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, TelVue's ability to obtain sufficient cash to continue its operations, TelVue's ability 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, 2011 and in this Quarterly Report on Form 10-Q. These 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," "approximately" 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 developments. To the extent that the information presented in this Quarterly Report on Form 10-Q 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 is a broadcast technology company that specializes in playback, automation, workflow and multi-screen delivery solutions for public, education and government ("PEG") television stations; cable, telephone company ("Telco") and satellite television providers; K-12 and higher education institutions; professional broadcasters and media companies. TelVue delivers local programming to over thirty million homes nationwide; powers over 1,500 PEG and campus television channels; provides leased access and local origination solutions to over seventy five Multi System Operators ("MSOs") including eight of the top ten, and the nation's largest telephone company; and delivers on-campus local channels to over one million students on college campuses nationwide.

TelVue was incorporated as a Delaware corporation 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® broadcast and storage servers, and encoding and transcoding workstations, the TelVue HyperCaster™ Internet Protocol (IP) broadcast server, and services such as WEBUS®, TelVue CloudCast™ and TelVue Connect™. TelVue Princeton® consists of 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 HyperCaster™ server models for cable, Telco and professional broadcasters supports streaming cable standard (MPEG-2 Transport) and advanced video codecs (AVC/H.264) used increasingly in the industry for bandwidth savings for both standard and high-definition channels as well as new technologies such as 3D-TV. TelVue Turbo™ Workflow Accelerator is a scalable workflow application that streamlines publishing videos to TelVue CloudCast™ from any TelVue broadcast server. CampusOneHD™ provides an all-in-one video solution for campuses including local, high-definition television channels, digital signage and life safety, and streaming and Video-on-Demand.

WEBUS® 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. TelVue CloudCast™ is a live streaming and Video-on-Demand service for integrating video on the Internet. Additionally, TelVue CloudCast™ allows broadcasters to deliver 24x7 linear channels including live programming via both multi-screen Internet streaming and traditional broadcast delivery without the need to own or operate a facility with traditional broadcast equipment. TelVue Connect™ is a cloud-based, multi-user contribution, transcoding, scheduling and distribution application that simplifies broadcast channel management. TelVue Connect™ allows operators to avoid the cost and time investment in dedicated facilities and equipment for on-premise media drop-off and encoding and outsources the entire process to the cloud.

TelVue is currently marketing its products and services to cable and Telco MSOs, municipal governments, K-12 school districts, higher education institutions, and other broadcasters as a means of lowering cost, simplifying operations, and improving the quality of their video channels.

TPS products include:

TelVue Princeton® Digital Broadcaster B100 TelVue Princeton® Digital Broadcaster B3000 TelVue Princeton® Digital Video Archive Server S3000F TelVue Princeton® Encoding Workstation C500W TelVue Princeton® Encoding and Transcoding Workstation T7500E TelVue HyperCaster™
TelVue Turbo™ Workflow Accelerator
CampusOneHD™ High-Definition Broadcast Platform TelVue ProVue™ Professional HD IP Broadcast Decoder

TPS services include:

WEBUS®             Automated broadcast digital signage display on TV
                   Channel
WEBUS Inside™      WEBUS® integrated within TelVue Princeton® Servers
WEBLINX®           Automated WEBUS® message display on websites
VideoActives™      Real time, dynamic video content for channels
TelVue CloudCast™  Live, linear and on-demand Internet streaming and
                   hosted broadcasting
TelVue Connect™    Cloud video service for multi-user content
                   contribution and scheduling

TelVue's second and legacy business segment is the marketing and service company, which sells automatic number identification ("ANI") telecommunication services to the cable television industry. 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 National Data Center in Philadelphia, Pennsylvania. TelVue serves cable television systems across the United States via trunk lines and data circuits that it currently leases from Qwest. TelVue believes it receives a favorable trunk usage rate from Qwest. 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 and as other video streaming options become more prevalent in the industry.

In September 2012, TelVue completed a reduction in staff that it estimates will eliminate in excess of $500,000 in annual operating costs. TelVue will continue to evaluate additional expense reductions and look for sources of capital to continue to fund its operations.

NEW PRODUCTS AND SERVICES

In the second quarter of 2012, TelVue launched the TelVue ProVue™, the first professional native Internet Protocol ("IP") video decoder that is designed to seamlessly switch between changing video formats, including SD and HD, MPEG-2 and H.264 at resolutions up to 1080p. TelVue ProVue™ is suited for a variety of applications including IP broadcast video decoding, HD/SD and digital/analog simulcast, multicast, point-to-point and full integration with the TelVue HyperCaster™ broadcast server. The Company expects the TelVue ProVue™ to help capture a greater portion of the HD broadcast market share as hyperlocal and community broadcasters begin to upgrade their infrastructures to HD broadcast.

Also in the second quarter of 2012, TelVue launched a new tool to allow cable and Telco operators to broaden the range of their content by aggregating programming via the Internet for video-on-demand ("VOD") services. The TelVue Connect™ has been extended to support descriptive information about programming, known as metadata, in the industry-specific CableLabs® Asset Distribution Interface standard. This metadata can be captured and passed to the operator's VOD system to populate the on-demand program guide. The new metadata feature allows cable and Telco operators to easily aggregate content from multiple contributors for their on-demand offerings. It also gives contributors a browser-based "drag-and-drop" solution for program submission from anywhere.
TelVue Connect™ automatically converts the submitted programming to the format required by cable and Telco VOD services, supporting both traditional and IP-based systems. This new extension of TelVue Connect™ allows TelVue to expand sales to cable and Telco operators beyond solutions for broadcast channel origination to include VOD workflow. Hyperlocal content such as sports continues to gain in popularity and can be an important differentiator for operator's VOD offerings.

TelVue also launched full support of automated Electronic Program Guide ("EPG") data publishing and transfers between the TelVue Princeton® and TelVue HyperCaster™ lines of digital broadcast servers and the Minerva iTVFusion 5.3 TVoIP platform, which is the leading software solutions for the delivery of television services to IP connected devices. The automation of EPG data publishing and transfer gives local origination and leased access channel timely and updated entries in the program guide, making it easier to promote local programming making it more accessible to DVR recording. The TelVue automated EPG data publishing and transfer feature eliminates the need to enter program guide data manually. Operators can also import the EPG data directly to the Minerva platform without incurring any additional fees, such as custom data charges, from their primary EPG data provider.

In the third quarter of 2012, TelVue launched the second generation of its popular TelVue HyperCaster™ B100 IP Broadcast Server. The second generation HyperCaster B100 enhances the usability and reliability of the B100 line of broadcast servers, which have already proven to be easy to use, reliable, and affordable solutions for the broadcast industry. New features include a 32 GB Solid State Drive for the operating system for speed and reliability, twice as much RAM, a 4-core central processing unit for faster processing, and a front panel display for easier configuration. The new platform also supports twice as much broadcast throughput for higher quality or more channel capacity.

Also in the third quarter of 2012, TelVue launched the version 4 of its TelVue CloudCast™ online video player with new features including social media tools to post videos to the popular Facebook and Twitter services, and improved analytics to provide clients with a better understanding of who's watching what to maximize viewership, and return on investment.

TelVue also expanded its TelVue CloudCast™ hosted broadcasting capability to support the capture of live streaming events to a file for archive and Video-on-Demand playback. This feature is especially important for live sporting events.

CRITICAL ACCOUNTING POLICIES

In presenting its 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 the Company 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 results of operations, financial position and liquidity. TelVue believes that the estimates and assumptions 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 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.

An area that requires estimates and assumptions is the valuation allowances on deferred tax assets.

Revenue Recognition

In accordance with accounting principles generally accepted in the United States, TelVue recognizes revenues related to TelVue Princeton®, TelVue HyperCaster™, TelVue ProVue™ and other equipment upon shipment of the equipment to its customers. Revenues related to its WEBUS®, TelVue CloudCast™ and TelVue Connect™ 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. Revenues for the product maintenance plans are deferred and are recognized on a straight-line basis in subsequent periods. 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 method. 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 TelVue'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 notes thereto included in its Annual Report on Form 10-K which contains accounting policies and other disclosures required by accounting principles generally accepted in the United States.

RESULTS OF OPERATIONS:

The following discussion deals with the increase in operating loss for the three and nine months ended September 30, 2012, when compared to the same period of 2011, and the reasons for the changes. TelVue further discusses the continued loss of its subscriber base for the ANI service, when comparing the three and nine months ended September 30, 2012 to the three and nine months ended September 30, 2011. TelVue also discusses the changes in TPS revenue and expenses.

Detailed financial information for the three months ended September 30, 2012 and 2011 is as follows:

                                        Three Months Ended
                                  September 30,       September 30,       $ Change        % Change
                                     2012                2011            Fav/(Unfav)     Fav/(Unfav)
Revenues
TelVue products and services    $     1,127,507     $       920,501    $     207,006            22.5
ANI services                            105,842             168,365          (62,523 )         (37.1 )

Cost of Revenues
TelVue products and services            545,625             468,177          (77,448 )         (16.5 )
ANI services                             23,618              27,394            3,776            13.8

Operating Expenses
Selling and marketing
TelVue products and services            483,977             265,706         (218,271 )         (82.1 )
ANI services                                  -                   -                -               -
General and administrative
TelVue products and services            856,400             787,454          (68,946 )          (8.8 )
ANI services                             14,243              25,376           11,133            43.9
Depreciation
TelVue products and services             64,644              61,266           (3,378 )          (5.5 )
ANI services                                  -               3,866            3,866           100.0

Operating Loss                         (755,158 )          (550,373 )       (204,785 )         (37.2 )

Other Income (Expense)                      875            (256,637 )        257,512           100.3

Net Loss                        $      (754,283 )   $      (807,010 )  $      52,727             6.5

Detailed financial information for the nine months ended September 30, 2012 and 2011 is as follows:

                                         Nine Months Ended
                                  September 30,       September 30,       $ Change        % Change
                                     2012                2011            Fav/(Unfav)     Fav/(Unfav)
Revenues
TelVue products and services    $     2,939,296     $     2,798,826    $     140,470             5.0
ANI services                            347,992             522,788         (174,796 )         (33.4 )

Cost of Revenues
TelVue products and services          1,483,942           1,551,887           67,945             4.4
ANI services                             74,966              88,616           13,650            15.4

Operating Expenses
Selling and marketing
TelVue products and services          1,362,656             818,119         (544,537 )         (66.6 )
ANI services                                  -                   -                -               -
General and administrative
TelVue products and services          3,202,734           2,257,032         (945,702 )         (41.9 )
ANI services                             65,810              96,888           31,078            32.1
Depreciation
TelVue products and services            178,957             190,077           11,120             5.9
ANI services                              9,073              11,149            2,076            18.6

Operating Loss                       (3,090,850 )        (1,692,154 )     (1,398,696 )         (82.7 )

Other Income (Expense)                 (248,144 )          (737,234 )        489,090            66.3

Net Loss                        $    (3,338,994 )   $    (2,429,388 )  $    (909,606 )         (37.4 )

Additional financial information by reporting segment for the three and nine months ended September 30, 2012 and 2011 is as follows:

                                       TelVue products and services               ANI services
Three months ended September 30,         2012               2011              2012          2011

Operating income/(loss)              $     (823,139 )   $     (662,102 )   $    67,981    $  111,729
Other income/(expense)               $          875     $     (222,770 )   $         -    $  (33,867 )
Net income/(loss)                    $     (822,264 )   $     (884,872 )   $    67,981    $   77,862
Capital expenditures                 $       26,105     $       24,727     $         -    $        -




                                     TelVue products and services              ANI services
Nine months ended September 30,          2012             2011             2012          2011

Operating income/(loss)             $    (3,288,993 )  $ (2,018,289 )   $   198,143    $  326,135
Other income/(expense)              $      (228,222 )  $   (639,918 )   $   (19,922 )  $  (97,316 )
Net income/(loss)                   $    (3,517,215 )  $ (2,658,207 )   $   178,221    $  228,819
Capital expenditures                $       261,225    $    106,697     $         -    $        -

Revenues

TelVue's 2012 third quarter revenues increased 13.3% from $1,088,866 in the same period in 2011 to $1,233,349. The increase was driven by growth in the TPS segment with a partial offset from continued contraction of the legacy ANI business segment. For the nine months ended September 30, 2012, TelVue revenues were down 1.0% from $3,321,614 to $3,287,288 reflecting a weaker first quarter overall in 2012.

TPS segment revenue in the third quarter of 2012 grew by 22.5% from $920,501 to $1,127,507 due to growth in the cable/Telco and healthcare verticals, and expansion of cloud-based service sales. TPS revenues for the nine months ended September 30, 2012 rose 5.0% to $2,939,296 from $2,798,826 in the same period in 2011. TPS revenues growth was also due in part to a) 80.0% and 89.2% increases in revenue from sales of TelVue CloudCast™ hosted broadcast services for the three and nine month periods ended September 30, 2012, as Internet video and broadband TV continue to gain in popularity; and b) 8.2% and 16.3% increase in three and twelve month maintenance service revenue, as TelVue's equipment footprint continues to grow.

Legacy ANI segment third quarter revenue contracted 37.1% from $168,365 in 2011 to $105,842 in 2012 due to continued migration of the customer base to alternate technologies. For the nine months ended September 30, 2012, ANI segment revenue decreased 33.4% from $522,788 in the same period in 2011 to $347,992, for reasons cited above. There were expected decreases of $1,045 and $2,568 in pay-per-view revenue for the three and nine months ended September 30, 2012, respectively, when compared to the same period of 2011, and decreases of $7,040 and $8,514 in pay-per-view plus revenue for the three and nine months ended September 30, 2012, respectively, when compared to the three and nine months ended September 30, 2011. These decreases were mainly due to a reduction in the number of subscribers served during these periods when compared to 2011 (as discussed below). Additionally, there were decreases in feature revenue of $23,137 and $49,742, decreases of $16,920 and $33,205 in data link revenue and decreases of $4,889 and $13,749 in program number revenue for the three and nine months ended September 30, 2012, respectively, when compared to the three and nine months ended September 30, 2011, primarily due to a decline in the number of ANI subscribers. As of September 30, 2012, the ANI service was serving approximately 700,000 full-time cable subscribers compared to approximately one million full-time cable subscribers as of September 30, 2011. During the nine months ended September 30, 2012, there were 108,000 ANI subscriber cancellations and no new additions. The subscriber decline is the result of cable operators moving to two-way digital services which limit the number of analog pay-per-view channels available for content and allow the cable operator's customers to order digital pay-per-view or video on demand via the set top box, eliminating the need for the TelVue 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.

While consolidated revenues in the first half of 2012 fell, sales orders for the nine months ended September 30, 2012 for the Company's focal products (TPS broadcast servers and hosted services) rose by 23.5 % over the comparable period in 2011. Sales orders included a 33% increase in TelVue Care maintenance contracts. Sales orders during the nine months ended September 30, 2012 also included a $278,000 two-year contract for TelVue CloudCast™ hosted broadcasting, for which revenue will be recognized in

equal monthly amounts over the contract term as service is provided by the Company. It is anticipated that approximately $34,500 of this TelVue CloudCast™ contract will be recognized during the fourth quarter of 2012, with approximately $139,000 recognized in 2013 and approximately $86,000 in 2014.

TelVue expects to continue to expand in the cable, Telco, and professional broadcast markets and also believes the Company will resume growth in the PEG and education markets as the economy continues to recover. Additionally, the Company expects to begin to develop direct sales to Media companies as the Company continues to invest in development and marketing of its new cloud video services. In general, new product and service introductions have been concentrated in the area cloud services - for which the company recognizes revenue over contract periods which range from 12 to 24 months. In general cloud services entail monthly or quarterly billing to and payment by customers. If cloud services become an increasing portion of the Company's business, as expected we anticipate a decline in revenue and cash flow volatility as compared with equipment sales.

Operating Expenses and Income

Overall TelVue's third quarter operating loss increased from $550,373 in 2011 to $755,158 in 2012. This increase was driven by i) an increase both in research & development and in marketing and sales spending in the TPS segment, - in particular associated with TelVue CloudCast™ services; and ii) continued . . .