f10q0310_competitiveco.htm
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
þ QUARTERLY REPORT PURSUANT TO SECTION
13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the
quarter ended: March 31,
2010
or
¨ TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934
For
the Transition Period from ___________ to____________
Commission
File Number:
333-76630
Competitive
Companies, Inc.
(Exact
Name of registrant as specified in its charter)
Nevada
|
65-1146821
|
(State
or other jurisdiction of
|
(IRS
Employer I.D. No.)
|
incorporation)
|
|
19206
Huebner Rd., Suite 202
San
Antonio, TX 78258
(Address
of principal executive offices and Zip Code)
(210)
233-8980
(Registrant’s
telephone number, including area code)
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the
past 12 months, and (2) has been subject to such filing requirements for the
past 90 days. Yes o No
þ
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files. Yes ¨
No ¨
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer, or a smaller reporting company.
See the definitions of “large accelerated filer,” “accelerated filer” and
“smaller reporting company” in Rule 12b-2 of the Exchange Act:
Large
accelerated filer ¨
|
Accelerated
filer ¨
|
Non-accelerated
filer ¨
|
Smaller
reporting company þ
|
|
|
Indicate
by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
Yes ¨ No þ
As of May
19, 2010, there were 107,029,858
shares outstanding of the registrant’s common stock.
COMPETITIVE
COMPANIES, INC.
FORM
10-Q
March
31, 2010
INDEX
|
PART I - FINANCIAL
INFORMATION
|
|
|
|
|
|
|
ITEM 1.
|
FINANCIAL STATEMENTS
|
1 |
|
|
|
|
|
|
Condensed
Consolidated Balance Sheets
(Unaudited)
|
1 |
|
|
|
|
|
|
Condensed
Consolidated Statements of Operations
(Unaudited)
|
2 |
|
|
|
|
|
|
Condensed
Consolidated Statements of Cash Flows
(Unaudited)
|
3 |
|
|
|
|
|
|
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
|
4 |
|
|
|
|
|
ITEM 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
|
14 |
|
|
|
|
|
ITEM 3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
|
19 |
|
|
|
|
|
ITEM 4.
|
CONTROLS AND PROCEDURES
|
19 |
|
|
|
|
|
PART II - OTHER INFORMATION
|
|
|
|
|
|
|
ITEM 1.
|
LEGAL PROCEEDINGS
|
20 |
|
|
|
|
|
ITEM 1A.
|
RISK FACTORS
|
20 |
|
|
|
|
|
ITEM 2.
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
|
23 |
|
|
|
|
|
ITEM 3.
|
DEFAULTS UPON SENIOR
SECURITIES
|
24 |
|
|
|
|
|
ITEM 4.
|
(REMOVED AND RESERVED)
|
24 |
|
|
|
|
|
ITEM 5.
|
OTHER INFORMATION
|
24 |
|
|
|
|
|
ITEM 6.
|
EXHIBITS
|
24 |
PART
I – FINANCIAL INFORMATION
Item
1. Financial Statements.
Competitive
Companies, Inc.
|
|
(Debtor-in-Possession)
|
|
Condensed
Consolidated Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March
31,
|
|
|
December
31,
|
|
|
|
2010
|
|
|
2009
|
|
Assets
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
Cash
|
|
$ |
42,131 |
|
|
$ |
10,133 |
|
Accounts
receivable, net of allowance of $16,000 and $18,000
|
|
|
14,048 |
|
|
|
13,611 |
|
Prepaid
expenses
|
|
|
2,850 |
|
|
|
2,850 |
|
Total
current assets
|
|
|
59,029 |
|
|
|
26,594 |
|
|
|
|
|
|
|
|
|
|
Property
and equipment, net
|
|
|
26,109 |
|
|
|
29,745 |
|
|
|
|
|
|
|
|
|
|
Other
assets:
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
- |
|
|
|
1,366 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$ |
85,138 |
|
|
$ |
57,705 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
and Stockholders' Equity (Deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
Not Subject to Compromise
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses
|
|
$ |
695,468 |
|
|
$ |
538,975 |
|
Deferred
revenues
|
|
|
39,040 |
|
|
|
38,552 |
|
Short
term notes payable
|
|
|
70,480 |
|
|
|
68,480 |
|
Convertible
debt, net of discounts of $32,665 and $-0- at
|
|
|
|
|
|
|
|
|
March
31, 2010 and December 31, 2009, respectively
|
|
|
107,335 |
|
|
|
90,000 |
|
Total
current liabilities
|
|
|
912,323 |
|
|
|
736,007 |
|
|
|
|
|
|
|
|
|
|
Liabilities
Subject to Compromise (a)
|
|
|
380,114 |
|
|
|
390,075 |
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
1,292,437 |
|
|
|
1,126,082 |
|
|
|
|
|
|
|
|
|
|
Stockholders'
(deficit):
|
|
|
|
|
|
|
|
|
Preferred
stock, $0.001 par value 10,000,000 shares authorized:
|
|
|
|
|
|
|
|
|
Class
A convertible, no shares issued and
|
|
|
|
|
|
|
|
|
outstanding
with no liquidation value
|
|
|
- |
|
|
|
- |
|
Class
B convertible, 1,495,436 shares issued and
|
|
|
|
|
|
|
|
|
outstanding
with no liquidation value
|
|
|
1,495 |
|
|
|
1,495 |
|
Class
C convertible, 1,000,000 shares issued and
|
|
|
|
|
|
|
|
|
outstanding
with no liquidation value
|
|
|
1,000 |
|
|
|
1,000 |
|
Common
stock, $0.001 par value, 500,000,000 shares authorized,
|
|
|
|
|
|
|
|
|
105,810,812
and 98,745,813 shares issued and outstanding
|
|
|
|
|
|
|
|
|
at
March 31, 2010 and December 31, 2009, respectively
|
|
|
105,811 |
|
|
|
98,746 |
|
Additional
paid-in capital
|
|
|
2,991,548 |
|
|
|
2,710,583 |
|
Subscription
payable, 14,854,267 and 8,194,506 shares
|
|
|
|
|
|
|
|
|
at
March 31, 2010 and December 31, 2009, respectively
|
|
|
533,047 |
|
|
|
390,921 |
|
Accumulated
(deficit)
|
|
|
(4,840,200 |
) |
|
|
(4,271,122 |
) |
Total
stockholders' (deficit)
|
|
|
(1,207,299 |
) |
|
|
(1,068,377 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders' (deficit)
|
|
$ |
85,138 |
|
|
$ |
57,705 |
|
|
|
|
|
|
|
|
|
|
(a)
Liabilities subject to compromise consist of the
following:
|
|
|
|
|
|
|
|
|
secured
by a $250,000 life insurance policy
|
|
$ |
140,145 |
|
|
$ |
142,009 |
|
Subordinated
debentures, 8.5%
|
|
|
15,686 |
|
|
|
15,686 |
|
Subordinated
debentures, 5%
|
|
|
10,000 |
|
|
|
10,000 |
|
Trade
payables and other miscellaneous claims
|
|
|
214,283 |
|
|
|
222,380 |
|
|
|
$ |
380,114 |
|
|
$ |
390,075 |
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these financial
statements.
Competitive
Companies, Inc.
|
|
(Debtor-in-Possession)
|
|
Condensed
Consolidated Statements of Operations
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For
the three months ended
|
|
|
|
March
31,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
Revenue
|
|
$ |
55,027 |
|
|
$ |
90,300 |
|
Cost
of sales
|
|
|
62,320 |
|
|
|
81,498 |
|
|
|
|
|
|
|
|
|
|
Gross
profit (loss)
|
|
|
(7,293 |
) |
|
|
8,802 |
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
General
and administrative
|
|
|
156,079 |
|
|
|
102,865 |
|
Salaries
and wages
|
|
|
26,821 |
|
|
|
47,209 |
|
Consulting
fees
|
|
|
- |
|
|
|
10,448 |
|
Depreciation
|
|
|
3,636 |
|
|
|
7,855 |
|
Bad
debts (recoveries)
|
|
|
(2,000 |
) |
|
|
(1,140 |
) |
Total
operating expenses
|
|
|
184,536 |
|
|
|
167,237 |
|
|
|
|
|
|
|
|
|
|
Net
operating loss
|
|
|
(191,829 |
) |
|
|
(158,435 |
) |
|
|
|
|
|
|
|
|
|
Other
income (expenses):
|
|
|
|
|
|
|
|
|
Impairment
of goodwill
|
|
|
(373,018 |
) |
|
|
- |
|
Interest
expense
|
|
|
(11,353 |
) |
|
|
(3,207 |
) |
Total
other income (expenses)
|
|
|
(384,371 |
) |
|
|
(3,207 |
) |
|
|
|
|
|
|
|
|
|
Net
loss before reorganization items
|
|
|
(576,200 |
) |
|
|
(161,642 |
) |
Forgiveness
of Chapter 11 debt
|
|
|
8,097 |
|
|
|
- |
|
Professional
fees
|
|
|
(975 |
) |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(loss)
|
|
$ |
(569,078 |
) |
|
$ |
(161,642 |
) |
|
|
|
|
|
|
|
|
|
Weighted
average number of common shares
|
|
|
|
|
|
|
|
|
outstanding
- basic and fully diluted
|
|
|
102,804,559 |
|
|
|
65,102,944 |
|
|
|
|
|
|
|
|
|
|
Net
(loss) per share - basic and fully diluted
|
|
$ |
(0.01 |
) |
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these financial
statements.
Competitive
Companies, Inc.
|
|
(Debtor-in-Possession)
|
|
Condensed
Consolidated Statements of Cash Flows
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For
the three months ended
|
|
|
|
March
31,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
Cash
flows from operating activities
|
|
|
|
|
|
|
Net
(loss) before reorganization items
|
|
$ |
(568,103 |
) |
|
$ |
(161,642 |
) |
Adjustments
to reconcile net (loss) to
|
|
|
|
|
|
|
|
|
net
cash (used in) operating activities:
|
|
|
|
|
|
|
|
|
Provision
for bad debts (recoveries)
|
|
|
(2,000 |
) |
|
|
(1,140 |
) |
Depreciation
|
|
|
3,636 |
|
|
|
7,855 |
|
Impairment
of goodwill
|
|
|
373,018 |
|
|
|
- |
|
Amortization
of beneficial conversion feature
|
|
|
3,542 |
|
|
|
1,854 |
|
Decrease
(increase) in assets:
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
1,563 |
|
|
|
8,709 |
|
Prepaid
expenses
|
|
|
- |
|
|
|
308 |
|
Deposits
|
|
|
1,366 |
|
|
|
- |
|
Increase
(decrease) in liabilities:
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses
|
|
|
69,017 |
|
|
|
36,798 |
|
Deferred
revenues
|
|
|
488 |
|
|
|
- |
|
Net
cash used in operating activities
|
|
|
|
|
|
|
|
|
before
reorganization items
|
|
|
(117,473 |
) |
|
|
(107,258 |
) |
Debt
forgiveness on prepetition liabilities
|
|
|
8,097 |
|
|
|
- |
|
Professional
fees paid for services rendered in
|
|
|
|
|
|
|
|
|
connection
with the Chapter 11 proceeding
|
|
|
(975 |
) |
|
|
- |
|
Net
cash used in operating activities
|
|
|
(110,351 |
) |
|
|
(107,258 |
) |
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities
|
|
|
|
|
|
|
|
|
Purchase
of equipment
|
|
|
- |
|
|
|
(9,987 |
) |
Net
cash (used
in) investing activities
|
|
|
- |
|
|
|
(9,987 |
) |
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities
|
|
|
|
|
|
|
|
|
Proceeds
from short term and convertible debt
|
|
|
52,000 |
|
|
|
27,025 |
|
Principal
payments on short term debt
|
|
|
- |
|
|
|
(21,247 |
) |
Proceeds
from sale of common stock
|
|
|
93,949 |
|
|
|
104,774 |
|
Principal
payments on prepetition debt
|
|
|
(3,600 |
) |
|
|
- |
|
Net
cash provided by financing activities
|
|
|
142,349 |
|
|
|
110,552 |
|
|
|
|
|
|
|
|
|
|
Net
increase (decrease)
in cash
|
|
|
31,998 |
|
|
|
(6,693 |
) |
Cash
- beginning
|
|
|
10,133 |
|
|
|
23,340 |
|
Cash
- ending
|
|
$ |
42,131 |
|
|
$ |
16,647 |
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosures:
|
|
|
|
|
|
|
|
|
Interest
paid
|
|
$ |
1,736 |
|
|
$ |
6,298 |
|
Income
taxes paid
|
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
Non-cash
investing and financing activities:
|
|
|
|
|
|
|
|
|
Value
of shares issued for subscriptions payable
|
|
$ |
174,874 |
|
|
$ |
104,014 |
|
Beneficial
conversion feature on short term debt
|
|
$ |
36,207 |
|
|
$ |
- |
|
Value
of shares payable for the acquisition of Voice Vision,
Inc.
|
|
$ |
(300,000 |
) |
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these financial
statements.
Competitive
Companies, Inc
Notes to
Financial Statements
(Unaudited)
Note
1 – Nature of Business and Significant Accounting Policies
The
condensed consolidated interim financial statements included herein, presented
in accordance with United States generally accepted accounting principles and
stated in US dollars, have been prepared by the Company, without audit, pursuant
to the rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although the
Company believes that the disclosures are adequate to make the information
presented not misleading.
These
statements reflect all adjustments, consisting of normal recurring adjustments,
which in the opinion of management are necessary for fair presentation of the
information contained therein. It is suggested that these consolidated interim
financial statements be read in conjunction with the financial statements of the
Company for the year ended December 31, 2009 and notes thereto included in the
Company's Form 10-K annual report. The Company follows the same accounting
policies in the preparation of interim reports.
In June
2009, the Financial Accounting Standards Board (“FASB”) issued the FASB
Accounting Standards Codification (the “ASC”). The ASC has become the single
source of non-governmental accounting principles generally accepted in the
United States (“GAAP”) recognized by the FASB in the preparation of financial
statements. The ASC does not supersede the rules or regulations of the
Securities and Exchange Commission (“SEC”), therefore, the rules and
interpretive releases of the SEC continue to be additional sources of GAAP for
the Company. The Company adopted the ASC as of July 1, 2009. The ASC does not
change GAAP and did not have an effect on the Company’s financial position,
results of operations or cash flows.
Results
of operation for the interim period are not indicative of annual
results.
The
Company is in the telecommunications industry with operations in San Antonio,
Texas and Wisconsin. The Company’s Wisconsin operations consist of providing
Dial-up, Wireless and DSL Internet services to businesses and residents within
various markets throughout Wisconsin, the United States and Puerto Rico. The
Company is focused on serving a wide array of customers as a general broadband
internet service provider with a concentrated focus on fixed wireless for its
broadband delivery. The Company terminated its internet service contracts to
residential apartment complexes in September of 2009 and does not plan to
include this in its future business model.
Reclassifications
Certain
reclassifications have been made to prior year amounts to conform to the current
year presentation.
Recent Accounting
Pronouncements
In
January 2010, the FASB issued ASU No. 2010-06 regarding fair value measurements
and disclosures and improvement in the disclosure about fair value
measurements. This ASU requires additional disclosures regarding
significant transfers in and out of Levels 1 and 2 of fair value measurements,
including a description of the reasons for the transfers. Further,
this ASU requires additional disclosures for the activity in Level 3 fair value
measurements, requiring presentation of information about purchases, sales,
issuances, and settlements in the reconciliation for fair value
measurements. This ASU is effective for fiscal years beginning after
December 15, 2010, and for interim periods within those fiscal
years. We are currently evaluating the impact of this ASU; however,
we do not expect the adoption of this ASU to have a material impact on our
financial statements.
In
February 2010, the FASB issued ASU No. 2010-09 regarding subsequent events and
amendments to certain recognition and disclosure requirements. Under
this ASU, a public company that is a SEC filer, as defined, is not required to
disclose the date through which subsequent events have been
evaluated. This ASU is effective upon the issuance of this
ASU. The adoption of this ASU did not have a material impact on our
financial statements.
In
April 2010, the FASB issued ASU No. 2010-18 regarding improving comparability by
eliminating diversity in practice about the treatment of modifications of loans
accounted for within pools under Subtopic 310-30 – Receivable – Loans and Debt
Securities Acquired with Deteriorated Credit Quality (“Subtopic
310-30”). Furthermore, the amendments clarify guidance about
maintaining the integrity of a pool as the unit of accounting for acquired loans
with credit deterioration. Loans accounted for individually under
Subtopic 310-30 continue to be subject to the troubled debt restructuring
accounting provisions within Subtopic 310-40, Receivables—Troubled Debt
Restructurings by Creditors. The amendments in this Update are
effective for modifications of loans accounted for within pools under Subtopic
310-30 occurring in the first interim or annual period ending on or after July
15, 2010. The amendments are to be applied
prospectively. Early adoption is permitted. We are
currently evaluating the impact of this ASU; however, we do not expect the
adoption of this ASU to have a material impact on our financial
statements.
Note
2 – Going Concern
Our
condensed consolidated financial statements are prepared using accounting
principles generally accepted in the United States of America applicable to a
going concern, which contemplate the realization of assets and liquidation of
liabilities in the normal course of business. We have incurred continuous losses
from operations, have an accumulated deficit of $4,840,200 and a working capital
deficit of $853,294 at March 31, 2010, and have reported negative cash flows
from operations over the last five years. In addition, we do not currently have
the cash resources to meet our operating commitments for the next twelve months,
and we expect to have ongoing requirements for capital investment to implement
our business plan. Finally, our ability to continue as a going concern must be
considered in light of the problems, expenses and complications frequently
encountered by entrance into established markets and the competitive environment
in which we operate.
Since
inception, our operations have primarily been funded through private equity
financing, and we expect to continue to seek additional funding through private
or public equity and debt financing.
Our
ability to continue as a going concern is dependent on our ability to generate
sufficient cash from operations to meet our cash needs and/or to raise funds to
finance ongoing operations and repay debt. However, there can be no assurance
that we will be successful in our efforts to raise additional debt or equity
capital and/or that our cash generated by our operations will be adequate to
meet our needs. These factors, among others, indicate that we may be unable to
continue as a going concern for a reasonable period of time.
Our
condensed consolidated financial statements do not include any adjustments
relating to the recoverability and classification of recorded asset amounts, or
the amounts and classification of liabilities that might be necessary should we
be unable to continue as a going concern.
Note
3 – Petition for Relief under Chapter 11
On May 5,
2009, DiscoverNet, Inc., a wholly owned subsidiary of the Company, (the
"Debtor") filed petitions for relief under Chapter 11 of the federal bankruptcy
laws in the United States Bankruptcy Court for the Western District of
Wisconsin. Under Chapter 11, certain claims against the Debtor in existence
prior to the filing of the petitions for relief under the federal bankruptcy
laws are stayed while the Debtor continues business operations as
Debtor-in-possession. These claims are reflected in the March 31, 2010, balance
sheet as "liabilities subject to compromise." Additional claims (liabilities
subject to compromise) may arise subsequent to the filing date resulting from
rejection of executory contracts, including leases, and from the determination
by the court (or agreed to by parties in interest) of allowed claims for
contingencies and other disputed amounts. Claims secured against the Debtor's
assets ("secured claims") also are stayed, although the holders of such claims
have the right to move the court for relief from the stay. Secured claims are
secured primarily by liens on the Debtor's property, plant, and
equipment.
The
Debtor has received approval from the Bankruptcy Court to pay or otherwise honor
certain of its prepetition obligations, including employee wages and product
warranties. The Debtor has determined that there is insufficient collateral to
cover the interest portion of scheduled payments on its prepetition debt
obligations. Contractual interest on those obligations amounts to $3,564, which
is $1,829 in excess of reported interest expense; therefore, the debtor has
discontinued accruing interest on these obligations. Refer to Note 7 for a
discussion of the credit arrangements entered into subsequent to the Chapter 11
filings. A plan of reorganization has not yet been developed and accepted by the
bankruptcy court.
As such,
the Company has presented the financial statements and disclosures as a
Debtor-in-Possession in accordance with FASB ASC 852-10-15, “Financial Reporting
by Entities in Reorganization under the Bankruptcy Code”.
Note
4 – Business Combinations
Acquisition – January 12,
2010
On
January 12, 2010, the Company entered into a share exchange agreement and plan
of merger whereby the Company acquired 100% of the outstanding interest of Voice
Vision, Inc., a California corporation in the Voice over internet Protocol
business (“VoiP”). Pursuant to the share exchange agreement, Competitive
Companies, Inc. (“CCI”) acquired 100% of the equity of Voice Vision, Inc.
(“VVI”) in exchange for ten million (“10,000,000”) shares of common stock on a
1.91245 to 1 basis. The fair market value of the shares was $300,000
based on the closing stock price on January 12, 2010, the date of
grant.
The
merger provides CCI with valuable VoiP video technology that CCI expects to be
able to market to its existing customers, and ultimately, to a wider array of
consumers.
The
Company has recognized the identifiable assets acquired and liabilities assumed
as follows:
|
|
January
12, 2010
|
|
Consideration:
|
|
|
|
Equity
instruments (10,000,000 shares issued of CCI1)
|
|
$ |
300,000 |
|
Fair
value of total consideration exchanged
|
|
$ |
300,000 |
|
|
|
|
|
|
Recognized
amounts of identifiable assets
|
|
|
|
|
acquired
and liabilities assumed:
|
|
|
|
|
Cash
|
|
$ |
- |
|
Accounts
payable and accrued expenses
|
|
|
(73,018 |
) |
Consideration
paid in excess of fair value2
|
|
|
373,018 |
|
Total
identifiable net assets
|
|
$ |
300,000 |
|
1
The fair value of the 10,000,000 shares of common stock issued as
consideration paid for 100% of VVI was determined on the basis of the
closing market price of CCI’s common shares on the grant date of January
12, 2010.
|
|
|
|
|
2
The consideration paid in excess of the fair value of assets
acquired and liabilities assumed has been recorded as goodwill and
expensed due to impairment.
|
|
|
|
|
Management
believes the sales and development team, and technology acquired from Voice
Vision will enable the Company to enhance their business model and increase
their revenue stream while keeping pace with the rapidly changing technology
through the video phone product developed by VVI.
Acquisitions - April 2,
2009
On April
2, 2009, the Company entered into a share exchange agreement and plan of merger
whereby the Company acquired 100% of the outstanding interest of four private
companies under common control by the CEO of Competitive Companies, Inc.
Pursuant to the share exchange agreement, Competitive Companies, Inc. (CCI)
acquired 100% of the combined equity of DiscoverNet, Inc. (DNI), Innovation
Capital Management, Inc. (ICMI), Innovation Capital Management, LLC (ICML), and
DiscoverNet, LLC (DNL) in exchange for stock on a 10 to 1 basis, resulting in
the issuance of 31,102,740 shares. The fair market value of the
shares was $1,555,137 based on the closing stock price on April 2, 2009, the
date of grant.
The
merger provides CCI with valuable assets, sound management and a solid investor
base that is an integral part of our business.
The
Company has recognized the identifiable assets acquired and liabilities assumed
as follows:
|
|
April
2, 2009
|
|
Consideration:
|
|
|
|
Equity
instruments (31,102,740 shares issued of CCI1)
|
|
$ |
1,555,137 |
|
Fair
value of total consideration exchanged
|
|
$ |
1,555,137 |
|
|
|
|
|
|
Recognized
amounts of identifiable assets
|
|
|
|
|
acquired
and liabilities assumed:
|
|
|
|
|
Cash
|
|
$ |
25,273 |
|
Accounts
receivable and intercompany loans
|
|
|
40,328 |
|
Equipment
|
|
|
44,746 |
|
Other
current assets
|
|
|
2,804 |
|
Accounts
payable and accrued expenses
|
|
|
(249,964 |
) |
Long
term debt
|
|
|
(198,290 |
) |
Consideration
paid in excess of fair value2
|
|
|
1,890,240 |
|
Total
identifiable net assets
|
|
$ |
1,555,137 |
|
1
The fair value of the 31,102,740 common shares issued as consideration
paid for 100% of DNI, ICMI, ICML & DNL was determined on the basis of
the closing market price of CCI’s common shares on the grant date of April
2, 2009.
|
|
|
|
|
2
The consideration paid in excess of the fair value of assets
acquired and liabilities assumed has been allocated towards additional
paid in capital due to the related party nature of the companies acquired
(under common management by the Company’s CEO, Bill Gray).
|
|
|
|
|
The
unaudited supplemental pro forma results of operations of the combined entity
had the date of the acquisitions been January 1, 2010 or January 1, 2009 are as
follows:
|
|
Combined
Pro Forma:
|
|
|
|
For
the three months ended March 31, 2010
|
|
|
For
the three months ended March 31, 2009
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
Revenue
|
|
$ |
55,027 |
|
|
$ |
206,668 |
|
Cost
of sales
|
|
|
62,320 |
|
|
|
164,407 |
|
Gross
profit
|
|
|
(7,293 |
) |
|
|
42,261 |
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
184,536 |
|
|
|
299,870 |
|
|
|
|
|
|
|
|
|
|
Net
operating (loss)
|
|
|
(191,829 |
) |
|
|
(257,609 |
) |
|
|
|
|
|
|
|
|
|
Other
income (expense)
|
|
|
(377,249 |
) |
|
|
(15,088 |
) |
|
|
|
|
|
|
|
|
|
Net
(loss)
|
|
$ |
(569,078 |
) |
|
$ |
(272,697 |
) |
|
|
|
|
|
|
|
|
|
Weighted
average number of common shares
|
|
|
|
|
|
|
|
|
Outstanding
– basic and fully diluted
|
|
|
104,171,225 |
|
|
|
91,884,752 |
|
|
|
|
|
|
|
|
|
|
Net
(loss) per share – basic and fully diluted
|
|
$ |
(0.01 |
) |
|
$ |
- |
|
Management
believes the communications network, management team and other assets acquired
will enable the Company to enhance their business model and enable the Company
to take advantage of opportunities in the fast changing telecommunications
industry.
Note
5 – Related Party
On
February 11, 2010, CCI issued 3,000,000 shares to the Company’s CEO, William H.
Gray, in partial satisfaction of the April 2, 2009 acquisition of four entities
under Mr. Gray’s control. The Company intends to issue an additional 3,734,858
shares to Mr. Gray as part of the acquisition in the near term.
From time
to time the Company has received loans from the Officer, Bill Gray. The total of
the unsecured, interest free, demand notes was $3,474 and $1,474 at March 31,
2010 and December 31, 2009, respectively.
Note
6 – Property and equipment
Property
and equipment consist of the following:
|
|
March
31,
|
|
|
December
31,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
Telecommunication
equipment and computers
|
|
$ |
29,666 |
|
|
$ |
29,666 |
|
Furniture
and fixtures
|
|
|
47,383 |
|
|
|
47,383 |
|
Software
|
|
|
3,200 |
|
|
|
19,647 |
|
|
|
|
80,249 |
|
|
|
96,696 |
|
|
|
|
|
|
|
|
|
|
Less
accumulated depreciation
|
|
|
(54,140 |
) |
|
|
(66,951 |
) |
|
|
$ |
26,109 |
|
|
$ |
29,745 |
|
|
|
|
|
|
|
|
|
|
Depreciation
expense totaled $3,636 and $7,855 for the three months ending March 31, 2010 and
2009, respectively. During the three months ending March 31, 2010 the Company
disposed of $16,447 of fully depreciated assets that were no longer in service.
No gain or loss resulted from the disposal.
Note
7 – Short Term Debt
Short
term debt consists of the following at March 31, 2010 and December 31, 2009,
respectively:
|
|
March
31,
|
|
|
December
31,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
Related
party, unsecured promissory note, interest free, due on
demand.
|
|
$ |
3,474 |
|
|
$ |
1,474 |
|
|
|
|
|
|
|
|
|
|
Unsecured
promissory note carries an 8% interest rate, matured on March 2, 2010.
Currently in default.
|
|
|
30,000 |
|
|
|
30,000 |
|
|
|
|
|
|
|
|
|
|
Unsecured
promissory note carries an 8% interest rate, matured on June 15, 2009.
Currently in default.
|
|
|
10,000 |
|
|
|
10,000 |
|
|
|
|
|
|
|
|
|
|
Unsecured
promissory note carries an 8% interest rate, matured on June 15, 2009.
Currently in default.
|
|
|
10,000 |
|
|
|
10,000 |
|
|
|
|
|
|
|
|
|
|
Secured
line of credit, including accrued interest, carries a variable interest
rate at 2.25% above “Money Rates”. The line matured on March 17, 2009, and
the debt is currently under the protection of the bankruptcy petition. The
Chapter 11 Reorganization Plan has not yet been submitted for approval
from the bankruptcy court therefore, the Company has not yet entered into
credit arrangements with the lender. The note carries an additional 5%
default rate, and is secured by a $250,000 life insurance policy on the
CEO.
|
|
|
140,145 |
|
|
|
142,009 |
|
|
|
|
|
|
|
|
|
|
Unsecured
promissory note, including accrued interest, carries an 8.5% interest
rate, maturing on October 1, 2010. The debt is currently under the
protection of the bankruptcy petition. The Chapter 11 Reorganization Plan
has not yet been submitted for approval from the bankruptcy court
therefore, the Company has not yet entered into credit arrangements with
the lender.
|
|
|
15,686 |
|
|
|
15,686 |
|
|
|
|
|
|
|
|
|
|
Unsecured,
interest free promissory note carries a 5% late fee penalty in the event
the Company is more than 10 days late with monthly payments of $1,000
beginning on September 1, 2008, matured on June 6, 2009. Currently in
default and under the protection of the bankruptcy petition. The Chapter
11 Reorganization Plan has not yet been submitted for approval from the
bankruptcy court therefore, the Company has not yet entered into credit
arrangements with the lender.
|
|
|
10,000 |
|
|
|
10,000 |
|
|
|
|
|
|
|
|
|
|
Unsecured
note payable in default to a stockholder, with interest at 8%, and monthly
principal and interest payments of $683, maturing on February 23, 2011.
Currently in default.
|
|
|
17,006 |
|
|
|
17,006 |
|
Total
notes payable
|
|
|
236,311 |
|
|
|
236,175 |
|
Less:
liabilities subject to compromise
|
|
|
165,831 |
|
|
|
167,695 |
|
Less:
current portion
|
|
|
70,480 |
|
|
|
68,480 |
|
Notes
payable, less current portion
|
|
$ |
- |
|
|
$ |
- |
|
Note
8 – Convertible Debt
Convertible
debt consists of the following at March 31, 2010 and December 31, 2009,
respectively:
|
|
March
31,
|
|
|
December
31,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
Unsecured
convertible promissory note carries an 8.75% interest rate, matured on
July 16, 2009. The principal is convertible into shares of common stock at
the discretion of the note holder at a price equal to eighty percent (80%)
of the volume weighted average price of the Company’s common stock for the
twenty two (22) trading days prior to the conversion date, or $0.06 per
share, whichever is greater. Currently in default.
|
|
$ |
50,000 |
|
|
$ |
50,000 |
|
|
|
|
|
|
|
|
|
|
Unsecured
convertible promissory note carries an 8.75% interest rate, matured on
December 26, 2009. The principal is convertible into shares of common
stock at the discretion of the note holder at a price equal to eighty
percent (80%) of the volume weighted average price of the Company’s common
stock for the twenty two (22) trading days prior to the conversion date,
or $0.001 per share, whichever is greater. Currently in
default.
|
|
|
10,000 |
|
|
|
10,000 |
|
|
|
|
|
|
|
|
|
|
Unsecured
convertible promissory note carries an 8.75% interest rate, matured on
December 15, 2009. The principal is convertible into shares of common
stock at the discretion of the note holder at a price equal to eighty
percent (80%) of the volume weighted average price of the Company’s common
stock for the twenty two (22) trading days prior to the conversion date,
or $0.001 per share, whichever is greater. Currently in
default.
|
|
|
10,000 |
|
|
|
10,000 |
|
|
|
|
|
|
|
|
|
|
Unsecured
convertible promissory note carries an 8.75% interest rate, matured on
December 15, 2009. The principal is convertible into shares of common
stock at the discretion of the note holder at a price equal to eighty
percent (80%) of the volume weighted average price of the Company’s common
stock for the twenty two (22) trading days prior to the conversion date,
or $0.001 per share, whichever is greater. Currently in
default.
|
|
|
5,000 |
|
|
|
5,000 |
|
|
|
|
|
|
|
|
|
|
Unsecured
convertible promissory note carries an 8.75% interest rate, matured on May
11, 2009. The principal is convertible into shares of common stock at the
discretion of the note holder at a price equal to eighty percent (80%) of
the volume weighted average price of the Company’s common stock for the
twenty two (22) trading days prior to the conversion date, or $0.001 per
share, whichever is greater. Currently in default.
|
|
|
10,000 |
|
|
|
10,000 |
|
|
|
|
|
|
|
|
|
|
Unsecured
convertible promissory note carries an 8.75% interest rate, matured on
April 30, 2009. The principal is convertible into shares of common stock
at the discretion of the note holder at a price equal to eighty percent
(80%) of the volume weighted average price of the Company’s common stock
for the twenty two (22) trading days prior to the conversion date, or
$0.001 per share, whichever is greater. Currently in
default.
|
|
|
5,000 |
|
|
|
5,000 |
|
|
|
|
|
|
|
|
|
|
Secured
convertible promissory note carries an 8.00% interest rate, matures on
December 5, 2010. The principal is convertible into shares of common stock
at the discretion of the note holder at a price equal to fifty eight
percent (58%) of the average of the three lowest bid prices of the
Company’s common stock over the ten (10) trading days prior to the
conversion notice, as limited by the number of authorized shares
available. The note is secured by a reserve of authorized and issuable
shares of three times the number of shares that is actually issuable upon
full conversion of the note. At March 31, 2010 the Company had 5,172,414
shares reserved. The note carries a twenty two percent (22%) interest rate
in the event of default.
|
|
|
50,000 |
|
|
|
- |
|
Total
convertible debt
|
|
|
140,000 |
|
|
|
90,000 |
|
Less:
discount on beneficial conversion feature
|
|
|
32,665 |
|
|
|
- |
|
Convertible
debt
|
|
$ |
107,335 |
|
|
$ |
90,000 |
|
In
addition, the Company recognized and measured the embedded beneficial conversion
feature present in the convertible debt by allocating a portion of the proceeds
equal to the intrinsic value of the feature to additional paid-in-capital. The
intrinsic value of the feature was calculated on the commitment date using the
effective conversion price of the convertible debt. This intrinsic value is
limited to the portion of the proceeds allocated to the convertible
debt.
The
aforementioned accounting treatment resulted in a total debt discount equal to
$36,207. The discount is amortized over a nine month period, from the date of
issuance until the stated redemption date of the debt.
According
to the terms of the Convertible Promissory Notes, the number of shares that
would be received upon conversion was 3,125,859 shares at March 31,
2010.
During
the three months ended March 31, 2010, the Company recorded financial expenses
in the amount of $3,542 attributed to the amortization of the aforementioned
debt discount.
As of
March 31, 2010, no shares were issued pursuant to debt conversion.
The
Company recorded interest expense in the amount of $11,353 and $3,207 for the
three months ended March 31, 2010 and 2009, respectively.
Note
9 – Stockholders’ equity
On
January 30, 2009, the shareholders of the Registrant voted to increase the
authorized common shares of the Registrant from 70,000,000 authorized shares of
common stock to 500,000,000 authorized shares of common
stock. Additionally, the shareholders voted to increase the
authorized preferred shares of the Registrant from 10,000,000 authorized shares
of preferred stock to 100,000,000 authorized shares of preferred stock. As a
result of this vote, the Registrant filed an amendment to its Articles of
Incorporation to reflect this change.
Common
stock
During
the three months ending March 31, 2010 the Company issued a total of 873,571
shares of common stock to six individual investors that had purchased the
Company’s common stock prior to December 31, 2009, which was previously recorded
as stock subscriptions payable in the total amount of $24,875.
During
the three months ending March 31, 2010, CCI received $76,949
in exchange for a total of 3,191,428 shares of its $.001 par value common stock
from a total of twenty one individual investors.
During
the three months ending March 31, 2010, CCI received subscriptions payable of
$17,000 from a total of two individual investors in exchange for a total of
533,332 shares of its $.001 par value common stock. The shares were subsequently
issued in April of 2010.
On
February 11, 2010, CCI issued 3,000,000 shares to the Company’s CEO, William H.
Gray, in partial satisfaction of the April 2, 2009 acquisition of four entities
under Mr. Gray’s control. The Company intends to issue an additional 3,734,858
shares to Mr. Gray as part of the acquisition in the near term.
On
January 12, 2010, CCI issued a subscription payable for 10,000,000 shares as
payment on the acquisition of Voice Vision, Inc. The fair market value of the
shares totaled $300,000 based on the closing stock price on the date of grant.
The shares will be issued to shareholders of record as the certificates are
submitted for exchange. No shares have been issued as of the date of this
report.
Note 10 –
Subsequent Events
Common
stock
On April
1, 2010, CCI issued 333,332 shares of its $.001 par value common stock
previously outstanding as a subscription payable.
On April
1, 2010, CCI sold 142,857 shares of its $.001 par value common stock for
proceeds of $5,000 to an individual investor.
On April
2, 2010, CCI sold 100,000 shares of its $.001 par value common stock for
proceeds of $5,000 to an individual investor.
On April
3, 2010, CCI sold 100,000 shares of its $.001 par value common stock for
proceeds of $5,000 to an individual investor.
On April
8, 2010, CCI cancelled and returned to treasury 100,000 shares of its $.001 par
value common stock previously held by a related party.
On April
19, 2010, CCI sold 100,000 shares of its $.001 par value common stock for
proceeds of $5,000 to an individual investor.
On April
19, 2010, CCI sold 142,857 shares of its $.001 par value common stock for
proceeds of $5,000 to an individual investor.
On April
20, 2010, CCI sold 100,000 shares of its $.001 par value common stock for
proceeds of $5,000 to an individual investor.
On April
27, 2010, CCI sold 100,000 shares of its $.001 par value common stock for
proceeds of $5,000 to an individual investor.
On May
17, 2010, CCI issued 200,000 shares of its $.001 par value common stock
previously outstanding as a subscription payable.
In
accordance with ASC 855-10, all subsequent events have been reported through the
filing date.
Item
2. Management’s Discussion and Analysis of Financial Condition and Results of
Operations.
You
should read the following discussion and analysis of our financial condition and
plan of operations together with our financial statements and related notes
appearing elsewhere in this Quarterly Report. Various statements have been
made in this Quarterly Report on Form 10-Q that may constitute “forward-looking
statements”. Forward-looking statements may also be made in Competitive
Companies’ other reports filed with or furnished to the United States Securities
and Exchange Commission (the “SEC”) and in other documents. In addition, from
time to time, Competitive Companies through its management may make oral
forward-looking statements. Forward-looking statements are subject to risks and
uncertainties which could cause actual results to differ materially from such
statements. The words “believe,” “expect,” “anticipate,” “optimistic,” “intend,”
“plan,” “aim,” “will,” “may,” “should,” “could,” “would,” “likely” and similar
expressions are intended to identify forward-looking statements. Readers
are cautioned not to place undue reliance on these forward-looking statements,
which speak only as of the date on which they are made. Competitive Companies,
Inc. (“CCI”) undertakes no obligation to update or revise any
forward-looking statements.
Business
CCI is a
Nevada corporation that acts as a holding company for its operating
subsidiaries, Competitive Communications, Inc. (“Competitive Communications”),
which is an approved and regulated local and long distance telephone company,
and CCI Residential Services Inc. (“CCI Residential”), which is a non-regulated
telephone company providing local and long distance telephone service,
high-speed Internet and cable television service to large apartment complexes,
DiscoverNet, Inc. (“DiscoverNet”), a Company providing web hosting, dial-up,
wireless and DSL internet services to businesses and residents within various
markets throughout Wisconsin, the United States and Puerto Rico, DiscoverNet of
Wisconsin, LLC, (“DiscoverNet, LLC”), a dormant entity available for future
projects, Innovation Capital Management, Inc., (“ICM, Inc.”), an investment
company that focuses on raising capital and developing joint ventures and
acquisitions, and Innovation Capital Management, LLC (“ICM, LLC”), a Company
that maintains management office operations.
The
telecommunications products and services provided by the Company and its
subsidiaries include local telephone services, domestic and international long
distance services, enhanced voice, data and Internet services, and Cable TV
service primarily to residents of apartment complexes, retail businesses and
residential users. It is our intention in the future to provide bundled services
to our customers as well as expand to customers beyond apartment complexes by
providing additional services and options other than our current
products.
Due to
increased competition and our customers’ expanded use of cellular telephones as
their primary home telephone, we discontinued servicing apartment complexes in
California and Alabama during 2009. As a result, we closed our office
in California and moved our headquarters to San Antonio, Texas. The
transition has enabled us to shift our focus to more contemporary revenue
sources, such as, web hosting, dial-up, wireless and DSL internet
services.
On April
2, 2009, we entered into an acquisition agreement and plan of merger whereby the
Company acquired 100% of the outstanding interest of four private companies
under common control by the CEO of Competitive Companies, Inc. Pursuant to the
share exchange agreement, Competitive Companies, Inc. (CCI) acquired 100% of the
combined equity of DiscoverNet, Inc. (DNI), ICM, Inc. (ICMI), ICM, LLC (ICML),
and DiscoverNet, LLC (DNL).
On
January 12, 2010 we acquired Voice Vision, Inc. (“VVI”) in an effort to expand
our voice over internet protocol (“VoIP”) services. The acquisition
is expected to enable us to expand our services to our existing customers and
compete in a rapidly changing technological market place. VVI has
developed a video VoIP product that we expect to be able to bring to market in
the near term.
These
mergers provide us with valuable assets, sound management and a solid investor
base that is an integral part of our business.
Management
believes the communications network, management team and other assets acquired
will enable the Company to enhance our business model and enable us to take
advantage of opportunities in the fast changing telecommunications
industry.
Results
of Operations for the Three Months Ended March 31, 2010
The
following table summarizes selected items from the statement of operations for
the period ended March 31, 2010 compared to March 31, 2009.
INCOME:
|
|
Three
Months Ended
March
31,
|
|
|
Increase/(Decrease)
|
|
|
|
2010
|
|
|
2009
|
|
|
$ |
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$ |
55,027 |
|
|
$ |
90,300 |
|
|
$ |
(35,273 |
) |
|
|
(39 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of Sales
|
|
|
62,320 |
|
|
|
81,498 |
|
|
|
(19,178 |
) |
|
|
(24 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
Profit (Loss)
|
|
$ |
(7,293 |
) |
|
$ |
8,802 |
|
|
$ |
(16,095 |
) |
|
|
(183 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
Profit
Percentage
of Sales
|
|
|
(13 |
%) |
|
|
10 |
% |
|
|
- |
|
|
|
(23 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
Revenues
for the three months ended March 31, 2010 were $55,027 compared to revenues of
$90,300 for the three months ended March 31, 2009. This resulted in a
decrease in revenues of $35,273 or 39% when compared to the same period one year
earlier. Regulations governed by the Federal Communications Commission were
changed that allowed direct competitors to our telephone and cable services to
compete with our customers in the apartment complexes that we service. As a
result, we were unable to remain competitive with larger competitors and some of
our customers switched providers and ultimately, we had to discontinue service
to the apartment complexes during the third quarter of 2009 and rely on revenues
solely from our newly acquired entities.
Cost
of sales
Our cost
of sales for the three months ended March 31, 2010 and 2009 was $62,320 and
$81,498, a decrease of $19,178 or24% from $62,320. The decrease in our cost of
sales during the three months ended March 31, 2010 compared to the same period
in 2009, is a result of the cancellation of our California contracts with our
apartment complex customers. We are continuing to eliminate underutilized
circuits and have made continued efforts to continually manage and reduce costs,
where applicable.
Gross
profit percentage of revenue
As of the
three months ended March 31, 2010, gross profit margins decreased by 23% from
the prior year due to our inability to reduce cost of sales on a pro rata basis
with our reduction in revenues. Our fixed costs supporting the infrastructure of
our telephone and cable services could not be reduced significantly .
In addition, the expanded operations from California to Wisconsin as adopted
with our acquisitions added significant costs of revenues. We expect to generate
future revenues to compensate for the additional costs as we expand our
operations.
EXPENSES:
|
|
Three
Months Ended
March
31,
|
|
|
Increase/(Decrease)
|
|
|
|
2010
|
|
|
2009
|
|
|
$ |
|
|
|
% |
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General
and
administrative
|
|
|
156,079 |
|
|
|
102,865 |
|
|
|
53,214 |
|
|
|
52 |
% |
Salaries
and wages
|
|
|
26,821 |
|
|
|
47,209 |
|
|
|
(20,388 |
) |
|
|
(43 |
%) |
Consulting
fees
|
|
|
- |
|
|
|
10,448 |
|
|
|
(10,448 |
) |
|
|
(100 |
%) |
Depreciation
|
|
|
3,636 |
|
|
|
7,855 |
|
|
|
(4,219 |
) |
|
|
(54 |
%) |
Bad
debt
(recoveries)
|
|
|
(2,000 |
) |
|
|
(1,140 |
) |
|
|
860 |
|
|
|
75 |
% |
Total
Expenses
|
|
|
184,536 |
|
|
|
167,237 |
|
|
|
17,299 |
|
|
|
10 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
operating (loss)
|
|
|
(191,829 |
) |
|
|
(158,435 |
) |
|
|
33,394 |
|
|
|
21 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment
of
goodwill
|
|
|
(373,018 |
) |
|
|
- |
|
|
|
373,018 |
|
|
|
100 |
% |
Interest
expense
|
|
|
(11,353 |
) |
|
|
(3,207 |
) |
|
|
8,146 |
|
|
|
254 |
% |
Forgiveness
of Chapter 11 debt
|
|
|
8,097 |
|
|
|
- |
|
|
|
8,097 |
|
|
|
100 |
% |
Professional
fees on reorganization items
|
|
|
(975 |
) |
|
|
- |
|
|
|
975 |
|
|
|
100 |
% |
Total
other
income
(expenses)
|
|
|
(377,249 |
) |
|
|
(3,207 |
) |
|
|
374,042 |
|
|
|
11,663 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(loss)
|
|
|
(569,078 |
) |
|
|
(161,642 |
) |
|
|
(407,436 |
) |
|
|
252 |
% |
General
and administrative expenses
General
and administrative expenses for the three months ended March 31, 2010 and 2009
were $156,079 and $102,865, an increase of $53,214, or 52%. The increase in our
general and administrative expenses was a result of the additional costs
incurred to support our additional offices acquired with our expanded
operations.
Salaries
and wages
Salaries
and wages for the three and nine months ended March 31, 2010 and 2009 were
$26,821 and $47,209, a decrease of $20,388, or 43%. The idecrease in salary
expenses during the three months in 2010 was a result of the closure of our
California offices and termination of the employees therein.
Consulting
fees
Consulting
fees for the three months ended March 31, 2010 and 2009 were $-0- and $10,448, a
decrease of $10,448, or 100%. The decrease in consulting fees was a result of
using less outsourced professional services as our revenues
declined.
Depreciation
Depreciation
expenses for the three months ended March 31, 2010 and 2009 were $3,636 and
$7,855, an decrease of $4,219, or 54%. The decrease is due to the
disposal of assets no longer in service during the fourth quarter of
2009.
Bad
debt
Bad debt
expenses (recoveries) for the three months ended March 31, 2010 and 2009 were
$(2,000) and $(1,140), an increase of $860, or 75%. Our increase in
bad debt (recoveries) during the three months in 2010 is a result of our
increase in our allowance for doubtful accounts. As our accounts receivable
aging increased and collectability became uncertain, we increased our allowance
for doubtful accounts.
Net
operating (loss)
The net
operating loss for the three months ended March 31, 2010 and 2009 was $(191,829)
and $(158,435), an increase of $33,394, or 21%. Our increased loss was due to a
significant decrease in revenues and additional costs associated with the
expanded operations acquired in our mergers.
Other
income (expense)
Other
income (expense) for the three months ended March 31, 2010 and 2009 was
$(365,896) and $-0-. The amount of other income (expense) in the
three months ended 2010 was due to a $975 bankruptcy filing charge and debt
forgiveness income of $8,097 with regard to our recently acquired subsidiary,
DiscoverNet, Inc, not present in the comparative three month period in 2009, as
well as impairment of goodwill resulting from our 2010 acquistion of Voice
Vision, Inc.
Interest expense
Interest
expense for the three months ended March 31, 2010 and 2009 was $11,353 and
$3,207. Our interest expense in 2010 was higher because of an increase in loans
requiring interest payments and interest expense.
Net
(loss)
Our net
loss for the three months ended March 31, 2010 was $(569,078) and $(161,642), an
increase of $407,436, or 252%. We continue to have a net loss and believe the
loss will be reduced and profitability will be attained in the future as we
bring our products to market. Our net loss was significantly greater during the
three months ended March 31, 2010 compared to the same period in 2009 due to our
one time goodwill impairment charges of $373,018 associated with our acquisition
of Voice Vision, Inc. and the decline of revenues due to the cancellation of our
services to apartment complexes within California.
Liquidity
and Capital Resources
The
following table summarizes total current assets, liabilities and working capital
at March 31, 2010 compared to December 31, 2009.
|
March
31,
2010
|
December
31,
2009
|
Increase
/ (Decrease)
|
$
|
|
%
|
|
|
|
|
|
|
Current
Assets
|
59,029
|
26,594
|
32,435
|
|
122%
|
|
|
|
|
|
|
Current
Liabilities
|
912,323
|
736,007
|
176,316
|
|
24%
|
|
|
|
|
|
|
Working
(Deficit)
|
(853,294)
|
(709,413)
|
143,881
|
|
20%
|
While we
have raised capital to meet our working capital and financing needs in the past,
additional financing is required in order to meet our current and projected cash
flow deficits from operations and development of alternative revenue sources. As
of March 31, 2010, we had a working capital deficit of $(853,294). Our poor
financial condition raises substantial doubt about our ability to continue as a
going concern and we have incurred losses since inception and may incur future
losses.
Should we
not be able to continue to secure additional financing when needed, we may be
required to slow down or suspend our growth or reduce the scope of our current
operations, any of which would have a material adverse effect on our
business.
Our
future capital requirements will depend on many factors, including the expansion
of our wireless internet services in rural markets; VoiP services; additional
marketing of the (800) services; the cost and availability of third-party
financing for development; addition of new revenue sources; and administrative
and legal expenses.
We
anticipate that we will incur operating losses in the next twelve months. Our
prospects must be considered in light of the risks, expenses and difficulties
frequently encountered by companies in their early stage of
development. Such risks for us include, but are not limited to, an
evolving and unpredictable business model; recognition of additional revenue
sources; and the management of growth. To address these risks, we must, among
other things, expand our customer base, implement and successfully execute our
business and marketing strategy, respond to competitive developments, and
attract, retain and motivate qualified personnel. There can be no
assurance that we will be successful in addressing such risks, and the failure
to do so could have a material adverse effect on our business prospects,
financial condition and results of operations.
Satisfaction
of our cash obligations for the next 12 months.
As of
March 31, 2010, our cash balance was $42,131.
Our plan for satisfying our cash requirements for the next twelve months is
through sales-generated income, sale of shares of our common stock, third party
financing, and/or traditional bank financing. We anticipate sales-generated
income during that same period of time, but do not anticipate generating
sufficient amounts of revenues to meet our working capital requirements.
Consequently, we intend to make appropriate plans to insure sources of
additional capital in the future to fund growth and expansion through additional
equity or debt financing or credit facilities.
Going
concern.
Our
condensed consolidated financial statements are prepared using accounting
principles generally accepted in the United States of America applicable to a
going concern, which contemplate the realization of assets and liquidation of
liabilities in the normal course of business. We have incurred continuous losses
from operations, have an accumulated deficit of $(4,840,200) and a working
capital deficit of $(853,294) at March 31, 2010, and have reported negative cash
flows from operations over the last five years. In addition, we do not currently
have the cash resources to meet our operating commitments for the next twelve
months. The Company’s ability to continue as a going concern must be
considered in light of the problems, expenses, and complications frequently
encountered by entrance into established markets and the competitive nature in
which we operate.
Our
ability to continue as a going concern is dependent on our ability to generate
sufficient cash from operations to meet our cash needs and/or to raise funds to
finance ongoing operations and repay debt. However, there can be no assurance
that we will be successful in our efforts to raise additional debt or equity
capital and/or that our cash generated by our operations will be adequate to
meet our needs. These factors, among others, indicate that we may be unable to
continue as a going concern for a reasonable period of time.
Summary
of product and research and development that we will perform for the term of our
plan.
We are
not anticipating significant research and development expenditures in the near
future.
Expected
purchase or sale of plant and significant equipment.
We do not
anticipate the purchase or sale of any plant or significant equipment as such
items are not required by us at this time.
Significant
changes in the number of employees.
As of
March 31, 2010, we had four full-time employees. Currently, there are no
organized labor agreements or union agreements between us and our
employees.
Assuming
we are able to pursue additional revenue through acquisitions and/or strategic
alliances with those companies we have executed Letters of Intent with, we
anticipate an increase of personnel and may need to hire additional
employees. In the interim, we intend to use the services of
independent consultants and contractors to perform various professional services
when appropriate. We believe the use of third-party service providers may
enhance our ability to control general and administrative expenses and operate
efficiently.
Off-Balance
Sheet Arrangements
We do not
have any off-balance sheet arrangements that have or are reasonably likely to
have a current or future effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources that are material to investors.
Recently
Issued Accounting Standards
In
January 2010, the FASB issued ASU No. 2010-06 regarding fair value measurements
and disclosures and improvement in the disclosure about fair value
measurements. This ASU requires additional disclosures regarding
significant transfers in and out of Levels 1 and 2 of fair value measurements,
including a description of the reasons for the transfers. Further,
this ASU requires additional disclosures for the activity in Level 3 fair value
measurements, requiring presentation of information about purchases, sales,
issuances, and settlements in the reconciliation for fair value
measurements. This ASU is effective for fiscal years beginning after
December 15, 2010, and for interim periods within those fiscal
years. We are currently evaluating the impact of this ASU; however,
we do not expect the adoption of this ASU to have a material impact on our
financial statements.
In
February 2010, the FASB issued ASU No. 2010-09 regarding subsequent events and
amendments to certain recognition and disclosure requirements. Under
this ASU, a public company that is a SEC filer, as defined, is not required to
disclose the date through which subsequent events have been
evaluated. This ASU is effective upon the issuance of this
ASU. The adoption of this ASU did not have a material impact on our
financial statements.
In April
2010, the FASB issued ASU No. 2010-18 regarding improving comparability by
eliminating diversity in practice about the treatment of modifications of loans
accounted for within pools under Subtopic 310-30 – Receivable – Loans and Debt
Securities Acquired with Deteriorated Credit Quality (“Subtopic
310-30”). Furthermore, the amendments clarify guidance about
maintaining the integrity of a pool as the unit of accounting for acquired loans
with credit deterioration. Loans accounted for individually under
Subtopic 310-30 continue to be subject to the troubled debt restructuring
accounting provisions within Subtopic 310-40, Receivables—Troubled Debt
Restructurings by Creditors. The amendments in this Update are
effective for modifications of loans accounted for within pools under Subtopic
310-30 occurring in the first interim or annual period ending on or after July
15, 2010. The amendments are to be applied
prospectively. Early adoption is permitted. We are
currently evaluating the impact of this ASU; however, we do not expect the
adoption of this ASU to have a material impact on our financial
statements.
Item
3. Quantitative and Qualitative Disclosure About Market Risk.
This item
in not applicable as we are currently considered a smaller reporting
company.
Item
4. Controls and Procedures.
Evaluation
of Disclosure Controls and Procedures
Our Chief
Executive Officer and Principal Accounting Officer, William Gray, has evaluated
the effectiveness of our disclosure controls and procedures (as defined in Rule
13a-15(e) under the Securities Exchange Act of 1934, as amended) as of the end
of the period covered by this report. Based on the evaluation, Mr.
Gray concluded that our disclosure controls and procedures are not effective in
timely alerting him to material information relating to us (including our
consolidated subsidiaries) required to be included in our periodic SEC filings
and ensuring that information required to be disclosed by us in the reports we
file or submit under the Act is accumulated and communicated to our management,
including our chief financial officer, or person performing similar functions,
as appropriate to allow timely decisions regarding required disclosure, for the
following reasons:
·
|
The
Company does not have an independent board of directors or audit committee
or adequate segregation of duties;
|
·
|
All
of our financial reporting is carried out by our financial
consultant;
|
·
|
We
do not have an independent body to oversee our internal controls over
financial reporting and lack segregation of duties due to the limited
nature and resources of the
Company.
|
We plan
to rectify these weaknesses by implementing an independent board of directors
and hiring additional accounting personnel once we have additional resources to
do so.
Changes
in Internal Control Over Financial Reporting
There
were no changes in our internal control over financial reporting that occurred
during our most recent fiscal quarter that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.
PART
II – OTHER INFORMATION
Item
1. Legal Proceedings.
On
May 5, 2009, DiscoverNet, Inc., a wholly owned subsidiary of the Company, (the
“Debtor”) filed petitions for relief under Chapter 11 of the federal bankruptcy
laws in the United States Bankruptcy Court for the Western District of Wisconsin
(the “Bankruptcy Court”). Under Chapter 11, certain claims against the Debtor in
existence prior to the filing of the petitions for relief under the federal
bankruptcy laws are stayed while the Debtor continues business operations as
Debtor-in-possession. These claims are reflected in the December 31, 2009,
balance sheet as “liabilities subject to compromise.” Additional claims
(liabilities subject to compromise) may arise subsequent to the filing date
resulting from rejection of Executor contracts, including leases, and from the
determination by the court (or agreed to by parties in interest) of allowed
claims for contingencies and other disputed amounts. Claims secured against the
Debtor’s assets (“secured claims”) also are stayed, although the holders of such
claims have the right to move the court for relief from the stay. Secured claims
are secured primarily by liens on the Debtor’s property, plant, and
equipment.
The
Debtor has received approval from the Bankruptcy Court to pay or otherwise honor
certain of its prepetition obligations, including employee wages and product
warranties. The Debtor has determined that there is insufficient collateral to
cover the interest portion of scheduled payments on its prepetition debt
obligations. Contractual interest on those obligations amounts to $6,549, which
is $1,096 in excess of reported interest expense; therefore, the debtor has
discontinued accruing interest on these obligations. Refer to Note 7 of the
notes to the financial statements for a discussion of the credit arrangements
entered into subsequent to the Chapter 11 filings. A plan of reorganization has
not yet been developed and accepted by the Bankruptcy Court.
Item
1A. Risk Factors.
Risks Relating to Our
Business and Marketplace
We
have incurred losses since inception and expect to incur losses for the
foreseeable future. In addition, our poor financial condition raises substantial
doubt about our ability to continue as a going concern.
Our net
losses for the three months ended March 31, 2010 and 2009 were $(569,078) and
$(161,642). As of March 31, 2010, we had $42,131 in cash available to finance
our operations and a working capital deficit of $(853,294). Capital requirements
have been and will continue to be significant, and our cash requirements have
exceeded cash flow from operations since inception. We are in need of additional
capital to continue our operations and have been dependent on the proceeds of
private placements of securities and recent loans from an officer to satisfy
working capital requirements. We will continue to be dependent upon the proceeds
of future private or public offerings to fund development of products,
short-term working capital requirements, marketing activities and to continue
implementing the current business strategy. There can be no assurance that we
will be able to raise the necessary capital to continue
operations.
Our
ability to continue as a going concern is dependent on our ability to raise
funds to finance ongoing operations; however, we may not be able to raise
sufficient funds to do so. Our independent auditors have indicated that there is
substantial doubt about our ability to continue as a going concern over the next
twelve months. Because of these factors, an investor cannot determine
if and when we will become profitable and therefore runs the risk of losing
their investment.
If
we are unable to obtain additional funding, our business operations will be
harmed and if we do obtain additional financing our then existing stockholders
may suffer substantial dilution.
We will
require additional funds to expand our operations and believe the current cash
on hand and the other sources of liquidity will not be sufficient enough to fund
our operations through fiscal 2010. We anticipate that we will require
approximately $1,000,000 to $2,000,000 to fund our continued operations for
fiscal 2010 as well as be able to close on the intended acquisitions, depending
on revenue from operations.
Additional
capital will be required to effectively support the operations and to otherwise
implement our overall business strategy. There can be no assurance that
financing will be available in amounts or on terms acceptable to us, if at all.
The inability to obtain additional capital will restrict our ability to grow and
may reduce our ability to continue to conduct business operations. If we are
unable to obtain additional financing, we will likely be required to curtail our
marketing and development plans and possibly cease our operations. Any
additional equity financing may involve substantial dilution to our then
existing stockholders.
We
may acquire assets or other businesses in the future.
We may
consider acquisitions of assets or other business. Any acquisition involves a
number of risks that could fail to meet our expectations and adversely affect
our profitability. For example:
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The
acquired assets or business may not achieve expected
results;
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We
may incur substantial, unanticipated costs, delays or other operational or
financial problems when integrating the acquired
assets;
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We
may not be able to retain key personnel of an acquired
business;
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Our
management’s attention may be diverted;
or
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Our
management may not be able to manage the acquired assets or combined
entity effectively or to make acquisitions and grow our business
internally at the same time.
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If these
problems arise we may not realize the expected benefits of an
acquisition.
Without
realization of additional capital, it would be unlikely for us to continue as a
going concern.
As a
result of our deficiency in working capital at March 31, 2010 and other factors,
our independent auditors have indicated that there is substantial doubt about
our ability to continue as a going concern over the next twelve months. The
financial statements do not include any adjustments as a result of this
uncertainty. The going concern qualification may adversely impact our ability to
raise the capital necessary for the continuation of operations.
Our
limited resources may prevent us from retaining key employees or inhibit our
ability to hire and train a sufficient number of qualified management,
professional, technical and regulatory personnel.
Our
success may also depend on our ability to attract and retain other qualified
management and personnel familiar with the telecommunications industry.
Currently, we have a limited number of personnel that are required to perform
various roles and duties as a result of our limited financial resources. We
intend to use the services of independent consultants and contractors to perform
various professional services, when appropriate, to help conserve our capital.
However, if and when we determine to acquire additional personnel, we will
compete for such persons with other companies and other organizations, some of
which have substantially greater capital resources than we do. We cannot give
you any assurance that we will be successful in recruiting or retaining
personnel of the requisite caliber or in adequate numbers to enable us to
conduct our business.
Competition
from companies with already established marketing links and brand recognition to
our potential customers may adversely affect our ability to introduce and market
our products.
The
telecommunications industry is highly competitive. Many of our current and
potential competitors have financial, personnel and other resources, including
brand name recognition, substantially greater than ours, as well as other
competitive advantages over us. Certain competitors may be able to
secure product from vendors on more favorable terms, devote greater resources to
marketing and promotional campaigns, and adopt more aggressive pricing than we
will. There can be no assurance we will be able to compete
successfully against these competitors, which ultimately may have a materially
adverse effect on our business, results of operations, financial condition and
potential products in the future.
We
may not be able to provide our products and services if we do not connect or
continue to connect with the traditional carriers, our primary
competitors.
As a
competitive carrier, we must coordinate with traditional carriers so that we can
provide local service to customers on a timely and competitive basis. The
Telecommunications Act created incentives for regional Bell operating companies
to cooperate with competitive carriers and permit access to their facilities by
denying such companies the ability to provide in-region long distance services
until they have satisfied statutory conditions designed to open their local
markets to competition. The regional Bell operating companies in our markets are
not yet permitted by the FCC to offer long distance services. These companies
may not be accommodating once they are permitted to offer long distance service.
Currently, AT&T is permitted to offer both local and long distance services
in some of our mutual service areas, but we have not yet noticed any impact on
our markets.
Many
competitive carriers, including us, have experienced difficulties in working
with traditional carriers with respect to initiating, connecting, and
implementing the systems used by these competitive carriers to order and receive
network elements and wholesale services and locating equipment in the offices of
the traditional carriers.
If we
cannot obtain the cooperation of a regional Bell operating company in a region,
whether or not we have been authorized to offer long distance services, our
ability to offer local services in such regions on a timely and cost-effective
basis will be harmed.
Risks Relating to our Common
Stock
If
we fail to remain current on our reporting requirements, we could be removed
from the OTC Bulletin Board which would limit the ability of broker-dealers to
sell our securities and the ability of stockholders to sell their securities in
the secondary market.
Companies
trading on the OTC Bulletin Board, such as us, must be reporting issuers under
Section 12 of the Securities Exchange Act of 1934, as amended, and must be
current in their reports under Section 13, in order to maintain price quotation
privileges on the OTC Bulletin Board. More specifically, FINRA has
enacted Rule 6530, which determines eligibility of issuers quoted on the OTC
Bulletin Board by requiring an issuer to be current in its filings with the
Commission. Pursuant to Rule 6530(e), if we file our reports late
with the Commission three times in a two-year period or our securities are
removed from the OTC Bulletin Board for failure to timely file twice in a
two-year period then we will be ineligible for quotation on the OTC Bulletin
Board for one year. We have had one late filing and have once been
removed from the OTC Bulletin Board in the last two years. Therefore,
we must not have two more late filings or have our securities removed from the
OTC Bulletin Board, within the two year period, otherwise we will be in jeopardy
of being dequoted from the OTC Bulletin Board for a one year
period. As a result, the market liquidity for our securities could be
severely adversely affected by limiting the ability of broker-dealers to sell
our securities and the ability of stockholders to sell their securities in the
secondary market.
Our
internal controls may be inadequate, which could cause our financial reporting
to be unreliable and lead to misinformation being disseminated to the
public.
Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting. As defined in Exchange Act Rule 13a-15(f),
internal control over financial reporting is a process designed by, or under the
supervision of, the principal executive and principal financial officer and
effected by the board of directors, management and other personnel, to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles and includes those policies and
procedures that: (i) pertain to the maintenance of records that in reasonable
detail accurately and fairly reflect the transactions and dispositions of the
assets of Competitive Companies; (ii) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that
receipts and expenditures of Competitive Companies are being made only in
accordance with authorizations of management and directors of Competitive
Companies, and (iii) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of Competitive
Companies’ assets that could have a material effect on the financial
statements.
We have a
limited number of personnel that are required to perform various roles and
duties. Furthermore, we have one individual, our CEO, who is responsible for
monitoring and ensuring compliance with our internal control procedures. As a
result, our internal controls may be inadequate or ineffective, which could
cause our financial reporting to be unreliable and lead to misinformation being
disseminated to the public. Investors relying upon this misinformation may make
an uninformed investment decision.
Because
our common stock is deemed a low-priced “Penny Stock,” an investment in our
common stock should be considered high risk and subject to marketability
restrictions.
Since our
common stock is a “penny stock,” as defined in Rule 3a51-1 under the Securities
Exchange Act, it will be more difficult for investors to liquidate their
investment of our common stock. Until the trading price of the common stock
rises above $5.00 per share, if ever, trading in the common stock is subject to
the penny stock rules of the Securities Exchange Act specified in rules 15g-1
through 15g-10. Those rules require broker-dealers, before effecting
transactions in any penny stock, to:
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Deliver
to the customer, and obtain a written receipt for, a disclosure
document;
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Disclose
certain price information about the
stock;
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Disclose
the amount of compensation received by the broker-dealer or any associated
person of the broker-dealer;
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Send
monthly statements to customers with market and price information about
the penny stock; and
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In
some circumstances, approve the purchaser’s account under certain
standards and deliver written statements to the customer with information
specified in the rules.
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Consequently,
the penny stock rules may restrict the ability or willingness of broker-dealers
to sell the common stock and may affect the ability of holders to sell their
common stock in the secondary market and the price at which such holders can
sell any such securities. These additional procedures could also limit our
ability to raise additional capital in the future.
FINRA
sales practice requirements may also limit a stockholder’s ability to buy and
sell our stock.
In
addition to the “penny stock” rules described above, FINRA has adopted rules
that require that, in recommending an investment to a customer, a broker-dealer
must have reasonable grounds for believing that the investment is suitable for
that customer. Prior to recommending speculative low priced securities to their
non-institutional customers, broker-dealers must make reasonable efforts to
obtain information about the customer’s financial status, tax status, investment
objectives and other information. Under interpretations of these rules, FINRA
believes that there is a high probability that speculative low priced securities
will not be suitable for at least some customers. The FINRA requirements make it
more difficult for broker-dealers to recommend that their customers buy our
common stock, which may limit your ability to buy and sell our stock and have an
adverse effect on the market for our shares.
Item
2. Unregistered Sales of Equity Securities.
During
the three months ending March 31, 2010 the Company issued a total of 873,571
shares of common stock to six individual investors that had purchased the
Company’s common stock prior to December 31, 2009, which was previously recorded
as stock subscriptions payable in the total amount of $24,875.
During
the three months ending March 31, 2010, CCI received $76,949 in exchange for a
total of 3,191,428 shares of its $.001 par value common stock from a total of
twenty one individual investors.
During
the three months ending March 31, 2010, CCI received subscriptions payable of
$17,000 from a total of two individual investors in exchange for a total of
533,332 shares of its $.001 par value common stock. The shares were subsequently
issued in April of 2010.
On
February 11, 2010, CCI issued 3,000,000 shares to the Company’s CEO, William H.
Gray, in partial satisfaction of the April 2, 2009 acquisition of four entities
under Mr. Gray’s control. The Company intends to issue an additional 3,734,858
shares to Mr. Gray as part of the acquisition in the near term.
All of
these shares were issued in reliance upon an exemption from the securities
registration afforded by the provisions of Section 4(2) and/or Regulation D as
promulgated by the United States Securities and Exchange Commission under the
Securities Act of 1933, as amended.
Item
3. Defaults Upon Senior Securities.
There
were no defaults upon senior securities during the period ended March 31,
2010.
Item
4. (Remove and Reserved).
Item
5. Other Information.
None.
Item
6. Exhibits.
Exhibit
No.
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Description
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31.1
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Certification
of Principal Executive Officer, pursuant to 18 U.S.C. 1350, as adopted
pursuant to Section 302 of 2002
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31.2
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Certification
of Principal Financial Officer, pursuant to 18 U.S.C. 1350, as adopted
pursuant to Section 302 of 2002
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32.1
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Certification
of Principal Executive Officer, pursuant to 18 U.S.C. 1350, as adopted
pursuant toSection 906 of the Sarbanes-Oxley Act of
2002
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32.2
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Certification
of Principal Financial Officer, pursuant to 18 U.S.C. 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
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SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
COMPETITIVE
COMPANIES, INC.
By: /S/ William Gray
William
Gray,
Chief
Executive Officer
Date: May
20, 2010
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