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EX-32.1 - EXHIBIT 32.1 - BROADVIEW NETWORKS HOLDINGS INCc16753exv32w1.htm
EX-31.2 - EXHIBIT 31.2 - BROADVIEW NETWORKS HOLDINGS INCc16753exv31w2.htm
EX-32.2 - EXHIBIT 32.2 - BROADVIEW NETWORKS HOLDINGS INCc16753exv32w2.htm
EX-31.1 - EXHIBIT 31.1 - BROADVIEW NETWORKS HOLDINGS INCc16753exv31w1.htm
Table of Contents

 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
Mark One
     
þ   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For The Quarterly Period Ended March 31, 2011
     
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 333-142946
Broadview Networks Holdings, Inc.
(Exact name of registrant as specified in its charter)
     
Delaware   11-3310798
(State or other jurisdiction of incorporation or organization)   (I.R.S. Employer Identification No.)
     
800 Westchester Avenue,    
Suite N501 Rye Brook, NY 10573   10573
(Address of principal executive offices)   (Zip code)
(914) 922-7000
(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 o No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
             
Large accelerated filer o   Accelerated filer o   Non-accelerated filer þ   Smaller reporting company o
        (Do not check if a smaller reporting company)    
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
     
Class   Outstanding at May 9, 2011
Class A Common Stock, $.01 par value per share   9,333,680
Class B Common Stock, $.01 par value per share   360,050
 
 

 

 


 

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 Exhibit 31.1
 Exhibit 31.2
 Exhibit 32.1
 Exhibit 32.2

 

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This quarterly report contains both historical and “forward-looking statements.” All statements other than statements of historical fact included in this report that address activities, events or developments that we expect, believe or anticipate will or may occur in the future are forward-looking statements including, in particular, the statements about our plans, objectives, strategies and prospects regarding, among other things, our financial condition, results of operations and business. We have identified some of these forward-looking statements with words like “believe,” “may,” “will,” “should,” “expect,” “intend,” “plan,” “predict,” “anticipate,” “estimate” or “continue” and other words and terms of similar meaning. These forward-looking statements may be contained throughout this report, including but not limited to statements under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These forward-looking statements are based on current expectations about future events affecting us and are subject to uncertainties and factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control and could cause our actual results to differ materially from those matters expressed or implied by forward-looking statements. Many factors mentioned in our discussion in this report will be important in determining future results. Although we believe that the expectations reflected in these forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Forward-looking statements (including oral representations) are only predications or statements of current plans, which we review continuously. They can be affected by inaccurate assumptions we might make or by known or unknown risks and uncertainties, including, among other things, risks associated with:
   
servicing and refinancing our substantial indebtedness;
 
   
our history of net losses;
 
   
the elimination or relaxation of certain regulatory rights and protections;
 
   
billing and other disputes with vendors;
 
   
failure to maintain interconnection and service agreements with incumbent local exchange and other carriers;
 
   
the loss of customers in an adverse economic environment;
 
   
regulatory uncertainties in the communications industry;
 
   
system disruptions or the failure of our information systems to perform as expected;
 
   
the failure to anticipate and keep up with technological changes;
 
   
inability to provide services and systems at competitive prices;
 
   
difficulties associated with collecting payment from incumbent local exchange carriers, interexchange carriers and wholesale customers;
 
   
the highly competitive nature of the communications market in which we operate including competition from incumbents, cable operators and other new market entrants, and declining prices for communications services;
 
   
continued industry consolidation;
 
   
restrictions in connection with our indenture governing the notes and credit agreement governing the revolving credit facility;
 
   
government regulation;

 

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increased regulation of Internet-protocol-based service providers;
 
   
vendor bills related to past periods;
 
   
the ability to maintain certain real estate leases and agreements;
 
   
interruptions in the business operations of third party service providers;
 
   
limits on our ability to seek indemnification for losses from individuals and entities from whom we have acquired assets and operations;
 
   
the financial difficulties faced by others in our industry;
 
   
the failure to retain and attract management and key personnel;
 
   
the failure to manage and expand operations effectively;
 
   
the failure to successfully integrate future acquisitions, if any;
 
   
misappropriation of our intellectual property and proprietary rights;
 
   
the possibility of incurring liability for information disseminated through our network;
 
   
service network disruptions due to software or hardware bugs of the network equipment; and
 
   
fraudulent usage of our network and services.
Because our actual results, performance or achievements could differ materially from those expressed in, or implied by, these forward-looking statements, we cannot give any assurance that any of the events anticipated by these forward-looking statements will occur or, if any of them do, what impact they will have on our business, results of operations and financial condition. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. We do not undertake any obligation to update these forward-looking statements to reflect new information, future events or otherwise, except as may be required under federal securities laws.

 

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PART I — FINANCIAL INFORMATION
Item 1.  
Financial Statements
Broadview Networks Holdings, Inc.
Condensed Consolidated Balance Sheets
(dollars in thousands)
                 
    March 31,     December 31,  
    2011     2010  
    (Unaudited)        
ASSETS
               
Current assets:
               
Cash and cash equivalents
  $ 10,546     $ 25,204  
Certificates of deposit
    2,387       2,894  
Investment securities
    13,556       13,554  
Accounts receivable, less allowance for doubtful accounts of $12,622 and $10,664
    36,971       35,945  
Other current assets
    11,630       10,718  
 
           
Total current assets
    75,090       88,315  
 
               
Property and equipment, net
    85,589       85,144  
Goodwill
    98,238       98,238  
Intangible assets, net of accumulated amortization of $41,154 and $39,747
    13,646       15,053  
Other assets
    7,616       8,075  
 
           
Total assets
  $ 280,179     $ 294,825  
 
           
 
               
LIABILITIES AND STOCKHOLDERS’ DEFICIENCY
               
Current liabilities:
               
Revolving credit facility
  $ 17,122     $  
Accounts payable
    12,900       12,431  
Accrued expenses and other current liabilities
    17,652       29,232  
Taxes payable
    6,497       9,361  
Deferred revenues
    8,588       8,555  
Current portion of capital lease obligations
    2,367       2,298  
 
           
Total current liabilities
    65,126       61,877  
 
               
Long-term debt
    301,711       319,108  
Deferred rent payable
    3,578       3,086  
Deferred revenues
    1,063       1,133  
Capital lease obligations, net of current portion
    3,870       2,682  
Deferred income taxes payable
    4,252       4,009  
Other
    456       769  
 
           
Total liabilities
    380,056       392,664  
 
               
Stockholders’ deficiency:
               
Common stock A — $.01 par value; authorized 80,000,000 shares, issued 9,342,509 shares and outstanding 9,333,680 shares
    107       107  
Common stock B — $.01 par value; authorized 10,000,000 shares, issued and outstanding 360,050 shares
    4       4  
Series A Preferred stock — $.01 par value; authorized 89,526 shares, designated, issued and outstanding 87,254 shares entitled in liquidation to $181,922 and $176,623
    1       1  
Series A-1 Preferred stock — $.01 par value; authorized 105,000 shares, designated, issued and outstanding 100,702 shares, entitled in liquidation to $209,961 and $203,845
    1       1  
Series B Preferred stock — $.01 par value; authorized 93,180 shares, designated, issued and outstanding 91,187 shares entitled in liquidation to $190,122 and $184,585
    1       1  
Series B-1 Preferred stock — $.01 par value; authorized 86,000 shares, designated and issued 64,986 shares, and outstanding 64,633 shares entitled in liquidation to $134,759 and $130,834
    1       1  
Series C Preferred stock — $.01 par value; authorized 52,332 shares, designated, issued and outstanding 14,402 shares entitled in liquidation to $22,591 and $21,717
           
Additional paid-in capital
    140,811       140,811  
Accumulated deficit
    (240,626 )     (238,588 )
Treasury stock, at cost
    (177 )     (177 )
 
           
Total stockholders’ deficiency
    (99,877 )     (97,839 )
 
           
Total liabilities and stockholders’ deficiency
  $ 280,179     $ 294,825  
 
           
See notes to unaudited condensed consolidated financial statements.

 

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Broadview Networks Holdings, Inc.
Unaudited Condensed Consolidated Statements of Operations
(dollars in thousands)
                 
    Three Months Ended March 31,  
    2011     2010  
 
               
Revenues
  $ 98,419     $ 105,706  
Operating expenses:
               
Cost of revenues (exclusive of depreciation and amortization)
    45,837       50,060  
Selling, general and administrative
    34,770       37,769  
Depreciation and amortization
    9,781       11,408  
 
           
Total operating expenses
    90,388       99,237  
 
           
 
               
Income from operations
    8,031       6,469  
Interest expense
    (9,717 )     (9,922 )
Interest income
    20       4  
 
           
 
               
Loss before provision for income taxes
    (1,666 )     (3,449 )
Provision for income taxes
    (372 )     (288 )
 
           
 
               
Net loss
  $ (2,038 )   $ (3,737 )
 
           
See notes to unaudited condensed consolidated financial statements.

 

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Broadview Networks Holdings, Inc.
Unaudited Condensed Consolidated Statements of Cash Flows
(dollars in thousands)
                 
    Three Months Ended March 31,  
    2011     2010  
 
               
Cash flows from operating activities
  $ (2,038 )   $ (3,737 )
Net loss
               
Adjustments to reconcile net loss to net cash used in operating activities:
               
Depreciation
    8,371       7,888  
Amortization of deferred financing costs
    674       656  
Amortization of intangible assets
    1,407       3,505  
Amortization of bond premium
    (275 )     (245 )
Provision for doubtful accounts
    566       1,411  
Share-based compensation
          59  
Deferred income taxes
    243       242  
Other
    (316 )     14  
Changes in operating assets and liabilities:
               
Accounts receivable
    (1,592 )     1,293  
Other current assets
    (912 )     979  
Other assets
    (215 )     (53 )
Accounts payable
    469       (493 )
Accrued expenses and other current liabilities
    (14,444 )     (14,857 )
Deferred revenues
    (37 )     (156 )
Deferred rent payable
    492       95  
 
           
Net cash used in operating activities
    (7,607 )     (3,399 )
 
               
Cash flows from investing activities
               
Purchases of property and equipment
    (8,816 )     (7,709 )
Purchases of investment securities
    (13,556 )     (38,554 )
Sales of investment securities
    13,557       38,556  
Other
    507       (3 )
 
           
Net cash used in investing activities
    (8,308 )     (7,710 )
 
               
Cash flows from financing activities
               
Repayments of revolving credit facility
          (100 )
Proceeds from capital lease financing
    2,006       22  
Payments on capital lease obligations
    (749 )     (932 )
 
           
Net cash provided by (used in) financing activities
    1,257       (1,010 )
 
           
 
               
Net decrease in cash and cash equivalents
    (14,658 )     (12,119 )
Cash and cash equivalents at beginning of period
    25,204       21,975  
 
           
Cash and cash equivalents at end of period
  $ 10,546     $ 9,856  
 
           
See notes to unaudited condensed consolidated financial statements.

 

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Broadview Networks Holdings, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(dollars in thousands)
1. Organization and Description of Business
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared based upon Securities and Exchange Commission (“SEC”) rules that permit reduced disclosure for interim periods. These financial statements reflect all adjustments necessary for a fair presentation of the results of operations and financial condition for the interim periods shown, including normal recurring accruals and other items. The results for interim periods are not necessarily indicative of results for the full year. For a more complete discussion of significant accounting policies and certain other information, the Company’s interim unaudited financial statements should be read in conjunction with its audited financial statements as of and for the year ended December 31, 2010 included in the Company’s Form 10-K. The condensed consolidated interim financial statements include both the Company’s accounts and the accounts of its wholly-owned subsidiaries. All significant intercompany transactions have been eliminated in consolidation. The Company has evaluated the impact of subsequent events through the date the condensed consolidated financial statements were filed with the SEC.
The preparation of the condensed consolidated financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amount of revenues and expenses during the reporting period. Management periodically reviews such estimates and assumptions as circumstances dictate. Actual results could differ from those estimates. The Company has reclassified prior year amounts to conform to the current year presentation.
The Company is an integrated communications company founded in 1996 to take advantage of the deregulation of the U.S. telecommunications market following the Telecommunications Act of 1996. The Company has one reportable segment providing domestic wireline telecommunications services consisting of local and long distance voice services, Internet, and data services to commercial and residential customers in the northeast United States.
2. Investment Securities
Investment securities represent the Company’s investment in short-term U.S. Treasury notes. The Company’s primary objectives for purchasing these investment securities are liquidity and safety of principal. The Company considers these investment securities to be available-for-sale. Accordingly, these investments are recorded at their fair value of $13,556 and $13,554 as of March 31, 2011 and December 31, 2010, respectively. The fair value of these investment securities are based on publicly quoted market prices, which are Level 1 inputs under the fair value hierarchy. All of the Company’s investment securities mature in less than one year. The cost of these investment securities approximated their fair value as of March 31, 2011 and 2010. During the three months ended March 31, 2011 and 2010, the Company purchased $13,556 and $38,554 and sold $13,557 and $38,556 respectively, of U.S. Treasury notes. All unrealized and realized gains are determined by specific identification.
3. Recent Accounting Pronouncements
In September 2009, the accounting standard regarding multiple deliverable arrangements was updated to require the use of the relative selling price method when allocating revenue in these types of arrangements. This method allows a vendor to use its best estimate of selling price if neither vendor specific objective evidence nor third party evidence of selling price exists when evaluating multiple deliverable arrangements. The Company adopted this standard on January 1, 2011. The adoption of this standard update did not have a significant impact on the Company’s consolidated financial statements.

 

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Broadview Networks Holdings, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(dollars in thousands)
3. Recent Accounting Pronouncements (continued)
In September 2009, the accounting standard regarding arrangements that include software elements was updated to require tangible products that contain software and non-software elements that work together to deliver the products essential functionality to be evaluated under the accounting standard regarding multiple deliverable arrangements. The Company adopted this standard on January 1, 2011. The adoption of this standard update did not have a significant impact on the Company’s consolidated financial statements.
4. Fair Value of Financial Instruments
The Company’s financial instruments include cash and cash equivalents, certificates of deposit, investments in U.S. Treasury notes, trade accounts receivable, accounts payable, revolving credit facility and long-term debt. The Company’s available cash balances are invested on a short-term basis (generally overnight) and, accordingly, are not subject to significant risks associated with changes in interest rates. All of the Company’s cash flows are derived from operations within the United States and are not subject to market risk associated with changes in foreign exchanges rates. The carrying amounts of the Company’s cash and cash equivalents, certificates of deposit, trade accounts receivable and accounts payable reported in the consolidated balance sheets as of March 31, 2011 and December 31, 2010 are deemed to approximate fair value because of their liquidity and short-term nature. The carrying amounts of the Company’s investments in U.S. Treasury notes are recorded at their fair value of $13,556 and $13,554 which are based on the publicly quoted market price as of March 31, 2011 and December 31, 2010, respectively.
As of March 31, 2011 and December 31, 2010, the fair value of the amount outstanding under the Company’s revolving credit facility approximated its carrying value of $17,122 and $17,122, respectively, due to its variable market-based interest rate. The fair value of the Company’s senior secured notes at March 31, 2011 and December 31, 2010 was $294,000 and $293,250, respectively, which was based on the publicly quoted closing price of the notes at those dates. The publicly quoted closing price used to value the Company’s senior secured notes is considered to be a Level 1 input. The carrying value of the Company’s senior secured notes at March 31, 2011 and December 31, 2010 was $301,711 and $301,986, respectively.
5. Commitments and Contingencies
The Company has, in the ordinary course of its business, disputed certain billings from carriers and has recorded the estimated settlement amount of the disputed balances. The settlement estimate is based on various factors, including historical results of prior dispute settlements. The amount of such charges in dispute at March 31, 2011 was approximately $17,326. The Company believes that the ultimate settlement of these disputes will be at amounts less than the amount disputed and has accrued the estimated settlement in accrued expenses and other current liabilities at March 31, 2011. It is possible that the actual settlement of such disputes may differ from these estimates and the Company may settle at amounts greater than the estimates.
The Company is involved in claims and legal actions arising in the ordinary course of business. Management is of the opinion that the ultimate outcome of these matters will not have a material adverse impact on the Company’s consolidated financial position, results of operations, or cash flows. For more information, see our Form 10-K for the year ended December 31, 2010.

 

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Broadview Networks Holdings, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(dollars in thousands)
6. Long-term Debt Guarantees
The Company’s senior secured notes are fully, unconditionally and irrevocably guaranteed on a senior secured basis, jointly and severally, by each of the Company’s existing and future domestic restricted subsidiaries. The notes and the guarantees rank senior in right of payment to all existing and future subordinated indebtedness of the Company and its subsidiary guarantors, as applicable, and equal in right of payment with all existing and future senior indebtedness of the Company and of such subsidiaries. The notes and the guarantees are secured by a lien on substantially all of the Company’s assets, provided, however, that pursuant to the terms of an intercreditor agreement, the security interest in those assets consisting of receivables, inventory, deposit accounts, securities accounts and certain other assets that secure the notes and the guarantees are contractually subordinated to a lien thereon that secures the Company’s revolving credit facility with an aggregate principal amount of $25,000 and certain other permitted indebtedness.
7. Income Taxes
At March 31, 2011, the Company had net operating loss carryforwards (“NOLs”) available totaling approximately $196,848, which begin to expire in 2019. The Company has provided a full valuation allowance against the net deferred tax asset because management does not believe it is more likely than not that this asset will be realized. If the Company achieves profitability, the net deferred tax assets may be available to offset future income tax liabilities.

 

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Item 2.  
Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the Unaudited Condensed Consolidated Financial Statements and Notes to the Unaudited Condensed Consolidated Financial Statements included elsewhere in this quarterly report and our Form 10-K for the year ended December 31, 2010 filed with the Securities and Exchange Commission (the “SEC”). Certain information contained in the discussion and analysis set forth below and elsewhere in this quarterly report, including information with respect to our plans and strategies for our business and related financing, includes forward-looking statements that involve risk and uncertainties. In evaluating such statements, existing and prospective investors should specifically consider the various factors identified in this quarterly report that could cause results to differ materially from those expressed in such forward-looking statements, including matters set forth in our Form 10-K for the year ended December 31, 2010 filed with the SEC.
Overview
We are a leading competitive communications provider, in terms of revenue, offering voice and data communications and managed network solutions to business customers of all sizes throughout the country with a concentration in 20 markets across 10 states throughout the Northeast and Mid-Atlantic United States, including major metropolitan markets such as New York, Philadelphia, Baltimore, Washington, D.C. and Boston. To meet the demands of communications-intensive business customers, we offer dedicated local and long distance voice, high-speed data and integrated services, as well as value-added products and services such as managed services and hosted Voice Over Internet Protocol (“VoIP”) solutions (also known as cloud-based Communication as a Service (“CaaS”)). Our network architecture pairs the strength of a traditional infrastructure with an IP platform, built into our core and extending to the edge, to support dynamic growth of VoIP, Multiprotocol Label Switching (“MPLS”) and other next generation technologies. In addition, our network topology incorporates metro Ethernet access in key markets, enabling us to provide T-1 equivalent and high-speed Ethernet access services via unbundled network element loops to customers served from selected major metropolitan collocations, significantly increasing our margins while also enhancing capacity and speed of certain service offerings.
We recorded an operating loss of $3.0 million for the year ended December 31, 2008. For the years ended December 31, 2010 and 2009, we recorded operating income of $20.8 million and $26.4 million, respectively. For the three months ended March 31, 2011 and the years ended December 31, 2010, 2009 and 2008, we recorded net losses of $2.0 million, $18.8 million, $13.9 million and $42.9 million, respectively. Although we expect to continue to have net losses for the foreseeable future, we continue to search for ways of increasing operating efficiencies that could lead to potentially more profitable net results.
Our business is subject to several macro trends, some of which negatively affect our operating performance. Among these negative trends are lower usage per customer, which translates into less usage-based revenue and lower unit pricing for certain services. In addition, we continue to face other industry wide trends including rapid technology changes and overall increases in competition from existing large competitors such as Verizon and established cable operators, other competitive local exchange carriers and newer entrants such as VoIP, wireless and other service providers. These factors are partially mitigated by several positive trends. These include a more stable customer base, increasing revenue per customer due to the trend of customers buying more products from us as we deploy new technology and expand our offerings, a focus on larger customers and an overall increase in demand for data, managed and enhanced services. Although our overall revenue has declined since 2008, we have partially mitigated the impact of the revenue decline on our overall operating results by reducing costs of revenue and selling, general and administrative (“SG&A”) costs, the achievement of operating efficiencies throughout the organization and by the net effect of non-recurring gains and losses.
As of March 31, 2011, we had approximately 260 sales, sales management and sales support employees, including approximately 190 quota-bearing sales representatives, who target small and medium sized business or enterprise customers located within the footprint of our switching centers and approximately 260 collocations. We also offer our hosted IP product, OfficeSuite, on a nationwide basis and have chosen our agent sales channel as our primary distribution channel. We focus our sales efforts on communications intensive business customers who purchase multiple products that can be cost-effectively delivered on our network. These customers generally purchase high margin services in multi-year contracts and result in high retention rates. We believe that a lack of focus on the small and medium sized business segment from the Regional Bell Operating Companies has created an increased demand for alternatives in the small and medium sized business communications market. Consequently, we view this market as a sustainable growth opportunity and have focused our strategies on providing small and medium sized businesses with a competitive communications solution.

 

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We focus our business strategy on providing services based on our T-1-based products, which we believe offer greater value to customers, increase customer retention and provide revenue growth opportunities for us. Historically, the Company’s revenue was dominated by off-net, voice revenue from smaller customers. We have transitioned a large percentage of our revenue base to T-1-based products. Revenue from the sale of T-1-based products and managed services represents approximately 49% of our total revenue and approximately 57% of our retail revenue stream, with typical incremental gross profit margins in excess of 60%.
Our facilities-based network encompasses approximately 2,900 route miles of metro and long-haul fiber, approximately 260 collocations and approximately 475 lit buildings. Our network has the ability to deliver traditional services, such as Plain Old Telephone Service (“POTS”) and T-1 lines, as well as Digital Subscriber Line (“DSL”), and next generation services, such as dynamic VoIP integrated T-1s, Ethernet in the first mile, hosted VoIP solutions, and MPLS Virtual Private Networks. We provide services to our customers primarily through our network of owned telecommunications switches, data routers and related equipment and owned and leased communications lines and transport facilities using a variety of access methods, including unbundled network element loops, special access circuits and digital T-1 transmission lines for our on-net customers. A significant portion of our customer base has been migrated to a cost-effective and efficient IP-based infrastructure, which enhances the performance of our network. As of March 31, 2011, approximately 75% of our total lines were provisioned on-net.
Results of Operations
The following table sets forth, for the periods indicated, certain financial data as a percentage of total revenues.
                 
    Three Months Ended March 31,  
    2011     2010  
 
               
Revenues:
               
Voice and data services
    85.8 %     87.6 %
Wholesale
    5.7 %     5.0 %
Access
    6.2 %     5.2 %
 
           
Total network services
    97.7 %     97.8 %
Other
    2.3 %     2.2 %
 
           
Total revenues
    100.0 %     100.0 %
 
           
Operating expenses:
               
Network services
    45.6 %     46.6 %
Other cost of revenues
    1.0 %     0.8 %
Selling, general and administrative
    35.3 %     35.7 %
Depreciation and amortization
    9.9 %     10.8 %
 
           
Total operating expenses
    91.8 %     93.9 %
 
           
 
               
Income from operations
    8.2 %     6.1 %
Interest expense, net of interest income
    (9.9 %)     (9.4 %)
 
           
Loss before provision for income taxes
    (1.7 %)     (3.3 %)
Provision for income taxes
    (0.4 %)     (0.3 %)
 
           
 
               
Net loss
    (2.1 %)     (3.6 %)
 
           

 

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Key Components of Results of Operations
Revenues
Our revenues, as detailed in the table above, consist primarily of network services revenues, which consists primarily of voice and data managed and hosted services, wholesale services and access services. Voice and data services consist of local dial tone, long distance and data services, as well as managed and hosted services. Wholesale services consist of voice and data services, data collocation services and transport services. Access services includes carrier access and reciprocal compensation revenue, which consists primarily of usage charges that we bill to other carriers to originate and terminate their calls from and to our customers. Network services revenues represents a predominantly recurring revenue stream linked to our retail and wholesale customers.
We generate approximately 86% of our revenues from retail end customer voice and data products and services. Revenue from end customer data includes T-1/T-3, integrated T-1 data and other managed services trending to an increasing percentage of our overall revenue even as voice revenues, predominately POTS and long distance services, remain the core of our revenue base. Data cabling, service installation and wiring and phone systems sales and installation also form a small portion of our overall business. We continue to focus on data, managed and hosted services as growth opportunities as we expect the industry to trend toward lower usage components of legacy products such as long distance and local usage. This lower usage is primarily driven by trends toward customers using more online and wireless communications.
Cost of Revenues (exclusive of depreciation and amortization)
Our network services cost of revenues consist primarily of the cost of operating our network facilities. Determining our cost of revenues requires significant estimates. The network components for our facilities-based business include the cost of:
   
leasing local loops and digital T-1 lines which connect our customers to our network;
 
   
leasing high capacity digital lines that connect our switching equipment to our collocations;
 
   
leasing high capacity digital lines that interconnect our network with the incumbent local exchange carriers;
 
   
leasing space, power and terminal connections in the incumbent local exchange carrier central offices for collocating our equipment;
 
   
signaling system network connectivity; and
 
   
Internet transit and peering, which is the cost of delivering Internet traffic from our customers to the public Internet.
The costs to obtain local loops, digital T-1 lines and high capacity digital interoffice transport facilities from the incumbent local exchange carriers vary by carrier and by state and are regulated under federal and state laws. We do not anticipate any significant changes in Verizon local loop, digital T-1 line or high capacity digital interoffice transport facility rates in the near future. Except for our lit buildings, in virtually all areas, we obtain local loops, T-1 lines and interoffice transport capacity from the incumbent local exchange carriers. We obtain interoffice facilities from carriers other than the incumbent local exchange carriers, where possible, in order to lower costs and improve network redundancy; however, in most cases, the incumbent local exchange carriers are our only source for local loops and T-1 lines.
Our off-net network services cost of revenues consists of amounts we pay to Verizon and AT&T pursuant to our commercial agreements with them. Rates for such services are prescribed in the commercial agreements and available for the term of the agreements. The commercial agreements, which expire between June 2011 and December 2013, require certain minimum purchase obligations, which we have met in all of the years we were under the commercial agreements.

 

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Our network services cost of revenues also includes the fees we pay for long distance, data and other services. We have entered into long-term wholesale purchasing agreements for these services. Some of the agreements contain significant termination penalties and/or minimum usage volume commitments. In the event we fail to meet minimum volume commitments, we may be obligated to pay underutilization charges. We do not anticipate having to pay any underutilization charges in the foreseeable future.
Gross Profit (exclusive of depreciation and amortization)
Gross profit (exclusive of depreciation and amortization), referred to herein as “gross profit”, as presented in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, represents income from operations, before depreciation and amortization and SG&A. Gross profit is a non-GAAP financial measure used by our management, together with financial measures prepared in accordance with GAAP such as revenues, cost of revenues, and income from operations to assess our historical and prospective operating performance.
The following table sets forth, for the periods indicated, a reconciliation of gross profit to income from operations as income from operations is calculated in accordance with GAAP:
                 
    Three Months Ended March 31,  
    2011     2010  
 
               
Income from operations
  $ 8,031     $ 6,469  
Depreciation and amortization
    9,781       11,408  
Selling, general and administrative
    34,770       37,769  
 
           
Gross profit
  $ 52,582     $ 55,646  
 
           
Selling, General and Administrative
SG&A is comprised primarily of salaries and related expenses, software development expenses, non-cash compensation, occupancy costs, sales and marketing expenses, commission expenses, bad debt expense, billing expenses, professional services expenses and insurance expenses.
Determining our allowance for doubtful accounts receivable requires significant estimates. In determining the proper level for the allowance we consider factors such as historical collections experience, the aging of the accounts receivable portfolio and economic conditions. We perform a credit review process on each new customer that involves reviewing the customer’s current service provider bill and payment history, matching customers with national databases for delinquent customers and, in some cases, requesting credit reviews through Dun & Bradstreet Corporation.
Depreciation and Amortization
Our depreciation and amortization expense currently includes depreciation for network related voice and data equipment, fiber, back-office systems, third party conversion costs, furniture, fixtures, leasehold improvements, office equipment and computers and amortization of intangibles associated with mergers, acquisitions and software development costs.
Adjusted EBITDA Presentation
Adjusted EBITDA as presented in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, represents net loss before depreciation and amortization, interest income and expense, provision for income taxes, share-based compensation, severance and related separation costs and professional fees related to strategic initiatives. Adjusted EBITDA is not a measure of financial performance under GAAP. Adjusted EBITDA is a non-GAAP financial measure used by our management, together with financial measures prepared in accordance with GAAP such as net loss, income from operations and revenues, to assess our historical and prospective operating performance.

 

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The following table sets forth, for the periods indicated, a reconciliation of adjusted EBITDA to net loss as net loss is calculated in accordance with GAAP:
                 
    Three Months Ended March 31,  
    2011     2010  
 
               
Net loss
  $ (2,038 )   $ (3,737 )
Add back non-EBITDA items included in net loss:
               
Depreciation and amortization
    9,781       11,408  
Interest expense, net of interest income
    9,697       9,918  
Provision for income taxes
    372       288  
 
           
 
               
EBITDA
    17,812       17,877  
Severance and related separation costs
    152       39  
Professional fees related to strategic initiatives
    42       32  
Share-based compensation
          59  
 
           
 
               
Adjusted EBITDA
  $ 18,006     $ 18,007  
 
           
Adjusted EBITDA is not a financial measurement prepared in accordance with GAAP. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Components of Results of Operations—Adjusted EBITDA Presentation” in our Form 10-K for the year ended December 31, 2010 for our reasons for including adjusted EBITDA data in this quarterly report and for material limitations with respect to the usefulness of this measurement.
Three Months Ended March 31, 2011 Compared to Three Months Ended March 31, 2010
Set forth below is a discussion and analysis of our results of operations for the three months ended March 31, 2011 and 2010.
The following table provides a breakdown of components of our statements of operations for the three months ended March 31, 2011 and 2010:
                                         
    Three Months Ended March 31,        
    2011     2010        
            % of Total             % of Total        
    Amount     Revenues     Amount     Revenues     % Change  
 
                                       
Revenues:
                                       
Network services
  $ 96,166       97.7 %   $ 103,389       97.8 %     (7.0 %)
Other
    2,253       2.3 %     2,317       2.2 %     (2.8 %)
 
                             
Total revenues
    98,419       100.0 %     105,706       100.0 %     (6.9 %)
 
                             
 
                                       
Cost of revenues:
                                       
Network services
    44,899       45.6 %     49,255       46.6 %     (8.8 %)
Other
    938       1.0 %     805       0.8 %     16.5 %
 
                             
Total cost of revenues
    45,837       46.6 %     50,060       47.4 %     (8.4 %)
 
                             
 
                                       
Gross profit:
                                       
Network services
    51,267       52.1 %     54,134       51.2 %     (5.3 %)
Other
    1,315       1.3 %     1,512       1.4 %     (13.0 %)
 
                             
Total gross profit
  $ 52,582       53.4 %   $ 55,646       52.6 %     (5.5 %)
 
                             

 

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Revenues
Revenues for the three months ended March 31, 2011 and 2010 were as follows:
                                         
    Three Months Ended March 31,        
    2011     2010        
            % of Total             % of Total        
    Amount     Revenues     Amount     Revenues     % Change  
 
                                       
Revenues:
                                       
Voice and data services
  $ 84,399       85.8 %   $ 92,625       87.6 %     (8.9 %)
Wholesale
    5,656       5.7 %     5,236       5.0 %     8.0 %
Access
    6,111       6.2 %     5,528       5.2 %     10.5 %
 
                             
Total network services
    96,166       97.7 %     103,389       97.8 %     (7.0 %)
Other
    2,253       2.3 %     2,317       2.2 %     (2.8 %)
 
                             
Total revenues
  $ 98,419       100.0 %   $ 105,706       100.0 %     (6.9 %)
 
                             
Revenues from voice services have decreased $7.6 million or 11.8% between 2011 and 2010. This decrease is due to increased line churn, lower usage revenue per customer, lower prices per unit for certain services and a lower number of lines and customers. Our revenues from data services have decreased by $0.9 million or 3.6% between 2011 and 2010. Our carrier access revenues have increased due to a one-time settlement of reciprocal compensation charges. Excluding this settlement, our carrier access revenues have decreased primarily due to decreasing revenue from voice services, which reduces our revenues from access originations and terminations and reciprocal compensation. In addition, carrier access revenues have decreased due to lower fees charged to the carriers. Our wholesale revenue increased primarily as a result of organic growth of our T-1 and data products as well as from voice terminations. Our other revenues include data cabling, service installation and wiring and phone systems sales and installation, which revenues were substantially the same in 2011 and 2010.
Cost of Revenues (exclusive of depreciation and amortization)
Cost of revenues were $45.8 million for the three months ended March 31, 2011, a decrease of 8.4% from $50.1 million for the same period in 2010 due to our overall decline in revenue. The decrease is also due to the identification and elimination of inefficiencies in our operating platforms. Our costs consist primarily of those incurred from other providers and those incurred from the cost of our network. Costs where we purchased services or products from third party providers comprised $35.6 million, or 77.6% of our total cost of revenues for the three months ended March 31, 2011 and $38.7 million, or 77.3%, in the three months ended March 31, 2010. The most significant components of our costs purchased from third party providers consist of costs related to our Verizon wholesale advantage contract, unbundled network element loop costs and T-1 costs, which totaled $8.0 million, $4.8 million and $11.4 million, respectively, for the three months ended March 31, 2011. Combined, these costs decreased by 11.7% between 2011 and 2010. These costs totaled $9.6 million, $5.8 million and $12.0 million, respectively, for the three months ended March 31, 2010. We have experienced a decrease in these costs where we purchased services or products from third parties primarily due to our effective migration of lines to lower cost platforms.
Gross Profit (exclusive of depreciation and amortization)
Gross profit was $52.6 million for the three months ended March 31, 2011, a decrease of 5.5% from $55.6 million for the same period in 2010. The decrease in gross profit is due to the decline in revenue. As a percentage of revenues gross profit increased to 53.4% in 2011 from 52.6% in 2010. The increase in gross profit as a percentage of revenue is primarily due to lower costs resulting from provisioning more lines from resale and unbundled network platform to on-net. We are focusing sales initiatives towards increasing the amount of data and integrated T-1 lines sold, as we believe that these initiatives will produce incrementally higher margins than those currently reported from POTS services. In addition, as we continue to drive additional cost saving initiatives, including provisioning customers to our on-net facilities, identifying additional inaccuracies in billing from existing carriers, renegotiating existing agreements and executing new agreements with additional interexchange carriers, we believe that our gross profit as a percentage of revenue will continue to improve.

 

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Selling, General and Administrative
SG&A expenses were $34.8 million, 35.3% of revenues, for the three months ended March 31, 2011, a decrease of 7.9% from $37.8 million, 35.7% of revenues, for the same period in 2010. This decrease is primarily due to decreased bad debt expenses of $0.8 million from decreased accounts receivable write-offs during the three months ended March 31, 2011.
Depreciation and Amortization
Depreciation and amortization costs were $9.8 million for the three months ended March 31, 2011, a decrease of 14.0% from $11.4 million for the same period in 2010. This decrease in depreciation and amortization expense was due to fully amortizing one of our acquired customer base intangible assets during 2010. Amortization expense included in our results of operations for customer base intangible assets for the three months ended March 31, 2011 was $1.3 million, a decrease of $1.8 million from $3.1 million included in our results of operations during the same period in 2010.
Interest
Interest expense was $9.7 million for the three months ended March 31, 2011, a decrease of 2.0% from $9.9 million for the same period in 2010. The decrease was primarily due to lower interest expense as a result of having a lower average outstanding debt balance for the three months ended March 31, 2011 compared to the same period in 2010. The lower average debt balance is due to reduced borrowings under our revolving credit facility. Our effective annual interest rates for the three months ended March 31, 2011 and 2010 are as follows:
                 
    Three Months Ended March 31,  
    2011     2010  
 
               
Interest expense
  $ 9,717     $ 9,922  
Weighted average debt outstanding
  $ 322,731     $ 327,852  
Effective interest rate
    12.04 %     12.11 %
Off-Balance Sheet Arrangements
We have no special purpose or limited purpose entities that provide off-balance sheet financing, liquidity, or market or credit risk support, and we do not currently engage in hedging, research and development services, or other relationships that expose us to any liabilities that are not reflected on the face of our financial statements.
We do maintain standby letters of credit outstanding of $3.5 million, of which $1.3 million are fully collateralized by the letter of credit subfacility under our revolving credit facility. We posted cash collateral of $2.2 million for the remaining letters of credit. These standby letters of credit were issued as collateral in connection with some of our leased facilities and are pursuant to state regulatory requirements.
Liquidity and Capital Resources
Our principal sources of liquidity are cash from operations, our cash, cash equivalents and investments and our capital lease line. Our short-term liquidity requirements consist of interest on our notes, capital expenditures and working capital. Our long-term liquidity requirements consist of the principal amount of our notes and our outstanding borrowings under our revolving credit facility. A significant majority of our planned capital expenditures are “success-based” expenditures, meaning that they are directly linked to new revenue, and if they are made, they will be made only when it is determined that they will directly lead to more profitable revenue. As of March 31, 2011, we had $5.5 million of capital lease obligations outstanding under our capital lease lines and $0.4 million of availability remaining. As of March 31, 2011, we had $17.1 million of outstanding borrowings under our revolving credit facility. Additionally, we have used our revolving credit facility to collateralize $1.3 million of outstanding letters of credit as of March 31, 2011. Outstanding borrowings under our revolving credit facility are due and payable on February 23, 2012. Our cash and cash equivalents are being held in several large financial institutions, although most of our balances exceed the Federal Deposit Insurance Corporation insurance limits.

 

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As of March 31, 2011, we will require approximately $51.2 million in cash to service the interest due on our notes throughout the remaining life of the notes. Our notes and our revolving credit facility both mature in 2012. We may need to refinance all or a portion of our indebtedness, including the notes, at or before maturity. We cannot assure you that we will be able to refinance any of our indebtedness, including the notes and our credit facility, on commercially reasonable terms or at all. However, we continuously evaluate and consider all financing opportunities. Any future acquisitions or other significant unplanned costs or cash requirements may also require that we raise additional funds through the issuance of debt or equity.
Disputes
We are involved in a variety of disputes with multiple carrier vendors relating to billings of approximately $17.3 million as of March 31, 2011. While we hope to resolve these disputes through negotiation, we may be compelled to arbitrate these matters. We believe we have accrued an amount appropriate to settle all remaining disputed charges. However, it is possible that the actual settlement of any remaining disputes may differ from our reserves and that we may settle at amounts greater than the estimates. We believe we will have sufficient cash on hand to fund any differences between our expected and actual settlement amounts. In the event that disputes are not resolved in our favor and we are unable to pay the vendor charges in a timely manner, the vendor may deny us access to the network facilities that we require to serve our customers. If the vendor notifies us of an impending “embargo” of this nature, we may be required to notify our customers of a potential loss of service, which may cause a substantial loss of customers. It is not possible at this time to predict the outcome of these disputes.
Three Months Ended March 31, 2011 Compared to Three Months Ended March 31, 2010
Cash Flows from Operating Activities
Cash used in operating activities was $7.6 million for the three months ended March 31, 2011, compared to $3.4 million for the same period in 2010. During each of the three months ended March 31, 2011 and 2010, we paid $17.1 million in interest expense on our notes. The increase in cash used in operations was primarily due to increases in working capital in 2011 compared to decreased working capital in 2010.
Cash Flows from Investing Activities
Cash used in investing activities was $8.3 million for the three months ended March 31, 2011, compared to $7.7 million for the same period in 2010. The change in cash flow from investing activities was due to increased capital expenditures.
Cash Flows from Financing Activities
Cash flows provided by financing activities was $1.3 million for the three months ended March 31, 2011, compared to cash used in financing activities $1.0 million for the same period in 2010. The change in cash flows from financing activities was primarily due to additional proceeds from capital lease financing of $2.0 million during the three months ended March 31, 2011 as compared to the same period in 2010.

 

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Application of Critical Accounting Policies and Estimates
The preparation of the condensed consolidated financial statements in accordance with GAAP requires us to make judgments, estimates and assumptions regarding uncertainties that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses. We use historical experience and all available information to make these judgments and estimates and actual results could differ from those estimates and assumptions that are used to prepare our financial statements at any given time. Despite these inherent limitations, management believes that Management’s Discussion and Analysis of Financial Condition and Results of Operations and the accompanying condensed consolidated financial statements and footnotes provide a meaningful and fair perspective of our financial condition and our operating results for the current period. For more information, see our Form 10-K for the year ended December 31, 2010.
Other Matters
At March 31, 2011, we had net NOLs available totaling approximately $196.8 million, which begin to expire in 2019. We have provided a full valuation allowance against the net deferred tax asset as of March 31, 2011 because we do not believe it is more likely than not that this asset will be realized. If we achieve profitability, the net deferred tax assets may be available to offset future income tax liabilities.
Item 3.  
Quantitative and Qualitative Disclosures About Market Risk
In the normal course of business, our financial position is subject to a variety of risks, such as the collectability of our accounts receivable and the recoverability of the carrying values of our long-term assets. Our debt obligations consist primarily of long-term debt with fixed interest rates and our revolving credit facility with a variable interest rate. We are not exposed to market risks from changes in foreign currency exchange rates or commodity prices. We do not hold any derivative financial instruments nor do we hold any securities for trading or speculative purposes.
We continually monitor the collectability of our accounts receivable and have not noted any significant changes in our collections as a result of current economic and market conditions. We believe that our allowance for doubtful accounts is adequate as of March 31, 2011. Should the market conditions worsen or should our customers’ ability to pay decrease, we may be required to increase our allowance for doubtful accounts, which would result in a charge to our SG&A expenses.
Our available cash balances are invested on a short-term basis (generally overnight) and, accordingly, are not subject to significant risks associated with changes in interest rates. Substantially all of our cash flows are derived from our operations within the United States and we are not subject to market risk associated with changes in foreign exchange rates.
Our investment securities are classified as available for sale, and consequently, are recorded on the balance sheets at fair value with unrealized gains and losses reflected in stockholders’ deficiency. Our investment securities are comprised solely of short-term U.S. Treasury notes with original maturity dates of less than one year. These investment securities like all fixed income instruments, are subject to interest rate risk and will fall in value if market interest rates increase.
The fair value of our senior secured notes at March 31, 2011, was approximately $294.0 million and was based on publicly quoted market prices. Our senior secured notes, like all fixed rate securities are subject to interest rate risk and will fall in value if market interest rates increase.
The fair value of the debt outstanding under our revolving credit facility approximates its carrying value of $17.1 million due to its variable interest rate. A hypothetical change in interest rates of 100 basis points would change our interest expense by $0.2 million on an annual basis.

 

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Item 4.  
Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
As required by SEC Rule 15d-15(b), we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 31, 2011. For information regarding the Company’s internal control over financial reporting, see our Form 10-K for the year ended December 31, 2010.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting during the quarter ended March 31, 2011 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

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PART II — OTHER INFORMATION
Item 1.  
Legal Proceedings
We are not currently a party to a material legal action.
We are, however, party to certain legal actions arising in the ordinary course of business. We are also involved in certain billing and contractual disputes with our vendors. We do not believe that the ultimate outcome of any of the foregoing actions will result in any liability that would have a material adverse effect on our financial condition, results of operations or cash flows.
For more information, see the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our Form 10-K for the year ended December 31, 2010.
Item 1A.  
Risk Factors
There have been no material changes in our risk factors from those set forth in our Form 10-K for the year ended December 31, 2010, which should be read in conjunction with this report.
Item 2.  
Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3.  
Defaults Upon Senior Securities
None.
Item 4.  
(Removed and Reserved)
Item 5.  
Other Information
None.

 

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Item 6.  
Exhibits
The following exhibits are filed herewith:
         
Exhibit No.   Description
  31.1    
Certification of the Company’s Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
       
 
  31.2    
Certification of the Company’s Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
       
 
  32.1    
Certification of the Company’s Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
       
 
  32.2    
Certification of the Company’s Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on May 9, 2011.
         
  BROADVIEW NETWORKS HOLDINGS, INC.
 
 
  By:   /s/ Michael K. Robinson    
    Name:   Michael K. Robinson   
    Title:   Chief Executive Officer, President and Director   
     
  By:   /s/ Corey Rinker    
    Name:   Corey Rinker   
    Title:   Chief Financial Officer, Treasurer and
Assistant Secretary 
 

 

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EXHIBIT INDEX
         
Exhibit    
No.   Description
  31.1    
Certification of the Company’s Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
       
 
  31.2    
Certification of the Company’s Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
       
 
  32.1    
Certification of the Company’s Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
       
 
  32.2    
Certification of the Company’s Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

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