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, 1999
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 27,
1999: 24,194,500 shares.
Transitional Small Business Disclosure Form: Yes No X
------ ------
This report includes a total of 15 pages.
TELVUE CORPORATION
INDEX
PAGE
NO.
-----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets as of June 30, 1999
(unaudited) and as of December 31, 1998
Statements of Operations for the three
months ended June 30, 1999 (unaudited)
and June 30, 1998 (unaudited)
Statements of Operations for the six
months ended June 30, 1999 (unaudited)
and June 30, 1998 (unaudited)
Statements of Cash Flows for the six
months ended June 30, 1999 (unaudited)
and June 30, 1998 (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
June 30, December 31,
1999 1998
------------- -----------
<S> <C> <C>
ASSETS (Unaudited) *
CURRENT ASSETS
Cash and cash equivalents $ 363,061 $ 453,569
Accounts receivable - trade 765,460 786,083
Other receivables 6,957 4,910
Prepaid income taxes 1,339 -
Deferred tax asset 285,935 285,935
Other current assets 31,624 11,626
----------- ----------
TOTAL CURRENT ASSETS 1,454,376 1,542,123
PROPERTY AND EQUIPMENT
Machinery and equipment 4,863,417 4,791,240
Less accumulated depreciation 3,860,038 3,462,823
----------- ----------
1,003,379 1,328,417
DEFERRED TAXES, net 1,731,154 1,932,778
SECURITY DEPOSITS 9,300 9,300
----------- ----------
$4,198,209 $4,812,618
=========== ==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Notes payable-majority stockholder-current $ 1,416,000 $ 1,380,000
Accounts payable 222,856 512,047
Accrued expenses 151,419 172,839
Accrued dividends 633,366 422,244
Income taxes payable - 8,661
----------- ----------
TOTAL CURRENT LIABILITIES 2,423,641 2,495,791
NOTES PAYABLE - MAJORITY STOCKHOLDER 524,737 1,039,712
ACCRUED INTEREST - MAJORITY STOCKHOLDER 2,467,818 2,694,837
REDEEMABLE CONVERTIBLE PREFERRED STOCK, $1 par
value, 6,900,000 shares authorized,
3,518,694 shares issued and outstanding 3,518,694 3,518,694
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIT
Common stock, $.01 par value, 100,000,000
shares authorized and 24,194,500
shares issued and outstanding 241,945 241,945
Additional paid-in capital 1,550,535 1,550,535
Accumulated deficit (6,529,161) (6,728,896)
----------- -----------
(4,736,681) (4,936,416)
----------- -----------
$4,198,209 $ 4,812,618
=========== ===========
* 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
June 30,
----------------------------
1999 1998
---- ----
REVENUES $ 1,425,838 $ 1,589,755
OPERATING EXPENSES
Service 563,565 742,303
Selling and marketing 136,061 147,213
General and administrative 160,611 184,093
Depreciation 190,151 221,492
------------ -----------
1,050,388 1,295,101
------------ -----------
OPERATING INCOME 375,450 294,654
OTHER INCOME (EXPENSE)
Interest income 5,392 4,929
Interest expense (93,081) (132,056)
Litigation settlement - (40,463)
----------- -----------
(87,689) (167,590)
----------- -----------
INCOME BEFORE INCOME TAXES 287,761 127,064
INCOME TAX (97,817) (63,000)
----------- ----------
NET INCOME 189,944 64,064
DIVIDENDS ON REDEEMABLE
CONVERTIBLE PREFERRED STOCK (105,561) (105,561)
----------- -----------
NET INCOME (LOSS) AVAILABLE TO
COMMON STOCKHOLDERS $ 84,383 $ (41,497)
=========== ===========
NET INCOME (LOSS) PER COMMON SHARE
BASIC $.00 ($.00)
=========== ==========
DILUTED $.00 ($.00)
=========== ==========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING
BASIC 24,194,500 23,931,424
========== ==========
DILUTED 82,262,387 23,931,424
========== ==========
The accompanying unaudited notes are an integral part of these statements.
<PAGE>
TELVUE CORPORATION
STATEMENTS OF OPERATIONS
(UNAUDITED)
Six Months Ended
June 30,
----------------------------
1999 1998
---- ----
REVENUES $ 3,011,894 $ 3,191,108
OPERATING EXPENSES
Service 1,187,254 1,496,318
Selling and marketing 297,275 316,994
General and administrative 323,944 346,632
Depreciation 397,215 436,448
----------- -----------
2,205,688 2,596,392
----------- -----------
OPERATING INCOME 806,206 594,716
OTHER INCOME (EXPENSE)
Interest income 10,288 12,105
Interest expense (194,006) (272,260)
Litigation settlement, net - (40,463)
----------- -----------
(183,718) (300,618)
----------- -----------
INCOME BEFORE INCOME TAXES 622,488 294,098
INCOME TAX (211,624) (137,000)
------------ ----------
NET INCOME 410,864 157,098
DIVIDENDS ON REDEEMABLE
CONVERTIBLE PREFERRED STOCK (211,122) (211,122)
----------- -----------
NET INCOME (LOSS) AVAILABLE TO
COMMON STOCKHOLDERS $ 199,742 $ (54,024)
=========== ===========
NET INCOME (LOSS) PER COMMON SHARE
BASIC $.01 ($.00)
=========== ===========
DILUTED $.00 ($.00)
=========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING
BASIC 24,194,500 23,873,285
=========== ===========
DILUTED 82,262,387 23,873,285
=========== ===========
The accompanying unaudited notes are an integral part of these statements.
<PAGE>
TELVUE CORPORATION
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six months Ended
June 30,
---------------------
1999 1998
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 410,864 $ 157,098
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 397,215 436,448
Deferred taxes 201,624 125,000
Issuance of common stock - 38,000
Changes in assets and liabilities:
Decrease (increase) in -
Accounts receivable - trade 20,616 (5,767)
Other receivables (2,047) (114,748)
Prepaid income taxes (1,339) (1,000)
Other current assets (19,998) (17,922)
Increase (decrease) in -
Accounts payable (289,191) (30,206)
Accrued expenses (21,420) 13,401
Income taxes payable (8,661) (12,000)
Deferred trunk credit - (63,300)
Accrued interest - majority stockholder (227,019) 272,260
----------- -----------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 460,644 797,264
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (72,177) (131,500)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Debt reduction:
Notes payable - majority stockholder (478,975) (925,000)
----------- -----------
NET (DECREASE) IN CASH AND
CASH EQUIVALENTS (90,508) (259,236)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 453,569 445,368
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 363,061 $ 186,132
=========== ===========
The accompanying unaudited notes are an integral part of these statements.
<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 June 30,
1999, the results of operations for the three and six months ended June 30,
1999 and 1998 and cash flows for the six months ended June 30, 1999 and
1998.
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,
1998, 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:
-----------------------------------
Supplemental disclosures of cash paid during the period-
1999 1998
---- ----
Income taxes $ 20,000 $25,000
Interest $421,025 $ 0
Non-cash Investing and Financing Transactions
- ---------------------------------------------
The Company accrued dividends on its redeemable convertible preferred stock
of 211,122 for each of the six months ended June 30, 1999 and 1998. During
the six months ended June 30, 1999 and 1998, no shares of preferred stock
were issued in payment of preferred stock dividends.
3. EARNINGS (LOSS) PER COMMON SHARE:
--------------------------------
Earnings (loss) per common share amounts are based upon the weighted average
number of common and common equivalent shares outstanding during the year.
Common equivalent shares are excluded from the computation in periods in
which they have an antidilutive effect.
In February 1997, the Financial Accounting Standards Board issued SFAS 128
Earnings per Share ("SFAS 128"), which specifies the computation,
presentation, and disclosure requirements for earnings per share ("EPS"). It
replaces the presentation of primary and fully diluted EPS with basic and
diluted EPS. Basic EPS excludes all dilution. It is based upon the
weighted average number of common shares outstanding during the period.
Diluted EPS reflects the potential dilution that would occur if securities
or other contracts to issue common stock were exercised or converted into
common stock. The Company has adopted SFAS 128 as of the fourth quarter of
1997 and has restated all previously reported per share amounts to conform
to the new presentation.
The following is a reconciliation from basic earnings per share to diluted
earnings per share for the six months ended June 30, 1999. Because of the
net loss available to common stockholders for the six months ended June 30,
1998, no potential common shares are included in the computation of a
diluted per share amount since such potential common shares would not have a
dilutive effect.
Net Income
(Loss)
Available Average
to Common Shares Earnings
Stockholders Outstanding Per Share
------------ ----------- --------
1999 $ 199,742 24,194,500 $ .01
Effect of dilution
Warrants 29,915,160
Convertible preferred stock 211,122 27,681,784
Convertible accrued interest - 955,701
----------- ---------- ------
Diluted $ 410,864 82,747,145 $ .00
=========== ========== ======
1998 $ (54,024) 23,873,285 $ .00
=========== ========== ======
4. DIVIDENDS ON REDEEMABLE CONVERTIBLE PREFERRED STOCK:
----------------------------------------------------
As of June 30, 1999, undeclared dividends on outstanding preferred stock
amounted to $633,366.
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 (expense) consist of the following
components:
1999 1998
----------- ----------
Current
Federal $ - $ (12,000)
State - -
----------- ----------
- (12,000)
Deferred
Federal (211,624) (97,000)
State - (28,000)
---------- ----------
$(211,624) $(125,000)
---------- ----------
$(211,624) $(137,000)
========== ==========
The Company has a net operating loss carryforward ("NOL") of approximately
$3,000,000 on a tax reporting basis. The carryforward will begin to expire
in 2004, if not utilized. The Company believes it is more likely than not
that it will utilize the NOL prior to the expiration dates.
Differences between the effective income tax rate and the statutory federal
income tax rate were primarily the result of the change in the valuation
allowance.
6. NOTES PAYABLE AND ACCRUED INTEREST - MAJORITY STOCKHOLDER:
----------------------------------------------------------
As of June 30, 1999, the Company had various outstanding notes due to the
majority stockholder in the aggregate principal amount of 1,940,737 and
accrued interest due on these notes in the aggregate amount of $2,467,818.
Effective as of March 31, 1999, the Company obtained from the majority
stockholder an extension to January 1, 2001, 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 in the amount of $150,000 through
December 31, 1999. Effective January 1, 1999, the Company began to make
current interest payments from the $150,000 monthly payment. The balance of
the payment is applied to loan principal. The Company may make monthly
payments in excess of $150,000 when, in the opinion of management, the
Company has excess cash that is not needed to fund operations. The Company
made payments of $900,000, including interest, during the six months ended
June 30, 1999. The Company has classified twelve estimated principal
payments of $118,000 each as a current liability on the balance sheet.
7. COMMITMENTS AND CONTINGENCIES
-----------------------------
The Company has received notice from a cable operating company customer
asserting its right to be indemnified against claims of patent infringement
made to the cable operator by a third party. The third party has alleged
to the cable operator that portions of the cable operator's pay-per-view
operations infringe one or more patents held by such party. No notice of
alleged infringement has been received by the Company from such third
party. The Company has retained independent patent counsel to review the
terms and the alleged infringement. The Company is unable at this time to
determine the amount or extent of liability, if any, to the cable operator.
<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's equipment for
providing the Service nationwide is located at the Company's home office in
Mt. Laurel, New Jersey. The equipment 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 equipment 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 Company serves cable
television systems across the United States via trunk lines and data
circuits that it currently leases from MCIWorldcom. The Company believes it
receives a favorable trunk usage rate from MCIWorldcom.
Income before income taxes was $287,761 and $127,064 for the three
months ended June 30, 1999 and 1998, respectively. The Company had income
before income taxes of $410,864 and $157,098 for the six months ended June
30, 1999 and 1998, respectively. The Company experienced a decrease in the
average monthly buy rate from 18.2% and 18.9% for the three and six months
ended June 30, 1998, respectively, to 12.6% and 14.0% for the three and six
months ended June 30, 1999, respectively. The drop in the buy rate caused
the pay-per-view buy revenue to decrease approximately $175,019 and
$247,782 for the three and six months ended June 30, 1999, respectively.
The Company believes a somewhat weak movie product is one of the reasons
for the decrease in the buy rates for the three and six months ended June
30, 1999. Although the pay-per-view buy revenue decreased, the Company had
an increase in feature revenue of $35,838 and $113,735 for the three and
six months ended June 30, 1999, respectively as a result of the Company
serving approximately 1,400,000 more full-time subscribers at June 30, 1999
when compared to June 30, 1998. PPV+ service revenue decreased $111,536
for the six months ended June 30, 1999, primarily because included in the
1998 PPV+ revenue was $89,000 of revenue from the Company's share of a PPV+
product which was written off as uncollectable in September 1998. The PPV+
promotion of such product was discontinued as of June 1998.
The Company had net income of $410,864 for the six months ended June
30, 1999, compared to $157,098 for the six months ended June 30, 1998,
respectively. Included in net income is income tax of $211,624 for the six
months ended June 30, 1999 compared to $137,000 for the six months ended
June 30, 1998. The Company's income before income taxes is $622,488 for the
six months ended June 30, 1999. As of June 30, 1999, the Company's net
operating loss carryforward is approximately $3,000,000 on a tax reporting
basis (see Note 5 to the Company's financial statements).
Service expenses decreased $178,738 and $309,064 for the three and six
months ended June 30, 1999, respectively. This is a result of a decrease in
trunk expense due to the buy rate decrease (see above) and a reduction in
the telephone rates charged by MCIWorldcom effective January 1, 1999.
As of June 30, 1999, the Company was serving approximately 11,700,000
full-time cable subscribers and 1,253,000 part-time subscribers, compared to
approximately 10,300,000 full-time cable subscribers and 1,200,000 part-time
subscribers served as of June 30, 1998. The part-time subscribers did not
significantly contribute to the revenue or service expenses for the six
months ended June 30, 1999 and 1998. However, during the six months ended
June 30, 1999, 58,000 part-time subscribers converted to using the Company's
service on a full-time basis.
During the six months ended June 30, 1999, the Company purchased
$72,177 of equipment compared to $131,500 purchased during the six months
ended June 30, 1998. Depreciation accounted for 18% of total operating
expenses for the six months ended June 30, 1999, compared to 17% for the six
months ended June 30, 1998. Selling and marketing expenses decreased 8% and
6% for the three and the six months ended June 30, 1999, respectively, and
general and administrative expenses decreased 13% and 7% for the three and
six months ended June 30, 1999, respectively. The decreases occurred
primarily as a result of stock grants being issued during the three months
ended June 30, 1998, to key employees. Compensation expense of $10,000 for
selling and marketing and $20,000 for general and administrative was
recorded as a result of the stock grants. No such stock grants were issued
during the six months ended June 30, 1999.
Total liabilities decreased $814,144 and total assets decreased
$614,409 for the six months ended June 30, 1999. The decrease in total
liabilities was partially as result of a decrease in accounts payable of
$289,191. The accounts payable at December 31, 1998, was higher than usual
as a result of an $84,000 equipment purchase and DS3 trunk invoices of
approximately $100,000 that were on hold due to incorrect billing. There
was also a decrease in notes payable - majority stockholder of $478,975 and
a decrease in accrued interest - majority stockholder of $227,019 due to
debt repayment. Partially offsetting the above decreases is an increase in
accrued dividends on preferred stock of $211,122. The decrease in assets is
partially attributable to a decrease in deferred tax asset of $201,624, and
an increase in accumulated depreciation of $397,215. The Company's days for
sales in accounts receivable is 47 days for the six months ended June 30,
1999 compared to 53 days for the six months ended June 30, 1998. The
Company does not offer incentives/discounts to its customers, nor has it
changed its credit terms with its customers.
The Company had positive cash flow from operating activities of
$460,644 during the six months ended June 30, 1999 compared to $797,264 for
the six months ended June 30, 1998. Net cash provided by operating
activities decreased as a result of a decrease in accounts payable due to
additional payables being recorded at December 31, 1998 (see above) and a
decrease in accrued interest majority stockholder as a result of paying
interest during the six months ended June 30, 1999. During 1998, no
interest was paid to the majority stockholder. All payments were applied to
principal and are in the cash flows from investing activities section of the
statement of cash flows. Ignoring changes in operating assets and
liabilities that result from timing issues, and considering only adjustments
to reconcile net income to net cash provided by operating activities, the
Company would have positive cash flow from operating activities of
$1,009,703 for the six months ended June 30, 1999, compared to positive cash
flow from operating activities of $756,546 for the six months ended June 30,
1998.
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 1989 to February 1996, the
Company borrowed an aggregate of $6,128,712 from Mr. Lenfest. The interest
rates on the loans range from a floating rate based on the prime rate of PNC
Bank to a fixed rate of 12%. Interest on one of the loans in the principal
amount of $1,471,272 as of December 31, 1998, is payable quarterly and, at
the option of the Company 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. Interest due on this loan prior to
1998, in the amount of $473,682 has been paid with 473,682 shares of
Preferred Stock. No Preferred Stock has been issued for 1998 or 1999
accrued interest. In addition, during January 1995, Mr. Lenfest purchased
from Science the Company's non-interest bearing note in the amount of
$541,000 (the "Prior Science Note").
The Company remains dependent upon the deferral of a lump sum repayment
of principal and interest due to Mr. Lenfest, to fund operations and capital
expenditures from operating cash flow. Effective as of March 31, 1999, 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, 2001. Nevertheless, the Company intends to
continue to voluntarily make monthly payments of $150,000 to Mr. Lenfest. On
January 1, 1999, the Company began to pay current monthly interest payments
to Mr. Lenfest from the $150,000 monthly payment. The balance of the
payment is applied to loan principal. During the six months ended June 30,
1999, the Company made total payments of $900,000 to Mr. Lenfest (see Note 6
to the Company's financial statements). 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, 1999.
The aggregate outstanding loan balance due to Mr. Lenfest as of June 30,
1999, is $1,940,737 in loan principal and $2,467,818 in accrued interest.
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
a lump sum 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 or that it will retain its current customers. In
addition, revenues are affected by the "buy rates" of subscribers connected
to the Service. The Company has no control over the buy rates. As noted
above, the Company experienced a decrease in the average monthly buy rate
from 18.2% and 18.9% for the three and six months ended June 30, 1998, to
12.6% and 14.0% for the three and six months ended June 30, 1999,
respectively. Hence, there can be no assurance that buys rates will increase
or will remain at their current level.
The Company's software for its pay-per-view ANI ordering is "Year 2000
Compliant". The Company's long distance telecommunications provider,
MCIWorldcom, has informed the Company that they have implemented a
Strategic Year 2000 Compliance Plan in which appropriate remedial action to
non-compliant elements is being performed. According to MCIWorldcom the
network systems that provide dial tone and `data tone' are remediated and
Year 2000 tested, and are in the final stages of field deployment. In
addition, the application components that comprise MCIWorldcom's major
revenue products and services are Year 2000 ready. During the third
quarter of 1999 MCIWorldcom has stated that it plans to focus on continued
integration and interoperability testing, testing of contingency plans,
independent verification and validation, and change management to achieve
ongoing compliance. Finally, MCIWorldcom has stated that it will complete
decommissioning projects, customer-specific migrations/upgrades, and
selected internal and international systems. In the event that MCIWorldcom
is not fully Year 2000 compliant, there exists the possibility that the
Company would not be able to receive telephones calls from the cable
operator subscribers, and therefore, could not process any orders. If
MCIWorldcom does not become fully Year 2000 compliant during 1999, the
Company will switch to another long distance telephone service provider who
is Year 2000 compliant. As a result of such switch the Company would incur
duplicate facility and data link costs for a few months due to temporarily
having redundant facilities in service. There can be no assurances,
however, that other long distance telephone service providers will be year
2000 compliant.
The Company has verified, through testing, that all but one of the
cable operator billing vendors, to whom the Company transmits the pay-per-
view ordering data, are Year 2000 compliant. The Company has received Year
2000 compliance certificates from these billing vendors. The one remaining
billing vendor has informed the Company that they have performed tests and
are Year 2000 compliant. The Company has requested a compliance
certificate. In the event that the billing vendors are not fully Year 2000
compliant, the Company would not be able to transfer information regarding
pay-per-view orders, and therefore, no pay-per-view orders could be
fulfilled. The Company's contingency plan would be determined by the cable
operator's decision with respect to selecting a different billing vendor.
The Company's software that it uses for administrative purposes and
the software that creates the customer invoices are "Year 2000 Compliant".
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 September 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 Shareholders' 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 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).
10.13 Letter effective as of March 31, 1999, from H.F. Lenfest, waiving
the repayment of loans and accrued interest until January 1, 2001
(incorporated by reference to the March 31, 1999, Form 10-QSB).
11. Statement re: Computation of Per Share Earnings (see the Company's
June 30, 1999 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: 8/12/99 By: /s/Frank J. Carcione
------------------------------------------------------
Frank J. Carcione, President (Chief Executive Officer)
Dated: 8/12/99 By: /s/Irene A. DeZwaan
-----------------------------------------------------
Irene A. DeZwaan, Treasurer (Controller)
<PAGE>
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0
3,518,694
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