however, are in a different price league altogether. So, why are his instruments a great deal less expensive, while they claim to have the same mu sical potential? Nagyvary and other experts all agree that the standard of excellence set by Stradivarius and Guarne rius is definitely unique. Nagyvary 's instruments are the modern instruments scientifically closest to the frequency of the Stradivarius violins . Nagyvary adm its, however, that no one can touch the brilliance of the Guarneri.
The Intrigue Nagyvary believes that the secret of the rare classical violins could be in the lacquer, but just as important are the many years of maturation of the instruments. And when the violins are played by top musicians, the instruments mature in top fashion . Nagyvary says that his instruments have the same potential for excellence as the rare classical instruments; they just don't yet have the history. "It is in the playing that the mystery of excellence occurs," adds Nagyvary.
artificially, without ever finding this sound box. It's a mystery," says Machold.
Limited but High Yields Machold explains that there are only about 550 Stradivarius left, among which are 12 violas and 66 cellos, and only 80 Guarneri Del Gesu violins. These instruments can reach prices from $10-30 million . "This is the highest end of the market with very high yields," says Mach old. "Then there are some 50 Bergonzis and a few hundred Guadagninis left. So the total market for the very high end instruments is as limited as the market for Rembrandt paintings." For private investment purposes, the market immediately under the top instruments is interesting. These are instruments ranging from $500,000 up to a few million dollars.
This market is also relatively limited, because there are only some 2,000 instruments left in this price range. Investing in violins has some advantages over other investments. For instance, the instruments can be allrisk insured for a tiny percentage of the value (under 0.4 percent). According to the insurer intermediate Drewes & Focke, a musician would rather lose his or her leg than the instrument, so these instruments are almost never damaged. Furthermore, they are rarely stolen . The instruments are so well known, described and registered that they
The Mystery Continues And it 's a mystery that the Machold family has been involved in since 1861, when the firm began in Germany as violin makers. By the 1980s the company had become an international dealer in fine stringed instruments, with offices or representation now in Bremen, Zurich, Vienna, New York, Chicago, Tokyo, and Seoul. "We never found the 'sound box' that could explain why these classical instruments are so unique," Dr. Dietmar Machold explains . "There have been tests everywhere in the world to try to figure out why the sounds of the Guarneri or the Stradivarius are the way they are, without ever really finding proof. The Piagmalios project in Japan , for instance, tested every element of the violins- taking apart the instrument, putting it back together, playing it www.vrexpo .net
FALL 200S VALUERICH MAGA ZINE 147
Craftsmen maintain and restore fine instruments in the Machold offices of Vienna.
would be very difficult to fence. Once, in a television interview with a German music professor, it was mentioned that his violin- a Bergonzi- was worth nearly 2 million Deutschmarks. Within a few days the violin was stolen from his car while he stopped at a gas station, driving from Heidelberg to the north of Germany. For more than a year the thieves tried to sell the instrument, but no dealer they went to wanted to pay the amount they had in mind. Finally they visited a dealer who imm ediately recognized the instrument and offered almost a million Deutschmarks, asking the thieves to return the next day so he could have his specialist look at the instrument. They did return and the specialist confirmed that the instrument was the one stolen from the professor, at which point the police "stepped out of the closet" and arrested the perpetrators. There is also no sense in stealing an instrument and holding onto it until the air is clear, because instruments, as Machold and Nagyvary explain, need to be played; otherwise there wil l be a loss in quality, which can take a long time to reinstate. A Living Investment
Another potentially very important factor, unknown to other investment types, is that of musicians playing the instruments. In almost all of the lending/ usage contracts between the investor and the musician, clauses are included that the musician has to perform for free a few 48 1VALUERICH MAGAZINE FALL 2005
times a year for the owner. You can show your business prospects and relations your involvement in culture and works of art and also provide an added treat. "It's much less attractive to sit and listen to the performance of bonds, as it is to listen to music;' an investor explains. So the investor buys the instruments and gets a top-notch musician for free. Not a bad deal. "Without the help of these wonderful investors, I would not be ab le to play on an instrument that is suitable for me. Such instruments are simply too expensive for a person living on a musician's salary to purchase herself," exp lains Carol Rodland, playing a viola made by Carolus Landulphus. "This instrument helps me to perform to my utmost. But a price of over $600,000 is just not affordable. Thanks to Klim Media AG, a publishing company and copyright owner of Francis Raleigh's Bologna Revisted (Athena Press, London), I can play and contribute now in this league:' An Extraordinary Case
Machold's late father sold the Antonio Stradivari Cremona 1694, know as the "Muir McKenzie;' in 1972 to the German violinist Maria Grevesmuhl. She paid 200,000 Deutschmarks, which in those days was approximately $92,000. This violin was recently sold for $4.2 million . So, in a little over 30 years, the price increased in value more than 140 percent a year. Of course, people may say this is an extraordinary case, and it is. But a 1999
study at the University of Cincinnati compared the development of violin prices from 1960 to 1996 with the Dow Jones Industrial Average, the Standard and Poor Index, and 10- and 30-year Treasury bonds. The study excluded the rarest instruments, like the Stradivari and Guarneri del Gesu, because too little data was available on the sale of those instruments to be of any use. The study compa red an investment of $5,000 in the stock market DJIA and the S&P 500 and in violins in 1960. The $5,000 would be worth a little over $50,000 in the stock markets, but just under $250,000 if invested in violins. Investments in 10- and 30-year Treasury bonds reached a similar result, around $50,000 for the financial in struments and nearly $250,000 for violins. Market logic
There's no doubt that rare classical violins are still a good investment. "The prices will only go up," Nagyvary comments. He considers the Guarneri violin as the best possible investment. If he had a spare million dollars he would invest it in violins. Machold explains that instruments are a very good investment for the midterm: "It is not that you can buy an instrument today and sell it with a huge profit tomorrow. If you as an investor are willing to stick with it for five years, you will have a probable yield of 15 to 20 percent a year. And normally an instrument on the market in the price range just under the top will attract a buyer within twelve months. Instruments in the higher price range are already sold before they are even on the market:' This is market logic that every entrepreneur can understand. There are a limited number of rare classical instruments. Any modern instrument needs hundreds of years to have a shot at the same sound quality, so there will be no increase in the availability of instruments. On the other hand, the number of very talented musicians is rising rapidly, especially with today's increased classical music contributions from India and China. So, investing in rare violins is a magic investment in more ways than one. VR William Lie: firstname.lastname@example.org www.machold.com www. valuerichonline.com
and that was done by chemicals which were prescribed by the local drugstore: Perhaps that 's why the chemists, physicists and scientists are so interested in Nagyvary 's theories and handcrafted violins . "My customers are mainly not musicians, but scientists and doctors [Ph .D.s) who play the violin on the side just for fun. They are the ones who really understand my theories and give me more credit than the violin shops." Nagyvary is thrilled to have been asked to speak on "The Physics of the Violin" at the International Symposium in Tokyo, Japan, this December, where top physicists and scientists from all over the world will gather to celebrate Dr. Joseph Nagyvary demonstrates the sound signature of his violin. Albert Einstein's discovery of the relativity theory 100 years ago. The finest Japanese violinists will give a concert playing a Stravidari and a By Kayla Willson Nagyvary violin . The audience "I have ruffled too many feathers- many of the will be able to compare the two and give their impressions. dealers don't like the idea that a scientist comes along "This will give me a lot of exposure in Japan," and tells them that they are using the wrong materials. says Nagyvary. He will be selling his violins So I'm not getting many endorsements from the violin and hopes to make several trips to Japan after shops," Dr. Joseph Nagyvary, the Hungarian-born scientist making contacts at the convention . and violin maker, tells ValueRich in a recent interview. So, who buys Nagyvary violins? Nagyvary spent 30 years researching the materials and "My best violins definitely go to the doctors ... in mechanics of violins made in (remora, Italy, by the Europe, we call scientists doctors, but my best customers Amatis and Stradivari in the 17th and 18th centuries . Most are actually medical doctors- they have the money," violinmakers believe that the brilliance of these historic laughs Nagyvary. Prices for Nagyvary violins range from instruments lies in the proper tuning of the free plates to certain low frequencies. In contrast, Nagyvary's theory $8,000 to $12,000, with exceptional instruments priced from the beginning was that the key to the secret was in at $15,000 to $18,000. Nagyvary sold 10 violins last year and hopes to sell even more after his exposure in Japan . the materials and chemicals that go into the wood and lacquer (varnish) and the preparation of the wood itself. In his thick Hungarian accent, Nagyvary tells Va/ueRich Collaborating with two established laboratories in he's not worried about the future of his violins : "It may take a couple of years to call attention of the musical community Colorado and Utah, Nagyvary has analyzed the lacquer, to my methods of violin making and hopefully before too taking small samples and narrowing down the chemicals, long, the professional musicians will also start buying my in his goal to reproduce the unequaled sound quality of the Stradivari violins. He thinks he has come "fairly close" to violins . But I'm not unhappy selling them to doctors, as I want my violins to survive. Better to have them in the the actual sound quality, something no one else has done. Nagyvary further explains what he believes is crucial to hands of physicists, chemists and collectors who don't play too much and wear them down like a toothbrush! " VR the secret of re-creating the perfect sound quality: " The lacquer is just one part- the whole preparation of the www.nagyvaryviolins.com wood was to prevent the insects from damaging the wood,
FALL 2005 VALU ERICH MAGAZIN E 149
Replacing Rumor with Reputation On ine
Finally, a Web site that tackles the fundamental problem for professionals and their customers on the Internet â€˘â€˘. How do you know who you're dealing with? By Robert Warren
"Every day, society grows farther away from the familiarity of the neighborhood barbershop and town grocery store:' says iKarma CEO Paul Williams. "We find ourselves taking more leaps of faith while trusting fewer people. "Consume rs today face a virtual roulette wheel as they try to narrow the choices in a search for quality professional se rvices -and there's almost no way to te ll a good bet from a bad one:Âˇ "And as hard as it is on consumers, it's doubly hard on the service providers whose marketing rests on their own credibility," adds iKarma president Scott Pitchford. "We all want to be remembered 50 I VALUERICH MAGAZINE FALL 2005
arm a and appreciated for the good things we do for our customers. But how do you do that in a faceless society where customers are more likely to be complete strangers?" When talk turns to reputations, Williams and Pitchford are on fire. Their ambition is to spread that fire to the rest of the world. They are the busy minds behind newly launched iKarma (www.ikarma.com) , a new online service dedicated to promoting and documenting professional and personal reputations on the Web.
The iKarma office is abuzz with activity as its tight- knit team of strategists, programmers and marketers develop next -stage business plans for the weeks and months to follow. If all goes as planned, iKarma will achieve success as a new kind of animal on the Web: an online service that combines eBaystyle customer feedback with the social networking aspects of a Friendster.com.
Social Networking, Reconsidered Dozens of online contact services have sprung up in recent years- Friendster, Tribe, Ryze and many others- meeting with differerent levels of success. But while these networking services have grown rapidly by focusing on the "si x degrees of separation" model, they www. va I uericho nline.com
i.Deos continue to struggle with the quest ion member's reputation with customers and what others think of them, rather than of contact relevance beyond the friendcolleagues. Profiled members are given what they think of themselves. All of of-a -fr iend level. Designed to grow the tools to include links to their profile the core iKarma staff have their own like a social networking site, iKarma page in e-mails, on Web sites and on profile pages and invite iKarma.com tackles the "circle of friends" problem printed materials- anywhere that might members to leave feedback about them . by enhancing and extending the value be seen by a customer or colleague In fact, Williams and Pitchford think of the original personal relationship -in order to build their standing. there should be plenty of corporate The basic iKarma service is cost-a real-life business function too often interest in iKarma. "The message is that free and open to anyone. For a $10 lost in virtual networking services. it's safe- and very profitable- for "'Si x degrees' networking has severe monthly fee, users are provided a a business to open themselves up to limitations in the professional world;' wide range of expanded management honest, constructive feedback;' says Pitchford says. "I don't Pitchford . "We believe iKarma CEO Paul Williams, left. and President Scott Pitchford care if my neighbor has in it highly enough that seek to put a fri,ndly face on the World Wide We~. a friend who has a friend we do it ourselves:' whose neighbor happens Going forward, the to be a CPA. That kind of iKarma growth plan calls for information is useless to me. rolling out new products as But do other knowledgeable the network grows. These people consider that CPA include partner and affiliate competent? That's what I programs, industry-specific need to know - if so, I can services designed to better make my own introduction . meet the unique needs of "Word of mouth has major user groups such as always been the best form of stock brokers, CPAs, realtors, advertising. People rely on etc., and iKarma Enterprise, the opinions of people they a premium program that trust. It's basic human nature," ~ offers larger-business users says Williams. "Historically, significantly greater control business has always been and management powers conducted based on strong over their iKarma pages. ties- on an individual 's Good Karma From the Start standing in th e community, and whether that individual Williams and Pitchford ,. L treats others with honor and first met while working options and marketing tools. fairness . iKarma is firmly rooted in the for an investment banking firm in Credib ility works both ways. Every honor ideal. Reputation matters, and the last years of the nineties Int ernet feedback poster is required to fill out strong trusting relationships mean good boom . Williams had been building an a profile page, including that poster's business. There is no form of advertising online brokerage service, and Pitchford own rating, naturally lending greater that can trump a good reputation :' was brought in to automate the firm 's validity and weight to members with back office. Even then, they saw the Building Karma trustworthy records. This helps reduce power that word of mouth wielded hastily posted negative comments. After joining iKarma, professionals over ca reers, stock prices and profits. Again , Pitchford says, honor is the are provided with tools to create a In 2000, Williams left the firm to found key. "Libel is almost always anonymous profile Web page with information StockBrokerShop.com, a successful data today. When someone attaches their about who they are and what they mining and executive research firm real name to an opinion, they think do: service descriptions, contact delivering high-quality broker data to about it first, because their own information and a photo. Customers recruiting departments of brokerage name is at risk. Positive and negative firms . Pitchford joined a few years later and other professionals may then feedback serve a purpose when the post eBay-style feedback comments as a full partner, and today the company reputations of both parties are at stake:' and rate the user. All comments are serves many of the largest brokerage And the company practices what it firms in the United States. Th e seed displayed on the user's profile page. preaches. iKarma requires an iKarma. As feedback comments add up, the of iKarma was sown in that success. com profile from prospective employees profile grows into a detailed third "No matter how successful we in lieu of a resume- asking, in effect, pa rty documentation of that iKarma became," says Williams, "we still found www. vrexpo.net
FALL 2005 VALUERICH MAGAZINE I 51
ourselves spend ing hours on the phone with new prospects who had a bad experience with other data and research firms, and so treated us with doubt and suspicion . That's a lot of wasted t ime and energy- both for them and us. We realized that a tool like iKarma could cut that time to zero, and actually give new customers the confidence t hey need to make a purchase:' But the Internet has added even further need for a service like iKarma . "Anyone can go on the Internet right now and anonymously libel someone. Anyone researching that person on Google will find those libelous comments," says Pitchford . "It's a free-for-all out there right now. "What iKarma does is provide an ordered environment for negative feedback, as well as a place for happy customers to sing the praises of businesses who treat them well . iKarma makes it possible for a business to resolve conflicts and avoid damaging Internet libel that is currently nearly impossible to correct ."
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An iKarma page is online word of mouth. Revolutionizing Reputation
Despite reams of academic studies suggesting the significant business value of reputation systems such as iKarma, some important questions still await definitive answe rs. Can the value of a good reputation thrive on an Internet that, by its very nature, encourages anonymity? Is there room for principle
in a world of digital commerce? Williams and Pitchford are betting there is. Because, without a service like iKarma, growing Internet commerce will continue to present professionals with an increasingly problematic environment. The sense in the iKarma offices is one of optimism , of setting out to change the online business landscape for the better. The team eagerly antic ipates the task of updating "word of mouth" reputation building for the new century. "Some revolutions are about throwing out the old for the new;' says Williams. "And others are about just coming to our senses and returning to what is good and what works. The powerful value of a good name is nothing new. "iKarma simply renews an ideal as old as civilization itself, by providing good businesses with the means to prosper against unprincipled competitors who rely on customer ignorance and silence. If what we're doing here plays a role in the return to business sanity, then we've accompl ished something :' V R www.ikarma.com
Our comprehensive approach p rovides sm aller, highgrowth public companies with the m ost efficient and cost effective path for growth. Our effort seamlessly integrates convention al investor relation s activities w ith raising capital, acquisition s, research, retail stock support, in stitutional sponsorship, and the facilitation of lon g-term investment banking relation ships. We provide all of this in one affordable, comprehensive p ackage w hich greatly reduces the fin ancial burden of coordinating the sep arate, fee-based relationships otherwise required to accomplish these important objectives.
The fastest easiest way to become a public company. I have a NASDAQ full reporting entity (J RBO ). It is empty and clean . Let's talk.
Call Dr. Robert E. Williams, 1-352-207-5905
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ROI Group Associates, Inc. 39 Broadway, 24'h Floor New York, NY 10006 (212) 495-0200 www.roiny.co m
52 1VALUERICH MAGAZINE FALL 200S
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By Liza Grant Smith
What do you get when you mix a beleaguered small-cap competitor and a visionary t urnaround specialist? The makings of a compelling drama and one amazing ride. It's the position no one wants to find t hemselves in- up against the ropes and on the brink of defeat. Labeled a "d efining moment" by philosophers, to writers and audiences it is the stuff of great movies. Rocky set the precedent. And these days you can't throw a rock in Hollywood without hitting a screenplay about an underdog battling adversity to attain some impossible victory. These are the blockbusters that have critics raving and audiences cheering. However, despite triumphing over equal amounts of adversity, smallcap turnaround stories, such as that of Metropolitan Health Networks (MetCare), have a hard time attaining the same accolades from their more finicky audience: Wall Street and its investors. FADE IN:
Born in 1996 as a physician practice group, Metropolitan Health Networks, Inc. (AMEX: MDF; PCX: MDF) completed a successful lPG in February 1997 at si x dollars per share. The Company used the $4 million in proceeds to acquire physician practices and diagnostic services businesses. Within a year, however, MetCare was experiencing significant operational and financial d ifficulties, due in large part to lackluster pe rformance of the acquired businesses. Things continued to spiral downward as the 1998 audit was qualified by a going concern and, in May 1999, the stock was delisted from NASDAQ's Small Cap Market and moved to the Bulletin Board . In response to these events, MetCare's board of directors replaced the senior management team in 1999. Through a strategically advantageous relationship with Humana, MetCare began to establish itself as a growing health care services company focused on the 54 1VAlUERICH MAGAZINE FAll 2005
managed care business. Prospects appeared good, but this period of contentment would be short-lived. Like many a man before him, MetCare's CEO at the time fell victim to the Wall Street whispers. He was troubled by the Street's intimation that a single-customer operating strategy was inherently problematic and could ultimately be lethal. Bowing to the market's influence, MetCare began to diversify. The Company acquired a diagnostic laboratory
business in 2000 and formed a pharmacy business in 2001 . While they presented opportunities for the managed care business, the Company lacked both the capital and expertise necessary to successfully launch into these new areas. A vocal opponent of MetCare's new strategy was one of the Company's directors, Michael Earley. Recruited to the board in 2000 because of his public company experience and background, Earley found www.valuerichonline.com
Brink the situation to be of concern . "The board, management team, and down through the ranks became very fragmented in terms of where they were focusing their time, attention and resources," says Earley. According to him, there was a "Field of Dreams" attitude that if the Company could somehow build these businesses, the money would come. Earley was not that optimistic and voiced his opinion that the new diversification strategy was a formula for disaster. "People laugh at me because I say it over and over again;' says Earley, "but most successful businesses are very tightly focused on one business and you live, eat and sleep that business." With a lack of support for his point of view, Earley resigned from MetCare's board in February 2002 and dedicated his time to a business he had been hired to put back on track in Newport Beach. In late 2002, as his involvement in that project was successfully winding down, Earley received a call from some of MetCare's investors. They wanted to discuss his views of the business and what could be done. As a result of the ensuing dialogue, they ultimately asked if Earley would be willing to come back and step in as CEO. The decision to return was not an easy one. Since leaving MetCare and wishing the managers and other directors well, Earley had essentially stopped watching the Company. What he now saw was both concerning and intriguing. Ultimately, it was both his hunger for a challenge and his own words that persuaded him. "There was a part of me," says Earley, "that said 'you expressed very strong views while on the board about what should be done with this Company, and now you have a chance to execute it and see if it works :" THE DEFINING MOMENT
The Company had reached its "defining moment:' On the verge of bankruptcy, Met Care had defaulted on its financial obligations, was facing an open www.vrexpo .net
federal investigation in Delaware, still owed the IRS approximately $4 million in payroll tax liability penalties and interest, and continued to have a going concern qualification from its auditors. Many believed that this was a virtually impossible hole to climb out of. Ever a realist, Earley began pursuing multiple tracks. On the one hand, the Company began to plan for the worst. They started preparing for bankruptcy, whether it would ultimately be on their own terms or someone else's. They also began having straightforward discussions with creditors regarding the range of alternatives. Ultimately, the creditors had faith in MetCare's strategic
MetCare had defaulted on its financial obligations, was facing an open federal investigation in Delaware, still owed the IRS approximately $4 million in payroll tax liability penalties and interest, and continued to have a going concern qualification from its auditors. vision and were willing to stand still as the Company executed its plan . The final objective was to focus the Company. The lab business was shut down and the pharmacy was sold in November 2003. For Earley, the sale of the pharmacy was the first indication that the Company was beginning to get out of the woods. In addition to generating $3 million in cash, the sale stopped the constant bleeding of cash associated with its operations . By the end of 2003, despite an improved cash flow, the elimination of excess overhead and renegotiation of the Company's largest contract with Humana, which was starting to generate increased earnings, Earley still had three major obstacles to overcome: the federal investigation, the IRS bill
n.Sitle Stor and the auditor's going concern. Knowing that MetCare would have to live with the 10-K for an entire year, he challenged his team to eliminate all three issues before filing in March 2004. Earley came up with a creative strategy to negotiate with the IRS. In his mind, a long term payment plan was unacceptable as it would mean shouldering the ongoing stigma of an IRS problem . Due to the Company's increasing credibility as a result of its recent clean up activities, Earley was able to put together a deal with investors who were not interested in investing in a company with IRS problems. They would, however' invest if the problem went away. Three million dollars would be put into escrow with the understanding that, if the IRS would settle the obligation and release the Company from future liabilities, the funding would go forward. The ultimatum put to the IRS was clear: We've worked hard to get this money together. If you want the money, let's settle. The Company successfully settled the $4 million IRS obligation for $3 million . THE COURTROOM SCENE
Earley and his team then met with the U.S. Attorney 's Office in Delaware and argued that the problems the Attorney 's Office were investigating were those related to previous management's activities and that since then, the Company had been significantly changed in virtually every aspect. They further argued that continuing the investigation would only serve to hurt existing shareholders, who now had a chance to recoup some of their losses, and new shareholders who put their faith in the potential of a turnaround . They were successful in their arguments and the investigation was dropped. Earley had checked two of the three items off his list and the third one would soon fall into place. The improved financial performance of 2003 and a lack of outstanding issues resulted in a clean audit opinion . The underdog had made an amazing FALL 2005 VALUERICH MAGAZINE I 55
comeback, but that was only part of the fight. MetCare was also battling for market recognition. Unfortunately, after years of failing to deliver on its promises, MetCare's credibility was shot. The prior CEO had been extremely active with brokers and investors in an attempt to generate interest in the Company. When Earley stepped into the CEO position, he adopted a different strategy. "I literally stood in my office and had creditors or investors come in and scream at me and call me names;' says Earley. "You sort of just have to take it. We made the conscious decision that, other than our required disclosure, we weren't going to say anything. No one would believe us even if they took the time to listen." If the Company survived, the plan was to start ticking off the accomplishments they had laid out. In Earley's opinion, to sell credibility without substantiation was pointless. As MetCare entered 2004, Management began thinking about approaching the investment community. The Company 's focus had shifted from problem solving to business building . In late 2003 Congress had passed the Medicare Prescription Drug, Improvement, and Modernization Act (MMA), which provided increased funding for healthcare providers like MetCare and helped to improve its financial fundamentals. They also engaged the investor relations firm of Cameron Associates and began to tell people about the Company and its opportunities. Because many brokerage firms preclude their brokers from trading in Bulletin Board stocks, Earley was eager to get the stock listed on a recognized exchange in order to gain access to a wider investor audience. MetCare applied for listing on the American Stock Exchange, and the stock began trading in November of 2004 . To Earley, this was the last step in restructuring and was the equivalent of receiving a Good Housekeeping Seal of Approval. His next choice was a more unusual strategic move. Earley became intrigued with the Archipelago Exchange, the world's largest fully electronic stock exchange, and decided to dually list MetCare on both the Amex and 56 1VALUERICH MAGAZINE FALL 2005
ArcaEx. For MetCare, the selling point was the potential exposure. "It's like anything else," says Earley, "you have to get people's attention . The A rca Ex listing was just another way to get in front of people and get their attention. [ArcaEx] promised to do that for us if we listed, and they 've delivered:' MetCare's exposure has included commercials on XM radio, upcoming
print ads and the Company's logo featured on ArcaEx's Indy car for several races. Earley points to ArcaEx's youth and eagerness to build business as reasons for its aggressiveness and willingness to really get behind clients . Robert Power, Director of Listings for ArcaEx, echoes Earley's sentiments about the advantages of small-cap companies listing with ArcaEx, which boasts over 550 brokers and dealers as participants. "A listing on a national exchange allows a company to send a message that they've graduated from the OTCBB and differentiated themselves from the thousands of OTCBB companies;' says Power. "A listing on ArcaEx for growth companies like MetCare allows them to directly get their story out to [an] important part of the Wall Street community." While Earley was eager to gain market favo r, he wasn't willing to sacrifice his beliefs or strategic vision to do it. "You have to accept that the industry
can be out of favor;' says Earley. "You can't manage your business for the market's expectations, because as soon as you start to do that, the market will change and you will be out on a limb." War veteran MetCare has proved itself worthy. The Company is currently poised for the future with management that has depth and the financial resources to execute on its business plans. In keeping with its core competency of providing health care to Medicare eligible patients in Florida, the Company has now launched its own independent HMO in underserved Florida markets. As for Earley, his success at MetCare and previous experiences, have earned him a reputation as a "turnaround specialist:' He is quick to dismiss this title. "I call it 'transition;" he says . "I've suggested to people that I like transitional management situations. They 're complicated processes, but they're also very interesting:' However, Earley is enjoying MetCare's current business building mode. "I 've spent a lot of time solving problems that somebody else created. Now I have the chance to create my own problems," he jokes. "We have the wind at our back with legislation and demographics. It would be pretty silly if we didn't succeed and succeed big. In a peculiar way, that kind of generates sheer terror:'
FADEOUT: This brings us to the end of MetCare's turnaround and hopefully the beginning of a new story -that of its ongoing success. After doing the unthinkable and turning MetCare around, what's next for Michael Earley and his management team? Well, they certainly aren't going to Disney World . "If we want to be part of this business in a big way and want to be part of the overall healthcare solution, now's the time when we have to work as hard as we can work;' he says. "From a business standpoint, there's not much time to catch our breath :' R Metropolitan Health Networks, Inc. AMEX : MDF; PCX: MDF
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By Liza Grant Smith
The days when deals were closed with a handshake and a promise are largely over. Market horror stories and scathing personal experiences have made both Wall Street and its participants more skeptical and slow to embrace emerging financial products. Why, then, are investment banks, individual investors and hedge funds supporting a vehicle that makes investments in entities without products, 58 JVALUERICH MAGAZINE FALL 2005
operations or revenue and offers only a promise to acquire a yet-to-beidentified business in the future? As it turns out, despite making a reckless first impression, specified purpose acquisition companies (SPACs), blank-check companies that are essentially publicly traded corporate buy-out funds, offer both investment protection and potentially significant returns for informed investors. By their own definition, SPACs are "formed for the purpose of effecting
a merger, capital stock exchange, asset acquisition or other similar combination with an unidentified target:' The blind pool of money is publicly raised through an IPO, with the acquisition target typically in a specified industry. The goal is to have investors allocate money, thereby giving the SPAC management team credibility to approach targets, negotiate a good deal, merge the companies and ultimately create value for investors. Understanding the distinct structural www. valuerichonline .com
n.Vest components of SPACs is critical for interested investors. Their sophistication, not any perceived lack of downside protection, is wha t makes some firms wary of selling SPACs to investors. SPAC securities are offered in units, with each unit consisting of one share of common stock and one or two warrants, which all trade independently in t he public market. The unit, offered at a price of $6, begins trading on or promptly after the date of the prospectus. The common stock and warrants, however, begin trading separately after the company files an audited balance sheet reflecting the receipt of the gross offering proceeds. This filing must occur within 90 days of the prospectus filing. The warrants represent the first level of investment protection . Warrant holders are entitled to purchase one share of common stock at a price of $5, with warrants exercisable for a period beginning on the later of the completion of a business combination by the SPAC and one year after the date of the prospectus. They will ultimately expire five years from the date of the prospectus. Since the warrants are freely tradable, investors can use them to hedge their position post-IPO or they can serve as a leverage component when investors wait for the management team to bring back a dea l that may potentially increase their value. This component is a key differentiator between SPACs and similar investment products such as business development companies (BDCs) . The warrants essentially function as a type of synthetic security that offers the investor additional value. For the SPAC IPO offerings done to date, the unit, shares and warrants are quoted on the OTC Bulletin Board . SPACs may not be listed on the NYSE or NASDAQ until a business combination is complete, and then only if they otherwise satisfy the listing criteria. There are currently three SPACs listed on the Amex that have satisfied the Am ex's stringent listing requ irements . The second level of investment protection comes in the form of a trust www.vrexpo .net
account backing the common shares. Approximately 85 percent to 95 percent of the gross offering proceeds from the IPO are deposited into trust and held until the business combination or the SPAC's liquidation, whichever comes first. The funds are invested exclusively in short-term government securities and earn interest as time passes. This means investors are risking a maximum of 5 percent to 15 percent to see if the management team can create value for them by delivering a successful business combination. After the business combination, however, investors take on all the risks of an investment in a typical IPO.
Understanding the distinct structural components of SPACs is critical for interested investors. Their sophistication, not any perceived lack of downside protection, is what makes some firms wary of selling SPACs to investors. The remainder of the IPO proceeds are used to cover the underwriter's discount, offering expenses and working capital needs. For investors, this expense item is partially or wholly offset by the value of the warrants issued in combination with the common stock. A SPAC's management team is far from autonomous in its operations. While they remain responsible for identifying targets, approval is required from a majority (often 80 percent) of the non-management stockholders before a business combination can ever go forward. Public stockholders who vote against the combination have the option of converting their common stock holdings into a pro-rata share of the trust account, adding yet another form of protection and liquidity. To ensure clarity and establish expectations, SPACs are subject to a timeline and certain operating
boundaries. A letter of intent for a business combination must be signed within 18 months of a SPAC's IPO or it will be forced to dissolve and distribute all assets to public stockholders. After the letter of intent, the management team then has six months to close the deal. With a potential for two years until the business combination is complete, SPACs are not for those seeking immediate returns. Investors must have the wherewithal to allocate funds for an 18- to 24-month timeline. The timeline is also an issue for acquisition targets dealing with SPACs. Since SPACs must go back to shareholders for proxy and approval, execution of the business combination could be a three- to six-month process, much longer than is typically associated with private equity firms or strategic partners . Additionally, the shareholder approval requirement adds a level of uncertainty to dealing with SPACs. The purchase price of the initial target must be at least 80 percent of the net asset value of the SPA C. However, the acquisition does not have to be funded entirely by IPO proceeds. SPAC securities may be issued to cover all or part of the purchase price, while the cash portion of the price may be financed. One of the most critical factors in any SPAC are the people behind the blank check. Investing in a SPAC means putting both your money and your faith in the experience and ability of the executives involved. With a number of well-received business combinations announced in the past year, there is growing acceptance among issuers that SPACs are a viabl e vehicle, thereby increasing the number of product providers. Due to the intricacies of SPACs, ideal management teams typically feature seasoned individuals with success in private equity, investment banking and/ or building companies, and those with a background in the specified industry. Regardless of qualifications, the key concern is whether the team can bring a good business combination to the table. "There is significant dilution in these FALL 2005 VALUERICH MAGAZINE j 59
in equity is not robust, due in part over what acquisitions they chose to deals between the fees, the management to the fact that many of the mid -tier make or not make. The new requi rement t eam promote and the warrants;' says firms are no longer in existence. It has that SPAC management teams get Michael Rapp, CEO of Broadband become challenging for companies to (generally) 80 percent of the independent Capital Management LLC. "Management tap into capital markets, thus making shareholders to approve deals el iminates needs to deliver back significant value the SPAC structure interesting. some of the blindness of a blind pool. in order to offset the dilution. That's growth of hedge funds and their The "That's a tremendous protection for clearly a challenge in these vehicles:' affinity for SPACs is another component the investors and I think one of the With opportunity comes responsibility. in the product's popularity. The SPAC's key reasons [SPACs] didn't work last SPAC management teams face their business combination approval feature time and now work this time," says own set of requirements. Obligations hedge funds with ownership provides Bruce Strzelczyk of Sanders Morris include purchasing a specified number flexibility and protection. By electing to Harris Group Inc. "Before, you were of warrants in the public market at vote against the business a pre -determined price combination, they have after the IPO completion, the option of converting advancing the start-up and their common stock shares operating expenses, and into a proportional share rei mbursing IPO investors in of the trust. Additionally, t he event the trust account SPACs provid e immed iate is invaded by creditors. Plus, liquidity that is not available if a sufficient number of in private equity funds. public stockholders oppose Post-IPO performance a business combination, the of SPACs depends largely t rust is liquidated and the on whether the company management team is left has announced its intended wi t hout results or returns. acquisition . As of May All in all, SPACs 2005, units trading without remain an intriguing an announced acquisition product for investors. ~ tracked the S&P 500 "There's some very good ] when their performance downside protection in the a.. vehicle, and there can be The growth of hedge funds and their affinity for was adjusted for their increased volatility. Presignificant upside potential SPACs is another component in their popularity. announcement, the if management is successful market is betting on the quality of the in bringing back a well-received business;' making a bet, and now, you can management team and deal structure, says Rapp. "Along the way, investors argue, you're making an investment." can sell shares or warrants in the market which allows investors to hedge. Units The second modification to trading with an announced acquisition at some price providing liquidity:' SPACs was the requirement that were up an average of 66 percent. The SPACs of today are not a new management provide some element The popularity of SPACs is not product, but rather are-engineered and of guarantee. In the initial SPAC expected to be indefinite. Industry greatly improved version of an old idea. product, there was nothing stopping Aft er breaking onto the scene in the midexperts suggest that the sentiment management from losing interest in a could shift positively or negatively, 1990s, SPACs virtually disappeared du e to SPAC and essentially abandoning it. th e technology bubble burst, the threedepending on changes in supply, "What that essentially does is makes demand and other economic factors. year bear market and significant product the management team have some skin With billions of dollars of SPACs currently issues diminishing their market appeal. in the game;' says Strzelczyk. "Now when Over the past two years, however, in registration, some believe that there they promise to purchase warrants at th e popularity of the innovative will be a flight to quality in which more some valuation and there's money on of the teams with better management, investment vehicle has surged. The the table, they have a real commitment backlog in SPAC IPOs as of May track records and strategies will get to spend the time and effort to do this:' represented $1.5 billion in potential their deals done while weaker teams Market conditions have also led to gross proceeds, with nine SPACs filing will not enjoy the same success. the recent appeal of SPACs. With its S-1 s with the SEC in that month alone. No one can predict when the market lackluster performance, the opportunity One of the key driving forces of this window for SPACs will close. However, cost of allocating funds to this product resurgence are the product modifications due to the investment vehicle's appeal for a potential two-year time frame is low. that have been made to the new round and its potential for returns in today's If the market were generating returns in of SPACs. During their elementary years, marketplace, most seem more concerned the 15-to-20-percent range, this would SPACs were truly blind investments. with ma ximizing the opportun ity likely not be the case. Additionally, the Ma nagement teams had sole control market for IPOs with $25 -100 million while the window is open. V R 60 I VALUERICH MAGAZINE FALL 2005
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Don't Forget the Public' In Public Company 1
By Lester Rosenkrantz
Functional investor relations programs are not luxuries reserved for large organizations; they are a necessary part of running any public company's business operations.
Every CEO, CFO and sometimes, to a lesser extent, COO of a small public- or soon-to-be public- company must devote serious time and attention to its investor relations effort and should consider hiring a professional investor relations firm to help them do so. Investor relations are extremely important to three types of companies: public companies experiencing rapid growth or going through a turnaround; pre-IPO companies; and companies t hat have completed a reverse merger into a shell corporation . Growth companies need an advocate to position them on Wall Street, while turnaround situations need experts who know how to reposition the changed corporate story to investors. Companies that are about to go public have the sponsorship of their underwriters, but t hey also need the support of the Wall Street community after going public to buttress the momentum t he underwriters have begun . Companies that have merged int o a shell need the most help from investor relations firms. They generally lack support from underwriting firms and other financial sponsors. Since shell companies typically don't have the bandwidth to support active marketing of their stock, they tend to find themselves orphaned in the public market fairly quickly. Many will argue that sophisticated investor relations programs are only for large multinational corporations wi t h deep pockets. True, some big public companies may have investor relations departments with staff that outnumber the total number of employees of a typical micro-cap company. But smaller companies can learn from their bigger peers. 62 1VALUERICH MAGAZINE FALL 2005
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One of the reasons large organizations dominate the public markets is because they recognized early on that investor relations is an area of expertise that requires dedicated personnel to accomplish successfully. In fact, the only public or pre-IPO companies that do not need investor relations firms are organizations that are not interested in new markets or growth.
IR Advantages for Smaller Companies Many companies hire investor relations firms because they need a systematic approach to getting analyst research coverage. Research coverage is extremely difficult for a company to get on its own. With thousands of companies clamoring for attention from Wall Street every day, it is critical to have an IR firm that knows its way around the Street and can make introductions to a ta rgeted audience. In addition, a company can expect its investor relations firm to achieve the following: e Develop the corporate story. This includes w riting and editing press
releases, conference call scripts, fact sheets and other co rporate materials for correspondence with the Street. TheIR firm should also prepare and coach management on conducting productive conference calls with the investment community. Build a database of investors and analysts. This involves identifying key investment executives who will be open to receiving regular communications and updates from the company. Facilitate relationships. The investor relations firm is responsible for building the company's relationship with Wall Street. This includes arranging meetings with receptive buy- and sell-side investors; seeking invitations to present at conferences and investment forums; encou raging investment community participation in conference calls; responding to shareholder inquiries; and encouraging analysts and investment letters to publish reports on the company. Provide constructive feedback. www. valuerichonline.co m
The investor relations firm is the intermediary between a public company and Wall Street. As such, the firm should follow up with analysts and investors following meetings, conference calls and other presentations to gauge the Street's reaction to the company's messages. It should also provide quarterly updates on institutional purchases and sales, as well as detailed reports of various IR initiatives and their results. Every company, regardless of size, should periodically assess whether or not its investor relations program is having a positive impact on its relationship with the financial community. There are seven questions senior managers can ask to help gauge the effectiveness of the company 's investor relations efforts:
e Has the trading volume of
the stock improved? Is the stock trading at a higher multiple? Has the base of institutional ownership broadened since implementing the program?
e Are new research analysts
covering the stock? Does the company have greater access to capital markets? Has the company increased its visibility in the business media? Have the company's reputation and credibility been enhanced in the financial community?
Not all investor relations programs are designed to address every single one of these issues at all stages of a company 's growth, but every program should achieve some of the elements all of the time. Senior management and the investor relations firm should take an active role in ensuring that the program maintains its focus, and both should be willing to finetune the program as needed.
n.Business The Payoff There are many worthwhile initiatives that help an emerging company. However, not all are directly tied to helping an organization flourish in the public markets. When evaluating strategies for business development, one area that should not be compromised is investor relations. A thoughtfully developed and diligently executed comprehensive investor relations program can capitalize on the opportunities that come from being in the public markets and will deliver the Street recognition that the company deserves. R
Lester Rosenkrantz is the president of Cameron Associates, Inc. (www.cameronassoc.com), an investor relations firm focused on the micro cap marketplace. A Wall Street investment banker for many years, Lester has over 35 years of experience helping emerging growth companies reach out to public and private investor audiences. He can be reached at 212/ 245-8800 or email@example.com.
maryanne russell PHOTOGRA HY
New Yor k, NY I 212.308.8722 i nfo@maryan ner ussell.com www.maryanner ussell.com A Certified Women 's Business Enterprise (WBE) qualified for D iversity Programs
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FALL 2005 VALUERICH MAGAZINE 163
Insurance Connoisseurs By Liza Grant Smith
There is an old adage that the key to success is to do one thing and do it well. It seems as if some of today's financial services providers have forgotten this wisdom in their Napoleonic quest for size and strength. They have, in effect, become the equivalent of chain restaurants w ith novel-length menus offering everything from chimichangas to veal piccata. Unfortunately, with these types of establishments, it 's not uncommon after the bill is paid for patrons to end up passably full , but far from satisfied or impressed. Advanced life insurance and estate planning veteran, American Business and Professional Program, Inc., has
built its 40-year reputation through the adoption of a different stance. By taking its clients and advisor partners on a focused culinary tour of the increasingly complex cuisine of life insurance, the firm is generating rave reviews, helping to develop evolved palettes, and truly realizing success through specialization . Not too long ago, life insurance was sold door-to-door, like vacuum cleaners or encyclopedia sets. After a quick interview, individuals were
64 1VALUERICH MAGAZINE FALL 2005
American Business& Professional Program, Inc.
presented with a choice of several basic policies best suited to fit their needs. The entire sales and selection process often took only a few hours. Since then, the insurance industry has undergone dramatic change, the extent of which many individuals fail to fully realize. In knowledgeable hands, today's extensive portfolio of life insurance products can be utilized to provide solutions to a broad array of areas including business, estate planning, family planning, charitable planning and pension planning. Ongoing developments in the current legal environment also make being informed critical. American Business CEO and president Alan Grad, who was a Wharton School graduate, echoes this sentiment. "Because of changes in tax and business laws, certain methods and types of products have become more attractive from an economic and tax-efficiency standpoint," he says . Grad goes on to point out that, unlike most of its competitors, American Business' focus has always been on client education, rather than quickness of the process. "We make sure clients have a full understanding of not just the insurance products, but the economics and other factors that are going to revolve around their decision." American Business' singu lar focus and expertise allows for this deep and ongoing relationship and has elicited extremely positive responses from the firm 's 35,000 clients . "It is the best package service I have seen anywhere;' says Ronald Winston, chairman of Harry Winston, Inc. "American Business has great in-depth approaches to personal, financial and estate planning . It is a service that has no equal:' Grad explains that, in their quest for life insurance products, affluent customers face a multitude of sources, including brokerage firms, accounting firms and banks that claim to offer this type of service, and that individuals are uncertain which way they should go for creative techniques and concepts. Meetings with the big multi-service providers are often disappointing due to www. valuerichonline.com
Meeting today's sophisticated life insurance needs is a highly discriminating art. a lack of new information or ideas. Grad is also well aware that other life insurance firms their size have expanded in-house service offerings to include segments such as investment plann ing, property and casualty insurance and medical insurance, but he feel s it is a mistake. "We have become experts in this one area and are able to stay on top of everything ," he says . "Wh ereas, if you try to w ear too many hats, the client w ill realize that you're not an expert at anything and it will backfire on you ." American Busines s clients receive highly creative services and quickly learn of the firm 's exten sive experti se. "Many of us live at a frenetic pace," says another client of American Business, Ross Greenburg, president of HBO Sports. "It is nice to know that American Business can help to give me and CEO and President Alan Grad my family the security we need as advisor is kept in the loop throughout w e look ahead to a near certain future." the process with joint meetings, Clients are not t he only ones singing constant updates and timely feedback. the praises of American Business. The "The Two Client Philosophy has really firm 's model has always been one of differentiated us from any other firm;' working strateg ically and contractually says Joel Katz, Founder and Chairman of with advisor firms, while maintaining American Business, "Our professionals ultimate independence f rom the know how to do it, they are trained in insurance products and carriers they it and it leads to a very smooth and utili ze. Advisor firms are assigned one or long lasting relationship with (advisor more American Business professionals firms) because they are part of the who all abide by similar rules and process and there are no surprises." protocol, ma inta ining continu ity. There are no conflicts of interest with An Uncommon Firm for agents and attorneys, as American Uncommon Customers Business is paid purely by the insurance American Business currently has products rather than through fees. four offices, located in New York City, Probably the biggest indication of Manhasset, Westchester, and Boca Raton, the importance of advisor relationships, Fla., employs 50 full-time professionals however, is the Firm's established "twoand has a full in-house underwriting client philo sophy." All American Business department. Since its establishment professionals are trained in this exclusive in 1965, American Business has set of principles, which states that there remained singularly focused and are always two cli ents the Firm is working achieved all growth internally in order for in 90 percent of the cases : the end to maintain its strict quality standards. user and the advi sor through w hich the Grad confidently asserts that the firm 's Firm got in touch with that end user. professionals "are head and shoulders The philo sophy places an imperative above any other group that is out there." on the satisfaction of both clients. The www.vrexpo .n et
Thi s may have something to do with the Firm's recruitm ent policy, the first component of which is a lack of advertising . Prospective employees are referred primarily by the existing team or through trusted adviso r partners. The focus is not on hiring books of business, but finding talented and seasoned people. While many firms are moving away from individualized service, American Business' team of relationship-oriented professionals thrives on one-on -one meetings with affluent individuals, wheth er they are heads of a corporation, CFOs, sports and entertainment figures, or owners of small to medium -size companie s. The Firm was born with a focus on th e affluent ma rketplace and has not wavered or faltered since. Advisor firms have always acted as the conduit to these individuals and American Business' impressive li st of current relationships illustrates the strength of its reputation and business model. The ever-growing list includes CPA fi rms, property and casualty firms, Wall Street investment firms and major international sports agencies, among others. "American Business has been a re source to our firm for over 5 years;' says James Butler Regional Chief Executive Officer of US! Northeast. "Throughout that time, the quality and dedication of their professionals in estate planning and insurance has proven to be of major assistance to our client base. We value their contribution and professionalism :路 Life insurance sales should no longer be a numbers game where success is defined by how many doorbells providers ring or how many unrelated side items they offer. The current comple xities and far-reaching implications involved in life insurance selection have made expertise in the area a full-time job. Those not willing to make the commitment had better be prepared for some client indigestion . R www.americanbusiness.com info @americanbusiness.com FALL 2005 VALUERICH MAGAZINE l 65
SANDERS MORRIS HARRIS Investment Banking Group
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New York City 405 Lexington Ave., New York, NY 10174 ·tel: 800-724-0761, tel: 212-895-3500, fax: 212-895-3555 Long Island, New York 99 Sunnyside Blvd., Woodbury, NY 11797 ·tel: 800-537-6923, tel: 516-393-8300, fax: 516-364-1310 Chicago 200 West Jackson Boulevard, Suite 2000, Chicago, IL 60606 • tel : 800-621-0659, tel: 312-554-2200, fax: 312-554-1009 John Garrity 99 Sunnyside Boulevard, Woodbury, NY 11797 ·tel: 516-393-8300 email@example.com Member NASD & SIPC
68 1VALUERICH MAGAZINE FALL 2005
www. vafuerich on fine .com
THE AMERICAN EXCHANGE
Nurturing Small- to Mid-cap Public Companies By Katherine Waldron Welcome to the newer and better American Stock Exchange. After a few short years under the helm of NASD, the Amex has emerged from its shadow and is once more making inroads into the small- to mid-cap marketplace. The Amex is seizing its newly independent status as an opportunity to once again be the premier exchange for small-cap and mid-cap companies. At the end of 2004, the Ame x became an independent entity. A new Amex Board of Governors was appointed with the election of 14 new governors, and Neal Wolkoff was formally given the Chairman and CEO title in April. Amex is a floor-based auction market that specializes in equities, options and exchange -traded funds (ETFs) and structured products. It is credited with having "invented " ETFs and has been particularly successful with such wellknown products at SPDRs (S&P 500 depository receipts) and DIAMONDS (a unit investment trust that tracks the Dow Jones Industrial Average). With the new team in place, the Amex is already earning good marks as an aggressive competitor. The Amex ended the first half of 2005 with 49 new company li stings- roughly equal to the first half of 2004. There ha s also been a significant uptick in the number of initial public offerings (IPOs), with nin e IPOs taking place in the first half, as compared to 10 for all of 2004. www. vrexpo .net
AMEX Chairman and CEO, Neal Wolkoff
Focus on Small and Midsize Companies The Ame x is now focused on strengthening the value of the Exchange to ensure that it remains a competitive and innovative exchange. And a key to its success will be its ability to attract and retain th e sma ll and midsize companies. While the Amex has some very large-cap companies, its focus is on the small / mid-cap companies. As Wolkoff puts it, servicing the small- and mid -cap s "is what we do. Our core business plan revolves around listing smaller equities." He estimates that almost 80 percent of the Am ex's 600 listings are small- and mid-caps. A selling point with these smaller companies, says Wolkoff, is that Amex is entrepreneurial. "We are bright,
n.Business aggressive, creative and we create value." The larg er exc hang es (such as NYSE) are too big to provide a focused approach for the small- to mid-cap companies, and the smaller regional exchanges don't have th e resources to provide th e customer serv ices for these types of companies that the Ame x can , exp lains Wolkoff. It is this support for the smaller companies that is the Amex 's primary market differentiator. John McGonegal, senior vice president for equities at the Amex, describes the leve ls of support: "On the first level, each of our listing compani es gets assigned an issuer services director. These directors walk our listed companies th rough our product offerings, of which we have two key services- t he Amex Investor Relations Alliance and Ame x Online. TheIR Alliance provides the Ame x compani es with a full-service inve stor relations offering, thereby taking the burden off of the executives of these smaller companies. The online service, says McGon ega l, is a password -protected site that shows w hat buy-and-sell money managers have bought and are focused on . "We have databa ses of money managers in select cities with all the inform atio n our listing compan ies need to find the right one and to call on them . We have more than 70,000 names in the database:' Together, the IR Alliance and Amex Online services, according to McGonegal, would cost between $75 ,000 and $80,000 per year if a company were to do this on its own. He estimates that the Ame x is see ing about 500 login s daily to this service.
Focus on Technology The Am ex is also devoting resources to improving and upgrading its technology. "Our numb er one goal is to devote resources and manpower to technology," said Wolkoff. "We are working on the entire infrastructure of the Amex so that we w ill be compliant with new regulations next year." This ultimatel y wil l allow the company to perform better and to direct more FALL 2005 VALUERICH MAGAZINE j 69
Photo: Alan Rose nberg/ Ameri can Stock Exc hang e
resources toward building its business. The Amex is focused on improving its technology and becoming the voice for smaller companies. In June, Wolkoff testified to the Securities and Exchange Commission about the effects of Sarbanes-Oxley on smaller companies . The Sarbanes-Oxley Act was created in response to corporate scandals such as Enron, WorldCom and Tyco International. Its goal was to increase protections for investors by requiring more accurate and reliable corporate disclosures through various mechanisms including auditor independence and enhanced financial disclosure. There has been some fallout for smaller companies from Sarbanes-Oxley compliance costs. Wolkoff said about 20 companies have gone private. Tough Competition
While the Amex is aggressively pursuing the small- to mid-cap markets, it is not without its struggles. In July, Barclays Global Investors announced that it would move the primary listing for 81 of its ETFs, called iS hares, from the Amex to the New York Stock Exchange 70 I VALUERICH MAGAZINE FALL 200S
and the all-electronic Archipelago Exchange over a two-year period. Says Wolkoff, "while we are clearly disappointed and feel that we have lost a partner, we are still the leading listing venue for ETFs- in the first half of 200S, we launched 20 new ETFs. No other exchange launched a single new product. I'm confident that by the time Barclays has moved all of its products, the Amex will likely have made that number up and more. The Amex has always been much more than just a listing venue . We lead the industry in innovation and we work with multiple issuers to bring new products to the marketplace. We have a number of new products in the pipeline that I'm very excited about:' Challenges Ahead
As for Amex challenges ahead, says Wolkoff, "our No. 1 priority is getting technology into a state-of-the-art position and being compliant with NMS, which we will be doing this year and next. "Our next priority is the corporate state of affairs - i.e., the Amex organization and fees. We need to be nimble, be efficient, use our
resources to the best extent poss ible and maintain our independence:' The third priority is to continue to add as many new listings as possible. "We need for companies to understand that it's a new Amex. We are building our reputation, enhancing our technology and becoming an aggressive pursuer of listed companies .... We have a compelling value package:' As for any merger thoughts, that is not in the picture, says Wolkoff. "We are deep in the process of doing what we need to do- designing, planning and building- and we are not compelled to enter into a large-scale merger. We are not opposed to reaching out and establishing relationships; that's an important part of our future. However, we don't want to be taken over and put out of business because someone else wants to take over our order flow and eliminate a competitor. We have a clear focus and we plan to stick to our business strategy, I think in this era of big mergers and consolidation, the industry should be rooting for the Ame x as the exchange dedicated to serving the small- and mid-cap market." VR www. valuerichonline.com
CAMERO Assoc iates Qu ali t y I n v estor Re la t ions Since 1976
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II Cache, Inc. Follow-on Offering Co-Managing Underwriter
TAC Acquisition Corp.
Dyadic International, Inc. Common Stock Unit Reverse Public Offering Lead Placement Agent
Initial Public Offering Co-Managing Underwriter
itA~ . t..<J
1 t ll'<<J..,rd
Genitope Corporation Follow-on Offering Co-Managing Underwriter
MRU Holdings, Inc. Convertible Preferred
Eurobancshares, Inc. IPO - Common Stock
PIPE Co-Placement Agent
Sirna Therapeutics Common Stock Unit PIPE Co-Placement Agent
Stee!Cloud, Inc. Common Stock Unit PIPE Lead Placement Agent
Keryx Biopharmaceuticals, Inc. Follow-on Offering Co-Managing Underwriter
- - - - - - - - --·- ·- ----' 570 Lexington Avenue, New York, NY 10022.6822 • www.breanmurray.com Member NASD, NYSE, and SIPC
Oakmont Acquisition Corporation
URS URS Corporation
Initial Public Offering of Common Stock Units
Offering of Common Stock
$125.5 mill ion $51 million
Norcros (Holdings) Limited a portfolio company of
Bndgepomt has completed the sale of
l autotype l Autotype International Ltd.
Diagnostic Imaging Group, LLC acquired the CD and DVD manufacturing and distribution operations of
jj Ma~~Mi4 for £50 million
Universal Music Group
for $261 million
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Evercore Capital Partners
American Real Estate Partners, Angelica Corporation has acquired
Corrections Corporation of America 6.25% Senior Secured Notes due 2013
Royal Institutional Services, Inc.
Aldabra Acquisition Corporation Initial Public Offering of Common Stock Units
Osteolmplant Technologies, Inc.
has been recapitalized by
has acquired from an affiliate certain securities related to the
Sands Hotel & Casino
Encore Medical Group
$375 million for $45 million
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for $18 million
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,-;3 SUPERIOR '(ai ESSEK Harlem Furniture, Inc.
Superior Essex Inc.
has been reorganized with
Secondary Offering of Common Stock
Pouschlne Cook Capital Management, Bear Grow1h Capital Partners, Mercantile Capital Partners and management
atud tu financial advisor
ACI Capital Integrated Alanm Services Group,
12% Senior Secured Notes due 2011
Convertible Preferred Stock
Essex Crane Rental Corp. Private Placement of Secondarily Secured Term Notes
a wholly owned subsidiary of
Volt Information Sciences, Inc. has formed a joint venture with
have agreed to acqui re the Elastomers and Performance Additives business of
f!olyOne. PolyOne Corporation
Nortel Networks Corporation
for $120 mUllan
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for $16 million
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Liberty Tire Services, LLC
acud tu financial advisor July 2004
acud tu piAummt agent Ju~
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74 1VALUERICH MAGAZINE FALL 200S
www. valuerichon Iin e.com
n.Business What's worse than paying your taxes? Filing them- or at least it's a very close second. And if you are a company, particularly a smaller one, filing your SEC requirements under the new Sarbanes-Oxley rules is now an even bigger headache. With the newness of th is law, nearly everyone, including CPAs, consultants and the companies themselves, are trying to figure things out, and at first glance it 's not looking good. While compliance with SOx, as the Sarbanes-Oxley bill is called, for smaller companies does not take effect until next year, larger companies' compliance has already begun . And in taking a quick look around at what is happening, it appears that many of these companies that thought they had their processes and procedures under control are finding out that they may not- which can be a costly problem to fi x. One company that hopes to come to the rescue is Alpha Consulting Group, LLC. It has developed ASP software, aptly named, SOx Blox, which aims to simplify the process of properly documenting accounting processes, as required by SOx. Alpha was started in 1999 as a CFO and controller outsourcing group targeting small companies, and the software was originally developed for Alpha's internal use. But after showing it to some CPAs and consultants, they decided to offer it directly to customers . It now has a patent pending, and Alpha hopes that this software will enable companie s to "do it themselves." "SOx compliance doesn't have to be a costly or inefficient process," says John Maleckar, president and CEO of Alpha and also a CPA, who estimates that as much as 3 percent to 4 percent of a company's total revenues may go to w ard getting it into compliance w ith SOx. But consultants and CPAs may not be able to reduce that number. "We changed our focu s in 2004 to SOx work since so many companies needed to
comply with the Act. We quickly found out that most of the consultants and accountants doing the SOx work had no experience with documenting processes and testing internal control environments - necessary to comply with the Act:' Worsen ing the problem, he says, "Most CPA firms already had a full plate with their regular audit and tax work. Companies delayed their projects because they didn't know how hard it was going to be to get the work done. On top of that, the SEC
0ur software is ~~the grid. Once all the-answJrs [on co~pliance] are :in, the puzzle is solved:'
and Public Companies Accounting Oversight Board (PCAOB) didn't issue guidance until everyone was knee deep in their projects, which created an ever-changing playing field :' KISS: Keep It Simple, Stupid
To solve these problems, Alpha applied the principle of simplicity in its software program . "There is a certain elegance to simplicity," says Maleckar. This simplicity is based on the fact that there are common elements across all businesses. And these common elements are based upon generally accepted accounting principles. "We are focusing our efforts on the smaller issuers; having found common elements are especially relevant to th ese companies:' Maleckar compares his company's software to a three-dimensional
Answer to small-cap SOx woes come courtesy of DrewS. London, left, and John Maleckar. www. vrexpo .net
crossword puzzle with clues, but no grid. "Our software is the grid. So when companies input the answers on compliance into the grid, then once all the answers are in, the puzzle is solved .. .. Once a client fills in the blanks, the database crunches the results and produces standard reports." Th e software, hopes Drew London, Director of Business Development, may revolutionize how SOx is handled. " We identify what cycles and processes a company has based on their financia l statements. We define the beginning and end parts for those processes and teach the companies how to input the information into the right fields in the right way so that it is useful information :' In the end, therefore, it will become more efficient, not to mention less costly, to comply with SOx. Alpha is targeting primarily smaller companies, those with less than $75 million in market capitalization, although it does have clients w ith well over $1 billion in market capitalization . There are approximately 7,000 small companies that fit into Alpha's target market, and it expects to get its fair share of this business. With the software comes training, as well as Alpha's continued engagement at whatever level of involvement the client wants. Several "team leaders" now along the East Coast work with Alph a's clients wherever they are clustered -southern Florida, Boston, Chicago and New York for now. However, the Company anticipates that demand will be far and wide and in cit ies both small and large. It also sees SOx Blox as offering companies more than just SEC compliance. Says London: "The biggest byproduct of having properly documented accounting processes is that you find out exactly how transactions are processed and approved. Once you do that, you can analyze a process and streamline it and bring operating costs down." Contact: Drew London 703-380-2874 firstname.lastname@example.org FALL 2005 VALUERI CH MAGAZINE 175
H. C. WAINWRIGHT & CO., INC. Inves tments Since 1868 Member of NASD and SIPC
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James Stewart played George Bailey in It's a Wonderful Life, a small town banker who had an important role in his customers' lives.
Ste""ards of Gro""th By Katherine Waldron
Years ago when people thought of their banker, they were likely t o think of someone with whom t hey had a solid and long-term business relationship - someone like George Bailey, from the movie It's a Wonderful Life, who would be there for them as they went through life- buying homes, financing college, etc. 78 1VALUERICH MAGAZINE FALL 2005
While those days seem long gone for individuals, smaller companies are still hoping to find this experience as they seek to grow from incubator status to IPO and beyond . Capital Growth Financial (CGF), based in southeast Florida, was founded in 1995 with the aim of seeking out growth compan ies at virtually any stage of development and offering them a continuing stream of financial services as they grew from small private
companies to larger public companies. "We haven't really seen anyone else effectively put it all under one umbrella," says Alan Jacobs, chairman and CEO of CGF. By offering an umbrella of products and services, Jacobs believes CGF can continue working with mid-level companies as they grow. For example, CGF did a public offering for a company in the security industry." Since that IPO we have worked with them to arrange the financing for an www.valuerichonline .com
n.Business acquisition- a combination of senior debt and convertible notes," adds Jacobs. Many times financial entities that do IPOs are not in a position to follow up with additional services such as this.
Retail and Institutional Overlap The Company 's business model combines retail, institutional, merchant and investment banking along with proprietary research for its clients . Its retail and institutional brokerage group is by far the largest in terms of both revenues and people. It currently has about 90 brokers nationwide, mostly on the East Coast, in Florida and New York. "Our philosophy;' says Jacobs, "is to offer the potential for higher yields than traditional public stocks." Oftentimes, the Company can recommend some of its merchant clients' activities as potential investments for its retail clients. One recent example of this was CGF 's financing of a Ritz-Carlton investment, in which it offered some of its high net-worth clients the opportunity to diversify into some of these investments. But such investments may not be for everyone, explains Jacobs. "There is an expected higher yield, but the tradeoff is that it is not as liquid an asset -closer to a three-year investment."
Investment and Merchant Banking The Company's merchant group focuses on both equity and debt investments in the middle market. It currently has about nine clients. Two key components that CGF 's merchant group looks for when considering a potential client are a well-managed company and high growth . In such instances, CGF can get involved with small companies that are not yet ready to go public, but need access to money. In other instances, CGF can provide companies that have already gone public with supplemental money for acquisitions or other expansion . "Most of our merchant banking clients are already public;' says Jacobs. "So having this group available is another way we can be helpful www. vrexpo .net
and enable companies to grow." CGF's investment banking group consists of, among other things, managing IPOs and being a placement agent for both private and public companies. While it is not industry focused, it has historically done most of its work in the financial, health care, security and technology sectors
in Boston, Chicago and San Francisco, as planned . "Opening in other cities could get us back to the kind of growth we had in the past five years," says Jacobs CGF also is looking to add more services, such as a venture capital group. This would allow it to establish relationships with growth companies at an earlier stage than
Capital Growth Financial combines retail, institutional, merchant and investment banking along with proprietary research for its clients, as well as retail and institutional brokerage, allowing it to assist quality companies from an early stage as they continue to grow. -sectors that are fairly hot right now.
What the Future Holds As a whole, the banking industry is expecting significant growth in the next year- close to 40 percent for some of the mid- to large-size public financial institutions. Since it was founded, CGF has accomplished growth that outpaces this rate- doubling every year. Near-term, CGF expects to keep increasing at a rate of about 20 percent per year. This could go higher if it is successful in opening duplicate offices
it does now. " We are looking at the earlier end, getting involved with companies before IPOs, with private placements or a fixed income loan first. Or maybe combine an IPO with other types of finances;' adds Jacobs. In the meantime, Jacobs and his associates will apply their talents to provide clients with the financial services they need to accomplish growth- the old-fashioned way, when the banker stepped in and lent whatever hand was necessary, whenever necessary. V R www.capitalgrowthfinancial.com FALL 2005 VALUERICH MAGAZINE I 79
ENGAGED IN THE CHALLENGES YOU FACE Intelligent Capital Solutions (ICS) with its headquarters in Frankfurt, Germany is a highly experienced, full service, Financial Consulting Company. Our mission is to help form alliances between entrepreneurial, innovative companies and venture capital or private investors. With our partners in Europe, Asia and the USA, we are able to provide custom designed strategic solutions and plans for the specific needs of a company and its projects. For attractive companies and products we are able to raise seed capital through our in-house Private Placement Department of up to â‚Ź 5 Million.
nology. If required, we will use these resources and contacts to assess a potential business opportunity. We will then evaluate and determine the probability of commercial success of the specific project and help create the necessary information package . To find appropriate partners ICS will apply its CMP (Capital Matching Process), which was designed to ensure swift and sound processing of detailed information. Through ICS a company seeking capital and a partnership will be presented expeditiously to matching entities in a global market.
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Intelligent Capital Solutions GmbH- Dreieichstrasse 59 - Frankfurt a.M.- Germany - Phone +49 69 66 12 410- Internet: www.ics-europe.de
By Liza Grant Smith
When it comes to the treatment of cancer and other serious medical conditions, there is rarely a magic bullet. Therefore, each drug developer adopts a unique approach for targeting particular markets. While these approaches are diverse, the companies share the common challenge of maintaining their drug candidate's specificity. It's called a "lock-and-key effect:' Cell membranes of diseased cells called receptors turn certain functions of the cell on and off. The goal of drug developers is to create a key that addresses these receptors. While developing the key is challenging, guaranteeing that it will fit only the specified lock is the true test. Those that fail can produce unwanted side effects in cells other than the ones targeted . Chemokine Therapeutics Corporation (TSX:CTI, OTC:CHKT). a biotechnology company developing drugs in the field of chemokines, has exciting potential in this custom-key-making arena. The
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COMPANY . . . CONNECT Company's lead peptide-based drug candidates in cancer metastasis and immune system recovery have the potential for better efficacy and safety than existing drugs and represent multibillion-dollar market opportunities. This, in combination with a strong management team, impressive patent estate and strategic partnerships may allow Chemokine Therapeutics to unlock more than just health-care solutions. It may also be its key to financial success. Chemokines are a complex family of small proteins p roduced in the body that regulate the development and movement of cells. They are produced and secreted by many different cells in response to injury, allergens or invading microorganisms, and bind to receptors. Through the design and developm ent of peptide -based drugs, companies can generate smaller versions or analogs of natural chemokines to block the functions of chemokines (antagon ists) or mimic their functions (agonists). CTI 's rational peptide design methodology enables the Company to produce peptide analogues with a high affinity for chemokine receptors, endowing the candidates with a high degree of specificity and longer duration of activity. Dr. Shahin Rafii, an internationally known cancer and vascular biologist and stem cell authority at Cornell University, underscores the importance of the platform CTI has discovered . He points to the fact that chemokines have a much lower half-life than cytokines, making them difficult to
Chemonkine Therapeutics Corp. 6190 Agronomy Rd, Suite 405 Vancouver, BC Canada V67 1Z3 www.chemokine.net
deliver. Therefore, technology like that of CTI , which makes it possible for them to remain in circulation longer at high levels, allows for a better biological vehicle of the function. The Company's leading drug candidates illustrate these concepts. CTCE-9908
CTI's oncology drug candidate, CTCE9908, may prevent the spread of cancer to other organs (known as metastasis) by binding to CXCR4 receptors expressed on cancer cells. This binding prevents cancer cells from interacting with normal cells, which are rich in chemokine SDF-1. In the absence of the candidate, SDF-1 binds to the receptors and enables cancer cells to settle in organs where it is present. CTCE-9908 represents a new paradigm in cancer treatment and is a departure from existing drugs that attempt to prevent cancer metastases by rapidly destroying actively dividing cancer cells. Since they can also destroy
CONNECT lan Harper, Director of Investor Relations 604-822-0305 email@example.com
normal cells, potential side effects of these drugs include weakening of immunity, weight loss and organ failure. Preclinical studies have produced encouraging results for CTCE-9908. The candidate has been shown to prevent lung cancer metastases by 68 percent and metastases outside the lung by 100 pe rcent. Additionally, Phase I cl inical trials demonstrated an excellent safety profile. CTCE-0214
Unlike CTCE-9908, which acts as an antagonist to the SDF-1 receptor, the Company's other leading drug candidate, CTCE-0214, is an SDF-1 agonist. Natural SDF-1 is responsible for the maintenance of infection -fighting white blood cells, platelets and stem cells in humans. The candidate's abili t y to mimic that function means it can help patients with weakened immune systems cope with chemotherapy or other disease conditions by accelerating the renewal of infection -fighting cell s.
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Due to its unique mechanism of action, CTCE-0214 has the potential to be more effective than currently available cytokine-based drugs for treating immunosuppression . Preclinical studies showed that the candidate increases blood neutrophils, platelet and progenitor stem cells within minutes to hours. This is a sharp contrast to Amgen's blockbuster, Neupogen, which requires
hours or days for the same effect. A significant advantage of both of CTI 's leading drug candidates is the indication t hat they can be used concurrently with other drugs for the treatment of cancer and immunosuppression to improve outcomes. This means the drug-based therapy is not likely to be sacrificed for alternative treatments . To maintain its competitive edge, CTI has established a wall of protection around its intellectual property with 84 1VALUERICH MAGAZINE FALL 2005
both composition and patents. Patents that have been filed are pending and have been issued in the U.S., Europe, Australia, Japan and Brazil. The development of a patent estate represents only one part of the strategic process. "What's important in terms of ultimately generating revenues is who Chemokine partners up with," says Jennings Capital analyst Shameze Rampertab. "At the end of the day, the success of Chemokine will not be in selling drugs. The success of Chemokine will be in showing Phase II efficacy, and licensing it out to a big pharma partner or specialty pharmaceutical company." This partner will complete the development and commercialization of the product and ultimately generate sales. Chemokine, in turn, will receive royalties or a profit-sharing mechanism as its revenue flow. According to Frederica Bell, CTI's Director of Investor Relations, the importance of these partnerships goes beyond financial gains. "While the revenue a partnership brings is attractive for any small biotech," Bell says, "Chemokine places as much importance on the validation of our clinical programs and management team that a partnership implies:' PPD, Inc. (NASDAQ: PPDI), a global contract research organization providing expertise to clients in clinical trial design and implementation, has acquired $2.7 million worth of preferred equity in CTI. Their investment was designed to continue the development of CTCE-0214 and gave them an exclusive option to license the candidate following completion of all Phase I studies for a first milestone payment of $1 .5 million. In addition to subsequent milestone payments, PPD would be responsible for royalties and development costs. CTI has also entered into a research collaboration agreement with Procter & Gamble Pharmaceuticals for the
development of chemokine-based drugs for neovascularization. After completing R&D work, P&G has the option to license and develop a compound for commercialization with CTI, again receiving milestone and royalty payments in return. According to Rampertab, it is unwise to focus purely on the science aspect of a biotech company. He suggests that without a solid management team, a company likely represents a poor biotech investment, even if the product is good. Bell agrees. Managing Future Success "Chemokine's management team is an incredibly important factor for the future success of the Company," she says. "The diversity of experience, from small biotech to big pharma, brings perspective and depth to how we run the Company:' Founder/ Chairman/ President/ CEO Hassan Salari has an extensive background in biotech, with his most recent achievements in successful entrepreneurial endeavors. The expertise and reputation extend to the Company's clinical and scientific advisory boards, which are peppered with leaders in the medical, scientific, financial and capital market fields. Analyst opinion of CTI has been encouraging. Jennings Capital Inc. and Fundamental Research Corp. both published reports this summer rating CTI, respectively, a "Speculative Buy" and a "Buy." Based on the company fundamentals and market potential, they agree that CTI 's stock is undervalued. Rampertab suggests that the critical event for biotechs like CTI is to show significant efficacy. Producing clinical results in a timely fashion is ultimately what will move the stock. Bell echoes that sentiment and suggests that the Company 's impending progression into Phase II development presents an attractive window of opportunity for investors. "Phase II company valuations tend to be higher than those for Phase I stage companies," Bell says . " With a market capitalization of just $30 million, our current valuation is extremely attractive for those looking to get into biotech on the ground floor." V R www.valuerichonline.com
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Survivors in this Darwinian environment are not those with stre ngth of idea, but those with strength of execution. Therefore, lacking support, many of the innovative advances in business practices and technologies that could enable quantum environmental gains will be lost. The goal of GreenShift Corporation (OTCBB: GSHF), a New Jersey-based business development company, is to help prevent this f rom happening. By using equity and debt 86 1 VA LUERICH MAGAZINE FALL 2005
capital to strategically develop and support a portfolio of socially responsible companies, GreenShift plans to show that, with a little cultivation, the green market can produce both efficiency and profits. As a society, we tend to seek out expedient resolutions to problems. We hope that with a single sweeping change, we can fi x things virtually overnight. This superhero mentality is far from realistic when it comes to address ing monumental issues such
as today 's environmental concerns. GreenShift suggests, instead, that we support what it calls "green shifts;' or incremental advances in business practices and technologies that allow for environmental gains. "We are faced with environmental challenges today that have been generations in the making and will take several generations to completely repair," says Greenshift 's chairman and CEO, Kevin Kreisler. "We maintain that www.valuerichonline.com
we will collectively achieve a far greater positive impact by looking for ways to incrementally channel the flow of natural resources through commerce more intelligently, with the essential goal of increasing profitability. We have a great many things we can do today to achieve this and, with the right focus, these improvements- these small green sh ifts- become powerful levers to effect substantial improvements to the state of the global environment." This belief is the core of Green Shift's business model and the foundation of its investment strategy. BDC Payoffs Through its election to become a business development company (BDC), GreenShift is able to offer significant advantages to both its portfolio companies and investors. BDCs, regulated by the Investment Company Act of 1940, are essentially publicly traded equity funds created by Congress to encourage the flow of public capital to businesses with limited access to strategic investment and vital resources, which can include management support, econom ies of scale, financ ial assistance, regulatory assistance and compatible technologies. Unlike traditional private equity funds, BDCs operate for an indefinite period of time and continuously recycle contributed capital. Therefore, GreenShift's portfolio companies have access to a nearly perpetual capital base to support them through economic trends and cycles. BDCs also present a unique opportunity for investors. Since they are publicly reg istered investment companies with shares trading on an exchange, BDCs are available to public investors who would otherwise not typically have access to private equity funds. Benefits include transparency, liquidity and current dividend income not present in other investment vehicles. Due to their ta x structure, BDCs must pay out most of their taxable income each year in the form of dividends, providing investors with a current income stream. With operations initiated in April , GreenShift intends to pay a dividend this year and then quarterly going forwa rd. What distinguishes GreenShift from www. vrexpo .n et
GreenShift Corporation GreenShift Corporation 111 Howard Blvd, Suite 108 Mount Arlington, NJ 07856 www.greenshift.com
other BDCs, however, is its investment in a diversified portfolio of strategically compatible growth -stage public and private businesses and technologies that are socially responsible. It is important to note that, in addition to meeting the Company's environmental impact goals, potential acquisitions must also be attractive f rom a profitability standpoint. Survival of the Fittest "Green business strategies that do not include another type of green- profit -as their fundamental prerequisite are, in my view, destined to produce at best mediocre results;' says Kreisler. "Everyone wants to be green, but few people will actually be green when it costs more or is an inconvenience to do so. This is the core of our investment philosophy -we are developing and supporting technologies and companies that strive to make it easy and cost-effective for people and businesses to be green:' A look at some of GreenShift's existing portfolio companies illustrates the Company's beliefs. Veridium Corporation (OTCBB: VRDM)
Veridium Corpo ration (OTCBB: VRDM), 55 percent owned by GreenShift, is a publicly traded environmental management VERIDIUM company. Veridium is paid to recycle hazardous waste, and the company then markets the recovered metallic ore concentrates to smelters and metal manufacturers. This enables its clients to eliminate their ongoing environmental liability, qualify for
CONNECT Kevin Kreisler, Chairman & CEO 973-418-7145 firstname.lastname@example.org
exemption from generation taxes and reduce ongoing regulatory expenses. Veridium, meanwhile, reuses the partially spent chemical compounds to cover a portion of its own variable costs while favorably reducing the burden on virgin natural resources. During GreenShift's first quarter of operations, it assisted Veridium with the acquisition of two companies that together added approximately $3.5 million to Veridium's revenue run rate and brought annualized sales to roughly $19 million. Green Shift hopes Veridium's aggregate revenue will reach more than $50 million thanks to the acquisition of additional companies this year. lnseq Corporation (OTCBB: ICDT)
Green Shift also
supporte.d lnseq Corporatton (OTCBB: ICDT) in its recent acquisitions. lnseq, 70 percent owned by GreenShift, intends to build a full-featured seconda ry comm.odities exchange and a clearinghouse for secondary commodity transactions . The two acqu isitions brought approximately $21 million in revenue to what was previously a development-stage company. GreenWorks Corporation Not all of GreenShift's po rtfolio companies are publicly traded . GreenWorks Corporation is a private environmental engineering company founded to acquire, clean up and develop environmentally contaminated properties using innovative and environmentally friendly technologies. GreenWorks, FALL 2005 VALUERICH MAGAZINE J 87
which currently has approximately $4 million in revenue, intends to go public during 2005, once targeted acquisitions expected to bring in more than $30 million in revenue are complete. GreenShift shareholders will receive a dividend of one share of Green Works for every five shares of GreenShift they hold at the time of the scheduled offering . Green Design Technology is also a critical component in the resolution of environmental challenges. GreenShift has formed GreenShift Industrial Design Corporation (GIDC) to strategically address this issue and bring significant positive benefits to shareholders. GIDC, a wholly owned portfolio company, will focus on the engineering and marketing of green technology and will hold all of GreenShift's intellectual property. GreenShift intends to capitalize GIDC in the immediate term in order to acquire the Company's initial wave of technologies and products. Once acquired, management will refine "killer apps" of the technologies that are strategically compatible with
its portfolio companies and then sub-license and/or transfer these technologies to the companies on favorable terms . Management believes this will have the dual-pronged effect of improving the value of portfolio companies through improved costefficiency and stimulating ongoing cash flow. GIDC will receive royalties from product and technology sales
and eventually earn revenue from the provision of customized "greengineering" services to third-party clients. GreenShift's other portfolio holdings include a pre-revenue R&D company with a focus on alternative energy resources, a provider of an array of utility installation, management and maintenance services, and the inventor of a new patentpending breakthrough technology for the cost-effective conversion of corn oil into biodiesel fuels. The most recent additions represent investments in a development-stage company with patented and proprietary technologies involving new implementations of vapor compression distillation, and the nation's leading retail renewable energy provider, which sources and sells renewable energy certificates. Environmental friendliness doesn't have to be a public relations strategy or a selfless non-profitable stance. For GreenShift, the green market represents an immense opportunity to both effect environmental change and generate significant returns. That 's the kind of good will that everyone, including investors, can be happy about. VR
OUR STRATEGY _ _ _ __ ONCOVISTA INC. _ _ __ Dr. Ale x Weis is heading up OncoVista, a Company dedicated to developing non-toxic and highly efficacious novel cancer treatments designed to improve upon current anti-cancer drugs, many of which produce devastating sideeffects. Alex was one of the co-founders of ILEX Oncology which was acquired by Genzyme Corporation in 2004 for $1.4 billion. OncoVista has in-licensed technologies from the University ofTexas as well as the University of Edmonton in Alberta, Canada . Technology from the
OncoVista has an experienced management team, and has built a superb advisory team of leading clinical oncologists in the United States and Europe who will guide OncoVista 's drug development programs and registration strategies. The Company is at term sheet-stage discussions for in-licensing of several promising Phase I and Phase II clinical trial candidates. The Company is also developing molecular biologybased diagnostic tools for 1) monitoring the performance of drugs in clinical trials, 2) quantitation of prognostic factors and, 3) early detection of initial disease or recurrence.
University of Texas ta rgets a protein found to be expressed in cancer cells more actively than normal cells, and provides an approach to the design of innovative therapies . The Canadian contribution is a database for improving drug design and drug testing. OncoVista also holds the ex clusive r ights to L-Nucleosides, a technology developed by Dr. Weis and Genencor. L-Nucleoside conjugates are active as both anti-tumor and anti-parasitic drugs.
OUR FUTURE _ _ _ __ OncoVista has a letter of intent for an IPO in early 2006 , and is at the Value Rich Conference building relationships with institutional investors and broker-dealer organiz ations in anticipation of the initial public offering.
THIS WEDNESDAY _ _ __ Dr. Weis will be at the ValueRich Conference on Wednesday . Please stop by the OncoVista booth and learn more about OncoVista.
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By Katherine Waldron
The sizzling heat of summer brings with it yearly news of wildfires spreading near mansions in California, while the dead of winter brings tales of house fires started from burning fireplaces. Home damages from such disasters tend to run into the hundreds of thousands of dollars per home, often even more. That is why constructing fire-retardant and strong plywood 90 I VALUERICH MAGAZINE FALL 2005
for roofs and walls is a major part of a multibillion-dollar construction industry- an industry so large that its manufacturing size is measured in the billions of square feet per annum. One technology targeting this market niche was conceived back in the 1980s and developed out of NASA's interest in developing fire-retardant materials for a then nascent space shuttle program. The material that was invented, Pyrotite, was a proprietary, patented formula that used natural and "environmentally friendly"
materials and was touted as an improved method of coating fuselages and aircraft. Shortly thereafter, Barrier Technology was formed to license the technology for use in fire-retardant materials for the housing market. The Company teamed with Weyerhaeuser Corp. for several years to come up with a methodology for putting Pyrotite on wood materials -a process they named Blazeguard 速. The concept involves water locked into crystals of a thin ceramic coating applied to the wood. As the temperature rises www.valuerichonline.com
during a fire, the water is released . The Weyerhaeuser venture was then spun off and in 1996 the company was restructured to become International Barrier Technology Inc. (OTCBB: IBTGF), headquartered in Canada.
Growth Potential The market for f ire-resistant building materials is huge. The commercial modular building segment alone is estimated at close to $4 billion per yea r. By comparison, Barrier is small . "We measure our sales in millions of square footage in an industry that measures in the billions of square feet," says Dr. Michael Huddy, president of Barrier. But while they maintain that they are merely minnows in a big ocean, they see huge growth and market potential for their company. "Our potential to grow far exceeds any downturn, or bubble, in the real estate market;' says Dr. Huddy. "The thing that is going to hold us up isn't going to be the size of the market, which is large in compa rison to what we are doing . We need to get the people and capacity and grow." They currently have plans to expand their sales force beyond their current East Coast presence and into the Midwest as well as Western regions of the U.S. Furthering their growth potential is an expansion of their manufacturing facilities. A recent private placement has enabled them t o build a new factory. Once this is up and running,
IBTGF: OTCBB IBH: TSXV International Barrier Technology, Inc. 1530 56th Street, Suite 204 Delta, BC V4L 2A8 Canada www.intbarrier.com
which Dr. Huddy anticipates will be sometime in October, it will provide them with a fully automated line that will produce triple the output of their current facility. Since they plan on keeping the older facility for customized jobs and research and development, they will have, in essence, quadrupled their potential output capability up to 50 million square feet per year.
Burning Down the House Barrier first started marketing their product to town homes in Florida, Maryland and Virginia, which have some of the highest concentrations of town home developments. Their customers include Centex, Lennar, D.R. Horton, and Beazer, among others . They have recently begun marketing fire-rated roof assemblies to the
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commercial modular buildings market -i.e., mini-warehouses, portable classrooms and temporary construction site buildings. They are partnering with Mule-Hide Products Co., Inc. -a company dedicated to developing products for roof applications. They now plan to expand into roof deck construction in non-modular, residential construction. The target market for these residential roof deck assemblies will be the wildfire-prone areas of the U.S. Southwest and Mountain States. Dr. Huddy explains the concept behind using their technology to protect houses from wildfires : "As a fire moves through the brush, it moves very fast. If you can stop the home from igniting as the fi re moves through, then the chances of the home being saved are increased." Given the size of the available market to Barrier, they anticipate high-revenue growth for the foreseeable future. They expect their revenues to more than double each year for at least the next two years and have already increased their first quarter revenue by more than 157 percent over the same period last year. At the end of their 2004 fiscal year they had sold 5.5 million square feet and anticipate that they will be well over 11 million in fiscal year 2005 . Beyond these markets, the company is looking toward going global and selling their licensing rights to companies overseas. As Dr. Huddy sees it, their growth rate will be determined by how fast and sensibly they can grow their facilities and workforce. "The market is huge and even by doubling our revenues over the next few years, we will still be flying under the radar." V R FALL 2005 VALUERIC H MAGAZINE 191
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Stem cell research is a hot-button topic these days. Using embryonic cells elicits very aggressive stances from people who believe either that it will cure a wide range of diseases or that it is akin to killing a potential life form. A new technology may help squelch this controversy by instead using cells from a person's own blood to create the stem cells needed to combat diseases that include multiple sclerosis, congestive heart failure, diabetes, rheumatoid arthritis and Crohn's disease. The technology is called autologous cellular therapy and was developed by t he U.S. Department of Energy 's Argonne National Laboratory. PharmaF rontiers Corp. (OTCBB:PFTR), based outside 92 1VALUERIC H MAGA ZI NE FALL 2005
Houston, sees this methodology as a unique breakthrough for stem cell research and has obtained the exclusive, worldwide license to this technology from the University of Chicago through its prime contractor relationship with Argonne.
A Kinder, Gentler Stem Cell Process The uniqu eness of the technology is centered around the concept of using an individual 's blood to obtain stem cell s. A patient can donate blood and the blood is taken to a laborato ry where it is processed to obtain stem cells, or mononuclear cells. From this blood bag enough stem cells (between 10 million and 100 million) can be obtained for
When TovaxinTM(modified, non-replicating T-cells) are injected subcutaneously back into the MS patient, they elicit an immune response against the other harmful T cells that are degrading the myelin. This greatly reduces the number of harmful T cells and it is expected that this vaccine may stop and reverse multiple sclerosis progression. just about any therapeutic application, according to David McWill iams, CEO of PharmaFrontiers. The resulting stem cells can be expanded and differentiated into other cell types when cultu red in the presence of the appropriate growth factors- including nerve cells, liver cells, blood ve ssel cells and skin cells . "Donating your own blood;' says McWilliams, "i s a far less painful www.valuerichonline .com
procedure and much less expensive than other current procedures, such as those involving bone marrow. Further, because embryonic stem cells are a mi xed cell line, i.e., not from the person's own blood, rejection and/ or inappropriate growth, such as a tumor, may occur:' Formal FDA approval is still a ways away as the stem cell extraction platform readies for preclinical trials. But PharmaFrontiers believes that this platform will prove itself far less costly and less traumatic for most applications than what is out there today.
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PHARMA FRONTIERS PFTR:OTCBB PharmaFrontiers Corporation 2408 Timberloch PI, Suite B7 The Woodlands, TX 77380 www.pharmafrontiers.net
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Suited to aT
Another platform being pursued by PharmaFrontiers is aT-cell vaccination technology- Tova xin™. Using the T-cell concept, very specific disease-causing cells are extracted from a patient and altered so that, when injected back into that patient, they can effectively stop the disease's progress, much like a vaccine. Compared to other therapies, says McWilliams, Tova xin™ is very promising . "We have been employing this in multiple sclerosis patients and getting outstanding results . ... Under current therapies, you must suffer frequent injections, and the symptoms are that you feel as if you have the flu . There is also only a 30 percent reduction in a relapse for multiple sclerosis patients. In our trials the therapy is very safe and the reduction in relapses for these patients is between 80 and 90 percent:' Rights to Tova xin™ originally were obtained under an exclusive, worldwide
license from the Baylor College of Medicine in Houston . This platform is in Phase 1/ 11 of clinical trials, using a 20patient database, and they hope to start a major Phase II trial by the end of the year. Pharma Pioneers
While both platforms are still a ways from FDA approval, McWilliams believes that PharmaFrontiers is in a very competitive position once they finally get the approvals. And the market seems to bear this out. Multiple sclerosis is a $4 billion worldwide market today and growing. There are approximately 400,000 people with MS in the U.S. and more than 1 million worldwide- and that is a market that McWilliams estimates is only treating half the patients. Meanwhile, rheumatoid arthritis claims about 1 million sufferers within the U.S., 3 to 4 million worldwide; late-stage heart failure patients within
The target cell for PharmaFrontiers' stem cell therapy is the monocyte. www.vrexpo .net
the U.S. total about 1.5 million; and there are more than 1 million people in the U.S. with type 1 diabetes. But until the FDA approvals, PharmaFrontier will have little revenue. In fact, it had no revenues for the 12 months ending December 2004 and a net loss of $4.6 million. It currently has a market capitalization of approximately $30 million . For start-up biotechnology companies, small revenue streams are not unusual, points out McWilliams. And until the Company can take its platforms to market, it is pursuing partnerships as well as government funding, in addition to equity investments. Overall, he has high hopes for his company. "We have not ju st the quality of the technology but we have a very experienced management team," he says, adding, "Now is a good time for people to get involved -at the early stage." R
Monocytes are separated from other blood cells prior to differentiation. FALL 2005 VAlU ERI CH MAGAZINE 193
Chances are that you don't pay too much attention to w ho makes things such as the arm on your airline seat that enables you to watch in-flight TV, or the everyday medical equipment used during your physical, or the auto parts used during a NASCAR race. But if you are a company such as Gateway International Holdings Inc., it is these components, and the tools used to make t hem, that are your business. Gateway International Holdings Inc., based in Anaheim, Calif., has spent the past few years getting a foothold in providing tools and components for the aerospace and d efense industries and also to the medical and automobile industries. The company got its start through a reverse merger in 2002, when it acquired E.M. Tool Co. Today it has eight subsidiaries and an estimated market capital ization of close t o $68 million (based on a share price of approximately $1 .70). Company founder and CEO Larry Consalvi explains, "We
for Growth in a Little-KnoV~n Industry By Katherine Waldron
have companies that sell the machines, companies that manufacture the tools, and companies that provide the tools for all manufacturing companies. We sell tools directly to the government. But our business is commercial, military and medical -a broad range of manufacturing." He adds that they intend to grow aggressively within the next few years, going from an estimated $28 million in revenues this year to $100 million in three years. "Much of this growth;' he says, "will be through acqu isitions . ... We are looking
for new acquisitions all the time:' Gateway 's Southern California presence has to do with the sizable number of potential acquisition targets in the region. According to Tony Amish, the company's outside financial consultant and business adviser, "There are thousands of precision tool and machine manufacturers in this area:' While many of these companies are small, ranging in yearly revenues from $300,000 to just under $1 million, they provide a ready supply to Gateway as it seeks to expand over the next several years.
The Right Tools While the tools and precision manufacturing business is not big on cachet, it is nevertheless a surprisingly large market. Sizing up this market can be complicated since it crosses so many industry sectors, but it appears to have very high growth potential. For example, the homeland security and defense industry will rely heavily on many of the components that companies such as Gateway are producing . Those markets are expected to reach $160 billion in less than 10 years. Defense spending has risen to an all-time high . Also, the general international movement toward new fuel -efficient aircraft is adding growth in the aerospace market. While there are a few sizable companies, most tool and precision parts companies remain small and www.valuerichonline.com
clustered within states such as California and Ohio. Virtually all of these small companies are owned privately. "Most of these companies have no exit strategy;' explains Amish . Unless the principal owners are able to hand their businesses down to their children, they will be looking to sell eventually. Gateway's intent ion is to purchase these companies and grow through both acquisition as well as internally. They are not interested in making wholesale changes to these acquisitions either: "We want the management that comes with the company. We want well-run businesses:' The Subsidiaries
Gateway currently holds eight subsidiaries. Every company director runs a subsidiary. Consalvi heads up Elite Machine Tool Company, a dealer of pre-owned machine tools. Another subsidiary, Eran Engineering, manufactures and assembles components for commercial and military aircraft. It specializes in providing in-flight entertainment systems for commercial aircraft. ESK Inc., an assembly parts plant, passes its products through Eran, which handles the direct sales. Another subsid iary, Accurate Technology, manufactures precision parts for Boeing, Toyota Racing Development (TRD) and others. The company's revenues, says Consalvi, have grown substantially. "We have a backlog in excess of $5 million and growing with projected annual sales of $5 million:' Spacecraft Machine Products, which operates in the aerospace and defense industries, was acquired early this year. It provides defense-related products to companies such as Raytheon, Northrop Grumman and Boeing . Revenues of this subsidiary are just $2 million, but Consalvi says that, "by adding the manufacturing capacity of Accurate Technology, this new acquisition will enable us to enhance our growth in the space-machine products:' Right now Gateway's subsidiaries remain fairly distinct from each other, www. vrexpo .net
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[GJ 速 GATEWAY INTERNATIONAL HoLDING~ INc.
Gateway International Holdings Inc. 451 Atlas Street Brea, CA 92821 www.cryoport.com
but that may change according to Amish, who explains that one of the benefits of their growth through acquisition would be centralizing functions such as sales, marketing and financial services to realizing cost savings. "If we are larger, we spread costs over many more profitable companies, so the parent company
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To bring its filings up to date, Gateway still must file two more reports with the SEC, which they expected to do by the end of August. After that, they hope to return to the OTC Bulletin Board. Once the SEC issues are behind them, Consalvi sees nothing but upside. Despite the market saturation
Gateway International has a foothold in providing tools and components for the aerospace and defense industries, as well as the medical and automobile industries.
costs go down. We want to expand from within each company, but there is a benefit to size. For example, if we are big enough, we can have a purchasing department that buys for all units." The SEC Glitch
Meanwhile, the company has been working to catch up with its filings at the SEC. It was taken off of the OTC Bulletin Board when it fell behind on its filings and currently trades on the Pink Sheets. This was the result of its inability to obtain complete financial information regarding one of its original subsidiaries, Bechler Cams. While the litigation surrounding that issue was settled at the end of 2003 and the transaction was rescinded, Gateway fell behind in its filings.
of so many tool and equipment manufacturers, he expects to grow fast and at a high pace. "There will be quite a few announcements coming out about where we are going," he says. Gateway remains predominantly focused on the Southern California market, where all their companies are located. In time, they expect to slowly become more nationally and globally focused . Says Consalvi, "Th e team of people all run their own subsidiaries. So we don't want to be spread too far afield. We don't want to take on more than we can manage." But Gateway expects plenty of upside growth driven by the marketplace. "Keep an eye on Gateway," says Consalvi, "We ~re in an extremely strong market with continual growth :' V R FALL 2005 VALUE RI CH MAGAZINE 195
By Katherine Waldron
Every city has abandoned buildings and sites that have been vacant for years - passed over by developers in favor of cleaner and more pristine land. But with good real estate getting harder to find and many of these vacant sites in prime locations, companies and municipalities are taking another look. Cities are losing annual property taxes in the millions because such abandoned properties sit stagnate on the municipal books. GOER is assisting many municipalities with such conditions by addressing these properties and the cities' losses, while getting properties back on the tax rolls and bringing new end users to support such communities with new employment and developments through environmental encumbered properties. And that is where Global Development and Environmental Resources (GOER) comes into play. GOER, now gone public with their cutting-edge strategies and technologies, seems to offer a slam-dunk for any company or local government needing help with a site's cleanup so that it can be redeveloped and thereby revitalize the community. While there are many cleanup companies out there today, GOER sees itself as unique and without competition . 96 1VALUE RICH MAGAZINE FALL 2005
Business of Industrial Cleanup Rakes In Revenues As Phil Pritchard, CEO and principal partner for GOER, is happy to explain, his is the only company providing a turnkey solution -from buying the site to cleaning it up to eventually selling it. Throughout every step in the process, says Pritchard, the company makes revenues. When acquiring a site, it either obtains the deed outright or buys the site at a considerable discount; when it cleans up the site, allocated government funds pay for the cleanup; and after the site gets a clean bill of health, GOER sells the site to one of the many businesses lining up to buy them. But aside from its turnkey approach, GOER also has technologically advanced methods for cleaning up sites. GOER asserts that it can clean up properties in a substantially shorter time frame than other companies while still staying within the regulations. For instance, GOER's time frame for a typical gas station cleanup, according to Pritchard, is generally between 90 and 120 days, compared with the more typical 24 months.
Benefiting From Red Tape One key to the GOER business model is the complexity of government regulations as well as the financing issues surrounding businesses that need to clean up their sites. For the most part, says Pritchard, smaller companies are overwhelmed
by what is required to clean up sites, and they are unable to get bank loans until the sites are cleaned up. When they go to a bank, the lender needs a "phase one assessment:' If the company comes up with any type of liability in this assessment phase, including environmental issues, then its chance of financing is gone. "No lender will take on that responsibility without a comprehensive cleanup," says Pritchard . Often the result, he says, is that the companies owning or controlling the properties have no idea how to handle their liabilities. "To try to deal with the U.S. EPA or state agencies is very difficult, since the cleanup process is so complex. As a result, a lot of companies are simply running from their liabilities:' Once they skip town, the municipalities take over the sites as "brownfields;' where they remain undeveloped because of contamination and fear of liability. Enter GOER. It can acquire the property, sometimes for the cost of a deed transfer, clean up the site using government funding and then sell it to an interested business entity. And there are plenty of organizations out there looking for industrial sites, according to Pritchard. Citing two recent examples, Pritchard says: "We took on a five-acre property off an interstate in Illinois. The company wasn't getting refinancing. The bank denied it. So the company www. valuerichonline.com
quit paying . The bank foreclosed, then took on the liability, not knowing what it had . Then they just deeded it over to us. They didn't want this type of liability sitting on their books." In another case, he says, "We had a 39-gas-station deal in the Midwest worth about $150 million, but because the sites were contaminated we took over the business for $50 million. Each station had a huge cleanup. But we applied to the state for funds and were fully compensated for our cleanup by the government."
. . CONNECT
Global Development and Environmental Resources 205 E. Warm Spring Rd, Suite 1OS Las Vegas, NV 89123 www.gderinc.com
Dante Panella, Public Relations 727-204-4627 firstname.lastname@example.org
GOER has four key patents dealing with its cleanup p rocess : one for road stabilization, man-made lakes -ponds and erosion (infrastructure arm), one for soil and groundwater cleanup, one for dust control, one for hazardous waste chemicals and
savings of between 50 percent and 60 percent over the more traditional asphalt method, GOER already has approval from the Department of Transportation in many states and $10 million in work despite having introduced the product only recently.
PCB (polychlorinated biphenyls) contamination . PCBs are a major contaminate from transformers or from manufacturers using the substance t o clean their tools. "Up until now, there hasn't been a very good method to treat the groundwater," explains Pritchard . "We are in the process of introducing a product that will clean this. That patent is being used presently now on several pilot studies ." No Competition
Construction of a man-made retention pond utilizing enzyme technology.
one for commerc ial degreasers. "When we acquire a property, we have special patented technology that we use. Typically, a cleanup company lifts up the soil and hauls it off to a landfill. We never haul away the dirt. We never interrupt the business, which for a gas station is particularly important," says Pritchard. GOER's road cleanup is particularly interesting, as it includes a technology that allows the company to help build rural roads using biological enzymes, bypassing the need to use concrete and asphalt. "The mi xture we have, we mi x into the natural soils and the soils bind with the product and turns into concrete," says Pritchard . At a cost www. vrexpo .net
This technology may have even more uses in the future, as GOER has recently been approached by a golf course to use the technology to build its lakes. "Typically a liner is used, but with this technology we open up the ground, spray the enzymes around and we have our base." The golf course operator has also asked the company to use the technology to make its golf paths. Even more importantly it should be acknowledged that many courses have effluent (tainted) water. Using GOER's enzymes also cleans the tainted water coming into the ponds. GOER has a fifth patent on the way that will allow it to work on
GOER, which is three years old and has 15 employees, currently ha s $64 million in contracts. This does not include another 38 percent growth anticipated by the end of the year through letters of intent it has on hand. It is anticipating continued strong revenue growth for the foreseeable future. About half of GOER's revenues are from state governments and about half from businesses. In the future, says Pritchard, the company will receive more revenues directly from businesses as fewer sites are abandoned and left on the doorstep of local governments. GOER views international business as an area of strong potential growth. It is only at 10 percent right now, says Pritchard, because the company has just begun focusing on this market. As an example, he points to Shanghai, where GOER currently has a letter of intent to participate in rural development. "I have never seen one city grow so fast," he says. In the meantime, GOER is fresh from its IPO, and Pritchard sees enormous upside in his business. "There is nobody else out there like us. We have no competition:' R FALL 2005 VA~UERICH MAGAZINE 197
The Axial Vector Engine By Katherine Waldron
The old adage that what goes up must come down is usually correct- until you start talking about oil prices. Depending on the day and the pundit, opinions indicate that we might see prices as high as $80 per barrel by the end of the year. And with gasoline prices already passing the $3 per gallon mark in some cities, people are already changing their driving habits. But help, or at least relief, may be on the way. One company's technology is claiming a 40 percent reduction in energy usage along with a substantially cleaner-burning engine. The technology converts combustion energy into rotational energy without the use of a traditional crankshaft. The perfect linear motion of the pistons eliminates the need for piston rings and does away with considerable friction, vibration and noise. Axial Vector Engine Corporation bo ught the proprietary intellectual property for this internal combustion engine two years ago, from the estate of the inventor. Surprisingly, this technology has been around for a long time, and was even in experimental aircraft as far back as the late 1940s, but it was never successfully brought to market. Axial teamed up with Adaptive Propulsion Systems, a division of Tactronics . This partnership has developed a wide array of new designs and improvements, completely re engineering the engine. "We applied new material sciences," says Dr. Ray Brouzes, president, CEO and director of Axial Vector. " We revolutionized, simplified and reduced the weight. And we gave it a higher torque, so that for many applications, it doesn't need a transmission anymore." As a re sult, the engine has much greater fuel economy and atmospheric emis sions are minimized. Brouzes is very excited about 98 1VALUERICH MAGAZI NE FALL 2005
• 40 percent more fuel efficient • 200 horsepower, yet can be carried by a an average-sized man • Burns multiple fuels with cleaner emissions • Computerized, self-monitoring and adiusting This new engine will solve a host of issues for the military, industry, utilities and consumers alike.
the potential market for this "reciprocating engine:' The worldwide market for engines is well over$ 100 billion per year and there are more than 1 billion engines in use. Axial Vector Engine Corporation is publicly trading on the OTC Bulletin Board (AXVC) and has a market capitalization of more than $1 23 million, with shares trading above $4.
First Stop: The Military The first prototype Axial Vector engine is aimed at military and industrial applications. Adaptive Propulsion , Axial 's first Licensee, has been in discussions with the U.S. m i Iita ry for use of the
engine in special military vehicles and applications. Thorough performance and reliability testing of the engine at military facilities are planned in December. After that, says Brouzes, "we expect some very substantial contracts:' The product seems well suited for the military for several reasons : Axial claims the engine has much greater fuel efficiency, much lower weight, fewer parts, smaller size and a unmatched weight-to-horsepower and -torque ratio and, unlike current engines, can use a variety of fuels. A typical 200-horsepower engine and transmission weigh close to 1,000 pounds, but the Axial Vector engine www. valuerichonline .com
weighs less than 100 pounds. An average-size man can lift it. "Our engine doesn't have radiators, water pumps, oil pans, hoses, belts, timing chains, spark plugs, a crank shaft, piston rings, or cast-iron parts;' says Brouzes. "A lot of heavy components have been removed. Also, there is no starter motor- one of the most-often-replaced parts. "The engine is 96 percent mechanically efficient. All the points where we have removed friction, such as with the piston rings, increase energy efficiency and decrease noise. As a result, the engine idles at only 5 RPMs versus the 500 RPMs typical of a conventional engine." The fact that the engine has multi-fuel capabilities is important, since the U.S. Military must phase out all gasoline engines within the next few years for safety reasons. The military has been considering various systems and it favors a multifuel engine that can use diesel, as well as JPS and JP8 (less-flammable aviation fuels). The Axial engine can burn any of these, and even switch fuels on the run by monitoring its exhaust emissions to provide feedback to the engine's digital signal processor, dynamically adjusting to maintain optimal performance at all times. Next Up: High-End Generators The second market the company will initially pursue is the high-end generator market- providing backup generator systems for businesses, hospitals and perhaps even homes, as well as marketing them for use in smaller power networks. "Increasingly," says Brouzes, "people want to have small, local distribution of power networks because of the unreliability of larger and aging power grids [i.e., brownouts and blackouts). We believe that our engine, because of its design and fuel efficiency, will be the lowest-cost power generator using an internal combustion engine:' Additionally, because the units are small, they are mobile, so they are attractive for emergencies such as floods and hurricanes. "We have an engine we are designing for operational conditions such as.these. We can design them to run at least 30,000 to 40,000 hours." Another attractive aspect of an Axial www. vrexpo .net
. . CONNECT
AXVC:OTCBB Axial Vector Engine Corporation 1607 NE 41st Avenue Portland, OR 97232 www.axialvectorengine.com
engine generator is its automation. "It is both a generator and a computer," explains Brouzes. "The system monitors the incoming power that you are consuming. If it senses that your load is increasing, or that you are getting into a new power rate, then it will automatically turn itself on and start feeding certain components (i.e., a pool or air conditioning system). Depending on usage demands and the power rate, it could ultimately, automatically disconnect you completely from the grid so that you are operating on your own, saving money:' A small central unit, 5 megawatts of power, distributed to 20 to 50 homes, would allow a neighborhood to be more autonomous in its power distribution, not dependent on large power grids, susceptible to long blackouts after storms. Axial already has seen interest from five or six utility companies seeking a license to install this technology. The company also has received requests from Latin America and Asia, mainly in electrification programs for smaller villages that are not part of the power grid system. The generator's portability and 40 percent cost efficiencies make it very interesting. Axial will be able to provide remote diagnostic capabilities for its systems using satellite communication technology. Finally: The Auto Industry As for when a technology like this will enter into the consumer automobile market- that is still a ways off. The auto manufacturers are inherently resistant
CONNECT Sam Higgins, Secretary!Treasurer 503-595-5088 email@example.com
to changing current technology. Brouzes believes, however: "There will be very strong motivation for the auto industry to look at our engines. The government is being tweaked again about fuel efficiency. The best way to enter this market is to prove the engine's capabilities beyond a shadow of a doubt, such as by selling to the military and proving its mettle to the consumer with its generator applications. "We have 40 percent better mileage and a 50-80 percent reduction in atmospheric pollutants over today's cars. Further, our engine self-adjusts, by analyzing emissions, exhaust gases, ozone levels and even atmospheric levels. These computer capabilities enable the engine to readjust such things as timing, valve openings or compression to always maintain optimal performance." What's Ahead? For now, Axial is focused on the military testing coming up in December. However, the company knows there is good potential demand for its product in many other markets and it plans is to pursue them. As Brouzes sees it, "the big challenge isn't competition .. . . We know of no one who has the fuel efficiency, horsepower and torque that we have. "But it is not just having the new product, it is securing proper distribution channels through licenses with market leaders and access to markets, capitalization, etc." He adds, "It's nice when you are in a business that is environmentally sound, burns cleaner and will make us less dependent on oil- and keep 路 more money in our pockets:' R FALL 2005 VA~UERICH MAGAZINE J99
HE ••A LU ERICH MARKET pLA( E V~
Meet the management of these public companies face to face at the ValueRich Small-cap Financial Expo, Javits Center, New York Sept. 14-15, 2005.
AMERICAN CAPITAL PARTNERS LIMITED Aerogrow Symbol: Private 900 28th Street, Suite 201 Boulder, CO 80303 www.aerogrow.com Contact John Thompson , Director of Marketing 303-444-7755 firstname.lastname@example.org
American Capital Partners Symbol: ARPJ PINK 319 Clematis Street, Suite 211 West Palm Beach , FL 33401 Contact M.J. Wilbur, Associate 561-366-9211 email@example.com
Bl t~:~ PHAN ~ TECHNOLOGIES , INC. Delivering v isionary medical technology
Biophan Technologies, Inc. Symbol: BIPH OTCBB 150 Lucias Gordan Drive West Henrietta, NY 14586 www.biophan.com Contact Michael Weiner
Bontan Corp. ontortlillnmont
AGU Entertainment Symbol: AGUE OTCBB 3200 W. Oakland Pk Blvd. Lauderdale Lakes, FL 33311 www.aguent.com
Axial Vector Engine Corp. Symbol: AXVC OTCBB 1607 NE 41 Avenue Portland, OR 97232 www.axialvectorengine.com
Bontan Corp. Symbol: BNTNF OTCBB 47 Avenue Rd, Suite 200 Toronto, On M5R 2G3 www.bontancorporation.com
Contact Judy Crowhurst, Business Development 954-714-8100
Contact Katie Hastings, Assistant to the President 503-595-5088 Katie@axialvectorengine.com
Contact Kam Shah, CEO 416-860-0211 kam @bontancorpation .com
BPZ Energy, Inc.
Developing Energy - Providing Opportunities
America Health Choice Symbol: AMHI OTCBB 2221 Justin Rd, Suite 119-154 Flower Mound, TX 75028 w w w.americanhealthchoice.com
Baltia Air Lines Symbol: BLTA OTCBB 63 -25 Saunders Street, Suite 71 Rego Park, NY 11374 www.baltia.com
BPZ Energy Symbol: BPZI OTCBB 580 Westlake Park blvd, Suite 525 Houston, TX 77077 www.bpzenergy.com
Contact John C. Stuecheli, VP & CFO 972 -538-0122 ext. 206 j stu echeli @msn .com
Contact Igor Dmitrowsky 718-275-5205 baltia @juno.com
Contact Randall Keys, CFO 281-556-6200 firstname.lastname@example.org
100 I VALUERICH MAGAZINE FALL 2005
www. val uerichonli ne .co m
AMERICAN STOCK EXCHANGE速 Equities Options ETFs SPECIALIST UNITS: Weiskopf, Silver & Co.
AIM securities Co.
Michael S. Marchisi
Kellog Group, LLC
J.Streicher & Co.
Jonathan Q. Frey
La Branche & Co.
HBH Specialists, LLC
AGS Specialist, LLC
Cohen Specialists, LLC
Brendan E. Cryan and Company, LLC Brendan E. Cryan 212-306-1668
www .amex .c o m
HE ••A LU ERICH MARKET pLA( E V~
Meet the management of these public companies face to face
at the ValueRich Small-cap Financial Expo, Javits Center, New York Sept. 14-15, 2005 .
...~..., China Digital Media Corporation ii~'fl~l~lll DIG tM£01 A.
BSD MEDICAL BSD Medical Symbol: BSM AMEX 21 88 West 2200 South Salt Lake City, UT 841 19 www.bsdmc.com Contact Hyrum Mea d, President 801-972-5555 ti ff a email@example.com
Charys Holding Company, Inc.
China Digital Media Corp. Symbol: CDGT OTCBB 2505 Symbol: 06, 25/F, Stelux House 698 Prince Road East Kowloon, Hong Kong www.chinadigimedia .com Contact Y.K. MA, Deputy Director of Corporate Affairs 852-820-82774 yk.ma @arcotect.com
COACH INDUSTRIES GROUP, INC.
Cryoport Inc. Symbol: CYRX PINK 451 Atlas Street Brea, CA 92821 www.cryoport.com Contact Dante Panella, Public Relations 727-204-4627 d pa nella @fi rstca pita Ii nvestors.com
Getting You Going On Your New PC
Charys Holding Company, Inc. Symbol: CHYS OTCBB 1 1 17 Perimeter Center West, Suite N4 15 Atlanta, GA 30338 www.charys.com
Coach Industries Group Symbol: CIGI OTCBB 12330 SW 53rd Street, Suite 703 Cooper City, FL 33330 www.cigi.cc
Detto Technologies Symbol: OTTO OTCBB 14320 NE 21st Street, Suite 11 Bellevue, WA 98007 www.detto.com
Contact Ralph Delucia, Director of Investor Relations 678-443-2300 rdelucia @charys .com
Contact Lillian Rosado, Office Manager 954-602-1400 ext. 229 firstname.lastname@example.org
Contact Cindy Neweii-Timmons 425-201-6530 email@example.com
Chemokine Therapeutics Symbol: CHKT/ CTI OTCBB/TO 6190 Agronomy Road, Suite 405 Vancouver, BC V6T 1Z3 Canada www.chemokine.net
Covansys Corp. Symbol: CVNS NASDAQ 32605 WestTwelve Mile Road Farmington Hills, Ml 48334 www.covansys.com
0081 Medical International Symbol: DBMI OTCBB 1200 MacArthur Blvd. Mahwah, NJ 07430 www.dobimedical.com
Contact lan Harper, Director of Corporate Development 604-822-0305 firstname.lastname@example.org
Contact Michelle Jones, Vice President of Marketing 248-488-2088 rvattiku @covansys.com
Contact Wendy Irvine, Director of Marketing Communications 201-760-6464 ext. 219 email@example.com
102 1 VALUERICH MAGAZINE FALL 2005
to issuers, broker-dealers, officers, directors, accountants, attorneys, licensed registered representatives, and other securities professionals in matters involving: • • • • •
• • • • • • • • • • • • •
Various going public transactions; Restricted stock matters; Mergers and acquisitions; Initial Public Offerings; The United States Attorneys Office, Securities and Exchange Commission, National Association of Securities Dealers, Commodity Futures Trading Commission, Federal Trade Commission, Federal Bureau of Investigation, Grand Juries, and Stock Exchanges; General securities, corporate, contractual, business and transactional matters; Drafting of materials for public and private offerings and compliance; Blue Sky filings and compliance; Drafting of periodic filings and other SEC disclosure under the Securities Exchange Act of 1934; Drafting SEC registration statements and filings; Sarbanes-Oxley compliance; Internal investigations; Investor relations matters, including Securities Act of 1933 Section 17(b) disclosure; Market maker, Rule 15c-211, and Form 211 documents; Purchase and sale of broker-dealers; White Collar criminal defense; Federal criminal trials and related appeals; Defense of federal district court civil injunctive actions, SEC and CFTC administrative court actions, and NASD matters;
• Temporary Restraining Orders;
• • • •
Civil trials and appeals; Trading suspensions and Stop Order proceedings; State regulatory and enforcement matters; and Self Regulatory Organization investigations and examinations.
For more information about Hamilton, Lehrer & Dargan, P.A. or the information in this Profile, please contact Brenda Lee Hamilton, Esquire at Hamilton, Lehrer & Dargan, P.A. at 2 East Camino Real, Suite 202, Boca Raton, Florida 33432, Phone: (561) 416-8956, Fax: (561) 416-2855; Email: firstname.lastname@example.org
A LU ERICH MARKET pLA( E V E •• ~
Meet the management of these public companies face to face
at the ValueRich Small-cap Financial Expo, Javits Center, New York Sept. 14-15, 2005 .
Enterra Energy, LLC
Glnb.ll Developmeflt & Environmcnl•tl RI!SOUI"Ct!S, Inc.
Edgar Online Symbol: EDGR NASDAQ 50 Washington Street Norwalk, CT 06854 www.e dgar-online.com
Enterra Energy, LLC Symbol: Private One Memorial Place 7633 East 63rd Place Suite 300 Tulsa, OK 74133
Global Development Corp. Symbol: GDVE PINK 375 East Warm Springs Road, Suite 14 Las Vegas, NV 89119 www.gderi nc.com
Contact Jennifer Blackwell , Marketing Manager 203-852-5627 jblackwell @edgar-online.com
Contact George Scheirmann, Project Specialist 866-473-5564
Contact Dante Panella, Public Relations 727-204-4627 d pane II a@fi rstca pita Ii nvestors.com
ll NEAR SOLUTIONS SMART PEOPLE. SMART TECHNOLOGY.
elinear Solutions Symbol: ELU AMEX 2901 West Sam Houston Pa rkway N, Suite E-300 Houston, TX 77043 www.elinear.com Contact Brian Stanton 713-896-0500 bstanton @e linear.com
ENECO, Inc. ENECO, Inc. Symbol: Private Un iversity of Utah Research Park 391-B Chipeta Way Salt Lake City, UT 84108 www.eneco.com Contact Lew Brown, CEO 801-583-2000 lbrown @eneco-usa.com
104 1VALUERICH MAGAZINE FALL 2005
Fellows Energy, LTD GreenShift Corporation Fellows Energy, LTD Symbol: FLWE OTCBB 8716 Arapahoe Road Boulder, CO 80303 www.fellowsenergy.com
Greenshift Corp. Symbol: GSHF OTCBB 111 Howard Blvd, Suite 108 Mount Arlington, NJ 07856 www.greenshift.com
Contact Joseph Young, Controller 303-327-1525 josephyoung @fellowsenergy.com
Contact Kevin Kreisler, Chairman & Chief Executive Officer 973-418-7145 kkrei sIer@g reen sh ift.co m
[GJ @) GmwAY lNrERNATioNAL HoLDINGS INc.
Gateway International Holding Symbol: GWYI PINK 3840 East Eagle Drive Anaheim, CA 92807 www.gwyi.com
Guardian technologies Symbol: GDTI OTCBB 516 Herndon Parkway, Suite A Herndon, VA 20170 www.guardiantechintl.com
Contact Dante Panella, Public Relations 727-204-4627 d pa nella @fi rstca pita Ii nvestors.co m
Contact Robert Dishaw, President 703-464-5495 ext. 104 Robert .email@example.com
www. valuerichonline .com
KEATING INVESTMENTS, LLC
Reverse Merger Specialists Providing a Turnkey Solution for Private Companies Seeking a Rational Alternative to an IPO
Keating Securities, LLC- Member NASD, SIPC Market-Maker ID: KTNG For more information, please call: Investment Banking, Domestic: Margie Blackwell (720) 889-0133 Investment Banking, International: Luca Toscani (415) 433-1800 Syndicate: Jeff Andrews (720) 889-0134
A LU ERICH MARKET pLA( E E •• V~
Meet the management of these public companies face to face
at the ValueRich Small-cap Financial Expo, Javits Center, New York Sept. 14-15, 2005.
····.lmmersiorr Health Discovery Corporation
Law Enforcement Associates
Leading The World In Discovery
Health Discovery Corp. Symbol: HDVY OTCBB 6709 Waters Avenue Savannah, GA 31406 www.healthfiscoverycorp.com
Immersion Corp. Symbol: IMMR NASDAQ 801 Fox Lane San Jose, CA 95113 www.immersion.com
Law Enforcement Associates Symbol: AID AMEX 100 Hunter Place Youngsville, NC 27596 www.leacorp.com
Contact Stephen Barnhill, M.D., Chairman & CEO 912-713-4007 barnhillmd @healthdiscoverycorp.com
Contact Stephen Ambler, CFO/VP Finance 408-350-8767 firstname.lastname@example.org
Contact Paul Feldman, President 919-554-4700 email@example.com
HearUSA Symbol: EAR AMEX 1250 Northpoint Parkway West Palm Beach, FL 33407 www.hearusa.com
International Barrier Technology Inc. Symbol: IBTGF/ IBH OTCBB/TSXV 1530 56th Street, Suite 204 Tsawwassen, BC V4L 2A8 Canada
Manhattan Pharmaceuticals, Inc.
Manhattan Pharmaceuticals Symbol: MHTT OTCBB 810 Seventh Avenue, 4th Floor New York, NY 10019 www.manhattanpharma.com
Contact Paul Brown M.D., President 56 1-478-8770 ext . 100 pb firstname.lastname@example.org
Contact Peter Kietas, IR Manager 866-948-0848 email@example.com
Contact Amanda Watkins, Associate Account Executive 212-825-3210 awatkins @investorrelationsgroup.com
lceweb, Inc. Symbol: IWEB OTCBB 205 Van Buren Street, Suite 420 Herndon, VA 20170 www.iceweb.com
IPIX Corp. Symbol: IPIX NASDAQ 12120 Sunset Hills Road, Suite 410 Reston, VA 20190 www.ipix.com
Natural Nano Symbol: Private 150 Lucius Gordon Drive, Suite 1 15 West Henrietta, NY 14586 www.naturalnano.com
Contact Myle Phuong, Office Manager 703-964-8000 ext. 100 firstname.lastname@example.org
Contact Stephanie Holtzman 703-674-4151 stephanie.holtzman @ipix.com
Contact Michael Reidlinger, President 585-214-8005 lisa @naturalnano.com
106 1VALUERICH MAGAZINE FALL 2005
www. valuerichonline .com
THE PIPEs CONFERENCE2005
FOR PRIVATE INVESTMENTS
The Waldorf-Astoria, New York City October 26-27, 2005 A mix of education and networking provides an ideal setting to meet investors, investment bankers, attorneys and others active in the small cap equity market. Two full days of roundtable discussions along with company presentations provide an unparalleled forum for meeting everyone who moves the market.
~~~ lhis ~tl;. (COMPANY\ PRESENTATIONS
This year's conference at The Waldorf-Astoria features presentations from over 100 publicly traded companies. This will be a major forum for deal-making ... don't miss it.
The State of the Market Legal & Regulatory Panel #1 : Enforcement, Investigations, & Fund Registration
Finding & Evaluating Deals
Reverse Mergers+ PIPEs : Exploring IPO Alternatives
Legal & Regulatory Panel #2 : Negotiating Private Placements & Trading PIPEs
Investment Banking North of the Border: Investing in Canadian Issuers
Investing in Micro Caps Specified Purpose Acquisition Companies: What You Should Know About "SPACs"
Managing Investor Relations & Public Relations Investing in PIPE Funds: "The Emerging Fund Managers Panel" Independent & Issuer-Sponsored Research Legal Workshop: What Issuers Need to Know (2 CLE Credits) Legal Workshop: What Investors Need to Know (2 CLE Credits)
EXPERT PRESENTATIONS ·-------------~====~~ • • • •
Section 16 & Short-Swing Trading Planning for Hedge Fund Registration International "Private Placing" Activity Academic Research Findings Small Stock IPOs Valu ing Private Equity Portfolios
Impact of Market Regs and SOX on Small Companies
Valuing Intellectual Property & Using IP as Collateral in Deals
Using Technology to Structure Equity-linked Placements Investing in Chinese Companies
Call (516) 876-8006 to register or visit www.thepipesconference.com for more information or to register online.
A L U ERICH MARKET pLA( E E •• ...
Meet the management of these public companies face to face at the ValueR1ch Smal l-cap F1nanc1al Expo, Jav1ts Center, New York Sept. 14-15,2005.
ONC:oV isTaTM INNOVATIVE
New Life Scientific Inc. Symbol: NWLF OCTBB 4400 Route 9 South , Suite 1000 Freehold, NJ 07728 www.newl ifesci.com
OncoVista, Inc. Symbol: Private 14785 Omicron Dr, Suite 104 San Antonio, TX 78245 www.oncovista .com
PharmaFrontiers Corp. Symbol: PFTR OTCBB 2408 Timberloch Place, Suite B7 The Woodlands, TX 77380 www.pharmafrontiers.net
Contact Jim Painte r, Investor Relations 32 1-2 06-6682 jamespainter@e m ergingmarketsllc.com
Contact Alexander We is PH . D, President & CEO 21 0-6 77-6000 alex.weis@oncovista .com
Contact George Jarkesy, Jr. 281-272-9331 george@j a rkesy.com
Newtek Business Services, Inc.
Rocketinfo Inc. technologies,
A P ublicly Traded Co mpany Sym bol "ONSC "
Newtek Business Services Symbol: NKBS NASDAQ 462 Seventh Avenue, 14th Floo r New York, NY 10018 www.newtekbusinessservices.com
OnScreen Technologies, Inc. Symbol: ONSC OTCBB 200 9th Avenue North, Suite 210 Safety Harbor, FL 34695 www.onscreentech .com
Rocketinfo Inc. Symbol: RKTI OTCBB 27 Oakmont Dr Rancho Mirage, CA 92270 www.rocketinfo.com
Contact Ba rry Sloane, Chairman / CEO 212-356-9550 bs email@example.com
Contact John Thatch, CEO 727-797-6664 firstname.lastname@example.org
Contact Gary Campbell, CEO 604-684-0 17 4 email@example.com
Onstream >>> >>>>>>>> MEDIA NOVADEL Pharma Symbol: NVD AME X 25 Minneakoning Road, Suite 101 Flemington, NJ 0882 2 www.novadel.com
OnStream Media Symbol: ONSM NASDAQ 1291 SW 29th Avenue Pompano Beach, FL 33069 www.onstreammedia.com
SiriCOMM, Inc. Symbol: SIRC OTCBB 2900 Davis Blvd., Suite 130 Joplin, MO 64804 www.siricomm .com
Contact M ic hael Spicer, Chief Financial Officer 908-782-3431 ext . 2550 mspicer@novadel .com
Contact Randy S. Selman, Chairman, President & Chief Executive Officer 954-917-6655 ra ndysel @onsm .com
Contact Hank Hoffman, President & CEO 417-626-9971 hank.hoffman @siricomm.com
1OB I VALUERICH MAGAZINE FALL 2005
Magnificent mountaintop lots are ideal locations for affluent families or discriminating investors seeking a piece of paradise to develop for sumptuous vacations or lavish retreats. Enjoy shaded sunrises, gentle showers and magical sunsets that illuminate world renowned Waimea Bay and Oahu's exquisite North shore. Located 30 minutes from downtown Honolulu, nearby activities are seasonal. During the winter experience the splendor and beauty of the largest ridable waves in the world. In the summer snorkel, scuba dive or enjoy hiking trails to ancient Hawaiian sites. Oahu's North Shore is more reasonably priced than similar locations in Maui, Kailua-Kana's "Gold Coast" and most of the "Mainland's" metropolitan areas. Prime real estate inventory in Hawaii is limited. Call me if your goal is to buy or seU-Iand, an estate, luxury home or condo in Hawaii.
A LU ERICH MARKETpLACE -~ E ••
Meet the management of these public companies face to face
at the ValueRich Small-cap Financial Expo, Javits Center, New York Sept. 14-15, 2005 .
X SORL Auto Parts, Inc. Symbol: SAUP OTCBB
Transax Symbol: TNSX OTCBB
Worldwide Manufacturing, USA Symbol: WMFG OTCBB
Ruili Industrial Area
5201 Blue Lagoon Drive, 8th Floor
1169 Yumeng Rd Ruian, Zhejiang, China 325200 www.sorl-autoparts.com
Miami, FL 33126 www.transax.com
1425 4th Avenue, Suite 505 Seattle, WA 98101 www.wwmuas.com
Contact David He, Senior Manager, Investor Relations +56 577-6581-7720 firstname.lastname@example.org
Contact Stephen Walters, President & CEO 305-629-3090 swalters @transax.com
Contact Andrea Costa, Vice President 212-495-0200 ext. 14 Acosta@roiny.com
BEVERAGE NETWORK, INC
SpaceDev, Inc. Symbol: SPDV OTCBB
Vertical Health Solution Symbol: VHSL OTCBB
Xstream Beverage Network, Inc. Symbol: XSBV OTCBB
13855 Stowe Drive Poway, CA 92064 www.spacedev.com
855 Dunbar Avenue Oldsmar, FL 34677 www.vetmarket.com
4800A Northwest 15th Avenue Fort Lauderdale, FL 33309 www.xbev.com
A m anda Watkins, Associate Account Executive 2 12-825-3210
Steve Walters, CEO 727-548-8345 ext. 222
Kara Spector, Director of Marketing 954-598-7997 kspector@x bev.com
awatki ns @i nvestorrel ationsg ro u p.com
S Y S C A N I M A G I N G I N C.
Syscan Imaging, Inc. Symbol: SYII OTCBB
Viking Systems, Inc. Symbol: VKSY OTCBB
1772 Technology Drive
7825 Fay Avenue, Suite 200
San Jose, CA 95110 www.syscaninc,com
La Jolla, CA 92037 www.vikingsystems.com
David Clark 561-835-4069 dc email@example.com
Tom Marsh Tmarsh @vikingsystems .com 858-456-6608
110 I VALUERICH MAGAZINE FALL 2005
$1,000,000** 100% financing with payments of only $3,541 *per month
Dream It ... Live It Flagstar Bank will customize a loan program to make your dream come true,
no matter how grand or ambitious. Purchase a new or second home, increase liquidity, maximize tax benefits or exploit equity with a leader in luxury home lending. Interest Only • Purchase or Refinance • Debt Consolidation • Construction • Capitalization
For a confidential consultation please call Steven G. Hinytzke 1-888-760-8383
LENDER Member FDIC
Information is subject to change without notice. This is not an offer for extension of credit or a commitment to lend. Borrower has option to make interest on I payments. All calculations are approximate. All rates, fees and program s are subject to change and/or withdrawals from the market without notice. Qualificc tions are subject to available Collateral, credit income, assets and a first position deed of trust. U.S. properties only. Permanents residents only. Non-permanen residents are subject to investor requirements. A Zero down payment option is also available with certain restrictions. Ask for details. * Interest-on ly payment for the first 10 years, plus 15 years fully-amortized, for a total of 25 years. The above figures are based on a 20% down payment and rate of 4.250 % and 1 .00~ loan discount fee as of 8-25-05. APR is 4.388%. Initial interest-only payments of $3,541 per month for 10 years and adjustable fully-amortized payments c $7,522.78 for 15 years based on rate as of 8-25-05. Actual adjustable fully-a mortized payments will be based on rate when 10- year interest only period expire: **Eligible Pledged Assets Securities include but are not limited to: Stocks, Mutual Funds, Bills, Notes, Bonds, Certificates of Deposit, Money Market funds an • Cash.
300' OF OCEANFRONT AND LAKEFRONT Gorgeous British Colonial estate in excellent condition. Amenities include tennis court, movie theatre, fitness center, huge swimming pool with pavilion and lakefront guest house consisting of two suites.
Call Linda Gary Cell: 561-346-5880 BROKER Linda A. Gary Real Estate, Inc. 420 So. County Road Palm Beach, FL 33480 www.lindaagaryrealestate.com Email: firstname.lastname@example.org Office: 561-655-6881 Fax: 561-881-5231
LINDA A. GARY REAL ESTATE, INC. Licensed Real Estate Broker
Stunning home with 4BR (4 th BR- presently library) , 4 BA, Powder Room, plus staff quarters. Heated pool with pavi lion, high ceilings, beautiful moldings. A very special property!
Newly built and completed 2003-2004. Elevator, beautiful moldings, fun family room, large covered loggia for pool area. Barbeque grill area. Great for entertaining.
Fabu lous home with 4BR's, plus powder room, family room . Extensive moldings, 12' ceiling in living room with working fireplace . Several balconies with stairs leadi ng to the pool, state of the art elevator and beautifu l kitchen.
LINDA A. GARY REAL E STATE , INC . Licensed Real Estate Broker
Linda A. Gary Real Estate, Inc. Corner of Worth Ave. and South Co unty Rd.
www.lindaagaryrealestate.com Email: large205 @aol.com
Office: 561-655-68: Fax: 561-655-2884