UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
March 12, 2007
Date of Report (Date of earliest event reported)
TelVue Corporation
(Exact name of registrant as specified in its 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)
856-273-8888
(Registrant's telephone number, including area code)
N/A
(Former name or former address,
if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any
of the following provisions:
__ Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
__ Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(7 CFR 240.14a-12)
__ Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
__ Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
This Current Report on Form 8-K/A ("Form 8-K/A") amends the Form 8-K
filed by TelVue Corporation ("TelVue") on March 13, 2007 (the "Original 8-
K") to include the information required by Item 9.01 of the Form 8-K in
connection with TelVue's recent acquisition of Princeton Server Group, Inc.
("PSG").
Item 9.01 Financial Statements and Exhibits
(a) Financial Statements of Business Acquired
The financial statements of PSG, including the report of the
independent registered public accounting firm, Pressman Ciocca Smith LLP,
required by this item appear at Exhibit 99.2 to this Current Report on Form
8-K/A and are incorporated by reference herein.
(b) Pro Forma Financial Information
The pro forma financial information required by this item appear at
Exhibit 99.3 to this Current Report on Form 8-K/A and are incorporated by
reference herein.
Information set forth or incorporated by reference in this document
contains financial estimates and other "forward-looking" statements within
the meaning of the Private Securities Litigation Reform Act of 1995. The
financial estimates and forward-looking statements are subject to risks and
uncertainties that may cause future experience and results to differ
materially from those discussed in these financial estimates and forward-
looking statements. Important factors that might cause such a difference
include, but are not limited to, the challenges and costs of integrating the
operations and personnel of PSG; reaction of customers of PSG and TelVue and
related risks of maintaining pre-existing relationships of PSG and TelVue; the
impact of acquisitions and divestitures on the synergies of TelVue's programs;
competitive factors, including pricing pressures; and other events. Except
for TelVue's ongoing obligations to disclose material information under the
federal securities laws, TelVue disclaims an obligation to update any
financial estimates or forward-looking statements after the date of this
document.
(c) Exhibits.
2.1* Stock Purchase Agreement by and among TelVue Corporation and
stockholders holding all the issued and outstanding shares of
Princeton Server Group, Inc. dated as of March 7, 2007.
23.1 Consent of Independent Registered Public Accounting Firm - Pressman
Ciocca Smith LLP
99.1* Press Release, dated March 7, 2007.
99.2 Financial Statements of Princeton Server Group, Inc.
99.3 Unaudited Pro Forma Consolidated Financial Statements.
* Previously filed with the Original 8-K.
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
ndersigned hereunto duly authorized.
Date: May 25, 2007 TelVue Corporation
By: /s/ Joseph Murphy
Name: Joseph Murphy
Title: President and Chief Executive
Officer
EXHIBIT INDEX
2.1* Stock Purchase Agreement by and among TelVue Corporation and
stockholders holding all the issued and outstanding shares of
Princeton Server Group, Inc. dated as of March 7, 2007.
23.1 Consent of Independent Registered Public Accounting Firm -
Pressman Ciocca Smith LLP
99.1* Press Release dated March 7, 2007.
99.2 Financial Statements of Princeton Server Group, Inc.
99.3 Unaudited Pro Forma Consolidated Financial Statements.
* Previously filed with the Original 8-K.
EXHIBIT 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors
TelVue Corporation:
We consent to incorporation by reference in the registration statement on
Form S-8 (No. 333-87631) of TelVue Corporation of our report dated May 18,
2007, relating to the balance sheets of Princeton Server Group, Inc.
(formerly a limited liability company known as Princeton Server Group LLC)
as of December 31, 2006 and 2005, and the related statements of operations,
stockholders' deficit and cash flows for the years then ended, which report
appears in the current report on Form 8-K/A of TelVue Corporation filed as
of May 29, 2007.
/s/ Pressman Ciocca Smith LLP
Huntingdon Valley, Pennsylvania
May 25, 2007
EXHIBIT 99.2
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To The Board of Directors and Stockholders
Princeton Server Group, Inc.
We have audited the accompanying balance sheets of Princeton Server
Group, Inc. (formerly a limited liability company known as Princeton
Server Group LLC) as of December 31, 2006 and 2005, 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 the standards of the Public
Company Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. The
Company is not required to have, nor were we engaged to perform, an audit of
its internal control over financial reporting. Our audit included
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the
Company's internal control over financial reporting. Accordingly, we
express no such opinion. An audit also includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
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 Princeton Server
Group, Inc. as of December 31, 2006 and 2005, and the results of its
operations and its cash flows for the years then ended in conformity with
accounting principles generally accepted in the United States of America
/s/ Pressman Ciocca Smith LLP
Huntingdon Valley, Pennsylvania
May 18, 2007
<Page>
<Table>
Princeton Server Group, Inc.
Balance Sheets
December 31, 2006 and 2005
2006 2007
------------- -----------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 156,982 $ 83,436
Accounts receivable - trade, net of
allowances for doubtful accounts of
$3,400 in 2006 338,747 135,038
Inventory 68,888 83,903
Prepaid expenses 3,095 1,963
----------- ----------
TOTAL CURRENT ASSETS 567,712 304,340
PROPERTY AND EQUIPMENT 128,910 95,375
Less accumulated depreciation 63,719 31,436
----------- ----------
65,191 63,939
PATENTS, net of accumulated amortization
of $859 in 2006 and $289 in 2005 10,538 11,108
---------- ----------
$ 643,441 $ 379,387
========== ==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable $ 129,145 $ 22,113
Accrued expenses 95,949 218,872
Note payable - stockholder, current 100,000 -
Deferred service revenue 171,791 31,615
----------- ----------
TOTAL CURRENT LIABILITIES 496,885 272,600
NOTE PAYABLE - STOCKHOLDER, net of
current portion - 85,000
CONVERTIBLE NOTES PAYABLE 400,329 250,000
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, $.01 par value, 10,000,000
shares authorized, 3,963,000 shares issued
and outstanding at December 31, 2006 39,630 -
Additional paid-in capital 945,275 -
Accumulated deficit in 2006 and
members' deficit in 2005 (1,238,678) (228,213)
----------- -----------
(253,773) (228,213)
----------- -----------
$ 643,441 $ 379,387
=========== ===========
See accompanying notes.
<Page>
Princeton Server Group, Inc.
Statements of Operations
Years Ended December 31, 2006 and 2005
2006 2005
---- ----
REVENUES
Consulting $ 311,958 $ 577,520
Product sales 1,521,418 397,505
----------- -----------
1,833,376 975,025
COST OF REVENUES
Consulting 201,023 385,937
Product sales 761,971 148,217
----------- -----------
962,994 534,154
----------- -----------
GROSS PROFIT 870,382 440,871
OPERATING EXPENSES
Selling and marketing 675,839 141,984
General and administrative
(excluding depreciation and amortization) 1,136,865 392,648
Depreciation & amortization 32,853 23,936
----------- -----------
1,845,557 558,568
----------- -----------
OPERATING LOSS (975,175) (117,697)
OTHER INCOME (EXPENSE)
Interest income 5,245 1,729
Interest expense (15,461) (6,885)
----------- -----------
(10,216) (5,156)
----------- ----------
LOSS BEFORE INCOME TAXES (985,391) (122,853)
INCOME TAX EXPENSE (BENEFIT) - -
----------- -----------
NET LOSS $(985,391) $(122,853)
========== ==========
See accompanying notes.
<Page>
Princeton Server Group, Inc.
Statements of Stockholders' Deficit
Years Ended December 31, 2006 and 2005
Additional Members/ Total
Common Paid-In Accumulated Stockholders'
Stock Capital Deficit Deficit
-------------------------------------------------
BALANCE, JANUARY 1, 2005 $ - $ - $ (105,360) $(105,360)
Net loss - - (122,853) (122,853)
---------- ---------- ---------- ----------
BALANCE, DECEMBER 31, 2005 - - (288,213) (228,213)
Issuance of 963 units of
limited liability company - - 959,831 959,831
Issuance of 3,963,000 shares
of common stock 39,630 945,275 (984,905) -
Net loss - - (985,391) (985,391)
---------- ---------- ---------- ----------
BALANCE, DECEMBER 31, 2006 $ 39,630 $945,275 $(1,238,678) $(253,773)
========== ========== ========== ==========
See accompanying notes.
<Page>
Princeton Server Group, Inc.
Statements of Cash Flows
Years Ended December 31, 2006 and 2005
CASH FLOWS FROM OPERATING ACTIVITIES 2006 2005
---- ----
Net loss $ (985,391) $ (122,853)
Adjustments to reconcile net loss
to net cash (used in) operating
activities:
Depreciation and amortization 32,853 23,936
Accrued interest on note payable 329 -
Changes in operating assets and
liabilities:
Accounts receivable - trade (203,709) (86,838)
Inventory 15,015 (75,903)
Prepaid expenses (1,132) (933)
Accounts payable 107,032 117,498
Accrued expenses (122,923) -
Deferred service revenue 140,176 26,702
---------- ----------
NET CASH (USED IN)
OPERATING ACTIVITIES (1,017,750) (118,391)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (33,535) (56,869)
Patent costs - (11,397)
---------- ----------
NET CASH (USED IN)
INVESTING ACTIVITIES (33,535) (68,266)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from convertible notes 400,000 250,000
Proceeds from note payable - stockholder 15,000 20,000
Capital contribution 709,831 -
---------- ----------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 1,124,831 270,000
---------- ----------
NET INCREASE IN CASH
AND CASH EQUIVALENTS 73,546 83,343
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 83,436 93
---------- ----------
CASH AND CASH EQUIVALENTS
AT END OF YEAR $ 156,982 $ 83,436
========== ==========
See accompanying notes.
</Table>
<Page>
Princeton Server Group, Inc.
Notes to Financial Statements
December 31, 2006 and 2005
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of Princeton Server Group,
Inc. (formerly a limited liability company known as Princeton Server Group
LLC) ("the Company") is presented to assist in understanding its financial
statements. These accounting policies conform to accounting principles
generally accepted in the United States of America and have been
consistently applied in the preparation of the financial statements.
Business Activity and Concentration of Credit Risk
The Company was formed as a limited liability company in March 2003 for the
purpose of manufacturing digital broadcast appliances used by broadcasters
to operate digital broadcast channels and manage digital video programming.
Effective June 30, 2006, the Company was merged into a newly formed
corporation changing the entity from a limited liability company to a
corporation. Members of the limited liability company were issued 1,000
shares of common stock for each unit owned.
The Company maintains cash balances at a financial institution. 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 2006, one customer accounted for 16% of sales and accounted for 3%
of receivables at December 31, 2006. During 2005, two customers accounted
for 61% of sales and accounted for 29% of receivables at December 31,
2005.
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America 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
Trade accounts receivable are stated at the amount management expects to
collect from outstanding balances. Management provides for probable
uncollectible amounts through a charge to earnings and a credit to a
valuation allowance based on its assessment of the current status of
individual accounts. Balances that are still outstanding after management
has used reasonable collection efforts are written off through a charge to
the valuation allowance and a credit to trade accounts receivable.
Inventory
Inventory is stated at the lower of cost or market. Cost is determined
by the specific-identification method, and market represents the lower of
replacement cost or estimated net realizable value.
Property and Equipment
Property and equipment are stated at cost. Depreciation is provided using
accelerated methods over the estimated useful lives of the assets.
Property and equipment consists primarily of operating equipment.
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.
Intangible Assets
Intangible assets with definite lives, such as patents, are amortized on
the straight-line method over the life of the assets.
Valuation of Long-Lived Assets
In accordance with Statement of Financial Accounting Standards No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets," the
Company periodically evaluates whether events or circumstances have
occurred that indicate that the remaining useful lives of its long-
lived assets, including property and equipment should be revised or that
the remaining balance of such assets may not be recoverable using objective
methodologies. Such methodologies include evaluations based on cash
flows generated by the underlying assets or other determinants of fair
value. As of December 31, 2006, management believes that no revisions to
the remaining lives or write-downs of carrying values are required.
Revenue Recognition
The Company recognizes consulting revenues in the month service is provided.
Revenues from product sales are recognized when a firm sales agreement is
in place, delivery has occurred and collectibility of the fixed or
determinable sales price is reasonably assured. A portion of the revenues
from product sales is allocated to technical support and is recognized
monthly over the initial year.
Income Taxes
Effective July 1, 2006, the Company uses the asset and liability method of
accounting for income taxes in accordance with 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. The
measurement of deferred tax assets is reduced, if necessary, by a valuation
allowance for any tax benefits which are not expected to be realized.
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.
Prior to July 1, 2006, the Company was a limited liability company. In
lieu of corporate income taxes, the members of a limited liability
corporation are taxed on their proportionate share of the Company's
taxable income. Accordingly, no provision for corporate income taxes is
included in these financial statements for periods prior to July 1, 2006
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.
NOTE 2 - SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for: 2006 2005
---- ----
Interest-related party $ 9,867 $ 6,885
Interest-other 5,265 -
-------- -------
Interest $ 15,132 $ 6,885
======== =======
Income taxes $ - $ -
======== =======
Noncash Investing and Financing Transactions
In February 2006, a convertible note in the amount of $250,000 was converted
into 308 units of the limited liability company. In June 2006, 3,963 units
of the limited liability company were converted into 3,963,000 shares of
common stock.
NOTE 3 - PROPERTY AND EQUIPMENT
A schedule of property and equipment at December 31, 2006 and 2005, is as
follows:
Estimated
Useful Lives
2006 2005 in Years
- ---------------------------------------------------------------------------
Operating equipment $ 107,401 $ 73,866 5
Office furniture and equipment 21,509 21,509 5
--------- --------
$ 128,910 $ 95,375
========= ========
NOTE 4 - NOTE PAYABLE - STOCKHOLDER
The note payable - stockholder bears interest at prime plus 2.25%, with a
ceiling of 10.0%. The effective interest rates were 10.0% and 9.5% at
December 31, 2006 and 2005, respectively. The outstanding balances at
December 31, 2006 and 2005 were $100,000 and $85,000, respectively. The
note was repaid in March 2007.
NOTE 5 - CONVERTIBLE NOTES PAYABLE
At December 31, 2006, the Company had a note payable to TelVue Corporation
("TelVue") in the amount of $400,000 plus accrued interest of $329. The
note was a convertible note, which bore interest at six percent (6%). No
payments of principal or interest were due until July 1, 2007. Interest
accrued through July 1, 2007 would be added to the principal. Interest
was payable monthly from July 1, 2007 through January 1, 2008. The
remaining balance was payable in forty eight (48) monthly installments
of principal and interest commencing February 1, 2008. The note was
scheduled to mature in January 2012.
TelVue had the option to convert the unpaid principal balance of the note
and all accrued, but unpaid interest into common stock of the Company.
In connection with the note, the Company issued a warrant, which entitled
TelVue to purchase 129,629 shares of common stock of the Company for $1.08
per share. The warrant commences on July 1, 2007 and expires on December
31, 2016.
The note was forgiven in March 2007, when TelVue acquired all of the
outstanding stock of the Company. See Note 10.
At December 31, 2005, the Company had a convertible note payable in the
amount of $250,000. The note was scheduled to be repaid in quarterly
payments of $17,660, including interest at 12%, commencing July 1, 2007.
The loan was scheduled to mature in April 2012. In February 2006, the
note was converted into 308 units of the limited liability company and
subsequently converted into 308,000 shares of common stock.
NOTE 6 - LEASE COMMITMENTS
The Company leases office space under an operating lease requiring future
minimum lease payments of $15,322 in 2007. Rental expense under the
operating lease for office facilities amounted to $27,803 and $15,664 for
the years ended December 31, 2006 and 2005, 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 expense incurred in 2006.
NOTE 7 - CORPORATE INCOME TAXES
The provisions for income tax expense (benefit) for 2006 consist of the
following components:
Current
Federal $ -
State -
--------
-
Deferred
Federal (43,128)
State (175,485)
--------
(218,613)
Valuation allowance increase 218,613
--------
-
--------
$ -
========
The categories of temporary differences that give rise to deferred tax
assets and liabilities were as follows:
Federal State
------- -----
Deferred Tax Assets:
Net operating loss carryforward $ 175,485 $ 43,128
Valuation allowance (175,485) (43,128)
---------- --------
Net Deferred Tax Asset $ - $ -
========== ========
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred
tax assets will not be realized. The ultimate realization of deferred tax
assets is dependent upon the generation of future taxable income during the
periods in which temporary differences are deductible and carryforwards are
available. Due to the uncertainty of the Company's ability to realize the
benefit of the deferred tax assets, the net deferred tax assets were fully
offset by a valuation allowance at December 31, 2006.
The Company has a net operating loss carryforward for Federal income tax
purposes of approximately $500,000 on a tax-reporting basis. The
carryforward will begin to expire in 2026, if not utilized.
NOTE 8 - RELATED PARTY TRANSACTIONS
The Company has a note payable to a stockholder. Interest paid to the
stockholder for the years ended December 31, 2006 and 2005 was $9,867 and
$6,885, respectively.
During 2006 and 2005, a stockholder provided legal services to the Company.
Total fees paid for theses services were $23,023 and $2,000 for the years
ended December 31, 2006 and 2005, respectively.
NOTE 9 - 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, Accrued Expenses
and Notes Payable - Stockholder
The carrying amount approximates fair market value because of the short
maturity of those instruments
Convertible Notes Payable
The carrying amounts approximate estimated fair market value.
NOTE 10 - SUBSEQUENT EVENT
On March 12, 2007, TelVue acquired all of the issued and outstanding stock
of the Company for a purchase price of $6.1 million in cash plus the
forgiveness of the note described in Note 5.
EXHIBIT 99.4
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The Unaudited Pro Forma Consolidated Financial Statements are based on the
historical financial statements of TelVue Corporation ("TelVue") and the
historical financial statements of Princeton Server Group, Inc. ("PSG").
The Unaudited Pro Forma Consolidated Balance Sheet gives effect to the PSG
acquisition as if it had occurred as of December 31, 2006 and the Unaudited
Pro Forma Consolidated Statements of Operations give effect to the PSG
acquisition as if it had occurred as of January 1, 2006. 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 Unaudited Pro Forma Consolidated Financial Statements do
not purport to represent what TelVue's financial position or results of
operations would actually have been had the PSG acquisition in fact occurred
on such dates or to project TelVue's financial position or results of
operations for any future date or period. The Unaudited Pro Forma
Consolidated Financial Statements should be read in conjunction with the
historical financial statements of TelVue (included in TelVue's Form 10-KSB,
dated March 29, 2007) and PSG (included elsewhere in this Form 8-K/A)
The Unaudited Pro Forma Consolidated Financial Statements give effect only
to the adjustments set forth in the accompanying notes and do not reflect
any benefits anticipated by management as a result of the PSG acquisition
TelVue Corporation
Unaudited Pro Forma Consolidated Balance Sheet
December 31, 2006
Historical Historical Pro Forma TelVue
TelVue PSG Adjustments Pro Forma
- -------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Cash and cash
equivalents $ 191,157 $ 156,982 $ - $ 348,139
Accounts receivable
- trade, net 392,134 338,747 - 730,881
Inventory - 68,888 - 68,888
Prepaid expenses 62,328 3,095 - 65,423
---------- ----------- ---------- ---------
TOTAL CURRENT ASSETS 645,619 567,712 - 1,213,331
NOTE RECEIVABLE 400,329 - (400,329)(a) -
PROPERTY AND EQUIPMENT, net 897,498 65,191 63,719 (a) 1,026,408
DEFINITE-LIVED INTANGIBLE
ASSETS, net - 10,538 4,538,182 (a) 4,548,720
INDEFINITE-LIVED INTANGIBLE
ASSETS - GOODWILL - - 1,354,612 (a) 1,354,612
INDEFINITE-LIVED INTANGIBLE
ASSETS - OTHER - - 397,260 (a) 397,260
OTHER ASSETS 8,800 - - 8,800
---------- --------- ---------- ----------
$1,952,246 $ 643,441 $5,953,444 $ 8,549,131
========== ========= ========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable $ 105,109 $ 129,145 $ - $ 234,254
Accrued expenses 374,568 95,949 - 470,517
Note payable -
stockholder, current - 100,000 - 100,000
Deferred service revenue 153,041 171,791 - 324,832
---------- -------- --------- ---------
TOTAL CURRENT LIABILITIES 632,718 496,885 - 1,129,603
LINES OF CREDIT - MAJORITY
STOCKHOLDER 2,600,000 - 6,100,000 (a) 8,700,000
NOTE PAYABLE - MAJORITY
STOCKHOLDER 541,000 - - 541,000
ACCRUED INTEREST - MAJORITY
STOCKHOLDER 111,735 - - 111,735
CONVERTIBLE NOTE PAYABLE - 400,329 (400,329)(a) -
STOCKHOLDERS' DEFICIT
Common Stock 483,564 39,630 (39,630) (a) 483,564
Additional paid-in capital 4,874,656 945,275 (945,275) (a) 4,874,656
Accumulated deficit (7,291,427) (1,238,678) 1,238,678 (a) (7,291,427)
----------- ---------- ---------- -----------
(1,933,207) (253,773) 253,773 (1,933,207)
----------- ---------- ---------- -----------
$1,952,246 $ 643,441 $5,953,444 $ 8,549,131
=========== ========== ========== ===========
See Notes to Unaudited Pro Forma Consolidated Financial Statements.
TelVue Corporation
Unaudited Pro Forma Consolidated Statement of Operations
Three Months Ended March 31, 2007
Historical Historical Pro Forma TelVue
TelVue PSG Adjustments Pro Forma
- --------------------------------------------------------------------------------
REVENUES $ 612,396 $ 290,545 $ - $ 902,941
COST OF REVENUES 280,793 126,372 - 407,165
----------- ---------- ----------- -----------
GROSS PROFIT 331,603 164,173 - 495,776
OPERATING EXPENSES
Selling and marketing 403,753 150,168 - 553,921
General and administrative 355,489 311,183 - 666,672
Depreciation and
amortization 101,616 6,571 (6,571) (b) 241,538
6,485 (c)
133,437 (d)
---------- --------- ---------- -----------
860,858 467,922 133,351 1,462,131
---------- --------- --------- -----------
OPERATING LOSS (529,255) (303,749) (133,351) (966,355)
OTHER INCOME (EXPENSE)
Interest income 30,415 139 - 30,554
Interest expense (98,807) (1,667) (100,937)(e) (201,411)
----------- ---------- ---------- -----------
(68,392) (1,528) (100,937) (170,857)
----------- ---------- ---------- -----------
NET LOSS $(597,647) $(305,277) $(234,288) $(1,137,212)
=========== ========== ========== ============
BASIC AND DILUTED LOSS
PER COMMON SHARE $ (0.01) $ (0.02)
=========== ===========
See Notes to Unaudited Pro Forma Consolidated Financial Statements.
TelVue Corporation
Unaudited Pro Forma Consolidated Statement of Operations
Year Ended December 31, 2006
Historical Historical Pro Forma TelVue
TelVue PSG Adjustments Pro Forma
- -------------------------------------------------------------------------------
REVENUES $ 2,089,397 $1,833,376 $ - $ 3,922,773
COST OF REVENUES 1,040,224 962,994 - 2,003,218
----------- ---------- ------------ -----------
GROSS PROFIT 1,049,173 870,382 - 1,919,555
OPERATING EXPENSES
Selling and marketing 1,468,776 675,839 - 2,144,615
General and administrative 1,096,941 1,136,865 - 2,233,806
Depreciation and
amortization 232,765 32,853 (32,853)(b) 899,190
25,941 (c)
640,484 (d)
------------ ---------- ----------- -----------
2,798,482 1,845,557 633,572 5,277,611
------------ ---------- ----------- -----------
OPERATING LOSS (1,749,309) (975,175) (633,572) (3,358,056)
OTHER INCOME (EXPENSE)
Interest income 17,819 5,245 - 23,064
Interest expense (110,025) (15,461) (606,812)(e) (732,298)
Gain on sales of equipment 7,000 - - 7,000
------------ ---------- ----------- -----------
(85,206) (10,216) (606,812) (702,234)
------------ ---------- ----------- -----------
NET LOSS $(1,834,515) $ (985,391) $(1,240,384) $(4,060,290)
============ ============ =========== ============
BASIC AND DILUTED LOSS
PER COMMON SHARE $ (0.04) $ ( 0.08)
========== ==========
See Notes to Unaudited Pro Forma Consolidated Financial Statements.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The Unaudited Pro Forma Consolidated Balance Sheet gives effect to the
PSG acquisition as if it had occurred as of December 31, 2006 and the
Unaudited Pro Forma Consolidated Statements of Operations for the year
ended December 31, 2006 and for the three months ended March 31, 2007,
give effect to the PSG acquisition as if it had occurred on January 1,
2006. The following pro forma adjustments have been made to the
Unaudited Pro Forma Consolidated Financial Statements to reflect the
PSG acquisition.
(a) To record the acquisition of PSG. The Company is in the process of
obtaining a third-party valuation for many of the assets and liabilities
acquired, and the preliminary estimates are subject to adjustment when
the third party valuation is finalized. Accordingly, subsequent revisions
to these preliminary estimates should be expected and may be material.
The preliminary amount of the purchase price allocated to software is
$3,600,000, to patent applications is $788,000, to other finite-lived
intangible assets is $160,000, to trademarks is $397,000 and to goodwill
at December 31, 2006 would have been approximately $1,400,000. The
trademarks have been assigned an indefinite life.
(b) To reverse historical depreciation and amortization of PSG.
(c) To record depreciation of property and equipment acquired from PSG.
(d) To record amortization expense of definite-lived intangible assets
acquired from PSG.
(e) To record additional interest expense as a result of $6,100,000 of
additional debt incurred with the acquisition of PSG.