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.