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CyberBucks Venture Catalyst facing doubts about future

Epic Cycle Begins Move Toward Its Expansion

Once business incubators were in favor, and companies like San Diego-based Venture Catalyst appeared to be headed for unparalleled good times.

But those days are long gone for the public firm which is traded as VCAT on the Over the Counter Bulletin Board. The company is hanging on by its fingernails, based on its year-end quarterly report released last month.

Looking at Venture Catalyst’s fiscal year net loss of $18.5 million on $8.8 million in revenues is bad enough, but even more telling is the revelation that its auditors have told the company it has “substantial doubt about VCAT’s ability to continue as a going concern.”

The company abandoned an earlier business plan that envisioned it harboring high-tech startups, collecting fees and equity participation in the winners. Today, its one client, Barona Casino, is focused on its $240 million expansion, and isn’t spending money on consulting services from VCAT.

Last quarter, Barona paid VCAT only $200,000, which made up 100 percent of VCAT’s revenues. As stated previously, it has only one customer.

Venture Catalyst also revealed it has a little more than $2 million in cash as of Sept. 17, enough to sustain its operations for about 2 & #733; months. After that, it hopes to obtain $1 million from an income tax refund, which will provide sufficient funding for another two months.

Beyond that, the company says Barona owes it $7.5 million from earlier advances it made in connection with the expansion. Chairman Don Speer said those advances, which are not documented as loans, will be repaid when VCAT asks for the money.

But as far as the consulting fees, which are contractually promised through March 2004, VCAT doesn’t expect to see any.

To questions about how the firm expects to survive, Speer said those will be forthcoming in a subsequent SEC filing due within 15 days.

VCAT, with 15 employees and offices in Mission Valley, was delisted earlier this year from Nasdaq, and traded Oct. 3 at 15 cents.

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Epic Ready For Some Football:

Epic Cycle Interactive Inc., a San Diego engineering services company, has been rolling with the heavy punches dealt most Internet companies this year. It shaved staff by a few dozen positions to about 25 people.

And yet, the company in recent months is expanding, rather than contracting. A few months ago, it opened a new office in Irvine and added a business development staff member. Soon, four new salespersons will come on board, said CEO Jim Fitzgerald.

The company, headquartered in Downtown, also operates an office in Pleasanton to better serve Bay Area customers. Among its new clients are the NFL’s Oakland Raiders and San Francisco 49ers, both of which use software developed by Epic Cycle to run their Web sites.

The firm is also working on the first phase of a contract with the U.S. Marine Corps to design an e-commerce system for all its commissaries. Fitzgerald couldn’t disclose contract amounts.

This summer, Epic Cycle took over some 5,000 square feet of space in the Comerica Bank building at 600 B Street, moving from 510 Market Street.

Remedent Begins OTC Trading:

Remedent USA, Inc., headquartered in Escondido, began trading on the over the counter bulletin board under the symbol REMM last week.

The 3-year-old firm, once focused only on designing and distributing toothbrushes and other oral hygiene equipment, is branching out into other areas.

Controller Cole Gehrung said since June, the company has restructured to include three distinct business lines: toothbrushes; high-tech dental products, including curing devices and internal oral cameras; and professional employer organizations.

The latter line, PEOs, also called employee leasing firms, handle payroll and human resource functions for businesses, essentially leasing the workers back to the employer. Remedent said it hopes to complete the first acquisition of a PEO by the first quarter of next year, then follow up with other acquisitions.

Remedent’s move from being traded on the pink sheets market to the OTC bulletin board is an important first step in attracting new capital and increasing its market penetration, said Chairman and President Kenneth Hegemann.

While Remedent has its headquarters in Escondido, only Hegemann and one other employee work there. Other offices for the 16-person firm are in Encino, Lake Forest, and in Belgium, where its European sales and distribution are located.

REMM lost $771,000 on sales of $440,000 for its last fiscal year ended March 31. It was traded at 15 cents last week.

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NStor Continues Talks:

San Diego-based nStor Technologies Inc., a provider of storage area network systems, said it is continuing discussions with an existing investor and potential buyer of 49 percent of the company, and with an undisclosed Asian public company for another equity investment.

NStor said it is also discussing a distribution agreement with an affiliate of the Asian firm.

In August, nStor disclosed it was negotiating with Maurice Halperin, who owned about 9 percent of nStor shares, to purchase what amounts to a majority ownership. Halperin’s firm, Halco Investments, LC, provided nStor with an 8 percent short-term loan of $3.9 million for nStor’s capital needs last month.

For the first six months of this year, nStor lost $8 million on sales of $10.2 million, compared with a net loss of $649,000 on sales of $23.4 million. Traded on AMEX, the stock closed at 40 cents on Oct. 3. Its 52-week range is between 30 cents and $2.68.

NStor also said it signed a partnership agreement with Adaptec Inc. for products it will use in its systems.

Higher Earnings:

Two San Diego companies, Overland Data Inc., and Websense, announced higher-than-anticipated earnings for their just completed quarters. Overland said earnings for its first quarter will hit 7 to 9 cents per diluted share, above the Wall Street consensus of 6 cents, and revenues should exceed $39 million, above previous analyst expectations of $37.4 million. Overland, a supplier of automated data backup systems, said actual quarterly results won’t be released until Oct. 18.

Websense, a maker of Internet monitoring software, said its quarterly earnings should be more than 6 cents per share, greater than analysts’ consensus of 2 cents, and that revenue projections should exceed $9.5 million. Traded on Nasdaq as WBSN, the stock shot up $3.40 on the news Oct. 3 to $14.05. The 52-week range is between $23.50 and $7.38.

Send high-tech finance news to mallen@ sdbj.com or fax it to (858) 571-3628.


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