UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT
OF 1934
For the quarterly period ended June 30, 1998
OR
[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT
OF 1934
For the transition period from _____________ to _____________
Commission File No. 0-19492
NVIEW Corporation
(Exact name of registrant as specified in its charter)
Virginia 54-1413745
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
860 Omni Boulevard, Newport News, Virginia 23606
(Address of principal executive office)
Registrant's telephone number, including area code: (757) 873-1354
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
[X] YES[ ] NO
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of August 3, 1998: 6,255,166 shares of common stock without par
value.
<PAGE>
nVIEW CORPORATION AND SUBSIDIARIES
Quarterly Report on Form 10-Q for the
Quarter Ended June 30, 1998
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets as of June 30, 1998
(unaudited) and December 31, 1997...................................3
Unaudited Condensed Consolidated Statements of Operations
for the Three Months Ended June 30, 1998
and 1997 and the Six Months Ended June 30, 1998 and 1997...........4
Unaudited Condensed Consolidated Statement of Shareholders'
Equity for the Six Months Ended June 30, 1998..................... 5
Unaudited Condensed Consolidated Statements of Cash Flows for
the Six Months Ended June 30, 1998 and 1997........................6
Notes to Unaudited Condensed Consolidated Financial Statements....8
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations.................. .9
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
nVIEW CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
June 30,1998 December 31,
(Unaudited) 1997
------------- -------------
<S> <C>
Assets
Current assets:
Cash and cash equivalents $1,077,633 $742,063
Receivables, net 2,315,972 4,317,967
Inventories (note 3) 2,697,998 3,975,958
Prepaid expenses 167,879 346,180
------------- -------------
Total current assets 6,259,482 9,382,168
Property and equipment, net 413,308 459,724
Other assets, net 162,852 123,819
------------- -------------
$6,835,642 $9,965,711
============= =============
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $1,314,391 $1,020,760
Accrued expenses 809,335 951,971
------------- -------------
Total current liabilities 2,123,726 1,972,731
Shareholders' equity:
Common stock, no par value
Authorized 20,000,000
shares;
6,255,166 and 5,005,166
shares
issued and outstanding at
June 30,
1998, and December 31, 1997,
respectively. --- ---
Additional paid-in capital (note 5) 25,954,103 25,060,978
Accumulated deficit (21,242,187) (17,067,998)
------------- -------------
Total shareholders' equity 4,711,916 7,992,980
Commitments and contingencies
------------- -------------
$6,835,642 $9,965,711
============= =============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
nVIEW CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Operations
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------------ -------------------------
June 30, June 30,
-------- --------
1998 1997 1998 1997
---- ---- ---- ----
---------- ----------- ----------- -----------
<S> <C>
Sales $3,209,204 $5,197,395 $6,216,257 $12,360,844
Cost of goods sold 2,862,180 4,787,587 5,585,578 10,325,787
---------- ----------- ----------- -----------
Gross profit 347,024 409,808 630,679 2,035,057
Marketing and promotion 660,441 785,364 1,305,905 1,636,555
Research and development
(note 5) 1,459,220 364,188 2,020,428 872,957
General and administrative 782,758 613,912 1,438,695 1,023,442
---------- ----------- ----------- -----------
Operating expenses 2,902,419 1,763,464 4,765,028 3,532,954
---------- ----------- ----------- -----------
Loss from operations (2,555,395) (1,353,656) (4,134,349) (1,497,897)
Other income (expense):
Interest expense (26,962) (28,396) (37,973) (56,787)
Interest income (202) 26,376 1,187 40,462
Miscellaneous 237 (346) (3,054) 22
---------- ----------- ----------- -----------
(26,927) (2,366) (39,840) (16,303)
---------- ----------- ----------- -----------
Net loss ($2,582,322) ($1,356,022) ($4,174,189) ($1,514,200)
========== =========== =========== ===========
Weighted average common
shares outstanding 5,582,089 5,005,166 5,295,221 5,005,166
========== =========== =========== ===========
Net loss per share - basic
and diluted (note 6) ($0.46) ($0.27) ($0.79) ($0.30)
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
nVIEW CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidated Statement of Shareholders' Equity
Six Months Ended June 30, 1998
<TABLE>
<CAPTION>
Common Stock
------------------------
Additional Total
Number of Paid-in Accumulated Shareholders'
Shares Amount Capital Deficit Equity
-------------- -------- ----------- ----------- -------------
<S> <C>
Balance at
December 31, 1997 5,005,166 --- $25,060,978 ($17,067,998) $7,992,980
Common shares
issued for
research and
development 1,250,000 893,125 893,125
Net loss --- --- --- (4,174,189) (4,174,189)
-------------- -------- ----------- ----------- -------------
Balance at
June 30, 1998 6,255,166 --- $25,954,103 ($21,242,187) $4,711,916
============== ======== =========== =========== =============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
nVIEW CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Cash Flows
Six Months Ended
June 30
1998 1997
---- ----
Cash flows from operating activities:
Net loss ($4,174,189) ($1,514,200)
Adjustments to reconcile net loss to
net cash provided by operating
activities:
Depreciation and amortization 237,426 314,339
Stock issued for research and
development 893,125 ---
Change in assets and liabilities
increasing (decreasing) cash
flows from operating
activities:
Receivables, net 2,001,995 3,348,685
Inventories 1,277,960 1,770,650
Prepaid expenses 178,301 (71,669)
Other assets (98,975) ---
Accounts payable 293,631 (3,265,515)
Accrued expenses (142,636) (215,304)
------------ -----------
Total adjustments 4,640,827 1,881,186
------------ -----------
Net cash provided by
operating activities 466,638 366,986
------------ -----------
Cash flows from investing activities:
Additions to property and equipment (130,440) (212,657)
Payment of deferred patent costs (628) (4,169)
------------ -----------
Net cash used in investing
activities (131,068) (216,826)
------------ -----------
(Continued)
<PAGE>
nVIEW CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Cash Flows, Continued
Six Months Ended
June 30
-------
1998 1997
Net increase in cash and cash equivalents ---- ----
$335,570 $150,160
Cash and cash equivalents at beginning
of period
742,063 1,802,596
------------ ----------
Cash and cash equivalents at end of
period $1,077,633 $1,952,756
============ ==========
Supplemental disclosure of cash flow information:
Cash paid during the year for interest $ 31,262 $ 171,132
============ ==========
Cash paid during the year for income
taxes $ --- $ ---
============ ==========
See accompanying notes to condensed consolidated financial statements.
<PAGE>
nVIEW CORPORATION AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
1. The accompanying unaudited consolidated financial statements of nVIEW
Corporation (the "Company") have been prepared by the Company pursuant to
the instructions for Form 10-Q and, accordingly, certain information and
footnote disclosures normally included in financial statements prepared
in accordance with generally accepted accounting principles have been
condensed or omitted where permitted by regulation. In management's
opinion, the accompanying unaudited interim condensed consolidated
financial statements reflect all adjustments, consisting of a normal
recurring nature, necessary for a fair presentation of the consolidated
results of operations for the interim periods presented. The consolidated
results of operations for such interim periods are not necessarily
indicative of the results that may be expected for future interim periods
or for the year ended December 31, 1998. These interim consolidated
financial statements and the notes thereto should be read in conjunction
with the audited consolidated financial statements and the notes thereto
included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1997.
2. Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reported
period in conformity with generally accepted accounting principles.
Actual results could differ from those estimates.
The Company's sales are generated from a relatively small number of
products. In addition, the markets in which the Company competes are
characterized by rapidly changing technology, requiring constant product
innovation. Most of the Company's existing products are at or near the
end of their respective product life cycles. The Company is currently in
the process of developing a new product line (the P1500 projector is the
first product in the nVIEW Professional Series) which is expected to be
available for sale in the latter half of 1998. Although management
believes that this new product line will gain acceptance in the
marketplace and will provide the Company access to new markets, there can
be no assurance that the new product line will be completed on a timely
basis or that the products will be accepted in the marketplace. Lack of
acceptance of the new product line, especially in light of the age of the
Company's existing products, could have a material adverse effect on the
Company's results of operations and financial position.
3. Inventories at June 30, 1998 and December 31, 1997 consist of the
following:
June 30, December 31,
1998 1997
--------- -----------
Raw material $ 783,533 $ 1,158,830
Work in process 6,590 201,919
Finished goods 1,907,875 2,615,209
--------- -----------
Inventories $ 2,697,998 $ 3,975,958
=========== ===========
4. During the first quarter of 1998 the Company entered into a loan and
security Agreement (the "Agreement") with an asset based lender. The
Agreement, which expires on February 23, 2001, allows for maximum
borrowing of $5 million, subject to certain borrowing base limitations,
at the prime rate plus 1 1/2%. The borrowing base at June 30, 1998 was
approximately $945 thousand. Accounts receivable, equipment, inventory,
intangibles and other assets are pledged as collateral. The terms of the
Agreement contain no financial covenants. The Company is a party to two
stand-by letters of credit agreements in favor of suppliers for $900
thousand. The letters of credit reduce the Company's available credit
line under its borrowing agreement with its lender. As of June 30, 1998
and August 11, 1998, there was no outstanding balance under the line or
letters of credit. At August 11, 1998, the borrowing base of
approximately $644 thousand was not sufficient to support the outstanding
letters of credit. As a result, a portion of the Company's $1.6 million
in cash at that date was restricted by the lender in favor of the letters
of credit.
<PAGE>
5. On May 20, 1998, the Company issued 1,250,000 shares of restricted common
stock to a vendor in exchange for research and development of a major
component of a new product, the P1500, expected to be released later in
the year. The transaction, which was valued by an independent appraisal,
resulted in research and development expense of $893,125 for the three
and six month periods ended June 30,1998.
6. During 1997, nVIEW adopted FAS 128, Earnings Per Share. All per share
amounts presented have been calculated in accordance with FAS 128.
7. Certain 1997 amounts in the condensed consolidated financial statements
have been reclassified to conform to 1998 financial statement
presentation.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
In addition to historical information, this report contains forward-looking
statements, which are subject to risks and uncertainties. Accordingly, the
Company's actual results could differ materially from those anticipated in these
forward-looking statements. Undue reliance should not be placed on these
forward-looking statements, which reflect management's analysis only as of the
date hereof.
The following discussion and analysis should be read in conjunction with the
Management's Discussion and Analysis included in the Company's Annual Report on
Form 10-K for the year ended December 31, 1997.
Results of Operations
The Company's sales are generated from a relatively small number of products. In
addition, the markets in which the Company competes are characterized by rapidly
changing technology, requiring constant product innovation. Most of the
Company's existing products are at or near the end of their respective product
life cycles. The Company is currently in the process of developing a new product
line (the P1500 projector is the first product in the nVIEW Professional Series)
which is expected to be available for sale in the latter half of 1998. Although
management believes that this new product line will gain acceptance in the
marketplace and will provide the Company access to new markets, there can be no
assurance that the new product line will be completed on a timely basis or that
the products will be accepted in the marketplace. Lack of acceptance of the new
product line, especially in light of the age of the Company's existing products,
could have a material adverse effect on the Company's results of operations and
financial position.
The net loss for the six months ended June 30, 1998 was $4.2 million or $.79 per
share, compared with a net loss of $1.5 million, or $.30 per share for the same
period of 1997. For the quarter ended June 30, 1998, the net loss was $2.6
million or $.46 per share, compared with a net loss of $1.4 million, or $.27 per
share for the second quarter of 1997. The Company's 1998 second quarter results
include an $893 thousand charge to research and development expense representing
the value of stock granted to Snell & Wilcox Limited in exchange for the
development of a component of the P1500 projector. This charge was accounted for
as a non-cash exchange of stock for goods and recorded at the fair market value
of the stock upon delivery of the goods with an offsetting entry to
shareholders' equity.
Sales decreased 50% to $6.2 million for the first six months of 1998 compared to
$12.4 million for the same period of 1997. Sales of $3.2 million for the second
quarter of 1998 were 38% less than the same quarter of 1997 and slightly higher
than the $3.0 million recorded in the previous quarter ended March 31, 1998. The
Company experienced declines in sales in each successive quarter of 1997. This
trend is the result of both decreased quantities and decreased selling prices
for products sold in the Company's traditional audio visual channels. For the
first six months of 1998, average sales prices for the Company's projectors
declined 24% and the quantity of projectors sold declined 23% when compared to
the first six months of 1997. The Company's market share in the audio visual
channel has continued to decrease due to market conditions which include short
product lives, increased competition and declining prices.
In response to this situation, the Company is developing a new product series.
The P1500 projector is the first product in the new nVIEW Professional Series
and was originally scheduled for release in the second quarter of 1998. The
P1500 projector is designed for the professional video market and features a
modular design concept, allowing it to be configured to meet the needs of a
specific application, and to be modified and upgraded by installing additional
printed circuit boards as future capabilities (such as HDTV) become available.
The Company has experienced development delays and management expects to release
the product during the second half of 1998.
<PAGE>
During the first six months of 1998, sales of the Company's Diamond series of
projectors declined $4.4 million from the same period of 1997, of which $2.3
million was attributed to a decline in sales to Polaroid Corporation under an
Original Equipment Manufacturer's Agreement which ended in 1997. The decline in
Diamond series projector sales was partially offset by a $445 thousand increase
in sales of the Company's polysilicon projectors which are purchased from a
manufacturer and private labeled by the Company. This increase was due to the
introduction of both the L-600 SVGA portable projector and the L-800 XGA
projector in 1998.
Also contributing to the decline in sales for the first six months of 1998 was a
$1.6 million reduction in sales of LCD panel products. This decline was expected
as demand has shifted away from panel products to projectors, due to the
significant reduction in projector prices and the increased portability of
projectors.
For the quarter ended June 30, 1998, sales declined $2.0 million from the same
quarter in 1997. This decline included a $1.2 million reduction in sales of the
Company's Diamond series of projectors and a $677 thousand decline in the sale
of panel products. For the second quarter of 1998, sales of the Company's
polysilicon projectors were consistent with the same quarter of 1997.
The Company anticipates selling out substantially all of its remaining older
product inventory by September 30, 1998, at which time future quarterly results
will be dependent upon selling the new P1500 projector. Continued delays in the
release of the P1500 projector could result in significant declines in future
quarterly sales.
Gross profit as a percentage of sales was 10% for the six months ended June 30,
1998 compared to 16% for the comparable period of 1997. Quarterly gross profit
increased to 11% for the three months ended June 30, 1998 compared to 8% for the
same quarter of 1997. Although up slightly for the second quarter of 1998, gross
profit margins are expected to remain low until the release of the Company's new
P1500 product series. Also contributing to the lower margins were declining
sales prices, especially for older model products as the Company continues to
deplete its inventory. As a result of selling the older products, the Company is
also experiencing idle capacity in its production facility which further reduces
gross profit margins. During the second quarter of 1998, the Company also
recorded a $163 thousand increase to its inventory reserve.
Operating expenses increased 65% to $2.9 million, and 35% to $4.8 million, for
the quarter and six months ended June 30, 1998, respectively. Second quarter
1998 operating expenses include $893 thousand of research and development
expense representing the value of stock granted to a vendor in exchange for the
development of a component to be used in the new product series.
Marketing and promotion expenses for the first six months of 1998 decreased 20%
to $1.3 million from $1.6 million for the same period of 1997. For the quarter
ended June 30, 1998, marketing and promotion expenses decreased 16% to $660
thousand from $785 thousand for the same quarter of 1997. The decline in 1998
marketing and promotion expenses is due to the closing of the Company's sales
office in the United Kingdom, as well as reduced compensation expense in 1998 as
a result of lower personnel levels. The elimination of the Company's agreements
with computer distributors also reduced related cooperative advertising expenses
in 1998, as did lower promotional expenses in the Company's audio visual
channel. Management will allow future growth in marketing and promotion expenses
as required to effectively launch new products in the remainder of 1998.
<PAGE>
Research and development expenses for the first six months of 1998 increased
131% to $2.0 million from $873 thousand for the same period of 1997. For the
quarter ended June 30, 1998, research and development expenses increased 301% to
$1.5 million from $364 thousand for the same quarter of 1997. The single largest
factor contributing to this increase was an $893 thousand charge to research and
development expense representing the value of 1,250,000 shares of the Company's
common stock issued to Snell & Wilcox Limited under the terms of an agreement
dated January 21, 1998. In consideration for the stock, Snell and Wilcox
developed the professional video board to be featured in the Company's new
Professional Series product. Snell and Wilcox also agreed to provide the
professional video board exclusively to the Company for at least one year. Under
the terms of the agreement with Snell & Wilcox, no future stock issuances will
be awarded.
General and administrative expenses for the first six months of 1998 increased
41% to $1.4 million from $1 million for the same period of 1997. For the quarter
ended June 30, 1998, general and administrative expenses increased 28% to $783
thousand from $614 thousand for the same quarter of 1997. In the first quarter
of 1997, a $115 thousand payment was received in settlement of a suit and
reduced general and administrative expenses. In the first six months of 1998,
the Company recorded a $491 thousand addition to the allowance for doubtful
accounts, associated with specific past due accounts, which contributed to the
increase noted above.
Other expenses increased $24 thousand for the six months ended June 30, 1998 and
$25 thousand for the quarter ended June 30, 1998 from the corresponding periods
of 1997. Interest expense for the second quarter of 1998 remained relatively
unchanged from the second quarter of 1997 and represents costs associated with
the Company's borrowing arrangements during these periods. Interest income,
however, has decreased in 1998 compared to 1997 as a result of lower cash
balances available for investing.
Financial Condition
Total assets decreased 31% to $6.8 million at June 30, 1998 from $10 million at
December 31, 1997. The reduction resulted from a $2 million decrease in accounts
receivable and a $1.3 million decrease in inventories. These changes reflect
lower sales and the delayed production of the Company's new P1500 projector,
which has resulted in lower overall inventory levels. The Company's current
ratio is 2.9, down from 4.8 at December 31, 1997.
Cash and cash equivalents at June 30, 1998 were $1.1 million, up $336 thousand
from December 31, 1997. Because less inventory was purchased and produced during
the second quarter, cash collections from accounts receivable exceeded cash
disbursements, resulting in an overall increase in cash balances. Although this
increase occurred, actual cash collections in the second quarter were 29% lower
than the previous quarter.
Net receivables decreased from $4.3 million at December 31, 1997 to $2.3 million
at June 30, 1998. The ending balance of receivables, however is consistent with
the previous quarter ended March 31, and reflects lower quarterly sales during
the second quarter of 1998 ($3.2 million) compared to the fourth quarter of 1997
($4.1 million), as well as the impact of a $325 thousand increase to the
Company's allowance for doubtful accounts during the quarter.
Inventories decreased $1.3 million from December 31, 1997 to June 30, 1998. The
reduction in inventories resulted from the sale of older model VGA projectors
and newer Diamond projectors during the second quarter, as the Company continues
to sell out existing projector inventories until the release of the P1500. The
decline in inventory was partially offset by an increase in the recently
introduced L-600 and L-800 poly-silicon projector series.
Current liabilities increased by $151 thousand to $2.1 million at June 30, 1998
from December 31, 1997. This increase reflects the receipt of projectors near
the end of the quarter, which are purchased from a manufacturer and private
labeled by the Company.
<PAGE>
Liquidity and Capital Resources
Cash provided by the collection of accounts receivable and the availability on
the line of credit to support letters of credit were sufficient to fund the
Company's operations during the second quarter of 1998. Also contributing to the
Company's positive cash flow in the second quarter was a reduction in purchases
of raw materials.
The Company entered into a three year line of credit agreement with a lender on
February 23, 1998 ("Agreement"). Amounts available to borrow under the Agreement
are based upon the results of an advance percentage applied to eligible
receivables, as defined by the lender, and the amount available to borrow is
capped at $2 million until the Company begins selling its new P1500 projector
and until the lender is satisfied such sales are eligible to borrow against. The
advance percentage will decrease if the Company exceeds a minimum formula
defined in the Agreement.
Availability under the Agreement will fluctuate on a daily basis and will
decrease if accounts receivable become ineligible, as defined in the Agreement.
The availability will also decrease if sales of the P1500 projector do not occur
or if such sales do occur but the lender does not allow the Company to
immediately borrow against them, as set forth in the Agreement. As of the date
of this filing, no amounts have been borrowed under the Agreement, although
$900,000 has been reserved to secure two stand by letters of credit.
Current availability under the Company's existing line of credit of
approximately $644 thousand combined with cash of $1.6 million is funding
current operations and two stand by letters of credit which total $900 thousand.
One such letter of credit is in favor of a key supplier of parts used in the
P1500 projector, under which there have been no significant deliveries to date.
The Company has only used its available line to secure stand by letters of
credit and has not drawn on the line since its inception on February 23, 1998.
However, in future quarters, management believes that initial purchases of
inventory components to be used in its new P1500 projector will require the
Company to draw on the line of credit. As a result, during the remainder of
1998, the Company's short-term borrowing needs could exceed its availability
under its line of credit, due to product release and/or production delays of the
P1500 projector; delays in receiving approval from the Company's lender allowing
borrowing against initial P1500 sales, as defined in the Company's loan
agreement; declining levels of older inventory which have historically funded
current operations; and the inability to predict the timing of collections,
inventory deliveries and payments with absolute certainty.
In order to prepare for the potential shortfall in short term capital,
management is attempting to reduce one of its letters of credit to provide
sufficient flexibility to meet its borrowing needs. Additionally, if required,
the Company will plan reductions in discretionary spending. The Company is also
in discussions with its lender to attempt to increase the availability under its
line of credit, by adding selected foreign receivables and inventory to the
borrowing base. There can be no assurance that management will be successful in
carrying out these objectives.
Year 2000 Compliance
The Company has performed a preliminary internal review to identify and address
the impact on its operating and application software and products related to the
year 2000. Based on the results of the initial review, the Company does not
anticipate year 2000 issues relating to the products the Company produces and
distributes. Year 2000 compliance issues relating to the Company's material
requirements planning and other application software can be resolved primarily
through replacement and normal upgrades of its software and hardware. The cost
of such replacements and upgrades is not expected to be material and the Company
anticipates completing these installations during 1999; however, there can be no
assurance that such replacements and upgrades can be completed on schedule and
within estimated costs.
<PAGE>
Risk Factors
The following discussion of risk factors describes certain aspects of the
business environment in which the Company operates. These risk factors, along
with other information in this report, should be carefully considered by users
of this report.
Over the past several years, the Company has generated losses from operations.
The Company expects to continue to incur losses until its P1500 projector
achieves market acceptance. There can be no assurances that the P1500 projector
will achieve market acceptance at a level sufficient to generate income in any
future period.
Management believes that initial purchases of inventory components to be used in
its new P1500 projector will require the Company to draw on its line of credit.
The Company's short-term borrowing needs could exceed its availability under the
line of credit, which is reduced by two stand by letters of credit. (See
Liquidity and Capital Resources in Management's Discussion and Analysis of
Financial Condition.)
The markets in which the Company operates are characterized by rapidly changing
technology, resulting in short product lives. Actual or anticipated product
releases by the Company or its competitors could cause customers to delay
purchases until the new products are available and/or to discontinue purchases
of existing products altogether. The Company's competitors may introduce
products which utilize new technologies to which the Company does not have
access. Any of these factors could have a material effect on the Company's
business and results of operations.
During 1998 the Company intends to enter new markets in which it has not
previously competed. The P1500 projector is the first product in the
Professional Series developed by the Company for sale into these new markets.
Management has devoted all product development resources of the Company on the
new series, and the success of the Company is largely dependent on successful
launch and market acceptance of the series in the new markets.
The Company's new products in development for 1998 release are based on single
source components, and unknown circumstances outside the Company's control could
affect availability of critical components.
A significant portion of the Company's shipments typically occur in the last
month of a quarter due to customers' ordering patterns, the timing of sales
promotions, component availability or technical challenges. These factors may
cause volatility in quarterly and annual results in future periods.
Revenue from the sale of products is recognized at the time of shipment to the
customer. The Company maintains a reserve for sales returns and allowances (the
"Reserve") based upon historical rates of returns. While the Company believes
its estimated Reserve is adequate, future returns could be greater than the
Reserve and may materially affect future results of operations.
The Company is continuing its efforts to reduce inventory levels and sell older
inventory. Price reductions of certain of the Company's older products have
resulted in lower gross margins. This trend is likely to continue until the
Company begins significant sales of the P1500, as older inventory continues to
be liquidated and as the current products become less attractive in the market
place due to the introduction of new products by the Company or its competitors.
<PAGE>
The trading price of the Company's common stock has been and is expected to
continue to be subject to immediate and wide fluctuations due to factors both
within and outside of the Company's control. These factors include, but are not
limited to, the following: Fluctuations in operating results or financial
position, availability of financing, new product introductions by the Company or
its competitors, product reviews by trade publications, estimates or statements
made by analysts regarding the Company or the industry and markets in which the
Company operates and stock market price fluctuations.
The Nasdaq Stock Market instituted new initial and continued listing
requirements, effective February 23, 1998. The Company has been notified that it
is not in compliance with certain of the continued listing requirements for the
Nasdaq National Market and is subject to delisting proceedings. The Company
filed an appeal on June 19, 1998, which stays the delisting until the appeal is
decided. There can be no assurance that Nasdaq will grant the appeal, nor that
the Company will be eligible to move to the Nasdaq SmallCap Market.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: August 14, 1998
nVIEW CORPORATION
By: Jerry W. Stubblefield
--------------------
Jerry W. Stubblefield
President, Chief Executive Officer,
Chief Financial Officer
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