EXHIBIT INDEX APPEARS ON PAGE
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended June 30, 1996
Commission File Number: 0-17170
TELVUE CORPORATION
(Exact name of small business issuer as specified in its charter)
DELAWARE 51-0299879
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
16000 Horizon Way, Suite 500
Mt. Laurel, New Jersey 08054
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code:(609) 273-8888
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the preceding 12 months (or for such
shorter period that the issuer was required to file such reports) and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No
------ ------
Number of shares of registrant's common stock outstanding as of July 23,
1996: 23,794,500 shares.
Transitional Small Business Disclosure Form: Yes No X
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This report includes a total of 16 pages.
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TELVUE CORPORATION AND FORMER SUBSIDIARY
INDEX
PAGE
NO.
-----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets as of June 30, 1996
(unaudited) and as of December 31, 1995
Statements of Operations for the three
months ended June 30, 1996 (unaudited)
and June 30, 1995 (unaudited)
Statements of Operations for the six
months ended June 30, 1996 (unaudited)
and June 30, 1995 (unaudited)
Statements of Cash Flows for the six
months ended June 30, 1996 (unaudited)
and June 30, 1995 (unaudited)
Notes to Financial Statements (unaudited)
Item 2. Management's Discussion and Analysis or Plan
of Operation
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
<PAGE>
<TABLE>
PART I. Financial Information
ITEM I. Financial Statements
TELVUE CORPORATION
BALANCE SHEETS
June 30, December 31,
1996 1995
------------- -----------
<S> <C> <C>
ASSETS (Unaudited) *
CURRENT ASSETS
Cash and cash equivalents $ 383,136 $ 216,409
Accounts receivable - trade 765,187 783,588
Other receivables 14,544 15,525
Other current assets 23,645 4,219
----------- -----------
TOTAL CURRENT ASSETS 1,186,512 1,019,741
PROPERTY AND EQUIPMENT
Machinery and equipment 5,003,031 5,007,768
Less accumulated depreciation 2,292,602 2,198,719
----------- -----------
2,710,429 2,809,049
SECURITY DEPOSITS 8,800 8,800
----------- -----------
$ 3,905,741 $ 3,837,590
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable - trade $ 317,155 $ 342,947
Accounts payable - equipment 38,487 28,114
Accrued expenses 133,544 247,469
Accrued dividends 151,974 -
----------- -----------
TOTAL CURRENT LIABILITIES 641,160 618,530
NOTES PAYABLE - MAJORITY STOCKHOLDER 6,669,712 6,526,712
ACCRUED INTEREST - MAJORITY STOCKHOLDER 1,754,444 1,462,576
REDEEMABLE CONVERTIBLE PREFERRED STOCK, $1 par
value, 6,900,000 shares authorized, 2,532,895
shares issued and outstanding (liquidation
value 2,684,869 and 2,532,895, respectively) 2,532,895 2,532,895
STOCKHOLDERS' DEFICIT
Common stock, $.01 par value, 100,000,000
shares authorized, 23,794,500 shares
issued and outstanding 237,945 237,945
Additional paid-in capital 1,515,535 1,515,535
Accumulated deficit (9,445,950) (9,056,603)
----------- -----------
(7,692,470) (7,303,123)
----------- -----------
$ 3,905,741 $ 3,837,590
=========== ===========
* Derived from audited financial statements.
The accompanying unaudited notes are an integral part of these statements.
<PAGE>
TELVUE CORPORATION AND FORMER SUBSIDIARY
STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended June 30,
--------------------------------
1996 1995
---- ----
REVENUES $ 1,279,733 $ 1,048,580
OPERATING EXPENSES
Service 706,685 704,951
Research and development - 9,872
Selling and marketing 188,655 205,088
General and administration 120,948 107,116
Depreciation 226,355 207,249
----------- -----------
1,242,643 1,234,276
----------- -----------
OPERATING INCOME (LOSS) 37,090 (185,696)
OTHER INCOME (EXPENSE)
Interest expense (143,865) (149,993)
Loss on disposal of property and equipment (2,028) (9,362)
Minority interest in net loss of former subsidiary - 893
----------- -----------
(145,893) (158,462)
----------- -----------
NET LOSS (108,803) (344,158)
DIVIDENDS ON REDEEMABLE
CONVERTIBLE PREFERRED STOCK (76,077) (60,956)
----------- -----------
NET LOSS AVAILABLE TO
COMMON STOCKHOLDERS $ (184,880) $ (405,114)
=========== ===========
NET LOSS PER COMMON SHARE $(.01) $(.02)
=========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 23,794,500 23,794,500
=========== ===========
The accompanying unaudited notes are an integral part of these statements.
<PAGE>
<PAGE>
TELVUE CORPORATION AND FORMER SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Six Months Ended June 30,
-------------------------
1996 1995
---- ----
REVENUES $ 2,584,115 $ 2,053,736
OPERATING EXPENSES
Service 1,436,856 1,148,856
Research and development - 9,872
Selling and marketing 366,684 357,088
General and administration 263,168 247,682
Depreciation 453,273 413,066
----------- -----------
2,519,981 2,176,564
----------- -----------
OPERATING INCOME (LOSS) 64,134 (122,828)
OTHER INCOME (EXPENSE)
Interest expense (291,868) (292,912)
Loss on disposal of property and equipment (9,640) (17,086)
Minority interest in net loss of former subsidiary - 4,848
----------- -----------
(301,508) (305,150)
----------- -----------
NET LOSS (237,374) (427,978)
DIVIDENDS ON REDEEMABLE
CONVERTIBLE PREFERRED STOCK (151,974) (121,912)
----------- -----------
NET LOSS AVAILABLE TO
COMMON STOCKHOLDERS $ (389,348) $ (549,890)
=========== ===========
NET LOSS PER COMMON SHARE $(.02) $(.02)
=========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 23,794,500 23,794,500
=========== ===========
The accompanying unaudited notes are an integral part of these statements.
<PAGE>
<PAGE>
TELVUE CORPORATION AND FORMER SUBSIDIARY
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended June 30,
-------------------------
1996 1995
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES $ (237,374) $ (427,978)
Net Loss
Adjustments to reconcile net loss to net
cash provided (used) by operating activities:
Depreciation 453,273 413,066
Loss on disposal of property and equipment 9,640 17,086
Minority interest in net loss of former subsidiary - (4,848)
Changes in assets and liabilities:
Decrease (increase) in -
Accounts receivable - trade 18,401 (156,601)
Other receivable 981 23,780
Other current assets (19,426) (25,207)
Increase (decrease) in -
Accounts payable - trade (25,792) 59,731
Accounts payable - equipment 10,373 (268,387)
Accrued expenses (113,925) 41,429
Accrued interest - majority stockholder 291,868 292,912
----------- -----------
NET CASH PROVIDED (USED) BY OPERATING
ACTIVITIES 388,019 (35,017)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (364,292) (507,526)
Proceeds from sale of property and equipment - 200
----------- -----------
NET CASH USED BY INVESTING ACTIVITIES (364,292) (507,326)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable - majority stockholder 143,000 523,733
----------- -----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 166,727 (18,610)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 216,409 164,588
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 383,136 $ 145,978
=========== ===========
The accompanying unaudited notes are an integral part of these statements.
<PAGE>
<PAGE>
TELVUE CORPORATION AND FORMER SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION:
----------------------
Summary Financial Information and Results of Operations
- --------------------------------------------------------
In the opinion of the management, the accompanying unaudited financial
statements have been prepared in conformance with generally accepted
accounting principles and with the regulations of the Securities and Exchange
Commission and contain all adjustments (consisting of only normal recurring
adjustments) necessary to make the financial statements not misleading and to
present fairly the financial condition as of June 30, 1996, the results of
operations for the three and six months ended June 30, 1996 and 1995 and cash
flows for the six months ended June 30, 1996 and 1995.
Interim Financial Information
- -----------------------------
While management believes that the disclosures presented are adequate to
prevent misleading information, it is suggested that these unaudited financial
statements be read in conjunction with the audited financial statements and
notes included in the Company's Form 10-KSB report for the fiscal year ended
December 31, 1995 as filed with the Securities and Exchange Commission.
Prior period financial statements have been reclassified to conform with
current quarter presentation.
2. SUPPLEMENTAL CASH FLOW INFORMATION:
-----------------------------------
For purposes of Statements of Cash Flows, the Company considers investment
instruments with an original maturity of three months or less to be cash
equivalents.
Supplemental disclosures of cash paid during the period-
1996 1995
---- ----
Income taxes $ 0 $ 0
Interest $ 0 $ 0
3. NET LOSS PER COMMON SHARE:
--------------------------
The net loss per Common Share is based on the weighted average number of
shares of Common Stock outstanding during each period.
4. DIVIDENDS ON REDEEMABLE CONVERTIBLE PREFERRED STOCK:
----------------------------------------------------
As of June 30, 1996, preferred undeclared dividends amounted to $151,974.
5. INCOME TAXES:
-------------
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109 "Accounting for Income Taxes". At January 1,
1996, the cumulative temporary differences between the Company's financial
statement losses and the losses reported on the Company's tax returns
consisted of accelerated tax depreciation of $529,000 and nondeductible
interest expense of $1,462,576. In addition, the Company has a net operating
loss carry forward of approximately $6,400,000 on a tax reporting basis.
The carryforward will begin to expire in 2004, if not utilized. The Company
has not recorded a deferred tax asset at June 30, 1996, because the Company
believes there is at least a 50% chance that the carryforward will expire
unused. Accordingly, any tax benefit of the loss carryforward and of the
other cumulative temporary differences has been offset by a valuation
allowance of the same amount.
6. NOTES PAYABLE AND ACCRUED INTEREST - MAJORITY STOCKHOLDER:
----------------------------------------------------------
As of June 30, 1996, the Company had various outstanding notes due to the
majority stockholder in the aggregate amount of $6,669,712 and accrued
interest due on these notes of $1,754,444. Effective as of December 31,
1996, the Company obtained from the majority stockholder an extension to
January 1, 1998, of his prior agreement not to demand repayment of his loans
or the accrued interest on the loans. The Company has, therefore, classified
the notes and accrued interest as long-term liabilities.
7. DISPOSITION OF SUBSIDIARY
-------------------------
On July 28, 1995 the Company terminated its partnership with Voice FX
Corporation. The June 30, 1995, Statements of Operations and Statements of
Cash Flows include the accounts of the Company and the accounts of the
TelVue-Voice FX Joint Venture, a partnership owned seventy percent (70%) by
the Company, up until July 28, 1995. The Company is continuing to
independently provide the services that were previously offered under the
partnership.
<PAGE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
TelVue Corporation (the "Company") is a marketing and service company
primarily selling automatic number identification ("ANI") telecommunications
services to the cable television industry for the automated ordering of
pay-per-view features and events (the "Service"). The Company provides the
Service through equipment it purchases. The Company also leases trunk
telephone lines from local and long distance telephone companies to connect
present cable television subscribers to the Company's Points of Presence
("POPs") for ordering the Service from their local cable television systems.
The Company also leases data circuits from local and long distance telephone
companies to link the POPS to the cable systems' billing vendors.
The acquisition of the Company's equipment requires a substantial
expenditure of capital before meaningful revenues can be realized.
In addition, revenues are affected by the "buy rates" of subscribers
connected to the Service. The Company considers the buy rates of its
subscribers to be low compared to long term buy rates projected by
industry pay-per-view analysts.
Since May 1992, the Company has had a POP which is located at the
Company's home office in Mt. Laurel, New Jersey (the "National POP").
The National POP was established to provide enhanced service features
which are not available with the equipment located at the regional POPs.
The Company believes these enhanced service features, which identify the
cable operator by name ("Custom Greeting") and, on accepted orders, speaks
the movie or event title, start-time and channel appearance ("Title
Speak"), are necessary for it to remain competitive within the pay-per-
view ANI industry. The National POP can also speak promotional messages
for products and services at the time a cable subscriber is placing an
order for a pay-per-view movie or event (the "Pay-per-view Plus service").
The National POP is able to serve cable television systems across the
United States via trunk lines and data circuits which it currently leases
from MCI Telecommunications Corporation ("MCI"). The Company's lease
agreement with MCI expires June 1, 2000.
The National POP can service, without installing a new regional POP,
cable television systems which are located in a state or telephone Local
Access Transport Area ("LATA") where a regional POP does not exist.
The Company can also move all regional cable television systems onto the
National POP. As these systems are moved to the National POP, the
regional POPs will be eliminated. As of June 30, 1996, the Company has
only one regional POP remaining. Cable television systems using the
National POP are charged, in addition to their per order fee,
installation and setup fees, monthly data circuit fees, enhanced service
feature fees, and Pay-per-view Plus service fees.
On September 27, 1994, the Company entered into a service agreement
with Video Jukebox Network, Inc. ("VJN"). The agreement provides that
the Company will act as a 900 call service bureau to facilitate the
ordering, by VJN customers, of music videos on the cable or home dish
of the VJN customer. Mr. H.F. Lenfest, the majority stockholder of the
Company and an affiliate of VJN ("Mr. Lenfest"), has guaranteed the
obligation of the Company to remit the funds received by the Company on
behalf of VJN under the terms of the service agreement. Mr. Lenfest is
the Chairman of the Board of Directors of VJN. He also controls a
corporation that is a partner in a partnership that is the principal
stockholder of VJN. The Company believes that the terms of the service
agreement with VJN are at market rates. As of July 23, 1996, Mr.
Lenfest had loaned the Company $358,267 to purchase equipment and
software needed to provide service to VJN (the "VJN Loan"), Interest
on the VJN Loan is set at the prime rate of PNC Bank plus 1%. VJN has
informed the Company that VJN has developed its own voice recognition
system and intends to process its 900 number calls internally. The
Company and VJN are presently discussing the termination of the
Company's contract with VJN (which would otherwise expire on September
22, 1997) and the terms under which the Company would provide space at
the Company's headquarters for the location of a backup system for
VJN's system. The management of the Company does not believe that the
termination of the VJN contract will have a material effect on the
Company operations.
The Company had an agreement to provide management services to Lenfest
Networks, Inc. ("LNI"), a company wholly-owned by Mr. Lenfest. LNI owned
and operated a personal advertising television video programming service
with pay-per-call applications, and did business as "INTRONET". The
Company had authority to perform all services necessary for the
management of the business, other than to acquire or dispose of assets,
to incur debt other than in the ordinary course of business or to
encumber the assets of the business. During 1996, the Company was
compensated in the amount of $12,000 per month. The Company believes
the terms of the management agreement with LNI were at market rates.
LNI substantially reduced operations on March 31, 1996, and as a result,
the Company stopped performing its management duties effective February
29, 1996.
The Company's net loss was $108,803 for the three months ended June 30,
1996, compared to $344,158 for the three months ended June 30, 1995.
The net losses for the six months ended June 30, 1996 and 1995 were
$237,374 and $427,978, respectively. Service revenues for the second
quarter and the six months ended June 30, 1996 increased $231,153 and
$530,379, respectively, over comparable periods from the prior year.
The growth in service revenues is partially attributable to the Company
serving approximately 1,000,000 more cable subscribers during the six
months ended June 30, 1996 than were served during the six months ended
June 30, 1995. The increase is also attributable to an increase in the
average monthly buy rate from 22.5% for the six months ended June 30,
1995, to 25.4% for the six months ended June 30, 1996. The Company has
been experiencing an upward trend in the average buy rate when compared
to prior periods. Since the buy rate is subject to factors over which
the Company has no control, there can be no assurance that the buy rate
will grow at the rate that it has during the six months ended June 30,
1996. The service revenue increase is also a result of an increase in
installation and data circuit income of $32,056 for the second quarter
of 1996 and $59,464 for the six months ended June 30, 1996, over
comparable periods from the prior year. In addition, the Company had
National POP feature revenue of $131,609 and $242,054 for the second
quarter and six months ended June 30, 1996, respectively, compared to
$92,937 and $180,477 for the second quarter and six months ended June
30, 1995, respectively. The Company had Pay-per-view Plus revenue of
$73,997 and $154,922 for the second quarter and six months ended June
30, 1996, respectively compared to $12,319 and $19,105 for the second
quarter and six months ended June 30, 1995. The installation and data
circuit revenue as well as the feature revenue are a result of the
migration of additional customers from the regional POPs to the National
POP as well as the addition of new customers to the National POP.
The Pay-per-view Plus revenue increased over 1995 because the
Pay-per-view Plus service had just become active during January 1995,
and there were not as many promotions being offered or customers using
the Pay-per-view Plus service.
Service expenses for the second quarter and six months ended June 30,
1996, increased $1,734 and $288,000 from the comparable 1995 periods.
The increase in service expenses for the second quarter is minimal as a
result of service expense increases being offset by a decrease in trunk
facility access expenses of $18,655 as a result of the elimination of
the regional POPs (see below). The increase in service expenses for
the six months ended June 30, 1996 is partially attributable to an
increase in trunk usage expense of $257,945. A portion of the trunk
expense increase is a result of an increase in the average monthly buy
rate (see above). In addition, during the first quarter of 1995 service
expenses were reduced by $173,709 for one-time credits earned from
Sprint Communications, Inc. ("Sprint"), the Company's former
telecommunications provider, against trunk usage expense in accordance
with the Company's contract agreement with Sprint.
The National POP and the regional POPs had required, a substantial
purchase of equipment by the Company. Depreciation accounted for 18% of
the total operating expenses for both the second quarter and the six
months ended June 30, 1996, compared to 19% and 17% for the second
quarter and six months ended June 30, 1995, respectively. For the
six months ended June 30, 1996, selling and marketing expenses
increased 3% and general and administrative expenses increased 6% over
the comparable 1995 period. These minimal increases were a result of
small increases in various expenses.
The Company migrated approximately 293,000 subscribers from the
regional POPs to the National POP during the six months ended June 30,
1996. As of June 30, 1996, there remains one customer with 7,400
subscribers on one regional pop. The Company is attempting to move this
customer to the National POP by the end of 1996. As a result of
migrating customers from the regional POPS to the National POP during
the six months ended June 30, 1996, the Company recorded a loss on the
disposal of property and equipment of $9,640. This loss was a result
of being unable to use or sell excess equipment inventory made available
by the retirement of seven regional POPs.
Total liabilities increased $457,498 and total assets increased $68,151
for the six months ended June 30, 1996. The increase in total liabilities
was primarily a result of the Company's draws of a total of $143,000 under
funding arrangements with Mr. Lenfest, plus an increase in accrued
interest of $291,868 on outstanding loans from Mr. Lenfest and an
increase in accrued dividends on preferred stock in the amount of
$151,974. The increase in assets is attributable to an increase in cash.
The Company's days for sales in accounts receivable is 55 days for the
six months ended June 30, 1996, compared to 49 days for the six months
ended June 30, 1995. The Company believes the increase of 6 days is not
material. The Company does not offer incentives/discounts to its
customers, nor has it changed its credit terms with its customers.
During the six months ended June 30, 1996, the Company purchased $364,292
of equipment compared with $507,526 purchased during the six months ended
June 30, 1995. The 1996 equipment purchases consisted primarily of one
switched access audio response unit ("SARU") and software enhancements
and peripheral equipment for the National POP totaling $285,478, and
$75,790 in software to be used to provide service to VJN. The Company
had previously purchased the SARUs from Syntellect Network Systems, Inc.
("Syntellect"). However, during April 1996 the division of Syntellect
that manufactures the SARUs was sold to Atlas Telecom ("Atlas").
The Company is developing a new line of business to provide cable systems
with direct response commercials from a number of sources ("DRTV"). Cable
operators would receive a percentage of the proceeds from sales,
generated from the commercials. The Company is currently providing the
service to cable networks, some of which are owned by an affiliate, and
plans eventually to have cable systems directly using the service. During
the initial test phase in November 1995 and December 1995, the Company
proved its ability to obtain and distribute direct response commercials
in addition to tracking sales by commercial and location. It remains to
be seen, however, whether enough cable operators will participate to
generate the revenue necessary to make this line of business profitable.
The DRTV service generated revenue of $6,419 and $17,392 for the second
quarter and six months ended June 30, 1996, respectively. Expenses for
the second quarter and six months ended June 30, 1996 were $24,522 and
$51,907, respectively. The expenses for the six months ended June 30,
1996 included $13,114 for cable operator commissions and production costs
and $38,007 for payroll and payroll taxes and benefits. During the six
months ended June 30, 1995, the Company incurred $9,872 in research and
development costs required for software development for the DRTV service
compared to no comparable expenses for the six months ended June 30, 1996.
The Company had positive cash flow from operations of $388,019 during the
six months ended June 30, 1996. Ignoring changes in operating assets and
liabilities that result from timing issues, and considering only
adjustments to reconcile net loss to net cash provided by operating
activities, the Company would have positive cash flow from operating
activities of $225,539 for the six months ended June 30, 1996, compared
to negative cash flow from operating activities of $2,674 for the for
the six months ended June 30, 1995. The increase in cash flow for the
six months ended June 30, 1996, is primarily a result of increased
revenue (see above) along with the Company paying a lower rate per 800
number call. Mr. Lenfest had agreed to defer cash interest payments of
$291,868 during the six months ended June 30, 1996. The deferring of
the interest payments along with the increase in revenue has enabled
the Company to accumulate cash. The Company's 1996 forecast for the
second half of 1996 indicates there will be sufficient cash available
to begin making payments to Mr. Lenfest on a monthly basis, therefore,
the Company is considering beginning monthly payments to Mr. Lenfest.
Since November 2, 1989, the Company has funded its expansion and
operating deficit from the $2,500,000 of proceeds from the sale of shares
of the Company's Common Stock and Preferred Stock to Mr. Lenfest and
from borrowings from Mr. Lenfest. From November 2, 1989, through December
31, 1993, the Company had borrowed $3,690,000 from Mr. Lenfest under
various loan agreements. On March 8, 1994, Mr. Lenfest agreed to loan
to the Company up to $1,500,000 for the purchase of additional equipment
needed to expand the National POP. Interest on the National Equipment
Loan is set at the floating prime interest rate of PNC Bank plus 1%.
Interest on the National Equipment Loan is to be paid quarterly. At the
option of the Company, the interest may be paid by the delivery of shares
of the Company's Preferred Stock at the rate of one share of Preferred
Stock for each one dollar of accrued interest. As of July 23, 1996 the
Company has borrowed $1,471,272 under the terms of the National Equipment
Loan. Interest due on the National Equipment Loan through September 30,
1995, in the amount of $162,210 has been paid with 162,210 shares of
Preferred Stock. On December 22, 1995, the Company borrowed $55,000 from
Mr. Lenfest to meet advertising expenses and programming expenses that
were not budgeted for 1995 (the "Advertising Loan"). It has been orally
agreed that interest on the Advertising Loan is set at the floating prime
interest rate of PNC Bank plus 1%. During January 1995, Mr. Lenfest
purchased from Science Dynamics Corporation ("Science") the Company's
non-interest bearing note in the amount of $541,000 held by Science.
During February 1996, the Company borrowed from Mr. Lenfest $143,000 to
purchase one SARU (the "SARU Loan"). It has been orally agreed that
interest on the SARU Loan is to be set at the floating prime interest
rate of PNC Bank plus 1%. As of July 23, 1996, Mr. Lenfest had loaned
$411,173 under the TelVue Partnership Loan, $358,267 under the VJN loan
and $143,000 under the SARU loan, bringing aggregate loans from Mr.
Lenfest to $6,669,712, including the $541,000 note purchased from Science
(see the Company's December 31, 1995 Form 10-KSB for a description of the
TelVue Partnership Loan). Interest on $5,217,539 of the borrowings is
set at the floating prime interest rate of PNC Bank plus 1%. Interest
on $500,000 of the loan is set at 12%. Interest on $411,173 is set at
the floating prime interest rate of PNC Bank plus 2%. In addition,
effective as of December 31, 1995, the Company obtained from Mr. Lenfest
a written agreement stating he will not demand repayment of his loans or
the cash payment of accrued interest on the loans through January 1, 1998.
Although Mr. Lenfest has agreed not to demand repayment of his loans or
accrued interest, as indicated above, the Company is considering making
monthly payments to Mr. Lenfest.
The Company's ability to fund its operating expenses is directly related
to the cable industry's buy rates and, therefore, is volatile. The
Company remains dependent upon the deferral of principal and interest
payments due to Mr. Lenfest in order to fund operations and required
equipment purchases. Since the Company's cash flow is subject to factors
over which the Company has no control, there can be no assurance that
the Company will continue to fund its operations or equipment purchases
without seeking outside financing. Should the Company require funding
in the future it will seek additional financing from Mr. Lenfest and
other sources. In the event Mr. Lenfest should decide to terminate
funding, for either equipment purchases or future operations, the
Company will seek additional funds from third parties, although there
can be no assurance that such funds will be available or will be
available on terms that are acceptable to the Company. The Company
has been unable to obtain such funding in the past. In the event
that the Company is unable to secure additional needed funds, the
Company will take actions necessary to continue operations with the
funds available, including, without limitation, reducing capital
expenditures for the National POP and downsizing the work force. If
additional needed funds do not become available, unless the Company
is able to continue to achieve positive cash flow on a consistent
basis, it will not be able to continue its business operations.
Shares of Common Stock that have had the same beneficial owner since April
21, 1988, or that have had the same beneficial owner for a continuous
period in excess of two years prior to the record date of any meeting
of stockholders, are entitled to ten votes per share in any matters
submitted for vote, at a meeting of stockholders. All other stockholders
have one vote per share unless this limitation is waived by the Board of
Directors. As of June 30, 1996, 7,011,128 shares of the Company's Common
Stock were entitled, to one vote per share. The remaining 16,783,372
shares of Common Stock were entitled to one vote per share. Mr. Lenfest
owns 12,896,968 shares of Common Stock that are entitled to ten votes per
share and 1,660,485 shares of Common Stock that are entitled to one vote
per share.
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
3.1 Certificate of Incorporation of the Company (incorporated by reference
to the Company's Registration Statement on Form S-8, dated March 30,
1989 (the "Registration Statement")).
3.2 Bylaws of the Company (incorporated by reference to the Company's
Registration Statement).
3.3 Certificate of Amendment of Certificate of Incorporation of the
Company, dated April 11, 1990 (incorporated by reference to the
Company's Annual Report on Form 10-K for the year ended December 31,
1991, (the "1991 Form 10-K")).
3.4 Certificate of Amendment of Certificate of Incorporation of the
Company, dated March 15, 1991 (incorporated by reference to the 1991
Form 10-K).
3.5 Form of copy of Amendment of Certificate of Incorporation of the
Company, filed September 25, 1995 (incorporated by reference to the
Company's Form 10-QSB for the period ended September 30, 1995).
4.1 Incentive Stock Option Plan (incorporated by reference to the
Company's Registration Statement).
4.2 Form of Stock Option Agreement (incorporated by reference to the
Company's Annual Report on Form 10-K for the year ended December 31,
1989, (the "1989 Form 10-K")).
4.3 Warrant Agreement, dated March 15, 1991, between the Company and H.F.
Lenfest (incorporated by reference to the Company's Annual Report on
Form 10-K for the year ended December 31, 1990, (the "1990 Form
10-K")).
4.4 Certificate of Designation of Class A Preferred Stock (incorporated
by reference to the June 30, 1990 Form 10-Q).
10.1 Distributorship Agreement, dated November 2, 1989, between the Company
and Science (incorporated by reference to the 1989 Form 10-K).
10.2 Stock Purchase Agreement, dated November 2, 1989, between the
Company and H.F. Lenfest (incorporated by reference to the Company's
Report on Form 8-K, dated November 15, 1989, (the "1989 Form 8-K")).
10.3 Shareholder's Agreement, dated November 2, 1989, among the Company
and certain of its stockholders (incorporated by reference to the
Company's 1989 Form 8-K).
10.4 Option Agreement, dated November 2, 1989, among the Company and
certain of its stockholders (incorporated by reference to the 1989
Form 8-K).
10.5 Form of Credit Agreement between the Company and H.F. Lenfest
(incorporated by reference to the 1990 Form 10-K).
10.7 Form of Line of Credit Agreement between the Company and H.F. Lenfest
(incorporated by reference to the 1990 Form 10-K).
10.8 Subordinated Promissory Note, dated November 15, 1994 in the principal
amount of $541,000 payable to Science Dynamics Corporation
(incorporated by reference to the 1994 Form 10-KSB).
10.10 Letter Agreement dated November 8, 1990 between Science Dynamics
Corporation and H.F. Lenfest (incorporated by reference to the
Company's Report on Form 8-K for November 16, 1990).
10.11 Loan Agreement dated December 24, 1991, between the Company and H.F.
Lenfest (incorporated by reference to the 1991 Form 10-K).
10.12 General Partnership Agreement of TelVue-Voice FX Joint Venture dated
October 12, 1993 (incorporated by reference to the September 30, 1993
Form 10-QSB).
10.14 Lease Agreement for office space and the First Amendment to Lease
dated March 30, 1994, between the Company and Bloom Associates
(incorporated by reference to the 1994 Form 10-KSB).
10.15 Maximum Value Plan Agreement dated January 27, 1994, between Sprint
Communications Company L.P. and the Company (incorporated by reference
to the Company's Form 10-QSB for the period ended September 30, 1994,
(the September 30, 1994 Form 10-QSB)).
10.16 Addendum to Clarity Maximum Value Plan Agreement dated March 3, 1994,
between Sprint Communications Company L.P. and the Company
(incorporated by reference to the September 30, 1994 Form 10-QSB).
10.17 Service Agreement dated September 27, 1994, between Video Jukebox
Network, Inc., and the Company (incorporated by reference to the
September 30, 1994 Form 10-QSB).
10.18 Management Agreement, dated March 10, 1995, between the Company and
Lenfest Networks, Inc (incorporated by reference to the Company's Form
10-QSB for the period ended June 30, 1995).
10.19 Letter effective as of December 31, 1995, from H.F. Lenfest, waiving
the repayment of loans and accrued interest until January 1, 1998
(incorporated by reference to the Company's Form 10-QSB for the period
ended March 31, 1996).
11. Statement re: Computation of Per Share Earnings (see the Company's
June 30, 1996 Financial Statement included herein).
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.
TELVUE CORPORATION
Dated: 8/07/96 By: /s/Frank J. Carcione
--------------------------------------------
Frank J. Carcione, (Chief Executive Officer)
Dated: 8/07/96 By: /s/Irene A. DeZwaan
-------------------------------------------
Irene A. DeZwaan, Treasurer (Controller)
<PAGE>
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