Read Articles: Surprise! Accounting is the Hot New Major  Do You Need Accounting Software For Your Small ...  How to Choose the Right Accounting Software for...  After the latest and accurate help in relation ...  Asset and liability basics  7 Things to Consider Before Buying Small Busine...  Accounting Methods – Cash and Accrual  Non-Profit Organizations - What Are They?  Press ReleaseUCLA Alumni Association Retains th...  How to Stop Waste, Fraud and Abuse  Internal Control: A Preventive Maintenance Pr...  What Software Do You Need For Your Small Business  Explode Your Consulting Income  Understanding Depreciation: It May Be More Sim...  3 Essential Tools for Starting and Maintaining ...  Outside The Box  HOW TO STAY FOCUSSED AND BUILD YOUR BUSINESS  mmaterial Values in Business Management  Top 7 Strategies for Writing Accounting Procedures  Taxing Overseas Firms for SOX Compliance  9 things you must do to maximize your chances o...  Starting An Online Business From Home  Why Online Presence Is Essential For Small Busi...  Bottleneck-oriented Business Management  An introduction to point of sale software  10 Amazing Ways To Jump Start Your Sales  Company/Employee Handbook as Organisational Imp...  Resume Writing and Preparation is Free Online   Here is the latest and accurate assistanc...  Is Your Business Profitable?  Small Business 101: Deadly Ignorance  How to Start an Investment Club - Business Model  Resume Outline - Add Structure & Flow to Your R...  Issuing Warrants to Investors  Can You Play the Drums?  Policies and Procedures Used as Management Key  How Nov. 15, 2004 Deadline for Sarbanes Oxley 4...  The Fun Of Starting A New Business  Managing Your Home Based Online Business – 2  Do you think that your workload is hampering yo... Index Pages: 1 - 2

Issuing Warrants to Investors  by: Dave Lavinsky When raising capital for a business venture, warrants are a common form of equity that is given to investors. A warrant is like an option – it gives the holder the right to buy a security at a fixed or formulaic price, which is known as the "exercise" or "strike" price. Warrants are often confused with options. Options, as used in the venture capital space, are typically long term (up to 10 years). They are also typically issued to employees versus investors. Conversely, warrants act like short-term options and, unlike employee options, can be traded as an independent security. In general, neither the issuance of warrants nor their exercise (at least by non-employees) is a taxable event. In fact, in 1984, Congress reversed the earlier position of the IRS that the expiration of a warrant is a taxable event for the issuer. However, whenever a debt security with warrants attached is issued as a package, original issue discount problems are invited. One type of warrant that once popular as a financing mechanism for emerging ventures is contingent warrants. These warrants become exercisable if and when the holder does something for the issuer, for example buys a certain level of product. Contingent warrants are no longer used often since the SEC ruled in favor of current and periodic recognition of expense to the issuer. Like an option, a warrant is considered a "common-stock equivalent” for accounting purposes. And, if the warrant has been "in the money" (i.e., the exercise price is below the market price) for three consecutive months, it is deemed to impact earnings per share under the so-called treasury-stock method. That is, the warrants are considered exercised, new stock is issued at the exercise price, and the proceeds to the issuer are used to buy in stock at the market price. Warrants are a common financing mechanism and companies seeking venture capital should consider and become knowledgeable about this type of equity device. About the author: GT Business Plans has developed over 200 business plans for clients that have collectively raised over $750 million in financing, launched numerous new product and service lines and gained competitive advantage and market share. GT Business Plans is the sister site of GT Venture Capital

More Resources

01/05/2009 05:10 AM

The sectors that could spark a rally (Business Standard India)

Investors would like to forget 2008 – a year when the Sensitive Index shed more than half its value in 2008, its worst performance ever. But market experts say investors could look forward to some important changes in 2009. Here are some of them.

01/06/2009 08:28 AM

Auto makers look to Mexico (The Globe and Mail)

And, what happens to CPP, OAS payments if consumer price index actually declines

12/31/2008 06:35 PM

Schwarzenegger Offers 2010 Budget Plan With New Debt (Update1) (Bloomberg)

Dec. 31 (Bloomberg) -- California Governor Arnold Schwarzenegger proposed closing the state’s widening budget deficit by selling almost $5 billion of debt, closing schools early and curbing tax breaks given to families.

12/30/2008 04:16 PM

Threegold Resources Completes $1.2 Million Private Placement (CCNMatthews via Yahoo! Finance)

VAL-D'OR, QUEBEC, CANADA-- - Threegold Resources Inc. is pleased to announce that it has completed its previously-announced private placement through Desjardins Securities Inc. of Montreal, Quebec by issuing a total of 1,200 units at a price of $1,000 per unit, for aggregate gross proceeds to Threegold of $1.2 million.

12/30/2008 04:13 PM

Threegold Resources Completes $1.2 Million Private Placement (Marketwire via Yahoo! Finance)

Threegold Resources Inc. is pleased to announce that it has completed its previously-announced private placement through Desjardins Securities Inc. of Montreal, Quebec by issuing a total of 1,200 units at a price of $1,000 per unit, for aggregate gross proceeds to Threegold of $1.2 million. Each unit consisted of 5,714 "flow-through" common shares at a price per share of $0.14 and 2,000 common ...

12/31/2008 02:40 AM

Play safe (Business Standard India)

As uncertainties prevail and a revival expected only post second quarter of 2009, it will pay to focus on large cap companies with a proven track record, high earnings visibility and low leverage.

12/30/2008 06:45 PM

Gold Reserve’s Board of Directors Rejects Rusoro Mining Ltd.’s Unsolicited Offer (Finanzen.net)

Gold Reserve Inc. (NYSE Alternext:GRZ) (TSX:GRZ) today announced that its Board of Directors unanimously ...

12/29/2008 12:35 PM

U.S. throws GMAC $6 billion lifeline (CNN Money)

In yet another move to prop up the crumbling U.S. auto industry, the government announced Monday that it will pump $6 billion into GMAC Financial Services, a financing company critical to the survival of General Motors.

12/30/2008 06:37 PM

Gold Reserves Board of Directors Rejects Rusoro Mining Ltd.s Unsolicited Offer (Business Wire via Yahoo! Finance)

SPOKANE, Wash.----Gold Reserve Inc. today announced that its Board of Directors unanimously voted to reject Rusoro Mining Ltd.’s unsolicited offer of December 15, 2008 to acquire all of the outstanding shares and equity units of Gold Reserve in consideration for three shares of Rusoro for each Gold Reserve share tendered under the Offer.

12/24/2008 02:58 AM

India Hot Stocks: Fortis Healthcare up on rights issue (Reuters via Yahoo! Malaysia News)

(Adds Fortis Healthcare)