Net2Phone (NASDAQ:NTOP)
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Net2Phone (NASDAQ: NTOP) today announced that it has
received $18.8 million from Altice One, an investment fund with
interests in cable properties, due to a recent change in ownership of
those cable properties.
On November 4, 2004, Net2Phone entered into cable telephony
license agreements (the "Agreements") with three Altice One cable
properties (collectively "Altice"), to enable Altice to offer
Net2Phone's VoIP solutions to its subscribers in Belgium, Luxembourg
and France. Since Altice launched Net2Phone telephony services earlier
this year, approximately 10,000 customers have subscribed.
The Agreements with Altice provide that, in the event of a change
in control of any of the cable systems, Altice is required to either
terminate the Agreements and remit a predetermined buyout payment to
Net2Phone, or cause an acquirer of a controlling interest to be bound
by the Agreements.
On November 15, 2005, Altice notified Net2Phone that a third party
had acquired a controlling interest in Altice, that the third party
would not agree to be bound by all of Altice's obligations under the
Agreements, and that therefore, the Agreements were being terminated.
Simultaneously, Altice wired an $18.8 million buyout payment to
Net2Phone. This amount is materially less than the predetermined
buyout payment Net2Phone believes is required by the Agreements.
Altice has indicated that they would welcome further discussions with
Net2Phone in this regard.
Net2Phone has informed Altice and its third-party acquirer that
the buyout provisions of the Agreements require an additional payment
of approximately $29 million and that it reserves its rights to all
claims that may result from the termination. Net2Phone is considering
Altice's statement that it would welcome further discussions and
believes such discussions could include, in addition to Net2Phone's
position related to the additional buyout payment, executing new
operating agreements with the new ownership group to continue to
provide services to the existing cable systems.
In any event, under the terms of the Altice agreement, Net2Phone
will continue to service Altice's telephony subscribers for a 90-day
transition period.
The $18.8 million Altice payment will not be reflected in
Net2Phone's first quarter financial statements, but will be recorded
in Net2Phone's second fiscal quarter ending January 31, 2006.
Net2Phone expects the financial impact will include: writing off
approximately $7 million of assets on its balance sheet (reported as
"consideration paid to customers"), reviewing the valuation
implications of redeploying certain fixed assets, increasing
Net2Phone's reported "cash, cash equivalents and marketable
securities" by $18.8 million and recognizing a net gain from the
termination of the Agreements.
About Net2Phone
Net2Phone provides VoIP PacketCable, SIP and wireless solutions
around the world. As a leader in turnkey hosted VoIP telephony
services, Net2Phone has routed billions of VoIP minutes globally,
servicing more than 100,000 users in the US as well as hundreds of
thousands of more overseas. Net2Phone provides partners with a
SIP-based broadband telephony solution, calling cards, prefix dialing
and enterprise services in over 100 countries. Net2Phone's PacketCable
platform provides cable operators with the ability to deliver a high
quality primary line-type service with features such as emergency
calling. For more information about Net2Phone's products and services,
please visit www.net2phone.com.
This press release contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. These
forward-looking statements involve risks and uncertainties and actual
results could differ materially from those discussed in the
forward-looking statements. For this purpose, any statements contained
in this press release that are not statements of historical fact may
be deemed to be forward-looking statements. Factors which may affect
the Company's results include, but are not limited to, the Company's
ability to satisfy in a timely manner the requirements of Section 404
of the Sarbanes-Oxley Act and the rules and regulations adopted
pursuant thereto, the Company's ability to expand its customer base,
the Company's ability to develop additional and leverage its existing
distribution channels for its products and solutions, dependence on
strategic and channel partners including their ability to distribute
the Company's products and meet or renew their financial commitments,
the Company's ability to address international markets, the
effectiveness of the Company's sales and marketing activities, the
acceptance of the Company's products in the marketplace, the timing
and scope of deployments of the Company's products by customers,
fluctuations in customer sales cycles, customers' ability to obtain
additional funding, technical difficulties with respect to the
Company's products or products in development, the need for ongoing
product development in an environment of rapid technological change,
the emergence of new competitors in the marketplace, the Company's
ability to compete successfully against established competitors with
greater resources, the uncertainty of future governmental regulation,
the Company's ability to manage growth, obtain patent protection, and
obtain additional funds, general economic conditions and other risks
discussed in this Press Release and in the Company's filings with the
Securities and Exchange Commission. In addition, the payment of any
additional amount related to the termination of the Agreements or any
execution of new agreements is uncertain and speculative, and may be
affected by uncertainties associated with any continued negotiation,
or arbitration if necessary, with Altice. Consequently, there can be
no assurance that Net2Phone will receive any portion of this
additional $29 million or will be able to execute new operating
agreements on terms favorable to Net2Phone or at all. All
forward-looking statements and risk factors included in this document
are made as of the date hereof, based on information available to the
Company as of the date thereof, and the Company assumes no obligation
to update any forward-looking statement or risk factors.