Emerging Business and Technology Group of Levine, Katz, Nannis + Solomon, P.C. 2009 WINTER NEWSLETTER It’s cold, the snow is deep and money is tight……. ï It’s Buckle down time…ð Sequoia Capital recently presented to their portfolio companies a submission entitled “Presentation of Doom”. The last slide in this presentation states “Get Real or Go Home” and urges the CEO’s to: o Adapt quickly o Use a zero based budgeting approach o Make cuts o Review salaries o Employ a heavily committed sales structure o Bolster balance sheets o Become cash flow positive as soon as possible o Spend every dollar as if it’s your last If you are one of these companies that haven’t felt it yet (and we do have a few) consider yourself lucky – believe us you will see it as it has now penetrated all types of businesses. It’s been a tough Q4 of 2008 for most of our technology companies. The first half of 2009 is not looking better so far either. So its time to face reality, make your 2009 sales goal realistic, and make sure you have enough cash to get through these tough times. The two toughest questions are: - Can I afford to reduce sales and marketing right now, when sales is my biggest issue? - How deep should I go in headcount reductions? Wage freezes are commonplace right now, and many of our clients have already done pay cuts to the executive team of 20% or more. You can get through this, but it will require strong leadership and some tough decisions. Consult your board and advisors often during these times. Give your Levine, Katz, Nannis + Solomon, PC professional a call and lets, together, “right size” your company. You can’t afford not to act quickly. But, there is a bright light in all this doom. If you have a good technology and the window of opportunity for commercialization is at least a couple of years, the Federal Government may be your next source of financing. The Small Business Innovation Research Program is now a $2.5 billion program for small businesses. If you would like further information about the program please contact Larry Nannis at lnannis@lknscpa.com. IFRS is coming…. International accounting standards are here, and if all goes as planned, adoption will take place in 2014 for most Companies. What does this mean for you? Well here are a few major differences between GAAP and IFRS. o IFRS does not allow LIFO for inventory. o IFRS revenue recognition standards are much less extensive than GAAP o IFRS does not allow curing debt covenant violations after year end o IFRS has a different probability threshold for contingencies than GAAP o IFRS views impairments of assets differently, making them more likely Levine, Katz, Nannis + Solomon, PC has already begun to work with several clients under IFRS. These rules are much less “rules driven” and more theory to be applied in practice. It’s too early to judge, but never too early to begin to get ready. Give Jeffrey Solomon a call at (781) 453-8700 if you have questions. Welcome New Clients to our emerging business and technology group CommonAngels, Inc. – Premier angel group in Northeast. Xenith LLC – Manufacturing/distributor of technologically advanced sporting goods. Byallaccounts.com, Inc. – online financial services company to manage account aggregation. Venture backed. Sustainability Roundtable, Inc. - is a consortium of leading tenants, landlords and technical experts in real estate which provides regularly updated research on what has proven to work best in the move to more sustainable facilities. Precision Solutions Group, Inc. – provides customer support and consulting around Prism, JDE World and Proteau. Swaptree, Inc. - is an internet-based service that leverages a proprietary trading technology to enable users to swap books, CDs, DVDs and video games for free. Venture backed. Krent/Paffett/Carney, Inc. - Focused on exhibit design, and integrated media, for museums, aquaria’s and corporate spaces Play Hard – A flash based football gave featuring persistent stat tracking and great graphics. Venture backed. Vacation Home Rentals LLC – online site that provides rental homes and other incredible properties around the globe. EdTech Networks, Inc. - provides innovative solutions and programs that enable communities to improve their schools and local economies. Venture backed. Crimson Hexagon - delivers next-generation sentiment mining technology to keep you informed about online opinion. Beacon Interactive Systems - designs and builds high quality collaborative solutions that combine integrated data sources with people and business processes. Mikel, Inc. – Provides innovative, cost effective design solutions addressing operational gaps in maritime technology, defense and security industries. QD Vision - is a nanotechnology product company delivering a new generation of display and lighting solutions to major industries where color, power and design matter. Radiation Monitoring Devices, Inc. - has been recognized as a national leader in the specialized fields of radiation detector materials, nuclear instrumentation and custom detector applications. We welcome you all to our LKNS emerging business/technology practice group!! 2008 Most Common Accounting Areas that created Audit Adjustments by our LKNS Auditors o Bundled software with services and other post-contract support improperly booked into revenue. o Warrants not accounted for properly. o Purchase accounting didn’t allocate goodwill properly and consider other intangibles in the combination. o Stock compensation charges Please let us know if we can assist you in your year end preparation in any way before we begin your work. Our tech audit team is keenly experienced in these types of issues and can lend a hand. Watch out for fair value accounting issues in 2009!! Accounting standards require audit committee to get really involved If you are a board member, on a public board or even in a private company, I am sure you’ve become much more involved in the business than a few years ago. We are now strongly suggesting calls and/or meetings with audit committees prior to fieldwork and at the conclusion of the audit. Generally discussed are: o Outlook for 2009 and capital needs o Going concern issues for the company o Review of our audit adjustments o Key risk areas o Revenue recognition o Upcoming standards to be dealt with o Communication about responsibility over the financials o Staffing of the accounting department o Fraud Issues o Fair value accounting and how it impacts the financials If you own a company or are on a board, please consider these issues. If you haven’t established an audit committee for your company yet, we urge you to do so soon. The emerging business and technology group at Levine, Katz, Nannis + Solomon, PC is one of the premier CPA departments in Massachusetts specializing in working with young technology and emerging businesses. Focused specifically on assisting these clients with accounting, tax and fund raising issues, our group works with hundred of companies to get them to the next level. Please contact partners Jeffrey Solomon or Larry Nannis, heads of the emerging business/technology group, with any questions at (781) 453-8700. We’ll get through this together, but it may be tough. Looking forward to hearing from you soon.