diff --git a/__tests__/test-app.js b/__tests__/test-app.js
index 84d52b2..3f6230d 100644
--- a/__tests__/test-app.js
+++ b/__tests__/test-app.js
@@ -115,6 +115,7 @@ describe('ngx-library:app', () => {
           'demo/src/browserslist',
           'demo/src/favicon.ico',
           'demo/src/hmr.ts',
+          'demo/src/karma.conf.js',
           'demo/src/main.server.ts',
           'demo/src/main.ts',
           'demo/src/polyfills.ts',
@@ -127,7 +128,6 @@ describe('ngx-library:app', () => {
           'demo/angular.json',
           'demo/.editorconfig',
           'demo/.gitignore',
-          'demo/karma.conf.js',
           'demo/prerender.ts',
           'demo/tsconfig.json',
           'demo/server.ts',
@@ -745,6 +745,7 @@ describe('ngx-library:app', () => {
           'demo/src/browserslist',
           'demo/src/favicon.ico',
           'demo/src/hmr.ts',
+          'demo/src/karma.conf.js',
           'demo/src/main.server.ts',
           'demo/src/main.ts',
           'demo/src/polyfills.ts',
@@ -758,7 +759,6 @@ describe('ngx-library:app', () => {
           'demo/angular.json',
           'demo/.editorconfig',
           'demo/.gitignore',
-          'demo/karma.conf.js',
           'demo/prerender.ts',
           'demo/README.md',
           'demo/server.ts',
@@ -829,6 +829,7 @@ describe('ngx-library:app', () => {
           'demo/src/_variables.scss',
           'demo/src/browserslist',
           'demo/src/favicon.ico',
+          'demo/src/karma.conf.js',
           'demo/src/main.server.ts',
           'demo/src/main.ts',
           'demo/src/polyfills.ts',
@@ -842,7 +843,6 @@ describe('ngx-library:app', () => {
           'demo/angular.json',
           'demo/.editorconfig',
           'demo/.gitignore',
-          'demo/karma.conf.js',
           'demo/prerender.ts',
           'demo/README.md',
           'demo/server.ts',
@@ -1006,7 +1006,7 @@ describe('ngx-library:app', () => {
       return ngLibraryApp.then(() => {
         assert.equal(ngLibraryApp.generator.delExcludedFiles, false);
 
-        assert.file('demo/karma.conf.js');
+        assert.file('demo/src/karma.conf.js');
         assert.file('demo/tsconfig.json');
         assert.file('demo/tslint.json');
       });
@@ -1025,7 +1025,7 @@ describe('ngx-library:app', () => {
       return ngLibraryApp.then(() => {
         assert.equal(ngLibraryApp.generator.delExcludedFiles, true);
 
-        assert.noFile('demo/karma.conf.js');
+        assert.noFile('demo/src/karma.conf.js');
         assert.noFile('demo/tsconfig.json');
         assert.noFile('demo/tslint.json');
       });
diff --git a/app/files.js b/app/files.js
index 65d166e..5ca8469 100644
--- a/app/files.js
+++ b/app/files.js
@@ -80,6 +80,7 @@ module.exports = [
   {name: 'demo/src/browserslist', path: 'demo/src/browserslist', isTpl: false},
   {name: 'demo/src/favicon.ico', path: 'demo/src/favicon.ico', isTpl: false},
   {name: 'demo/src/hmr.ts', path: 'demo/src/hmr.ts', isTpl: false},
+  {name: 'demo/src/karma.conf.js', path: 'demo/src/karma.conf.js', isTpl: false},
   {name: 'demo/src/jestGlobalMocks.ts', path: 'demo/src/jestGlobalMocks.ts', isTpl: false},
   {name: 'demo/src/main.server.ts', path: 'demo/src/main.server.ts', isTpl: false},
   {name: 'demo/src/main.ts', path: 'demo/src/main.ts', isTpl: false},
@@ -96,7 +97,6 @@ module.exports = [
   {name: 'demo/_README.md', path: 'demo/README.md', isTpl: true},
   {name: 'demo/editorconfig', path: 'demo/.editorconfig', isTpl: false},
   {name: 'demo/gitignore', path: 'demo/.gitignore', isTpl: false},
-  {name: 'demo/karma.conf.js', path: 'demo/karma.conf.js', isTpl: false},
   {name: 'demo/prerender.ts', path: 'demo/prerender.ts', isTpl: false},
   {name: 'demo/proxy.conf.json', path: 'demo/proxy.conf.json', isTpl: false},
   {name: 'demo/server.ts', path: 'demo/server.ts', isTpl: false},
diff --git a/app/index.js b/app/index.js
index f6ce0dc..256fad2 100644
--- a/app/index.js
+++ b/app/index.js
@@ -318,6 +318,7 @@ module.exports = class extends Generator {
         this.exclusions.push('demo/src/browserslist');
         this.exclusions.push('demo/src/favicon.ico');
         this.exclusions.push('demo/src/hmr.ts');
+        this.exclusions.push('demo/src/karma.conf.js');
         this.exclusions.push('demo/src/main.server.ts');
         this.exclusions.push('demo/src/main.ts');
         this.exclusions.push('demo/src/polyfills.ts');
@@ -336,7 +337,6 @@ module.exports = class extends Generator {
         this.exclusions.push('demo/README.md');
         this.exclusions.push('demo/.editorconfig');
         this.exclusions.push('demo/.gitignore');
-        this.exclusions.push('demo/karma.conf.js');
         this.exclusions.push('demo/prerender.ts');
         this.exclusions.push('demo/proxy.conf.json');
         this.exclusions.push('demo/server.ts');
diff --git a/app/templates/demo/src/app/app.component.spec.ts b/app/templates/demo/src/app/app.component.spec.ts
index 101f364..5076224 100644
--- a/app/templates/demo/src/app/app.component.spec.ts
+++ b/app/templates/demo/src/app/app.component.spec.ts
@@ -6,14 +6,13 @@ import { AppComponent } from './app.component';
 import { FooterComponent } from './shared/footer/footer.component';
 
 import { RouterOutletStubComponent, RouterLinkStubDirective } from '../testing/router-stubs';
-import { Observable } from 'rxjs/Observable';
-import 'rxjs/add/observable/of';
+import { Observable, of } from 'rxjs';
 
 @Component({ selector: 'app-header', template: '' })
 class HeaderStubComponent { }
 
 class RouterStub {
-  events: Observable<Event> = Observable.of<Event>();
+  events: Observable<Event> = of<Event>();
 }
 
 describe('AppComponent', () => {
diff --git a/app/templates/demo/karma.conf.js b/app/templates/demo/src/karma.conf.js
similarity index 100%
rename from app/templates/demo/karma.conf.js
rename to app/templates/demo/src/karma.conf.js
diff --git a/app/templates/demo/src/testing/router-stubs.ts b/app/templates/demo/src/testing/router-stubs.ts
index c985fa3..ce72482 100644
--- a/app/templates/demo/src/testing/router-stubs.ts
+++ b/app/templates/demo/src/testing/router-stubs.ts
@@ -2,7 +2,7 @@
 import { Component, Directive, Injectable, Input } from '@angular/core';
 import { NavigationExtras } from '@angular/router';
 // Only implements params and part of snapshot.params
-import { BehaviorSubject } from 'rxjs/BehaviorSubject';
+import { BehaviorSubject } from 'rxjs';
 
 // export for convenience.
 export { ActivatedRoute, Router, RouterLink, RouterOutlet } from '@angular/router';
diff --git a/yarn.lock b/yarn.lock
index edc2739..a317248 100644
--- a/yarn.lock
+++ b/yarn.lock
@@ -2027,14 +2027,7 @@ extsprintf@1.0.2:
   version "1.0.2"
   resolved "https://registry.yarnpkg.com/extsprintf/-/extsprintf-1.0.2.tgz#e1080e0658e300b06294990cc70e1502235fd550"
 
-fancy-log@^1.1.0:
-  version "1.3.0"
-  resolved "https://registry.yarnpkg.com/fancy-log/-/fancy-log-1.3.0.tgz#45be17d02bb9917d60ccffd4995c999e6c8c9948"
-  dependencies:
-    chalk "^1.1.1"
-    time-stamp "^1.0.0"
-
-fancy-log@^1.3.2:
+fancy-log@1.3.2, fancy-log@^1.3.2:
   version "1.3.2"
   resolved "https://registry.yarnpkg.com/fancy-log/-/fancy-log-1.3.2.tgz#f41125e3d84f2e7d89a43d06d958c8f78be16be1"
   dependencies:
@@ -2042,6 +2035,13 @@ fancy-log@^1.3.2:
     color-support "^1.1.3"
     time-stamp "^1.0.0"
 
+fancy-log@^1.1.0:
+  version "1.3.0"
+  resolved "https://registry.yarnpkg.com/fancy-log/-/fancy-log-1.3.0.tgz#45be17d02bb9917d60ccffd4995c999e6c8c9948"
+  dependencies:
+    chalk "^1.1.1"
+    time-stamp "^1.0.0"
+
 fast-deep-equal@^1.0.0:
   version "1.0.0"
   resolved "https://registry.yarnpkg.com/fast-deep-equal/-/fast-deep-equal-1.0.0.tgz#96256a3bc975595eb36d82e9929d060d893439ff"
@@ -2242,7 +2242,7 @@ fs-exists-sync@^0.1.0:
   version "0.1.0"
   resolved "https://registry.yarnpkg.com/fs-exists-sync/-/fs-exists-sync-0.1.0.tgz#982d6893af918e72d08dec9e8673ff2b5a8d6add"
 
-fs-extra@^6.0.1:
+fs-extra@6.0.1:
   version "6.0.1"
   resolved "https://registry.yarnpkg.com/fs-extra/-/fs-extra-6.0.1.tgz#8abc128f7946e310135ddc93b98bddb410e7a34b"
   dependencies: