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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 Form 10-K/A
 Amendment No. 1
 Mark One
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For The Fiscal Year Ended December 31, 2007
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the Transition Period from          to
 Commission File Number 333-147720
 Broadview Networks Holdings, Inc.
 (Exact name of registrant as specified in its charter)
 Delaware(State or other jurisdiction of 
incorporation or organization)
    
    11-3310798(I.R.S. Employer
Identification Number)800 Westchester Avenue, 
Suite N501 Rye Brook, NY 10573
    
    10573(Zip Code)(Address of principal executive offices)
 (914) 922-7000  (Registrants telephone number, including area code)  Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
NONE
 o þ
 . þ o
 þ 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
  NOT APPLICABLE because no public market exists for such shares, the aggregate market value of
the common stock held by non-affiliates of the Company is not determinable.
  Class
    
    Outstanding at March 11, 2008Class A common stock, $.01 par value
    
    9,342,880Class B common stock, $.01 par value
    
    360,050
 DOCUMENTS INCORPORATED BY REFERENCE
NONE.




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##### 



EXPLANATORY STATEMENT TO FORM 10-K AMENDMENT
  ITEM 1. BUSINESSITEM 1A. RISK FACTORSITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAITEM 9A. CONTROLS AND PROCEDURESITEM 11. EXECUTIVE COMPENSATIONITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULESEX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32.1: CERTIFICATIONEX-32.2: CERTIFICATION




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ITEM 1. BUSINESS
 Company Overview




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tm)
  Industry Overview
  Our Strengths




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Significant Growth Potential of our newer product offerings.
 Experience Integrating Companies and Providing New Services.
 Unique Integrated OSS Infrastructure.
 Award Winning Customer Service.
 Facilities-Based Network Infrastructure.




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Experienced and Proven Senior Management Team.
 Our Markets
  Region
    
    MarketNew York Metro
    
    New York City
Long Island
WestchesterPennsylvania
    
    Allentown
Pittsburgh
Harrisburg
PhiladelphiaUpstate New York
    
    Buffalo
Syracuse
AlbanyMassachusetts
    
    Boston Metro
Western MANew Jersey
    
    Northern NJ
Southern NJRhode Island
    
    Rhode IslandNew Hampshire
    
    New HampshireMaryland
    
    BaltimoreDelaware
    
    DelawareDistrict of Columbia and Northern Virginia
    
    District of Columbia and Northern
VirginiaConnecticut
    
    Connecticut
 Our Customers




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Products and Services
    Voice Services
    
    Data Services
    
    Value-Added Products and Services
    
    Local, regional,
domestic and
international
services
    
    
    
    Dedicated Internet T-1 access
    
    
    
    Traditional and converged telephone systems
    
    T-1 Primary rate
interface and Session
Initiation Protocol
services
    
    
    
    Broadband Internet access
    
    
    
    Hosted VoIP solutions
    
    Private line
    
    
    
    Dial-up, DSL data service and
Symmetric DSL Internet access
    
    
    
    Enhanced e-mail security
    
    Voicemail
    
    
    
    E-mail
    
    
    
    Managed firewall
    
    Caller
    
    
    
    Collocation
    
    
    
    Internet policy management
    
    Call waiting
identification
    
    
    
    IP Virtual Private Networks
(MPLS and Remote Access
Switching)
    
    
    
    Managed Wide Area Network
    
    Call forwarding
    
    
    
    Metro Ethernet Services
    
    
    
    Local Area Network/Wide Area Network integration
    
    Conference calling
    
    
    
    
    
    
    
    Web hosting
    
    VoIP
    
    
    
    
    
    
    
    Inside wiring
    
    Toll free services
    
    Data backup and recovery
    
    Unified Communications solutions
    
    Fixed-Mobile Convergence solutions
 Voice Services




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Data Services
  Integrated Services
  Value-Added Products and Services
  Managed Services.
 Hosted VoIP Solutions.




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Sales and Marketing
      Customer Service and Retention




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Network Deployment
  Voice and Data Switches
  Collocations and Edge Equipment
  On-Net (Lit) Buildings




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ATM Backbone Network and IP Network Equipment
  Fiber Network and Fiber Equipment
  Feature/Application Servers
  Customer Access Methods
 (TM)




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On-net T-1:
 On-net unbundled network element loops:
 Off-Net: (TM)
 Service Agreements with Carriers




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Integrated OSS
   Sales, Order Entry and Provisioning Systems
    Customer Relationship Management System




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Network Management Systems
  Billing System
  Cost Assurance System
  Collections Management System
  Competition




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Regional Bell Operating Companies
   Competitive Local Exchange Carriers and New Market Entrants
   Interexchange Carriers
  Data/Internet Services Providers




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Vendors, Installers and Communication Management Companies
  Intellectual Property
   Employees
  Available Information
   Directors, Executive Officers and Corporate Governance  Code of Business Conduct
and Ethics




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Regulation
 Overview
    Federal Regulation
   
    
    Reciprocal Compensation.Requires all incumbent local exchange carriers and competitive
local exchange carriers to complete calls originated by competing carriers under reciprocal
arrangements at prices based on




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a reasonable approximation of incremental cost or through mutual exchange of traffic without
explicit payment.
 
    
    Resale.Requires all incumbent local exchange carriers and competitive local exchange
carriers to permit resale of their communications services without unreasonable or
discriminatory restrictions or conditions. In addition, incumbent local exchange carriers
are required to offer for resale wholesale versions of all communications services that the
incumbent local exchange carrier provides at retail to subscribers that are not
telecommunications carriers at discounted rates, based on the costs avoided by the incumbent
local exchange carrier in the wholesale offering.
    
    Access to Rights-of-Way.Requires all incumbent local exchange carriers and competitive
local exchange carriers and any other public utility that owns or controls poles, conduits,
ducts, or rights-of-way used in whole or in part for wire communications, to permit
competing carriers (and cable television systems) access to those poles, ducts, conduits and
rights-of-way at regulated prices. Competitive local exchange carrier rates for access to
its poles, ducts, conduits and rights-of-way, however, are not regulated.
  Legislation.
 Unbundled Network Elements.




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Special Access.
 Interconnection Agreements.




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Collocation.
 Regulation of Internet Service Providers.
  Long Distance Competition.
  Detariffing.




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Intercarrier Compensation.
    Verizon/MCI Merger.




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CALEA.
  Customer Proprietary Network Information.
 Universal Service.




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Telephone Numbering.
 Slamming.
 Taxes and Regulatory Fees.
 State Regulation




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Local Regulation
  Regulation of VoIP




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Federal and State




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Other Domestic Regulation




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ITEM 1A. RISK FACTORS
 Our business faces many risks. Accordingly, prospective investors and shareholders should
carefully consider the risks and uncertainties described below and the other information in this
report, including the consolidated financial statements and notes to consolidated financial
statements. If any of the following risks or uncertainties actually occurs, our business, financial
condition or results of operations would likely suffer. Additional risks and uncertainties not
presently known to us or that are not currently believed to be important to you also may adversely
affect our company.
 We have a history of operating losses and we may not be profitable in the future.
  Our substantial indebtedness may restrict our operating flexibility, could adversely affect our
financial health and could prevent us from fulfilling our financial obligations.
  
    
    make it more difficult for us to satisfy our current and future debt obligations;
    
    make it more difficult for us to obtain additional financing for working capital, capital
expenditures, acquisitions or general corporate purposes;
    
    require us to dedicate a substantial portion of our cash flows from operating activities
to the payment of principal and interest on our indebtedness, thereby reducing the funds
available to us for our operations and other purposes, including investments in service
development, capital spending and acquisitions;
    
    place us at a competitive disadvantage to our competitors who are not as highly leveraged
as we are;
    
    make us vulnerable to interest rate fluctuations, if we incur any indebtedness that bears
interest at variable rates;
    
    impair our ability to adjust to changing industry and market conditions; and
    
    make us more vulnerable in the event of a downturn in general economic conditions or in
our business or changing market conditions and regulations.
  If the incumbent local exchange carriers with which we have interconnection agreements engage in
anticompetitive practices or we experience difficulties in working with the incumbent local
exchange carriers, our ability to offer services on a timely and cost-effective basis will be
materially and adversely affected.




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Our ability to provide our services and systems at competitive prices is dependent on our ability
to negotiate and enforce favorable interconnection and other agreements.




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Difficulties we may experience with incumbent local exchange carriers, interexchange carriers, and
wholesale customers over payment issues may harm our financial performance.




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Our current billing disputes with our vendors may cause us to pay our vendors certain amounts of
money, which could materially adversely affect our business, financial condition, results of
operations and cash flows and which may cause us to be unable to meet certain financial covenants
related to our senior indebtedness.
  The communications market in which we operate is highly competitive, and we may not be able to
compete effectively against companies that have significantly greater resources than we do, which
could cause us to lose customers and impede our ability to attract new customers.
  
    
    long-standing relationships and strong reputation with customers;
    
    financial, technical, marketing, personnel and other resources substantially greater than
ours;
    
    more funds to deploy communications services and systems that compete with ours;
    
    the potential to subsidize competitive services with revenue from a variety of
businesses;
    
    anticipated increased pricing flexibility and relaxed regulatory oversight;
    
    larger networks; and
    
    benefits from existing regulations that favor the incumbent local exchange carriers.




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Continued industry consolidation could further strengthen our competitors, and could adversely
affect our prospects.
   Providers of VoIP service have been the target of recent intellectual property infringement
litigation that may materially and adversely affect our ability and/or the ability of other
providers to continue to sell or provide VoIP service.
  The indenture governing the notes and the credit agreement governing our credit facility contain
restrictive and operating covenants that limit our operating flexibility, and we may obtain a
credit facility in the future that may include similar or additional restrictions.
  
    
    incur or guarantee additional indebtedness or issue preferred stock;
    
    pay dividends or distributions on, or redeem or repurchase, capital stock;
    
    create liens with respect to our assets;
    
    make investments, loans or advances;
    
    prepay subordinated indebtedness;
    
    enter into transactions with affiliates;




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
    
    merge, consolidate, reorganize or sell our assets; and
    
    engage in any business other than activities related or complementary to communications.
  To service our indebtedness, including the notes, we will require a significant amount of cash.
The ability to generate cash depends on many factors beyond our control.
   Elimination or relaxation of regulatory rights and protections could harm our business, results of
operations and financial condition.
   Regulation.




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We are subject to substantial government regulation that may restrict our ability to provide local
services and may increase the costs we incur to provide these services.
     Regulation.
 The communications industry faces significant regulatory uncertainties and the adverse resolution
of these uncertainties could harm our business, results of operations and financial condition.




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Regulation.
 The effects of increased regulation of IP-based service providers are unknown.
  Declining prices for communications services could reduce our revenues and profitability.
  Our vendors periodically issue substantial bills related to services provided during past periods.
  Certain real estate leases and agreements are important to our business and failure to maintain
such leases and agreements could adversely affect us.




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System disruptions or the failure of our information systems to perform as expected could result
in increased capital expenditures, customer and vendor dissatisfaction, loss of business or the
inability to add new customers or additional services.
    We depend on a limited number of third party service providers for long distance and other
services, and if any of these providers were to experience significant interruptions in its
business operations, or were to otherwise cease to provide such services to us, our ability to
provide services to our customers could be materially and adversely affected.
  The communications industry is undergoing rapid technological changes, and new technologies may be
superior to the technologies we use. We may fail to anticipate and keep up with such changes.




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Limits exist 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 could adversely affect our public image
and our financial results.
  If we are unable to retain and attract management and key personnel, we may not be able to
execute our business plan.
   Our success depends on the ability to manage and expand operations effectively.
  
    
    offer high-quality, reliable services at reasonable costs;
    
    introduce new technologies;
    
    install and operate telecommunications switches and related equipment;
    
    lease access to suitable transmission facilities at competitive prices;
    
    scale operations;
    
    obtain successful outcomes in disputes and in litigation, rule-making, legislation and
regulatory proceedings;
    
    successfully negotiate, adopt or arbitrate interconnection agreements with other
carriers;
    
    acquire necessary equipment, software and facilities;
    
    integrate existing and newly acquired technology and facilities, such as switches and
related equipment;
    
    evaluate markets;
    
    add products;




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
    
    monitor operations;
    
    control costs;
    
    maintain effective quality controls;
    
    hire, train and retain qualified personnel;
    
    enhance operating and accounting systems;
    
    address operating challenges;
    
    adapt to market and regulatory developments; and
    
    obtain and maintain required governmental authorizations.
   Failure to successfully and efficiently integrate InfoHighway into our operations may
adversely affect our ability to realize the expected benefits of the merger.
  
    
    retaining existing employees;
    
    transitioning the branding of the acquired company to Broadview;
    
    persuading employees of Broadview and the acquired companies that the business cultures
are compatible, maintaining morale, and retaining and integrating key employees;
    
    incorporating new facilities into our business operations;
    
    coordinating sales and marketing functions;
    
    combining products and services;
    
    integrating systems; and
    
    maintaining our standards, controls, procedures, and policies.




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We may engage in future acquisitions that are not successful or fail to integrate acquired
businesses into our operations, which may adversely affect our competitive position and growth
prospects.
   
    
    integrating that businesss personnel, services, products or technologies into our
operations;
    
    retaining key personnel of the acquired business;
    
    failing to adequately identify or assess liabilities of that business;
    
    failing to achieve the forecasts we used to determine the purchase price of that
business; and
    
    diverting our managements attention from the normal daily operation of our business.
   Misappropriation of our intellectual property and proprietary rights could impair our competitive
position, and defending against intellectual property infringement and misappropriation claims
could be time consuming and expensive and, if we are not successful, could cause substantial
expenses and disrupt our business.
   As an Internet access provider, we may incur liability for information disseminated through our
network.




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MCG, Baker, NEA and other significant investors control us, and their interests as equity holders
may conflict with interests of noteholders.
  Complying with Section 404 of Sarbanes-Oxley may strain our resources and divert management.




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ITEM 7. 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 Selected Consolidated Financial Data and the Consolidated
Financial Statements and Notes to Consolidated Financial Statements included elsewhere in this
report. Certain information contained in the discussion and analysis set forth below and elsewhere
in this 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 report that could cause results to differ materially from those expressed in
such forward-looking statements, including matters set forth in the section entitled Risk
Factors.
 Overview




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$




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Results of Operations
  Year Ended December 31,2005
    
    2006
    
    2007Consolidated Statement of Operations Data:Revenues:Retail end customer voice and data services
    
    
    88.2
    %
    
    
    88.5
    %
    
    
    89.7
    %Wholesale customer voice and data services
    
    
    5.1
    
    
    
    4.6
    
    
    
    2.8Access
    
    
    6.0
    
    
    
    5.5
    
    
    
    5.6Network services
    
    
    99.3
    
    
    
    98.6
    
    
    
    98.1Other
    
    
    0.7
    
    
    
    1.4
    
    
    
    1.9Total revenues
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Operating expenses:Network services
    
    
    47.6
    %
    
    
    47.2
    %
    
    
    51.2
    %Other cost of revenues
    
    
    0.3
    
    
    
    0.8
    
    
    
    0.7Selling, general and administrative
    
    
    39.2
    
    
    
    38.8
    
    
    
    36.9Software development
    
    
    1.0
    
    
    
    0.7
    
    
    
    0.5Depreciation and amortization
    
    
    19.0
    
    
    
    18.3
    
    
    
    16.8Impairment charges
    
    
    0.0
    
    
    
    0.0
    
    
    
    0.9Merger integration costs
    
    
    1.9
    
    
    
    0.5
    
    
    
    0.1Total operating expenses
    
    
    109.0
    
    
    
    106.3
    
    
    
    107.1Loss from operations
    
    
    (9.0
    )
    
    
    (6.3
    )
    
    
    (7.1
    )Other income (expense)
    
    
    0.0
    
    
    
    0.0
    
    
    
    0.1Interest expense
    
    
    (7.4
    )
    
    
    (9.3
    )
    
    
    (7.6
    )Interest income
    
    
    0.2
    
    
    
    0.5
    
    
    
    0.3Loss before income taxes
    
    
    (16.2
    )
    
    
    (15.1
    )
    
    
    (14.3
    )Provision for income taxes
    
    
    0.0
    
    
    
    0.1
    
    
    
    0.2Net loss
    
    
    (16.2
    )%
    
    
    (15.2
    )%
    
    
    (14.5
    )%
 Key Components of Results of Operations
 Revenues




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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.
    Gross Profit (exclusive of depreciation and amortization)




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Year Ended December 31,2005
    
    
    2006
    
    
    2007(In thousands)Net loss
    
    $
    (38,928
    )
    
    $
    (41,513
    )
    
    $
    (65,489
    )Add back non-gross profit items included in net loss:Selling, general and administrative
    
    
    94,138
    
    
    
    105,986
    
    
    
    166,322Software development
    
    
    2,301
    
    
    
    1,819
    
    
    
    2,293Depreciation and amortization
    
    
    45,756
    
    
    
    49,781
    
    
    
    75,980Impairment charges
    
    
    
    
    
    
    
    
    
    
    4,000Merger integration costs
    
    
    4,531
    
    
    
    1,430
    
    
    
    500Interest and other expenses
    
    
    17,384
    
    
    
    24,047
    
    
    
    32,661Provision for income taxes
    
    
    
    
    
    
    262
    
    
    
    726Gross profit
    
    $
    125,182
    
    
    $
    141,812
    
    
    $
    216,993
     
    
    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.




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Selling, General and Administrative
     Depreciation and Amortization
   Year Ended December 31,2005
    
    
    2006
    
    
    2007(In thousands)Statements of Operations Data:Revenues:Network services
    
    $
    238,798
    
    
    $
    268,892
    
    
    $
    442,530Other
    
    
    1,598
    
    
    
    3,761
    
    
    
    8,629Total revenues
    
    
    240,396
    
    
    
    272,653
    
    
    
    451,159Cost of revenues:Network services
    
    
    114,466
    
    
    
    128,794
    
    
    
    230,865Other
    
    
    748
    
    
    
    2,047
    
    
    
    3,301Total cost of revenues
    
    
    115,214
    
    
    
    130,841
    
    
    
    234,166Gross profit:Network services
    
    
    124,332
    
    
    
    140,098
    
    
    
    211,665Other
    
    
    850
    
    
    
    1,714
    
    
    
    5,328Total gross profit
    
    $
    125,182
    
    
    $
    141,812
    
    
    $
    216,993




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Year Ended December 31, 2007 Compared to Year Ended December 31, 2006
 Revenues
  Year Ended December 31,2006
    
    
    2007
    
    
    % Change(Unaudited)(In thousands)Revenues:Voice and data services
    
    $
    241,258
    
    
    $
    404,485
    
    
    
    67.7
    %Wholesale
    
    
    12,606
    
    
    
    12,693
    
    
    
    0.7Access
    
    
    15,028
    
    
    
    25,352
    
    
    
    68.7Total network services
    
    
    268,892
    
    
    
    442,530
    
    
    
    64.6Other
    
    
    3,761
    
    
    
    8,629
    
    
    
    129.4Total revenues
    
    $
    272,653
    
    
    $
    451,159
    
    
    
    65.5
    %
  Cost of Revenues (exclusive of depreciation and amortization)




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Gross Profit (exclusive of depreciation and amortization)
  Selling, General and Administrative
   Depreciation and Amortization
  Impairment Charges
  Interest




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Year Ended December 31,2006
    
    2007(In thousands)Interest expense excluding conversion fee and financing cost write-off
    
    $
    22,738
    
    
    $
    34,390Weighted average debt outstanding
    
    $
    181,938
    
    
    $
    276,565Effective interest rate
    
    
    12.49
    %
    
    
    12.43
    %
  Net Loss
  Year Ended December 31, 2006 Compared to Year Ended December 31, 2005
 Revenues
  Year Ended December 31,2005
    
    
    2006
    
    
    % Change(In thousands)Revenues:Voice and data services
    
    $
    211,919
    
    
    $
    241,258
    
    
    
    13.8
    %Wholesale
    
    
    12,367
    
    
    
    12,606
    
    
    
    1.9Access
    
    
    14,512
    
    
    
    15,028
    
    
    
    3.6Total network services
    
    
    238,798
    
    
    
    268,892
    
    
    
    12.6Other
    
    
    1,598
    
    
    
    3,761
    
    
    
    135.4Total revenues
    
    $
    240,396
    
    
    $
    272,653
    
    
    
    13.4
    %
  Cost of Revenues (exclusive of depreciation and amortization)




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Gross Profit (exclusive of depreciation and amortization)
  Selling, General and Administrative
  Depreciation and Amortization
  Interest
  Year Ended December 31,2005
    
    2006(In thousands)Interest expense excluding conversion fee and financing cost write-off
    
    $
    17,842
    
    
    $
    22,738Weighted average debt outstanding
    
    $
    144,250
    
    
    $
    181,938Effective interest rate
    
    
    12.37
    %
    
    
    12.49
    %
  Net Loss




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Off-Balance Sheet Arrangements
  Liquidity and Capital Resources
   Disputes




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Credit Facility




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2006 Note and 2007 Note Offerings
    Year Ended December 31, 2007 Compared to Year Ended December 31, 2006
  Cash Flows from Operating Activities
  Cash Flows from Investing Activities
  Cash Flows from Financing Activities
  Capital Expenditures




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##### Table of Contents



Year Ended December 31, 2006 Compared to Year Ended December 31, 2005
 Cash Flows from Operating Activities
  Cash Flows from Investing Activities
  Cash Flows from Financing Activities
  Capital Expenditures
  Contractual Obligations
  Less Than
    
    
    1-3
    
    
    3-5
    
    
    More ThanTotal
    
    
    1 Year
    
    
    Years
    
    
    Years
    
    
    5 Years(In thousands)11 3/8% senior secured notes due 2012
    
    $
    300,000
    
    
    $
    
    
    
    $
    
    
    
    $
    300,000
    
    
    $
    Cash interest for senior secured notes
    
    
    170,625
    
    
    
    34,125
    
    
    
    68,250
    
    
    
    68,250
    
    
    
    Capital lease obligations
    
    
    11,324
    
    
    
    4,377
    
    
    
    6,658
    
    
    
    289
    
    
    
    Operating leases
    
    
    41,242
    
    
    
    10,575
    
    
    
    17,963
    
    
    
    7,589
    
    
    
    5,115Subtotal
    
    
    523,191
    
    
    
    49,077
    
    
    
    92,871
    
    
    
    376,128
    
    
    
    5,115Purchase commitment obligations:Communications commitments
    
    
    152,938
    
    
    
    49,944
    
    
    
    80,732
    
    
    
    22,262
    
    
    
    Total contractual obligations
    
    $
    676,129
    
    
    $
    99,021
    
    
    $
    173,603
    
    
    $
    398,390
    
    
    $
    5,115
 Application of Critical Accounting Policies and Estimates




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##### Table of Contents



Revenue Recognition
  Accounts Receivable and Allowance for Doubtful Accounts
  Impairment of Long-Lived Assets
 Accounting for the Impairment or Disposal of
Long-Lived Assets
 Goodwill and Other Intangible Assets
 Goodwill and Other Intangible Assets
 Disputes




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##### Table of Contents



Uncertainty in Income Taxes
 Accounting for Uncertainty in Income Taxes
  Other Matters




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##### Table of Contents



ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 Index to Consolidated Financial Statements
 Report of Independent Registered Public Accounting FirmConsolidated Balance Sheets at December 31, 2006 and 2007Consolidated Statements of Operations for the years ended December 31, 2005, 2006 and 2007Consolidated Statements of Stockholders Equity (Deficiency) for the years ended December 31, 2005, 2006 and 2007Consolidated Statements of Cash Flows for the years ended December 31, 2005, 2006 and 2007Notes to Consolidated Financial StatementsFinancial Statement Schedule




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
     Ernst & Young LLP




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##### Table of Contents



BROADVIEW NETWORKS HOLDINGS, INC. AND SUBSIDIARIES
 
 Consolidated Balance Sheets
 SuccessorDecember 31,2006
    
    
    2007(In thousands, except share amounts)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    43,952
    
    
    $
    41,998Restricted cash
    
    
    460
    
    
    
    Accounts receivable, less allowance for doubtful accounts of $7,971 and $10,082
    
    
    41,313
    
    
    
    56,426Other current assets
    
    
    8,308
    
    
    
    8,463Total current assets
    
    
    94,033
    
    
    
    106,887Property and equipment, net
    
    
    61,395
    
    
    
    77,373Goodwill
    
    
    69,632
    
    
    
    96,154Intangible assets, net of accumulated amortization of $65,128 and $109,335
    
    
    79,848
    
    
    
    82,841Other assets
    
    
    13,417
    
    
    
    18,543Total assets
    
    $
    318,325
    
    
    $
    381,798LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIENCY)Current liabilities:Accounts payable
    
    $
    12,684
    
    
    $
    21,247Accrued expenses and other current liabilities
    
    
    47,506
    
    
    
    43,952Taxes payable
    
    
    8,604
    
    
    
    10,818Deferred revenues
    
    
    8,019
    
    
    
    10,148Current portion of capital lease obligations and equipment notes
    
    
    3,084
    
    
    
    3,136Total current liabilities
    
    
    79,897
    
    
    
    89,301Long-term debt
    
    
    210,000
    
    
    
    304,740Deferred rent payable
    
    
    2,747
    
    
    
    2,628Capital lease obligations and equipment notes, net of current portion
    
    
    4,685
    
    
    
    6,114Deferred income taxes payable
    
    
    
    
    
    
    1,141Other
    
    
    526
    
    
    
    589Total liabilities
    
    
    297,855
    
    
    
    404,513Stockholders equity (deficiency):Common stock A  $.01 par value; authorized 80,000,000, issued and outstanding
8,871,427 shares and 9,342,880 shares, respectively
    
    
    102
    
    
    
    107Common stock B  $.01 par value; authorized 10,000,000, issued and outstanding
0 shares and 360,050 shares, respectively
    
    
    
    
    
    
    4Series A Preferred stock  $.01 par value; authorized 89,526 shares,
designated, issued and outstanding 89,521 shares and 87,254 shares,
respectively, entitled in liquidation to $112,925 and $123,880
    
    
    1
    
    
    
    1Series A-1 Preferred stock  $.01 par value; authorized 105,000 shares,
designated, issued and outstanding 100,702 shares, entitled in liquidation to
$127,030 and $142,973
    
    
    1
    
    
    
    1Series B Preferred stock  $.01 par value; authorized 93,180 shares,
designated, issued and outstanding 92,832 shares and 91,202 shares,
respectively, entitled in liquidation to $117,102 and $129,485
    
    
    1
    
    
    
    1Series B-1 Preferred stock  $.01 par value; authorized 86,000 shares,
designated, issued and outstanding 42,231 shares and 64,986 shares,
respectively, entitled in liquidation to $53,272 and $92,265
    
    
    
    
    
    
    1Series C Preferred stock  $.01 par value; authorized 52,332 shares,
designated, issued and outstanding 0 shares and 14,402 shares, respectively,
entitled in liquidation to $0 and $13,011
    
    
    
    
    
    
    Additional paid-in capital
    
    
    117,689
    
    
    
    140,270Accumulated deficit
    
    
    (97,324
    )
    
    
    (163,100
    )Total stockholders equity (deficiency)
    
    
    20,470
    
    
    
    (22,715
    )Total liabilities and stockholders equity (deficiency)
    
    $
    318,325
    
    
    $
    381,798




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##### Table of Contents



BROADVIEW NETWORKS HOLDINGS, INC. AND SUBSIDIARIES
 
 Consolidated Statements of Operations
 Year Ended December 31,2005
    
    
    2006
    
    
    2007(In thousands)Revenues
    
    $
    240,396
    
    
    $
    272,653
    
    
    $
    451,159Operating expenses:Cost of revenues (exclusive of depreciation and amortization)
    
    
    115,214
    
    
    
    130,841
    
    
    
    234,166Selling, general and administrative (includes share-based
compensation of $673, $754 and $2,552)
    
    
    94,138
    
    
    
    105,986
    
    
    
    166,322Software development
    
    
    2,301
    
    
    
    1,819
    
    
    
    2,293Depreciation and amortization
    
    
    45,756
    
    
    
    49,781
    
    
    
    75,980Impairment charges
    
    
    
    
    
    
    
    
    
    
    4,000Merger integration costs
    
    
    4,531
    
    
    
    1,430
    
    
    
    500Total operating expenses
    
    
    261,940
    
    
    
    289,857
    
    
    
    483,261Loss from operations
    
    
    (21,544
    )
    
    
    (17,204
    )
    
    
    (32,102
    )Other income
    
    
    
    
    
    
    21
    
    
    
    240Interest expense
    
    
    (17,842
    )
    
    
    (25,463
    )
    
    
    (34,390
    )Interest income
    
    
    458
    
    
    
    1,395
    
    
    
    1,489Loss before provision for income taxes
    
    
    (38,928
    )
    
    
    (41,251
    )
    
    
    (64,763
    )Provision for income taxes
    
    
    
    
    
    
    (262
    )
    
    
    (726
    )Net loss
    
    
    (38,928
    )
    
    
    (41,513
    )
    
    
    (65,489
    )Dividends on preferred stock
    
    
    (22,002
    )
    
    
    (32,996
    )
    
    
    (55,031
    )Modification of preferred stock
    
    
    
    
    
    
    
    
    
    
    (95,622
    )Loss available to common shareholders
    
    $
    (60,930
    )
    
    $
    (74,509
    )
    
    $
    (216,142
    )Loss available per common share  basic and diluted
    
    $
    (9.54
    )
    
    $
    (10.07
    )
    
    $
    (23.09
    )Weighted average common shares outstanding  basic and diluted
    
    
    6,385,863
    
    
    
    7,396,610
    
    
    
    9,359,132




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##### Table of Contents



BROADVIEW NETWORKS HOLDINGS, INC. AND SUBSIDIARIES
 
 Consolidated Statements of Stockholders Equity (Deficiency)
 Year Ended December 31,2005
    
    
    2006
    
    
    2007Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount(In thousands, except share amounts)Series A common stockBalance at beginning of year
    
    
    2,181,437
    
    
    $
    
    
    
    
    6,605,872
    
    
    $
    66
    
    
    
    8,871,427
    
    
    $
    102Common stock issued
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Issuance of shares pursuant to the plan of merger
    
    
    4,359,707
    
    
    
    66
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Issuance of shares pursuant to management incentive plan
    
    
    66,250
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Repurchase/(cancellation) of shares
    
    
    (1,522
    )
    
    
    
    
    
    
    (1,307,770
    )
    
    
    
    
    
    
    (97,435
    )
    
    
    (1
    )Shares issued in InfoHighway acquisition
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    568,888
    
    
    
    6Issuance of shares pursuant to conversion of senior unsecured
subordinated notes
    
    
    
    
    
    
    
    
    
    
    3,573,325
    
    
    
    36
    
    
    
    
    
    
    
    Balance at end of year
    
    
    6,605,872
    
    
    
    66
    
    
    
    8,871,427
    
    
    
    102
    
    
    
    9,342,880
    
    
    
    107Series B common stockBalance at beginning of year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Issuance of shares pursuant to management incentive plan
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    360,050
    
    
    
    4Balance at end of year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    360,050
    
    
    
    4Series A Preferred stockBalance at beginning of year
    
    
    87,254
    
    
    
    
    
    
    
    89,521
    
    
    
    1
    
    
    
    89,521
    
    
    
    1Issuance of shares pursuant to the plan of merger
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Issuance of new shares in cancellation of note payable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Issuance/(cancellation) of shares pursuant to management incentive plan
    
    
    2,267
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,267
    )
    
    
    Balance at end of year
    
    
    89,521
    
    
    
    1
    
    
    
    89,521
    
    
    
    1
    
    
    
    87,254
    
    
    
    1Series A-1 Preferred StockBalance at beginning of year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    100,702
    
    
    
    1Issuance of shares pursuant to conversion of senior unsecured
subordinated notes
    
    
    
    
    
    
    
    
    
    
    100,702
    
    
    
    1
    
    
    
    
    
    
    
    Balance at end of year
    
    
    
    
    
    
    
    
    
    
    100,702
    
    
    
    1
    
    
    
    100,702
    
    
    
    1Series B Preferred StockBalance at beginning of year
    
    
    
    
    
    
    
    
    
    
    92,832
    
    
    
    1
    
    
    
    92,832
    
    
    
    1Issuance of shares pursuant to the merger
    
    
    92,510
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Issuance of shares pursuant to management incentive plan
    
    
    383
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Repurchase/(cancellation) of shares
    
    
    (61
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,630
    )
    
    
    Balance at end of year
    
    
    92,832
    
    
    
    1
    
    
    
    92,832
    
    
    
    1
    
    
    
    91,202
    
    
    
    1Series B-1 Preferred StockBalance at beginning of year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    42,231
    
    
    
    Shares issued in InfoHighway acquisition
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22,755
    
    
    
    1Issuance of shares pursuant to conversion of senior unsecured
subordinated notes
    
    
    
    
    
    
    
    
    
    
    42,231
    
    
    
    
    
    
    
    
    
    
    
    Balance at end of year
    
    
    
    
    
    
    
    
    
    
    42,231
    
    
    
    
    
    
    
    64,986
    
    
    
    1Series C Preferred StockBalance at beginning of year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Issuance of shares pursuant to management incentive plan
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,402
    
    
    
    Balance at end of year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,402
    
    
    
    Additional paid-in capitalBalance at beginning of year
    
    
    
    
    
    
    37,391
    
    
    
    
    
    
    
    44,254
    
    
    
    
    
    
    
    117,689Issuance of shares pursuant to the plan of merger
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Issuance of new shares in cancellation of note payable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net effect of merger recapitalization
    
    
    
    
    
    
    5,908
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,388Repurchase of shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,538
    )Shares issued in InfoHighway acquisition
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,446Warrants issued in InfoHighway acquisition
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,285Deferred compensation
    
    
    
    
    
    
    955
    
    
    
    
    
    
    
    754
    
    
    
    
    
    
    
    Adoption of SFAS No. 123R
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,083
    )
    
    
    
    
    
    
    Issuance of shares pursuant to conversion of senior unsecured
subordinated notes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    73,764
    
    
    
    
    
    
    
    Balance at end of year
    
    
    
    
    
    
    44,254
    
    
    
    
    
    
    
    117,689
    
    
    
    
    
    
    
    140,270Accumulated deficitBalance at beginning of year
    
    
    
    
    
    
    (16,883
    )
    
    
    
    
    
    
    (55,811
    )
    
    
    
    
    
    
    (97,324
    )Adoption of FIN 48
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (287
    )Net Loss
    
    
    
    
    
    
    (38,928
    )
    
    
    
    
    
    
    (41,513
    )
    
    
    
    
    
    
    (65,489
    )Balance at end of year
    
    
    
    
    
    
    (55,811
    )
    
    
    
    
    
    
    (97,324
    )
    
    
    
    
    
    
    (163,100
    )Deferred compensationBalance at beginning of year
    
    
    
    
    
    
    (801
    )
    
    
    
    
    
    
    (1,083
    )
    
    
    
    
    
    
    Deferred compensation
    
    
    
    
    
    
    (282
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Adoption of SFAS No. 123R
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,083
    
    
    
    
    
    
    
    Balance at end of year
    
    
    
    
    
    
    (1,083
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total stockholders equity (deficiency)
    
    
    
    
    
    $
    (12,572
    )
    
    
    
    
    
    $
    20,470
    
    
    
    
    
    
    $
    (22,715
    )




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##### Table of Contents



BROADVIEW NETWORKS HOLDINGS, INC. AND SUBSIDIARIES
 
 Consolidated Statements of Cash Flows
 Year Ended December 31,2005
    
    
    2006
    
    
    2007(In thousands)Cash flows from operating activitiesNet loss
    
    $
    (38,928
    )
    
    $
    (41,513
    )
    
    $
    (65,489
    )Adjustments to reconcile net loss to net cash provided by (used in) operating activities:Depreciation
    
    
    17,679
    
    
    
    19,302
    
    
    
    31,907Amortization and write-off of deferred financing costs
    
    
    1,030
    
    
    
    2,383
    
    
    
    2,437Amortization of intangible assets
    
    
    28,077
    
    
    
    30,479
    
    
    
    44,206Amortization of bond premium
    
    
    
    
    
    
    
    
    
    
    (435
    )Provision for doubtful accounts
    
    
    3,823
    
    
    
    4,115
    
    
    
    6,546Noncash subordinated debt interest
    
    
    5,991
    
    
    
    4,920
    
    
    
    Stock based compensation
    
    
    673
    
    
    
    754
    
    
    
    2,552Increase in fair value of derivatives
    
    
    (762
    )
    
    
    
    
    
    
    Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    1,141Impairment charges
    
    
    
    
    
    
    
    
    
    
    4,000Other
    
    
    (65
    )
    
    
    (18
    )
    
    
    251Changes in operating assets and liabilities:Restricted cash
    
    
    
    
    
    
    (460
    )
    
    
    460Accounts receivable
    
    
    (3,243
    )
    
    
    (1,492
    )
    
    
    (12,357
    )Prepaid expenses and other current assets
    
    
    1,180
    
    
    
    (1,328
    )
    
    
    725Other assets
    
    
    (1,307
    )
    
    
    (208
    )
    
    
    (2,186
    )Accounts payable
    
    
    (6,007
    )
    
    
    (15,598
    )
    
    
    1,400Accrued and other current liabilities
    
    
    (378
    )
    
    
    11,349
    
    
    
    (19,680
    )Deferred revenue
    
    
    (359
    )
    
    
    260
    
    
    
    1,970Deferred rent
    
    
    747
    
    
    
    336
    
    
    
    (119
    )Other liabilities
    
    
    
    
    
    
    15
    
    
    
    Net cash provided by (used in) operating activities
    
    
    8,151
    
    
    
    13,296
    
    
    
    (2,671
    )Cash flows from investing activitiesProceeds from disposal of property and equipment
    
    
    223
    
    
    
    
    
    
    
    Cash acquired in merger
    
    
    7,991
    
    
    
    
    
    
    
    Acquisition, net of cash and restricted cash acquired
    
    
    
    
    
    
    (88,787
    )
    
    
    (56,638
    )Merger acquisition costs
    
    
    (10,030
    )
    
    
    (3,635
    )
    
    
    (1,768
    )Purchase of property and equipment
    
    
    (18,915
    )
    
    
    (23,146
    )
    
    
    (30,418
    )Net cash used in investing activities
    
    
    (20,731
    )
    
    
    (115,568
    )
    
    
    (88,824
    )Cash flows from financing activitiesProceeds from capital lease financing and equipment notes
    
    
    372
    
    
    
    7,794
    
    
    
    5,217Payments on capital lease obligations and equipment notes
    
    
    (2,080
    )
    
    
    (3,367
    )
    
    
    (3,760
    )Repayments of long-term debt
    
    
    (3,000
    )
    
    
    (84,000
    )
    
    
    Repayments of revolving credit facility
    
    
    
    
    
    
    
    
    
    
    (12,005
    )Proceeds from issuance of subordinated debt
    
    
    30,000
    
    
    
    10,000
    
    
    
    Repayment of subordinated debt
    
    
    
    
    
    
    (972
    )
    
    
    Proceeds from issuance of long-term debt
    
    
    
    
    
    
    210,000
    
    
    
    95,175Drawdowns on revolving credit facility
    
    
    
    
    
    
    
    
    
    
    11,500Payment of subordinated debt conversion fees
    
    
    
    
    
    
    (1,531
    )
    
    
    Payment of deferred financing fees
    
    
    
    
    
    
    (8,453
    )
    
    
    (4,883
    )Payments for shares repurchased under MIP
    
    
    
    
    
    
    
    
    
    
    (1,703
    )Other
    
    
    115
    
    
    
    
    
    
    
    Net cash provided by financing activities
    
    
    25,407
    
    
    
    129,471
    
    
    
    89,541Net increase (decrease) in cash and cash equivalents
    
    
    12,827
    
    
    
    27,199
    
    
    
    (1,954
    )Cash and cash equivalents at beginning of period
    
    
    3,926
    
    
    
    16,753
    
    
    
    43,952Cash and cash equivalents at end of period
    
    $
    16,753
    
    
    $
    43,952
    
    
    $
    41,998Supplemental disclosure of cash flow informationCash paid during the year for interest
    
    $
    10,584
    
    
    $
    7,123
    
    
    $
    32,008Supplemental schedule of non-cash informationEquity securities issued in connection with acquisition
    
    $
    
    
    
    $
    
    
    
    $
    21,742




---



##### Table of Contents



BROADVIEW NETWORKS HOLDINGS, INC. AND SUBSIDIARIES
 
 Notes to Consolidated Financial Statements
 December 31, 2007
 (in thousands, except share information)
 1. Organization and Description of Business
  Change of Ownership
  Business Combinations
   2. Significant Accounting Policies
 Basis of Presentation
  Revenue Recognition




---



##### Table of Contents



Costs of Revenue
  Cash and Cash Equivalents
  Restricted Cash
  Accounts Receivable and Allowance for Doubtful Accounts
  Property and Equipment
  Impairment of Long-Lived Assets




---



##### Table of Contents



Goodwill
 Goodwill and
Other Intangible Assets
 Third Party Conversion Costs
  Debt Issuance Costs
  Significant Vendor
  Income Taxes
  Uncertainty in Income Taxes
 Accounting for Uncertainty in Income Taxes




---



##### Table of Contents



Stock-Based Compensation
 Share-Based
Payment Accounting for Stock-Based Compensation  Transition and Disclosure) Accounting for Stock Issued to Employees,
  Software Development Costs
 Accounting for the Cost of Computer Software Developed or Obtained for Internal Use
   Advertising
  Disputes




---



##### Table of Contents



Use of Estimates
  Comprehensive Income
  Accounting for Derivatives and Hedging Activities
  3. Recent Accounting Pronouncements
 Business Combinations (Revised)
 The Fair Value Option for Financial Assets and
Financial Liabilities  Including an Amendment of SFAS 115
 Fair Value Measurements




---



##### Table of Contents



4. Acquisitions and Merger Agreements
 2007 Acquisition
   Cash paid, net of cash acquired of $7,841
    
    $
    56,638Equity securities issued, including warrants
    
    
    21,742Acquisition costs
    
    
    1,504$
    79,884




---



##### Table of Contents



Accounting for Derivative Financial
Instruments Indexed to, and Potentially Settled in, a Companys Own Stock
 Recognition of Liabilities in Connection with a Purchase Business
Combination
  Assets acquired, excluding cash:Accounts receivable
    
    $
    9,302Other current assets
    
    
    880Property and equipment
    
    
    17,435Goodwill
    
    
    26,258Customer-based intangibles
    
    
    46,800Other intangibles
    
    
    4,400Other non-current assets
    
    
    495Total assets acquired
    
    
    105,570Liabilities assumed:Current liabilities
    
    
    25,686Net assets acquired
    
    $
    79,884
 2006 Acquisition
    Assets acquired:Cash and cash equivalents
    
    $
    10,646Restricted cash
    
    
    1,508Accounts receivable
    
    
    19,441Other current assets
    
    
    3,817Property and equipment
    
    
    17,607Goodwill
    
    
    38,033Customer-based intangibles
    
    
    21,412Other intangibles
    
    
    7,909Other non-current assets
    
    
    1,811Total assets acquired
    
    
    122,184




---



##### Table of Contents



Liabilities assumed:Current liabilities
    
    
    20,732Other liabilities
    
    
    511Total liabilities assumed
    
    
    21,243Net assets acquired
    
    $
    100,941
   2006
    
    2007Revenues
    
    $
    507,906
    
    
    $
    498,965Net loss
    
    $
    (60,720
    )
    
    $
    (75,703
    )Loss available per common share  basic and diluted
    
    $
    (9.70
    )
    
    $
    (23.59
    )
  2005 Merger
   Assets acquired:Cash and cash equivalents
    
    $
    7,991Accounts receivable
    
    
    14,915Other current assets
    
    
    3,335Property and equipment
    
    
    29,225Customer-based intangibles
    
    
    84,000Goodwill
    
    
    19,842Other
    
    
    985Total assets acquired
    
    
    160,293Liabilities assumed:Current liabilities
    
    
    56,893Long-term debt
    
    
    87,870Other long term liabilities
    
    
    3,745Total liabilities assumed
    
    
    148,508Net assets acquired
    
    $
    11,785




---



##### Table of Contents



5. Other Assets
  2006
    
    
    2007Deferred carrier charges
    
    $
    3,021
    
    
    $
    2,563Prepaid expenses
    
    
    2,729
    
    
    
    3,903Other
    
    
    2,558
    
    
    
    1,997Total other current assets
    
    $
    8,308
    
    
    $
    8,463
  2006
    
    
    2007Deferred financing costs
    
    $
    9,648
    
    
    $
    12,094Lease security and carrier deposits
    
    
    2,017
    
    
    
    2,778Other
    
    
    1,752
    
    
    
    3,671Total other non-current assets
    
    $
    13,417
    
    
    $
    18,543
   6. Property and Equipment
  2006
    
    
    2007Network equipment
    
    $
    65,018
    
    
    $
    107,286Computer and office equipment
    
    
    16,794
    
    
    
    19,196Capitalized software costs
    
    
    8,639
    
    
    
    10,607Furniture and fixtures and other
    
    
    8,084
    
    
    
    8,574Leasehold improvements
    
    
    4,661
    
    
    
    5,386103,196
    
    
    
    151,049Less accumulated depreciation and amortization
    
    
    (41,801
    )
    
    
    (73,676
    )$
    61,395
    
    
    $
    77,373
  7. Identifiable Intangible Assets and Goodwill
  Customer Relationships:




---



##### Table of Contents



Trademark:
    2006
    
    
    2007Gross
    
    
    
    
    
    
    
    
    
    
    GrossCarrying
    
    
    Accumulated
    
    
    Net Carrying
    
    
    Carrying
    
    
    Accumulated
    
    
    Net CarryingValue
    
    
    Amortization
    
    
    Value
    
    
    Value
    
    
    Amortization
    
    
    ValueCustomer base
    
    $
    137,067
    
    
    $
    (64,901
    )
    
    $
    72,166
    
    
    $
    183,867
    
    
    $
    (107,168
    )
    
    $
    76,699Trademarks
    
    
    7,000
    
    
    
    
    
    
    
    7,000
    
    
    
    7,400
    
    
    
    (1,258
    )
    
    
    6,142Other
    
    
    909
    
    
    
    (227
    )
    
    
    682
    
    
    
    909
    
    
    
    (909
    )
    
    
    $
    144,976
    
    
    $
    (65,128
    )
    
    $
    79,848
    
    
    $
    192,176
    
    
    $
    (109,335
    )
    
    $
    82,841
   Year ending December 31:2008
    
    $
    40,9582009
    
    
    16,4312010
    
    
    11,5202011
    
    
    4,6052012
    
    
    3,066Thereafter
    
    
    6,261$
    82,841
  Balance at December 31, 2005
    
    $
    27,964Effects of 2006 acquisition
    
    
    41,668Balance at December 31, 2006
    
    
    69,632Effects of 2007 acquisition
    
    
    26,258Other
    
    
    264Balance at December 31, 2007
    
    $
    96,154




---



##### Table of Contents



8. Accrued Expenses and Other Current Liabilities
  2006
    
    
    2007Recurring network costs and other operating accruals
    
    $
    14,211
    
    
    $
    23,488Carrier settlements(a)
    
    
    15,186
    
    
    
    Accrued interest(b)
    
    
    8,615
    
    
    
    11,375Merger transaction costs(c)
    
    
    2,999
    
    
    
    2,090Payroll related liabilities
    
    
    6,320
    
    
    
    6,840Other
    
    
    175
    
    
    
    159Total accrued expenses and other current liabilities
    
    $
    47,506
    
    
    $
    43,952
 
 (a)
    
    In February 2007, we finalized a settlement with our major
telecommunications supplier and paid $15,200 to extinguish
approximately $39,000 of outstanding disputes. Additional disputes
with this and other suppliers are included in accounts payable and
accrued expenses and other current liabilities.(b)
    
    Represents accrued interest on the Senior Secured Notes. Interest is
paid semi-annually on March 1 and September 1 of each year.(c)
    
    The accrual for merger transaction costs consists of the following: ATX
    
    
    InfoHighway
    
    
    LeaseSeverance
    
    
    Severance
    
    
    Termination
    
    
    Other
    
    
    TotalBalance at December 31, 2006
    
    $
    1,810
    
    
    $
    
    
    
    $
    781
    
    
    $
    408
    
    
    $
    2,999Additions
    
    
    
    
    
    
    2,000
    
    
    
    
    
    
    
    
    
    
    
    2,000Payments
    
    
    (1,523
    )
    
    
    (914
    )
    
    
    (149
    )
    
    
    (323
    )
    
    
    (2,909
    )Balance at December 31, 2007
    
    $
    287
    
    
    $
    1,086
    
    
    $
    632
    
    
    $
    85
    
    
    $
    2,090
 9. Obligations Under Capital and Operating Leases
 Capital Leases
   Year ending December 31:2008
    
    $
    4,6712009
    
    
    4,3722010
    
    
    2,7762011
    
    
    44412,263Less amounts representing interest
    
    
    3,0139,250Less current portion
    
    
    (3,136
    )Capital lease obligations, net of current portion
    
    $
    6,114




---



##### Table of Contents



Operating Leases
  Year ending December 31:2008
    
    $
    11,8072009
    
    
    10,6942010
    
    
    9,6782011
    
    
    5,6812012
    
    
    3,844Thereafter
    
    
    5,246Total minimum lease payments
    
    $
    46,950
  Year ending December 31:2008
    
    $
    7322009
    
    
    7412010
    
    
    6552011
    
    
    40Total sublease rentals
    
    $
    2,168
  10. Debt
 Senior Secured $210,000 Notes
  ,




---



##### Table of Contents



Senior Secured $90,000 Notes
    Revolving $25,000 Senior Credit Facility




---



##### Table of Contents



Senior Credit Facility
    Senior Subordinated Debt
    11. Shareholders Equity (Deficiency)
 Equity




---



##### Table of Contents



Liquidations




---



##### Table of Contents



12. Stock Based Compensation
 Restricted Stock Awards
  Accounting
for Certain Transactions Involving Stock Compensation




---



##### Table of Contents



Weighted-AverageSeries A and B
    
    
    Series C
    
    
    Series A and B
    
    
    Grant Date FairPreferred
    
    
    Preferred
    
    
    Common
    
    
    ValueOutstanding December 31, 2004
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Grants
    
    
    2,650
    
    
    
    
    
    
    
    66,250
    
    
    $
    502.43Forfeit/Cancel/Repurchase
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Outstanding December 31, 2005
    
    
    2,650
    
    
    
    
    
    
    
    66,250
    
    
    $
    502.43Grants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forfeit/Cancel/Repurchase
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Outstanding December 31, 2006
    
    
    2,650
    
    
    
    
    
    
    
    66,250
    
    
    $
    502.43Grants
    
    
    
    
    
    
    14,402
    
    
    
    360,050
    
    
    $
    137.50Forfeit/Cancel/Repurchase
    
    
    (2,650
    )
    
    
    
    
    
    
    (66,250
    )
    
    $
    502.43Outstanding December 31, 2007
    
    
    
    
    
    
    14,402
    
    
    
    360,050
    
    
    $
    137.50




---



##### Table of Contents



Stock Options
   Series C
    
    AverageCommon Stock
    
    Preferred
    
    Exercise PriceOutstanding December 31, 2004
    
    
    29,352
    
    
    
    
    
    
    $
    0.01Grants
    
    
    
    
    
    
    
    
    
    
    Forfeit/Cancel/Repurchase
    
    
    (29,352
    )
    
    
    
    
    
    
    0.01Outstanding December 31, 2005
    
    
    
    
    
    
    
    
    
    
    Grants
    
    
    
    
    
    
    
    
    
    
    Forfeit/Cancel/Repurchase
    
    
    
    
    
    
    
    
    
    
    Outstanding December 31, 2006
    
    
    
    
    
    
    
    
    
    
    Grants
    
    
    
    
    
    
    21,599
    
    
    
    137.50Forfeit/Cancel/Repurchase
    
    
    
    
    
    
    (699
    )
    
    
    137.50Outstanding December 31, 2007
    
    
    
    
    
    
    20,900
    
    
    $
    137.50
  13. Income Taxes
  2005
    
    
    2006
    
    
    2007Current:Federal
    
    $
    
    
    
    $
    
    
    
    $
    (293
    )State
    
    
    
    
    
    
    262
    
    
    
    164Deferred
    
    
    
    
    
    
    
    
    
    
    855$
    
    
    
    $
    262
    
    
    $
    726
  2005
    
    2006
    
    2007Statutory federal income tax rate
    
    
    34.0
    %
    
    
    34.0
    %
    
    
    35.0
    %State and local income tax, net of federal tax benefits
    
    
    0.0
    
    
    
    0.4
    
    
    
    0.2Permanent items
    
    
    0.0
    
    
    
    0.0
    
    
    
    0.3Valuation allowance
    
    
    (34.0
    )
    
    
    (34.4
    )
    
    
    (35.5
    )Effective income tax rate
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %




---



##### Table of Contents



December 312006
    
    
    2007Accounts receivable
    
    $
    1,859
    
    
    $
    3,857Deferred revenue
    
    
    3,198
    
    
    
    3,882Other
    
    
    1,095
    
    
    
    2,153Total deferred tax assets-Current
    
    
    6,152
    
    
    
    9,891Net Operating loss carry forwards
    
    
    28,040
    
    
    
    49,342Customer lists
    
    
    1,305
    
    
    
    3,626Trademark
    
    
    
    
    
    
    1,403Other
    
    
    983
    
    
    
    2,218Total deferred tax assets-Noncurrent
    
    
    30,328
    
    
    
    56,588Total deferred tax assets
    
    
    36,480
    
    
    
    66,479Customer Lists
    
    
    20,778
    
    
    
    23,713Trademark
    
    
    46
    
    
    
    1,297Goodwill
    
    
    1,117
    
    
    
    1,141Accelerated Depreciation
    
    
    13,565
    
    
    
    13,389Total deferred tax liabilities-Noncurrent
    
    
    35,506
    
    
    
    39,540Total deferred tax assets-Current
    
    
    6,152
    
    
    
    9,891Valuation allowance
    
    
    (6,152
    )
    
    
    (9,891
    )Net current deferred tax assets
    
    
    
    
    
    
    Total deferred tax assets-Noncurrent
    
    
    30,328
    
    
    
    56,588Total deferred tax liabilities-Noncurrent
    
    
    35,506
    
    
    
    39,540Valuation allowance
    
    
    5,178
    
    
    
    (18,189
    )Net noncurrent deferred tax liabilities
    
    
    
    
    
    
    (1,141
    )
   Accounting for Uncertainty in Income
Taxes
 14. Employee Savings and Retirement Plan




---



##### Table of Contents



15. Fair Values of Financial Instruments
    16. Commitments and Contingencies
      Year ending December 31:2008
    
    $
    49,9442009
    
    
    50,9082010
    
    
    29,8242011
    
    
    22,262Total future obligations
    
    $
    152,938




---



##### Table of Contents



17. Earnings per share
  2005
    
    
    2006
    
    
    2007Loss available to common shareholders (Numerator):Net loss
    
    $
    (38,928
    )
    
    $
    (41,513
    )
    
    $
    (65,489
    )Dividends on preferred stock
    
    
    (22,002
    )
    
    
    (32,996
    )
    
    
    (55,031
    )Modification of preferred stock
    
    
    
    
    
    
    
    
    
    
    (95,622
    )Loss available to common shareholders
    
    $
    (60,930
    )
    
    $
    (74,509
    )
    
    $
    (216,142
    )Shares (Denominator):Weighted average common shares outstanding:Class A common stock
    
    
    6,385,863
    
    
    
    7,396,610
    
    
    
    9,131,327Class B common stock
    
    
    
    
    
    
    
    
    
    
    227,805Total weighted average common shares outstanding  basic and diluted
    
    
    6,385,863
    
    
    
    7,396,610
    
    
    
    9,359,132Loss available per common share  basic and diluted
    
    $
    (9.54
    )
    
    $
    (10.07
    )
    
    $
    (23.09
    )
  Earnings Per Share
   18. Unaudited Quarterly Results of Operations




---



##### Table of Contents



2006Three Months EndedMarch 31
    
    
    June 30
    
    
    September 30
    
    
    December 31(2)Revenues
    
    $
    59,369
    
    
    $
    59,377
    
    
    $
    57,675
    
    
    $
    96,232Loss from operations
    
    $
    (4,325
    )
    
    $
    (3,602
    )
    
    $
    (3,416
    )
    
    $
    (5,859
    )Net loss
    
    $
    (9,412
    )
    
    $
    (8,324
    )
    
    $
    (11,079
    )
    
    $
    (12,696
    )Dividends on preferred stock
    
    
    (6,131
    )
    
    
    (6,315
    )
    
    
    (8,600
    )
    
    
    (11,950
    )Loss available to common shareholders
    
    $
    (15,543
    )
    
    $
    (14,639
    )
    
    $
    (19,679
    )
    
    $
    (24,646
    )Loss available per common share  basic and diluted(1)
    
    $
    (2.37
    )
    
    $
    (2.23
    )
    
    $
    (2.59
    )
    
    $
    (2.79
    )Weighted average common shares outstanding  basic and diluted
    
    
    6,564,872
    
    
    
    6,564,872
    
    
    
    7,599,147
    
    
    
    8,830,247
 
 (1)
    
    The sum of quarterly per share amounts may not equal per share amounts
reported for year-to-date periods. This is due to changes in the
number of weighted-average shares outstanding and the effects of
rounding for each period.(2)
    
    The Company acquired ATX on September 29, 2006. The Companys results
of operations for the three months ended December 31, 2006 include the
operations of ATX.




---



##### Table of Contents



2007Three Months EndedMarch 31
    
    
    June 30(2)
    
    
    September 30
    
    
    December 31(3)Revenues
    
    $
    95,821
    
    
    $
    106,524
    
    
    $
    123,652
    
    
    $
    125,162Loss from operations
    
    $
    (8,055
    )
    
    $
    (6,655
    )
    
    $
    (6,115
    )
    
    $
    (11,277
    )Net loss
    
    $
    (15,252
    )
    
    $
    (15,354
    )
    
    $
    (14,990
    )
    
    $
    (19,892
    )Dividends on preferred stock
    
    
    (12,309
    )
    
    
    (13,346
    )
    
    
    (14,471
    )
    
    
    (14,905
    )Modification of preferred stock
    
    
    (95,622
    )
    
    
    
    
    
    
    
    
    
    
    Loss available to common shareholders
    
    $
    (123,183
    )
    
    $
    (28,700
    )
    
    $
    (29,461
    )
    
    $
    (34,797
    )Loss available per common share  basic and diluted(1)
    
    $
    (13.92
    )
    
    $
    (3.19
    )
    
    $
    (3.15
    )
    
    $
    (3.72
    )Weighted average common shares outstanding  basic and diluted
    
    
    8,848,454
    
    
    
    8,983,336
    
    
    
    9,342,880
    
    
    
    9,342,880
 
 (1)
    
    The sum of quarterly per share amounts may not equal per share amounts
reported for year-to-date periods. This is due to changes in the
number of weighted-average shares outstanding and the effects of
rounding for each period.(2)
    
    The Company acquired InfoHighway on May 31, 2007. Accordingly, the
Companys results of operations include the operations of InfoHighway
from June 1, 2007.(3)
    
    We recognized an impairment charge due to rebranding of ATX initiative




---



##### Table of Contents



ITEM 9A. CONTROLS AND PROCEDURES




---



##### Table of Contents



ITEM 11. EXECUTIVE COMPENSATION
 COMPENSATION DISCUSSION & ANALYSIS
  Determination of Compensation
    
    
    Akamai Technologies Inc.
    
    CBeyond Inc.
    
    Covad Communications Group Inc.
    
    Equinix Inc.
    
    InfoSpace Inc.
    
    Leap Wireless International Inc.




---



##### Table of Contents




    
    Limelight Networks Inc.
    
    McLeod USA Inc.
    
    MetroPCS Communications Inc.
    
    Ntelos Holdings Corp.
    
    Paetec Holding Corp.
    
    Radiant Systems Inc.
    
    Savvis, Inc.
    
    Time Warner Telecom
    
    XO Holdings
  Components of Compensation for 2007
  Base Salary




---



##### Table of Contents



Annual Bonuses
  Long-Term Equity Compensation
    4 01(k) Savings Plan




---



##### Table of Contents



Perquisites and Other Benefits
  Severance Benefits
  SUMMARY COMPENSATION TABLE
  Stock
    
    
    Option
    
    
    All OtherSalary
    
    
    Bonus
    
    
    Awards
    
    
    Awards
    
    
    Compensation
    
    
    TotalName and Principal Position
    
    Year
    
    
    ($)
    
    
    ($)
    
    
    ($)(1)
    
    
    ($)(1)
    
    
    ($)(2)
    
    
    ($)Michael K. Robinson
    
    
    2007
    
    
    
    400,000
    
    
    
    
    
    
    
    598,923
    
    
    
    
    
    
    
    91,955
    
    
    
    1,090,878President and Chief
    
    
    2006
    
    
    
    400,000
    
    
    
    300,000
    
    
    
    219,813
    
    
    
    97,420
    
    
    
    96,400
    
    
    
    1,016,203Executive OfficerCorey Rinker
    
    
    2007
    
    
    
    260,000
    
    
    
    
    
    
    
    225,889
    
    
    
    9,685
    
    
    
    80,898
    
    
    
    576,472Executive Vice President, Chief
    
    
    2006
    
    
    
    260,000
    
    
    
    75,000
    
    
    
    129,703
    
    
    
    
    
    
    
    
    
    
    
    464,703Financial Officer, Treasurer and
Assistant SecretaryBrian P. Crotty
    
    
    2007
    
    
    
    310,000
    
    
    
    
    
    
    
    480,089
    
    
    
    26,891
    
    
    
    77,417
    
    
    
    894,397Chief Operating Officer
    
    
    2006
    
    
    
    310,000
    
    
    
    190,000
    
    
    
    175,550
    
    
    
    
    
    
    
    
    
    
    
    675,550Charles C. Hunter
    
    
    2007
    
    
    
    250,000
    
    
    
    
    
    
    
    198,164
    
    
    
    9,685
    
    
    
    
    
    
    
    457,849Executive Vice President,
    
    
    2006
    
    
    
    250,000
    
    
    
    75,000
    
    
    
    83,954
    
    
    
    
    
    
    
    
    
    
    
    408,954General Counsel and SecretaryTerrence J. Anderson
    
    
    2007
    
    
    
    250,000
    
    
    
    
    
    
    
    205,963
    
    
    
    20,972
    
    
    
    
    
    
    
    476,935Executive Vice President, Finance
    
    
    2006
    
    
    
    250,000
    
    
    
    150,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    400,000and Corporate DevelopmentKen A. Shulman
    
    
    2007
    
    
    
    250,000
    
    
    
    
    
    
    
    161,012
    
    
    
    16,130
    
    
    
    
    
    
    
    427,142Executive Vice President, Chief
    
    
    2006
    
    
    
    250,000
    
    
    
    100,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    350,000Technology Officer and Chief Information Officer
 
 (1)
    
    Represents the compensation cost the Company recognized for financial
statement reporting purposes with




---



##### Table of Contents



respect to the applicable fiscal
year in accordance with Statement of Financial Accounting Standards
No. 123(R), Share-Based Payment, or SFAS 123(R). For additional
information on the calculation of the net compensation expense
including the valuation assumptions used, please refer to note 12 of
the Companys audited consolidated financial statements.(2)
    
    Represents company paid travel ($28,080) and lodging ($63,875)
expenses incurred by Mr. Robinson and the value of non-cash
compensation received by Mr. Rinker and Mr. Crotty in connection with
their acquisition of company owned automobiles.




---



##### Table of Contents



GRANTS OF PLAN-BASED AWARDS TABLE
 All Other StockAwards:Number of
    
    All Other OptionShares of
    
    Awards: Number ofStock or
    
    Securities
    
    Exercise Price of
    
    Grant Date FairGrant
    
    Units (#)
    
    Underlying Options (#)
    
    Option Awards
    
    Value of OptionName
    
    Date
    
    (1)
    
    (1)
    
    ($/Unit)
    
    Awards(2)Michael K. Robinson
    
    
    4/20/07
    (3)
    
    
    3,683
    
    
    
    
    
    
    
    
    
    
    
    4/20/07
    (3)
    
    
    
    
    
    
    451
    
    
    $
    137.50
    
    
    $
    25,3964/20/07
    (4)
    
    
    
    
    
    
    5,415
    
    
    $
    137.50
    
    
    $
    304,919Corey Rinker
    
    
    4/20/07
    (3)
    
    
    933
    
    
    
    
    
    
    
    
    
    
    
    4/20/07
    (4)
    
    
    1554/20/07
    (4)
    
    
    
    
    
    
    774
    
    
    $
    137.50
    
    
    $
    43,584Brian P. Crotty
    
    
    4/20/07
    (3)
    
    
    2,243
    
    
    
    
    
    
    
    
    
    
    
    4/20/07
    (4)
    
    
    4304/20/07
    (4)
    
    
    
    
    
    
    2,149
    
    
    $
    137.50
    
    
    $
    121,010Charles C. Hunter
    
    
    4/20/07
    (3)
    
    
    863
    
    
    
    
    
    
    
    
    
    
    
    4/20/07
    (4)
    
    
    1554/20/07
    (4)
    
    
    
    
    
    
    774
    
    
    $
    137.50
    
    
    $
    43,584Terrence J. Anderson
    
    
    4/20/07
    (3)
    
    
    1,958
    
    
    
    
    
    
    
    
    
    
    
    4/20/07
    (4)
    
    
    3354/20/07
    (4)
    
    
    
    
    
    
    1,676
    
    
    $
    137.50
    
    
    $
    94,376Kenneth A. Shulman
    
    
    4/20/07
    (3)
    
    
    1,203
    
    
    
    
    
    
    
    
    
    
    
    4/20/07
    (4)
    
    
    2584/20/07
    (4)
    
    
    
    
    
    
    1,289
    
    
    $
    137.50
    
    
    $
    72,584
 
 (1)
    
    Securities granted under the MIP have been presented as units for purposes of this
table only. Each unit represents 1 share of Series C preferred stock and 25 shares of
Class B common stock. However, while presented as a unit for convenience, the actual
grants represent separate and distinct securities for accounting and securities law
purposes.(2)
    
    The amounts shown in this column do not reflect realized compensation for the named
executive officers; rather, they reflect the Companys accounting expense, specifically
the fair value of stock option awards as of the date of grant calculated in accordance
with SFAS No. 123(R).(3)
    
    Award was entirely vested upon grant.(4)
    
    Award will vest in equal annual installments at the end of March of 2008, 2009 and 2010. Narrative Disclosure Relating to Summary Compensation and Grants of Plan-Based Awards Tables
 Chief Executive Officer Employment Agreement




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##### Table of Contents



Employment Agreements with Other Named Executive Officers
   Management Incentive Plan
  OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
 Option Awards(1)
    
    Stock Awards(1)Number of Units
    
    Number of UnitsUnderlying
    
    Underlying
    
    
    
    
    
    
    
    
    
    Number of
    
    Market ValueUnexercised
    
    Unexercised
    
    
    
    
    
    
    
    
    
    Units That
    
    of Units ThatOptions
    
    Options
    
    Option
    
    
    
    
    
    Have Not
    
    Have Not(#)
    
    (#)
    
    Exercise Price
    
    Option
    
    Vested
    
    VestedName
    
    Exerciseable
    
    Unexerciseable(2)
    
    ($)
    
    Expiration Date
    
    (#)(2)
    
    ($)(3)Michael K. Robinson(1)
    
    
    451
    
    
    
    5,415
    
    
    $
    137.50
    
    
    
    3/30/2010
    
    
    
    
    
    
    
    Corey Rinker(1)
    
    
    
    
    
    
    774
    
    
    $
    137.50
    
    
    
    3/30/2010
    
    
    
    155
    
    
    $
    21,313Brian P. Crotty(1)
    
    
    
    
    
    
    2,149
    
    
    $
    137.50
    
    
    
    3/30/2010
    
    
    
    430
    
    
    $
    59,125Charles C. Hunter(1)
    
    
    
    
    
    
    774
    
    
    $
    137.50
    
    
    
    3/30/2010
    
    
    
    155
    
    
    $
    21,313Terrence J. Anderson(1)
    
    
    
    
    
    
    1,676
    
    
    $
    137.50
    
    
    
    3/30/2010
    
    
    
    335
    
    
    $
    46,063Ken A. Shulman(1)
    
    
    
    
    
    
    1,289
    
    
    $
    137.50
    
    
    
    3/30/2010
    
    
    
    258
    
    
    $
    35,475
 
 (1)
    
    Securities granted under the MIP have been presented as units for purposes of this
table only. Each unit represents 1 share of Series C preferred stock and 25 shares of
Class B common stock. However, while presented as a unit for convenience, the actual
grants represent separate and distinct securities for accounting and securities law
purposes.(2)
    
    Award will vest in equal annual installments at the end of March of 2008, 2009 and 2010.(3)
    
    The market value of the shares assumes a price of $137.50 per unit which represents the
fair market value of a unit as of December 31, 2007, determined in reliance on a
valuation performed in March 2007.




---



##### Table of Contents



OPTION EXERCISES AND STOCK VESTED DURING FISCAL YEAR
  Stock AwardsNumber of UnitsAcquired on
    
    Value RealizedClass or Series
    
    Vesting
    
    on VestingName
    
    of Stock
    
    (#)(3)
    
    ($)Michael K. Robinson
    
    
    (1
    )
    
    
    250
    
    
    $
    163,462(2
    )
    
    
    3,183
    
    
    $
    437,663Corey Rinker
    
    
    (1
    )
    
    
    135
    
    
    $
    88,270(2
    )
    
    
    618
    
    
    $
    85,030Brian P. Crotty
    
    
    (1
    )
    
    
    225
    
    
    $
    147,116(2
    )
    
    
    1,718
    
    
    $
    236,280Charles C. Hunter
    
    
    (1
    )
    
    
    105
    
    
    $
    68,654(2
    )
    
    
    618
    
    
    $
    85,030Terrence J. Anderson
    
    
    (1
    )
    
    
    
    
    
    
    (2
    )
    
    
    1,676
    
    
    $
    184,360Ken A. Shulman
    
    
    (1
    )
    
    
    
    
    
    
    (2
    )
    
    
    1,289
    
    
    $
    141,790
 
 (1)
    
    Securities granted under the MIP have been presented as units for
purposes of this table only. Each unit represents 1 share of either
Series A preferred stock or Series B preferred stock and 25 shares of
Class A common stock. However, while presented as a unit for
convenience, the actual grants represent separate and distinct
securities for accounting and securities law purposes. The market
value of the units acquired upon vesting is based on a unit price of
$653.85 per unit. The amounts shown in the Value Realized on Vesting
column is calculated by multiplying the number of units by the fair
value of the underlying shares on the vesting date.(2)
    
    Securities granted under the MIP have been presented as units for
purposes of this table only. Each unit represents 1 share of Series C
preferred stock and 25 shares of Class B common stock. However, while
presented as a unit for convenience, the actual grants represent
separate and distinct securities for accounting and securities law
purposes. The market value of the units acquired upon vesting is based
on a unit price of $137.50 per unit. The amounts shown in the Value
Realized on Vesting column is calculated by multiplying the number of
units by the fair value of the underlying shares on the vesting date. Potential Payments Upon Termination Or Change In Control




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##### Table of Contents



Value of TaxCash Severance
    
    Equity Acceleration
    
    Gross-UpName
    
    Event
    
    ($)
    
    ($)(1)
    
    ($)(2)
    
    Total ($)Michael K. Robinson.
    
    Voluntary Termination
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Involuntary Termination
    
    
    700,000
    
    
    
    304,919
    
    
    
    0
    
    
    
    1,004,919Death or Disability
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Change in Control
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Corey Rinker
    
    Voluntary Termination
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Involuntary Termination
    
    
    260,000
    
    
    
    0
    
    
    
    0
    
    
    
    260,000Death or Disability
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Change in Control
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Brian P. Crotty
    
    Voluntary Termination
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Involuntary Termination
    
    
    310,000
    
    
    
    0
    
    
    
    0
    
    
    
    310,000Death or Disability
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Change in Control
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Charles C. Hunter
    
    Voluntary Termination
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Involuntary Termination
    
    
    250,000
    
    
    
    0
    
    
    
    0
    
    
    
    250,000Death or Disability
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Change in Control
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Terrence J. Anderson
    
    Voluntary Termination
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Involuntary Termination
    
    
    250,000
    
    
    
    0
    
    
    
    0
    
    
    
    250,000Death or Disability
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Change in Control
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Ken A. Shulman
    
    Voluntary Termination
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Involuntary Termination
    
    
    250,000
    
    
    
    0
    
    
    
    0
    
    
    
    250,000Death or Disability
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Change in Control
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
 
 (1)
    
    The reference to units in the above table do not refer to separate
securities. The calculation of the value of the equity acceleration is
determined by calculating the number of units that would vest in
connection with the applicable event (each unit representing 1 share
of either Series A preferred stock or Series B preferred stock and
25 shares of Class A common stock) and multiplying it by $653.85,
which represents the fair market value of a unit as of December 31,
2007, determined in reliance on a valuation performed in March 2007.(2)
    
    Pursuant to the terms of Mr. Robinsons employment agreement, in the
event that any payment under the agreements constitutes an excess
parachute payment under Section 280G of the Internal Revenue Code, he
will be entitled to a gross-up payment to cover the 20% excise tax
which may be imposed on such payment pursuant to Section 4999 of the
Internal Revenue Code (amount shown is estimate). DIRECTOR COMPENSATION




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##### Table of Contents



PART IV
 
 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 Financial Statements and Schedules
          SCHEDULE II  VALUATION AND QUALIFYING ACCOUNTS
BROADVIEW NETWORKS HOLDINGS, INC. AND SUBSIDIARIES
 Balance at
    
    
    
    
    
    OtherBeginning of
    
    Charges to
    
    Accounts
    
    Deductions
    
    Balance atDescription
    
    Period
    
    Expenses
    
    Note(a)
    
    Note(b)
    
    End of Period(Dollars in thousands)Allowance for Uncollectible Accounts Receivable:Year Ended December 31, 2005
    
    
    908
    
    
    
    3,823
    
    
    
    8,874
    
    
    
    (6,910
    )
    
    
    6,695Year Ended December 31, 2006
    
    
    6,695
    
    
    
    6,384
    
    
    
    4,724
    
    
    
    (9,832
    )
    
    
    7,971Year Ended December 31, 2007
    
    
    7,971
    
    
    
    6,546
    
    
    
    5,380
    
    
    
    (9,815
    )
    
    
    10,082Valuation Allowance for Deferred Tax Assets:Year Ended December 31, 2005
    
    
    
    
    
    
    
    
    
    
    (84,642
    )(c)
    
    
    
    
    
    
    (84,642
    )Year Ended December 31, 2006
    
    
    (84,642
    )
    
    
    
    
    
    
    83,668
    (d)
    
    
    
    
    
    
    (974
    )Year Ended December 31, 2007
    
    
    (974
    )
    
    
    
    
    
    
    (49,221
    )(e)
    
    
    
    
    
    
    (50,195
    )
 
 (a)
    
    Allowance for Uncollectible Accounts Receivable includes $5,481, $3,485 and $1,273 of
allowances for uncollectible accounts receivable as of acquisition dates from business
combinations occurring during the year ended December 31, 2005, 2006 and 2007, respectively
and recoveries of amounts previously written off.(b)
    
    Allowance for Uncollectible Accounts Receivable includes amounts written off as uncollectible.(c)
    
    Net effect of purchase accounting in relation to the 2005 merger and current year activity.(d)
    
    Net effect of the completion of the study of the available net operating loss carryforwards
(NOLs) resulting from the 2005 merger and current year activity.(e)
    
    Net effect of purchase accounting in relation to 2007 merger and current year activity. Exhibits
 ExhibitNo.
    
    Description2.1
    
    Stock Purchase Agreement, dated as of June 26, 2006, by and among Broadview Networks Holdings,
Inc., ATX Communications, Inc., the stockholders of ATX Communications, Inc. and, for the limited
purposes set forth therein, Leucadia National Corporation.(a)2.2
    
    Agreement and Plan of Merger, dated as of February 23, 2007, by and among Broadview Networks




---



##### Table of Contents



ExhibitNo.
    
    DescriptionHoldings, Inc., Eureka Acquisition Corporation, Eureka Broadband Corporation, the significant
stockholders of Eureka Broadband Corporation set forth therein and Jeffrey Ginsberg, as agent for
the stockholders of Eureka Broadband Corporation.(a)3.1
    
    Tenth Amended and Restated Certificate of Incorporation, dated May 31, 2007, of Broadview Networks
Holdings, Inc.(d)3.2
    
    Second Amended and Restated Bylaws of Broadview Networks Holdings, Inc.(a)4.1
    
    Indenture, dated as of August 23, 2006, by and among Broadview Networks Holdings, Inc., the
Guarantors named therein and The Bank of New York, as trustee.(a)4.2
    
    Supplemental Indenture, dated as of September 29, 2006, by and among Broadview Networks Holdings,
Inc., the Guarantors named therein and The Bank of New York, as trustee.(a)4.3
    
    Form of Exchange 11 3/8% Senior Secured Note due 2012.(a)4.4
    
    Form of Guarantee of Exchange 11 3/8% Senior Secured Note due 2012.(a)4.5
    
    Second Supplemental Indenture, dated as of May 14, 2007, by and among Broadview Networks Holdings,
Inc., the Guarantors named therein and The Bank of New York, as trustee.(a)4.6
    
    Third Supplemental Indenture, dated as of May 31, 2007, by and among Broadview Networks Holdings,
Inc., the Guarantors named therein and The Bank of New York, as trustee.(a)4.7
    
    Security Agreement, dated as of August 23, 2006, by and among by and among Broadview Networks
Holdings, Inc, the subsidiaries of Broadview Networks Holdings, Inc. named therein and The Bank of
New York, as collateral agent.(a)4.8
    
    Supplement to the Security Agreement, dated as of September 29, 2006, by and among Broadview
Networks Holdings, Inc, the subsidiaries of Broadview Networks Holdings, Inc. named therein and
The Bank of New York, as collateral agent.(a)4.9
    
    Second Supplement to the Security Agreement, dated as of May 31, 2007, by and among Broadview
Networks Holdings, Inc, the subsidiaries of Broadview Networks Holdings, Inc. named therein and
The Bank of New York, as collateral agent.(a)10.1
    
    Management Incentive Plan, dated as of February 9, 2007, of Broadview Networks Holdings, Inc.(a)(f)10.2
    
    Employment Agreement, dated as of February 10, 2005, by and between Broadview Networks Holdings,
Inc. and Michael K. Robinson.(a)(f)10.3
    
    Employment Agreement, dated as of March 3, 1994, by and between Bridgecom Holdings, Inc. and Brian
Crotty.(a)(f)10.4
    
    Employment Agreement, dated as of January 14, 2004, by and between Broadview Networks Holdings,
Inc. and Terrence J. Anderson.(a)(f)10.5
    
    Employment Agreement, dated as of January 14, 2005, by and between Broadview Networks Holdings,
Inc. and Kenneth Shulman.(a)(f)10.6
    
    Employment Agreement, dated as of March 3, 1994, by and between Bridgecom Holdings, Inc. and
Charles Hunter.(a)(f)10.7
    
    Employment Agreement, dated as of March 3, 2994, by and between Bridgecom Holdings, Inc. and Corey
Rinker.(a)(f)10.8
    
    Credit Agreement, dated as of August 23, 2006, 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.(a)10.9
    
    Collateral Agreement, dated as of August 23, 2006, by and among Broadview Networks Holdings, Inc.,
the Subsidiary Grantors named therein and The CIT Group/Business Credit, Inc., as administrative
agent.(a)10.10
    
    Supplement to the Collateral Agreement, dated as of October 20, 2006, by and among Broadview
Networks Holdings, Inc., the Subsidiary Grantors named therein and The CIT Group/Business Credit,
Inc., as administrative agent.(a)10.11
    
    Second Supplement to the Collateral Agreement, dated as of June 26, 2007, by and among Broadview




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ExhibitNo.
    
    DescriptionNetworks Holdings, Inc., the Subsidiary Grantors named therein and The CIT Group/Business Credit,
Inc., as administrative agent.(a)10.12
    
    Guaranty Agreement, dated as of August 23, 2006, by and among the Subsidiary Grantors named
therein and The CIT Group/Business Credit, Inc., as administrative agent.(a)10.13
    
    Supplement to the Guaranty Agreement, dated as of October 20, 2006, by and among the Subsidiary
Grantors named therein and The CIT Group/Business Credit, Inc., as administrative agent.(a)10.14
    
    Second Supplement to the Guaranty Agreement, dated as of June 26, 2007, by and among the
Subsidiary Grantors named therein and The CIT Group/Business Credit, Inc., as administrative
agent.(a)10.15
    
    Intercreditor Agreement, dated as of August 23, 2006, by and among The CIT Group/Business Credit,
Inc., as administrative agent, The Bank of New York, as trustee, collateral agent and second
priority agent, Broadview Networks Holdings, Inc. and the Subsidiary Grantors named therein.(a)10.16
    
    Joinder to the Intercreditor Agreement, dated as of October 20, 2006, by and among The CIT
Group/Business Credit, Inc., as administrative agent, The Bank of New York, as trustee, collateral
agent and second priority agent, Broadview Networks Holdings, Inc. and the Subsidiary Grantors
named therein.(a)10.17
    
    Amendment No. 1 to the Intercreditor Agreement, dated as of May 10, 2007, by and among The CIT
Group/Business Credit, Inc., as administrative agent, The Bank of New York, as trustee, collateral
agent and second priority agent, Broadview Networks Holdings, Inc. and the Subsidiary Grantors
named therein.(a)10.18
    
    Joinder No. 2 to the Intercreditor Agreement, dated as of June 26, 2007, by and among The CIT
Group/Business Credit, Inc., as administrative agent, The Bank of New York, as trustee, collateral
agent and second priority agent, Broadview Networks Holdings, Inc. and the Subsidiary Grantors
named therein.(a)10.19
    
    Third Amended and Restated Shareholders Agreement, by and among Broadview Networks Holdings, Inc.
and the shareholders named therein, dated as of May 31, 2007.(b)10.20
    
    Indemnity Escrow Agreement, dated May 31, 2007, between Broadview Networks Holdings, Inc., the
agent for the former stockholders of Eureka Broadband Corporation and JP Morgan Chase Bank,
N.A.(b)10.21
    
    Escrow Agreement, dated September 29, 2006, by and among ATX Communications, Inc., LUK CLEC LLC,
Broadview Networks Holdings, Inc. and JPMorgan Chase Bank, N.A.(e)10.22
    
    1997 Stock Option Plan.(c)(f)10.23
    
    2000 Stock Option Plan.(c)(f)12.1
    
    Ratio of Earnings to Fixed Charges.(d)21.1
    
    Subsidiaries of Broadview Networks Holdings, Inc.(d)31.1
    
    Certification 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 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 pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.*32.2
    
    Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.*
 
 *
    
    Filed herewith.(a)
    
    Incorporated by reference to Broadview Networks Holdings, Inc.s
Form S-4/A filed on October 16, 2007 (File No. 333-142946).




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(b)
    
    Incorporated by reference to Broadview Networks Holdings, Inc.s
Form 8-K filed on November 19, 2007 (File No. 333-142946).(c)
    
    Incorporated by reference to Broadview Networks Holdings, Inc.s
Form S-1 filed on November 30, 2007 (File No. 333-147720).(d)
    
    Incorporated by reference to Broadview Networks Holdings, Inc.s Form
10-K filed on March 31, 2008 (File No. 333-96391).(e)
    
    Incorporated by reference to Broadview Networks Holdings, Inc.s
Form S-1/A filed on June 27, 2008 (File No. 333-147720).(f)
    
    Management contract or compensatory plan or arrangement.




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SIGNATURES
  BROADVIEW NETWORKS HOLDINGS, INC.By:
    /s/ Michael K. RobinsonName:
    Michael K. RobinsonTitle:
    Chief Executive Officer, President and
Assistant Treasurer