"You've probably never seen worse financials in any company that's taken a public offering." That's the assessment of Corporate Capital Resources in Westlake Village--not from a disgruntled shareholder, but from the company's founder and president, Daniel D. Weston.
: CorpCap was set up as a publicly traded venture-capital firm that would invest in new companies with terrific ideas in exchange for a stake in those businesses. When one of those companies would go public, CorpCap stockholders would receive some of the shares and their investment would grow with the new company.
It hasn't worked out that way. In the past four years, CorpCap has created or acquired 37 companies, but none of them has gone public. At least 23 of them have never opened for business. Some of the ideas that have yet to go into production include a fish farm, a Washington lobbyist group for small investors, a sterilization system and a soilless lettuce farm.
Of the few that have reached production, Weston concedes, most have never made more than a few thousand dollars. There is the business that sells water beds to hospitals, for example. It has sold 15 in the past three years.
CorpCap's ideas haven't done much for its bottom line. The audited results for CorpCap's fiscal year ended Sept. 30 listed a net loss of $2.1 million, while current assets were a negative $2,977. Unaudited results for the nine months ended June 30, meanwhile, showed an operating loss of $452, with current assets of $79,541.
In the past several years, CorpCap's stock has fallen from a high of $4.125 a share in 1983 to $1.06 on Friday. Interest in CorpCap's stock is so thin that Weston gave away 2,000 shares as a door prize at an investment club convention last year.
Weston maintains that CorpCap has good ideas for start-up companies, he just needs financing to make them work. He has raised about $2 million in recent months from a public offering. But he's hoping to raise much more from a group of investors who live on Kwajalein Atoll, part of the Marshall Islands in the western Pacific Ocean. So far, however, Weston hasn't seen a cent from the islanders.
Some of the ideas for the start-up companies are Weston's, but he also relies on outsiders.
In 1985, for example, CorpCap formed four joint ventures with officials of Magna Technologies, a Thousand Oaks firm, to market such products as an underwater treadmill for race horses and portable testing centers for acquired immune deficiency syndrome.
Magna later closed. Then in May, the Securities and Exchange Commission filed a civil suit alleging that Magna was "a sham" and its sole reason for being was to manipulate its stock price.
Besides agreeing to several joint ventures, Weston also ordered some Magna stock. "Let's face it. Those people were polished," he said.
In the meantime, CorpCap waited three years for the SEC to approve a desperately needed $15-million offering. Because the company had little in the way of funds, few of its ideas for start-up companies got into production.
By comparison, some of CorpCap's rivals have been more far more successful. Colorado Venture Capital in Boulder, for example, has a portfolio of 12 companies, and has taken seven of those public since it started in 1981. Biotech Capital, a New York venture-capital firm, helped six companies go public since 1981.
But in February, the SEC finally approved CorpCap's public offering for warrants that later are converted to common stock.
"Now we are effective. We are bringing in money. We are funding our companies, and you will see within the period of the next three to four months one after the other coming forth," said Weston, 63, who draws an annual salary of $100,000.
One venture capitalist, who worked at one of the country's most respected venture-capital firms, reviewed CorpCap's prospectus and concluded: "I can't imagine people putting money into this thing. Every one of these businesses is junk."
But Norma Yaeger, president of the Encino brokerage firm Yaeger Securities, is recommending CorpCap. "This is an excellent opportunity for investors," she said.
CorpCap's prospectus lists an impressive body of 34 advisers overseeing its investment choices, including Stephen McNichols, a former Colorado governor; a former Federal Reserve Board governor, and Cleveland's Businessman of the Year. While these advisers did sign agreements to counsel CorpCap in exchange for a fee, Weston said none of them has been actively involved with the company.
"I don't know anything about them short of that I'm on their mailing list and they'd like me to invest in their company," said CorpCap adviser Izhak Rubin, a UCLA professor.
Asked About Role
Andrew Brimmer, former Federal Reserve Board governor who now sits on the boards of Bank of America, DuPont and Gannett, is also listed as a CorpCap adviser. Asked about his role, Brimmer paused and said, "Oh, that's that company out in California, isn't it?"