What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2010-03-25 compared with 2009-11-23 · 39 added, 35 removed, 33 unchanged (69% of the section changed)

2 unchanged sentences

Except for the historical information contained herein, the matters discussed below are forward-looking statements that involve certain risks and uncertainties, including, among others, the risks and uncertainties discussed below.

Management’s objective for the three months ended September 30, 2009 was to improve overall operations to reduce the need for external financing in the difficult economic and financial markets.

We continued our focus on consolidation of our entities.

We have been actively engaged in seeking additional external financing

and other strategic partnerships and relationships to further enhance the scale, depth and profitability of the business

In the three months ended September 30, 2009, we had a net loss of $(3,052,220) ($0.04)per share basic and diluted), as compared to a net loss of $1,145,947 ($0.04 per share basic and diluted) in the three months ended September 30, 2008.

The increase in the losses year on year was predominantly as a result of costs and SEC accounting provisions

associated with the Semotus transaction which is non recurring.

Our overall cash decreased by $ 1,212,545 in the three months ended September 30, 2009, compared to a decrease of $80,744 in the three months ended September 30, 2008.

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008

Revenues for the three months ended September 30, 2009 increased 349.7% to $14,504,855 as compared to $3,225,251for the three months ended September 30, 2008.

Management’s objective for the three and six months ended December 31, 2009 was to improve overall operations to reduce the need for external financing in the difficult economic and financial markets.

We continued our focus on growing our prepaid card business which resulted in increased gross margins for the period.

been actively engaged in seeking additional external financing and other strategic partnerships and relationships to further enhance the scale, depth and profitability of the business.

In the three months ended December 31, 2009, we had a net loss of $10,053,977 ($0.13 per share basic and diluted), as compared to a net loss of $8,548,596 ($0.21 per share basic and diluted) in the three months ended December 31, 2008.

We had a net loss of $13,106,197 ($0.17 per share basic and diluted) in the six months ended December 31,

2009, as compared to a net loss of $9,694,544 ($0.28 per share basic and diluted) in the six months ended December 31, 2008.

The increase in the losses year on year was a direct result of a one time Goodwill impairment charge of $7,760,028 along with some other exceptional operational costs relating to the ceasing of non-profitable businesses, in February 2010, that were acquired as part of the CHVC transaction in 2009.

Management felt it prudent to revalue the businesses acquired in 2009 at this time

based on this action.

Without this charge the net loss would have been $2,402,216 for the three months and $5,345,145 for the six months ended December 31, 2009.

Our overall cash decreased by $1,049,752 in the six months ended December 31, 2009, compared to a decrease by $638,392 in the six months ended December 31, 2008.

RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED DECEMBER 31, 2009 AND 2008

Revenues for the three months ended December 31, 2009 increased 337% to $10,884,061 as compared to $2,492,602 for the three months ended December 31, 2008.

Revenues for the six months ended December 31, 2009 increased 378% to $25,388,916 as compared to $5,292,173 for the six months ended December 31, 2008.

This increase is primarily due to the acquisition of the six subsidiaries of China Voice Holding, Corp.

(CHVC) and growth of our wholesale call traffic business.

(CHVC) and successful launch and growth of our prepaid calling products business.

COST OF REVENUES AND GROSS MARGIN

The overall gross margin has improved in the three months ended September 30, 2009 versus 2008 due to the launch of our own branded calling cards through one of our subsidiaries, Wize Communications.

Our own brand calling cards enable us to

increase margin by selling our high margin products through our existing strong distribution channels.

The overall gross margin has improved in the three and six months ended December 31, 2009 versus 2008 due to the launch of our own branded calling cards through one of our subsidiaries, Wize Communications.

Our own brand calling cards enable us to increase margin by selling our high margin products through our existing strong distribution

OPERATING EXPENSES

Operating expenses increased 140.4% to $2,556,911 in the three month period ended September 30, 2009 versus $1,063,450 for the same period in the last fiscal year.

Operating expenses decreased to $1,901,876 in the three month period ended December 31, 2009 versus $4,200,888 for the same period in the last fiscal year, and decreased 5% to $4,480,941 in the six month period ended December 31, 2009 versus $4,711,694 for the same period in the last fiscal year.

Operating expenses consist of general and administrative expenses, including payroll, accounting, legal, consulting, rent and other overhead costs.

1 unchanged sentence

Ltd., investor relations and public relations.

These costs have decreased during the three months ended September 30, 2009 versus 2008 due to cost savings that have been achieved by the business following the full integration of the six companies acquired from China Voice Holding Company.

These costs have decreased during the three and six months ended December 31, 2009 versus 2008 due to cost savings that have been achieved by the business following the full integration of the six companies acquired from China Voice Holding Company.

The non-cash charges for compensation consist mainly of the grants of stock issued as part of settlements for services rendered.

The common stock issued was valued at its fair market value at the date of issuance.

The common stock issued was valued at its fair market value at the date of issuance and do not represent any cash payments.

INTEREST EXPENSE

The $1,176,754 for the three months ended September 30, 2009 in interest expense is related to accrued interest on the convertible and promissory notes, as well as the amortization of the debt discounts related to those notes.

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

The $765,790 and $1,948,029 for the three and six months ended December 31, 2009, respectively, in interest expense is related to accrued interest on the convertible and promissory notes, as well as the amortization of the debt discounts related to those notes.

The other component is exchange gains and losses from currency

transactions in the Euro and U.S.

The amount of interest charges related to accounting for debt discounts that did not involve the payment of cash amounted to $1,152,889.

LIQUIDITY AND CAPITAL RESOURCES

Overall cash decreased by $1,212,545 for the three months ended September 30, 2009 due to a continued loss from operations, and delays in the private offerings that only partially closed as of June 30, 2009, and which we previously expected to fully close during the fiscal year ending June 30, 2009.

We were able to cover some of the cash loss

through proceeds from convertible and additional promissory note issuances.

Overall cash decreased by $1,049,752 for the six months ended December 31, 2009 due to a continued loss from operations, and delays in the private offerings that only partially closed during 2009, and which we previously expected to fully close prior to December 31 2009.

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

and additional promissory note issuances.

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

Three Months Ended

September 30,

Six Months Ended

Net cash used in operating activities

$ (1,321,959)

Net cash used in investing activities

Net cash used in financing activities

Net cash provided by foreign currency activities

Net cash provided by financing activities

Net cash used in foreign currency activities

Net increase (decrease) in cash and cash equivalents

During the three months ended September 30, 2009, cash used in operating activities was $1,052,944 resulting from a gross loss of $3,052,220 and operating expenses of $2,556,911.

During the six months ended December 31, 2009, cash used in operating activities was $1,678,061 resulting from a gross profit of $1,387,419 and operating expenses of $4,480,941.

The loss included non cash charges for stock and option compensation, accretion of debt discount of $974,577 and $1,152,889 respectively.

Other operating activities that increased cash were a decrease in accounts receivable of $134,715, of prepaid expenses of $8,724, Inventory of $399,565, due from related parties of $294,174 and an increase in accrued liabilities of $4,929 and accrued interest of $239,781.

Operating activities that decreased cash were an increase

in deposits of $12,610, a decrease in cash overdraft of $100,842 and a decrease in accounts payable of $1,030,011.

Cash provided by financing activities for the three months ended September 30, 2009 consisted of an increase in the line of credit of $16,176, the sale of short term promissory notes, which provided $200,000 in cash, the issuance of notes payable of $115,000 to related parties, and the redemption of preferred stock in the amount

$5,845 of cash was used in foreign currency transactions related to exchange losses on convertible notes payable during the three months ended September 30, 2009 and $245,883 was provided by foreign currency exchange gains in the three months ending 30 September 2008.

As of September 30, 2009, we had cash and cash equivalents of $124,457, a decrease of $1,212,545from the balance at June 30, 2009, which was $1,337,002.

Our working capital deficit increased as of September 30, 2009 to ($10,260,012) as compared to a working capital deficit of ($12,071,300) at June 30, 2009 .

Other operating activities that increased cash were a decrease in accounts receivable of $33,824, decrease of prepaid expenses of $8,234, reduction in Inventory of $401,146 and accrued interest of $241,770.

Operating activities that a decrease included a decrease in cash overdraft of $100,842 and a decrease in accounts payable of

Cash provided by financing activities for the six months ended December 31, 2009 consisted of the sale of short term promissory notes, which provided $175,096 in cash, and from our line of credit in the amount of $16,176.

Cash used in financing activities for the six month ended December 31, 2009 consisted of repayment of $225,279

to various promissory note holders.

$10,801of cash was used in foreign currency transactions related to exchange losses on convertible notes payable during the six months ended December 31, 2009 and $245,883 was used in the six months ending December 31 2008.

As of December 31, 2009, we had cash and cash equivalents of $287,250, a decrease of $1,049,752 from the balance at June 30, 2009, which was $1,337,002.

Our working capital deficit increased as of December 31, 2009 to ($16,340,861) as compared to a working capital deficit of ($10,221,559) at June 30, 2009 .

have not yet generated sufficient revenues to cover the costs of continued product and service development and support, sales and marketing efforts and general and administrative expenses

15 unchanged sentences

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis