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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
FOR THE FISCAL YEAR ENDED: OCTOBER 31, 1999
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 NUMBER: 0-11552
TELEVIDEO, INC.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 94-2383795
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(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
2345 HARRIS WAY, SAN JOSE, CALIFORNIA 95131
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (408) 954-8333
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
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SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, $0.01 PAR VALUE
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(TITLE OF CLASS)
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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.
YES NO X
--- ---
THE APPROXIMATE AGGREGATE MARKET VALUE OF REGISTRANT'S COMMON STOCK
HELD BY NON-AFFILIATES ON JANUARY 12, 2000 (BASED UPON THE CLOSING SALES PRICE
OF SUCH STOCK AS REPORTED IN THE OVER THE COUNTER MARKET AS OF SUCH DATE) WAS
$5,948,750.
AS OF JANUARY 12, 2000, 11,271,085 SHARES OF REGISTRANT'S COMMON STOCK
WERE OUTSTANDING.
DOCUMENTS INCORPORATED BY REFERENCE: Certain portions of the Registrant's
Definitive Proxy Statement to be used in connection with Registrant's Annual
Meeting of Stockholders to be held on April 18, 2000 have been incorporated
by reference into Part III of this Annual Report on Form 10-K.
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO
ITEM 405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED,
TO THE BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION
STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY
AMENDMENT TO THIS FORM 10-K. [ ]
1
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K for the fiscal year ended October 31,
1999 includes certain statements that may be deemed to be "forward-looking
statements" within the meaning of Section 27A of the Securities Act and Section
21E of the Exchange Act. All statements, other than statements of historical
facts, included in this Annual Report that address activities, events or
developments that the company expects, believes or anticipates will or may occur
in the future, including, but not limited to, such matters as future product
development, business development, marketing arrangements, future revenues from
contracts, business strategies, expansion and growth of the company's operations
and other such matters are forward-looking statements. These kinds of statements
are signified by words such as "believes," "anticipates," "expects," "intends,"
"may," "will" and other similar expressions. However, these words are not the
exclusive means of identifying such statements. These statements are based on
certain assumptions and analyses made by the company in light of its experience
and perception of historical trends, current conditions, expected future
developments and other factors it believes are appropriate in the circumstances.
Such statements are subject to a number of assumptions, risks and uncertainties,
including the risk factors discussed below, general economic and business
conditions, the business opportunities (or lack thereof) that may be presented
to and pursued by the company, changes in law or regulations and other factors,
many of which are beyond control of the company. Investors are cautioned that
any such statements are not guarantees of future performance and that actual
results or developments may differ materially from those projected in the
forward-looking statements.
(Remainder of this page was intentionally left blank)
2
INTRODUCTORY STATEMENT
References in this Form 10-K to "TeleVideo," the "Registrant" or the
"Company" refer to TeleVideo, Inc. and its subsidiaries unless the context
indicates otherwise. This report contains registered and unregistered trademarks
of other companies.
PART I
ITEM 1. BUSINESS
THE COMPANY
Founded in 1975, TeleVideo is a market leader providing innovative high
performance terminal and network computer products to the business and consumer
markets. The Company markets its products worldwide primarily through
distributors, value-added resellers ("VARs"), systems integrators and original
equipment manufacturers ("OEMs").
The Company first became a leader in the video display terminal
industry by introducing a new generation of "smart" terminals based on the Intel
microprocessor at a time when dumb terminals were the industry standard.
TeleVideo holds a number of proprietary terminal emulations, including the TV910
and TV9425, which have been an industry standard for more than 15 years and are
currently used in millions of terminals worldwide. Today, TeleVideo is utilizing
its expertise in server-based network computing to forge new ground in
delivering thin-client solutions.
TeleVideo operates in one industry segment.
PRODUCTS
TeleCLIENT Family
TeleVideo's TeleCLIENT products consist of a family of thin-client
Windows-based terminals. The TC7000 is a stand alone design that can be
connected to a variety of monitors to meet specific needs. The TC7150 and
TC7170 are integrated units with 15 and 17 inch color CRT monitors,
respectively. The TeleCLIENT TC7300 Series is a fully-integrated
Windows-based thin-client with a built-in high resolution TFT LCD screen.
Bundled as an all-in-one design, the TC7300 Series is designed for use in
limited workspaces. The TeleCLIENT family of products is designed for use in
the healthcare, government, education, retail and other task-oriented
client/server based computing environments. TeleVideo's thin-clients are
accelerated by a Pentium-class 233MHz microprocessor. TeleCLIENT thin-clients
are powered by Windows CE, enabling fast and easy access to business-critical
applications. The TeleCLIENT family of products also provides flexibility to
choose the Remote Desktop Protocol that executes either the Windows NT 4.0
Terminal Server Edition, or the Citrix ICA protocol through Citrix MetaFrame
or WinFrame. Windows CE gives the TC7000, TC7150, TC7170 and the TC7300
Series server-side access to popular Windows-based business applications such
as the Microsoft Office suite and Java, as well as the Internet.
Video Display Terminals
3
The 990 is a general purpose terminal with ASCII, ANSI and PC TERM
operating modes. For maximum versatility and flexibility, the terminal is
compatible with a wide variety of keyboard styles and allows users to
interface to a bar code scanner, wand reader, credit card reader, electronic
scale or other specialized keyboards for point-of-sale or
point-of-transaction processing.
The TeleVideo 995-65 14-inch monochrome terminal allows the user
AlphaWindowing capability at a non-windowing price for new or existing software
applications. The windows capability provides increased productivity for
applications running on UNIX. The 995 also has a power management screen saver
which protects the environment and promotes energy conservation.
iTelePC
Televideo's iTelePC iT2000 is an "internet appliance," a new and
relatively low-cost PC designed for Internet access and specialized business
use, but without the full capabilities of a personal computer. The iT2000 comes
integrated with a 15-inch monitor that brings the Internet to the household or
business in a small, easy-to-use design. Powered by Microsoft Windows CE, the
233 MHz iT2000 comes with no set-up required.
PRODUCT DEVELOPMENT
TeleVideo serves markets that are characterized by rapid
technological change and the Company has continuous ongoing programs to
develop new products. Although the Company's research and development staff
consists of 10 employees as of January 12, 2000, various joint projects of
the Company are supported by engineers from participating companies. During
fiscal 1999, TeleVideo spent approximately $0.6 million on Company-sponsored
research and development. Company-sponsored research and development expenses
for fiscal 1998 and 1997 were approximately $0.4 million and $0.8 million,
respectively. The Company did not engage in any customer-sponsored research
and development program during such years.
Because of the fast pace of technological advances, the Company must be
prepared to design, develop and manufacture new and more powerful low-cost
products in a relatively short time. TeleVideo believes it has had mixed success
to date in accomplishing these goals simultaneously. Like other companies in the
computer industry, it will continue to experience delays in completing new
product design and tooling. There is no assurance that the Company will be able
to design and manufacture new products, including its iTelePC and TeleCLIENT
family of products, that respond to the rapid changes in the marketplace.
SALES, MARKETING AND CUSTOMERS
North American sales are handled from TeleVideo sales offices located
in San Jose, California; Lake Forest, California; Wharton, New Jersey; Hoffman
Estates, Illinois; Gainsville, Georgia; and Dallas, Texas. Products are sold
through distributors, mass merchants, retail stores, VARs, systems integrators
and OEMs.
Products sold in Europe, Asia Pacific, Africa and Latin America are
handled by the Company's office in San Jose, California through distributors,
OEMs and international representatives. The Company also appointed an agent in
the United Kingdom in fiscal 1999 to manage existing customer relationships and
to build new ones throughout Europe.
TeleVideo distributors generally do not have exclusive geographic
territories. Distributor contracts can generally be terminated by either party
without cause upon advanced written notice of 30 days or 60 days. TeleVideo's
distributors typically handle a variety of computer-related products, including
products competitive with those of TeleVideo. The typical distribution
4
arrangement requires the distributor to purchase TeleVideo products with certain
limited stock rotation rights. Distributors may also exercise price protection
rights should the Company's product price be reduced.
TeleVideo, through its headquarters' marketing and supporting staff,
continues to work closely with its distributors, mass merchants, retail
stores, VARs, systems integrators and original OEMs. TeleVideo's marketing
staff also provides the customers with training, sales and promotional
materials, cooperative advertising programs, trade show participation and
sales leads. The marketing organization also leads the product marketing role
giving direction to product management and competitive positioning. The
Company spent approximately 9% ($0.7 million), 7% ($1.1 million) and 7% ($1.3
million) of its net revenues on advertising in fiscal 1999, 1998 and 1997,
respectively.
TeleVideo's customers typically purchase the Company's products on an
as-needed basis. Therefore, the Company will continue to manufacture its
products based on sales forecasts and upon customer orders. As a result of this
strategy, the Company believes that backlog is not material to its business
taken as a whole. Because of the possibility of customer changes in delivery
schedules or cancellation of orders, which is not uncommon in the computer
industry, the Company's backlog as of any particular date may not be indicative
of actual net sales for any succeeding period. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
For the fiscal year ended October 31, 1999, TeleVideo's largest
customer (Savior, Inc.) accounted for 10% of the Company's sales, while
another customer accounted for 9%. TeleVideo's sales terms are primarily cash
in advance or upon delivery, or on credit terms that are typically net 30 or
net 45 days.
INTERNATIONAL SALES
The Company had export sales (primarily to Europe, Asia and Latin
America) of approximately $1.6 million in fiscal 1999 (representing 19.8% of
total net sales), $2.1 million in fiscal 1998 (14.2% of total sales) and $2.7
million in fiscal 1997 (13.6% of total net sales). In fiscal 1999, the
Company appointed an agent in the United Kingdom to manage existing customer
relationships and to build new ones throughout Europe. The Company is
evaluating the feasibility of establishing a fully equipped TeleVideo
presence in Europe but has made no commitments in this regard.
TeleVideo's international sales are subject to certain risks common to
non-United States operations, including but not limited to governmental
regulations, import restrictions and export control regulations, changes in
demand resulting from fluctuations in exchange rates, as well as risks such as
tariff regulations. TeleVideo's international sales are generally U.S.
dollar-denominated and, therefore, are not directly subject to international
currency fluctuations. The strength of the dollar in relation to certain
international currencies may, however, adversely affect the Company's sales to
international customers.
FOREIGN JOINT VENTURE ACTIVITY
TELEVIDEO-RUS
In January 1996, TeleVideo established a company called "TeleVideo-RUS"
in the Commonwealth of Independent States with an initial investment of
$150,000. In fiscal 1997, the Company sold this investment for $250,000 and
recognized a profit of $100,000.
THREE H
5
Three H Partners, owned equally by TeleVideo and a Russian entity, was
formed in fiscal 1991. The Company invested a total of $76,000 into Three H. The
Company wrote off this investment in fiscal year 1996.
TLK, INC.
In November 1996, the Company invested $150,000 in exchange for a 20%
ownership in TLK, Inc. for the China Power Plant projects in Lin Zhang, Quin
Yuan and Henan Provinces in China. The Company wrote off this investment in
fiscal year 1997.
KORAM, INC.
On March 3, 1997, the Company deposited $224,820 in escrow in Korea,
which amount was used to purchase a 50% interest in a restaurant venture in
Seoul, Korea. The amount deposited has been written down to $109,820 due to the
devaluation of the Korean won. The Company accounts for this investment on the
equity basis of accounting.
COMPETITION
TeleVideo believes that brand recognition, product quality,
availability, extensive standard product features, service and price are
significant competitive factors in the Company's markets. In addition to the
factors listed above, the principal considerations for distributors and
resellers in determining which products to offer include profit margins,
immediate delivery, product support, and credit terms. TeleVideo has continued
and in the future will likely continue to face significant competition, with
respect to these factors, particularly from the large international
manufacturers. Most of these companies have significantly greater financial,
marketing and technological resources than the Company, and may be able to
command better terms with their suppliers due to higher purchasing volumes.
Therefore, there is no assurance that the Company will be able to successfully
compete in the future.
PRODUCTION
The Company subcontracts substantially all of the manufacture of its
products to manufacturers in Taiwan, The People's Republic of China and South
Korea. The testing, inspection and some minor assembly work are done at its
California headquarters. The Company believes its current manufacturing
facilities in California will continue to be adequate for its purposes for the
foreseeable future.
The Company generally uses standard parts and components for its
products, although certain components are presently available and secured
only from a single source. The Company's largest supplier accounted for
approximately 61% (approximately $3.2 million) of net purchases in fiscal
1999. Loss of this supplier might have an adverse effect on the product
supply of the Company. The Company believes, however, that in most cases,
alternative sources of supply could be arranged as and when needed by the
Company. To date, TeleVideo has not experienced any significant difficulties
or delays in production of its terminal products.
PROPRIETARY RIGHTS
The Company regards certain aspects of its products as proprietary and
relies upon a combination of trademark and copyright laws, trade secrets,
confidentiality procedures and
6
contractual provisions to protect its proprietary rights. The Company has
registered trademarks in the United States and in over 20 foreign countries for
"TeleVideo" and the TeleVideo logo.
The continuing development of the Company's products and business is
dependent, primarily, on the knowledge and skills of certain of its employees.
To protect its rights to its proprietary information, the Company requires all
employees and consultants to enter into confidentiality agreements that prohibit
the disclosure of confidential information to persons unaffiliated with the
Company. There can be no assurance, however, that these agreements will provide
meaningful protection for the Company's technology or other confidential
information in the event of any unauthorized use or disclosure. There also can
be no assurance that third parties will not independently develop products
similar to or duplicative of products of the Company. The Company believes that
due to the rapid pace of technological change in its industry, the Company's
success is likely to depend more upon continued innovation, technical expertise,
marketing skill and customer support than on legal protection of the Company's
proprietary rights.
GOVERNMENT REGULATIONS
Most of the Company's products are subject to regulations adopted by
the Federal Communications Commission ("FCC"), which establishes radio frequency
emanation standards for computing equipment. TeleVideo believes that all of the
Company's products that are subject to such regulations comply with these
regulations. Although there can be no assurance, the Company has no reason to
believe that new products will not also be approved. Failure to comply with the
FCC specifications could preclude the Company from selling non-complying systems
in the United States until appropriate modifications are made. To date, the
Company has not encountered any FCC compliance problems.
EMPLOYEES
As of January 19, 1999, the Company's full-time employees totaled
43, as compared with 41 reported at the end of fiscal 1998. Of the total
number of employees, 20 are engaged in product research, engineering,
development and manufacturing; 14 in marketing and sales; and 9 in general
management and administration. The Company believes that its future success
will depend, in part, on its ability to continue to attract and retain highly
skilled technical, marketing and management personnel.
None of the Company's employees is subject to a collective bargaining
agreement or represented by a union, and the Company has never experienced a
work stoppage. The Company believes that its employee relations are good.
ITEM 2. PROPERTIES
The Company's headquarters, research and development and
administrative operations are housed in a 69,630 square foot building located
on 2.5 acres in San Jose, California, which was owned by the Company. On
December 28, 1998, the Company sold the building and has leased it back. The
aggregate monthly lease amounts to $104,000. Please refer to Note 6 of the
financial statements ("Sale and Leaseback of Building") for additional
details. The lease expires on December 31, 2013.
The Company leases domestic sales offices in Hoffman Estates, Illinois;
Lake Forest, California; Wharton, New Jersey; Gainsville, Georgia; and Dallas,
Texas. The lease terms range from month-to-month tenancy to a term of three
years. Management believes that the Company would be able to secure an extension
to the leases if such an extensions are deemed necessary in the future. All of
the leases are operating leases.
7
ITEM 3. LEGAL AND OTHER PROCEEDINGS
TAX AUDITS
On July 14, 1997, the State of Massachusetts issued to the Company a
certificate of withdrawal to do business in the state. Consequently, $250,000
was removed from deferred taxes and was recognized as other income.
OTHER LEGAL PROCEEDINGS
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
fourth quarter of fiscal 1999.
EXECUTIVE OFFICERS
The following sets forth certain information with regard to
executive officers of TeleVideo (ages are as of January 19, 2000):
Executive Officer Age Position
- ----------------- --- --------
Dr. K. Philip Hwang 64 Chairman of the Board and Chief
Executive Officer
TeleVideo, Inc.
Jun Keun Yum 48 Vice President of Operations, Chief
Technology Officer and
Director of TeleVideo, Inc.
James D. Wheat 42 Vice President of Finance and
Chief Financial Officer
TeleVideo, Inc.
Joseph Burroughs 61 Vice President of Worldwide Sales
TeleVideo, Inc.
- ----------------
Dr. K. Philip Hwang, age 64, is the founder of the Company and has
been Chairman of the Board and Chief Executive Officer since October 1976.
From August 1990 to April 1991, he served as the Acting Chief Financial
Officer. Since 1992, Dr. Hwang has also served as Chairman of AdMOS (Advanced
MOS Systems), an engineering firm specializing in ASIC chip design. AdMOS is
a private corporation in which TeleVideo holds a 20% interest.
Jun Keun Yum, age 48, joined TeleVideo in January 1999 as Vice
President of Operations and Chief Technology Officer. Prior to that, Mr. Yum
was a General Manager and Executive Director of Samsung Electronics Co.,
Ltd., Seoul, Korea from January 1993 to December 1998. Previously from
October 1986 to December 1992, he was co-founder and President of Pixelab,
Inc. of Lisle, Illinois. Mr. Yum has a BS degree in Electrical Engineering
from Han Yang University of Seoul, Korea and an MS degree in Electrical
Engineering from Illinois Institute of Technology.
James D. Wheat, age 42, joined TeleVideo in March 1999 as Vice
President of Finance and Chief Financial Officer. Prior thereto, from
November 1997 to February 1999, Mr. Wheat served as Vice President and
Corporate Controller of Sunterra, a public timeshare company. From 1991 to
November 1997, Mr. Wheat served as internal auditor, division controller and
external reporting manager of Raychem Corporation, a materials manufacturing
company. Mr. Wheat is a Certified Public Accountant, Certified Management
Accountant, Certified Internal Auditor and is a licensed real estate broker
in California. He received a B.B.A. degree from the University of Michigan
and an M.B.A. degree from The Wharton School of Business at the University of
Pennsylvania.
Joseph Burroughs, age 61, joined TeleVideo in July 1999 as Vice
President of Worldwide Sales. Prior to joining TeleVideo, beginning in
January 1997, Mr. Burroughs was President of B&A Channel Consultants, San
Ramon, California, a consulting company owned by Mr. Burroughs. From February
1997 to October 1998, he served as channel manager with Meridian Data, Inc.,
Scotts Valley, California, a networking storage company. From August 1995 to
September 1996, Mr. Burroughs served as Channel Marketing and Sales Director
for SBE, San Ramon, California, a networking products company. From July 1993
to August 1995, Mr. Burroughs served as Channel Marketing Manager for
Networth, Inc., Irving, Texas, a networking products company. Mr. Burroughs
received a B.S. in marketing from the Rochester Institute of Technology.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's Common Stock is traded in the over-the-counter market
and quoted on the NASD electronic bulletin board under the symbol "TELV". The
following table sets forth for the periods indicated the high and low last
sales prices for the Common Stock. The prices quoted below reflect
inter-dealer prices, without retail mark-ups, markdowns or commissions and
may not necessarily represent actual transactions.
High Low
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FISCAL 1998:
First Quarter $3.3750 $1.7500
Second Quarter 3.1250 1.3750
Third Quarter 2.0625 0.9688
Fourth Quarter 1.0313 0.7188
FISCAL 1999:
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First Quarter $1.0000 $0.6250
Second Quarter 1.0938 0.3750
Third Quarter 1.0312 0.3750
Fourth Quarter 0.8125 0.5625
There were 746 holders of record of the Company's Common Stock at
January 12, 2000. On January 12, 2000, the closing price of the Company's Common
Stock in the over-the-counter market, was $1.4375 per share.
The Company has never paid cash dividends on its Common Stock and does
not anticipate paying cash dividends in the foreseeable future. The Company
presently intends to retain any earnings for use in its business.
(The remainder of this page was left blank intentionally.)
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data reflect the continuing
operations of TeleVideo. The data below has been derived from the Company's
audited consolidated financial statements for the fiscal years presented and
should be read in conjunction with such audited financial statements and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" presented elsewhere herein.
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Year Ended October 31,
---------------------------------------------------------------------------
1999 1998 1997 1996 1995
---------- ---------- ---------- --------- --------
STATEMENT OF OPERATIONS DATA:
Net sales $ 8,070 $14,751 $19,884 $21,576 $16,914
Income (loss) from continuing
operations (4,570) (4,727) (3,115) (4,638) (4,741)
Net (loss) income (3,707) (8,881)(1) (3,444)(2) (2,993)(3) 415(4)
Net (loss) income (per share),
Basic and diluted (0.33) (0.79) (0.31) (0.26) 0.04
BALANCE SHEET DATA:
Cash and cash equivalents $ 4,487 $ 1,640 $ 3,604 $ 4,496 $5,145
Working capital 5,596 2,533 9,208 13,239 13,035
Total assets 18,317 10,433 17,692 23,014 24,600
Stockholders' equity 2,504 6,211 15,062 18,468 21,435
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the accompanying Notes to Consolidated Financial
Statements for a discussion of operating results, liquidity needs and
acquisitions and dispositions during the periods.
(1) Includes net loss from investment in APT venture of $4,076,903.
9
(2) Includes net gains(loss) from the following (in thousands):
(A) Loss from investment in APT venture $ (623)
(B) Gain from Russian investment 100
(C) Gain from tax settlement 250
(D) Korean currency valuation adjustment (115)
(E) Loss from write-off of TLK (150)
-----
$ (538)
------
------
(3) Includes net gain from the sale of InterTerminal joint venture
interest of $1,370,000.
(4) Includes net gains (loss) from the following (in thousands):
(A) Sale of building $1,350
(B) Disposition of Russian joint venture interest 1,910
(C) Sale of interest in Kabil Electronics 1,422
(D) Disposal of SMS product line (346)
------
$4,336
------
------
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
The Company continues to focus its efforts toward providing
high-performance Windows-based terminals to the business and consumer markets.
In recent years, the Company has phased out the sale of multimedia products and
monitors to focus on utilizing its expertise in server-based network computing
to forge new ground in delivering thin-client solutions. In November 1998, the
Company launched its Windows-based terminal products.
The Company has strengthened its sales organization in fiscal 1999 to
provide more efficient geographical coverage and market penetration for its
thin-client products. The Company faces strong competition in the marketplace
and continues to look for ways to improve operating efficiency. In order to
lower the production costs, the Company has continued to negotiate with its
suppliers and has also shifted many production processes overseas.
RESULTS OF OPERATIONS
FISCAL 1999 COMPARED TO FISCAL 1998
Net sales for fiscal year 1999 were approximately $8.1 million,
compared with $14.8 million in fiscal 1998, a decrease of $6.7 million, or 45%.
The decrease in net sales reflects the Company's continued shift away from the
sale of monitors and multimedia products. In fiscal 1999, monitor and multimedia
sales totaled $1.0 million as compared with fiscal 1998, when sales
10
of monitors and multimedia products totaled $6.3 million. Sales of terminals
decreased in fiscal 1999 to $6.0 million from $7.5 million in fiscal 1998.
Cost of sales for fiscal year 1999 was approximately $8.1 million,
compared with $13.4 million in fiscal 1998, a decrease of $5.3 million, or
40%. However, cost of sales as a percentage of net sales increased from 90.7%
in 1998 to 100.1% in 1999. The increase in cost of sales as a percentage of
sales in 1999 is due in part to royalty payments that the Company began
making in fiscal 1999 under a licensing agreement for the operating system
software used in the Company's TeleCLIENT products, which the Company began
selling in fiscal 1999. For accounting purposes, the royalty expense is being
amortized on a straight line basis over the life of the licensing agreement
which results in a larger proportion of expense, relative to sales, during
the initial months when the TeleCLIENT product is being introduced into the
marketplace. The Company also recorded a provision for obsolescence in the
fourth quarter of fiscal 1999 for multimedia products and monitors, which the
Company is in the process of phasing out.
Sales and marketing expenses for fiscal year 1999 were approximately
$2.2 million, compared with $2.4 million in fiscal 1998, a decrease of $0.2
million, or 8%. As a percentage of net sales, sales and marketing expenses
increased to 27% in fiscal 1999 from 16% in fiscal 1998. The increase primarily
represents costs incurred by the Company to launch its TeleCLIENT product line
in fiscal 1999.
Research and development expenses were $0.6 million in fiscal 1999,
compared with $0.4 million in fiscal 1998. As a percentage of net sales,
research and development expenses increased to 7% in fiscal 1999 compared with
3% in fiscal 1998. The increase represents increased costs associated with the
continued development of new products, including the Company's TeleCLIENT
product line.
General and administrative expenses were $1.8 million in fiscal
1999, compared with $3.3 million in fiscal 1998, a decrease of $1.5 million
or 45%. As a percentage of net sales, general and administrative expenses
were 22% in fiscal 1999 and 1998. In fiscal 1999, the Company began incurring
lease expenses in accordance with the sale and leaseback of the Company's
headquarters facility. Additional details about the sale and leaseback
transaction can be found in "Liquidity and Capital Resources" and in Note 6
to the financial statements, "Sale and Leaseback of Building." In fiscal
1998, the Company incurred a charge of approximately $2.0 million to reflect
a write-off of its accounts and notes receivable from Applied Computer
Technology, Inc.
The Company's loss from operations was approximately $4.6 million in
fiscal 1999 as compared with $4.7 million in fiscal 1998.
Interest income, net of interest expense, was $30,000 in fiscal
1999, as compared with $77,000 in fiscal 1998. Other income was $0.5 million
in fiscal 1999 as compared with none in fiscal 1998. Other income represents
primarily the amortization of the deferred gain on the December 1998 sale of
the Company's building.
The net loss for fiscal year 1999 was approximately $3.7 million,
compared with a net loss of $8.9 million in fiscal 1998, a decrease of $5.2
million, or 58%. In fiscal 1998, the Company recorded a loss of approximately
$4.1 million from its equity investment in Applied Photonics Technology, Inc.
Net loss per share in fiscal 1999 was $0.33 based on 11,271,085
weighted average shares outstanding, compared to a net loss per share in fiscal
1998 of $0.79 based on 11,267,685 weighted average shares outstanding.
11
An income tax credit of 0.4 million was recorded in fiscal 1999 as
the Company reduced its tax liability originally set up for various tax
exposure. The Company has approximately $102 million in federal net operating
loss and credit carryovers and approximately $34 million in state net
operating loss carryovers to offset future federal and state corporate income
tax liabilities. No net deferred tax asset has been recognized by the Company
for any future tax benefit to be provided from the loss carry forwards since
realization of any such benefit is not assured.
FISCAL 1998 COMPARED TO FISCAL 1997
Net sales for fiscal year 1998 were approximately $14.8 million,
compared with $19.9 million in fiscal 1997, a decrease of $5.1 million, or 26%.
The decrease in net sales reflects the decrease in the sale of multimedia
products, which the Company is gradually phasing out, from approximately $6.5
million in 1997 to approximately $1.9 million in 1998, a decrease of 71%.
Additionally, there were decreases in the sales of OMTI boards, spares, repairs
and miscellaneous products from approximately $2.3 million in 1997 to $1.2
million in 1998, or 48%. Sales of OMTI boards have decreased as demand from
customers has shifted toward newer technologies. Sales of spares, repairs and
miscellaneous products decreased in 1998 as price decreases made it more cost
effective for customers to replace, rather than to repair, their related
equipment. However, net sales of monitors increased from $3.5 million in 1997 to
$4.4 million in 1998, an increase of 26%, to partially offset the decrease in
net sales of multimedia and other products.
Cost of sales for fiscal year 1998 were approximately $13.4 million,
compared with $17.8 million in fiscal 1997, a decrease of $4.4 million, or 25%.
Cost of sales as a percentage of net sales increased from 89.5% in 1997 to 90.7%
in 1998, due primarily to lower profit margins on sales of both multimedia
products and monitors. During 1998, the Company phased out its multimedia
product lines and sold most of its multimedia inventory at below average gross
margins to reduce its excess stock. The Company's net inventory level decreased
by 21% in 1998, to $2.3 million, from $2.9 million at October 31, 1997. The
Company also experienced competitive pricing pressure on the sale of monitors,
leading to lower gross margins in fiscal 1998 as compared with fiscal 1997.
Manufacturing expenses (which are included in cost of sales) decreased from
approximately $1.3 million in fiscal 1997 to approximately $1.1 million in
fiscal 1998, a decrease of $0.2 million or 15%. The decrease was mainly due to
the decrease in number of employees from 27 in 1997 to 17 in 1998.
Sales and marketing expenses for fiscal year 1998 were approximately
$2.4 million, compared with $3.0 million in fiscal 1997, a decrease of $0.6
million, or 20%. As a percentage of net sales, sales and marketing expenses
increased slightly to 16% in fiscal 1998 from 15% in fiscal 1997. The decrease
in actual expenses was primarily due to a decrease in employee headcount in the
sales and marketing departments and a reduction in advertising expenses.
Research and development expenses were $0.4 million in fiscal 1998, compared
with $0.8 million in fiscal 1997. As a percentage of net sales, research and
development expenses decreased to 3% in fiscal 1998 compared with 4% in fiscal
1997. The decrease was due mainly to a reduction in engineering headcount in
fiscal 1998.
General and administrative expenses were $3.3 million in fiscal 1998,
compared with $1.5 million in fiscal 1997, an increase of $1.8 million or 120%.
As a percentage of net sales, general and administrative expenses increased to
22% in fiscal 1998 compared with 7% in fiscal 1997. The increase was due
primarily to the increase in bad debts from approximately $293,000 in fiscal
1997 to approximately $2.3 million in 1998. This increase reflected the
Company's write-off of its accounts and notes receivable balance from Applied
Computer Technology, Inc., of approximately $2.0 million in fiscal 1998.
12
The Company's loss from operations was approximately $4.7 million in
fiscal 1998 as compared with $3.1 million in fiscal 1997. The increase was
primarily due to the increase in general and administrative expenses resulting
from the increase in bad debt expense, and the decrease in net sales from $19.9
million in fiscal 1997 to $14.8 million in fiscal 1998.
The net loss for fiscal year 1998 was approximately $8.9 million,
compared with a net loss of $3.4 million in fiscal 1997, an increase of $4.5
million, or 55%. In fiscal 1998, the Company recorded a loss of approximately
$4.1 million from its equity investment in Applied Photonics Technology, Inc.
Net loss per share in fiscal 1998 was $0.79 based on 11,267,685
weighted average shares outstanding, compared to a net loss per share in fiscal
1997 of $0.31 based on 11,254,810 weighted average shares outstanding.
No income tax expense or credit was provided for in fiscal 1998. At
October 31, 1998, the Company had approximately $98 million in federal net
operating loss and credit carryovers and approximately $32 million in state net
operating loss carryovers to offset future federal and state corporate income
tax liabilities. No net deferred tax asset has been recognized by the Company
for any future tax benefit to be provided from the loss carry forwards since
realization of any such benefit is not assured.
LIQUIDITY AND CAPITAL RESOURCES
At October 31, 1999, the Company had $4.5 million in cash and cash
equivalents, an increase of approximately $2.9 million over the balance of $1.6
million at October 31, 1998. This includes a $1.0 million certificate of deposit
which the Company purchased in fiscal 1999.
Approximately $1.0 million in certificates of deposit were pledged as
collateral for comparable amounts of stand-by and sight letters of credit. At
October 31, 1999, the Company had no outstanding letters of credit which were
secured by the pledged deposits under this agreement.
In December 1998, the Company sold its 69,360 square foot headquarters
building in San Jose, California, including land and improvements, to TVCA,
LLC, an unaffiliated Delaware limited liability company ("TVCA") for $11.0
million. The nature of the consideration was $8.25 million in cash and a
$2.75 million promissory note. The note bears interest at 7.25% per annum.
Principal and accrued interest are payable in equal monthly installments of
$21,735 on the first day of each month, commencing January 1, 1999. If not
earlier paid in full, any unpaid principal and all accrued interest is due
and payable to the Company on December 1, 2013.
In December 1998, the Company sold its main facility (land and
building) for approximately $11.0 million and concurrently leased back this
facility over a 15 year lease term expiring in December 2013. The land
component has been recorded as an operating leaseback. The building component
has been accounted for as a capital lease, whereby a leased building asset
and capital lease obligation were recorded at the fair value of approximately
$6.27 million. As a result of the sale for $11.0 million (which includes a
$2.75 million note receivable), a deferred gain of approximately $8.0 million
was recorded. The deferred gain attributable to the land element, which
approximates $3.44 million, is being amortized over the 15 year lease life on
a straight line method. The deferred gain attributable to the building
element, which approximates $4.56 million, is being amortized over leased
building asset life, which has been determined to be the 15 year lease term,
on a straight line method.
Net accounts receivable were $1.5 million at October 31, 1999, compared
with $2.4 million at October 31, 1998, a decrease of $0.9 million, or 38%
while net inventories were $1.5 million
13
at October 31, 1999, as compared with $2.3 million at October 31, 1998, a
decrease of $0.8 million.
Working capital at the end of the fiscal 1999 was approximately $5.6
million, an increase of $3.1 million, or 124%, from the fiscal 1998 year-end
level of approximately $2.5 million, primarily as a result of the proceeds from
the sale of the Company's headquarters facility.
The Company believes that, with respect to its current operations, the
Company's cash balance of approximately $4.5 million at October 31, 1999, which
includes its $1.0 million certificate of deposit, plus revenues from operations
and other non-operating cash receipts, will be sufficient to meet the Company's
working capital and capital expenditure needs for the next twelve months.
FACTORS THAT MAY AFFECT FUTURE RESULTS
COMPETITIVE MARKETS
The terminal market is intensely competitive. The principal elements
of competition are pricing, product quality and reliability, price/performance
characteristics, compatibility, marketing and distribution capability, service
and support, and reputation of the manufacturer. TeleVideo competes with a large
number of manufacturers, most of which have significantly greater financial,
marketing and technological resources than TeleVideo. There can be no assurance
that the Company will be able to continue to compete effectively.
PRODUCT DEVELOPMENT
The computer market is characterized by rapid technological change and
product obsolescence, often resulting in short product life cycles and rapid
price declines. The Company's success will continue to depend primarily on its
ability to continue to reduce costs through manufacturing efficiencies and price
negotiation with suppliers, the continued market acceptance of its existing
products and its ability to develop and introduce new products. There can be no
assurance that TeleVideo will successfully develop new products or that the new
products it develops will be introduced in a timely manner and receive
substantial market acceptance. There can also be no assurance that product
transitions will be managed in such a way to minimize inventory levels and
product obsolescence of discontinued products. The Company's operating results
could be adversely affected if TeleVideo is unable to manage all aspects of
product transitions successfully.
SINGLE SOURCED PRODUCTS
The Company generally utilizes standard parts and components available
from multiple suppliers. However, certain parts and components used in the
Company's products are available from a single source. If, contrary to its
expectations, the Company is unable to obtain sufficient quantities of any
single-sourced components, the Company will experience delays in product
shipments.
RELIANCE ON FORECASTS
The Company offers its products through various channels of
distribution. Changes in the financial condition of, or in the Company's
relationship with, its distributors could cause actual operating results to vary
from those expected. Also, the Company's customers generally order products on
an as-needed basis. Therefore, virtually all product shipments in a given fiscal
quarter result from orders received in that quarter. The Company anticipates
that the rate of new orders will vary significantly from month to month. The
Company's manufacturing
14
plans and expenditure levels are based primarily on sales forecasts.
Consequently, if anticipated sales and shipments in any quarter do not occur
when expected, expenditure and inventory levels could be disproportionately high
and the Company's operating results for that quarter, and potentially future
quarters, would be adversely affected.
FACTORS THAT COULD AFFECT STOCK PRICE
The market price of TeleVideo's common stock could be subject to
fluctuations in response to quarter to quarter variations in operating results,
changes in analysts' earnings estimates, market conditions in the computer
technology industry, as well as general economic conditions and other factors
external to the Company.
FOREIGN CURRENCY AND POLITICAL RISK
The Company markets its products worldwide. In addition, a large
portion of the Company's part and component manufacturing, along with key
suppliers, are located outside the United States. Accordingly, the Company's
future results could be adversely affected by a variety of factors, including
without limitation, fluctuation in foreign currency exchange rates, changes in a
specific country's or region's political or economic conditions, trade
protection measures, import or export licensing requirements, unexpected changes
in regulatory requirements and natural disasters.
(Remainder of this page was intentionally left blank)
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company believes that its exposure to market risk for changes in
interest rates is not significant because the Company's investments are
limited to highly liquid instruments with maturities of three months or less.
At October 31, 1999, the Company has approximately $4.5 million of short-term
investments classified as cash and equivalents. All of the Company's
transactions with international customers and suppliers are denominated in US
dollars.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
PAGE NO.
IN 10-K
---------
Report of Independent Certified Public Accountants.................. 16
Consolidated Balance Sheets - October 31, 1999 and
1998................................................................ 17
Consolidated Statements of Operations for the Years Ended
October 31, 1999, 1998 and 1997..................................... 18
Consolidated Statement of Stockholders' Equity for the Years Ended
October 31, 1999, 1998 and 1997..................................... 19
Consolidated Statements of Cash Flows for the Years Ended
October 31, 1999, 1998 and 1997..................................... 20
Notes to Consolidated Financial Statements ......................... 21
(Remainder of page left blank intentionally)
15
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
TeleVideo, Inc.
We have audited the accompanying consolidated balance sheets of TeleVideo, Inc.
and Subsidiaries as of October 31, 1999 and 1998, and the related consolidated
statements of operations, stockholders' equity, and cash flows for each of the
three years in the period ended October 31, 1999. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of TeleVideo, Inc.
and Subsidiaries as of October 31, 1999 and 1998, and the consolidated results
of their operations and their consolidated cash flows for each of the three
years in the period ended October 31, 1999, in conformity with generally
accepted accounting principles.
/s/ GRANT THORNTON LLP
- -----------------------
Grant Thornton LLP
San Jose, California
December 10, 1999
16
TELEVIDEO, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
October 31,
----------------------------
ASSETS 1999 1998
------------ ------------
CURRENT ASSETS:
Cash and cash equivalents (including restricted cash of
$1,000 in 1999 and 1998) $ 4,487 $ 1,640
Accounts receivable, less allowance of $1,383 in 1999 and $1,352 in 1998 1,523 2,420
Inventories 1,464 2,275
Prepayments and other 987 420
Notes receivable - current 67 0
----------- -----------
Total current assets 8,528 6,755
----------- -----------
PROPERTY, PLANT AND EQUIPMENT:
Land 0 890
Building 0 1,035
Production equipment 624 530
Office furniture and equipment 1,152 1,146
Building improvements 0 1,105
Leased property under capital lease 6,270 0
----------- -----------
8,046 4,706
Less accumulated depreciation and amortization 2,010 2,138
----------- -----------
Property, plant and equipment, net 6,036 2,568
INVESTMENTS IN AFFILIATES 1,117 1,110
NOTE RECEIVABLE, LESS CURRENT PORTION 2,636 0
----------- -----------
Total assets $ 18,317 $ 10,433
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Obligation under capital lease - current $ 270 $ 0
Accounts payable 964 541
Notes payable 0 2,500
Accrued liabilities 1,160 820
Income taxes - 361
Deferred gain on sale of land and building - current 538 0
----------- -----------
Total current liabilities 2,932 4,222
----------- -----------
Obligation under capital lease, less current portion 5,812 0
Deferred gain on sale of land and building, less current portion 7,069 0
----------- -----------
Total liabilities 15,813 4,222
----------- -----------
----------- -----------
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value;
Authorized--75,000,000 shares
Outstanding--11,271,085 shares at October 31, 1999 and 1998, respectively
(net of 120,000 treasury shares) 453 453
Additional paid-in capital 95,703 95,703
Accumulated deficit (93,652) (89,945)
----------- -----------
Total stockholders' equity 2,504 6,211
----------- -----------
Total liabilities and stockholders' equity $ 18,317 $ 10,433
----------- -----------
----------- -----------
The accompanying notes are an integral part of these financial statements.
17
TELEVIDEO, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Year Ended October 31,
------------------------------------
1999 1998 1997
-------- -------- --------
NET SALES $ 8,070 $ 14,751 $ 19,884
COST OF SALES 8,082 13,381 17,785
-------- -------- --------
GROSS PROFIT (LOSS) (12) 1,370 2,099
OPERATING EXPENSES:
Sales and marketing 2,183 2,438 2,995
Research and development 598 370 762
General and administrative 1,777 3,289 1,457
-------- -------- --------
Total operating expenses 4,558 6,097 5,214
-------- -------- --------
Loss from operations (4,570) (4,727) (3,115)
EQUITY IN GAIN/(LOSS) OF AFFILIATES 7 (4,077) (888)
INTEREST AND OTHER INCOME (EXPENSE), net 495 (77) 559
-------- -------- --------
Loss before income taxes $ (4,068) $ (8,881) $ (3,444)
Benefit for income taxes 361 -- --
Net Loss $ (3,707) $ (8,881) $ (3,444)
-------- -------- --------
-------- -------- --------
Net loss per share, Basic and diluted $ (0.33) $ (0.79) $ (0.31)
-------- -------- --------
-------- -------- --------
Shares used in computing basic and diluted net loss per share 11,271 11,268 11,255
-------- -------- --------
-------- -------- --------
The accompanying notes are an integral part of these financial statements.
18
TELEVIDEO, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
THREE YEARS ENDED
OCTOBER 31, 1999, OCTOBER 31, 1998, OCTOBER 31, 1997
Common Stock Additional Total
------------------- Paid in Accumulated Srockkholders'
Shares Amount Capital Deficit Equity
-------- -------- ---------- - ------------ -------------
Balance - October 31, 1996 11,230 $ 449 $95,639 $ (77,620) $ 18,468
Exercise of employee stock options 25 1 37 - 38
Net loss - - - (3,444) (3,444)
-------- -------- -------- --------- --------
Balance - October 31, 1997 11,255 450 95,676 (81,064) 15,062
Exercise of employee stock options 16 3 27 - 30
Net loss - - - (8,881) (8,881)
-------- -------- -------- ---------- --------
Balance - October 31, 1998 11,271 453 95,703 (89,945) 6,211
Net loss - - - (3,707) (3,707)
-------- -------- -------- ---------- --------
Balance - October 31, 1999 11,271 $453 $95,703 $(93,652) $ 2,504
-------- -------- -------- ---------- --------
-------- -------- -------- ---------- --------
The accompanying notes are an integral part of this financial statement.
19
TELEVIDEO, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
Year Ended October 31,
------------------------------
1999 1998 1997
------ ------ -------
INCREASE (DECREASE) IN CASH:
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $(3,707) $(8,881) $(3,444)
Charges (credits) to operations not affecting cash:
Provision for bad debts on receivables 572 2,300 293
Amortization of deferred gain (470) - -
Provision for excess and obsolete inventories 680 123 (379)
Net loss on sales of property and investment - - 12
Loss on investment in unconsolidated affiliates - 4,077 888
Depreciation and amortization 370 204 362
Income tax settlement - - (250)
Changes in operating assets and liabilities:
Accounts receivable 323 564 (697)
Inventories 131 524 3,290
Prepayments and other (567) (200) (159)
Accounts payable 423 (998) (1,540)
Accrued liabilities 342 90 (126)
Income taxes (361) - -
------- ------- -------
Net cash used in operating activities (2,264) (2,197) (1,750)
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net proceeds from sale of land and building 7,859 - -
Additions to property, plant and equipment (100) (12) (55)
Loans to affiliate and other (7) (1,700) (2,300)
Increase in investments in affiliates 0 (1,000) (3,225)
Payments received on notes receivable from affiliate and other 47 415 6,400
------- ------- -------
Net cash provided by (used in) investing activities 7,799 (2,297) 820
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 0 30 38
Proceeds from note payable - affiliate 0 500 -
Proceeds from note payable - other 0 2,000 -
Payments on notes payable and lease obligations (2,688) 0 -
------- ------- -------
Net cash (used in) provided by financing activities (2,688) 2,530 38
------- ------- -------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,847 (1,964) (892)
CASH AND CASH EQUIVALENTS AT THE BEGINNING
OF THE YEAR 1,640 3,604 4,496
------- ------- -------
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR $ 4,487 $ 1,640 $ 3,604
------- ------- -------
------- ------- -------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Income taxes - $ - $ -
Interest $ 444 $ 98 $ -
The accompanying notes are an integral part of these financial statements.
20
TELEVIDEO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1999, 1998 AND 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the
Company and certain of its majority owned subsidiaries, after elimination of
inter-company accounts and transactions.
INVESTMENTS IN AFFILIATES
All of the Company's unconsolidated affiliates are accounted for using
either the equity or the cost method.
REVENUE RECOGNITION
The Company recognizes revenue when products are shipped. The Company
performs periodic evaluations of its customers' financial condition and
maintains a reserve for potential credit losses and adjusts the reserve
periodically to reflect both actual and potential credit losses. Product
warranties are based on the ongoing assessment of actual warranty expenses
incurred.
BASIC AND DILUTED NET LOSS PER SHARE
The Company adopted SFAS No. 128 "Earnings per Share" during the year ended
October 31, 1998. Basic earnings per share is computed using the weighted
average number of common shares outstanding during the period. Diluted earnings
per share is computed using the weighted average number of common and common
equivalent shares outstanding during the period. Common equivalent shares
consist of the incremental common shares issuable upon conversion of convertible
securities (using the if-converted method) and shares issuable upon the exercise
of stock options and warrants (using the treasury stock method). Common
equivalent shares are excluded from the computation if their effect is
anti-dilutive.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with original maturities
of three months or less to be cash equivalents.
USE OF ESTIMATES
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements, as
well as revenues and expenses during the reporting period. Actual results could
differ from those estimates.
ADVERTISING COSTS
21
Advertising costs are expensed as incurred. Advertising expense totaled
approximately $0.7 million in fiscal 1999, approximately $1.1 million in
fiscal 1998 and $1.3 million in fiscal 1997.
RESEARCH AND DEVELOPMENT COSTS
Costs incurred for the development and enhancement of new products and
services are charged to expense as incurred.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of cash and cash equivalents, accounts receivable, trade
payables and notes payable approximates carrying value due to the short term
nature of such instruments.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is computed
on a currently adjusted standard basis (which approximates average cost) for
both finished goods and work-in-process and includes material, labor and
manufacturing overhead costs. Amounts shown are net of reserves for
obsolescence of $1.0 million and $0.6 million as of October 31, 1999 and
1998, respectively (in thousands):
October 31,
-------------------
1999 1998
------ ------
Purchased parts and subassemblies $ 216 $1,196
Work-in-process 313 91
Finished goods 935 988
------ ------
$1,464 $2,275
------ ------
------ ------
PROPERTY, PLANT AND EQUIPMENT, INCLUDING LEASED PROPERTY
Depreciation and amortization are provided over the estimated useful lives
of the assets using both straight-line and accelerated methods.
Building 40 years
Production equipment 1-10 years
Office furniture 1-10 years
Leased property 15 years
RECLASSIFICATIONS
Certain reclassifications have been made to conform to the 1999
presentation, including changes which effect comparability of the annual
financial information to previously filed quarterly information. None of such
reclassifications are material to the financial statements taken as a whole.
22
2. ACQUISITIONS AND DIVESTITURES
MYSIMON, INC.
In September 1998, the Company invested $1 million in the online
comparison shopping Internet company, mySimon, Inc., receiving convertible
preferred stock. Televideo's investment in mySimon currently represents an
ownership interest of between 3% and 4%. The investment has been accounted
for on the cost method.
mySimon, Inc. uses proprietary intelligent agent technology called
Virtual Learning Agent (VLA) to assist online shoppers by searching the
Internet to find the best prices on products from among thousands of online
merchants.
KORAM, INC.
On March 3, 1997, the Company deposited $224,820 in escrow in Korea, which
amount is to be used to purchase a 50% ownership in a restaurant venture in
Seoul, Korea. In February 1998, the Company completed its purchase of a 50%
interest in Koram, Inc. The Company's investment has been written down to
$109,820 due to the devaluation of the Korean won. This investment is accounted
for under the equity method of accounting.
APPLIED PHOTONICS TECHNOLOGY, INC.
On April 16, 1997, the Company entered into a Common Stock Purchase
agreement with Applied Photonics Technology, Inc. (APT), a California
corporation, whereby the Company purchased a 30% interest in APT for $3.0
million.
Founded in October 1996, APT is a developmental stage enterprise
specializing in the development of electronics display technology. The
anticipated markets for APT's outdoor media display system include the billboard
and illuminated sign markets, sports stadiums and arenas, transportation
terminals, volume retailers and malls, and safety/public information displays.
The Company accounts for its investment in APT using the equity method of
accounting. During the fiscal year ended October 31, 1998, the Company wrote
off its equity investment, related goodwill, and note receivable of
approximately $4.1 million. In December 1998, the Company loaned APT
$176,000. In September 1999, the Company loaned APT $125,000. The $125,000
note bears interest at the rate of 6% per annum and was due on December 1,
1999. As of January 19, 2000, the Company has not yet received payment on the
note, nor has APT received financing. In September 1999, the Company entered
into a consulting agreement with APT in which APT agreed to undertake two
engineering development projects for the Company. The Company made an advance
payment of $125,000 under the Agreement, which is the entire amount of the
Company's obligation. The Company has written off the $426,000 in loans and
advances to APT as of October 31, 1999. The Company has not guaranteed any
obligations of APT and has made no commitments to provide additional
financial support to APT.
23
3. LETTER OF CREDIT AGREEMENT
The Company has one letter of credit agreement with the bank whereby the
bank will issue up to a total of $1.0 million of standby and sight letters of
credit. These agreements are contingent upon the Company maintaining time
deposits (CD's) at the bank as collateral in a total amount no less than the
outstanding borrowings. At October 31, 1999, the Company had no letters of
credit outstanding.
4. RELATED PARTY TRANSACTIONS
During 1999, 1998, and 1997 the Company has had transactions with its
affiliates as follows (in thousands):
1999 1998 1997
--------- --------- ---------
Note receivable at October 31:
AdMOS (1) $ 4 $ 4 $ 4
AdMOS (1) 180 180 4
Interest receivable at October 31:
AdMOS (1) 69 69 68
AdMOS (1) 94 77 60
(1) Amounts are fully reserved. The Company acquired a 20% interest in
AdMOS Technologies in fiscal 1991 and the investment was written off
in fiscal 1992.
The Company also borrowed $500,000 from Gem Management, Inc., a company
owned by the majority shareholder's spouse, on September 15, 1998. The
unsecured loan bears annual interest at a prime rate with principal and
interest due on demand. On February 16, 1999, the outstanding loan principal
and interest was paid in full.
24
5. TRANSACTIONS WITH MAJOR CUSTOMERS
The Company has entered into the following transactions with one of its
major customers, Applied Computer Technology, Inc., (ACT).
1) In June 1997, the Company loaned ACT $2,300,000. Interest on the loan
accrues at 2% per month. All interest income accrued on the loan is being
deferred by the Company until the amounts are received. As of October 31, 1997,
the loan principal balance was $900,000. Since then the loan has been paid down
to $485,000, which was the loan balance at October 31, 1998 prior to the
write-off discussed below.
2) At October 31, 1997, ACT had owed the Company approximately $2.1 million
in trade receivables, which represented approximately 41% of net trade
receivables. Subsequently, the Company agreed to exchange $900,000 of
outstanding trade receivables for $900,000 of Series A convertible preferred
stock of ACT. The preferred shares were convertible into common stock at the
option of the holder, based on the 5 day average closing bid price of ACT common
stock prior to conversion, subject to a floor of $2.50 per share and a ceiling
of $4.25 per share. The conversion rate was subsequently changed. ACT had the
obligation to register the shares by filing a registration statement with the
Securities and Exchange Commission (SEC) and the preferred shares would have
been automatically converted once the registration statement became effective.
However, ACT failed to register the shares with SEC.
The preferred shares were issued in December 1997. As of October 31,
1997, the Company had reflected the $900,000 as a long term receivable and had
further provided a reserve of $292,500 against the $900,000 to reflect the fair
value of the preferred shares ultimately issued, taking into consideration the
lack of liquidity of the securities.
Additionally, $864,620 was outstanding as trade receivables due from ACT
at October 31, 1998.
ACT has experienced a significant downturn in its business and the
Company has written off a total amount of $1,957,120 as uncollectible
receivables as of October 31, 1998, which includes $864,620 trade
receivables, $607,500 long term note receivable and $485,000 note receivable.
6. SALE AND LEASEBACK OF BUILDING
In December 1998, the Company sold its main facility (land and
building) for approximately $11.0 million and concurrently leased back this
facility over a 15 year lease term expiring in December 2013. The land
component has been recorded as an operating leaseback. The building component
has been accounted for as a capital lease, whereby a leased building asset
and capital lease obligation were recorded at the fair value of approximately
$6.27 million. As a result of the sale for $11.0 million (which includes a
$2.75 million note receivable), a deferred gain of approximately $8.0 million
was recorded. The deferred gain attributable to the land element, which
approximates $3.44 million, is being amortized over the 15 year lease life on
a straight line method. The deferred gain attributable to the building
element, which approximates $4.56 million, is being amortized over leased
building asset life, which has been determined to be the 15 year lease term,
on a straight line method. The aggregate monthly lease amounts to $104,000.
These payments escalate to $126,000 through 2013.
Future aggregate minimum lease payments are as follows
October 31, $
---------- -----------
2000 $ 1,231,774
2001 1,241,628
2002 1,241,628
2003 1,293,358
2004 1,303,704
Thereafter 12,958,068
-----------
$19,270,160
The $2.75 million note receivable bears interest at 7.25% per annum.
Principal and accrued interest is payable in equal monthly installments of
$21,735 each on the first day of each month, which the Company began
receiving on January 1, 1999. If not earlier paid in full, any unpaid
principal and all accrued interest shall be due and payable to TeleVideo,
Inc. on December 1, 2018.
25
7. CAPITAL STOCK
The Company effected a 4-for-1 reverse stock split of its outstanding
common stock on April 23, 1998. All shares and per share amounts have been
retroactively adjusted for such reverse stock split.
PREFERRED STOCK
The Company has authorized 3,000,000 shares of preferred stock. No preferred
stock has been issued to date.
STOCK OPTION PLANS
The Company has three stock option plans, the 1991 ISO Plan ("1991 ISO
Plan"), the 1981 ISO Plan ("1981 ISO Plan") and the 1981 Supplemental Plan
(the "Supplemental Plan") accounted for under the APB Opinion 25 and related
interpretations. The 1991 ISO Plan provides for the granting of incentive
options to employees, including officers, for up to 4,000,000 shares. The
outstanding options have a term of ten years when issued. The exercise price
of each option equals the market price of the Company's stock on the date of
grant. Both the 1981 ISO Plan and the Supplemental Plan expired in October
1991 and the exercise price for options granted under those plans was
re-priced at $0.22 per share in November 1991, the market price of the
Company's common stock at that date. Accordingly, no compensation cost has
been recognized for any of the plans. Had compensation cost for the plans
been determined based on the fair value of the options at the grant dates
consistent with the method of Statement of Financial Accounting Standards
123, Accounting for Stock-Based Compensation ("SFAS 123"), the Company's net
loss and loss per share would have been changed to the pro forma amounts
indicated below. Pro forma results for 1998 and 1997 may not be indicative of
the pro forma results in the future periods because the pro forma amounts do
not include pro forma compensation cost for options granted prior to November
1, 1995.
OCTOBER 31,
----------------------
1999 1998
------- -------
Net loss (in thousands)
As reported ($3,707) ($8,881)
Pro forma ($3,826) ($8,987)
Loss per share, basic and diluted
As reported ($0.33) ($0.79)
Pro forma ($0.34) ($0.80)
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes options-pricing model with the following weighted-average
assumptions used for grants in 1999 and 1998 respectively: no expected
dividends; weighted average risk-free interest rate of 6.00% and 6.69%; stock
volatility 219% in 1999 and 164% in 1998; and expected lives of 10 years. The
weighted average fair value of options granted were $0.84, $1.49 and $1.24 in
1999, 1998 and 1997, respectively.
26
A summary of the status of the Company's stock option plans as of October
31, 1999, and changes during the three years ending October 31, 1999 is
presented below:
OPTIONS OUTSTANDING
OCTOBER 31, 1999
OUTSTANDING EXERCISABLE
--------------------------------------- ---------------------------
WTD AVG. WTD AVG. WTD AVG.
RANGE OF NUMBER REMAINING EXERCISE NUMBER EXERCISE
EXERCISE PRICES OUTSTANDING CONT. LIFE PRICE EXERCISABLE PRICE
--------------- ----------- ---------- -------- ----------- --------
1991 ISO PLAN
$0.75 - $0.84 205,500 9.42 $0.84 - -
$0.88 - $1.32 61,750 5.36 $0.98 54,438 $0.99
$1.52 - $2.12 17,375 5.79 $1.72 13,562 $1.67
$2.64 - $2.88 2,875 5.56 $2.77 2,031 $2.78
------- ---- ----- ------ -----
Totals 287,500 8.29 $1.06 70,031 $1.18
------- ---- ----- ------ -----
------- ---- ----- ------ -----
1981 SUPPLEMENTAL PLAN
$0.88 37,500 2.06 $ 0.88 37,500 $ 0.88
1981 ISO PLAN
$0.88 250 2.06 $ 0.88 750 $ 0.88
Summary of Changes:
1981 ISO PLAN
WEIGHTED
AVERAGE
OUTSTANDING EXERCISE PRICE
------------ --------------
Balance, October 31, 1996 3,156 $0.88
Granted - -
Exercised (844) $0.88
Canceled (1,083) $0.88
------
Balance, October 31, 1997 1,250 $0.88
Granted - -
Exercised (500) $0.88
Canceled - -
------
Balance, October 31, 1998 750 $0.88
Granted -
Exercised (500) $0.88
Canceled - -
--------
27
Balance, October 31, 1999 250 $0.88
------
------
1981 SUPPLEMENTAL PLAN
WEIGHTED
AVERAGE
OUTSTANDING EXERCISE PRICE
----------- --------------
Balance, October 31, 1996 37,500 $0.88
Exercised - -
Canceled - -
------
Balance, October 31, 1997 37,500 $0.88
Exercised - -
Canceled - -
------
Balance, October 31, 1998 37,500 $0.88
Exercised - -
Canceled - -
------
Balance, October 31, 1999 37,500 $0.88
------
------
1991 ISO PLAN
WEIGHTED
AVERAGE
AVAILABLE OUTSTANDING EXERCISE PRICE
--------- ----------- --------------
Balance, October 31, 1996 575,219 332,750 $2.08
Granted (12,250) 12,250 $1.24
Exercised - (23,688) $1.58
Terminated/Canceled 110,125 (110,125) $2.20
-------- --------
Balance, October 31, 1997 673,094 211,187 $1.96
Granted (111,875) 111,875 $1.37
Exercised - (10,775) $1.64
Terminated/Canceled 128,288 (128,288) $2.43
-------- --------
Balance, October 31, 1998 688,507 184,000 $1.27
Granted (205,500) 205,500 $0.84
Exercised - - -
Terminated/Canceled 102,000 (102,000) $1.37
-------- --------
Balance, October 31, 1999 585,007 287,500
-------- --------
-------- --------
28
8. INCOME TAXES
At October 31, 1999, the Company had tax loss carryforwards of
approximately $97 million for federal income tax and approximately $15.5
million for state income tax reporting purposes, respectively. The net
operating loss carryforwards expire through fiscal 2013. The Tax Reform Act
of 1986 contains provisions which may limit the net operating loss
carryforwards to be used in any given year upon occurrence of certain events,
including significant changes in ownership interests.
Deferred tax assets and liabilities are determined based on the
difference between the financial statement and tax bases of assets and
liabilities as measured by the enacted tax rates which will be in effect when
these differences reverse. Deferred tax expense is the result of changes in
deferred tax assets and liabilities.
No deferred tax asset or benefit was recorded at October 31, 1999, as all
amounts have been fully reserved. The valuation allowance increased by $1,488 in
fiscal 1999 and increased by $3,823 in fiscal 1998. The components are as
follows (in thousands):
1999 1998
-------- --------
Net operating loss $ 36,192 $ 35,168
Other 1,350 1,328
-------- --------
37,542 36,496
Less valuation allowance (37,542) (36,496)
-------- --------
Net benefit $ - $ -
-------- --------
-------- --------
The following is a reconciliation of expected tax expense (benefit) to
actual for each of the years ended October 31 (in thousands):
1999 1998 1997
--------- --------- ---------
Book loss $(3,707) $(8,881) $(3,444)
------- ------- -------
Expected tax benefit 1,353 3,020 1,170
------- ------- -------
Adjustments to reconcile
expected to actual benefit:
Reduction of estimated
tax liability 361 - -
Effect of change in
valuation allowance (net) (1,353) (3,020) (1,170)
------- ------- -------
Actual tax benefit $ 361 $ - $ -
------- ------- -------
------- ------- -------
The Company had pending a California Franchise tax exposure estimate of
$361,000 resulting from previous income tax audits. The Company believes that
no further liability exists at October 31, 1999. This amount has been
recorded as a tax benefit in the accompanying statement of operations.
29
9. CONCENTRATIONS
The Company, which operates in a single industry segment, designs,
produces and markets high performance terminals and monitors designed for
office and home automation both domestically and internationally. The Company
had export sales primarily to Europe, Asia and Latin America of approximately
19.8% ($1.6 million), 14.2% ($2.1 million) and 13.5% ($2.7 million) of net
sales during fiscal 1999, 1998, and 1997, respectively.
For the fiscal year ended October 31, 1999, one customer accounted for
10% of the Company's sales (Savoir, Inc.), while another customer accounted
for 9%. For the fiscal year ended October 31, 1998, one customer accounted
for 12% and another customer accounted for 11% of net sales. For the fiscal
year ended October 31, 1997, one customer accounted for 17% and another
customer accounted for 16% of net sales.
Information about the Company's operations in different geographic
locations is as follows:
----------------------------------------------------------------------------
United Europe Other Total
(in thousands) States
----------------------------------------------------------------------------
1999
Total revenues $ 6,503 $1,023 $ 544 $ 8,070
Operating
(Loss)/income (5,024) 253 201 (4,570)
Identifiable assets 18,317 0 0 18,317
1998
Total revenues $12,681 $1,685 $ 385 $14,751
Operating
(Loss)/income (5,188) 354 107 (4,727)
Identifiable assets 10,433 0 0 10,433
1997
30
Total revenues $17,197 $2,242 $ 445 $19,884
Operating
(Loss)/income (3,657) 408 134 (3,115)
Identifiable assets 17,692 0 0 17,692
10. SIGNIFICANT FOURTH QUARTER ADJUSTMENTS
In the fourth quarter of fiscal 1999, the Company wrote off $426,000 in
loans and advances to APT (refer to Note 2). The Company also recorded a
$353,000 expense for inventory obsolescence for certain of its computer
monitors in inventory at October 31, 1999. The Company has reduced its
estimated tax liability of $361,000 as any such tax exposure has been reduced
to zero.
11. ACCRUED LIABILITIES
Accrued liabilities consist of the following at October 31: (in thousands)
1999 1998
-------- --------
Employee compensation and benefits $ 209 $173
Warranty 169 169
Legal reserve 200 200
Accrued sales and use tax 0 1
Professional fees 77 60
Royalties 175 0
Other 330 217
------ ----
$1,160 $820
------ ----
------ ----
12. VALUATION AND QUALIFYING ACCOUNTS
The Company's reserves for doubtful accounts receivable and inventory
obsolescence consist of the following: (in thousands)
CHARGED
BALANCE AT (CREDITED) BALANCE AT
BEGINNING TO COSTS & END OF
OF PERIOD EXPENSE DEDUCTIONS PERIOD
---------- ---------- ---------- ----------
YEAR ENDED OCTOBER 31, 1997:
Reserve for doubtful accounts $1,280 $ 293 $(530)(1) $ 1,043
Reserve for inventory obsolescence $ 663 $ 379 $(519)(2) $ 523
YEAR ENDED OCTOBER 31, 1998:
Reserve for doubtful accounts $1,043 $2,300 $(1,991)(1) $ 1,352
Reserve for inventory obsolescence $ 523 $ 813 $ (690)(2) $ 646
YEAR ENDED OCTOBER 31, 1999:
Reserve for doubtful accounts $1,352 $ 572 $ (541)(1) $ 1,383
Reserve for inventory obsolescence $ 646 $ 680 $ (289)(2) $ 1,037
(1) Deductions represent write-offs of fully reserved receivables.
(2) Reductions due to sales or scrap of fully reserved inventory.
31
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
NONE.
PART III
The following items included in the Company's Definitive Proxy
Statement dated February 28, 2000 used in connection with the Company's Annual
Meeting of Stockholders to be held on April 18, 2000 are incorporated herein
by reference:
PAGES IN
PROXY STATEMENT
---------------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT 4
ITEM 11. EXECUTIVE COMPENSATION 8
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 3
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 10
(The remainder of this page was left blank intentionally.)
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Report.
1. FINANCIAL STATEMENTS.
The Consolidated Financial Statements, Notes thereto and the Report of
Grant Thornton LLP, Independent Public Accountants, thereon are included in Part
II of this Report on Form 10-K.
2. FINANCIAL STATEMENT SCHEDULES.
All schedules have been omitted since the required information is not
present in amounts sufficient to require submission of the schedule, or because
the information required is included in the accompanying Consolidated Financial
Statements.
3. EXHIBITS.
The following exhibits have been or are being filed herewith and are
numbered in accordance with Item 601 of Regulation S-K:
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- -------------------------------------------------------------------------------
3.1 (1) Restated Certificate of Incorporation of Registrant, as
amended and currently in effect
3.2 (2) Bylaws of the Registrant
10.1 (3) TeleVideo, Inc. 1991 Incentive Stock Option Plan and form of
Incentive Stock Option Agreement
10.2 (3) TeleVideo, Inc. 1992 Outside Directors' Stock Option Plan+
10.3 (4) Management Bonus Plan effective fiscal 1984, as amended
10.4 (2) Form of Distributor and Licensing Agreement
10.5 (2) Form of Original Equipment Manufacturer Agreement
10.6 (5) Real Estate Purchase Agreement dated December 28, 1998 and
accompanying Lease and Agreement of Lease, Escrow Agreement,
Pledge and Security Agreement and Assignment between the
Registrant and TVCA, LLC, dated December 28, 1998
10.7 (1) Continuing Letter of Credit Agreement with Comerica Bank
21.1 (1) Subsidiaries
23.1 (1) Consent of Grant Thornton LLP
27.1 (1) Financial Data Schedule
+ Denotes a management contract or compensatory plan or arrangement.
- ---------------
(1) Filed herewith.
(2) Incorporated by reference from the Registrant's Annual Report on Form
10-K for the fiscal year ended October 31, 1987, filed on January 29, 1988.
(3) Incorporated by reference from the Registrant's Annual Report on Form
10-K for the fiscal year ended October 31, 1991, filed January 27, 1992.
(4) Incorporated by reference from the Registrant's Annual Report on Form
10-K, filed January 29, 1985 and Annual Report on Form 10-K, filed January
28, 1986.
(5) Incorporated by reference from the Registrant's Current Report on Form
8-K, filed on January 2, 1999.
32
(b) Reports on Form 8-K. No report on Form 8-K was filed by the Company
with respect to the quarter ended October
31, 1999.
Pursuant to the requirements of Section 13 or 15(d) 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.
TELEVIDEO, INC.
-----------------------------------
(Registrant)
Date: January 31, 2000 By: /s/ K. Philip Hwang
-----------------------------------
K. Philip Hwang
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities on the dates indicated.
Signature Title Date
- --------------------------- ----------------------------- ----------
/s/ K. Philip Hwang Chairman of the Board and January 31, 2000
- --------------------------- Chief Executive Officer
K. Philip Hwang (Principal Executive Officer)
/s/ James D. Wheat Chief Financial Officer January 31, 2000
- -------------------------- (Principal Financial and
James D. Wheat Accounting Officer)
/s/ Robert E. Larson Director January 31, 2000
- ------------------------------
Robert E. Larson
/s/ Woo K. Kim Director January 31, 2000
- ------------------------------
Woo K. Kim
33