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6 - Vendor Settlements, Contingent Gains and Gain of Forgiveness of Debt
9 Months Ended
Sep. 30, 2011
Other Income and Other Expense Disclosure [Text Block]
6 — Vendor Settlements, Contingent Gains and Gain of Forgiveness of Debt

During the nine months ended September 30, 2011, the Company entered into numerous cash payment plan agreements with vendors for amounts less than the liability recorded in accounts payable and accrued expenses and, in some cases, in exchange for the issuance of shares of the Company’s common stock.  As a result of these agreements, the Company recorded a gain on forgiveness of debt of $1,087,000 and $3,009,000 for the three and nine months ended September 30, 2011, respectively.  In addition, the Company wrote-off certain accounts payable for Competitive Local Exchange Carriers (“CLEC”) that resulted in a gain of $527,000 and $865,000 for the same periods, and is included in accounts payable write-off.  The CLEC accounts payable were written off based on a two year statute of limitations on such accounts payable balances. In the three and nine months ended September 30, 2011, these transactions reduced accounts payable by $958,000 and $5,155,000,respectively, and accrued expenses by $0 and $93,000, respectively.

At September 30, 2011, the balance in vendor settlements payable was $3,396,000 including $1,164,000 of deferred gains subject to timely payments.  The settlements will be paid in periods ranging from one to thirty months with an aggregate monthly payment of approximately $81,000.   The Company will continue to approach vendors to enter into similar agreements as well as continuing to write-off certain CLEC accounts payable under statute of limitations.

During the nine months ended September 30, 2010, the Company entered into numerous payment plan agreements with vendors for amounts less than the liability recorded in accounts payable and accrued expenses and, in some cases, in exchange for the issuance of shares of the Company’s common stock.  As a result of these agreements, the Company recorded a gain on forgiveness of debt of  $261,000 and $907,000 in the three and nine months period ended September 30, 2010, respectively.  In addition, the Company wrote-off certain accounts payable for Competitive Local Exchange Carriers (“CLEC”) that resulted in a gain of $0 and $685,000 for the same periods.  These transactions reduced accrued expenses by $1,535,000 and reduced accounts payable by $1,863,000. These transactions also resulted in vendor settlements payable of $2,152,000 at September 30, 2010 including $1,064,000 of gain contingency based on timely payments and issuance of 1,610,069 shares of common stock valued at $30,000.