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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-Q

For the quarterly period ended: April 30, 2003

OR

For the transition period from                              to                             

Commission file number: 0-11552

Televideo, Inc.
(Exact name of registrant as specified in its charter)

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 June 6, 2003 is: 11,309,772.

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

        This Quarterly Report on Form 10-Q for TeleVideo Inc. (the "Company") for the second quarter ended April 30, 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)

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 AND SIX MONTHS ENDED APRIL 30, 2003 AND APRIL 30, 2002
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(Unaudited)

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 SIX MONTHS ENDED APRIL 30, 2003 AND APRIL 30, 2002
(IN THOUSANDS)
(Unaudited)

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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)

       15,278 shares of the common stock of Xeline (Keyin Telecom);

b)    45,000 shares of the common stock of Biomax;

c)    285,714 shares of the common stock of MultiMedia SOC, Inc. (Synertech);

d)    60% from the TeleVideo Ningbo China equity, equivalent to 60% of the outstanding shares of TeleVideo Ningbo China;

e)    any and all intellectual property of TeleVideo, including but not limited to patents, hardware and software engineering documents;

f)    any and all trademarks, trade names and intangible assets of TeleVideo. Under this line of credit, which bears interest equal with prime rate plus one percent, payable monthly, the Company received $200,000 in February, $300,000 in June, $500,000 in July, $500,000 in September, $500,000 in December 2001, $500,000 in April,  $500,000 in October 2002 and $500,000 in April 2003. In November 2001 the Company paid back approximately $500,000 from this loan by giving in exchange its interest in Alpha Technology and the proceeds from Koram investment. 

    In June 2002, due to the decrease recorded by the interest rate on the market, the interest rate for this note was changed from 8% to prime rate plus one percent. On June 6, 2003 the outstanding balance for this loan was approximately $3,017,000, and the interest rate was 5.25%. The note contains no explicit repayment terms and is therefore payable on demand from the holder. On April 4, 2003, Gem Management refused to extend further credit to the Company.

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

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TELEVIDEO, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

APRIL 30, 2003

1.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

        BASIS OF PRESENTATION

        The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information. The information at April 30, 2003 and for the six months ended April 30, 2003 and 2002 include all adjustments that the management of the Company believes are necessary for fair presentation for the results of the periods presented.

        Results for any interim period are not necessarily indicative of results for any future interim period or for the entire year. The accompanying financial statements and notes thereto should be read in conjunction with the financial statements and notes thereto included in the Company's annual report on Form 10-K.

        PRINCIPLES OF CONSOLIDATION

        The condensed consolidated financial statements include the accounts of the Company and its majority owned subsidiaries, after elimination of inter-company accounts and transactions. All of the Company's unconsolidated affiliates are accounted for using the equity or the cost method.

        USE OF ESTIMATES

        In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, 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.

        CASH AND CASH EQUIVALENTS

        The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents.

        INVENTORIES

        Inventories are stated at the lower of cost or market. Costs are computed on a currently adjusted standard basis (which approximates average cost) or both finished goods and work-in-process and includes material, labor and manufacturing overhead costs. The cost of purchased parts is determined on a first-in, first-out basis. Amounts shown are net of reserves for obsolescence of $0.8 million at both April 30, 2003 and October 31, 2002, respectively:

		April 30, 2003			October 31, 2002
Purchased parts and subassemblies		$	358		$	252
Work-in-process			790			452
Finished goods			1,038			716
		$	2,186		$	1,420

        Last year the Company shipped car alarm systems back to Alpha Technology in value of approximately $0.9 million, in order to fix some functional problems. Because the Company considered it would be hard to sell these products in the U.S., the Company agreed to consign these products to Alpha Technology. The Company reclassified these amounts from other receivables to inventory again. Consequently, the Company increased inventory reserve for these products by $0.51 million.

REVENUE RECOGNITION

      In accordance with Staff Accounting Bulletin No. 101 "Revenue recognition in Financial Statements" the Company recognizes revenue when products are shipped, by meeting all four of the following criteria: (i) persuasive evidence of arrangements exists; (ii) delivery has occurred; (iii) the Company's price to the buyer is fixed or determinable; and (iv) collectibility is reasonably assured. 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. In addition, such allowances provide for returns resulting from stock balancing agreements and price protection programs. Product warranties are based on the ongoing assessment of actual warranty expenses incurred.

PROPERTY, PLANT AND EQUIPMENT

        Depreciation and amortization are provided over the estimated useful lives of the assets using both straight line and accelerated methods.

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

        LOSS PER SHARE

        Loss per share is based on the weighted average number of shares of common stock outstanding during each period. Diluted earnings per share is computed using the weighted average number of common and common equivalent shares outstanding during the period.

        RECLASSIFICATIONS

        Certain reclassifications have been made to conform to the 2003 presentation. None of such reclassifications are material to the financial statements taken as a whole.

2.    ACQUISITIONS AND DIVESTITURES

   Valuation Methodology

     TeleVideo has equity investments in several privately-held companies. While the preferred method of valuing this type of investment is to seek an appraisal from an experienced third party, the company may first perform a cost-benefit analysis comparing the cost of such an appraisal to the value of the investment and the potential value from a more accurate appraisal compared to the company's internal valuation methods. When TeleVideo determines that an appraisal is not cost-effective, it follows the valuation protocol described below, which it believes comports with the current best practices in the valuation industry.

          1. When the company involved is publicly traded, the company uses the most recent market price available on the relevant valuation date.

        2. When the company is not publicly traded, the company values its investment by looking to recent transactions concerning the company's stock, such as additional equity investments or sales of equity interests in arms' length transactions.

          3. When no such transactions have taken place, the company's market value is determined based on discounted future cash flows reflected in management's financial projections. The cash flow period preferred to be used is five years, the discount rate used is based on the subject company's average cost of capital as adjusted from the risks associated with the company's operations (if no relevant information on this point has been provided, the discount rate used is 20%), and the terminal value is estimated based upon the terminal growth rate used by management (if no relevant information on this point has been provided, the terminal growth rate used is 5%). Information from management reflects management's best estimates regarding the company's future performance.

          4. When financial projections are not available, an attempt is made to determine the company's value from straight line extrapolation of its recent financial results. In this case, a terminal growth rate of 5% is used.

          5. Finally, when the recent financial results of the company are negative and show little past trend towards break-even, a determination is made whether the company's book value reasonably approximates the company's liquidation value. If so, then the company is valued at the amount of its shareholders' equity, and any equity position in the company is valued on a straight pro rata basis without any adjustment for private company status, minority ownership, or majority ownership.

     This valuation model has been evaluated by TeleVideo's accountants to confirm that it comports with GAAP.

Equity Method

Mulix, Inc.

      On February 2000, the Company purchased for $1,000,000 in cash an aggregate of 14,269,230 shares of unregistered Series A Convertible Preferred Stock of Mulix, Inc., a Delaware corporation. The Company's investment in Mulix represents a 35% interest in this privately held corporation.

      Mulix was dissolved effective November 30, 2000. Thus, the entire investment of $1.0 million was written off as of October 31, 2000.

K&T Telecom, Inc.

    In July 2000, TeleVideo purchased an aggregate of 9,608 shares of common stock, or a 49% ownership interest, in K&T Telecom, Inc. for $600,000 in cash. K&T Telecom, Inc., a privately held Korean corporation, is a manufacturer of telecommunication and electronics devices, including a hands-free accessory and collision sensors. The investment is accounted for on the equity method of accounting.

     The financial statements sent to the Company by K&T Telecom reports no sales for the first nine months of the year 2002 and an accumulated net loss from the start of the business of approximately $0.2 million.

     Total assets were in amount of approximately $0.9 million and total liabilities were of approximately $0.5 million at September 30, 2002, resulting total stockholders' equity in amount of approximately $0.4 million. Considering that TeleVideo's interest in this company is 49%, the fair market value of this investment was estimated at approximately $0.2 million at the end of fiscal 2002. TeleVideo is currently considering the possibility of withdrawing from this joint venture.

    In reaching this valuation, TeleVideo considered the following factors: the company's shares are not publicly traded, there have been no known recent transactions in the company's shares, no financial projections are available from the company's management, and prior operating results have been negative. Therefore, in accordance with the valuation methodology adopted by TeleVideo, this company has been valued on a pro-rata share of stockholders' equity basis. The company's most recent financial results are not available to TeleVideo, and the stockholders' equity figure includes approximately $190,000 in quick assets, or more than 45% of the stockholders' equity figure.

    During the second quarter of the fiscal 2003, K&T Telecom filed for bankruptcy and, consequently, the entire book value of approximately $0.2 million was written off.

Alpha Technology, Inc.

    In August 2000, the Company purchased for $650,000 in cash an aggregate of 9,608 shares of stock of Alpha Technology, Inc. Alpha Technology, Inc. is a Korean company, manufacturing electronic and car accessories, including two-way car alarm systems. The Company's investment in Alpha Technology, Inc. represents a 49% interest in this privately held corporation.

     TeleVideo has the right to participate in future sales of Alpha Technology, Inc. securities to maintain its proportionate interest in this company. If Alpha Technology, Inc. increases its capital thereafter, TeleVideo will be given the opportunity to participate in the stock issuance in order to maintain the percentage of stock held currently by TeleVideo.

     In the fiscal year 2001, due to the decrease of the fair market value of Alpha Technology investment, the Company adjusted the carrying value of this investment on the financial statements from $600,000 to $418,033. In November 2001, the Company decided to withdraw from this joint venture, and to sell its interest in Alpha Technology to Gem Management, a company owned by Dr. Hwang's wife, Gemma Hwang. In exchange for the 9,608 shares of Alpha Technology, the amount of approximately $418,000 (the value of transaction and the book value of Alpha Technology investment as of July 31, 2001) will be deducted from the Note Payable owed by TeleVideo to Gem Management. Before the transaction, the Company owed to Gem Management $1.5 million, bearing an annual interest of 8%.

Ningbo China

      In October 2000, TeleVideo acquired a 10% ownership interest in Televideo (China) Co., Ltd. ("Ningbo"), a manufacturer of computer terminals and monitors, through a $1 million investment. In December 2000, TeleVideo acquired an additional 20% ownership interest in Ningbo for $2 million. In that same month, TeleVideo changed its method of accounting for this investment to the equity method.

     Under the terms of the investment, TeleVideo would provide certain technology and professional training on its terminal products, including technology relating to the processor used for TeleClient, in exchange for $2.5 million payable over a two year term as follows: $1.2 million was to be received in December 2000 and the remaining $1.3 million was payable in two installments of $650,000 in June 2001 and June 2002.

     To date, TeleVideo has received only $1.42 million of the $2.5 million due from Ningbo. At one point, TeleVideo did agree to reschedule Ningbo's payments for the remaining $1,080,000; however, to date, Ningbo has failed to make any of the new payments. The unpaid balance has since been expensed as government and transfer fees.

     In the third quarter of fiscal 2001, the capital of Ningbo decreased from $10 million to approximately $5 million due to the departure of two investors from the venture. Thereafter, the Chinese government requested that Ningbo change its initial agreement with TeleVideo to allow the payments made by Ningbo to TeleVideo to be recorded as a withdrawal of TeleVideo's investment instead of payments for technology and training provided by TeleVideo. TeleVideo agreed with this change, and consequently, TeleVideo has reduced the carrying value of this investment on its financial statements from $3.0 million to $1.7 million.

    The financial statements sent to the Company by Ningbo reports sales of approximately $0.1 million and a net loss of approximately $0.2 million for the period January to September 2002. The accumulated net loss from the start of the business is approximately $0.7 million.

     The total assets at September 30, 2002 were approximately $2.5 million, including technology and training prepaid to TeleVideo in amount of approximately $1.2 million. Total liabilities were in amount of $0.1 million, resulting total stockholders' equity of approximately $2.4 million. Deducting the prepayment to TeleVideo, recorded as asset, the remaining total stockholders' equity is approximately $1.2 million, and, considering that the Company's interest increased to 60% after two investors had withdrawn, the fair market value of this investments was estimated to approximately $0.7 million at the end of fiscal 2002. Because TeleVideo does not have control over Ningbo operations, this investment is accounted under the equity method, rather consolidation, conform with  FASB No. 94.

     In November 2002, TeleVideo learned that certain persons involved with Ningbo had stolen and/or embezzled funds from that company. TeleVideo has undertaken efforts, including retaining investigators and attorneys, to seek the recovery of any portion of its investment. Currently, TeleVideo has no reasonable estimate of the amount of funds it may be possible to recover, and the carrying value of this investment on the financial statements may have to be adjusted once again.

     While the investment in this company is described as an equity investment, TeleVideo has been valuing it in accordance with TeleVideo's expected recovery of the funds invested after the embezzlement previously reported was discovered. TeleVideo has therefore not applied its valuation methodology to this investment.

     During the second quarter of 2003 Ningbo definitively stopped  all its operation and closed all of  its facilities. Consequently, the Company written off the entire value of this investment of approximately $0.7 million, as of April 30, 2003. The estimated fair value of the proceeds from the liquidation of Ningbo was determined considering total assets of $0.9 million, less depreciation and liabilities of $0.1 million. The cost of liquidation was estimated at 20% from the liquidation value, resulting total net proceeds from liquidation in amount of approximately $0.7 million. Considering that TeleVideo has 60% interest in Ningbo, the estimated proceeds from the liquidation of this  investment are approximately $0.4 million, recorded in the Company's financial statements under the other assets section.

Cost Method

mySimon, Inc.

      In September 1998, the Company invested $1 million in the online comparison shopping Internet company, mySimon, Inc., receiving convertible preferred stock.

      On February 29, 2000, CNET Networks, Inc. (formerly, CNET, Inc. or "CNET") completed the acquisition of mySimon, Inc. As a result of this acquisition, the Company received 375,108 shares of common stock of CNET in exchange for 100% of its interest in mySimon, Inc. During same period of time, the Company also adjusted its balance sheet to reflect the conversion to a marketable security. The cost method used to book the investment in mySimon was changed to market value method in accordance with SFAS 115 to record the investment in CNET stock.

      During the fiscal year 2000 and 2001, the Company recognized gains from the sales of CNET stocks of $10.1 million and $0.3 million respectively.

      On June 6, 2003, the Company owned approximately 32,500 shares of CNET common stock and the market value was approximately $5.80 per share.

Koram, Inc.

      In February 1998, the Company purchased a 50% interest in Koram, Inc, a Korean restaurant venture. During 2000, the Company decided to discontinue its participation in this joint venture. The Company's venture partner agreed to transfer the funds for our participation into the TeleVideo account when the exchange rate Korean Won and US Dollar will be the most advantageous. Also, the Company changed its method of accounting for this investment to cost method. No difference in the value of this investment was recorded as result of the change from the equity accounting method to the cost accounting method.

      In November 2001, the Company decided to pay back a portion from the Gem Management's loan with the funds deposited in Korea, which were in a total amount of approximately $64,000. Before the transaction, the Company owed Gem Management $1.5 million, bearing an annual interest of 8%.

Biomax Co, Ltd.

      On May 12, 2000, the Company purchased for a cash investment of $917,431 an aggregate of 45,000 ordinary shares of Biomax Co., Ltd. ("Biomax"). Biomax is a startup company, with its principal offices located in Seoul, Korea, engaged in developing an herbal product to help lower cholesterol levels in humans. Its existing technology was developed by and obtained from the Korea Research Institute of Bioscience and Biotechnology. The Company's investment in Biomax represents a 15% interest in this privately held corporation.

      The agreement gives the Company the right to nominate one member to the Biomax Board of Directors. Dr. K. Philip Hwang, the Company's Chairman of the Board and Chief Executive Officer, was nominated and elected to the Biomax board.

      The Company has the right to participate in future sales of Biomax securities to maintain its proportionate interest in Biomax. In the event the Company wants to sell all or a portion of its shares, it has given Biomax and Biomax's President, who is its controlling shareholder, a right of first refusal to purchase the shares. The controlling shareholder also must obtain the Company's prior written consent in order to sell over 10% of Biomax.

      Biomax also agreed to discuss with the Company certain specified kinds of events and transactions that could materially impact Biomax's business, capital structure and financial condition. The agreement further prohibits Biomax from sharing its technology with third parties or assisting with research and development efforts of third parties without the prior written consent of the Company, other than in the normal course of business, and further prohibits the controlling shareholder from engaging in businesses that could compete with Biomax. The restrictions and promises in the agreement will terminate at such time as the Company has sold at least 70% of the shares it acquired under the agreement.

     The financial statements received from Biomax reports sales of $ 0.1 million and a net loss of approximately $0.1 million for the first three months of the year 2003. The accumulated net loss from the start of the business is in amount of approximately $1.0 million.

     Total assets were in amount of approximately $1.0 million and total liabilities were of approximately $0.4 million at March 31, 2003, resulting total stockholders' equity in amount of approximately $0.7 million. Considering that Televideo interest in this company is 15%, the fair market value of this investment was estimated at approximately $0.1 million at April 30, 2003.

     In reaching this valuation, TeleVideo considered the following factors: the company's shares are not publicly traded, there have been no known recent transactions in the company's shares, no financial projections are available from the company's management, and prior operating results have been negative. Therefore, in accordance with the valuation methodology adopted by TeleVideo, this company has been valued on a pro-rata share of stockholders' equity basis. The company reported tangible assets of $456,000 against a most recent quarterly loss of $64,000. This information further supports the choice of the stockholders' equity method and the valuation derived therefrom.

Xeline (Keyin) Telecom Co. Ltd.

      On May 12, 2000, the Company purchased for $2,522,972 an aggregate of 15,278 ordinary shares of Xeline (Keyin) Telecom Co. Ltd. ("Xeline"). Xeline is a private company located in Seoul, Korea, which is engaged in developing power line technology for electricity transportation. The Company's investment in Xeline represents a 5.75% interest in this corporation.

      The Company has the right to participate in future sales of Xeline securities to maintain its proportionate interest in Xeline. In the event the Company wants to sell all or a portion of its shares, it has given Xeline and its controlling shareholder, who is also its President and Chief Executive Officer, a right of first refusal to purchase the shares.

      Xeline also agreed to keep the Company expressly advised regarding certain specified kinds of events and transactions that could materially impact Xeline's business, capital structure and financial condition. Xeline has agreed that it will not transfer its power line communications ("PLC") technology to a third party without the prior written consent of the Company, except in the context of a strategic technology transfer agreement approved by the Xeline Board. The restrictions and promises in the agreement will terminate at such time as the Company has sold at least 70% of the shares it acquired under the agreement.

     The investment agreement also contemplates that TeleVideo will participate in a strategic alliance with Xeline under the terms of which TeleVideo will support Xeline in its overseas marketing and sales activities related to Xeline's PLC technology. In addition, TeleVideo and Xeline will cooperate to incorporate Xeline's PLC technology into TeleVideo's computer products, including the Tele-Client series. The parties contemplate entering into a separate sale and marketing agreement to more fully document the terms and conditions of the strategic relationship.

    The financial statements sent to the Company by Xeline reports sales of approximately $36,000 and a net loss of approximately $0.3 million for the first four months of the year 2003. The accumulated net loss from the start of the business is of approximately $4.0 million.

     Total assets were in amount of approximately $9.3 million and total liabilities were of approximately $6.5 million at June 30, 2002, resulting total stockholders' equity in amount of approximately $2.8 million. Considering that Televideo interest in this company is 5.75%, the fair market value of this investment was estimated at approximately $0.2 million at April 30, 2003.

     In reaching this valuation, TeleVideo considered the following factors: the company's shares are not publicly traded, there have been no known recent transactions in the company's shares, no financial projections are available from the company's management, and prior operating results have been negative. Therefore, in accordance with the valuation methodology adopted by TeleVideo, this company has been valued on a pro-rata share of stockholders' equity basis. For the most recent period for which TeleVideo has financial results, the company recorded a loss in excess of its gross sales for the period. Based on this result, any analysis other than the stockholders' equity method would result in a negative value for the business. However, the company has $1.8 million in current assets, which lends support to its stockholders' equity figure.

MultiMedia SOC, Inc. (formerly described as Synertek, Inc.)

     In June 2000, the Company purchased for $1,000,000 in cash an aggregate of 285,714 shares of common stock of MultiMedia SOC, Inc. (formerly described as Synertek, Inc.), a Nevada corporation, representing an 8% interest in this company. MultiMedia SOC, Inc. manufactures and sells handheld digital multimedia and communications appliances.

    The financial statements sent to the Company by MultiMedia SOC, Inc. report sales of approximately $0.2 million and a net loss of approximately $0.9 million for the year 2002. The accumulated net loss recorded from the start of the business is approximately $1.9 million.

     Total assets were in amount of approximately $1.9 million at the end of 2002. Total liabilities were approximately $0.2 million, resulting total stockholders' equity in amount of approximately $1.7 million. Considering that TeleVideo's interest in this company is 8%, the fair market value of this investment was estimated at approximately $0.1 million at the end of fiscal 2002.

     In reaching this valuation, TeleVideo considered the following factors: the company's shares are not publicly traded, there have been no known recent transactions in the company's shares, no financial projections are available from the company's management, and prior operating results have been negative. Therefore, in accordance with the valuation methodology adopted by TeleVideo, this company has been valued on a pro-rata share of stockholders' equity basis. This method values the company at approximately $1.7 million.

    MultiMedia SOC has signed a termsheet for a substantial investment by a third party. The amount of the investment, the terms, and the implied valuation of MMSOC are confidential. If the investment is not consummated, there is a high likelihood that MMSOC will become insolvent and dissolve. TeleVideo is unable to make an assessment of what the dollar value of its proportionate share of the recovery, if any, would be. This information further supports the choice of the stockholders' equity method and the valuation derived therefrom.

3.    LETTER OF CREDIT AGREEMENT

At April 30, 2003, the Company had no letters of credit agreements.

4.  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 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 December 2000, the Company subleased a part of it's headquarter space. The leasing agreement is for a period of three years, beginning January 2001 with a monthly rent amount of approximately $81,000. This sublease will not affect the Company's manufacturing facilities.

        Under the lease agreement, the sublessee is required to open a standby letter of credit in the TeleVideo favor in amount of $500,000. The letter of credit has an initial term of one year, beginning January 2001, and this term was automatically extended until the end of the leasing contract, which is January 10, 2004.

5.  SUBSEQUENT EVENTS

       None.

Table of Content

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

COMPARISON OF RESULTS FOR THE THREE MONTHS ENDED APRIL 30, 2003 AND THE THREE MONTHS ENDED APRIL 30, 2002 

        Net sales for the second quarter of fiscal 2003 were $1.9 million, compared with $2.2 million in the second quarter of fiscal 2002, a decrease of $0.3 million or 14%. The decrease is due in principal to the decrease in sales of our integrated TeleClient line of products, TC7380, by about $0.4 million, partially offset by the supplementary revenue provided by the sales of our new wireless tablet thin client, TeleCLIENT MC3000, introduced in the third quarter of fiscal 2002. The total net sales of TeleCLIENT MC3000 were approximately $0.1 million in the second quarter of fiscal 2003.

        Cost of sales was $1.6 million in the second quarter of fiscal 2003, compared with $1.7 million in the second quarter of fiscal 2002, a decrease of $0.1 million or 6%. The decline was due to the lower total net sales, partially offset by a lower gross margin. 

        Sales and marketing expenses were $0.4 million in the second quarter of fiscal 2003, same as in the second quarter of fiscal 2002. As a percentage of net sales, sales and marketing expenses increased to 21% in the second quarter of fiscal 2003, compared with 18% in the second quarter of fiscal 2002, due to the decrease recorded in the total net sales.

        Research and development expenses were $0.3 million in the second quarter of fiscal 2003, compared with $0.2 million in the second quarter of fiscal 2002. The increase is due primarily to the supplementary expenses recorded with the software development  for our products.

        General and administrative expenses were $0.3 million in the second quarter of fiscal 2003, compared with $0.5 million in the second quarter of fiscal 2002. As a percentage of net sales, general and administrative expenses decreased to 16% in the second quarter of fiscal 2003 compared with 23% in the second quarter of fiscal 2002. In the second quarter of the fiscal 2002 the Company prepared and held the annual shareholders meeting, resulting higher general and administrative expenses for that period. In the fiscal 2003, due to the going private process, the meeting was not held.

        The Company's loss from operations was approximately $0.7 million in the second quarter of fiscal 2003 compared with approximately $0.6 million in the second quarter of fiscal 2002. 

        Other income was $0.4 million in the second quarter of fiscal 2003, same as in the second quarter of fiscal 2002.

       The loss from investments was $0.6 million in the second quarter of fiscal 2003, compared with a loss of $0.1 million in the second quarter of fiscal 2002.

        Net loss for the second quarter of fiscal 2003 was $0.9 million compared with a net loss of $0.3 million in the second quarter of fiscal 2002.

COMPARISON OF RESULTS FOR THE SIX MONTHS ENDED APRIL 30, 2003 AND THE SIX MONTHS ENDED APRIL 30, 2002

        Net sales for the first six months of fiscal 2003 were $3.6 million, compared with $3.7 million in the first six months of fiscal 2002, a decrease of $0.1 million or 3%. The decrease is due in principal to the decrease in sales of our integrated TeleClient  TC 7380 line of products, by about $0.1 million, and terminal products by about $0.1 million, partially offset by the supplementary revenue provided by the sales of our new wireless tablet thin client, TeleCLIENT MC3000, introduced in the third quarter of fiscal 2002. The total net sales of TeleCLIENT MC3000 were approximately $0.1 million in the first six months of fiscal 2003.

        Cost of sales was $2.9 million in the first six months of fiscal 2003, compared with $2.8 million in the first six months of fiscal 2002. The increase in cost, compared with the decrease in sales is due in principal to the lower gross margin, after the Company lowered the prices of thin client products in March 2003.

        Sales and marketing expenses were $0.7 million in the first six months of fiscal 2003, compared with $0.8 million in the first six months of fiscal 2002. As a percentage of net sales, sales and marketing expenses decreased to 19% in the first six months of fiscal 2003 compared with 22% in the first six months of fiscal 2002.

        Research and development expenses were $0.4 million in the first six months of fiscal 2003, compared with $0.3 million in the first six months of fiscal 2002. The increase is due primarily to the supplementary expenses recorded with the software development  for our products.

        General and administrative expenses were $0.7 million in the first six months of fiscal 2003, compared with $0.9 million in the first six months of fiscal 2003. As a percentage of net sales, general and administrative expenses decreased to 19% in the first six months of fiscal 2003 compared with 24% in the first six months of fiscal 2002. In the second quarter of the fiscal 2002 the Company prepared and held the annual shareholders meeting, resulting higher general and administrative expenses for that period. In the fiscal 2003, due to the going private process, the meeting was not held.

        The Company's loss from operations was approximately $1.2 million in the first six months of fiscal 2003 compared with approximately $1.1 million in the first first six months of fiscal 2002. 

        Other income was $0.8 million in the first six months of fiscal 2003, same as in the first six months of fiscal 2002.

       The loss from investments was $0.6 million in the first six months of fiscal 2003, compared with a loss of $0.1 million in the first six months of fiscal 2002.

        Net loss for the first six months of fiscal 2003 was $1.1 million, compared with $0.6 million in the first six months of fiscal 2002, due in principal due to the loss from investments recoded in the second quarter of fiscal 2003.

        LIQUIDITY AND CAPITAL RESOURCES

        At April 30, 2003, the Company had $0.7 million in cash and cash equivalents, compared with $0.9 million at the end of fiscal 2002. The decrease is due in principal to the increase in inventory value of approximately $0.8 million and the increase in the prepayments amount of $0.1 million, partially offset by the decrease in accounts receivable in amount of approximately $0.3 million and the proceeds from note payable in amount of $0.5 million. Net cash used in operating activities increased from $0.4 million used in the six months ended April 30, 2002 to $0.6 million used for the same period in fiscal 2003.

        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 shall be due and payable to TeleVideo, Inc. on December 1, 2013.

        In December 1998, the Company leased back this facility over a 15-year lease term expiring in December 2013. The land 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, 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 on a straight line basis over the leased building asset life, which has been determined to be the 15 year lease term.

        In December 2000, the Company subleased a part of it's headquarter space. The leasing agreement is for a period of three years, beginning January 2001 with a monthly rent amount of approximately $81,000. This sublease will not affect the Company's manufacturing facilities.

        Under the lease agreement, the sublessee is required to open a standby letter of credit in the TeleVideo favor in amount of $500,000. The letter of credit has an initial term of one year, beginning January 2001, and this term will be automatically extended until the end of the leasing contract, which is January 10, 2004.

        Net accounts receivable were $1.2 million at April 30, 2003, compared with $1.6 million at October 31, 2002, a decrease of $0.4 million, or 25%, while net inventories were $2.2 million at April 30, 2003, as compared with $1.4 million at October 31, 2002, an increase of $0.8 million, or 57%. The decrease in accounts receivable reflects large collections in the first quarter of fiscal 2003, compared with lower sales volume. The increase in inventory reflects the purchase of additional terminal and TeleCLIENT products during the period, and to the lower than expected sales volume recorded for these products.

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 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.

        INVESTMENTS IN AFFILIATES

        Investments in affiliates represent approximately 3% of the Company's total assets at April 30, 2003. As a result, the Company's success will be adversely affected if the investees fail to execute their business plans. If there is an impairment in the carrying value of the affiliate investments the Company will reduce the carrying of such investments.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

    The Company is subject to market risk for changes in interest rates, because its line of credit with Gem Management has a variable interest rate, equal with Wall Street prime rate published at beginning of each month, plus one percent. Anyway, the Company could renegotiate its agreement with Gem Management, regarding the interest rate, as it happened in fiscal 2002, but the success of these negotiations can not be assured. The market risk for changes in interest rate for the Company's investments is not significant because these investments are limited to highly liquid instruments with maturities of three months or less. At April 30, 2003, the Company has approximately $0.7 million classified as cash and cash equivalents.

      The Company is also subject to equity price risk related to its investments in marketable securities. At June 6, 2003, the Company owned approximately 32,508 shares of CNET common stock and the estimated fair value of these marketable securities was approximately $189,000. All of the Company's transactions with international customers and suppliers are denominated in US dollars.

     As of April 30, 2003, the Company had a long-term note receivable (the "Note") of $2.7 million. The Company received the Note, which bears interest at a fixed rate of 7.25% per annum, as partial consideration for the sale of the Company's headquarters facility in December 1998. The interest rate on the Note is fixed over the life of the Note, with principal and interest 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 shall be due and payable to TeleVideo, Inc. on December 1, 2013.

        Because the interest rate on the Note is fixed for the term of the Note, any change in interest rates would not affect the Company's earnings or cash flows if it chose to hold onto the note, although a change in interest rates could affect the market value of the Note if the Company chose to sell the note prior to maturity.

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ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures: The Company's Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of disclosure controls and procedures as defined in Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934, as amended, within 90 days of the filing of this Quarterly Report on Form 10-Q. Based on such evaluation, they have concluded that as of such date, the Company's disclosure controls and procedures are effective.

Changes in Internal Controls: There were no significant changes in the Company's internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation.

 

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

        None.

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ITEM 6. EXHIBIT AND REPORTS ON FORM 8-K.

(a)    EXHIBIT(S).        

(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

(b)    REPORTS ON FORM 8-K.

None.

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SIGNATURES

        Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this amended report to be signed on its behalf by the undersigned, thereunto duly authorized.

		TELEVIDEO, INC.
		(REGISTRANT)
DATE:   June 19, 2003		BY:		/s/ RICHARD KIM
				Richard Kim  Vice President and Chief Financial Officer

 

CERTIFICATIONS

I, K. PHILIP HWANG, certify that:

 

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:

 

	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;

 

5.

The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function):

 

	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

 

6.

The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: June 19, 2003		/s/ K. Philip Hwang
		K. Philip Hwang Chairman and Chief Executive Officer

 

I, RICHARD KIM, certify that:

 

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:

 

	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;

 

5.

The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function):

 

	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

 

6.

The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: June 19, 2003		/s/ Richard Kim,
		Richard Kim Vice President and Chief Financial Officer

 

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DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

PART I. FINANCIAL INFORMATION

    ITEM 1. FINANCIAL STATEMENTS.

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

        TELEVIDEO, INC. INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED APRIL 30, 2003 AND APRIL 30, 2002 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (Unaudited)

        TELEVIDEO, INC. INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED APRIL 30, 2003 AND APRIL 30, 2002 (IN THOUSANDS) (Unaudited)

        TELEVIDEO, INC. NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS APRIL 30, 2003

    ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

    ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

    ITEM 4. CONTROLS AND PROCEDURES

PART II. OTHER INFORMATION

    ITEM 1. LEGAL PROCEEDINGS.
    ITEM 6. EXHIBIT AND REPORTS ON FORM 8-K.

SIGNATURES

CERTIFICATIONS