TELEVIDEO INC - 10-Q Quarterly Report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-Q

ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: January 31, 2003

o	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.
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)

94-2383795
(IRS Employer Identification No.)

2345 Harris Way, San Jose, California 95131
(Address of principal executive offices)

Registrant's telephone number, including area code: (408) 954-8333

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 ý No o

The number of shares outstanding of registrant's Common Stock, as of March 3, 2003 is: 11,309,772.

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q for TeleVideo Inc. (the "Company") for the first quarter ended January 31, 2003, 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 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 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. Prospective 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.

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

TELEVIDEO, INC.

INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

			January 31, 2003		October 31, 2002
			(Unaudited)		(Audited)
ASSETS
CURRENT ASSETS:
	Cash and cash equivalents		$	733	$	898
	Accounts receivable, net			1,035		1,558
	Inventories, net			2,224		1,420
	Marketable Securities			82		64
	Prepayments and other			413		244
	Notes receivable—current			85		84

		Total current assets		4,572		4,268

PROPERTY, PLANT AND EQUIPMENT:
	Production equipment			671		671
	Office furniture and equipment			1,251		1,251
	Leased property under capital lease			6,270		6,270

				8,192		8,192
	Less accumulated depreciation and amortization			3,462		3,340

		Property, plant and equipment, net		4,730		4,852

INVESTMENTS IN AFFILIATES				1,379		1,379
NOTE RECEIVABLE, LESS CURRENT PORTION				2,374		2,395

		Total assets	$	13,055	$	12,894

LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
	Accounts payable			949		416
	Notes payable			2,517		2,517
	Accrued liabilities			737		707
	Obligation under capital lease—current		$	385	$	372
	Deferred gain on sale of land and building—current			538		538

		Total current liabilities		5,126		4,550

	Obligation under capital lease—long-term			4,732		4,826
	Deferred gain on sale of land and building—long-term			5,340		5,475

		Total liabilities		15,198		14,851

STOCKHOLDERS' ( DEFICIT):
Common stock, $.01 par value:
	Authorized—23,000,000 shares Outstanding—11,309,772 shares at January 31, 2003 and 11,309,772 shares at October 31, 2002			454		454
	Additional paid-in capital			95,735		95,734
	Accumulated other comprehensive (loss) income, net			(4)		(22)
	Accumulated deficit			(98,328)		(98,123)

		Total stockholders' (deficit) equity		(2,143)		(1,957)

		Total liabilities and stockholders' (deficit) equity	$	13,055	$	12,894

The accompanying notes are an integral part of these financial statements.

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TELEVIDEO, INC.

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JANUARY 31, 2003 AND JANUARY 31, 2002
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(Unaudited)

			Three Months Ended January 31,
			2003		2002
NET SALES			$	1,721	$	1,510
COST OF SALES				1,363		1,146

GROSS PROFIT				358		364
OPERATING EXPENSES:
	Sales and marketing			349		377
	Research and development			129		132
	General and administration			397		398

		Total operating expenses		875		907

		Loss from operations		(517)		(543)
INTEREST (EXPENSES) INCOME, net				(81)		(76)
OTHER INCOME, net				394		387

		Net loss	$	(204)	$	(232)

Net loss per share, basic and diluted			$	(.02)	$	(.02)

Weighted average shares outstanding				11,310		11,310

The accompanying notes are an integral part of these financial statements.

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TELEVIDEO, INC.

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED JANUARY 31, 2003 AND JANUARY 31, 2002
(IN THOUSANDS)
(Unaudited)

		Three Months Ended January 31,
		2003		2002
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash used in operating activities		$	(103)	$	(301)

CASH FLOWS FROM INVESTING ACTIVITIES:
	Net additions to property, plant and equipment		-		1
	Note receivable		19		19
	Proceeds from investments		-		418

Net cash (used in) provided by investing activities			19		438

CASH FLOWS FROM FINANCING ACTIVITIES:
	Proceeds from notes payable		-		17
	Payments on lease obligations		(81)		(78)

Net cash provided by (used in) Financing activities			(81)		(61)

(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS			(165)		76
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD			898		870

CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD		$	733	$	946

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Non cash investing/financing activities:

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 element 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 $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 commencing on January 1, 1999. If not earlier paid in full, any unpaid principal and all accrued interest is due and payable to TeleVideo, Inc. on December 1, 2013.

In May 2001 the Company obtained a line of credit from Gem Management, a company owned by Gemma Hwang, the spouse of majority stockholder, in amount of $3.5 million, including $200,000 previously loaned. The Company can borrow money under this line of credit when needed, in order to assure the continuity of the operations. In consideration of Gem Management loan to the Company, the Company pleads and grants to Gem Management a secured interest in the following described property:

a)

	January 31, 2003		October 31, 2002
Purchased parts and subassemblies	$	312	$	252
Work-in-process		1,310		452
Finished goods		602		716

	$	2,224	$	1,420

	TELEVIDEO, INC.

	(REGISTRANT)

DATE: March 21, 2003	BY:	/s/ RICHARD KIM
		Richard Kim Vice President and Chief Financial Officer

	a)		designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

	b)		evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and

	c)		presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

	a)		all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and

	b)		any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

	a)		designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

	b)		evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and

	c)		presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

Production equipment		1-10 years
Office furniture		1-10 years
Leased property		15 years

(1)		Exhibit 99.1: Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(2)		Exhibit 99.2: Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

1.		I have reviewed this quarterly report on Form 10-Q of Televideo, Inc.;

2.		Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.		Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.		The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:


Date: March 21, 2003		/s/ K. Philip Hwang
		K. Philip Hwang Chairman and Chief Executive Officer


Date: March 21, 2003		/s/ Richard Kim,
		Richard Kim Vice President and Chief Financial Officer