Presentation (PowerPoint)
Transcript of Presentation (PowerPoint)
1February 12, 2004
2
Statement of Operations
Reorganized Reorganized Reorganized Reorganized Reorganized PredecessorMpower Holding Mpower Holding Mpower Holding Mpower Holding Mpower Holding Mpower Holding
STATEMENT OF OPERATIONS (amounts in $ thousands, Three Months Ended Three Months Ended Three Months Ended For the Year Ended July 31, 2002 to January 1, 2002 to except share and per share amounts) December 31, 2003 September 30, 2003 December 31, 2002 December 31, 2003 December 31, 2002 July 30, 2002Operating Revenues:
Core Customer $32,655 $32,708 $31,311 $129,563 $51,622 $64,714Switched Access 4,224 4,089 6,642 18,609 11,193 18,575 Total Operating Revenues 36,879 36,797 37,953 148,172 62,815 83,289
Operating Expenses:Cost of Operating Revenues 16,627 17,737 20,131 75,445 33,414 51,320 Selling, General and Administrative 18,635 18,084 23,271 77,434 42,779 65,627 Reorganization Expense - - - - - 266,383 Stock-Based Compensation Expense 41 43 57 175 276 442 Network Optimization Cost - (954) (6,390) (954) (6,390) 19,000 Gain on Sale of Assets, net (267) (185) (16) (534) (90) (91) Depreciation and Amortization 3,961 4,121 4,998 16,369 7,987 28,620 Total Operating Expenses 38,997 38,846 42,051 167,935 77,976 431,301
Loss from Continuing Operations (2,118) (2,049) (4,098) (19,763) (15,161) (348,012)
(Loss) Gain on Sale of Investments, net - - (489) - (539) 4,326 Gain (Loss) on Discharge of Debt - - 35,030 (102) 35,030 315,310 Other income 1,427 - - 1,427 - - Interest Income 63 40 371 199 963 3,237 Interest Expense (101) (102) (1,315) (526) (2,539) (18,065) (Loss) Income before Discontinued Operations (729) (2,111) 29,499 (18,765) 17,754 (43,204)
Income (Loss) from Discontinued Operations 678 922 (29,117) (2,368) (34,193) (34,765) Net (Loss) Income (51) (1,189) 382 (21,133) (16,439) (77,969) Accrued Preferred Stock Dividends - - - - - (3,974) Net (Loss) Income Applicable to Common Stockholders ($51) ($1,189) $382 ($21,133) ($16,439) ($81,943)
Basic Weighted Average Shares Outstanding 78,213,486 65,762,792 64,999,025 68,515,811 64,999,025 59,461,374 Diluted Weighted Average Shares Outstanding 78,213,486 65,762,792 65,365,420 68,515,811 65,247,708 59,461,374
Basic and Diluted (Loss) Income per Share Applicable toCommon Stockholders:
(Loss) Income before Discontinued Operations ($0.01) ($0.03) $0.45 ($0.27) $0.27 ($0.79)Income (Loss) from Discontinued Operations $0.01 $0.01 ($0.44) ($0.04) ($0.52) ($0.59)Net (Loss) Income ($0.00) ($0.02) $0.01 ($0.31) ($0.25) ($1.38)
Gross Margin $20,252 $19,060 $17,822 $72,727 $29,401 $31,969Gross Margin (% of Revenue) 54.9% 51.8% 47.0% 49.1% 46.8% 38.4%
Adjusted EBITDA $1,617 $976 ($5,449) ($4,707) ($13,378) ($33,658)Adjusted EBITDA (% of Revenue) 4.4% 2.7% -14.4% -3.2% -21.3% -40.4%
3
Balance Sheet
Mpower Holding Mpower Holding Mpower HoldingBALANCE SHEET (amounts in $ thousands) December 31, 2003 September 30, 2003 December 31, 2002Current Assets
Cash & Cash Equivalents $29,307 $36,629 $10,773Restricted Investments 92 204 84 Accounts Receivable, net 14,076 13,757 13,923 Other Receivables 5,039 8,335 - Assets Held for Sale - - 20,471 Prepaid Expenses and Other Current Assets 4,487 3,827 5,814 Total Current Assets 53,001 62,752 51,065
Property and Equipment, net 33,762 35,597 38,497 Long-Term Restricted Investments 9,537 9,561 13,547 Deferred Financing Costs, net - 33 16 Intangibles, net 8,948 10,094 13,530 Other Assets 3,781 5,203 10,768 Total Assets $109,029 $123,240 $127,423
Current LiabilitiesCurrent Maturities of Long-Term Debt and Capital Leases $256 $1,460 $4,638Line of Credit - 3,725 - Accounts Payable 15,754 18,467 23,462 Accrued Sales Tax Payable 3,647 5,745 5,753 Accrued Property Taxes Payable 2,818 3,527 3,030 Deferred Revenue 4,696 4,699 3,183 Accrued Other Expenses 13,406 17,225 14,352 Total Current Liabilities 40,577 54,848 54,418
Capital Lease Obligations - 2 371 Long-Term Deferred Revenue 2,211 2,064 1,497
Total Liabilities 42,788 56,914 56,286 Common stock 78 78 65 Additional Paid-in Capital 103,735 103,769 87,511 Accumulated Deficit (37,572) (37,521) (16,439)
Total Stockholders' Equity 66,241 66,326 71,137 Total Liabilities and Stockholders' Equity $109,029 $123,240 $127,423
4
Business Overview
Operations in Los Angeles, San Diego, Las Vegas, Chicago and Northern California
“Smart-build” CLEC– A facilities-based network integrating state-of-the-art voice and high-speed data
applications– No resale or UNE-P
Customer profile– Retail only
• No wholesale customers– Small-to-Medium Enterprise (“SME”)
• Some residential, mostly in Las Vegas – Largely acquired through direct sales force
• Some agent relationships• Some telemarketing
5
Market Overview
Los San Northern LasAngeles Diego California Vegas Chicago Total
Switch Sites 2 1 2 1 1 7Nortel DMS500 Voice SwitchesNortel Passport ATM SwitchesTollbridge/Nuera Voice Gateways
Collocations 142 28 40 18 66 294Lucent Anymedia Digital Loop CarriersCopper Mountain DSLAMs (DSL/T1)
Addressable Business Lines 2,500,000 500,000 725,000 175,000 1,400,000 5,300,000 At Businesses with <100 employees
T-1 Customers 2,590 390 302 776 629 4,687
DSL Customers 2,925 804 680 828 1,144 6,381
Business POTS Lines 101,384 22,644 11,272 25,803 22,388 183,491
Residential Lines 2,756 178 75 16,802 3,158 22,969
Annual Run Rate Revenue (approx) $76,000,000 $15,600,000 $9,600,000 $26,800,000 $19,600,000 $147,600,00051% 11% 7% 18% 13%
As of December 31, 2003
6
Service Overview
Integrated Voice and High Speed Internet Access– 4 to 24 voice lines with high speed Internet access over a UNE T1 loop
Dedicated High Speed Internet Access– 1.54 Mbps of synchronous speed Internet access over a UNE T1 loop– Variable Synchronous speed Internet access over a UNE DSL loop
Voice Transport– Trunks & PRI– Inbound and Outbound– 2-way– DID
Plain Old Telephone Service (“POTS”) Complementary Services
– Long Distance– Centrex– Calling card – Toll-free– Full voice features including voicemail, call forwarding, caller ID, etc.– Full data features including web hosting, dial-up, and remote access
7
Components of Revenue
Recurring Customer– Revenue received from customers every month for services described on
prior page
Recurring Switched Access– Revenue received from inter-exchange carriers (“IXCs”), or long distance
companies– Arises from long distant usage by our customers who pick a carrier other
than Mpower for their long distance service
Non-Recurring Customer– Revenue received from customers for installation of new service– Offsets our cost of acquiring the customer
8
Ending Access Lines in Service
0
50,000
100,000
150,000
200,000
250,000
300,000
Ending Access Lines in Service
Residential 40,911 41,271 38,350 32,934 30,565 28,393 26,685 24,484 22,969
Business 228,382 237,674 241,618 238,818 239,284 239,004 232,729 236,014 235,373
4Q 2001 1Q 2002 2Q 2002 3Q 2002 4Q 2002 1Q 2003 2Q 2003 3Q 2003 4Q 2003
9
Average Access Lines in Service
0
50,000
100,000
150,000
200,000
250,000
300,000
Average Access Lines in Service
Residential 41,091 39,811 35,642 31,750 29,479 27,539 25,585 23,727
Business 233,028 239,646 240,218 239,051 239,144 235,867 234,372 235,694
1Q 2002 2Q 2002 3Q 2002 4Q 2002 1Q 2003 2Q 2003 3Q 2003 4Q 2003
10
Gross Access Line Additions
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
Gross Access Lines Additions
Residential 5,288 3,897 2,501 2,252 1,790 2,383 1,485 1,918
Business 28,468 20,858 17,193 18,517 16,729 15,259 16,482 12,268
1Q 2002 2Q 2002 3Q 2002 4Q 2002 1Q 2003 2Q 2003 3Q 2003 4Q 2003
11
Gross Access Line Disconnects
0
5,000
10,000
15,000
20,000
25,000
30,000
Gross Access Lines Disconnects
Residential 4,928 6,818 7,917 4,621 3,962 4,091 3,686 3,433
Business 19,176 16,914 19,993 18,051 17,009 21,534 13,197 12,909
1Q 2002 2Q 2002 3Q 2002 4Q 2002 1Q 2003 2Q 2003 3Q 2003 4Q 2003
12
Access Line Churn
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
Access Line ChurnBusiness and Residential
Business 2.80% 2.37% 2.76% 2.52% 2.37% 3.00% 1.89% 1.82%
Residential 4.02% 5.51% 6.88% 4.68% 4.32% 4.80% 4.60% 4.67%
1Q 2002 2Q 2002 3Q 2002 4Q 2002 1Q 2003 2Q 2003 3Q 2003 4Q 2003
13
Access Line Churn
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
8.00%
9.00%
Access Line ChurnPayphone and Core Business
Core Business 2.99% 2.50% 2.93% 2.41% 2.09% 2.47% 1.94% 1.83%
Payphone 1.38% 1.38% 1.46% 3.34% 4.70% 8.07% 1.31% 1.69%
1Q 2002 2Q 2002 3Q 2002 4Q 2002 1Q 2003 2Q 2003 3Q 2003 4Q 2003
14
Revenue
$0.0
$5.0
$10.0
$15.0
$20.0
$25.0
$30.0
$35.0
$40.0(in
$ m
illio
ns)
Revenue
Non-Recurring (1) $0.51 $0.50 $0.52 $0.47 $0.54 $0.52 $0.51 $0.57
Residential Recurring (2) $4.96 $5.45 $4.58 $4.33 $3.83 $3.68 $3.24 $3.10
Business Recurring (3) $28.99 $30.88 $31.77 $33.15 $32.37 $33.56 $33.05 $33.21
1Q 2002 2Q 2002 3Q 2002 4Q 2002 1Q 2003 2Q 2003 3Q 2003 4Q 2003
NOTES:1. Non-Recurring Revenue is revenue billed to customers for the initial installation of service.2. Residential Recurring Revenue is the total amount of revenue billed to residential customers plus a portion of switched access revenue allocated between business and residential lines on a pro-rata basis.3. Business Recurring Revenue is the total amount of revenue billed to business customers plus a portion of switched access revenue allocated between business and residential lines on a pro-rata basis.
15
Revenue Metrics
$36.0
$38.0
$40.0
$42.0
$44.0
$46.0
$48.0
(in $
mill
ions
)Average Monthly Recurring Revenue per Access Line
Business (1) $41.47 $42.95 $44.08 $46.22 $45.12 $47.43 $47.00 $46.96
Residential (2) $40.24 $45.64 $42.84 $45.45 $43.26 $44.50 $42.21 $43.60
1Q 2002 2Q 2002 3Q 2002 4Q 2002 1Q 2003 2Q 2003 3Q 2003 4Q 2003
NOTES:1. Average Monthly Recurring Revenue per Business Access Line is calculated by taking the average number of Business lines in service for the quarter divided by the Recurring Business Revenue for the quarter divided by 3.2. Average Monthly Recurring Revenue per Residential Access Line is calculated by taking the average number of Residential lines in service for the quarter divided by the Recurring Residential Revenue for the quarter divided by 3.
16
Cost of Operating Revenue
$0.0
$5.0
$10.0
$15.0
$20.0
$25.0
(in $
mill
ions
)
Cost of Operating Revenue
Non-Rec. Customer (1) $1.30 $0.98 $1.01 $0.93 $0.72 $0.70 $0.55 $0.39
Real Estate (2) $2.40 $2.44 $2.51 $2.50 $2.50 $2.52 $2.50 $2.34
Network (3) $5.37 $4.53 $4.67 $4.23 $4.49 $4.07 $4.16 $3.64
Recurring Customer (4) $14.08 $13.68 $11.66 $12.47 $14.42 $11.67 $10.53 $10.26
1Q 2002 2Q 2002 3Q 2002 4Q 2002 1Q 2003 2Q 2003 3Q 2003 4Q 2003
NOTES:1. Non-Recurring Customer Costs are one-time costs we are billed by the LEC for initiating new service for our customers.2. Real Estate Costs are costs associated with our collocations and our switch sites.3. Network Costs are costs associated with connecting our collocations to our switch sites and our switch sites to other carriers.4. Recurring Customer Costs are costs directly associated with customer lines including monthly loop expenses, toll charges, and other recurring customer costs.
17
Operating Cost Metrics
$0.0
$2.0
$4.0
$6.0
$8.0
$10.0
$12.0
$14.0
$16.0
$18.0
Monthly Cost of Operating Revenue per Average Access Line
Recurring Customer (1) $17.10 $16.30 $14.10 $15.30 $17.90 $14.80 $13.50 $13.20
Network (2) $6.50 $5.40 $5.60 $5.20 $5.60 $5.10 $5.30 $4.70
Real Estate (3) $2.90 $2.90 $3.00 $3.10 $3.10 $3.20 $3.20 $3.00
1Q 2002 2Q 2002 3Q 2002 4Q 2002 1Q 2003 2Q 2003 3Q 2003 4Q 2003
NOTES:1. Monthly Recurring Customer Costs per Average Access Line in Service is the quarterly Recurring Customer Cost of Operating Revenue divided by the average number of total access lines in service for the quarter divided by 3.2. Monthly Network Costs per Average Access Line in Service is the quarterly Network Cost of Operating Revenue divided by the average number of total access lines in service for the quarter divided by 3.3. Monthly Real Estate Costs per Average Access Line in Service is the quarterly Real Estate Cost of Operating Revenue divided by the average number of total access lines in service for the quarter divided by 3.
18
Gross Margin
Gross Margin
$0.0
$5.0
$10.0
$15.0
$20.0
$25.0
(in $
mill
ions
)
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
(% o
f Rev
enue
)
Gross Margin ($) $11.30 $15.20 $17.00 $17.80 $14.60 $18.80 $19.10 $20.30
Gross Margin (%) 32.80% 41.30% 46.20% 47.00% 39.80% 49.80% 51.80% 54.90%
1Q 2002 2Q 2002 3Q 2002 4Q 2002 1Q 2003 2Q 2003 3Q 2003 4Q 2003
19
Selling, General & Administrative
$0.0
$5.0
$10.0
$15.0
$20.0
$25.0
$30.0
(in $
mill
ions
)
Selling, General & Administrative
Acquisition (1) $12.40 $11.00 $11.00 $10.30 $6.90 $6.70 $6.60 $6.20
Maintenance (2) $16.20 $17.70 $16.70 $12.90 $14.20 $12.90 $11.50 $12.50
1Q 2002 2Q 2002 3Q 2002 4Q 2002 1Q 2003 2Q 2003 3Q 2003 4Q 2003
NOTES:1. Acquisition SG&A is all of the SG&A incurred in connection with the sale and installation of new lines during the quarter.2. Maintenance SG&A is all other SG&A not included in Acquisition SG&A.
20
SG&A Metrics
$0
$100
$200
$300
$400
$500
$600
$700
Acquisition Expense per Gross Access Line Addition(Including Non-recurring Revenue and Expense)
Business (1) $434 $518 $639 $559 $410 $431 $392 $470
Residential (2) $131 $144 $141 $120 $64 $116 $56 $58
1Q 2002 2Q 2002 3Q 2002 4Q 2002 1Q 2003 2Q 2003 3Q 2003 4Q 2003
NOTES:1. Acquisition Expense per Gross Business Access Line Addition is equal to Acquisition SG&A (associated with Business Lines) plus Non- Recurring Customer Cost of Operating Revenue (associated with Business Lines) minus Non-Recurring Customer Revenue (associated with Business Lines) all divided by the Gross Business Access Line Additions. 2. Acquisition Expense per Gross Residential Access Line Addition is equal to Acquisition SG&A (associated with Residential Lines) plus Non- Recurring Customer Cost of Operating Revenue (associated with Residential Lines) minus Non-Recurring Customer Revenue (associated with Residential Lines) all divided by the Gross Residential Access Line Additions.
21
SG&A Metrics
0
20
40
60
80
100
120
140
160
180
Average Direct Account Managers
Direct Account Managers 167 149 152 140 120 120 112 93
1Q 2002 2Q 2002 3Q 2002 4Q 2002 1Q 2003 2Q 2003 3Q 2003 4Q 2003
22
SG&A Metrics
0
10
20
30
40
50
60
Monthly Gross Line Installs per Average Direct Account Manager
Gross Line Installs 57 47 38 44 47 42 49 44
1Q 2002 2Q 2002 3Q 2002 4Q 2002 1Q 2003 2Q 2003 3Q 2003 4Q 2003
23
SG&A Metrics
$0
$5
$10
$15
$20
$25
Monthly Maintenance Expense per Average Access Line in Service
Maintenance (1) $20 $21 $20 $16 $18 $16 $15 $16
1Q 2002 2Q 2002 3Q 2002 4Q 2002 1Q 2003 2Q 2003 3Q 2003 4Q 2003
NOTES:1. Monthly Maintenance Expense per Average Access Line in Service is equal to the Maintenance SG&A divided by the Average Access Lines in Service divided by 3.
24
Adjusted EBITDAAdjusted EBITDA
(see reconciliation to Net Loss on following page)
-$20.0
-$15.0
-$10.0
-$5.0
$0.0
$5.0
(in $
mill
ions
)
-60.0%
-50.0%
-40.0%
-30.0%
-20.0%
-10.0%
0.0%
10.0%
(% o
f Rev
enue
)
EBITDA ($) ($17.30) ($13.50) ($10.70) ($5.40) ($6.50) ($0.80) $1.00 $1.60
EBITDA (%) -50.20% -36.80% -29.10% -14.30% -17.70% -2.10% 2.70% 4.40%
1Q 2002 2Q 2002 3Q 2002 4Q 2002 1Q 2003 2Q 2003 3Q 2003 4Q 2003
NOTE 1:Adjusted EBITDA represents earnings before interest, taxes, depreciation, amortization and other non-operating items, and excludes network optimization costs, stock-basedcompensation and reorganization costs. We believe that this non-GAAP measure provides an enhancement to overall understanding of our past financial performance and ourprospects for the future as well as useful information to investors because of; (i) the historical use by Mpower of Adjusted EBITDA as a measurement of performance;(ii) the value of Adjusted EBITDA as a measure of performance before gains, losses or other charges considered to be outside the company's core business operating results;and (iii) the use of Adjusted EBITDA, or a similar term, by almost all companies in the CLEC sector as a measurement of performance. We exclude from our presentation ofAdjusted EBITDA, network optimization costs (which are costs resulting principally from the closure of certain of our markets), stock-based compensation expenses (whichare costs related to stock options issued with an exercise price below fair market value), gain or loss on sale of assets, and reorganization costs (which are non-recurring costs related to our bankruptcy) because we do not believe that including such costs in Adjusted EBITDA provides investors with an appropriate measure of determining Mpower'sperformance in its core business. Mpower's utilization of Adjusted EBITDA is not meant to be considered in isolation or as a substitute for loss from continuing operations, netloss, cash flow and other measures of financial performance prepared in accordance with GAAP. Adjusted EBITDA is not a GAAP measurement and Mpower's use of it may notbe comparable to similarly titled measures employed by other companies in the telecommunications industry.
25
GAAP Reconciliation
NOTE 1:Adjusted EBITDA represents earnings before interest, taxes, depreciation, amortization and other non-operating items, and excludes network optimization costs, stock-basedcompensation and reorganization costs. We believe that this non-GAAP measure provides an enhancement to overall understanding of our past financial performance and ourprospects for the future as well as useful information to investors because of; (i) the historical use by Mpower of Adjusted EBITDA as a measurement of performance;(ii) the value of Adjusted EBITDA as a measure of performance before gains, losses or other charges considered to be outside the company's core business operating results;and (iii) the use of Adjusted EBITDA, or a similar term, by almost all companies in the CLEC sector as a measurement of performance. We exclude from our presentation ofAdjusted EBITDA, network optimization costs (which are costs resulting principally from the closure of certain of our markets), stock-based compensation expenses (whichare costs related to stock options issued with an exercise price below fair market value), gain or loss on sale of assets, and reorganization costs (which are non-recurring costs related to our bankruptcy) because we do not believe that including such costs in Adjusted EBITDA provides investors with an appropriate measure of determining Mpower'sperformance in its core business. Mpower's utilization of Adjusted EBITDA is not meant to be considered in isolation or as a substitute for loss from continuing operations, netloss, cash flow and other measures of financial performance prepared in accordance with GAAP. Adjusted EBITDA is not a GAAP measurement and Mpower's use of it may notbe comparable to similarly titled measures employed by other companies in the telecommunications industry.
Reorganized Reorganized Reorganized Reorganized Reorganized PredecessorMpower Holding Mpower Holding Mpower Holding Mpower Holding Mpower Holding Mpower Holding
Three Months Ended Three Months Ended Three Months Ended For the Year Ended July 31, 2002 to January 1, 2002 toRECONCILIATION TO GAAP (amounts in $ thousands) December 31, 2003 September 30, 2003 December 31, 2002 December 31, 2003 December 31, 2002 July 30, 2002
Adjusted EBITDA $1,617 $976 ($5,449) ($4,707) ($13,378) ($33,658)Depreciation and Amortization (3,961) (4,121) (4,998) (16,369) (7,987) (28,620) Reorganization Expense - - - - - (266,383) Network Optimization Cost - 954 6,390 954 6,390 (19,000) Gain on Sale of Assets, net 267 185 16 534 90 91 Stock-Based Compensation Expense (41) (43) (57) (175) (276) (442) Loss from Continuing Operations (2,118) (2,049) (4,098) (19,763) (15,161) (348,012) (Loss) Gain on Sale of Investments, net - - (489) - (539) 4,326 Gain (Loss) on Discharge of Debt - - 35,030 (102) 35,030 315,310 Other income 1,427 - - 1,427 - - Interest Income 63 40 371 199 963 3,237 Interest Expense (101) (102) (1,315) (526) (2,539) (18,065) (Loss) Income before Discontinued Operations (729) (2,111) 29,499 (18,765) 17,754 (43,204) Income (Loss) from Discontinued Operations 678 922 (29,117) (2,368) (34,193) (34,765) Net (Loss) Income (GAAP) ($51) ($1,189) $382 ($21,133) ($16,439) ($77,969)
26
Net Income / (Loss)
-$80
-$60
-$40
-$20
$0
$20
$40
$60
(in $
mill
ions
)Net Income / (Loss)
Net Loss ($73.72) ($61.92) $40.85 $0.38 ($15.15) ($4.74) ($1.19) ($0.05)
1Q 2002 2Q 2002 3Q 2002 4Q 2002 1Q 2003 2Q 2003 3Q 2003 4Q 2003
27
Capital Expenditures
$0.0
$0.5
$1.0
$1.5
$2.0
$2.5
$3.0
$3.5
(in $
mill
ions
)
Capital Expenditures(in Continuing Operations only)
CAPEX $3.2 $2.0 $1.4 $2.4 $2.0
4Q 2002 1Q 2003 2Q 2003 3Q 2003 4Q 2003
28
Independent Asset Appraisal
NOTE:1. As of July 31, 2002, prior to Fresh Start Accounting implemented with our emergence from bankruptcy. This is not intended to be a comparison of our current gross or net PP&E on our balance sheet as of December 31, 2003, which was $32,394,000.
Original Cost Depreciation Reserve (1) Net Book Value (1) Appraised Value (1)ASSETS HELD FOR FUTURE USE-0 $44,395,576 $0 $44,395,576 $2,782,337BUILDINGS & PROPERTY-BUILDINGS 4,185,536 556,893 3,628,643 4,065,385CAPITALIZED COST-INTEREST 204,244 0 204,244 0COMPUTER EQUIPMENT-HARDWARE 19,909,369 10,117,519 9,791,850 5,346,484COMPUTER EQUIPMENT-LABOR 1,354,164 161,569 1,192,596 389,270COMPUTER EQUIPMENT-SOFTWARE 10,006,533 1,681,232 8,325,301 4,489,917CUSTOMER PREMISE EQUIPMENT-CPE DSL 10,806,873 5,557,346 5,249,528 2,217,824CUSTOMER PREMISE EQUIPMENT-CPE POTS 13,259 3,776 9,483 3,191ENGINEERING EQUIPMENT-LABOR 19,231,434 4,645,374 14,586,059 4,843,978ENGINEERING EQUIPMENT-REMOTE SWITCH 105,127,426 40,510,829 64,616,597 14,605,842ENGINEERING EQUIPMENT-SWITCH 64,194,108 26,066,872 38,127,235 7,892,448ENGINEERING EQUIPMENT-SWITCH SOFTWARE RTU 872,458 80,380 792,078 222,470ENGINEERING EQUIPMENT-TRANSMISSION 24,302,460 10,881,232 13,421,228 3,819,336INVENTORY-WAREHOUSE 7,312,920 0 7,312,920 4,990,805LAND-LAND 220,110 0 220,110 220,110LEASEHOLD IMPROVEMENTS-COLLOCATION 14,039,011 4,829,223 9,209,788 5,480,028LEASEHOLD IMPROVEMENTS-OFFICE 4,641,377 1,115,240 3,526,137 1,997,066LEASEHOLD IMPROVEMENTS-SWITCH 2,223,001 321,790 1,901,211 695,284OFFICE EQUIPMENT-EQUIPMENT 4,396,812 1,882,340 2,514,472 2,738,894OFFICE EQUIPMENT-FURNITURE 2,347,265 893,116 1,454,149 1,565,518VEHICLES-AUTOMOBILES 2,648,305 1,875,984 772,321 1,981,875
TOTAL $342,432,242 $111,180,715 $231,251,527 $70,348,060
29
Stock Options Outstanding
As of December 31, 2003
Total Stock Options Outstanding 14,603,916Weighted Average Strike Price $0.64
Stock Options with Strike Prices Above….. $5.00 206,576
Stock Options with Strike Prices at or Below….. $5.00 14,397,340 Weighted Average Strike Price $0.52
Total Warrants Outstanding 2,937,548Strike Price $1.62
Outstanding Stock Options and Warrants 17,334,888 (with Strike Prices at or Below $5.00)Average Strike Price $0.71
30
Current Adjusted Enterprise Valuation
As of February 11, 2004
A Common Shares Outstanding (as of December 31, 2003) 78,232,742 B Warrants and Stock Options Outstanding (with Strike Prices At or Below $5.00) 17,334,888 C Average Strike Price $0.71
D = A + B Outstanding Common Shares plus Assumed Exercise of Warrants and Stock Options 95,567,630
E Current Assets $53,001,000F Current Liabilities $40,577,000
G = E - F Net Working Capital $12,424,000H = B x C Cash from Assumed Exercise of Options and Warrants $12,230,014I = G + H Adjusted Net Working Capital $24,654,014
J Long-term Debt and Capital Leases $0K = J - I Adjusted Net Debt -$24,654,014
L Current Stock Price (closing price on February 11, 2004) $1.65
M = D x L Adjusted Equity Value $157,686,590
N = K + M Adjusted Enterprise Value $133,032,575
O 4Q Revenue $36,879,000P = O x 4 4Q Revenue - Annualized $147,516,000
Q = N / P Adjusted Enterprise Value as Multiple of Annualized 4Q Revenue 0.90 x
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