New Visual finances fine, CEO insists
Aliza Earnshaw
Business Journal staff writer
A publicly traded tech company relocating to Portland has been struggling with its cash situation, but its CEO says the company has been working hard to turn that situation around.
The company is developing a semiconductor for the telecommunications market.
New Visual Corp., now in the process of relocating from San Diego, Calif., to downtown Portland, reported $1.7 million in accounts payable in its most recent quarterly filing with the Securities and Exchange Commission. That money is owed mostly to vendors, said Brad Ketch, who joined New Visual (OTCBB: NVEI) as CEO in December last year.
"Over a long period of time, the company has accrued debt, to service providers in most cases," Ketch said. "We've made considerable progress in reducing that."
In fact, New Visual's accounts payable had reduced by more than $536,000 as of July 31 this year, the end of the company's third quarter, from just under $2.25 million as of Oct. 31 last year.
One method for conserving cash has been to issue stock instead of paying cash to employees, executives and vendors, said Ketch.
"We in essence are saying to them, you have an opportunity to receive from us for services rendered either cash or stock. I owe you a hundred grand, and I say, 'Will you take stock instead?' And if you believe the stock will be worth more than that, you'll take it."
Investors in New Visual, Ketch added, "see that we are successful in issuing stock, and they take it as a vote of confidence."
As further evidence of confidence in the company's future, both Ketch and New Visual chairman Ray Willenberg, Jr. purchased New Visual stock last week. Willenberg, who already owned almost 2.6 million shares, or about 3.8 percent of the company, purchased another 400,000 restricted common shares for $100,000, or 25 cents per share. Ketch, who owned only options until his purchase, bought 40,000 restricted common shares.
Both Ketch and Willenberg are paid in cash, as well as stock options. Willenberg, who served as president and CEO of New Visual until June 1, 2002, received a salary of $258,406 in 2002. Ketch's base salary since he became CEO is $20,833 per month, and he was issued 1.5 million options at 64 cents per share. Earlier this week, New Visual stock was trading over the bulletin board at 24 cents per share.
As in the past, New Visual continues to negotiate some of its consulting and employment agreements to include payment with stock. Consulting agreements made earlier this year, for example, involved issuing 3.2 million shares to pay the consultants.
Some legal settlements that New Visual reports in its latest quarterly SEC filing have involved share-based payments made to past consultants and former officers of the company.
In December last year, New Visual settled with one former vendor for $15,000 plus 51,562 shares of common stock, valued at $23,203 at the end of January this year. A lawsuit settled between New Visual and two former officers resulted in the return of 2.2 million shares to the company, which were recorded non-cash gain of $1.47 million for the first 9 months of 2003.
An engineering company sued New Visual last year for breach of contract, and New Visual settled in February, paying the engineering company $40,000.
New Visual has "stopped spending more than we receive," said Ketch. "Investors will see in the future that the current section of our balance sheet will improve."
New Visual's current assets, as of July 31, totaled just over $188,000, down from over $323,000 at Oct. 31 last year. In addition to $117,578 in cash, down from more than $311,000 as of Oct. 31 last year, New Visual reported just over $9,000 "receivable from officers" in its current assets, along with more than $61,000 in "other current assets."
New Visual has not generated any revenue for the past two years, and has reported $12,200 in total revenue since the company's inception in late 1999. The company's current cash strategy, as it transitions its business model, is to raise new investment. New Visual is exiting its film-production business in favor of a new business, developing and marketing semiconductors for the telecommunications industry.
"We are expecting new cash investments soon," said Ketch. New Visual announced in early November an infusion of $300,000 in unsecured, short-term debt financing, and "we are expecting cash investments in the first half of 2004," said Ketch, of between $1.5 million and $2.5 million in convertible, unsecured debt financing.
New Visual has reached a non-binding "agreement in principle" for this longer-term debt financing. The $300,000 bridge financing will be repaid from the larger, longer-term convertible, New Visual said in a press release.
As of July 31, New Visual owed just under $1.2 million in convertible notes, and just over $730,000 in "notes payable," in addition to the accounts-payable figure of $1.7 million. Total debt decreased to $3.7 million as of July 31 from $4.9 million as of Oct. 31 last year. "We've had a year of disciplined chopping away at liabilities," said Ketch.
One New Visual debt that has been entirely paid off, according to the company, is the remaining $138,000 that was owed to the Adaptive Networks Inc. as of July 31. That was the final money owed as part of New Visual's agreement with the Newton, Mass., technology company to develop a semiconductor for the telecommunications market for New Visual.
The chip, named Embarq, is the first product that New Visual is developing in line with its new business model. Until less than two years ago, New Visual was focused on film production. Its first film, "Step Into Liquid," is a surfing documentary that was released this summer. Now the company's involvement in filmmaking is limited, said Ketch, to marketing "Step Into Liquid"and realizing the return on New Visual's $2.2 million investment in the film. In line with the new business model, New Visual will change its name to Rim Semiconductor Co. during 2004.
© 2004 American City Business Journals Inc.
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