##### 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 September 30, 2008
 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 333-96391
 Broadview Networks Holdings, Inc.
  Delaware
(State or other jurisdiction of incorporation or organization)
    
    11-3310798
(IRS Employer Identification Number)
 800 Westchester Avenue, 
Suite N501 Rye Brook, NY 10573
(Address of principal executive offices)
    
    10573
(Zip code)
 (914) 922-7000
  o þ
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ
  Class
    
    Outstanding at
November 13, 2008Class A Common Stock, $.01 par value per share 
Class B Common Stock, $.01 par value per share
    
    9,342,880
360,050




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##### 



TABLE OF CONTENTS
 PART I  FINANCIAL INFORMATIONItem 1.
    
    Financial Statements (Unaudited)Condensed Consolidated Balance Sheets as of December 31, 2007 and September 30, 2008 (unaudited)
    
    
    5Condensed Consolidated Statements of Operations (unaudited) for the three and nine months ended
September 30, 2007 and 2008
    
    
    6Condensed Consolidated Statements of Cash Flows (unaudited) for the nine months ended
September 30, 2007 and 2008
    
    
    7Notes to Condensed Consolidated Financial Statements
    
    
    8Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    15Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    28Item 4.
    
    Controls and Procedures
    
    
    28PART II  OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    29Item 1A.
    
    Risk Factors
    
    
    29Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    29Item 3.
    
    Defaults Upon Senior Securities
    
    
    29Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    29Item 5.
    
    Other Information
    
    
    29Item 6.
    
    Exhibits
    
    
    29Signatures
    
    
    30EX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32.1: CERTIFICATIONEX-32.2: CERTIFICATION
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
  
    
    our history of operating losses;
    
    our substantial indebtedness;
    
    the elimination or relaxation of certain regulatory rights and protections;
    
    incumbent local exchange carriers, with which we have interconnection agreements,
leveraging their historical monopoly position;
    
    the failure to anticipate and keep up with technological changes;
    
    our ability to provide services and systems at competitive prices;
    
    difficulties associated with collecting payment from incumbent local exchange carriers,
interexchange carriers and wholesale customers;
    
    billing and other disputes with vendors;
    
    the highly competitive nature of the communications market in which we operate and
declining prices for communications services;
    
    continued industry consolidation;
    
    the recent intellectual property infringement litigation involving the provision of Voice
over Internet Protocol (VoIP) services;
    
    restrictions in connection with our indenture governing the notes and credit agreement
governing the credit facility;
    
    servicing our indebtedness;
    
    government regulation;
    
    regulatory uncertainties in the communications industry;
    
    increased regulation of Internet-protocol-based service providers;
    
    declining prices for communication services;
    
    vendor bills related to past periods;
    
    the ability to maintain certain real estate leases and agreements;
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
    
    system disruptions or the failure of our information systems to perform as expected;
    
    interruptions in the business operations of third party service providers;
    
    the loss of our customers;
    
    the ability to seek indemnification for losses from individuals and entities from whom we
have acquired assets and operations;
    
    the financial difficulties 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 engage in future acquisitions;
    
    misappropriation of our intellectual property and proprietary rights;
    
    the possibility of incurring liability for information disseminated through our network.
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PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 Broadview
Networks Holdings, Inc.
 
 Condensed Consolidated Balance Sheets
(in thousands, except share amounts)
 December 31,
    
    
    September 30,2007
    
    
    2008(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    41,998
    
    
    $
    22,878Accounts receivable, less allowance for doubtful accounts of $10,082 and $13,101
    
    
    56,426
    
    
    
    56,264Other current assets
    
    
    8,463
    
    
    
    10,379Total current assets
    
    
    106,887
    
    
    
    89,521Property and equipment, net
    
    
    77,373
    
    
    
    85,806Goodwill
    
    
    96,154
    
    
    
    96,237Intangible assets, net of accumulated amortization of $109,335 and $140,380
    
    
    82,841
    
    
    
    57,464Other assets
    
    
    18,543
    
    
    
    17,568Total assets
    
    $
    381,798
    
    
    $
    346,596LIABILITIES AND STOCKHOLDERS DEFICIENCYCurrent liabilities:Accounts payable
    
    $
    21,247
    
    
    $
    21,926Accrued expenses and other current liabilities
    
    
    43,952
    
    
    
    30,088Taxes payable
    
    
    10,818
    
    
    
    8,292Deferred revenues
    
    
    10,148
    
    
    
    11,877Current portion of capital lease obligations and equipment notes
    
    
    3,136
    
    
    
    3,928Total current liabilities
    
    
    89,301
    
    
    
    76,111Long-term debt
    
    
    304,740
    
    
    
    314,137Deferred rent payable
    
    
    2,628
    
    
    
    2,329Capital lease obligations and equipment notes, net of current portion
    
    
    6,114
    
    
    
    5,813Deferred income taxes payable
    
    
    1,141
    
    
    
    1,826Other
    
    
    589
    
    
    
    639Total liabilities
    
    
    404,513
    
    
    
    400,855Stockholders deficiency:Common stock A  $.01 par value; authorized 80,000,000, issued and outstanding 9,342,880 shares
    
    
    107
    
    
    
    107Common stock B  $.01 par value; authorized 10,000,000, issued and outstanding 360,050 shares
    
    
    4
    
    
    
    4Series A Preferred stock  $.01 par value; authorized 89,526 shares, designated, issued and outstanding
87,254 shares entitled in liquidation to $123,880 and $135,367
    
    
    1
    
    
    
    1Series A-1 Preferred stock  $.01 par value; authorized 105,000 shares, designated, issued and
outstanding 100,702 shares, entitled in liquidation to $142,973 and $156,230
    
    
    1
    
    
    
    1Series B Preferred stock  $.01 par value; authorized 93,180 shares, designated, issued and outstanding
91,202 shares entitled in liquidation to $129,485 and $141,492
    
    
    1
    
    
    
    1Series B-1 Preferred stock  $.01 par value; authorized 86,000 shares, designated, issued and
outstanding 64,986 shares entitled in liquidation to $92,265 and $100,820
    
    
    1
    
    
    
    1Series C Preferred stock  $.01 par value; authorized 52,332 shares, designated, issued and outstanding
14,402 shares entitled in liquidation to $13,011 and $14,907
    
    
    
    
    
    
    Additional paid-in capital
    
    
    140,270
    
    
    
    140,512Accumulated deficit
    
    
    (163,100
    )
    
    
    (194,886
    )Total stockholders deficiency
    
    
    (22,715
    )
    
    
    (54,259
    )Total liabilities and stockholders deficiency
    
    $
    381,798
    
    
    $
    346,596
 See notes to unaudited condensed consolidated financial statements.
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Broadview Networks Holdings, Inc.
 
 Unaudited Condensed Consolidated Statements of Operations
(in thousands, except share amounts)
 Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2007
    
    
    2008
    
    
    2007
    
    
    2008Revenues
    
    $
    123,652
    
    
    $
    125,535
    
    
    $
    325,998
    
    
    $
    377,391Operating expenses:Cost of revenues (exclusive of depreciation and
amortization)
    
    
    64,890
    
    
    
    65,026
    
    
    
    168,136
    
    
    
    196,474Selling, general and administrative (includes share-based
compensation of $226, $63, $2,340 and $242)
    
    
    42,383
    
    
    
    41,467
    
    
    
    120,866
    
    
    
    127,150Software development
    
    
    647
    
    
    
    414
    
    
    
    1,811
    
    
    
    1,229Depreciation and amortization
    
    
    21,760
    
    
    
    17,828
    
    
    
    55,507
    
    
    
    54,525Merger integration costs
    
    
    87
    
    
    
    
    
    
    
    503
    
    
    
    Total operating expenses
    
    
    129,767
    
    
    
    124,735
    
    
    
    346,823
    
    
    
    379,378Income (loss) from operations
    
    
    (6,115
    )
    
    
    800
    
    
    
    (20,825
    )
    
    
    (1,987
    )Other income
    
    
    130
    
    
    
    (3
    )
    
    
    226
    
    
    
    (10
    )Interest expense
    
    
    (9,919
    )
    
    
    (10,019
    )
    
    
    (25,146
    )
    
    
    (29,474
    )Interest income
    
    
    449
    
    
    
    167
    
    
    
    1,160
    
    
    
    598Loss before provision for income taxes
    
    
    (15,455
    )
    
    
    (9,055
    )
    
    
    (44,585
    )
    
    
    (30,873
    )Benefit (provision) for income taxes
    
    
    465
    
    
    
    (118
    )
    
    
    (1,013
    )
    
    
    (913
    )Net loss
    
    
    (14,990
    )
    
    
    (9,173
    )
    
    
    (45,598
    )
    
    
    (31,786
    )Dividends on preferred stock
    
    
    (14,471
    )
    
    
    (16,202
    )
    
    
    (40,126
    )
    
    
    (47,203
    )Modification of preferred stock
    
    
    
    
    
    
    
    
    
    
    (95,622
    )
    
    
    Loss available to common shareholders
    
    $
    (29,461
    )
    
    $
    (25,375
    )
    
    $
    (181,346
    )
    
    $
    (78,989
    )Loss available per common share  basic and diluted
    
    $
    (3.05
    )
    
    $
    (2.62
    )
    
    $
    (19.59
    )
    
    $
    (8.16
    )Weighted average common shares outstanding 
basic and diluted
    
    
    9,667,680
    
    
    
    9,679,455
    
    
    
    9,255,153
    
    
    
    9,674,728
 See notes to unaudited condensed consolidated financial statements.
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Broadview Networks Holdings, Inc.
 
 Unaudited Condensed Consolidated Statements of Cash Flows
(in thousands)
 Nine Months Ended September 30,2007
    
    
    2008Cash flows from operating activities
    
    $
    (45,598
    )
    
    $
    (31,786
    )Net lossAdjustments to reconcile net loss to net cash provided by (used in) operating activities:Depreciation
    
    
    23,602
    
    
    
    23,430Amortization and write-off of deferred financing costs
    
    
    1,605
    
    
    
    1,983Amortization of intangible assets
    
    
    31,904
    
    
    
    31,045Amortization of bond premium
    
    
    (359
    )
    
    
    (603
    )Provision for doubtful accounts
    
    
    4,187
    
    
    
    4,205Share-based compensation
    
    
    2,340
    
    
    
    242Deferred income taxes
    
    
    1,040
    
    
    
    685Other
    
    
    392
    
    
    
    50Changes in operating assets and liabilities:Restricted cash
    
    
    37
    
    
    
    Accounts receivable
    
    
    (12,415
    )
    
    
    (3,429
    )Prepaid expenses and other current assets
    
    
    (223
    )
    
    
    (1,898
    )Other assets
    
    
    (185
    )
    
    
    (933
    )Accounts payable
    
    
    (5,968
    )
    
    
    679Accrued expenses and other current liabilities
    
    
    (23,064
    )
    
    
    (15,339
    )Taxes payable
    
    
    (1,530
    )
    
    
    (2,526
    )Deferred revenue
    
    
    1,319
    
    
    
    1,729Deferred rent
    
    
    (160
    )
    
    
    (299
    )Other liabilities
    
    
    (240
    )
    
    
    Net cash provided by (used in) operating activities
    
    
    (23,316
    )
    
    
    7,235Cash flows from investing activitiesAcquisition, net of cash and restricted cash acquired
    
    
    (58,462
    )
    
    
    (4,953
    )Purchase of property and equipment
    
    
    (21,093
    )
    
    
    (31,452
    )Merger acquisition costs
    
    
    (1,939
    )
    
    
    (296
    )Other
    
    
    
    
    
    
    (83
    )Net cash used in investing activities
    
    
    (81,494
    )
    
    
    (36,784
    )Cash flows from financing activitiesProceeds from capital lease financing and equipment notes
    
    
    4,653
    
    
    
    3,192Payments on capital lease obligations and equipment notes
    
    
    (3,022
    )
    
    
    (2,700
    )Proceeds from issuance of long-term debt
    
    
    95,175
    
    
    
    Drawdowns on revolving credit facility
    
    
    11,500
    
    
    
    10,000Repayments on revolving credit facility
    
    
    (11,956
    )
    
    
    Payment of deferred financing fees
    
    
    (4,319
    )
    
    
    (63
    )Payments for shares purchased under under MIP
    
    
    (1,703
    )
    
    
    Net cash provided by financing activities
    
    
    90,328
    
    
    
    10,429Net decrease in cash and cash equivalents
    
    
    (14,482
    )
    
    
    (19,120
    )Cash and cash equivalents at beginning of period
    
    
    43,952
    
    
    
    41,998Cash and cash equivalents at end of period
    
    $
    29,470
    
    
    $
    22,878
 See notes to unaudited condensed consolidated financial statements.
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Broadview Networks Holdings, Inc.
 
 Notes to Unaudited Condensed Consolidated Financial Statements
(in thousands, except share information)
 1. Organization and Description of Business
 Basis of Presentation
   2. Significant Accounting Policies
 Property and Equipment
  Significant Vendor
  Comprehensive Income
  Use of Estimates
  Allowance for Doubtful Accounts
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Broadview Networks Holdings, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
(in thousands, except share information)
 3. Recent Accounting Pronouncements
 Share-Based Payment
 Business Combinations (Revised) Business Combinations
 Noncontrolling Interests in Consolidated
Financial Statements  an amendment of ARB No. 51 Consolidated Financial Statements
 Disclosures about Derivative Instruments and
Hedging Activities
 The Hierarchy of Generally Accepted Accounting
Principles The Meaning of Present Fairly in Conformity With Generally Accepted Accounting
Principles.
 4. InfoHighway Acquisition
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Broadview Networks Holdings, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
(in thousands, except share information)
 4. InfoHighway Acquisition (continued)
  Accounting
for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Companys Own
 5. Lightwave Acquisition
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Broadview Networks Holdings, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
(in thousands, except share information)
 5. Lightwave Acquisition (continued)
  Assets acquired:Accounts receivable
    
    $
    614Other current assets
    
    
    18Property and equipment
    
    
    411Intangible assets
    
    
    5,668Other assets
    
    
    12Total assets acquired
    
    
    6,723Liabilities assumed:Accrued expenses and other current liabilities
    
    
    110Net assets acquired
    
    $
    6,613
 6. Accrued Expenses and Other Current Liabilities
  December 31,
    
    
    September 30,2007
    
    
    2008Recurring network costs and other operating accruals
    
    $
    23,488
    
    
    $
    21,656Accrued interest(a)
    
    
    11,375
    
    
    
    2,872Merger transaction costs(b)
    
    
    2,090
    
    
    
    1,107Payroll related liabilities
    
    
    6,840
    
    
    
    3,903Other
    
    
    159
    
    
    
    550Total accrued expenses and other current
    
    $
    43,952
    
    
    $
    30,088
 
 (a)
    
    Represents accrued interest on the Senior Secured Notes. Interest is paid semi-annually on
March 1 and September 1 of each year.(b)
    
    The accrual for merger transaction costs consists of the following: ATX
    
    
    InfoHighway
    
    
    LeaseSeverance
    
    
    Severance
    
    
    Terminations
    
    
    Other
    
    
    TotalBalance at December 31, 2007
    
    $
    287
    
    
    $
    1,086
    
    
    $
    632
    
    
    $
    85
    
    
    $
    2,090Payments
    
    
    (236
    )
    
    
    (334
    )
    
    
    (340
    )
    
    
    (73
    )
    
    
    (983
    )Balance at September 30, 2008
    
    $
    51
    
    
    $
    752
    
    
    $
    292
    
    
    $
    12
    
    
    $
    1,107
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Broadview Networks Holdings, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
(in thousands, except share information)
 7. Debt
 Senior Secured Notes
   ,
  Revolving $25,000 Senior Credit Facility
    12




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Broadview Networks Holdings, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
(in thousands, except share information)
 7. Debt (continued)
   8. Commitments and Contingencies
    9. Income Taxes
 Accounting for Uncertainty in Income Taxes
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Broadview Networks Holdings, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
(in thousands, except share information)
 10. Earnings per share
  Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2007
    
    
    2008
    
    
    2007
    
    
    2008Loss available to common shareholders (Numerator):Net loss
    
    $
    (14,990
    )
    
    $
    (9,173
    )
    
    $
    (45,598
    )
    
    $
    (31,786
    )Dividends on preferred stock
    
    
    (14,471
    )
    
    
    (16,202
    )
    
    
    (40,126
    )
    
    
    (47,203
    )Modification of preferred stock
    
    
    
    
    
    
    
    
    
    
    (95,622
    )
    
    
    Loss available to common shareholders
    
    $
    (29,461
    )
    
    $
    (25,375
    )
    
    $
    (181,346
    )
    
    $
    (78,989
    )Shares (Denominator):Weighted average common shares outstanding:Class A common stock
    
    
    9,342,880
    
    
    
    9,342,880
    
    
    
    9,060,035
    
    
    
    9,342,880Class B common stock
    
    
    324,800
    
    
    
    336,575
    
    
    
    195,118
    
    
    
    331,848Weighted average common shares outstanding  basic and
diluted
    
    
    9,667,680
    
    
    
    9,679,455
    
    
    
    9,255,153
    
    
    
    9,674,728Loss available per common share  basic and diluted
    
    $
    (3.05
    )
    
    $
    (2.62
    )
    
    $
    (19.59
    )
    
    $
    (8.16
    )
  Earnings Per Share
   14




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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/A for the year ended December 31, 2007 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, 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/A for the year ended December 31, 2007 filed with the SEC.
 Overview
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Results of Operations
  Three
Months Ended September 30,
    
    

Nine
Months Ended September 30,2007
    
    
    2008
    
    
    2007
    
    
    2008Revenues:Voice and data services
    
    
    86.6
    %
    
    
    86.4
    %
    
    
    88.0
    %
    
    
    86.9
    %Wholesale
    
    
    2.4
    %
    
    
    3.9
    %
    
    
    2.8
    %
    
    
    3.7
    %Access
    
    
    6.0
    %
    
    
    5.7
    %
    
    
    5.6
    %
    
    
    5.7
    %Total network services
    
    
    95.0
    %
    
    
    96.0
    %
    
    
    96.4
    %
    
    
    96.3
    %Other
    
    
    5.0
    %
    
    
    4.0
    %
    
    
    3.6
    %
    
    
    3.7
    %Total revenues
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Operating expenses:Network services
    
    
    49.9
    %
    
    
    49.8
    %
    
    
    49.8
    %
    
    
    50.0
    %Other cost of revenues
    
    
    2.6
    %
    
    
    2.0
    %
    
    
    1.8
    %
    
    
    2.0
    %Selling, general and administrative
    
    
    34.3
    %
    
    
    33.0
    %
    
    
    37.0
    %
    
    
    33.7
    %Software development
    
    
    0.5
    %
    
    
    0.3
    %
    
    
    0.6
    %
    
    
    0.3
    %Depreciation and amortization
    
    
    17.6
    %
    
    
    14.2
    %
    
    
    17.0
    %
    
    
    14.4
    %Merger integration costs
    
    
    0.1
    %
    
    
    0.0
    %
    
    
    0.2
    %
    
    
    0.0
    %Total operating expenses
    
    
    105.0
    %
    
    
    99.3
    %
    
    
    106.4
    %
    
    
    100.4
    %Income (loss) from operations
    
    
    (5.0
    %)
    
    
    0.7
    %
    
    
    (6.4
    %)
    
    
    (0.4
    %)Other income
    
    
    0.1
    %
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %Interest expense
    
    
    (8.0
    %)
    
    
    (7.9
    %)
    
    
    (7.7
    %)
    
    
    (7.8
    %)Interest income
    
    
    0.4
    %
    
    
    0.1
    %
    
    
    0.4
    %
    
    
    0.2
    %Loss before provision for income taxes
    
    
    (12.5
    %)
    
    
    (7.1
    %)
    
    
    (13.7
    %)
    
    
    (8.0
    %)Provision for income taxes
    
    
    0.4
    %
    
    
    (0.1
    %)
    
    
    (0.3
    %)
    
    
    (0.2
    %)Net loss
    
    
    (12.1
    %)
    
    
    (7.2
    %)
    
    
    (14.0
    %)
    
    
    (8.2
    %)
 Key Components of Results of Operations
 Revenues
    17




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##### Table of Contents



Cost of Revenues (exclusive of depreciation and amortization)
  
    
    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.
    18




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##### Table of Contents



Gross Profit (exclusive of depreciation and amortization)
   Three
Months Ended September 30,
    
    

Nine
Months Ended September 30,2007
    
    
    2008
    
    
    2007
    
    
    2008Net loss
    
    $
    (14,990
    )
    
    $
    (9,173
    )
    
    $
    (45,598
    )
    
    $
    (31,786
    )Add back non-gross profit items included in net loss:Provision (benefit) for income taxes
    
    
    (465
    )
    
    
    118
    
    
    
    1,013
    
    
    
    913Interest and other expenses
    
    
    9,340
    
    
    
    9,855
    
    
    
    23,760
    
    
    
    28,886Merger integration costs
    
    
    87
    
    
    
    
    
    
    
    503
    
    
    
    Depreciation and amortization
    
    
    21,760
    
    
    
    17,828
    
    
    
    55,507
    
    
    
    54,525Software development
    
    
    647
    
    
    
    414
    
    
    
    1,811
    
    
    
    1,229Selling, general and administrative
    
    
    42,383
    
    
    
    41,467
    
    
    
    120,866
    
    
    
    127,150Gross profit
    
    $
    58,762
    
    
    $
    60,509
    
    
    $
    157,862
    
    
    $
    180,917
     
    
    gross profit does not reflect our capital expenditures, future requirements for capital
expenditures or contractual commitments to purchase capital equipment;
    
    gross profit does not reflect the interest expense, or the cash requirements necessary to
service interest or principal payments, associated with our indebtedness;
    
    although depreciation and amortization are non-cash charges, the assets being depreciated
and amortized will likely have to be replaced in the future, and gross profit does not
reflect any cash requirements for such replacements; and
    
    gross profit does not reflect the SG&A expenses necessary to run our ongoing operations.
  19




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##### Table of Contents



Selling, General and Administrative
    Depreciation and Amortization
  Three Months Ended September 30, 2007 Compared to Three Months Ended September 30, 2008
   Three Months Ended September 30,2007
    
    
    2008% of Total
    
    
    
    
    
    
    % of TotalAmount
    
    
    Revenues
    
    
    Amount
    
    
    Revenues
    
    
    % ChangeRevenues:Network services
    
    $
    117,440
    
    
    
    95.0
    %
    
    $
    120,570
    
    
    
    96.0
    %
    
    
    2.7
    %Other
    
    
    6,212
    
    
    
    5.0
    %
    
    
    4,965
    
    
    
    4.0
    %
    
    
    (20.1
    %)Total revenues
    
    $
    123,652
    
    
    
    100.0
    %
    
    $
    125,535
    
    
    
    100.0
    %
    
    
    1.5
    %Cost of revenues:Network services
    
    $
    61,725
    
    
    
    49.9
    %
    
    $
    62,570
    
    
    
    49.8
    %
    
    
    1.4
    %Other
    
    
    3,165
    
    
    
    2.6
    %
    
    
    2,456
    
    
    
    2.0
    %
    
    
    (22.4
    %)Total cost of revenues
    
    $
    64,890
    
    
    
    52.5
    %
    
    $
    65,026
    
    
    
    51.8
    %
    
    
    0.2
    %Gross profit:Network services
    
    $
    55,715
    
    
    
    45.1
    %
    
    $
    58,000
    
    
    
    46.2
    %
    
    
    4.1
    %Other
    
    
    3,047
    
    
    
    2.4
    %
    
    
    2,509
    
    
    
    2.0
    %
    
    
    (17.7
    %)Total gross profit
    
    $
    58,762
    
    
    
    47.5
    %
    
    $
    60,509
    
    
    
    48.2
    %
    
    
    3.0
    %
 20




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##### Table of Contents



Revenues
  Three Months Ended September 30,2007
    
    
    2008% of Total
    
    
    
    
    
    
    % of TotalAmount
    
    
    Revenues
    
    
    Amount
    
    
    Revenues
    
    
    % ChangeRevenues:Voice and data services
    
    $
    107,095
    
    
    
    86.6
    %
    
    $
    108,446
    
    
    
    86.4
    %
    
    
    1.3
    %Wholesale
    
    
    2,920
    
    
    
    2.4
    %
    
    
    4,926
    
    
    
    3.9
    %
    
    
    68.7
    %Access
    
    
    7,425
    
    
    
    6.0
    %
    
    
    7,198
    
    
    
    5.7
    %
    
    
    (3.1
    %)Total network services
    
    
    117,440
    
    
    
    95.0
    %
    
    
    120,570
    
    
    
    96.0
    %
    
    
    2.7
    %Other
    
    
    6,212
    
    
    
    5.0
    %
    
    
    4,965
    
    
    
    4.0
    %
    
    
    (20.1
    %)Total revenues
    
    $
    123,652
    
    
    
    100.0
    %
    
    $
    125,535
    
    
    
    100.0
    %
    
    
    1.5
    %
  Cost of Revenues (exclusive of depreciation and amortization)
  Gross Profit (exclusive of depreciation and amortization)
  Selling, General and Administrative
  Depreciation and Amortization
  21




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##### Table of Contents



Interest
  Three Months Ended September 30,2007
    
    2008Interest expense
    
    $
    9,919
    
    
    $
    10,019Weighted average debt outstanding
    
    $
    310,664
    
    
    $
    310,882Effective interest rate
    
    
    12.77
    %
    
    
    12.89
    %
 Net Loss
  Nine Months Ended September 30, 2007 Compared to Nine Months Ended September 30, 2008
   Nine Months Ended September 30,2007
    
    
    2008% of Total
    
    
    
    
    
    
    % of TotalAmount
    
    
    Revenues
    
    
    Amount
    
    
    Revenues
    
    
    % ChangeRevenues:Network services
    
    $
    314,357
    
    
    
    96.4
    %
    
    $
    363,458
    
    
    
    96.3
    %
    
    
    15.6
    %Other
    
    
    11,641
    
    
    
    3.6
    %
    
    
    13,933
    
    
    
    3.7
    %
    
    
    19.7
    %Total revenues
    
    $
    325,998
    
    
    
    100.0
    %
    
    $
    377,391
    
    
    
    100.0
    %
    
    
    15.8
    %Cost of revenues:Network services
    
    $
    162,320
    
    
    
    49.8
    %
    
    $
    188,837
    
    
    
    50.0
    %
    
    
    16.3
    %Other
    
    
    5,816
    
    
    
    1.8
    %
    
    
    7,637
    
    
    
    2.0
    %
    
    
    31.3
    %Total cost of revenues
    
    $
    168,136
    
    
    
    51.6
    %
    
    $
    196,474
    
    
    
    52.0
    %
    
    
    16.9
    %Gross profit:Network services
    
    $
    152,037
    
    
    
    46.6
    %
    
    $
    174,621
    
    
    
    46.3
    %
    
    
    14.9
    %Other
    
    
    5,825
    
    
    
    1.8
    %
    
    
    6,296
    
    
    
    1.7
    %
    
    
    8.1
    %Total gross profit
    
    $
    157,862
    
    
    
    48.4
    %
    
    $
    180,917
    
    
    
    48.0
    %
    
    
    14.6
    %
 Revenues
  Nine Months Ended September 30,2007
    
    
    2008% of Total
    
    
    
    
    
    
    % of TotalAmount
    
    
    Revenues
    
    
    Amount
    
    
    Revenues
    
    
    % ChangeRevenues:Voice and data services
    
    $
    287,022
    
    
    
    88.0
    %
    
    $
    327,822
    
    
    
    86.9
    %
    
    
    14.2
    %Wholesale
    
    
    9,214
    
    
    
    2.8
    %
    
    
    13,944
    
    
    
    3.7
    %
    
    
    51.3
    %Access
    
    
    18,121
    
    
    
    5.6
    %
    
    
    21,692
    
    
    
    5.7
    %
    
    
    19.7
    %Total network services
    
    
    314,357
    
    
    
    96.4
    %
    
    
    363,458
    
    
    
    96.3
    %
    
    
    15.6
    %Other
    
    
    11,641
    
    
    
    3.6
    %
    
    
    13,933
    
    
    
    3.7
    %
    
    
    19.7
    %Total revenues
    
    $
    325,998
    
    
    
    100.0
    %
    
    $
    377,391
    
    
    
    100.0
    %
    
    
    15.8
    %
 22




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##### Table of Contents



Cost of Revenues (exclusive of depreciation and amortization)
   Selling, General and Administrative
   Depreciation and Amortization
  23




---



##### Table of Contents



Interest
  Nine Months Ended September 30,2007
    
    2008Interest expense
    
    $
    25,146
    
    
    $
    29,474Weighted average debt outstanding
    
    $
    265,644
    
    
    $
    310,105Effective interest rate
    
    
    12.62
    %
    
    
    12.67
    %
 Net Loss
  Off-Balance Sheet Arrangements
  Liquidity and Capital Resources
   24




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##### Table of Contents



Disputes
     Credit Facility
       25




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##### Table of Contents



2006 Note and 2007 Note Offerings
   Nine Months Ended September 30, 2007 Compared to Nine Months Ended September 30, 2008
 Cash Flows from Operating Activities
  Cash Flows from Investing Activities
  Cash Flows from Financing Activities
  26




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##### Table of Contents



New Accounting Standards
  Share-Based Payment
 Business Combinations (Revised) Business Combinations
 Noncontrolling Interests in Consolidated
Financial Statements  an amendment of ARB No. 51 Consolidated Financial Statements
 Disclosures about Derivative Instruments and
Hedging Activities
 The Hierarchy of Generally Accepted Accounting
Principles The Meaning of Present Fairly in Conformity With Generally Accepted Accounting
Principles.
 Application of Critical Accounting Policies and Estimates
  Other Matters
  27




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures About Market Risk
     
 Item 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
   Changes in Internal Controls Over Financial Reporting
  28




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##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
   
 Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity 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
  Exhibit No.
    
    Description31.1
    
    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.
 29




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##### Table of Contents



SIGNATURES
  BROADVIEW NETWORKS HOLDINGS, INC.By:
    /s/ Michael K. RobinsonName:
    Michael K. RobinsonTitle:
    Chief Executive Officer,
President and Assistant TreasurerBy:
    /s/ Corey RinkerName:
    Corey RinkerTitle:
    Chief Financial Officer,
Treasurer and Assistant Secretary 30