<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF
1934.
FOR THE TRANSITION PERIOD FROM _________________ TO __________________
COMMISSION FILE NUMBER 000-23415
PRINCETON VIDEO IMAGE, INC.
(Exact Name of Registrant as Specified in Its Charter)
New Jersey 22-3062052
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
15 Princess Road, Lawrenceville, New Jersey, 08648
(Address of Principal Executive Offices)
609-912-9400
(Registrant's Telephone Number, Including Area Code)
Indicate by check 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 past 12 months (or for such shorter period that the registrant is required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes X No___
The aggregate number of shares of the Issuer's common stock outstanding on May
3, 2000 was 9,878,448.
<PAGE> 2
Part I - Financial Information
Item 1. Financial Statements
PRINCETON VIDEO IMAGE, INC.
BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
March 31 June 30,
2000 1999
---- ----
ASSETS
Current Assets:
<S> <C> <C>
Cash and cash equivalents $ 11,653,909 $ 12,494,373
Restricted securities held to maturity 137,357 138,000
Trade accounts receivable 445,918 378,652
License rights 500,000 1,166,667
Other current assets 166,912 177,097
------------ ------------
Total current assets 12,904,096 14,354,789
Property and equipment, net 3,543,778 3,806,718
Intangible assets, net 592,987 547,546
Other assets 781,271 182,065
------------ ------------
Total assets $ 17,822,132 $ 18,891,118
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses $ 3,797,527 $ 4,300,499
Unearned revenue 350,080 436,162
------------ ------------
Total current liabilities 4,147,607 4,736,661
Unearned revenue 779,481 1,019,472
Other liabilities 47,974 --
------------ ------------
Total liabilities 4,975,062 5,756,133
------------ ------------
Commitments and contingencies
Redeemable preferred stock:
Cumulative, Series A, conditionally redeemable, $4.50 par value,
authorized 167,000 shares; issued and outstanding 67,600 shares at
March 31, 2000, redemption value equal to carrying value
(par plus all accrued but unpaid dividends) 435,387 421,700
Cumulative, Series B, conditionally redeemable, $5.00 par value,
authorized 93,300 shares; issued and outstanding 86,041 shares at
March 31, 2000, redemption value equal to carrying value
(par plus all accrued but unpaid dividends) 589,305 569,955
------------ ------------
Total redeemable preferred stock 1,024,692 991,655
Shareholders' Equity:
Common stock, no par value; $.005 stated value; authorized 40,000,000
shares; 9,864,162 and 8,199,379 shares issued and outstanding at
March 31, 2000 and June 30, 1999, respectively 49,318 40,996
Additional paid-in capital 60,413,503 51,535,488
Less: Related party note (998,080) (1,153,278)
Accumulated deficit (47,642,363) (38,279,876)
------------ ------------
Total shareholders' equity 11,822,378 12,143,330
------------ ------------
Total liabilities, redeemable preferred stock and
shareholders' equity $ 17,822,132 $ 18,891,118
============ ============
</TABLE>
See accompanying notes to financial statements.
2
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PRINCETON VIDEO IMAGE, INC.
STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
For the three months ended For the nine months ended
March 31, March 31,
--------- ---------
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Royalties and license fees $ 494,060 $ 172,975 $ 975,793 $ 318,242
Advertising and contract revenue 296,217 181,165 894,155 478,136
------------ ------------ ------------ ------------
Total revenue 790,277 354,140 1,869,948 796,378
Costs and expenses:
Sales and marketing 936,922 867,825 3,171,416 1,645,688
Product development 801,948 374,290 2,007,596 1,201,044
Field operations and support 1,429,936 1,235,448 4,356,574 3,081,798
General and administrative 951,920 874,243 2,810,592 2,438,136
------------ ------------ ------------ ------------
Total costs and expenses 4,120,726 3,351,806 12,346,178 8,366,666
Operating loss (3,330,449) (2,997,666) (10,476,230) (7,570,288)
Interest and other income 193,308 293,176 516,742 814,034
------------ ------------ ------------ ------------
Loss before tax benefit (3,137,141) (2,704,490) (9,959,488) (6,756,254)
Tax benefit -- -- 596,998 --
------------ ------------ ------------ ------------
Net loss (3,137,141) (2,704,490) (9,362,490) (6,756,254)
Accretion of preferred stock
dividends (11,013) (11,013) (33,038) (33,038)
------------ ------------ ------------ ------------
Net loss applicable to common stock $ (3,148,154) $ (2,715,503) $ (9,395,528) $ (6,789,292)
============ ============ ============ ============
Basic and diluted net loss per share
applicable to common stock ($ 0.32) ($ 0.33) ($ 1.02) ($ 0.83)
============ ============ ============ ============
Weighted average number of
shares of common stock
outstanding 9,850,370 8,183,552 9,206,803 8,182,996
============ ============ ============ ============
</TABLE>
See accompanying notes to financial statements
3
<PAGE> 4
PRINCETON VIDEO IMAGE, INC.
STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For the nine months ended
March 31
-------------------------
2000 1999
Cash flows from operating activities:
<S> <C> <C>
Net loss $ (9,362,490) $ (6,756,254)
Adjustments to reconcile net loss to net
cash used in operating activities
Amortization of unearned income (342,848) (230,742)
Depreciation expense 1,393,994 901,248
Amortization of intangibles/license rights 1,288,882 385,710
Charges associated with stock, warrant and option
grants and related party note receivable 611,941 21,625
Increase (decrease) in cash resulting
from changes in:
Trade accounts receivable (67,266) 21,611
Other current assets (589,816) 66,574
Other assets (599,207) 66,606
Accounts payable and accrued expenses 652,073 343,692
Unearned revenue 16,775 278,200
Miscellaneous other (6,721) (684)
---------------------------
Net cash used in operating activities (7,004,683) (4,902,414)
---------------------------
Cash flows from investing activities:
Purchases of property and equipment (1,131,055) (757,404)
Purchases of license rights (1,100,000) (400,000)
Increase in intangible assets (67,457) (36,591)
---------------------------
Net cash used in investing activities (2,298,512) (1,193,995)
---------------------------
Cash flows from financing activities:
Proceeds from sales of common stock, net 8,307,434 100
Cash received from related party notes receivable 155,297
---------------------------
Net cash provided by financing activities 8,462,731 100
---------------------------
Net increase (decrease) in cash and cash equivalents (840,464) (6,096,309)
Cash and cash equivalents at beginning of
period 12,494,373 21,552,627
---------------------------
Cash and cash equivalents at end of period $ 11,653,909 $ 15,456,318
=============================
</TABLE>
See accompanying notes to financial statements.
4
<PAGE> 5
PRINCETON VIDEO IMAGE, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. Nature of Business and Basis of Presentation
Princeton Video Image, Inc., (the "Company"), was incorporated on July
23, 1990 in the State of New Jersey. The Company has developed and is
marketing a real-time Live Video Insertion System (the "L-VIS(TM)
System") that, through patented pattern recognition technology places
computer-generated electronic advertising images into television
broadcasts of sporting and other events. These electronic images range
from simple corporate names or logos to sophisticated multi-media 3-D
animated productions. The L-VIS System has been used to insert
advertising images into live and pre-recorded television broadcasts.
The Company is developing a series of products for the Internet and
interactive television to allow viewers to interact with live or
recorded video programming. The Company is also marketing its systems
on a worldwide basis through licensing agreements or the formation of
joint ventures.
The condensed financial statements presented herein have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X and are unaudited. Reference should be
made to the Company's audited financial statements for the fiscal year
ended June 30, 1999 including the footnotes thereto, included in the
Company's Annual Report on Form 10-KSB for the same fiscal year end. In
the opinion of management, the financial statements reflect all
adjustments (which consist of normal recurring accruals) necessary for
a fair statement of the results of the interim periods presented.
Beginning with the quarter ended September 30, 1999, the Company
changed the presentation of the revenue and expense categories on the
Statement of Operations in order to provide a better description of the
contents of each category. Selling, general and administrative ("SG&A")
expenses have been broken out into two categories: Sales and marketing
and General and administrative. Research and development has been
renamed Product development and L-VIS System costs has been renamed
Field operations and support. With the exception of the increased
detail for the SG&A expenses, the accounting for each category has not
changed.
For the nine months ended March 31, 2000 and March 31, 1999, the
Company had no items of other comprehensive income.
2. Per Share Data
Statement of Financial Accounting Standards No. 128 requires the
presentation of basic and diluted per share amounts. Basic per share
amounts are computed by dividing net loss applicable to common stock by
the weighted average number of common shares outstanding during the
period. Diluted per share amounts are computed by dividing net loss
applicable to common stock by the weighted average
5
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number of common shares outstanding plus the dilutive effect of common
share equivalents.
Since the Company incurred net losses for all periods presented, both
basic and diluted per share calculations are the same. Accordingly,
options and warrants to purchase 3,436,854 and 2,732,608 shares of
common stock that were outstanding at March 31, 2000 and 1999,
respectively, were not included in diluted per share calculations, as
their effect would be antidilutive.
3. New Pronouncements
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities"
("SFAS No. 133"). This statement establishes accounting and reporting
standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. It
requires recognition of all derivatives as either assets or liabilities
on the balance sheet and measurement of those instruments at fair
value. If certain conditions are met, a derivative may be designated
specifically as: (a) a hedge of the exposure to changes in the fair
value of a recognized asset or liability or an unrecognized asset or
firm commitment (a fair value hedge); (b) a hedge of the exposure to
variable cash flows of a forecasted transaction (a cash flow hedge); or
(c) a hedge of the foreign currency exposure of net investment in a
foreign operation, an unrecognized firm commitment, an
available-for-sale security, or a foreign-currency-denominated-
transaction. This statement is effective for all fiscal quarters of
fiscal years beginning after June 15, 2000. The effect of adopting
SFAS No. 133 is not expected to be material.
4. Related Party Transactions
A member of the Board of Directors of the Company is a Managing
Director and Executive Vice President of Allen & Company, Incorporated
("Allen & Co.") which is a shareholder of the Company. Allen & Co.
received commissions in the aggregate amount of approximately $438,000,
as well as warrants initially exercisable for 200,000 shares of common
stock for its services rendered on behalf of the Company with respect
to a private placement of 1.6 million shares of Common Stock in October
1999.
5. Income Taxes
Under a plan developed by the New Jersey Economic Development Authority
("NJEDA") in 1999, the Company sold $795,997 of its total $1,812,019 of
state tax benefit of unused state Net Operating Loss carryover ("NOL")
and unused Research and Development ("R&D") tax credits. The Company
received $596,998 in December 1999, or 75% of the value of the tax
benefits as guaranteed under the program. This amount was recognized as
an income tax benefit by the Company in December 1999. The balance of
the unused NOL and R&D tax credits are available for the company to use
(or sell) in the future.
6. Industry Segment, Geographic and Customer Information
The Company operates in one industry segment, real-time video imaging.
6
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The Company markets its L-VIS System worldwide through licensing
agreements. One licensee, Publicidad Virtual S.A. de C.V. accounted for
35% and 36% of net sales for the nine months ended March 31, 2000 and
1999, respectively.
Geographic information is as follows:
<TABLE>
<CAPTION>
U.S. LatinAmerica Other
--------------- ---------------- ---------------
Nine months ended March 31, 2000
<S> <C> <C> <C>
Advertising and production revenue $ 894,155 - -
License and royalty fees 661,676 314,117
-------------- --------------- ---------------
Total $ 894,155 661,676 314,117
=============== ================ ===============
Nine months ended March 31, 1999
Advertising and production revenue $ 455,685 - 22,451
License and royalty fees
285,742 32,500
-------------- --------------- ---------------
Total $ 455,685 $ 285,742 $ 54,951
============== =============== ===============
</TABLE>
All Company assets are based in the United States with the exception of
certain L-VIS Systems and related equipment which are being used by the
Company's licensees in connection with foreign operations. The
approximate value of these L-VIS Systems located in foreign countries
is as follows:
<TABLE>
<CAPTION> Latin
L-VIS Systems America Other Total
------------- ------ ----- -----
At March 31,
<S> <C> <C> <C> <C>
2000 $392,061 $247,500 $639,561
-------- -------- --------
1999 $259,101 $277,500 $536,601
-------- -------- --------
At June 30,
1999 $620,634 $135,000 $755,634
-------- -------- --------
1998 $343,244 $ 0 $343,244
-------- -------- --------
</TABLE>
7. Subsequent Events
On April 7, 2000, the Company issued 14,286 shares of its common stock
to the Sarnoff Corporation (formerly the David Sarnoff Research Center)
as a royalty payment for the fiscal quarter ended March 31, 2000,
pursuant to the terms of a Research Agreement between the Company and
the David Sarnoff Research Center, dated June 1995, as amended.
On April 5, 2000 the Board of Directors authorized an amendment to the
Corporation's Amended 1993 Stock Option Plan to increase the authorized
number of shares which may be issued pursuant to options granted under
the Plan from 2,160,000 shares to 3,660,000 shares, subject to
shareholder approval and ratification within one year.
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<PAGE> 8
On April 21, 2000, the Company entered into an agreement with NFL
International, a division of NFL Enterprises, L.P., effective February
1, 2000. Under the terms of the agreement, the Company was granted
exclusive rights to use electronic insertion technology in certain NFL
International broadcasts of NFL/NFLEL games during the 2000 and 2001
season and non-U.S. telecasts of Super Bowl XXXV and XXXVI, and is
obligated to pay certain fees in connection with these rights.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion should be read in conjunction with the
Company's unaudited financial statements, the notes thereto and the
other financial information included elsewhere in this report and in
the Company's June 30, 1999 Annual Report on Form 10-KSB filed with the
Securities and Exchange Commission.
Overview
Since its inception in 1990, the Company has devoted substantially all
of its resources to the development and marketing of the L-VIS(TM)
System, an electronic video insertion system based on patented,
proprietary technology that was designed to modify television
broadcasts by inserting electronic imagery, including both
advertisements and program enhancements, into the original video
stream. The Company has incurred substantial operating losses since its
inception. As of March 31, 2000, the Company had an accumulated deficit
of approximately $47,642,000. This deficit is the result of research
and development expenses incurred in the development and
commercialization of the L-VIS System and its deployment pursuant to
customer contracts, operating expenses relating to manufacturing, sales
and marketing activities of the Company, and general and administrative
costs. The Company expects to incur losses during fiscal year 2000 as
it executes its business strategy of developing new products and
increasing its penetration of domestic and international markets in the
field of real-time virtual image insertion, while it builds upon and
protects its proprietary patent portfolio.
The Company intends to focus its efforts on increasing market
acceptance of the L-VIS System and developing additional software
applications. During the first nine months of fiscal 2000, the Company
increased in number its sales and marketing staff, which is responsible
for negotiating and entering into agreements with teams, leagues and
broadcasters, and also for promoting the L-VIS System to advertisers
and broadcasters in order to create market awareness. While we
anticipate that any purchase of advertising will be done through the
rights holder or the broadcaster, the Company is attempting to increase
advertiser interest and demand by promoting the L-VIS System directly
to potential advertisers. Therefore, the Company expects to incur
additional losses and to experience substantial negative cash flow from
operating activities through the next 12 months or until such later
time as it achieves revenues sufficient to finance its ongoing capital
expenditures and operating expenses. The Company's ability to produce
positive cash flow will be determined by numerous factors, including
its ability to reach agreements with, and retain, customers for the
L-VIS System.
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The Company expects to continue generating revenue from ads sold by
rights holders that use the L-VIS System. These revenues are expected
to be shared with the rights holders. Accordingly, in order to generate
revenues from the use of the L-VIS System, the Company needs to enter
into agreements with rights holders. Such agreements can take various
forms, including revenue sharing, under which the Company receives a
percentage of the fee paid by the advertisers, and also contractual
arrangements whereby the Company receives an agreed upon fee for its
services. The Company realizes revenues when the advertisement runs
over the air. Due to the seasonal nature of sporting events, the
Company's revenue is subject to seasonal fluctuations. However, this
seasonality may be mitigated by the multi-sport capabilities of the
L-VIS System and its use in non-sporting events.
In addition to revenue arising from advertising and contractual
arrangements, a second revenue source is the licensing of the L-VIS
System to third parties. These licenses may be territorial in nature,
or they may cover individual major broadcast events. In the case of a
territorial license, the licensee is responsible for generating
business within the territory and the Company will share in the
business through one or more means including royalties, license fees,
and/or equity participation in the licensee. In the case of individual
events, the Company may receive a flat fee or a fee based on revenues
generated by the licensee, depending on the nature of the license.
A third revenue source for the Company are the services provided by the
L-VIS System which support the electronic insertion of visual aids in
live sporting events, such as the virtual first-down line and animated
graphics in football games, and a virtual finish-line in horse races.
The Company also offers an advanced post-production package in which
the L-VIS System is used to place products or logos into pre-recorded
television programs, movie scenes, or live television broadcasts. The
Company realizes revenues through contractual arrangements to provide
these visual enhancement services.
Results of Operations
Quarter ended March 31, 2000 compared to the quarter ended March 31,
1999
Revenue
Revenues include receipts from advertising use of the L-VIS System,
contractual arrangements made with customers for visual aids and
program enhancements, and license and royalty fees earned from use of
the L-VIS System outside the United States. Total revenue increased
123% to $790,277 for the quarter ended March 31, 2000 from $354,140 for
the quarter ended March 31, 1999. Of this total, royalty and license
fees increased 186% to $494,060 from $172,975 for the quarters ended
March 31, 2000 and 1999, respectively. This resulted from increased
royalties from Canwest Global Communications for its use of the L-VIS
technology in Canadian television broadcasts. Royalties received from
Publicidad Virtual also increased over the prior year due to the
restructuring of our licensing agreement allowing the Company to share
in revenues generated by Publicidad. Advertising and contract revenue
increased 64% to $296,217 from $181,165 for the quarters ended March
31, 2000 and 1999, respectively, as a result of increased use of the
L-VIS technology in professional and college football, including Super
Bowl XXXIV and the Rose Bowl. Also contributing to this increase were
contractual revenues earned for program enhancement services
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provided to CBS News in the live television broadcast of its CBS Early
Show and Turner Network Television in its broadcast of the Winter
Goodwill Games.
Sales and Marketing
Sales and marketing expenses include salaries and travel expenses of
sales and marketing personnel, sales commissions, public relations,
promotion, support personnel and allocated operating costs. Total sales
and marketing expenses increased 8% to $936,922 for the quarter ended
March 31, 2000 from $867,825 for the quarter ended March 31, 1999. This
increase resulted from several factors, including (i) an increase in
marketing personnel necessary to support the Company's continued focus
on the sales and marketing of the L-VIS System, (ii) the institution of
a commission program for sales and marketing executives, and (iii)
increased trade show activity. This increase was partially offset by
decreased license fees paid to obtain certain international broadcast
and programming rights, and a reduction in outside consulting expenses.
Product Development
Product development expenses include the costs associated with all
Company personnel, materials and contract personnel engaged in research
and development activities to increase the capabilities of the L-VIS
System hardware platforms, including platforms for overseas use, and to
create improved software programs for individual sports, and program
enhancement services. Also included are costs related to the
development of a new series of products which will allow viewers to
interact with live or recorded video programming via the Internet or
through interactive television.
Product development expenses increased 114% to $801,948 for the quarter
ended March 31, 2000 from $374,290 for the quarter ended March 31, 1999
resulting from a shift in the allocation of new and existing
engineering and management personnel to deployment of new applications
of our core technology, including our post production product for use
in entertainment programming and development work on products for the
Internet and interactive television.
Field Operations and Support
Field operations and support expenses include the costs associated with
the material production, depreciation and operational support of the
L-VIS System units, including training costs for operators, the
shipping of L-VIS System units to international and domestic venues and
support of the L-VIS Systems in the field. Field operations and support
expenses increased 16% to $1,429,936 for the quarter ended March 31,
2000 from $1,235,448 for the quarter ended March 31, 1999. This
increase was the result of several factors including (i) depreciation
expense related to the increased number of L-VIS systems used in both
domestic and international venues, (ii) costs associated with increased
activity in Europe, (iii) costs associated with program enhancement
services provided in news programming for the live television broadcast
of the CBS Early Show, and (iv) costs associated with the use of the
L-VIS System in Super Bowl XXXIV and post season college football,
including the Rose Bowl.
General and Administrative
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General and administrative costs include salaries of management,
financial and support personnel, allocated rent and operating costs and
legal and accounting fees. General and administrative costs increased
9% to $951,920 for the quarter ended March 31, 2000 from $874,243 for
the quarter ended March 31, 1999, primarily as a result of professional
fees associated with newly awarded patents and the defense of the
Company's existing intellectual property. Also contributing to this
increase were expenses incurred as a result of increased activity with
strategic partners in Europe.
Interest and Other Income
Interest and other income decreased 34% to $193,308 for the quarter
ended March 31, 2000 from $293,176 for the quarter ended March 31, 1999
as a result of lower cash balances available for investment.
Net Loss
As a result of the foregoing factors, the Company's net loss increased
16% to $3,137,141 for the quarter ended March 31, 2000 from $2,704,490
for the quarter ended March 31, 1999.
Nine Months ended March 31, 2000 compared to the nine months ended
March 31, 1999
Revenue
Total revenue increased 135% to $1,869,948 for the nine months ended
March 31, 2000 from $796,378 for the nine months ended March 31, 1999 .
Royalties and license fees increased 207% to $975,793 from $318,242 for
the nine months ended March 31, 2000 and 1999, respectively, as a
result of the addition of Sasani Limited as our exclusive licensee in
South Africa and Canwest Global Communications for its use of the L-VIS
technology in Canadian television broadcasts. Royalties received from
Publicidad Virtual also increased over the prior year due to the
restructuring of our licensing agreement allowing the Company to share
in revenues generated by Publicidad. Advertising and contract revenue
increased 87% to $894,155 from $478,136 for the nine months ended March
31, 2000 and 1999, respectively, as a result of several factors,
including (i) increased use of the L-VIS System by MLB during the 1999
baseball season, (ii) revenues earned from CBS Sports for the insertion
of the virtual first down line in the national broadcast of 1999-2000
NFL regular season games, (iii) increased use of the L-VIS technology
in professional and college football, including Super Bowl XXXIV and
the Rose Bowl, and (iv) contractual revenues earned for program
enhancement services provided to CBS News in the live television
broadcast of its CBS Early Show and Turner Network Television in its
broadcast of the Winter Goodwill Games.
Sales and Marketing
Total sales and marketing expenses increased 93% to $3,171,416 for the
nine months ended March 31, 2000 from $1,645,688 for the nine months
ended March 31, 1999 as a result of numerous factors, including (i) an
increase in marketing personnel and public relations activity necessary
to support the Company's continued focus on the sales and marketing of
the L-VIS System, (ii) the institution of a commission program
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for sales and marketing executives, (iii) license fees paid to obtain
certain international broadcast and programming rights, and (iv)
non-cash compensation charges incurred in relation to the issuance of
options for consulting services associated with promoting the use of
PVI's technology in soccer and the television production community.
This increase was partially offset by a reduction in outside consulting
expenses.
Product Development
Product development expenses increased 67% to $2,007,596 for the nine
months ended March 31, 2000 from $1,201,044 for the nine months ended
March 31, 1999 due to (i) a shift in the allocation of new and existing
engineering and management personnel to deployment of new applications
of our core technology, including our post production product for use
in entertainment programming and development work on products for the
Internet and interactive television, and (ii) increased depreciation
resulting from additional systems being used for in-house development.
Field Operations and Support
Field operations and support expenses increased 41% to $4,356,574 for
the nine months ended March 31, 2000 from $3,081,798 for the nine
months ended March 31, 1999. This increase was the result of several
factors, including (i) the purchase of small parts and expenses
associated with the manufacture of additional L-VIS Systems and a
mobile production truck, (ii) depreciation expense related to these
systems and truck, (iii) costs associated with increased activity in
Europe, (iv) costs associated with program enhancement services
provided in news programming for the live television broadcast of the
CBS Early Show as well as in auto racing, (v) costs associated with the
use of the L-VIS System by CBS Sports for the insertion of the virtual
first-down marker in NFL regular season football games, and (vi) costs
associated with the use of the L-VIS System in Super Bowl XXXIV and
post season college football, including the Rose Bowl.
General and Administrative
General and administrative expenses increased 15% to $2,810,592 for the
nine months ended March 31, 1999 from $2,438,136 for the nine months
ended March 31, 1999 as a result of professional fees associated with
newly awarded patents and the defense of the Company's existing
intellectual property. Also contributing to the increase were non-cash
compensation charges incurred for stock options issued to members of
the Board of Directors for their services and expenses incurred as a
result of increased activity in Europe.
Interest and Other Income
Interest and other income decreased 37% to $516,742 for the nine months
ended March 31, 2000 from $814,034 for the nine months ended March 31,
1999 as a result of lower cash balances available for investment.
Tax Benefit
Tax benefit increased to $596,998 from $0 for the nine months ended
March 31, 2000 and 1999, respectively, as a result of the sale of a
portion of the Company's state NOL
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and R&D tax credits. The sale was made under a plan developed by the
New Jersey Economic Development Authority in 1999 and was not available
during the nine months ended March 31, 1999.
Net Loss
As a result of the foregoing factors, the Company's net loss increased
39% to $9,362,490 for the nine months ended March 31, 2000 from
$6,756,254 for the nine months ended March 31, 1999.
Year 2000 Risk Compliance
The Company completed its Y2K project plan and assessment (the
"Project") to identify, correct and test all internal and external
computer systems as well as identify potential problem areas relative
to the Y2K readiness of the Company's suppliers, vendors, customers and
business partners. The Company also addressed concerns related to leap
year calendar date calculations. As of April 30, 2000, the Company's
products, computer and communication infrastructures have operated
without Y2K or leap year related problems. The Company has not
encountered serious Y2K non-compliance problems with any of its
suppliers or broadcast partners. The Company does not anticipate any
disruptions in operations but there is no guarantee that the Company
has discovered all possible failures. The Company continues to monitor
and perform quality assurance checks on its internal systems. The
Company spent less than $100,000 on its Y2K Project all of which was
incurred in 1999.
Liquidity and Capital Resources
The Company has incurred significant operating losses and negative cash
flows in each year since it commenced operations, due primarily to (i)
start-up costs, (ii) the costs of developing, testing and building
L-VIS Systems, (iii) operating expenses relating to sales and marketing
activities of the Company, and (iv) the costs associated with the
operational support of the L-VIS Systems in both domestic and
international field operations. Since its inception, the Company has
primarily financed its operations from (i) the net proceeds of
approximately $27,900,000 from private placements of common stock,
warrants and redeemable preferred stock, including a private placement
of common stock in October 1999, (ii) the payment of a $2,000,000
licensing fee by Presencia in consideration of the license granted by
the Company to Publicidad, (iii) the proceeds of a bridge loan
financing which closed in October 1997, (iv) the proceeds from the
initial public offering of its common stock which closed in December
1997, (v) revenues and license fees relating to use of the L-VIS
System, (vi) investment income earned on cash balances and short term
investments, and (vii) the sale of a portion of the Company's state net
operating loss and research and development tax credits.
As of March 31, 2000, the Company's cash and cash equivalents reflected
a net decrease of approximately $840,000 to $11,653,909 from
$12,494,373 at June 30, 1999. This decrease reflects influx of net
proceeds in the amount of $8.2 million from the October 1999 private
placement reduced by cash used in operations during the nine month
period ended March 31, 2000.
13
<PAGE> 14
Net cash used in operating activities increased to $7,004,683 from
$4,902,414 for the nine months ended March 31, 2000 and 1999,
respectively, for several reasons. Amortization of intangibles
increased to $1,288,882 from $385,710 for the nine months ended March
31, 2000 and 1999, respectively, due to the purchase by the Company of
certain electronic imaging license rights which are being amortized
over their term. Charges associated with option and warrant grants
increased to $611,941 from $21,625 for the nine months ended March 31,
2000 and 1999, respectively, as a result of the Company's decision to
issue stock for royalties due under the terms of a licensing agreement
with the Sarnoff Corporation and option grants to sales and marketing
consultants as well as to members of the Board of Directors for their
services.
Depreciation expense increased 55% to $1,393,994 from $901,248 for the
nine months ended March 31, 2000 and 1999, respectively, as a direct
result of the increased number of L-VIS Systems built for both domestic
and international use.
Net cash used in investing activities increased to $2,298,512 from
$1,193,995 for the nine months ended March 31, 2000 and 1999,
respectively. This significant use of cash was primarily the result of
increased capital expenditures for the purchase of components used in
the building of additional L-VIS Systems and a mobile production truck
in addition to payments made for certain electronic imaging license
rights.
Net cash proceeds from financing activities increased to $8,462,731
from $100 for the nine months ended March 31, 2000 and 1999,
respectively as a result of the receipt of net proceeds of
approximately $8.2 million from a private equity offering of the
Company's common stock in October 1999. The Company believes that its
existing available cash, cash equivalents and short-term investments,
as well as the proceeds of this private placement, will be sufficient
to meet its capital needs for a period of at least 15 months, although
there can be no assurance that the Company will not require additional
funds sooner. The Company's actual working capital requirements will
depend on numerous factors, including the progress of the Company's
research and development programs, the Company's ability to maintain
its customer base and attract new customers to use the L-VIS System,
the level of resources the Company is able to allocate to the
development of greater marketing and sales capabilities, technological
advances and the status of its competitors. The Company expects to
incur costs and expenses in excess of expected revenues through the
remainder of the current fiscal year as the Company continues to
execute its business strategy by adding to its sales and marketing
management force in its efforts to strengthen relationships with rights
holders, broadcasters and advertisers.
There is no assurance the Company will generate sufficient cash flow
from product sales to liquidate liabilities as they become due.
Accordingly, the Company may require additional funds to meet planned
obligations beyond June 30, 2001 and may seek to raise such amounts
through a variety of options. These include future cash from
operations, proceeds from equity financings, proceeds from equipment
financing lease arrangements and the potential sale of tax benefits
relating to the Company's net operating losses. In the event the
Company is unable to liquidate its liabilities, planned operations may
be scaled back. Additional funding may not be available when needed or
on terms acceptable to us, which could have a material adverse effect
on our business, financial condition and results of operations. If
adequate funds are not
14
<PAGE> 15
available we may delay or eliminate some expenditures. The financial
statements do not include any adjustments that might result from the
outcome of these uncertainties.
As of June 30, 1999, the Company had net operating loss carryforwards
for federal income tax purposes of approximately $30,311,000 which
expire in the years 2006 through 2019. Based upon the Company's initial
public offering of Common Stock in December 1997, the Company has
undergone an additional "ownership change" within the meaning of
Section 382 of the Internal Revenue Code of 1986, as amended (the
"Code"). Under Section 382 of the Code, upon undergoing an ownership
change, the Company's right to use its then existing net operating loss
carryforwards as of the date of the ownership change is limited during
each future year to a percentage of the fair market value of the
Company's then outstanding capital stock immediately before the
ownership change and if other ownership changes have occurred prior to
this ownership change, the utilization of such losses may be further
limited. The timing and manner in which the net operating loss
carryforwards may be utilized in any year by the Company will be
limited by Section 382 of the Code.
Effect of Inflation
Domestic inflation has not had a significant impact on the Company's
sales or operating results. However, inflation may have an impact upon
business in a number of international markets.
Cautionary Statement on Forward-Looking Statements
Some of the information in this Quarterly Report, including
Management's Discussion and Analysis of Financial Condition and Results
of Operations, contain forward-looking statements. Such statements can
be identified by the use of forward-looking words such as "may,"
"will," "expect," "anticipate," "estimate," "continue" or other similar
words. These statements discuss future expectations and projections of
results of operations or of financial conditions. When considering such
forward-looking statements, you should keep in mind that certain risks
may cause actual results to differ from any projections contained in
forward-looking statements. These risks include:
- adverse economic conditions;
- intense competition, including entry of new competitors and
products;
- adverse federal, state, local and foreign government
regulation;
- inadequate capital to operate our business;
- unexpected costs and operating deficits;
- lower revenues than forecast;
- inability to successfully market the L-VIS (TM) System to
television viewers, advertisers, broadcasters and sporting
events rights holders;
- inability of third party sales forces to sell L-VIS System
advertising;
- contractual restrictions on use of video insertion technology;
- risks associated with doing business in international markets;
- seasonal fluctuations based upon the game schedules of each
sport;
- manufacturing inexperience;
- challenges to our patent and proprietary technology;
- technological obsolescence of the L-VIS System;
15
<PAGE> 16
- inability to upgrade and develop software for use of the L-VIS
System with new sports and other new uses;
- dependence on a sole source of supply for certain hardware
components;
- the possible fluctuation and volatility of our operating
results and financial condition;
- adverse publicity and news coverage;
- loss of key employees; and
- Year 2000 compliance problems.
Item 3 Quantitative and Qualitative Disclosures About Market Risk
The Company does not have material exposure to market risk from market
risk sensitive instruments.
Part II
Item 2 Changes in Securities and Use of Proceeds
On each of January 10, 2000, and April 7, 2000 the Company issued
14,286 shares of common stock to the Sarnoff Corporation (formerly, the
David Sarnoff Research Center) as royalty payments for the fiscal
quarters ended December 31, 1999 and March 31, 2000, pursuant to the
terms of a Research Agreement between the Company and the David Sarnoff
Research Center, dated June 1995, as amended. The issuance of the
common stock was exempt from registration under the Securities Act by
virtue of Section 4(2) and Regulation D as a transaction not involving
a public offering. The common stock was issued for investment only and
not for purposes of distribution. A legend to such effect was affixed
to the stock certificate issued. The Sarnoff Corporation received
adequate information about the Company.
The Company commenced an initial public offering of its common stock,
no par value on December 16, 1997 pursuant to a registration statement
on Form SB-2 (Registration No. 333-37725) (the "Registration
Statement"), which was declared effective by the Securities and
Exchange Commission on December 16, 1997. From the effective date of
the Registration Statement to March 31, 2000, the approximate amount of
net offering proceeds used was $3,210,000 for repayment of indebtedness
and expenses related thereto, $7,766,000 for the manufacture and
deployment of L-VIS(TM) Systems, $3,425,000 for research and
development, $4,841,000 for sales and marketing, $3,954,000 for capital
expenditures, and approximately $1,939,000 for working capital and
general corporate purposes.
Item 5 Other Information
On April 5, 2000 The Board of Directors authorized an amendment to the
Company's Amended 1993 Stock Option plan to increase the authorized
number of shares which may be issued pursuant to options granted under
the Plan from 2,160,000 shares to 3,660,000 shares, subject to
shareholder approval and ratification within one year.
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits
16
<PAGE> 17
3.1 Restated Certificate of Incorporation (Incorporated by
reference to Exhibit 3.1 to the Company's Registration
Statement on Form SB-2 (Registration No. 333-37725) which
became effective on December 16, 1997).
3.2 Restated Bylaws, as amended (incorporated by reference to
Exhibit 3.2 to the Company's quarterly report on Form 10-Q for
the fiscal quarter ended December 31, 1999).
10.1 Letter agreement dated April 21, 2000 between the Company and
NFL International, a division of NFL Enterprises, L.P.*
27.1 Financial Data Schedule
* Confidential treatment has been requested with respect to a portion of
this agreement.
(b) Reports on Form 8-K.
None.
Signatures
In accordance with the requirements of the Securities and Exchange Act
of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
Princeton Video Image, Inc.
May 12, 2000 By: /s/ Dennis P. Wilkinson
---------------------- -----------------------
Dennis P. Wilkinson,
President and
Chief Executive Officer
May 12, 2000 By: /s/ Lawrence L. Epstein
----------------------- -----------------------
Lawrence L. Epstein,
Chief Financial Officer
17
<PAGE> 1
Exhibit 10.1
[NOTE: CERTAIN PORTIONS OF THIS AGREEMENT HAVE BEEN MARKED TO INDICATE THAT
CONFIDENTIALITY HAS BEEN REQUESTED FOR THE CONFIDENTIAL INFORMATION. THE
CONFIDENTIAL PORTIONS HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION.]
April 21, 2000
Mr. Larry Epstein
Princeton Video Image, Inc.
15 Princess Road
Lawrenceville, NJ 08648
Dear Larry:
This letter agreement sets forth the material terms of the agreement
between Princeton Video Image, Inc. ("PVI") and NFL International ("NFL"), a
division of NFL Enterprises, L.P., in connection with PVI's electronic image
insertion of advertisements into certain NFL and NFL Europe League ("NFLEL")
games. Except as set forth under Consideration below, this agreement (the
"Agreement") supercedes the agreement between NFL and PVI dated December 23,
1998 (the "Original Agreement"), and any other previous agreements, whether
written or oral, and may only be amended in writing by both parties.
Term: The term of the Agreement shall commence on February 1, 2000 and
continue through the conclusion of Super Bowl XXXVI (January 2002), subject to
the termination rights set forth herein.
Consideration:
[CONFIDENTIAL
TREATMENT
REQUESTED]
NFL Game Rights: During the Term, PVI will have the exclusive right to
use electronic insertion technology for virtual images ("Technology") in the NFL
<PAGE> 2
International television broadcasts and rebroadcasts thereof of the NFL/NFLEL
games set forth below (including edited and/or repackaged versions of such
games). NFL further agrees that, during the Term, it shall not license any third
party to use electronic insertion technology in any NFL International ancillary
(non-game) television programming. All uses of the Technology shall be in
accordance with the terms and conditions set forth on Exhibit A ("Guidelines").
Super Bowl XXXV and XXXVI:
Commercial Breaks: Similar to Super Bowl XXXIII and
XXXIV, PVI will have the right to use the Technology within
the standard commercial breaks (approximately 22) of the World
Feed, provided such insertions do not exceed 10 seconds per
commercial break. The parties agree that the World Feed is not
broadcast in the United States, Canada and certain other
countries that take the US Feed.
In Game: In order to use the Technology during the
game, PVI must enter into separate agreements with the
international broadcasters, which agreements shall be subject
to the pre-approval of the NFL. NFL will assist PVI in
securing agreements with such broadcasters, provided NFL makes
no representations/ warranties to PVI that such broadcasters
will enter into agreements with PVI. In connection with Super
Bowl XXXV, the parties agree that PVI has the right to provide
a sponsored First Down Line in the World Feed (provided PVI
and CBS are providing the First Down Line in the United States
and further provided that the provision of a Sponsored First
Down Line in the World Feed will be seamless and simultaneous
with the broadcast). All elements of the First Down Line
sponsorship including, but not limited to, graphics,
advertisers, sponsors, number of sponsors, content, size,
placement and other related elements must be pre-approved by
the NFL. The First Down Line may not be sponsored or altered
in any manner for any other NFL game other than Super Bowl
XXXV.
2000 and 2001 NFL Seasons: In order to use the Technology
during the game, PVI must enter into separate agreements with the
international broadcasters, which agreements shall be subject to the
pre-approval of the NFL. NFL will assist PVI in securing agreements
with such broadcasters; provided, NFL makes no representations/
warranties to PVI that such broadcasters will enter into agreements
with PVI. The parties agree that the game broadcast in the US may carry
virtual images, including a First Down Line and such other technology
as may be developed during the Term. PVI may not make any changes to
the feed, including, but not limited to, covering the logo of the US
broadcaster, without the prior written approval of NFL.
2000 and 2001 NFL Europe League Season: In the US broadcasts
(FOX, FOX Sports Net and DirecTV) of NFL Europe League games, the NFL
will
2
<PAGE> 3
permit PVI's First Down Line (and other similar technology) in the
broadcast of such games and will manage all on-field advertising at the
World Bowl to allow for a red zone and First Down commercial
application therein. In addition, PVI may implement other uses of the
Technology in the US broadcasts (FOX, FOX Sports Net and DirecTV) of
NFL Europe League games and NFL produced NFL Europe League programming.
PVI may also implement the Technology, including the First Down Line
and a red zone in the World Bowl, in international broadcasts of the
games and NFL produced Europe League programming, subject to PVI
entering into separate agreement with such international broadcasters,
which agreements shall be subject to the pre-approval of NFLEL. NFLEL
will assist PVI in securing agreements with such broadcasters;
provided, NFL and NFLEL makes no representations/ warranties to PVI
that such broadcasters will enter into agreements with PVI.
In connection with the US broadcast of NFLEL games, the NFL shall
provide PVI with the following commercial inventory from FOX's broadcasts of
NFLEL games (allocated from the NFL's commercial inventory from FOX) to be used
by PVI in its advertising packages: (i) two (2) 30-second advertisements during
each NFLEL regular season game (not to exceed six (6) 30-second spots in the
aggregate); and (ii) four (4) 30-second advertisements during the World Bowl.
In connection with the Sponsored First Down Line in Super Bowl XXXV,
PVI and NFL will work together to offer promotional rights outside the US to one
sponsor for forty (40) days prior to such game, subject to the NFL's
pre-approval of all aspects of such promotion, including graphics, advertiser,
content, size, placement, etc.
Advertisements: The sponsors (with respective categories and territory)
set forth on Exhibit B attached hereto ("Exclusive Sponsor") shall have
exclusive category rights in such category. If an Exclusive Sponsor elects not
to advertise via the Technology, PVI and the international broadcaster cannot
sell to a competing sponsor. Other NFL/NFLEL sponsors attached hereto as Exhibit
C shall have a right of first refusal, which list may be amended from time to
time by NFL. All advertisers must be pre-approved by NFL. PVI agrees that only
NFL/NFLEL official sponsors have rights to use the intellectual property of the
respective league. Accordingly PVI may not insert advertisements for
non-sponsors that contain, directly or indirectly, any intellectual property of
the NFL/NFLEL. NFL agrees to participate in at least two (2) meetings per year
between PVI and NFL broadcasters/sponsors.
Approval: NFL shall have pre-approval rights over all uses of the
Technology and insertions, including, but not limited to, content, identity,
duration, size, location, frequency and other related factors.
Costs: PVI shall be responsible for all costs and expense in connection
with the Technology, including without limitation, the insertion of the First
Down Line, and any other related cost and expense.
3
<PAGE> 4
Promotion/Press Release: NFL agrees to promote PVI as the exclusive
provider of the Technology, which promotion shall be set forth under separate
cover, All press releases and announcements must be pre-approved by the parties.
Termination: NFL may terminate this Agreement: (i) upon the provision
of written notice in the event of a material breach of the Agreement (including
without limitation any default in payments) by PVI, unless such breach is cured
within ten (10) days of such notice; (ii) automatically and without notice in
the event of PVI's insolvency, commission of an action of bankruptcy,
adjudication of bankruptcy or the filing of a petition for voluntary or
involuntary bankruptcy or the appointment of a receiver or trustee for PVI's
assets; or (iii) immediately upon notice, in the case of any act or omission of
PVI that in NFL's sole judgment may cause material harm, irreparable or
otherwise to NFL, the National Football League or any affiliate thereof.
Indemnification: During the Term and thereafter, PVI hereby agrees to
indemnify, hold harmless and defend NFL, the National Football League and its
Member Clubs, and their respective affiliates, officers, directors, employees
from and against all loss, claims, liability, demands, damages, reasonable
attorneys' fees, judgments and settlements arising out of or in connection with
any act or omission of PVI, its agents, employees, sub-contractors or anyone
acting on its behalf in connection with this Agreement or arising from or
related to the use of the Technology.
Other: NFL agrees to provide PVI with the following if PVI is not in
breach of the Agreement:
- One (1) page advertisement in the Super Bowl game program for
Super Bowl XXXV and XXXVI (PVI shall be responsible for all
creative costs and 50% of the media cost for such
advertisement).
- 10 Super Bowl Hospitality packages for Super Bowl XXXV and
XXXVI (four (4) complimentary game tickets and six (6) game
tickets at PVI's cost). In addition, NFL shall (i) reserve
five (5) hotel rooms (at PVI's cost), and (ii) provide PVI
with ten (10) complimentary tickets to the NFL International
Friday Night Party.
- $5,000 in NFL licensed merchandise over the Term to be used by
PVI solely in connection with advertising sales.
Governing Law and Jurisdiction: This Agreement shall be governed by and
construed in accordance with the laws of the State of New York. The parties
hereto consent to the jurisdiction of the federal courts of the United States
located in New York, New York or the state courts of the State of New York,
located in New York, New York in connection with any controversy arising out of
the operation of this Agreement and agree not to bring any action or proceeding
arising out of or relating to this Agreement in any other court.
Non-Waiver: Waiver by either party to complain of any act, omission or
default on the part of the other party, no matter how long the same may continue
or how many
4
<PAGE> 5
times such shall occur, shall not be deemed to be a waiver of rights, or an any
similar future act, omission or default.
Assignment: This Agreement may not be assigned by PVI without NFL's
prior written consent. For purposes of this Agreement, an assignment requiring
NFL consent shall include, among other things, a sale of substantially all of
the assets, merger, consolidation, change of control or other similar
transaction.
Reservation of Rights: Except as expressly licensed hereunder to PVI,
NFL retains any and all rights with respect to NFL marks and logos; NFL/NFLEL
Games and related programming and the exhibition, distribution or exploitation
of the same.
5
<PAGE> 6
If the foregoing accurately sets forth our mutual understanding, please
countersign below.
Sincerely,
NFL INTERNATIONAL, a division of NFL
Enterprises, L.P.
By: /s/ Douglas Quinn
Name: Douglas Quinn
Title: SVP-MA NFLI
Date: 4-21-00
Agreed and Acknowledged:
PRINCETON VIDEO IMAGE, INC.
By: /s/ Lawrence L. Epstein
Name: Lawrence L. Epstein
Title: VP/CFO
Date: 4/21/00
6
<PAGE> 7
EXHIBIT A
- - All uses of the Technology including the graphics, advertisers,
sponsors, content, size, placement and other related elements must be
pre-approved by the NFL.
- - With respect to NFL Games, PVI or the broadcaster may not insert images
on the playing field, sidelines or between the goal posts other than
the First Down Line in Super Bowl XXXV pursuant to this Agreement. With
respect to NFLEL games, PVI may insert images solely as specified in
this Agreement.
- - In-stadium signage may not be covered or altered in any way.
- - Subject to NFL pre-approval, PVI may (at its cost and expense) use its
own camera within the stadium to shoot additional exposures (location
of camera is subject to NFL/member club/stadium approval and
availability). PVI agrees that the NFL shall own all right, title and
interest in any and all footage shot within an NFL stadium, including,
without limitation, any copyright therein and any and all ancillary,
subsidiary and derivative rights thereto. Such footage will be
considered a "work made for hire" for NFL specifically ordered or
commissioned by NFL with NFL being deemed the sole author of all such
results and proceeds. To the extent that title to any such work may not
by operation of law vest in NFLI or such work is not considered a "work
made for hire", all rights, title and interest will be deemed
irrevocably assigned to NFL by PVI. Notwithstanding the other
provisions of this paragraph, the NFL acknowledges and agrees that it
does not have nor will it gain pursuant to the terms of this agreement,
any right, title, or proprietary interest in (a) the Technology, or (b)
any of PVI's or any third party's patents, patent rights, copyrights,
trademarks, trade names, service marks and confidential and proprietary
interests related thereto used to create any virtual insertions made by
PVI under this Agreement. Nothing in this Agreement shall prohibit PVI
from licensing the Technology (including any applications of the
Technology developed by PVI in connection with this Agreement) to any
other party.
- - CANADA:
- Using the PVI camera, PVI may insert (a) three (3) images per
quarter during the NFL Pre-Season, Regular Season and Playoffs
(not to exceed 12 in the aggregate from the beginning to end
of the telecast), (b) four (4) images per quarter during the
Super Bowl (not to exceed 16 in the aggregate from the
beginning to end of the telecast), and (c) one (1) virtual
blimp shot per quarter during the NFL Regular Season, Playoffs
and the Super Bowl. These exposures (a-c above) may only be
used during US network commercial breaks.
- - MEXICO:
- Using the PVI camera, PVI may insert (a) three (3) images per
quarter during the NFL Regular Season and Playoffs (not to
exceed 12 in the aggregate from the
7
<PAGE> 8
beginning to end of the telecast), (b) four (4) images per
quarter during the Super Bowl (not to exceed 16 in the
aggregate from the beginning to end of the telecast), and (c)
one (1) virtual blimp shot per quarter during the NFL
Pre-Season, Regular Season, Playoffs and the Super Bowl. These
exposures (a-c above) may only be used during (i) US network
commercial breaks, or (ii) during non-game time or action
(i.e. network promotions, sideline interviews by US network
reporters) provided that such insertions do not diminish the
production or flow of the game as produced by the US
broadcasters.
- - OTHER
- In addition to the images set forth above, PVI may use its
technology to insert advertisements in the endzone area from
the US network feed for Canada and Mexico. For camera angles
behind the goal posts, vertical signage that covers only the
goal post pad will be allowed. For camera angles facing the
goal post, images shall be located to the left or right of the
goal post.
- - ADDITIONAL TERRITORIES:
- Guidelines shall be established by the NFL on a case by case
basis based on the Canada/Mexico restrictions.
8
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEETS, STATEMENTS OF OPERATIONS AND STATEMENTS OF CASH FLOW FILED AS PART OF
PRINCETON VIDEO IMAGE, INC.'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER
ENDED MARCH 31, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
QUARTERLY REPORT ON FORM 10-Q.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-END> MAR-31-2000
<CASH> 11,653,909
<SECURITIES> 137,357
<RECEIVABLES> 445,918
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 12,904,096
<PP&E> 7,671,981
<DEPRECIATION> 4,128,203
<TOTAL-ASSETS> 17,822,132
<CURRENT-LIABILITIES> 4,147,607
<BONDS> 0
1,024,692
0
<COMMON> 49,318
<OTHER-SE> 11,773,060
<TOTAL-LIABILITY-AND-EQUITY> 17,822,132
<SALES> 0
<TOTAL-REVENUES> 1,869,948
<CGS> 0
<TOTAL-COSTS> 12,346,178
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
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<INCOME-PRETAX> 9,362,490
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<INCOME-CONTINUING> 9,362,490
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