Discontinued Operations

9 Months Ended

Sep. 30, 2011

Notes to Financial Statements

Note 12 - Discontinued Operations

Our ISDN resale services no longer fit into our overall strategic plan. In September 2010, we entered into an agreement with an independent telecommunications service provider to transfer these services and the related customers, and going forward the Company will receive a 15% monthly recurring referral fee for those revenues for as long as the customers maintain service. The only remaining assets of the ISDN resale services are the receivables for services provided prior to the transfer, and the Company will retain and collect these accounts. The transfer of the customers was completed in the third quarter of 2011, and the Company will have no continuing involvement with the ISDN product line.

The Company accordingly classified these ISDN related revenues and expenses as discontinued operations in accordance with ASC 205.20 "DiscontinuedOperations. " The accompanying condensed consolidated financial statements reflect the operating results and balance sheet items of the discontinued operations separately from continuing operations. Prior year financial statements have been restated in conformity with generally accepted accounting principles to present the operations of the ISDN resale services as a discontinued operation.

Revenues from the ISDN resale services, reported as discontinued operations, for the nine months ended September 30, 2011 and 2010 were $81,000 and $563,000, respectively, and for the three months ended September 30, 2011 and 2010 were $0 and $174,000, respectively. Net income from the ISDN resale services, reported as discontinued operations, for the nine months ended September 30, 2011 and 2010 were $29,000 and $180,000, respectively, and for the three months ended September 30, 2011 and 2010 were $11,000 and $68,000, respectively. The assets and liabilities from the ISDN resale services, reported as net current (liabilities)/assets of discontinued operations, as of September 30, 2011 and 2010 were ($50,000) and $169,000, respectively. No income tax provision was required to be recognized by the Company against income from the ISDN resale services over the related periods.