What changed in this filing

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Item 1. Financial Statements

2009-11-23 compared with 2009-05-20 · 495 added, 1071 removed, 22 unchanged (99% of the section changed)

FINANCIAL STATEMENTS

TELECOM GROUP, INC.

Semotus Solutions, Inc.)

FLINT TELECOM GROUP, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

and cash equivalents

receivables, net of allowance for doubtful accounts

$346,727 and $190,083

in marketable securities

expenses and other current assets

from related parties

plant & equipment:

leases – equipment

property, plant & equipment

September 30,

Current assets:

Cash and cash equivalents

Accounts receivable, net of allowance for doubtful accounts of $257,893

for September 30, 2009 and $205,397 for June 30, 2009

Notes receivable

Investment in marketable securities

Due from Flint Telecom, Ltd.

Due from related parties

Prepaid expenses and other current assets

Current assets

Fixed assets:

Capitalized leases – equipment

Total fixed assets

accumulated depreciation

property, plant & equipment

& STOCKHOLDERS' DEFICIT

payable-trade

accrued liabilities

interest payable

obligations – current

payable, net of discount

notes payable, net of discount

to Flint Telecom Ltd.

Total current

Net fixed assets

Other intangible assets, net

LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities:

Accounts payable

Cash overdraft

Other accrued liabilities

Accrued interest payable

Lease obligations – current

Lines of credit

Notes payable

Notes payable – related parties, net of discount

Convertible notes payable, net of discount

Convertible notes payable – related parties, net of discount

Redeemable preferred stock

Total current liabilities

Convertible notes payable – long term, net of discount

Convertible notes payable – long term - due to related parties, net of discount

Notes payable due to related parties – long term

payable due to related parties, net of discount

obligations - long-term

Lease obligations - long-term

Line of credit – long term

Total liabilities

Stockholders'

Commitments and contingencies

Stockholders' equity (deficit)

Preferred stock:

$0.001 par value;

100,000,000 authorized, 76,956,920

issued and outstanding at March 31, 2009, 28,460,094 issued and

outstanding at June 30, 2008

stock issuable

paid-in capital

stock compensation

comprehensive loss

stockholders' deficit

liabilities and stockholders’ deficit

See accompanying notes to condensed consolidated

financial statements.

TELECOM GROUP, INC.

Semotus Solutions, Inc.)

CONSOLIDATED STATEMENTS OF OPERATIONS

profit (loss)

and development

and marketing

and administrative:

and payroll related expense

fee payable to Flint Ltd

compensation and option expense:

general and administrative

5,000,000 authorized, 886,981 issued and outstanding at September 30, 2009, 1,250,000 issued and outstanding at June 30, 2009

Common stock:

$0.01 par value;

100,000,000 authorized, 76,285,811 issued and outstanding at September 30, 2009, 71,294,702 issued and outstanding at June 30, 2009

Common stock issuable

Additional paid-in capital

Accumulated comprehensive loss

Accumulated deficit

Total stockholders' equity (deficit)

Total liabilities and stockholders’ equity (deficit)

See accompanying notes to condensed consolidated financial statements.

FLINT TELECOM GROUP, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

September 30,

Cost of revenues

Gross profit (loss)

Operating expenses:

operations, net of tax

loss per common share:

average shares outstanding:

accompanying notes to condensed consolidated financial

TELCOM GROUP, INC.

Semotus Solutions, Inc.)

CONSOLIDATED STATEMENTS OF CASH FLOWS

Flows from Operating Activities:

to reconcile net loss to net cash provided (used) by operating

non-cash transactions:

and option compensation expense

on purchase of non-convertible notes

of debt discounts & warrants

of debt issuance costs

on disposal of Semotus

on disposal of fixed assets

in assets and liabilities, net of acquisition:

cash used in operating activities

Flows from Investing Activities:

of property, plant & equipment

assumed in acquisition of Semotus

cash used in investing activities

Flows From Financing Activities:

from short term notes issued

term notes repaid

from convertible notes issued

General and administrative:

Bad debt expense

Salaries and payroll related expense

Management fee to Flint Telecom, Ltd.

Stock compensation and option expense:

Directors and officers

Depreciation and amortization expense

Total operating expenses

Operating loss

Other income (expense)

Interest expense

Provision for income taxes

Net loss per common share:

Weighted average shares outstanding:

See accompanying notes to condensed consolidated financial statements.

FLINT TELCOM GROUP, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three months ended

September 30,

Cash Flows from Operating Activities:

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization

Other non-cash transactions:

Stock and option compensation expense

Accretion of debt discount

Amortization of debt issuance costs

Changes in assets and liabilities, net of acquisition and disposals:

Accounts receivable

Prepaid expense

Accounts payable

Cash overdraft

Accrued liabilities

Net due from Flint Telecom, Ltd.

Due from related parties

Accrued interest

Net cash used in operating activities

Cash Flows from Investing Activities:

Purchases of fixed assets

Investment in notes receivable

Net cash used in investing activities

Cash Flows From Financing Activities:

Proceeds from lines of credit

Proceeds from related parties debt

Proceeds from debt

Debt issuance fees and expenses

Payments on debt

Paid to Flint Telecom Ltd.

from the offering

on lease obligations

cash provided by financing activities

Flows From Foreign Currency Activities:

gain (loss) on convertible notes

cash provided by (used in) foreign currency activities

increase (decrease) in cash and cash equivalents

and cash equivalents, beginning of the period

and cash equivalents, end of the period

See accompanying notes to condensed consolidated financial

TELECOM GROUP, INC.

Semotus Solutions, Inc.)

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

CASH FLOW DISCLOSURE:

paid for interest

paid for income taxes

SCHEDULE OF NONCASH ACTIVITIES:

purchased under capital lease obligations

of marketable securities

stock issued upon conversion of notes payable and accrued interest (Note

– beneficial conversion

of Semotus Solutions, Inc.:

stock compensation

of Semotus Solutions, Inc.:

assets of Semotus

liabilities of Semotus

of CHVC Subsidiaries:

accompanying notes to condensed consolidated financial

TELECOM GROUP, INC.

Semotus Solutions, Inc.)

OF STOCKHOLDERS’ DEFICIT

Stock Issuance

Comprehensive

at June 30, 2008

of Semotus Solutions, Inc.

of the six CHVC subsidiaries

of new shares as compensation to officers and key

of deferred stock compensation

of notes payable into equity

of warrants to holders of notes payable

conversion feature on convertible notes payable

options expense for nine months ended March 31, 2009

Redemption of preferred stock

Payments on lease obligations

Net cash provided by financing activities

Cash Flows From Foreign Currency Activities:

Exchange gain (loss) on convertible notes

Net cash provided by (used in) foreign currency activities

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents, beginning of the period

Cash and cash equivalents, end of the period

See accompanying notes to condensed consolidated financial statements.

FLINT TELECOM GROUP, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

SUPPLEMENTAL CASH FLOW DISCLOSURE:

Cash paid for interest

Cash paid for income taxes

SUPPLEMENTAL SCHEDULE OF NONCASH ACTIVITIES:

Assets purchased under capital lease obligations

Conversion of notes payable and accrued interest (Note 12)

Discounts – warrants

Discounts – beneficial conversion

Capitalization of accrued interest to a note payable

See accompanying notes to condensed consolidated financial statements.

FLINT TELECOM GROUP, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT) AND OTHER COMPREHENSIVE LOSS

Common Stock Issuable

Paid-In Capital

Compre-hensive Loss

Balances at June 30, 2009

$(21,035,869)

Conversion of notes payable

Beneficial conversion feature on convertible notes payable

Shares issued to consultants for services

Issuance of warrants to holders of notes payable

Conversion of notes payable into equity

Stock compensation expense

Stock options expense

Comprehensive Loss:

of employment agreements

loss for nine months ended March 31, 2009

at March 31, 2009

accompanying notes to condensed consolidated financial

TELECOM GROUP, INC.

Semotus Solutions, Inc.)

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Organization and

Telecom Group, Inc.

(formerly named Semotus Solutions, Inc.) (“Flint”, “We” or

the “Company”), is a Nevada Corporation.

We were originally formed in

2005 as Flint Telecom, Inc., a Delaware Corporation, and started operations in

April 2006 as a wholly owned subsidiary of Flint Telecom Limited, headquartered

in Dublin, Ireland.

Flint Telecom Limited is a holding company whose

sole operating business in the United States was Flint Telecom,

Flint Telecom Limited was a vehicle for the initial funding of

Flint and for the development of the proprietary intellectual property

October 1, 2008, Semotus Solutions, Inc.

(“Semotus”) acquired substantially all

of the assets and liabilities of Flint Telecom, Inc.

in exchange for 28,460,094

shares of restricted common stock pursuant to a definitive Contribution

Agreement dated April 23, 2008.

Although Semotus is the legal

acquirer, for accounting purposes Flint is the accounting acquirer.

changed to Flint Telecom Group, Inc.

The existing Semotus operations

became a division of Flint, and were subsequently sold in January

provide next generation turnkey voice, data and wireless services through

partner channels primarily in the United States.

We offer a wholesale call

platform for aggregating call traffic at cost competitive rates to other

Carriers and distribute telecommunications services and products through our

distribution channels.

We are headquartered in Boca Raton, Florida

and operate in the United States.

January 29, 2009, we acquired six U.S.

Comprehensive loss

Net loss for the three months ended September 30, 2009

Balances at September 30, 2009

$(24,088,089)

See accompanying notes to condensed consolidated financial statements.

FLINT TELECOM GROUP, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Organization and Formation

Flint Telecom Group, Inc.

(formerly named Semotus Solutions, Inc.) (“Flint”, “We” or the “Company”), is a Nevada Corporation.

We were originally formed in 2005 as Flint Telecom, Inc., a Delaware Corporation, and started operations in April 2006 as a wholly owned subsidiary of Flint Telecom Limited,

headquartered in Dublin, Ireland.

Flint Telecom Limited is a holding company whose sole operating business in the United States was Flint Telecom, Inc.

Flint Telecom Limited was a vehicle for the initial funding of Flint and for the development of the proprietary intellectual property (“IP”).

On October 1, 2008, Semotus Solutions, Inc.

(“Semotus”) acquired substantially all of the assets and liabilities of Flint Telecom, Inc.

in exchange for 28,460,094 shares of restricted common stock pursuant to a definitive Contribution Agreement dated April 23, 2008.

Although Semotus is the legal acquirer, for accounting purposes

Flint is the accounting acquirer.

The name was changed to Flint Telecom Group, Inc.

The existing Semotus operations became a division of Flint, and were subsequently sold in January 2009.

We provide next generation turnkey voice, data and wireless services through partner channels primarily in the United States.

We offer a wholesale call platform for aggregating call traffic at cost competitive rates to other Carriers and distribute telecommunications services and products through our distribution channels.

are headquartered in Boca Raton, Florida and operate in the United States.

On January 29, 2009, we acquired six U.S.

operating subsidiaries of China Voice Holding Corp.

(“CHVC”), namely:

Inc., Cable and Voice Corporation, StarCom Alliance Inc, Dial-Tone Communication

Inc, Phone House of Florida, Inc., and Phone House, Inc.

(of California) (the

“Acquisition Companies”), in exchange for 21,000,000 shares of our restricted

common stock and $500,000 in cash at Closing and $1,000,000 in deferred

Acquisition Companies provide the following telecom services and / or distribute

the following telecom products:

was established in January 2007, and

is a provider of wholesale VoIP telecommunications services located in

South Florida.

and Voice Corporation was established on June 1, 2008, and is a master

distributor of advanced broadband products and services located in Tampa,

Alliance, Inc.

was established in January 2008, and is a master

distributor of prepaid cellular products and

CVC Int’l Inc., Cable and Voice Corporation, StarCom Alliance Inc, Dial-Tone Communication Inc, Phone House of Florida, Inc., and Phone House, Inc.

(of California) (the “Acquisition Companies”), in exchange

for 21,000,000 shares of our restricted common stock and $500,000 in cash at Closing and $1,000,000 in deferred payments.

The Acquisition Companies provide the following telecom services and / or distribute the following telecom products:

CVC Int’l, Inc.

was established in January 2007, and is a provider of wholesale VoIP telecommunications services located in South Florida.

Cable and Voice Corporation was established on June 1, 2008, and is a master distributor of advanced broadband products and services located in Tampa, Florida.

StarCom Alliance, Inc.

was established in January 2008, and is a master distributor of prepaid cellular products and services.

Phone House Inc.

of Florida was established on March 6, 2008.

Phone House, Inc.

of California was established on June 12, 2001.

Dial-Tone Communication

Dial-Tone Communication Inc.

was established on July 19, 2007.

Each provides discount calling

cards that enable users who purchase cards in the United States to call

internationally.

Basis of Presentation and Future Prospects

accompanying condensed consolidated financial statements have been prepared by

us, without audit and in accordance with the instructions to Form 10-Q and

Regulation S-K.

In the opinion of our management, all adjustments

(including normal recurring accruals) considered necessary for a fair

presentation have been included.

Operating results for the three and

nine months ended March 31, 2009 are not necessarily indicative of the results

that may be expected for the year ending June 30, 2009.

information and footnote disclosures normally included in financial statements

prepared in accordance with generally accepted accounting principles have been

condensed or omitted.

We believe that the disclosures provided are

adequate to make the information presented not misleading.

consolidated financial statements should be read in conjunction with the audited

consolidated financial statements and related notes included in our SEC Forms

8-K/A filed on December 23, 2008 and on March 31, 2009.

financial statements have been prepared on a going concern basis, which

contemplates the realization of assets and the settlement of liabilities in the

normal course of our business.

As reflected in the accompanying

financial statements, Flint had a net loss of $1,246,295 and $10,940,839 for the

three and nine months ended March 31, 2009, respectively, negative cash flow

from operating activities of $3,387,428 for the nine months ended March 31,

2009, an accumulated stockholder’s deficit of $5,818,074 and a working capital

deficit of $7,908,813 as of March 31, 2009.

Also, as of March 31,

2009, we had limited liquid and capital resources.

We are currently

largely dependent upon obtaining sufficient short and long term financing in

order to continue running its operations.

foregoing factors raise substantial doubt about our ability to continue as a

Each provides discount calling cards that enable users who purchase cards in the United States to call internationally.

Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared by us, without audit and in accordance with the instructions to Form 10-Q and Regulation S-K.

In the opinion of our management, all adjustments (including normal recurring accruals) considered necessary for a fair presentation have been included.

results for the three months ended September 30, 2009 are not necessarily indicative of the results that may be expected for the year ending June 30, 2010.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted.

We believe that the disclosures provided are adequate to make the information

presented not misleading.

These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in our SEC Form 10K filed on October 13, 2009.

Going Concern

Ultimately, our ability to continue as a going concern

is dependent upon its ability to attract new sources of capital, exploit the

growing telecom services market in order to attain a reasonable threshold of

operating efficiency and achieve profitable operations.

The financial

statements do not include any adjustments that might be necessary if we are

unable to continue as a going concern.

secured indicative funding commitments from investors for additional capital,

which management believes is sufficient to fund our cash flow

of the CHVC Acquisition Companies

January 29, 2009, we acquired six U.S.

operating subsidiaries of China Voice

Holding Corp.

(“CHVC”), namely:

CVC Int’l Inc., Cable and Voice Corporation,

StarCom Alliance Inc, Dial-Tone Communication Inc, Phone House of Florida, Inc.,

and Phone House, Inc.

(of California) (the “Acquisition Companies”), in exchange

for 21,000,000 shares of our restricted common stock and $500,000 in cash at

Closing and $1,000,000 in deferred payments.

of the closing of the transaction and in addition

to the issuance of the commo n stock and

cash paid as noted above , we also acquired 15,000,000 shares of

restricted common stock of CHVC in exchange for deferred payments totaling

Additionally, we issued a Promissory Note to CHVC

dated January 29, 2009, in an amount of $7,000,000 , pursuant to which we are obligated to

make payments as follows:

$2,333,333.33 on or before December 31, 2009;

$2,333,333.33 on or before July 31, 2010, and $2,333,333.34, plus any remaining

balance due on the Note on or before December 31, 2010 ( the “ Note” ).

Note shall not bear any interest pre-default.

The Note will bear

interest at eighteen percent (18%) per year for any period of time when a

payment is past due.

15,000,000 shares of CHVC

restricted common stock are attached to the Note as collateral, pursuant to a Security

The foregoing description of the Stock Purchase

Agreement, Note and Security Agreement are qualified in their entirety by

reference to the full text of the Stock Purchase Agreement, Note and Security

Agreement, a copy of which are filed as exhibits to the Current Report on Form

8-K that we filed on February 4, 2009.

25, 2009 the Merger Agreement and Stock Purchase Agreement were amended, to,

among other things, extend the payment schedules to CHVC as described

Please see Note 22:

Subsequent Events, for more detailed

information on these amendments.

from the Merger Agreement, as a hiring and retention incentive and in lieu of

issuing stock options under the Company’s stock option plan, during the three

months ended March 31, 2009 we issued 6,500,000 shares of restricted common

stock, vesting over a period of four years, to executive officers and key

employees, and 255,000 shares of restricted common stock that were immediately

vested to other key employees.

These shares of restricted common

stock were valued at various prices between $0.15 and $0.38.

recorded approximately $167,519 in expense in the three and nine months ended

March 31, 2009, related to the shares of restricted common stock granted to

these executive officers and key employees.

following are condensed pro forma financial information as though the

acquisition of the CHVC Acquisition Companies had occurred as of the beginning

of the nine months ended March 31, 2009 and 2008.

In association with the

acquisition of CHVC subsidiaries, we recorded the purchase price in excess of

the net assets acquired as of the acquisition date as goodwill.

goodwill was recorded on January 29, 2009, the closing date of the CHVC

subsidiaries acquisition in the amount of $8,554,248.

Telecom Group, Inc.

Pro Forma Statement of Operations

income (loss)

income (loss) per common share

average shares outstanding

and Subsequent Disposition of Semotus Solutions, Inc.

the nine months ended March 31, 2009, we acquired Semotus Solutions, Inc.

(“Semotus”) through a reverse merger and disposed of the Semotus software

business on January 28, 2009.

Semotus issued.

28,460,094 shares of

restricted common stock to Flint Telecom, Inc.

pursuant to a definitive

Contribution Agreement dated April 23, 2008

(the “Contribution Agreement”).

Through the acquisition of Semotus,

we acquired $492,796 in fair value of assets, $584,680 in liabilities and

recorded $2,538,148 in goodwill.

Separate from the Contribution

Agreement, as a hiring and retention incentive and in lieu of issuing stock

options under the Company’s stock option plan, we issued 8,410,000 shares of

restricted common stock, vesting over a period of four years, to executive

officers and key employees, and 3,508,000 shares of restricted common stock to

These shares of restricted common stock were valued at

We recorded approximately $257,813 and $3,283,031

in expense in the three and nine months ended March 31, 2009, related to the

shares of restricted common stock granted to these executive officers, directors

and key employees.

following are condensed pro forma financial information as though the reverse

merger with Semotus had occurred as of the beginning of the nine months ended

March 31, 2009 and 2008.

Telecom Group, Inc.

Pro Forma Statement of Operations

income (loss)

income (loss) per common share

average shares outstanding

Business Disposition:

January 29, 2009, we sold all of the assets and liabilities of the ‘Semotus

Business’ or ‘Solutions Division’ to Mr.

Anthony LaPine for 3,508,000 shares of

our restricted common stock owned by Mr.

LaPine exercised his right

to purchase the Semotus Business/Solutions Division from Flint, in accordance

with Section 8.2(f) of the Contribution Agreement by and among Semotus

Solutions, Inc.

(now named Flint Telecom Group, Inc., and referred to as

“Flint”) and Flint Telecom, Inc.

dated April 23, 2008, in exchange for 3,508,000

shares of our restricted common stock owned by Mr.

transaction was further clarified and consummated by the Agreement and Plan of

Corporate Separation and Reorganization by and among Flint and Semotus, Inc.

executed as of January 29, 2009, pursuant to which we transferred all of the

assets and properties, subject to all the liabilities, debts, obligations and

contracts, of the Solutions Division to Semotus, Inc.

in exchange for Mr.

LaPine’s 3,508,000 shares of our restricted common stock.

Business”, as set forth in Section 7.18 of the Contribution Agreement, is

defined as the operations of Semotus as conducted immediately prior to the

acquisition transaction of Flint Telecom, Inc.

that closed on October 1, 2008,

and does not reflect the business operations of Flint Telecom, Inc.

connection with that transaction.

The financial impact of this

transaction is as a gain of

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

consolidation efforts after the CHVC acquisition transaction closed, we

discontinued our VOIP telecom division based in New York City,

and are moving to an outsourced solution for our Partners.

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

Accounting Pronouncements

September 2006, the Financial Accounting Standards Board (the “FASB”) issued

Statement No.

157, “Fair Value Measurements” (“SFAS 157”);

SFAS 157 establishes

a formal framework for measuring fair value under GAAP.

and codifies the many definitions of fair value included among various other

authoritative literature, clarifies and, in some instances, expands on the

guidance for implementing fair value measurements, and increases the level of

disclosure required for fair value measurements.

Although SFAS

to and amends the provisions of existing FASB and AICPA pronouncements, it does

not, of itself, require any new fair value measurements, nor does it establish

valuation standards.

SFAS 157 applies to all other accounting

pronouncements requiring or permitting fair value measurements, except for;

123R, share-based payment and related pronouncements, the practicability

exceptions to fair value determinations allowed by various other authoritative

pronouncements, and AICPA Statements of Position 97-2 and 98-9 that deal with

software revenue recognition.

This statement is effective for

financial statements issued for fiscal years beginning after November 15, 2007,

and interim periods within those fiscal years.

We have adopted SFAS

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

February 2007, the FASB issued Statement No.

159, “The Fair Value Option for

Financial Assets and Liabilities”.

This Statement permits entities to

choose to measure many financial instruments and certain other items at fair

The objective is to improve financial reporting by providing entities

with the opportunity to mitigate volatility in reported earnings caused by

measuring related assets and liabilities differently without having to apply

complex hedge accounting provisions.

The fair value option

established by this Statement permits all entities to choose to measure eligible

items at fair value at specified election dates.

A business entity shall report

unrealized gains and losses on items for which the fair value option has been

elected in earnings (or another performance indicator if the business entity

does not report earnings) at each subsequent reporting date.

Statement is effective as of the beginning of an entity’s first fiscal year that

begins after November 15, 2007.

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.

141(revised 2007), “Business

Combinations” (“SFAS No.

which revises current purchase accounting guidance in SFAS No.

“Business Combination s ”.

requires most assets acquired and liabilities assumed in a business combination

to be measured at their fair values as of the date of

141R also modifies the initial measurement

and subsequent remeasurement of contingent consideration and acquired

contingencies, and requires that acquisition related costs be recognized as

expense as incurred rather than capitalized as part of the cost of the

141R is effective for fiscal years

beginning after December 15, 2008 and is to be applied prospectively to

business combinations occurring after adoption.

The impact of SFAS No.

on our consolidated financial statements will depend on the nature and extent of

the Company’s future acquisition activities.

December 2007, the FASB issued SFAS No.

160, “Noncontrolling Interests in

Consolidated Financial Statements – an Amendment of ARB No.

This Statement

amends ARB 51 to establish accounting and reporting standards for the

noncontrolling interest in a subsidiary and for the deconsolidation of a

It clarifies that a noncontrolling interest in a

subsidiary is an ownership interest in the consolidated entity that should be

reported as equity in the consolidated financial statements.

Statement changes the way the consolidated income statement is

It requires consolidated net income to be reported at

amounts that include the amounts attributable to both the parent and the

noncontrolling interest.

It also 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.

statement is effective for financial statements issued for fiscal years

beginning after December 15, 2008, and interim periods within those fiscal

We do not believe that the adoption of SFAS 160 will have a

material affect on our financial statements.

Interpretation

Accounting Standards Board Interpretation No 48, “Accounting for Uncertainty in

Income Taxes — an interpretation of FASB Statement No 109, “Accounting for

Income Taxes (“FIN 48”)” is effective for fiscal years beginning after December

FIN 48 addresses the determination of whether tax benefits

claimed or expected to be claimed on a tax return should be recorded in the

financial statements.

Under FIN 48, we may recognize the tax benefit

from an uncertain tax position only if it is more likely than not that the tax

position will be sustained on examination by the taxing authorities, based on

the 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 settlement.

FIN 48 also provides guidance on

de-recognition, classification, interest and penalties on income taxes,

accounting in interim periods and requires increased disclosures.

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.

to finance the CHVC acquisition, we entered into a Common Stock and Warrant

Purchase Agreement with Redquartz Atlanta, LLC (“Redquartz”), in which we sold

5,454,545 shares restricted common stock at $0.275 per share and issued

3,750,000 warrants to purchase shares common stock at $0.40 per share, having a

three year term and a cashless exercise provision, in exchange for

As of March 31, 2009, this investment was only partially

closed, with Redquartz having invested $500,000 of the $1,500,000 total that was

Additionally, on January 29, 2009, we

entered into a Stock Purchase Agreement with an individual investor, in which we

sold 1,454,545 shares of restricted common stock at $0.275 per share in exchange

for $400,000.

The foregoing description of the common stock and

warrant purchases are qualified in their entirety by reference to the full text

of the Common Stock and Warrant Purchase Agreement, the Warrant Certificate and

the Stock Purchase Agreement, copies of which are filed as exhibits to the Form

8-K that we filed on February 4, 2009.

1, 2009, we entered into a Stock Purchase Agreement with an individual investor,

in which we sold 100,000 shares of restricted common stock at $0.20 per share in

exchange for $20,000.

These financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities in the normal course of our business.

As reflected in the accompanying financial statements, Flint had a net loss of $3,052,220 and $1,145,947 for the three months ended September

30, 2009 and 2008, respectively, negative cash flow from operating activities of $1,052,944 for the three months ended September 30, 2009, an accumulated stockholder’s deficit of $921,186 and a working capital deficit of $12,071,300 as of September 30, 2009.

Also, as of September 30, 2009, we had limited liquid and capital resources.

We are currently largely dependent upon obtaining sufficient short and long term financing in order to continue running our operations.

The foregoing factors raise substantial doubt about our ability to continue as a going concern.

Ultimately, our ability to continue as a going concern is dependent upon our ability to attract new sources of capital, exploit the growing telecom services market in order to attain a reasonable threshold of operating efficiency and

achieve profitable operations.

The financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.

We have secured indicative funding commitments from investors for additional capital, which management believes is sufficient to fund our cash flow needs for the next twelve months.

Recent Accounting Pronouncements

In September 2009, the FASB issued authoritative guidance that applies to arrangements with multiple deliverables and provides another alternative for determining the selling price of deliverables.

In addition, the residual method of allocating arrangement consideration is no longer permitted under this guidance.

The guidance is

effective for fiscal years beginning on or after July 15, 2010.

We are currently evaluating the potential impact, if any, of the adoption of this guidance on our consolidated financial statements.

In September 2009, the FASB issued authoritative guidance which removes non-software components of tangible products and certain software components of tangible products from the scope of existing software revenue guidance, resulting in the recognition of revenue similar to that for other tangible products.

It also requires expanded qualitative

and quantitative disclosures.

The guidance is effective for fiscal years beginning on or after June 15, 2010.

We are currently evaluating the potential impact, if any, of the adoption of this guidance on our consolidated financial statements.

In June 2009, the FASB issued authoritative guidance for determining whether an entity is a variable interest entity (“VIE”) and requires an enterprise to perform an analysis to determine whether the enterprise’s variable interest or interests give it a controlling financial interest in a VIE.

Under this guidance, an enterprise

has a controlling financial interest when it has a) the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and b) the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the VIE.

The guidance also requires an enterprise to assess whether it has an implicit financial responsibility to ensure that a VIE operates as designed when determining whether

it has power to direct the activities of the VIE that most significantly impact the entity’s economic performance.

The guidance also requires ongoing assessments of whether an enterprise is the primary beneficiary of a VIE, requires enhanced disclosures and eliminates the scope exclusion for qualifying special-purpose entities.

The guidance is

effective for fiscal years beginning after Novermber 15, 2009.

We are currently evaluating the potential impact, if any, of the adoption of this guidance on our consolidated financial statements.

Management does not believe that there are any recently-issued, but not yet effective, accounting standards that could have a material effect on the accompanying financial statements.

Accounts Receivable and Concentration of Credit Risk

One customer accounted for 65% of our revenue for the three months ended September 30, 2009.

Two customers accounted for 38% of the accounts receivable at September 30, 2009, the largest of which accounted for 28% of the receivables.

Two customers together accounted for 89% of our revenue for the three months ended September 30,

2008, 45% and 44% respectfully.

Two other customers accounted for 37% and 30% of the accounts receivable at September 30, 2008.

Investment in Marketable Securities

acquired 15,000,000 shares of restricted common stock of CHVC in exchange for

deferred payments totaling $1,500,000 and a Promissory Note to CHVC dated

January 29, 2009, in an amount of $7,000,000

classify these securities as investments in marketable securities available for

These securities are stated at their fair value in accordance with SFAS

115 “ Accounting for Cert ain Investments in Debt and Equity

Securities ”, and EITF 00-8 “ Accounting by a Grantee for an

Equity Instrument to be Received in Conjunction with Providing Goods or

Unrealized gains or losses in investments in marketable

securities available for sale are recognized as an element of other

comprehensive income on a monthly basis based on fluctuations in the fair value

of the security as quoted on an exchange or an inter-dealer quotation system.

Realized gains or losses are recognized in the consolidated statements of

operations when the securities are liquidated.

the securities received from CHVC are quoted on the Pink Sheets.

The securities

are restricted as to resale.

As the securities are restricted, we are

unable to liquidate these securities until the restriction is removed.

Unrealized gains or losses on marketable securities available for sale are

recognized as an element of comprehensive income on a monthly basis based on

changes in the fair value of the

as quoted on an exchange or an inter-dealer quotation system.

liquidated, realized gains or losses on the sale of marketable securities

available for sale are reflected in our net income for the period in which the

security was liquidated.

securities are evaluated periodically to determine whether a decline in their

value is other than temporary.

Management utilizes criteria such as the

magnitude and duration of the decline, in addition to the reasons underlying the

decline, to determine whether the loss in value is other than temporary.

term “other-than-temporary” is not intended to indicate that the decline is

It indicates that the prospects for a near term recovery of value are

not necessarily favorable, or that there is a lack of evidence to support fair

values equal to, or greater than, the carrying value of the investment.

The unrealized loss on marketable securities available for sale, net of

the effect of taxes, for the three months and nine months ended March 31, 2009

was $5,800,000.

will continue to monitor the underlying value of this

Receivable and Concentration of Credit Risk

customers accounted for 39% and 18% of our revenue, respectively, for the three

months ended March 31, 2009.

Four customers accounted for 25%, 14%, 14% and 12%

of our revenue, respectively, for the nine months ended March 31,

Three customers accounted for 54% of the accounts receivable at

March 31, 2009, the largest of which accounted for 25% of the receivables.

customers accounted for 62% and 14% of our revenue, respectively, for the three

months ended March 31, 2008.

accounted for 57% of our revenue for the nine months ended March 31,

payable at March 31, 2009 were $4,345,963.

Four vendors accounted for 47% of the

payables at March 31, 2009, the largest of which accounted for 24% of the

we believe that we have adequate alternative vendors to purchase services and

products, there can be no assurance of comparability, which could have a

detrimental effect on the business.

Further, when the vendor provides services

for direct access to and call routing for residential or business customers, a

reduction in or elimination of that vendor service will probably have a

detrimental affect on that portion of our business.

Plant and Equipment

We have acquired $1,319,334 in

equipment and incurred $823,236 in principal amount of capital lease obligations

primarily for computer and telephony equipment.

During the three

months ended March 31, 2009, we incurred $112,651 in capital lease

During the nine months ended March 31, 2009, we incurred

$336,339 in capital lease charges.

There were no capital lease obligations

in the nine months ended March 31, 2008.

The future minimum payments

under these capital leases are $112,651 in fiscal 2009 and $450,605 in fiscal

The lease terms expire from November 2010 to June

The interest rates range from 9.1% to

and Convertible Notes

the three months ended March 31, 2009, we issued a $300,000 Promissory Note, due

March 31, 2009, with 300,000 shares of restricted common stock issued on March

As of April 21, 2009, this Note had not been repaid and

under the terms of the Note we are required to issue an additional 300,000

shares of restricted common stock to the Note holder.

the three months ended March 31, 2009, we also issued a €100,000 (US $132,048)

Promissory Note, due April 30, 2009, with 30,000 shares of restricted common

stock to be issued on April 30, 2009.

30, 2007 to March 31, 2009, we issued $3,140,583 principal amount of Promissory

notes with Warrants, $3,661,646 principal amount of U.S.

We acquired 15,000,000 shares of restricted common stock of CHVC in exchange for deferred payments totaling $1,500,000 and a Promissory Note to CHVC dated January 29, 2009, in an amount of $7,000,000.

We classify these securities as investments in marketable securities available for sale.

These securities are stated at their fair value.

Unrealized gains or losses in investments in marketable securities available for sale are recognized as an element of other comprehensive income on a monthly basis based on fluctuations in the

fair value of the security as quoted on an exchange or an inter-dealer quotation system.

Realized gains or losses are recognized in the consolidated statements of operations when the securities are liquidated.

To date, the securities received from CHVC are quoted on the Pink Sheets.

The securities are restricted as to resale.

As the securities are restricted, we are unable to liquidate these securities until the restriction is removed.

Unrealized gains or losses on marketable securities available for sale are recognized as

an element of comprehensive income on a monthly basis based on changes in the fair value of the security as quoted on an exchange or an inter-dealer quotation system.

Once liquidated, realized gains or losses on the sale of marketable securities available for sale are reflected in our net income for the period in which the security was liquidated.

Marketable securities are evaluated periodically to determine whether a decline in their value is other than temporary.

Management utilizes criteria such as the magnitude and duration of the decline, in addition to the reasons underlying the decline, to determine whether the loss in value is other than temporary.

The term “other-than-temporary”

is not intended to indicate that the decline is permanent.

It indicates that the prospects for a near term recovery of value are not necessarily favorable, or that there is a lack of evidence to support fair values equal to, or greater than, the carrying value of the investment.

Related Party Transactions

We have limited access to capital from either banking institutions or the capital markets.

Consequently, we have loans from a number of third parties, including related parties, as follows.

On January 29, 2009, we acquired six U.S.

operating subsidiaries of China Voice Holding Corp.

(“CHVC”), (the “Acquisition Companies”) and 15,000,000 shares of CHVC’s restricted common stock, in exchange for 21,000,000 shares of our restricted common stock, $500,000 in cash at Closing, a $7,000,000 promissory note

and $2,500,000 in deferred payments.

See Note 4 for more details on the transaction.

Bill Burbank, our President and Chief Operating Officer, was and still currently remains the President and Chief Executive Officer of CHVC.

As of September 30, 2009, $7,886,981 was due and owing to CHVC.

Additionally, during the three months ended September 30, 2009, Mr.

Burbank, our President, loaned $40,000 to us.

This loan bears no interest or contains any additional cash fees.

loan is due on demand by Mr.

The balance of the loan as of September 30, 2009 was $40,000.

Flint Telecom Ltd, which is controlled by Mr.

Browne, Flint’s CEO, and Mr.

Butler, one of Flint’s board members, has a loan balance of $88,731 at September 30, 2009.

During the three months ended September 30, 2009, Flint Telecom Ltd.

assigned a portion, $91,850, of its $202,500 promissory note to a number of unrelated

third parties.

See Note 12 for more details on this transaction.

This note has a 15% interest rate and originally matured on March 30, 2009 but was extended to September 30, 2011.

The loan includes charges for management fees earned by Flint Telecom, Ltd.

The management fees are for the executive, operating and financial services provided by Flint Telecom, Ltd.

The investment from Flint Telecom, Ltd.

was $258,731 at September 30, 2009.

The investment

is for capital needed for our operations.

Flint Telecom, Ltd.

was also issued warrants on September 30, 2008 exercisable into 1,202,500 common shares at $0.50 per share which expire on September 30, 2011.Flint Telecom, Ltd.

also has a direct equity investment in us.

On May 13, 2009 we issued to Mr.

Butler a Convertible Promissory Note in an amount of $1,516,000, accruing no interest, convertible in whole or in part at $0.40 per share, and due and payable through installment payments of $100,000 each, beginning as of October 31, 2009, and we issued 3,260,000 shares of restricted common stock in the Company,

vesting quarterly over a period of three years beginning as of January 1, 2011 such that 100% of the shares are vested as of January 1, 2014.On June 30, 2009 we issued Mr.

Butler a subordinated secured convertible promissory note having an interest at a rate of 10% per annum, convertible at $0.275 per share into an aggregate of up to 2,181,818 shares of restricted common stock, with a maturity date 18 months after the Closing (the “Notes”) and warrants to purchase an aggregate of up to 2,181,818 shares

of our restricted common stock at $0.35 per share, having a five year term and a cashless exercise provision (the “Warrants”).

The Warrants are not exercisable until our Articles of Incorporation are amended to increase the number of total authorized shares of common stock to 200,000,000.

$150,000 was due and payable to Mr.

Butler by no later than August 11, 2009, which has not yet been repaid and is currently in default, but management is negotiating an extension and believes

it will come to an agreement to extend this Note.

Upon default, the Note holder may declare this Note immediately due and payable and demand payment of all principal and the Note holder may proceed to collect such amount.

We also have a number of loans outstanding from Mr.

Butler, one of our directors, with a total outstanding balance of $2,266,000 as of September 30, 2009.

We issued to Mr.

Butler various promissory notes, convertible promissory notes, warrants and shares of restricted common stock as consideration

for these loans.

During the three months ended September 30, 2009, Mr.

Keaveney, our CFO, loaned $75,000 to us and we issued to him a promissory note in the amount of $75,000, due and payable with a cash fee of $10,000 on or before October 24, 2009.

As of the date of this filing, this note has not yet been repaid and Mr.

Keaveney is entitled to

additional cash fees of $10,000 per month for every month the note is not repaid.

Accounts Payable

Accounts payable at September 30, 2009 were $4,110,169.

Five vendors accounted for 47% of the payables at September 30, 2009, the largest of which accounted for 12% of the payables.

Accounts payable at September 30, 2008 were $892,678.

Three vendors accounted for 42% of the payables at September 30, 2008, the largest

of which accounted for 20% of the payables.

Although we believe that we have adequate alternative vendors to purchase services and products, there can be no assurance of comparability, which could have a detrimental effect on the business.

Further, when the vendor provides services for direct access to and call routing for residential or business customers, a reduction in or elimination

of that vendor service will probably have a detrimental effect on that portion of our business.

Lines of Credit

Effective June 4, 2009, we entered into a Loan and Security Agreement with Thermo Credit LLC (“Thermo”), for a line of credit in an amount not to exceed $2,000,000 (the “Agreement”).

Under the terms of the Agreement, we agreed to pay a commitment fee equal to 2%of the amount of the Credit Facility, an unused

facility fee of 0.25% per annum and a monitoring fee equal to the greater of $1,500.00 per month, or 0.05% of the Credit Facility per week.

The line of credit is evidenced by a Loan and Security Agreement and a Promissory Note in the maximum amount of $2,000,000.

The Note carries an interest rate of the greater of the prime rate plus 8%, or 15%.

The indebtedness is secured by a pledge and grant to Thermo of a security interest in all of our property or assets, real or personal, tangible or intangible,

now existing or hereafter acquired.

As of September 30, 2009, we owed $2,000,000 under the Thermo line of credit.

The first principal payment was due to Thermo on September 30, 2009 and as of the date of the filing of this quarterly report, payment has not been made and we are in default and the total balance has therefore been classified as a current liability.

Management is currently negotiating an extension and/or restructure of the terms of this line of credit with Thermo, and we believe that Thermo will agree to such an extension or restructuring of the terms of this line of credit.

Upon default, the entire unpaid balance of principal, together with all accrued but unpaid interest thereon, and all other indebtedness owing to Thermo at such time, which as of October 10, 2009 was $2,143,961, shall, at the option of Thermo, become immediately due and payable without further notice.

In addition, Thermo shall be entitled to

foreclose upon its security interests granted under the Agreement and to cause the Collateral to be immediately seized wherever found and sold with or without appraisal.

Collateral consists of any and all of our subsidiaries’ property or assets, real or personal, tangible or intangible, now existing or hereafter acquired, and all supporting obligations, products and proceeds of all of the foregoing.

We have a second line of credit with the Ulster Bank of Ireland in the amount of €800,000, which has a total value as of September 30, 2009 of approximately $1,167,360.

This line of credit has a 4.45% variable interest rate and continues for an indefinite period of time with no set maturity date, but which is subject to

review on an annual basis.

Promissory Notes and Convertible Promissory Notes

During the three months ended September 30, 2009, we issued $315,000 principal amount of Promissory Notes, some with warrants and some with shares of restricted common stock, restructured $540,000 principal amount of promissory notes into U.S.

Dollar Convertible Promissory Notes issued with warrants, and restructured $91,850 principal amount

of promissory notes originally issued to Flint Telecom, Ltd.

into convertible notes, which were assigned to third parties and converted into 334,000 shares of restricted common stock.

Substantially all of the proceeds have been used for the expansion of our business, including capital expenditures and working capital.

During the three months ended September 30, 2008, we issued $315,000 principal amount of Promissory Notes, $723,330 principal amount of U.S.

Dollar Convertible Promissory Notes.

As of September 30, 2009, $7,000,000 principal amount of a promissory note issued to CHVC, $2,675,976 principal amount of other promissory notes, some issued with warrants and some with shares of restricted common stock, $1,607,000 principal amount of U.S.

Dollar Convertible Promissory Notes, $1,740,000 principal amount of U.S.

Dollar Convertible

Promissory Notes and €1,475,000 (US $1,947,738) principal amount of Euro

Convertible Promissory Notes.

Substantially all of the proceeds have been used

for the expansion of our business, including capital expenditures and working

Promissory Notes issued with warrants, were outstanding.

Promissory Notes:

During the three months ended September 30, 2009, we issued a $100,000 promissory note due September 18, 2009, with warrants to purchase up to 200,000 shares of common stock at $0.50 per share and having a 3 year term.

As of September 30, 2009 this note had not been repaid and is currently in default.

Management is negotiating an

extension with this note holder and we believe we will come to a mutual agreement to extend this note.

three months ended September 30, 2009 we also issued a $125,000 promissory note with a $25,000 cash fee due on or before October 28, 2009, and a $75,000 promissory note with a $10,000 cash fee due on or before October 24, 2009.

Additional cash fees of $10,000 per month accrue for every month the note is not repaid.

As of September 30, 2009, we had a total of $2,675,976 worth of principal amounts outstanding under various promissory notes issued to approximately 20 individuals and entities, with interest rates ranging from 0% to 15%, to be repaid between 30 September 2009 and 30 September 2011.

Approximately $1,500,000 worth of principal under

these notes has not been repaid as of September 30, 2009 and is currently in default.

Management is negotiating extensions with these note holders and we believe we will come to a mutual agreement to extend these notes.

Upon default, the Note holders may declare their notes immediately due and payable and demand payment of all principal and the note holders may proceed to collect such amounts.

Dollar Convertible Promissory Notes:

Dollar Convertible Promissory Notes were issued from December 2007 to June 30,

2008 to approximately 50 different individuals and entities with an interest

rate of 12% and maturities ranging from six months to one year.

The conversion

price for $910,146 of the Notes

based upon a formula which is the lower of (i) the expected market

capitalization divided by the number of shares outstanding and (ii) a price per

share derived by a percentage multiplied by the average daily closing price of

the common stock in the first 20 days of trading, provided however that if the

estimated market capitalization is actually below $10 million at the calculation

date, then the $10 million number will be used in the calculation.

$2,751,500 of

Dollar Convertible Promissory Notes were issued from December 2007 to June 30, 2008 to approximately 50 different individuals and entities with an interest rate of 12% and maturities ranging from six months to one year.

The Notes have a conversion price of $0.275 per share.

the three months ended March 31, 2009, $1,474,282 in principal and interest was

converted by the U.S.

Dollar Convertible Promissory Notes into a total of

5,361,025 shares of restricted common stock.

As of March 31, 2009, a

total of $2,267,755 in principal and accrued interest of the U.S.

Convertible Promissory Notes was converted into 8,246,381 shares.

holder of U.S.

Dollar Convertible Promissory Note in the amount of $122,895

executed a six month extension to June 30, 2009.

A holder of two U.S.

Dollar Convertible Promissory Notes in the amount of $148,056 and $180,861 in

principal and accrued interest executed a twenty-four month extension to

December 31, 2010.

The remaining $1,235,425 was due to U.S.

Promissory Note holders as of December 31, 2008 and has not been

Management is negotiating extensions with these Note holders

and we believe that all of the remaining Note holders will agree extensions or

convert the Notes.

Upon default, we are required to pay interest in

cash to the Note holder, payable on demand, on the outstanding principal balance

of the Note from the date of the default until the default is cured at the rate

of the lesser of thirty percent (30%) per annum and the maximum applicable legal

rate per annum.

Upon default, the Note holders may at any time at

their option declare the entire unpaid principal balance of the Note, together

with all interest accrued hereon, due and payable.

Convertible Promissory Notes

Convertible Promissory Notes have been issued to one individual, Mr.

Butler, in two tranches each with an interest rate of 15%.

conversion price for €1,175,000 (US $1,551,588) of the Notes is based upon a

formula which is the lower of (i) the expected market capitalization divided by

the number of shares outstanding and (ii) a price per share derived by a

percentage multiplied by the average daily closing price of the common stock in

the first 90 days of trading, provided however that if the estimated market

capitalization is actually below $10 million at the calculation date, then the

$10 million number will be used in the calculation.

$396,150) of the Notes have a conversion price of $0.25 per share.

Notes with Warrants

the nine months ended March 31, 2009, we issued $1,502,500 of Promissory

$1,202,500 of the Promissory Notes were issued to Flint

Telecom, Ltd.

These notes have a 15% interest rate and mature on

March 30, 2009.

The warrants are exercisable into 1,202,500 common

shares at $0.50 per share.

The warrants expire on September 30,

issued $300,000 of Promissory Notes with Warrants to an individual on September

The Note has a 15% interest rate and matures on December

The warrants are exercisable into 300,000 common shares at

$0.50 per share.

The warrants expire on September 30, 2011.

the nine months ended March 31, 2009, we issued a $250,000 Promissory Note due

March 30, 2009 to an individual with 250,000 warrants exercisable at $0.50 per

share, expiring on November 10, 2011.

months ended March 31, 2009, the warrant component of the promissory notes was

valued at $1,132,869.

The value was recorded as a discount to the promissory

note and $1,132,869 was expensed through March 31, 2009.

following are the assumptions used for the Black Scholes

term (in years)

average volatility

dividend yield

During the three months ended September 30, 2009, $24,000in

principal plus accrued interest was converted into 92,411 shares.

One Note holder, RedQuartz, having a principal amount as of June 30, 2009 of $75,000, executed an extension to September 30, 2011.

The remaining $16,000 in principal is held by one note holder and was due as of December 31, 2008 and has not been repaid.

Management is negotiating an extension with this note holder and we believe that he will agree to an extension or convert the note.

Upon default, we are required to pay interest

in cash to the Note holder, payable on demand, on the outstanding principal balance of the Note from the date of the default until the default is cured at the rate of the lesser of thirty percent (30%) per annum and the maximum applicable legal rate per annum.

Upon default, the Note holder may at any time at his option declare the entire unpaid principal balance of the Note, together with all interest accrued hereon, due and payable.

As of September 30, 2009, a total of $1,607,000 worth of principal in U.S.

Convertible promissory notes was outstanding.

$91,000 of that is under the promissory notes as described in the above paragraph, and the remaining $1,516,000 is owed to Mr.

Butler and is described in Footnote 9:

Related Party Transactions.

Convertible Promissory Notes issued with Warrants:

Effective September 1, 2009, we entered into an agreement with a holder of $740,000 worth of Promissory Notes to cancel all principal and cash fees due under the Notes and to invest a portion of that amount, $540,000, under the same terms and conditions of the Private Equity Offering that closed on June 30, 2009, which includes a subordinated

secured convertible promissory note having an interest at a rate of 10% per annum, convertible at $0.275 per share into an aggregate of up to 1,963,636 shares of restricted common stock, with a maturity date 18 months after the Closing (the “Notes”) and warrants to purchase an aggregate of up to 1,963,636 shares of our restricted common stock at $0.35 per share, having a five year term and a cashless exercise provision (the “Warrants”).

The Warrants are not exercisable until

our Articles of Incorporation are amended to increase the number of total authorized shares of common stock to 200,000,000.

The holder was also granted a subordinated security interest in all of our assets.

The remaining $200,000 continues to be due and payable by no later than September 30, 2009.

To date, the $200,000 has not yet been repaid and is in default.

Management believes that the Note holder will agree to another extension.

This Note is secured by 5,000,000 shares of

China Voice Holding Corp.’s restricted common stock held directly by Flint;

additionally, Mr.

Keaveney, our CFO, and Mr.

Browne, our CEO, jointly and severally, also personally guaranteed this Note.

Upon default, the Note holder may declare this Note immediately due and payable and demand payment of all principal and the Note holder may proceed to collect such amount.

As of September 30, 2009, we also have $1,200,000 worth in principal amount of subordinated convertible promissory notes outstanding having an interest rate of 10% per anum, convertible at $0.275 per share into an aggregate of 4,363,636 shares of restricted common stock, with a maturity date 18 months after the issuance dates, and warrants

to purchase an aggregate of up to 4,363,636 shares of our restricted common stock at $0.35 per share, having a five year term and a cashless exercise provision.

These holders were also granted a subordinated security interest in all of our assets.

For the three months ended September 30, 2009, the warrant component of the promissory notes was valued at $1,640,807.

The value was recorded as a discount to the promissory note and $619,764was expensed in the three months ending September 30, 2009.

The following are the assumptions used for the Black Scholes calculation:

Three Months Ended

September 30, 2009

Expected term (in years)

Weighted average volatility

242.96% – 295.54

Expected dividend yield

Risk-free rate

Debt Schedule:

The following table sets forth the summary schedule of the cash payments required to be made by us, broken down by the type of loan:

Notes payable

Convertible notes payable

Line of credit

Notes payable – related parties

Convertible notes payable – related parties

Commitments and Contingencies

We are a party to various legal proceedings in the normal course of business.

Based on evaluation of these matters and discussions with counsel, we believe that any potential liabilities arising from these matters will not have a material adverse effect on our consolidated results of operations or financial position.

Stockholder’s Equity

Common Stock:

As of September 30, 2009, we had 100,000,000 total shares of common stock authorized and 88,785,975 shares were issued and outstanding, however, 12,500,082 of these shares have not yet vested and vesting is contingent upon continued employment with the Company;

these shares will not be considered issued and outstanding until the shares vest,

and therefore as of September 30, 2009, 76,285,811 shares were issued and outstanding.

There is no special voting or economic rights or privileges.

Preferred Stock:

As of September 30, 2009, 5,000,000 total shares of preferred stock were authorized and 886,981 shares of Series C preferred stock were issued and outstanding, par value $0.001.

These shares are not convertible into common stock and have no voting rights.

As of September 30, 2009, there are no shares of Series A or B preferred stock issued

or outstanding.

We have, as part of various debt and other agreements, issued warrants to purchase our common stock.

The following summarizes the information relating to all warrants issued and outstanding as of September 30, 2009:

Number of Warrants

Per Share Warrant Exercise Price

Expiration Date

All warrants are fully exercisable upon issuance other than the June 30, 2009 and September 1, 2009 subscription warrants, which cannot be exercised until our total authorized common shares have been increased to at least 200,000,000, which we expect to occur at our next annual shareholders’ meeting to be held on December 2, 2009.

shareholders holding more than a majority of our common shares outstanding have agreed to vote for an increase in our total authorized shares from 100,000,000 to 200,000,000 at our next annual shareholders’ meeting.

Stock Option Plans:

As part of the reverse merger with Semotus that closed on October 1, 2008, we assumed Semotus’ 1996 and 2005 Stock Option Plans.

The 2005 Stock Option Plan (the “2005 Plan”) was adopted by Semotus in July 2005 and in September 2005 the 2005 Plan was approved by its shareholders.

In September 2007 the 2005 Plan was amended to provide for the granting of stock options to purchase up to 1,150,000 shares of our common stock, subject to adjustment

only in the event of a stock split, stock or other extraordinary dividend, or other similar change in the common stock or capital structure.

The 2005 Plan expires in July 2015, ten years after its adoption.

Under the 2005 Plan, the Option Committee may grant incentive stock options to purchase shares of our common stock only to employees, and may grant non-qualified stock options to purchase shares of our common stock to our directors, officers, consultants and advisers.

The Option Committee

may grant options to purchase shares of our common stock at prices not less than fair market value, as defined under the 2005 Plan, at the date of grant for all stock options.

The Option Committee also has the authority to set exercise dates (no longer than ten years from the date of grant), payment terms and other provisions for each grant.

In addition, incentive options may be granted to persons owning more than 10% of the voting power of all classes of stock, at a price no lower than 110% of the fair market

value at the date of grant, as determined by the Option Committee.

Incentive options granted under the Plan generally vest over three years at a rate of 33% after year one and then equally on a monthly basis over the next two years from the date of grant.

Non-qualified options granted under the Plan generally vest 100% immediately.

As of September 30, 2009, 1,163,750 options were outstanding under the 2005 Plan.

Stock Based Compensation, for stock option activity.

The 1996 Stock Option Incentive Plan (the “Plan”) was originally adopted by Semotus in June 1996.

The Plan provided for the granting of stock options to acquire common stock and/or the granting of stock appreciation rights to obtain, in cash or shares of common stock, the benefit of the appreciation of the value of shares of common

stock after the grant date.

The Plan expired in June of 2006, ten years after its adoption.

As of September 30, 2009, 54,975 options remain outstanding and exercisable under the 1996 Plan.

Earnings (Loss) Per Share

We report Basic and Diluted Earnings per Share (EPS) as follows:

Basic EPS is computed as net income (loss) divided by the weighted average number of common shares outstanding for the period.

Diluted EPS reflects the potential dilution that could occur from common shares issuable through stock options, warrants and other convertible

Common equivalent shares are excluded from the computation of net loss per share if their effect is anti-dilutive.

Since we incurred a net loss for the three months ended September 30, 2009, 16,047,182 potential shares were excluded from the shares used to calculate diluted EPS as their effect is anti-dilutive .

Since we incurred a net loss for the three months ended September 30, 2008, 8,741,215

potential shares were excluded from the shares used to calculate diluted EPS as their effect is anti-dilutive.

We reported a net loss of $3,052,220)for the three months ended September 30, 2009.

We reported a net loss of $1,145,957 for the three months ended September 30, 2008.

Stock Based Compensation

of the reverse merger with Semotus that closed on October 1, 2008, we assumed

Semotus’ 1996 and 2005 Stock Option Plans, as described in Semotus’ SEC Form 10K

for the fiscal year ended March 31, 2008.

adopted Statement of Financial Accounting Standards (SFAS) No.

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

fair value of its employee stock option awards.

We recognize the cost

of all share-based awards on a straight line vesting basis over the vesting

period of the award.

Total stock compensation expense recognized by us during

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

estimated the fair value of our option awards granted on or after October 1,

2008 using the Black-Scholes option valuation model that uses the assumptions

noted in the following table.

Expected volatilities are based on the

historical volatility of our stock.

We use actual data to estimate option

exercises, forfeitures and cancellations within the valuation

The expected term of options granted represents the period of

time that options granted are expected to be outstanding.

risk-free rate for periods within the contractual life of the option is based on

Stock Options:

As part of the reverse merger with Semotus that closed on October 1, 2008, we assumed Semotus’ 1996 and 2005 Stock Option Plans, as described in Note 12.

We recognize expense related to the fair value of employee stock option awards on a straight line vesting basis over the vesting period of the award.

Total stock expense recognized by us during the three months ended September 30, 2009 was $582,858.

We have estimated the fair value of our option awards granted on or after October 1, 2008 using the Black-Scholes option valuation model that uses the assumptions noted in the following table.

Expected volatilities are based on the historical volatility of our stock.

We use actual data to estimate option exercises, forfeitures and

cancellations within the valuation model.

The expected term of options granted represents the period of time that options granted are expected to be outstanding.

The risk-free rate for periods within the contractual life of the option is based on the U.S.

Treasury yield curve in effect at the time of grant.

Black-Scholes

-Based Option Valuation Assumptions

term (in years)

average volatility

dividend yield

following table summarizes the stock option transactions for the quarter ended

March 31, 2009 based upon a closing stock price of $0.50 per share as of March

Exercise Price ($)

Average Remaining Contractual Life

Average Grant Date Fair Value ($)

at December 31, 2008

at March 31, 2009

aggregate intrinsic value of options as of March 31, 2009 was zero, and is

calculated as the difference between the exercise price of the underlying

options and the market price of our common stock for the shares that had

exercise prices that were lower than the $0.50 market price of our common stock

at March 31, 2009, of which there were none.

options were exercised during the three months ended March 31,

the quarter ended March 31, 2009, as a hiring and retention incentive and in

lieu of issuing stock options under the Company’s stock option plan, we issued

6,500,000 shares of restricted stock, vesting over a period of four years, to

executive officers, and a total of 1,600,000 shares of restricted common stock

to other key employees.

These shares of restricted common stock have

a total value of $2,004,500, calculated based on the closing market price of our

common stock on the date of grant.

We recorded approximately $167,519

in expense for the three and nine months ended March 31, 2009 related to these

October 1, 2008, as a hiring and retention incentive and in lieu of issuing

stock options under the Company’s stock option plan, we issued 8,410,000 shares

of restricted common stock, vesting over a period of four years, to executive

officers and key employees.

These shares of restricted common stock have a total

value of $6,307,500;

this value was calculated based upon the closing market

price of our common stock on the date of grant, October 1, 2008, which was $0.75

Among these 8,410,000 shares, 1,660,000 shares have been cancelled in

the January 2009.

We recorded approximately $257,813 and $652,031 in expense for

the three and nine months ended March 31, 2009 respectively, related to the

these shares of restricted common stock granted to the executive officers and

key employees.

We also amended Mr.

LaPine’s employment agreement and issued to

him 3,508,000 shares of restricted common stock, having a total value of

this value was calculated based upon the closing market price of our

common stock on the date of grant, October 1, 2008, which was $0.75 per share.

However, these shares were returned to us as consideration for the sale of the

Semotus Business that closed on January 29, 2009 (See Note 4 Acquisition and

Subsequent Disposition of Semotus Solutions, Inc.

for more details on the

Semotus Business disposition).

We recorded $2,631,000 in expense for

the nine months ended March 31, 2009, related to the 3,508,000 shares of

restricted common stock issued to Mr.

Gains and Losses

maintain certain bank accounts denominated in euros and have issued and

outstanding €1,475,000 Convertible Notes.

The reporting currency of Flint is the

Three Months Ended

Black-Scholes -Based Option Valuation Assumptions

September 30, 2009

4.0 – 7.0 yrs

193.0% - 222.6%

Expected term (in years)

Expected volatility

Weighted average volatility

Expected dividend yield

Risk-free rate

The following table summarizes the stock option transactions for the three months ended September 30, 2009 based upon a closing stock price of $0.22 per share as of September 30, 2009:

Stock Options

Average Exercise Price ($)

Weighted Average Remaining Contractual Life

Weighted Average Grant Date Fair Value ($)

Intrinsic Value ($)

Outstanding at July 1, 2009

Outstanding at September 30, 2009

Exercisable at September 30, 2009

The aggregate intrinsic value of outstanding options as of September 30, 2009 was $450, and is calculated as the difference between the exercise price of the underlying options and the market price of our common stock for the shares that had exercise prices that were lower than the $0.22 market price of our common stock at September 30, 2009.

No options were exercised during the three months ended September 30, 2009 or 2008.

Restricted Common Stock:

During the three months ended September 30, 2009, we issued a total of 501,515 shares of restricted stock to consultants as settlements for services rendered.

We recorded approximately $185,561 in expense for the three months ended September 30, 2009 related to these shares of restricted common stock granted to these consultants.

Exchange Gains and Losses

We maintain certain bank accounts denominated in Euros and as of September 30, 2009 have issued and outstanding €1,123,840 convertible notes, €100,000 in non-convertible notes payable, and a portion equal to one million dollars (USD$1,000,000) of the balance due on a $7,000,000 note must be paid through a payment

of GBP£721,000, regardless of whether the U.S.

dollar strengthens or weakens in relation to the GBP pound sterling during the term of the Note and whether there is therefore a foreign currency translation gain or loss.

The reporting currency of Flint is the U.S.

Dollar so that transactions and balances are translated into dollars.

recorded a $105,078 and $374,650 loss on translation for the three and nine

months ended March 31, 2009, respectively.

Stockholder’s Equity

October 1, 2008, as a result of the closing of the

acquisition transaction by and among Flint Telecom, Inc.

Semotus, and as approved by our s tock holders, we

filed an amendmen t to our articles of

incorporation increasing our total authorized shares of common stoc k to 100,000,000.

As of March 31, 2009,

76,957,002 shares were issued and

There are no special voting or economic rights or

(Loss) Per Share

accordance with SFAS No.

128 "Earnings per Share" (EPS), we report Basic and

Diluted EPS as follows:

Basic EPS is computed as net income (loss) divided by

the weighted average number of common shares outstanding for the

Diluted EPS reflects the potential dilution that could occur

from common shares issuable through stock options, warrants and other

convertible securities.

Common equivalent shares are excluded from the

computation of net loss per share if their effect is anti-dilutive.

incurred a net loss for the three and nine months ended March 31, 2009,

22,861,777 potential shares were excluded from the shares used to calculate

diluted EPS as their effect is anti-dilutive .

Since we incurred a net

loss for the three and nine months ended March 31, 2008, 8,741,215 potential

shares were excluded from the shares used to calculate diluted EPS as their

effect is anti-dilutive.

reported a net loss of $1,246,295 and $10,940,839 for the three and nine months

ended March 31, 2009, respectively.

We reported a net loss of

$531,572 and $1,604,431 for the three and nine months ended March 31, 2008,

respectively.

Related Party Transactions

On January 29, 2009, Redquartz Atlanta, LLC

(“Redquartz”), which is partly owned by Mr.

Stephen Keaveney, our CFO and a

member of our board of directors, agreed to purchase 5,454,545 shares of our

restricted common stock at $0.275 per share and we agreed to

warrants to purchase shares of Flint’s common stock at $0.40 per share, having a

three year term and a cashless exercise provision, in exchange for

See Note 7 for more

January 29, 2009, we sold all of the assets and liabilities of the ‘Semotus

Business’ or ‘Solutions Division’ to Mr.

Anthony LaPine for 3,508,000 shares of

Flint restricted common stock owned by Mr.

exercised his right to purchase the Semotus Business/Solutions Division from us,

in accordance with Section 8.2(f) of the Contribution Agreement by and among

Semotus Solutions, Inc.

(now named Flint Telecom Group, Inc., and referred to as

“Flint”) and Flint Telecom, Inc.

dated April 23, 2008, in exchange for 3,508,000

shares of Flint restricted common stock owned by Mr.

transaction was further clarified and consummated by the Agreement and Plan of

Corporate Separation and Reorganization by and among Flint and Semotus, Inc.

executed as of January 29, 2009, pursuant to which we transferred all of the

assets and properties, subject to all the liabilities, debts, obligations and

contracts, of the Solutions Division to Semotus, Inc.

in exchange for Mr.

LaPine’s 3,508,000 shares of Flint restricted common stock.

Business”, as set forth in Section 7.18 of the Contribution Agreement, is

defined as the operations of Semotus as conducted immediately prior to the

acquisition transaction of Flint Telecom, Inc.

that closed on October 1, 2008,

and does not reflect the business operations of Flint Telecom, Inc.

connection with that transaction.

limited access to capital from either banking institutions or the capital

Consequently, we have loans from Flint Telecom Ltd, which is controlled

Browne, Flint’s CEO, and Mr.

Butler, one of Flint’s board

also has a direct equity investment in

The loan balance was $17,895 at March 31, 2009.

loan includes charges for management fees earned by Flint, Ltd.

management fees are for the executive, operating and financial services provided

by Flint, Ltd.

The investment from Flint, Ltd.

was $1,482,883

at March 31, 2009.

The investment is for capital needed for our

the nine months ended March 31, 2009, we issued $1,502,500 of Promissory

$1,202,500 of the Promissory Notes were issued to the Flint

Telecom, Ltd.

These notes have a 15% interest rate and mature on

March 30, 2009.

The warrants are exercisable into 1,202,500 common

shares at $0.50 per share.

The warrants expire on September 30,

issued $300,000 of Promissory Notes with Warrants to Mr.Butler on September 30,

The Note has a 15% interest rate and matures on December 31,

The warrants are exercisable into 300,000 common shares at

$0.50 per share.

The warrants expire on September 30,

addition, € 1,475,000 in Euro

convertible notes are owed by us t o Mr.

Butler, and $ 634 ,000 in U.S.

Dollar convertible notes are owed to Mr.

Butler and his family members and

See Footnote 10 for more details

on these notes.

Effective January 29, 2009, we entered into a two year employment agreement with our

President, Bill Burbank.

The agreement automatically renews for six month

periods unless 60 days prior notice is provided by either party.

Burbank will receive salary in the amount of $186,000 pe r year and

2,000,000 shares of restricted common stock vesting over a period of four years,

such that ¼ of the shares shall vest at the

first annual anniversary of the Effective Date, and quarterly thereafter so that

100% of the shares shall be fully veste d at his four year

anniversary with Flint.

However, during the time Mr.

Burbank is an Officer

of China Voice Holding Corp.

he will be compensated as follows:

January 2009,

60% of base monthly salary and for months thereafter , 90% of monthly base

Effective March 1, 2009, we entered into a two year

employment agreement with our CFO, Steve Keaveney.

The agreement

automatically renews for six month periods unless 60 days prior notice is

provided by either party.

Pursuant to the terms of his employme nt, Mr.

Keaveney will receive salary in the amount of

$180,000 per year and 3,500,000 shares of restricted common stock vesting over a

period of four years, such that ¼ of the

shares shall vest at his first annual anniversary, and quarterly thereafter so

100% of the shares shall be fully vested at his four year

The foregoing description of the terms of employment of

Burbank and Mr.

Keaveney are qualified in their entirety by reference to the

full text of their employment agreements, which are attached as exhibits to our Current Reports on

Form 8-K filed on February 4, 2009 and March 6, 2009,

respectively.

and Contingencies

party to various legal proceedings in the normal course of business.

evaluation of these matters and discussions with counsel, we believe that any

potential liabilities arising from these matters will not have a material

adverse effect on our consolidated results of operations or financial

assumed an operating lease for its facility in New York, N.Y.

starting on April

The lease expires on May 1, 2010.

base lease payment is $9,300 and there are additional payments owed for costs

passed through by the landlord.

We have incurred $83,700 in lease payments for

the nine months ended March 31, 2009.

The future minimum lease payments are

$27,900 in fiscal 2009 and $93,000 in fiscal 2010.We have two leases for

apartments in New York, N.Y.

for former executives, which expire on 30 th June

The future minimum lease payments are $11,085 and $21,900 for fiscal

and Goodwill Impairment

association with the acquisition of CHVC subsidiaries, in accordance with FASB

141, “Goodwill and Other Intangible Assets”, we recorded the purchase price in

excess of the net assets acquired as of the acquisition date as

The goodwill was recorded on January 29, 2009, the closing

date of the CHVC subsidiaries acquisition (See Note 3, Acquisition of the CHVC

Acquisition Companies.) in the amount of $7,654,248.

In accordance

with Statement of Financial Accounting Standards No.

142 (SFAS No.

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 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,

The goodwill 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, and was mainly

associated with the Hiplink family of products.

recorded other income of $1,279,657 and $1,131,956 for the three months and nine

months ended March 31, 2009.

Other income is comprised mainly from

the gain from disposition of Semotus Solutions, Inc., net of 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.

the three months ended March 31, 2009, we disposed of the Semotus business (see

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

result of the transaction, we recorded a gain of $1,639,767.

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

Euro and U.S.

For the three and nine months ended March 31,

2008, other income amounted to $104.

and Board of Directors Changes

Effective January 29, 2009, we appointed Mr.

Burbank as our President, Chief Operating Officer and as a new member to our

Board of Directors.

Additionally, on

January 29, 2009, we appointed Stephen Keaveney and Garrett A.

Sullivan as new

members of our Board of Directors.

To effectuate these new

board appointments, our board of directors took

such actions as was necessary to increase the s ize of the our board of

directors to seven directors, with the vacancies created by such board increase

filled by Mr.

Keaveney and Mr.

Burbank nor Mr.

Keaveney qualify as

“ independent” directors, as that term is defined by the NASDAQ Stock Market and the SEC, and they will

not be serving on any Board Committees.

Also effective as of

January 29, 2009, we appointed John Iacovelli as our Chief Technology Officer

and Jose Ferrer as our Executive Vice President of Business

Please see our SEC Form 8-K filed on February 4, 2009

for a description of the business experience of Messrs.

Burbank, Keaveney,

Sullivan, Iacovelli and Ferrer for at least the past five years and a

description of their terms of employment compensation.

March 1, 2009, Charles K.

Dargan, II resigned as our Chief Financial Officer, as

part of a planned transition after the acquisition of Semotus Solutions, Inc,

for which he was the Chief Financial Officer, to Flint.

March 1, 2009, Steve Keaveney was appointed our Chief Financial

Please see our SEC Form 8-K filed on March 6, 2009 for a

description of Mr.

Keaveney’s terms of employment.

On April 24, 2009, we entered into two

amendments with China Voice Holding Corp.

1) the First Amendment to the Agreement and Plan of

Merger by and among Flint, Flint Acquisition Corps.

(A-E), each a wholly owned

subsidiary of Flint, CHVC, and CVC Int ’ l Inc., Cable and

Voice Corporation, StarCom Alliance Inc ,

Dial-Tone Communication Inc, Phone House Inc.

(of Florida), and Phone House,

(of California), each a wholly-owned subsidiary of CHVC (and

together, the “ Targets” ) dated January 29, 2009 (the “ Merger Agreement” ),

and 2) the First Amendment to the Sto ck

Purchase Agreement by and among Flint and CHVC dated January 29, 2009 (the

“ Stock Purchase Agreement” ), whereby the consideration to be paid under these

agreements is modified as follows:

The First Amendment to the Agreement and Plan of Merger

modifies the Agreement and Plan of Merger

such that all shares of the Targets ’ Common Stock are

converted into the right to receive a cash payment, paid to CHVC, at the

Closing Date equal to $500,000 and $200,000 paid on March 16, 2009.

addition to the aforeme ntioned amounts

already paid, we shall issue to CHVC 800,000 shares ($800,000 issue

price) of Series C preferred stock, redeemable through the following payment

$275,000 in May of 2009, with the remaining $525,000 redeemable in

five equal monthly installment payments of

$105,000 each, starting on July 15, 2009.

A lternatively,

should we close on new funding from a third party, the remaining

$525,000 shall be redeemed through one lump sum payment, up to a maximum of

twenty five percent (25%) of wha tever net

amount we actually receive.

Additionally, effective March 16, 2009, we agreed to omit

the Targets ’ future minimum revenue targets and our right of

we therefore released to CHVC the 6,300,000 shares of

restricted common stock that were b eing

held in escrow pursuant to the Merger Agreement.

Amendment to the Stock Purchase Agreement modifies the Stock Purchase Agreement

such that we shall pay to CHVC $500,000 by no later than April 30,

Additionally, we shall issue to

CHVC 1,000,000 shares ($1,000,000 issue

price) of Series C preferred stock, redeemable through the following payment

$275,000 in May of 2009, with the remaining $725,000 redeemable in

five equal monthly installment payments of $145,000 each, startin g on July 15, 2009.

Alternatively, should we close on new

funding from a third party, the remaining $725,000 shall be redeemed through one

lump sum payment, up to a maximum of twenty five percent (25%) of whatever net

amount we actually receives.

Additiona lly,

entered into a security agreement with CHVC

(the “ Security Agreement” ) whereby the obligation to redeem the preferred stock

issued to CHVC is secured by the capital stock of the Targets.

Notwithstanding, CHVC agrees to subordinate its security

int erest in the Targets to any future third

party funding closed by us , as required by us and approved by

CHVC, such approval not to be unreasonably withheld.

We also executed a

First Amendment to the Promissory Note issued to CHVC on January 29, 2009 (the

“ Note” ), whereby we agreed to add

the following language to the end of Section 2(a) of the Note:“ A portion equal to one million dollars (USD$1,000,000)

of the balance due on the Note shall be paid by Maker [Flint] through a payment

of seven hundred twenty o ne thousand pound

sterling (GBP£ 721,000) on or before

December 31, 2010, regardless of whether the U.S.

dollar strengthens or weakens

in relation to the GBP pound sterling during the term of the Note and whether

there is therefore a foreign currency trans l ation gain or loss

for either party.”

The foregoing descriptions of the First Amendment to the

Agreement and Plan of Merger, the First Amendment to the Stock Purchase

Agreement, the First Amendment to the Promissory Note and the Security Agreement

are qua lified in their entirety by

reference to the full text of those agreements, which are filed as exhibits to

our Current Report on Form 8-K dated April 30, 2009.

Promissory Notes

On May 2, 2009 we accepted a short-term loan in an

amount of two hundred fift y thousand

dollars ($250,000), all principal and a cash fee of one hundred twenty five

thousand dollars ($125,000) to be repaid by July 31, 2009.

Promissory Note is secured by 5,000,000 shares of restricted common stock of

CHVC held directly by Flint .

On May 5, 2009 we accepted a short term loan in an

amount of one hundred thousand euro ( € 100,000), all

principal and a cash fee of eight thousand euro ((€ 8,000) to be repaid by no later than May 31,

On May 1 3 , 2009 we accepted

a short-term loan in an amount of five hundred thousand dollars ($500,000), all

principal and a cash fee of tw o hundred

fifty thousand dollars ($250,000) to be repaid by no later than August 11,

This Promissory Note is secured by 10,000,000 shares of

restricted common stock of CHVC held directly by us .

Additionally, Effective May 2, 2009, we entered into

a n agreement with China Voice Holding Corp.

(CHVC), to allow for a temporary waiver of CHVC ’ s security

interest in the 15,000,000 CHVC shares of restricted common stock held directly

such waiver to remain in place for so long as the promissory notes issued in May of 2009, as described above, remain

The foregoing descriptions of the Promissory Notes and

CHVC Agreement are qualified in their entirety by reference to the full text of

those notes and agreement, which are attached hereto as Exhi bits 4.

respectively, and are incorporated herein by reference.

13, 2009 we entered into an agreement with Mr.

Butler to cancel his 5 existing

Promissory Notes without repayment, including the repayment of any and all

principal amounts underneath these Promissory Notes (EURO 1,175,000,

EURO300,000, $141,000, $173,000 and $300,000 each) (the “Notes”) as well as to

waive and cancel all past, present and future accrued interest amounts that may

have been due under the Notes, and in exchange we issued a new Convertible

Promissory Note in an amount of $1,516,000, accruing no interest, convertible in

whole or in part at $0.40 per share, and due and payable through installment

payments of $100,000 each, beginning as of October 31, 2009, and we issued

3,260,000 shares of restricted common stock in the Company, vesting quarterly

over a period of three years beginning as of January 1, 2011 such that 100% of

the shares are vested as of January 1, 2014.

foregoing description of the Restructure Agreement and Convertible Promissory

Note are qualified in their entirety by reference to the full text of the

Restructure Agreement and Convertible Promissory Note, which are attached as

Exhibits 4.7 and 4.8, respectively.

We recorded a $5,845 loss and a $245,883 gain on translation for the three months ended September 30, 2009 and 2008, respectively.

Subsequent Events

We have evaluated subsequent events through November 23, 2009, which is the date the financial statements were available to be issued.

On October 22, 2009 we were loaned $250,000 and we issued a promissory note in the amount of $250,000, due and payable with a cash fee of $25,000 by no later than the earlier of (i) November 20, 2009, (ii) the day after we receive additional funding from a third party investor, (iii) the issuance of any debt or equity, (iv) in the event of

a warrant exercise, or (v) in the event of any other capital invested (the “Note”), and we issued a warrant to purchase up to 250,000 shares of our common stock at $0.50 per share and having a three year term.

The Note is currently in default and we received a notice of default on November 23, 2009.

The Note is secured by two million (2,000,000) shares of our restricted common stock held directly by Flint Telecom, Ltd.

Upon default, the note holder shall have the option

of either taking the security of the two million (2,000,000) shares or leaving the Note and fee in place plus interest at the highest legally valid interest rate until the Note is paid in full.

On October 28, 2009 we were loaned $230,000 and we issued a promissory note in the amount of $260,000 including accrued interest of $30,000, due and payable on or before December 28, 2009.

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 1. Financial Statements