UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

Mark One

ý Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

for the Quarterly Period Ended March 31, 2004.

o 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: 000-25755

WORLDGATE COMMUNICATIONS, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware		23-2866697
(State of Incorporation)		(I.R.S. Employer Identification No.)

3190 Tremont Avenue Trevose, Pennsylvania 19053
(Address of Principal Executive Offices) (Zip Code)

(215) 354-5100
(Registrant’s Telephone Number, Including Area Code)

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 ý No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes o No ý

As of May 9, 2004, there were 28,475,538 shares of common stock, par value $.01 per share, outstanding.

WORLDGATE COMMUNICATIONS, INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE THREE MONTHS ENDED MARCH 31, 2004

TABLE OF CONTENTS

PART II. FINANCIAL INFORMATION

Item 1. Financial Statements
Item 2. Management’s Discussion And Analysis Of Financial Condition And Results Of Operations.
Item 3. Quantitative And Qualitative Disclosures About Market Risk.
Item 4. Controls And Procedures.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.
Item 2. Changes In Securities And Use Of Proceeds.
Item 3. Defaults Upon Senior Securities.
Item 4. Submission Of Matters To A Vote Of Security Holders.
Item 5. Other Information.
Item 6. Exhibits And Reports On Form 8-K.

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

WORLDGATE COMMUNICATIONS, INC.
CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands)

	March 31, 2004			December 31, 2003
	(Unaudited)			(Audited)
ASSETS
Current assets:
Cash and cash equivalents	$	3,448		$	3,365
Accounts receivable, less allowance for doubtful accounts of $0 at March 31, 2004 and $381 at December 31, 2003	112			146
Prepaid and other assets	75			199
Total current assets	3,635			3,710

Property and equipment	2,613			2,605
Less: accumulated depreciation and amortization	(1,440		)	(1,338		)

Property and equipment, net	1,173			1,267
Deposits and other assets	3			140

Total assets	$	4,811		$	5,117

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	345		$	440
Accrued expenses	705			594
Accrued compensation and benefits	199			238
Deferred rent credit, current and other	30			30
Total current liabilities	1,279			1,302

Deferred rent credit	128			135
Total liabilities	1,407			1,437

Stockholders’ equity:
Preferred Stock, $.01 par value, 13,500,000 shares authorized	—			—
Common stock, $.01 par value, 50,000,000 shares authorized, 27,771,748 shares issued and outstanding at March 31, 2004 and 25,706,843 shares issued and outstanding at December 31, 2003	283			262
Additional paid-in capital	204,908			202,466
Unearned compensation	(400		)	(400		)
Accumulated deficit	(201,382		)	(198,643		)
Less Treasury Stock, at cost - 500,000 shares as of March 31, 2004 and December 31, 2003	(5		)	(5		)
Total stockholders’ equity	3,404			3,680
Total liabilities and stockholders’ equity	$	4,811		$	5,117

The accompanying notes are an integral part of these financial statements.

WORLDGATE COMMUNICATIONS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(Dollars in Thousands, Except per Share Amounts)

	Three Months ended March 31
	2004			2003

Revenues from operating activities of continuing operations
Equipment product revenues earned from third parties	$	0		$	0
Equipment product revenues earned from related parties	0			0
Service fee revenues earned from third parties	0			0
Service fee revenues earned from related parties	0			0
Total revenues from operating activities of continuing operations	0			0
Costs and expenses from operating activities of continuing operations
Cost of equipment product revenues	0			0
Cost of service fee revenues	0			0
Engineering and development (excluding depreciation and amortization amounts of $0 and $144 for the three months ended March 31, 2004 and 2003, respectively).	800			535
Sales and marketing (excluding depreciation and amortization amounts of $0 and $17 for the three months ended March 31, 2004 and 2003, respectively).	191			86
General and administrative (excluding depreciation and amortization amounts of $102 and $84 for the three months ended March 31, 2004 and 2003, respectively).	1,674			192
Depreciation and amortization	102			0
Total costs and expenses from operating activities from continuing operations	2,767			813
Loss from operating activities of continuing operations	(2,767		)	(813		)
Interest and other income	7			0
Interest and other expense	(1		)	0
Loss from continuing operations	(2,761		)	(813		)
Income (loss) from discontinued operations	23			(1,072		)

Net loss	$	(2,738	)	$	(1,885	)

Net loss per common share (basic and diluted)	$	(0.10	)	$	(0.08	)
Weighted average common shares outstanding - basic and diluted	27,236,662			23,578,645

The accompanying notes are an integral part of these financial statements.

WORLDGATE COMMUNICATIONS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in Thousands)

	Three months ended March 31,
	2004	2003
Cash flows from operating activities of continuing operations:

(215) 354-5100

ITEM 1. FINANCIAL STATEMENTS