DECEMBER 3rd, 1892
TO THE BOARD OF DIRECTORS:-
I beg to advise you that a settlement has been reached with the Eastern Pennsylvania Phonograph Company concerning the appraisement and purchase of the stock of Supplies and Office Furniture which we were required to take over as a condition of the execution by them of the new contract which bears date November 1st, 1892.
A full detailed inventory of supplies and furniture is on file in our Accounting Department which can be referred to whenever desired. Below I submit in parietal detail which I believe will be sufficient for the purpose of this report.
Appraised valuation of supplies and furniture as agreed between the N.A.P. Co and the Eastern Pennsylvania Phonograph Company $4087,78
Less amount collected by Eastern Pennsylvania Phonograph Company on subleases expiring after November 1st, from which date all such monies are payable to the N.A.P. Co. $783.71
Deduct 25% of above, which under the third clause of contract hereinbefore named is payable to the Eastern Pennsylvania Phonograph Company

$195.93 $587.78

Net amount due the Eastern Pennsylvania Phono. Co. $3500.00
Of this amount a sum of about $350 will represent our permanent investment consisting of office furniture and fixtures. The balance represents salable supplies all of which we can dispose of at a fair advance upon appraised values.
It was urged by the Directors of the Eastern Pennsylvania Phonograph Company that this amount should be liquidated within a period not exceeding thirty days from the date of our agreement, to which proposition we declined to accede. After considerable delay they finally accepted our counter proposition viz:- That we issue to the Eastern Pennsylvania Phonograph Company four notes as follows:-
One at [illegible] months--maturing March 1st, 1893 $875.
" " 6 " " May 1st, 1893 $875
" " 8 " " Sept 1st, 1893 $875
These periods are sufficiently extended to enable us to pay the notes with the proceeds of sales of material which they represent.
It was expressly understood and agreed that the above proposition did not in any way affect the balance due from the Eastern Pennsylvania Phonograph Company on Nov. 1st in pursuance of which they duly forwarded us a check for the said balance.
The Eastern Pennsylvania Phonograph Company is to be charged with the entire cost of packing and returning to the Works at Orange, N.J., all machines in their possession and not under sub-lease at the date of the transfer-November 1st-and for all parts missing from or broken on said machines, bills for which are to be rendered when the repairs have been made.
Furthermore the Eastern Pennsylvania Phonograph Company has assumed liability for the collection of all charges on sub-leases made by it or its Agents prior to November 1st, 1892 and in advance as required by the original contract with the North American Phonograph Company.
The average life of present leases beyond November 1st in this territory is six months and the gross amount still due for collection, including rental of batteries and other supplies is about $550.
Following is a statement of the yearly revenue and expense of the Eastern Pennsylvania Phonograph Company upon the basis of its present organization as compiled from their records.
(Gross revenue from rental of batteries November 1st, 1891 to November 1st, 1892)
On cells rented with machines at $20 per year per battery $280.95
On cells charged for owners $83.50
Charged to slot account on basis of cost which is figured at about55 cents each including labor and fixed charges $306.95

$671.40

Amount realized upon sale and rental of supplies exclusive of records.
Total sales (about) $2100
Gross profit (about) $850.00
RECORDS.
Total sale about $2150.
Gross profit (about) $575.00
Add estimated revenue from Exhibition outfits leased for Pairs and other purposes $300.00
TOTAL AMOUNT GROSS REVENUE (OR SAY $2500 PER ANNUM) $2496.40
AVERAGE YEARLY EXPENSE
SALARIES
A.P. Wallace Manager $1200
N.H. Wood, Electrician & Solicitor $1000
Miss L.S. Wood, Typewritest & Bookkeeper $364
James Bowes, Inspector & Repairs $364 $2928 BROUGHT FORWARD $2928.00
OFFICE RENT $850.00
TELEPHONE SERVICE $120.00
INSURANCE (on $4000) 20.00
OFFICE EXPENSE (Nest Stationary, Postage, Janitor, Taxes & c.) $250.00
Traveling and Advertising $335.00
Expressage, Freight, Cargage & c $270.00
ELECTRIC LIGHT
Illumination $32.85
Charging Batteries $245.34 $278.19
TOTAL YEARLY EXPENSE (or say $5000 per anum) $5051.19
There are about 100 Phonographs in service in this Company's territory 56 of which are in Philadelphia; three of the latter were sold and 53 leased. Of the former 2 are in use commercially and one in domestic use. Of the latter 34 are use commercially 13 are in domestic use and one is used for exhibition purposes.
Concerning the organization of the territory of Pennsylvania I beg to state that I have delegated Mr. Thomas to appoint dealers in the following places.
TOWN COUNTY POPULATION
Allentown Lehigh Co 25,228
Ashland Schuylkill Co. 7,346
Bethlehem Northampton Co. 17,064
Bloomsburgh Columbia Co. 4,635
Carbondale, Lackawana Co. 10,833
Carlisle, Cumberland Co. 7,620
Chambersburgh Franklin Co. 7,823
Columbia, Lancaster Co. 10,599
Danville, Montour Co. 7,988
Dunmore Lackawana Co. 8,315
Easton, Northampton Co. 20,097
Harrisburgh, Bauphin Co. 39,385
Hazleton, Luzerne Co. 11,872
Lancaster, Lancaster Co. 32,011
Lansford, Carbon Co. 4,004
Lebanon, Lebanon Co. 14,364
Lock Haven, Clinton Co. 7,358 TOWN COUNTY POPULATION
Mahoney City Schuylkill Co. 11,286
Mauch Chunk, Carbon Co. 4,401
Middletown, Dauphin Co. 5,080
Milton, Northumberland Co. 5,317
Mount Carmel Northumberland Co. 8,254
Nauticoke, Luzerne Co. 10,044
Olyphant, Lackawana Co. 4,083
Pittston, Luzerne Co. 10,302
Plymouth Luzerne Co. 9,344
Pottsville, Schuylkill Co. 14,117
Reading Berks Co. 58,661
Ronovo, Clinton Co. 4,154
Scranton, Lackawana Co. 75,215
Shamokin, Northumberland Co. 14,403
Shenandoah, Schuylkill Co. 15,944
Southeaton, Wyoming Co. 5,816
Steelton, Dauphin Co. 9,250
Sunbury, Northumberland Co. 5,930
Towanda, Bradford Co. 4,169
Wilkes Barre, Luzerne Co. 37,718
Williamsport, Lycoming Co. 27,132
York, York Co. 20,763
Ballefonte Center Co. 3,221
Susquehanna Susquehanna Co, 3,872
Tamaqua, Schuylkill Co. 6,054
Additions will be made to the above as circumstances may determine at points tributary to those named, thereby giving us a total representation of between fifty and sixty sales agents. The method of appointing these will be referred to later on in this report.
I desire not to call the attention of the Board of Philadelphia.
In the territory over which we have assumed control up to the present time the two most important centres are Chicago and Philadelphia. The method of handling our business in Chicago has already been determined, but our course with respect to Philadelphia is as yet undecided.
I have found upon investigation that the late Manager of the Eastern Pennsylvania Phonograph Company Mr. Wallace, is not in a position to assume the Agency at that point and give us proper representation.
His resources are extremely limited and it would be impracticable for him thus handicapped to conduct a business satisfactory to himself remunerative to us or creditable to the enterprise.
It is perhaps unnecessary for me to say that it is of the highest importance that our representation in the great Cities of America should be as thorough as our resources will permit.
The impression made in these centres are reflected throughout the balance of the Country and exert a widespread influence, and I therefore recommend that we assume control of the Philadelphia Office.
In this connection it would not be necessary to increase the expense of the office beyond the present sum, details of which are given above. The expenditures should be readjusted for the purpose of securing more suitable quarters but in effecting this the total expense would not be increased. As an offset to the excess of expenditures over receipts which now averages about $2500 per year, we would secure to ourselves the larger portion of the regular commissions which are paid to the Resident Agents.
It may be here stated that the profits on the sale of 100 machines would more than cover the cost of running the Philadelphia office for one year on the present basis of expenditure, leaving supplies entirely out of the question. METHOD OF APPOINTING AGENTS
It is the Policy of the Company to secure wherever possible Agents or Dealers who can purchase outright machines and supplies but in many instances it will be impracticable to adhere to this plan for obvious reasons, and we will be obliged to furnish outfits practically on consignment. In order to protect our interests, under circumstances of this character, to as large an extent as possible, I have arranged with American Surety Company #160 Broadway, New York City to issue to us an indemnity bond in the sum of $1000 the scope of which is indicated in the following letter from the Vice President of that Company, the original of which is filled in this Office:-
AMERICAN SURETY COMPANY
160 Broadway,
New York, November 15th, 1892
Mr. A.O. Tate, Vice President,
North American Phonograph Company,
42 Broad St., New York.
Dear Sir:-
Referring to our conversation of this date in regard to bonding agents of your Company throughout the country in the sum of $1,000 each to sell Phonographs, the ownership and propriety right in which until sold is retained by the North American Phonograph Company. I now officially confirm what I have stated to you orally, that in consideration of all the bonds being placed with this Company, we will write them at the uniform rate of one per cent, it being understood that the bond is to be confined to guaranteeing the Company against loss by larceny or embezzlement must be an appropriation of machines or moneys of your Company by the employee to his own use to constitute a claim. We also understand that you will agree to have a periodical check upon the accounts so as to know positively that the weekly reports made to your Company of machines on hand, collections, etc., are correct. To start the matter I enclose herewith twelve of our forms used for making applications, and on receipt of each application we will have certain inquiries to address to you by blank in regard to the accounts of each agent, to be answered by your Company, the answers forming the basis upon which the bond is issued.
Awaiting your further pleasure in this matter,
Yours very truly
(signed) H.D. Lyman
Vice President
The premium upon this Bond will be paid by the person against whom we are indemnified. This arrangement provides a uniform system of protection, and in addition to insuring us against actual loss of money or property through the fraudulent acts of our representatives, it will have a beneficial effect viewed solely as a moral agent.
The Board is respectfully requested to approve this action.
There are submitted herewith for approval copies of the rules which have been adopted for the guidance and control of Agents together with copies or letters of appointment and acceptance. The attention of the Board is particularly directed to Rule #13,
FLORIDA PHONOGRAPH COMPANY
Settlement with this Company has been effected upon the following basis:-
Amount due N.A.P. Co as per our records $1047.20
ITEMS DISPUTED
Freight on machines returned prior to October 1890 $78.58
Repairs and charges for goods destroyed by Fire $12.01 BROUGHT FORWARD $1047.20
Bills for rental of Phonographs & Graphophones prior to January 1st, 1891 (old style machines upon which they claim to have collected very little or no rent $323.30 $413.89

$633.31

We proposed stating the indebtedness at $700 to which they assented.
The appraised valuation of material which we take over from this Company is $275.00 consisting chiefly of storage batteries and automatic cabinets. After deducting this amount the Florida Company will stand indebted to us in the sum of $425 which will be liquidated out of the first monies payable to that Company under the new contract. The Board is requested to approve this settlement.
GEORGIA PHONOGRAPH COMPANY
The appraised valuation of this Company's stock of Supplies is $955.11 of which we have arranged to take on consignment material to the value of $352.31. The outstanding Balances $602.80 is to be liquidated in the following manner.
Freight allowance on consigned goods $77.22
Net amount to Georgia Co's a/o October 1st $226.72
Rentals collected by Georgia beyond Oct. 1st, 1892 $93.17
Cash to be paid to Georgia Company $203.69 $602.80
The Board is requested this settlement.
SALE OF MACHINES TO NEW ENGLAND PHONO. CO.
I beg to report the sale of 109 Phonographs to the New England Phonograph Company at $50 each spot cash. They were all old instruments which had been in service from two to three years.
The cost of renewals and repairs on these would represent a heavy expense and economy was effected through their sale at the reduced figure named. They are not to be included in the Trust Agreement relating to the sale of 1000 machines, the Edison Phonograph Works having signified their willingness to exclude them. The Board is requested to approve this transaction and to authorize counsel to prepare such papers as it may be necessary to pass between the North American Phonograph Company and the Edison Phonograph Works.
OLD DOMINION PHONOGRAPH COMPANY
I am as yet unable to report a settlement with this Company. Up to present they have insisted upon acting as our Agents for the whole of their territory, a proposition which we can under no circumstances accept. They have not yet signed the new contract.
It will be necessary for the writer to go to Roanoke at an early date to make final arrangements with this Company.
After deducting from their open account the appraised value of supplies they remain indebted to us the extent of about $8000 in addition to which they are some $10,000 in appears on Franchise Account. I have no doubt of being able to make a satisfactory settlement and of having them execute the new agreement.
In anticipation of Mr. Lombard's presence at this meeting it was my intention to incorporate herein a report of settlements which have been effected with the Western Companies that have signed the new contract, but owing to Mr. Lombard's inability to be here these matters will have to be deferred until our next meeting.
All of which is respectfully submitted.
A.O. Tate
VICE PRESIDENT

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