What changed in this filing

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Item 2. Management’s Discussion and Analysis

2009-05-20 compared with 2009-02-20 · 262 added, 190 removed, 250 unchanged (64% of the section changed)

13 unchanged sentences

Revenue Recognition –

Flint recognizes revenues based upon contract terms and completion of the sales

We recognize revenues based upon contract terms and completion of the sales

process in accordance with Staff Accounting Bulletin No.

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the Company’s partners.

The Company recognizes the revenue when the service is

provided and payment is collected either through credit cards or through

payments by check.

The appropriate partner revenue allocation is deducted from

those accounts that pay Flint directly.

Other accounts that pay the partners

directly, Flint recognizes the portion of the revenue share that relates to it

and invoices the Partner for this.

The invoice becomes a receivable from the

Partner when raised.

We recognize the revenue when the service is provided

and payment is collected either through credit cards or through payments by

The appropriate partner revenue allocation is deducted from those

accounts that pay us directly.

Other accounts that pay the partners directly, we

recognize the portion of the revenue share that relates to it and invoices the

Partner for this.

The invoice becomes a receivable from the Partner when

Cost of Revenue –

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exercised or converted into common stock or resulted in the issuance of common

stock that then shared in the earnings of the Company.

Any dilutive security

issued, that would create an anti-dilutive effect, is not included in the

weighted average share calculation for that period.

stock that then shared in our earnings.

Any dilutive security issued, that would

create an anti-dilutive effect, is not included in the weighted average share

calculation for that period.

Stock Compensation Expense –

Flint adopted Statement of Financial Accounting Standards (SFAS) No.

We adopted Statement of Financial Accounting Standards (SFAS) No.

(revised 2004), “Share-Based Payment,” requiring us to recognize expense related

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Total stock compensation expense recognized by us during the three

and six months ended December 31, 2008 was $3,045,249.

Income taxes - The

Company accounts for income taxes in accordance with SFAS No.

“Accounting for Income Taxes.” Under SFAS No.

109, income taxes are

recognized for the amount of taxes payable or refundable for the current year

and deferred tax liabilities and assets are recognized for the future tax

consequences of transactions that have been recognized in the Company’s

financial statements or tax returns.

A valuation allowance is provided when it

is more likely than not that some portion or all of the deferred tax asset will

not be realized.

and nine months ended March 31, 2009 was $443,948 and $3,489,198,

respectively.

Income taxes - We

account for income taxes in accordance with SFAS No.

109, “Accounting

for Income Taxes.” Under SFAS No.

109, income taxes are recognized for

the amount of taxes payable or refundable for the current year and deferred tax

liabilities and assets are recognized for the future tax consequences of

transactions that have been recognized in our financial statements or tax

A valuation allowance is provided when it is more likely than not that

some portion or all of the deferred tax asset will not be realized.

Cash and Cash

Equivalents – The

Company considers all highly liquid investments with original maturities of

three months or less or money market funds from substantial financial

institutions to be cash equivalents.

The Company places substantially all of its

cash and cash equivalents in interest bearing demand deposit accounts with one

financial institution and in amounts that are insured either by the Irish

government for Euro deposits or by the Federal Deposit Insurance Corporation for

U.S deposits.

Equivalents – We

consider all highly liquid investments with original maturities of three months

or less or money market funds from substantial financial institutions to be cash

We place substantially all of its cash and cash equivalents in

interest bearing demand deposit accounts with one financial institution and in

amounts that are insured either by the Irish government for Euro deposits or by

the Federal Deposit Insurance Corporation for U.S deposits.

Concentrations of Credit

Risk - Financial instruments which potentially subject the Company to

Risk - Financial instruments which potentially subject us to

concentrations of risk consist principally of trade and other receivables.

Company extends credit to its customers in the ordinary course of business and

extend credit to its customers in the ordinary course of business and

periodically reviews the credit levels extended to customers, estimates the

collectability and creates an allowance for doubtful accounts, as needed.

Company does not require cash collateral or other security to support customer

Provision is made for estimated losses on uncollectible

Company estimates its allowance for doubtful accounts by applying estimated loss

percentages against its aging of accounts receivable balances.

not require cash collateral or other security to support customer receivables.

Provision is made for estimated losses on uncollectible accounts.

estimate our allowance for doubtful accounts by applying estimated loss

percentages against our aging of accounts receivable balances.

The estimated

loss percentages are updated periodically and are based on the Company’s

historical write-off experience, net of recoveries.

Changes to allowances may be

required if the financial condition of the Company’s customers improves or

deteriorates or if the Company adjusts its credit standards for new customers,

thereby resulting in write-off patterns that differ from historical

loss percentages are updated periodically and are based on our historical

write-off experience, net of recoveries.

Changes to allowances may be required

if the financial condition of our customers improves or deteriorates or if we

adjust its credit standards for new customers, thereby resulting in write-off

patterns that differ from historical experience.

Estimates - The

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the reported amounts of revenues and expenses during the reporting period.

Certain significant estimates were made in connection with preparing the

Company’s financial statements.

Certain significant estimates were made in connection with preparing our

financial statements.

Actual results could differ from those

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cash and cash equivalents, accounts receivable, accounts payable and short term

notes approximate fair value because of their short maturity as of December 31,

notes approximate fair value because of their short maturity as of March 31,

Convertible Notes were recorded at face value as of the issuance date.

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Net foreign currency

transaction losses were $269,571 for the six months ended December 31,

transaction losses were $374,650 for the nine months ended March 31,

Equipment – These assets are stated at cost, net of accumulated

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between the estimated fair value and the carrying value of the

objective for the first half of our fiscal year was to become public, increase

the size of the business through acquisition or other strategic business

combination structures, and to improve overall operations to reduce the need for

external financing in the difficult economic and financial

We closed a reverse merger with Semotus on October 1, 2008,

which brought us public, increased the depth and breadth of operations, enhanced

the management team and identified acquisitions in the telecom, media and

technology (TMT) space.

After the reverse merger with Semotus, we

continued our focus on our operations and consolidation of the two

We have been actively engaged in seeking other potential

acquisition targets to further enhance the scale, depth and profitability of the

three months ended December 31, 2008, we had a net loss of $8,548,598 ($0.21 per

and Goodwill Impairment-In association with the acquisition of CHVC

subsidiaries, in accordance with FASB 142, “Goodwill and Other Intangible

Assets”, we recorded the purchase price in excess of the net assets acquired as

of the acquisition date as goodwill.

The goodwill was recorded on January 29,

2009, the closing date of the CHVC subsidiaries acquisition (See Note 3,

Acquisition of the CHVC

Companies.) in the amount of $8,554,248.

In accordance with Statement of

Financial Accounting Standards No.

142 (SFAS No.

142), we perform an evaluation

of the fair values annually, and more frequently if an event occurs or

circumstances change that may indicate that the fair value of a reporting unit

is less than the carrying amount.

We are currently performing a

valuation of the assets acquired for the purchase price allocation and

management expects the valuation will be done by June 30, 2009.

accordance with FASB 142, “Goodwill and Other Intangible Assets” we determined

that the goodwill from the Semotus acquisition was impaired due to the

disposition of the Semotus Business Division on January 29, 2009 (See Note 4,

Acquisition and Subsequent Disposition of Semotus Solutions, Inc.).

was recorded on October 1, 2008, the closing date of the Semotus acquisition

(See Note 4, Acquisition and Subsequent Disposition of Semotus Solutions, Inc.)

in the amount of $2,538,148.

objective for the three months ended March 31, 2009 was to increase the size of

the business through acquisition or other strategic business combination

structures, and to improve overall operations to reduce the need for external

financing in the difficult economic and financial markets.

an acquisition of six wholly owned subsidiary companies of China Voice Holding

on January 29, 2009, thereby increasing the depth and breadth of

operations, enhanced the management team and identified additional acquisitions

in the telecom, media and technology (TMT) space.

After the CHVC

subsidiaries acquisition, we continued our focus on our operations and

consolidation of the entities.

We have been actively engaged in

seeking other potential acquisition targets to further enhance the scale, depth

and profitability of the business

three months ended March 31, 2009, we had a net loss of $1,246,295 ($0.02 per

share basic and diluted), as compared to a net loss of $531,572 ($0.02 per share

basic and diluted) in the three months ended December 31, 2007.

loss of $9,694,544 ($0.28 per share basic and diluted) in the six months ended

December 31, 2008, as compared to net loss of $1,072,860 ($0.04 per share basic

and diluted) in the six months ended December 31, 2007.

cash decreased by $638,392 in the six months ended December 31, 2008, compared

to an increase by $246,001 in the six months ended December 31,

OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED DECEMBER 31, 2008 AND

for the three months ended December 31, 2008 increased 816% to $2,987,042 as

compared to $326,095 for the three months ended December 31,

Revenues for the six months ended December 31, 2008 increased

1,453% to $6,212,293 as compared to $399,880 for the six months ended December

This increase is primarily due to the growth of our

wholesale call traffic business.

basic and diluted) in the three months ended March 31, 2008.

We had a net loss

of $10,940,839 ($0.24 per share basic and diluted) in the nine months ended

March 31, 2009, as compared to net loss of $1,604,431 ($0.06 per share basic and

diluted) in the nine months ended March 31, 2008.

The increase in the

losses year on year were predominantly as a result of costs and SEC accounting

provisions associated with the Semotus transaction which are non recurring.

overall cash decreased by $1,163,562 in the nine months ended March 31, 2009,

compared to an increase of $150,783 in the nine months ended March 31,

OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2009 AND

for the three months ended March 31, 2009 increased 2,197.3% to $11,220,472 as

compared $492,275 for the three months ended March 31, 2008.

for the nine months ended March 31, 2009 increased 1,854% to $17,432,765 as

compared to $892,155 for the nine months ended March 31, 2008.

increase is primarily due to the acquisition of the six subsidiaries of China

Voice Holding, Corp.

(CHVC) and growth of our wholesale call traffic

OF REVENUES AND GROSS MARGIN

overall gross loss margin has improved in both the three and six months ended

December 31, 2008 versus 2007 due to larger traffic volumes being delivered

through the call platform.

The revenue increases now cover the fixed cost

component of cost of sales.

The cost of revenues principally is the cost of call

generation, including transmission and termination, network charges including

access costs, lease and right-of-way charges and other third party fulfillment

costs, and other telecommunication fees, such as emergency 911 service

expenses increased 1,563% to $7,118,899 in the three month period ended December

31, 2008 versus $428,025 for the same period in the last fiscal year, and

increased 928% to $8,182,348 in the six month period ended December 31, 2008

versus $796,082 for the same period in the last fiscal year.

increase is mainly due to costs associated with the reverse merger with Semotus

Solutions, Inc., the growth of the telephony business, the non-cash expense of

stock and options issued to directors, officers and employees, and the

impairment of goodwill.

We categorize operating expenses into three

major categories:

research and development, sales and marketing, and general and

administrative.

The table below summarizes the changes in these three categories

of operating expenses (unaudited):

overall gross margin has improved in both the three and nine months ended March

31, 2009 versus 2008 due to larger traffic volumes being delivered through the

call platform and the cessation of certain business activities that required

high cost of revenues.

We have moved from a fixed cost of revenue structure to a

fully variable cost model that results in consistent positive gross margins

going forward.

The cost of revenues principally is the cost of call generation,

including transmission and termination, network charges including access costs,

lease and right-of-way charges and other third party fulfillment costs, and

other telecommunication fees, such as emergency 911 service fees.

expenses increased 147% to $1,544,129 in the three month period ended March 31,

2009 versus $624,884 for the same period in the last fiscal year, and increased

575% to $9,591,430 in the nine month period ended March 31, 2009 versus

$1,420,964 for the same period in the last fiscal year.

This increase

is mainly due to non-recurring costs associated with the reverse merger with

Semotus Solutions, Inc.

and the CHVC subsidiaries, the growth of the telephony

business, the non-cash expense of stock and options issued to directors,

officers and employees, and the impairment of goodwill.

We categorize

operating expenses into three major categories:

research and development, sales

and marketing, and general and administrative.

The table below summarizes the

changes in these three categories of operating expenses

and development

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development and maintenance.

These costs also include the expenses of hiring

sales personnel and maintaining a customer support activities.

incurred in 2008 are a result of an increase in sales and marketing personnel

through the Semotus Business, as well as a management fee to Flint,

These costs also include the expenses of

hiring sales personnel and maintaining a customer support

These costs incurred in 2008 are a result of an increase

in sales and marketing personnel through the Semotus Business, as well as a

management fee to Flint, Ltd.

and administrative expenses include senior management, accounting, legal,

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investor relations and public relations.

These costs have increased during the

three and six months ended December 31, 2008 versus 2007 due to the costs

associated with becoming a publicly traded company and the stock compensation

and option expense from the stock and options issued to directors,

These costs have increased

during the three and nine months ended March 31, 2009 versus 2008 due to the

costs associated with becoming a publicly traded company and the stock

compensation and option expense from the stock and options issued to directors,

officers and employees.

Also, we determined that the goodwill from the Semotus

acquisition was impaired due to the disposition of the Semotus Business

The goodwill was mainly associated with the Hiplink family of

Also, we determined that the goodwill from

the Semotus acquisition was impaired due to the disposition of the Semotus

Business Division.

non-cash charges for compensation consist mainly of the grants of stock as a

result of the reverse merger with Semotus Solutions, Inc., and of warrants

issued as part of financing loans.

The common stock issued was valued at its

fair market value at the date of issuance.

INCOME (EXPENSE)

$231,029 for the three months ended December 31, 2008 and $12,655 for the six

months ended December 31, 2008 in other expense is comprised mainly from the

expense related to accrued interest on the convertible and promissory notes, as

well as the amortization of the debt discounts related to those notes.

component is exchange gains and losses from currency transactions in the Euro

There was no other income or expense for the three and six

months ended December 31, 2007.

result of the reverse merger with Semotus Solutions, Inc.

and the acquisition of

the six CHVC subsidiaries, and of warrants issued as part of financing

The common stock issued was valued at its fair market value at

the date of issuance.

$1,279,657 for the three months ended March 31, 2009 and $1,131,956 for the nine

months ended March 31, 2009 in other income is comprised mainly from the gain

from Semotus spin-off, net any other expense related to accrued interest on the

convertible and promissory notes, as well as the amortization of the debt

discounts related to those notes.

During the three months ended March

31, 2009, the Company disposed of Semotus (see Note 4).

As a result of the

Acquisition and Subsequent Disposition of Semotus Solutions, Inc., we recorded a

gain of $1,639,767.

The other component is exchange gains and losses

from currency transactions in the Euro and U.S.

OPERATIONS, NET OF TAX

the three months ended March 31, 2009, as part of our restructuring and

consolidation efforts after the CHVC acquisition transaction closed, we

discontinued our wholesale telecom operations that were based out of New York

As a result of this discontinuation, we recorded $(870,749) in

discontinued operations, net of tax for the three months and nine months ended

March 31, 2009

AND CAPITAL RESOURCES

cash decreased by $638,392 for the six months ended December 31, 2008 due to a

cash decreased by $1,163,562 for the nine months ended March 31, 2009 due to a

continued loss from operations, purchases of equipment for the wholesale call

platform, and the reverse merger with Semotus.

We were able to cover some of the

cash loss through proceeds from convertible and promissory note issuances.

increased $246,001 for the six months ended December 31, 2007 due mainly to

financing from Flint Telecom Ltd.

which offset the operating losses.

and uses of cash are summarized as follows (unaudited):

platform, the reverse merger with Semotus and the acquisition of the six CHVC

subsidiaries.

We were able to cover some of the cash loss through proceeds from

convertible and promissory note issuances.

Cash increased $150,783

for the nine months ended March 31, 2008 due mainly to financing from Flint

Telecom Ltd., which offset the operating losses.

The sources and uses

of cash are summarized as follows (unaudited):

used in operating activities

$ (2,228,501)

used in investing activities

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increase (decrease) in cash and cash equivalents

the six months ended December 31, 2008, cash used in operating activities from

continuing operations consisted principally of an operating loss of $9,694,544

resulting from a gross loss of $338,587 and operating expenses of $8,182,348.

The loss included non cash charges for stock and option compensation and

impairment of goodwill of $3,045,249 and $2,538,148, respectively.

non-cash expenses were depreciation and amortization of $947,735 and a loss on

the purchase of notes of $174,956.

operating activities that increased cash were a decline in accounts receivable

of $53,971, an increase in accounts payable of $343,692, of accrued liabilities

of $29,361, of accrued interest of $396,525 and deferred revenue of

the six months ended December 31, 2007, cash used in operating activities from

continuing operations consisted principally of an operating loss of $1,072,860

the nine months ended March 31, 2009, cash used in operating activities was

$3,187,428 resulting from a gross gain of $15,982 and operating expenses of

The loss included non cash charges for stock and option compensation

and impairment of goodwill of $3,489,198 and $2,538,148,

respectively.

Other non-cash expenses were depreciation and

amortization of $379,338 and a loss on the purchase of notes of

operating activities that increased cash were an increase in accounts payable of

$1,235,492, of accrued liabilities of $606,118, and accrued interest of

the nine months ended March 31, 2008, cash used in operating activities was

$1,771,022 resulting from gross loss of $183,572 and operating expenses of

operating activities contributing to the increase in cash were mainly decline in

accounts receivable of $63,389 and an increase in accounts payable of $212,802,

slightly offset by a decrease in accrued liabilities of $77,565.

the six months ended December 31, 2008, cash used in investing activities

consisted of $329,558 of purchases of telephony equipment and $83,162

for the cash assumed in the acquisition of Semotus Solutions.

During the six

months ended December 31, 2007, no cash was used in or provided by investing

provided by financing activities for the six months ended December 31, 2008

Other operating activities contributing to the increase in cash were

mainly an increase in accounts payable of $128,202, slightly offset by a

decrease in accrued liabilities of 34,096.

the nine months ended March 31, 2009, cash used in investing activities

consisted of $351,305 of purchases of telephony equipment, $196,906 for the cash

assumed in the acquisition of six CHVC subsidiaries and $700,000 cash

consideration payment for the acquisition of the six CHVC subsidiaries.

the nine months ended March 31, 2008, $48,659 was used in investing activities

of purchase telephony equipment.

provided by financing activities for the nine months ended March 31, 2009

consisted of the sale of short term promissory notes, which provided $3,526,060

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lease obligations.

Cash provided by financing activities for the six months

ended December 31, 2007 consisted principally of proceeds from convertible notes

Cash provided by financing activities for the nine months

ended March 31, 2008 consisted principally of proceeds from convertible notes

issued of $2,840,089 and advances from Flint, Ltd.

of cash was used in foreign currency transactions for the six months ended

December 31, 2008.

There were no foreign currency transactions for the six

months ended December 31, 2007.

December 31, 2008, we had cash and cash equivalents of $848,629, a decrease of

of cash was used in foreign currency transactions for the nine months ended

March 31, 2009.

There were no foreign currency transactions for the

nine months ended March 31, 2008.

March 31, 2009, we had cash and cash equivalents of $323,459, a decrease of

$1,163,562 from the balance at June 30, 2008, which was

working capital deficit increased as of December 31, 2008 to ($8,395,627) as

compared to a working capital deficit of ($2,814,281) at June 30, 2008 .

Our working capital deficit increased as of March 31,

2009 to ($7,908,813) as compared to a working capital deficit of ($2,814,281) at

June 30, 2008 .

We have not yet

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However, there is no assurance that any additional capital will be

We closely monitor our cash position and our operating costs

in order to maintain an adequate level of cash.

We closely monitor our cash balances and our

operating costs in order to maintain an adequate level of cash.

capital lease for our telecom equipment for which future minimum lease payments

2 unchanged sentences

lease payments are $63,363 in fiscal 2009 and $93,000 in fiscal

no material commitments for capital expenditures at December 31,

There were no material commitments for capital expenditures at

March 31, 2008.

ACCOUNTING PRONOUNCEMENTS

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November 15, 2007, and interim periods within those fiscal years.

believe that the adoption of SFAS 157 will have a material affect on our

financial statements.

adopted SFAS 157 and we believe that it has no material impact on the Financial

February 2007, the FASB issued Statement No.

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beginning of an entity’s first fiscal year that begins after November 15, 2007.

We do not believe that the adoption of SFAS 159 will have a material affect on

our financial statements.

We have adopted SFAS 159 and we believe that it has no material impact on the

Financial Statements.

December 2007, the FASB issued SFAS No.

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impact of SFAS No.

141R on the Company’s consolidated financial statements

will depend on the nature and extent of the Company’s future acquisition

141R on our consolidated financial statements will

depend on the nature and extent of our future acquisition

December 2007, the FASB issued SFAS No.

10 unchanged sentences

amounts attributable to both the parent and the noncontrolling interest.

requires disclosure, on the face of

consolidated statement of income, of the amounts of consolidated net income

attributable to the parent and to the noncontrolling interest.

This statement is

effective for financial statements issued for fiscal years beginning after

December 15, 2008, and interim periods within those fiscal years.

believe that the adoption of SFAS 160 will have a material affect on our

financial statements.

requires disclosure, on the face of the consolidated statement of income, of the

amounts of consolidated net income attributable to the parent and to the

noncontrolling interest.

This statement is effective for financial statements

issued for fiscal years beginning after December 15, 2008, and interim periods

within those fiscal years.

We do not believe that the adoption of SFAS 160 will

have a material affect on our financial statements.

Interpretation

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technical merits of the position.

The tax benefits recognized in the financial

statements from such a position should be measured based on the largest benefit

that has a greater than 50% likelihood of being realized upon ultimate

The tax benefits

in the financial statements from such a position should be measured based on the

largest benefit that has a greater than 50% likelihood of being realized upon

ultimate settlement.

FIN 48 also provides guidance on de-recognition,

1 unchanged sentence

periods and requires increased disclosures.

The Company is evaluating the

effects of FIN 48 for the 2008 fiscal year, but it does not believe that it has

a liability for unrecognized tax benefits.

does not believe that there are any other recently-issued accounting

pronouncements, but not yet effective accounting standards, which could have a

material effect on the accompanying financial statements.

We have adopted FIN 48 and we

believe that it has no material impact on the Financial Statements.

January 2009, FASB released final FSP No.

EITF 99-20-1, Amendments to the Impairment

Guidance of EITF Issue No.

According to FASB, the FSP amends the

impairment guidance in EITF Issue No.

99-20, “Recognition of Interest Income and

Impairment on Purchased Beneficial Interests and Beneficial Interests That

Continue to Be Held by a Transferor in Securitized Financial Assets,” to achieve

more consistent determination of whether an other-than-temporary impairment

(OTTI) has occurred.

The FSP is effective for interim and annual reporting

periods ending after December 15, 2008, and shall be applied prospectively.

Retrospective application to a prior interim or annual reporting period is not

We have adopted FSP No.

EITF 99-20-1 and we believe that it has no

material impact on the Financial Statements.

FAS 107-1 and APB 28-1

9, 2009 the FASB issued FSP No.

FAS 107-1 and APB 28-1, Interim Disclosures about Fair

Values of Financial Instruments , which amends SFAS 107, Disclosures about Fair Values of

Financial Instruments, and requires that companies also disclose the fair value

of financial instruments during interim reporting similar to those that are

currently provided annually.

FSP No.FAS 107-1 and APB 28-1 is effective for

interim reporting periods ending after June 15, 2009 and it will have no impact

on our statement of financial position or results of operations.

does not believe that there are any other recently-issued, but not yet

effective, accounting standards that could have a material effect on the

accompanying financial statements.

LOOKING STATEMENTS AND RISK FACTORS

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis