Selling, general and administrative. Selling, general and administrative expense consists of salaries of our employees and associated benefits, and the cost of insurance, legal, rent, utilities and other services, expenses associated with acquiring customers, including commissions paid to our sales force, advertising costs, travel, entertainment, referral fees and amounts paid in connection with revenue-sharing arrangements. Selling, general and administrative expense decreased 7.1% from $12.7 million for the three months ended April 30, 2003 to $11.8 million for the three months ended April 30, 2004 due to continuing cost management initiatives, elimination of certain expenses directly related to the restructurings of our operations, and to an overall reduction in employee headcount. We expect to incur significant selling, general and administrative expense related to anticipated future growth of our Net2Phone Cable Telephony business.
Depreciation and amortization. Depreciation and amortization increased 17.4% from $2.3 million for the three months ended April 30, 2003 to $2.7 million for the three months ended April 30, 2004. This increase is primarily attributable to accelerated depreciation on certain capitalized software. As a percentage of total revenue, these costs increased from 9.7% for the three months ended April 30, 2003 to 12.6% for the three months ended April 30, 2004, primarily due to a 9.7% reduction in revenue during the three months ended April 30, 2004 as compared with the same period during fiscal 2003.
Non-cash services provided by IDT (attributable to direct cost of revenue and selling, general and administrative). During the three months ended April 30, 2004, we recorded an expense of $0.5 million related to the receipt of services from IDT to be paid for through the issuance of Class A common stock. This expense, which was recorded for the first time in fiscal second quarter 2004, was based on a binding memorandum of understanding executed on October 29, 2003 with IDT, whereby,in exchange for attractive pricing on local and inter-exchange network access, termination, origination and other related services, as compared to third party vendors, access to IDT’s facilities and other benefits, we have agreed to issue 6.9 million shares of our Class A common stock to IDT at the time we enter into a definitive agreement. This charge represents the market value of 0.3 million Class A common shares, which were accrued during the third quarter ended April 30, 2004, as well as a favorable mark-to-market adjustment recorded on the accumulated shares vested during the prior quarter. It is anticipated that these shares will be issued upon execution of a definitive agreement and will be held in escrow to secure IDT’s performance obligations, and, subsequently, released from escrow on October 29, 2004. Until such release, these shares and others subsequently accrued will be marked to market as required by variable accounting rules. See “Related Party Transactions” below.
Non-cash compensation (attributable to selling, general and administrative). Non-cash compensation decreased from $2.7 million for the three months ended April 30, 2003 to a net expense reduction of $7.1 million for the three months ended April 30, 2004. The fiscal 2004 amount reflects the reversal of $7.6 million of previously recognized non-cash compensation expenses, related to our repriced options due to a decline in our stock price on April 30, 2004 compared to our stock price on January 31, 2004. This reversal was partially offset by $0.5 million of non-cash compensation expense primarily generated by grants of restricted shares under our 1999 Amended and Restated Stock Option and Incentive Plan and the funding of our 401K plan through a company stock match program. For the three months ended April 30, 2003, we recorded a charge of $1.0 million, of compensation expense related to these repriced options. Another factor related to this decrease is a $1.1 million charge taken during the three months ended April 30, 2003, relating to the discount amortization of ADIR shares sold to Net2Phone and ADIR employees in fiscal 2001, which was fully amortized during fiscal 2003 as a result of the termination of all ADIR employees. The $3.8 million of ADIR unamortized deferred compensation, which remained at the close of fiscal 2003, was written off as a component of other income, net during the first quarter of fiscal 2004 as a result of the termination of all ADIR employees. See ADIR Technologies, Inc. (note 10.)
Restructuring, severance, impairment and other items. Restructuring, severance, impairment and other items decreased from $1.7 million for the three months ended April 30, 2003 to $0.4 million for the three months ended April 30, 2004.
The following table summarizes the charges included in restructuring, severance, impairment and other items in the statements of operations:
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During the three months ended April 30, 2004, we incurred $0.4 million of restructuring, severance, impairment and other charges, which include $0.2 million in new impaired lease costs and nominal employee separation costs, and $0.5 million in executive separation charges, which are partially offset by $0.3 million in reversals of previously recorded reserves due to completion of subleasing agreements at more favorable terms than originally estimated.
For the three months ended April 30, 2003, we incurred restructuring, severance, impairment and other charges of $1.7 million. These included the following: $1.0 million in executive separation costs, a charge of $0.5 million for continued costs associated with unutilized circuits $0.2 million relating to various office lease termination costs, and $0.1 million in employee severance costs. Additionally, in accordance with SFAS 146, in the third quarter of fiscal 2003, we increased our reserve related to exited lease space by $0.1 million based on a review of all related costs. Partially offsetting these items, we recorded a favorable mark-to-market adjustment of $0.2 million relating to the proceeds owed to former shareholders of an operation we purchased in fiscal 2000 and discontinued during fiscal 2001.
Income (loss) from operations. Loss from operations was $9.8 million for the three months ended April 30, 2003 as compared to income from operations of $0.4 million recorded for the three months ended April 30, 2004. This change is primarily due to a reversal of $9.8 million in non-cash compensation expense and cost savings achieved in direct costs and selling, general and administrative expenses, partially offset by non-cash services expense, which was first incurred during the three months ended January 31, 2004.
Interest income, net. Interest income consists primarily of interest earned on cash and cash equivalents, which is partially offset by interest expense incurred on long-term obligations. Interest income increased 20% from $0.5 million for the three months ended April 30, 2003 to $0.6 million for the three months ended April 30, 2004. This increase is primarily a result of higher cash balances generated by proceeds received from the issuance of 14 million common shares on November 25, 2003.
Other income (loss), net. Other income (loss), net includes the losses or gains resulting from non-operating transactions. Other income increased from a net loss of $0.07 million recorded during the three months ended April 30, 2003, to a loss of $1.4 million recorded for the three months ended April 30, 2004. This increase is primarily attributable to a mark-to-market adjustment taken on Net2Phone shares held by Deutsche Bank, based on a decrease in our stock price at quarter end.
Liquidity and Capital Resources
Historically, we have satisfied our cash requirements through a combination of cash flow from operating activities and sales of equity securities. Our cash requirements have also been satisfied through our existing cash, cash equivalents and marketable securities balances. We do not maintain an interest in any off balance sheet financing vehicles.
The following table provides our cash flow data for the nine months ended April 30, 2004 and 2003.
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| Net cash used in operating activities | | $ | (13,113 | ) | $ | (1,726 | ) |
| Net cash used in investing activities | | | (49,068 | ) | | (1,940 | ) |
| Net cash provided by (used in) financing activities | | | 63,167 | | | (706 | ) |
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| Net increase (decrease) in cash and cash equivalents | | $ | 986 | | $ | (4,372 | ) |
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As of April 30, 2004, we had total cash, cash equivalents, restricted cash, and marketable securities of $136.8 million and working capital of $106.2 million. Of the $136.8 million, $22.2 million in restricted cash, cash equivalents, and marketable securities, was held as collateral for various letter of credit obligations, the majority of which related to our purchase of Aplio, S.A. from the stockholders of Aplio. On May 7, 2003, these obligations were assigned to Deutsche Bank AG London. Our payment obligations to Deutsche Bank are secured by standby letters of credit from a U.S. commercial bank, which are, in turn, collateralized by $20.9 million of marketable securities held by the bank. The letters of credit expire on August 4, 2006. Those restricted funds are classified as restricted cash, cash equivalents and marketable securities-long term on our balance sheet. We generated negative cash flow from operating activities of $1.7 million during the nine months ended April 30, 2003, compared with net cash used in operating activities of $13.1 million during the nine months ended April 30, 2004. The increase in cash flow used in operating activities is primarily due to the receipt of $19.5 million in the first quarter of fiscal 2003 from the settlement of litigation with Cisco Systems. This increase was partially offset by significantly reduced operating costs, and favorable changes in working capital as a result of the timing of receipts and disbursements.
Net cash used in investing activities was $1.9 million during the nine months ended April 30, 2003, as compared to net cash used in investing activities of $49.1 million for the nine months ended April 30, 2004. This increase in cash used in investing activities is primarily due to more cash being available for investment following our issuance of 14 million common shares during the second quarter of fiscal 2004. Our capital expenditures decreased slightly from $4.6 million for the nine months ended April 30, 2003 to $4.3 million for the nine months ended April 30, 2004. However, we anticipate that capital expenditures will significantly increase as Net2Phone Cable Telephony acquires fixed assets to build its infrastructure and deploy equipment related to contract obligations it may enter into with cable operators.
Net cash provided by (used in) financing activities increased from $(0.7) million for the nine months ended April 30, 2003 to $63.2 million for the nine months ended April 30, 2004. This change is due primarily to $58.6 million in net proceeds from the issuance of shares through an underwritten common stock offering at $4.50 per share on November 25, 2003. 10.5 million shares were issued to the public, an additional 1.0 million shares were issued as part of an over allotment option exercised by the underwriters, and an aggregate of 2.5 million shares were purchased by IDT Corporation and Liberty Media Corporation, our controlling shareholders. We have used, and intend to use, the net proceeds from the common share issuance for general corporate purposes, capital expenditures, and working capital, including funding our Net2Phone Cable Telephony business.
We believe that, based upon our present business plans, our existing cash resources will be sufficient to meet our currently anticipated working capital and capital expenditure requirements, and to fund any potential operating cash flow deficits in the foreseeable future. We believe that as the expected growth of our Net2Phone Cable Telephony subsidiary accelerates or if we acquire the business or assets of another company, we may need to raise additional capital from equity or debt sources. There can be no assurance that we will be able to raise such capital on favorable terms or at all. If we are unable to obtain such additional capital, we may be required to reduce the scope of our anticipated expansion, which could have a material effect on our business, financial condition or results of operations.
Contractual Obligations and Commercial Commitments
The following table provides a summary of our contractual obligations and commercial commitments as of April 30, 2004.
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| Contractual Obligations | Total | | Less than 1 year | | 1-3 years | | 4-5 years | | After 5 years | |
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| Capital lease obligations | $ | 317 | | $ | 317 | | $ | — | | $ | — | | $ | — | |
| Operating leases | | 13,686 | | | 3,066 | | | 7,488 | | | 3,025 | | | 107 | |
| Other long term obligations | | 16,954 | | | — | | | 16,954 | | | — | | | — | |
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| Total contractual obligations | $ | 30,957 | | $ | 3,383 | | $ | 24,442 | | $ | 3,025 | | $ | 107 | |
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| | Payments Due by Period | |
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| Other Commercial Commitments | Total | | Less than 1 year | | 1-3 years | | 4-5 years | | After 5 years | |
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| Standby letters of credit | $ | 22,153 | | $ | 618 | | $ | 21,063 | | $ | 472 | | $ | — | |
| Guarantees | | 367 | | | — | | | 367 | | | — | | | — | |
| Purchase commitments | | 854 | | | 854 | | | — | | | — | | | — | |
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| | $ | 23,374 | | $ | 1,472 | | $ | 21,430 | | $ | | | $ | | |
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Other long term obligations include a $17.0 million debt obligation to Deutsche Bank which matures in 2006. Market gains on shares held by Deutsche Bank will serve to reduce our overall obligation if our stock price increases above a pre-established price. This obligation is secured by standby letters of credit from a U.S. commercial bank, which are, in turn, collateralized by a $20.9 million of marketable securities held by the bank.
Related Party Transactions
Our strategic investors include IDT Corporation, a leading global telecommunications provider, and Liberty Media Corporation, a global media company. IDT and Liberty Media together own NTOP Holdings, LLC, which is our controlling shareholder. IDT and Liberty Media, directly and through their ownership of NTOP Holdings, LLC, hold 40.2 percent of our outstanding capital stock, and 56.7 percent of our stockholder vote as of June 4, 2004.
IDT Corporation
We continue to maintain significant business relationships with IDT Corporation and its affiliates (“IDT”), and IDT maintains a controlling ownership interest in us. In the three and nine months ended April 30, 2004, we, provided carrier services to IDT of $0.7 million and $3.2 million, respectively. In the three months and nine months ended April 30, 2004, we purchased wholesale carrier services from IDT of $1.0 million and $2.8 million, respectively. During the three and nine months ended April 30, 2003, we provided carrier services to IDT of $2.8 million and $5.7 million, respectively, and purchased wholesale carrier services from IDT of $2.0 million and $8.0 million, respectively.
During the second quarter of fiscal 2004, we executed an agreement with Union Telecard Alliance, LLC (“UTA”), a subsidiary of IDT, which ended UTA’s distribution of Net2Phone disposable calling cards effective December 31, 2003, and provided for an orderly wind-down over a two-year period of our disposable calling card business. This resulted in exit costs of $0.5 million to compensate UTA for estimated obligations associated with the Net2Phone disposable calling cards currently in the marketplace. These exit costs were recorded in restructuring, severance, impairment and other items during the three months ended January 31, 2004. Pursuant to the terms of our agreement with UTA, the parties will settle the aforementioned obligations over a two-year period ending December 31, 2005, through monthly reconciliations of on-going wind down activities, with final settlement to be completed by February 15, 2006. Consequently, no sales of disposable calling cards to IDT affiliates were recorded for the three months ended April 30, 2004 and sales of just $1.1 million were recorded for the nine months ended April 30, 2004. In the three and nine months ended April 30, 2003, we sold disposable calling cards to IDT affiliates totaling $1.6 million and $5.1 million, respectively.
Our corporate headquarters and several other facilities are leased from IDT. In the three and nine months ended April 30, 2004, IDT charged us $0.5 million and $1.4 million, respectively, for leasing their facilities. In the three and nine months ended April 30, 2003, IDT charged us $0.5 million and $1.7 million, respectively, in facilities lease costs. IDT’s treasury function provides investment management services relating to our portfolio of marketable securities. During the fiscal third quarter of 2004, $22.0 million in securities purchases and sales were settled through IDT. During the three months and nine months ended April 30, 2004, $22.0 million and $33.5 million, respectively, in securities purchases and sales were settled through IDT. During the three and nine months ended April 30, 2003, $10.1 million in securities sales were settled through IDT.
On occasion, we have aggregated long distance minutes and other services purchases with IDT.
We outsource some of our administrative and support functions to IDT. These administrative functions include, but are not limited to, tax consulting services, payroll services and internal audit support services. In most cases, fees for services are negotiated on a cost recovery basis. In March 2004, we entered into an Intellectual Property Legal Services Agreement with IDT, pursuant to which we will receive legal services from IDT related to a wide variety of intellectual property matters, including, but not limited to, patent and trademark prosecution and technology protection and development. Based upon this agreement, we will pay IDT a percentage of licensing fees we may receive related to specific technologies as a result of IDT’s assistance in these matters, in addition to a $25,000 monthly fee for these services. The agreement has a two-year term, which can be terminated with 30 days notice by either party upon a material breach of the agreement, or with 90 days notice at the discretion of either party. We are currently negotiating other service agreements with IDT. For example, we currently pay IDT $10,000 a month for tax services, and are now finalizing a Tax Services Agreement to memorialize this arrangement. During the three and nine months ended April 30, 2004, we incurred fees totaling $0.2 million and $0.3 million, respectively, for all such services. During the three and nine months ended April 30, 2003, we incurred fees totaling $0.09 million and $0.1 million for such services.
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On occasion, we provide services to IDT, based on the need for such services. During the three and nine months ended April 30, 2004, we charged IDT reimbursement fees for project support services totaling $0.05 million and $0.2 million, respectively. We charged IDT $0.2 million in reimbursement fees for project support services during the three and nine months ended April 30, 2003.
The due from (to) IDT balances represent net amounts due from (to) IDT to (by) us principally for wholesale carrier services, sales of disposable cards, and facilities lease payments. At both April 30, 2004 and July 31, 2003, we owed IDT $1.1 million. The average balance we owed to IDT during the three and nine months ended April 30, 2004 was $1.1 million and $0.7 million, respectively, compared with averages of $2.1 million and $1.3 million, respectively, that was owed to IDT for the three and nine months ended April 30, 2003.
On October 29, 2003, we entered into a binding memorandum of understanding (“MOU”) with IDT, which requires us to issue 6.9 million shares of Class A common stock to IDT at the time we execute definitive telecommunications services and related agreements with IDT. No definitive agreement has been executed as of June 14, 2004. The parties’ efforts to establish detailed terms and conditions continue. Once issued, the shares will be held in escrow to secure IDT’s performance obligations under agreements and are to be released to IDT in equal annual installments over five years, with the first release scheduled for October 29, 2004. During the second quarter of fiscal 2004, IDT started providing us with services and benefits under the terms of the MOU and continued to provide these services and benefits in the third quarter of fiscal 2004. The issuance of the 6.9 million shares is subject to variable accounting treatment and, therefore, the shares must be marked-to-market each quarter based on their current market value. Consequently, we recorded charges of $0.5 million and $2.7 million to non-cash services related to this agreement during the three and nine months ended April 30, 2004, respectively, which represents the market value of the 0.3 million and 0.7 million shares that we may release from escrow to IDT for services and benefits provided by IDT during the aforementioned periods.
We determined that non-cash services provided by IDT are attributable to direct cost of revenue and selling, general and administrative expense. However, given that the services provided by IDT do not individually have readily identifiable market values, and that the variable accounting treatment will result in different values being ascribed to the same services from period to period, we believe differentiating between direct cost of revenue and selling, general and administrative is not practicable. Therefore we have classified the non-cash services provided by IDT in a separate line in the consolidated statements of operations. In accordance with EITF Topic D-90, Grantor Balance Sheet Presentation of Unvested, Forfeitable Equity Instruments Granted to a Nonemployee, the 0.7 million shares we may release from escrow to IDT have been included in the total number of Class A common stock shares reported as issued and outstanding as of April 30, 2004, in our condensed consolidated financial statements, although such shares have not yet been issued to IDT.
The MOU memorializes IDT’s agreement to provide Net2Phone Cable Telephony, directly or through its subsidiaries, with local and inter-exchange network access, termination, origination and other related services, including sales and marketing assistance and an agreement by IDT not to compete in the cable telephony market. IDT is a competitive local exchange carrier and an inter-exchange carrier and its network includes switching facilities in several U.S. cities and additional points of presence in various countries, allowing us to co-locate our equipment and interconnect to IDT’s network at those points.
Liberty Media Corporation
On October 17, 2003, one of our wholly owned subsidiaries, Net2Phone Cable Telephony, LLC (“NCT”) and Liberty Cablevision of Puerto Rico, Inc. (“LCV”), an affiliate of Liberty Media Corporation, executed a Cable Telephony Production Agreement. According to the terms of this agreement NCT is to provide cable telephony services to LCV’s customers, and NCT will act as LCV’s agent in requisitioning, configuring, staging and installing all infrastructure and technology components that would facilitate these telecommunication services. We recorded $1.4 million in revenue from LCV during the quarter ended April 30, 2004, of which $1.3 million reflects infrastructure and related technology components installed during the quarter that are necessary for LCV to broadly distribute our services. We expect to widen our service offerings to an increased number of LCV’s customers beginning in the fourth quarter of fiscal 2004.
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Agreement with Officer
Pursuant to an employment agreement with our then General Counsel dated January 8, 2001, we guaranteed that the value (as defined in the agreement) of 150,000 options to purchase our common stock held by our General Counsel would be at least $1.6 million on January 7, 2004. To the extent the value of such options was less than $1.6 million, we would pay our then General Counsel the difference in cash. On January 7, 2004, the value of the 150,000 options was $0.7 million. As required by the agreement, we paid $0.9 million to our then General Counsel at that time. We had amortized the $1.6 million guaranteed option value over the three-year term of the agreement, less the intrinsic value of the stock options as of each fiscal quarter end. Accordingly, there was no non-cash compensation related to this agreement for the three months ended April 30, 2004. Non-cash compensation was reduced by $0.2 million for the nine months ended April 30, 2004. We recorded non-cash compensation expense of $0.1 million and $0.4 million for the three and nine months ended April 30, 2003, respectively, related to this agreement.
Effects of Inflation
Due to relatively low levels of inflation over the last several years, inflation has not had a material effect on our results of operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Securities and Exchange Commission’s rule related to market risk disclosure requires that we describe and quantify our potential losses from market risk sensitive instruments attributable to reasonably possible market changes. Market risk sensitive instruments include all financial or commodity instruments and other financial instruments (such as investments and debt) that are sensitive to future changes in interest rates, currency exchange rates, commodity prices or other market factors. We are not materially exposed to market risks from changes in foreign currency exchange rates or commodity prices. We do not hold derivative financial instruments nor do we hold securities for trading or speculative purposes. We are exposed to changes in interest rates primarily from our investments in cash equivalents. Under our current policies, we do not use interest rate derivative instruments to manage our exposure to interest rate changes. Our reported financial results may vary significantly based upon fluctuations in our stock price. Our long-term obligation with Deutsche Bank changes based upon our stock price. If our stock price decreases, this will increase our overall obligation. If our stock price increases, this will decrease our overall obligation. In addition, we have repriced stock options and granted restricted shares that require variable accounting treatment and, therefore must be marked-to-market each quarter based on their current market value.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures. Our Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this Quarterly Report. Based on such evaluation, such officers have concluded that, as of such date, our disclosure controls and procedures are effective in alerting them on a timely basis to material information relating to Net2Phone (and its consolidated subsidiaries) required to be included in our reports filed or submitted under the Exchange Act.
Changes in Internal Control over Financial Reporting. There were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II—OTHER INFORMATION
Item 1. Legal Proceedings
Multi-Tech
On February 15, 2000, Multi-Tech Systems, Inc. (“Multi-Tech”), filed suit against Net2Phone and other companies in the United States Federal District Court in Minneapolis, Minnesota. Multi-Tech alleged “the defendant companies are infringing because they are providing the end users with the software necessary to simultaneously transmit voice and data on their computers in the form of making a phone call over the Internet”. On August 16, 2002, following an initial hearing, the Court issued an order construing the claims of all the patents in the suit in a way that we consider favorable to our non-infringement defenses. On October 31, 2002, the Court entered a consent judgment dismissing the patent infringement claims asserted by Multi-Tech. On November 19, 2002, Multi-Tech filed an appeal with the United States Court of Appeals for the Federal Circuit. On February 3, 2004, the Court of Appeals for the Federal Circuit affirmed the decision of the District Court in favor of Net2Phone. On February 16, 2004, Multi-Tech filed a Petition for a Rehearing of this decision with the Court of Appeals, which was denied on March 31, 2004.
Class Actions
Four substantially similar class action lawsuits were filed in the United States District Court for the Southern District of New York on behalf of all persons who acquired our stock between July 29, 1999 and December 6, 2000. Net2Phone, certain of our executive officers, directors and underwriters involved in our initial public offering were named as defendants in these complaints. The complaints allege, in part, that certain underwriters of our initial public offering violated federal securities laws by failing to disclose that they had solicited and received undisclosed commissions and allocated shares in our initial public offering to those investors in exchange for their agreement to purchase our shares in the after-market at pre-determined prices. The complaints also allege that, whether or not Net2Phone and the named executives were aware of the underwriters’ arrangements, Net2Phone and the named executives have statutory liability under the federal securities laws for issuing a registration statement in connection with our initial public offering that failed to disclose that these allegedly undisclosed arrangements existed. The suits against us are substantially the same as suits asserting the same allegations that have been filed against several hundred other companies that closed their initial public offerings at or about the same time that we did. The court to which the various cases have been assigned has extended the deadline for all defendants to respond to the complaints. We have been able to secure the voluntary dismissal of the claims against those executive officers and directors named in the lawsuits. In addition, our underwriting agreement with our underwriters provides for indemnification of Net2Phone and its executives and directors for liabilities arising out of misstatements in our registration statement attributable to material non-disclosures by the underwriters. We intend to pursue our indemnification claims against the underwriters. In addition, we maintain directors and officers’ liability insurance coverage, which should substantially cover the costs of defending the various suits. However, an unfavorable decision in these matters could have a material adverse effect on our business operations, financial condition and results of operations.
Item 2. Changes in Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
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Item 6. Exhibits and Reports on Form 8-K
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| Exhibit No. | | Description |
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| 10.1 | | Intellectual Property Legal Services Agreement, dated as of January 1, 2004, between the Company and IDT Corporation |
| 31.1 | | Certification of the Chief Executive Officer, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| 31.2 | | Certification of the Chief Financial Officer, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| 32 | | Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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We furnished a report on Form 8-K dated March 10, 2004 reporting under Item 12 our press release regarding our earnings for the quarter ended January 31, 2004.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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| | NET2PHONE, INC. |
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| Date: June 14, 2004 | | By: | /s/ Stephen M. Greenberg |
| | | | Stephen M. Greenberg
Chief Executive Officer |
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| Date: June 14, 2004 | | By: | /s/ Arthur Dubroff |
| | | | Arthur Dubroff
Chief Financial Officer |
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