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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the Quarterly Period Ended June 30, 2004

OR

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 0-32941

Mpower Holding Corporation
(Exact name of registrant as specified in its charter)

DELAWARE
  
52-2232143
(State or other jurisdiction of incorporation or organization)
  
(I.R.S. Employer Identification No.)


175 Sully's Trail, Suite 300
Pittsford, NY 14534
(Address of principal executive offices, including Zip Code)

(585) 218-6550
(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 x 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 x

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
YES x NO o

The number of shares outstanding of the issuer's common stock, as of July 30, 2004:

Common stock (par value $0.001 per common share)....78,466,157 shares outstanding
 

 
     
 

MPOWER HOLDING CORPORATION

INDEX

   
Page No.
PART I -
 
Item 1.
  
 
3
 
4
 
5
 
6
Item 2.
10
Item 3.
18
Item 4.
18
     
PART II -
 
Item 1.
19
Item 5.
20
Item 6.
20
 
21



 
  2  
 

PART I - FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (Unaudited)

MPOWER HOLDING CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)

   
June 30,
  
December 31,
  
   
2004
  
2003
  
ASSETS
Current assets:
              
Cash and cash equivalents
  
$
32,356
  
$
29,307
  
Accounts receivable, less allowance for doubtful accounts of $1,976 and $2,292 at June 30, 2004 and December 31, 2003, respectively
    
11,611
    
14,076
  
Other receivables
    
2,012
    
5,039
  
Prepaid expenses and other current assets
    
2,353
    
4,579
  
Total current assets
    
48,332
    
53,001
  
Property and equipment, net
    
31,296
    
33,762
  
Long-term restricted cash and cash equivalents
    
9,479
    
9,537
  
Intangibles, net of accumulated amortization of $8,781 and $6,491 at June 30, 2004 and December 31, 2003, respectively
    
6,658
    
8,948
  
Other assets
    
4,109
    
3,781
  
Total assets
  
$
99,874
  
$
109,029
  
               
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
              
Current maturities of capital lease obligations
  
$
66
  
$
256
  
Accounts payable
    
10,467
    
15,754
  
Accrued sales tax payable
    
3,603
    
3,647
  
Accrued property taxes payable
    
2,970
    
2,818
  
Accrued bonus
    
921
    
2,388
  
Deferred revenue
    
4,867
    
4,696
  
Accrued other expenses
    
10,264
    
11,018
  
Total current liabilities
    
33,158
    
40,577
  
Long-term deferred revenue
    
1,978
    
2,211
  
Total liabilities
    
35,136
    
42,788
  
Commitments and contingencies
              
Stockholders’ equity:
              
Preferred stock, 49,900,000 shares authorized but unissued at June 30, 2004 and December 31, 2003
    
—
    
—
  
Series A preferred stock, 100,000 shares authorized but unissued at June 30, 2004 and December 31, 2003
    
—
    
—
  
Common stock, $0.001 par value, 1,000,000,000 shares authorized, 78,454,844 and 78,232,742 shares issued and outstanding at June 30, 2004 and December 31, 2003, respectively
    
78
    
78
  
Additional paid-in capital
    
103,899
    
103,735
  
Accumulated deficit
    
(39,239
)
  
(37,572
)
Total stockholders’ equity
    
64,738
    
66,241
  
Total liabilities and stockholders’ equity
  
$
99,874
  
$
109,029
  
               


See accompanying condensed notes to unaudited interim consolidated financial statements.
 
  3  
 

MPOWER HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)

   
Three Months
Ended
June 30,
  
Three Months
Ended
June 30,
  
Six Months
Ended
June 30,
  
Six Months
Ended
June 30,
  
   
2004
  
2003
  
2004
  
2003
  
Operating revenues:
                          
Telecommunication services
  
$
38,496
  
$
37,758
  
$
75,649
  
$
74,496
  
Operating expenses:
                          
Cost of operating revenues
(exclusive of depreciation and amortization shown separately below of $1,964 and $1,742 for the three months ended June 30, 2004 and 2003, respectively, and $3,902 and $3,688 for the six months ended June 30, 2004 and 2003, respectively)
    
17,740
    
18,953
    
34,128
    
41,081
  
Selling, general and administrative
(exclusive of depreciation and amortization shown separately below of $1,915 and $2,242 for the three months ended June 30, 2004 and 2003, respectively, and $3,878 and $4,599 for the six months ended June 30, 2004 and 2003, respectively)
    
18,212
    
19,587
    
35,761
    
40,715
  
Stock-based compensation expense
    
39
    
29
    
78
    
91
  
Gain on sale of assets, net
    
(62
)
  
(177
)
  
(260
)
  
(82
)
Depreciation and amortization
    
3,879
    
3,984
    
7,780
    
8,287
  
     
39,808
    
42,376
    
77,487
    
90,092
  
Loss from continuing operations
    
(1,312
)
  
(4,618
)
  
(1,838
)
  
(15,596
)
Other income (expense):
                          
Interest income
    
77
    
46
    
165
    
96
  
Interest expense
    
(67
)
  
(184
)
  
(133
)
  
(323
)
Other expense
    
(95
)
  
—
    
(95
)
  
—
  
Loss on discharge of debt
    
—
    
—
    
—
    
(102
)
Loss before discontinued operations
    
(1,397
)
  
(4,756
)
  
(1,901
)
  
(15,925
)
Discontinued operations:
                          
(Loss) income from discontinued operations
    
(7
)
  
13
    
234
    
(3,968
)
Net loss
  
$
(1,404
)
$
(4,743
)
$
(1,667
)