4 - Property and Equipment

9 Months Ended

Sep. 30, 2011

Property, Plant and Equipment Disclosure [Text Block]

4 — Property and Equipment

The following is a summary of the Company’s property and equipment (in thousands):

	September 30, 2011			December 31, 2010
	(unaudited)
Telecommunications equipment	$	3,327		$	3,327
Computer equipment		204			174
Telecommunications software		107			107
Leasehold improvements, office equipment and furniture		86			86
Total property and equipment		3,724			3,694
Less: accumulated depreciation and amortization		(3,615	)		(3,585	)
Property and equipment, net	$	109		$	109

Depreciation expense included in network costs was $9,000 and $7,000 for the three months ended September 30, 2011 and 2010, respectively and $27,000 and $18,000 for the nine months ended September 30, 2011 and 2010, respectively. Depreciation and amortization expense included in general and administrative expenses was $3,000 and $9,000 for the three months ended September 30, 2011 and 2010, respectively and $10,000 and $27,000 for the nine months ended September 30, 2011 and 2010, respectively.

In May 2006, the Company entered into a strategic agreement with Cantata Technology, Inc. (“Cantata”), a VoIP equipment and support services provider. Under the terms of this agreement, the Company obtained VoIP equipment to expand its operations. Payments were scheduled to be based on either the actual underlying traffic utilized by each piece of equipment or fixed cash payments. Through December 31, 2009, the Company had purchased VoIP equipment under this agreement totaling $691,000. The value of the equipment was based on the present value of future scheduled payments. At December 31, 2009, the Company had accrued $1,096,000 due to Cantata, which was equal to the undiscounted future scheduled payments. The difference between the undiscounted future payments and the purchase price was recorded to interest expense. The Company was previously sued by Cantata for breach of contract and lack of payment and the lawsuit was settled in January 2010 for $500,000. The settlement contains a long-term payment plan and is subject to timely payments by the Company. As of September 30, 2011, the remaining amount due under the settlement agreement was $272,000.

- Definition

The entire disclosure for long-lived, physical assets that are used in the normal conduct of business to produce goods and services and not intended for resale. Examples include land, buildings, machinery and equipment, and other types of furniture and equipment including, but not limited to, office equipment, furniture and fixtures, and computer equipment and software. This disclosure may include property plant and equipment accounting policies and methodology, a schedule of property, plant and equipment gross, additions, deletions, transfers and other changes, depreciation, depletion and amortization expense, net, accumulated depreciation, depletion and amortization expense and useful lives, income statement disclosures, assets held for sale and public utility disclosures.

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