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, 1997
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 April 22,
1997: 23,794,500 shares.
Transitional Small Business Disclosure Form: Yes No X
------ ------
This report includes a total of 16 pages.
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TELVUE CORPORATION
INDEX
PAGE
NO.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets as of March 31, 1997
(unaudited) and as of December 31, 1996
Statements of Operations for the three
months ended March 31, 1997 (unaudited)
and March 31, 1996 (unaudited)
Statements of Cash Flows for the three
months ended March 31, 1997 (unaudited)
and March 31, 1996 (unaudited)
Notes to Financial Statements (unaudited)
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
<PAGE>
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<TABLE>
PART I. Financial Information
ITEM I. Financial Statements
TELVUE CORPORATION
BALANCE SHEETS
March 31, December 31,
1997 1996
------------- -----------
<S> <C> <C>
ASSETS (Unaudited) *
CURRENT ASSETS
Cash and cash equivalents $ 731,529 $ 668,367
Accounts receivable - trade 907,862 913,106
Other receivables 4,575 289,342
Other current assets 19,710 12,964
----------- -----------
TOTAL CURRENT ASSETS 1,663,676 1,883,779
PROPERTY AND EQUIPMENT
Machinery and equipment 4,212,628 4,111,240
Less accumulated depreciation 2,070,480 1,872,504
----------- -----------
2,142,148 2,238,736
DEFERRED TAXES, net 1,070,000 -
SECURITY DEPOSITS 9,300 8,800
----------- -----------
$ 4,885,124 $ 4,131,315
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Notes payable-majority stockholder-current $ 500,000 $ 1,000,000
Accounts payable - trade 381,270 220,415
Accounts payable - equipment 18,638 98,559
Accrued expenses 162,225 164,876
Accrued dividends 89,569 -
Deferred trunk credit 159,150 190,800
----------- -----------
TOTAL CURRENT LIABILITIES 1,310,852 1,674,650
NOTES PAYABLE - MAJORITY STOCKHOLDER 5,219,712 5,369,712
ACCRUED INTEREST - MAJORITY STOCKHOLDER 2,030,868 1,902,964
REDEEMABLE CONVERTIBLE PREFERRED STOCK, $1 par
value, 6,900,000 shares authorized,
2,985,636 shares issued and outstanding 2,985,636 2,985,636
COMMITMENTS AND CONTINGENCIES
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 (8,415,424) (9,555,127)
----------- -----------
(6,661,944) (7,801,647)
----------- -----------
$ 4,885,124 $ 4,131,315
=========== ===========
* Derived from audited financial statements.
The accompanying unaudited notes are an integral part of these statements.
<PAGE>
TELVUE CORPORATION
STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended March 31,
--------------------------------
1997 1996
---- ----
REVENUES $ 1,542,844 $ 1,304,382
OPERATING EXPENSES
Service 771,324 730,171
Selling and marketing 134,532 158,334
General and administrative 162,245 161,915
Depreciation 197,976 226,918
----------- -----------
1,266,077 1,277,338
----------- -----------
OPERATING INCOME 276,767 27,044
OTHER INCOME (EXPENSE)
Interest income 10,409 -
Interest expense (127,904) (148,003)
Loss on disposal of property and equipment - (7,612)
----------- -----------
(117,495) (155,615)
----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES 159,272 (128,571)
INCOME TAX BENEFIT 1,070,000 -
--------- -----------
NET INCOME (LOSS) 1,229,272 (128,571)
DIVIDENDS ON REDEEMABLE
CONVERTIBLE PREFERRED STOCK (89,569) (75,897)
------------ ------------
NET INCOME (LOSS) AVAILABLE TO
COMMON STOCKHOLDERS $ 1,139,703 $ (204,468)
============ ============
NET INCOME (LOSS) PER COMMON SHARE $.05 $(.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.
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TELVUE CORPORATION
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended March 31,
-------------------------------
1997 1996
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) $ 1,229,272 $ (128,571)
Adjustments to reconcile net loss to net
cash provided (used) by operating activities:
Depreciation 197,976 226,918
Loss on disposal of property and equipment - 7,612
Provision for deferred taxes, net (1,070,000) -
Changes in assets and liabilities:
Decrease (increase) in -
Accounts receivable - trade 5,244 (11,575)
Other receivable 284,767 (14,471)
Other current assets (6,746) (18,853)
Security deposits (500) -
Increase (decrease) in -
Accounts payable - trade 160,855 43,727
Accounts payable - equipment (79,921) 16,588
Accrued expenses (2,651) (58,959)
Deferred trunk credit (31,650) -
Accrued interest - majority stockholder 127,904 148,003
----------- -----------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 814,550 210,419
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (101,388) (283,225)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable - majority stockholder - 143,000
Debt reduction:
Notes payable - majority stockholder (650,000) -
----------- -----------
NET CASH PROVIDED BY (USED BY)
FINANCING ACTIVITIES (650,000) 143,000
NET INCREASE IN CASH AND
CASH EQUIVALENTS 63,162 70,194
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 668,367 216,409
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 731,529 $ 286,603
=========== ===========
The accompanying unaudited notes are an integral part of these statements.<PAGE>
<PAGE>
TELVUE CORPORATION
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION:
----------------------
Summary Financial Information and Results of Operations
- --------------------------------------------------------
In the opinion of 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, 1997, the results of
operations for the three months ended March 31, 1997 and 1996 and cash flows
for the three months ended March 31, 1997 and 1996.
Interim Financial Information
- -----------------------------
While management believes that the disclosures presented are adequate to
prevent misleading information, these unaudited financial statements must 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,
1996 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-
1997 1996
---- ----
Income taxes $ 0 $ 0
Interest $ 0 $ 0
Non-cash Investing and Financing Transactions
- ---------------------------------------------
The Company accrued dividends on its redeemable convertible preferred stock
of 89,569 and 75,897 during the three months ended March 31, 1997 and 1996,
respectively. During the three months ended March 31, 1997 and 1996, no
shares of preferred stock were issued in payment of preferred stock
dividends.
3. NET INCOME (LOSS) PER COMMON SHARE:
-----------------------------------
The net income (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, 1997, undeclared dividends on outstanding preferred stock
amounted to $89,569.
5. CORPORATE INCOME TAXES:
-----------------------
The Company uses the asset and liability method of accounting for income
taxes in accordance with Financial Accounting Standards Board Statement
(SFAS) No. 109, "Accounting for Income Taxes". SFAS 109 requires recognition
of deferred tax assets and liabilities for the expected future tax
consequences of events that have been recognized in the financial statements
or tax returns. Under this method, deferred tax liabilities and assets are
determined based on the differences between the financial statement carrying
amounts and tax bases of assets and liabilities using enacted tax rates in
effect in the years in which the differences are expected to reverse.
Differences between financial reporting and tax bases arise most frequently
from differences in timing of income and expense recognition. Deferred
income tax expense is measured by the change in the net deferred income tax
asset or liability during the year.
The provisions for income tax benefit consist of the following components:
1997 1996
----------- ----------
Current $ - $ -
Deferred
Federal 970,000 -
State 100,000 -
----------- ----------
1,070,000 -
----------- ----------
$ 1,070,000 $ -
=========== ==========
The Company has a net operating loss ("NOL") carryforward of approximately
$6,250,000 on a tax reporting basis. The carryforward will begin to expire
in 2004, if not utilized. Prior to 1997, the Company believed it was more
likely than not that the NOL would expire unused and, therefore, recorded a
100% valuation allowance against the net deferred tax asset. However, as a
result of pre-tax income of $159,272 for the three months ended March 31,
1997, the Company has reassessed the likelihood that it may utilize the NOL
to offset corporate taxable income.
As a result, the Company has recorded a net deferred tax asset of $1,070,000
at March 31, 1997, by reducing the valuation allowance it has previously
provided to offset the income tax benefit of the NOL. At March 31, 1996, any
tax benefit of the loss carryforward and of other cumulative temporary
differences were offset by a valuation allowance of the same amount.
Differences between the actual income tax rate and the statutory federal
income tax rate were primarily the result of the valuation allowance decrease
in 1997 and the valuation allowance increase in 1996.
6. NOTES PAYABLE AND ACCRUED INTEREST - MAJORITY STOCKHOLDER:
----------------------------------------------------------
As of March 31, 1997, the Company had various outstanding notes due to the
majority stockholder in the aggregate amount of $5,719,712 and accrued
interest due on these notes of $2,030,868. Effective as of March 31, 1997,
the Company obtained from the majority stockholder an extension to January 1,
1999, of his prior agreement not to demand repayment of his loans or the
accrued interest on the loans. The Company has decided to voluntarily make,
and the majority stockholder has agreed to accept, monthly payments against
loan principal in the amount of $50,000 through December 31, 1997. The
Company may monthly principal payments in excess of $50,000 when the Company
has excess cash that is not needed to fund operations. The Company made
principal payments of $650,000 during the three months ended March 31, 1997.
During April 1997, the Company made a principal payment of $100,000. The
Company has, therefore, classified $500,000 of the notes payable to the
majority stockholder as a short-term liability and has classified the
remaining balance on the notes payable and the accrued interest as long-term
liabilities.
7. COMMITMENTS AND CONTINGENCIES
-----------------------------
A former employee ("the Plaintiff") of the Company has filed suit against the
Company and its majority stockholder. The Plaintiff alleges breach of
contract, breach of implied covenant of good faith and fair dealing,
detrimental reliance and unjust enrichment. The suit seeks damages for an
unspecified amount for compensation and compensatory and punitive damages.
Based upon correspondence from plaintiff's counsel prior to filing the suit,
the Company's counsel believes that the plaintiff is seeking actual damages
of approximately $400,000 for commissions, unpaid salary, stock options and
other benefits. The Company believes that the Plaintiff's claims are without
merit and intends to vigorously defend the suit brought against it. The
Company believes that the likelihood of an unfavorable outcome is low.
<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.
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 provides enhanced service features. 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, the Company believes, for it to
remain competitive within the pay-per-view ANI industry. The National POP
also speaks 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
"PPV+ service"). The National POP serves 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 amended lease
agreement with MCI expires July 10, 2001. The Company believes it receives
a favorable trunk usage rate from MCI.
As described in the Form 10-KSB for the period ended December 31, 1996
("Report on Form 10-KSB"), on September 27, 1994, the Company entered into a
service agreement with Box Worldwide, Inc., formerly known as Video Jukebox
Network, Inc. ("VJN"). The agreement provided that the Company would 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. In July 1996,
VJN informed the Company that VJN wanted to terminate the agreement and
agreed to reimburse the Company $284,619, which amount covers costs incurred
by the Company for software development, costs incurred to convert hardware
originally purchased to service VJN, and accrued interest expense as of July
31, 1996, that the Company incurred on the VJN Loan. On January 10, 1997,
VJN paid the Company $284,619. The management of the Company believes that
the termination of the VJN contract will not have a material effect on the
Company's operations.
The Company had net income before income taxes of $159,272 for the
quarter ended March 31, 1997, compared to a net loss before income taxes of
$128,571 for the quarter ended March 31, 1996. It is the first time in the
Company's history that it has generated net income before income taxes for a
quarter. Although the Company experienced a decrease in the average monthly
buyrate from 26.1% for the quarter ended March 31, 1996 to 24.2% for the
quarter ended March 31, 1997, the service revenue for the 1997 quarter
increased $238,462 over 1996. The growth in service revenues is partially
attributable to the Company serving approximately 1,300,000 more full-time
cable subscribers for the quarter ended March 31, 1997 compared to March 31,
1996. The service revenue increase is also a result of an increase in
installation and data circuit revenue of $59,336, an increase in National POP
feature revenue of $114,870 and an increase in PPV+ revenue of $58,895. The
increase in installation and data link revenue is a result of customer
additions to the National POP. National POP feature revenue increased as a
result of both new and existing customers using more optional features. The
PPV+ revenue increased over 1996 as a result of customer additions and as a
result of more previously existing customers using the PPV+ Service.
The Company had net income of $1,229,272 of which $1,070,000 was the
result of the recognition of net deferred tax assets. The Company's income
before income taxes is $159,272 for the quarter ended March 31, 1997.
Because of such pre-tax income the Company reduced its deferred tax asset
valuation allowance since the Company now believes that it will benefit, in
part, from the utilization of its net operating losses. As of January 1,
1997, the Company's net operating loss carryforward was approximately
$6,250,000 on a tax reporting basis (see Note 5 to the financial statements).
Service expenses for the quarter ended March 31, 1997, increased
$41,153 from the comparable 1996 period. The increase in service expenses
for the quarter is attributable to an increase in trunk usage expense of
$70,971 as a result of an increase in full-time subscribers. The increase in
trunk usage expense is partially offset by decreases in various other service
expense categories.
As of March 31, 1997, the Company was serving approximately 8,700,000
full-time cable subscribers on the National POP compared to approximately
7,400,000 full-time cable subscribers served as of March 31, 1996. The
Company has one customer with approximately 7,000 cable subscribers remaining
on a Regional POP. The Company plans to have this customer using the
National POP by the second quarter of 1997. In November 1996, the Company
began serving cable subscribers on a part-time basis ("Part-time
Subscribers"). Part-time Subscribers are subscribers who only use the
Company's ANI service for major special events, such as boxing, wrestling and
concerts. The Company is marketing and providing service to subscribers on
a part-time basis because it wants customers who are using alternate pay-per-
view ordering services to become familiar and comfortable with the Company's
ANI service in anticipation that these customers may choose to use the
Company's ANI service on a full-time basis. As of March 31, 1997, the
Company was serving approximately 1,600,000 Part-time Subscribers. The Part-
time Subscribers did not significantly contribute to the revenue or service
expense increases for the quarter ended March 31, 1997.
The National POP and the Regional POPs had required a substantial
purchase of equipment by the Company. During the quarter ended March 31,
1997, the Company purchased $101,388 of equipment compared with $283,225
purchased during quarter ended March 31, 1996. Depreciation accounted for
16% and 18% of total operating expenses for the quarters ended March 31, 1997
and 1996, respectively. For the quarter ended March 31, 1997, selling and
marketing expenses decreased 15% as a result of a decrease of $9,812 in
commission expense as a result of more commissions being paid on contract
renewals during the first quarter of 1996, and a decease of $9,336 in
advertising expense. There was no significant change in general and
administrative expenses during the quarters ended March 31, 1997 and 1996.
Total liabilities decreased $385,894 and total assets increased
$753,809 for the quarter ended March 31, 1997. The decrease in total
liabilities was primarily a result of an decrease in notes payable - majority
stockholder of $650,000 as a result of debt repayment. Partially offsetting
the debt repayment is an increase in accrued interest of $127,904 on
outstanding loans from Mr. H.F. Lenfest, the majority stockholder and
Chairman of the Board of Directors of the Company ("Mr. Lenfest"), and an
increase in accounts payable of $160,855. The increase in assets is
attributable to an increase in deferred taxes of $1,070,000 as a result of
generating net income before taxes during the quarter ended March 31, 1997
(see above and Note 5 to the financial statements). The increase in deferred
taxes is partially offset by a decrease in other receivables of $284,767 as
a result of the Company receiving a reimbursement from VJN of $284,619 during
January 1997 (see above). The Company's days for sales in accounts
receivable is 53 days for the quarter ended March 31, 1997, compared to 55
days for the quarter ended March 31, 1996. The Company believes the decrease
of 2 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, 1997, 5,192,811 shares of the Company's Common Stock were entitled
to one vote per share. The remaining 18,601,689 shares of Common Stock were
entitled to ten votes per share. Mr. Lenfest owns 14,557,453 shares of
Common Stock that are entitled to ten votes per share.
The Company had positive cash flow from operations of $814,550 during
the quarter ended March 31, 1997. Ignoring changes in operating assets and
liabilities that result from timing issues, and considering only adjustments
to reconcile net income (loss) before income taxes to net cash provided by
operating activities, the Company would have positive cash flow from
operating activities of $357,248 for the quarter ended March 31, 1997,
compared to positive cash flow from operating activities of $105,959 for the
quarter ended March 31, 1996. The increase in cash flow for the quarter
ended March 31, 1997, is primarily a result of increased revenue (see above).
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. Through March 31, 1997, the Company had
borrowed an aggregate of $6,128,712 from Mr. Lenfest, as previously discussed
in the Report on Form 10-KSB. Interest on $500,000 of the loans is set at
12% per annum, interest on $411,173 is set at the floating prime interest
rate of PNC Bank plus 2%, and interest on $5,217,539 of the loans is set at
the floating prime interest rate of PNC Bank plus 1%. Interest on the
$1,471,272 of the loans 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. During January 1995, Mr. Lenfest purchased from
Science Dynamics Corporation ("Science") the Company's non-interest bearing
note in the amount of $541,000 (the "Prior Science Note").
Effective as of March 31, 1997, 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, 1999. The
deferring of the interest payments along with the increase in revenue has
enabled the Company to accumulate cash. Interest payments amounted to
$127,904 for the quarter ended March 31, 1997, compared to $148,003 for the
quarter ended March 31, 1996. During 1996, the Board of Directors of the
Company (with Mr. Lenfest not participating) authorized that, the Company may
make monthly principal payments of $50,000 to Mr. Lenfest. In addition, the
Board of Directors of the Company authorized that at management's discretion,
the Company may make monthly principal payments in excess of $50,000 when the
Company has excess cash not needed to fund operations. Mr. Lenfest has agreed
to accept payments of principal through December 31, 1997. During the first
quarter of 1997, the Company made principal payments of $650,000 to Mr.
Lenfest. The outstanding loan balance due to Mr. Lenfest as of March 31,
1997, is $5,719,712, of which $541,000 accrues no interest.
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 total debt repayment.
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 of the Company's
equipment and software providers are net 30 days.
The Company's ability to fund its operating expenses primarily depends
on three factors: the continued expansion of the Company's subscriber base,
the cable industry's buy rates, and the continued deferral by Mr. Lenfest of
the cash repayment of his loans to the Company. Management believes its
present marketing strategies will further increase the customer base,
although there can be no assurances that the Company will be able to attract
any further customers. 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. Although cable industry buy rates have
increased each year for the last four years, the Company experienced a
decrease in the average monthly buy rate from 26.1% for the first quarter of
1996 to 24.2% for the first quarter of 1997. Hence, there can be no
assurance that buys rates will continue to increase or will remain at their
current level.
The Company remains dependent upon the deferral of principal and
interest payments due to Mr. Lenfest to fund operations and capital
expenditures from operating cash flow. Mr. Lenfest has agreed not to demand
the cash repayment of principal or accrued interest on the outstanding loans
through January 1, 1999. Nevertheless, management intends to continue to
repay the outstanding principal amount of loans made by Mr. Lenfest from cash
not needed for operations. Management believes that the Company will have
sufficient funds to continue such repayments and will be able to fund its
core business from operating cash flow through December 31, 1997.
Although no equipment purchases are anticipated for the remainder of
1997 that can not be funded from cash flow generated by operations, should
the Company require additional funding, it will seek additional financing
from Mr. Lenfest and from other sources. 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.
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, (the
September 30, 1995 Form 10-QSB)).
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 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 10Q-SB).
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 10Q-SB for the period ended
September 30, 1994, (the September 30, 1994 Form 10Q-SB)).
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 10Q-SB).
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 10Q-SB).
10.18 Management Agreement, dated March 10, 1995, between the Company and
Lenfest Networks, Inc., (incorporated by reference to the Company's
Form 10Q-SB for the period ended June 30, 1995 (the June 30, 1995
Form 10Q-SB)).
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).
10.20 Letter effective as of March 31, 1997, from H.F. Lenfest, waiving
the repayment of loans and accrued interest until January 1, 1999.
11. Statement re: Computation of Per Share Earnings (see the Company's
March 31, 1997 Financial Statements 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: May 13, 1997 By: /s/Frank J. Carcione
--------------------------------------------
Frank J. Carcione, (Chief Executive Officer)
Dated: May 13, 1997 By: /s/Irene A. DeZwaan
-------------------------------------------
Irene A. DeZwaan, Treasurer (Controller)
<PAGE>
EXHIBIT INDEX
10.20 Letter effective as of March 31, 1997, from H.F. Lenfest, waiving
the repayment of loans and accrued interest until January 1, 1999.
<PAGE>
As of March 31, 1997
Frank Carcione
President
TelVue Corporation
16000 Horizon Way, Suite 500
Mt. Laurel, NJ 08054
Dear Frank,
At your request, this will continue our prior agreement. Namely, absent
any default under the terms of my loans to the TelVue or any other
obligations of TelVue to any other person, including, without limitation,
any voluntary or involuntary bankruptcy or insolvency proceedings by or
against TelVue, I agree not to demand repayment of the loans or payment in
cash of the accrued interest prior to January 1, 1999.
Very truly yours,
\s\H F Lenfest
--------------------
H.F. (Gerry) Lenfest
</TABLE>
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 731,529
<SECURITIES> 0
<RECEIVABLES> 907,862
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,663,676
<PP&E> 4,212,628
<DEPRECIATION> 2,070,480
<TOTAL-ASSETS> 4,885,124
<CURRENT-LIABILITIES> 1,410,852
<BONDS> 0
<COMMON> 237,945
0
2,985,636
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 4,885,124
<SALES> 1,542,844
<TOTAL-REVENUES> 1,542,844
<CGS> 0
<TOTAL-COSTS> 771,324
<OTHER-EXPENSES> 494,753
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 127,904
<INCOME-PRETAX> 159,272
<INCOME-TAX> 1,070,000
<INCOME-CONTINUING> 1,229,272
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,229,272
<EPS-PRIMARY> .05
<EPS-DILUTED> .02
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