Archive for the 'Finance' Category
July 2nd, 2009, 11:00 am by Jan Norman, small-business columnist
Spectrum Pharmaceuticals Inc. in Irvine said today it has received commitments from institutional investors for $21 million  in a direct stock offering.
This investment brings to $51 million the amount Spectrum has raised in the past three months.
Long-time institutional investors put in $20 million in late May and another $10 million in June, said Senior Vice President Russell Skibsted.
The biotech company, which trades on NASDAQ, has a series of cancer treatments in various stages of development including Zevalin, an FDA-approved drug for relapses of non-Hodgkin’s lymphoma, and drugs in trials for treatment of cancer of the bladder and prostate.
Spectrum may hear today whether the FDA will approve Zevalin for treating first instances of non-Hodgkin’s lymphoma, Skibsted.
“We are pleased that existing institutional investors continue to show their support for Spectrum,” said Chairman Rajesh C. Shrotriya.
In the most recent deal, which should close by July 6, Spectrum will sell 2.9 million shares and warrants for an additional 1.5 million shares. The company expects to net $20 million after paying $1 million in agents fees and other offering costs.
Click here for more details about the offering.
Click here to read Register staffer Colin Stewart’s profile of the company.
Other investing stories…
Posted in: Finance • Private equity • Top posts • direct stock offering • irvine • Spectrum Pharmaceuticals | 1 Comment »
July 1st, 2009, 12:00 pm by Jan Norman, small-business columnist
Private equity investment activity during the first half of the year was the slowest in seven years, reports PitchBook Data Inc., a research firm that specializes in private equity.
Here’s the snapshot comparison for year-to-year deals and dollars invested (click on image for a larger view):
 Source: PitchBook Data Private equity investors are important sources of capital for private companies to grow or acquire other companies or public companies to go private. Although best known for the multi-billion-dollar deals, especially from 2005 to 2007, private equity has been more significant to mid-sized companies both for money and management expertise.
Although both the number of investments and amount of money invested dropped dramatically in the first half and second quarter, private equity investors are sitting on a record high $400 billion and continue to raise more money.
PitchBook attributes that unwillingness to put money into deals to investors waiting for the investment climate to improve.
Some of the highlights:
- First half, January through June, 407 deals totaling $24.7 billion
- Second quarter, April through June, 174 deals totaling 11.1 billion
- The hardest hit industry was energy in which the six investments during the second quarter represented an 87% decline from a year ago
- A third of the second quarter investments were in business products and services, but the number was still down 65% from a year earlier
Even when private equity made an investment, the median size of the deal was down 82% to $11.8 million.
In response to the current credit markets, private equity investors have been using less leverage and targeting smaller, operational improvement and distressed-company investments, PitchBook says.
Other investing stories…
Posted in: Private equity • Reports • Top posts • PitchBook Data Inc. | Post a Comment »
June 30th, 2009, 5:00 am by Jan Norman, small-business columnist
California’s corporations paid $531 million less in state income tax July through May, compared to a year earlier. The revenue was even $84 million less than the state Department of Finance estimated in early May.
That downturn is in spite of a last-minute rush by companies to pay their taxes to avoid a new penalty.
Also, personal income taxes, which includes payments by owners of S-corporations, limited liability companies and partnerships, were $10.2 billion below last year’s actual collections and sales taxes were $2.8 billion below. The Dept. of Finance was too optimistic on these tax categories too.
Here are the comparisons from Controller John Chiang’s office (click on image for larger view):
 Source: State Controller Chiang points out that corporate tax payments in May soared 52%. But that doesn’t reflect improved financial performance by these companies.
“The Governor signed a bill in October that imposes a 20% understatement penalty on corporate tax. Companies were given the option to avoid the penalty by filing an amended return and paying their actual tax liability by May 31, 2009. As a result, miscellaneous corporate taxes…soared to over $730 million by the end of May, an increase of over 650% from last May.”
The state managed to get businesses to pay early, but not necessarily more in taxes in the long run.
The tax collections barely reflect the increase in the sales tax starting April 1 and vehicle registration fees effective May 19.
Other business news….
Posted in: Reports • Taxes • Top posts • California Controller • Dept. of Finance | 17 Comments »
June 24th, 2009, 12:00 pm by Jan Norman, small-business columnist
Small-business owners, major corporations and taxpayer groups have launched a campaign to urge the California  legislature and Gov. Schwarzenegger not to raise taxes because of the current state budget crisis.
The group, Californians Against Higher Taxes, has put up a web site, MoreJobsNotTaxes, and is airing radio ads in this market and in Sacramento because the legislature put out its budget-balancing proposal that includes several billion dollars in new taxes, including cutbacks in business deductions for operating losses, taxes on oil companies and cigarettes.
Earlier this year, the Legislature passed $12.6 billion in new taxes.
CLICK here to listen to the ad.
What do you think?
Can California solve its budget crisis without new taxes?
Other economy stories…
Posted in: Meltdown • Taxes • Top posts • Californians Against Higher Taxes | 10 Comments »
June 23rd, 2009, 6:00 am by Jan Norman, small-business columnist
If you have a cell phone that your employer has issued to you for company use, you’re supposed to pay tax on any personal calls you make on that phone.
Right.
Although the tax has been on the books since 1989, it’s a good bet most employees and companies aren’t even aware of it, must less pay it.
The Internal Revenue Service recently called for public comments on how to improve compliance with the law. But IRS Commissioner Doug Shulman says that call wasn’t a signal that his folks are going to crack down on personal use of company-issued cell phones.
At first Shulman said his agency just wants to simplify the law and remove uncertainty about compliance. But later he called for Congress to repeal the tax.
“The current law … is burdensome, poorly understood by taxpayers and difficult for the IRS to administer consistently,” he said. “The passage of time, advances in technology and the nature of communication in the modern workplace have rendered this law obsolete.”
John Walls, spokesman for CTIA-the Wireless Association, called the tax obsolete. “In 1989, cell phones were considered a luxury item. Now we have unlimited calling on our cell phones. We have free nights and weekends. The (employer) is not even paying for that. Why should I get taxed for that?”
Karen Kerrigan, president of the Small Business and Entrepreneurship Council, added, “The law does not reflect the reality of business or the nature of communication today. There is no reason why Congress can’t quickly act to put this relic to rest.”
The House of Representatives voted to repeal the tax last year, but the bill stalled in the Senate. This year, Senators John Kerry, D-Mass., and John Ensign, R-Nev., are co-authoring a similar repeal measure that is co-sponsored by almost half the Senators.
The IRS may be talking repeal now, but it has enforced the tax in the past. University of California campuses in Los Angeles and Sandiego paid $238,474 and $186,471 respectively to settle fines over the issue.
Other business stories….
Posted in: Taxes • Top posts • cell phone taxes • Internal Revenue Service | 4 Comments »
June 22nd, 2009, 6:00 am by Jan Norman, small-business columnist
A laser treatment for glaucoma captured top honors in this year’s Tech Coast Angels Fast Pitch Competition in Irvine recently.
In the 8th annual fast and fun competition, 12 entrepreneurial finalists had 90 seconds each to persuade a panel of professional investors and advisors that their venture is the next Google or Microsoft.
At the end of the evening, ophthalmologist Michael Berlin had not only persuaded the judges that his venture, EyeLight Inc., was the “Best Overall” presentation and investment opportunity, he persuaded the audience to give him the “Audience Choice” award.
 Michael Berlin, right, wins top honors at O.C. Fast Pitch Event The other winners were:
- “Best Presentation Award: Derek Morikawa, Vision Robotics Vineyard Products, LLC
- “Best Funding Opportunity: Deanna Bebb, P&E Automation, Inc.
The winners will be given the opportunity to make more in-depth presentations to Tech Coast Angels’ groups in Orange, Los Angeles, San Diego and Santa Barbara counties in pursuit of equity investments.
For entrepreneurs, the Fast Pitch Competition is a chance to practice telling their story and perhaps win a wider audience of investors. The audience gains appreciation for the value of cutting to the chase and just maybe one of them will be a pitcher at future competitions.
Entrepreneurs who seek outside investors know this brief description of their company as an “elevator pitch.” Imagine entering an elevator with an investor and winning him over in the time it takes the elevator to travel to his floor.
The judges always provide great advice and a pinch of humor before the winner is announced.
The Tech Coast Angels started in April with all-comers coaching sessions, which by themselves provide entrepreneurs valuable advice about describing their value proposition quickly.
Read about past Fast Pitch competitions and preparation here, here and here.
Here’s what Karen E. Klein said about this year’s competition in an article for BusinessWeek:
Learning to project the proper level of excitement and expertise, then translate it into a quick but compelling “elevator pitch” committed to memory, is one of the biggest challenges many entrepreneurs face. Unless they pursue private funding, many never perfect their pitch—much to the detriment of their sales, networking, and publicity efforts….
“You have to love your project and talk about it like you would talk about your children,” Berlin says. “You talk about what it is, what makes it different, why it’s unique, why it’s important. If you love it, the energy and excitement you naturally feel carries through to your audience.”
Click here to read more about Fast Pitch and see videos from past competitions.
Other business stories…
Posted in: Awards • Tech Coast Angels • Top posts • Fast Pitch Competition | 2 Comments »
June 19th, 2009, 5:00 am by Jan Norman, small-business columnist
Local banks report a huge number of calls and applications for deferred-payment, interest-free loans of up to $35,000 for financially troubled small businesses.
The loans are under the U.S. Small Business Administration’s America’s Recover Capital program, or ARC loans for short. As of June 15 small-business owners can apply to private lenders that participate in the SBA’s loan programs. The SBA will guarantee 100% of the loan and pay the interest to the lenders on behalf of the borrowers.
Wells Fargo Bank, the most active SBA lender in the Santa Ana District is extremely busy with calls about the loans.
“We support the SBA’s economic recovery efforts and we will participate in the ARC Loan Program as a part of our commitment to helping small-business owners succeed financially,” says Mary McCarthy, regional business manager for Wells Fargo. “We believe as these businesses grow and thrive they will create new jobs in communities across the country.”
Businesses can call 800-359-3557 to obtain a Wells Fargo SBA ARC loan application or visit a local Wells Fargo business banker to discuss this loan program and other loan programs that might be right for them.
Wells Fargo business customers who had been with Wachovia should call 800-877-1722 for an ARC Loan application.
Many community banks are limiting their ARC loans at first to existing customers.
“I’m getting 10 to 15 calls a day about ARC so our participation right now is only to existing bank customers and then we’ll see,” says Joan Earhart, head of Business Community Capital, the SBA division of Fullerton Community Bank. “I’m surprised how many other banks are looking at (the ARC program) this same way.”
She attributes that caution to:
- Lenders are wary about the program especially because of the recent credit freeze that made it impossible for them to sell their loans in the secondary market or to get capital for lending
- The ARC loans are time consuming to make
- They are small loans and the interest that the SBA is paying is below market so it is not a very profitable program for lenders.
“We’re not in it to make money; we want to help people stay in business,” she says.
“We’re telling people to go to their own bank to apply for ARC loans,” Earhart adds. “No one knows you as well as your banker, especially if you are experiencing financial difficulties.”
ARC loan proceeds will be distributed to the borrower over a six-month period, and repayment will not begin until 12 months after the final disbursement. Borrowers can repay the loan principal over five years.
CLICK HERE for more information about the ARC program
CLICK HERE for a list of lenders that participate in SBA lending programs. They may not all be making ARC loans. Or call 714-550-7420 for the SBA’s Santa Ana District Office.
Other business stories….
Posted in: Banks • Finance • Local companies • Meltdown • Top posts • ARC loan program • business loans | 5 Comments »
June 18th, 2009, 5:00 am by Jan Norman, small-business columnist
Entrepreneurs and new ventures will find it increasingly difficult to attract equity investors, predicts Luis Villalobos, founder of Orange County-based Tech Coast Angels which is one of the nation’s largest groups of early-stage equity investors.
Part of the problem is the professional investors’ inability to get their money out of existing deals in order to have money for new ventures: (All the charts are courtesy of Luis Villalobos. Click on image for larger view.)
 And that’s impacting the number of U.S. venture capital funds, which Villalobos applauds because “there’s too much money in a few huge funds that can’t efficiently invest it.”
The sad state of the industry was one of the more obvious conclusions Villalobos reached in his 8th annual update on angel and venture capitalist activity and the economy to the Harvard Business School Association of Orange County on Wednesday, June 17.
The value of Villalobos’ shows are that he manages to be provacative in good times and bad, and he pulls a lot of information into one tidy package. It’s a primer for those who haven’t been paying attention to the dismal state of investing, initial public offerings, mergers and acquisitions and a tough reminder for those who have.
Bottom line is the title: Risk Capital & Economic Outlook: Bleak & Bleaker
“It feels kind of like Chicken Little,” Villalobos said before his presentation, “but just because you’re paranoid doesn’t mean they’re not out to get you.”
Venture capitalists aren’t too interested in investing in early stage companies, Villalobos said, which puts more pressure on angel investors to get the next generation of high growth innovators up and running.
The trends show rough sledding for angel investors:
- It takes longer to exit an investment.
- It’s tougher to get out all.
- the money received from mergers, acquisitions or IPOs is healthy but not the 50 times invested so often heralded.
No one tracks individual angel investors but the Angel Capital Association has data on those in angel groups:
 Professional investors are reacting to the economy, “which looks VERY scary,” Villalobos says.
- Unemployment (8.3% in O.C., 11% in California, 9.4% in U.S.) is higher than projected just a few months ago
- Federal deficits are stunning ($1.845 trillion)
- Stimulus package isn’t priming the pump because individuals are saving the money they get and banks aren’t lending the money pushed their way
With all the negative data in Villalobos’ presentation, he says, “I am hardly hopeless. This is a wakeup call. This is a great country and we certainly have seen worse. This is not anywhere near as bad as the Depression.”
Other economy stories..
Posted in: Reports • Tech Coast Angels • Top posts • Venture capital • Luis Villalobos | 1 Comment »
June 17th, 2009, 5:00 am by Jan Norman, small-business columnist
A 2004 law intended to stop major corporations from using abusive tax shelters has hit more than a thousand small businesses with penalties that exceed $1 million in some cases.
Los Angeles pensions attorney Alex Brucker dug up many of these cases for the Small Business Council of America, a national group that represents
 Alex Brucker private and family-owned busineses in federal tax and pension issues.
Among the local cases Brucker found:
- An Orange County doctor invested $600,000 in a pension plan for the practice’s 10 employees. Even though the investment may still be allowed as a tax deduction, the doctor has been fined $1.2 million.
- A seven-employee printing business in El Monte was told to pay $13,000 in taxes and $1.4 million in penalties.
- A San Diego construction company set up pension and ESOP plans for employees and later was assessed $1.2 million in penalties.
“There are cases like these all over the United States,” Brucker said. “If I committed fraud, the penalty would be 75% of the taxes owed. This is far greater, and it doesn’t matter if it was intentional or not.”
The penalties, which are automatic, are not for any tax dodge but for failure to report that the business and/or owner invested in something the IRS had determined to be set up for the sole purpose of avoiding paying taxes. In at least some of these cases, no such determination had been made when the investment was made.
“But if the owners had known, they wouldn’t have made the investment; 95% of these small-business owners did this innocently because their trusted advisers told them it was OK,” Brucker said. “The IRS makes these determinations after the fact, and then applies the same penalty to small business as to the Enrons of the world even if they got no tax benefit.”
The penalty is $200,000 per year on the business and $100,000 on each owner. Brucker gave the example of a Norco business owned by a man, wife and three minor children, for a total of $500,000 penalty. The business went bankrupt, Brucker said, and the man and wife died.
Chris Wynkoop, Irvine CPA for the Orange County doctor mentioned above who is fighting the $1.2 million penalty, said, “A lot of these people had IRS determination letters ahead of time that the investment was allowable, and then later they were penalized. It’s a horror story.”
His client won’t talk for the record because of fear of IRS reprisals. (He was not the doctor’s accountant when the pension investment was made.)
The National Taxpayer Advocate Nina Olsen in her 2008 annual report said, “The statute as written can impose unconscionable hardship on taxpayers.”
Olsen also said:
“It is rare that a tax provision is found to violate the United States Constitution, but we believe the imposition of such a large penalty on a taxpayer who entered into a transaction that produced little or even no tax savings and without regard to the taxpayer’s knowledge or intent raises significant constitutional concerns, including possible violation of the Eighth Amendment’s prohibition against excessive government fines and due process protections.”
Recently Brucker’s group, the Small Business Council, called for a moratorium on the Internal Revenue Service pursuing such cases until Congress could review the consequences on small business.
Now a bipartisan group of congressmen and U.S. senators has sent a letter to IRS Commissioner Doug Shulman to stop assessing penalties and collecting huge fines because they intend to cange the law.
The IRS is reviewing the request, according to spokeswoman Michelle Eldridge.
The letter was sent by Sen. Max Baucus, D-Montana and chairman of the Senate Finance Committee. It was also signed by Sen. Chuck Grassley, R-Iowa, top Republican on the committee; Rep. John Lewis, D-Georgia, chairman of the House Ways and Means Subcommittee on Oversight; and Rep Charles Boustany of Louisiana, ranking Republican on the subcommittee.
“We’re asking the IRS to temporarily suspend the collection of certain penalties while we work on legislation,” Baucus said. “I don’t condone investments in tax shelters but I also want to make sure our small businesses survive and thrive.”
Brucker said he has opposed some of the pension and health and welfare plans that seem to violate the intent of the law, “but I said the IRS should take it out on the promoters of these plans, not the taxpayer.
Other business stories…
Posted in: Taxes • Top posts • abusive tax shelters • Small Business Council of America | 6 Comments »
June 17th, 2009, 1:00 am by Jan Norman, small-business columnist
Union Bank has revamped its online resource center for women and minority business owners by providing an array of useful content to help these specialized  businesses.
Content includes:
- Financing for woman-, minority- and service-disabled veteran-owned businesses: Details options for obtaining loans, lines of credit, and other products to help entrepreneurs start and grow their business.
- Supplier diversity: Aims to increase the types of businesses from whom Union Bank buys products and services.
- Certification Center: Describes qualifications for Women’s Business Enterprise or Minority Business Enterprise certification and provides contacts to help business owners start the process.
- Resource Center - includes informational articles by Union Bank executives, a link to Union Bank’s quarterly newsletter, Small Business Focus, and a list of organizations and agencies that are helpful for new small businesses.
- Women/Diverse Associations: Provides extensive lists of the associations and organizations that cater specifically to women and diverse audiences.
- Frequently Asked Questions: Provides answers to several questions regarding financing and loans.
If you have a resource, tip or strategy to help small businesses, send it to me at jnorman@ocregister.com. If I use it, I’ll give you credit and link to your web site.
Other business tips…
Posted in: Finance • Run your business • Tip of the Day • Top posts • Women entrepreneurs • Union Bank | Post a Comment »
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