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
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 0-25036
VIDEONICS, INC.
(Exact name of Registrant as specified in its charter)
California 77-0118151
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1370 Dell Ave, Campbell, California 95008
(Address of principal executive offices)(Zip Code)
Registrant's telephone number, including area code: (408) 866-8300
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 [X] No [ ]
As of April 30, 2000, there were 5,898,974 shares of the Registrant's
Common Stock, no par value, outstanding.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
VIDEONICS, INC.
CONDENSED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Quarter Ended
March 31,
----------------------
2000 1999
------- -------
Net revenues and other income $ 3,059 $ 3,665
Cost of revenues 1,882 2,207
------- -------
Gross profit 1,177 1,458
------- -------
Operating expenses:
Research and development 561 898
Selling and marketing 698 996
General and administrative 217 374
------- -------
1,476 2,268
------- -------
Operating loss (299) (810)
Interest expense, net (21) (13)
------- -------
Net loss $ (320) $ (823)
======= =======
Net loss per common share - basic
and diluted $ (0.05) $ (0.14)
======= =======
Shares used in computing net loss per
common share - basic and diluted 5,888 5,858
======= =======
The accompanying notes are an integral
part of these financial statements.
2
<PAGE>
<TABLE>
VIDEONICS, INC.
CONDENSED BALANCE SHEETS
(in thousands)
<CAPTION>
March 31, December 31,
ASSETS 2000 1999
-------- --------
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 359 $ 715
Accounts receivable, net 862 886
Inventories 3,845 3,785
Prepaid and other current assets 168 145
-------- --------
Total current assets 5,234 5,531
Property and equipment, net 394 513
Other assets 45 45
-------- --------
Total assets $ 5,673 $ 6,089
======== ========
LIABILITIES
Current liabilities:
Accounts payable $ 985 $ 974
Accrued expenses 605 734
-------- --------
Total current liabilities 1,590 1,708
-------- --------
Long term liabilities:
Note payable to shareholder 1,035 1,035
-------- --------
Total liabilities 2,625 2,743
-------- --------
SHAREHOLDERS' EQUITY
Common stock, no par value:
Authorized: 30,000 shares
Issued and outstanding: 5,898 shares at
March 31, 2000 and 5,874 shares at
December 31, 1999 20,722 20,700
Retained deficit (17,674) (17,354)
-------- --------
Total shareholders' equity 3,048 3,346
-------- --------
Total liabilities and shareholders' equity $ 5,673 $ 6,089
======== ========
<FN>
The accompanying notes are an integral
part of these financial statements.
</FN>
</TABLE>
3
<PAGE>
<TABLE>
VIDEONICS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<CAPTION>
Quarter Ended
March 31,
------------------
2000 1999
----- -----
<S> <C> <C>
Cash flows from operating activities:
Net cash used in operating activities $(321) $(104)
----- -----
Cash flows from investing activities:
Cash received from sale of Nova Systems - 52
Purchase of property and equipment (57) (21)
----- -----
Net cash provided by (used in) investing activities (57) 31
----- -----
Cash flows from financing activities:
Proceeds from issuance of common stock 22 -
----- -----
Net cash provided by financing activities 22 -
----- -----
Decrease in cash and cash equivalents (356) (73)
Cash and cash equivalents at beginning of year 715 837
----- -----
Cash and cash equivalents at end of quarter $ 359 $ 764
===== =====
<FN>
The accompanying notes are an integral
part of these financial statements.
</FN>
</TABLE>
4
<PAGE>
VIDEONICS, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
1. The condensed financial statements at March 31, 2000 and for the three
month period then ended are unaudited, except for the balance sheet
information as of December 31, 1999, which is derived from the audited
financial statements of Videonics Inc. ("Videonics" or the "Company") and
reflect all adjustments (consisting only of normal recurring adjustments)
which are, in the opinion of management, necessary for a fair presentation
of the financial position and operating results for the interim periods.
The condensed financial statements should be read in conjunction with the
financial statements and notes thereto, together with management's
discussion and analysis of financial condition and results of operations,
contained in the Company's Annual Report on Form 10-K for the year ended
December 31, 1999, as amended. The results of operations for the
three-month period ended March 31, 2000 are not necessarily indicative of
the results for the year ending December 31, 2000, or any future interim
period.
2. Inventories comprise (in thousands):
March 31, December 31,
2000 1999
------ ------
(unaudited)
Raw materials $3,293 $3,179
Work in process 324 302
Finished goods 228 304
------ ------
$3,845 $3,785
====== ======
3. Note Payable to Shareholder:
On April 16, 1999, the Company replaced a $1,000,000 unsecured loan bearing
interest at 8% per year and due on October 16, 1999, with a new unsecured
loan in the amount of $1,035,000 bearing interest at a rate of 8% per year
and due on January 16, 2001. The new loan is from the same director and
significant shareholder of the Company as the previous loan. Accrued
interest under the new loan is payable at maturity. On March 22, 2000, the
loan in the amount of $1,035,000 was amended to change the maturity date
from January 16, 2001 to January 16, 2002.
5
<PAGE>
VIDEONICS, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
4. Disposal of Subsidiary and Business
Sale of Nova Systems
On January 29, 1999, the Company completed the sale of certain assets and
the assumption of certain liabilities related to the sale of its Nova
Systems Division ("Nova") to a privately held company in Massachusetts. For
the year ended December 31, 1998, Nova recorded revenues of $1.9 million
and a loss from operations of $248,000. The sale of Nova may provide the
Company with net revenues from royalties of up to a maximum of
approximately $450,000, contingent upon future sales of Nova products by
the acquiring company. Royalties will be paid, to the extent due, by the
acquiring company on a monthly basis from March 1999 until receipt of
approximately $450,000. The sale of Nova resulted in a $48,000 loss to the
Company. As of March 31, 2000, royalties of $250,000 have been received.
Sale of the German Subsidiary
On September 29, 1999, the Company sold its wholly owned subsidiary in
Germany. The Company's German office was primarily a sales office. Revenue,
net loss and assets employed by the Company's foreign subsidiary were not
material to the consolidated financial statements. The Company recorded a
loss of $65,000 in connection with the sale.
5. Segment Information:
In 1998, the Company adopted SFAS 131. At December 31, 1999, Videonics
presented two reportable segments - (1) Video Production and (2) Signal
Processing.
The Company's "Video Production" segment manufactures and sells video
post-production equipment into broadcast, cable, industry and home producer
markets. The Company's "Signal Processing" segment, which was represented
by the Company's Nova Division, manufactured and sold signal conversion and
processing equipment primarily into television and cable studios. As
described in Note 4, the Company's Nova System Division ("Signal
Processing" segment) was sold on January 29, 1999.
6
<PAGE>
VIDEONICS, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
The table below presents information about reported segments for the
quarters ending March 31, (in thousands):
2000 1999
------- -------
Video Production
Sales $ 3,059 $ 3,574
Operating loss (299) (774)
Signal Processing
Sales - 91 (1)
Operating loss - (36)(1)
(1) Results presented are through January 29, 1999, the date the Company
completed its sale of Nova.
6. Line of Credit
In August 1999, the Company obtained a $1.0 million asset based line of
credit from Venture Banking Group, a division of Cupertino National Bank,
secured by the Company's assets. Interest on any advances will be
calculated at a rate of 1.5% above prime. Under the terms of the credit
agreement, the Company is required to maintain certain financial ratios and
meet other covenants, including those related to net worth, profitability
and indebtedness. The Company obtained a waiver of the profitability
covenant for the quarter ending March 31, 2000. The maturity date of the
line of credit is August 25, 2001. In connection with this agreement the
Company issued to the Venture Banking Group a warrant to purchase 95,000
shares of the Company's common stock at an exercise price of $0.65. This
warrant expires on September 15, 2002. The Company recognized $45,000 (the
fair value of the warrant issued using the Black-Scholes model) as prepaid
financing costs during the quarter ended September 1999. This amount is
being amortized to interest expense over the term of the loan. As of March
31, 2000, the Company had not borrowed under the line of credit. As of May
10, 2000, an aggregate of $100,000 is outstanding under the line of credit.
7. Comprehensive Loss
There are no differences between net loss for the three months ended March
31, 1999 and 2000 and the comprehensive loss for such periods.
7
<PAGE>
VIDEONICS, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
8. Recent Accounting Pronouncements:
In June of 1998, the Financial Accounting Standards Board issued Statement
No. 133, "Accounting for Derivative Instruments and Hedging Activities",
(SFAS 133) which establishes accounting and reporting standards for
derivative instruments, and for hedging activities. It requires that an
entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair
value. Management of the Company has evaluated the effects of this standard
and believes there will be no material impact on the Company's financial
position or results of operations. The Company will adopt SFAS 133 as
required for its first quarterly filing of the year 2001.
In March 2000, the FASB issued Interpretation No. 44, "Accounting for
Certain Transactions Involving Stock Compensation," an interpretation of
APB Opinion No. 25 ("FIN 44"). FIN 44 establishes guidance for the
accounting for stock option grants or modifications to existing stock
options awards and is effective for option grants made after June 30, 2000.
FIN 44 also establishes guidance for the repricing of stock options and
determining whether a grantee is an employee, for which the guidance was
effective after December 15, 1998 and modifying a fixed option to add a
reload feature, for which the guidance was effective after January 12,
2000. The Company does not expect that the adoption of the remaining
provisions will have a material effect on the financial statements.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition," which
provides guidance on the recognition, presentation and disclosure of
revenue in financial statements filed with the Securities and Exchange
Commission. SAB 101 outlines the basic criteria that must be met to
recognize revenue and provides guidance for disclosures related to revenue
recognition policies. SAB 101 is effective for the fiscal quarter beginning
April 1, 2000, however earlier adoption is permitted. The Company has not
yet determined the impact, if any, that adoption will have on the
consolidated financial statements.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion in this section "Management's Discussion and
Analysis of Financial Condition and Results of Operations" contains
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995, particularly statements regarding market
opportunities, market share growth, competitive growth, new product
introductions, success of research and development expenses, customer acceptance
of new products, gross margin and selling, general and administrative expenses.
These forward-looking statements involve risks and uncertainties, and the
cautionary statements set forth below, specifically those contained in "Factors
That May Affect Future Results of Operations," identify important factors that
could cause actual results to differ materially from those predicted in any such
forward-looking statements. Such
8
<PAGE>
factors include, but are not limited to, adverse changes in general economic
conditions, including adverse changes in the specific markets for the Company's
products, adverse business conditions, decreased or lack of growth in the market
for video post-production equipment, adverse changes in customer order patterns,
increased competition, lack of acceptance of new products, pricing pressures,
lack of success in technological advancements, risks associated with foreign
operations, and other factors.
Results of Operations
Net Revenues. Net revenues decreased approximately 17% from $3.7 million in
the first quarter of 1999 to $3.1 million in the first quarter of 2000. The
decrease in revenue was due primarily to a decrease in sales of the Company's
older videographer products offset slightly by shipments of CommandPost and
StudioSketch, which began shipping during the last days of March 2000.
Gross Profit. Gross profit decreased approximately 19% from $1.5 million in
the first quarter of 1999 to $1.2 million in the first quarter of 2000. Gross
profit, as a percentage of net revenues, decreased to approximately 38% in the
first quarter of 2000 from approximately 40% for the first quarter of 1999. The
decrease in gross profit as a percentage of revenues is due primarily to a
change in product mix, and manufacturing costs spread over lower revenues.
Research and Development. Research and development expenses decreased
approximately 38% to $561,000 during the first quarter of 2000 compared to
$898,000 in the first quarter of 1999. The decrease is primarily due to a
decrease in personnel.
Selling and Marketing. Selling and marketing expenses decreased
approximately 30% to $698,000 in the first quarter of 2000 compared to $996,000
in the first quarter of 1999. As a percentage of net revenues, these expenses
decreased to 23% in the first quarter of 2000 compared to 27% in the first
quarter of 1999. The decrease is primarily due to a decrease in personnel and
reduced advertising expenses.
General and Administrative. General and administrative expenses decreased
approximately 42% to $217,000 in the first quarter of 2000 compared to $374,000
in the first quarter of 1999. As a percentage of net revenues, these expenses
decreased to 7% in the first quarter of 2000 compared to 10% in the first
quarter of 1999. The decrease is primarily due to a decrease in personnel.
Interest Expense, net. Interest expense increased to $21,000 in the first
quarter of 2000 compared to $13,000 in the first quarter of 1999. The increase
in interest expense primarily relates to the amortization of prepaid financing
costs associated with a warrant issued to the Venture Banking Group in September
of 1999 (see Note 6 of the "Notes to the Condensed Financial Statements" for
further detail). Additionally, interest is calculated on the $1.0 million note
payable to a director and significant shareholder of the Company, only partially
offset by interest income on outstanding cash balances available for investment.
Benefit from Income Taxes. During the first quarter of 2000 and 1999, the
Company maintained a 100% valuation allowance against its deferred tax assets
due to the uncertainty surrounding the realization of such assets. If it is
determined that it is more likely than not that the deferred tax assets are
realizable, the valuation allowance will be reduced.
9
<PAGE>
Factors That May Affect Future Results of Operations: The Company believes
that in the future its results of operations could be impacted by factors such
as delays in development and shipment of the Company's new products and major
new versions of existing products, market acceptance of new products and
upgrades, growth in the marketplace in which it operates, competitive product
offerings, and adverse changes in general economic conditions in any of the
countries in which the Company does business. The Company's results in prior
years have been affected by these factors, particularly with respect to
developing and introducing new products such as MXPro, Effetto Pronto and
MXProDV in 1997, 1998 and 1999.
Due primarily to the factors noted above, the Company has experienced
substantial volatility in its operations. The Company's future earnings and
stock price may continue to be subject to significant volatility, particularly
on a quarterly basis. Any shortfall in revenue or earnings from levels expected
by securities analysts or anticipated by the Company based upon product
development and introduction schedules could have an immediate and significant
adverse effect on the trading price of the Company's common stock in any given
period. Additionally, the Company may not learn of such shortfalls until late in
the fiscal quarter, which could result in an even more immediate and adverse
effect on the trading price of the Company's common stock. Finally, the Company
participates in a highly dynamic industry, which often results in significant
volatility of the Company's common stock price. See the Company's 1999 Form 10-K
section entitled "Business - Research and Development".
Year 2000 Update
We believe that we have successfully rendered our product, internal
management and other administrative systems and external information systems
year 2000 compliant. Since January 1, 2000, we have experienced no disruptions
in our business operations as a result of year 2000 compliance problems or
otherwise, and have received no reports of any year 2000 compliance problems
with our products. To date, the total cost of our efforts to address year 2000
compliance has not been material. Nonetheless, some problems related to the year
2000 risks may not appear until several months after January 1, 2000. Year 2000
issues could include problems with our own products or with third-party products
or technology that we use. Any problems that are not identified and corrected
successfully and completely could adversely affect our business.
Liquidity and Capital Resources
From the Company's inception until its initial public offering in December
1994, which resulted in net proceeds to the Company of $15.8 million, the
Company financed its operations through private sales of equity, shareholder
loans, cash flow from operations, and bank borrowings. At March 31, 2000, the
Company's principal source of liquidity is cash of approximately $359,000.
Additionally, at March 31, 2000, the Company had borrowings from a director and
significant shareholder totaling $1.0 million at an interest rate of 8.0% per
year, due January 16, 2002.
Net cash used by operations was $321,000 for the first quarter of 2000
compared to $104,000 for the same period last year. The use of cash from
operating activities during the first quarter of 2000 is due to a net loss
before depreciation and a decrease in accrued expenses. The use of cash from
operating activities during the first quarter of 1999 is due to a net loss
before depreciation and a decrease in accrued expenses, substantially offset by
a decrease in inventories. Net cash used in investing activities for the first
quarter of 2000 was $57,000, due to property and equipment
10
<PAGE>
expenditures primarily for computers, software and engineering equipment used in
research and development and other activities. Net cash provided by investing
activities for the first quarter of 1999 was $31,000, as the Company received
$52,000 in connection with the sale of Nova, offset partially by property and
equipment expenditures primarily for computers, software and engineering
equipment used in research and development and other activities. Net cash
provided in financing activities during the first quarter of 2000 was $22,000
primarily from the receipt of cash from the exercise of the stock options issued
under the Company's stock option plans. Financing activities during the first
quarter of 1999 did not provide cash.
The Company has incurred losses and negative cash flows from operations for
each of the two years in the period ended March 31, 2000 and is dependent upon
support from a substantial shareholder and upon generating sufficient revenues
from existing and soon to be released products in order to fund operations.
During 1999, Management of the Company continued to take steps to further reduce
costs, including the sale of its Nova Systems Division, and its German
subsidiary, both of which had incurred losses in the two years immediately
preceding their sale. The Company is assessing its product lines to identify how
to enhance existing or create new distribution channels. During the first
quarter of 2000, the Company introduced three new products, two of which began
shipping late in the quarter with the third expected to begin shipping within
the next four months. The Company is currently developing and expects to
introduce two more products during 2000.
As described in the notes to the consolidated financial statements, the
Company has obtained a $1.0 million asset based line of credit from Venture
Banking Group, a division of Cupertino National Bank, secured by substantially
all of the Company's assets. Interest on any advances will be calculated at a
rate of 1.5% above prime. Under the terms of the credit agreement, the Company
is required to maintain certain financial ratios and meet other covenants,
including those related to net worth, profitability and indebtedness. The
Company obtained a waiver of the profitability covenant for the quarter ending
March 31, 2000. The maturity date of the line of credit is August 25, 2001. As
of May 10, 2000, an aggregate of $100,000 is outstanding under the line of
credit.
The Company believes that its current cash, borrowings from a shareholder,
together with its operating cash flows, will be sufficient to meet the Company's
requirements for working capital, and capital expenditures through the end of
2000.
11
<PAGE>
Item 3. Quantitative and Qualitative Disclosure about Market Risk
The Company's market risk disclosures pursuant to Item 3 are not material
and are therefore not required.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No. Description of Document
----------- -----------------------
4.03 First Amendment to Holder Rights Agreement between
Venture Bank and Videonics Inc. dated February 24,
2000.
10.19 Amendment to Loan between Carl Berg and Videonics Inc.
dated March 22, 2000.
27.0 Financial Data Schedule for the Period ended March 31,
2000.
(b) No reports on Form 8-K were filed during the quarter ended March 31, 2000.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
May 10, 2000 VIDEONICS, INC.
Date Registrant
By: /s/ Gary L. Williams
--------------------
Gary L. Williams
Vice President of Finance,
Chief Financial Officer
(Chief Accounting Officer
and Authorized Signer)
13
Exhibit 4.03
FIRST AMENDMENT TO HOLDER RIGHTS AGREEMENT
THIS FIRST AMENDMENT TO HOLDER RIGHTS AGREEMENT (the "First Amendment")
is made and entered into as of February 24, 2000 by and between Videonics, Inc.,
a California corporation (the "Company") and Venture Banking Group, a division
of Cupertino National Bank (the "Holder").
WHEREAS, the Company and Holder have entered into that certain Holder
Rights Agreement dated as of September 15, 1999 (the "Agreement").
WHEREAS, the Company and Holder desire to amend the Agreement as set
forth in this First Amendment.
NOW, THEREFORE, the parties, intending to be legally bound, agree as
follows:
1. Amendment to Section 1.02. The first paragraph of Section 1.02 is
hereby amended in its entirety to read as follows:
If the Holder requests that the Company file a registration
statement on Form S-3 (or any successor form to Form S-3) for
a public offering of the shares of Registrable Securities, and
the Company is a registrant entitled to use S-3 (or any
successor form to Form S-3), the Company will use its best
commercial efforts to effect a registration on Form S-3 (or
any similar successor form) and any related qualification or
compliance with respect to all the Registrable Securities
owned by the Holder so that such registration will be filed
with the Securities and Exchange Commission within thirty (30)
days of the Company's receipt from the Holder of a written
request for such registration; provided, however, that the
Company shall not be obligated to effect any such
registration, qualification or compliance, pursuant to this
Section: (i) if the Company is not qualified as a registrant
entitled to use Form S-3 (or the applicable successor form);
(ii) if the Company shall furnish to the Holder a certificate
signed by the Chief Executive Officer of the Company stating
that in the good faith judgement of the Board of Directors of
the Company, it would be seriously detrimental to the Company
and its shareholders for such Form S-3 registration to be
effected at such time, in which event the Company shall have
the right to defer the filing of the Form S-3 registration
statement for a period of not more than one hundred twenty
(120) days after the date of the certificate; provided,
however, that the Company shall not utilize this right more
than once in any twelve (12) month period; or (iii) in any
particular jurisdiction in which the Company would be required
to qualify to do business or to execute a general consent to
service of process in effecting such registration,
qualification or compliance.
<PAGE>
2. New Section 1.03. A new section 1.03 shall be inserted after Section 1.02
(and subsequent sections shall be renumbered) as follows:
1.03 Company Registration.
(a) Notice of Registration. If at any time or from time to
time the Company shall determine to register any of its equitable
securities under the 1933 Act for sale for cash, whether for its own
account or the account of any of its security holders or both, other
than (i) a registration relating solely to employee benefit plans, (ii)
a registration relating solely to a Rule 145 transaction, (iii) a
registration in which the only equity security being registered is
Common Stock issuable upon conversion of convertible debt securities
which are also debt securities which are also being registered, (iv) on
a Form S-4, Form S-8 (or Form S-3, if such registration covers an
offering of the type contemplated by Form S-8) or any successor or
similar forms or (iv) a registration pursuant to an agreement which, by
its terms, would prohibit the inclusion of Registrable Securities,
unless such prohibition is waived, the Company will:
(i) give to the Holder written notice thereof; and
(ii) subject to the terms of this Agreement, use its
reasonable efforts to include in such registration (and any
related qualification under blue sky laws or other
compliance), and in any underwriting involved therein, all the
Registrable Securities specified in a written request, made
within ten (10) business days after receipt of such written
notice from the Company, by the Holder; provided that the
provisions of this Section 1.03(a) are subject in all respect
to the provisions of Section 1.03(b) regarding underwritten
offerings.
(b) Underwriting. If the registration of which the Company
gives notice is for a registered public offering involving an
underwriting, the Company shall so advise the Holder as a part of the
written notice given pursuant to Section 1.03(a). In such event the
right of the Holder to registration pursuant to this Section 1.03 shall
be conditioned upon such Holder's participation in such underwriting,
and the inclusion of Registrable Securities in the underwriting shall
be limited to the extent provided herein.
The Company and the Holder shall enter into an underwriting
agreement in customary form with the managing underwriter selected for
such underwriting by the Company. Notwithstanding any other provision
of this Section 1.03, if the managing underwriter of such underwritten
offering advises the Company that marketing factors require a
limitation of the number of shares to be underwritten, the Company may
exclude some or all of the Registrable Securities from such
registration and underwriting. The Company shall so advise the Holder
of the number of shares that may be included in the registration, if
any, and the underwriting shall be allocated first to the Company and,
if additional shares may be sold, subject to any agreement which by its
terms would give any other person priority over, or rights similar to
<PAGE>
those held by, the Holder relating to the inclusion of shares in such
registration, such additional shares shall be allocated to the Holder.
(c) Right to Terminate or Delay Registration. The Company
shall have the right to terminate or withdraw any registration
initiated by it under this Section 1.03 prior to the effectiveness of
such registration whether or not the Holder has elected to include
securities in such registration. If, at any time after delivery of a
notice of registration pursuant to Section 1.03(a) and prior to the
effective date of the registration statement filed in connection with
such registration, the Company shall determine for any reason to delay
registration of its securities, the Company may in its sole discretion
delay such registration upon notice of such determination to the
Holder, and the Company shall be permitted to delay registering any
Registrable Securities for any period it deems necessary in its
reasonable discretion.
3. Amendments to Sections 1.04(a) and (b). Section 1.04(a) is hereby amended in
its entirety to read as follows:
All Registration Expenses incurred in connection with any registration,
qualification or compliance pursuant to Sections 1.02 or 1.03 shall be
borne by the Company. All Selling Expenses shall be borne by the
Holder.
The first sentence of Section 1.03(b) is hereby amended in its entirety to read
as follows:
Definitions: "Registration Expenses" shall mean all expenses incurred
by the Company in complying with Sections 1.02 and 1.03 hereof,
including, without limitation, all registration, filing and
qualification fees, underwriters' expense allowances, printing
expenses, fees and disbursements of counsel for the Company, blue sky
fees and expenses.
4. Reference to the Agreement. On and after the effective date of this
First Amendment, each reference in the Agreement to "the Agreement," "this
Agreement," "hereunder," and "hereof" or words of like import referring to the
Agreement shall mean the Agreement, as amended by this First Amendment. The
Agreement, as amended by this First Amendment, is and shall continue to be in
full force and effect and is hereby in all respects ratified and confirmed. This
First Amendment shall be effective upon execution by the Company and the Holder.
5. Counterparts. This First Amendment may be executed in two (2) or
more original and identical documents, signed simultaneously or at separate
times by the parties, and each signed original shall be deemed to be an original
for all purposes.
6. Complete Agreement. The Agreement (together with its Exhibits and
the other documents referred to herein) and this First Amendment are intended by
the parties hereto to be the final expression of their agreement and constitute
and embody the entire agreement and understanding of the parties with regard to
the subject matter hereof and is a complete and exclusive statement of the terms
and conditions thereof, and shall supersede any and all prior correspondence,
conversations, negotiations, agreements or understandings relating to the same
subject.
<PAGE>
7. Choice of Law . It is the intention of the parties that the internal
laws of the State California (irrespective of its choice of law principles)
shall govern the validity of this First Amendment, the construction of its terms
and the interpretation of the rights and duties of the parties.
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment
to be executed by their duly authorized representatives as of the day
and year above.
VIDEONICS, INC.
By: /s/ Gary Williams
-----------------------
Name: Gary Williams
---------------------
Title: V.P. of Finance and CFO
-----------------------
VENTURE BANKING GROUP
By: /s/ Jason Hartmann
-----------------------
Name: Jason Hartmann
---------------------
Title: Commercial Loan Officer
-----------------------
Exhibit 10.19
Videonics Inc.
This loan amends the note dated April 16, 1999.
March 22, 2000
Carl Berg
10050 Bandley Drive
Cupertino, CA 95014
BORROWER: Videonics, Inc.
LENDER: Carl Berg
This letter is our promise to repay.................................. $1,035,000
cash loaned to Borrower. This loan is due and payable on January 16, 2002.
Interest will be due on the outstanding balance for the actual days outstanding
from January 16, 1999 at an annual interest rate of 8.0%. Interest will be paid
at maturity on January 16, 2002.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower defaults under
any loan, extension of credit, security agreement, purchase or sales
agreement, or any other agreement, in favor of any other creditor or
person that may materially affect any of Borrower's property or
Borrower's ability to repay this loan or perform Borrower's obligations
under this loan. (c) Borrower becomes insolvent, a receiver is appointed
for any part of Borrower's property, Borrower makes an assignment for the
benefit of creditors, or any proceeding is commenced either by Borrower
or against Borrower under any bankruptcy or insolvency laws.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance of this loan and all accrued unpaid interest immediately due, without
notice, and then Borrower will immediately pay that amount. Lender may delay or
forgo enforcing any of its rights or remedies under this loan without losing
them.
GENERAL: This note has been delivered to Lender and accepted by Lender in the
State of California. If there is a lawsuit, Borrower agrees upon Lender's
request to submit to the jurisdiction of the courts of Santa Clara County, the
State of California. This loan shall be governed by and construed in accordance
with the laws of the State of California.
LENDER: Carl Berg BORROWER: Videonics, Inc.
By: /s/ Carl Berg By: /s/ Gary Williams
---------------------- ----------------------
Carl Berg Gary L. Williams
V.P. of Finance and CFO
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S INCOME STATEMENT AND BALANCE SHEET DATED MARCH 31, 2000 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 359
<SECURITIES> 0
<RECEIVABLES> 862
<ALLOWANCES> 0
<INVENTORY> 3,845
<CURRENT-ASSETS> 5,234
<PP&E> 394
<DEPRECIATION> 0
<TOTAL-ASSETS> 5,673
<CURRENT-LIABILITIES> 1,590
<BONDS> 1,035
0
0
<COMMON> 20,722
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 5,673
<SALES> 3,059
<TOTAL-REVENUES> 3,059
<CGS> 1,882
<TOTAL-COSTS> 1,882
<OTHER-EXPENSES> 1,476
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (320)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (320)
<EPS-BASIC> (0.05)
<EPS-DILUTED> (0.05)
</TABLE>
