UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2009
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from________to________
Commission File Number: 0-17170
TELVUE CORPORATION
(Exact name of registrant issuer as specified in its charter)
DELAWARE 51-0299879
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
16000 Horizon Way, Suite 500
Mt. Laurel, New Jersey 08054
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (856) 273-8888
Indicate by check mark whether the registrant (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 registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [_]
Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (ss.232.405 of
this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). Yes [_] No [_]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer [_] Accelerated filer [_]
Non-accelerated filer [_] Smaller reporting company [X]
(Do not check if a smaller
reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act) Yes [_] No [X]
Number of shares of registrant's common stock outstanding as of April 21, 2009:
48,561,644 shares.
TELVUE CORPORATION
INDEX
PAGE
NO.
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 2009
(unaudited) and as of December 31, 2008 ........................... 3
Consolidated Statements of Operations for the three months ended
March 31, 2009 (unaudited) and March 31, 2008 (unaudited) ......... 4
Consolidated Statements of Cash Flows for the three months ended
March 31, 2009 (unaudited) and March 31, 2008 (unaudited) ......... 5
Notes to Consolidated Financial Statements (unaudited) ............ 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations ............ 12
Item 3. Quantitative and Qualitative Disclosures About
Market Risk .............................................. 25
Item 4T. Controls and Procedures .................................. 25
PART II. OTHER INFORMATION
Item 6. Exhibits ................................................. 26
2
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
TELVUE CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
2009 2008
------------ ------------
ASSETS (Unaudited) *
CURRENT ASSETS
Cash and cash equivalents .................... $ 58,737 $ 250,698
Accounts receivable - trade, net of
Allowances of $7,524 at March 31,
2009 and $5,700 at December 31, 2008 ........ 744,860 560,579
Inventory .................................... 277,977 266,032
Prepaid expenses ............................. 101,950 54,636
------------ ------------
TOTAL CURRENT ASSETS ...................... 1,183,524 1,131,945
PROPERTY AND EQUIPMENT ......................... 7,273,330 7,235,689
Less accumulated depreciation ................ 6,139,441 6,051,809
------------ ------------
1,133,889 1,183,880
DEFINITE-LIVED INTANGIBLE ASSETS,
Net of accumulated amortization of
$1,280,607 at March 31, 2009 and
$1,132,969 at December 31, 2008 ............. 3,268,113 3,415,751
INDEFINITE-LIVED INTANGIBLE ASSETS-OTHER ....... 397,260 397,260
OTHER ASSETS ................................... 10,430 8,800
------------ ------------
$ 5,993,216 $ 6,137,636
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable - trade ..................... $ 314,545 $ 315,236
Accrued expenses ............................. 498,840 444,659
Deferred service revenue ..................... 460,660 359,764
Other liabilities ............................ 1,707 1,784
------------ ------------
TOTAL CURRENT LIABILITIES ................. 1,275,752 1,121,443
LINES OF CREDIT - MAJORITY STOCKHOLDER ......... 16,350,000 15,950,000
NOTE PAYABLE - MAJORITY STOCKHOLDER ............ 541,000 541,000
ACCRUED INTEREST - MAJORITY STOCKHOLDER ........ 2,150,922 1,960,708
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, $.01 par value, 100,000,000
shares authorized, 48,461,644 and 48,461,644
shares issued and outstanding at March 31,
2009 and December 31, 2008, respectively ..... 484,616 484,617
Additional paid-in capital .................... 4,877,353 4,877,353
Accumulated deficit ........................... (19,686,427) (18,797,485)
------------ ------------
(14,324,458) (13,435,515)
------------ ------------
$ 5,993,216 $ 6,137,636
============ ============
* Derived from audited financial statements.
The accompanying unaudited notes are an integral part of these statements.
3
TELVUE CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended
March 31,
----------------------------
2009 2008
------------ ------------
REVENUES
TPS services ................................. $ 626,315 $ 449,500
ANI services ................................. 297,430 306,357
------------ ------------
923,745 755,857
COST OF REVENUES
TPS services ................................. 335,828 394,069
ANI services ................................. 95,342 85,553
------------ ------------
TOTAL COST OF REVENUES ......................... 431,170 479,622
------------ ------------
GROSS MARGIN ................................... 492,575 276,235
OPERATING EXPENSES
Selling and marketing ........................ 233,602 449,341
General and administrative ................... 672,752 853,156
Depreciation and amortization ................ 284,951 298,146
------------ ------------
1,191,305 1,600,643
------------ ------------
OPERATING LOSS ................................. (698,730) (1,324,408)
OTHER INCOME (EXPENSE)
Interest income .............................. 2 303
Interest expense ............................. (190,214) (255,516)
------------ ------------
TOTAL OTHER INCOME (EXPENSE) ................... (190,212) (255,213)
------------ ------------
NET LOSS ....................................... $ (888,942) $ (1,579,621)
============ ============
BASIC AND DILUTED NET LOSS PER COMMON SHARE .... $ (.02) $ (.03)
============ ============
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING
BASIC AND DILUTED ............................ 48,461,644 48,433,074
============ ============
The accompanying unaudited notes are an integral part of these statements.
4
TELVUE CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
March 31,
---------------------------
2009 2008
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss ...................................... $ (888,942) $(1,579,621)
Adjustments to reconcile net loss to
net cash (used in) operating activities:
Depreciation and amortization ............... 284,951 298,146
Changes in assets and liabilities:
Accounts receivable - trade ................. (184,281) 179,382
Inventory ................................... (11,945) (43,305)
Prepaid expenses ............................ (47,314) (58,819)
Other Assets ................................ (1,630) -
Accounts payable - trade .................... (691) (244,868)
Accrued expenses ............................ 54,102 147,960
Deferred service revenue .................... 100,896 3,358
Accrued interest - majority stockholder ..... 190,214 255,516
----------- -----------
NET CASH (USED IN) OPERATING ACTIVITIES .... (504,640) (1,042,251)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment .......... (87,321) (126,669)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from line of credit - majority
stockholder ............................... 400,000 1,200,000
----------- -----------
NET INCREASE/(DECREASE) IN CASH AND CASH
EQUIVALENTS .................................... (191,961) 31,080
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD .......................... 250,698 225,660
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD ....... $ 58,737 $ 256,740
=========== ===========
The accompanying unaudited notes are an integral part of these statements.
5
TELVUE CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
---------------------
Summary Financial Information and Results of Operations
- -------------------------------------------------------
In the opinion of management of TelVue Corporation ("TelVue" or the "Company"),
the accompanying unaudited financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America
and with the regulations of the Securities and Exchange Commission and contain
all adjustments (consisting of only normal recurring adjustments) necessary to
make the financial statements not misleading and to present fairly the financial
condition as of March 31, 2009 and the results of operations for the three
months ended March 31, 2009 and 2008 and cash flows for the three months ended
March 31, 2009 and 2008.
Going Concern and Management's Plan
- -----------------------------------
The accompanying financial statements of TelVue have been prepared on the basis
of generally accepted accounting principles applicable to a "going concern,"
which assume that the Company will continue in operation for at least one year
and will be able to realize its assets and discharge its liabilities in the
normal course of operations.
Conditions exist, however, that cast doubt about the Company's ability to
continue as a "going concern." In order to fund operations, the Company relies
on funds drawn on lines of credit held by the Company with its majority
stockholder who is also a director, H.F. (Gerry) Lenfest. Based on the Company's
current draw-down rate, the funds remaining in the current lines of credit are
not sufficient to sustain the Company's operations for the next 12 month period.
Funding the Company's future capital requirements will depend on numerous
factors including, but not limited to, the Company receiving continued financial
support from Mr. Lenfest, which he has not committed to at this time, or seeking
other alternatives. While management is working towards mitigating the adverse
conditions and events which raise doubt about the validity of the "going
concern" assumption used in preparing these financial statements, there can be
no assurance that management will be successful.
These financial statements do not reflect adjustments that would be necessary if
the Company were unable to continue as a "going concern." If the Company were
unable to continue as a "going concern," then substantial adjustments would be
necessary to the carrying values of assets, the reported amounts of its
liabilities, the reported expenses, and the balance sheet classifications used.
Interim Financial Information
- -----------------------------
While management believes that the disclosures presented are adequate to prevent
misleading information, these unaudited financial statements must be read in
conjunction with the audited financial statements and notes included in TelVue's
Annual Report on Form 10-K for the year ended December 31, 2008, as filed with
the Securities and Exchange Commission.
Prior period financial statements have been reclassified to conform with current
quarter presentation.
6
Basis of Consolidation
- ----------------------
The consolidated financial statements include the accounts of TelVue and
Princeton Server Group, Inc. ("PSG"), which was acquired on March 12, 2007 and
was maintained as a wholly-owned subsidiary until February 28, 2008, on which
date PSG was merged into TelVue. From the date of the acquisition of PSG until
the merger date, intercompany accounts and transactions were eliminated in
consolidation. Since the merger date, the accounts of PSG have been included
directly within TelVue's accounts.
Business Combination
- --------------------
In accordance with Statement of Financial Accounting Standards ("SFAS") No. 141,
"Business Combinations," the Company accounts for all business combinations by
the purchase method. Furthermore, the Company recognizes intangible assets apart
from goodwill if they arise from contractual or legal rights or if they are
separable from goodwill.
Goodwill, Trademarks and Other Intangible Assets
- ------------------------------------------------
In accordance with SFAS No. 142, "Goodwill and Other Intangible Assets," the
Company classifies intangible assets into three categories: (1) intangible
assets with definite lives subject to amortization, (2) intangible assets with
indefinite lives not subject to amortization, and (3) goodwill. The Company
tests intangible assets with definite lives for impairment if conditions exist
that indicate the carrying value may not be recoverable. Such conditions may
include an economic downturn in a geographic market or a change in the
assessment of future operations. The Company records an impairment charge when
the carrying value of the definite lived intangible asset is not recoverable by
the cash flows generated from the use of the asset.
Intangible assets with indefinite lives and goodwill are not amortized. The
Company tests these intangible assets and goodwill for impairment at least
annually or more frequently if events or circumstances indicate that such
intangible assets or goodwill might be impaired. All goodwill is assigned to
reporting units, which are one level below TelVue's operating segments. Goodwill
is assigned to the reporting unit that benefits from the synergies arising from
each business combination. The Company performs impairment tests of goodwill at
each reporting unit level. Such impairment tests for goodwill include comparing
the fair value of the respective reporting unit with its carrying value,
including goodwill. When the fair value is less than the carrying value of the
intangible assets or the reporting unit, the Company records an impairment
charge to reduce the carrying value of the assets to fair value.
At December 31, 2008, management determined that the goodwill acquired with the
PSG acquisition was impaired and an impairment charge of $1,921,405 was
recognized.
The Company determines the useful lives of its identifiable intangible assets
after considering the specific facts and circumstances related to each
intangible asset. Factors the Company considers when determining useful lives
include the contractual term of any agreement, the history of the asset, the
Company's long-term strategy for the use of the asset, any laws or other local
regulations which could impact the useful life of the asset, and other economic
factors, including competition and specific market conditions. Intangible assets
that are deemed to have definite lives are amortized, generally on a
straight-line basis, over their useful lives, ranging from 1 to 15 years.
7
2. ACQUISITION
-----------
On March 12, 2007, the Company acquired all of the issued and outstanding shares
of capital stock of PSG for a purchase price of $6,100,000 in cash plus the
forgiveness of a $400,000 loan owed by PSG, in addition to the cancellation of a
warrant that was issued in conjunction with the loan. The acquisition was funded
with funds drawn under a $10,000,000 line of credit held by the Company with its
majority stockholder, Mr. Lenfest. The Company accounts for this acquisition as
a business combination under the purchase method of accounting. The results of
PSG are included in the Company's TelVue Products and Services ("TPS") operating
segment.
Upon closing of the acquisition, the Company made preliminary estimates of the
fair values of the assets and liabilities for consolidation. The Company has
since obtained a third-party valuation for many of the assets and liabilities
acquired. There were no material differences between the preliminary estimates
and the final valuations. The amount of purchase price allocated to software is
$3,600,000, patent applications is $788,000, other finite-lived intangible
assets is $160,000, trademarks is $397,000 and goodwill is $1,921,405. As was
mentioned above, an impairment charge was recognized related to the goodwill,
eliminating this balance as of December 31, 2008. The trademarks have been
assigned an indefinite life.
The accompanying financial statements include the operations of PSG since the
date of acquisition.
3. SUPPLEMENTAL CASH FLOW INFORMATION
----------------------------------
No income taxes or interest were paid during the three months ended March 31,
2009 or 2008.
4. EARNINGS PER COMMON SHARE
-------------------------
Basic 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 of outstanding common stock. Diluted earnings per common share
is computed by dividing net income, after the deduction of preferred stock
dividends, when applicable, by the weighted average number of shares of
outstanding common stock adjusted to include incremental common shares that
would have been outstanding if potentially dilutive common shares had been
issued. Common equivalent shares are excluded from the computation in periods in
which they have an antidilutive effect. Because of the net loss available to
common stockholders for the three months ended March 31, 2009 and 2008, no
potential common shares were included in the computation of a diluted per share
amount since such potential common shares would not have a dilutive effect.
5. CORPORATE INCOME TAXES
----------------------
The Company uses the asset and liability method of accounting for income taxes
in accordance with SFAS No. 109, "Accounting for Income Taxes." SFAS No. 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.
8
Differences between financial reporting and tax bases arise most frequently from
differences in timing of income and expense recognition. Deferred income tax
expense is measured by the change in the net deferred income tax asset or
liability during the year.
The provisions for income tax benefit from continuing operations for the three
months ended March 31, 2009 and 2008 consisted of the following components:
2009 2008
--------- ---------
Current
Federal ................... $ - $ -
State ..................... - -
--------- ---------
- -
Deferred
Federal ................... 730,000 531,000
State ..................... 228,000 142,000
--------- ---------
958,000 673,000
Valuation allowance increase (958,000) (673,000)
--------- ---------
- -
--------- ---------
$ - $ -
========= =========
TelVue recorded an increase in valuation allowance of $958,000 at March 31, 2009
which reduced its deferred tax asset to zero. The valuation allowance was
recorded due to the uncertainty as to whether future net income would be
generated that would utilize TelVue's net operating loss carry forward. TelVue's
federal net operating loss carry forward was approximately $13,000,000 on a
tax-reporting basis as of March 31, 2009. The carry forward will begin to expire
in 2010, if not utilized.
In June 2006, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 48 "Accounting for Uncertainty in Income Taxes - an
interpretation of FASB Statement 109" ("FIN 48"). FIN 48 establishes a single
model to address accounting for uncertain tax positions. FIN 48 clarifies the
accounting for income taxes by prescribing a minimum recognition threshold a tax
position is required to meet before being recognized in the financial
statements. FIN 48 also provides guidance on derecognition, measurement,
classification, interest and penalties, accounting in interim periods,
disclosure and transition. The Company adopted the provisions of FIN 48 on
January 1, 2007. Upon adoption, the Company recognized no adjustment in the
amount of unrecognized tax benefits. As of the date of adoption, the Company had
no unrecognized tax benefits. The Company's policy is to recognize interest and
penalties that would be assessed in relation to the settlement value of
unrecognized tax benefits as a component of income tax expense.
The Company and its subsidiary are subject to U.S. federal income tax as well as
income tax in multiple state jurisdictions. The Company is no longer subject to
U.S. federal income tax examinations for years before 2003 and state income tax
examinations before 2002. However, to the extent allowed by law, the tax
authorities may have the right to examine prior periods where net operating
losses were generated and carried forward, and make adjustments up to the amount
of the net operating loss carryforward amount. The Company is not currently
under Internal Revenue Service ("IRS") tax examination. The Company is not
currently under examination by any state jurisdictions.
9
6. NOTES PAYABLE AND LINE OF CREDIT - MAJORITY STOCKHOLDER
-------------------------------------------------------
Note Payable - Majority Stockholder
- -----------------------------------
On June 16, 2005, the members of the Board of Directors of the Company and Mr.
Lenfest, a director and the majority stockholder of the Company, extended the
maturity date of a promissory note in the principal amount of $541,000 issued by
the Company and currently held by Mr. Lenfest (the "Science Note") to January 1,
2011. The Science Note was originally issued by the Company to Science Dynamics
Corporation ("Science") and was payable December 31, 1996. In January 1995, Mr.
Lenfest purchased the Science Note from Science. The Science Note is
non-interest bearing.
Line of Credit (2005 Note) - Majority Stockholder
- -------------------------------------------------
On April 27, 2005, TelVue entered into a Line of Credit Note with Mr. Lenfest
(the "2005 Note"). The 2005 Note was secured to provide funding to grow the
TelVue Virtual Television Network ("TVTN"). Under the terms of the 2005 Note,
the Company may borrow, from time to time, up to the maximum principal amount of
the 2005 Note which is $3,800,000. The minimum advance under the 2005 Note is
$100,000 and the interest rate is equal to the prime rate plus one percent (1%).
The 2005 Note contains customary events of default, including, among others,
non-payment of principal and interest and in the event the Company is involved
in certain insolvency proceedings. In the event of a default, all of the
obligations of the Company under the 2005 Note may be declared immediately due
and payable. The Line of Credit is unsecured and will expire six years from the
date of the first advance, which is November 23, 2011, unless extended or
renewed. Principal and interest on the 2005 Note are also due and payable on
November 23, 2011. The Note was exhausted by the end of 2007. As of March 31,
2009, accrued interest due on the 2005 Note was $764,129.
Line of Credit (2006 Note) - Majority Stockholder
- -------------------------------------------------
On November 3, 2006, the Company entered into an additional Line of Credit Note
with Mr. Lenfest, in the principal amount of $10,000,000 (the "2006 Note").
Under the 2006 Note, the Company could request up to $5,000,000 for general
working capital and an additional $5,000,000 for purposes other than general
working capital upon mutual agreement by the Company and Mr. Lenfest. The
minimum advance under the 2006 Note is $100,000 and the interest rate is equal
to the prime rate plus one percent (1%). The 2006 Note contains customary events
of default, including, among others, non-payment of principal and interest and
in the event TelVue is involved in certain insolvency proceedings. In the event
of a default, all of the obligations of the Company under the 2006 Note may be
declared immediately due and payable. The 2006 Note is unsecured and will expire
six years from the date of the first advance under the 2006 Note unless extended
or renewed. Principal and interest are also due and payable six years from the
date of the first advance under the 2006 Note. As of March 31, 2009, the Company
had borrowed $10,000,000 under the 2006 Note, fully exhausting the Note. As of
March 31, 2009, accrued interest due on the 2006 Note was $1,318,245.
On December 26, 2006, TelVue borrowed $400,000 from Mr. Lenfest under the 2006
Note to loan to PSG to fund their operating expenses (the "PSG Note"). The PSG
Note was a convertible note that bore interest at a rate of six percent (6%) per
annum. No payments of principal or interest were due until July 1, 2007. Under
the PSG Note, interest accrued through July 1, 2007 was to be added to the
10
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 PSG Note was
scheduled to mature in January 2012. The Company had the option to convert the
unpaid principal balance of the PSG Note and all accrued interest into common
stock of PSG. In connection with the PSG Note, TelVue received a warrant, which
entitled TelVue to purchase 129,629 shares of common stock of PSG for $1.08 per
share. The warrant was to commence on July 1, 2007 and expire on December 31,
2016. The PSG Note was forgiven and the warrant was canceled on March 12, 2007,
in connection with TelVue's acquisition of all of the outstanding stock of PSG.
On March 12, 2007, PSG was acquired by TelVue for $6,100,000, the forgiveness of
the PSG Note and cancellation of the warrant (described above). TelVue borrowed
the $6,100,000 from Mr. Lenfest under the 2006 Note to fund the acquisition. PSG
develops high performance digital video systems, appliances and software that
support capture, storage, manipulation and play-out of digital media in multiple
popular formats. PSG markets its product to local Cable TV Public, Education and
Government Local Access Channels ("PEG Channels") and Local Origination
broadcast stations, professional broadcast stations and schools and
universities. TelVue acquired PSG as a complement to its TVTN Network with the
objective being to offer towns, municipalities and schools a packaged turnkey
product of hardware and software.
Line of Credit (2007 Note) - Majority Stockholder
- -------------------------------------------------
As a result of the anticipated exhaustion of the line of credit under the 2006
Note, TelVue entered into an additional Line of Credit Note with Mr. Lenfest on
December 21, 2007 in the principal amount of $2,300,000 (the "2007 Note"). The
minimum advance under the 2007 Note is $100,000 and the interest rate is equal
to the prime rate plus one percent (1%). The 2007 Note contains customary events
of default, including, among others, non-payment of principal and interest and
in the event TelVue is involved in certain insolvency proceedings. In the event
of a default, all of the obligations of TelVue under the 2007 Note may be
declared immediately due and payable. The 2007 Note is unsecured and will expire
six years from the date of the first advance under the 2007 Note unless extended
or renewed. Principal and interest on the 2007 Note are also due and payable six
years from the date of the first advance under the 2007 Note. As of March 31,
2009, TelVue had borrowed $2,300,000 under the 2007 Note, fully exhausting the
Note. As of March 31, 2009, accrued interest due on the 2007 Note was $67,733.
Line of Credit (2009 Q1 Note) - Majority Stockholder
- ----------------------------------------------------
As a result of the anticipated exhaustion of the line of credit under the 2007
Note, TelVue entered into an additional Line of Credit Note with Mr. Lenfest on
March 2, 2009 in the principal amount of $400,000 (the "2009 Q1 Note"). The
minimum advance under the 2009 Q1 Note is $100,000 and the interest rate on the
2007 Note is equal to the prime rate plus one percent (1%). The 2009 Q1 Note
contains customary events of default, including, among others, non-payment of
principal and interest and in the event TelVue is involved in certain insolvency
proceedings. In the event of a default, all of the obligations of TelVue under
the 2009 Q1 Note may be declared immediately due and payable. The 2009 Q1 Note
is unsecured and will expire six years from the date of the first advance under
the 2009 Q1 Note unless extended or renewed. Principal and interest on the 2009
Q1 Note are also due and payable six years from the date of the first advance
under the 2009 Q1 Note. As a result of the exhaustion of the 2007 Note, TelVue
began drawing on the 2009 Q1 Note on March 3, 2009. As of March 31, 2009, TelVue
had borrowed $250,000 under the 2009 Q1 Note, with accrued interest due of $815.
11
7. RELATED PARTY TRANSACTIONS
--------------------------
See Note 6, included herein, for information of related party transactions
between TelVue and its majority stockholder.
8. FINANCIAL DATA BUSINESS SEGMENT
-------------------------------
Based on the criteria set forth in SFAS No. 131 "Disclosures about Segments of
an Enterprise and Related Information," the Company operates two business
segments. The first segment, TPS, includes equipment such as the TelVue
Princeton(TM) Server Product Line and services such as WEBUS(R) and PEG.TV(TM).
The TelVue Princeton(TM) Server Product Line includes high performance digital
video systems, servers, and software that support capture, storage, manipulation
and play-out of digital media in multiple popular formats. WEBUS(R) is a
broadcast digital signage system for displaying a fully automated TV
station-like display on a cable system access channel using computer-based
digital technology. PEG.TV(TM) is a live streaming and Video-on-Demand service
for integrating video on the Internet. The second segment is a marketing and
service division, which sells automatic number identification ("ANI")
telecommunications services to the cable television industry.
Summarized financial information by reporting segment as of and for each of the
three months ended March 31, 2009 and 2008, is as follows:
Three months ended March 31, 2009 ANI TPS Total
- ------------------------------------ ----------- ----------- -----------
Revenues ........................... $ 297,430 $ 626,315 $ 923,745
Depreciation and amortization ...... 44,094 240,857 284,951
Operating income/(loss) ............ 99,985 (798,715) (698,730)
Interest expense ................... 41,846 148,366 190,212
Net income/(loss) .................. 58,139 (947,081) (888,942)
Capital expenditures ............... - 87,321 87,321
Three months ended March 31, 2008 ANI TPS Total
- ------------------------------------ ----------- ----------- -----------
Revenues ........................... $ 306,357 $ 449,500 $ 755,857
Depreciation and amortization ...... 39,548 258,598 298,146
Operating income/(loss) ............ 113,919 (1,438,327) (1,324,408)
Interest expense ................... 42,966 212,247 255,213
Net income/(loss) .................. 70,953 (1,650,574) (1,579,621)
Capital expenditures ............... - 126,669 126,669
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This Quarterly Report on Form 10-Q contains certain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended, which are
intended to be covered by the safe harbors created thereby. All forward-looking
statements involve risks and uncertainty, including, without limitation, the
ability of TelVue to obtain sufficient cash to continue its operations, the
ability of TelVue to continue its growth strategy, increases in costs of labor
and employee benefits, general market conditions, competition and similar
matters discussed in TelVue's Annual Report on Form 10-K for the fiscal year
ended December 31, 2008 and in this Quarterly Report on Form 10-Q. These
12
forward-looking statements may include declarations regarding the Company's
belief or current expectations of management, such as statements including the
words "budgeted," "anticipate," "project," "estimate," "expect," "may,"
"believe," "potential" and similar statements are intended to be among the
statements that are forward-looking statements. Because such statements reflect
the reality of risk and uncertainty that is inherent in the Company's business,
actual results may differ materially from those expressed or implied by such
forward-looking statements. Readers are cautioned not to place undue reliance on
these forward-looking statements, which are made as of the date this report was
filed with the Securities and Exchange Commission.
Readers are advised that the Company undertakes no obligation to release
publicly any revisions to the forward-looking statements to reflect events or
circumstances after the date hereof or to reflect unanticipated events or
development. To the extent that the information presented in this Quarterly
Report on Form 10-Q for the quarter ended March 31, 2009 discusses financial
projections, information or expectations about the Company's products or
markets, or otherwise makes statements about future events, such statements are
forward-looking. The Company is making these forward-looking statements in
reliance on the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995.
Although the Company believes that the assumptions underlying the
forward-looking statements contained herein are reasonable, any of the
assumptions could be inaccurate, and therefore, there can be no assurance that
the forward-looking statements included in this Quarterly Report will prove to
be accurate. In light of the significant uncertainties inherent in the
forward-looking statements included in this Quarterly Report, the inclusion of
such information should not be regarded as a representation by TelVue or any
other person that the Company's objectives and plans will be achieved.
OVERVIEW OF COMPANY:
TelVue Corporation, a Delaware corporation ("TelVue" or the "Company"), was
incorporated on November 26, 1986. Until December 30, 1988, TelVue was a wholly
owned subsidiary of Science Dynamics Corporation ("Science"). On that date,
TelVue's shares of common stock were distributed to Science's shareholders of
record as of December 30, 1988, on the basis of three shares of TelVue's common
stock for each share of Science's common stock then outstanding.
TelVue operates two business segments. The first segment, TelVue Products and
Services ("TPS"), includes equipment such as the TelVue Princeton(TM) Server
Product Line and services such as WEBUS(R) and PEG.TV(TM). The TelVue
Princeton(TM) Server Product Line includes high performance digital video
systems, servers, and software that support capture, storage, manipulation and
play-out of digital media in multiple popular formats. WEBUS(R) is a broadcast
digital signage system for displaying a fully automated TV station-like display
on a cable system access channel using computer-based digital technology.
PEG.TV(TM) is a live streaming and Video-on-Demand service for integrating video
on the Internet. The second segment is a marketing and service division, which
sells automatic number identification ("ANI") telecommunications services to the
cable television industry.
During the second quarter of 2008, the Company embarked upon a new branding and
sales re-organization plan. The new branding consolidated certain of the
Company's products and services under one name - TPS. The services formerly
referred to as TelVue Virtual Television Networks ("TVTN") collectively are now
- -referred to as follows:
13
WEBUS(R) Automated broadcast digital signage display on TV Channel
WEBUS Inside(TM) WEBUS(R) integrated within TelVue Princeton(TM) Servers
PEG.TV(TM) Internet Streaming and Video-on-Demand Service
WEBLINX(TM) Automated WEBUS(R) message display on websites
VideoActives(TM) Real time, dynamic video content for channels
WEB-EM(R) Automated WEBUS(R) message display on cell phones and email
The products formerly referred to as Princeton Server Group are now known as the
TelVue Princeton(TM) Server Product Line. These products offer high performance
digital video systems, servers, and software that support capture, storage,
manipulation and play-out of digital media in multiple popular formats. The
TelVue Princeton(TM) Server Product Line includes, but is not limited to:
TelVue Princeton(TM) B100
TelVue Princeton(TM) B1000
TelVue Princeton(TM) B3000
TelVue Princeton(TM) S3000F
TelVue Princeton(TM) C500W
TelVue Princeton(TM) T7400E
This branding and re-organization effort, backed with a new Company logo,
marketing materials and exhibit materials, was released on July 9, 2008 at a
major industry conference. Additionally, TelVue's website was redesigned and
updated to reflect the new branding. The new website was completed on November
5, 2008. This effort provides focus on TelVue's primary business as a leading
technology provider for hyperlocal broadcasters, energizes its staff, and better
educates the market regarding the many products and services provided by TelVue.
In 2003, TelVue developed the WEBUS(R) service. WEBUS(R) is a digital signage
system for displaying a fully-automated, TV station-like display on a cable
system access channel using computer-based digital technology. WEBUS(R) displays
the programming as graphics, text, imbedded music and pictures with voice
narration and can run full-motion video clips. TelVue is currently marketing
WEBUS(R) and its other products and services to municipal governments, K-12
school districts, higher education institutions, cable Multi-System Operators
("MSOs"), and other broadcasters as a means of providing richer and more robust
TV programming for their local Cable TV Public, Education and Government Local
Access Channels ("PEG Channels") or Local Origination channels. Currently, most
municipalities use a simple TV display made up of only text messages with
background music. TelVue directly charges the municipalities a start-up and
yearly support fee. For some clients, a sponsorship program helps locate
regional and national businesses as sponsors or underwriters for TelVue clients
to help defray TelVue charges. In return, the TelVue client places an
acknowledgement of the sponsor's support on its town or school's access channel.
TelVue optionally offers video and graphics production services to its WEBUS(R)
customers who do not have the capability to produce their own local videos or
who desire a custom look and feel for their channel. WEBUS(R) customers also
receive TelVue's WEBLINX(TM) plug-in application that transmits a town's
WEBUS(R) messages and graphics directly to the town's website. If residents do
not have cable TV access, they can easily view messages via the Internet.
While WEBUS(R) is well suited for broadcast digital signage and bulletin board,
the TelVue Princeton(TM) Server Product Line provides digital server and
broadcast automation technology to store, schedule, and playback long-form video
during the local programming time allocated on the channels. TelVue acquired
Princeton Server Group, Inc. ("PSG") because it believed, and continues to
believe, the TelVue Princeton(TM) Server Product Line and WEBUS(R) together
provides a complete technology and support solution to owners and operators of
14
PEG Channels and other Local Origination Channels. The PSG acquisition included
four pending patents filed with the U.S. Patent Office. As a further integration
of the two companies, TelVue introduced WEBUS Inside(TM) in the first quarter of
2009, which integrates the WEBUS(R) bulletin board technology into the TelVue
Princeton(TM) broadcast servers on a single hardware platform. A multi-channel
TelVue Princeton(TM) video server can run multiple independent WEBUS(R) feeds,
automatically filling program gaps with community bulletin board and digital
signage. This combination of broadcast digital signage and playback in a single
server offers TelVue a competitive and cost advantage.
As a complement to the WEBUS(R) service, TelVue has introduced VideoActives(TM),
which are real-time, data-driven, on-air graphics such as local weather, local
traffic, headline news, financial market indices, sports, quotes of the day and
trivia questions. VideoActives(TM) are designed to enhance the presentation of
the channels with dynamic and local content driven automatically by live data
feeds.
During the second quarter of 2008, TelVue introduced another new service,
PEG.TV(TM). This Internet streaming and video-on-demand service provides
operators of PEG Channels the opportunity to stream their channel live on the
Internet and/or to place selected video content on an Internet-based "player" on
their website. PEG.TV(TM) gives a town, school, or other organization complete
control and branding of their web video content. TelVue introduced a new
PEG.TV(TM) feature in the first quarter of 2009 that allows customers to index
their videos. For example, customers can add Agenda Chapter points and related
information to long town council meetings. This service, along with other
products and services, demonstrates TelVue's initiative to provide comprehensive
and industry-leading solutions to its marketplace for both traditional
television broadcast over cable, DTV, and satellite as well as modern Internet
video delivery.
The WEB-EM(R) technology enables local management officials to send messages to
residents over cell phones and email. This four-in-one technology provides
simultaneous phone, email, website and television notification. While TelVue
still maintains the WEB-EM(R) technology, the Company is not actively marketing
it to customers due to soft initial sales, in addition to increased competition
from companies focusing solely on the text messaging market.
To expand its sales reach, TelVue commenced a change in sales strategy to
incorporate a third-party reseller network distribution method. This method
broadens TelVue's sales reach by employing both locally-based and
nationally-based resellers to create sales opportunities, supported by TelVue's
internal sales staff, which should increase sales while reducing and delaying
some sales expenses until a sale is consummated. This change in strategy
resulted in a restructuring of TelVue's sales department, significantly reducing
direct sales staff and management. To date, 13 resellers have been contracted.
Many are still in the training and orientation process. To help expedite the
impact of the Company's reseller relationships, TelVue launched a Partner
Resource Center in March 2009 on the Company's website that includes training
materials, videos, and sales tools to assist the Company's new resellers.
Additionally, in November 2008, TelVue reached an agreement with a leading U.S.
designer, manufacturer, and supplier of a comprehensive line of broadband
systems equipment to co-develop digital video storage products to be sold under
the partner's brand. This original equipment manufacturer ("OEM") sales strategy
is expected to complement the Company's reseller network and provide additional
growth opportunities leveraging the Company's OEM partner's strong distribution
channel and brand.
15
2008 Revenue and Business Model Refocus
There was a decrease in 2008 TelVue Princeton(TM) sales and revenue as well as a
decrease in new WEBUS(R) subscriptions compared to 2007 that were largely
attributed to the sponsorship business model approach that dominated the second
half of 2007 and first half of 2008. TelVue's original TVTN business model
relied on providing bulletin board and playback equipment to municipal access
channels for no or low cost in exchange for the ability to broker PBS-like
underwriting and deliver sponsored content on the channels. With thousands of
PEG Channels across the United States, this sponsorship and content driven model
had the potential to aggregate municipal access channels into the largest
television network in the world. One of TelVue's primary reasons for acquiring
PSG was to gain access to a long form programming storage and playback platform
that could help realize the sponsorship business model while also providing
owner economics and consolidation of the core broadcast technologies required.
Despite early success selling the sponsorship model, this model did not scale
for the Company primarily due to the challenges of scaling sponsor sales to
offset the costs of providing the technology. Regional and national sponsor
sales were not successful due to the fact that contiguous DMA coverage often
expected in traditional television markets could not be guaranteed and precise
PEG Channel viewership statistics are not available as they are on commercial
television channels. Hyperlocal sponsor sales required a strong local presence
and without consistent market coverage in a given region, the costs for a local
presence simply did not scale. Additionally, many access stations resisted the
idea of allowing a third party company to participate in programming and sponsor
decisions on the channel, despite the many mutually positive benefits. The
Company believes the focus on the sponsor model caused a negative market
reaction to the Company's products in 2008, including the TelVue Princeton(TM)
Server Product Line that had conversely seen growth from 2006 to 2007.
In the second half of 2008, the Company reacted to the market feedback and
re-focused the business on the Company's technology, products, and services
strengths. TelVue was re-branded by merging the TVTN WEBUS(R) technology and
Princeton Server Group technology under one consistent brand, image, and sales
model. TelVue now sells its products and services without sponsorship to empower
hyperlocal channels to improve quality, streamline operations, and future-proof
with modern technologies. Although the business model changes naturally impacted
2008 performance, the Company is optimistic that the refocusing back to its core
strengths as a broadcast technology company has been successful. The marketplace
has already reacted favorably, and coupled with the Company's new reseller
strategy we are very optimistic about returned growth in 2009. Additionally,
with a restructuring in 2008 largely to eliminate positions that no longer were
a fit with the Company's new focus, the Company has significantly improved its
cost structure. TelVue's first quarter 2009 results corroborate these positive
changes and include a 23% overall increase in revenue, a 39% increase in TPS
segment revenue, a 158% increase in new sales orders, and a 25% decrease in
operational expenses all compared to the same period 2008.
TelVue's second and legacy business segment is a marketing and service company
which sells automatic number identification ("ANI") telecommunications services
to the cable and satellite television industry for the automated ordering of
pay-per-view features and events (the "ANI service").
The ANI service permits cable and satellite television companies to process
special ordering services without the attendant, high manpower requirements, or
extensive physical plant and facilities that are otherwise required. TelVue
provides the ANI service through the equipment it purchases. TelVue's equipment
for providing the ANI service nationwide is located at TelVue's home office in
Mount Laurel, New Jersey. TelVue serves cable television systems across the
16
United States via trunk lines and data circuits that it currently leases from
Verizon. TelVue believes it receives a favorable trunk usage rate from Verizon.
As noted below, TelVue expects continued loss of its subscriber base for the ANI
service as digital, interactive two-way services are offered by cable,
satellite, and broadband service providers for Video-on-Demand.
CRITICAL ACCOUNTING POLICIES
In presenting TelVue's financial statements in conformity with accounting
principles generally accepted in the United States, TelVue is required to make
certain estimates and assumptions that affect the amounts reported therein.
Several of the estimates and assumptions TelVue is required to make relate to
matters that are inherently uncertain as they pertain to future events. However,
events that are outside of TelVue's control cannot be predicted and, as such,
they cannot be contemplated in evaluating such estimates and assumptions. If
there is a significant unfavorable change to current conditions, it will likely
result in a material adverse impact to TelVue's consolidated results of
operations, financial position and liquidity. TelVue believes that the estimates
and assumptions it used when preparing its financial statements were the most
appropriate at that time. Presented below are those accounting policies that
TelVue believes require subjective and complex judgments that could potentially
affect reported results.
Use of Estimates
The Company's discussion and analysis of its financial condition and results of
operations are based upon TelVue's consolidated financial statements, which have
been prepared in accordance with accounting principles generally accepted in the
United States of America. The preparation of these consolidated financial
statements requires TelVue to make estimates and judgments that affect the
reported amounts of assets, liabilities, revenues and expenses, and related
disclosures of contingent assets and liabilities. On an ongoing basis, the
Company evaluates estimates, including those related to impairment of long-lived
assets and allowance for doubtful accounts. The Company bases estimates on
historical experience and on various other assumptions that are believed to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying value of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions; however, the Company
believes that its estimates, including those for the above-described items, are
reasonable.
Areas that require estimates and assumptions include valuation of accounts
receivable and inventory, determination of useful lives of property and
equipment, estimation of certain liabilities and sales returns.
Goodwill and Other Intangibles
Goodwill and other intangibles are reviewed for impairment annually, or more
frequently if impairment indicators arise. Goodwill is required to be tested for
impairment between the annual tests if an event occurs or circumstances change
that more-likely-than-not reduce the fair value of a reporting unit below its
carrying value. As of December 31, 2008, based on concerns over TelVue's net
loss and negative cash flow, uncertainty regarding future cash flows and
uncertainty whether the current carrying value of the Goodwill related to the
PSG acquisition will be recovered by future cash flows, management determined
that the carrying value of this Goodwill was impaired, and the Company recorded
a $1,921,405 charge to write off this Goodwill. As a result, the net loss for
2008 was increased by this amount to $7,545,259. Had management not made this
subjective determination, the Company would not have recorded this charge.
17
Revenue Recognition
In accordance with accounting principles generally accepted in the United
States, TelVue recognizes revenues related to its TelVue Princeton(TM) Server
Product Line upon shipment of the equipment to customers. Revenues related to
TelVue's WEBUS(R) and PEG.TV(TM) services are recognized on a monthly basis,
being amortized over the term of the agreement. TelVue also sells annual product
maintenance plans covering equipment support and application upgrades. The
revenue related to these plans is recognized on a straight-line basis over the
term being covered by the plan. If the Company chose to recognize these revenues
when payments were received under these agreements, then the Company would
recognize more revenue in earlier periods and would not record any deferred
revenues. TelVue believes that its practice allows the Company to better match
revenues with the expenses related to providing these services over the term of
the agreements and, accordingly, is a better reflection of generally accepted
accounting principles. Revenue related to TelVue's ANI service is recognized in
the month the service is provided.
Stock-Based Compensation
TelVue accounts for stock-based compensation in accordance with the fair value
recognition provisions of SFAS 123R. The Company uses a Black-Scholes
option-pricing valuation model which requires the input of highly subjective
assumptions. These assumptions include estimating the length of time employees
will retain their vested stock options before exercising them ("expected term"),
the estimated volatility of TelVue's common stock price over the expected term
and the number of options that will ultimately not complete their vesting
requirements. Changes in the subjective assumptions can materially affect the
estimate of fair value of stock-based compensation.
The above listing is not intended to be a comprehensive list of all the
Company's accounting policies. In many cases, the accounting treatment of a
particular transaction is specifically dictated by generally accepted accounting
principles, with no need for management's judgment in their application. See
TelVue's audited financial statements and related notes included in its Annual
Report on Form 10-K for December 31, 2008, which contains accounting policies
and other disclosures required by accounting principles generally accepted in
the United States.
RESULTS OF OPERATIONS:
Beginning in January 2008, TelVue began a weighted allocation of all
compensation, general and administrative, interest and amortization expenses
between ANI and TPS. Previously, only a minimal amount of expenses were
allocated between business segments.
During 2008, TelVue conducted two separate reductions in workforce. Combined,
they involved the elimination of 14 full-time positions and resulted in net
expense savings of approximately $550,000 for the calendar year 2008, which was
recognized across all departments and business segments.
In March 2009, TelVue conducted an additional reduction in workforce, involving
the elimination of 5 full-time positions, with a combined salary of $359,000.
18
The following discussion deals with the increase in operating income for the
three months ended March 31, 2009, compared to the three months ended March 31,
2008, and the reasons for the increases. TelVue further discusses the continued
loss of its subscriber base for the ANI service, when comparing the three months
ended March 31, 2009 to the three months ended March 31, 2008. The subscriber
decline is the result of cable operators moving to digital services which limit
the number of analog pay-per-view channels available for content and allows the
cable operator's customers to order digital pay-per-view or video on demand via
the set top box. TelVue also discusses the marketing of its TPS segment and the
changes in TPS revenue and expenses.
March 31, March 31, $ Change % Change
2009 2008 Fav/(Unfav) Fav/(Unfav)
----------- ----------- ----------- -----------
Revenues
TPS ......................... $ 626,315 $ 449,500 $ 176,815 39.3
ANI Services ................ 297,430 306,357 (8,927) (2.9)
Cost of Revenues
TPS ......................... 335,828 394,069 58,241 14.8
ANI Services ................ 95,342 85,553 (9,789) (1.1)
Operating Expenses
Selling and marketing ....... 233,602 449,341 215,739 48.0
General and administrative .. 672,752 853,156 180,404 21.1
Depreciation and amortization 284,951 298,146 13,195 4.4
----------- ----------- ----------- -----------
Operating Loss ................. (698,730) (1,324,408) 625,678 47.2
Other Income (Expense) ......... (190,212) (255,213) 65,001 25.5
----------- ----------- ----------- -----------
Net Loss ....................... $ (888,942) $(1,579,621) $ 690,679 43.7
=========== =========== =========== ===========
The TPS segment had an operating loss of $798,715 for the three months ended
March 31, 2009, compared to an operating loss of $1,438,327 for the three months
ended March 31, 2008 primarily due to a 39% increase in TPS segment revenue, in
addition to savings related to the reduction in workforce. The ANI segment had
operating income of $99,985 for the three months ended March 31, 2009, compared
to $113,919 for the three months ended March 31, 2008. The decrease in operating
income for the ANI segment was mainly a result of a change in the allocation of
expenses whereby a slightly higher percentage of expenses were allocated to the
ANI segment than in 2008.
Revenues
TPS revenue increased $176,815 for the three months ended March 31, 2009,
compared to the same period of 2008. The majority of the revenue increases were
attributed to an increase in TelVue Princeton(TM) Server Product Line sales, in
addition to an increase in consulting revenue related to technical consulting
services TelVue provides to specific customers. These increases were offset by
declines in sponsorship revenue due to the previously mentioned change in
direction of TelVue moving away from a sponsorship driven sales model.
19
TPS segment sales orders increased by 158% for the three months ended March 31,
2009 compared to the same three months in 2008. The increased sales orders
included significant multi-server orders received in two new vertical markets,
Cable Leased Access, and Professional Broadcasting. The Company's TelVue
Princeton(TM) products provide MSOs that must run Leased Access channels a way
to unify equipment and reduce operation costs through centralization. TelVue's
cost-effective TelVue Princeton(TM) B100 model is the heart of the Company's
Edgecasting for Professional Broadcasters that allows content providers who
traditionally broadcast to multiple head-ends over 24x7 Satellite feeds to
instead deliver content over the Internet to edge video servers. Edgecasting
allows distribution cost savings and the ability to further localize content
regionally, especially important for ad networks.
ANI services revenue decreased of $8,927 for the three month period ended March
31, 2009, when compared to the same period of 2008. As expected, pay-per-view
buy revenue decreased $7,445 for the three months ended March 31, 2009, and
pay-per-view plus revenue decreased $12,783 for the three months ended March 31,
2009 when compared to the same periods of 2008. These decreases were mainly due
to a reduction in the number of subscribers served during this period when
compared to 2008 (as discussed below). These declines were offset by an increase
of $7,618 in program number revenue along with an increase of $3,698 in feature
revenue. TelVue believes there is a loss of focus by cable operators on the
pay-per-view product line, primarily because of the amount of time cable
operators are spending on promoting new product lines such as digital service
and high-speed Internet access.
As of March 31, 2009, TelVue was serving approximately 4.1 million full-time
cable subscribers compared to approximately 4.6 million full-time cable
subscribers served as of March 31, 2008. Cable operators cancelled the ANI
service primarily as a result of moving their subscribers onto two-way digital
service, which allows the cable operator to process ordering of pay-per-view
movies and events directly from its customers without using TelVue's ANI
service. Management believes the long-term effects of deployment of digital
two-way service will continue to negatively impact the TelVue ANI service. As a
result of the cable and satellite subscriber cancellations noted above, TelVue
expects to continue to experience a decrease in its revenue and operating income
indefinitely for its ANI segment.
Cost of Revenues
Cost of revenues for the TPS segment decreased $58,241 for the three months
ended March 31, 2009, when compared to the same period of 2008, primarily as a
result of savings in compensation related to the reductions in workforce, offset
by an increase in the cost of sales related to the consulting revenue.
ANI cost of revenues increased $9,789 for the three months ended March 31, 2009,
when compared to the same period of 2008. This increase was primarily due to an
increase in compensation expense related to a higher percentage expenses being
allocated to the ANI segment.
Selling and Marketing Expenses
Selling expenses related to the TPS segment decreased $208,216 for the three
months ended March 31, 2009, when compared to the same period of 2008. This
decrease was attributed to the previously discussed reduction in workforce, in
addition to savings in consulting expenses related to the elimination of outside
sponsorship sales and marketing consultants.
20
Selling expenses related to the ANI service decreased $7,523 for the three
months ended March 31, 2009 when compared to the same period of 2008. This
decrease was primarily the result of savings in compensation related to the
reduction in workforce.
General and Administrative Expenses
TPS general and administrative expenses decreased $178,598 for the three months
ended March 31, 2009 when compared to the same period of 2008. This decrease was
related to the reduction in workforce, combined with savings in outside
consulting expenses and lower recruitment expense in 2009 compared to 2008.
ANI segment general and administrative expenses decreased $1,805 for the three
months ended March 31, 2009, when compared to the same period of 2008, primarily
a result savings related to the reduction in workforce, offset by increases in
expense related to the previously mentioned change in allocation percentages,
where a higher percentage of expenses are being allocated to the ANI segment.
Net Loss
TelVue had a net loss of $888,942 for the three months ended March 31, 2009,
compared to a net loss of $1,579,621 for the three months ended March 31, 2008,
primarily due to an increase in products and service revenues when compared to
2008, in addition to savings in compensation related to the previously mentioned
reductions in workforce.
Income Taxes
At March 31, 2009 and 2008, TelVue recorded valuation allowance increases of
$958,000 and $673,000, respectively, to reduce its deferred tax asset to zero.
The valuation allowances were recorded due to the uncertainty as to whether
future net income would be generated that would utilize TelVue's net operating
loss carry forward. TelVue's federal net operating loss carry forward was
approximately $13,000,000 on a tax-reporting basis as of March 31, 2009 (see
Note 5 of TelVue's accompanying financial statements).
Depreciation and Amortization
TelVue purchased $87,321 of equipment during the three months ended March 31,
2009 compared to $126,669 purchased during the three months ended March 31,
2008. The majority of the equipment purchased during the three months ended
March 31, 2009 and 2008 was for software development and equipment related to
the TPS segment. Depreciation and amortization expense decreased $13,195 for the
three months ended March 31, 2009 when compared to the three months ended March
31, 2008, as a result of fewer capital purchases, in addition to declining
amortization expense related to the PSG intangible assets. Depreciation and
amortization accounted for 24% of total operating expenses for the three months
ended March 31, 2009.
As of March 31, 2009, TelVue maintained a bad debt reserve in the amount of
$7,524, compared to a reserve of $6,961 as of March 31, 2008. The reserve was
calculated based on the estimate that 1.0% of outstanding receivables would not
be collected.
21
TelVue's days for sales in average accounts receivable was 64 days at March 31,
2009, compared to 47 days at March 31, 2008. TelVue does not offer incentives or
discounts to its customers, nor has it changed its credit terms with its
customers for its ANI services. A 2% cash, 1% net 15 days discount is offered by
TelVue for payments related to equipment purchases. TelVue had negative cash
flow from operating activities of $504,640 for the three months ended March 31,
2009. The increase in cash flow compared to 2008 was primarily due to increases
in TPS revenue and decrease in operating expenses across both business segments
(as described above).
LIQUIDITY AND CAPITAL RESOURCES:
Going Concern and Management's Plan
The accompanying financial statements of TelVue have been prepared on the basis
of generally accepted accounting principles applicable to a "going concern,"
which assume that TelVue will continue in operation for at least one year and
will be able to realize its assets and discharge its liabilities in the normal
course of operations.
Conditions exist, however, that cast doubt about TelVue's ability to continue as
a "going concern." In order to fund operations, TelVue relies on funds drawn on
lines of credit provided by its majority stockholder and director of the
Company, H.F. (Gerry) Lenfest. Based on TelVue's current draw-down rate, the
funds remaining in the current lines of credit are not sufficient to sustain
TelVue's operations for the next 12 month period. Funding TelVue's future
capital requirements will depend on numerous factors including, but not limited
to, TelVue receiving continued financial support from Mr. Lenfest, which he has
not committed to at this time, or seeking other alternatives. While management
is working toward mitigating the adverse conditions and events which raise doubt
about the validity of the "going concern" assumption used in preparing the
accompanying financial statements, there can be no assurances that management
will be successful.
The accompanying financial statements do not reflect adjustments that would be
necessary if TelVue were unable to continue as a "going concern." If TelVue were
unable to continue as a "going concern," then substantial adjustments would be
necessary to the carrying value of assets, the reported amounts of its
liabilities, the reported expenses, and the balance sheet classifications used.
Funding
Since November 2, 1989, TelVue has funded its expansion and operating deficit
from the proceeds of the sale of shares of TelVue's common stock and Preferred
Stock (as defined below) to Mr. Lenfest and from loans from Mr. Lenfest.
During January 1995, Mr. Lenfest purchased from Science Dynamics Corporation
("Science"), TelVue's non-interest bearing note in the amount of $541,000 (the
"Science Note"). The Science Note was originally issued by TelVue to Science and
was payable December 31, 1996. The maturity date of the Science Note had been
extended by TelVue and Mr. Lenfest on a yearly basis. On June 16, 2005, the
members of the Board of Directors of TelVue and Mr. Lenfest extended the
maturity date of the Science Note to January 1, 2011.
22
On April 27, 2005, TelVue entered into a Line of Credit Note with Mr. Lenfest
(the "2005 Note"). The 2005 Note was secured to provide funding to grow the
TelVue Virtual Television Network ("TVTN"). Under the terms of the 2005 Note,
the Company may borrow, from time to time, up to the maximum principal amount of
the 2005 Note which is $3,800,000. The minimum advance under the 2005 Note is
$100,000 and the interest rate is equal to the prime rate plus one percent (1%).
The 2005 Note contains customary events of default, including, among others,
non-payment of principal and interest and in the event the Company is involved
in certain insolvency proceedings. In the event of a default, all of the
obligations of the Company under the 2005 Note may be declared immediately due
and payable. This line of credit is unsecured and will expire six years from the
date of the first advance, which is November 23, 2011, unless extended or
renewed. Principal and interest on the 2005 Note are also due and payable on
November 23, 2011. The Note was exhausted by the end of 2007. As of March 31,
2009, accrued interest due on the 2005 Note was $764,129.
As a result of the anticipated exhaustion of the credit under the 2005 Note,
TelVue entered into an additional Line of Credit Note with Mr. Lenfest on
November 3, 2006, in the principal amount of $10,000,000 (the "2006 Note").
Under the 2006 Note, TelVue may request up to $5,000,000 for general working
capital. TelVue may request up to an additional $5,000,000 available under the
2006 Note for purposes other than general working capital upon mutual agreement
by TelVue and Mr. Lenfest. The minimum advance under the 2006 Note is $100,000
and the interest rate on the 2006 Note is equal to the prime rate plus one
percent (1%). The 2006 Note contains customary events of default, including,
among others, non-payment of principal and interest and in the event TelVue is
involved in certain insolvency proceedings. In the event of a default, all of
the obligations of TelVue under the 2006 Note may be declared immediately due
and payable. The 2006 Note is unsecured and will expire six years from the date
of the first advance under the 2006 Note unless extended or renewed. Principal
and interest on the 2006 Note are also due and payable six years from the date
of the first advance under the 2006 Note. As of March 31, 2009, the Company had
borrowed $10,000,000 under the 2006 Note, fully exhausting the Note. As of March
31, 2009, accrued interest due on the 2006 Note was $1,318,245.
As a result of the anticipated exhaustion of the line of credit under the 2006
Note, TelVue entered into an additional Line of Credit Note with Mr. Lenfest on
December 21, 2007, in the principal amount of $2,300,000 (the "2007 Note"). The
minimum advance under the 2007 Note is $100,000 and the interest rate on the
2007 Note is equal to the prime rate plus one percent (1%). The 2007 Note
contains customary events of default, including, among others, non-payment of
principal and interest and in the event TelVue is involved in certain insolvency
proceedings. In the event of a default, all of the obligations of TelVue under
the 2007 Note may be declared immediately due and payable. The 2007 Note is
unsecured and will expire six years from the date of the first advance under the
2007 Note unless extended or renewed. Principal and interest on the 2007 Note
are also due and payable six years from the date of the first advance under the
2007 Note. As of March 31, 2009, TelVue had borrowed $2,300,000 under the 2007
Note, fully exhausting the Note. As of March 31, 2009, accrued interest due on
the 2007 Note was $67,733.
As a result of the anticipated exhaustion of the line of credit under the 2007
Note, TelVue entered into an additional Line of Credit Note with Mr. Lenfest on
March 2, 2009, in the principal amount of $400,000 (the "2009 Q1 Note"). The
minimum advance under the 2009 Q1 Note is $100,000 and the interest rate on the
2009 Q1 Note is equal to the prime rate plus one percent (1%). The 2009 Q1 Note
contains customary events of default, including, among others, non-payment of
principal and interest and in the event TelVue is involved in certain insolvency
proceedings. In the event of a default, all of the obligations of TelVue under
23
the 2009 Q1 Note may be declared immediately due and payable. The 2009 Q1 Note
is unsecured and will expire six years from the date of the first advance under
the 2009 Q1 Note unless extended or renewed. Principal and interest on the 2009
Q1 Note are also due and payable six years from the date of the first advance
under the 2009 Q1 Note. As a result of the exhaustion of the 2007 Note, TelVue
began drawing on the 2009 Q1 Note on March 3, 2009. As of March 31, 2009, TelVue
had borrowed $250,000 under the 2009 Q1 Note, with accrued interest due of $815.
On December 26, 2006, TelVue borrowed $400,000 from Mr. Lenfest under the 2006
Note to loan to PSG to fund their operating expenses (the "PSG Note"). The PSG
Note was a convertible note that bore interest at a rate of six percent (6%) per
annum. No payments of principal or interest were due until July 1, 2007. Under
the PSG Note interest accrued through July 1, 2007 was to 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 PSG Note was
scheduled to mature in January 2012. TelVue had the option to convert the unpaid
principal balance of the note and all accrued interest into common stock of PSG.
In connection with the PSG Note TelVue received a warrant, which entitled TelVue
to purchase 129,629 shares of common stock of PSG for $1.08 per share. The
warrant was to commence on July 1, 2007 and expire on December 31, 2016. The PSG
Note was forgiven and the warrant was canceled on March 12, 2007, in connection
with TelVue's acquisition of all of the outstanding stock of PSG.
On March 12, 2007, PSG was acquired by TelVue for $6.1 million and the
forgiveness of the PSG Note (described above). TelVue borrowed $6.1 million from
Mr. Lenfest under the 2006 Note. PSG develops high performance digital video
systems, appliances, and software that support capture, storage, manipulation
and play-out of digital media in multiple popular formats. PSG markets their
product to PEG TV and local origination broadcast stations, professional
broadcast stations and schools and universities. TelVue acquired PSG as a
complement to its TVTN Network with the objective being to offer towns,
municipalities and schools a packaged turnkey product of hardware and software.
On June 16, 2005, Mr. Lenfest, the holder of all of TelVue's outstanding Class A
Redeemable Convertible Preferred Stock (the "Preferred Stock"), informed TelVue
of his intent to convert all of his 3,518,694 shares of Preferred Stock into
TelVue's common stock. Each share of Preferred Stock was convertible into 6.667
shares of common stock. The conversion of the Preferred Stock to common stock
occurred on August 2, 2005, upon Mr. Lenfest's delivery of the Preferred Stock
in the form of a lost certificate affidavit. As a result of the conversion,
TelVue issued 23,459,133 shares of common stock to Mr. Lenfest. Mr. Lenfest's
beneficial ownership interest in the common stock of TelVue, after the
cancellation of the warrants to purchase common stock described below, was
approximately 78.5 percent as of December 31, 2007. The Preferred Stock was
eliminated and is included as 23,459,133 shares of common stock in the
stockholders' equity section of the balance sheet. On August 21, 2006, the Board
of Directors, with Mr. Lenfest abstaining from the action, waived the two year
holding period required to receive the full voting power of ten votes per share
for the 23,459,133 shares of common stock Mr. Lenfest received for the
conversion of his Preferred Stock.
The Preferred Stock had a par value of $1 per share and provided for a
cumulative six percent (6%) semiannual dividend. The dividend was payable in
cash or additional shares of Preferred Stock at $1 per share, at TelVue's
option. TelVue had accrued dividends on the Preferred Stock since the beginning
of 1998, but no dividends had been paid. On June 16, 2005, Mr. Lenfest agreed to
relinquish his right to all accrued but unpaid dividends attributable to the
Preferred Stock. Therefore, $3,061,269 of accrued dividends was reversed and is
included in stockholders' equity as a decrease to TelVue's accumulated deficit.
24
On June 16, 2005, the members of the Board of Directors of TelVue and Mr.
Lenfest agreed to terminate a Warrant Agreement between Mr. Lenfest and TelVue.
Pursuant to the Warrant Agreement, Mr. Lenfest had the right to purchase up to
29,915,160 shares of TelVue's common stock for $.01 per share, the fair market
value of the common stock on the grant date. The Warrant Agreement was entered
into on March 15, 1991, in connection with a prior line of credit to TelVue
provided by Mr. Lenfest.
TelVue's ability to fully fund its operating expenses has suffered by the loss
of a large number of its subscriber base for the ANI service. As discussed
above, TelVue anticipates a continued decrease in revenue and an increase in net
loss for the ANI service. In order to continue to fund a majority of its ANI
operating expenses, TelVue needs to retain its current subscriber base level.
Management believes that over time, continued erosion will occur in the
subscriber base. During the quarter ended March 31, 2009, TelVue had 95,000 full
and part-time subscribers cancel service and no new subscribers were added to
the ANI service. Cable operators have cancelled the ANI service primarily as a
result of moving their subscribers onto two-way digital service.
TelVue has been, and continues to be, dependent upon Mr. Lenfest for funds to
pay the majority of operating and capital expenditures. As discussed above, the
financing from Mr. Lenfest under the 2005 Note, 2006 Note and 2007 Notes has
been exhausted. As a result of this, TelVue secured the 2009 Q1 Note from Mr.
Lenfest to help TelVue grow to a profitable level. The 2005 Note, 2006 Note and
2007 Note have helped, and the 2009 Q1 Note will help, to fund the growth of
TPS. While maintaining the ANI pay-per-view ordering business, TelVue intends to
continue to aggressively market and sell TPS. However, there can be no assurance
that its marketing efforts will be successful.
The Company does expect to see some adverse effects on sales in 2009 due to the
current economic conditions, primarily in the public, education and government
markets. The Company does anticipate some of this being offset by federal
stimulus dollars being allocated to these markets. Additionally, the Company
feels that expansion into markets outside of these will broaden the Company's
sources of revenue which will help to offset any revenue declines related to the
economy.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
TelVue, a smaller reporting company, is not required to provide information
required by this Item.
ITEM 4T. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures. TelVue's Chief Executive
Officer and its Treasurer (Controller), have evaluated the effectiveness of
TelVue's disclosure controls and procedures (as defined in the Securities
Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e) of the Securities Exchange
Act of 1934, as amended) as of the end of the period covered by this report.
Based upon that evaluation, TelVue's Chief Executive Officer and its Treasurer
(Controller) have concluded that TelVue's disclosure controls and procedures
were adequate and effective to ensure that material information relating to
TelVue would be made known to them by others within TelVue, particularly during
the period in which this quarterly report on Form 10-Q was being prepared.
(b) Changes in Internal Controls. During the quarterly period covered by this
report, there were no changes in TelVue's internal control over financial
reporting that has materially affected, or is reasonably likely to materially
affect TelVue's internal control over financial reporting.
25
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS
Exhibits
3.1 Certificate of Incorporation of TelVue (incorporated by reference to
TelVue's Registration Statement on Form S-8, filed with the Securities
and Exchange Commission on April 20, 1989 (the "Registration Statement"),
File No. 333-28263).
3.2 Bylaws of TelVue (incorporated by reference to TelVue's Registration
Statement, File No. 333-288263).
3.3 Certificate of Amendment of Certificate of Incorporation of TelVue, dated
April 11, 1990 (incorporated by reference to TelVue's Annual Report on
Form 10-K for the year ended December 31, 1991, (the "1991 Form 10-K"),
File No. 000-17170).
3.4 Certificate of Amendment of Certificate of Incorporation of TelVue, dated
March 15, 1991 (incorporated by reference to the 1991 Form 10-K, File No.
000-17170).
3.5 Form of copy of Amendment of Certificate of Incorporation of TelVue,
filed September 25, 1995 (incorporated by reference to the TelVue's Form
10-QSB for the period ended September 30, 1995, (the September 30, 1995
Form 10-QSB, File No. 000-17170).
4.1 The TelVue Corporation 1999 Stock Option Plan (incorporated by reference
to Exhibit 99 of TelVue's Registration Statement on Form S-8, dated
September 23, 1999 (the "1999 Stock Option Plan"), File No. 000-17170).
4.2 Form of ISO Option Agreement issued pursuant to the 1999 Stock Option
Plan (incorporated by reference to TelVue's Annual Report on Form 10-KSB
for the year ended December 31, 1999, (the "1999 Form 10-KSB") File No.
000-17170).
4.3 Form of NQSO Option Agreement issued pursuant to the 1999 Stock Option
Plan (incorporated by reference to the 1999 Form 10-KSB, File No.
000-17170).
4.4 Certificate of Designation of Class A Preferred Stock (incorporated by
reference to the September 30, 1990 Form 10-Q, File No. 000-17170).
4.5 Warrant Termination Agreement, dated June 16, 2005, by and between TelVue
and H.F. (Gerry) Lenfest (incorporated by reference to the September 30,
2005 Form 10-QSB, File No. 000-17170).
4.6 Waiver by H.F.(Gerry) Lenfest, waiving the right to receive past, present
or future dividends with respect to the TelVue's Class A Redeemable
Convertible Preferred Stock (incorporated by reference to the September
30, 2005 Form 10-QSB, File No.000-17170).
10.1 Distributorship Agreement, dated November 2, 1989, between the Company
and Science (incorporated by reference to the 1989 Form 10-K, File No.
000-17170).
26
10.2 Stock Purchase Agreement, dated November 2, 1989, between the Company and
H.F. Lenfest (incorporated by reference to the Company's Report on Form
8-K, dated November 15, 1989 (the "1989 Form 8-K"), File No. 000-17170).
10.3 Shareholders' Agreement, dated November 2, 1989, among TelVue and certain
of its stockholders (incorporated by reference to the Company's 1989 Form
8-K, File No. 000-17170).
10.4 Option Agreement, dated November 2, 1989, among TelVue and certain of its
stockholders (incorporated by reference to the 1989 Form 8-K, File No.
000-17170).
10.5 Lease Agreement dated April 25, 1991 for office space and the First
Amendment to Lease dated March 30, 1994 ("Office Lease Agreement"),
between TelVue and Bloom Associates (incorporated by reference to the
1994 Form 10-KSB, File No. 000-17170).
10.6 Second Amendment to Office Lease Agreement Dated May 5, 1999, between
TelVue and Bloom Associates (incorporated by reference to the 1999 Form
10-KSB, File No. 000-17170).
10.7 Third Amendment to Office Lease Agreement Dated April 28, 2004, between
TelVue and Bloom Associates (incorporated by reference to the June 30,
2006 Form 10-QSB, File No. 000-17170).
10.8 Fourth Amendment to Office Lease Agreement Dated April 19, 2006, between
TelVue and The Bloom Organization of South Jersey, LLC (incorporated by
reference to the June 30, 2006 Form 10-QSB, File No. 000-17170).
10.9 Asset Purchase Agreement by and among TelVue and J.D. Kraengel and
Associates, Inc. f/k/a Dacon Corporation d/b/a Source Communications
Group and Jeffrey Kraengel, dated February 14, 2001 (incorporated by
reference to the March 26, 2001 Form 8-K, File No. 000-17170).
10.10 Retirement Agreement dated April 29, 2004 between TelVue and Frank J.
Carcione (incorporated by reference to the December 31, 2004 Form 10-KSB
(the "2004 Form 10-KSB"), File No. 000-17170).
10.11 Summary of Director Compensation (incorporated by reference to the 2004
Form 10-KSB, File No. 000-17170).
10.12 Summary of Executive Compensation, as amended (incorporated by reference
to the December 31, 2008 Form 10-K ("2008 Form 10-K"), File No. 000-
17170).
10.13 Line of Credit Note, dated April 27, 2005, between H.F. (Gerry) Lenfest
and TelVue (incorporated by reference to the Form 8-K filed on May 3,
2005, File No. 000-17170).
10.14 Amended and Restated Promissory Note, in the principal amount of
$541,000, dated June 16, 2005, between H.F. (Gerry) Lenfest and TelVue
(incorporated by reference to the September 30, 2005 Form 10-QSB, File
No. 000-17170).
10.15 Line of Credit Note, dated November 3, 2006, between H.F. (Gerry) Lenfest
and TelVue (incorporated by reference to the Form 8-K filed on November
3, 2006, File No. 000-17170).
27
10.16 Stock Purchase Agreement by and among TelVue and Princeton Server Group,
Inc. dated March 12, 2007 (incorporated by reference to the March 13,
2007 Form 8-K, File No. 000-17170).
10.17 Convertible Note for $400,000 dated December 26, 2006 issued to TelVue by
the Princeton Server Group, Inc. (incorporated by reference to the
December 31, 2006 Form 10-KSB, File No. 000-17170).
10.18 Separation Agreement by and between TelVue and Stanley Greene, dated
December 29, 2006 (incorporated by reference to the December 31, 2006
Form 10-KSB, File No. 000-17170).
10.19 Separation Agreement by and between TelVue and Irene DeZwaan, dated
February 8, 2007 (incorporated by reference to the December 31, 2006 Form
10-KSB, File No. 000-17170).
10.20 Amendment of 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 acquisition of Princeton
Server Group, Inc. ("PSG") incorporated by reference to the May 12, 2007
Form 8-K/A, File No. 000-17170).
10.21 Line of Credit Note, dated December 21, 2007, between H.F. (Gerry)
Lenfest and TelVue (incorporated by reference to the Form 8-K filed on
December 21, 2007, File No. 000-17170).
10.22 Separation Agreement and Release by and between TelVue and Joseph M.
Murphy, dated December 31, 2008 (incorporated by reference to the Form
8-K filed on January 6, 2009, File No. 000-17170).
10.23 Line of Credit Note, dated March 2, 2009, between H.F. (Gerry) Lenfest
and TelVue (incorporated by reference to the Form 8-K filed on March 5,
2009. File No. 000-17170).
10.24 Fifth Amendment to Office Lease Agreement dated March 16, 2009
(incorporated by reference to the 2008 Form 10-K, File No. 000-17170).
11. Statement re: Computation of Per Share Earnings (see TelVue's March 31,
2009 Financial Statements included herein).
23. Consent of Pressman Ciocca Smith LLP, Independent Registered Public
Accounting Firm (incorporated by reference to the 2008 Form 10-K, File
No. 000-17170).
31.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section
1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
(included herein).
31.2 Certification of Controller pursuant to 18 U.S.C. Section 1350 as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (included
herein).
32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section
1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(included herein).
32.2 Certification of Controller pursuant to 18 U.S.C. Section 1350 as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (included
herein).
28
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TELVUE CORPORATION
DATED: 05/15/09 By: /s/ Jesse Lerman
----------------
Jesse Lerman
President (Chief Executive Officer)
DATED: 05/15/09 By: /s/ John Fell
-------------
John Fell
Treasurer (Controller)
EXHIBIT INDEX
31.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section
1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
31.2 Certification of Controller pursuant to 18 U.S.C. Section 1350 as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section
1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
32.2 Certification of Controller pursuant to 18 U.S.C. Section 1350 as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
29