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 March 31, 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 May
6, 1996:
23,794,500 shares.
Transitional Small Business Disclosure Form: Yes No X
------ ------
This report includes a total of 16 pages.
<PAGE>
TELVUE CORPORATION AND FORMER SUBSIDIARY
INDEX
PAGE
NO.
-----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets as of March 31, 1996
(unaudited) and as of December 31, 1995
Statements of Operations for the three
months ended March 31, 1996 (unaudited)
and March 31, 1995 (unaudited)
Statements of Cash Flows for the three
months ended March 31, 1996 (unaudited)
and March 31, 1995 (unaudited)
Notes to Financial Statements (unaudited)
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
March 31,
December 31,
1996
1995
-------------
- -----------
<S> <C>
<C>
ASSETS (Unaudited)
*
CURRENT ASSETS
Cash and cash equivalents $ 286,603 $
216,409
Accounts receivable - trade 795,163
783,588
Other receivables 29,996
15,525
Other current assets 23,072
4,219
-----------
- -----------
TOTAL CURRENT ASSETS 1,134,834
1,019,741
PROPERTY AND EQUIPMENT
Machinery and equipment 5,039,641
5,007,768
Less accumulated depreciation 2,181,897
2,198,719
-----------
- -----------
2,857,744
2,809,049
SECURITY DEPOSITS 8,800
8,800
-----------
- -----------
$ 4,001,378 $
3,837,590
===========
===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable - trade $ 386,674 $
342,947
Accounts payable - equipment 44,702
28,114
Accrued expenses 188,510
247,469
Accrued dividends 75,897
-
-----------
- -----------
TOTAL CURRENT LIABILITIES 695,783
618,530
NOTES PAYABLE - MAJORITY STOCKHOLDER 6,669,712
6,526,712
ACCRUED INTEREST - MAJORITY STOCKHOLDER 1,610,579
1,462,576
REDEEMABLE CONVERTIBLE PREFERRED STOCK, $1 par
value, 6,900,000 shares authorized,
2,532,895 shares issued and outstanding 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 (9,261,071)
(9,056,603)
-----------
- -----------
(7,507,591)
(7,303,123)
-----------
- -----------
$ 4,001,378 $
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
March 31,
- --------------------------------
1996
1995
----
----
REVENUES $ 1,304,382 $
1,005,156
OPERATING EXPENSES
Service 730,171
443,905
Selling and marketing 178,029
152,000
General and administration 142,220
140,566
Depreciation 226,918
205,817
-----------
- -----------
1,277,338
942,288
-----------
- -----------
OPERATING INCOME 27,044
62,868
OTHER INCOME (EXPENSE)
Interest expense (148,003)
(142,919)
Loss on disposal of property and equipment (7,612)
(7,724)
Minority interest in net loss of former subsidiary -
3,955
-----------
- -----------
(155,615)
(146,688)
-----------
- -----------
NET LOSS (128,571)
(83,820)
DIVIDENDS ON REDEEMABLE
CONVERTIBLE PREFERRED STOCK (75,897)
(60,956)
-----------
- -----------
NET LOSS AVAILABLE TO
COMMON STOCKHOLDERS $ (204,468) $
(144,776)
===========
===========
NET LOSS PER COMMON SHARE $(.01)
$(.01)
===========
===========
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)
Three Months Ended
March 31,
- -------------------------------
1996
1995
----
----
CASH FLOWS FROM OPERATING ACTIVITIES $ (128,571) $
(83,820)
Net Loss
Adjustments to reconcile net loss to net
cash provided (used) by operating activities:
Depreciation 226,918
205,817
Loss on disposal of property and equipment 7,612
7,724
Minority interest in net loss of former subsidiary -
(3,955)
Changes in assets and liabilities:
Decrease (increase) in -
Accounts receivable - trade (11,575)
(98,717)
Other receivable (14,471)
24,229
Other current assets (18,853)
(20,312)
Security deposits -
-
Increase (decrease) in -
Accounts payable - trade 43,727
(5,257)
Accounts payable - equipment 16,588
(221,220)
Accrued expenses (58,959)
57,908
Accrued interest - majority stockholder 148,003
142,919
-----------
- -----------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 210,419
5,316
-----------
- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (283,225)
(331,640)
Proceeds from sale of property and equipment -
200
-----------
- -----------
NET CASH USED BY INVESTING ACTIVITIES (283,225)
(331,440)
-----------
- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable - majority stockholder 143,000
283,801
-----------
- -----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 70,194
(42,323)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 216,409
164,588
-----------
- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 286,603 $
122,265
===========
===========
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 March 31, 1996, the
results of
operations for the three months ended March 31, 1996 and 1995 and
cash flows
for the three months ended March 31, 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 March 31, 1996, preferred undeclared dividends amounted to
$75,897.
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 March 31, 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 March 31, 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 $1,610,579. Effective as of March
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 March 31, 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 and the
installation of the
leased local and long distance telephone company's trunks require
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. 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 May 6,
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%. The Company had
originally
planned to begin providing service to VJN cable subscribers during
May 1995.
This has been rescheduled to August 1996, as a result of software
development
problems.
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 of 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 ceased doing business 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 $128,571 for the quarter ended
March 31,
1996, compared to $83,820 for the quarter ended March 31, 1995.
Service
revenues for the first quarter increased $299,226 over 1995. The
growth in
service revenues is partially attributable to the Company serving
approximately 667,000 more cable subscribers during the quarter
ended March
31, 1996 than were served during the quarter ended March 31, 1995.
The
increase is also attributable to an increase in the average monthly
buy rate
from 20.9% for the quarter ended March 31, 1995, to 26.1% for the
quarter
ended March 31, 1996. The Company has been experiencing a
continuing upward
trend in buy rates when comparing the monthly buy rates during the
current
year to that of the same month in the prior year. The service
revenue
increase is also a result of installation and data circuit income
of $122,375
for 1996, compared to $94,967 for 1995. In addition, the Company
had
National POP feature revenue of $110,445 and $87,540 for the
quarters ended
March 31, 1996 and 1995, respectively. The Company had
Pay-per-view Plus
revenue of $80,925 and $27,085 for the quarters ended March 31,
1996 and
1995, respectively. 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 three months ended March 31, 1996,
increased
$286,266 from the comparable 1995 period. The increase in service
expenses
for the year is attributable to an increase in trunk usage expense
of
$256,455. A portion of the trunk expense increase is a result of
an increase
in the average monthly buy rate (see above) along with the Company
serving
more subscribers on the National POP as of March 31, 1996 when
compared to
March 31, 1995 (see below). In addition, 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 Company migrated approximately 275,000 subscribers from
the
regional POPs to the National POP during the first quarter of 1996.
As of
March 31, 1996, the Company was serving approximately 7,400,000
cable
subscribers on the National POP compared to approximately 5,660,000
cable
subscribers served as of March 31, 1995. The Company's remaining
25,000
regional subscribers will be migrated to the National POP by the
end of the
second quarter of 1996.
The National POP currently requires, and the regional POPs
had
required, a substantial purchase of equipment by the Company.
Depreciation
accounted for 18% of the total operating expenses for the quarter
ended March
31, 1996, compared to 22% for the quarter ended March 31, 1995.
For the
quarter ended March 31, 1996, selling and marketing expenses
increased 17%
and general and administrative expenses increased 1% over the
comparable 1995
period. The increase in selling and marketing expenses is
primarily
attributable to an increase in commission expense of $20,263 as a
result of
contract renewals and customer additions.
For the quarter ended March 31, 1996, the Company recorded a
loss on
the disposal of property and equipment of $7,612. This loss was a
result of
being unable to use or sell excess equipment inventory made
available by the
retirement of four regional POPs. The retirement of the four
regional POPs
resulted from the migration of customers from the regional POPs to
the
National POP. As the remaining four regional POPs are retired, the
Company
will have a surplus of equipment inventory. The Company will need
to dispose
of this excess equipment if it is unable to obtain a purchaser and
will
record a further loss.
Total liabilities increased $368,256 and total assets
increased
$163,788 for the quarter ended March 31, 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 $148,003 on outstanding loans from Mr. Lenfest
and an
increase in accrued dividends on preferred stock in the amount of
$75,897.
The increase in assets is attributable to an increase in cash and
property
and equipment. The Company's days for sales in accounts receivable
is 55
days for the quarter ended March 31, 1996, compared to 47 days for
the
quarter ended March 31, 1995. The Company believes the increase of
8 days is
not material. The Company does not offer incentives/discounts to
its
customers, nor has it changed its credit terms with its customers.
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
March 31, 1996, 16,706,681 shares of the Company's Common Stock
were entitled
to one vote per share. The remaining 7,087,819 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.
During the quarter ended March 31, 1996, the Company
purchased $283,225
of equipment compared with $331,640 purchased during the quarter
ended March
31, 1995. Included in the 1996 equipment purchases is one switched
access
audio response unit ("SARU") and software enhancements and
peripheral
equipment for the National POP totaling $206,770, and $75,790 in
software to
be used to provide service to VJN. The Company purchases the SARUs
from
Syntellect Network Systems, Inc. ("Syntellect"). Syntellect has
purchased a
competitor of the Company and, as a result, the Company is
evaluating
alternative sources for future equipment purchases.
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 $10,973 and expenses of $27,385 for the
quarter ended
March 31, 1996. The expenses included $7,690 for cable operator
commissions
and production costs and $19,214 for payroll and payroll taxes and
benefits.
The Company had positive cash flow from operations of
$210,419 during
the quarter ended March 31, 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
$105,959
for the quarter ended March 31, 1996, compared to positive cash
flow from
operating activities of $125,766 for the for the quarter ended
March 31,
1995. The decrease in cash flow is due to the credits that reduced
trunk
usage expenses from Sprint during the first quarter of 1995 (see
above). The
Company has been able to continue operations as a result of Mr.
Lenfest
agreeing to defer cash interest payments of $148,003 during the
quarter ended
March 31, 1996. Mr. Lenfest has agreed to defer cash interest
payments on
outstanding borrowings through January 1, 1998, thereby increasing
cash
available for operations.
The Company's 1996 budget indicates that the Company will
have
sufficient cash flow to meet operating expenses for its
pay-per-view core
business through 1996 as long as Mr. Lenfest continues to allow the
deferment
of principal and interest. The 1996 budget also anticipates
insufficient
availability of cash during the first half of 1996 to purchase two
additional
SARUs that are required to meet the Company's growing cable
subscriber base.
Mr. Lenfest has therefore agreed to fund the purchase of two
additional SARUs
during 1996 (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%. During February 1996, the Company borrowed from Mr.
Lenfest
$143,000 to purchase one SARU under the terms of the SARU Loan.
The Company believes that increases in accrued interest under
the loans
from Mr. Lenfest do not have a direct material effect on operations
or
continued availability of credit. Cash flow from operations is
sufficient to
fund current operations but is insufficient to fund debt repayment
or
necessary capital expenditures. At present, the only source of
financing
available to the Company is from Mr. Lenfest, who has agreed to
fund
specified additional necessary capital expenditures. The Company
believes
its suppliers look primarily to the Company's timely payment of
outstanding
invoices. Historically, the Company has paid all the suppliers it
deals with
on a timely basis and, therefore, the cash flow from operations has
no effect
on the Company's availability of credit from key suppliers of goods
and
services. The payment terms with Syntellect, the Company's major
equipment
supplier, vary based upon the terms the Company negotiates with
Syntellect.
The negotiated terms are affected by the equipment purchased, the
date by
which the equipment is needed and the Company's ability to pay.
The
negotiated payment terms range from net 30 days to net 90 days or
to
installment payments over a period of months. The payment terms
for the
Company's equipment supplier of peripheral equipment, Dacon
Corporation, is
net 30 days.
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 May 1, 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. As of
May 6, 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.
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 is also dependent upon the deferral of principal and
interest
payments due to Mr. Lenfest in order to fund its operations. 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 without seeking outside financing. Should the Company
require
funding in the future for operations, 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.
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.
11. Statement re: Computation of Per Share Earnings (see the
Company's
March 31, 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: 5/13/96 By: /s/Frank J. Carcione
- --------------------------------------------
Frank J. Carcione, (Chief
Executive Officer)
Dated: 5/13/96 By: /s/Irene A. DeZwaan
- -------------------------------------------
Irene A. DeZwaan, Treasurer
(Controller)
<PAGE>
EXHIBIT INDEX
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.
<PAGE>
H.F. (Gerry) Lenfest
202 Shoemaker Road
Pottstown, Pennsylvania 19464
(610) 327-0965
As of December 31,
1995
Frank Carcione, President
TelVue Corporation
16000 Horizon Way, Suite 500
Mt. Laurel, NJ 08054
Dear Frank,
You have represented to me that TelVue Corporation will have
insufficient
cash to repay before January 1, 1998 the principal or interest on
the loans
made by me to TelVue. Based on that representation and absent any
default
under the terms of the loans, including, without limitation, any
voluntary or
involuntary bankruptcy or insolvency proceedings by or against
TelVue, I
agree not to demand repayment in cash of the principal portion of
the loans,
or payment in cash of accrued interest on the loans, prior to that
date.
Very truly yours,
/s/Gerry
--------------------
H.F. (Gerry) Lenfest
HFL:slr
<PAGE>
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<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 286,603
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<RECEIVABLES> 795,163
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0
2,532,895
<OTHER-SE> 0
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