Back to GetFilings.com



 
United States
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q
 
(Mark one)
 
 
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
 
For the quarterly period ended April 30, 2005
 
 
 
OR
 
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
Commission file number 000-26763
 
NET2PHONE, INC.
(Exact Name of Registrant as Specified in Its Charter)
 
DELAWARE
 
22-3559037
(State or Other Jurisdiction of Incorporation or Organization)
 
(I.R.S. Employer Identification No.)
 
 
 
520 Broad Street, Newark, New Jersey
 
07102
(Address of Principal Executive Offices)
 
(Zip Code)
 
(973) 438-3111
(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     No  
 
     Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act) Yes     No  
 
     As of June 1, 2005, the registrant had outstanding 48,606,088 shares of common stock, $.01 par value, and 28,911,750 shares of Class A common stock, $.01 par value. (The number of outstanding shares of Class A common stock does not include 6.9 million shares we expect to issue as of the date definitive agreements are executed between Net2Phone, Inc. and IDT Corporation as described in more detail in Note 7 to the Consolidated Financial Statements included herein.)
 
Back to Contents
 
NET2PHONE, INC.
 
TABLE OF CONTENTS
 
 
 
 
Page
No.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2
 
 
Back to Contents
 
PART I—FINANCIAL INFORMATION
 
Item 1. Financial Statements
 
NET2PHONE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
 
(In thousands, except per share data)
 
April 30,
2005
(unaudited)
 
July 31,
2004
(note 1)
 
 
 
 
 
ASSETS:
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
466
 
$
12,408
 
Restricted cash, cash equivalents, and marketable securities
 
 
1,167
 
 
919
 
Marketable securities
 
 
84,595
 
 
98,391
 
Notes receivable from employees
 
 
125
 
 
925
 
Other current assets
 
 
10,282
 
 
9,239
 
 
 
 
 
Total current assets
 
 
96,635
 
 
121,882
 
Property and equipment, net
 
 
21,476
 
 
18,929
 
Restricted cash, cash equivalents, and marketable securities -- long term
 
 
19,716
 
 
20,362
 
Consideration paid to customers, net
 
 
7,379
 
 
—
 
Other assets
 
 
2,334
 
 
4,084
 
 
 
 
 
Total assets
 
$
147,540
 
$
165,257
 
 
 
 
 
 
 
 
 
 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY:
 
 
 
 
 
 
 
Current liabilities
 
 
 
 
 
 
 
Accounts payable
 
$
1,831
 
$
838
 
Accrued expenses
 
 
13,995
 
 
9,629
 
Deferred revenue
 
 
8,905
 
 
6,145
 
Capital Lease obligations
 
 
—
 
 
127
 
Due to IDT
 
 
112
 
 
971
 
Other current liabilities
 
 
692
 
 
484
 
 
 
 
 
Total current liabilities
 
 
25,535
 
 
18,194
 
Other liabilities
 
 
749
 
 
1,109
 
Long-term obligations
 
 
18,195
 
 
17,329
 
 
 
 
 
Total liabilities
 
 
44,479
 
 
36,632
 
 
 
 
 
 
 
 
 
Stockholders’ equity:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common stock, $.01 par value; 200,000 shares authorized including redeemable shares; 51,795 and 50,083 shares issued and outstanding
 
 
518
 
 
501
 
Class A common stock, $.01 par value; 37,924 shares authorized; 28,912 shares issued and outstanding
 
 
289
 
 
289
 
Additional paid in capital
 
 
943,589
 
 
938,371
 
Accumulated deficit
 
 
(803,752
)
 
(773,699
)
Accumulated other comprehensive loss
 
 
(1,409
)
 
(962
)
Deferred compensation
 
 
(3,527
)
 
(1,159
)
Loans to stockholders
 
 
(806
)
 
(1,171
)
Treasury stock, at cost; 3,227 and 3,325 shares
 
 
(31,841
)
 
(33,545
)
 
 
 
 
Total stockholders’ equity
 
 
103,061
 
 
128,625
 
 
 
 
 
Total liabilities and stockholders’ equity
 
$
147,540
 
$
165,257
 
 
 
 
 
 
The accompanying notes are an integral part of these condensed consolidated financial statements
 
3
 
Back to Contents
 
NET2PHONE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
 
(In thousands, except per share data)
 
Nine months ended
April 30,
 
Three months ended
April 30,
 
 
 
 
 
 
 
2005
 
2004
 
2005
 
2004
 
 
 
 
 
 
 
Revenue (a)
 
$
57,828
 
$
61,667
 
$
19,703
 
$
21,451
 
Costs and expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
Direct cost of revenue (exclusive of depreciation and amortization and non-cash services provided by IDT) (a)
 
 
34,712
 
 
34,981
 
 
11,615
 
 
12,790
 
Selling, general and administrative (a)
 
 
39,639
 
 
35,949
 
 
13,388
 
 
11,787
 
Depreciation and amortization
 
 
6,347
 
 
7,815
 
 
2,356
 
 
2,668
 
Non-cash services provided by IDT (attributable to direct cost of revenue and selling, general and administrative)
 
 
252
 
 
2,706
 
 
(702
)
 
452
 
Non-cash compensation (attributable to selling, general and administrative)
 
 
2,937
 
 
(3,063
)
 
1,089
 
 
(7,059
)
Restructuring, severance, impairment and other items (a)
 
 
2,094
 
 
1,449
 
 
329
 
 
421
 
 
 
 
 
 
 
Total costs and expenses
 
 
85,981
 
 
79,837
 
 
28,075
 
 
21,059
 
 
 
 
 
 
 
Miscellaneous income
 
 
301
 
 
—
 
 
133
 
 
—
 
 
 
 
 
 
 
Income (loss) from operations
 
 
(27,852
)
 
(18,170
)
 
(8,239
)
 
392
 
Interest income, net
 
 
1,454
 
 
1,466
 
 
260
 
 
591
 
Other income (loss), net
 
 
(2,254
)
 
11,817
 
 
(1,827
)
 
(1,445
)
 
 
 
 
 
 
Net loss
 
$
(28,652
)
$
(4,887
)
$
(9,806
)
$
(462
)
 
 
 
 
 
 
Net loss per common share -- basic and diluted
 
$
(0.38
)
$
(0.07
)
$
(0.13
)
$
(0.01
)
 
 
 
 
 
 
Weighted average number of common shares used in the calculation of basic and diluted net loss per common share:
 
 
76,068
 
 
68,860
 
 
76,217
 
 
75,559
 
 
 
 
 
 
 
 
(a)
Includes the following income and expenses resulting from transactions with IDT Corporation:
 
 
Revenue
 
$
5,300
 
$
3,244
 
$
1,099
 
$
673
 
 
Direct cost of revenue
 
 
2,960
 
 
2,847
 
 
733
 
 
985
 
 
Selling, general and administrative
 
 
1,365
 
 
1,640
 
 
501
 
 
651
 
 
Restructuring, severance, impairment and other items
 
 
—
 
 
479
 
 
—
 
 
—
 
 
The accompanying notes are an integral part of these condensed consolidated financial statements
 
4
 
Back to Contents
 
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
NINE MONTHS ENDED APRIL 30, 2005
 
(in thousands)