8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): February 3, 2005

Cypress Communications Holding Co., Inc.

(Exact name of registrant as specified in its charter)

Delaware	000-30401	36-4166222
(State or other Jurisdiction	(Commission File Number)	(IRS Employer
of Incorporation)		Identification No.)

15 Piedmont Center, Suite 100
Atlanta, Georgia 30305
(Address of principal executive offices) (Zip Code)

(404) 869-2500
(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act

TABLE OF CONTENTS

EX-2.1 AMENDMENT TO AGREEMENT AND PLAN OF MERGER

EX-99.1 PRESS RELEASE

Item 1.01 Entry into a Material Definitive Agreement

     In a February 4, 2005 press release, Cypress Communications Holding Co., Inc. (the “Company”) announced that it agreed to an amendment (the “Amendment”) to the Agreement and Plan of Merger (as amended, the “Merger Agreement”) entered into on November 5, 2004, between the Company, TechInvest Holding Company, Inc. (“Parent”) and TechInvest Acquisition, Inc., a wholly owned subsidiary of Parent (“Purchaser”), pursuant to which Parent will acquire the Company.

     The total value of the transaction, at the time of the execution of the Merger Agreement, was $39.350 million. The Merger Agreement contains provisions for final merger consideration adjustments, upwards or downwards, based on the achievement of certain conditions pertaining to changes in certain current assets and liabilities between the execution of the Merger Agreement and closing of the transaction.

     On February 3, 2005, in recognition of potential increases in working capital relating to the telecommunications tax recovery, the Company and Parent agreed to the Amendment to increase the merger consideration by $935,000, making the total value of the transaction $40.285 million. The parties also agreed in the Amendment, among other things, that accounts receivable attributable to the telecommunications tax recovery will be capped in light of the increase in the merger consideration for purposes of calculating the final merger consideration adjustment.

     The Merger Agreement provides that the merger consideration will first be used to repay outstanding indebtedness. The remaining consideration, after transaction expenses, will be distributed to stockholders, with an estimated price per share of $1.71, subject to final merger consideration adjustments (The $1.71 per share cash consideration is estimated by the Company as of December 31, 2004 and is subject to adjustment upwards or downwards pursuant to the merger agreement).

     The closing of the transaction is subject to certain terms and conditions customary for transactions of this type, including receipt of stockholder and regulatory approvals and other conditions.

     In connection with the Merger Agreement and the transactions contemplated by it, the Company has scheduled a special meeting of its stockholders for March 15, 2005.

     The foregoing description of the Merger Agreement and the Amendment does not purport to be complete and is qualified in its entirety by reference to the Merger Agreement and the Amendment, which are filed as of November 8, 2004 on Form 8-K and as Exhibit 2.1 to this Current Report on Form 8-K, respectively, and incorporated herein by reference.

     The Company will be preparing and filing with the Securities and Exchange Commission and mailing to its stockholders a proxy statement regarding the proposed merger and related matters. Stockholders are urged to read the proxy statement carefully when it is available, as it will contain important information that stockholders should consider before making a decision about the merger. In addition to receiving the proxy statement from the Company by mail, stockholders also will be able to obtain the proxy statement, as well as other filings

containing information about the Company, without charge, from the Securities and Exchange Commission’s website (http://www.sec.gov) or, without charge, from the Company’s website at www.cypresscom.net. This announcement is neither a solicitation of proxy, an offer to purchase nor a solicitation of an offer to sell shares of the Company.

     The Company and its executive officers and directors may be deemed to be participants in the solicitation of proxies from the Company’s stockholders with respect to the proposed merger. Information regarding any interests that the Company’s executive officers and directors may have in the transaction will be set forth in the proxy statement.

Item 2.02 Results of Operations and Financial Condition.

     On February 4, 2005, the Company issued a press release announcing its results of operations and financial condition for the fiscal quarter ended September 30, 2004. The announcement of the third quarter results and the filing of the Form 10-Q had been delayed as the Company evaluated the financial impact of payments made to telecommunications service providers for taxes and surcharges for which it might be exempt. The Company notified the Securities and Exchange Commission on November 12, 2004 of the delay with the filing of a Form 12b-25.

     In accordance with General Instruction B.2 of Form 8-K, this Current Report on Form 8-K, including Exhibit 99.1, shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such a filing.

Item 9.01 Financial Statements and Exhibits

     (c) Exhibits.

     Exhibit 2.1 Amendment to Agreement and Plan of Merger by and among TechInvest Holding Company, Inc., TechInvest Acquisition, Inc. and Cypress Communications Holding Co., Inc., dated as of February 3, 2005

     Exhibit 99.1 Press release issued by Cypress Communications Holding Co., Inc. on February 4, 2005

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 hereunto duly authorized.

Cypress Communications Holding Co., Inc. (Registrant)
By:	/s/ Gregory P. McGraw
	Gregory P. McGraw
	President and Chief Executive Officer

Date: February 7, 2005

Exhibits

Exhibit No.	Description
2.1	Amendment to Agreement and Plan of Merger by and among TechInvest Holding Company, Inc., TechInvest Acquisition, Inc. and Cypress Communications Holding Co., Inc., dated as of February 3, 2005
99.1	Press release issued by Cypress Communications Holding Co., Inc. on February 4, 2005

EX-2.1

Exhibit 2.1

AMENDMENT NO. 1 TO AGREEMENT AND PLAN OF MERGER

     This AMENDMENT NO. 1 TO AGREEMENT AND PLAN OF MERGER (this “Amendment”) is entered into as of February 3, 2005 by and among TECHINVEST HOLDING COMPANY, INC., a Delaware corporation (“Parent”), TECHINVEST ACQUISITION, INC., a Delaware corporation and a wholly owned subsidiary of Parent (“Purchaser”), and CYPRESS COMMUNICATIONS HOLDING CO., INC., a Delaware corporation (the “Company”).

     WHEREAS, the Parties entered into an Agreement and Plan of Merger dated November 5, 2004 (the “Agreement”); and

     WHEREAS, the Parties desire to amend the Agreement, in accordance with Section 9.1 thereof, to clarify their agreement with respect to certain matters;

     NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and based upon the mutual covenants contained herein, the Parties agree as follows:

     1. Clause (iii) of Section 1.8(b) of the Agreement is hereby amended to read in its entirety as follows:

     (iii) The Unadjusted Consideration shall be increased on a dollar-for-dollar basis by the amount of cash on the Company’s balance sheet as of the Measurement Date and, if mutually determined by the Parties, by the amount of cash received by the Company through the Closing Date upon the exercise of Company Options and Warrants between the Measurement Date and the Closing Date.

     2. Section 1.8(b) of the Agreement is hereby further amended to include a clause (iv) which shall read in its entirety as follows:

     (iv) The Unadjusted Consideration shall be decreased by the amount of cash received by the Company, on or prior to the Measurement Date, that relates to refunds attributable to the Company’s having made payments to telecommunications service providers, in periods prior to July 1, 2004, for taxes and surcharges from which the Company might be exempt (the “Telecom Tax Recovery”), other than cash received by the Company from telecommunications service providers identified on Schedule 1.8(b) of the Disclosure Schedules relating to the Telecom Tax Recovery.

     3. The definition of “Unadjusted Consideration” in Section 8.1 of the Agreement is hereby amended to read in its entirety as follows:

     “Unadjusted Consideration” means $40,285,000.

     4. Exhibit 1.8 to the Agreement is hereby deleted in its entirety and the Exhibit 1.8 attached as Annex A hereto is hereby inserted in lieu thereof.

     5. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to them in the Agreement.

     6. The laws of the State of Delaware (without giving effect to the principles of conflicts of law thereof) govern all matters arising out of or relating to this Agreement, including, without limitation, its validity, interpretation, construction, performance and enforcement.

     7. Except as specifically modified by this Amendment, all terms and conditions of the Agreement shall remain in full force and effect.

[Signature Page Follows]

     IN WITNESS WHEREOF, the Parties have duly executed this Amendment No. 1 to Agreement and Plan of Merger on the date set forth above.

CYPRESS COMMUNICATIONS HOLDING CO., INC.
By:	/s/ Gregory P. McGraw
	Gregory P. McGraw Chief Executive Officer
TECHINVEST HOLDING COMPANY, INC.
By:	/s/ Charles H. Ogburn
	Charles H. Ogburn
	Director
TECHINVEST ACQUISITION, INC.
By:	/s/ Charles H. Ogburn
	Charles H. Ogburn
	Director

ANNEX A
To Amendment No. 1 to Agreement and Plan of Merger

Exhibit 1.8

($ amounts in thousands)

	As of
	July 31, 2004
Current Assets (1)
Accounts Receivable	$	7,912
Other Receivable		(59	)
Bad Debt Allowance		(215	)
Prepaid Expenses		1,025
Other Current Assets		0
Long-Term Deferred Interest Charges		0
Long-Term Deposits		41
Total Current Assets	$	8,704
Current Liabilities (2)
Accounts Payable	$	2,591
Accrued Liabilities (3)		9,631
Deferred Revenues		1,288
Other Current Liabilities		319
Long-Term Customer Deposits		456
Long-Term Accrued Restructuring Liabilities		56
Total Current Liabilities	$	14,342
Assumed Net Working Capital (4)	($	5,638	)

(1)	For purposes of calculating Net Working Capital as of the Measurement Date, no adjustment that would relate to refunds or credits, or potential refunds or credits, attributable to the Telecom Tax Recovery shall be made to any working capital account on this Exhibit 1.8, other than adjustments relating to any Telecom Tax Recovery from telecommunications service providers identified on Schedule 1.8(b) of the Disclosure Schedules.
(2)	“Current Liabilities,” as of July 31, 2004 and as of the Measurement Date, specifically exclude all dollar amounts attributable to the capital leases; the Senior Loan including accrued interest and fees; the Convertible Debt including accrued interest, fees and Convertible Debt discount; and the Bridge Loan including accrued interest and fees; and, as of the Measurement Date, shall exclude Transaction Liabilities.
(3)	Accrued liabilities include amounts reserved for litigation matters.
(4)	“Assumed Net Working Capital” has the meaning set forth in Section 1.8 (a).

EX-99.1

Exhibit 99.1

FOR IMMEDIATE RELEASE

For more information, contact:

Neal Miller
Executive Vice President and Chief Financial Officer
Cypress Communications
nmiller@cypresscom.net
404-442-0234

Cypress Communications Reports Second Consecutive Quarter of Net Income in Third Quarter 2004
and Filing of Form 10-Q; Announces Amendment to Merger Agreement and Scheduling of Stockholders’
Meeting

ATLANTA, February 4, 2005 – Cypress Communications Holding Co., Inc. (Pink Sheets: CYHI.PK) , formerly known as U.S. RealTel, Inc., today filed its Form 10-Q with the Securities and Exchange Commission, reporting its consolidated operating and financial results for its third quarter ended September 30, 2004. The announcement of the third quarter results and the filing of the Form 10-Q had been delayed as Cypress evaluated the financial impact of payments made to telecommunications service providers for taxes and surcharges for which it might be exempt. Cypress notified the Securities and Exchange Commission on November 12, 2004 of the delay with the filing of a Form 12b-25.

     Cypress also has been informed by NASDAQ that as a result of the Form 10-Q’s not having been filed on a timely basis, Cypress’s common stock will not be quoted on the Over the Counter Bulletin Board beginning February 3, 2005. Cypress is re-applying to have its common stock quoted now that its Form 10-Q has been filed.

     Cypress also announced an amendment to the Agreement and Plan of Merger (as amended, the “Merger Agreement”) entered into on November 5, 2004, between Cypress, TechInvest Holding Company, Inc. (“Parent”), an affiliate of Crescent Capital Investments, Inc. (“Crescent Capital”), and TechInvest Acquisition, Inc., a wholly-owned subsidiary of Parent (“Purchaser”). Cypress has scheduled a special stockholders meeting for March 15, 2004 to consider the Merger Agreement.

Financial Highlights

     The Company reported revenues for the third quarter ended September 30, 2004 of $19.4 million, a decrease of 4% from second quarter 2004 revenues of $20.3 million, primarily

due to seasonal factors associated with the business. Third quarter 2004 revenue also showed an 8% decrease from third quarter 2003 revenue of $21.0 million, primarily due to anticipated reductions in the customer base acquired in the acquisition of WorldCom’s Intermedia Advanced Building Networks unit in 2002. Customer base reductions resulted from contract expirations and the decline in occupancy rates in buildings serviced by Cypress Communications. Revenues for the nine months ended September 30, 2004 were $59.6 million, a decrease of 8% from $64.8 million for the nine months ended September 30, 2003, for same reasons noted above.

     The Company reported net income of $303,000 or $0.05 per share for the third quarter of 2004 as compared to a net loss of $1.8 million or ($0.31) per share for the third quarter of 2003 on 5,874,000 weighted average shares of common stock outstanding for each period respectively. The improvement in the reported net income is related primarily to the improved gross margins from EZ Office bundled services, lower operating expenses and the competitive local exchange carrier (CLEC) migration discussed below. Net income for the nine months ended September 30, 2004 was $335,000 or $0.06 per share as compared to a net loss of $3.0 million or ($0.52) per share for the nine months ended September 30, 2003 on 5,874,000 weighted average shares of common stock outstanding for each period respectively.

     The Company reported third quarter 2004 EBITDA (net income (loss) excluding net interest, income taxes, depreciation and amortization) of $2.3 million, versus third quarter 2003 EBITDA of $46,000. When comparing EBITDA for the third quarter of 2004 to the third quarter of 2003, the increase in EBITDA can be primarily attributed to network cost savings and gross margins realized as a result of the substantial completion of network migration efforts as a CLEC to wholesale interconnection arrangements with the regional bell operating companies and incumbent local telephone companies, along with reductions in other operating expenses. EBITDA for the nine months ended September 30, 2004 was $6.1 million, a 190% increase over the $2.1 million of EBITDA reported for the nine months ended September 30, 2003. (2003 EBITDA includes a one-time extinguishment of certain accrued liabilities of $967,000 and $2.0 million for the three and nine months ended September 30, 2003 respectively attributable to the Company’s success in renegotiating a settlement of prior period disputes with one of its major suppliers.)

     EBITDA is presented because it is a widely accepted performance indicator, although it should be noted that it is not a measure of liquidity or of financial performance under generally accepted accounting principles (“GAAP”). The EBITDA numbers presented may not be comparable to similarly titled measures reported by other companies. EBITDA, while providing

useful information, should not be considered in isolation or as an alternative to net income or cash flows as determined under GAAP. Consistent with Securities and Exchange Commission Regulation G, the attached table provides a reconciliation of EBITDA to the GAAP measure of operating income (in thousands).

     As of September 30, 2004, cash, cash equivalents and short-term investments totaled $1.8 million, as compared to $2.2 million at June 30, 2004.

     During the quarter ended September 30, 2004, Cypress management determined that Cypress had made payments to telecommunication service providers for federal, state and local taxes and surcharges on telecommunications services for which Cypress might be exempt. The evaluation of the amounts paid required that Cypress delay the filing of its Form 10-Q for the quarter ended September 30, 2004, and Cypress notified the Securities and Exchange Commission of such delay on November 12, 2004 with the filing of a Form 12b-25.

     Cypress has quantified the amount of taxes it believes were erroneously billed and paid. Cypress is attempting to recover these taxes and surcharges directly from the telecommunications service providers involved. Although management believes that the amount of taxes and surcharges which Cypress is entitled to recover is in the range of $1 million to $2.5 million, there is no assurance that any amounts will be recovered or when any amounts will be recovered, if ever. The recovery of these taxes and surcharges will be recorded in the financial statements when the taxes and surcharges are actually recovered.

Amendment to the Merger Agreement; Special Stockholders Meeting

     On November 5, 2004, Cypress, TechInvest Holding Company, Inc., an affiliate of Crescent Capital, and Purchaser, entered into the Merger Agreement pursuant to which Parent will acquire Cypress. The total value of the transaction, at the time of the execution of the Merger Agreement, was $39.350 million. The Merger Agreement contains provisions for final merger consideration adjustments, upwards or downwards, based on the achievement of certain conditions pertaining to changes in certain current assets and liabilities between the execution of the Merger Agreement and closing of the transaction.

     On February 3, 2005, in recognition of the potential increase in working capital relating to the telecommunications tax recovery, Cypress and Parent agreed to amend the Merger Agreement (the “Amendment”) to increase the merger consideration by $935,000, making the total value of the transaction $40.285 million. The parties also agreed in the Amendment, among other things, that accounts receivable attributable to the telecommunications tax recovery will be capped in light of the increase in the merger consideration for purposes of calculating the final merger consideration adjustment.

     The Merger Agreement provides that the merger consideration will first be used to repay outstanding indebtedness. The remaining consideration, after transaction expenses, will be distributed to stockholders, with an estimated price per share of $1.71, subject to final merger consideration adjustments. (The $1.71 per share cash consideration is estimated by Cypress as of December 31, 2004 and is subject to adjustment upwards or downwards pursuant to the merger agreement.)

     The closing of the transaction is subject to certain terms and conditions customary for transactions of this type, including receipt of stockholder and regulatory approvals and other conditions.

     In connection with the Merger Agreement and the transactions contemplated by it, Cypress has scheduled a special meeting of its stockholders for March 15, 2005.

About Cypress Communications

     Cypress Communications (Pink Sheets: CYHI.PK) is the preferred communication solution provider in more than 1,300 commercial office buildings in 25 major metropolitan U.S. markets. Each day, Cypress uses its fiber optic and copper broadband infrastructure to connect more than 100,000 employees for over 8,000 small- and medium-sized businesses in commercial office buildings. As a single-source provider of communication solutions, Cypress supplies advanced digital and IP phone service, unlimited local and long distance calling, business-class Internet connectivity, firewalls, security and VPN solutions, audio/web conferencing and business television solutions. The Cypress EZ Office^sm product suite provides a premium bundled solution with one number to call for support, one simple bill and the highest level of service available. Cypress Communications Holding Company, Inc., is headquartered in Atlanta, GA. The company’s web address is www.cypresscom.net.

Safe Harbor Statement

     Safe Harbor Statement under the Private Securities Reform Act of 1995: The statements contained herein, which are not historical facts, are considered forward-looking statements under federal securities laws. Such forward-looking statements are based on the beliefs of our management as well as assumptions made by and information currently available to them. The Company has no obligation to update such forward-looking statements. Actual results may vary significantly from these forward-looking statements based on a variety of factors. Certain of these important factors are described in the Company’s Annual Report on Form 10-KSB for the fiscal year ended December 31, 2003 and Quarterly Report on Form 10-Q for the fiscal quarter ended September 20, 2004.

Not a Proxy Solicitation

     This communication is not a solicitation of a proxy from any security holder of Cypress. Cypress will be filing a proxy statement with the Securities and Exchange Commission and other relevant documents concerning the proposed merger. WE URGE INVESTORS TO READ THE PROXY STATEMENT AND ANY OTHER RELEVANT DOCUMENTS TO BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. Investors will be able to obtain the documents free of charge at the Securities and Exchange Commission’s website, www.sec.gov. In addition, documents filed with the SEC by Cypress will be available free of charge at the Company’s website www.cypresscomm.net.

     The Company and its executive officers and directors may be deemed to be participants in the solicitation of proxies from the Company’s stockholders with respect to the proposed merger. Information regarding any interests that the Company’s executive officers and directors may have in the transaction will be set forth in the proxy statement.

The Cypress Communications logo is a service mark of Cypress Communications, Inc. All other marks used herein are the property of their respective owners.

CYPRESS COMMUNICATIONS HOLDING CO., INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
(In thousands except share data)

	September 30,			December 31,
	2004			2003
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	1,782		$	1,900
Accounts receivable, net of allowance for doubtful accounts of $260 at September 30, 2004 and $412 at December 31, 2003		7,702			7,652
Prepaid expenses and other current assets		1,004			1,271
TOTAL CURRENT ASSETS		10,488			10,823
PROPERTY AND EQUIPMENT, NET		23,894			24,249
INTANGIBLE ASSETS, NET		98			523
TOTAL ASSETS	$	34,480		$	35,595
LIABILITIES AND STOCKHOLDERS’ DEFICIT
CURRENT LIABILITIES
Accounts payable and accrued expenses	$	11,540		$	16,344
Line of credit		4,396			2,016
Current portion of long-term debt		8,528			494
Deferred income		1,271			1,316
TOTAL CURRENT LIABILITIES		25,735			20,170
Long term debt		10,157			17,543
Accrued liabilities, long-term		610			315
TOTAL LIABILITIES		36,502			38,028
STOCKHOLDERS’ DEFICIT
Preferred stock, $.001 par value; 5,000,000 shares authorized; 100 Series A issued and outstanding shares at September 30, 2004 and December 31, 2003					—
Common stock, $.001 par value; 50,000,000 shares authorized; 6,468,000 issued and outstanding shares (including treasury) at September 30, 2004 and December 31, 2003		6			6
Additional paid-in capital		23,677			23,607
Accumulated deficit		(24,845	)		(25,186	)
Less: Treasury Stock, at cost; 594,000 shares at September 30, 2004 and December 31, 2003		(860	)		(860	)
TOTAL STOCKHOLDERS’ DEFICIT		(2,022	)		(2,433	)
	$	34,480		$	35,595

CYPRESS COMMUNICATIONS HOLDING CO., INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
AND THE THREE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003

	For the three months ended						For the nine months ended
	September 30,			September 30,			September 30,			September 30,
	2004			2003			2004			2003
REVENUES	$	19,433		$	21,046		$	59,587		$	64,818
DIRECT COSTS		9,663			12,140			28,978			33,761
REVENUES – NET OF DIRECT COSTS		9,770			8,906			30,609			31,057
OPERATING EXPENSES
Sales and marketing		607			1,248			2,202			4,267
General and administrative		8,450			9,712			26,294			29,428
Stock based compensation		9			52			70			385
Extinguishment of liabilities and other credits		(426	)		(967	)		(426	)		(1,995	)
TOTAL OPERATING EXPENSES		8,640			10,045			28,140			32,085
OTHER INCOME (EXPENSE)
Interest income		0			2			0			17
Interest expense and financing costs		(874	)		(724	)		(2,304	)		(1,997	)
Net gain on disposal of assets		60			30			221			123
Other		(13	)		1			(51	)		(149	)
TOTAL OTHER EXPENSE — NET		(827	)		(691	)		(2,134	)		(2,006	)
NET INCOME (LOSS)	$	303		$	(1,830	)	$	335		$	(3,034	)
Net Income (Loss) Per Common Share — Basic and Diluted	$	0.05		$	(0.31	)	$	0.06		$	(0.52	)
Weighted Average Common Shares Outstanding		5,874			5,874			5,874			5,874

CYPRESS COMMUNICATIONS HOLDING CO., INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003

	2004			2003
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	335		$	(3,034	)
Adjustments to reconcile net income (loss) to net cash used in operating activities
Depreciation and amortization		3,460			3,149
Bad debt expense		(31	)		1,398
Stock based compensation		70			385
Gain on disposal of assets and extinguishment of liabilities		(587	)		(123	)
Non cash interest expense		390			457
Other non-cash items		0			149
Changes in assets and liabilities, net of acquisitions
(Increase) decrease in accounts receivable		(19	)		(1,226	)
(Increase) decrease in other assets and prepaid expenses.		208			(171	)
Increase (decrease) in accounts payable and accrued expenses		(3,669	)		(5,775	)
Increase (decrease) in deferred income		(45	)		891
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES		150			(3,900	)
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of business		0			(2,570	)
Capital expenditures		(2,841	)		(2,462	)
Sale of property and equipment		223			188
NET CASH BY USED IN INVESTING ACTIVITIES		(2,618	)		(4,844	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long term loans					4,132
Principal payments of long-term debt		(30	)		(502	)
Proceeds from line of credit, net of repayments		2,380			—
NET CASH PROVIDED BY FINANCING ACTIVITIES		2,350			3,630
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(118	)		(5,114	)
CASH AND CASH EQUIVALENTS, AT BEGINNING OF PERIOD		1,900			8,258
CASH AND CASH EQUIVALENTS, AT END OF PERIOD	$	1,782		$	3,144
Supplemental Disclosure of Cash Flow Information:
Interest paid	$	1,033		$	902

	2004		2003
Supplemental Disclosures of Non cash Investing and Financing Activities
Note payable in connection with acquisition of subsidiary	$	—	$	500
Capital leases assumed in connection with acquisition of subsidiary	$	—	$	107

Consistent with Securities and Exchange Commission Regulation G, the following table provides a reconciliation of EBITDA to the GAAP measure of operating income (in thousands):

	Three Months Ended					Nine Months Ended
	(In Thousands)
	September 30,		September 30,			September 30,		September 30,
	2004		2003			2004		2003
Net Income (loss) as reported	$	303	$	(1,830	)	$	335	$	(3,034	)
Adjustments:
Depreciation and amortization		1,120		1,154			3,460		3,149
Interest (income) expense, net		874		722			2,304		1,980
EBITDA	$	2,297	$	46		$	6,099	$	2,095