##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For The Quarterly Period Ended September 30, 2010
 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.
  Delaware
    
    11-3310798(State or other jurisdiction of incorporation or organization)
    
    (IRS Employer Identification Number)800 Westchester Avenue,Suite N501 Rye Brook, NY 10573
    
    10573(Address of principal executive offices)
    
    (Zip code)
 (914) 922-7000
 o o
 o o
  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 15, 2010Class A Common Stock, $.01 par value per share
    
    9,333,680Class B Common Stock, $.01 par value per share
    
    360,050




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##### 



TABLE OF CONTENTS
 PART I  FINANCIAL INFORMATIONItem 1. Financial Statements
    
    
    5Condensed Consolidated Balance Sheets as of December 31, 2009 and September 30, 2010 (unaudited)
    
    
    5Condensed Consolidated Statements of Operations (unaudited) for the three and nine months ended
September 30, 2009 and 2010
    
    
    6Condensed Consolidated Statements of Cash Flows (unaudited) for the nine months ended September
30, 2009 and 2010
    
    
    7Notes to Condensed Consolidated Financial Statements
    
    
    8Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    11Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    24Item 4. Controls and Procedures
    
    
    24PART II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    25Item 1A. Risk Factors
    
    
    25Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    25Item 3. Defaults Upon Senior Securities
    
    
    25Item 4. (Removed and Reserved)
    
    
    25Item 5. Other Information
    
    
    25Item 6. Exhibits
    
    
    26Signatures
    
    
    27Exhibit 10.24Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   2




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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
  
    
    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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##### Table of Contents




    
    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;
    
    disruption and instability in the financial markets;
    
    the financial difficulties by others in our industry;
    
    the solvency and liquidity of the administrative agent and primary creditor under
our revolving credit facility;
    
    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, 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.
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PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 Broadview Networks Holdings, Inc.
 
 Condensed Consolidated Balance Sheets
 (dollars in thousands)
 December 31,
    
    
    September 30,2009
    
    
    2010(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    21,975
    
    
    $
    7,588Certificates of deposit
    
    
    1,878
    
    
    
    2,894Investment securities
    
    
    23,549
    
    
    
    13,556Accounts receivable, less allowance for doubtful accounts of $7,942 and $9,848
    
    
    41,388
    
    
    
    36,145Other current assets
    
    
    10,976
    
    
    
    11,881Total current assets
    
    
    99,766
    
    
    
    72,064Property and equipment, net
    
    
    86,875
    
    
    
    86,448Goodwill
    
    
    98,238
    
    
    
    98,238Intangible assets, net of accumulated amortization of $51,728 and $62,243
    
    
    27,484
    
    
    
    16,969Other assets
    
    
    14,965
    
    
    
    9,303Total assets
    
    $
    327,328
    
    
    $
    283,022LIABILITIES AND STOCKHOLDERS DEFICIENCYCurrent liabilities:Accounts payable
    
    $
    9,196
    
    
    $
    8,094Accrued expenses and other current liabilities
    
    
    35,630
    
    
    
    19,238Taxes payable
    
    
    12,768
    
    
    
    9,702Deferred revenues
    
    
    8,965
    
    
    
    8,873Current portion of capital lease obligations
    
    
    3,080
    
    
    
    2,102Total current liabilities
    
    
    69,639
    
    
    
    48,009Long-term debt
    
    
    326,510
    
    
    
    319,375Deferred rent payable
    
    
    3,343
    
    
    
    3,199Deferred revenues
    
    
    1,445
    
    
    
    1,161Capital lease obligations, net of current portion
    
    
    1,776
    
    
    
    1,638Deferred income taxes payable
    
    
    3,040
    
    
    
    3,767Other
    
    
    721
    
    
    
    759Total liabilities
    
    
    406,474
    
    
    
    377,908Stockholders deficiency:Common stock A  $.01 par value; authorized 80,000,000 shares, issued 9,342,509 shares and
outstanding 9,333,680 shares
    
    
    107
    
    
    
    107Common stock A  $.01 par value; authorized 10,000,000 shares, 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 $156,927 and $171,479
    
    
    1
    
    
    
    1Series A-1 Preferred stock  $.01 par value; authorized 105,000 shares, designated, issued and
outstanding 100,702 shares, entitled in liquidation to $181,114 and $197,908
    
    
    1
    
    
    
    1Series B Preferred stock  $.01 par value; authorized 93,180 shares, designated, issued and outstanding
91,187 shares entitled in liquidation to $164,001 and $179,208
    
    
    1
    
    
    
    1Series B-1 Preferred stock  $.01 par value; authorized 86,000 shares, designated and issued
64,986 and outstanding 64,333 shares entitled in liquidation to $116,243 and $127,082
    
    
    1
    
    
    
    1Series C Preferred stock  $.01 par value; authorized 52,332 shares, designated, issued and outstanding
14,402 shares entitled in liquidation to $18,466 and $20,868
    
    
    
    
    
    
    Additional paid-in capital
    
    
    140,752
    
    
    
    140,812Accumulated deficit
    
    
    (219,836
    )
    
    
    (235,636
    )Treasury stock, at cost
    
    
    (177
    )
    
    
    (177
    )Total stockholders deficiency
    
    
    (79,146
    )
    
    
    (94,886
    )Total liabilities and stockholders deficiency
    
    $
    327,328
    
    
    $
    283,022
 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 September 30,
    
    
    Nine Months Ended September 30,2009
    
    
    2010
    
    
    2009
    
    
    2010Revenues
    
    $
    111,761
    
    
    $
    100,423
    
    
    $
    349,782
    
    
    $
    309,037Operating expenses:Cost of revenues (exclusive of depreciation and
amortization)
    
    
    54,844
    
    
    
    47,214
    
    
    
    173,972
    
    
    
    146,879Selling, general and administrative (includes share-based
compensation of $59, $0, $174 and $59)
    
    
    37,371
    
    
    
    36,573
    
    
    
    118,633
    
    
    
    114,044Depreciation and amortization
    
    
    12,111
    
    
    
    11,402
    
    
    
    37,914
    
    
    
    34,153Total operating expenses
    
    
    104,326
    
    
    
    95,189
    
    
    
    330,519
    
    
    
    295,076Income from operations
    
    
    7,435
    
    
    
    5,234
    
    
    
    19,263
    
    
    
    13,961Interest expense
    
    
    (10,043
    )
    
    
    (9,397
    )
    
    
    (30,143
    )
    
    
    (28,760
    )Interest income
    
    
    10
    
    
    
    34
    
    
    
    104
    
    
    
    50Other income
    
    
    
    
    
    
    
    
    
    
    16
    
    
    
    Loss before provision for income taxes
    
    
    (2,598
    )
    
    
    (4,129
    )
    
    
    (10,760
    )
    
    
    (14,749
    )Provision for income taxes
    
    
    (240
    )
    
    
    (521
    )
    
    
    (939
    )
    
    
    (1,051
    )Net loss
    
    $
    (2,838
    )
    
    $
    (4,650
    )
    
    $
    (11,699
    )
    
    $
    (15,800
    )
 See notes to unaudited condensed consolidated financial statements.
  6




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Broadview Networks Holdings, Inc.
 
 Unaudited Condensed Consolidated Statements of Cash Flows
 (dollars in thousands)
 Nine Months Ended September 30,2009
    
    
    2010Cash flows from operating activitiesNet loss
    
    $
    (11,699
    )
    
    $
    (15,800
    )Adjustments to reconcile net loss to net cash provided by operating activities:Depreciation
    
    
    24,311
    
    
    
    23,599Amortization of deferred financing costs
    
    
    1,969
    
    
    
    1,994Amortization of intangible assets
    
    
    13,551
    
    
    
    10,515Amortization of bond premium
    
    
    (676
    )
    
    
    (757
    )Provision for doubtful accounts
    
    
    5,256
    
    
    
    3,789Write-off of costs incurred in connection with initial public offering
    
    
    
    
    
    
    3,669Share-based compensation
    
    
    174
    
    
    
    59Deferred income taxes
    
    
    727
    
    
    
    727Other
    
    
    51
    
    
    
    27Changes in operating assets and liabilities:Accounts receivable
    
    
    1,911
    
    
    
    1,454Other current assets
    
    
    2,298
    
    
    
    (905
    )Other assets
    
    
    (1,350
    )
    
    
    (1
    )Accounts payable
    
    
    5,148
    
    
    
    (1,102
    )Accrued expenses and other current liabilities
    
    
    (25,530
    )
    
    
    (16,392
    )Taxes payable
    
    
    1,516
    
    
    
    (3,066
    )Deferred revenues
    
    
    (1,304
    )
    
    
    (376
    )Deferred rent payable
    
    
    (200
    )
    
    
    (144
    )Net cash provided by operating activities
    
    
    16,153
    
    
    
    7,290Cash flows from investing activitiesPurchases of property and equipment
    
    
    (24,371
    )
    
    
    (23,172
    )Purchases of investment securities
    
    
    (98,664
    )
    
    
    (89,215
    )Sales of investment securities
    
    
    98,628
    
    
    
    99,220Other
    
    
    (112
    )
    
    
    (1,016
    )Net cash used in investing activities
    
    
    (24,519
    )
    
    
    (14,183
    )Cash flows from financing activitiesDrawdowns on revolving credit facility
    
    
    1,964
    
    
    
    912Repayments of revolving credit facility
    
    
    (1,964
    )
    
    
    (7,290
    )Proceeds from capital lease financing
    
    
    373
    
    
    
    1,549Payments on capital lease obligations
    
    
    (3,083
    )
    
    
    (2,665
    )Net cash used in financing activities
    
    
    (2,710
    )
    
    
    (7,494
    )Net decrease in cash and cash equivalents
    
    
    (11,076
    )
    
    
    (14,387
    )Cash and cash equivalents at beginning of period
    
    
    22,177
    
    
    
    21,975Cash and cash equivalents at end of period
    
    $
    11,101
    
    
    $
    7,588
 See notes to unaudited condensed consolidated financial statements.
  7




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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
     2. Investment Securities
   8




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Broadview Networks Holdings, Inc.
 Notes to Unaudited Condensed Consolidated Financial Statements (continued)
 (dollars in thousands)
 3. Recent Accounting Pronouncements
  4. InfoHighway Acquisition
   5. Fair Values of Financial Instruments
    9




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Broadview Networks Holdings, Inc.
 Notes to Unaudited Condensed Consolidated Financial Statements (continued)
 (dollars in thousands)
 6. Commitments and Contingencies
    7. Revolving Credit Facility
  8. Long-term Debt Guarantees
   9. Income Taxes
   10




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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, 2009 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 for the year ended December 31, 2009 filed with the SEC.
 Overview
      11




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Results of Operations
  Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2009
    
    
    2010
    
    
    2009
    
    
    2010Revenues:Voice and data services
    
    
    87.6
    %
    
    
    87.7
    %
    
    
    86.9
    %
    
    
    87.9
    %Wholesale
    
    
    4.1
    %
    
    
    5.6
    %
    
    
    4.2
    %
    
    
    5.2
    %Access
    
    
    5.0
    %
    
    
    5.0
    %
    
    
    5.3
    %
    
    
    4.8
    %Total network services
    
    
    96.7
    %
    
    
    98.3
    %
    
    
    96.4
    %
    
    
    97.9
    %Other
    
    
    3.3
    %
    
    
    1.7
    %
    
    
    3.6
    %
    
    
    2.1
    %Total revenues
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Operating expenses:Network services
    
    
    47.6
    %
    
    
    46.5
    %
    
    
    48.0
    %
    
    
    46.8
    %Other cost of revenues
    
    
    1.4
    %
    
    
    0.5
    %
    
    
    1.8
    %
    
    
    0.7
    %Selling, general and
administrative
    
    
    33.4
    %
    
    
    36.4
    %
    
    
    33.9
    %
    
    
    36.9
    %Depreciation and amortization
    
    
    10.8
    %
    
    
    11.4
    %
    
    
    10.8
    %
    
    
    11.1
    %Total operating expenses
    
    
    93.2
    %
    
    
    94.8
    %
    
    
    94.5
    %
    
    
    95.5
    %Income from operations
    
    
    6.8
    %
    
    
    5.2
    %
    
    
    5.5
    %
    
    
    4.5
    %Interest expense
    
    
    (9.1
    %)
    
    
    (9.3
    %)
    
    
    (8.6
    %)
    
    
    (9.3
    %)Loss before provision for
income taxes
    
    
    (2.3
    %)
    
    
    (4.1
    %)
    
    
    (3.1
    %)
    
    
    (4.8
    %)Provision for income taxes
    
    
    (0.2
    %)
    
    
    (0.5
    %)
    
    
    (0.2
    %)
    
    
    (0.3
    %)Net loss
    
    
    (2.5
    %)
    
    
    (4.6
    %)
    
    
    (3.3
    %)
    
    
    (5.1
    %)
  12




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Key Components of Results of Operations
 Revenues
   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.
     13




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Gross Profit (exclusive of depreciation and amortization)
   Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2009
    
    
    2010
    
    
    2009
    
    
    2010Income from operations
    
    $
    7,435
    
    
    $
    5,234
    
    
    $
    19,263
    
    
    $
    13,961Depreciation and amortization
    
    
    12,111
    
    
    
    11,402
    
    
    
    37,914
    
    
    
    34,153Selling, general and administrative
    
    
    37,371
    
    
    
    36,573
    
    
    
    118,633
    
    
    
    114,044Gross profit (exclusive of depreciation and amortization)
    
    $
    56,917
    
    
    $
    53,209
    
    
    $
    175,810
    
    
    $
    162,158
 Selling, General and Administrative
   Depreciation and Amortization
  Adjusted EBITDA Presentation
   Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2009
    
    
    2010
    
    
    2009
    
    
    2010Net loss
    
    $
    (2,838
    )
    
    $
    (4,650
    )
    
    $
    (11,699
    )
    
    $
    (15,800
    )Add back non-EBITDA items included in net loss:Depreciation and amortization
    
    
    12,111
    
    
    
    11,402
    
    
    
    37,914
    
    
    
    34,153Interest expense, net of
interest income
    
    
    10,033
    
    
    
    9,363
    
    
    
    30,039
    
    
    
    28,710Provision for income taxes
    
    
    240
    
    
    
    521
    
    
    
    939
    
    
    
    1,051EBITDA
    
    
    19,546
    
    
    
    16,636
    
    
    
    57,193
    
    
    
    48,114Costs associated with initial public offering
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,669Severance
and related separation costs
    
    
    105
    
    
    
    419
    
    
    
    501
    
    
    
    699Professional
fees related to strategic initiatives
    
    
    41
    
    
    
    
    
    
    
    101
    
    
    
    56Share-based compensation
    
    
    59
    
    
    
    
    
    
    
    174
    
    
    
    59Adjusted EBITDA
    
    $
    19,751
    
    
    $
    17,055
    
    
    $
    57,969
    
    
    $
    52,597Percentage
of total revenues
    
    
    17.7
    %
    
    
    17.0
    %
    
    
    16.6
    %
    
    
    17.0
    %
  14




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
    
    adjusted EBITDA does not reflect our capital expenditures, future requirements for
capital expenditures or contractual commitments to purchase capital equipment;
 
    
    adjusted EBITDA 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 adjusted EBITDA does not
reflect any cash requirements for such replacements;
 
    
    adjusted EBITDA does not reflect the cost of equity awards to employees;
 
    
    adjusted EBITDA does not reflect the effect of earnings or charges resulting from matters
that management considers not indicative of our ongoing operations; and
 
    
    to the extent that we change our accounting for certain transactions or other items from
period to period, our adjusted EBITDA may not be directly comparable from period to period.
  15




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Three Months Ended September 30, 2009 Compared to Three Months Ended September 30, 2010
   Three Months Ended September 30,2009
    
    
    2010% of Total
    
    
    
    
    
    
    % of TotalAmount
    
    
    Revenues
    
    
    Amount
    
    
    Revenues
    
    
    % ChangeRevenues:Network services
    
    $
    108,096
    
    
    
    96.7
    %
    
    $
    98,681
    
    
    
    98.3
    %
    
    
    (8.7
    %)Other
    
    
    3,665
    
    
    
    3.3
    %
    
    
    1,742
    
    
    
    1.7
    %
    
    
    (52.5
    %)Total revenues
    
    
    111,761
    
    
    
    100.0
    %
    
    
    100,423
    
    
    
    100.0
    %
    
    
    (10.1
    %)Cost of revenues:Network services
    
    
    53,163
    
    
    
    47.6
    %
    
    
    46,718
    
    
    
    46.5
    %
    
    
    (12.1
    %)Other
    
    
    1,681
    
    
    
    1.4
    %
    
    
    496
    
    
    
    0.5
    %
    
    
    (70.5
    %)Total cost of revenues
    
    
    54,844
    
    
    
    49.0
    %
    
    
    47,214
    
    
    
    47.0
    %
    
    
    (13.9
    %)Gross profit:Network services
    
    
    54,933
    
    
    
    49.1
    %
    
    
    51,963
    
    
    
    51.8
    %
    
    
    (5.4
    %)Other
    
    
    1,984
    
    
    
    1.9
    %
    
    
    1,246
    
    
    
    1.2
    %
    
    
    (37.2
    %)Total gross profit
    
    $
    56,917
    
    
    
    51.0
    %
    
    $
    53,209
    
    
    
    53.0
    %
    
    
    (6.5
    %)
  16




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##### Table of Contents



Revenues
  Three Months Ended September 30,2009
    
    
    2010% of Total
    
    
    
    
    
    
    % of TotalAmount
    
    
    Revenues
    
    
    Amount
    
    
    Revenues
    
    
    % ChangeRevenues:Voice and data services
    
    $
    97,857
    
    
    
    87.6
    %
    
    $
    88,034
    
    
    
    87.7
    %
    
    
    (10.0
    %)Wholesale
    
    
    4,637
    
    
    
    4.1
    %
    
    
    5,604
    
    
    
    5.6
    %
    
    
    20.9
    %Access
    
    
    5,602
    
    
    
    5.0
    %
    
    
    5,043
    
    
    
    5.0
    %
    
    
    (10.0
    %)Total network services
    
    
    108,096
    
    
    
    96.7
    %
    
    
    98,681
    
    
    
    98.3
    %
    
    
    (8.7
    %)Other
    
    
    3,665
    
    
    
    3.3
    %
    
    
    1,742
    
    
    
    1.7
    %
    
    
    (52.5
    %)Total revenues
    
    $
    111,761
    
    
    
    100.0
    %
    
    $
    100,423
    
    
    
    100.0
    %
    
    
    (10.1
    %)
  Cost of Revenues (exclusive of depreciation and amortization)
  Gross Profit (exclusive of depreciation and amortization)
   17




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##### Table of Contents



Selling, General and Administrative
  Depreciation and Amortization
  Interest
  Three Months Ended September 30,2009
    
    
    2010Interest expense
    
    $
    10,043
    
    
    $
    9,397Weighted average debt outstanding
    
    
    330,105
    
    
    
    320,575Effective annual interest rate
    
    
    12.17
    %
    
    
    11.73
    %
 Nine Months Ended September 30, 2009 Compared to Nine Months Ended September 30, 2010
   Nine Months Ended September 30,2009
    
    
    2010% of Total
    
    
    
    
    
    
    % of TotalAmount
    
    
    Revenues
    
    
    Amount
    
    
    Revenues
    
    
    % ChangeRevenues:Network services
    
    $
    337,193
    
    
    
    96.4
    %
    
    $
    302,549
    
    
    
    97.9
    %
    
    
    (10.3
    %)Other
    
    
    12,589
    
    
    
    3.6
    %
    
    
    6,488
    
    
    
    2.1
    %
    
    
    (48.5
    %)Total revenues
    
    
    349,782
    
    
    
    100.0
    %
    
    
    309,037
    
    
    
    100.0
    %
    
    
    (11.6
    %)Cost of revenues:Network services
    
    
    167,883
    
    
    
    48.0
    %
    
    
    144,772
    
    
    
    46.8
    %
    
    
    (13.8
    %)Other
    
    
    6,089
    
    
    
    1.8
    %
    
    
    2,107
    
    
    
    0.7
    %
    
    
    (65.4
    %)Total cost of revenues
    
    
    173,972
    
    
    
    49.8
    %
    
    
    146,879
    
    
    
    47.5
    %
    
    
    (15.6
    %)Gross profit:Network services
    
    
    169,310
    
    
    
    48.4
    %
    
    
    157,777
    
    
    
    51.1
    %
    
    
    (6.8
    %)Other
    
    
    6,500
    
    
    
    1.8
    %
    
    
    4,381
    
    
    
    1.4
    %
    
    
    (32.6
    %)Total gross profit
    
    $
    175,810
    
    
    
    50.2
    %
    
    $
    162,158
    
    
    
    52.5
    %
    
    
    (7.8
    %)
  18




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##### Table of Contents



Revenues
  Nine Months Ended September 30,2009
    
    
    2010% of Total
    
    
    
    
    
    
    % of TotalAmount
    
    
    Revenues
    
    
    Amount
    
    
    Revenues
    
    
    % ChangeRevenues:Voice and data services
    
    $
    304,059
    
    
    
    86.9
    %
    
    $
    271,414
    
    
    
    87.9
    %
    
    
    (10.7
    %)Wholesale
    
    
    14,519
    
    
    
    4.2
    %
    
    
    16,193
    
    
    
    5.2
    %
    
    
    11.5
    %Access
    
    
    18,615
    
    
    
    5.3
    %
    
    
    14,942
    
    
    
    4.8
    %
    
    
    (19.7
    %)Total network services
    
    
    337,193
    
    
    
    96.4
    %
    
    
    302,549
    
    
    
    97.9
    %
    
    
    (10.3
    %)Other
    
    
    12,589
    
    
    
    3.6
    %
    
    
    6,488
    
    
    
    2.1
    %
    
    
    (48.5
    %)Total revenues
    
    $
    349,782
    
    
    
    100.0
    %
    
    $
    309,037
    
    
    
    100.0
    %
    
    
    (11.6
    %)
  Cost of Revenues (exclusive of depreciation and amortization)
  Gross Profit (exclusive of depreciation and amortization)
   19




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##### Table of Contents



Selling, General and Administrative
  Depreciation and Amortization
  Interest
  Nine Months Ended September 30,2009
    
    
    2010Interest expense
    
    $
    30,143
    
    
    $
    28,760Weighted average debt outstanding
    
    
    331,202
    
    
    
    322,886Effective annual interest rate
    
    
    12.13
    %
    
    
    11.88
    %
 Off-Balance Sheet Arrangements
    20




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##### Table of Contents



Liquidity and Capital Resources
   Disputes
    21




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##### Table of Contents



Nine Months Ended September 30, 2009 Compared to Nine Months Ended September 30, 2010
 Cash Flows from Operating Activities
  Cash Flows from Investing Activities
  Cash Flows from Financing Activities
  New Accounting Standards
    Application of Critical Accounting Policies and Estimates
   22




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##### Table of Contents



Other Matters
   23




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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 Control Over Financial Reporting
   24




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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. (Removed and Reserved)
 
 Item 5. Other Information
   25




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##### Table of Contents



Item 6. Exhibits
  Exhibit No.
    
    Description10.24
    
    
Amendment
No. 2 to the Credit Agreement, dated as of November 12, 2010, by
and among Broadview Networks Holdings, Inc., Broadview Networks,
Inc., Broadview Networks of Massachusetts, Inc., Broadview Networks
of Virginia, Inc., the Lenders named therein, Jefferies & Company, Inc., as syndication agent, and The CIT Group/Business Credit, Inc., as administrative agent, collateral agent and documentation agent.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.
  26




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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  27




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNo.
    
    Description10.24
    
    
Amendment
No. 2 to the Credit Agreement, dated as of November 12, 2010, by
and among Broadview Networks Holdings, Inc., Broadview Networks,
Inc., Broadview Networks of Massachusetts, Inc., Broadview Networks
of Virginia, Inc., the Lenders named therein, Jefferies & Company, Inc., as syndication agent, and The CIT Group/Business Credit, Inc., as administrative agent, collateral agent and documentation agent.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.
  28