San Francisco, March, 2015
The Black Swan Pushes Events to the Tipping Point-Maximizing Enterprise Value in the upcoming Crisis
This article was published by Steven R. Gerbsman and Robert Tillman in May, 2007.

Please read, enjoy and “be prepared”.

Best regards,
Steve Gerbsman

We are currently in one of the best economic times in our country?s history. The stock market is at all time highs, unemployment is at all-time lows, interest rates are low, money is plentiful and deal valuations are high and getting higher. There are, of course, many worrisome trends: terrorism, excessive government spending, trade deficits, high oil prices, immigration and over the longer term, such issues as an aging population and (possibly) global warming. Although problems and worries always exist, in historical terms, times are very good indeed.

The big questions for us as specialists in maximizing enterprise value are:

Will it end?

Yes. Of course. Even fundamentally healthy economies experience frequent and often violent corrections. The current world economy has evolved in many ways over the past decade. All large businesses are international. The primary economies of the world are very tightly linked together. Money is far more liquid and moves around the world with far less “friction” than it did in the past. The pace of technical change continues to increase. Nevertheless, we do not believe that the laws of history, and especially, the laws of human nature, have been repealed.

As always, “The more things change, the more that they remain the same.”

When will it end?

Unfortunately, no one knows the answer to this question. In historical terms, the current economic expansion has continued for a very long time and has survived numerous shocks, including war, a doubling of energy prices, natural disasters and localized economic downturns, such as the bursting of the sub-prime mortgage bubble. It appears to be “ripe” for a downturn. On the other hand, inherently unstable situations often persist for far longer than anyone could believe possible. During the 2000 Internet bubble, it seemed to us for quite some that the old rules of business no longer applied and that 25 year-old CEOs knew something us old guys did not know. When the crash occurred, we were relieved to find out that we were not so obsolete after all.

We did, however, underestimate the staying power of technically insolvent companies with broken or non-existent business models. Many of these companies had significant cash on the balance sheet (offset, of course, by significant liabilities) and investors who continued to infuse more cash far beyond the point of reason. Today, there exist immense pools of uncommitted cash, much of it in the hands of entities, such as private equity funds and hedge funds that are subject to minim al regulatory scrutiny and whose operations are obscured from the public view. In addition, the weakness of the dollar against both the Euro and the Pound Sterling makes U.S. assets a relative bargain. These factors tend to mitigate against an economic downturn. For how much longer they will continue to do so we do not know (and if we did know, we would certainly would not tell).

How will it end?

Fast, hard and unexpectedly. Two recent books shed a great deal of light on the process:

The first book, The Tipping Point by Malcolm Gladwell describes how human behavior causes events to cascade rapidly once a certain critical mass (the “Tipping Point”) has been achieved. Examples in the business world include periodic economic ?panics? and the spread of certain technologies and products, such as personal computers, iPods, cell phones, etc. It is very difficult to predict in advance when the ?tipping point? in any situation will be reached, but history has shown that, once it has been reached, events proceed very quickly.

The second book, The Black Swan: The Impact of the Highly Improbable by Nassim Nicholas Taleb describes how highly improbable, and hence unpredictable, events periodically create massive change. The title of the book derives from the observation that the existence of even a single black swan disproves the assertion that all swans are white. Historical examples include the Fall of France at the beginning of World War II, the rise of the Internet and 9/11.

There are many obvious candidates for a “black swan” event that pushes the world economy over “the tipping point” into a downturn – a war with Iran, a nuclear terrorist attack or a worldwide bird flu or small pox epidemic, but generally, it is what you do not see that gets you. We are fundamentally optimists about the long-term prospects of the world economy. In many highly measurable ways, the wor ld really is improving, driven by technological innovation, a lowering of barriers to trade and increasing economic integration. Nevertheless, we are old enough to have lived through many “bumps” along the road and know that such discontinuities will always occur. We believe that we will see a significant economic event sometime over the next 12-18 months, either localized to a particular sector or geographic region or globally.

Our Advice?

Before such an event occurs:

As a board member, investor or stakeholder:

1.  Implement tight cash flow, receivables and inventory reporting so that you are alerted to problems early.
2.  Focus on the control, preservation and forecasting of CASH on a weekly, monthly and quarterly basis.
3.  Require ?bottoms up? forecasting for all aspects of revenue and expense. Have the CEO and CFO defend ALL numbers.
4.  Hold the CEO responsible and accountable for Performance. If you are off the business plan/forecast, re-forecast based on the reality of ?what is? today.
5.  Communicate frequently with all parties at interest. Check that the CEO is providing leadership, motivation and morale to the management team and employees.
6.  Review all companies in your portfolio. Identify and define action plans to fix weaknesses now.
7.  Utilize professional resources to assist in maximizing enterprise value, when appropriate.
When such an event occurs:

Face up to reality and act quickly. When things are going bad, waiting seldom improves them. We have never seen a board of directors act too quickly when faced with a crisis. We have all too frequently seen a board act slowly or not at all.
Call for assistance early. The earlier professionals can get involv ed in the process, the better the potential outcome in maximizing enterprise value. Many times boards request assistance only after a company has run out of cash. Many more options exist to maximize enterprise value if a company has some running room.
About Gerbsman Partners

Gerbsman Partners focuses on maximizing enterprise value for stakeholders and shareholders in under-performing, under-capitalized and under-valued companies and their Intellectual Property. Since 2001, Gerbsman Partners has been involved in maximizing value for 88 technology, medical device, life science, digital marketing/social commerce, cyber and information security and solar companies and their Intellectual Property and has restructured/terminated over $810 million of real estate executory contracts and equipment lease/sub-debt obligations.  Since inception, Gerbsman Partners has been involved in over $ 2.3 billion of financings, restructurings and M&A transactions.

Gerbsman Partners has offices and strategic alliances in San Francisco, New York, Boston, Orange County, VA/DC, Europe and Israel.


Email: steve@gerbsmanpartners.com
Web: www.gerbsmanpartners.com
BLOG of Intellectual Capital: blog.gerbsmanpartners.com

Suddenly, everyone’s making computers you strap to your face. Here’s a rundown of all the big players.

This week, hardware maker HTC and PC game technology company Valve demonstrated theirs, called Vive, and it was met with wild rapturous applause from tech writers.

But how is it any different than Facebook’s Oculus? And what about those Microsoft goggles that their CEO is calling “the new desktop?” And whatever happened to Google Glass?

We thought it might be helpful to get an overview of all the different virtual reality and augmented reality headsets that companies are building and showing off.

Here’s what you need to know.

Vive VR

htc vive virtual reality headsetBusiness Insider

Who’s behind it? The hardware is made by HTC, best known for its phones, but the underlying technology is made by Valve, which makes very popular platforms for video games.

What does it do? It’s a virtual reality (VR) headset. When you wear it, you seem to be immersed in a computer-generated world. It’s like living inside a really realistic video game.

What’s cool about it? It’s incredibly realistic. But the best part: It’s got a couple of controllers you hold in your hands that actually let your hands show up in the virtual world, letting you wave at passing objects or shoot a gun or whatever. Business Insider’s Steve Kovach called it “the most mind-blowing virtual reality experience ever.”

What’s bad about it? So far, the consensus is it’s the best VR product out there. But it’s still got all the inherent problems with VR: It’s great fun for the person inside the headset, but there’s not much room for interaction with people in the real world. You have to connect it to some kind of computer. And you look silly wearing it.

When can you buy it and how much will it cost? A developer version will be available later this spring, and normal people will be able to buy it in stores by the end of the year, the company says. No word on price.

Oculus Rift

Henry Blodget trying OculusNicholas Carlson

Who’s behind it? Oculus was an independent company working on VR technology until Facebook’s Mark Zuckerberg developed a strong interest in the company and technology. Facebook bought it for $2 billion about a year ago.

What does it do? Virtual reality, which means it puts you into a 360-degree computer-generated world. The Rift is a developer headset that Oculus makes itself, but Oculus also provides technology to other hardware makers like Samsung.

What’s cool about it? It was the first VR headset that showed off how amazingly realistic this technology could be. Tech bigwigs have been raving about it since 2013. Business Insider’s Nicholas Carlson tried it for the first time last December, and immediately tweeted “It’s going to change everything.”

What’s bad about it? Some early versions caused people to get nauseated or disoriented, although this seems to have gotten a lot better with the most recent “Crescent Bay” prototype. It also doesn’t have any way to show your hands when you’re in the virtual world, which can be disorienting.

When can you buy it and how much will it cost? The latest development kit, which is a version for developers to build apps with, is available for $350. It’s expected to go on sale later this year and cost a few hundred bucks.

Gear VR

Samsung Gear VR virtual reality planeQantas

Who’s behind it? Samsung makes the hardware, but the VR experience is powered by Oculus. 

What does it do? It’s a full virtual reality headset, but it uses a Samsung smartphone instead of a computer to power the display.

What’s cool about it? It’s the only one of these products that you can actually buy today. You put the smartphone right in the headset, so you don’t need to be tethered to some kind of computer with wires as you do with most of these other products. It’s got pretty impressive resolution.

What’s bad about it? It doesn’t have full positional tracking like the Oculus Rift. What that means is, while it can tell which direction you’re looking in, it can’t tell if you lean forward or poke your head around an object. That makes it feel less realistic than the full Oculus or other VR headsets.

When can you buy it and how much will it cost? You can get it now for $200.


microsoft executives testing the hololensAP

Who’s behind it? Microsoft. The company has been working on it in a secret lab right below the visitor’s center on its campus in Redmond, Washington, since 2010. They finally showed a prototype in January.

What does it do? It’s not VR, but a slightly different thing called “augmented reality.” That means the goggles are translucent. Some apps totally immerse you in a computer generated world, just like VR. But in a lot of apps, most of what you see is the real world, with computer-generated images superimposed on top of it. So it’s more of a blend of reality and fantasy.

What’s cool about it? Microsoft has built some really cool work-type apps for it. For instance, it built an app with NASA that will let scientists walk around inside a 360-degree version of the Martian surface, constructed of pictures from the Mars Rover. Then, scientists can mark specific spots for further study, which calls the computer program to look up data the Rover collected on just those spots. Plus, Microsoft is promising that it will be part of the broader Windows 10 platform, so regular Windows developers will eventually be able to build apps for it.

What’s bad about it? The version Microsoft showed in January was just a prototype, very unfinished and clunky — the guts of the computer sat in a heavy unit that hangs around your neck. Microsoft has a lot of work ahead to get this thing done.

When can you buy it and how much will it cost? The party line is that this will be out “in the Windows 10 time frame.” Windows 10 is expected to ship this year, but we’d be stunned if Hololens ships at the same time. Maybe 2016. We have no idea what it’ll cost.

Magic Leap 

Your browser does not support the video tag.
Magic Leap

Who’s behind it? Magic Leap is a startup run by a colorful character named Rony Abovitz. It just got an investment of $542 million led by Google and featuring other investors like Marc Andreessen and Qualcomm.

What does it do? It’s an augmented reality product, apparently similar to HoloLens. The company hasn’t shown it widely yet, though, so we’re not sure.

What’s cool about it? Magic Leap says it’s developed new technology that projects images directly into each eyeball. This is supposed to eliminate the nausea that some people feel with VR headsets.

What’s bad about it? The company is so secretive, we don’t know what the actual product will look like. The web site is full of demonstrations of what users might see, like the little virtual elephant in the picture above.

When can you buy it and how much will it cost? Abovitz told the MIT Technology Review in February that it’s “not far away.” It will cost in the same price range as other consumer electronics devices.

Project Morpheus

project morpheus sony ps4 virtual reality headset prototype@PlayStation/Twitter

Who’s behind it? Sony.  

What does it do? It’s a full virtual reality headset with an emphasis on games. Sony has been in the console game business for almost 20 years, and many of the best games are available for Sony consoles, so this could become the gamer’s VR headset of choice.

What’s cool about it? It will work with the PlayStation 4 and developers will presumably be making new PS4 games for it. Some reviewers say the current prototype headset feels more finished than the Oculus Rift.

What’s bad about it? Sony seems to be moving very slowly, and it won’t come out until next year.

When can you buy it and how much will it cost? Sony is targeting “the first half of 2016,” but no word on price.


Google Glass 6Jim Edwards

Who makes it? Google was selling a prototype version for developers until earlier this year, but the company always said it was an experiment. Google shut the project down earlier this year.

What did it do? It was a form of augmented reality, where small images appeared to be superimposed on the world around.

What was cool about it? It was the least obtrusive device on this list – instead of a bulky headset or pair of goggles, it was just a pair of glasses frames with a tiny little display. The display beamed imaged onto the wearer’s eyeballs

What was bad about it? It really wasn’t ready for prime time, and it cost $1,500 to get one. The biggest controversy, though, was you could use it to record videos and there was no red light or other indicator that you were recording. Some people got really upset and even went so far as to attack Glass wearers, and ban them from certain public places like bars and movie theaters. Plus, it was meant to be worn out in the world — unlike most of these other devices, which are for use in the home or maybe at work — but it wasn’t very stylish.

When can you buy it and how much will it cost? You can’t buy one now. But Google apparently hasn’t given up: It’s reportedly working on a virtual reality version of Android that it might license to anybody who wants to make a VR headset.

New details about the next Apple TV may have just leaked out

Apple is working on a new version of its Apple TV streaming set-top box, John Paczkowski of BuzzFeed News reports.

The new version of the Apple TV will be “a significant overhaul of the device,” according to the report, and will introduce its own App Store in addition to adding Apple’s virtual assistant Siri for the first time.

Apple is said to be planning to announce the new Apple TV at its World Wide Developers Conference in June, and will also debut a software development kit allowing app developers to create their own apps for the streaming box.

The interior of the Apple TV is said to be getting an overhaul as well. Apple will include a version of its A8 chip as the processor, and will increase the internal storage “well beyond the 8 GB in the current device.”

The new report from Buzzfeed News appears to back up an earlier report from 9to5Mac’s Mark Gurman which revealed Apple’s would announce a slimmer version of the Apple TV complete with its own App Store and newly designed remote in the summer.

Interestingly enough, the Apple TV started out as a “hobby” product for Apple, but after reaching more than $1 billion in sales in 2013, Tim Cook has since said, “It’s a little more difficult to call it a hobby these days.”

Apple is also said to be developing its own TV subscription streaming service to launch in the fall, according to The Wall Street Journal, which will offer “about 25 channels, anchored by broadcasters such as ABC, CBS, and Fox, and would be available on Apple devices such as the Apple TV.”



San Francisco, March, 2015
“Terminating/Restructuring Prohibitive Real Estate, License, Payables & Contingent Liabilities”
Gerbsman Partners has been involved with numerous national and international equity sponsors, senior/junior lenders, investment banks and equipment lessors in the restructuring or termination of various Balance Sheet issues for their technology, life science, medical device, digital commerce, solar and cleantech portfolio companies. These companies were not necessarily in Crisis, had CASH (in some cases significant CASH) and/or investor groups that were about to provide additional funding. In order stabilize their go forward plan and maximize CASH resources for future growth, there was a specific need to address the Balance Sheet and Contingent Liability issues as soon as possible.

Some of the areas in which Gerbsman Partners has assisted these companies have been in the termination, restructuring and/or reduction of:

1.  Prohibitive executory real estate leases, computer and hardware related leases and senior/sub-debt obligations – Gerbsman Partners was the “Innovator” in creating strategies to terminate or restructure prohibitive real estate leases, computer and hardware related leases and senior and sub-debt obligations. To date, Gerbsman Partners has terminated or restructured over $810 million of such obligations. These were a mixture of both public and private companies, and allowed the restructured company to return to a path of financial viability.
2.  Accounts/Trade payable obligations – Companies in a crisis, turnaround or restructuring situation typically have accounts and trade payable obligations that become prohibitive for the viability of the company on a go forward basis. Gerbsman Partners has successfully negotiated mutually beneficial restructurings that allowed all parties to maximize enterprise value based on the reality and practicality of the situation.
3.  Software and technology related licenses – As per the above, software and technology related licenses need to be restructured/terminated in order for additional capital to be invested in restructured companies. Gerbsman Partners has a significant track record in this area.
About Gerbsman Partners

Gerbsman Partners focuses on maximizing enterprise value for stakeholders and shareholders in under-performing, under-capitalized and under-valued companies and their Intellectual Property. Since 2001, Gerbsman Partners has been involved in maximizing value for 88 technology, life science, medical device, solar and digital marketing/social commerce companies and their Intellectual Property, through its proprietary “Date Certain M&A Process” and has restructured/terminated over $810 million of real estate executory contracts and equipment lease/sub-debt obligations. Since inception, Gerbsman Partners has been involved in over $2.3 billion of financings, restructurings and M&A transactions.

Gerbsman Partners has offices and strategic alliances in Boston, New York, Washington, DC, Alexandria, VA, San Francisco, Orange County, Europe and Israel.



Phone: +1.415.456.0628, Cell: +1 415 505 4991
Email: steve@gerbsmanpartners.com
Web: www.gerbsmanpartners.com
BLOG of Intellectual Capital: blog.gerbsmanpartners.com


“Oh! My Papa”*

March 12, 2015
Sam Fox, My Father, A Holocaust Survivor- a tribute from a loving son

1929 – 2015

I wish to share with you some of the many lessons I was privileged to learn from my Father.

When asked by my Brother, “What is the secret to a successful and happy life?”, despite having experienced the Holocaust, in which he lost his parents and five siblings….despite then sitting in a wheelchair because of a paralyzing stroke….. despite that his wife, my Mother, was dying in the other room…..He said

“In life some people have it easy and make it hard and some people have it hard and make it easy”

The value of charity

“When I first came to America I had nothing, yet I always gave to charity. When I did, it always made me feel rich.” – from an acceptance speech upon receiving an award

The value of the pursuit of good

“The pursuit of the good is the noblest of character builders and one of the sources of true gratification”. There are other things in life besides self-interest. Personal involvement in others challenges, in community affairs are the greatest sources of personal achievement and success. Too many people refuse to understand what it means to be involved and to help others. They are truly missing something. There is nothing as gratifying and self-fulfilling as helping others. Why don’t you try it? If you do, I can assure you that you will arrive at a similar conclusion. Try it, you will like it”. – from another acceptance speech upon receiving an award

These were just some of his words. The valuable lessons learned by all who had the privilege of knowing him, came from watching him turn those words into deeds.

*Listen to Eddie Fisher’s beautiful song -Oh! My Papa


Greetings Cupcake Friends.
Since our company was founded in June 2012, we have worked very hard to make Cupcake Digital one of the most recognized industry leaders in children’s apps, with a mission of creating high-quality, award-winning products kids love and parents value.

This recognition has enabled us to build strong relationships with leading licensors of intellectual property, children’s entertainment content owners, publishers, and film and television studios. These relationships have, in turn, enabled us to develop and significantly expand our consumer offering.

Today, I am proud to give you a sneak preview of our latest product achievement that will mark yet another giant leap for the company.

Its name? NetKids™ Digital Entertainment Network

What is it? A subscription based digital entertainment network just for kids. NetKids™ is not only a place to find our library of award-winning apps, it also will be the premiere destination for the best in children’s videos, movies, e-books, music, activities and more.

Its promise? NetKids™ is a fun and safe place where favorite characters, superheroes, and new & familiar cartoon friends come alive.


Over a year in development and scheduled to launch in early April, NetKids™ is the culmination of integrating many of our strategic initiatives, including licensing, acquisitions, marketing, and technology.

At launch, the network will include over 75 of the best children’s media brands represented by more than 25 licensors. There will be over 100 kids’ books, with thousands in the wings that will be added on a weekly basis. There will also be over 100 hours of on-demand video. We will continue to on-board additional video properties, episodes and other content that will premiere weekly. All of this will be rounded out by fun activities that support children’s learning and imaginative play.

Please click here to view a “rough cut” video test drive of the NetKids™ platform. I wanted you to have the first sneak peek while we develop a series of preview videos that will be used to promote the release of the app in early April.

Click here to find Frequently Asked Questions about the product offering and the launch.

The business premise and in-market precedents behind NetKids™ are substantial. Ultimately we believe that the value NetKids™ will bring to parents and children will be a game changer for the children’s entertainment industry and for our company.

I want to thank you for your continuing support. I will continue to update you on our progress. If you have any questions, please don’t hesitate to reach out to me by email or phone.

Best Regards,
Brad Powers
Chairman & CEO
Cupcake Digital Inc.


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