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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON. D.C. 20549
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FORM 10-Q
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[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2003
OR
[_] 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: 0-25965
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j2 GLOBAL COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 51-0371142
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
6922 HOLLYWOOD BOULEVARD
SUITE 500
LOS ANGELES, CALIFORNIA 90028
(Address of principal executive offices)
(323) 860-9200
(Registrant's telephone number, including area code)
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Indicate by check mark whether the registrant (1) has filed all reports required
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes [X] No [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act).
Yes [X] No [ ]
As of April 30, 2003, the registrant had 11,275,289 shares of Common Stock
outstanding.
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J2 GLOBAL COMMUNICATIONS, INC.
FOR THE QUARTER ENDED MARCH 31, 2003
INDEX
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets (unaudited) 3
Condensed Consolidated Statements of Operations (unaudited) 4
Condensed Consolidated Statements of Cash Flows (unaudited) 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 12
Item 3. Quantitative and Qualitative Disclosures About Market Risk 17
Item 4. Controls and Procedures 17
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 19
Item 6. Exhibits and Reports on Form 8-K 19
Signatures 20
Certifications 21
2
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
j2 GLOBAL COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED, IN THOUSANDS)
March 31, December 31,
2003 2002
---------- ----------
ASSETS
Cash and cash equivalents $ 38,729 $ 32,777
Accounts receivable,
net of allowances of $287,000 and $233,000, respectively 4,770 5,082
Prepaid expenses and other current assets 1,219 1,408
---------- ----------
Total current assets 44,718 39,267
Furniture, fixtures and equipment, net 6,171 6,500
Goodwill and other purchased intangibles, net 17,447 17,324
Other assets 958 1,002
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Total assets $ 69,294 $ 64,093
========== ==========
LIABILITIES & STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses $ 2,265 $ 3,896
Deferred revenue 2,944 2,615
Current portion of capital lease payable 256 147
Current portion of long-term debt 230 449
Other 42 52
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Total current liabilities 5,737 7,159
Capital lease payable 225 140
Long-term debt 66 111
---------- ----------
Total liabilities 6,028 7,410
---------- ----------
Total stockholders' equity 63,266 56,683
Total liabilities and stockholders' equity $ 69,294 $ 64,093
========== ==========
See accompanying notes to condensed consolidated financial statements
3
j2 GLOBAL COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED, IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
Three Months Ended March, 31
2003 2002
----------- -----------
Revenues:
Subscriber $ 14,454 $ 9,370
Advertising 612 827
Licensed services and other 142 182
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15,208 10,379
Cost of revenues 3,010 3,440
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Gross profit 12,198 6,939
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Operating expenses:
Sales and marketing 2,510 1,296
Research and development 1,026 787
General and administrative 3,468 3,433
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Total operating expenses 7,004 5,516
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Operating earnings 5,194 1,423
Other income, net 74 93
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Earnings before income taxes and cumulative
effect of change in accounting principle 5,268 1,516
Income tax expense 235 --
----------- -----------
Earnings before cumulative effect of change
in accounting principle 5,033 1,516
Cumulative effect of change in accounting principle -- 225
----------- -----------
Net earnings $ 5,033 $ 1,741
=========== ===========
Net earnings per common share:
Basic $ 0.45 $ 0.16
Diluted $ 0.41 $ 0.16
Weighted average shares outstanding:
Basic 11,145,670 10,726,205
Diluted 12,348,629 11,202,789
See accompanying notes to condensed consolidated financial statements
4
j2 GLOBAL COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED, IN THOUSANDS)
Three Months Ended March 31,
2003 2002
---------- ----------
Cash flows from operating activities:
Net earnings $ 5,033 $ 1,741
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 919 912
Non-cash income tax expense 203 --
Compensation in exchange for note reduction 43 43
Cumulative effect of change in accounting principle -- (225)
Decrease (increase) in:
Accounts receivable 341 (150)
Interest receivable (18) (37)
Prepaid expenses 243 224
Other assets (91) (306)
(Decrease) increase in:
Accounts payable (1,644) (686)
Deferred revenue 279 224
---------- ----------
Net cash provided by operating activities 5,308 1,740
---------- ----------
Cash flows from investing activities:
Purchase of furniture, fixtures and equipment (300) (546)
Acquisition of a business, net of cash received (175) --
Proceeds from sale of equipment 73 --
Repayments of notes receivable, net 9 103
---------- ----------
Net cash used in investing activities (393) (443)
---------- ----------
Cash flows from financing activities:
Issuance of common stock under employee
stock purchase plan 90 --
Exercise of stock options 1,257 --
Repayment of long-term debt and capital leases (310) (208)
---------- ----------
Net cash provided by (used in) financing activities 1,037 (208)
---------- ----------
Net increase in cash and cash equivalents 5,952 1,089
Cash and cash equivalents at beginning of year 32,777 19,087
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Cash and cash equivalents at end of year $ 38,729 $ 20,176
========== ==========
See accompanying notes to condensed consolidated financial statements
5
J2 GLOBAL COMMUNICATIONS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2003
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
j2 Global Communications, Inc. (the "Company") is a leading provider of
outsourced, value-added messaging and communications services to individuals and
businesses throughout the world. The Company is a Delaware corporation and was
founded in 1995.
The consolidated financial statements include the accounts of the Company
and its direct and indirect wholly-owned subsidiaries; eFax.com, Inc.,
SureTalk.com, Inc., Documagix, Inc., ProtoDyne, Inc., j2 Latin America, Inc. and
dotCOM, Ltd. All inter-company accounts and transactions have been eliminated in
consolidation.
The accompanying interim condensed consolidated financial statements and
related financial schedules are unaudited. The Company's interim condensed
consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America
("GAAP") including those for interim financial information and with the
instructions for Form 10-Q and Article 10 of Regulation S-X issued by the
Securities and Exchange Commission ("SEC"). Accordingly, they do not include all
of the information and note disclosures required by GAAP for complete financial
statements. These statements are unaudited and, in the opinion of management,
all adjustments (which include only normal recurring adjustments) considered
necessary for a fair presentation have been included. Certain reclassifications
have been made to the prior year financial statements to conform to the current
year presentation. These consolidated financial statements should be read in
conjunction with the audited financial statements and related notes for the year
ended December 31, 2002 included in the Company's Annual Report on Form 10-K
filed with the SEC on March 31, 2003.
The results of operations for these interim periods are not necessarily
indicative of the operating results for the full year or for any future period.
NOTE 2 - USE OF ESTIMATES
The preparation of financial statements, in conformity with GAAP, requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. On an ongoing
basis, management evaluates its estimates, including those related to revenue
recognition, allowances for doubtful accounts and the valuation of deferred
income taxes, long-lived and intangible assets and goodwill. These estimates are
based on historical experience and on various other assumptions that are
believed to be reasonable under the current circumstances, the results of which
form the basis for making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources. Actual results
could differ from those estimates.
NOTE 3 - RECENT ACCOUNTING PRONOUNCEMENTS
In June 2002, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 146, "Accounting for
Exit or Disposal Activities". SFAS No. 146 addresses significant issues
regarding the recognition, measurement and reporting of costs that are
associated with exit and disposal activities, including restructuring activities
that are currently accounted for under Emerging Issues Task Force ("EITF") No.
94-3, "Liability Recognition for Certain Employee Termination Benefits and Other
Costs to Exit and Activity (including Certain Costs Incurred in a
Restructuring)". The scope of SFAS No. 146 also includes costs related to
terminating a contract that is not a capital lease and termination benefits that
employees who are involuntarily terminated receive under the terms of a one-time
benefit arrangement that is not an ongoing benefit arrangement or an individual
deferred-compensation contract. SFAS No. 146 is effective for exit or disposal
activities initiated after December 31, 2002. The adoption of SFAS No. 146 in
the first quarter of fiscal 2003 did not have a material effect on the Company's
financial condition, results of operations or liquidity.
6
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation-Transition and Disclosure". SFAS No. 148 amends SFAS No. 123,
"Accounting for Stock-Based Compensation", to provide alternative methods of
transition for a voluntary change to the fair value-based method of accounting
for stock-based employee compensation. In addition, SFAS No. 148 amends the
disclosure requirements of SFAS No. 123 to require prominent disclosure in both
annual and interim financial statements about the method of accounting for
stock-based employee compensation and the effect of the method used on reported
results. This Statement also amends Accounting Principles Board Opinion ("APBO")
No. 28, "Interim Financial Reporting", to require disclosure about those effects
in interim financial information. The amendments to SFAS No. 123 are effective
for financial statements for fiscal years ending after December 15, 2003. The
required disclosures for interim financial statements are effective for
financial reports containing condensed financial statements for interim periods
beginning after December 15, 2002. As the Company has elected not to change to
the fair value-based method of accounting for stock-based employee compensation,
SFAS No. 148 will have no impact on the Company's financial position, results of
operations or cash flows. Please refer to Note 9 to the condensed consolidated
financial statements included herein for interim disclosures regarding
stock-based employee compensation.
NOTE 4 - CRITICAL ACCOUNTING POLICIES
REVENUE RECOGNITION
The Company's subscriber revenues consist substantially of monthly
recurring and usage based subscription fees. In accordance with GAAP and with
SEC issued Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial
Statements", which clarifies certain existing accounting principles for the
timing of revenue recognition and classification of revenues in the financial
statements, the Company defers the portions of monthly recurring and usage based
fees collected in advance and recognizes them in the period earned.
Additionally, the Company defers and recognizes subscriber activation fees and
related direct incremental costs over a subscriber's estimated useful life.
The Company's advertising revenue consists primarily of revenues derived by
delivering email messages on behalf of advertisers to our customers who elect to
receive such messages. Revenues are recognized in the period in which the
advertising services are performed, provided that no significant Company
obligations remain and the collection of the resulting receivable is reasonably
assured.
VALUATION OF LONG-LIVED ASSETS
The Company assesses the impairment of long-lived assets, which include
furniture, fixtures and equipment and identifiable intangible assets with finite
useful lives (subject to amortization), in accordance with the provisions of
SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets".
This Statement addresses financial accounting and reporting for the impairment
or disposal of long-lived assets and requires that long-lived assets be reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. SFAS No. 144 also requires
companies to separately report discontinued operations and extends that
reporting to a component of an entity that either has been disposed of (by sale,
abandonment or in a distribution to owners) or is classified as held for sale.
Assets to be disposed of are reported at the lower of the carrying amount or
fair value less costs to sell.
In accordance with SFAS No. 144, the Company assesses the impairment of
long-lived assets whenever events or changes in circumstances indicate that the
carrying value may not be recoverable. Impairment indicators the Company
considers important, which could individually or in combination trigger an
impairment review, include the following:
o significant underperformance relative to expected historical or
projected future operating results;
o significant changes in the manner of the Company's use of the acquired
assets or the strategy for its overall business;
o significant negative industry or economic trends;
o significant decline in the Company's stock price for a sustained
period; and
o the Company's market capitalization relative to net book value.
7
If events and circumstances indicate that the carrying amount of a
long-lived asset may not be recoverable and the expected undiscounted future
cash flows attributable to the asset are less than the carrying amount of that
asset, an impairment loss equal to the excess of the asset's carrying value over
its fair value is recorded. Fair value is determined based on the present value
of estimated expected future cash flows using a discount rate commensurate with
the risk involved, quoted market prices or appraised values, depending on the
nature of the assets.
In accordance with SFAS No. 144, during the first quarter of 2003, the
Company assessed whether events or changes in circumstances occurred that
potentially indicate that the carrying amount of long-lived assets may not be
recoverable. Having done so, the Company concluded that there were no such
events or changes in circumstances during the quarter. Net long-lived assets
amounted to $6.9 million as of March 31, 2003.
VALUATION OF GOODWILL AND OTHER INTANGIBLE ASSETS
The Company assesses the impairment of goodwill and a trade name with an
indefinite useful life (not subject to amortization) in accordance with the
provisions of SFAS No. 142, "Goodwill and Other Intangible Assets". Under SFAS
No. 142, goodwill and intangible assets with indefinite useful lives are no
longer amortized, but are tested for impairment at a reporting unit level on an
annual basis and between annual tests if an event occurs or circumstances change
that would more likely than not reduce the fair value of a reporting unit below
its carrying value amount. Impairment indicators the Company considers
important, which could individually or in combination trigger an impairment
review, include the following:
o significant adverse change in legal factors or in the business
climate;
o adverse action or assessment by a regulator;
o unanticipated competition;
o significant changes in the manner of the Company's use of the acquired
assets or the strategy for its overall business;
o loss of key personnel;
o significant negative industry or economic trends; and
o significant decline in the Company's stock price for a sustained
period.
For purposes of financial reporting and impairment testing in accordance
with SFAS No. 142, the Company operates in one principal reporting unit, a
provider of outsourced, value-added messaging and communications services.
In testing for a potential impairment of goodwill and a trade name with an
indefinite useful life, the Company first compares its estimated fair value with
its book value, including goodwill and a trade name with an indefinite useful
life. If the Company's estimated fair value exceeds its book value, the assets
are considered not to be impaired and no additional steps are necessary. If,
however, the fair value of the Company is less than its book value, then the
Company is required to compare the carrying amount of its goodwill and trade
name with their respective implied fair values. The estimate of implied fair
value of these assets may require independent valuations of certain internally
generated and unrecognized intangible assets such as our subscriber base,
software and technology and patents and trademarks. If the carrying amounts of
goodwill and the trade name exceed their respective implied fair values, an
impairment loss would be recognized in an amount equal to the excess.
In accordance with SFAS No. 142, the Company performed annual impairment
tests of goodwill and this trade name as of December 31, 2002 and concluded
that, as of that date, there was no impairment. Furthermore, during the first
quarter of 2003, the Company assessed whether events or changes in circumstances
occurred that potentially indicate that the carrying amount of these assets may
not be recoverable. Having done so, the Company concluded that there were no
such events or changes in circumstance during the quarter. Net goodwill and a
trade name with an indefinite useful life amounted to $16.7 million as of March
31, 2003.
8
VALUATION OF DEFERRED TAX ASSETS
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carry-forwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date. The Company's ability to realize the deferred tax asset is
assessed throughout the year and a valuation allowance is established
accordingly.
NOTE 5 - NET EARNINGS PER SHARE
Basic earnings per share are computed on the basis of the weighted average
number of common shares outstanding. Diluted earnings per share are computed on
the basis of the weighted average number of common shares outstanding plus the
effect of outstanding stock options and warrants using the "treasury stock"
method. As of March 31, 2003, the components of basic and diluted earnings per
share were as follows (in thousands except share and per share amounts):
Three Months Ended March 31,
-------------------------
2003 2002
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Numerator for basic and diluted net earnings
per common share:
Net earnings $ 5,033 $ 1,741
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Denominator:
Weighted average outstanding shares of common stock 11,145,670 10,726,205
Dilutive effect of:
Employee stock options 1,070,238 476,584
Warrants 132,721 --
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Common stock and common stock equivalents 12,348,629 11,202,789
----------- -----------
Net earnings per share:
Basic $ 0.45 $ 0.16
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Diluted $ 0.41 $ 0.16
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NOTE 6 - ACQUISITION
On January 30, 2003, the Company acquired dotCOM, Ltd., d/b/a Cyberbox, a
Hong Kong-based company, for approximately $183,000 in cash, subject to
adjustment based upon certain customer retention targets. The transaction has
been accounted for under the purchase method and, accordingly, the results of
operations of dotCOM, Ltd. have been included in the consolidated results of the
Company since the date of acquisition. The excess of the purchase price over the
fair value of net assets acquired amounted to approximately $149,000. The excess
purchase price was comprised of approximately $122,000 of goodwill and $27,000
of identifiable intangible assets.
NOTE 7 - GOODWILL AND INTANGIBLE ASSETS
Upon the adoption of SFAS No. 142, "Goodwill and Other Intangible Assets",
in the first quarter of 2002, the Company discontinued amortizing the remaining
balances of goodwill and a trade name with an indefinite useful
9
life. In accordance with this Statement, no goodwill or trade name amortization
was recorded during the first quarters ended March 31, 2003 and 2002.
SFAS No. 142 also required that the amount of any unamortized deferred
credit from a business combination effected prior to July 1, 2001 be recognized
into earnings as the effect of a cumulative change of accounting principle. In
the first quarter of 2002, the Company recognized such a deferred credit
amounting to $225,000 in the accompanying condensed consolidated statement of
operations.
The following table reconciles per share data for net earnings before the
cumulative effect of a change in accounting principle to net earnings after such
change:
Three Months Ended March 31
---------------------------
2003 2002
------------ ------------
Basic net earnings before cumulative effect of a
change in accounting principle $ 0.45 $ 0.14
Cumulative effect of a change in accounting principle -- 0.02
------------ ------------
Basic net earnings per common share $ 0.45 $ 0.16
============ ============
Diluted net earnings before cumulative effect of a
change in accounting principle $ 0.41 $ 0.14
Cumulative effect of a change in accounting principle -- 0.02
------------ ------------
Diluted net earnings per common share $ 0.41 $ 0.16
============ ============
Weighted average shares outstanding:
Basic 11,145,670 10,726,205
============ ============
Diluted 12,348,629 11,202,789
============ ============
Intangible assets, which are included in other purchased intangibles, are
recorded at cost, less accumulated amortization. Amortization of intangible
assets with finite lives is provided over their estimated useful lives ranging
from 4 months to 8 years on a straight-line basis. Amortization expense,
included in general and administrative expense, during the quarter ended March
31, 2003 approximated $25,000. Amortization expense for the fiscal year ended
December 31, 2003 is estimated to approximate $127,000 and amortization expense
for the fiscal years ended December 31, 2004 through 2007 is estimated to
approximate $100,000 per year.
Goodwill and a trade name with an indefinite useful life are recorded net
of accumulated amortization through December 31, 2001. As of March 31, 2003,
intangible assets with finite lives, goodwill and trade name balances, net of
accumulated amortization were as follows (in thousands):
10
Amortization Historical Accumulated
period cost amortization Net
------------------- ---------- ------------ -----------
Intangible assets subject to amortization
- -----------------------------------------
Acquired product technology rights:
Patent 8 years $ 805 $ 119 $ 686
Other 4 months to 3 years 59 24 35
Intangible assets not subject to amortization
- ---------------------------------------------
Goodwill 23,639 8,181 15,458
Indefinite-lived trade name 1,500 232 1,268
NOTE 8 - INCOME TAXES
As of January 1, 2003, the Company had federal and state (California) net
operating loss carry-forwards ("NOLs") of approximately $109 million and $43
million, respectively. These NOLs expire through the year 2021 for the federal
and 2013 for the state. In addition, as of January 1, 2003, the Company had
federal and state research and development tax credits of $940,000 and $630,000,
respectively, which expire through the year 2021 for federal purposes and are
available indefinitely for state purposes.
The Tax Reform Act of 1986 imposed substantial restrictions on the
utilization of NOLs in the event of an "ownership change" (as defined in the
Internal Revenue Code) of a corporation. The Company's ability to utilize NOLs
is limited as a result of such "ownership changes". The NOLs attributable to the
eFax.com and SureTalk.com subsidiaries before their acquisitions by the Company
are also limited according to these provisions. After giving effect to these
limitations, we currently estimate that approximately $50 million of the federal
NOL and $43 million of the state NOL will be available for use before their
expiration.
The Company's valuation allowance is reviewed quarterly based upon the
facts and circumstances known at the time. Based on its historical cumulative
losses, the uncertainty of future operating results and other factors, the
Company has determined that it is not more likely than not that we will realize
the tax benefits of our NOLs and other deferred tax assets for which a full
valuation allowance is recorded.
In September 2002, the State of California enacted legislation that
prevents taxpayers from utilizing NOL carry-forwards in the 2002 and 2003 tax
years only. As a result, 2003 state tax expense of $235,000 consists of
apportioned California taxes offset by certain state research and development
tax credits.
NOTE 9 - ACCOUNTING FOR STOCK OPTIONS
The Company applies the intrinsic value-based method of accounting
prescribed by APBO No. 25, "Accounting for Stock Issued to Employees", and
related interpretations to account for its fixed plan stock options. These
interpretations include FASB Interpretation No. 44, "Accounting for Certain
Transactions Involving Stock Compensation an Interpretation of APBO No. 25",
issued in March 2000. Under this method, compensation expense is generally
recorded on the date of grant only if the current market price of the underlying
stock exceeded the exercise price. The Company has adopted the disclosure only
provisions of SFAS No. 123, "Accounting for Stock-Based Compensation", and SFAS
No. 148, "Accounting for Stock-Based Compensation-Transition and Disclosure",
which was released in December of 2002 as an amendment to SFAS No. 123. These
statements establish accounting and disclosure requirements using a fair
value-based method of accounting for stock-based employee compensation plans. As
allowed by SFAS No. 123 and SFAS No. 148, the Company has elected to continue to
apply the intrinsic value-based method of accounting described above.
The Company accounts for option grants to non-employees using the guidance
of SFAS No. 123, as amended by SFAS No. 148, and EITF No. 96-18, whereby the
fair value of such options is determined using the Black-
11
Scholes option pricing model at the earlier of the date at which the
non-employee's performance is complete or a performance commitment is reached.
In accordance with the intrinsic value method, no compensation cost has
been recognized for the Company's fixed plan stock option grants in the
accompanying financial statements. If the fair value-based method had been
applied in measuring stock compensation expense under SFAS No. 123, as amended
by SFAS No. 148, the pro forma effect on net earnings and net earnings per share
would have been as follows (in thousands, except share and per share amounts):
Three Months Ended March 31,
2003 2002
------------ ------------
Net earnings, as reported $ 5,033 $ 1,741
Add: Stock based employee compensation expense included
in reported net earnings, net of related tax benefits -- --
Deduct: Stock based employee compensation expense
determined under the fair value-based method for all awards,
net of related tax effects (402) (325)
------------ ------------
Pro forma net earnings $ 4,631 $ 1,416
============ ============
Basic net earnings per common share:
As reported $ 0.45 $ 0.16
============ ============
Pro forma $ 0.42 $ 0.13
============ ============
Diluted net earnings per common share:
As reported $ 0.41 $ 0.16
============ ============
Pro forma $ 0.38 $ 0.13
============ ============
NOTE 10 - SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest during the quarters ended March 31, 2003 and 2002
approximated $15,000 and $19,000, respectively, substantially all of which
related to long-term debt and capital leases.
During the first quarter of 2003, the Company entered into a capital lease
arrangement for certain computer equipment and software approximating $240,000.
In the first quarter of 2003, the Company recorded the tax benefit from the
exercise of non-qualified stock options as a reduction of its income tax
liability and an increase in equity in the amount of approximately $203,000.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
- -------------------------------------------------------------------------------
of Operations
- -------------
ORGANIZATION AND DESCRIPTION OF BUSINESS
j2 Global Communications, Inc. ( "we," "us" and "our") is a leading
provider of outsourced, value-added messaging and communications services to
individuals and businesses throughout the world. We are a Delaware corporation
and were founded in 1995. We offer faxing and voicemail solutions, document
management solutions, Web-initiated conference calling and unified messaging
services. We market our services principally under the brand names eFax(R),
jConnect(R), JFAX(R), eFax Corporate(R), jBlast(R), eFax BroadcastTM, Hotsend(R)
and PaperMaster(R).
12
We deliver our services through our global telephony/Internet Protocol
("IP") network, which covers more than 1,000 cities in 18 countries across 5
continents. We have created this network, and continuously seek to expand it,
through negotiating with U.S. and foreign telecommunications providers for
telephone numbers (also referred to as Direct Inward Dial numbers or "DIDs"),
Internet bandwidth and co-location space for our equipment. In addition, we have
expanded our network through small acquisitions of local players in
international territories, such as Hong Kong and Latin America. As of March 31,
2003, we had more than 4.6 million telephone numbers deployed to our customers.
In addition, we maintain an inventory of additional telephone numbers to be
assigned to new customers.
We organize our marketing and sales efforts into three distinct channels:
Web, Corporate and Licensed Services. The Web channel, which currently generates
the majority of our revenues, markets our eFax(R) and jConnect(R) branded
services primarily to individuals and small businesses through a combination of
Internet-based marketing and advertising, an in-house telesales group and
word-of-mouth. Introduced in late-2000, the Corporate channel markets our eFax
Corporate(R) branded service to midsize and large businesses, as well as
government agencies, through a growing in-house direct sales force. The
Corporate channel also markets our eFax BroadcastTM and jBlast(R) products
through an outsourced telesales organization. Our Licensed Services channel
seeks to integrate, on an opportunistic basis, our services and network
capabilities into third-party product offerings, to sell our software and to
license our intellectual property.
We generate a substantial portion of our revenues from subscribers that pay
through activation, subscription and usage fees. Greater than two-thirds of our
Corporate channel revenue is generated by usage fees. We also generate a small
percentage of our overall revenues from advertising to non-paid subscribers
(sometimes referred to as "free" subscribers). These "advertising-supported"
subscribers, which are managed through our Web channel, also serve as a
significant source of new paid subscribers, both for the Web channel and the
Corporate channel. This process of migrating advertising-supported customers to
paid services is part of our "life cycle management" program. This process
includes monitoring the usage level of advertising-supported customers, sending
them promotional up-sell messages and culling out subscribers that do not adhere
to the limitations on free services set forth in our customer agreements.
Of the more than 4.6 million telephone numbers deployed as of March 31,
2003, our Web channel had approximately 256,000 direct paying telephone numbers
and approximately 4.3 million advertising-supported telephone numbers. Our
Corporate channel had more than 48,000 telephone numbers deployed. For the three
months ended March 31, 2003, our Web channel produced 71% of our revenue and our
Corporate channel produced 29%, the remaining balance coming from our Licensed
Services channel and other minor sources.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2002
REVENUE ITEMS
SUBSCRIBER REVENUES. Subscriber revenues are comprised primarily of monthly
recurring subscription and usage based fees. Subscriber revenues were $14.5
million and $9.4 million for the three months ended March 31, 2003 and 2002,
respectively. The increase in subscriber revenues was due primarily to an
increase in our paying subscribers in both our Web and Corporate channels and an
increase in usage levels in our Corporate channel. The increase in paid
subscribers in our Web channel was the result of new Web sign-ups derived from
word-of-mouth and increased Internet advertising, and conversions of existing
advertising-supported customers to paid services as a result of our "lifecycle
management" program. The increase in paid subscribers in our Corporate channel
was the result of new customers generated by our direct sales force as well as
the conversion of existing advertising-supported customers to paid Corporate
accounts. Our number of subscribers (both paid and advertising-supported) was
greater than 4.6 million and 4.5 million as of March 31, 2003 and 2002,
respectively, and the percentage of paid subscribers has increased
year-over-year. Web subscriber revenues represented 71% and 74% of our total
subscriber revenues as of March 31, 2003 and 2002, respectively. Corporate
subscriber revenues represented 29% and 26% of our total subscriber revenues as
of March 31, 2003 and 2002, respectively.
ADVERTISING. We generate advertising revenues primarily by delivering email
messages on behalf of advertisers to our customers who elect to receive such
messages. Advertising revenues, a component of our Web channel, were
13
$612,000 and $827,000 for the three months ended March 31, 2003 and 2002,
respectively. The decrease in advertising revenues was due, among other reasons,
to a weaker advertising market inherent in the first quarter of 2003 compared to
the first quarter of 2002, which resulted in less advertising spend by our
advertisers and a slight decrease in advertising rates. We expect the Internet
advertising market to remain weak for the remainder of 2003 and, as a result,
our advertising revenues may further decline unless we are able to offset that
decline by offering added value to our advertisers.
LICENSED SERVICES AND OTHER. For the three months ended March 31, 2003, our
Licensed Services channel and other revenues consisted primarily of royalties
from licensing arrangements related to sales of consumable products to users of
existing eFax.com fax machines, which we no longer produce, and revenues from
licensing our document management software. For the three months ended March 31,
2002, our Licensed Services channel and other revenues consisted primarily of
royalties from licensing arrangements related to sales of consumable products to
users of existing eFax.com fax machines. Licensed Services channel and other
revenues were $142,000 and $182,000 for the three months ended March 31, 2003
and 2002, respectively. The decrease in our Licensed Services channel and other
revenues resulted primarily from expected declining consumable product royalties
related to older eFax.com fax machines being replaced or retired, offset by an
increase in revenues relating to the licensing of our document management
software.
REVENUES BY CHANNEL. For the three months ended March 31, 2003, our Web,
Corporate and Licensed Services channel revenues represented 71%, 29% and less
than 1% of our total revenues, respectively. For the three months ended March
31, 2002, our Web, Corporate and Licensed Services channel revenues represented
74%, 24% and 2% of our revenues, respectively. The primary reason for the change
in these revenue percentages across the sales channels was the faster rate of
growth of our Corporate channel during 2003.
COST OF REVENUES. Cost of revenues is comprised primarily of costs associated
with data and voice transmission, telephone numbers, customer service, online
processing fees and equipment depreciation. Cost of revenues was $3.0 million,
or 20% of total revenues, and $3.4 million, or 33% of total revenues, for the
three months ended March 31, 2003 and 2002, respectively. The decrease in cost
of revenues was due primarily to consolidation of various components of our
infrastructure, increased network efficiency and our ability to negotiate
reduced costs with several of our vendors. The decrease in cost of revenues as a
percentage of revenues was a result of our ability to negotiate reduced costs
with several of our vendors, the consolidation of various components of our
infrastructure and overall increases in revenue over the same periods, relative
to the fixed costs to support those revenues.
OPERATING EXPENSES
SALES AND MARKETING. Sales and marketing expenses are comprised primarily of
payments to sales and marketing personnel, customer acquisition payments,
advertising expenses, consulting services, promotional and public relations
activities, trade show appearances and other business development activities.
Our marketing and advertising relationships consist primarily of fixed cost,
impression-based and cost-per-click advertising arrangements with an array of
online service providers. On an ongoing basis, we assess the effectiveness of
these relationships in acquiring Web customers at acceptable costs.
Sales and marketing expenses were $2.5 million, or 17% of total revenues,
and $1.3 million, or 12% of total revenues, for the three months ended March 31,
2003 and 2002, respectively. The increase in sales and marketing expenses was
due primarily to the identification of additional marketing and advertising
relationships that were effective in acquiring Web customers, a more aggressive
customer acquisition campaign and additional selling personnel added to the
Corporate channel.
Amounts expensed under agreements with online service providers are
included in sales and marketing expense. For the three months ended March 31,
2003 and 2002, total amounts expensed under these agreements were $375,000 and
zero, respectively.
RESEARCH AND DEVELOPMENT. Our research and development costs consist primarily
of personnel related costs. Research and development costs were $1.0 million, or
7% of total revenues and $787,000, or 8% of total revenues for the three months
ended March 31, 2003 and 2002, respectively. The increase in research and
development costs was primarily due to an increase in personnel costs to:
develop and implement additional service features and
14
functionality and continue to bolster the capacity and security of our
infrastructure. Research and development costs as a percentage of revenue
decreased as a result of proportionately greater increases in revenues over the
same periods.
AMORTIZATION OF GOODWILL AND OTHER INTANGIBLES. Upon the adoption of SFAS No.
142, "Goodwill and Other Intangible Assets", in the first quarter of 2002, we
discontinued amortizing the remaining balances of goodwill and a trade name with
an indefinite useful life. In accordance with this statement, no goodwill or
trade name amortization was recorded during the first quarters ended March 31,
2003 and 2002.
SFAS No. 142 also required that the amount of any unamortized deferred
credit from a business combination effected prior to July 1, 2001 be recognized
into earnings as the effect of a cumulative change of accounting principle. In
the first quarter of 2002, we recognized such a deferred credit amounting to
$225,000 in the accompanying condensed consolidated statement of operations.
Amortization of goodwill and other intangibles, included in general and
administrative expenses, aggregated $25,000 and $112,000 for the three months
ended March 31, 2003 and 2002, respectively. The $112,000 as of March 31, 2002
represented amortization for an intangible asset with a finite useful life under
SFAS No. 142. This intangible asset was fully amortized as of January 2002. See
Note 7 to the accompanying condensed consolidated financial statements for a
further discussion of goodwill and intangible assets.
INTEREST AND OTHER INCOME. Our interest and other income are primarily related
to interest earned on cash and cash equivalents. Interest and other income
amounted to $74,000 and $93,000 for the three months ended March 31, 2003 and
2002, respectively. The decrease in interest and other income was primarily due
to higher interest rates earned on cash and investments (notwithstanding higher
cash and investment balances for 2003) in 2002.
INCOME TAXES. As of January 1, 2003, we had federal and state (California) Net
Operating Loss carry-forwards ("NOLs") of approximately $109 million and $43
million, respectively. These NOLs expire through the year 2021 for the federal
NOL and 2013 for the state NOL. In addition, as of December 31, 2002, we had
federal and state research and development tax credits of $940,000 and $630,000,
respectively, which expire through the year 2021 for federal purposes and last
indefinitely for state purposes.
The Tax Reform Act of 1986 imposed substantial restrictions on the
utilization of NOLs in the event of an "ownership change" (as defined in the
Internal Revenue Code) of a corporation. Our ability to utilize NOLs is limited
as a result of such "ownership changes". The NOLs attributable to the eFax.com
and SureTalk.com subsidiaries before we acquired them are also limited according
to these provisions. After giving effect to these limitations, we currently
estimate that approximately $50 million of the federal NOL and $43 million of
the state NOL will be available for use before their expiration.
Income tax expense amounted to approximately $235,000 and zero for the
three months ended March 31, 2003 and 2002, respectively. In September 2002, the
State of California enacted legislation that prevents taxpayers from utilizing
NOL carry-forwards in the 2002 and 2003 tax years only. As a result, 2003 state
tax expense of $235,000 consists of apportioned California taxes offset by
certain state research and development tax credits. For the remainder of 2003,
we expect to incur California income tax expense of approximately 5% of income
before taxes.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2003, our primary source of liquidity consisted of $38.7
million in cash and cash equivalents.
Net cash provided by operating activities was $5.3 million and $1.7 million
for the three months ended March 31, 2003 and 2002, respectively. For the first
quarter of 2003, the net cash provided by operating activities resulted
primarily from our operating earnings, supplemented by depreciation and
amortization, decreases in accounts receivable and prepaid expenses and an
increase in deferred revenue, offset by a decrease in accounts payable. For the
first quarter of 2002, the net cash provided by operating activities resulted
primarily from our operating earnings, supplemented by depreciation and
amortization, a decrease in prepaid expenses and an increase in deferred
revenue, offset by a decrease in accounts payable, an increase in other assets
and the benefit of a non-cash cumulative change in accounting principle.
15
Net cash used in investing activities was $393,000 and $443,000 for the
three months ended March 31, 2003 and 2002, respectively. For the first quarter
of 2003, net cash used in investing activities was comprised primarily of
purchases of furniture, fixtures and equipment and the acquisition of a
business, net of cash, offset by proceeds from the sale of equipment. For the
first quarter of 2002, net cash used in investing activities consisted primarily
of purchases of furniture, fixtures and equipment, offset by repayments of notes
receivable.
Net cash provided by (used in) financing activities was $1.0 million and
($208,000) for the three months ended March 31, 2003 and 2002, respectively. For
the first quarter of 2003, net cash provided by financing activities was
comprised primarily of proceeds from the exercise of stock options and common
shares issued under our employee stock purchase plan, offset by repayments of
long-term debt and capital lease obligations. For the first quarter of 2002, net
cash used in financing activities was due to repayments of long-term debt and
capital lease obligations.
Based on our past performance and current expectations, we believe that our
cash and cash equivalents will be sufficient to meet our anticipated needs for
working capital and capital expenditures for at least the next 12 months.
FINANCIAL COMMITMENTS
CAPITAL LEASING AND LOAN ARRANGEMENTS
We finance a portion of our operating technology software and hardware,
office equipment and certain insurance costs through capital leasing and loan
arrangements. Our software, hardware and office equipment financing is secured
by the related assets. Our financing for insurance costs is unsecured. Amounts
due under these arrangements approximated $777,000 and $847,000 as of March 31,
2003 and December 31, 2002, respectively, with installments due through 2006 at
fixed rates ranging from 3.4% to 8.8% per annum.
OPERATING LEASES
We lease certain facilities and equipment under non-cancelable operating
leases which expire at various dates through 2010. Future minimum lease payments
under operating leases as of March 31, 2003 for the remainder of the fiscal year
ending December 31, 2003 approximate $564,000.
Future minimum lease payments under non-cancelable operating leases (with
initial or remaining lease terms in excess of one year) are as follows (in
thousands):
Year Ending
December 31,
-------------
2004 $ 695
2005 695
2006 708
2007 708
2008 708
Thereafter 708
-------------
Total $ 4,222
=============
FORWARD-LOOKING INFORMATION
In addition to historical information, the foregoing Management's
Discussion and Analysis of Financial Condition and Results of Operations
contains forward-looking statements. These forward-looking statements involve
risks, uncertainties and assumptions. The actual results may differ materially
from those anticipated in these forward-looking statements as a result of many
factors, including but not limited to those discussed below, the results of any
acquisition we may complete and the factors discussed in the section in this
Quarterly Report on Form 10-Q entitled "Quantitative and Qualitative Disclosures
About Market Risk". Readers are cautioned not to place
16
undue reliance on these forward-looking statements, which reflect management's
opinions only as of the date hereof. We undertake no obligation to revise or
publicly release the results of any revision to these forward-looking
statements. Readers should carefully review the risk factors described below,
those identified in the "Risk Factors" section of our Annual Report on Form 10-K
filed with the Securities and Exchange Commission ("SEC") on March 31, 2003 and
the risk factors set forth in other documents we file from time to time with the
SEC.
Some factors that could cause actual results to differ materially from
those anticipated in these forward-looking statements include, but are not
limited to, our ability to:
o Sustain growth or profitability;
o Continue to maintain, expand and retain our customer base;
o Compete with other similar providers with regard to price, service and
functionality;
o Cost-effectively procure large quantities of telephone numbers in
desired locations in the United States and abroad;
o Obtain large quantities of non-paying users on a cost effective basis,
and effectively derive revenues from those users through advertising
to them and selling them paid services;
o Successfully manage our cost structure, including but not limited to
our telecommunication and personnel related expenses;
o Successfully adapt to technological changes in the messaging,
communications and document management industries;
o Successfully protect our intellectual property and avoid infringing
upon the proprietary rights of others;
o Adequately manage growth in terms of managerial and operational
resources;
o Maintain and upgrade our systems and infrastructure to deliver
acceptable levels of service quality and security of customer data and
messages;
o Introduce new services and achieve acceptable levels of
returns-on-investment for those new services; and
o Recruit and retain key personnel.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
- ------------------------------------------------------------------
The following discussion of the market risks we face contains
forward-looking statements. Forward-looking statements are subject to risks and
uncertainties. Actual results could differ materially from those discussed in
the forward-looking statements.
We believe that our exposure to market risk related to changes in interest
rates and foreign currency exchange rates is not significant, primarily because
our indebtedness under financing arrangements has fixed interest rates and our
transactions are substantially denominated in US Dollars. However, we invest our
cash primarily in high grade, short-term, interest-bearing instruments. Our
return on these instruments is subject to interest rate fluctuations.
We do not have derivative financial instruments for hedging, speculative or
trading purposes.
Item 4. Controls and Procedures
- -------------------------------
Within 90 days prior to the date of this report, we carried out an
evaluation, under the supervision and with the participation of our principal
executive officer and principal financial officer, of the effectiveness of the
design and
17
operation of our disclosure controls and procedures. Based on this evaluation,
our principal executive officer and principal financial officer concluded that
our disclosure controls and procedures are effective in providing them timely
alerts of material information required to be included in our periodic SEC
reports or to otherwise be promptly released to the public. It should be noted
that the design of any system of controls is based in part upon certain
assumptions about the likelihood of future events, and there can be no assurance
that any design will succeed in achieving its stated goals under all potential
future conditions, regardless of how remote.
In addition, we reviewed our internal controls, and there have been no
significant changes in our internal controls or in other factors that could
significantly affect those controls subsequent to the date of their last
evaluation.
18
PART II. OTHER INFORMATION
- --------------------------
Item 1. Legal Proceedings
- -------------------------
We are not currently aware of any legal proceedings or claims that we
believe are likely to have a material adverse effect on our business, prospects,
financial position, results of operations or cash flows.
Item 6. Exhibits and Reports on Form 8-K
- ----------------------------------------
A. Exhibits
99.1 Certification by Scott M. Jarus (Principal Executive Officer),
President of j2 Global Communications, Inc., pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
99.2 Certification by Nehemia Zucker (Principal Financial Officer),
Chief Financial and Marketing Officer of j2 Global
Communications, Inc., pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
B. Reports on Form 8-K
Item Description Filing Date
---- ----------- -----------
7,9 Regulation FD disclosure regarding fourth February 6, 2003
quarter and fiscal year 2002 financial
results, revised financial estimates for
first quarter and fiscal year 2003, and
February 2003 Investor Presentation.
ITEMS 2, 3, 4 AND 5 ARE NOT APPLICABLE AND HAVE BEEN OMITTED.
19
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.
j2 Global Communications, Inc.
Date: May 8, 2003 By: /s/ NEHEMIA ZUCKER
-------------------------------
Nehemia Zucker
Chief Financial and Marketing Officer
(Principal Financial Officer)
Date: May 8, 2003 By: /s/ GREGGORY KALVIN
----------------------
Greggory Kalvin
Vice President Finance
(Principal Accounting Officer)
20
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
UNDER SECTION 302 OF THE SARBANES-OXLEY ACT
I, Scott M. Jarus, certify that:
1. I have reviewed this quarterly report on Form 10-Q of j2 Global
Communications, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
(b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
/s/ Scott M. Jarus
------------------------------------
Scott M. Jarus
President
(Principal Executive Officer)
Dated: May 8, 2003
21
CERTIFICATION OF CHIEF FINANCIAL OFFICER
UNDER SECTION 302 OF THE SARBANES-OXLEY ACT
I, Nehemia Zucker, certify that:
1. I have reviewed this quarterly report on Form 10-Q of j2 Global
Communications, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
(b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
/s/ Nehemia Zucker
-------------------------------------
Nehemia Zucker
Chief Financial and Marketing Officer
(Principal Financial Officer)
Dated: May 8, 2003
22
INDEX TO EXHIBITS
Exhibit Number Description
- -------------- -----------
99.1 Certification by Scott M. Jarus (Principal Executive Officer),
President of j2 Global Communications, Inc., pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
99.2 Certification by Nehemia Zucker (Principal Financial Officer),
Chief Financial and Marketing Officer of j2 Global
Communications, Inc., pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
23