Compliments of excel....
Excel's post from RB:
This NV article below has been typed from the newspaper so it's format might not be the exact way it was presented and a word may be missing.
After reading you'll understand why the Oregon investors conveinently didn't post it.
Lawsuit says New Visual can’t keep story Straight
New Visual Corp., a company that has said it is funding development of a new technology through production of a surfing film, appears to have told different things to its public shareholders and to those lending the company money.
New Visual (OTCBB: NVEI) told its shareholders that the company would begin to recognize revenue from a surfing film it financed as soon as New Visual’s $ 2.25 million investment the film has been paid back.
However, according to a consolidated lawsuit filed in California Superior Court, San Diego, New Visual promised at least two people that their loans to the company would be repaid out of the first gross receipts from the surfing film, “Step into Liquid”.
That’s not what happened, according to the lawsuit.
Though New Visual has recorded more than $ 550,000 in revenue from “Step into Liquid”, which was released earlier this year; family trusts managed by Gerald Handler and Wayne Lill Jr. have not seen a dime of the $375,000 that Handler and Lill say they were promised, the suit alleges.
New Visual has said since last December that it is moving to Portland, where CEO Brad Ketch lives. New Visual’s chairman, Ray Willenberg Jr., lives in Southern California.
Willenberg is named in the suit, along with John Howell, a current director of the company.
Howell signed the promisory notes that said Handler’s and Lill’s family trusts would earn 50 percent interest on the combined $ 250,000 loaned to New Visual.
Bruce Brown and Dana Brown, also named in the suit, co-produced the movie. Between them, they own a third of Top Secret Production LLC, the company that was formed to make the movie.
Handler declined to be interviewed, and Lill said very little about the suit, beyond the fact that he had loaned money to New Visual because he and an acquaintance “both thought that a Bruce Brown surf film ought to be able to make enough money to pay a generous return on our initial investment.”
Bruce Brown was the director of the surfing classic, “The Endless Summer,” released in 1966. Dana Brown directed “Step into Liquid.”
John-Paul Beeghly, the film’s cinematographer says he has also received no distributions from the movie, apart from the salary he was paid while working on the film.
Beeghly owns nearly 17 percent of Top Secret.
Other Top Secret partners “were supposed to give me the financial records at the end of March, and I still haven’t seen them, “ Beeghly said.
New Visual owns half of Top Secret, and therein lies the problem, according to the lawsuit.
New Visual and Top Secret, Handler and Lill allege, are substantially the same company, controlled by the same people – “alter ego” companies, in the language of the complaint.
Top Secret is just a means of hiding movie revenue from New Visual’s creditors, the suit alleges.
The agreement between Top Secret and film distributor Artisan Entertainment Inc. shows top Secret’s address as identical to New Visual’s. The agreement was signed by New Visual Chairman Willenberg and by Rich Wilson, New Visual’s, secretary at the time. Wilson has since left the company.
The lawsuit also raises questions about whether New Visual will ever get enough money from the film to begin work on a promised semiconductor technology product.
New Visual has said in its filings with the Securities and Exchange Commission that the company will see more film revenue in fiscal 2004 than it did in fiscal 2003.
By Oct. 31 last year, the end of fiscal 2003, New visual has recognized revenue of $379,980 for “Step into Liquid.”
The company said it received no cash distributions until after Oct. 31.
By April, halfway into its fiscal 2004, New Visual said it has recognized a total of $550,823 in revenue from the film – just $170,843 more.
In its most recent annual filing the company said, “We expect to receive distribution [from the film] in fiscal 2004 in excess of $2,167,000.”
That figure would cover New Visual’s investment in the film.
“Step into Liquid” has finished its theatrical run in the United States, and so far has grossed just $120,000 in foreign distribution.
DVD distribution began in April, and New Visual announced this week that “over $12 Million” has been spent so far in the United States on purchases and rentals of the DVD, and that “over 230,000 units” have been sold by the film’s distributor.
According to the terms of Top Secret’s agreement with Artisan, included in New Visual’s most recent annual filing with the SEC, if each DVD sells for no less than $20, which would represent non discounted retail sales, Top Secret would be paid a total of $117,500 for 230,000 units sold.
Since New Visual is still being paid back its investments, all of this belongs to New Visual, assuming that Handler and Lill do not prevail and receive some award of legal costs, as they have requested in their suit.
The agreement with Artisan says nothing about distributions to Top Secret for DVD or video rentals.
New Visual has said in its recent filings that “we need to raise approximately $325,000 on an immediate basis in order to keep certain essential suppliers and vendors and to maintain our operations as presently conducted through fiscal 2004,” which closes at the end of October.
Contact Aliza Earnshaw at aearnshaw@bizjournals.com
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