XBRL Instance Document – Filed 11/2011 | Lightyear Network Solutions

XBRL Instance Document

Third Quarter 2011 Form 10-Q – filed 11/14/2011

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<!– EDGAR Online I-Metrix Xcelerate Instance Document, based on XBRL 2.1 http://www.edgar-online.com/ –>
<!– Version: 6.12.8 –>
<!– Round: 7b9693d6-0d95-4532-9f42-c1538c9d4fc7 –>
<!– Creation date: 2011-11-14T13:22:39Z –>
<!– Copyright (c) 2005-2011 EDGAR Online, Inc. All Rights Reserved. –>
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<dei:DocumentFiscalPeriodFocus contextRef=”eol_PE84720—1110-Q0025_STD_273_20110930_0″>Q3</dei:DocumentFiscalPeriodFocus>
<dei:TradingSymbol contextRef=”eol_PE84720—1110-Q0025_STD_273_20110930_0″>LYNS</dei:TradingSymbol>
<dei:EntityRegistrantName contextRef=”eol_PE84720—1110-Q0025_STD_273_20110930_0″>LIGHTYEAR NETWORK SOLUTIONS, INC.</dei:EntityRegistrantName>
<dei:AmendmentFlag contextRef=”eol_PE84720—1110-Q0025_STD_273_20110930_0″>false</dei:AmendmentFlag>
<dei:EntityFilerCategory contextRef=”eol_PE84720—1110-Q0025_STD_273_20110930_0″>Smaller Reporting Company</dei:EntityFilerCategory>
<dei:DocumentFiscalYearFocus contextRef=”eol_PE84720—1110-Q0025_STD_273_20110930_0″>2011</dei:DocumentFiscalYearFocus>
<dei:DocumentType contextRef=”eol_PE84720—1110-Q0025_STD_273_20110930_0″>10-Q</dei:DocumentType>
<dei:DocumentPeriodEndDate contextRef=”eol_PE84720—1110-Q0025_STD_273_20110930_0″>2011-09-30</dei:DocumentPeriodEndDate>
<dei:EntityCentralIndexKey contextRef=”eol_PE84720—1110-Q0025_STD_273_20110930_0″>0001130888</dei:EntityCentralIndexKey>
<dei:CurrentFiscalYearEndDate contextRef=”eol_PE84720—1110-Q0025_STD_273_20110930_0″>–12-31</dei:CurrentFiscalYearEndDate>
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<us-gaap:ProceedsFromPaymentsForOtherFinancingActivities contextRef=”eol_PE84720—1110-Q0025_STD_273_20110930_0″ unitRef=”iso4217_USD” decimals=”0″>316736</us-gaap:ProceedsFromPaymentsForOtherFinancingActivities>
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<us-gaap:StockholdersEquityNoteDisclosureTextBlock contextRef=”eol_PE84720—1110-Q0025_STD_273_20110930_0″><div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”>
Note H&#x2014;Stockholders&#x2019; Deficiency</font></div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”><br /></div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”justify”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”><font style=”DISPLAY: inline; TEXT-DECORATION: underline”>
Convertible Preferred Stock Dividends</font></font></div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”><br /></div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”>Holders
of convertible preferred stock are entitled to receive dividends at
the rate of 5% per annum of the aggregate stated value of
convertible preferred stock held by them, which accrue from and
after the date of issuance and become payable when, as and if
declared by the Company&#x2019;s board of directors. If the Company
fails to pay dividends on convertible preferred stock on a
quarterly basis, the dividend payment rate increases to 8% per
annum on all accrued but unpaid dividends. Through September 30,
2011, the Company&#x2019;s board of directors did not declare, and
the Company did not pay, a dividend on the issued and outstanding
shares of its convertible preferred stock, $0.001 par value per
share.&#xA0;Undeclared dividends on the Company&#x2019;s convertible
preferred stock at the rate of 8% per annum total $383,122 and
$1,136,877 or $0.04 and $0.12 per share for the three and nine
months ended September 30, 2011, respectively, and are cumulatively
$2,232,110 or $0.24 per share as of September 30, 2011. See Note J,
Subsequent Events.</font></div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”><br /></div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”><font style=”DISPLAY: inline; TEXT-DECORATION: underline”>
Warrants</font></font></div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”><br /></div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman”>
Milestone Warrants</font></div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”><br /></div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”>In
connection with a pre-2011 equity financing, the Company issued
warrants to investors to purchase shares of common stock at an
exercise price of $0.01 per share with a three year term, which
become exercisable if specified milestones are not met (the
&#x201C;Milestone Warrants&#x201D;). In the event that the specified
milestones are not met, the Company was obligated to issue to the
selling agent exercisable five-year warrants to purchase shares of
common stock at an exercise price of $4.00 per share (the
&#x201C;Selling Agent Milestone Warrants&#x201D;).</font></div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”><br /></div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”>On
February 26, 2011, the Company did not meet the third milestone
included in the outstanding Milestone Warrants. As a result of not
meeting the third milestone, the warrants associated with that
milestone were immediately vested and automatically exercised on a
cashless basis. In addition, the Company issued 42,201 Selling
Agent Milestone Warrants. The Company issued 445,564 shares of its
common stock to investors on February 26, 2011 in connection with
the cashless exercise of these Milestone Warrants.</font></div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”><br /></div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”>On
March 28, 2011, the Company did not meet the fourth and fifth
milestones included in the outstanding Milestone Warrants. As a
result of not meeting the fourth and fifth milestones, the warrants
associated with those milestones were immediately vested and
automatically exercised on a cashless basis. In addition, the
Company issued 84,542 Selling Agent Milestone Warrants. The Company
issued 892,456 shares of its common stock to investors on March 28,
2011 in connection with the cashless exercise of these Milestone
Warrants.</font></div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”><br /></div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”>On
April 27, 2011, the Company did not meet the sixth milestone
included in the outstanding Milestone Warrants. As a result of not
meeting the sixth milestone, the warrants associated with this
milestone were immediately vested and automatically exercised on a
cashless basis. In addition, the Company issued 42,332 Selling
Agent Milestone Warrants. The Company issued 445,576 shares of its
common stock to investors on April 27, 2011 in connection with the
cashless exercise of these Milestone Warrants.</font></div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”><br /></div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”>As
of September 30, 2011, there were no remaining Milestone Warrants
outstanding. As of September 30, 2011, there were 169,084 Selling
Agent Milestone Warrants outstanding.</font></div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”><br /></div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”><font style=”DISPLAY: inline; FONT-STYLE: italic”>
Fixed Warrants</font></font></div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”><br /></div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”>In
connection with a pre-2011 equity financing, the Company issued
exercisable five-year warrants to purchase shares of common stock
to investors and selling agents with an exercise price of $4.00 per
share (the &#x201C;Fixed Warrants&#x201D;). As of September 30, 2011,
there were 861,401 Fixed Warrants outstanding, of which 671,271
were issued to investors and 190,130 were issued to selling
agents.</font></div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”>&#xA0;</div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”><font style=”DISPLAY: inline; FONT-STYLE: italic”>
Additional Warrants</font></font></div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”><br /></div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”>In
connection with a pre-2011 equity financing, the Company
periodically issues exercisable five-year warrants to purchase
shares of common stock to investors with an exercise price of $0.01
per share and to selling agents with an exercise price of $4.00 per
share (the &#x201C;Additional Warrants&#x201D;). The Additional
Warrants are issued pursuant to a pre-determined formula at the end
of each calendar quarter during which shares originally purchased
in the equity financing are held by the original investor. The
Additional Warrants are eligible to be issued for a period of five
years from the equity financing. The Company issued 111,282
Additional Warrants (101,165 were issued to investors and 10,117
were issued to selling agents) during the nine months ended
September 30, 2011. As of September 30, 2011, there were 191,378
Additional Warrants outstanding, of which 173,980 were issued to
investors and 17,398 were issued to selling agents.</font></div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”><br /></div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman”>
Summary</font></div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”><br /></div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”>As
of September 30, 2011, in the aggregate there were 1,221,862
warrants outstanding and exercisable which had a weighted average
exercise price of $3.43, a weighted average remaining contractual
life of 4.0 years and an aggregate intrinsic value of approximately
$26,000.</font></div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”><br /></div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”><font style=”DISPLAY: inline; TEXT-DECORATION: underline”>
Stock Option Grants</font></font></div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”><br /></div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”>On
June 7, 2011, the Company&#x2019;s board of directors approved the
repricing of each of the outstanding stock options under the
Company&#x2019;s 2010 Stock and Incentive Compensation Plan to an
exercise price of $1.25 per share, subject to shareholder approval,
which was obtained on July 19, 2011. Since the members of the board
of directors controlled enough votes to ensure shareholder
approval, the shareholder approval was a formality. As such, the
modification was recognized on the date of board approval. As a
result of the modification, the Company recorded incremental
expense of approximately $84,000 immediately and will record
another incremental $185,000 over the remaining vesting
period.</font></div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”><br /></div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”>On
July 19, 2011, the Company granted incentive stock options to
purchase an aggregate of 100,000 shares of common stock at an
exercise price of $1.25 per share to two employees, pursuant to the
2010 Plan. The options vest ratably over a three year period and
expire after ten years. The aggregate $36,000 grant date fair value
will be amortized over the three year vesting term.</font></div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”><br /></div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”><font style=”DISPLAY: inline; BACKGROUND-COLOR: #ffffff”>
The Company has computed the fair value of options granted using
the Black-Scholes option pricing model.&#xA0; Forfeitures are
estimated at the time of valuation and reduce expense ratably over
the vesting period. This estimate&#xA0;will be&#xA0;adjusted
periodically based on the extent to which actual forfeitures
differ, or are expected to differ, from the previous estimate, when
it is material.&#xA0;The expected term of options granted
represents the estimated period of time that options granted are
expected to be outstanding. The Company utilizes the
&#x201C;simplified&#x201D; method to develop an estimate of the
expected term of &#x201C;plain vanilla&#x201D; option grants. Given
that LNSI's shares have only been publicly traded in their current
form since February 12, 2010, until such time as LNSI has
sufficient trading history to compute the historical volatility of
its common stock, the Company is utilizing an expected volatility
figure based on a review of the historical volatilities, over a
period of time, equivalent to the expected life of these options,
of similarly positioned public companies within its industry. The
risk-free interest rate was determined from the implied yields from
U.S. Treasury zero-coupon bonds with a remaining term consistent
with the expected term of the options.</font></font></div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”><br /></div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”><font style=”DISPLAY: inline; BACKGROUND-COLOR: #ffffff”>
In applying the Black-Scholes option pricing model, the Company
used the following weighted average
assumptions:</font></font></div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”><br /></div>
<div align=”left”>
<table cellpadding=”0″ cellspacing=”0″ width=”80%” style=”FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”>
<tr>
<td align=”left” valign=”bottom” width=”40%”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td valign=”bottom” width=”1%”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td colspan=”6″ nowrap=”nowrap” valign=”bottom” width=”28%”>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”center”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>For&#xA0;the&#xA0;Three&#xA0;Months&#xA0;Ended</font></div>
</td>
<td nowrap=”nowrap” valign=”bottom” width=”1%” style=”TEXT-ALIGN: left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td valign=”bottom” width=”1%”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td colspan=”6″ nowrap=”nowrap” valign=”bottom” width=”28%”>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”center”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>For&#xA0;the&#xA0;Nine&#xA0;Months&#xA0;Ended</font></div>
</td>
<td nowrap=”nowrap” valign=”bottom” width=”1%” style=”TEXT-ALIGN: left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
</tr>
<tr>
<td align=”left” valign=”bottom” width=”40%” style=”PADDING-BOTTOM: 2px”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td valign=”bottom” width=”1%” style=”PADDING-BOTTOM: 2px”>
<font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td colspan=”6″ nowrap=”nowrap” valign=”bottom” width=”28%” style=”BORDER-BOTTOM: black 2px solid”>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”center”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”><font style=”DISPLAY: inline”>
September&#xA0;30,</font></font></div>
</td>
<td nowrap=”nowrap” valign=”bottom” width=”1%” style=”PADDING-BOTTOM: 2px; TEXT-ALIGN: left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td valign=”bottom” width=”1%” style=”PADDING-BOTTOM: 2px”>
<font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td colspan=”6″ nowrap=”nowrap” valign=”bottom” width=”28%” style=”BORDER-BOTTOM: black 2px solid”>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”center”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”><font style=”DISPLAY: inline”>
September&#xA0;30,</font></font></div>
</td>
<td nowrap=”nowrap” valign=”bottom” width=”1%” style=”PADDING-BOTTOM: 2px; TEXT-ALIGN: left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
</tr>
<tr>
<td align=”left” valign=”bottom” width=”40%” style=”PADDING-BOTTOM: 2px”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td valign=”bottom” width=”1%” style=”PADDING-BOTTOM: 2px”>
<font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td colspan=”2″ nowrap=”nowrap” valign=”bottom” width=”13%” style=”BORDER-BOTTOM: black 2px solid”>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”center”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”><font style=”DISPLAY: inline”>
2011</font></font></div>
</td>
<td nowrap=”nowrap” valign=”bottom” width=”1%” style=”PADDING-BOTTOM: 2px; TEXT-ALIGN: left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td valign=”bottom” width=”1%” style=”PADDING-BOTTOM: 2px”>
<font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td colspan=”2″ nowrap=”nowrap” valign=”bottom” width=”13%” style=”BORDER-BOTTOM: black 2px solid”>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”center”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”><font style=”DISPLAY: inline”>
2010</font></font></div>
</td>
<td nowrap=”nowrap” valign=”bottom” width=”1%” style=”PADDING-BOTTOM: 2px; TEXT-ALIGN: left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td valign=”bottom” width=”1%” style=”PADDING-BOTTOM: 2px”>
<font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td colspan=”2″ nowrap=”nowrap” valign=”bottom” width=”13%” style=”BORDER-BOTTOM: black 2px solid”>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”center”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”><font style=”DISPLAY: inline”>
2011</font></font></div>
</td>
<td nowrap=”nowrap” valign=”bottom” width=”1%” style=”PADDING-BOTTOM: 2px; TEXT-ALIGN: left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td valign=”bottom” width=”1%” style=”PADDING-BOTTOM: 2px”>
<font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td colspan=”2″ nowrap=”nowrap” valign=”bottom” width=”13%” style=”BORDER-BOTTOM: black 2px solid”>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”center”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”><font style=”DISPLAY: inline”>
2010</font></font></div>
</td>
<td nowrap=”nowrap” valign=”bottom” width=”1%” style=”PADDING-BOTTOM: 2px; TEXT-ALIGN: left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
</tr>
<tr bgcolor=”#CCFFCC”>
<td align=”left” valign=”bottom” width=”40%”>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>Risk
free interest rate</font></div>
</td>
<td align=”right” valign=”bottom” width=”1%”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td valign=”bottom” width=”1%” style=”TEXT-ALIGN: left”>
<font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>
&#xA0;</font></td>
<td valign=”bottom” width=”12%” style=”TEXT-ALIGN: right”>
<font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>1.58</font></td>
<td nowrap=”nowrap” valign=”bottom” width=”1%” style=”TEXT-ALIGN: left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>%</font></td>
<td align=”right” valign=”bottom” width=”1%”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td valign=”bottom” width=”1%” style=”TEXT-ALIGN: left”>
<font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>
&#xA0;</font></td>
<td valign=”bottom” width=”12%” style=”TEXT-ALIGN: right”>
<font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>n/a</font></td>
<td nowrap=”nowrap” valign=”bottom” width=”1%” style=”TEXT-ALIGN: left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td align=”right” valign=”bottom” width=”1%”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td valign=”bottom” width=”1%” style=”TEXT-ALIGN: left”>
<font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>
&#xA0;</font></td>
<td valign=”bottom” width=”12%” style=”TEXT-ALIGN: right”>
<font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>1.58</font></td>
<td nowrap=”nowrap” valign=”bottom” width=”1%” style=”TEXT-ALIGN: left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>%</font></td>
<td align=”right” valign=”bottom” width=”1%”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td valign=”bottom” width=”1%” style=”TEXT-ALIGN: left”>
<font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>
&#xA0;</font></td>
<td valign=”bottom” width=”12%” style=”TEXT-ALIGN: right”>
<font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>2.48</font></td>
<td nowrap=”nowrap” valign=”bottom” width=”1%” style=”TEXT-ALIGN: left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>%</font></td>
</tr>
<tr bgcolor=”white”>
<td align=”left” valign=”bottom” width=”40%”>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>Expected
term (years)</font></div>
</td>
<td align=”right” valign=”bottom” width=”1%”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td valign=”bottom” width=”1%” style=”TEXT-ALIGN: left”>
<font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>
&#xA0;</font></td>
<td valign=”bottom” width=”12%” style=”TEXT-ALIGN: right”>
<font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>6.0</font></td>
<td nowrap=”nowrap” valign=”bottom” width=”1%” style=”TEXT-ALIGN: left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td align=”right” valign=”bottom” width=”1%”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td valign=”bottom” width=”1%” style=”TEXT-ALIGN: left”>
<font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>
&#xA0;</font></td>
<td valign=”bottom” width=”12%” style=”TEXT-ALIGN: right”>
<font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>n/a</font></td>
<td nowrap=”nowrap” valign=”bottom” width=”1%” style=”TEXT-ALIGN: left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td align=”right” valign=”bottom” width=”1%”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td valign=”bottom” width=”1%” style=”TEXT-ALIGN: left”>
<font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>
&#xA0;</font></td>
<td valign=”bottom” width=”12%” style=”TEXT-ALIGN: right”>
<font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>6.0</font></td>
<td nowrap=”nowrap” valign=”bottom” width=”1%” style=”TEXT-ALIGN: left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td align=”right” valign=”bottom” width=”1%”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td valign=”bottom” width=”1%” style=”TEXT-ALIGN: left”>
<font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>
&#xA0;</font></td>
<td valign=”bottom” width=”12%” style=”TEXT-ALIGN: right”>
<font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>6.0</font></td>
<td nowrap=”nowrap” valign=”bottom” width=”1%” style=”TEXT-ALIGN: left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
</tr>
<tr bgcolor=”#CCFFCC”>
<td align=”left” valign=”bottom” width=”40%”>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>Expected
volatility</font></div>
</td>
<td align=”right” valign=”bottom” width=”1%”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td valign=”bottom” width=”1%” style=”TEXT-ALIGN: left”>
<font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>
&#xA0;</font></td>
<td valign=”bottom” width=”12%” style=”TEXT-ALIGN: right”>
<font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>43.1</font></td>
<td nowrap=”nowrap” valign=”bottom” width=”1%” style=”TEXT-ALIGN: left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>%</font></td>
<td align=”right” valign=”bottom” width=”1%”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td valign=”bottom” width=”1%” style=”TEXT-ALIGN: left”>
<font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>
&#xA0;</font></td>
<td valign=”bottom” width=”12%” style=”TEXT-ALIGN: right”>
<font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>n/a</font></td>
<td nowrap=”nowrap” valign=”bottom” width=”1%” style=”TEXT-ALIGN: left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td align=”right” valign=”bottom” width=”1%”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td valign=”bottom” width=”1%” style=”TEXT-ALIGN: left”>
<font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>
&#xA0;</font></td>
<td valign=”bottom” width=”12%” style=”TEXT-ALIGN: right”>
<font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>43.1</font></td>
<td nowrap=”nowrap” valign=”bottom” width=”1%” style=”TEXT-ALIGN: left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>%</font></td>
<td align=”right” valign=”bottom” width=”1%”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td valign=”bottom” width=”1%” style=”TEXT-ALIGN: left”>
<font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>
&#xA0;</font></td>
<td valign=”bottom” width=”12%” style=”TEXT-ALIGN: right”>
<font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>46.7</font></td>
<td nowrap=”nowrap” valign=”bottom” width=”1%” style=”TEXT-ALIGN: left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>%</font></td>
</tr>
<tr bgcolor=”white”>
<td align=”left” valign=”bottom” width=”40%”>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>Expected
dividends</font></div>
</td>
<td align=”right” valign=”bottom” width=”1%”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td valign=”bottom” width=”1%” style=”TEXT-ALIGN: left”>
<font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>
&#xA0;</font></td>
<td valign=”bottom” width=”12%” style=”TEXT-ALIGN: right”>
<font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>0.0</font></td>
<td nowrap=”nowrap” valign=”bottom” width=”1%” style=”TEXT-ALIGN: left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>%</font></td>
<td align=”right” valign=”bottom” width=”1%”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td valign=”bottom” width=”1%” style=”TEXT-ALIGN: left”>
<font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>
&#xA0;</font></td>
<td valign=”bottom” width=”12%” style=”TEXT-ALIGN: right”>
<font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>n/a</font></td>
<td nowrap=”nowrap” valign=”bottom” width=”1%” style=”TEXT-ALIGN: left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td align=”right” valign=”bottom” width=”1%”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td valign=”bottom” width=”1%” style=”TEXT-ALIGN: left”>
<font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>
&#xA0;</font></td>
<td valign=”bottom” width=”12%” style=”TEXT-ALIGN: right”>
<font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>0.0</font></td>
<td nowrap=”nowrap” valign=”bottom” width=”1%” style=”TEXT-ALIGN: left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>%</font></td>
<td align=”right” valign=”bottom” width=”1%”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td valign=”bottom” width=”1%” style=”TEXT-ALIGN: left”>
<font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>
&#xA0;</font></td>
<td valign=”bottom” width=”12%” style=”TEXT-ALIGN: right”>
<font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>0.0</font></td>
<td nowrap=”nowrap” valign=”bottom” width=”1%” style=”TEXT-ALIGN: left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>%</font></td>
</tr>
</table>
</div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”>&#xA0;</div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”><font style=”DISPLAY: inline; BACKGROUND-COLOR: #ffffff”>
The weighted average estimated fair value of the stock options
granted during the three and nine months ended September 30, 2011
was $0.36 per share. The weighted average estimated fair value of
the stock options granted during the nine months ended September
30, 2010 was $1.85 per share.</font></font></div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”><br /></div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”>The
Company recognized approximately $133,000 and $430,000 of
stock-based compensation expense during the three and nine months
ended September 30, 2011, respectively, related to employee stock
option grants, which is reflected as selling, general and
administrative expense in the condensed consolidated statements of
operations. The Company recognized approximately <font style=”DISPLAY: inline; BACKGROUND-COLOR: #ffffff”>$105,000 and
$153,000</font> of stock-based compensation expense during the
three and nine months ended September 30, 2010, respectively,
related to employee stock option grants. During the nine months
ended September 30, 2011, options to purchase 100,000 shares of
common stock at a weighted average exercise price of $1.25 per
share were granted and options to purchase 192,167 shares of common
stock at a weighted average exercise price of $3.38 per share were
forfeited. As of September 30, 2011, there were 820,333 outstanding
stock options with a weighted average exercise price of $1.25 per
share, a weighted average remaining contractual life of 8.8 years
and no intrinsic value. As of September 30, 2011, there were
240,314 exercisable stock options with a weighted average exercise
price of $1.25 per share, a weighted average remaining contractual
life of 8.6 years and no intrinsic value. As of September 30, 2011,
there was approximately $1,094,000 of unrecognized employee
stock-based compensation expense that will be amortized over a
weighted average period of 1.7 years.</font></div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”><br /></div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”><font style=”DISPLAY: inline; TEXT-DECORATION: underline”>
Restricted Stock Grants</font></font></div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”><br /></div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”>The
Company recognized approximately $15,000 and $43,000 of stock-based
compensation expense during the three and nine months ended
September 30, 2011, respectively, related to director restricted
stock grants, which is reflected as professional fees expense in
the condensed consolidated statements of operations. As of
September 30, 2011, there was approximately $3,000 of unrecognized
director stock-based compensation expense related to 12,987
unvested restricted stock grants with a weighted average grant date
fair value of $4.75 that will be amortized over a weighted average
period of less than 0.1 years. Through September 30, 2010, there
was no stock-based compensation expense, as there were no
restricted stock grants.</font></div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”><br /></div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”><font style=”DISPLAY: inline; TEXT-DECORATION: underline”>
Notes Receivable from Affiliate</font></font></div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”><br /></div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”>On
February 12, 2010, certain investors contributed a note to LNSI in
exchange for an aggregate of 3,242,533 shares of LNSI stock. The
principal of $5,149,980 and the related interest receivable of
$420,464 at September 30, 2011, are recorded as a contra-equity
item because they represent receivables from an affiliate, LY
Holdings. The maturity date of this note receivable is December 31,
2011 and interest accrues at the rate of 5% and quarter end
interest payments were scheduled beginning June 30, 2010. On May
11, 2011, LNSI agreed to continue to forbear from demanding payment
of past due interest under this note receivable or commencing any
action until June 30, 2011. Interest income on the note receivable
was approximately $65,000 and $193,000 for the three and nine
months ended September 30, 2011, respectively, and approximately
$163,000 for the three and nine months ended September 30, 2010,
respectively.</font></div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”><br /></div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”>The
$7,750,000 note receivable from LY Holdings and the related
interest receivable of $729,443 at September 30, 2011 are recorded
as contra-equity items because they represent receivables from an
affiliate. The principal and the related interest receivable are
due on demand. The note receivable bears interest at a rate of
LIBOR plus 6% on the balance up to $7,000,000 and LIBOR plus 9% on
the balance in excess of $7,000,000, neither of which will exceed
10% per annum. Interest income on the note receivable was
approximately $128,000 and $378,000 for the three and nine months
ended September 30, 2011, respectively, and approximately $121,000
and $226,000 for the three and nine months ended September 30,
2010, respectively.</font></div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”><br /></div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”>See
Note J, Subsequent Events.</font></div>
</div></us-gaap:StockholdersEquityNoteDisclosureTextBlock>
<us-gaap:ProceedsFromSaleOfPropertyPlantAndEquipment contextRef=”eol_PE84720—1110-Q0025_STD_273_20110930_0″ unitRef=”iso4217_USD” decimals=”0″>191511</us-gaap:ProceedsFromSaleOfPropertyPlantAndEquipment>
<us-gaap:OtherLiabilitiesDisclosureTextBlock contextRef=”eol_PE84720—1110-Q0025_STD_273_20110930_0″><div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”>
Note D&#x2014;Other Liabilities</font></div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”><br /></div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”>Other
liabilities consist of the following:</font></div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”><br /></div>
<div align=”left”>
<table cellpadding=”0″ cellspacing=”0″ width=”80%” style=”FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”>
<tr>
<td align=”left” valign=”bottom” width=”64%”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td valign=”bottom” width=”1%”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td colspan=”2″ nowrap=”nowrap” valign=”bottom” width=”16%”>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”center”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>September&#xA0;30,</font></div>
</td>
<td nowrap=”nowrap” valign=”bottom” width=”1%” style=”TEXT-ALIGN: left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td valign=”bottom” width=”1%”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td colspan=”2″ nowrap=”nowrap” valign=”bottom” width=”16%”>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”center”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>December&#xA0;31,</font></div>
</td>
<td nowrap=”nowrap” valign=”bottom” width=”1%” style=”TEXT-ALIGN: left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
</tr>
<tr>
<td align=”left” valign=”bottom” width=”64%” style=”PADDING-BOTTOM: 2px”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td valign=”bottom” width=”1%” style=”PADDING-BOTTOM: 2px”>
<font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td colspan=”2″ nowrap=”nowrap” valign=”bottom” width=”16%” style=”BORDER-BOTTOM: black 2px solid”>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”center”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”><font style=”DISPLAY: inline”>
2011</font></font></div>
</td>
<td nowrap=”nowrap” valign=”bottom” width=”1%” style=”PADDING-BOTTOM: 2px; TEXT-ALIGN: left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td valign=”bottom” width=”1%” style=”PADDING-BOTTOM: 2px”>
<font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td colspan=”2″ nowrap=”nowrap” valign=”bottom” width=”16%” style=”BORDER-BOTTOM: black 2px solid”>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”center”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”><font style=”DISPLAY: inline”>
2010</font></font></div>
</td>
<td nowrap=”nowrap” valign=”bottom” width=”1%” style=”PADDING-BOTTOM: 2px; TEXT-ALIGN: left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
</tr>
<tr>
<td align=”left” valign=”bottom” width=”64%”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td valign=”bottom” width=”1%”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td colspan=”2″ nowrap=”nowrap” valign=”bottom” width=”16%”>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”center”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>(unaudited)</font></div>
</td>
<td nowrap=”nowrap” valign=”bottom” width=”1%” style=”TEXT-ALIGN: left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td valign=”bottom” width=”1%”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td colspan=”2″ nowrap=”nowrap” valign=”bottom” width=”16%”>
<font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td nowrap=”nowrap” valign=”bottom” width=”1%” style=”TEXT-ALIGN: left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
</tr>
<tr>
<td align=”left” valign=”bottom” width=”64%”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td align=”left” valign=”bottom” width=”1%”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td align=”left” colspan=”2″ nowrap=”nowrap” valign=”bottom” width=”16%”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td nowrap=”nowrap” valign=”bottom” width=”1%” style=”TEXT-ALIGN: left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td align=”left” valign=”bottom” width=”1%”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td align=”left” colspan=”2″ nowrap=”nowrap” valign=”bottom” width=”16%”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td nowrap=”nowrap” valign=”bottom” width=”1%” style=”TEXT-ALIGN: left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
</tr>
<tr bgcolor=”#CCFFCC”>
<td valign=”bottom” width=”64%” style=”MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: left”>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: left”>
<font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>Excise,
state and local taxes payable</font></div>
</td>
<td align=”left” valign=”bottom” width=”1%”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td valign=”bottom” width=”1%” style=”TEXT-ALIGN: left”>
<font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>
$</font></td>
<td valign=”bottom” width=”15%” style=”TEXT-ALIGN: right”>
<font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>808,065</font></td>
<td nowrap=”nowrap” valign=”bottom” width=”1%” style=”TEXT-ALIGN: left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td align=”left” valign=”bottom” width=”1%”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td valign=”bottom” width=”1%” style=”TEXT-ALIGN: left”>
<font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>
$</font></td>
<td valign=”bottom” width=”15%” style=”TEXT-ALIGN: right”>
<font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>701,757</font></td>
<td nowrap=”nowrap” valign=”bottom” width=”1%” style=”TEXT-ALIGN: left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
</tr>
<tr bgcolor=”white”>
<td valign=”bottom” width=”64%” style=”MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: left”>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: left”>
<font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>Other
accrued expenses</font></div>
</td>
<td align=”left” valign=”bottom” width=”1%”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td valign=”bottom” width=”1%” style=”TEXT-ALIGN: left”>
<font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>
&#xA0;</font></td>
<td valign=”bottom” width=”15%” style=”TEXT-ALIGN: right”>
<font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>271,401</font></td>
<td nowrap=”nowrap” valign=”bottom” width=”1%” style=”TEXT-ALIGN: left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td align=”left” valign=”bottom” width=”1%”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td valign=”bottom” width=”1%” style=”TEXT-ALIGN: left”>
<font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>
&#xA0;</font></td>
<td valign=”bottom” width=”15%” style=”TEXT-ALIGN: right”>
<font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>442,367</font></td>
<td nowrap=”nowrap” valign=”bottom” width=”1%” style=”TEXT-ALIGN: left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
</tr>
<tr bgcolor=”#CCFFCC”>
<td valign=”bottom” width=”64%” style=”MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: left”>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: left”>
<font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>Payroll,
payroll taxes and bonuses</font></div>
</td>
<td align=”left” valign=”bottom” width=”1%”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td valign=”bottom” width=”1%” style=”TEXT-ALIGN: left”>
<font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>
&#xA0;</font></td>
<td valign=”bottom” width=”15%” style=”TEXT-ALIGN: right”>
<font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>292,893</font></td>
<td nowrap=”nowrap” valign=”bottom” width=”1%” style=”TEXT-ALIGN: left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td align=”left” valign=”bottom” width=”1%”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td valign=”bottom” width=”1%” style=”TEXT-ALIGN: left”>
<font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>
&#xA0;</font></td>
<td valign=”bottom” width=”15%” style=”TEXT-ALIGN: right”>
<font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>507,542</font></td>
<td nowrap=”nowrap” valign=”bottom” width=”1%” style=”TEXT-ALIGN: left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
</tr>
<tr bgcolor=”white”>
<td valign=”bottom” width=”64%” style=”MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: left”>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: left”>
<font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>Deferred
rent</font></div>
</td>
<td align=”left” valign=”bottom” width=”1%”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td valign=”bottom” width=”1%” style=”TEXT-ALIGN: left”>
<font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>
&#xA0;</font></td>
<td valign=”bottom” width=”15%” style=”TEXT-ALIGN: right”>
<font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>275,091</font></td>
<td nowrap=”nowrap” valign=”bottom” width=”1%” style=”TEXT-ALIGN: left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td align=”left” valign=”bottom” width=”1%”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td valign=”bottom” width=”1%” style=”TEXT-ALIGN: left”>
<font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>
&#xA0;</font></td>
<td valign=”bottom” width=”15%” style=”TEXT-ALIGN: right”>
<font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>-</font></td>
<td nowrap=”nowrap” valign=”bottom” width=”1%” style=”TEXT-ALIGN: left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
</tr>
<tr bgcolor=”#CCFFCC”>
<td valign=”bottom” width=”64%” style=”PADDING-BOTTOM: 2px; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: left”>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: left”>
<font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>Customer
security deposits</font></div>
</td>
<td align=”left” valign=”bottom” width=”1%” style=”PADDING-BOTTOM: 2px”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td valign=”bottom” width=”1%” style=”BORDER-BOTTOM: black 2px solid; TEXT-ALIGN: left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td valign=”bottom” width=”15%” style=”BORDER-BOTTOM: black 2px solid; TEXT-ALIGN: right”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”><font style=”DISPLAY: inline”>
250,623</font></font></td>
<td nowrap=”nowrap” valign=”bottom” width=”1%” style=”PADDING-BOTTOM: 2px; TEXT-ALIGN: left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td align=”left” valign=”bottom” width=”1%” style=”PADDING-BOTTOM: 2px”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td valign=”bottom” width=”1%” style=”BORDER-BOTTOM: black 2px solid; TEXT-ALIGN: left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td valign=”bottom” width=”15%” style=”BORDER-BOTTOM: black 2px solid; TEXT-ALIGN: right”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”><font style=”DISPLAY: inline”>
234,558</font></font></td>
<td nowrap=”nowrap” valign=”bottom” width=”1%” style=”PADDING-BOTTOM: 2px; TEXT-ALIGN: left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
</tr>
<tr bgcolor=”white”>
<td align=”left” valign=”bottom” width=”64%”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td align=”left” valign=”bottom” width=”1%”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td valign=”bottom” width=”1%” style=”TEXT-ALIGN: left”>
<font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>
&#xA0;</font></td>
<td valign=”bottom” width=”15%” style=”TEXT-ALIGN: right”>
<font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td nowrap=”nowrap” valign=”bottom” width=”1%” style=”TEXT-ALIGN: left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td align=”left” valign=”bottom” width=”1%”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td valign=”bottom” width=”1%” style=”TEXT-ALIGN: left”>
<font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>
&#xA0;</font></td>
<td valign=”bottom” width=”15%” style=”TEXT-ALIGN: right”>
<font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td nowrap=”nowrap” valign=”bottom” width=”1%” style=”TEXT-ALIGN: left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
</tr>
<tr bgcolor=”#CCFFCC”>
<td valign=”bottom” width=”64%” style=”PADDING-BOTTOM: 4px; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: right”>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: right”>
<font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>Totals&#xA0;&#xA0;</font></div>
</td>
<td align=”left” valign=”bottom” width=”1%” style=”PADDING-BOTTOM: 4px”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td valign=”bottom” width=”1%” style=”BORDER-BOTTOM: black 4px double; TEXT-ALIGN: left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>$</font></td>
<td valign=”bottom” width=”15%” style=”BORDER-BOTTOM: black 4px double; TEXT-ALIGN: right”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”><font style=”DISPLAY: inline”>
1,898,073</font></font></td>
<td nowrap=”nowrap” valign=”bottom” width=”1%” style=”PADDING-BOTTOM: 4px; TEXT-ALIGN: left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td align=”left” valign=”bottom” width=”1%” style=”PADDING-BOTTOM: 4px”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td valign=”bottom” width=”1%” style=”BORDER-BOTTOM: black 4px double; TEXT-ALIGN: left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>$</font></td>
<td valign=”bottom” width=”15%” style=”BORDER-BOTTOM: black 4px double; TEXT-ALIGN: right”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”><font style=”DISPLAY: inline”>
1,886,224</font></font></td>
</tr>
</table>
</div>
</div></us-gaap:OtherLiabilitiesDisclosureTextBlock>
<us-gaap:NetCashProvidedByUsedInInvestingActivities contextRef=”eol_PE84720—1110-Q0025_STD_273_20110930_0″ unitRef=”iso4217_USD” decimals=”0″>-863461</us-gaap:NetCashProvidedByUsedInInvestingActivities>
<us-gaap:InvestmentIncomeInterest contextRef=”eol_PE84720—1110-Q0025_STD_273_20110930_0″ unitRef=”iso4217_USD” decimals=”0″>24183</us-gaap:InvestmentIncomeInterest>
<us-gaap:OtherNonoperatingIncomeExpense contextRef=”eol_PE84720—1110-Q0025_STD_273_20110930_0″ unitRef=”iso4217_USD” decimals=”0″>233372</us-gaap:OtherNonoperatingIncomeExpense>
<us-gaap:CostsAndExpensesRelatedParty contextRef=”eol_PE84720—1110-Q0025_STD_273_20110930_0″ unitRef=”iso4217_USD” decimals=”INF”>-2834</us-gaap:CostsAndExpensesRelatedParty>
<us-gaap:IncreaseDecreaseInAccountsReceivable contextRef=”eol_PE84720—1110-Q0025_STD_273_20110930_0″ unitRef=”iso4217_USD” decimals=”0″>-259032</us-gaap:IncreaseDecreaseInAccountsReceivable>
<us-gaap:Revenues contextRef=”eol_PE84720—1110-Q0025_STD_273_20110930_0″ unitRef=”iso4217_USD” decimals=”0″>53886561</us-gaap:Revenues>
<us-gaap:CommitmentsAndContingenciesDisclosureTextBlock contextRef=”eol_PE84720—1110-Q0025_STD_273_20110930_0″><div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”><font style=”DISPLAY: inline; FONT-WEIGHT: bold”>
Note I&#x2014;Commitments and Contingencies</font></font></div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”><br /></div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”><font style=”DISPLAY: inline; TEXT-DECORATION: underline”>
Litigation</font></font></div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”><br /></div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”><font style=”DISPLAY: inline; FONT-STYLE: italic”>
Alden Halpern v. Lightyear Network Solutions, Inc. fka Libra
Alliance Corporation</font> was filed in California District Court
on August 31, 2011.&#xA0; The plaintiff alleges violations of
federal and state securities laws with respect to his purchase of
Lightyear securities.&#xA0; Mr. Halpern alleges that Lightyear
falsely represented that the shares he was purchasing were
&#x201C;free-trading.&#x201D;&#xA0; Lightyear denies the
allegations.&#xA0; Lightyear has been granted an extension to
respond to the lawsuit while Mr. Halpern&#x2019;s counsel
&#xA0;further reviews the facts of the case.&#xA0; Mr. Halpern has
claimed damages of $750,000. Lightyear has notified its
insurance&#xA0;&#xA0;carriers concerning this matter and believes
the matter is covered by these policies, subject to a $150,000
deductible.&#xA0; The Company believes that the allegations are
meritless.&#xA0;&#xA0;The Company intends to contest the
allegations vigorously and has not recorded a provision for any
loss that could be incurred as a result of the action.</font></div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”><br /></div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”>As
of September 30, 2011, claims have been asserted against Lightyear
which arose in the normal course of business. While there can be no
assurance, management believes that the ultimate outcome of these
legal claims will not have a material adverse effect on the
condensed consolidated financial statements of the
Company.</font></div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”><br /></div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”><font style=”DISPLAY: inline; TEXT-DECORATION: underline”>
Billing Disputes</font></font></div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”><br /></div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”>As
of September 30, 2011, Lightyear has disputed certain vendor
billings which arose in the normal course of business. While there
can be no assurance, management believes that the ultimate outcome
of these billing disputes will not have a material adverse effect
on the condensed consolidated financial statements of the
Company.</font></div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”><br /></div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”><font style=”DISPLAY: inline; TEXT-DECORATION: underline”>
Consulting and Non-Competition Agreement</font></font></div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”><br /></div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”>On
April 21, 2011, the Company entered into an agreement with
Henderson, who was, at the time of the agreement, the
Company&#x2019;s Chief Executive Officer. Under the agreement,
Henderson will serve in an advisory capacity and with the honorary
title of Founder and Chair Emeritus and will provide consulting
services to the Company commencing on May 1, 2011 and terminating
on April 30, 2012. Henderson will receive a stipend of $296,000,
paid ratably over the term of the agreement, which contains certain
provisions relating to confidentiality, noncompetition and other
covenants on confidential materials and related matters. The term
of the agreement will end earlier upon the occurrence of either (i)
a change in control of Lightyear, (ii) the material breach of the
agreement by either party, which is not cured within fifteen days
upon written notice, or (iii) upon the resignation by Henderson as
a consultant. Henderson has not been released from any pledges or
personal guarantees previously made by him for the benefit of the
Company or any of its affiliates. The agreement terminates
Henderson&#x2019;s employment agreement with the Company. Henderson
will remain a director of the Company for the remainder of his
current term, and LY Holdings has agreed to vote its shares of
Company stock in favor of Henderson as a director of the Company
during the term of the agreement. See Note F, Related Party
Transactions.</font></div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”><br /></div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”><font style=”DISPLAY: inline; TEXT-DECORATION: underline”>
Operating Lease</font></font></div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”><br /></div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”>The
Company leases its office space in Louisville, Kentucky under terms
classified as an operating lease. In April 2009, the Company
entered into a new lease agreement. The term of the lease was for
six years, ending on March 31, 2015. Commencing in October 2009,
the Company and the landlord informally agreed to reduce the rent
by $15,000 per month. On June 30, 2011, the Company and the
landlord agreed to formalize this understanding by modifying the
lease agreement. The modified lease agreement has a monthly base
rent of approximately $60,000 and the lease term was extended until
September 30, 2015. In addition, the landlord formally agreed to
forgive the previously unpaid rent and maintenance charges as a
lease concession. The resulting deferred rent will be recognized
over the life of the lease.</font></div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”><br /></div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”>Rent
expense for the three and nine months ended September 30, 2011 was
approximately $119,000 and $288,000, respectively, and was
approximately $135,000 and $418,000 for the three and nine months
ended September 30, 2010, respectively.</font></div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”><br /></div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”>See
Note D, Other Liabilities.</font></div>
</div></us-gaap:CommitmentsAndContingenciesDisclosureTextBlock>
<us-gaap:RepaymentsOfLongTermCapitalLeaseObligations contextRef=”eol_PE84720—1110-Q0025_STD_273_20110930_0″ unitRef=”iso4217_USD” decimals=”0″>256020</us-gaap:RepaymentsOfLongTermCapitalLeaseObligations>
<us-gaap:DebtDisclosureTextBlock contextRef=”eol_PE84720—1110-Q0025_STD_273_20110930_0″><div>
<div style=”TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold”>
Note E&#x2014;Notes Payable</font></div>
<div style=”TEXT-INDENT: 0pt; DISPLAY: block”><br /></div>
<div style=”TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt”>On
January 21, 2011, the Company entered into a $2,000,000 secured
promissory note (the &#x201C;Note&#x201D;) arrangement with a bank.
The Note is secured by Lightyear LLC&#x2019;s lockbox bank account,
business operating bank account, other tangible and intangible
assets, the pledge of two million shares of the Company&#x2019;s
convertible preferred stock owned by LY Holdings, LLC (&#x201C;LY
Holdings&#x201D;), as well as the personal guaranties of certain
directors of the Company and a guaranty by Lightyear LLC. The Note
matures on January 21, 2013, and bears interest at a rate equal to
the Prime Rate plus 4.0%, but not less than 7.0% per annum.
Pursuant to the terms of the Note, the Company will make monthly
interest payments through January 21, 2013, as well as $500,000
principal payments on January 21, 2012, and July 21, 2012. The
final $1,000,000 principal payment is due on January 21, 2013. On
January 25, 2011, from the proceeds of this Note, $1,000,000 was
paid to a bank on behalf of Chris T. Sullivan
(&#x201C;Sullivan&#x201D;) to repay a portion of the $7,250,000
obligations payable &#x2013; related parties. Pursuant to an
agreement, in consideration for his personal guaranty, the Company
will pay one of its directors $60,000 for each year in which the
guaranty is in effect, payable in monthly installments of $5,000.
See Note J, Subsequent Events.</font></div>

</div></us-gaap:DebtDisclosureTextBlock>
<us-gaap:NetCashProvidedByUsedInOperatingActivities contextRef=”eol_PE84720—1110-Q0025_STD_273_20110930_0″ unitRef=”iso4217_USD” decimals=”0″>-362020</us-gaap:NetCashProvidedByUsedInOperatingActivities>
<us-gaap:PreferredStockDividendsIncomeStatementImpact contextRef=”eol_PE84720—1110-Q0025_STD_273_20110930_0″ unitRef=”iso4217_USD” decimals=”INF”>1136877</us-gaap:PreferredStockDividendsIncomeStatementImpact>
<us-gaap:IncomeLossFromContinuingOperationsBeforeIncomeTaxesMinorityInterestAndIncomeLossFromEquityMethodInvestments contextRef=”eol_PE84720—1110-Q0025_STD_273_20110930_0″ unitRef=”iso4217_USD” decimals=”0″>-578427</us-gaap:IncomeLossFromContinuingOperationsBeforeIncomeTaxesMinorityInterestAndIncomeLossFromEquityMethodInvestments>
<us-gaap:ShareBasedCompensation contextRef=”eol_PE84720—1110-Q0025_STD_273_20110930_0″ unitRef=”iso4217_USD” decimals=”0″>473345</us-gaap:ShareBasedCompensation>
<us-gaap:StockholdersEquityOther contextRef=”eol_PE84720—1110-Q0025_STD_273_20110930_0″ unitRef=”iso4217_USD” decimals=”0″>570967</us-gaap:StockholdersEquityOther>
<us-gaap:DebtIssuanceCostsIncurredDuringNoncashOrPartialNoncashTransaction contextRef=”eol_PE84720—1110-Q0025_STD_273_20110930_0″ unitRef=”iso4217_USD” decimals=”0″>273000</us-gaap:DebtIssuanceCostsIncurredDuringNoncashOrPartialNoncashTransaction>
<us-gaap:GainLossOnSaleOfPropertyPlantEquipment contextRef=”eol_PE84720—1110-Q0025_STD_273_20110930_0″ unitRef=”iso4217_USD” decimals=”0″>121619</us-gaap:GainLossOnSaleOfPropertyPlantEquipment>
<us-gaap:IncreaseDecreaseInAccruedLiabilities contextRef=”eol_PE84720—1110-Q0025_STD_273_20110930_0″ unitRef=”iso4217_USD” decimals=”0″>-22137</us-gaap:IncreaseDecreaseInAccruedLiabilities>
<us-gaap:InterestExpense contextRef=”eol_PE84720—1110-Q0025_STD_273_20110930_0″ unitRef=”iso4217_USD” decimals=”0″>234878</us-gaap:InterestExpense>
<us-gaap:DeferredIncomeTaxExpenseBenefit contextRef=”eol_PE84720—1110-Q0025_STD_273_20110930_0″ unitRef=”iso4217_USD” decimals=”0″>-123800</us-gaap:DeferredIncomeTaxExpenseBenefit>
<us-gaap:SubsequentEventsTextBlock contextRef=”eol_PE84720—1110-Q0025_STD_273_20110930_0″><div>
<div style=”TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold”>
Note J&#x2014;Subsequent Events</font></div>
<div style=”TEXT-INDENT: 0pt; DISPLAY: block”><br /></div>
<div style=”TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt”><font style=”DISPLAY: inline; TEXT-DECORATION: underline”>
Intercompany Agreement</font></font></div>
<div style=”TEXT-INDENT: 0pt; DISPLAY: block”><br /></div>
<div style=”TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt”>On
November 4, 2011, the Company, LY Holdings and Sullivan entered
into an Intercompany Obligations Settlement Agreement (the
&#x201C;Intercompany Agreement&#x201D;).&#xA0;&#xA0;Pursuant to the
Intercompany Agreement, LY Holdings will surrender all 9,500,000
shares of the Company&#x2019;s convertible preferred stock owned by
it (plus its right to $2,232,110 of accrued but undeclared and
unpaid preferred stock dividends), which will be canceled and
retired, in complete satisfaction of LY Holdings' principal
indebtedness to LNSI of $12,899,980, which is recorded on the books
of LNSI as Notes Receivable &#x2013; Affiliate. The remaining
Interest Receivable &#x2013; Affiliate was restructured, with LY
Holdings issuing LNSI a note with a face principal amount of
$1,223,203 (the &#x201C;Interest Note&#x201D;), which is secured by
two million shares of the Company&#x2019;s common stock owned by LY
Holdings. The Interest Note bears interest at the one-year LIBOR
rate plus 2% per annum and all principal and interest will be due
at the November 4, 2016 maturity date. <font style=”DISPLAY: inline; FONT-FAMILY: Times New Roman”>The Interest Note
contains customary events of default, including a default upon a
change of control of LY Holdings, and may be accelerated upon any
event of default.</font> The redemption of the preferred stock will
be accounted for by treating the excess of the fair value of the
consideration (the Notes Receivable &#x2013; Affiliate) over the
carrying value of the preferred stock as a dividend on the
preferred stock which will be deducted from earnings available to
common stockholders.</font></div>
<div style=”TEXT-INDENT: 0pt; DISPLAY: block”><br /></div>
<div style=”TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt”>Contemporaneously,
LNSI amended and restated its obligation payable to Sullivan under
the Settlement Agreement by issuing a note with a face principal
amount of $6,250,000 (the &#x201C;Settlement
Note&#x201D;).&#xA0;&#xA0;The Settlement Note will bear interest at
the three-month LIBOR rate plus 4% per annum, which will be paid
quarterly commencing on February 10, 2012.&#xA0;&#xA0;The principal
is due to be repaid at the January 10, 2013 maturity date.
<font style=”DISPLAY: inline; FONT-FAMILY: Times New Roman”>The
Settlement Note contains customary events of default, including a
default upon a change of control of either of LNSI or Lightyear
LLC, and may be accelerated upon any event of default at a default
interest rate that imposes a 5% penalty</font>.</font></div>
<div style=”TEXT-INDENT: 0pt; DISPLAY: block”><br /></div>
<div style=”TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt”>The
Settlement Note is secured by: (i) a Security Agreement dated as of
November 4, 2011 among LNSI, Lightyear LLC and Sullivan through
which LNSI and Lightyear LLC grant Sullivan a subordinated security
interest in substantially all of the assets of LNSI and of
Lightyear LLC; (ii) the personal guaranty of a director; (iii) a
Security Agreement between an entity affiliated with a director and
Sullivan whereby the entity grants to Sullivan a security interest
in its membership interest in thirty percent (30%) of LY Holdings;
and (iv) a Security Agreement between an entity affiliated with a
different director and Sullivan whereby the entity grants to
Sullivan a security interest in the entity&#x2019;s ten percent
(10%) membership interest in LY Holdings. <font style=”DISPLAY: inline; FONT-FAMILY: Times New Roman”>As of the closing
of the Intercompany Agreement, LY Holdings owned 10,000,000 shares,
or 45.27%, of LNSI&#x2019;s outstanding common
stock.</font></font></div>
<div style=”TEXT-INDENT: 0pt; DISPLAY: block”><br /></div>
<div style=”TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt”>On
November 4, 2011, LNSI entered into a Collateral Release Agreement
with LY Holdings and a bank whereby LY Holdings was released from
its pledge of 2,000,000 shares of&#xA0;LNSI convertible preferred
stock as collateral for the $2,000,000 note owed by LNSI to the
bank. Concurrent with the Collateral Release Agreement, LY Holdings
and the bank entered into a Stock Pledge Agreement whereby LY
Holdings pledged 2,000,000 shares of LNSI common stock owned by LY
Holdings as collateral for the note.</font></div>
<div style=”TEXT-INDENT: 0pt; DISPLAY: block”><br /></div>
<div style=”TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt”><font style=”DISPLAY: inline; TEXT-DECORATION: underline”>
Modification of Note Payable</font></font></div>
<div style=”TEXT-INDENT: 0pt; DISPLAY: block”><br /></div>
<div style=”TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt”>Effective
November 9, 2011, the Company and the bank agreed to modify the
terms of the $2,000,000 note.&#xA0;&#xA0;Pursuant to the term
sheet, the modified note will require the Company to (1) make an
immediate $50,000 principal payment; (2) make monthly principal and
interest payments totaling $37,780 per month, commencing on January
25, 2012; and (3) make a final payment consisting of the remaining
principal and any accrued but unpaid interest at the amended
January 25, 2014 maturity date.&#xA0;&#xA0;In addition, the bank
will waive all&#xA0;covenant violations that occurred during the
three months ended September 30, 2011 and agrees to amend the debt
covenants going forward.&#xA0;&#xA0;The modified note will bear
interest at a fixed rate of 6%. The modified note will be secured
by Lightyear LLC&#x2019;s lockbox bank account, business operating
bank account, other tangible and intangible assets, the pledge of
two million shares of the Company&#x2019;s common stock owned by LY
Holdings, as well as the personal guaranties of certain directors
of the Company and a guaranty by Lightyear LLC.</font></div>

</div></us-gaap:SubsequentEventsTextBlock>
<us-gaap:ProvisionForDoubtfulAccounts contextRef=”eol_PE84720—1110-Q0025_STD_273_20110930_0″ unitRef=”iso4217_USD” decimals=”0″>698937</us-gaap:ProvisionForDoubtfulAccounts>
<us-gaap:NetIncomeLoss contextRef=”eol_PE84720—1110-Q0025_STD_273_20110930_0″ unitRef=”iso4217_USD” decimals=”0″>-454627</us-gaap:NetIncomeLoss>
<us-gaap:ProceedsFromNotesPayable contextRef=”eol_PE84720—1110-Q0025_STD_273_20110930_0″ unitRef=”iso4217_USD” decimals=”0″>2000000</us-gaap:ProceedsFromNotesPayable>
<us-gaap:NonoperatingIncomeExpense contextRef=”eol_PE84720—1110-Q0025_STD_273_20110930_0″ unitRef=”iso4217_USD” decimals=”0″>297368</us-gaap:NonoperatingIncomeExpense>
<us-gaap:SignificantAccountingPoliciesTextBlock contextRef=”eol_PE84720—1110-Q0025_STD_273_20110930_0″><div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”>
Note B&#x2014;Summary of Significant Accounting
Policies</font></div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”><br /></div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”><font style=”DISPLAY: inline; TEXT-DECORATION: underline”>
Principles of Consolidation</font></font></div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”><br /></div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”>The
balance sheets, statements of operations and cash flows of the
Company have been included in our condensed consolidated financial
statements. All intercompany accounts and transactions have been
eliminated. The Company is managed as a single business and a
single segment.&#xA0;&#xA0;Activity of the Company&#x2019;s
wholly-owned subsidiary, Lightyear Alliance of Puerto Rico, LLC, is
insignificant.</font></div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”><br /></div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”><font style=”DISPLAY: inline; TEXT-DECORATION: underline”>
Estimates</font></font></div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”><br /></div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”>The
preparation of consolidated financial statements in accordance with
GAAP requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
consolidated financial statements and the reported amounts of
revenue and expenses during the reporting period. Actual results
could differ from those estimates. The Company&#x2019;s significant
estimates include the reserves related to receivables, the
recoverability and useful lives of long lived assets, the valuation
allowance related to deferred tax assets, the valuation of equity
and derivative instruments, and the valuation of assets acquired in
connection with SouthEast&#x2019;s October 1, 2010 purchase of the
business and assets of SouthEast Telephone, Inc.
(&#x201C;SETEL&#x201D;).</font></div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”>&#xA0;</div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”><font style=”DISPLAY: inline; TEXT-DECORATION: underline”>
Accounts Receivable</font></font></div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”><br /></div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”>Accounts
receivable are shown net of an allowance for doubtful accounts of
$894,890 and $559,468 as of September 30, 2011 and December 31,
2010, respectively. The Company&#x2019;s management has established
an allowance for doubtful accounts sufficient to cover probable and
reasonably estimable losses. The allowance for doubtful accounts
considers a number of factors, including collection experience,
current economic trends, estimates of forecasted write-offs, aging
of the accounts receivable portfolios, industry norms, regulatory
decisions and other factors. Management&#x2019;s policy is to fully
reserve all accounts that are 180-days past due. Accounts are
written off after use of a collection agency is deemed to be no
longer effective.</font></div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”><br /></div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”><font style=”DISPLAY: inline; TEXT-DECORATION: underline”>
Income Taxes</font></font></div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”><br /></div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”>LNSI
is taxed as a corporation. The Company&#x2019;s subsidiaries are
organized as limited liability companies, and have elected to be
treated as disregarded entities for income tax purposes, with
taxable income or loss passing through to LNSI, the parent,
effective February 12, 2010, the date of the Company&#x2019;s
recapitalization. The individual entities file state and local
income tax returns in certain jurisdictions and are subject to
minimum taxes which are based on measures other than
income.</font></div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”><br /></div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”>The
Company recognizes deferred tax liabilities and assets for the
expected future tax consequences of items that have been included
or excluded in the financial statements or tax returns. Deferred
tax liabilities and assets are determined on the basis of the
difference between the tax basis of liabilities and assets and
their respective financial reporting amounts (&#x201C;temporary
differences&#x201D;) at enacted tax rates in effect for the years in
which the temporary differences are expected to reverse. As of
September 30, 2011 and December 31, 2010, the Company has recorded
a valuation allowance for the amount of deferred tax assets that
are not more likely than not to be realized.</font></div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”><br /></div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”>The
Company accounts for uncertain tax positions based upon
authoritative guidance that prescribes a recognition threshold and
measurement process for financial statement recognition and
measurement of a tax position taken or expected to be taken in a
tax return. The guidance also provides direction on derecognition,
classification, interest and penalties, accounting in interim
periods and related disclosure.</font></div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”><br /></div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”>Management
has evaluated and concluded that there were no material uncertain
tax positions requiring recognition in the Company&#x2019;s
condensed consolidated financial statements as of September 30,
2011. The Company files income tax returns with most states. The
Lightyear LLC tax returns for the prior three years remain
open.</font></div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”><br /></div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”>The
Company&#x2019;s policy is to classify assessments, if any, for tax
related interest as interest expense and penalties as selling,
general and administrative expenses.</font></div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”><br /></div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”><font style=”DISPLAY: inline; TEXT-DECORATION: underline”>
Revenue Recognition</font></font></div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”><br /></div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”>Telecommunications
services income such as access revenue and usage revenue are
recognized on the accrual basis as services are provided. In
general, access revenue is billed one month in advance and is
recognized when earned. Wireless handheld devices are sold at a
discount when bundled with a long-term wireless service contract.
We recognize the equipment revenue and associated costs when title
has passed and the equipment has been accepted by the customer. The
Company provides administrative and support services to its agents
and representatives and pays commissions based on revenues from the
agents&#x2019; and representatives&#x2019; accounts. Amounts invoiced
to customers in advance of services being provided are reflected as
deferred revenues.</font></div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”>&#xA0;</div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”>The
Company pays certain agents and representatives an initial lump sum
commission. A portion of this commission is deferred and is
amortized over a three month period.</font></div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”><br /></div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”>Cost
of revenues represents primarily the direct costs associated with
the cost of transmitting and terminating traffic on other
carriers&#x2019; facilities.</font></div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”><br /></div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”>Commissions
paid to acquire customer call traffic are expensed in the period
when associated call revenues are recognized.</font></div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”><br /></div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”>The
accounting standards guidance provides for how taxes collected from
customers and remitted to governmental authorities should be
presented in the income statement. The guidance states that if
taxes are reported on a gross basis (included as revenue) a company
should disclose those amounts, if significant. The Company does not
include excise and other sales related taxes in its
revenues.</font></div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”><br /></div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”><font style=”DISPLAY: inline; TEXT-DECORATION: underline”>
Fair Value of Financial Instruments</font></font></div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”><br /></div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”>The
Company&#x2019;s financial instruments are cash, accounts
receivable, short term borrowings and accounts payable each of
which approximate their fair values based upon their short term
nature. The Company&#x2019;s other financial instruments include
notes payable, capital lease obligations and obligations payable.
The carrying value, of these instruments, approximate fair value,
as they bear terms and conditions comparable to market, for
obligations with similar terms and maturities.</font></div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”><br /></div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”><font style=”DISPLAY: inline; TEXT-DECORATION: underline”>
Inventories</font></font></div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”><br /></div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”>The
Company maintains inventories consisting of wireless telephones and
telecommunications equipment which are available for sale.
Inventories are stated at the lower of cost or market. Cost is
determined by the first-in, first-out method. At September 30, 2011
and December 31, 2010, the Company had reserves for obsolete
inventory of approximately $25,000.</font></div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”><br /></div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”>The
Company continually analyzes its slow-moving, excess and obsolete
inventories. Products that are determined to be obsolete are
written down to net realizable value.</font></div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”><br /></div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”><font style=”DISPLAY: inline; TEXT-DECORATION: underline”>
Stock-Based Compensation</font></font></div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”justify”>&#xA0;</div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”>The
Company measures the cost of services received in exchange for an
award of equity instruments based on the fair value of the award.
For employees and directors, the award is measured on the grant
date; for non-employees, the award is generally re-measured on
interim financial reporting dates until the service period is
complete. The fair value amount is then recognized over the period
during which services are required to be provided in exchange for
the award, usually the vesting period.</font></div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”><br /></div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”><font style=”DISPLAY: inline; TEXT-DECORATION: underline”>
Recent Accounting Pronouncements</font></font></div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”><br /></div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”>In
May 2011, the Financial Accounting Standards Board
(&#x201C;FASB&#x201D;) issued Accounting Standards Update
(&#x201C;ASU&#x201D;) No. 2011-04, &#x201C;Fair Value Measurement
(Topic 820) – Amendments to Achieve Common Fair Value Measurement
and Disclosure Requirements in U.S. GAAP and IFRSs.” This ASU
addresses fair value measurement and disclosure requirements within
Accounting Standards Codification (“ASC”) Topic 820 for the purpose
of providing consistency and common meaning between U.S. GAAP and
IFRSs. Generally, this ASU is not intended to change the
application of the requirements in Topic 820. Rather, this ASU
primarily changes the wording to describe many of the requirements
in U.S. GAAP for measuring fair value or for disclosing information
about fair value measurements. This ASU is effective for periods
beginning after December 15, 2011 and is not expected to have any
impact on the Company&#x2019;s condensed consolidated financial
statements or disclosures.</font></div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”>&#xA0;</div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”><font style=”DISPLAY: inline; TEXT-DECORATION: underline”>
Net Loss Per Common Share</font></font></div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”><br /></div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”>Basic
net loss per common share is computed by dividing the loss
attributable to common stockholders, after deducting the cumulative
undeclared dividends on the Company&#x2019;s convertible preferred
stock, by the weighted average number of shares of common stock
outstanding during the period. Weighted average shares outstanding
for the three and nine months ended September 30, 2011 includes the
weighted average underlying shares exercisable with respect to the
issuance of 173,980 warrants exercisable at $0.01 per share. In
accordance with the accounting literature, the Company has given
effect to the issuance of these warrants in computing basic net
loss per share because the underlying shares are issuable for
little or no cash consideration. Diluted net loss per common share
adjusts basic net loss per common share for the effects of
potentially dilutive financial instruments, only in the periods in
which such effects exist and are dilutive. At September 30, 2011,
9,500,000 shares of convertible preferred stock, 12,987 shares of
unvested restricted stock, plus outstanding stock options and
warrants to purchase 820,333 and 1,047,883 shares of common stock,
respectively, an aggregate of 11,381,203 potentially dilutive
shares of common stock, were excluded from the calculation of
diluted net loss per common share because their impact would have
been anti-dilutive. <font style=”DISPLAY: inline; BACKGROUND-COLOR: #ffffff”>At September 30, 2010,
9,500,000 shares of preferred stock, plus outstanding stock options
and warrants to purchase 774,500 and 3,549,702 shares of common
stock, respectively, an aggregate of 13,824,202 potentially
dilutive shares of common stock, were excluded from the calculation
of diluted net loss per common share because their impact would
have been anti-dilutive.</font></font></div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”><br /></div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”><font style=”DISPLAY: inline; TEXT-DECORATION: underline”>
Liquidity Plan</font></font></div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”><br /></div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”>Since
the Company began operations in 2004, it has historically incurred
significant operating losses. Through the date of the
Company&#x2019;s recapitalization on February 12, 2010, Lightyear
LLC had an accumulated member&#x2019;s deficit of approximately
$26.6 million. As of September 30, 2011, Lightyear had a cash
balance of $42,674 and a working capital deficit of $1.7
million.</font></div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”><br /></div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”>Based
on the Company&#x2019;s internal forecasts and assumptions regarding
its short term cash requirements, the Company believes that it has
sufficient working capital to support its operations through
September 30, 2012.&#xA0;The Company&#x2019;s future capital
requirements are expected to be driven by (i) network build-out
costs; (ii) debt reduction and debt service; (iii) public/investor
relations costs; (iv) acquisition opportunities; and (v) the need
to supplement working capital levels. The Company is currently
investigating the capital markets for sources of funding, which
could take the form of additional debt or equity financings. There
can be no assurance that the Company will be successful in securing
additional capital on commercially acceptable terms, if
needed.&#xA0;If the Company is unable to raise additional funds, it
may need to take measures to conserve cash and the Company might
(a) initiate additional cost reductions; (b) forego acquisition or
network build-out opportunities; and/or (c) seek additional
extensions of the scheduled payment obligations, including the
obligations payable &#x2013; related parties.</font></div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”><br /></div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”><font style=”DISPLAY: inline; TEXT-DECORATION: underline”>
Reclassifications</font></font></div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”><br /></div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”>Certain
2010 amounts have been reclassified for comparative purposes to
conform to the fiscal 2011 presentation. These reclassifications
have no impact on previously reported earnings.</font></div>
</div></us-gaap:SignificantAccountingPoliciesTextBlock>
<us-gaap:CostOfRevenue contextRef=”eol_PE84720—1110-Q0025_STD_273_20110930_0″ unitRef=”iso4217_USD” decimals=”0″>34735187</us-gaap:CostOfRevenue>
<us-gaap:SalesCommissionsAndFees contextRef=”eol_PE84720—1110-Q0025_STD_273_20110930_0″ unitRef=”iso4217_USD” decimals=”0″>4581358</us-gaap:SalesCommissionsAndFees>
<us-gaap:NetIncomeLossAvailableToCommonStockholdersBasic contextRef=”eol_PE84720—1110-Q0025_STD_273_20110930_0″ unitRef=”iso4217_USD” decimals=”0″>-1591504</us-gaap:NetIncomeLossAvailableToCommonStockholdersBasic>
<us-gaap:PaymentsToAcquirePropertyPlantAndEquipment contextRef=”eol_PE84720—1110-Q0025_STD_273_20110930_0″ unitRef=”iso4217_USD” decimals=”0″>1054972</us-gaap:PaymentsToAcquirePropertyPlantAndEquipment>
<us-gaap:DepreciationAndAmortization contextRef=”eol_PE84720—1110-Q0025_STD_273_20110930_0″ unitRef=”iso4217_USD” decimals=”0″>1282970</us-gaap:DepreciationAndAmortization>
<us-gaap:AdjustmentsToReconcileNetIncomeLossToCashProvidedByUsedInOperatingActivities contextRef=”eol_PE84720—1110-Q0025_STD_273_20110930_0″ unitRef=”iso4217_USD” decimals=”0″>92607</us-gaap:AdjustmentsToReconcileNetIncomeLossToCashProvidedByUsedInOperatingActivities>
<us-gaap:OperatingIncomeLoss contextRef=”eol_PE84720—1110-Q0025_STD_273_20110930_0″ unitRef=”iso4217_USD” decimals=”0″>-875795</us-gaap:OperatingIncomeLoss>
<us-gaap:IncreaseDecreaseInAccountsPayable contextRef=”eol_PE84720—1110-Q0025_STD_273_20110930_0″ unitRef=”iso4217_USD” decimals=”0″>290968</us-gaap:IncreaseDecreaseInAccountsPayable>
<us-gaap:OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock contextRef=”eol_PE84720—1110-Q0025_STD_273_20110930_0″><div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”>
Note A&#x2014;Organization, Operations, and Basis of
Presentation</font></div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”><br /></div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”><font style=”DISPLAY: inline; TEXT-DECORATION: underline”>
Basis of Presentation</font></font></div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”><br /></div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”>The
accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with accounting principles
generally accepted in the United States of America
(&#x201C;GAAP&#x201D;) for interim financial information and with the
instructions to Form 10-Q. Accordingly, they do not include all of
the information and footnotes required by GAAP for complete
financial statements. In the opinion of management, such statements
include all adjustments (consisting only of normal recurring items)
which are considered necessary for a fair presentation of the
condensed consolidated financial statements of Lightyear Network
Solutions, Inc. and subsidiaries (&#x201C;Lightyear,&#x201D; or the
&#x201C;Company&#x201D;) as of September 30, 2011. The results of
operations&#xA0;for the three and nine months ended September 30,
2011&#xA0;are not necessarily indicative of the operating results
for the full year. It is suggested that these unaudited condensed
consolidated financial statements be read in conjunction with the
consolidated financial statements and related disclosures of
Lightyear for the year ended December 31, 2010 which were filed
with the Securities and Exchange Commission on March 30, 2011. The
Company evaluates events that have occurred after the balance sheet
date but before the financial statements are issued. Based upon the
evaluation, the Company did not identify any recognized or
nonrecognized subsequent events that would have required further
adjustment or disclosure in the unaudited condensed consolidated
financial statements.</font></div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”><br /></div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”><font style=”DISPLAY: inline; TEXT-DECORATION: underline”>
Organization and Operations</font></font></div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”><br /></div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”>Lightyear
Network Solutions, Inc. (&#x201C;LNSI&#x201D;) was incorporated in
1997 and operates through its wholly owned subsidiaries, Lightyear
Network Solutions, LLC, organized in 2003 (&#x201C;Lightyear
LLC&#x201D;), and SE Acquisitions, LLC d/b/a SouthEast Telephone,
organized June 22, 2010, (&#x201C;SouthEast&#x201D;). The Company was
organized for the purpose of selling and marketing
telecommunication services and solutions, and owning other
companies which sell and market telecommunication services and
solutions. Lightyear provides telecommunications services
throughout the United States and Puerto Rico primarily through a
distribution network of authorized independent agents and
representatives. Lightyear is a licensed local carrier in 44 states
and provides long distance service in 49 states. Lightyear delivers
service to approximately 60,000 customer locations with a
significant concentration in the five state area of Kentucky, Ohio,
Indiana, Florida and Georgia. In addition to long distance and
local service, Lightyear currently offers a wide array of
telecommunications services including internet/intranet, calling
cards, advanced data, wireless, Voice over Internet Protocol
(&#x201C;VoIP&#x201D;) and conference calling. Lightyear maintains
its own network infrastructure and is a telecommunications reseller
and competes, both directly at the wholesale level and through
agents and representatives, at the retail level. Lightyear is
subject to regulatory requirements imposed by the Federal
Communications Commission (&#x201C;FCC&#x201D;), state and local
governmental agencies. Regulations by the FCC as well as state
agencies include limitations on types of services and service areas
offered to the public.</font></div>
</div></us-gaap:OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock>
<us-gaap:SellingGeneralAndAdministrativeExpense contextRef=”eol_PE84720—1110-Q0025_STD_273_20110930_0″ unitRef=”iso4217_USD” decimals=”0″>13466738</us-gaap:SellingGeneralAndAdministrativeExpense>
<us-gaap:IncomeTaxExpenseBenefit contextRef=”eol_PE84720—1110-Q0025_STD_273_20110930_0″ unitRef=”iso4217_USD” decimals=”0″>-123800</us-gaap:IncomeTaxExpenseBenefit>
<us-gaap:IncreaseDecreaseInPrepaidDeferredExpenseAndOtherAssets contextRef=”eol_PE84720—1110-Q0025_STD_273_20110930_0″ unitRef=”iso4217_USD” decimals=”0″>70232</us-gaap:IncreaseDecreaseInPrepaidDeferredExpenseAndOtherAssets>
<us-gaap:RepaymentsOfShortTermDebt contextRef=”eol_PE84720—1110-Q0025_STD_273_20110930_0″ unitRef=”iso4217_USD” decimals=”0″>320428</us-gaap:RepaymentsOfShortTermDebt>
<us-gaap:RepaymentsOfRelatedPartyDebt contextRef=”eol_PE84720—1110-Q0025_STD_273_20110930_0″ unitRef=”iso4217_USD” decimals=”0″>1000000</us-gaap:RepaymentsOfRelatedPartyDebt>
<us-gaap:CapitalExpendituresIncurredButNotYetPaid contextRef=”eol_PE84720—1110-Q0025_STD_273_20110930_0″ unitRef=”iso4217_USD” decimals=”0″>143370</us-gaap:CapitalExpendituresIncurredButNotYetPaid>
<us-gaap:CashPeriodIncreaseDecrease contextRef=”eol_PE84720—1110-Q0025_STD_273_20110930_0″ unitRef=”iso4217_USD” decimals=”INF”>-966535</us-gaap:CashPeriodIncreaseDecrease>
<us-gaap:InterestPaid contextRef=”eol_PE84720—1110-Q0025_STD_273_20110930_0″ unitRef=”iso4217_USD” decimals=”0″>498095</us-gaap:InterestPaid>
<us-gaap:IncreaseDecreaseInDepositOtherAssets contextRef=”eol_PE84720—1110-Q0025_STD_273_20110930_0″ unitRef=”iso4217_USD” decimals=”0″>240528</us-gaap:IncreaseDecreaseInDepositOtherAssets>
<us-gaap:BusinessCombinationDisclosureTextBlock contextRef=”eol_PE84720—1110-Q0025_STD_273_20110930_0″><div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”>
Note C&#x2014;Acquisition</font></div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”><br /></div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”><font style=”DISPLAY: inline; TEXT-DECORATION: underline”>
Acquisition of SETEL Net Assets</font></font></div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”><br /></div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”>On
October 1, 2010, SouthEast purchased substantially all of the
business and assets of SETEL. The purchase price paid consisted of
200,000 shares of common stock of LNSI, valued at $950,000, based
upon the Company&#x2019;s closing stock price of $4.75 on September
30, 2010, the assumption of certain liabilities and a cash payment
of $436,656 in order to pay any administrative and priority claims
of SETEL. The Company paid the $436,656 in claims with a portion of
the cash acquired from SETEL.&#xA0;SouthEast also assumed
SETEL&#x2019;s remaining obligations under certain notes payable and
capital leases. The Company began consolidating the results of
operations of SouthEast beginning October 1, 2010.</font></div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”><br /></div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”><font style=”DISPLAY: inline; TEXT-DECORATION: underline”>
Unaudited Pro-Forma Financial Information</font></font></div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”><br /></div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”>The
following presents the unaudited pro-forma combined results of
operations of the Company and SETEL for the three and nine months
ended September 30, 2010, as if the acquisition occurred on January
1, 2010.</font></div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”><br /></div>
<div align=”left”>
<table cellpadding=”0″ cellspacing=”0″ width=”100%” style=”FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”>
<tr>
<td align=”left” valign=”bottom”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td valign=”bottom”><font style=”DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>
&#xA0;</font></td>
<td colspan=”2″ nowrap=”nowrap” valign=”bottom”>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”center”><font style=”DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>
Three&#xA0;Months</font></div>
</td>
<td nowrap=”nowrap” valign=”bottom” style=”TEXT-ALIGN: left”>
<font style=”DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>
&#xA0;</font></td>
<td valign=”bottom”><font style=”DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>
&#xA0;</font></td>
<td colspan=”2″ nowrap=”nowrap” valign=”bottom”>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”center”><font style=”DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>
Nine&#xA0;Months</font></div>
</td>
<td nowrap=”nowrap” valign=”bottom” style=”TEXT-ALIGN: left”>
<font style=”DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>
&#xA0;</font></td>
</tr>
<tr>
<td align=”left” valign=”bottom”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td valign=”bottom”><font style=”DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>
&#xA0;</font></td>
<td colspan=”2″ nowrap=”nowrap” valign=”bottom”>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”center”><font style=”DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>
Ended</font></div>
</td>
<td nowrap=”nowrap” valign=”bottom” style=”TEXT-ALIGN: left”>
<font style=”DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>
&#xA0;</font></td>
<td valign=”bottom”><font style=”DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>
&#xA0;</font></td>
<td colspan=”2″ nowrap=”nowrap” valign=”bottom”>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”center”><font style=”DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>
Ended</font></div>
</td>
<td nowrap=”nowrap” valign=”bottom” style=”TEXT-ALIGN: left”>
<font style=”DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>
&#xA0;</font></td>
</tr>
<tr>
<td align=”left” valign=”bottom” style=”PADDING-BOTTOM: 2px”>
<font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td valign=”bottom” style=”PADDING-BOTTOM: 2px”><font style=”DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>
&#xA0;</font></td>
<td colspan=”2″ nowrap=”nowrap” valign=”bottom” style=”BORDER-BOTTOM: black 2px solid”>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”center”><font style=”DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>
<font style=”DISPLAY: inline”>September&#xA0;30,&#xA0;2010</font></font></div>
</td>
<td nowrap=”nowrap” valign=”bottom” style=”PADDING-BOTTOM: 2px; TEXT-ALIGN: left”><font style=”DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>
&#xA0;</font></td>
<td valign=”bottom” style=”PADDING-BOTTOM: 2px”><font style=”DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>
&#xA0;</font></td>
<td colspan=”2″ nowrap=”nowrap” valign=”bottom” style=”BORDER-BOTTOM: black 2px solid”>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”center”><font style=”DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>
<font style=”DISPLAY: inline”>September&#xA0;30,&#xA0;2010</font></font></div>
</td>
<td nowrap=”nowrap” valign=”bottom” style=”PADDING-BOTTOM: 2px; TEXT-ALIGN: left”><font style=”DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>
&#xA0;</font></td>
</tr>
<tr>
<td align=”left” valign=”bottom”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td valign=”bottom”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td colspan=”2″ nowrap=”nowrap” valign=”bottom”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td nowrap=”nowrap” valign=”bottom” style=”TEXT-ALIGN: left”>
<font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td valign=”bottom”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td colspan=”2″ nowrap=”nowrap” valign=”bottom”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td nowrap=”nowrap” valign=”bottom” style=”TEXT-ALIGN: left”>
<font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
</tr>
<tr bgcolor=”#CCFFCC”>
<td align=”left” valign=”bottom” width=”76%” style=”PADDING-BOTTOM: 4px”>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>Revenues</font></div>
</td>
<td align=”right” valign=”bottom” width=”1%” style=”PADDING-BOTTOM: 4px”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td valign=”bottom” width=”1%” style=”BORDER-BOTTOM: black 4px double; TEXT-ALIGN: left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>$</font></td>
<td valign=”bottom” width=”9%” style=”BORDER-BOTTOM: black 4px double; TEXT-ALIGN: right”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”><font style=”DISPLAY: inline”>
18,308,113</font></font></td>
<td nowrap=”nowrap” valign=”bottom” width=”1%” style=”PADDING-BOTTOM: 4px; TEXT-ALIGN: left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td align=”right” valign=”bottom” width=”1%” style=”PADDING-BOTTOM: 4px”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td valign=”bottom” width=”1%” style=”BORDER-BOTTOM: black 4px double; TEXT-ALIGN: left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>$</font></td>
<td valign=”bottom” width=”9%” style=”BORDER-BOTTOM: black 4px double; TEXT-ALIGN: right”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”><font style=”DISPLAY: inline”>
56,261,007</font></font></td>
<td nowrap=”nowrap” valign=”bottom” width=”1%” style=”PADDING-BOTTOM: 4px; TEXT-ALIGN: left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
</tr>
<tr bgcolor=”white”>
<td align=”left” valign=”bottom” width=”76%”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td align=”left” valign=”bottom” width=”1%”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td valign=”bottom” width=”1%” style=”TEXT-ALIGN: left”>
<font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>
&#xA0;</font></td>
<td valign=”bottom” width=”9%” style=”TEXT-ALIGN: right”>
<font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td nowrap=”nowrap” valign=”bottom” width=”1%” style=”TEXT-ALIGN: left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td align=”left” valign=”bottom” width=”1%”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td valign=”bottom” width=”1%” style=”TEXT-ALIGN: left”>
<font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>
&#xA0;</font></td>
<td valign=”bottom” width=”9%” style=”TEXT-ALIGN: right”>
<font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td nowrap=”nowrap” valign=”bottom” width=”1%” style=”TEXT-ALIGN: left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
</tr>
<tr bgcolor=”#CCFFCC”>
<td align=”left” valign=”bottom” width=”76%” style=”PADDING-BOTTOM: 4px”>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>Net
loss attributable to common stockholders</font></div>
</td>
<td align=”right” valign=”bottom” width=”1%” style=”PADDING-BOTTOM: 4px”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td valign=”bottom” width=”1%” style=”BORDER-BOTTOM: black 4px double; TEXT-ALIGN: left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>$</font></td>
<td valign=”bottom” width=”9%” style=”BORDER-BOTTOM: black 4px double; TEXT-ALIGN: right”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”><font style=”DISPLAY: inline”>
(1,237,465</font></font></td>
<td nowrap=”nowrap” valign=”bottom” width=”1%” style=”PADDING-BOTTOM: 4px; TEXT-ALIGN: left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>)</font></td>
<td align=”right” valign=”bottom” width=”1%” style=”PADDING-BOTTOM: 4px”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td valign=”bottom” width=”1%” style=”BORDER-BOTTOM: black 4px double; TEXT-ALIGN: left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>$</font></td>
<td valign=”bottom” width=”9%” style=”BORDER-BOTTOM: black 4px double; TEXT-ALIGN: right”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”><font style=”DISPLAY: inline”>
(3,933,550</font></font></td>
<td nowrap=”nowrap” valign=”bottom” width=”1%” style=”PADDING-BOTTOM: 4px; TEXT-ALIGN: left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>)</font></td>
</tr>
<tr bgcolor=”white”>
<td align=”left” valign=”bottom” width=”76%”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td align=”left” valign=”bottom” width=”1%”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td valign=”bottom” width=”1%” style=”TEXT-ALIGN: left”>
<font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>
&#xA0;</font></td>
<td valign=”bottom” width=”9%” style=”TEXT-ALIGN: right”>
<font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td nowrap=”nowrap” valign=”bottom” width=”1%” style=”TEXT-ALIGN: left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td align=”left” valign=”bottom” width=”1%”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td valign=”bottom” width=”1%” style=”TEXT-ALIGN: left”>
<font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>
&#xA0;</font></td>
<td valign=”bottom” width=”9%” style=”TEXT-ALIGN: right”>
<font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td nowrap=”nowrap” valign=”bottom” width=”1%” style=”TEXT-ALIGN: left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
</tr>
<tr bgcolor=”#CCFFCC”>
<td align=”left” valign=”bottom” width=”76%” style=”PADDING-BOTTOM: 4px”>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>Pro-forma
net loss per common share – basic and diluted</font></div>
</td>
<td align=”right” valign=”bottom” width=”1%” style=”PADDING-BOTTOM: 4px”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td valign=”bottom” width=”1%” style=”BORDER-BOTTOM: black 4px double; TEXT-ALIGN: left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>$</font></td>
<td valign=”bottom” width=”9%” style=”BORDER-BOTTOM: black 4px double; TEXT-ALIGN: right”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”><font style=”DISPLAY: inline”>
(0.06</font></font></td>
<td nowrap=”nowrap” valign=”bottom” width=”1%” style=”PADDING-BOTTOM: 4px; TEXT-ALIGN: left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>)</font></td>
<td align=”right” valign=”bottom” width=”1%” style=”PADDING-BOTTOM: 4px”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td valign=”bottom” width=”1%” style=”BORDER-BOTTOM: black 4px double; TEXT-ALIGN: left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>$</font></td>
<td valign=”bottom” width=”9%” style=”BORDER-BOTTOM: black 4px double; TEXT-ALIGN: right”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”><font style=”DISPLAY: inline”>
(0.22</font></font></td>
<td nowrap=”nowrap” valign=”bottom” width=”1%” style=”PADDING-BOTTOM: 4px; TEXT-ALIGN: left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>)</font></td>
</tr>
<tr bgcolor=”white”>
<td align=”left” valign=”bottom” width=”76%”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td align=”left” valign=”bottom” width=”1%”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td valign=”bottom” width=”1%” style=”TEXT-ALIGN: left”>
<font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>
&#xA0;</font></td>
<td valign=”bottom” width=”9%” style=”TEXT-ALIGN: right”>
<font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td nowrap=”nowrap” valign=”bottom” width=”1%” style=”TEXT-ALIGN: left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td align=”left” valign=”bottom” width=”1%”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td valign=”bottom” width=”1%” style=”TEXT-ALIGN: left”>
<font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>
&#xA0;</font></td>
<td valign=”bottom” width=”9%” style=”TEXT-ALIGN: right”>
<font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td nowrap=”nowrap” valign=”bottom” width=”1%” style=”TEXT-ALIGN: left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
</tr>
<tr bgcolor=”#CCFFCC”>
<td align=”left” valign=”bottom” width=”76%” style=”PADDING-BOTTOM: 4px”>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>Pro-forma
weighted average shares outstanding &#x2013; basic and
diluted</font></div>
</td>
<td align=”right” valign=”bottom” width=”1%” style=”PADDING-BOTTOM: 4px”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td valign=”bottom” width=”1%” style=”BORDER-BOTTOM: black 4px double; TEXT-ALIGN: left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td valign=”bottom” width=”9%” style=”BORDER-BOTTOM: black 4px double; TEXT-ALIGN: right”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”><font style=”DISPLAY: inline”>
20,031,101</font></font></td>
<td nowrap=”nowrap” valign=”bottom” width=”1%” style=”PADDING-BOTTOM: 4px; TEXT-ALIGN: left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td align=”right” valign=”bottom” width=”1%” style=”PADDING-BOTTOM: 4px”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td valign=”bottom” width=”1%” style=”BORDER-BOTTOM: black 4px double; TEXT-ALIGN: left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
<td valign=”bottom” width=”9%” style=”BORDER-BOTTOM: black 4px double; TEXT-ALIGN: right”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”><font style=”DISPLAY: inline”>
17,971,761</font></font></td>
<td nowrap=”nowrap” valign=”bottom” width=”1%” style=”PADDING-BOTTOM: 4px; TEXT-ALIGN: left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman”>&#xA0;</font></td>
</tr>
</table>
</div>
<div style=”DISPLAY: block; TEXT-INDENT: 0pt”><br /></div>
<div style=”DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman”>The
pro-forma combined results are not necessarily indicative of the
results that actually would have occurred if the acquisition of the
net assets of SETEL had been completed as of the beginning of 2010,
nor are they necessarily indicative of future consolidated
results.</font></div>
</div></us-gaap:BusinessCombinationDisclosureTextBlock>
<us-gaap:IncreaseDecreaseInInventories contextRef=”eol_PE84720—1110-Q0025_STD_273_20110930_0″ unitRef=”iso4217_USD” decimals=”0″>162435</us-gaap:IncreaseDecreaseInInventories>
<us-gaap:OperatingExpenses contextRef=”eol_PE84720—1110-Q0025_STD_273_20110930_0″ unitRef=”iso4217_USD” decimals=”0″>20027169</us-gaap:OperatingExpenses>
<us-gaap:ConcentrationRiskDisclosureTextBlock contextRef=”eol_PE84720—1110-Q0025_STD_273_20110930_0″><div>
<div style=”TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold”>
Note G&#x2014;Supplier Concentration</font></div>
<div style=”TEXT-INDENT: 0pt; DISPLAY: block”><br /></div>
<div style=”TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt”>Of
the telecommunications services used in its operations, Lightyear
acquired approximately 32% and 24% during the three months ended
September 30, 2011 from two suppliers and 30%, 24% and 10% during
the nine months ended September 30, 2011 from three suppliers. The
Company acquired approximately <font style=”BACKGROUND-COLOR: #ffffff; DISPLAY: inline”>45% and 11%</font>
during the three months ended September 30, 2010 and <font style=”BACKGROUND-COLOR: #ffffff; DISPLAY: inline”>43% and 12%</font>
during&#xA0;the nine months ended September 30, 2010 from two
suppliers. Although there are other suppliers of these services, a
change in suppliers could have an adverse effect on the business
which could ultimately negatively affect operating
results.</font></div>
</div></us-gaap:ConcentrationRiskDisclosureTextBlock>
<us-gaap:InterestExpenseRelatedParty contextRef=”eol_PE84720—1110-Q0025_STD_273_20110930_0″ unitRef=”iso4217_USD” decimals=”INF”>296276</us-gaap:InterestExpenseRelatedParty>
<us-gaap:IncreaseDecreaseInDeferredRevenue contextRef=”eol_PE84720—1110-Q0025_STD_273_20110930_0″ unitRef=”iso4217_USD” decimals=”0″>-1531659</us-gaap:IncreaseDecreaseInDeferredRevenue>
<us-gaap:RelatedPartyTransactionsDisclosureTextBlock contextRef=”eol_PE84720—1110-Q0025_STD_273_20110930_0″><div>
<div style=”TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold”>
Note F&#x2014;Related Party Transactions</font></div>
<div style=”TEXT-INDENT: 0pt; DISPLAY: block”><br /></div>
<div style=”TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt”>Lightyear
has significant transactions with its former parent, LY Holdings,
and its members and deals with certain companies or individuals
which are related parties, either by having owners in common or
because they are controlled by members of LY Holdings, by directors
of the Company or by relatives of members of LY Holdings or by
directors of the Company. Aggregate related party transactions are
segregated on the faces of the balance sheets and statements of
operations.</font></div>
<div style=”TEXT-INDENT: 0pt; DISPLAY: block”><br /></div>
<div style=”TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt”><font style=”DISPLAY: inline; TEXT-DECORATION: underline”>
Obligations Payable</font></font></div>
<div style=”TEXT-INDENT: 0pt; DISPLAY: block”><br /></div>
<div style=”TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt”>On
April 29, 2010, as amended on August 12, 2010 and February 7, 2011,
the Company purchased a $7,750,000 LY Holdings demand note
receivable resulting in an obligation payable of $7,750,000 to a
related party, Sullivan, a director of the Company (the
&#x201C;Settlement Agreement&#x201D;). The obligation payable &#x2013;
related party bears interest at a rate of LIBOR plus 6% on all
amounts owed up to $7,000,000 and LIBOR plus 9% on all amounts owed
in excess of $7,000,000, neither of which will exceed 10% per
annum. On the first day of each quarter year (through and including
the maturity date) Lightyear LLC will make a payment of all accrued
but unpaid interest. Lightyear LLC will make a payment of all
remaining principal and interest on the maturity date, which is
January 10, 2013.&#xA0;</font></div>
<div style=”TEXT-INDENT: 0pt; DISPLAY: block”><br /></div>
<div style=”TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt”>At
September 30, 2011 and December 31, 2010, the Company had
outstanding $6,250,000 and $7,250,000 on this obligation payable
&#x2013; related party, respectively.</font></div>
<div style=”TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt” align=”left”>&#xA0;</div>
<div style=”TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt”>See
Note J, Subsequent Events.</font></div>
<div style=”TEXT-INDENT: 0pt; DISPLAY: block”>&#xA0;</div>
<div style=”TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt”><font style=”DISPLAY: inline; TEXT-DECORATION: underline”>
Other</font></font></div>
<div style=”TEXT-INDENT: 0pt; DISPLAY: block”><br /></div>
<div style=”TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt”>A
director of the Company owns an indirect interest in a Lightyear
agency. The agency has a standard Lightyear agent agreement and
earned approximately $4,000 and $11,000 in commissions from
Lightyear during the three and nine months ended September 30,
2011, respectively, and <font style=”BACKGROUND-COLOR: #ffffff; DISPLAY: inline”>$5,000 and
$14,000</font> during the three and nine months ended September 30,
2010, respectively.</font></div>
<div style=”TEXT-INDENT: 0pt; DISPLAY: block”><br /></div>
<div style=”TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt”>Since
2008, a former employee (and son of a director) of the Company, has
maintained a representative position in a direct selling entity
which earned approximately $9,000 and $31,000 in commissions from
Lightyear during the three and nine months ended September 30, 2011
and <font style=”BACKGROUND-COLOR: #ffffff; DISPLAY: inline”>$15,000 and
$74,000</font> during the three and nine months ended September 30,
2010, respectively. This representative position was terminated
voluntarily on October 7, 2011.</font></div>
<div style=”TEXT-INDENT: 0pt; DISPLAY: block”><br /></div>
<div style=”TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt”>Commission
expense &#x2013; related parties includes certain VoIP and wireless
revenue override payments due to certain directors of the Company.
On June 22, 2011, certain holders of the override rights waived
their right to such payments for the second half of 2010 and the
full year 2011, which resulted in the Company reversing
approximately $86,000 of liabilities. During the three and nine
months ended September 30, 2011, Lightyear recorded approximate
expense of $14,000 and net credits of $3,000 related to VoIP and
wireless revenue overrides, respectively. During the three and nine
months ended September 30, 2010, Lightyear recorded approximately
<font style=”BACKGROUND-COLOR: #ffffff; DISPLAY: inline”>$35,000
and $104,000</font> of VoIP and wireless revenue override expense,
respectively.</font></div>
<div style=”TEXT-INDENT: 0pt; DISPLAY: block”><br /></div>
<div style=”TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt” align=”left”><font style=”DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt”>Pursuant
to a former officer&#x2019;s employment agreement, Lightyear
provided life insurance coverage consisting of $3,000,000 under a
whole life policy and $5,000,000 under a term life policy.
Lightyear also maintained $5,000,000 under a key man life policy on
the same former officer. The proceeds from $2,000,000 of the term
life policy and the full proceeds of the key man life policy had
been assigned to Sullivan as collateral for the obligations payable
&#x2013; related parties, but Sullivan waived those rights
concurrent with the actions described below. Pursuant to a
Consulting and Non-Competition Agreement dated April 21, 2011 (see
Note I, Commitments and Contingencies, Consulting and
Non-Competition Agreement, for additional details), J. Sherman
Henderson, III (&#x201C;Henderson&#x201D;) was assigned the term life
policy, and Henderson will be responsible for all premiums due on
the policy following the assignment. On May 5, 2011, (a) the
Company transferred the whole life policy to Henderson who will be
responsible for all premiums due on the policy following the
assignment; and (b) the Company elected to withdraw the cash
surrender value from the whole life policy and prior to September
30, 2011 collected the $0.3 million in cash surrender value
included in other assets at December 31, 2010. On July 27, 2011,
the Company terminated the key man life policy. Aggregate insurance
premium expense for these policies was approximately $7,000 and
$43,000 for the three and nine months ended September 30, 2011 and
<font style=”BACKGROUND-COLOR: #ffffff; DISPLAY: inline”>$19,000
and $63,000</font> for the three and nine months ended September
30, 2010, respectively.</font></div>
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<us-gaap:RepaymentsOfNotesPayable contextRef=”eol_PE84720—1110-Q0025_STD_273_20110930_0″ unitRef=”iso4217_USD” decimals=”0″>481342</us-gaap:RepaymentsOfNotesPayable>
<us-gaap:IncreaseDecreaseInOtherOperatingAssets contextRef=”eol_PE84720—1110-Q0025_STD_273_20110930_0″ unitRef=”iso4217_USD” decimals=”0″>5254</us-gaap:IncreaseDecreaseInOtherOperatingAssets>
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<lyns:GrossProceedsFromObligationsPayableRelatedParty contextRef=”eol_PE84720—1110-Q0025_STD_273_20110930_0″ unitRef=”iso4217_USD” decimals=”0″>2099980</lyns:GrossProceedsFromObligationsPayableRelatedParty>
<lyns:EquityIssuanceCostsWithheld contextRef=”eol_PE84720—1110-Q0025_STD_273_20110930_0″ unitRef=”iso4217_USD” decimals=”0″>1519304</lyns:EquityIssuanceCostsWithheld>
<us-gaap:NetIncomeLoss contextRef=”eol_PE84720—1110-Q0025_STD_273_20110930_0_452905x440920″ unitRef=”iso4217_USD” decimals=”0″>-454627</us-gaap:NetIncomeLoss>
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<us-gaap:StockIssuedDuringPeriodSharesNewIssues contextRef=”eol_PE84720—1110-Q0025_STD_273_20110930_0_452905x444581″ unitRef=”shares” decimals=”INF”>1783596</us-gaap:StockIssuedDuringPeriodSharesNewIssues>
<us-gaap:AdjustmentsToAdditionalPaidInCapitalSharebasedCompensationRequisiteServicePeriodRecognitionValue contextRef=”eol_PE84720—1110-Q0025_STD_273_20110930_0_452905x453698″ unitRef=”iso4217_USD” decimals=”0″>473345</us-gaap:AdjustmentsToAdditionalPaidInCapitalSharebasedCompensationRequisiteServicePeriodRecognitionValue>
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<us-gaap:StockholdersEquityOther contextRef=”eol_PE84720—1110-Q0025_STD_273_20110930_0_452905x467530″ unitRef=”iso4217_USD” decimals=”0″>570967</us-gaap:StockholdersEquityOther>
<us-gaap:GrossProfit contextRef=”eol_PE84720—1110-Q0025_STD_92_20100930_0″ unitRef=”iso4217_USD” decimals=”0″>3588669</us-gaap:GrossProfit>
<us-gaap:InvestmentIncomeInterest contextRef=”eol_PE84720—1110-Q0025_STD_92_20100930_0″ unitRef=”iso4217_USD” decimals=”0″>7903</us-gaap:InvestmentIncomeInterest>
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<us-gaap:NonoperatingIncomeExpense contextRef=”eol_PE84720—1110-Q0025_STD_92_20100930_0″ unitRef=”iso4217_USD” decimals=”0″>158710</us-gaap:NonoperatingIncomeExpense>
<us-gaap:CostOfRevenue contextRef=”eol_PE84720—1110-Q0025_STD_92_20100930_0″ unitRef=”iso4217_USD” decimals=”0″>7999755</us-gaap:CostOfRevenue>
<us-gaap:SalesCommissionsAndFees contextRef=”eol_PE84720—1110-Q0025_STD_92_20100930_0″ unitRef=”iso4217_USD” decimals=”0″>1222056</us-gaap:SalesCommissionsAndFees>
<us-gaap:NetIncomeLossAvailableToCommonStockholdersBasic contextRef=”eol_PE84720—1110-Q0025_STD_92_20100930_0″ unitRef=”iso4217_USD” decimals=”0″>-1211184</us-gaap:NetIncomeLossAvailableToCommonStockholdersBasic>
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<us-gaap:OperatingExpenses contextRef=”eol_PE84720—1110-Q0025_STD_92_20100930_0″ unitRef=”iso4217_USD” decimals=”0″>4575439</us-gaap:OperatingExpenses>
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<lyns:WeightedAverageNumberBasicDilutedSharesOutstanding contextRef=”eol_PE84720—1110-Q0025_STD_92_20100930_0″ unitRef=”shares” decimals=”0″>19831101</lyns:WeightedAverageNumberBasicDilutedSharesOutstanding>
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<us-gaap:OperatingExpenses contextRef=”eol_PE84720—1110-Q0025_STD_92_20110930_0″ unitRef=”iso4217_USD” decimals=”0″>6365210</us-gaap:OperatingExpenses>
<us-gaap:InterestExpenseRelatedParty contextRef=”eol_PE84720—1110-Q0025_STD_92_20110930_0″ unitRef=”iso4217_USD” decimals=”INF”>98459</us-gaap:InterestExpenseRelatedParty>
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<lyns:WeightedAverageNumberBasicDilutedSharesOutstanding contextRef=”eol_PE84720—1110-Q0025_STD_92_20110930_0″ unitRef=”shares” decimals=”0″>22242475</lyns:WeightedAverageNumberBasicDilutedSharesOutstanding>
<lyns:InvestmentIncomeInterestRelatedParties contextRef=”eol_PE84720—1110-Q0025_STD_92_20110930_0″ unitRef=”iso4217_USD” decimals=”0″>192664</lyns:InvestmentIncomeInterestRelatedParties>
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<context id=”eol_PE84720—1110-Q0025_STD_92_20100930_0″>
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<context id=”eol_PE84720—1110-Q0025_STD_273_20110930_0_452905x467530″>
    <entity>
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<context id=”eol_PE84720—1110-Q0025_STD_273_20110930_0_452905x453698″>
    <entity>
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<context id=”eol_PE84720—1110-Q0025_STD_273_20110930_0_452905x444581″>
    <entity>
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      <segment><xbrldi:explicitMember dimension=”us-gaap:StatementEquityComponentsAxis”>us-gaap:CommonStockMember</xbrldi:explicitMember></segment>
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    <period>
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<context id=”eol_PE84720—1110-Q0025_STD_273_20110930_0_452905x440920″>
    <entity>
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<context id=”eol_PE84720—1110-Q0025_STD_273_20110930_0″>
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<context id=”eol_PE84720—1110-Q0025_STD_273_20100930_0_455296x444874″>
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<context id=”eol_PE84720—1110-Q0025_STD_273_20100930_0_455296x444581″>
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<context id=”eol_PE84720—1110-Q0025_STD_273_20100930_0″>
    <entity>
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<context id=”eol_PE84720—1110-Q0025_STD_0_20101231_0_452905x467530″>
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<context id=”eol_PE84720—1110-Q0025_STD_0_20101231_0_452905x453698″>
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<context id=”eol_PE84720—1110-Q0025_STD_0_20101231_0_452905x444874″>
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<context id=”eol_PE84720—1110-Q0025_STD_0_20101231_0_452905x444581″>
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<context id=”eol_PE84720—1110-Q0025_STD_0_20101231_0_452905x440920″>
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<context id=”eol_PE84720—1110-Q0025_STD_0_20101231_0″>
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<context id=”eol_PE84720—1110-Q0025_STD_0_20091231_0″>
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<context id=”eol_PE84720—1110-Q0025_STD_0_20110930_0_452905x467530″>
    <entity>
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<context id=”eol_PE84720—1110-Q0025_STD_0_20110930_0_452905x440920″>
    <entity>
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<context id=”eol_PE84720—1110-Q0025_STD_0_20110930_0″>
    <entity>
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<context id=”eol_PE84720—1110-Q0025_STD_0_20100930_0″>
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<context id=”eol_PE84720—1110-Q0025_STD_0_20111110_0″>
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<unit id=”shares”>
    <measure>shares</measure>
</unit>
<unit id=”iso4217_USD”>
    <measure>iso4217:USD</measure>
</unit>
<unit id=”iso4217_USD_per_shares”>
    <divide>
      <unitNumerator>
        <measure>iso4217:USD</measure>
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      <unitDenominator>
        <measure>shares</measure>
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</unit>
<xbrll:footnoteLink xlink:role=”http://www.xbrl.org/2003/role/link” xlink:type=”extended”>
    <xbrll:loc xlink:href=”#fnid_31435241_2_39″ xlink:label=”fnid_31435241_2_39″ xlink:type=”locator”/>
    <xbrll:loc xlink:href=”#fnid_31435241_2_40″ xlink:label=”fnid_31435241_2_40″ xlink:type=”locator”/>
    <xbrll:footnote xlink:label=”footnote_31435253″ xlink:role=”http://www.xbrl.org/2003/role/footnote” xlink:type=”resource” xml:lang=”en-US”>Face value of obligations payable to LY Holdings of $2,099,980, less selling commissions withheld of $273,000 during the nine months ended September 30, 2010.</xbrll:footnote>
    <xbrll:footnote xlink:label=”footnote_31435254″ xlink:role=”http://www.xbrl.org/2003/role/footnote” xlink:type=”resource” xml:lang=”en-US”>Gross proceeds from issuance of common stock and warrants of $5,370,100, less issuance costs withheld and/or paid aggregating $1,519,304 including selling commissions, financial advisory fees, expense reimbursement, bank escrow fees, legal and other professional fees disbursed.</xbrll:footnote>
    <xbrll:footnoteArc xlink:from=”fnid_31435241_2_39″ xlink:to=”footnote_31435253″ xlink:arcrole=”http://www.xbrl.org/2003/arcrole/fact-footnote” order=”1.0″ xlink:type=”arc”/>
    <xbrll:footnoteArc xlink:from=”fnid_31435241_2_40″ xlink:to=”footnote_31435254″ xlink:arcrole=”http://www.xbrl.org/2003/arcrole/fact-footnote” order=”1.0″ xlink:type=”arc”/>
</xbrll:footnoteLink>
</xbrl>

XBRL Instance Document – Filed 11/2011

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