** **

**UNITED STATES**

**SECURITIES AND EXCHANGECOMMISSION**

**Washington, D.C. 20549**

** **

**FORM 10-QSB**

 
| **(Mark One)**                                   |
|--------------------------------------------------|
| ** **                                       | ** ** |
| **x**                                            | **QUARTERLY REPORT UNDER  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
| ** **                                       | ** ** |
| **For the quarterly period ended June 30, 2007** |
| ** **                                       | ** ** |
| **o**                                            | **TRANSITION REPORT UNDER  SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF 1934** |
|                                                  |  |  |

 

**For the transition periodfrom            to            **

 

**Commission file number 000-50712**

 

**PAYPHONE WIND DOWN CORPORATION**

(Exact name of small business issuer as specified in its charter)

 

| **Delaware**                              | ** ** | **58-2131736**                        |
|-------------------------------------------|------------|---------------------------------------|
| (State  or other jurisdiction of          |       | (I.R.S.  Employer Identification No.) |
| incorporation  or organization)           |       |                                  |
|                                      |       |                                  |
| **P.O. Box 143209, Fayetteville, GA**     | ** ** | **30214**                             |
| (Address  of principal executive offices) |       | (Zip  Code)                           |

 

**(770) 631-3489**

(Issuer’s telephone number)

 

Check whether the issuer(1) filed all reports required to be filed by Section 13 or15(d) of the Exchange Act during the past 12 months (or for such shorterperiod that the registrant was required to file such reports), and (2) hasbeen subject to such filing requirements for the past 90 days. Yes  o    No  x

 

Indicate by check markwhether the registrant is a shell company (as defined in Rule 12b-2 of theExchange Act). Yes  x    No  o

 

**APPLICABLE ONLY TO ISSUERS INVOLVEDIN BANKRUPTCY**

**PROCEEDINGS DURING THE PRECEDING FIVEYEARS**

 

Check whether theregistrant filed all documents and reports required to be filed bySection 12, 13 or 15(d) of the Exchange Act after the distribution ofsecurities under a plan confirmed by a court. Yes  x    No  o

 

Transitional SmallBusiness Disclosure Format. Yes  x    No  o

 

As of February 14, 2007,there were outstanding 4,987,624 shares of the Issuer’s common stock $.0001 parvalue.

 

 

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**PAYPHONE WIND DOWN CORPORATION**

**INDEX TO FORM 10-QSB**

**JUNE 30, 2007**

 
| Part I. Financial Information |
|------------------------------------|
|                               |   |   |   |
| Item 1.                            |   | Financial  Statements |   |
|                               |   | Statement  of Net Assets in Liquidation June 30, 2007 (Unaudited) |   |
|                               |   | Statements  of Changes in Net Assets in Liquidation for the three and six months ended  June 30, 2007 and 2006 (Unaudited) |   |
|                               |   | Notes  to Financial Statements (Unaudited) |   |
| Item  2.                           |   | Plan  of Operation |   |
| Item 3.                            |   | Controls and Procedures |   |
|                               |   |   |   |
| Part II. Other  Information   |
|                               |
| Item 1.                            |   | Legal Proceedings |   |
| Item 5.                            |   | Other Information |   |
| Item  6.                           |   | Exhibits |   |
| Signatures                         |   |   |

 

2

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**PART I. FINANCIAL INFORMATION**

**Item 1. Financial Statements**

 

**PAYPHONE WIND DOWN CORPORATION**

**STATEMENT OF NET ASSETS INLIQUIDATION**

**JUNE 30, 2007**

**(Unaudited)**

** **
| **ASSETS**                                         |   |      |      |
|----------------------------------------------------|--------|-----------|-----------|
| Cash                                               |   | $         | 2,273,853 |   |
| Cash, restricted                                   |   | 83,575    |      |
| Accounts  receivable                               |   | 5,091,542 |      |
| Deposits                                           |   | 323,313   |      |
| Total assets                                       |   | 7,772,283 |      |
|                                               |   |      |      |
| **LIABILITIES**                                    |   |      |      |
| Estimated costs  to be incurred during liquidation |   | 1,765,903 |      |
| Accounts payable                                   |   | 1,396,474 |      |
| Accrued expenses                                   |   | 3,763,119 |      |
| Accrued  property, excise and sales taxes          |   | 66,032    |      |
| Total  liabilities                                 |   | 6,991,528 |      |
|                                               |   |      |      |
| **Net  assets in liquidation**                     |   | $         | 780,755   |   |

 

The accompanying notes are an integral part of these financialstatements.

 

3

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**PAYPHONE WIND DOWN CORPORATION**

**STATEMENTS OF CHANGES IN NET ASSETSIN LIQUIDATION**

**FOR THE THREE AND SIX MONTHS ENDEDJUNE 30, 2007 AND 2006**

**(Unaudited)**

 
| ** **                                                     | ** ** | **For the three months ended June 30,** | ** ** | **For the six months ended June 30,** | ** ** |
|----------------------------------------------------------------|------------|-----------------------------------------------------------------------|------------|---------------------------------------------------------------------|------------|
| ** **                                                     | ** ** | **2007**                                                              | ** ** | **2006**                                                            | ** ** | **2007** | ** ** | **2006** | ** ** |
| **PRE-LIQUIDATION  OPERATIONS**                                |       |                                                                  |       |                                                                |       |   |   |   |   |
| Coin calls                                                     |       | $                                                                     | —     |                                                                | $          | 1,885,941 |   | $ | 601,243 |   | $ | 3,784,918 |   |
| Non-coin calls                                                 |       | —                                                                |       | 1,012,174                                                           |       | 288,032 |   | 2,051,257 |   |
| Other payphone  revenues                                       |       | —                                                                |       | 75,843                                                              |       | 38,689 |   | 419,682 |   |
| Total revenues                                                 |       | —                                                                |       | 2,973,958                                                           |       | 927,964 |   | 6,255,857 |   |
|                                                           |       |                                                                  |       |                                                                |       |   |   |   |   |
| Direct cost of  payphone operations                            |       | —                                                                |       | 2,705,251                                                           |       | 917,884 |   | 5,847,915 |   |
| Selling, general  and administrative                           |       | —                                                                |       | 704,618                                                             |       | 150,379 |   | 1,528,131 |   |
| Depreciation                                                   |       | —                                                                |       | —                                                              |       | — |   | 120,104 |   |
| Total operating  expenses                                      |       | —                                                                |       | 3,409,869                                                           |       | 1,068,263 |   | 7,496,150 |   |
|                                                           |       |                                                                  |       |                                                                |       |   |   |   |   |
| **Loss  from operations**                                      |       | —                                                                |       | (435,911                                                            | )          | (140,299 | ) | (1,240,293 | ) |
|                                                           |       |                                                                  |       |                                                                |       |   |   |   |   |
| **Other  income**                                              |       | 40,055                                                                |       | 95,109                                                              |       | 558,697 |   | 164,552 |   |
|                                                           |       |                                                                  |       |                                                                |       |   |   |   |   |
| **Income  (loss) from pre-liquidation operations**             |       | 40,055                                                                |       | (340,802                                                            | )          | 418,398 |   | (1,075,741 | ) |
|                                                           |       |                                                                  |       |                                                                |       |   |   |   |   |
| **LIQUIDATION  ACTIVITIES**                                    |       |                                                                  |       |                                                                |       |   |   |   |   |
| Administrative  expenses incurred after entering liquidation   |       | —                                                                |       | —                                                              |       | 100,000 |   | (2,468,148 | ) |
| Net realized  gain on sale of assets and liabilities           |       | —                                                                |       | —                                                              |       | 2,578,009 |   | — |   |
| Net unrealized  gain on revaluations of assets and liabilities |       | —                                                                |       | 17,800                                                              |       | — |   | 1,019,114 |   |
| **Net  income (loss) in liquidation**                          |       | —                                                                |       | 17,800                                                              |       | 2,678,009 |   | (1,449,034 | ) |
|                                                           |       |                                                                  |       |                                                                |       |   |   |   |   |
| **Net  increase (decrease) in net assets**                     |       | 40,055                                                                |       | (323,002                                                            | )          | 3,096,407 |   | (2,524,775 | ) |
|                                                           |       |                                                                  |       |                                                                |       |   |   |   |   |
| Shareholders’  equity (deficiency) at beginning of period |       | 740,700                                                               |       | 361,416                                                             |       | (2,315,652 | ) | 2,563,189 |   |
|                                                           |       |                                                                  |       |                                                                |       |   |   |   |   |
| Net assets in  liquidation at June 30, 2007 and 2006           |       | $                                                                     | 780,755    |                                                                | $          | 38,414 |   | $ | 780,755 |   | $ | 38,414 |   |

 

The accompanying notes are an integral part of these financialstatements.

 

4

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**PAYPHONEWIND DOWN CORPORATION**

**NOTES TO FINANCIAL STATEMENTS(UNAUDITED)**

**JUNE30, 2007**

 

**NOTE A—BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

 

***Summary Information***

 

The accompanyingunaudited financial statements have been prepared pursuant to therules and regulations of the Securities and Exchange Commission (“SEC”)for interim financial information and the general instructions toForm 10-QSB. Certain information and footnote disclosures, normallyincluded in annual financial statements, have been condensed or omittedpursuant to such SEC rules and regulations. These interim financialstatements should be read in conjunction with our audited financial statementsand notes thereto included in our Annual Report on Form 10-KSB for thefiscal year ended December 31, 2006.

 

***The Company***

 

Payphone Wind DownCorporation (“we,” “us,” “our,” or the “Company”), formerly ETS Payphones, Inc.(“ETS”), is a Delaware corporation that operated, serviced, and maintained asystem of payphones, concentrated primarily in the Eastern and Southern UnitedStates (other than Florida), as well as the District of Columbia and PuertoRico. The Company also provided other telecommunications products to certain ofits clients. Pursuant to the Annual Meeting of Stockholders held on February 15,2006, the stockholders of the Company approved, among other things, the windingdown of our operations following the sale of substantially all of our assets toEmpire Payphones, Inc. (“Empire”), pursuant to an Asset Sale Agreement datedNovember 1, 2005 (the “Asset Sale Agreement”). The Board of Directors of theCompany (the “Board of Directors”) approved the dissolution on October 31, 2005subject to stockholder approval and consummation of the Asset Sale Agreement.On February 9, 2007, pursuant to the First Amendment to the Asset SaleAgreement, dated as of February 9, 2007 (the “First Amendment”), the partiesfinalized the Asset Sale Agreement and agreed that the closing date would bedeemed effective as of December 31, 2006 (the “Closing Date”). However, forfinancial reporting purposes, the Company has deemed the sale date to beconcurrent with the closing, February 9, 2007, and accordingly, has recordedthe sale of the assets on that date. On February 12, 2007, the Company amendedthe Certificate of Incorporation of the Company to change the name of theCompany to “Payphone Wind Down Corporation” from ETS Payphones, Inc. In orderto accomplish the liquidation and dissolution, on February 14, 2007, the Boardof Directors filed a Certificate of Dissolution of the Company (“Certificate ofDissolution”) with the Delaware Secretary of State to dissolve the Company.Since February 9, 2007, the Company’s activities have been limited solely tothose incidental to effecting its dissolution, including the investment of anyfunds being held in reserve and the distribution of its remaining assets to itsstockholders.

 

Upon the filing of theCertificate of Dissolution with the State of Delaware, the Company ordered thetransfer agent to close the stock transfer books to discontinue recordingtransfers of the Company’s common stock at the close of business on the ClosingDate (the “Final Record Date”). As a result of the approval by the Company’sstockholders of the sale of substantially all of the assets of the Company andapproval of the liquidation and dissolution of the Company following theclosing of the sale, the Company changed its basis of accounting to theliquidation basis of accounting as of January 1, 2006. If the Company electedto continue to use the going concern basis of accounting to present itsoperations for the period January 1, 2006 through February 14, 2006, the effectwould be immaterial.

 

***Basisof Accounting***

 

As a result of ourshareholders’ approval of the sale of substantially all of the Company’s assetsand the imminent nature of the liquidation of our Company, the Company adoptedthe liquidation basis of accounting effective January 1, 2006. The liquidationbasis of accounting is considered appropriate when, among other things,liquidation of a company is probable and the net realizable values of assetsare reasonably determinable. Under this basis of accounting, assets are valuedat their estimated net realizable values and liabilities are stated at theirestimated settlement amounts. For financial statement presentation purposes,liquidating activities are limited to those relating to the revaluation anddisposition of assets and liabilities as well as costs incurred or expected tobe incurred specifically as a result of liquidation.

 

Interim results are notnecessarily indicative of results to be expected for the entire year. Thepreparation of financial statements requires management to make estimates andassumptions that affect the reported amounts of assets, liabilities, revenuesand expenses. Actual results could differ from those estimates. In the opinionof management, all adjustments (consisting of normal recurring adjustments)considered necessary for a fair presentation have been included. With regard tothe liquidating activities, the amounts ultimately realizable from thedisposition of the remaining assets, including costs to be incurred inconnection with the liquidation, or the amounts that creditors will agree toaccept in settlement of the obligations due them, may differ materiallyfrom the estimated or other amounts shown in the accompanying financialstatements, and the estimates are subject to material change in the near term.

 

5

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***EstimatedCosts to be Incurred During Liquidation***

 

Under the liquidationbasis of accounting, we accrue for the remaining costs to be incurred duringliquidation, including compensation and severance for the remaining employees,board fees, fees of professional service providers, and miscellaneous other costs.Such costs were estimated at $1,765,903 as of June 30, 2007. Our estimates arebased on assumptions regarding our ability to settle outstanding obligations tocreditors, resolve outstanding litigation, and the timing of distributions toshareholders. If there are delays, or we are not successful, in achieving theseobjectives, actual costs incurred may increase, reducing net assetsavailable in liquidation.

 

***Sale of the Company; Winding Down of Operations***

 

As reported in the Form8-K filed November 7, 2005 (the “November 7 Form 8-K”) and the Definitive ProxyStatement, filed on January 4, 2006 (the “Definitive Proxy Statement”), theCompany entered into the Asset Sale Agreement and related agreements includinga security agreement and a promissory note to sell substantially all of itsoperating assets to Empire. The assets sold to Empire included, subject tocertain exclusions, the Company’s payphones and related equipment,miscellaneous equipment, furniture, fixtures, general supplies, computers,software, promotional materials, customer lists, tools and spare partsinventory used in the operation of the business (the “Sale Assets”), contractsrelated to the Sale Assets, all of the Company’s interest in and to certain paytelephone numbers, trade names, trademarks and other intellectual property. Inaddition, as reported in the November 7 Form 8-K and in the Definitive ProxyStatement, the Company also entered into a Management Services Agreementeffective November 1, 2005 (“Management Services Agreement”), with Empirepursuant to which Empire provided management services and funded theoperational losses of the Company pending consummation of the sale transaction.As of December 31, 2006, the Company had not accrued any receivables for anyunfunded operational losses.

 

As reported in the Form8-K filed February 15, 2007 (the “February 15, 2007 Form 8-K”), on February 9,2007, the Asset Sale Agreement was amended pursuant to the First Amendment. TheFirst Amendment amended the Asset Sale Agreement to, among other things,specify that the remaining purchase price to be paid to the Company pursuant tothe Asset Sale Agreement was $1,827,966 (the “Remaining Purchase Price”). TheFirst Amendment provided that the Remaining Purchase Price was in full andfinal satisfaction of the remaining unpaid amount of (i) the Purchase Price (asdefined in the Asset Sale Agreement) remaining under the Asset Sale Agreementthrough December 31, 2006 and (ii) any Shortfall Advances (as defined in theManagement Services Agreement) accrued through December 31, 2006 pursuant tothe Management Services Agreement. Pursuant to the First Amendment, the Companyand Empire agreed that for purposes of the Asset Sale Agreement, the ClosingDate would be deemed to be effective as of December 31, 2006.

 

Pursuant to the terms ofthe Asset Sale Agreement, as amended by the First Amendment, the Companyreceived $802,966 in cash on February 9, 2007, and a secured Promissory Note,dated as of December 31, 2006, from Empire in the principal amount of$1,025,000.

 

The Promissory Noteprovided that the principal amount will be paid to the Company in monthlyinstallments beginning on the Closing Date with the last payment occurring onAugust 31, 2007. The Promissory Note contained a guaranty by ManhattanTelecommunications Corporation of certain obligations of Empire under thePromissory Note. On August 29, 2007, Empire paid the Promissory Note in full.

 

The aggregateconsideration received by the Company in connection with the transaction wasapproximately $4.5 million.

 

The description above ismore fully explained in the November 7 Form 8-K, the February 15, 2007 Form8-K, the Form 10-KSB for the fiscal year ended December 31, 2006, and theDefinitive Proxy Statement filed January 4, 2006 and to the exhibits therein,which are incorporated herein by reference.

 

***Stockholder Approval***

 

Pursuant to the AnnualMeeting of Stockholders held February 15, 2006, the stockholders of the Companyapproved, among other things, the sale of substantially all of our assets toEmpire pursuant to the Asset Sale Agreement and the winding down of ouroperations following the sale of substantially all of our assets to Empire. Inorder to accomplish the liquidation and dissolution of the Company, inaccordance with Delaware General Corporation Law, the Board of Directorsadopted a plan of dissolution. Pursuant to the plan of dissolution, on February14, 2007, the Company filed a Certificate of Dissolution with the DelawareSecretary of State to dissolve the Company.

 

6

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Once a corporation isdissolved under Delaware law, its existence is automatically continued for aterm of three years, or for such longer period as the Delaware Court ofChancery directs, solely for the purpose of winding down its business. Theprocess of winding down includes: (1) the prosecution and defense of lawsuits,if any; (2) the settling and closing of any business; (3) the disposition andconveyance of any property; (4) the discharge of any liabilities; and (5) thedistribution of any remaining assets to the stockholders.

 

Pursuant to Delaware law,the Company will continue in existence until at least February 14, 2010. SinceFebruary 9, 2007, the Company’s activities have been limited solely to thoseincidental to effecting its dissolution, including the investment of any fundsbeing held in reserve and the distribution of its remaining assets to itsstockholders. After the consummation of the Asset Sale Agreement, the remainingassets and properties of the Company consist primarily of cash and certainreceivables. Pursuant to the Asset Sale Agreement, the Company reduced itsnumber of employees significantly, with most employees being hired by Empireand other employees being terminated. As of June 30, 2007, only three directorsand three employees (two of which are directors) remain. The remaining staffwill be principally engaged in dealing with the winding down and dissolution ofthe Company.

 

As part of thedissolution of our Company, the Board of Directors may at any time delegate thewind down and management of our Company to a third party, including possibly aliquidating trust, to complete the liquidation of our remaining assets anddistribute the proceeds to the stockholders. In addition to the employmentagreements with our existing employees, we may pay our officers, directors,employees or agents additional compensation for services rendered in thedissolution.

 

The Company cannotpredict with certainty the precise amount of the liquidation distribution tostockholders. The Company has not established a firm timetable fordistributions to its stockholders. However, the Board of Directors intends,subject to contingencies inherent in winding down the Company’s business, tomake such distributions as promptly as practicable. The timing of anydistribution will depend on and could be delayed by, among other things,obstacles with claim settlements with creditors. Any delays could substantiallydiminish amounts available for distribution to our stockholders.

 

As a result of futureexpenses that will be incurred, both anticipated and not anticipated,dissolution and liquidation may not provide value to the Company’s stockholdersor result in any remaining capital for distribution to its stockholders. In addition,claims, liabilities and expenses during the winding down of the Company willcontinue to be incurred which will reduce the amount of assets available fordistribution. Any distributions made by the Company shall be made solely to thestockholders of record at the close of business on the Final Record Date exceptas may be necessary to reflect subsequent transfers recorded on our books as aresult of assignments by will, intestate succession or operation of law.

 

***Close of Stock Transfer Books***

 

Upon the filing of aCertificate of Dissolution with the State of Delaware, the Company ordered thetransfer agent to close the stock transfer books to discontinue recordingtransfers of the Company’s common stock at the close of business on the FinalRecord Date. As such, no transfers of the Company’s common stock will berecorded except transfers as a result of assignments by will, intestatesuccession or operation of law.

 

***Revenue Recognition***

 

Prior to the sale date,February 9, 2007, the Company derived its revenues from two principal sources:coin calls and non-coin calls. Coin calls represented calls paid for by callerswith coins deposited into the payphone. Coin call revenues were recorded in theamount of coins deposited in the payphones and in the period deposited. We alsoreceived revenues from non-coin calls made from our payphones. These non-coincalls included credit card, calling card, prepaid calling card, collect andthird-party billed calls where the caller dialed “0” plus the number or simplydialed “0” for an operator. Non-coin calls often required a number of services,including automated or live operators to answer the call, verifying billinginformation, validating calling cards and credit cards, routing andtransmitting the call to its destination, monitoring the call’s duration anddetermining the charge for the call, and billing and collecting the applicablecharge. We were contracted with a limited number of operator service providersto handle these calls and perform all associated functions, while payingus a commission on the revenues generated thereby.

 

7

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**NOTE B—OTHER INCOME**

 

Other income for the sixmonths ended June 30, 2007 and 2006 consists of the following:

 
| **2007**                                   | ** ** | **Q2** | ** ** | **Q1** | ** ** | **YTD** | ** ** |
|--------------------------------------------|------------|--------|------------|--------|------------|---------|------------|
|                                       |       |   |       |   |       |    |       |
| WPTA settlement                            |       | $      | —     |   | $          | 466,710 |       | $ | 466,710 |   |
| Loss recovery  and other legal settlements |       | — |       | 16,655 |       |    | 16,655     |   |
| Interest income                            |       | 35,928 |       | 16,908 |       |    | 52,836     |   |
| Other  miscellaneous income items          |       | 4,127  |       | 18,369 |       |    | 22,496     |   |
|                                       |       | $      | 40,055     |   | $          | 518,642 |       | $ | 558,697 |   |

 
| **2006**                                                          | ** ** | **Q2** | ** ** | **Q1**  | ** ** | **YTD** | ** ** |
|-------------------------------------------------------------------|------------|--------|------------|---------|------------|---------|------------|
|                                                              |       |   |       |    |       |    |       |
| Dial around  true-up receipts for prior years’ operations    |       | $      | 3,761      |    | $          | 90,027  |       | $ | 93,788 |   |
| Local exchange  carrier credits from prior years’ operations |       | 29,704 |       | 12,372  |       | 42,076  |       |
| Loss recovery  and other legal settlements                        |       | 21,000 |       | 1,196   |       | 22,196  |       |
| Reorganization  expense                                           |       | — |       | (43,985 | )          | (43,985 | )          |
| Interest income                                                   |       | 17,881 |       | 9,571   |       | 27,452  |       |
| Other  miscellaneous income items                                 |       | 22,763 |       | 262     |       | 23,025  |       |
|                                                              |       | $      | 95,109     |    | $          | 69,443  |       | $ | 164,552 |   |

 

***NOTE C -VALUATION OF ASSETS AND LIABILITIES***

*** ***

***Due to the Company changing to the liquidation basis of accounting, thevaluation of assets and liabilities has been adjusted to reflect the amountsexpected in liquidation. The valuation of assets at their net realizable valueand liabilities at their anticipated settlement amounts requires many estimatesand assumptions. In addition, there are substantial risks and uncertaintiesassociated with carrying out the liquidation of the Company’s existingoperations. The carrying amounts presented in the accompanying Statement of NetAssets in Liquidation represent estimates, based on present facts andcircumstances, of the net realizable values of assets and costs associated withcarrying out the dissolution and liquidation plan. The actual values and costsmay differ from the amounts shown herein and could be greater or lesser thanthe amounts recorded. Accordingly, it is not possible to predict the aggregateamount, if any, that will ultimately be distributable to shareholders.***

*** ***

***NOTE D – SALEOF PAYPHONE ASSETS***

 

***In accordance with the terms set forth in the Asset Sale Agreement andFirst Amendment, the Company has recorded the gain on sale of assets andliabilities to Empire. The gain on sale of assets and liabilities is calculatedas follows and is included in net realized gain on sale of assets andliabilities on the Statement of Changes in Net Assets in Liquidation:***

 
| Total sale  price, $250,000 cash; $2,092,252 receivable; $2,254,745 liabilities assumed |                             | $      | 4,596,997  |   |
|-----------------------------------------------------------------------------------------|----------------------------------|--------|------------|--------|
| Adjustments:                                                                            | Accounts receivable              |   | (1,110,532 | )      |
|                                                                                    | Fixed assets                     |   | (3,773,155 | )      |
|                                                                                    | Inventory                        |   | (402,440   | )      |
|                                                                                    | Other assets                     |   | (95,105    | )      |
|                                                                                    | Additional  liabilities assumed: |   |       |   |
|                                                                                    | Accounts payable                 |   | 1,337,589  |   |
|                                                                                    | Management fees                  |   | 828,000    |   |
|                                                                                    | Commissions and  bonuses         |   | 1,097,172  |   |
|                                                                                    | Other liabilities                |   | 99,483     |   |
| Gain on sale of  assets and liabilities                                                 |                             | $      | 2,578,009  |   |

 

8

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***NOTE E –ACCOUNTS RECEIVABLE***

*** ***

***As shown in the table below, the accounts receivable balance consistsof the remaining amount due on the Promissory Note from Empire (see Note A) andliabilities which were assumed by Empire pursuant to the Sale Agreement andFirst Amendment that are accounted for pursuant to guidelines set forth in***SFAS 140 – Accounting for Transfers and Servicing of Financial Assets andExtinguishment of Liabilities. We have recorded these items as accounts receivable and correspondingliabilities are also reflected on the Statement of Net Assets in Liquidation. 

*** ***
| **Item**                                             | ** ** | **6/30/07** | ** ** |
|------------------------------------------------------|------------|-------------|------------|
| Note receivable  Empire                              |       | $           | 350,901    |   |
| Liabilities  assumed by Empire but not derecognized: |       |        |       |
| Commissions and  bonuses                             |       | 3,351,917   |       |
| Accounts payable                                     |       | 1,337,589   |       |
| Other                                                |       | 51,135      |       |
| Total accounts  receivable                           |       | $           | 5,091,542  |   |

*** ***

***9***

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**Item2. Plan of Operation**

 

OUR STATEMENTS CONTAINEDIN THIS REPORT THAT ARE NOT HISTORICAL FACTS ARE, OR MAY BE DEEMED TO BE,FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 21E OF THE SECURITIESEXCHANGE ACT OF 1934, AS AMENDED. IMPORTANT FACTORS THAT COULD CAUSE ACTUALRESULTS TO DIFFER MATERIALLY FROM THOSE DISCUSSED IN SUCH FORWARD-LOOKINGSTATEMENTS (“CAUTIONARY STATEMENTS”) INCLUDE BUT ARE NOT LIMITED TO OUR ABILITYTO ACCURATELY ESTIMATE THE EXPENSES ASSOCIATED WITH EXECUTING OUR PLAN OF DISSOLUTIONAND ANY STATEMENTS REGARDING LIQUIDATING DISTRIBUTIONS, IF ANY, TO OURSTOCKHOLDERS. ALL SUBSEQUENT WRITTEN AND ORAL FORWARD-LOOKING STATEMENTSATTRIBUTABLE TO THE COMPANY OR PERSONS ACTING ON BEHALF OF THE COMPANY AREEXPRESSLY QUALIFIED BY SUCH CAUTIONARY STATEMENTS. WE ARE UNDER NO DUTY TOUPDATE ANY OF THE FORWARD-LOOKING STATEMENTS AFTER THE DATE OF THIS REPORT TOCONFORM SUCH STATEMENTS TO ACTUAL RESULTS OR TO CHANGES IN OUR EXPECTATIONS.

 

Payphone Wind DownCorporation (“we,” “us,” “our,” or the “Company”), formerly ETS Payphones, Inc.(“ETS”), is a Delaware corporation that operated, serviced, and maintained asystem of payphones, concentrated primarily in the Eastern and Southern UnitedStates (other than Florida), as well as the District of Columbia and PuertoRico. The Company also provided other telecommunications products to certain ofits clients. Pursuant to the Annual Meeting of Stockholders held on February15, 2006, the stockholders of the Company approved, among other things, the windingdown of our operations following the sale of substantially all of our assets toEmpire Payphones, Inc., (“Empire”) pursuant to an Asset Sale Agreement datedNovember 1, 2005 (the “Asset Sale Agreement”). The Board of Directors of theCompany (the “Board of Directors”) approved the dissolution on October 31, 2005subject to stockholder approval and consummation of the Asset Sale Agreement.On February 9, 2007, pursuant to the First Amendment to the Asset SaleAgreement, dated as of February 9, 2007 (the “First Amendment”), the partiesfinalized the Asset Sale Agreement and agreed that the closing date would bedeemed effective as of December 31, 2006 (the “Closing Date”). However, forfinancial reporting purposes, the Company has deemed the sale date to beconcurrent with the closing, February 9, 2007, and accordingly, has recordedthe sale of the assets on that date. On February 12, 2007, the Company amendedthe certificate of incorporation of the Company to change the name of theCompany to “Payphone Wind Down Corporation” from ETS Payphones, Inc. In orderto accomplish the liquidation and dissolution, on February 14, 2007, the Boardof Directors filed a certificate of dissolution of the Company (“Certificate ofDissolution”) with the Delaware Secretary of State to dissolve the Company.Since February 9, 2007, the Company’s activities have been limited solely tothose incidental to effecting its dissolution, including the investment of anyfunds being held in reserve and preparation for the distribution of itsremaining assets to its stockholders.

 

Upon the filing of theCertificate of Dissolution with the State of Delaware, the Company ordered thetransfer agent to close the stock transfer books to discontinue recordingtransfers of the Company’s common stock at the close of business on the ClosingDate (the “Final Record Date”). As a result of the approval by the Company’sstockholders of the sale of substantially all of the assets of the Company andapproval of the liquidation and dissolution of the Company following theclosing of the sale, the Company changed its basis of accounting to theliquidation basis of accounting as of January 1, 2006. If the Company electedto continue to use the going concern basis of accounting to present itsoperations for the period January 1, 2006 through February 14, 2006, the effectwould be immaterial.

 

***Sale of theCompany; Winding Down of Operations***

 

As reported in the Form8-K filed November 7, 2005 (the “November 7 Form 8-K”) and the Definitive ProxyStatement, filed on January 4, 2006 (the “Definitive Proxy Statement”), theCompany entered into the Asset Sale Agreement and related agreements includinga security agreement and a promissory note to sell substantially all of itsoperating assets to Empire. The assets sold to Empire included, subject tocertain exclusions, the Company’s payphones and related equipment,miscellaneous equipment, furniture, fixtures, general supplies, computers,software, promotional materials, customer lists, tools and spare parts inventoryused in the operation of the business (the “Sale Assets”), contracts related tothe Sale Assets, all of the Company’s interest in and to certain pay telephonenumbers, trade names, trademarks and other intellectual property. In addition,as reported in the November 7 Form 8-K and in the Definitive Proxy Statement,the Company also entered into a Management Services Agreement effectiveNovember 1, 2005 (“Management Services Agreement”), with Empire pursuant towhich Empire provided management services and funded the operational losses ofthe Company pending consummation of the sale transaction.

 

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As reported in the Form8-K filed February 15, 2007 (the “February 15, 2007 Form 8-K”), on February 9,2007, the Asset Sale Agreement was amended pursuant to the First Amendment. TheFirst Amendment amended the Asset Sale Agreement to, among other things,specify that the remaining purchase price to be paid to the Company pursuant tothe Asset Sale Agreement was $1,827,966 (the “Remaining Purchase Price”). TheFirst Amendment provided that the Remaining Purchase Price was in full andfinal satisfaction of the remaining unpaid amount of (i) the Purchase Price (asdefined in the Asset Sale Agreement) remaining under the Asset Sale Agreementthrough December 31, 2006 and (ii) any Shortfall Advances (as defined in theManagement Services Agreement) accrued through December 31, 2006 pursuant tothe Management Services Agreement. Pursuant to the First Amendment, the Companyand Empire agreed that, for purposes of the Asset Sale Agreement, the ClosingDate would be deemed to be effective as of December 31, 2006.

 

Pursuant to the terms ofthe Asset Sale Agreement, as amended by the First Amendment, the Companyreceived $802,966 in cash on February 9, 2007, and a secured Promissory Note,dated as of December 31, 2006, from Empire in the principal amount of$1,025,000.

 

The Promissory Noteprovided that the principal amount will be paid to the Company in monthlyinstallments beginning on the Closing Date with the last payment occurring onAugust 31, 2007. The Promissory Note contained a guaranty by ManhattanTelecommunications Corporation of certain obligations of Empire under thePromissory Note. The Promissory Note was paid in full by Empire on August 29,2007.

 

The aggregateconsideration received by the Company in connection with the transaction wasapproximately $4.5 million.

 

The description above isqualified in its entirety by the more detailed description in the November 7Form 8-K, the February 15, 2007 Form 8-K, the Form 10-KSB for the fiscal yearended December 31, 2006, and the Definitive Proxy Statement filed January 4,2006 and to the exhibits therein, which are incorporated herein by reference.

 

***Stockholder Approval***

 

Pursuant to the AnnualMeeting of Stockholders held February 15, 2006, the stockholders of the Companyapproved, among other things, the sale of substantially all of our assets toEmpire pursuant to the Asset Sale Agreement and the winding down of ouroperations following the sale of substantially all of our assets to Empire. Inorder to accomplish the liquidation and dissolution of the Company, inaccordance with Delaware General Corporation Law, the Board of Directorsadopted a plan of dissolution. Pursuant to the plan of dissolution, on February14, 2007, the Company filed a Certificate of Dissolution with the DelawareSecretary of State to dissolve the Company.

 

Once a corporation isdissolved under Delaware law, its existence is automatically continued for aterm of three years, or for such longer period as the Delaware Court ofChancery directs, solely for the purpose of winding down its business. Theprocess of winding down includes: (1) the prosecution and defense of lawsuits,if any; (2) the settling and closing of any business; (3) the disposition andconveyance of any property; (4) the discharge of any liabilities; and (5) thedistribution of any remaining assets to the stockholders.

 

Pursuant to Delaware law,the Company will continue in existence until at least February 14, 2010. TheCompany’s activities are limited solely to those incidental to effecting itsdissolution, including the investment of any funds being held in reserve andthe distribution of its remaining assets to its stockholders. After theconsummation of the Asset Sale Agreement, the remaining assets and propertiesof the Company consist primarily of cash and certain receivables. Pursuant tothe Asset Sale Agreement, the Company reduced its number of employeessignificantly, with most employees being hired by Empire and other employeesbeing terminated. Currently, only three directors and three employees (two ofwhich are directors) remain. The remaining staff will be principally engaged indealing with the winding down and dissolution of the Company.

 

As part of thedissolution of our Company, the Board of Directors may at any time delegate thewind down and management of our Company to a third party, including possibly aliquidating trust, to complete the liquidation of any remaining assets,satisfaction of any remaining liabilities and distribute any remaining proceedsto the stockholders. In addition to the employment agreements with our existingemployees, we may pay our officers, directors, employees or agents additional compensationfor services rendered in the dissolution.

 

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The Company cannotpredict with certainty the precise amount of the liquidation distribution tostockholders. The Company has not established a firm timetable fordistributions to its stockholders. However, the Board of Directors intends,subject to contingencies inherent in winding down the Company’s business, tomake such distributions as promptly as practicable. The timing of anydistribution will depend on and could be delayed by, among other things,obstacles with claim settlements with creditors. Any delays could substantiallydiminish amounts available for distribution to our stockholders.

 

As a result offuture expenses that will be incurred, both anticipated and not anticipated,dissolution and liquidation may not provide value to the Company’s stockholdersor result in any remaining capital for distribution to its stockholders. Inaddition, claims, liabilities and expenses during the winding down of theCompany will continue to be incurred which will reduce the amount of assetsavailable for distribution. Any distributions made by the Company shall be madesolely to the stockholders of record at the close of business on the FinalRecord Date, except as may be necessary to reflect subsequent transfersrecorded on our books as a result of assignments by will, intestate successionor operation of law.

 

***Close of Stock Transfer Books***

 

Upon the filing of aCertificate of Dissolution with the State of Delaware, the Company ordered thetransfer agent to close the stock transfer books to discontinue recordingtransfers of the Company’s common stock at the close of business on the FinalRecord Date. As such, no transfers of the Company’s common stock will berecorded except transfers as a result of assignments by will, intestatesuccession or operation of law.

 

***Liquidation Basis of Accounting***

 

The condensed financialstatements for the three and six months ending June 30, 2007 and 2006 wereprepared on the liquidation basis of accounting. Under the liquidation basis ofaccounting, assets are stated at their estimated net realizable values andliabilities are stated at their estimated settlement amounts. Estimates areperiodically reviewed and adjusted. Since the Company is in liquidation, theneed to present future quarterly Statements of Operations and Statements ofCash Flows is eliminated.

 

***Thevaluation of assets at their net realizable value and liabilities at theiranticipated settlement amounts requires many estimates and assumptions. Inaddition, there are substantial risks and uncertainties associated withcarrying out the dissolution and liquidation plan. The carrying amountspresented in the accompanying Statements of Changes in Net Assets in Liquidationrepresent estimates, based on present facts and circumstances, of the netrealizable values of assets and costs associated with carrying out thedissolution and liquidation plan based on the assumptions set forth below. Theactual values and costs are expected to differ from the amounts shown hereinand could be greater or lesser than the amounts recorded. Accordingly, it isnot possible to predict the aggregate amount, if any, that will ultimately bedistributable to shareholders.***

*** ***

***Factors to Consider***

 

# The followingcharacteristics of our status as a non-operating company may have a materialimpact upon our future financial condition.

#  

# ***Dissolution; Winding Down and Liquidation, Closing of StockRecord Book.***

#  

Pursuant to the AnnualMeeting of Stockholders held February 15, 2006, the stockholders of the Companyapproved, among other things, the sale of substantially all of our assets toEmpire pursuant to the Asset Sale Agreement and the winding down of ouroperations following the sale of substantially all of our assets to Empire. Theconsummation of the Asset Sale Agreement occurred as of December 31, 2006 andas a result, our activities are limited to collecting proceeds from assets notincluded in the sale, paying off creditors, satisfying requirements underapplicable law and distributing any remaining proceeds to stockholders ofrecord. As a result of future expenses that will be incurred, both anticipatedand not anticipated, dissolution and liquidation may not provide value to ourstockholders or result in any remaining capital for distribution to ourstockholders. In addition, claims, liabilities and expenses during the windingdown of our company will continue to be incurred which will reduce the amountof assets available for distribution. The stock transfer books of the Companyhave been closed and a Certificate of Dissolution has been filed with theDelaware Secretary of State. Any distributions made by us shall be made solelyto the stockholders of record at the close of business on the Final RecordDate, except as may be necessary to reflect subsequent transfers recorded onour books as a result of assignments by will, intestate succession or operationof law. We cannot assure the stockholders of the amount, if any, or timing ofany distribution to our stockholders as a result of the dissolution.

 

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# ***We will continue to incur claims, liabilities and expensesthat will reduce the amount available for distribution out of the liquidationto stockholders.***

#  

Claims, liabilities andexpenses incurred during the wind down process, such as payroll, legal,accounting and consulting fees and miscellaneous office expenses, will reducethe amount of assets available for future distribution out of the liquidation tostockholders. If available cash and amounts received on the sale of non-cashassets are not adequate to provide for our obligations, liabilities, expensesand claims, we may not be able to distribute out of the liquidation any cash atall, to our stockholders.

 

We filed a Certificate ofDissolution with the Secretary of State of the State of Delaware effectiveFebruary 14, 2007. Pursuant to Delaware General Corporation Law, we willcontinue to exist for three years after the Certificate of Dissolution is filedor for such longer period as the Delaware Court of Chancery shall direct, forthe purpose of prosecuting and defending suits against us and enabling us togradually close our business, to dispose of our property, to discharge ourliabilities and to distribute to our stockholders any remaining assets. UnderDelaware General Corporation Law, in the event we fail to create during thisthree-year period an adequate contingency reserve for payment of our expensesand liabilities, each stockholder could be held liable for payment to ourcreditors of such stockholder’s pro rata share of amounts owed to creditors inexcess of the contingency reserve, up to the amount actually distributed tosuch stockholder. Although the liability of any stockholder is limited to theamounts previously received by such stockholder from us (and from anyliquidating trust or trusts that may be established in connection with thedissolution) in the dissolution, this means that a stockholder could berequired to return all distributions previously made to such stockholder andreceive nothing from us under the plan of dissolution. Moreover, in the event astockholder has paid taxes on amounts previously received, a repayment of allor a portion of such amount could result in a stockholder incurring a net taxcost if the stockholder’s repayment of an amount previously distributed doesnot cause a commensurate reduction in taxes payable. While we will endeavor tomake adequate reserves for all known, contingent, and unknown liabilities,there is no guarantee that the reserves established by us will be adequate tocover all such expenses and liabilities.

 

# ***We will continue to incur the expenses of complying withpublic company reporting requirements.***

#  

We have an obligation tocontinue to comply with the applicable reporting requirements of the SecuritiesExchange Act of 1934, as amended, referred to as the “Exchange Act,” eventhough compliance with such reporting requirements is economically burdensome.We have sought and will continue to attempt to seek relief from the Securitiesand Exchange Commission from the reporting requirements under the Exchange Act,but to date we have not been successful in obtaining relief. We anticipatethat, if such relief were granted, we would continue to file current reports onForm 8-K to disclose material events relating to our liquidation anddissolution along with any other reports that the Securities and ExchangeCommission might require. However, the Securities and Exchange Commission hasnot granted, and may not in the future agree to grant, any such relief.

 

# ***Our Board of Directors may at any time turn management ofthe liquidation of the Company over to a third party, and some or all of ourdirectors may resign from our board at that time.***

#  

Our Board of Directorsmay at any time turn our management over to a third party to complete theliquidation of any remaining assets, satisfaction of any remaining liabilitiesand distribute any available proceeds to our stockholders, and some or all ofour directors may resign from our board at that time. Our Board of Directorscurrently consists of Guy A. Longobardo, our Chief Executive Officer andChairman of the Board, Michael H. McClellan, our Executive Vice President,Chief Financial Officer and Treasurer and Michael H. Buck. If management isturned over to a third party and all of our directors resign from our board,the third party would have sole control over the liquidation process, includingthe sale or distribution of any remaining assets.

 

# ***If we are deemed to be an investment company, we may besubject to substantial regulation that would cause us to incur additionalexpenses and reduce the amount of assets available for distribution.***

#  

If we invest our cashand/or cash equivalents in investment securities, we may be subject toregulation under the Investment Company Act of 1940. If we are deemed to be aninvestment company under the Investment Company Act because of our investmentsecurities holdings, we must register as an investment company under the InvestmentCompany Act. As a registered investment company, we would be subject to thefurther regulatory oversight of the Division of Investment Management of theSecurities and Exchange Commission, and our activities would be subject tosubstantial regulation under the Investment Company Act. Compliance with theseregulations would cause us to incur additional expenses, which would reduce theamount of assets available for distribution to our stockholders. To avoid thesecompliance costs, we intend to invest our cash proceeds in money market fundsand government securities, which are exempt from the Investment Company Act butwhich currently provide a very modest return.

 

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** **

**Item 3.Controls and Procedures**

 

Our Chief ExecutiveOfficer and Chief Financial Officer (collectively, the “Certifying Officers”)are responsible for establishing and maintaining disclosure controls andprocedures for the Company. Based upon such officers’ evaluation of thesecontrols and procedures as of the end of the period covered by this report, andsubject to the limitations noted hereinafter, the Certifying Officers haveconcluded that our disclosure controls and procedures are effective to ensurethat information required to be disclosed by us in this Quarterly Report isaccumulated and communicated to management, including our principal officers asappropriate, to allow timely decisions regarding required disclosure.

 

Pursuant to theManagement Services Agreement with Empire, through February 9, 2007, we hadgradually transitioned the responsibility for accounting, billing, records andcollection services relating to payphone operations to Empire. During theperiod from January 1, 2007 through February 9, 2007, in connection with the transitionto Empire we substantially changed our internal controls over financialreporting and Empire was primarily responsible for the accounting, billing, andcollection of all payphone operations related revenue of ETS and the remittanceof all related payments and obligations. During this period, we had oversightof Empire’s performance of its duties under the Management Services Agreementand regularly received information from Empire on the foregoing. We do notbelieve the transition and change in personnel had a significant impact on theeffectiveness of the design and operation of the Company’s disclosure andcontrols procedures. The summary of the services provided by Empire asdescribed herein is qualified in its entirety by the more detailed descriptionin the Current Report on Form 8-K filed on November 7, 2005, theDefinitive Proxy Statement filed on January 4, 2006, the Form 8-K filed onFebruary 15, 2007, and the Form 10-KSB for the fiscal year endedDecember 31, 2006, filed on October 9, 2007, and to the exhibits therein.

 

Both prior to andfollowing the transition to Empire, we assessed the effectiveness of ourinternal controls over financial reporting and found such controls, both beforeand after the transition to Empire, to be effective based upon the criteria setforth by the Certifying Officers.

 

Except as noted in thepreceding paragraphs, there were no changes in our internal controls overfinancial reporting that occurred during the six months ended June 30, 2007,that have materially affected, or are reasonably likely to materially affect,our internal control over financial reporting. Our management, including eachof the Certifying Officers, does not expect that our disclosure controls or ourinternal controls will prevent all error and fraud. A control system, no matterhow well conceived and operated, can provide only reasonable, not absolute,assurance that the objectives of the control system are met. In addition, thedesign of a control system must reflect the fact that there are resourceconstraints, and the benefits of controls must be considered relative to theircosts. Because of the inherent limitations on all control systems, noevaluation of controls can provide absolute assurance that all controls issuesand instances of fraud, if any, within a company have been detected. Theseinherent limitations include the realities that judgments in decision-makingcan be faulty, and that breakdowns can occur because of simple error ormistake. Additionally, controls can be circumvented by the individual acts ofsome persons, by collusion of two or more people or by management override ofthe control. The design of any system of controls also is based inpart upon certain assumptions about the likelihood of future events, and therecan be no assurance that any design will succeed in achieving its stated goalsunder all potential future conditions. Over time, control may becomeinadequate because of changes in conditions, or the degree of compliance withthe policies or procedures may deteriorate. Because of these inherentlimitations in a cost-effective control system, misstatements due to error orfraud may occur and not be detected.

 

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** **

**PART II. OTHER INFORMATION**

 

**Item1. Legal Proceedings**

 

The Company is involvedfrom time to time in lawsuits that arise in the ordinary course of ourbusiness. In March 2006 Commercial Payphones, Inc., a Florida corporation,initiated a lawsuit against the Company in state court in Dade County, Floridafor an alleged violation of a non-compete agreement alleging damages in excessof $15,000. We do not believe the allegations have legal merit and arevigorously defending the action and have filed a motion to quash service or, inthe alternative, to dismiss the complaint for lack of jurisdiction. However, wecannot predict with certainty the outcome or effect of this litigation. In 2005Clipper Telecommunications, Inc., Comchoice, Inc. and Coinlink, L.L.C. (the “Plaintiffs”)initiated a lawsuit against the Company and APCC Services, Inc. (a collector ofdial around compensation for the payphones industry) in the United StatesDistrict Court for the Western District of Texas. The complaint alleged damagesin excess of $75,000 relating to dial around compensation collected by APCCServices, Inc. and held in the Company’s accounts with APCC. The Company wassuccessful in obtaining a dismissal of the action. In December of 2006, thePlaintiffs filed a substantially similar complaint against the Company and APCCServices, Inc. in the state court of Texas. We do not believe the allegationshave legal merit and are vigorously defending the action. However, we cannotpredict with certainty the outcome or effect of this or other litigation inwhich the Company is or may become involved. On March 13, 2006, three formeremployees from the Puerto Rico branch filed a lawsuit against the Company inthe Commonwealth of Puerto Rico, Court of First Instance, Manati Courthousesubsequent to their termination that had occurred while Empire was managing theCompany pursuant to the Management Services Agreement. The lawsuit allegeddamages in excess of $300,000. The Company reached a settlement with the formeremployees on September 18, 2007. At June 30, 2007, adequate provision was madein the financial statements for losses relating to this matter.

 

**Item5. Other Information**

 

***None***

 

**Item6. Exhibits**

 
| EXHIBIT  NUMBER | ** ** | **DESCRIPTION**                                                                      |
|-----------------|------------|--------------------------------------------------------------------------------------|
| 3.1             |       | Certificate of Incorporation of ETS Payphones, Inc.,  dated November 8, 2002 (1)     |
| 3.2             |       | By-Laws of ETS Payphones, Inc. (1)                                                   |
| 31.1            |       | Certification of CEO pursuant to Section 302 of  the Sarbanes-Oxley Act of 2002 |
| 31.2            |       | Certification of CFO pursuant to Section 302 of  the Sarbanes-Oxley Act of 2002 |
| 32.1            |       | Certification of CEO pursuant to Section 906 of  the Sarbanes-Oxley Act of 2002 |
| 32.2            |       | Certification of CFO pursuant to Section 906 of  the Sarbanes-Oxley Act of 2002 |

 

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(1) Incorporated byreference from the Company’s Registration Statement on Form 10-SB (File No.000-50712)

 

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**SIGNATURES**

 

Pursuant to therequirements of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on its behalf by the undersigned thereunto dulyauthorized.

 
|                          | PAYPHONE WIND  DOWN CORPORATION |
|--------------------------|---------------------------------|
|                     |                            |   |
| Date: November  14, 2007 | By:                             | /s/ GUY A.  LONGOBARDO |   |
|                     |                            | Guy A.  Longobardo |
| * *                 | * *                        | *President  and Chief Executive Officer* |
|                     |                            |   |
|                     | By:                             | /s/ MICHAEL H.  MCCLELLAN |   |
|                     |                            | Michael H.  McClellan |
| * *                 | * *                        | *Executive  Vice President,* |
| * *                 | * *                        | *Chief Financial  Officer and Treasurer* |

 

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