SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K/A
(Amendment No. 1)
Current Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 26, 2001
TelVue Corporation
(Exact Name of Registrant as Specified in Charter)
Delaware 0-17170 51-0299879
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
16000 Horizon Way, Suite 500, Mt. Laurel, New Jersey 08054
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (856) 273-8888
The Current Report on Form 8-K filed by TelVue Corporation on March 26,
2001 is hereby amended to include the financial information required in
Item 7.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
(a) Financial Statements of Business Acquired:
See below for the audited financial statements
required by this Item.
(b) Pro Forma Financial Information:
See below for the pro forma financial
information required by this Item.
(c) Exhibits: None
TABLE OF CONTENTS
Page
No.
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
FINANCIAL STATEMENTS
Balance Sheet
Statement of Operations
Statement of Changes in Stockholder's Equity (Deficit)
Statement of Cash Flows
Notes to Financial Statements
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To The Board of Directors
J.D. Kraengel and Associates, Inc. f/k/a
Dacon Corporation d/b/a Source Communications Group
Mullica Hill, New Jersey
We have audited the accompanying balance sheet of J.D. Kraengel and
Associates, Inc. f/k/a Dacon Corporation d/b/a Source Communications Group
(an S Corporation) as of December 31, 2000, and the related statements of
operations, changes in stockholder's equity (deficit) and cash flows for
the year 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 audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. 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 audit provides 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 J.D. Kraengel and
Associates, Inc. f/k/a Dacon Corporation d/b/a Source Communications Group
as of December 31, 2000, and the results of its operations and its cash
flows for the year then ended in conformity with accounting principles
generally accepted in the United States of America.
/s/ Pressman Ciocca Smith LLP
Huntingdon Valley, PA 19006
May 10, 2001
J.D. KRAENGEL AND ASSOCIATES, INC. F/K/A DACON CORPORATION
D/B/A SOURCE COMMUNICATIONS GROUP
BALANCE SHEET
December 31, 2000
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 51,100
Accounts receivable - trade, less allowance
for doubtful accounts of $3,600 256,695
Inventory 8,891
Other current assets 100
----------
TOTAL CURRENT ASSETS 316,786
PROPERTY AND EQUIPMENT 319,663
Less accumulated depreciation 230,059
----------
89,604
$ 406,390
==========
LIABILITIES AND STOCKHOLDER'S DEFICIT
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 168,126
Payroll and sales taxes payable 10,854
Accrued pension contribution 45,228
Due to stockholder 421,584
----------
645,792
STOCKHOLDER'S EQUITY (DEFICIT)
Common stock, $1 par value, 1,000 shares authorized,
100 shares issued and outstanding 100
Additional paid-in capital 14,900
Accumulated deficit (254,402)
----------
(239,402)
----------
$ 406,390
==========
See accompanying notes.
J.D. KRAENGEL AND ASSOCIATES, INC. F/K/A DACON CORPORATION
D/B/A SOURCE COMMUNICATIONS GROUP
STATEMENT OF OPERATIONS
Year Ended December 31, 2000
REVENUES $1,934,164
COST OF GOODS SOLD 1,361,944
----------
GROSS PROFIT 572,220
OPERATING EXPENSES 568,493
----------
INCOME BEFORE OTHER INCOME 3,727
OTHER INCOME
Interest income 5,193
----------
NET INCOME $ 8,920
==========
See accompanying notes.
J.D. KRAENGEL AND ASSOCIATES, INC. F/K/A DACON CORPORATION
D/B/A SOURCE COMMUNICATIONS GROUP
STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY (DEFICIT)
Year Ended December 31, 2000
COMMON STOCK
Balance at beginning and end of year $ 100
==========
ADDITIONAL PAID-IN CAPITAL
Balance at beginning and end of year $ 14,900
==========
ACCUMULATED DEFICIT
Balance at beginning of year $ (263,322)
Net income 8,920
----------
$ (254,402)
==========
TOTAL STOCKHOLDER'S
EQUITY (DEFICIT) $ (239,402)
==========
See accompanying notes.
J.D. KRAENGEL AND ASSOCIATES, INC. F/K/A DACON CORPORATION
D/B/A SOURCE COMMUNICATIONS GROUP
STATEMENT OF CASH FLOWS
Year Ended December 31, 2000
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 8,920
Adjustments to reconcile net income to net cash
(used in) operating activities
Depreciation 35,914
Changes in operating assets and liabilities:
Accounts receivable - trade (156,255)
Inventory 83,708
Other current assets 1,847
Accounts payable and accrued expenses (53,090)
Payroll and sales tax payable 8,299
Accrued pension contribution 45,228
----------
NET CASH (USED IN)
OPERATING ACTIVITIES (25,429)
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property and equipment (7,012)
CASH FLOWS FROM FINANCING ACTIVITIES
Reduction in due to stockholder (104,498)
----------
NET DECREASE IN CASH (136,939)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 188,039
----------
CASH AND CASH EQUIVALENTS
AT END OF YEAR $ 51,100
==========
Supplementary Disclosures of Cash Flow Information
Cash paid during the year for:
Interest $ -
==========
Income taxes $ -
==========
See accompanying notes.
J.D. KRAENGEL AND ASSOCIATES, INC. F/K/A DACON CORPORATION
D/B/A SOURCE COMMUNICATIONS GROUP
NOTES TO FINANCIAL STATEMENTS
December 31, 2000
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of J.D. Kraengel and
Associates, Inc. f/k/a Dacon Corporation d/b/a Source Communications Group
("the Company") is presented to assist in understanding the Company's
financial statements. These accounting policies conform to generally
accepted accounting principles.
Business Activity and Concentration of Cash and Credit Risk
The Company provides communications solutions and network integration
primarily to customers located in the Mid-Atlantic states. Consequently,
the Company's ability to collect amounts due from customers is affected by
economic conditions in this area.
The Company maintains cash balances at three major financial institutions
in the Philadelphia area. One account is insured by the Bank Insurance
Fund up to $100,000. At times, the Company maintains a cash balance in
excess of the insured amount. The other accounts are uninsured.
During 2000, two customers accounted for 30% and 12% of sales and 16% and
0% of receivables at December 31, 2000.
Use of Estimates
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and reported amount of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers
securities purchased with an original maturity of three (3) months or less
to be cash equivalents.
Accounts Receivable - Trade
The Company uses the allowance method to provide for uncollectible accounts
receivable. The allowance is determined based on historical experience and
management's evaluation of outstanding accounts receivable.
Inventory
Inventory is stated at the lower of cost or market. Cost is determined by
the first-in, first-out method, and market represents the lower of
replacement cost or estimated net realizable value.
Property and Equipment
Property and equipment are carried at cost. Depreciation of property and
equipment is provided using the accelerated and straight-line methods. For
income tax purposes, recovery of capital costs for property and equipment
is made using accelerated methods over statutory recovery periods.
Expenditures for major 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
The Company continually evaluates whether events or circumstances have
occurred that indicate that the remaining useful lives of its long-lived
assets should be revised or that the remaining balance of such assets may
not be recoverable using objective methodologies. Such methodologies
include evaluations based on the cash flows generated by the underlying
assets or other determinants of fair value. As of December 31, 2000,
management believes that no revisions to the remaining lives or write-downs
of deferred charges are required.
Advertising
The Company follows the policy of expensing the cost of advertising when
incurred.
S Corporation
The Company, with the consent of the sole shareholder, has elected to be
treated as an "electing small business corporation" for federal and state
income tax purposes. In lieu of corporation income taxes, the shareholders
of an S Corporation are taxed on their proportionate share of the Company's
taxable income. Therefore, no provision or liability for corporate income
taxes has been included in these financial statements.
NOTE 2 - PROPERTY AND EQUIPMENT
The schedule of property and equipment at December 31, 2000 is as follows:
Estimated
Useful Lives
In Years
Furniture and fixtures $ 74,404 7
Equipment 245,259 5
---------
$ 319,663
=========
NOTE 3 - DUE TO STOCKHOLDER
At December 31, 2000, the Company had a payable of $421,584 due to its sole
stockholder. No repayment terms have been established.
NOTE 4 - DEFINED BENEFIT PENSION PLAN
The Company has a defined benefit pension plan covering all employees who
are at least 21 years of age and have completed two years of service.
Benefits are based on years of service and the employee's compensation.
The Company's funding policy to contribute annually at least the maximum
amount deductible for Federal income tax purposes.
The following table provides further information about the plan at October
1, 2000 and amounts recognized in the accompanying balance sheet at
December 31, 2000:
Fair value of plan assets at October 1, 2000 $ 388,934
Present value of benefits 1,000,642
Present value of vested accrued benefits 277,324
Benefit cost 155,948
Employer contributions 145,228
Benefits paid -
Weighted average assumptions as of October 1, 2000:
Expected return on plan assets 7%
NOTE 5 - RELATED PARTY TRANSACTIONS
The Company leases its facilities from the sole stockholder under a month-
to-month lease. Rental expense was $24,000 for the year ended December 31,
2000.
NOTE 6 - SUBSEQUENT EVENTS
In February 2001, the Company changed its name to J.D. Kraengel and
Associates, Inc.
On March 9, 2001, the Company sold substantially all of its assets,
consisting primarily of material contracts with equipment, software and
communication service providers, to TelVue Corporation ("TelVue") for
$1.3 million under the terms of an asset purchase agreement which was
signed on February 14, 2001. TelVue, a Delaware Corporation located in Mt.
Laurel, New Jersey, sells automatic number identification
telecommunications services to the cable television industry. The proceeds
consisted of $1,000,000 in cash and $300,000 pursuant to a promissory note.
Unaudited Pro Forma Financial Statements
The unaudited pro forma financial statements are based on the
historical financial statements of TelVue Corporation ("TelVue")
and the historical financial statements of J.D. Kraengel and Associates
f/k/a Dacon Corporation d/b/a Source Communications Group ("Source").
The Pro Forma Statements of Operations give effect to the Source
acquisition as if it had occurred as of January 1, 2000. The pro forma
adjustments are described in the accompanying notes and are based
upon available information and certain assumptions that management
believes are reasonable. The Pro Forma Financial Statements do not
purport to represent what TelVue's results of operations would
actually have been had the Source acquisition in fact occurred on January
1, 2000, or to project TelVue's results of operations for any
future date or period. The Pro Forma Financial Statements should be read
in conjunction with the historical financial statements of TelVue
(included in TelVue's Form 10-KSB, dated March 28, 2001) and
Source (included elsewhere in this Form 8-K/A).
TELVUE CORPORATION
PRO FORMA STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2001
Historical Historical Pro Forma TelVue
TelVue Source Adjustments Pro Forma
REVENUES $1,368,720 $ 307,977 $ - $1,676,697
OPERATING EXPENSES
Service 558,770 241,932 - 800,702
Selling and marketing 177,236 13,401 - 190,637
General and administrative 209,121 91,202 (45,228)(a) 209,909
(12,186)(b)
(33,000)(h)
Depreciation and amortization 83,297 - 1,786 (d) 105,916
20,833 (e)
--------- --------- --------- ---------
TOTAL OPERATING EXPENSES 1,028,424 346,535 (67,795) 1,307,164
--------- --------- --------- ---------
OPERATING INCOME (LOSS) 340,296 (38,558) 67,795 369,533
OTHER INCOME (EXPENSE)
Interest income 10,500 240 - 10,740
Interest expense (57,056) - (23,063)(f) (80,119)
--------- --------- --------- ---------
(46,556) 240 (23,063) (69,379)
--------- --------- --------- ---------
INCOME BEFORE TAXES 293,740 (38,318) 44,732 300,154
INCOME TAX (102,595) - (2,565)(g) (105,160)
--------- --------- --------- ---------
NET INCOME 191,145 $ (38,318) $ 42,167 194,994
========= =========
DIVIDENDS ON REDEEMABLE
CONVERTIBLE PREFERRED STOCK (105,561) (105,561)
--------- ---------
NET INCOME AVAILABLE TO
COMMON STOCKHOLDERS $ 85,584 $ 89,433
========= =========
NET INCOME PER COMMON SHARE
Basic $0.00 $0.00
========= =========
Diluted $0.00 $0.00
========= =========
See notes to unaudited pro forma financial statements.
TELVUE CORPORATION
PRO FORMA STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2000
Historical Historical Pro Forma TelVue
TelVue Source Adjustments Pro Forma
REVENUES $4,941,575 $1,934,164 $ - $6,875,739
OPERATING EXPENSES
Service 1,999,597 1,361,944 - 3,361,541
Selling and marketing 583,328 146,941 - 730,269
General and administrative 605,801 385,638 (145,228)(a) 822,211
(24,000)(b)
Depreciation and amortization 385,409 35,914 (35,914)(c) 475,885
7,143 (d)
83,333 (e)
--------- --------- --------- ---------
TOTAL OPERATING EXPENSES 3,574,135 1,930,437 (114,666) 5,389,906
--------- --------- --------- ---------
OPERATING INCOME 1,367,440 3,727 114,666 1,485,833
OTHER INCOME (EXPENSE)
Interest income 22,853 5,193 - 28,046
Interest expense (269,815) - (92,250)(f) (362,065)
--------- --------- --------- ---------
(246,962) 5,193 (92,250) (334,019)
--------- --------- --------- ---------
INCOME BEFORE TAXES 1,120,478 8,920 22,416 1,151,814
INCOME TAX (400,336) - (12,535)(g) (412,871)
--------- --------- --------- ---------
NET INCOME 720,142 $ 8,920 $ 9,881 738,943
========= =========
DIVIDENDS ON REDEEMABLE
CONVERTIBLE PREFERRED STOCK (422,244) (422,244)
--------- ---------
NET INCOME AVAILABLE TO
COMMON STOCKHOLDERS $ 297,898 $ 316,699
========== ==========
NET INCOME PER COMMON SHARE
Basic $0.01 $0.01
========== ==========
Diluted $0.01 $0.01
========== ==========
See notes to unaudited pro forma financial statements
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
The unaudited pro forma statements of operations for the year ended
December 31, 2000 and for the three months ended March 31, 2001, give
effect to the Source acquisition as if it had occurred on January 1,
2000. The following pro forma adjustments have been made to the
unaudited pro forma statements of operations to reflect the Source
acquisition.
(a) To eliminate Source's defined benefit plan expense.
The defined benefit plan was excluded from the Source acquisition.
(b) To reverse duplicative facilities expenses of Source not retained by
TelVue.
(c) To reverse historical depreciation expense of Source.
(d) To record depreciation expense of property and equipment acquired from
Source.
(e) To record amortization expense of goodwill and covenant-not-to compete
acquired from Source.
(f) To record interest expense as a result of $950,000 of additional debt
incurred with the acquisition of Source.
(g) To record the tax effect of the pro forma income at an assumed combined
federal and state income tax rate of 40%.
(h) To eliminate one-time transaction expenses incurred.
SIGNATURE
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 hereunto duly authorized.
TELVUE CORPORATION
By: /s/ FRANK J. CARCIONE
Frank J. Carcione,
President and Chief Executive Officer
Date: May 25, 2001