Profiting From Good Ideas By JEFF WEISS Contributing Reporter It is a widely held belief that everyone has a few good ideas in their lifetime. But ideas alone do not guarantee success when it comes to marketing a product. In order to see an idea get on a store shelf, one must carefully research not only the product itself, but also its potential competition. And even if your product has been meticulously scrutinized, one still needs passion, commitment, and the money to succeed. No one ever said innovation was easy. Overbreak LLC is in the business of ideas. There are thousands of people out there who have good ideas, but not the means to get them to the production line. This is where Overbreak comes in, taking the intellectual property and trademark rights for the invention, developing and manufacturing it, and putting it on the market with a portion of sales paid back to inventors as royalty fees. While most of their products are toys and novelty items, Overbreak seeks any exceptional invention, regardless of whom the creator is. In fact, two of their most recent top sellers were invented separately by a gym teacher in Nashville and a Hungarian general practitioner doctor. “Everybody has one or two great ideas in their life. Most of the time people think they can’t do anything with them or they give up. It takes the passion of getting over those hurdles and making it real,” said Dayne Sieling, president and co-founder of Sun Valley-based Overbreak. “It’s important not to be persuaded to give up after you hit the first hurdle. You need to keep pushing forward, you never know when an idea that was written on a napkin can be a success.” Westlake Village patent attorney Steven Sereboff agrees with Sieling that the nature of the inventor, his willingness to follow through on the concept, and his degree of resolve, heavily influence the likelihood of the product’s success. Good management “Success usually has less to do with the type of idea than the person who is pursuing it. It’s the classic adage that smart venture capital doesn’t invest in good ideas, they invest in a good management team,” Sereboff said. “It’s the people behind the idea that make it happen. It’s the people that see they need to stick with their original idea or maybe they realize that they need to change it. The essence for success for most companies is that they see the big picture, whether they need to shift to changing market needs, or sometimes a product can just hit the first time.” Sereboff also maintained that the timing of an idea is crucial to its realization. A concept might be brilliant, but if it is way ahead of its time it might never see the daylight. “A good idea has to be something so different that nobody is doing it or is likely to start doing it, yet not so different that the market would reject your idea. There are people who have not the next idea but the idea two or three generations away, it can take a human generation to accept fundamental change,” Sereboff said. Of course, since the dawn of time, human necessity has spawned some of the most ingenious innovation. When people are faced with a limitation inherent in an existing product, they often attempt to invent something more fitting to their needs. After their Northridge office was burglarized four years ago, Alexander Bordbar, co-founder of Philex Enterprises Inc. (along with brother Jason), decided to invent a PC-based security system, in order to provide a cheaper alternative to the exorbitant prices systems’ sold for. Without the $15,000 necessary to invest in such a system, the brothers were faced with two options: either remain susceptible to theft, or develop their own inexpensive alternative. They chose the latter. Confronting competition “We wanted to try something better that would work for us. We said what can I do to make something better? You need to research other items and say to yourself this does what I want but it doesn’t have this feature so my product will. You analyze the industry standards, take existing products but modify them,” Bordbar said. “We didn’t just want to invent something, but what we wanted didn’t exist. The non-entrepreneur will say there’s too much competition and leave it at that. The entrepreneur takes it and makes it succeed.” Chances are if your invention can be of service to the world, it has a chance to work. However, one can’t circumvent copious research, nor a passion for the sales and refinement of the product and still expect to succeed. Finally, one must never forget the fact that an invention is practically worthless if it costs too much money to produce. “Good ideas are ones that help others and it has to be something that can be sold at a reasonable price. If you can’t find something that reasonable to manufacture and sell it’s not a good idea,” Bordbar said. “We had a vision but we were already in the tech industry. Some people have an idea for an industry they don’t know and they don’t do enough research. There’s a lot of rags to riches stories but there’s a lot of people who stay rags. You always need to do your homework.”

Valley Briefs Medical Services Acquisition PracticeXpert Inc., a Toluca Lake based provider of administrative systems and technologies for medical practitioners, has acquired Cancer Care Network in Oklahoma City from The Shuster Group. The purchase price was $5.5 million including $4.1 million in cash, $500,000 in PracticeXpert common stock and $900,000 in notes. Cancer Care Network specializes in radiation and medical oncology billing and management for physicians and hospitals. Shuster Group officials said they decided to divest the company because its business model did not fit well with the company’s other businesses. Shuster operates a diversified health services company primarily in Oklahoma and surrounding states while CCN provides services nationally. Cindy Carmichael, CEO of CNN, will continue in that capacity. PracticeXpert has, since going public about a year ago, been aggressively acquiring medical billing companies across the country. The acquisition of CCN brings to six the number of firms it has acquired. Officials said the acquisition will bring the company’s annual revenues to about $15 million. Salem Issues Offering Salem Communications Corp. has issued a secondary public offering with plans to raise about $65 million for working capital and general corporate purposes, the company said. The shares being sold include 775,000 shares currently held by the Camarillo-based media company’s two founding principals, Edward G. Atsinger III and Stuart W. Epperson. Epperson, chairman of the board who is 67, owns about 4.3 million shares or just over 24 percent of the company’s Class A common stock. President and CEO Atsinger, 64, owns about 4.6 million shares or about 25 percent of the company’s common stock. Salem, which broadcasts religious and family-themed programming, has priced its offering at $30 per share. Credit Suisse First Boston LLC and Deutsche Bank Securities Inc. are managing the offering. Separately, Salem said it plans to acquire two additional radio stations in Honolulu, Hawaii from Visionary Related Entertainment LLC. Salem will acquire KPOI-FM 97.5 and KHUI-FM 99.5 for $3.7 million The purchase will bring to eight the number of Salem stations in the Honolulu market. Gravel Brouhaha Continues Santa Clarita officials said they plan to appeal a federal court’s decision to allow Mexican concrete company Cemex to mine a canyon in the region. The approval gives Cemex the green light to extract about 56 tons of sand and gravel, materials the company says are sorely needed for home construction and highway improvements. But local residents have been fighting Cemex for decades, claiming that mining the site would exacerbate the already problematic air quality and create tremendous traffic congestion as trucks move from the site down the freeway into the San Fernando Valley and Los Angeles. CSUN Honors GSBB California State University at Northridge this week will dedicate a lecture auditorium to Good, Swartz, Brown & Berns LLP, an accounting firm that has funded accounting scholarships and faculty development for the college’s Department of Accounting. GSBB managing partner David Swartz, a CSUN alumnus himself, said that a number of the 100 employees of the firm are alumni of the University. Acquisition Complete North American Scientific Inc. has completed the acquisition of NOMOS Corp. The Chatsworth-based company said that with the acquisition it expects to report revenues of $27 million in the fiscal year ending Oct. 31. North American Scientific’s board has also been expanded to include several former NOMOS executives. John A. Friede, former NOMOS chairman, and John W. Manzetti, who serves as the president of North American Scientific’s NOMOS radiation oncology division, will bring the number of board members to nine. Label Forms DVD Division Bungalo Records, a Woodland Hills-based record company with a number of urban artists on its imprints, is venturing into DVDs, the company said. The company is starting a DVD division, with the discs to be distributed via Universal Music & Video Distribution, which also distributes Bungalo CDs. IT Firm Heads Downtown IT company BroadSpire has moved its Mission Hills offices to downtown Los Angeles. The company said it wanted to get closer to its data center, which is located downtown, and to consolidate all its employees under one roof. BroadSpire has data centers in Virginia, London and Amsterdam, with sales and administrative offices in L.A., London and India. The L.A. office has between 35 and 40 employees. ValueClick Raises Guidance ValueClick Inc. raised its guidance for the remainder of 2004 after beating its expectations in the first quarter of the year. The Westlake Village-based Internet advertising company said it earned $13.4 million or $0.16 per diluted share on revenues of $36.7 million for the first quarter ended Mar. 31, 2004. That compared with net income of $1.2 million or $0.02 per diluted share on revenues of $19.5 million in the comparable quarter of 2003. ValueClick said that based on its first quarter results it was raising its guidance for the full 2004 year to $0.26 to $0.29 per share, from previous expectations of $0.21 to $0.27 per share. ValueClick said revenues, previously projected to fall in the range of $145 million to $148 million for the year, are now expected to range from $147 million to $150 million. Vitesse Losses Continue Vitesse Semiconductor Corp. reported a steep rise in revenues for the company’s second quarter ended Mar. 31, but its net losses are continuing. Vitesse said it lost $17.4 million or $0.08 per share in the period, compared to a loss of $25.1 million or $0.12 per share in the second quarter of fiscal 2003. Revenues increased to $56 million, compared to $38.1 million in the comparable period last year. The Camarillo-based telecommunications supplier said it expects revenue to increase about 8 percent sequentially in the third quarter and its loss to range between $0.06 per share and $0.10 per share in the coming quarter. 21st Goes East 21st Century Insurance Group has expanded its marketing efforts to the Midwest. The Woodland Hills-based company has begun to offer automobile insurance in Indiana, Illinois and Ohio. The move brings to eight the number of states in which the company operates. 21st Century also markets its auto insurance services in Arizona, Nevada, Oregon and Washington in addition to California. Sales, Earnings Rise at Tekelec Tekelec saw dramatic increases in revenues and earnings for the first quarter ended Mar. 31 resulting in part from its global expansion efforts. The Calabasas-based company said its net income rose to $5.8 million or $0.09 per diluted share, on revenues of $78.9 million in the first quarter of 2004, compared with net income of $1.5 million or $0.02 per share in the first quarter of 2003. First quarter 2004 revenues rose 43 percent from $55 million in the first quarter of 2003. “For the first time since 1993 revenues increased sequentially in the first quarter, unlike the 10 percent to 20 percent seasonal decline typically experienced in first quarter revenues,” said Tekelec President and CEO Fred Lax in releasing the report. Tekelec said 23 percent of its sales in the most recent period came from outside the U.S. The company projected revenues of $86 million to $88 million and earnings in the $0.01 to $0.02 range for the second quarter of 2004. Guitar Center Net Doubles Guitar Center Inc. more than doubled its net income in the first quarter of 2004 to $11.8 million or $0.46 per share. The Westlake Village-based company saw comparable store sales increase 11 percent in the period. For the first quarter of the year, store-wide revenues increased 21.6 percent to $349.7 million, compared with $287.5 million for the same period last year. As a result of the better-than-expected results, Guitar Center said it was projecting second quarter net sales to range between $331 million and $342 million and diluted earnings per share to be in the range of $0.33 to $0.35 cents, reflecting an increase from its previous guidance. 3D Loss Narrows 3D Systems Corp. narrowed its loss in the first quarter of 2004, thanks to a big boost to revenues in the quarter. The Valencia-based imaging company reported a net loss of $2.5 million or $0.19 per diluted share, on revenues of $29.5 million in the first quarter ended Mar. 31. That compared with a net loss of $14.9 million or $0.62 per share on revenues of $23 million in the first quarter of 2002. The company said it achieved the highest revenue levels in the company’s history in the first quarter of 2004. Wells Lights Madrid Marquee A grant from Wells Fargo Foundation will put the Madrid Theater in the black for the first time since it was renovated. Half of the $50,000 grant, awarded to the Valley Cultural Center, which operates the Madrid in Canoga Park, will go to the theater and the balance will go to the Concerts in the Park series that the Cultural Center also operates, said James Kinsey, president and CEO of the VCC. Wells Fargo will be the season sponsor of the Madrid Theater programs for the 2004 to 2005 season. VCC also runs 14 programs, including a July 4th extravaganza in its Concerts in the Park series from June through September. VCC took over operation of the Madrid from the city of Los Angeles just under a year ago. The city several years back renovated the theater, which had fallen into disrepair and operated as an adult entertainment venue. Although the facelift helped to spruce up the area, the theater struggled to find its audience. Kinsey said that since the VCC has operated it, it has developed a diverse range of programming including plays and concerts, and the agency is now working to book the theater during weekday nights by renting it for private corporate use as well as children’s programming. “We are redoubling our efforts to bring more business in during the week,” Kinsey said.

Copying Firm Finds Niche Among Large Competitors By JEFF WEISS Contributing Reporter “Keep on suing,” Daniel Fabregas, founder of North Hollywood-based, Duplikat: the Copy Experts, jokes, hinting at how the litigious nature of American society has spurred the necessity of niche businesses such as his. Founded in 2002 and still very much in the initial stages of growth, the fledgling enterprise specializes in doing copy reproductions for law firms either too swamped or incapable of handling the massive amounts of paperwork they accumulate. While revenues are certainly not huge, this entrepreneur has tripled his sales each year and has good feelings about the future. Fabregas had been employed in marketing for the United States Postal Service and sensed that due to budget cutbacks his division was going to be axed. Wanting a business his entire life, the Filipino immigrant decided to explore different options. When a friend suggested the legal copying business, the idea began to germinate. “I studied it by doing a feasibility study for a few months and saw that it had a lot of potential for profitability. I rented this office barely knowing what I was going to do. I started buying the machines with money from my savings account and before I knew it I was spending $15,000-$20,000 for the startup plus I needed money in the bank to keep it going,” Fabregas said. “The entire time I was doing this I still had my job at the post office. In July of 2002, I had been here for three months when I got laid off at the Post Office. The entire marketing department got scrapped. I still didn’t know exactly where to go but decided that I should keep pushing.” Last year, the friend who had initially suggested the idea, Fernando (“Doy”) Petelo, inquired about potentially working for Fabregas. Rather than just give his longtime pal a job, Fabregas offered to form a partnership, thinking that they would either sink or swim. Yet succeeding in the extremely competitive copy industry is difficult, considering that there are 1,200 Kinko’s worldwide, along with a litany of other independent copy shops. “We drummed up business by doing a lot of cold calls and by talking to people I knew that were involved in the legal field. I went to a lot of law offices gave them my price list and told them if there ever was an overflow that they couldn’t handle we could cater to their needs,” Fabregas said. “Slowly, we started to get one call, two calls, three calls, and sales were low but it started to pick up. Our total sales for last year have already been exceeded and it’s only the end of April. It looks like we’re headed in a good direction.” Other opportunities While revenues were a meager $25,000 for 2002, they climbed to $60,000 last year. This year Duplikat projects $150,000 in sales. Furthermore, Fabregas has begun to pursue other potential business opportunities. “I also have begun looking at other avenues. I won the bidding for a contract to be an official vendor for the County of Los Angeles’ Internal Services Department, where the different county offices go to if they need copying, printing or anything. ISD cannot do everything themselves and contract things out to outside vendors,” Fabregas said. “It took an entire year of efforts to win the bid, which only came through in March. We signed a three-year deal with them. I anticipate a lot of added business in the near future and that we can convert our part-time employees to full time. It’s slowly coming about.” Duplikat differentiates itself from other similar companies by offering full pickup and drop-off deliveries. Additionally, Duplikat has portable copiers that can be used to do on-site copying. With a low overhead and only four employees (two of which remain part-time), Fabregas aims to keep prices lower than Kinko’s, offering copies from as low as five cents a copy, where Kinko’s starts at eight cents. Flexibility While several national firms specialize in legal copying, there are few local companies that handle this particular niche. The company prides itself on being able to handle any request that a law firm might ask. A sign hangs in the office, “If we can’t do it, it might not be able to done.” While 80 percent of the company’s current business is law firms, Duplikat has satisfied non-legal companies as well. “They’re just phenomenal. We can’t be more pleased with their services. Their work is excellent. Everything is always on time,” Sherry Powell, Director of Graduate Services at the Concorde Career Institute in North Hollywood said. “They are delightful gentleman to work with. We have given them all of our printing work to do. We had used Kinko’s for many years but we switched to them and are delighted with their services.” With business steadily increasing, Fabregas’ goal includes expansion, using the North Hollywood location as his prototype. “In the future, I plan on expanding to Irvine, L.A., Santa Barbara. The goal is to open three more offices in the next five years. I’m setting this business up to be my working model,” Fabregas said. “It’s very challenging but I’m beginning to see the direction that I didn’t see when I started it. It’s all starting to focus.”

Firm Racking Up Sales By JEFF WEISS Contributing Reporter You can call Jeff Salmanson the Colonel Sanders of the reverse logistics industry. While fried chicken and the creation of easily disassembled racks to carry trees and plants from nursery to retailer seemingly have little in common, the founders of Kentucky Fried Chicken and Westlake Village based E-Z Shipper Racks LLC both shared massive initial rejection in their first attempts to build a successful business. Like Sanders, Salmanson drove up, down, and around the United States, traveling from business to business, doing his best to coax them into trying out his product. Salmanson’s efforts paid off, as he and managing partners David Czerwinski and Mel Harner have guided their company to dominance in their field. Salmanson possesses creativity and persistence two crucial attributes of a successful entrepreneur. He’s one of many talented Valley businesspeople who have taken an idea, stayed focus on their vision and have successfully marketed a product from the idea. Salmanson’s company is one of three businesses that the Business Journal highlights this week showcasing some of the best in Valley-area entrepreneurial endeavors. As the clich & #233; goes, necessity is the mother of invention. In Salmanson’s case, his moment came while he was selling corrugated shipping boxes in San Diego. A major company decided that they didn’t want boxes anymore because they didn’t display plants very well and they accumulated too much waste. Salmanson began to search for a recyclable container that could be shipped over and over again to his clients. “Our first idea was to make the container out of wood, but it didn’t work. We switched to metal, we did a lot of modifications, the first metal ones had a lot of problems, we had to use metal and screws, it wasn’t easy to put together and take apart,” Salmanson said. “Then we came across a way to attach metal to metal using a boltless racking system which has been around for a long time. People had it in their garages for years but we figured out a way to make it mobile. That’s when the program starting taking off.” But even though he had discovered a product that would soon change the way nursery products were shipped, Salmanson still had to convince the intransigent nursery owners to rent his wares. For approximately a year, Salmanson traveled on and off to find buyers, going to any nursery he could find and selling quite a few of his E-Z racks. It wasn’t an easy process. “One of our biggest customers right now is up in Oregon. When I was traveling around the country I went up there and had the racks shipped up there so I could show them to him. I rented a trailer and was out delivering them, just to show people how high quality the product was,” Salmanson said. ‘I was charging them $50 for a sample. One of the stores’ general managers told me to leave it so he could take a look at it. When he got the bill for $50, I got a call from the now retired owner, who said ‘I’m not paying for this. Come and pick it up.’ I told him I was in LA and he was in Oregon. He said, ‘I don’t want it, come and get it now.’ I said all right, I’ll see if I can find someone to come and get it. The next day he called me up and said, ‘You know what this thing is pretty good, can you send me a small order?” Big customers That same reticent nursery owner currently rents 27,000 racks a year from E-Z Racks. One of E-Z Racks’ first customers, Heinz Nursery in Irvine, continues to purchase from them in vast quantities. “It is the most economical and most versatile plant delivery system in the marketplace. It’s a rack that has been accepted and in many cases the only rack that accounts like Home Depot, Lowe’s will accept for product. It is the preferred rack in the Nursery industry for shrub and plant delivery,” Heinz’s distribution manager Gene Onufer said. Since 2000, when sales of the product began, growth has been constant. In 2000, E-Z Rack reported sales of just $1 million. But by the next year, revenues jumped to $2.5 million, followed by $5 million in 2002, $9 million last year, and E-Z Rack projects sales of $15 million for 2004. They will rent 300,000 racks this year to 2,500 different stores. Czerwinski and Harner purchased 50 percent of the business from Salmanson’s original partner co-founder Jon Dickey in 2002. All three men are currently managing partners. “The thing about E-Z Rack is it’s not only a wonderful product but it’s a whole system that attracts the racks. We have a system all over the country from our inventory to the growers to the stores and we send people in once a week to the stores to break them down,” Harner said. “When a store gets to a certain level of inventory in our system, we send a truck to come in and break the racks down, repackage them and bring them back. Furthermore, there’s no waste that accumulates like it does with corrugate product.” In order to maintain an efficient nationwide system, E-Z subcontracts these rack retrieval and delivery tasks to other companies. “We have 120,000 of these racks and we need to shuttle them quickly between 2,500 retailers. We have to move 2,500 different locations a week and to break them down, there’s a lot to keep track of,” Czerwinski said. “There’s probably 750 agents to do the breakdown for us. There’s hundreds of trucks. There’s 35 retrieval yards throughout the country that we have to manage. That’s the backbone of this business. It’s not just the fact that we get a great rack in place, but it’s the fact that we get them back and re-rent them again.” All three partners forecast an extremely bright future for the company and its hard not to considering that it has doubled sales, total rentals, and employees almost every year. Home Depot, Lowe’s, Sears are major renters and even Wal-Mart has demonstrated a degree of interest. Preferred system “Right now it’s the best system that exists out there to transport nursery goods into retail stores. It reduces the amount of labor required in unloading trucks which is a major benefit,” Vinny Naab, divisional sales merchant and head of Home Depot’s Mid-Atlantic division said. “It used to average three hours to unload a truck, now it takes 15 minutes. That time savings can be spent merchandising, signing, watering the product. It’s a simple logistical solution to what had been a big problem in the marketplace. We continually use more E-Z Racks every year.” However, the managing partners of E-Z Rack are determined not to grow complacent with the product’s success and are determined to develop other uses for the product. “Joining E-Z Rack has been the best thing we ever did. It has unlimited potential. We’re doing large racks for the nursery business and smaller racks. We’re making mini-racks to be on displays that can hold a few thousand pounds of plants,” Harner said. “We think that this new display can be put inside the store and can potentially sell a couple of million units each year. That’s the next step that we’re working on right now. We’re very close and working with some major companies on the verge of selling to them.” Even the United States Department of Defense has shown interest in the technology that E-Z Rack has pioneering, exploring the possibility of using the product to aid in rapid deployment plans. Potentially, an innovation originally used to mobilize plants may be used for the distribution of medicine, replacement parts, and food stuffs for all branches of the military. “We expect to have continued growth into different channels. One of the biggest opportunities we’re looking forward to is the mini-racks that we have developed,” Czerwinski said. “At Home Depot there are 100 corrugate displays at one time, if can go in there and take a piece of that market than we can save Home Depot labor and disposable cost. The military application is also a huge opportunity. The racks can be used for so many things. It’s limitless. We plan to grow rapidly over the next four or five years,”

Makeup Academy Follows Changes in Market By JEFF WEISS Contributing Reporter Perhaps the best definition of the archetypal entrepreneur is someone who can shift business strategies and goals quickly in order to meet constantly changing marketplace conditions. A true innovator identifies niches that no one currently fills and works to take advantage of that business loophole. Heather and Gregory Savalas, founders of Sherman Oaks-based Last Looks Makeup Academy, meet these criteria, having founded the first mobile makeup school to offer classes in cities across the United States. Furthermore, while they had initially planned to expand to cater to dozens of cities throughout the United States and Canada, the Savalas’ have decided to capitalize on the DVD explosion by offering their classes on disc, allowing thousands of potential students to take advantage of the schools’ knowledge at a fraction of the cost. Heather Savalas always wanted to be a makeup artist and found herself unchallenged at her business management job. Deciding to follow her dreams, she enrolled at Westmore Academy in Los Angeles, where she learned the craft, graduated, and eventually landed a job as a movie makeup artist. However, Savalas soon tired of the inaction that characterizes most movie shoots. Sitting around all day grew tedious and Savalas returned to Westmore where she eventually became its director of education. The inspiration for Last Looks began at Westmore, when Savalas noticed that many people wanted to become makeup artists but couldn’t come to Los Angeles for a variety of reasons. With all the makeup schools located in Los Angeles, an aspiring makeup artist had to fork over exorbitant amounts of money, drop everything in their life, pack their bags and leave their hometown for several months. Compounded with the new reality that television and film companies often shoot outside of Los Angeles, Savalas realized there was a need for a makeup school that offered classes in multiple locations. “We put those ideas together and (along with husband and partner Gregory Savalas) created Last Looks Makeup Academy, with better teachers, new curriculum, and the ability to travel to different locations. There was a need in the market. The first class we did was the most exciting time ever. As it grew, we constantly talked to all the people we knew to make it right. It was the first traveling makeup school ever,” Heather Savalas said. Rapid growth Taking out ads in periodicals such as New York City’s Village Voice, the business grew rapidly at first, before seeing a partial downturn when the economy sagged following 9/11. “We went through a downturn like everybody else, but during the downturn we discovered ways to cut costs, travel better and maximize our overhead businesswise,” Gregory Savalas said. “When the economy got better again we were in a strong financial position. Currently, we focus on seven cities (New York City, Chicago, Austin, Los Angeles, Atlantic City, Las Vegas and Savannah) and have significantly higher per class revenues. Profit margins have increased. The recession made us think not only how can we survive but it taught us how to learn and grow.” Over the past two years, Last Looks has also experienced a 30 percent increase in makeup sales, another element of the business. The company has increased instructors from two to four and plans to hire approximately half a dozen in the near future. In addition, they have expanded the scope of their classes, offering classes in Halloween, drag, and bridal makeup. “Every single employee is an Emmy or Oscar award winner. I don’t want it to sound corny because I don’t want to imply that they are better teachers because they have an Emmy,” Gregory Savalas said. “There are some people who do magnificent work but cannot teach. We really focus on quality makeup artists who have achieved that level of success but are great teachers as well.” Indeed Last Looks’ newest hire, makeup instructor Marianne Skiba has won two Emmys and has worked on films such as “Man on the Moon” and “Meet the Parents.” Other teachers, Thom Surprenant and Jill Rockow, have been makeup artists on the sets of “Pirates of the Caribbean,” “Charlie’s Angels,” “The Scorpion King,” and “Planet of the Apes.” With courses at other makeup academies running well upward of $10,000, Last Looks offers an affordable alternative, with two and three day courses ranging from $500 to $800. “We teach all the classes the other schools teach, we just teach them in short increments. In the end, a diploma from their school and our school means the same,” Gregory Savalas said. “You don’t get hired because you went to a particular school. You get hired because you know technique and how to do it well.” Providing an alternative The students seem to be pleased by the classes that Last Looks offers, as the company continues to be a viable alternative for people who don’t want to spend months mired in class after class. “It was great, the teachers were really cool and Heather is very organized. We had a lot of fun and learned a lot,” Melissa Browne, currently a part-time television makeup artist living in New York City said. “The process was very simple and easy in terms of how to pay, and how to do everything you really needed to learn. I still get materials from them when I need them and I learned a lot from hearing the backstage stuff from our teacher who had worked on tons of movies. They give you a heads up and an insider’s view of the industry.” For now, the next goal for the Savalas’ is to tap into the exploding DVD field, by offering classes that can be piped directly into someone’s living room. “We’re turning our classes into DVD’s with the best quality of everything in a way that won’t become obsolete,” Gregory Savalas said.

Spike in Food Prices Eats Up Profits for Restaurant Chains CORPORATE FOCUS By SHELLY GARCIA, Senior Reporter The jury is still out on the question of whether high-protein diets will slim you down, but one thing for sure is getting thinner restaurant profit margins. As millions gobble up the Atkins diet and others like it, the prices for meat, poultry, eggs and cheese are soaring, and as they do, restaurants are feeling the squeeze. How badly depends on the type of restaurant. Some have locked in prices for these commodities well in advance and needn’t take action until their contracts expire. But others have had to take additional menu price increases and for still others, signs of trouble are already showing on their operating statements. “All restaurant companies are pretty much in the same boat when it comes to this,” said Tony Brenner, an analyst with Roth Capital Partners in Newport Beach. “Many have over the past six months taken some action to pass on some of these increases in the form of their own price increases.” Shares in The Cheesecake Factory tumbled after the Calabasas-based restaurant chain reported that its food costs had risen to 24.9 percent of restaurant sales in the first quarter of 2004, up from 23.5 percent for the comparable period a year ago. Cheesecake, which was trading at $46.52 a share on April 19, before the first quarter report was released, on Thursday closed down about 6.5 percent at $43.45, and, believing that the price increases are going to continue, analysts have begun to revise their estimates downward. “I’ve still got it rated ‘sell,’ and part of it is fears of margin pressures and quality of earnings declining,” said Eric Wold, managing director at Merriman Curham Ford & Co. in San Francisco. Thanks to the Atkins Diet and others like it, it’s estimated that anywhere from 10 million and 34 million Americans are happily slapping a stick of butter onto the skillet and cooking up pork chops, beef and chicken in place of pasta and potatoes. Their hunger for these high protein, low carbohydrate diets, coupled with some feed shortages and the recent outbreaks of avian flu and mad cow diseases is testing the supply side so much that The Washington Post recently reported a thriving business in cattle rustling in places like the San Joaquin Valley, as a new breed of thieves in pickup trucks rushes to cash in on the high commodity prices. Meat prices rise Wholesale beef prices for the first three months of the year were up by about 5.5 percent over last year, wholesale prices for chicken rose about 47 percent in recent weeks, compared to last year and hog prices rose about 24 percent. In one week late in April alone the price of butter soared nearly 11 cents per pound over the previous week and cheddar cheese cost $0.065 more per pound in the same week as it did a week earlier. Some restaurant chains, like Sherman Oaks-based Worldwide Restaurant Concepts Inc., operators of the Sizzler and Pat & Oscar’s chains, have locked in beef prices for a year, and have taken only a nominal menu increase, typical of their yearly price increases, as a result. “We lock in our contracts on an annual basis, so we are not much affected by the beef crisis,” said Keith Wall, vice president and CFO at Worldwide. “If the prices continue up, when it comes time to renegotiate we’ll have to look at it.” Others, however, were caught short as they bellied up to their suppliers, and they have had to take menu price increases over and above their typical annual raises. “It is going to be impactful to a lot of companies,” said Wold. “What you’re seeing now is a lot of companies are really scrambling to raise menu prices if they can.” Raising prices on menu Wold said P.F. Chang’s China Bistro announced a 2 percent menu price increase in February, and the company is still expected to report lower profit margins. Chicago Pizza & Brewery Inc., operators of BJ’s, raised menu prices twice last year. And El Pollo Loco Inc. just moved to close a one-year contract for chicken to try to head off any further menu price increases. “Although the new contract prices for chicken are higher than our previous contract prices, we will offset some of the impact with a price increase that took effect in January,” the company said in announcing its first quarter results. Other restaurants, like Cheesecake, with a far more diversified menu, lock in prices for their poultry, fresh produce and dairy, about one-third of their food supplies, for only a 30-day period, leaving them far more vulnerable to rising commodity prices. In the first quarter of the year the company took a 2 percent menu price increase, twice the hike it took in the year earlier period, and Cheesecake officials said in a recent conference call that they plan to review operating margins again shortly and consider taking additional price hikes for their summer menu. Restaurants often need deal with food commodity increases, but in the past they have been able to minimize the effects by offering menus that avoid the pricier commodities and by steering customers to these other alternatives. That strategy has proved difficult in the current environment. “You name it and it’s going up,” said Wold. “In other years wait staff could recommend something else. When it’s everything, it gets tough.”

Northridge Says It’s Leaving Valley Chamber Alliance By SLAV KANDYBA Staff Reporter The Northridge/Porter Ranch Chamber of Commerce is pulling out of the United Chambers of Commerce of the San Fernando Valley, citing ineffectiveness, cost and a duplication of services provided by other groups, according to Northridge chamber officials. Northridge, one of the founding members of UCC, sent a letter on April 21 to Joel Simon, UCC chairman, expressing dissatisfaction with the organization. Simon acknowledged receipt of the letter but said it didn’t specifically mention Northridge was leaving UCC. “The letter doesn’t say they pulled out,” he said. On May 6, Simon sent a letter of reply to Northridge, urging that chamber to “renew an active involvement with the UCC.” He further attacked the organization for quitting and defended UCC’s legislative program as being “influential in local, state and federal” levels. “At a time when we are making genuine reform and progress toward goals you support, you are abandoning the process,” Simon wrote in the letter. UCC is an association of member chambers of commerce with affiliates from other groups, including the Economic Alliance of the San Fernando Valley and Los Angeles Area Chamber of Commerce, represented on its board, Simon said. Wayne Adelstein, president and CEO of the Northridge chamber, which has 431 registered member businesses, confirmed the organization’s intentions to leave UCC. He called UCC’s services “duplicative,” adding “we’re getting our information from other sources.” One of those sources, he said, is the Valley Industry and Commerce Association (VICA), which wields power through its lobbying efforts. “We get all our letters from other chambers, tend to get them quicker and more of them,” Adelstein said. Northridge’s 24-person board of directors mulled the pullout for some time as it evaluated the chamber’s memberships with not just UCC, but also VICA and the Economic Alliance of the San Fernando Valley, Adelstein said. At the end, it decided UCC wasn’t up to par, mainly because it hasn’t increased general membership at Valley-area chambers. Valley-wide, three to five percent of some 90,000 businesses belong to a chamber, while the U.S. Chamber of Commerce enlists 12 to 13 percent, Adelstein said. Bill Powers, a Chatsworth attorney who chaired UCC before Joel Simon, said Northridge’s decision was based on money. “It’s a financial consideration,” Powers said. “Their dues are a few hundred dollars a year.” He refuted the idea that VICA is competition and defined the purpose of UCC. “The UCC is not an umbrella organization, it’s a trade association of chambers of commerce,” Powers said. “VICA is directly competing with those chambers, our mission is to advance the mission of the chambers (and) we’ve done that.” Powers also said that Adelstein has suggested ideas to improve UCC but has not followed up with him personally. Northridge’s departure leaves UCC with 23 member chambers out of 25 total in the Valley. The Mid Valley Chamber of Commerce left in 2001.

Mannkind Making Another Attempt to Launch IPO By SHELLY GARCIA Senior Reporter Al Mann, the irrepressible godfather of the biotech industry, is getting ready to drive yet another company onto center stage. Mann’s latest venture, Mannkind Corp., a Valencia-based biopharmaceutical firm, has filed its intention to go public and is seeking to raise about $86 million. The immediate outlook for the company, which is working to develop a variety of therapies for diabetes, cancer and auto-immune diseases, is hardly sanguine. Like most in the biotech field, Mannkind has spent hundreds of millions, the majority of it Mann’s own money, over about a dozen years to formulate its lead product, an insulin delivery system for diabetes, and the company expects to incur even more losses before its product is ready for market. But that is not likely to dampen enthusiasm for the offering. “Al has a fantastic track record with picking the right market trends and products to take to market,” said John O. Johnson, managing director of The Spartan Group LLC, an investment banking firm in Burbank. Since the 1950s, Mann, the septuagenarian billionaire, has fathered some 10 companies, most recently selling off insulin pump maker MiniMed Inc. to Medtronic Inc. for more than $3 billion. He formed Mannkind in 1991 and three years ago, merged it with two of his other startups, AlleCure Corp. and CTL Immunotherapies Corp. which had been focusing on autoimmune and cancer therapies respectively. Since then, Mann has pumped $367 million into the company, $228 million of that his own money, and the rest through private equity and other stock placements, according to the registration statement filed. Mannkind has no revenues. Company officials are forbidden by SEC regulations from discussing an IPO until the transaction is completed, but Mann conceded in a Los Angeles Business Journal interview last year that funding Mannkind had eaten up a lot of capital. The proceeds of the IPO will be used mostly to continue to develop the Technosphere Insulin System, which is currently in late Phase II clinical trials, expand manufacturing operations for the product and expand other product development programs at the company. The offering is not likely to raise nearly enough to see the company through to marketing its Technosphere Insulin System, but the idea is to raise enough to move the research to a later stage when the shares are likely to be more valuable. The strategy is one that biopharmaceutical companies typically employ. “The earlier the stage, the bigger the discounts,” said Teresa Young, a partner who leads the life sciences practice for the Pacific Southwest region at Deloitte. “Obviously the market is taking into account market risk as these are pricing.” Three phases Pharmaceutical products go through three phases of trials before FDA approval is sought. The first phase determines efficacy; the second is proof of concept and the third is actual clinical trials on patients. There is a great deal of risk to an investor at any one of these phases, but the farther along the product is the greater the chances that it will reach the commercial marketplace. “The money will get them to the next stage where they have a much more valued place in the trajectory, and that will enjoin a higher value,” said Johnson. “In high growth companies, that’s a typical strategy.” Mann, who is 78, owns 65 percent of the company, and draws a mere $100,000 in annual salary (plus stock options), according to the registration statement, but he has no intention of scaling back his involvement. “By virtue of his holdings he (Mann) is and will be able to individually elect the members of our board of directors, control our management and affairs and prevent corporate transactions such as mergers, consolidations of the sales of all or substantially all of our assets ” the registration statement reads. Upon his death, his shares will be left to the Alfred E. Mann Medical Research Organization and AEM Foundation for Biomedical Engineering, not-for-profit research groups that fund Mann’s many charities. The membership of both groups includes four of Mann’s six children. Back into the market Mannkind, which has not yet priced its shares or reported a date for the offering, is one of a growing number of biotech and biomedical companies that have ventured back into the public financing markets. UBS Securities LLC, Piper Jaffray & Co., Wachovia Capital Markets LLC, Jefferies & Co Inc. and Harris Nesbitt Corp. are underwriting the offer. The company two years ago pulled back IPO plans when the public market for all kinds of companies virtually dried up. The recent resurgence in activity is due to several factors, Young said. “One is that the VC market really sees this as one of the better places to invest right now. And this also is an industry that is finally maturing.” Like a number of others, Mannkind has progressed closer to its endgame when an investment would pay off for investors. Also not to be overlooked is the attractiveness of the biopharmaceutical sector, which is generally engaged in solving the problems of aging. That, say investment and banking experts, is why biotech companies, unlike other kinds of technology businesses, have been able to seek public funding without any profits or, in a number of cases, revenues. “A lot depends on those trends and the probability of those trends,” Johnson said. “Fortunately, what Mannkind has is in part its positioning in the market with those demographics and Al Mann backing it.”

healthnet healthnet By SLAV KANDYBA Staff Reporter Workers at the Woodland Hills headquarters of Health Net Inc., will bear only a small burden of the layoffs the company plans to offset a decline in earnings. The managed care company said it would lay off a total of about 500 employees nationwide, about 5 percent of its workforce, but only 100 of that number will come from its headquarters operation. Health Net employs about 2,000 workers in Warner Center. The company expects to take a charge of $15 million to cover severance costs associated with the layoffs. “We’re reducing our workforce nationally, and as far as Woodland Hills, it’s going to affect fewer than 100 associates,” said a company spokesman. Health Net is still formulating its plan and was unable to provide further details concerning where the cuts would be made. Last week Health Net reported net income plummeted to about $15 million in the first quarter of 2004 from $72.1 million in the same quarter of 2003. Health Net is one of the nation’s largest publicly traded managed health care companies, with HMO, PPO and other services providing health benefits to about 5.3 million Americans in 14 states. The company pointed to an unexpected rise in costs as the reason for the dismal earnings. “What happened in the first quarter is that prior period costs of approximately $64 million pretax led to our coming up short of previously set expectations,” said Jay Gellert, Health Net president and CEO, in a conference call with analysts on May 4. “These prior period costs resulted from a large number of hospital claims and other items.” Some of the claims came from California, as well as Connecticut and New York. At the same time, Health Net’s decision to speed up claim payments in order to improve provider relations and reduce interest expenses on outstanding claims contributed to a higher than expected claim cost, Gellert said. “As we did so, the dollar value per claim came in higher in March than any historical pattern would have indicated,” Gellert said. “Our paid claims in the first quarter of ’04 were $120 million higher than in the fourth quarter of ’03, and much of it occurred in March, leading us to recognize these higher health care cost trends both for the quarter and the year.” Gellert added that so far April data suggests claims have fallen in line with past levels, but the company is nonetheless taking precautions. “We began raising prices at the start of the year, and we will start to see some effect in Q2,” Gellert said. The company also noted that it does not expect future enrollment and revenues to grow as much as it had previously anticipated, and as a result, Health Net made its decision to lay off a portion of its workforce. “Given all that’s transpired and knowing that our enrollment and revenues are not going to grow as much as we previously thought, we kew we had to address administrative costs,” said Gellert. “These reductions in enrollment and revenues were part of our earlier forecast, so we’d already begun the process of attacking administrative costs.” Health Net reported its Commercial Health Plan enrollment increased by 82,000 members, or three percent in the first quarter of the year, compared with the first quarter 2003, and by 25,000 members or one percent, over the previous quarter. In the first quarter, the nation’s ongoing military activity spurred revenue growth for Health Net’s government contracts, as more individuals enrolled in TRICARE, of Health Net’s offerings. Contracts revenue rose 11.1 percent from the first quarter of 2003, to nearly $504 million. The company has also postponed completion of its systems consolidation project called Health Net One, which was pushed back to the first half of 2005. Health Net shares closed at $23.40 on Friday, May 7, down from $25.50 on the day prior to the earnings report.

NEWSMAKERS Computer Software Lancaster-based Simulations Plus Inc. a provider of products for pharmaceutical development, announced that it has appointed Jeffrey A. Dahlen president of its Words+, Inc. subsidiary. Dahlen had formerly been vice president of research and development for Words+, a company that develops and sells computer-based assistive technology devices for people with severe disabilities. Consulting Westlake Village-based, Millennium Business Solutions Group Inc, a provider of business and technology solutions has announced the addition of six new staff members: Christine Steele has been named senior accountant for the company. Steele has over 25 years of accounting and business experience in both the public and private accounting sector. John Rinn has been named director of customer relations management. Rinn has over six years of sales consulting and sales force automation consulting experience. He has worked extensively with manufacturing, distribution, and service organizations. Peter Henry is MBSG’s new senior systems engineer and programmer. Henry has over 30 years experience in system design, programming and integration experience which includes the integration, implementation, and project management of manufacturing, distributional and financial solutions for many international businesses and organizations. Kayono Halim is the new customer relations developer and senior consultant. With over 15 years of combined programming experience including managing a small consulting firm for information technology and accounting package applications, Halim has extensive programming experience. Andrew Hagenbach has been named MAS 90 implementation specialist and trainer and quickbooks ProAdvisor. Hagenbach is a public accounting professional with over seven years of management information and accounting systems installation, implementation, and training experience. Hagenbach is a certified MAS 90 and MAS 200 consultant with over five years of experience in helping organizations with system design, installation, data conversion, implementation, process analysis and the design of customized processes and reports. Brian Cox is the new MAS 90/200 consultant and implementation specialist. With over 20 years experience in both the accounting and consulting fields, Cox has implemented and supported a variety of accounting financial systems. Cox is a Best Software certified trainer for MAS 90, MAS 200 and Crystal Reports. Education Harold Hellenbrand, currently dean of the College of Liberal Arts at Cal Poly San Luis Obispo, will join Cal-State Northridge on August 1, as its new provost and vice president for academic affairs. As provost and vice president for academic affairs, Hellenbrand will direct more than 1,700 faculty and staff members, with an annual budget exceeding $117 million. He will oversee Northridge’s nine colleges, its library, academic support units and central academic administrative offices. Hellenbrand’s accomplishments at San Luis Obispo include rewriting the campus’ discrimination complaint process, overseeing its College of Liberal Arts’ centennial campaign plan, instituting a college-wide technology committee and plan, hiring faculty, designing the college Web site and initiating the funding of student research projects and travel. Electronics California Amplifier Inc. announced that James E. Ousley was appointed to the company’s board of directors, increasing the size of the board to eight directors. Ousley most recently served as president, CEO and director of Vytek Corp. from 2000 until April 12, 2004, when the merger of California Amplifier and Vytek became effective. Prior to joining Vytek, he served as president and CEO of Syntegra USA, a global e-Business solutions provider and a division of British Telecommunications. Entertainment Stephen McPherson has been named president of ABC Primetime Entertainment. In this capacity, McPherson will have oversight of all development, current programming, marketing and scheduling for the primetime division of the ABC Television Network. Formerly, the president of Touchstone Television, McPherson oversaw development for the past three years, which were the most successful in the studio’s history. During his tenure, he was responsible for all day-to-day operations of the studio, including the development and production of the division’s network of primetime series, specials, and films. Health Care Edward Sedo has been named chief financial officer for Aegis Medical Systems, Inc. Sedo is a CPA with extensive public accounting experience at Pricewaterhousecoopers. He also has extensive experience in the healthcare arena having previously served as a hospital controller and as CFO at a regional home health care company. Manufacturing Anthony E. Giraudo was appointed to the COO position at Camarillo-based Semtech Corp., a manufacturer of semiconductors for communication devices and computers. Giraudo will oversee all day-to-day operational activities and play a key role in new product development, according to a statement. The graduate of University of New Mexico was previously CEO of TelASIC Communications, a spinoff from Raytheon, and takes over the position last held by Jason Carlson, now Semtech’s president and CEO. Real Estate Jerry Bruno has joined Younan Properties, a commercial real estate investment firm, as director of asset management. In his new postion, Bruno will be a member of the senior management team and will be responsible for managing the firm’s assets throughout Southern California. Prior to joining Younan Properties, Bruno worked for BH properties as director of property management, where he was responsible for a large, multi-use portfolio with assets located in California, Washington, Arizona, Texas and Florida. Pat Fitzharris has joined Troop Real Estate’s Westlake Village office. Fitzharris has 20 years experience in Conejo Valley home sales with special emphasis on relocation as well as the “Three Springs” area. Active in the community, Fitzharris has volunteered as a member of MANNA, Conejo Valley’s food bank. Professionally, she is a member of the National Association of Realtors and the Conejo Board of Realtors.