Transcript sellside - Iviewit

Presentation to Audax Group
September 2000
Strictly Confidential
WACHOVIA SECURITIES, INC.
Agenda
I.
Executive Summary
II.
Management Introductions
III.
The Company
IV.
Organization & Ownership Structure
V.
Financial Overview
Strictly Confidential
2
WACHOVIA SECURITIES, INC.
iviewit…The Sights and Sounds of the Internet
Imaging Link
Audio Link
Video Link
Strictly Confidential
3
WACHOVIA SECURITIES, INC.
iviewit Executive Summary
Developer and provider of proprietary, advanced
digital imaging and video/audio streaming
technologies -- at all bandwidths -- over the Internet,
NOW

High-definition images with “scan, pan, and zoom” capabilities

High-fidelity audio streams

Superior video quality
Strictly Confidential
4
WACHOVIA SECURITIES, INC.
iviewit Executive Summary

Focused intellectual property strategy
» 6 patent pending applications filed in U.S. and abroad
» 1 remaining patent application to be filed

Versatile technology applications and comprehensive revenue model
» Platform agnostic imaging and video technologies
» Process, store, host, distribute, and archive digital media…end-to-end
strategy
» Service and licensing revenue model

Rapid customer validation
» 17 customers since May 2000 product launch
» High profile customers with significant market presence

Poised for rapid growth
» Seeking $15 to $25 million of growth capital
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5
WACHOVIA SECURITIES, INC.
Management Introductions

Brian Utley, President
» Former VP and GM of IBM Boca Raton (6,000 professionals)
» Developed and managed the world-wide launch of AS400 and the PC

Eliot Bernstein, Founder and Executive Vice President
» Former President of West Coast Division for SB Lexington
» 15 years creating and developing multi-media marketing tools

Michael Reale, Vice President of Operations
» Former COO of Boca Research
» President of MGV Manufacturing Corp
» SVP for SCI Systems responsible for 7 worldwide operations
» Director of IBM PC Manufacturing
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6
WACHOVIA SECURITIES, INC.
Management Introductions

Raymond Hersh, Interim Chief Financial Officer
» Co-Founder & CEO of New Medical Concepts
» 9 years as an investment banker for NYSE member firms
» Branch Chief for SEC in New York City

James Armstrong, Vice President of Sales and Marketing
» Former Owner and Principal of The Armstrong Group
» National Sales Manager for Prudential Securities Life Agency

Kevin Lockwood, Vice President of Sales and Business Development
» Former EVP of Cylex Systems
» National Sales Manager for Acer America
» Managed launch of Fujitsu PC in the U.S.

Guy Iantoni, Director of Sales and Marketing
» 10 years of sales and marketing experience with Eli Lilly, MSDW, Fidelity
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7
WACHOVIA SECURITIES, INC.
Company Milestones
May1999
Real3D
Technology
Audit
March 1999
Filed 1st
Provisional
Patent
May 2000
Secured 1st
customer
Hollywood.com
September 1999
Raised $500M from
Huizenga Holdings
March 2000
Filed 1st non-provisional
international patent
August 1999
Hired President
March1999
Confirmed
feasibility of fullscreen, full
frame rate video
September 1999
Launched website
May 2000
Hired VP of
Operations
June1999
Incorporated
iviewit and raised
seed capital
Strictly Confidential
February 2000
Raised $1MM from
Crossbow/Alpine
Ventures
8
June 2000
Launched imaging
and video products at
ShowBiz Expo in LA
WACHOVIA SECURITIES, INC.
Intellectual Property Strategy

Ensure protection of IP assets by filing timely applications

Utilize nationally recognized IP counsel to ensure maximum protection
» Kenneth Rubenstein, Proskauer Rose, LLP
» William Dick, Special Advisor to Foley & Lardner, LLP
» Doug Boehm, Patent Counsel at Foley & Lardner, LLP

Establish market precedence through licensing of trade secrets and
know-how
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9
WACHOVIA SECURITIES, INC.
Patent Milestones
March 1999
First Provisional Imaging Filing
June 1999
First Provisional Video Filing
August - December 1999
10 Additional Provisional Filings
March 2000
First Non-Provisional Imaging Filing
June 2000
4 Non-Provisional Video Filings
August 2000
1 Non-Provisional Imaging Filing
TBD
1 Non-Provisional Imaging Filing
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10
WACHOVIA SECURITIES, INC.
iviewit Imaging Process
iviewit’s imaging process is an enabling technology which creates
an unparalleled, content-rich, viewing experience.
Significant advantages include:

Photo-quality Internet images

Resistance to pixelation even at 30+:1 magnification

Full-screen and panoramic viewing up to 360 o

Consistent quality regardless of the end-user’s Internet connection

File sizes of 30Kb to 700Kb for full panorama
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11
WACHOVIA SECURITIES, INC.
Iviewit Imaging Process
Source Image = si
Source
Image
sih
Aspect Ratio = siw / sih = sir
(width of the image divided by the height of the image, in inches)
siw
The Viewing Window is the window, defined in pixels, within which is to
be displayed the virtual image, scaled to fit.
Viewing
Window
vww
Strictly Confidential
vwh
Viewing Window = vw
Viewing Window Aspect Ratio = vww / vwh = vwr
Viewing Window width in pixels = vww
Viewing Window height in pixels = vwh
12
WACHOVIA SECURITIES, INC.
Iviewit Imaging Process
Viewing
Image
sir < vwr
To fit the Source Image to the Viewing Window :
vwh vih
if sir < vwr then
Viewing Image height (vih) = vwh
Viewing Image width (viw) = vih * sir
viw
vww
Viewing
Image
sir > vwr
Compare the Source Image Aspect Ratio to the Viewing
Window Aspect Ratio:
vih vwh
if sir >, = vwr then
Viewing Image width (viw) = vww
Viewing Image height (vih) = viw / sir
vww
viw
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13
WACHOVIA SECURITIES, INC.
Iviewit Imaging Process
Virtual Image
Viewing Image vih
vih virtih
viw
virtiw
The Maximum Magnification Factor is defined as the ratio of
the Virtual Image area to the Viewing Image area. This ratio
will determine the amount of zoom available without causing
the image to distort due to fewer pixels in the image being
displayed than available in the Viewing Window.
Maximum Magnification Factor = mmf
Viewing Image area = viw x vih = via
Virtual Image area = virtiw x virtih = via x mmf = virtia
To obtain the Virtual Image width and height:
virtiw = virtia * sir
virtih = virtiw / sir
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14
WACHOVIA SECURITIES, INC.
Iviewit Imaging Process
Virtual Image
Viewing
Window
vwh
virti
A zoom to the maximum level will be shown in the Viewing
Window as shown below. By panning the Viewing Window,
every portion of the Virtual Image may be viewed from each
level of zooming.
vww
virtiw
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15
WACHOVIA SECURITIES, INC.
Video Quality Parameters
At any given bandwidth, video quality is dependent upon all the following
parameters being optimized:

Picture size:
Full-screen objective

Frame rate:
30 frames/sec

Motion artifacts:
Fluid motion; minimum artifacts

Brightness:
Adequate gamma correction

Color:
Fidelity (minimum wash-out)

Audio quality:
Lack of muddiness; stereo imaging

Audio sync:
Audio video tracking

File size:
Minimum for a given quality level
Strictly Confidential
16
WACHOVIA SECURITIES, INC.
iviewit Video Process

Industry practice has been limited to 160 x 120 and 240 x 180 frame
size in order to achieve acceptable video quality.

Iviewit developed a process through which it has greatly expanded the
industry standard for video quality. This process:
» is based upon a consistently applied frame size of 320 x 240 throughout
the digitizing and encoding process and
» delivers to the encoding step a pre-processed file which increases the
efficiency of the encoding step by maintaining the integrity of all source
parameters.

As a result of this process, iviewit is able to deliver consistently
superior video product in full-screen.

iviewit is continuing to develop pre-processing techniques that will
further enhance video quality.
Strictly Confidential
17
WACHOVIA SECURITIES, INC.
iviewit vs. Industry Comparison
Video Parameters Industry Practice Iviewit Product
Picture size / Frame rate
28-56 Kbps
56-150 Kbps
150-300 Kbps
160x120 / 4-8 fps
240x180 / 12-20 fps
320x240 / 12-24 fps
240x180 / 8-15 fps
320x240 / 15-30 fps
320x240 / 30 fps
Motion artifacts
Severe to Fair
Fair to Good
Brightness
Low to Medium Contrast
Medium to High Contrast
Color
Fair to Good Fidelity
Fair to Good Fidelity
Audio quality
Mono
Stereo
Fair to Good
Fair
Good
Good to Very Good
Audio sync
Fair to Good
Good to Very Good
File size
Standard
Up to 10% Reduction
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18
WACHOVIA SECURITIES, INC.
Business Strategy

Become a leading, end-to-end solutions provider

Partner with selected customers and technology leaders

Hire high-impact CEO from the media/entertainment industry

Hire CTO, CFO, and marketing executive

Build recurring licensing and service revenues

Provide superior service through product innovations

Expand IP base through R&D and/or acquisitions

Bring on strategic industry investors
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19
WACHOVIA SECURITIES, INC.
Marketing Strategy

Target high profile content owners and distributors

Co-brand with famous celebrities and entertainers

Initial target markets include:
»
Advertising / e-Commerce
»
Hotel and Resorts
»
Auction and Collectibles
»
Luxury Items
»
Entertainment: Film and Music
»
Modeling
»
e-Learning and Distance Learning
»
Sports
»
Healthcare

National print media campaign targeting corporate decision-makers

National B2B public relations campaign

Target market trade show presence

Establish regional offices in CA, NY, and IL
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20
WACHOVIA SECURITIES, INC.
Current Customer List
Signed 17 clients in 4 months following
the May 2000 product launch
Current clients include:
High-probability prospects include:
»
Alanis Morissette
»
Broadband Services Corp.
»
Broadway.com
»
Dovebid/DSI
»
Ellen DeGeneres
»
Greg Manning Auctions
»
Gear Magazine (Guccione Media)
»
MTV/Viacom
»
Hollywood.com
»
SDI-Media
»
Hyatt Hotels & Resorts
»
Universal Studios
»
Virtual Education
»
Versifi
»
Z.com
»
Warner Brothers
In addition, iviewit is in high-level discussions with 25 other potential clients
Strictly Confidential
21
WACHOVIA SECURITIES, INC.
Strategic Partners

B2B & B2C
»

Atlas Entertainment
Healthcare
»

Greg Manning Auctions
Entertainment
»



Medical Online
Hosting
»
Exodus
»
Digital Island
»
Burst.com *

OEM / Resellers
»
Versifi *
»
Virage *
»
Cura Group
»
SDI-Media *
Production Services
»
Documentation Services Int’l
»
Five Star Productions *
Technology Partners
»
Burst.com *
»
Virage *
* Pending
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22
WACHOVIA SECURITIES, INC.
Target Milestones
4Q 2000
1Q - 2Q 2001
3Q - 4Q 2001

Secure growth capital

Establish Los Angeles office

Hire CEO

Hire SVP of Sales/Marketing

Hire CTO and CFO

Launch branding campaign

Establish Chicago and NYC office

Close 1st technology license

Introduce technology enhancements

Establish Dallas office

Reach annualized sales runrate of $7.2MM
Strictly Confidential
23
WACHOVIA SECURITIES, INC.
Organization Structure
TBD
Chief Executive Officer
Eliot Bernstein
Executive Vice President
and Founder
Brian Utley
President
Raymond Hersh
Chief Financial Officer
Interim
Michael Reale
VP of Operations
TBD
SVP of Marketing
TBD
Chief Technology Officer
Jim Armstrong
VP of Sales and Marketing

Privately held, Delaware
C-Corporation

Headquartered in
southeast Florida

19 employees
Strictly Confidential
Kevin Lockwood
VP of Sales and
Busines Development
Guy Iantoni
Director of Sales and Marketing
24
WACHOVIA SECURITIES, INC.
Board of Directors

Simon Bernstein (Chairman Emeritus)

Brian Utley

Eliot Bernstein

Ken Anderson
»
MyCFO
»
Partner, Arthur Andersen Private Client
Services
»



Donald Kane
»
President of GDI, holding company of
4 B2B companies
»
Managing Director at Goldman Sachs
»
Vice Chairman of Sagence Systems
»
Director of Versifi, Ergo Systems, and
Kellogg Graduate School of Mgmt.
Gerald Lewin
»
Director of Schaeffer Autosimulation
CPA and Senior Partner of Goldstein
Lewin & Co.
Maurice Buchsbaum
»
CEO of Emerald Capital Partners
»
Drexel Burnham
»
Kidder Peabody
»
JW Genesis
Strictly Confidential

25
Hank Powell
»
MD of Crossbow Ventures
»
Senior Technology Analyst of
Southeast Research Partners
»
McKinsey & Co. and J.P. Morgan
WACHOVIA SECURITIES, INC.
Advisory Board

Eric Chen

»
President of Emerald Capital
Partners
»
Partner and patent attorney at
Proskauer Rose, LLP
»
Investment banking background
»
MPEG-2 patent pool member
»
Legal staff at Bell Labs
– Furman Selz
– Hambrecht & Quist

– Fechtor Detwiler
Christopher Wheeler
»
– Southeast Research Partners

Kenneth Rubenstein
Partner at Proskauer Rose, LLP
Alan Epstein
»
Partner of Armstrong Hirsch
Jackoway Tyerman & Wertheimer
Strictly Confidential
26
WACHOVIA SECURITIES, INC.
Major Shareholders
Number of
Diluted Shares
Shareholder
Preferred Series A
Crossbow/Alpine Ventures
Common Series A
Eliot Bernstein
Simon Bernstein
Huizenga Holdings
Crossbow/Alpine Ventures (1)
Other
Total Voting
Common Series B
Eliot Bernstein
Simon Bernstein
Brian Utley
iviewit Technologies
Other Management
Other (2)
Total Non-Voting
Total Shares Outstanding Diluted
Ownership
Voting
2,580
3.6%
8.9%
11,320
5,350
3,007
4,644
2,196
15.7%
7.4%
4.2%
6.4%
3.0%
38.9%
18.4%
10.3%
16.0%
7.5%
29,097
40.3%
100.0%
12,330
5,000
3,428
5,000
4,250
13,069
17.1%
6.9%
4.7%
6.9%
5.9%
18.1%
43,077
59.7%
72,174
100.0%
(1) Includes anti-dilution rights
(2) Includes 5,200 non-issued employee options
Strictly Confidential
27
WACHOVIA SECURITIES, INC.
Financing History
Date
Investor
Amount
Post Money
Valuation
Jun-99
Individual Investors
$
208,000
N.A.
Sep-99
Huizenga Holdings
$
500,000
$ 10,000,000
Dec-99
Individual Investors
$
87,000
$ 10,000,000
Feb-00
Crossbow/Alpine Ventures
Individual Investors
$ 1,000,000
$ 185,000
$ 25,000,000
$ 25,000,000
Mar-00
Individual Investors
$
250,000
$ 25,000,000
Jun-00
Individual Investors
$
80,000
$ 25,000,000
Jul-00
Crossbow/Alpine Ventures
$
800,000
$ 25,000,000
TOTAL Raised
Strictly Confidential
28
$ 3,110,000
WACHOVIA SECURITIES, INC.
Use of Proceeds
Use of Proceeds:
$ 15,000,000
$ 25,000,000
Sales and Marketing
$ 8,000,000
$ 13,400,000
Expand Production Capabilities
$ 2,000,000
$ 3,800,000
Research and Development
$ 1,500,000
$ 2,800,000
General Corporate Purposes
$ 2,250,000
$ 3,250,000
Working Capital
$ 1,250,000
$ 1,750,000
Assumes a 16-18 month period
Strictly Confidential
29
WACHOVIA SECURITIES, INC.
The Sights and Sounds of the Internet
Income Statement (ending Dec. 31)
YEAR 1
REVENUE
$
3,639,248
YEAR 2
$
24,776,909
YEAR 3
$
63,830,946
COST OF GOODS SOLD
2,057,453
6,617,445
13,192,434
GROSS PROFIT
1,581,796
18,159,464
50,638,512
9,861,781
776,326
13,870,983
1,705,086
24,790,101
2,686,204
10,638,107
15,576,069
27,476,305
(9,056,311)
2,583,395
23,162,207
OPERATING EXPENSES:
SELLING, GENERAL, & ADMINISTRATIVE
RESEARCH AND DEVELOPMENT
TOTAL OPERATING EXPENSES
OPERATING PROFIT (LOSS)
NET INCOME (LOSS)
$
(9,157,644)
$
2,364,062
$
16,378,757
EARNINGS BEFORE INCOME TAXES, DEPRECIATION AND
AMORTIZATION
$
(8,860,499)
$
3,871,945
$
26,610,280
Strictly Confidential
31
WACHOVIA SECURITIES, INC.
2001 Video Revenues
$900,000
$800,000
$700,000
$600,000
Web Design & Consulting
Master Licensing
$500,000
Serving
$400,000
Hosting
Archival
$300,000
Encoding
$200,000
$100,000
$0
Q1
Strictly Confidential
Q2
Q3
32
Q4
WACHOVIA SECURITIES, INC.
2001 Imaging Revenues
$1,000,000
Web Design & Consulting
$900,000
Archival
$800,000
Hosting & Serving Revenue
for Hotels & Resorts
Serving Revenue
$700,000
$600,000
Hosting Revenue
$500,000
Master License Revenue
$400,000
Image Processing Revenue
$300,000
Hotel & Resort Packages
Revenue
Setup Fee Revenue
$200,000
Annual License Fee Revenue
$100,000
$0
Q1
Strictly Confidential
Q2
Q3
33
Q4
WACHOVIA SECURITIES, INC.
Imaging Revenues by Quarter
$6,000,000
Web Design & Consulting
$5,000,000
Archival
$4,000,000
Hosting & Serving Revenue
for Hotels & Resorts
Serving Revenue
Hosting Revenue
$3,000,000
Master License Revenue
Image Processing Revenue
$2,000,000
Hotel & Resort Packages
Revenue
Setup Fee Revenue
$1,000,000
Annual License Fee Revenue
Strictly Confidential
Q
9
Q
10
Q
11
Q
12
Q
8
Q
7
Q
6
Q
5
Q
4
Q
3
Q
2
Q
1
$0
34
WACHOVIA SECURITIES, INC.
Video Revenues by Quarter
$16,000,000
$14,000,000
$12,000,000
Web Design & Consulting
$10,000,000
Master Licensing
Serving
$8,000,000
Hosting
$6,000,000
Archival
Encoding
$4,000,000
$2,000,000
Strictly Confidential
35
Q
9
Q
10
Q
11
Q
12
Q
8
Q
7
Q
6
Q
5
Q
4
Q
3
Q
2
Q
1
$0
WACHOVIA SECURITIES, INC.
Revenues by Quarter
$20,000,000
$18,000,000
$16,000,000
$14,000,000
$12,000,000
Imaging
Video
$10,000,000
$8,000,000
$6,000,000
$4,000,000
$2,000,000
$0
Q1
Strictly Confidential
Q2
Q3
Q4
Q5
Q6
Q7
36
Q8
Q9
Q10 Q11 Q12
WACHOVIA SECURITIES, INC.
Cash Flow Statement
YEAR 1
YEAR 2
YEAR 3
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME (LOSS)
$
(9,157,644)
$
2,364,062
$
16,378,757
ADJUSTMENTS:
DEPRECIATION
297,146
(INCREASE) DECREASE IN ACCOUNTS RECEIVABLE, Net
(1,249,651)
INCREASE (DECREASE) IN ACCOUNTS PAYABLE
185,734
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
1,507,883
3,841,406
(5,993,849)
(9,222,813)
500,024
1,797,736
(9,924,415)
(1,621,879)
12,795,087
PAYMENTS FOR FIXED ASSETS
(921,438)
(3,664,811)
(7,025,770)
CASH USED IN INVESTING ACTIVITIES
(921,438)
(3,664,811)
(7,025,770)
CASH FLOWS FROM INVESTING ACTIVITIES:
CASH FLOWS FROM FINANCING ACTIVITIES:
PROCEEDS FROM INVESTOR FINANCING
20,000,000
-
-
CASH PROVIDED BY FINANCING ACTIVITIES
20,000,000
-
-
INCREASE IN CASH
9,154,147
CASH - BEGINNING
-
CASH - ENDING
Strictly Confidential
$
37
9,154,147
$
(5,286,690)
5,769,317
9,154,147
3,867,457
3,867,457
$
9,636,774
WACHOVIA SECURITIES, INC.
Balance Sheet
ASSETS
YEAR 1
CASH
$
ACCOUNTS RECEIVABLE, Net
9,154,147
YEAR 2
$
1,249,651
PROPERTY, PLANT & EQUIPMENT
LESS: ACCUMULATED DEPRECIATION
921,438
(297,146)
$
11,028,090
3,867,457
YEAR 3
$
9,636,774
7,243,499
16,466,312
4,586,248
(1,805,029)
11,612,018
(5,646,435)
$
13,892,176
$
32,068,670
$
685,758
$
2,483,495
LIABILITIES AND STOCKHOLDERS' EQUITY
ACCOUNTS PAYABLE
$
COMMON STOCK
ADDITIONAL PAID-IN CAPITAL
RETAINED EARNINGS (DEFICIT)
$
Strictly Confidential
38
185,734
1,000
19,999,000
(9,157,644)
1,000
19,999,000
(6,793,583)
1,000
19,999,000
9,585,175
10,842,356
13,206,417
29,585,175
11,028,090
$
13,892,176
$
32,068,670
WACHOVIA SECURITIES, INC.