News
and Newsletters
February
19, 2010
NewCheck Systems, Inc. has sold
substantially all of its Intellectual Property Assets to its Founder.
N.R.
Gordon & Company structured this transaction and served as financial
advisor to NewCheck Systems, Inc.
October
4, 2009
"In a corporate finance or M&A transaction,
the weak person at the table is usually the financial guy from the
company."*
We're
talking about middle market and smaller companies, of course, where CFOs and
controllers are accounting-centric by background and focus primarily
on financial reporting, systems, controls and internal operations. So when faced with a situation out of the
ordinary, they rarely optimize the outcome.
CEOs should change
the accounting/finance department paradigm to match that of companies
with in-house counsel, where staff attorneys handle recurring legal
issues routinely, but reach outside their organizations often to
supplement and complement their own core competencies.
*I've been consulting since 1995, and I
have yet to find a corporate attorney or investment banker that disagrees with
this statement.
July 24,
2009
Datameg Corporation Acquires Natural Blue Resources, Inc.
Datameg
Corporation has closed a share exchange transaction pursuant to which it became
the 100% parent of Natural Blue Resources, Inc., a Nevada Corporation. Datameg has changed its name to Natural Blue
Resources, Inc., a Delaware Corporation, has effected
a 1 for 100 reverse stock split and has changed its trading symbol from DTMG to
NTUR.
April
24, 2009
"We eat their lunch!"
If there's a
difference between the finance department of a large company and that of a
smaller one, it's that the large company actually has a finance department.
Appropriately,
smaller companies have accounting-centric staffs that
focus on day-to-day needs. But when faced with a transaction
that requires deal experience rather than accounting skill, how does the
accounting-centric CFO or controller fare?
In my
last financing transaction before starting my consulting practice, I was
negotiating a $75 million revolving credit with a Boston bank. I
asked the bank's loan officer a simple question: "How does a smaller
company do a deal like this?"
Large deal
or small, the bankers, lawyers, documents and process are essentially the
same. The real differences are (i) the size of the deal and
(ii) the experience that the company brings to the table. So, I
asked, "How do they do it?"
It was a
straightforward question and I got a straightforward relpy.
"Oh," the loan officer answered; "We eat their
lunch!"
April 14,
2009
Datameg Enters
Into Material Agreement With Natural Blue Resources
Natural Blue
Resources is exploring the development of drinking water in targeted regions of
the
January 20,
2009
Kitchen Living, LLC has sold substantially all of its assets to Venegas + Company, LLC
N.R. Gordon & Company served as financial
advisor to Kitchen Living, LLC
October 1,
2008
TuneToad has acquired 100% of the outstanding stock of Official Software, Inc.
N.R. Gordon & Company initiated this transaction
and served as financial advisor to Official Software, Inc.
TuneToad provides independent and emerging artists with a web
portal designed to facilitate the introduction of themselves, their music and
music videos to the market while simultaneously providing the market with a new
venue of entertainment through which users can discover new artists
inaccessible elsewhere.
Official Software has set the industry standard in intellectual property
automation through innovative, cross-platform software, online and management
tools. The Company's range of award-winning products and services
simplifies the way copyrights and trademarks are filed, tracked and managed.
Official's solutions are designed to meet the needs of individual creators from
musicians, writers, filmmakers, software developers and photographers to the
professional needs of law firms, publishers and Internet businesses.
August 2, 2007
Index
Capital Advisors, LLC has
announced the formation of Rent Indexed Mortgage Fund, LP. Using
The indexing approach enables the Fund's investors
to efficiently participate in the smaller building real estate market
(currently yielding higher returns than the larger building market), without
property specific risks or costs.
N.R. Gordon & Company, Inc.
served as financial advisor to Index Capital Advisors, LLC in connection with
the formation of the Fund.
June 8, 2007
WebGen Systems,
Inc. has completed the sale of its intellectual
property and other assets to buyers in the
N.R.
Gordon & Company, Inc. served as financial advisor to WebGen Systems,
Inc.
December 7, 2006
Neuro-Hitech,
Inc., a biopharmaceutical company focused on the development and
commercialization of next-generation compounds against proven targets for
neurodegenerative diseases, recently announced its acquisition of Q-RNA,
Inc.
N.R.
Gordon & Company, Inc. acted as Purchaser
Representative for the non- accredited investors of Q-RNA.
November 13, 2006
N.R. Gordon &
Company, Inc., is
pleased to announce its affiliation with Index Capital
Advisors, LLC, and the appointment of Neil R. Gordon as
Using its proprietary methodology and patented investment structure,
July 16, 2006
Raising
capital is a combination of marketing and finance. Think of investors as
customers and your securities as your product. Don't launch until you are
ready.
Q. When am I ready?
A. When you are ready to go to the next step and the next step. Be prepared to deliver your elevator pitch, a one-pager, an executive summary, a business plan and a power point presentation. Be able to defend your value proposition at every stage.
Q. How much
money should I ask for?
A. Define your need with well defined financial
projections. From there, how much capital you raise may depend
on whether there are natural milestones in your plan. It may
also depend on your investor. You may
need to circle back and see how you might do things differently depending on
how much capital is available.
Q. I need to round out my team but I don't have money.
A. Don't expect anyone to work for free. Be creative in compensating people who can help you.
Q. Are there
sources of interim funding?
A. Using your own money is a good way to retain ownership and demonstrate conviction. Family and friends might provide seed capital to get you ready for angels. Don't invest much or raise any capital until you have at least a preliminary business plan developed.
Q. Do I need
an advisory board? What does a well
rounded board look like?
A. Most investors invest in management. A proxy for that can be a group of seasoned advisors. Look for experience that supplements the skills of the management team and advisors that will lend more than their names to your venture.
Q. What
can I do to build my business while I'm preparing?
A. Talk to potential customers and lay the groundwork for sales. Learn about, and document, all you can about your market, competition and the like. The investor shouldn't know more about your market and your competition that you do.
Q. Do I
just stay in capital raising stealth mode until I'm ready?
A. You should network and let people know what you are
working on. Just don't try to sell
pieces of your dream until you are prepared to deliver something
meaningful in return.
Q.
What milestones are investors looking for?
A. Milestones are times when risk is reassessed. Achieve a milestone that reduces risk and you create value. Reduced risk also makes it more likely that you will create future value, which is what investors are looking for.
Q.
What percentage of my company will investors want?
A. They won't want any percentage of your
company if you don't lay the groundwork first. In any case,
it's not something to worry about. The idea is to optimize your
return, not minimize theirs.
March 27, 2006
Steps to a Better Banking
Relationship
·
Know what you
want. Know why you need to borrow and how large a loan you need. Know in
specific business terms how your cash flow will cover the interest and
principal payments. Know what other services you might buy from your bank. Be
as important a customer as you can be.
·
Tell the truth.
The more your bankers know about your business, the less concerned they will be
if it hits a downturn. Share reasonable prospects and projections with your
bank. Discuss your business risks as well as your opportunities.
·
Negotiate. Your
credit agreement spells out in detail what the bank can do, what you must do and
what you can't do. Worry less about the interest rate and more about terms and
conditions. Negotiate a deal that is fair to both you and the bank.
·
Talk to your
banker. If you want to know how your company can borrow for less or when you
can get release of an asset pledge or personal guarantee, ask your banker. The
discussion will benchmark your banking relationship and may give you an edge in
future negotiations.
·
Repeat the
process. As your business evolves your needs for credit and other banking
services evolve as well. Continue to evaluate your business needs, keep your
banker informed and continue to negotiate.
Feedback: Thanks
Neil, good advice. It is so important
for us at the bank to know our customer, and to have an open and frank
dialogue. Our business does not grow by
saying “no”, however we need to have a good
understanding of the circumstances and needs of our clients. Peter O’Neil, Business Banking Officer,
Citizens Bank
January
23, 2006 – (As published in the 128 Innovation Capital Newsletter)
Networking 101
As a regular at the 128 Innovation Capital Group, I’ve seen hundreds
of entrepreneurial hopefuls, in a quest for capital, come to learn, network and
briefly explain their dream. Most of them learn, some of them network but many
of them fail to achieve their capital raising objective. In part, they
don’t optimize the networking opportunity that 128 ICG and similar events
present.
If you’re not familiar with the format of the 128
ICG breakfast, here’s the essential flow:
Registration starts at about 7:15 AM, with ample
time for networking before you find a table. Once seated, there’s half a
minute or so each for your so-called “elevator pitch.” After introductions,
there’s a presentation on a topic of interest. Then there’s a final
opportunity to network. A list of attendees and their contact information is
available by the end of the meeting.
So how do you best use this meeting?
1.
Know why you’re
there. If it’s for the presentation, fine. Relax, sip some coffee,
chit chat with whomever and enjoy the show. If you’re there to raise
capital, keep reading.
2.
Attend some
meetings in advance of making your pitch. Introduce yourself and your
idea, but don’t jump the gun on capital raising.
3.
Reduce your idea,
your plan, your technology and everything else that’s important to just a few
sentences that will leave an investor wanting to know more.
4.
Practice your 30
second pitch more than once.
5.
Be more than an
idea. Organize as an LLC or as a corporation, invest in a domain name and
invest in business cards.
6.
Network!
Seek out the capital providers (although most won’t dabble in your space) and
the service providers (who know a lot of capital providers).
7.
Don’t flood the
meeting with attendees. Two founders might be okay. Three or more members
of the management team and I wonder who’s running the company. If you’re not
alone, coordinate your 30 second introductions.
8.
Sit with people
you don’t know. (Don’t sit with your co-founder.)
9.
Get the contact
list and follow up. Extend the networking opportunity beyond just the
meeting. (Look to the capital sources, the service providers, management
candidates and other entrepreneurs, in other words, everyone at the
meeting.) It’s all about expanding your network.
10.
Be
prepared. Have an executive summary (3-5 pages) that you can send out on
request.
11.
Remember that
you’re competing for capital with every entrepreneur in the room.
January
6, 2006
Official Software, Inc., has acquired the
Official Copyrighttm and Official Trademarktm products and software and certain
other related assets, from ICLUBcentral Inc.
N.R.
Gordon & Company, Inc., initiated this transaction
and served as financial advisor to Official Software, Inc.
Official Copyright (tm) Software and Official
Trademark (tm) software solutions are designed to meet the needs of individual
creators such as musicians, writers, filmmakers, software developers and
photographers, as well as the professional needs of law firms, publishers and
Internet businesses, to protect intellectual property rights to the full extent
of the law.
Official
Software, Inc., is an acquisition entity funded by
Robert Sama, the company's president and chief executive officer, and Neil R.
Gordon.
ICLUBcentral, based in
December
21, 2005
N.R.
Gordon & Company, Inc. is pleased to announce its affiliation with Decent Energy,
Inc., operator of DE's Cambridge Clean
Energy Incubator, and the appointment of Neil R. Gordon as Decent Energy's
chief financial officer.
Headquartered
in
The incubator is ready to help entrepreneurs, early
stage companies and others, by assisting with developing opportunities
involving clean energy, renewable energy and conservation products and
services.
The
incubator provides industry-focused assistance with:
·
Business plans
and business model development
·
Financial and
marketing strategy
·
Team building
·
Mentoring
·
Networking
·
Incubator
presentations and meetings
·
Program partner
offerings
The incubator also provides clean energy
entrepreneurs with infrastructure that includes office space and related
services.
September 20, 2005
Datameg Names Neil R. Gordon to Board of Directors
July 15, 2005
The Monitor Group
recently announced its acquisition of Strategic Pricing Group, Inc.
N.R.
Gordon & Company, Inc. acted as Purchaser
Representative for the non- accredited investors of SPG.
Strategic
Pricing Group, Inc., is the market leader and
innovator for management consulting services focused on pricing strategy and
implementation. Founded in 1987, the firm operates from offices in
Monitor
Group is one of the world's leading professional advisory firms, with
headquarters in
March 31, 2005
Becca Buys a Car
Twelve
years ago, when my daughter, Becca, was 15 years old, I took her with me to the
car dealer. She sat and watched as I talked, cajoled, sparred and negotiated
with the dealer, finally reaching agreement. When we returned home, her comment
to her mom was that she was surprised at how "rude" I was. She didn't
think I had done anything wrong, exactly. It was just that the way I behaved in
sitting across from the salesman wasn't something she had ever experienced
before.
Becca
grew up, went to Tufts, majored in economics, moved to
She
narrowed her search over the internet and set off alone to buy a car. Finding
one she liked, she started to negotiate.
Turning
the "I just have to check with the manager" ploy on end, she said,
"Let me take another look at it in the lot," and called me on the
cell phone, just to check in and report her progress, really. She was doing
quite nicely on her own.
I
won't go into the details. Just the end, when they were $500 apart and the
dealer was insisting that it was a "good deal." Becca decided it was
time to leave and the dealer challenged her. "You mean you're going to
walk out of here for five hundred dollars? She looked him squarely in the eye
(I suppose) and said to him, "You mean you're going to let me walk out of
here for five hundred dollars? She went to another dealer, where she bought the
nearly identical car for $1,000 less.
Like
daughters, CEO's, CFO's and others aren't born with deal experience. Those in
large companies often learn by watching those more senior. Those in smaller
companies too often fend for themselves and don't learn except through costly
error. Letting CEO's and CFO's learn, while avoiding costly errors, is one way
we add value.
February 20, 2005
"Accrual accounting can be
costly."
That
was the headline of a Wall Street Journal article that went on to state that
"companies that are most aggressive when booking non-cash earnings are
four times more likely to be sued by shareholders as less aggressive
peers."
There
can be a huge difference between accounting earnings (i.e., "net
income") and financial earnings (i.e., "money"). Net income,
honestly calculated, may be a measure of performance. Money, on the other hand,
can be used to buy things and pay people.
It's
not just the risk of being sued. Liquidity matters and without it, no amount of
creative accounting will stop the checks from bouncing.
January 25, 2005 (Reprinted by Capital Venue
in its March 2005 newsletter)
Managing
Interest Rate Risk.
Managers
often choose between fixed and floating rate debt. Which option they select,
and how they manage their company's potential exposure to fluctuating rates,
should depend on both the company's liquidity and its tolerance for risk. To a
much lesser extent, it should depend on management's expectations of future
interest rates.
Most
often, managers make interest rate decisions only when the company incurs new
debt. They negotiate a line of credit, the lender offers a fixed or floating
rate, and the company chooses one option or the other. Or, when deciding
between short- and long-term debt, management may not be able to choose, as
short-term debt is generally offered on a floating rate basis, while long-term
debt is more often offered with a fixed "coupon." In any case, once a
decision is made and the deal is closed, management typically ceases to
consider or further manage the company's interest rate risk. This passive
approach fails to recognize that a company's risk profile changes over times
that may not coincide with the closing dates for debt. Consider the following:
To finance an acquisition, Case Company will incur
$10 million in debt. The company already has $10 million in floating rate
(currently 5%) bank debt and $20 million in stockholders' equity. Management is
comfortable with the risk associated with the existing floating debt. They opt
for 8%, fixed rate, long-term notes for the new loan.
After
two successful years, the floating rate bank debt has been paid in full and
stockholders' equity has increased to $30 million. Good news, for sure. But
what has happened to the company's exposure to interest rate changes? It
doesn't have any exposure. Stockholders' equity has increased 50% and the
company's tolerance for risk is probably higher. But instead of more risk, the
company has no risk.
What
can management do differently? Management of Case Company should think about
refinancing the long-term debt or should consider synthetic alternatives (e.g.,
a swap), in order to restore an appropriate level of risk. A floating rate loan
might still cost Case Company only 5%. Why should Case Company continue paying
8% on their long term debt if they can tolerate the interest rate risk? By
exchanging the higher fixed rate for a lower floating rate (even if it is done synthetically
through a swap), Case Company is rewarded for incurring a risk that management
has already decided is acceptable.
December 10, 2004
“Put Your SOX On!"
The impact of Sarbanes-Oxley on early-stage companies
We
had the opportunity recently to participate in a panel discussion sponsored by
the Massachusetts Biotechnology Council's Finance Committee and Deloitte &
Touche. The panel focused specifically
on why private (or perhaps the better term is "not yet public")
companies should bother to comply with the provisions of Sarbanes-Oxley, since
they apply only to public companies."
Some observations and conclusions:
It is never too early to seriously think about
Sarbanes-Oxley compliance. Building
compliance into systems and procedures as they are developed can be
significantly more cost effective than modifying systems and procedures later
on.
While Sarbanes-Oxley applies to public companies,
lenders, investors, acquirers and others are already applying the standards
established by Sarbanes- Oxley to private companies. Expect the trend of third
parties to require Sarbanes-Oxley-like compliance to continue.
Think about the building of boards of directors and,
in particular, audit committees. Recognize that the majority of directors on a
public company's board must be independent directors. By definition,
"independent" excludes management, significant stockholders, lenders,
consultants and the like.
Don't conflict your accounting firm. There is a long
list of non-audit services that can prevent a firm from serving as independent
auditor to a public company.
April 26, 2004
Coppertoppe
Development, LLC has completed the purchase of the property now known as Coppertoppe Lodge and Retreat Center.
N.R.
Gordon & Company, Inc. served as financial advisor to Coppertoppe
Development, LLC, in connection with this transaction and the related
financing.
Coppertoppe Lodge and Retreat Center is set on 15 acres in the foothills of the White
Mountains, at the north end of
April 8, 2004
I've
done my share of financings; recently I've been thinking about some things that
have changed since my first one.
I
vaguely remember my first deal. It was for a dollar or two; succinctly
documented on a scrap of notebook paper that read, simply, "I.O.U." I
honestly don't remember if I was the lender or the borrower. A more recent
financing, albeit for a bit more money, amassed a thick seven inches of
assorted documents bound into two very heavy volumes. Why the difference?
The
borrower might be equally protected by either the I.O.U. or the twelve pound
credit agreement. (The borrower has the money, after all, but if you're an
actual borrower, you might want to check with counsel on this!) What's really
happened as I've grown up is that lenders have gotten better at defining their
rights. It's barely about the money at all (the part where you get the money
and pay it back with interest would nearly fit on the I.O.U.); ninety-nine
percent of the deal is now about the terms. That said:
Term
of the month - "Generally Accepted Accounting Principals" (aka,
"GAAP"):
Credit
agreements make you keep your books in accordance with GAAP. Fair enough I
suppose, that financial statements are prepared based on standardized rules.
The agreements also require that you comply with various ratios derived from
the financial statements. Generally, that's not a problem. But for a number of
reasons, accountants will, from time to time, change the rules.
When
GAAP changes, financial statements change and the ratios derived from them
change. What doesn't change are the rules of your
credit agreement. Dictated changes in GAAP could put you in default. (Changes
might also put you in compliance, but don't count on it.) If you think this is
hypothetical, you've never been a troubled but otherwise reasonably compliant
borrower.
Hint
of the month - Negotiate a provision that requires reasonable restatement of
any ratio that's affected by a future change in GAAP. Email me if you'd like a
copy of language that's worked for me in the past.
March 16, 2004
WebGen Systems,
Inc. has completed the sale of $5 million of
its common stock to an institutional investor and the simultaneous exchange by
the company's shareholders and noteholders of the company's preferred stock and
convertible notes for its common stock. Terms of the recapitalization
transactions were not disclosed.
N.R.
Gordon & Company, Inc. served as financial advisor to WebGen Systems in
connection with these transactions.
WebGen
Systems provides advanced software for energy conservation and control in
commercial buildings. They combine the highest level of industry expertise with
a reliable suite of open-protocol software tools, called IUET (for Intelligent
Use of Energy), to provide real-time command of energy use to generate savings.
Their system connects all aspects of building energy management to
automatically measure, monitor, and control energy consumption-building by
building, system by system, meter by meter, and device by device.