WorldGate Sells Assets

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Financially troubled WorldGate Communications Inc. will
sell a portion of its assets to interactive programming guide consortium
TVGateway LLC as it literally re-images itself as a videophone technology
provider.

In the process, the company will see staff reductions, starting with
WorldGate President Gerard Kunkel, who has announced he will resign.

The struggling interactive TV software provider announced today it has
entered a definitive agreement to sell certain television intellectual property
rights to TVGateway, a consortium backed by cablers including Adelphia
Communications Corp., Comcast Corp. and Cox Communications Inc.

WorldGate also was a partner in TVGateway, and as part of the agreement it
will sell back that equity investment to the consortium.

Total sale price for the assets is $3 million, to be paid in cash, with
$600,000 paid up front and the remaining $2.4 million paid at closing, expected
in September or October.

WorldGate will use the money to fund its operations and product
development.

The $600,000 installment and WorldGate’s own remaining cash on hand will be
enough to keep the company going until the deal closes.

The deal has been approved by the company’s board and is pending approval of
shareholders.

Under the sale agreement, TVGateway also will provide a license back to
WorldGate, allowing it to continue providing interactive cable television data
feeds and network monitoring for its clients using the technology it originally
developed.

WorldGate also will retain certain rights to its designs and technology, as
well as inventory, contractual rights and most of its other assets.

Meanwhile, WorldGate will refocus its efforts toward development of a
videophone designed to work with existing broadband networks.

But the company also will undergo “significant personnel reorganizations,
intended to reduce its operating costs and improve efficiencies,” according to a
release.

At the same time, WorldGate also released its second-quarter earnings
results, posting revenue of just $400,000 for the quarter, a $1.8 million drop
compared to first-quarter revenue.

Much of that drop was blamed on transfer of operations and employees to
TVGateway during the period and the resulting drop in income from TVGateway.

Losses for the quarter totaled $3 million, up $1.1 million compared to the
first quarter.
While revenue-generating units did increase for WorldGate,
fueled by Charter Communications’ launch of interactive service in Willimantic,
Conn., the company also saw several operator customers terminate their contracts
after the end of the quarter because of their concern for WorldGate’s financial
position, according to the earnings release.

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