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The Napeague Letter
Suspicious Stocks
Thursday, March 30, 2000
New Visual Entertainment, Inc. (OTC BB:NVXE)
As of Friday, June 23, 2000 NVXE's symbol has changed to NVEI, to reflect the implementation of a one for four reverse split that was effective as of that date. Click on the blue HTML link for more information about reverse splits.
Earlier today a reader E-mailed a suggestion to me that I include NVXE on the "Blivit List." I don't know how this person learned about NVXE, so I don't know whether it is being "pumped & dumped" in the conventional sense. However, although it seems to have generated a lot of excitement on various I-net forums, it does not appear to be a viable investment opportunity at this time.
Back at the beginning of February, NVXE was still well under $1.00, where it had been for the last several months. However, around mid-month it suddenly accelerated upward and approached $7.50 around the end of the month and again around mid-March. Currently, it is drifting back toward the $4.00 level.
New Visual Entertainment, Inc. (OTC BB:NVXE) describes itself as follows:
New Visual Entertainment, Inc. is a true stereoscopic 3D production company that specializes in 3D product development and distribution for special venue theaters, home video, broadcast and theatrical markets by utilizing patented technology for the creation and exhibition of 3-dimensional media. Through its New Wheel Technology, Inc. subsidiary, New Visual is attempting to develop a metallic high-speed digital transmission technology for a variety of applications. Through its Impact Pictures, Inc. subsidiary, New Visual intends to develop web animation, streaming media, multimedia productions and CD-ROM business cards and corporate presentations.
Now, these are absolutely wonderful plans and it would be really great if they were actually able to do half of these things. However, this company has no cash or other assets with which to make any of this happen.
As reported in its latest 10-Q, the company's balance sheet is extraordinarily weak. The company's accounts payable - the money owed to vendors who supply it with the resources needed to remain in business - are substantially larger than all of its assets combined. In fact, its accounts payable as of January 31st were $324,277, while its current assets were only $28,962.
The company itself admits this in Securities & Exchange Commission filings. Its most recent 10-Q Report, filed with the SEC on March 16, 2000 and covering the quarter that ended on January 31, 2000, describes its financial condition as follows:
The Company has continued losses in each of its years of operation, negative cash flow and liquidity problems. These conditions raise substantial doubt about the consolidated Company's ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments relating to the recoverability of reported assets or liabilities should the Company be unable to continue as a going concern.
The Company has been able to continue based upon the financial support of certain of its stockholders and the continued existence of the company is dependent upon this support and its ability to acquire assets by the issuance of stock. Management's plans in this regard are to receive the continued support of the stockholders and/or to obtain other financing until profitable operation and positive cash flow are achieved and maintained. There can be no guarantee that the stockholders will provide this support.
As a result, the real economic value of NVXE's stock is very low, as shown by the following information from its most recent 10-Q Report:
During the three months ended January 31, 2000, the Company sold 709,850 shares of common stock for $211,909 (or $0.30 per share).
During the three months ended January 31, 2000, the Company issued 119,060 shares of common stock between $.25 and $.35 for consulting services totaling $34,050.
Therefore, the company will need to go back to the financial markets for additional funds, and it is quite likely that whoever provides this funding will demand a larger portion of the equity in the company, either in return for the funds themselves, or as a "kicker", to increase their return on this investment in the face of the very high risks associated with it. One way or another, this would dilute whatever equity of its current shareholders.
Whitehorne & Company, a broker dealer, has put out a research report on NVXE. Although this report does an effective job of assessing the opportunities available in "Broadband", it does not provide an in-depth analysis of the company's financial condition.
As NVXE is headquartered in San Diego, this last Sunday the San Diego Union Tribune published a less-than-positive article about the company and its management team.
Although the company has issued a number of press releases since the beginning of the year reporting a variety of events, none of them have any direct impact on NVXE's core problem - its lack of funding.
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NOTICE
This analysis is based on publicly-available information, and is in no way warranted by me as to accuracy or completeness. I do not guarantee to advise you as to any change in this information.
I am not a stockholder in any Company mentioned in The Napeague Letter and I will not purchase, sell or own any of these Company's securities while they are followed by The Napeague Letter. I otherwise have no affiliation with any of these Companies, and I have not been compensated by any of them, or their agents or affiliates, or anyone with either a long or a short position in the Company's stock, in any way whatsoever, and I do not plan to be so compensated at any point in the future. |
