<PAGE>
FORM 10-KSB/A
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended December 31, 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
Mount Laurel, New Jersey 08054
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: 856-273-8888
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of Each Class
Common, $0.01 per share par value
Indicate by check mark whether the Issuer (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Issuer was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes X
----
Indicate by check mark if disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not contained herein, and will not be
contained, to the best of Issuer's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB.
The Issuer's revenue for the fiscal year ended December 31, 1999 was
$5,619,968.
The Market Value of voting stock held by non-affiliates of the Issuer March
10, 2000, based on a per share average bid and asked price of $.52 was
$5,034,664.
Number of shares of Issuer's common stock outstanding as of
March 10, 2000: 24,539,500 shares.
Transitional Small Business Disclosure Format: Yes No X
_____ _____
This Form 10-KSB/A is being filed to include Part II Item 7 (the "Financial
Statements"), of the TelVue Corporation Form 10-KSB for the fiscal year ended
December 31, 1999, which was filed with the Securities and Exchange Commission
on March 28, 2000 ("Form 10-KSB"). A technical error in the filing process
caused the Financial Statements not to be included in the EDGAR filing of the
Form 10-KSB.
<PAGE>
ITEM 7. FINANCIAL STATEMENTS
TELVUE CORPORATION
FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999 AND 1998
TABLE OF CONTENTS
Page No.
--------
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
FINANCIAL STATEMENTS
Balance Sheets
Statements of Operations
Statements of Stockholders' Deficit
Statements of Cash Flows
Notes to Financial Statements
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To The Board of Directors and Stockholders
TelVue Corporation
We have audited the accompanying balance sheets of TelVue Corporation (a
Delaware corporation) as of December 31, 1999 and 1998, and the related
statements of operations, stockholders' deficit and cash flows for the years
then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of TelVue Corporation as
of December 31, 1999 and 1998, and the results of its operations and its
cash flows for the years then ended in conformity with generally accepted
accounting principles.
/s/ Pressman Ciocca Smith LLP
Hatboro, Pennsylvania
January 31, 2000
<PAGE>
TELVUE CORPORATION
BALANCE SHEETS
December 31, 1999 and 1998
1999 1998
------------- -----------
[S] [C] [C]
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 325,698 $ 453,569
Accounts receivable - trade 752,297 786,083
Other receivables - 4,910
Deferred tax asset 204,000 285,935
Other current assets 16,573 11,626
----------- ----------
TOTAL CURRENT ASSETS 1,298,568 1,542,123
PROPERTY AND EQUIPMENT 5,039,277 4,791,240
Less accumulated depreciation 4,123,653 3,462,823
----------- ----------
915,624 1,328,417
OTHER ASSETS
Deferred tax asset 1,632,656 1,932,778
Other assets 13,875 9,300
----------- ----------
1,646,531 1,942,078
----------- ----------
$3,860,723 $4,812,618
=========== ==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Notes payable-majority stockholder-current $ 1,228,198 $ 1,380,000
Accounts payable 355,343 512,047
Accrued expenses 171,610 172,839
Accrued dividends payable 844,488 422,244
Income taxes payable - 8,661
----------- ----------
TOTAL CURRENT LIABILITIES 2,599,639 2,495,791
NOTES PAYABLE - MAJORITY STOCKHOLDER, net
of current portion 29,901 1,039,712
ACCRUED INTEREST - MAJORITY STOCKHOLDER 2,420,174 2,694,837
REDEEMABLE CONVERTIBLE PREFERRED STOCK,
$1 par value, 6,900,000 shares authorized,
3,518,694 shares, issued and outstanding,
(liquidation value $4,363,182) 3,518,694 3,518,694
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIT
Common stock, $.01 par value, 100,000,000
shares authorized, 24,199,500 and 24,194,500
shares issued and outstanding at December
31, 1999 and 1998, respectively 241,995 241,945
Additional paid-in capital 1,550,985 1,550,535
Accumulated deficit (6,500,665) (6,728,896)
----------- -----------
(4,707,685) (4,936,416)
----------- -----------
$3,860,723 $4,812,618
=========== ===========
See accompanying notes
<PAGE>
TELVUE CORPORATION
STATEMENTS OF OPERATIONS
Years Ended December 31, 1999 and 1998
1999 1998
---- ----
REVENUES $ 5,619,968 $ 6,122,249
OPERATING EXPENSES
Service 2,365,664 2,711,860
Selling and marketing 588,396 593,862
General and administrative 646,623 648,893
Depreciation 666,902 870,095
----------- -----------
4,267,585 4,824,710
----------- -----------
OPERATING INCOME 1,352,383 1,297,539
OTHER INCOME (EXPENSE)
Interest expense (363,724) (507,116)
Interest income 22,638 24,165
Other income (expense) 250 (33,430)
----------- -----------
(340,836) (516,381)
----------- -----------
INCOME BEFORE INCOME TAXES 1,011,547 781,158
INCOME TAX EXPENSE 361,072 308,385
------------ -----------
NET INCOME 650,475 472,773
DIVIDENDS ON REDEEMABLE
CONVERTIBLE PREFERRED STOCK (422,244) (422,244)
----------- ------------
NET INCOME AVAILABLE TO
COMMON STOCKHOLDERS $ 228,231 $ 50,529
=========== ============
EARNINGS PER COMMON SHARE:
BASIC $ .01 $ -
============ ============
DILUTED $ .01 $ -
============ ============
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 24,194,917 24,036,167
=========== ===========
See accompanying notes.
<PAGE>
TELVUE CORPORATION
STATEMENTS OF STOCKHOLDERS' DEFICIT
Years Ended December 31, 1999 and 1998
Additional Total
Common Paid-In Accumulated Stockholders'
Stock Capital Deficit Deficit
------- ---------- ----------- -------------
BALANCE,
DECEMBER 31, 1997 $238,145 $1,516,335 $(6,779,425) $(5,024,945)
Accrued dividends on
redeemable convertible
preferred stock - - (422,244) (422,244)
Issuance of 380,000 shares
of common stock 3,800 34,200 - 38,000
Net income - - 472,773 472,773
-------- --------- ----------- -----------
BALANCE,
DECEMBER 31, 1998 241,945 1,550,535 (6,728,896) (4,936,416)
Accrued dividends on
redeemable convertible
preferred stock - - (422,244) (422,244)
Issuance of 5,000 shares
of common stock 50 450 - 500
Net income - - 650,475 650,475
-------- --------- ----------- -----------
BALANCE,
DECEMBER 31, 1999 $241,995 $1,550,985 $(6,500,665) $(4,707,685)
======== ========== =========== ===========
See accompanying notes.
<PAGE>
TELVUE CORPORATION
STATEMENTS OF CASH FLOWS
Years Ended December 31, 1999 and 1998
1999 1998
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 650,475 $ 472,773
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation 666,902 870,095
(Gain) on sales or disposal of property and
equipment (250) -
Deferred tax expense 382,057 286,725
Issuance of common stock 500 38,000
Changes in operating assets and liabilities:
Accounts receivable - trade and other 38,696 137,025
Other current assets (4,947) (728)
Other assets (4,575) -
Accounts payable (156,704) 88,196
Accrued expenses (1,229) (19,466)
Income taxes payable (8,661) (3,339)
Deferred trunk credit - (164,200)
Accrued interest - majority stockholder (274,663) 507,116
----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,287,601 2,212,197
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (254,109) (303,996)
Proceeds from sales or disposal of
property and equipment 250 -
----------- -----------
NET CASH (USED IN)INVESTING ACTIVITIES (253,859) (303,996)
CASH FLOWS FROM FINANCING ACTIVITIES
Debt reduction:
Notes payable - majority stockholder (1,161,613) (1,900,000)
----------- -----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (127,871) 8,201
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 453,569 445,368
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 325,698 $ 453,569
=========== ===========
See accompanying notes.
<PAGE>
TELVUE CORPORATION
NOTES TO FINANCIAL STATEMENTS
December 31, 1999 and 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of TelVue Corporation
("the Company") is presented to assist in understanding its financial
statements. These accounting policies conform to generally accepted
accounting principles and have been consistently applied in the preparation
of the financial statements.
Business Activity and Concentration of Credit Risk
The Company primarily provides automatic telephone number identification
services to the cable television industry throughout the United States for
the automated ordering of pay-per-view features and events.
The Company grants credit to cable television operators throughout the
nation. Consequently, the Company's ability to collect the amounts due
from customers is affected by economic fluctuations in the cable television
industry.
The Company maintains cash balances at a financial institution located in
the Philadelphia Area. Accounts at this institution are insured by the
Bank Insurance Fund up to $100,000. The Company maintains cash balances in
excess of the insured amount.
During 1999, six customers accounted for 73% of sales and 65% of
receivables at December 31, 1999. During 1998, four customers accounted
for 50% of sales and 37% of receivables at December 31, 1998.
Currently, the Company's sole source of financing is the majority
stockholder. In the past, the Company has been unable to obtain funding
from other third parties on terms that are acceptable to the Company.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
For purposes of the statements of cash flows, the Company considers all
short-term debt securities purchased with an original maturity of three (3)
months or less to be cash equivalents.
Accounts Receivable - Trade
The Company evaluates its accounts receivable on a customer by customer
basis and has determined that no allowance for doubtful accounts is
necessary at December 31, 1999 and 1998. Historically, the Company has
experienced virtually no bad debt.
Property and Equipment
Property and equipment are stated at cost. Depreciation and amortization
are provided over five years using the straight-line method. Property and
equipment consists primarily of operating equipment. For income tax
purposes, recovery of capital costs for property and equipment is made
using accelerated methods over statutory recovery periods.
Expenditures for renewals and betterments that extend the useful lives of
property and equipment are capitalized. Expenditures for maintenance and
repairs are charged to expense as incurred.
Valuation of Long-Lived Assets
In accordance with Statement of Financial Accounting Standards No. 121
"Accounting for the Impairment of Long-Lived Assets to be Disposed of",
the Company assesses, on an on-going basis, the recoverability of long-
lived assets based on estimates of future undiscounted cash flows for the
applicable business acquired compared to net book value. Long-lived assets
include property and equipment. If the future undiscounted cash flow
estimate is less than net book value, net book value is then reduced to the
fair value of the assets. The Company also evaluates the depreciation
periods of assets, to determine whether events or circumstances warrant
revised estimates of useful lives. As of December 31, 1999, management
believes that no revisions to the remaining useful lives or writedowns of
long-lived assets are required.
Revenue Recognition
The Company recognizes revenue in the month service is provided, net of an
estimate for programs not billable by the cable television operator.
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.
Stock - Based Compensation
The Company accounts for stock-based compensation in accordance with APB
Opinion No. 25, "Accounting for Stock Issued to Employees," and related
interpretations, as permitted by Statement of Financial Accounting
Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation."
Compensation expense for stock options is measured as the excess, if any,
of the quoted market price of the Company's stock at the date of the grant
over the amount an employee must pay to acquire the stock. Compensation
expense for restricted stock awards is recorded annually based on the
quoted market price of the Company's stock at the date of the grant and the
vesting period.
Advertising
The Company follows the policy of charging the costs of advertising to
expense as incurred. Advertising expense is included in selling and
marketing expense in the accompanying statements of operations.
Earnings Per Common Share
Basic earnings per common share is computed by dividing net income, after
deduction of preferred stock dividends, by the weighted average number of
shares of outstanding. Diluted earnings per common share is computed by
dividing net income, after deduction of preferred stock dividends, when
applicable, by the weighted average number of shares outstanding adjusted
to include incremental common shares that would have been outstanding if
potentially dilutive common shares had been issued. Incremental shares of
59,728,815 and 57,027,826 in 1999 and 1998, respectively, were used in the
calculation of diluted earnings per common share.
NOTE 2 - SUPPLEMENTARY DISCLOSURES TO STATEMENTS OF CASH FLOWS
Cash paid (refunded) during the year for: 1999 1998
Interest $ 638,387 $ -
========= ========
Income taxes $ (12,324) $ 25,000
========= ========
Noncash Investing and Financing Transactions
The Company accrued dividends on its redeemable convertible preferred stock
of $422,244 in 1999 and 1998. In 1999 and 1998, the Company issued 5,000
shares of common stock valued at $500 under the Director Compensation Plan
(See Note 6). In 1998, the Company issued 375,000 shares of common stock
valued at $37,500 to four key employees.
NOTE 3 - PROPERTY AND EQUIPMENT
The schedule of property and equipment at December 31, 1999 and 1998, is as
follows:
Estimated
Useful Lives
1999 1998 in Years
---- ---- ------------
Operating equipment $ 4,785,771 $ 4,549,957 5
Office furniture and equipment 213,822 201,599 5
Leasehold improvements 39,684 39,684 5
___________ ___________
$ 5,039,277 $ 4,791,240
=========== ===========
NOTE 4 - NOTES PAYABLE - MAJORITY STOCKHOLDER
Notes payable, unsecured, to the majority stockholder consisted of the
following at December 31, 1999 and 1998:
1999 1998
---- ----
National equipment loan (a) $ 717,099 $ 1,471,272
Additional lines of credit (b) - 407,440
Notes payable (SDC) (c) 541,000 541,000
__________ ___________
$ 1,258,099 $ 2,419,712
=========== ===========
(a) In March 1994, the Company's majority stockholder provided a $1,500,000
line of credit for the purchase of additional equipment to expand the National
POP (Point of Presence). Amounts outstanding bear interest at prime plus one
percent (1%) and interest is payable quarterly. At the option of the Company,
interest may be paid by the delivery of shares of Redeemable Convertible
Preferred Stock (see Note 6) at $1 per share. The effective interest rates,
at December 31, 1999 and 1998, were 9.5% and 8.75%, respectively.
(b) The Company's majority stockholder has provided several additional
lines of credit. Borrowings under all of these lines of credit bear interest
at prime plus one percent (1%). There were no outstanding balances at
December 31, 1999. The effective interest rates, at December 31, 1998 were
all at 8.75%. The availability of additional funding may be terminated at
any time if the majority stockholder determines that there is no reasonable
prospect that the Company will be able to achieve net income on a consistent
basis.
(c) In January 1995, the Company's majority stockholder acquired from Science
Dynamics Corporation ("SDC") a subordinated note in the amount of $541,000.
The note is noninterest-bearing and repayment is restricted to cash not needed
for operations as determined by the Company.
The Company has obtained from the majority stockholder an extension of a
prior agreement whereby the majority stockholder has agreed not to demand
repayment of principal or interest during 2000. However, the Company has
decided to voluntarily make, and the majority stockholder has agreed to
accept, monthly payments of $125,000 for current interest and loan
principal. The Company, at its discretion, may make additional principal
payments when the Company has excess cash not needed to fund operations.
The Company has, therefore, classified $1,228,198 of the notes payable to
the majority stockholder as a short term liability and has classified the
balance of the notes payable and the accrued interest as long-term
liabilities.
NOTE 5 - LEASES
The Company leases office facilities and trunk lines and data circuits.
Future minimum lease payments under non-cancelable operating leases with
initial terms of one year or more consisted of the following at December
31, 1999:
Year Ending
December 31,
------------
2000 $124,082
2001 124,082
2002 124,082
2003 124,082
2004 51,701
________
$548,029
========
Rental expense under the operating lease for office facilities amounted to
$115,681 and $97,798 in 1999 and 1998, respectively.
It is expected that, in the normal course of business, expiring leases will
be renewed or replaced by leases on other properties; thus, it is
anticipated that future minimum operating lease commitments will not be
less than the amount shown for 2000.
NOTE 6 - CAPITAL STOCK
Common Stock Voting Rights and Concentration of Control
Shares of common stock, which have had the same beneficial owner since
April 21, 1988, or which have had the same beneficial owner for a
continuous period in excess of 2 years prior to the record date of any
meeting of stockholders, will be entitled to 10 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.
In November 1989, the Company issued 12,896,968 shares of common stock for
$1,250,000 to an individual who effectively acquired control of the
Company. In connection with this sale, the Board of Directors waived the
waiting period for these shares of common stock related to full voting
rights described above. In January 1995, this individual acquired an
additional 1,660,485 shares of common stock of the Company from SDC.
Redeemable Convertible Preferred Stock
In April 1990, the Company issued 1,250,000 shares of Class A Redeemable
Convertible Preferred Stock ("Preferred Stock") for $1,250,000. The
Preferred Stock has a par value of $1 per share and pays a cumulative $.06
semiannual dividend. The dividend is payable in cash or additional shares
of Preferred Stock at $1 per share, at the option of the Company. Each
share of Preferred Stock is convertible into 6.667 shares of common stock
at any time, at the option of the holder. The Preferred Stock has a
preference of $1 per share plus unpaid dividends in the event of
liquidation. The Company may redeem the Preferred Stock at any time for $2
per share. The stockholder of the Preferred Stock is the majority
stockholder. The majority stockholder can designate all of the Company's
directors and, therefore, could influence the Company's willingness to
cause a redemption of the Preferred Stock. As a result, the Preferred
Stock has been classified outside of the stockholders' deficit section of
the accompanying balance sheets.
Stock Option Plan
In May 1999, the Company established the TelVue Corporation 1999 Stock
Option Plan (the "Plan"). Under the Plan, the Company may grant options
to acquire up to 10 million shares of common stock. Options granted under
the plan are intended to be incentive stock options ("ISO"). The
exercise price of each ISO will not be less than the market price of the
Company's stock on the date of the grant. The exercise price for an
option, which is not an ISO, will not be less than 50% of the market price
of the Company's stock on the date of the grant. The options expire ten
years after the date of the grant. Options vest ratably over three years,
beginning one year after the date of grant. Employees hired prior to
January 1, 1995, are entitled to immediate vesting of 25% of their options.
As of December 31, 1999, options to purchase 1,625,000 shares of the
Company's common stock were granted and outstanding at an exercise price of
$.07 per share. At December 31, 1999, 367,500 options were vested and
exercisable. There was no significant difference between the amount of
compensation recognized and the amount that would have been recognized had
compensation expense been determined under the provisions of SFAS No. 123.
Stock Compensation
In December 1997, the Company adopted a Director Compensation Plan. Under
this plan, each non-employee director, other than the majority stockholder,
is compensated $500 for each meeting attended by receiving shares of common
stock issued at the higher of the per share fair market value of the common
stock as of the board of directors meeting date or $.05 per share. In 1999
and 1998, the Company issued 5,000 shares of common stock under this plan
and recognized director compensation expense of $500 each year.
In June 1998, the Company issued 375,000 shares of common stock to four
executives as a discretionary bonus. The shares were issued at the fair
value on the grant date of $.10 per share. The Company recorded
compensation expense of $37,500 with the issuance of these shares.
Common Stock Warrants
In connection with one of the lines of credit discussed in Note 4, the
Company agreed to issue warrants to the majority stockholder to purchase
29,915,160 shares of the Company's common stock for $.01 per share, the
fair market value of the common stock on the grant date. The warrants
provide for adjustments of the exercise price and the number of shares
issuable thereunder in the event that the Company issues additional shares
of common stock and other events as defined in the warrant agreement. The
warrant holder is entitled, at the Company's expense, to certain
registration rights under the Securities Act of 1933 in connection with any
shares of the Company's common stock issued pursuant to the exercise of the
warrants.
NOTE 7 - CORPORATE INCOME TAXES
The provisions for income tax (benefit) consist of the following
components:
Current 1999 1998
------- ---- ----
Federal (alternative minimum tax) $ (20,985) $ 21,660
State - -
_________ ________
(20,985) 21,660
Deferred
--------
Federal 373,121 264,994
State 94,622 73,844
_________ ________
467,743 338,838
Valuation allowance (decrease) (85,686) (52,113)
_________ ________
382,057 286,725
_________ _________
$ 361,072 $ 308,385
========= =========
The categories of temporary differences that give rise to deferred tax
assets and liabilities are as follows:
Federal State
------- -----
1999 1998 1999 1998
---- ---- ---- ----
Deferred Tax Assets:
Accrued interest - stockholder $ 745,716 $ 830,347 $ 226,891 $ 252,641
Net operating loss carryforward 904,526 1,215,281 104,635 190,321
Alternative minimum tax credit - 33,000 - -
__________ __________ _________ __________
Gross Deferred Tax Asset 1,650,242 2,078,628 331,526 442,962
Deferred Tax Liabilities:
Property and equipment,
principally due to
differences in depreciation (31,034) (86,299) (9,443) (26,257)
__________ _________ ________ _________
Net deferred tax asset before
valuation allowance 1,619,208 1,992,329 322,083 416,705
Valuation allowance - - (104,635) (190,321)
__________ _________ ________ _________
Net Deferred Tax Asset $ 1,619,208 $ 1,992,329 $ 217,448 $ 226,384
=========== =========== ========= ==========
The Company has a net operating loss carryforward of approximately
$2,700,000 on a tax-reporting basis. The carryforward will expire as
follows, if not utilized:
Year Ending
December 31,
------------
2006 $ 400,000
2007 700,000
2008 300,000
2009 800,000
2010 500,000
___________
$ 2,700,000
===========
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.
NOTE 8 - PENSION PLAN
The Company maintains a Simplified Employee Pension (SEP) plan under
section 408(k) of the Internal Revenue Code for all eligible employees.
Employees are eligible to participate if they are at least 21 years old and
have been employed by the Company for at least 90 days. Under the plan,
employees may elect to defer up to 15% of their salary, subject to Internal
Revenue Service limits. The Company may make discretionary contributions
for the participants. The Company elected to match fifty percent (50%) of
1999 and 1998 contributions by participating eligible employees up to five
percent (5%) of their salary, for a maximum contribution of 2.5% of salary.
The Company's contributions for 1999 and 1998 amounted to $19,090 and
$21,223, respectively.
NOTE 9 - RELATED PARTY TRANSACTIONS
The Company has several unsecured notes payable to the majority
stockholder. (See Note 4).
The Company provided its automated number identification services to
subsidiaries of Lenfest Communications, Inc. ("LCI"). The Company
recognized revenues of approximately $390,000 and $400,000 from LCI
subsidiaries in 1999 and 1998, respectively, and had a receivable of
$58,914 and $59,648 due from LCI at December 31, 1999 and 1998,
respectively. These services were provided at normal billing rates. At
December 31, 1999, the Company and LCI were under the control of the
majority stockholder of the Company. As of January 18, 2000, the majority
stockholder no longer controlled LCI. However, the Company continues to
provide its services to subsidiaries of LCI (now known as Comcast LCI
Holdings, Inc.).
NOTE 10 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to
estimate that value:
Cash and Cash Equivalents, Receivables, Accounts Payable and Accrued
Expenses.
The carrying amount approximates fair market value because of the short
maturity of those instruments
Long-term Debt and Accrued Interest
Due to the related party nature, it is uncertain at what rate the Company
could borrow funds from an unrelated party, if at all. Therefore, it is
not practical to estimate the fair market value of the long-term debt and
accrued interest.
NOTE 11 - 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 against 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. The
Company has not received any notice of alleged infringement from the third
party. The Company has retained independent patent counsel to review the
third party patents and the alleged infringement. The Company is unable at
this time to determine if it has liability under the indemnity provisions
of the contracts with the cable operator or the amount of such liability if
it exists.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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: 4/12/00 By: /s/Frank J. Carcione
-------------------------------
Frank J. Carcione
President (Chief Executive Officer)
