-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CZNmn+3D/uFX7FtmPXZrQ0u2zNm/pQIwi3OyTHmCHtiPXPXJdXVficJVXslZcoeC 6TYf6YKK5qQ4S2bhh9uRdQ== 0000912057-01-008005.txt : 20010326 0000912057-01-008005.hdr.sgml : 20010326 ACCESSION NUMBER: 0000912057-01-008005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010131 FILED AS OF DATE: 20010323 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TELEVIDEO INC CENTRAL INDEX KEY: 0000353779 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER TERMINALS [3575] IRS NUMBER: 942383795 STATE OF INCORPORATION: DE FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-11552 FILM NUMBER: 1577550 BUSINESS ADDRESS: STREET 1: 2345 HARRIS WAY CITY: SAN JOSE STATE: CA ZIP: 95131 BUSINESS PHONE: 4089548333 FORMER COMPANY: FORMER CONFORMED NAME: TELEVIDEO SYSTEMS INC DATE OF NAME CHANGE: 19920703 10-Q 1 a2042774z10-q.txt FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 ---------------------------- FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: January 31, 2001 ------------------ 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. ----------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 94-2383795 - ------------------------------- ---------------------------------- (State or other jurisdiction of (IRS Employer incorporation or organization) 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 No X --- --- The number of shares outstanding of registrant's Common Stock, as of March 1, 2001 is: 11,307,000. ------------ DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS This Quarterly Report on Form 10-Q for TeleVideo Inc. (the "Company") for the first quarter ended January 31, 2001, 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. PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS. [The remainder of this page is intentionally left blank.] TELEVIDEO, INC. INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
January 31, October 31, ASSETS 2001 2000 ----------- ----------- (Unaudited) (Audited) CURRENT ASSETS: Cash and cash equivalents $ 427 $ 3,261 Accounts receivable, net 1,336 1,560 Inventories, net 3,259 1,239 Marketable Securities 719 1,259 Prepayments and other 656 761 Notes receivable - current 73 73 ----------- ----------- Total current assets 6,470 8,153 ----------- ----------- PROPERTY, PLANT AND EQUIPMENT: Production equipment 669 669 Office furniture and equipment 1,128 1,128 Leased property under capital lease 6,270 6,270 ----------- ----------- 8,067 8,067 Less accumulated depreciation and amortization 2,494 2,401 ----------- ----------- Property, plant and equipment, net 5,573 5,666 ----------- ----------- OTHER ASSETS 166 166 INVESTMENTS IN AFFILIATES 8,807 6,807 NOTE RECEIVABLE, LESS CURRENT PORTION 2,539 2,557 ----------- ----------- Total assets $ 23,555 $ 23,349 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES: Obligation under capital lease - current $ 296 $ 296 Accounts payable 1,485 808 Accrued liabilities 1,073 1,238 Income taxes (346) 85 Deferred gain on sale of land and building - current 845 845 Deferred gain on sale to Ningbo 1,080 ----------- ---------- Total current liabilities 4,433 3,272 ----------- ---------- Obligation under capital lease - long-term 5,516 5,516 Deferred gain on sale of land and building - long-term 6,104 6,245 ----------- ---------- Total liabilities 16,053 15,033 ----------- ---------- STOCKHOLDERS' EQUITY: Common stock, $.01 par value: Authorized--75,000,000 shares Outstanding--11,307,000 shares at January 31, 2001 and 11,307,000 shares at October 31, 2000 454 454 Additional paid-in capital 95,734 95,734 Accumulated other comprehensive income, net 830 1,153 Accumulated deficit (89,517) (89,025) --------- --------- Total stockholders' equity 7,502 8,316 --------- --------- Total liabilities and stockholders' equity $ 23,555 $ 23,349 ========= ===========
The accompanying notes are an integral part of these financial statements. TELEVIDEO, INC. INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED JANUARY 31, 2001 AND JANUARY 31, 2000 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (Unaudited)
Three Months Ended January 31, ----------------------------- 2001 2000 --------- --------- NET SALES $ 1,538 $ 1,521 COST OF SALES 1,418 1,403 --------- --------- GROSS PROFIT 120 118 OPERATING EXPENSES: Sales and marketing 569 653 Research and development 223 221 General and administration 328 463 --------- --------- Total operating expenses 1,120 1,337 --------- --------- Loss from operations (1,000) (1,219) INTEREST INCOME, net 64 134 OTHER INCOME, net 446 124 --------- --------- Net loss $ (490) $ (961) ========= ========== Net loss per share, basic and diluted $ (.04) $ (.09) ========= ========= Weighted average shares outstanding 11,307 11,278 ========= =========
The accompanying notes are an integral part of these financial statements. TELEVIDEO, INC. INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED JANUARY 31, 2000 AND JANUARY 31, 1999 (IN THOUSANDS) (Unaudited)
Three Months Ended January 31, ------------------------ 2001 2000 --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net cash used in operating activities $ (2,307) $ (512) --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Net proceeds from sale of land and building -- -- Net additions to property, plant and equipment -- (6) Investment in Ningbo China (2,000) -- Deferred gain from Ningbo China 1,080 -- Note receivable 18 (22) --------- --------- Net cash (used in) provided by investing activities (902) 16 --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common stock -- 32 Loan from Smith Barney 375 -- Payments on lease obligations -- (62) --------- --------- Net cash provided by (used in) Financing activities 375 (30) --------- --------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (2,834) (526) CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD 3,261 4,487 --------- --------- CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD $ 427 $ 3,961 ========= =========
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. The accompanying notes are an integral part of these financial statements. TELEVIDEO, INC. NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JANUARY 31, 2001 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 January 31, 2001 and for the three months ended January 31, 2001 and 2000 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 $0.5 million at both January 31, 2001 and October 31, 2000, respectively:
January 31, October 31, 2001 2000 ----------- ----------- Purchased parts and subassemblies $ 430 $ 98 Work-in-process 264 314 Finished goods 2,565 827 ----------- ----------- $ 3,259 $ 1,239 =========== ===========
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 2001 presentation. None of such reclassifications are material to the financial statements taken as a whole. 2. ACQUISITIONS AND DIVESTITURES EQUITY METHOD 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. 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. During 1999, the Company granted and wrote off loans and advances to APT totaling $426,000. The Company has not guaranteed any obligations of APT and has made no commitments to provide additional financial support to APT. 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. The investment is accounted for on the equity method of accounting. Mulix was dissolved effective November 30, 2000. Thus, the entire investment was written off as of October 31, 2000. K&T Telecom, Inc. In July 2000, the Company purchased for $600,000 in cash an aggregate of 9,608 shares of stock of K&T Telecom, Inc, a Korean company. Its main activity is manufacturing telecommunication and electronics devices, including hands-free accessories and collision sensors. The Company's investment in K&T Telecom, Inc. represents a 49% interest in this privately held corporation. The investment is accounted for on the equity method of accounting. If K&T Telecom, Inc. subsequently increases its capital, TeleVideo will be given the opportunity to participate in the stock issuance in order to maintain the percentage of stock currently held by TeleVideo. 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. The investment is accounted for on the equity method of accounting. 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 currently held by TeleVideo. 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 the 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, the Company recognized gains from the sales of CNet stocks of $10.1 million. On March 15, 2001, The Company owned approximately 39,800 shares of CNET common stock and the market value was approximately $8.38 per share. Koram, Inc. In February 1998, the Company purchased a 50% interest in Koram, Inc, a Korean restaurant venture. This investment was accounted for under the equity method of accounting. During 2000, the Company decided to discontinue its participation in this joint venture. The Company's venture partner agreed to transfer the funds for its participation into the TeleVideo account when the exchange rate for the Korean Won and US Dollar will be the most advantageous. As such, the Company accounts for this investment under the cost method of accounting. 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 investment is accounted for on the cost method of accounting. 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. Keyin Telecom Co. Ltd. On May 12, 2000, the Company purchased for $2,522,972 an aggregate of 15,278 ordinary shares of Keyin Telecom Co. Ltd. ("Keyin"). Keyin is a private company located in Seoul, Korea, engaged in developing power line technology for electricity transportation. The Company's investment in Keyin represents a 5.75% interest in this corporation. The investment is accounted for on the cost method of accounting. The Company has the right to participate in future sales of Keyin securities to maintain its proportionate interest in Keyin. In the event the Company wants to sell all or a portion of its shares, it has given Keyin and its controlling shareholder, who is also its President and Chief Executive Officer, a right of first refusal to purchase the shares. Keyin also agreed to keep the Company expressly advised regarding certain specified events and transactions that could materially impact Keyin's business, capital structure and financial condition. Keyin 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 Keyin Board. The restrictions and promises in the agreement will terminate at such time when the Company sells 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 Keyin under the terms of which TeleVideo will support Keyin in its overseas marketing and sales activities related to Keyin's PLC technology. In addition, TeleVideo and Keyin will cooperate to incorporate Keyin's PLC technology into TeleVideo's computer products, including the Tele-CLIENT series. The parties contemplate entering into a separate sales and marketing agreement to more fully document the terms and conditions of the strategic relationship. Synertek, Inc. In June 2000, the Company purchased for $1,000,000 in cash an aggregate of 285,714 shares of common stock of Synertek, Inc., a Nevada corporation, representing an 8% interest in this company. Synertek, Inc. manufactures and sells handheld digital multimedia and communications appliances. The cash investment is accounted for on the cost method of accounting. Ningbo China In October 2000, the Company invested $1,000,000 in Televideo (China) Co., Ltd. (Ningbo China) for a 10% interest. The Company has agreed to invest an additional $2,000,000 in December 2000. The total investment will represent a 30% interest in this company, which will manufacture computer terminals and monitors. This investment is currently accounted for using the cost method. The investment agreement also provides for the use of TeleVideo's technical production skill of terminal products. For the use of this technology Ningbo China will pay the Company $2.5 million dollars over two years as follows: $1.2 million is to be received in December 2000 and the remaining $1.3 million in two installments of $650 thousand in June 2001 and June 2002. For this money, TeleVideo will give Ningbo China the right to use it's technology and provide professional training for the use of this technology. The most important technology is related to the processor used for TeleCLIENT. During December 2000, the Company invested $2,000,000 in Ningbo China for an additional 20% ownership interest. Accordingly, in December 2000, the Company changed its method of accounting for this investment to the equity method. During December 2000, the Company received approximately $960,000 from Ningbo China. During January 2001, the Company received an additional $120,000 from Ningbo China. Because TeleVideo has 30% interest in Ningbo and the technology provided by the Company is not yet used, the Company decided that the income resulting from the contract with Ningbo will be deferred until the technology is used. 3. LETTER OF CREDIT AGREEMENT At January 31, 2001, 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. 5. SUBSEQUENT EVENTS On February 28, 2001, Grant Thornton LLP was replaced as the independent accountant engaged to audit the consolidated financial statements of TeleVideo, Inc. (the "Company") by Choi, Cho & Ahn Accounting Corporation. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. RESULTS OF OPERATIONS Net sales for the first quarter of fiscal 2001 were $1.5 million, same as in the first quarter of fiscal 2000. Cost of sales was $1.4 million in the first quarter of fiscal 2000, same as in the first quarter of fiscal 2000. With all the efforts and expenses made to penetrate new markets, the Company failed to increase sales volume, and, as result, the net sales and cost of sales kept the same structure and level in the first quarter of financial year 2001, compared with the first quarter of fiscal year 2000. Sales and marketing expenses were $0.6 million in the first quarter of fiscal 2001, compared with $0.7 million in the first quarter of fiscal 2000. As a percentage of net sales, sales and marketing expenses decreased to 40% in the first quarter of fiscal 2001 compared with 47% in the first quarter of fiscal 2000. The decrease is due to the close of three regional offices, in Georgia, New Jersey and Texas. The Company decided to close these offices because no improvement in sales activity was recorded after opening them. Research and development expenses were $0.2 million in the first quarter of fiscal 2001, same as in the first quarter of fiscal 2000. General and administrative expenses were $0.3 million in the first quarter of fiscal 2001, compared with $0.5 million in the first quarter of fiscal 2000. As a percentage of net sales, general and administrative expenses decreased to 20% in the first quarter of fiscal 2001 compared with 33% in the first quarter of fiscal 2000. The decrease is due primarily to the reduction occurred in salary expenses, by the decrease of the number of employee used in general and administration activities. The Company's loss from operations was approximately $1.0 million in the first quarter of fiscal 2001 compared with approximately $1.2 million in the first quarter of fiscal 2000. Other income was $510,000 in the first quarter of fiscal 2000, compared with $260,000 in the first quarter of fiscal 1999, an increase of $117,000. The increase was due primarily to the sale of C-NET stock, and to the income resulted from the sublease of a part of the Company headquarter space, beginning from January 2001. Net loss for the first quarter of fiscal 2001 was $0.5 million compared with a net loss of $1.0 million in the first quarter of fiscal 2000. LIQUIDITY AND CAPITAL RESOURCES At January 31, 2001, the Company had $0.4 million in cash and cash equivalents, a decrease of approximately $2.9 million over the same balances at the end of fiscal 2000 of approximately $3.3 million. Net cash used in operating activities increased from $0.5 million used in the three months ended January 31, 2000 to $2.3 million used for the same period in fiscal 2001. This increase is due primarily to the investment in Ningbo China, made in December 2000. 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, and this will bring a monthly income of approximately $81,000. This sublease will not affect the company manufacturing facilities. 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. Net accounts receivable were $1.3 million at January 31, 2001, compared with $1.6 million at October 31, 2000, a decrease of $0.3 million, or 19%, while net inventories were $3.3 million at January 31, 2001, as compared with $1.2 million at October 31, 2000, an increase of $2.1 million. The decrease in accounts receivable reflects large collections in the first quarter of fiscal 2001. The increase in inventory reflects the purchase of additional terminal and TeleCLIENT products during the quarter, and also the purchase of the inventory of Mobile Electronics Division products, in total amount of over $1.0 million. 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 37% of the Company's total assets at January 31, 2001. 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. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. As of January 31, 2001, 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. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. None. ITEM 6. EXHIBIT AND REPORTS ON FORM 8-K. (a) EXHIBIT(S). None (b) REPORTS ON FORM 8-K. Form 8-K was filed on March 7th, 2001. 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: March 23, 2001 BY: /s/ K.PHILIP HWANG ------------------------------ K.PHILIP HWANG CHAIRMAN AND C.E.O. AND ACTING CHIEF FINANCIAL OFFICER -----END PRIVACY-ENHANCED MESSAGE-----