What changed in this filing

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Item 1. Financial Statements

2010-05-24 compared with 2010-03-25 · 324 added, 296 removed, 431 unchanged (59% of the section changed)

6 unchanged sentences

Accounts receivable, net of allowance for doubtful accounts of $469,852

for December 31, 2009 and $205,397 for June 30, 2009

for March 31, 2010 and $205,397 for June 30, 2009

Notes receivable

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Current liabilities:

Accounts payable

Accounts payable – trade

Cash overdraft

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Convertible notes payable – related parties, net of discount

Preferred convertible note payable – related party, net of discount

Due to Flint, Ltd.

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$0.001 par value;

5,000,000 authorized, 864,385 issued and outstanding at December 31, 2009, 1,250,000 issued and outstanding at June 30, 2009

5,000,000 authorized:

21,575 Series C issued and outstanding at March 31, 2010, 1,250,000 Series C issued and outstanding at June 30, 2009;

302,000 Series E issued and outstanding at March 31, 2010, 0 Series E issued and outstanding at June 30, 2009

Common stock:

$0.01 par value;

200,000,000 authorized, 78,035,893 issued and outstanding at December 31, 2009, 71,294,702 issued and outstanding at June 30, 2009

200,000,000 authorized, 89,820,958 issued and 88,820,958 outstanding at March 31, 2010, 71,294,702 issued and outstanding at June 30, 2009

Common stock issuable

Additional paid-in capital

Accumulated comprehensive loss

Accumulated other comprehensive loss

Accumulated deficit

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Three Months Ended

Six Months Ended

Nine Months Ended

Cost of revenues

Gross profit (loss)

Operating expenses:

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Depreciation and amortization expense

Total General and Administrative

Total operating expenses

Operating loss

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Impairment of goodwill and other intangible assets

Impairment of fixed assets

Net loss per common share:

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended

Nine Months Ended

Cash Flows from Operating Activities:

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Amortization of debt discounts & warrants

Loss on fixed assets

Accretion of debt discount

Amortization of debt issuance costs

Loss on disposal of fixed assets

Impairment of fixed assets

Gain on disposal of Semotus

Amortization of debt issuance costs / beneficial conversion feature

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

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Cash overdraft

Accrued liabilities

Due to Flint Telecom, Ltd.

Other accrued liabilities

Net due from Flint Telecom, Ltd.

Deferred revenue

Due from Related Parties

Accrued interest

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Cash assumed in acquisition of Semotus

Investment in notes receivable

Increase in notes receivable

Net cash used in investing activities

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Payments on line of credit

Short term notes repaid

Proceeds from the offering

Payments on lease obligations

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Exchange gain (loss) on convertible notes

Net decrease in cash

Net increase (decrease) in cash

Cash and cash equivalents, beginning of the period

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Due from related party satisfied with redeemable preferred stock

Transfer of due from Flint Telecom, Ltd.

to notes payable

Deferred stock compensation

Common stock issued upon conversion of notes payable and accrued interest

Purchase of marketable securities

Acquisition of Semotus Solutions, Inc.:

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Deferred revenue

Common stock issued upon conversion of notes payable and accrued interest

Disposition of Semotus Solutions, Inc.:

Accounts receivable

Prepaid expense

Accounts payable

Accrued liabilities

Deferred revenue

Acquisition of CHVC Subsidiaries:

Accounts receivable

Prepaid expense

Investment in marketable securities

Other intangible asset

Accounts payable

Accrued liabilities

Redeemable preferred stock

See accompanying notes to condensed consolidated financial statements.

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Beneficial conversion feature on convertible notes payable

Stock payable issued, net of adjustments

Stock payable issued, net of cancellations

Shares issued for payments of debt

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Balances at December 31, 2009

Beneficial conversion feature on convertible notes payable

Shares issued to consultants for services

Shares issued for cashless exercise of warrants

Conversion of notes payable

Shares issued to officers, directors, employees for vested stock compensation

Stock compensation expense

Stock options compensation expense

Comprehensive loss:

Comprehensive loss

Net loss for the three months ended March 31, 2010

Balances at March 31, 2010

See accompanying notes to condensed consolidated financial statements.

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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”).

(“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.

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 proprietary intellectual property.

On October 1, 2008, Semotus Solutions, Inc.

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We are headquartered in Overland Park, Kansas and operate in the United States.

We operate our business through eight wholly-owned subsidiaries, CVC Int’l Inc., Cable and Voice Corporation, StarCom Alliance Inc, Dial-Tone Communication Inc, Phone House of Florida, Inc., Phone House, Inc., Wize Communications, Inc., and Digital Phone

Solutions, Inc.

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

We operate our business through four wholly-owned subsidiaries, Cable and Voice Corporation, Phone House, Inc., Flint Prepaid, Inc.

(previously named Wize Communications, Inc.), and Digital Phone Solutions, Inc.

We provide next generation turnkey voice,

data and wireless services through partner channels primarily in the United States.

We distribute telecommunications services and products through our distribution channels.

The subsidiaries 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 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.

of California was established on June 12, 2001 and provides discount calling cards that enable users who purchase cards in the United States to call internationally.

- Digital Phone Solutions, Inc.

was established on January 29, 2009, and provides a suite of enhanced services solutions for IP Telephony Service Providers facilitated by the Flint network.

- Wize Communications, Inc.

was established on March 30, 2009, and is a provider and master distributor of prepaid cellular and calling card products and services.

As part of our ongoing emphasis on streamlining our operations and reaching profitability, we are in the process of shutting down CVC Int’l, Phone House Inc.

of Florida and Starcom Alliance.

- Flint Prepaid, Inc.

(previously named Wize Communications, Inc.) was established on March 30, 2009, and is a provider and master distributor of prepaid cellular and calling card products and services.

As part of our ongoing emphasis on streamlining our operations and reaching profitability, as of March 31, 2010 we have shut down four of our other wholly owned subsidiaries:

CVC Int’l, Phone House Inc.

of Florida, Dial-Tone Communications and Starcom Alliance.

Consequently, we recognized a loss in the form of a one-time impairment

charge of goodwill and other intangibles in the amount of $12,215,200.

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-X.

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 six months ended December 31, 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.

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 and nine months ended March 31, 2010 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.

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

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 $13,106,197 and $9,694,543 for the six months ended December 31,

2009 and 2008, respectively, negative cash flow from operating activities of $1,678,061 for the six months ended December 31, 2009, an accumulated stockholder’s deficit of $34,142,154 and a working capital deficit of $16,340,861 as of December 31, 2009.

Also, as of December 31, 2009, we had limited liquid and capital resources.

As reflected in the accompanying financial statements, Flint had a net loss of $21,616,123 and $10,940,839 for the nine months ended March 31,

2010 and 2009, respectively, negative cash flow from operating activities of $2,005,556 for the nine months ended March 31, 2010, an accumulated stockholder’s deficit of $42,652,080 and a working capital deficit of $18,594,788 as of March 31, 2010.

Also, as of March 31, 2010, 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.

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The Note will bear interest at eighteen percent (18%) per year for any period of time when a payment is past due.

As of December 31, 2009 the Note is in default because we were not able to make the first

installment payment due on or before December 31, 2009.

As of March 31, 2010 the Note is in default because we were not able to make the first installment

payment due on or before December 31, 2009.

15,000,000 shares of CHVC restricted common stock are attached to the Note as collateral, pursuant to a Security Agreement.

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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.

In addition to the aforementioned 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 schedule:

In addition to the aforementioned 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 schedule:

$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.

Alternatively, 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 whatever net amount we actually receive.

Alternatively,

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 whatever net amount we actually receive.

Additionally, effective March 16, 2009, we agreed to omit the Acquisition Companies’ future minimum revenue targets and our right of offset;

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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 for either party.

In the six months ended December 31, 2009, $385,615 was paid to CHVC and 385,615 shares of Series C preferred stock was redeemed.

As of December 31, 2009, $935,615 had been paid to CHVC and 935,615 shares of Series C preferred stock had been redeemed by CHVC, in accordance with the agreement, as amended and as described above, leaving

$864,385 to be paid to CHVC and 864,385 shares of Series C preferred stock issued and outstanding.

In the nine months ended March 31, 2010, $1,228,425 was paid to CHVC and 1,228,425 shares of Series C preferred stock was redeemed.

As of March 31, 2010, a total of $1,778,425 had been paid to CHVC and 1,778,425 shares of Series C preferred stock had been redeemed by CHVC, in accordance with the agreement, as amended and as described

above, leaving $21,575 to be paid to CHVC and 21,575 shares of Series C preferred stock issued and outstanding.

Separate 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 previous fiscal year ended June 30, 2009 we issued 3,000,000 shares of restricted common stock, vesting over a period of four years, to executive officers and key employees of

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These shares of restricted common stock were valued at $0.38 per share.

We recorded $78,437 and $156,874 in expense in the three and six months ended December 31, 2009, respectively, related to the shares of restricted common stock granted to these executive officers and key employees.

We recorded $570,000 and $712,500 in expense in the three and nine months ended March 31, 2010, respectively, related to the shares of restricted common stock granted to these executive officers and key employees.

During the three months ended March 31, 2010, 2,250,000 of these shares vested and the remaining 750,000 were cancelled.

We 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

Recent Accounting Pronouncements

In January 2010, the FASB issued ASU No.

2010-06 regarding fair value measurements and disclosures and improvement in the disclosure about fair value measurements.

This ASU requires additional disclosures regarding significant transfers in and out of Levels 1 and 2 of fair value measurements, including a description of the reasons

for the transfers.

Further, this ASU requires additional disclosures for the activity in Level 3 fair value measurements, requiring presentation of information about purchases, sales, issuances, and settlements in the reconciliation for fair value measurements.

This ASU is effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years.

We are currently evaluating the impact of this ASU;

however, we do not expect the adoption of

this ASU to have a material impact on our consolidated financial statements.

In February 2010, the FASB issued ASU No.

2010-09 regarding subsequent events and amendments to certain recognition and disclosure requirements.

Under this ASU, a public company that is a SEC filer, as defined, is not required to disclose the date through which subsequent events have been evaluated.

This ASU is effective

upon the issuance of this ASU.

The adoption of this ASU did not have a material impact on our consolidated financial statements.

In April 2010, the FASB issued ASU No.

2010-18 regarding improving comparability by eliminating diversity in practice about the treatment of modifications of loans accounted for within pools under Subtopic 310-30 – Receivable – Loans and Debt Securities Acquired with Deteriorated Credit Quality (“Subtopic 310-30”).

the amendments clarify guidance about maintaining the integrity of a pool as the unit of accounting for acquired loans with credit deterioration.

Loans accounted for individually under Subtopic 310-30 continue to be subject to the troubled debt restructuring accounting provisions within Subtopic 310-40, Receivables—Troubled Debt Restructurings by Creditors.

The amendments in this Update are effective for modifications of loans accounted for within pools under Subtopic 310-30 occurring

in the first interim or annual period ending on or after July 15, 2010.

The amendments are to be applied prospectively.

Early adoption is permitted.

We are currently evaluating the impact of this ASU;

however, we do not expect the adoption of this ASU to have a material impact on our consolidated financial statements.

In September 2009, in accordance with accounting pronouncements that applies to arrangements with multiple deliverables and provides another alternative for determining the selling price of deliverables.

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Accounts Receivable and Concentration of Credit Risk

Two customers accounted for 39% and 27% of the Company’s revenue for the three months ended December 31, 2009.

Two customer(s) accounted for 52% of our revenue for the six months ended December 31, 2009.

Three customers accounted for 44% of the accounts receivable at December 31, 2009, the largest of which accounted

for 15% of the receivables.

Two customers accounted for 42% and 43% of the Company’s revenue, respectively, for the three months ended December 31, 2008.

Two customers accounted for 43% and 44% of the Company’s revenue, respectively, for the six months ended December 31, 2008.

Seven customers accounted for 73% of the accounts receivable at December

31, 2008, the largest of which accounted for 25% of the receivables.

One customer accounted for 20% of the Company’s revenue for the three months ended March 31, 2010.

Two customers accounted for 44% of our revenue for the nine months ended March 31, 2010, comprising 31% and 13% each.

Two customers accounted for 14% and 15% of the accounts receivable at March 31, 2010, for a total

of 29% of the receivables.

Two 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, 2009.

Three customers accounted for 54% of the accounts receivable at March 31, 2009, the largest of

which accounted for 25% of the receivables.

Investment in Marketable Securities

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Goodwill and Other Intangible Assets

In association with the acquisition of CHVC subsidiaries, in accordance with FASB 142, “Goodwill and Other Intangible Assets”, we recorded the purchase price in excess of the net assets acquired as of the acquisition date as goodwill.

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

acquisition (See Note 4, Acquisition of the CHVC Acquisition Companies.) in the amount of $2,687,080.

In association with the acquisition of CHVC subsidiaries, in accordance with accounting principles regarding goodwill and other intangible assets, we recorded the purchase price in excess of the net assets acquired as of the acquisition date as goodwill.

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

subsidiaries acquisition (See Note 4, Acquisition of the CHVC Acquisition Companies.) in the amount of $2,687,080.

We also acquired identifiable intangible assets which are the customer relationships from the CHVC Acquisition Companies.

Under SAS 141R, we engaged an independent third party appraiser to value the customer relationships and the value of these identifiable assets were deemed to be $11,400,000 as of June 30, 2009.

In accordance with Statement of Financial Accounting Standards No.

Under accounting principles, we engaged an independent third party appraiser to value the customer relationships and the value of these identifiable assets were deemed to be $11,400,000 as of June 30, 2009.

In accordance with accounting principles,

we perform an evaluation of the fair values annually, and more frequently if an event occurs or circumstances change that may indicate that the fair value of a reporting unit is less than the carrying amount.

During the three months ended December 31, 2009, we began the process of shutting down three of the CHVC subsidiaries, CVC Int’l, Phone House Inc.

of Florida and Starcom Alliance.

Consequently, we performed an evaluation of the fair values of all of the CHVC subsidiaries

during the three months ended December 31, 2009 and determined that the goodwill was impaired in the amount of $7,760,028, which is primarily associated with the disposition of CVC Int’l, Phone House Inc.

of Florida and Starcom Alliance.

During the three and six months ended December 31, 2008, in 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.

During the nine months ended March 31, 2010, we shut down four of the CHVC subsidiaries, CVC Int’l, Phone House Inc.

of Florida, Dial-Tone Communications and Starcom Alliance.

Consequently, we performed an evaluation of the fair values of all of the CHVC subsidiaries during the

nine months ended March 31, 2010 and determined that the goodwill and intangible assets were impaired in the amount of $12,215,200, which is primarily associated with the disposition of CVC Int’l, Phone House Inc.

of Florida, Dial-Tone Communications and Starcom Alliance.

During the nine months ended March 31, 2009, in accordance with accounting principles regarding 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.

The goodwill was recorded on October 1, 2008, the closing

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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.

We have a number of loans outstanding from Mr.

Butler, one of our board members, for which we issued various promissory notes, convertible promissory notes, warrants and shares of restricted common stock to him as consideration.

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

Michael Butler Debt Restructure

We had a number of loans outstanding from Mr.

Butler, one of our board members as of March 31, 2010, for which we issued various promissory notes, convertible promissory notes, warrants and shares of restricted common stock to him as consideration.

As of December 31, 2009, the total outstanding balance on all of Mr.

Butler’s loans was $4,100,000.

executed a settlement agreement with Mr.

Butler on December 31, 2009 related to the restructuring of this debt into Shares of Series E Convertible Preferred Stock;

See Note 19, “Subsequent Events” for more detail.

loans were approximately $4,100,000.

Subject to an agreement that was executed December 31, 2009 that became effective February 5, 2010 we executed a settlement agreement with Mr.

Butler in which all of Mr.

Butler’s loans to Flint were cancelled in exchange for 302,000 shares of Series E preferred stock of Flint, valued at €10.00 per share, having the following material terms:

Yielding a 14% annual dividend payment, payable monthly in Euros, from February 28, 2010;

Convertible at any time into that number of shares of Common Stock as is determined by the quotient of (i) €10.00 over (ii) the Conversion Price in effect at the time of conversion.

The Conversion Price has a 20% discount to the Market Price at time of conversion and subject to a minimum conversion price of $0.275 per Common Share

Market Price means the average closing price of Flint’s common stock over the twenty trading days preceding the conversion request date

The common stock issued at the time of conversion will be restricted stock and subject to SEC 144 Rule

Based on the minimum conversion price, Mr.

Butler would receive 10,981,818 shares of common stock if all preferred shares were converted into common stock.

The Preference Shares will be transferable at Mr.

Butler’s discretion, after giving Flint a right of first refusal;

A penalty rate of 0.5% per month on the total amount outstanding will apply for dividend payments that are more than 10 days late, and will continue to apply until default payments are caught up.

Butler has the right to rescind this agreement in the event that we should enter into a voluntary or involuntary bankruptcy.

We have therefore classified these shares of Series E Convertible Preferred as a separate line item on our Balance Sheet under current liabilities as “Preferred Convertible Note Payable –related

party, net of discount”.

The foregoing description of the Settlement Agreement and Certification of Designation of Series E Preferred Stock are qualified in their entirety by reference to the full text of those agreements, which were attached to an SEC Form 8-K that was filed on February 11, 2010.

SEL Nominess:

On March 8, 2010 SEL Nominees Ltd.

(“SEL”) loaned us $58,000 and we issued a $58,000 convertible promissory note accruing interest at a rate of eighteen percent (18%) per annum, with interest only payments due each month and a maturity date of March 2011, and having a variable conversion price of 50% of the Market Price.

Price” means the average of the lowest three (3) Trading Prices for the common stock during the ten (10) Trading Day period ending one Trading Day prior to the date the Conversion Notice is sent.

The terms and conditions of this Note is qualified in its entirety by reference to the full text of the Note, which was attached as Exhibit 4.3 to our SEC Form 10Q filed on march 25, 2010.

On March 12, 2010 SEL loaned us $40,000 and we issued a $40,000 convertible promissory note accruing interest at a rate of eighteen percent (18%) per annum with interest only payments due each month and a maturity date of March 2011, and having a variable conversion price of 50% of the Market Price.

“Market Price” means the

average of the lowest three (3) Trading Prices for the common stock during the ten (10) Trading Day period ending one Trading Day prior to the date the Conversion Notice is sent.

The terms and conditions of this Note is qualified in its entirety by reference to the full text of the Note, which was attached as Exhibit 4.4 to our SEC Form 10Q filed March 25, 2010.

SEL is a related party due to the fact that SEL is controlled by Mr.

Butler, one of our board members as of March 31, 2010.

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

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

As of December 31, 2009, $7,886,981 was due and owing to CHVC.

Additionally, during the six months ended December 31, 2009, Mr.

Burbank loaned $40,000 to us.

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

is due on demand by Mr.

The balance of the loan as of December 31, 2009 was $40,000.

As of March 31, 2010, $7,092,192 was due and owing to CHVC.

Flint Telecom Ltd.

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 $109,959 at December 31, 2009.

During the six months ended December 31, 2009, Flint Telecom Ltd.

assigned a portion, $141,850, 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.

Browne, Flint’s CEO, has a loan balance of $55,325 at March 31, 2010.

During the nine months ended March 31, 2010, Flint Telecom Ltd.

assigned a portion, $147,175, of its $202,500 promissory note to a number of unrelated third parties.

This note has a 15%

interest rate and originally matured on March 30, 2009 but was extended to September 30, 2011.

The loan does not include charges for management fees earned by Flint Telecom, Ltd., which during the nine months ended March 31, 2010 and 2009 were $450,000 and $286,205, respectively.

$280,000 of these management fees were reclassified as note payables and assigned to third parties.

See Note 13 for more details on these transactions.

The management fees are for the executive, operating

and financial services provided by Flint Telecom, Ltd.

The loan is for working 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.

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.

During the six months ended December 31, 2009, Mr.

Loans from other Officers

During the nine months ended March 31, 2010, Mr.

Keaveney, our CFO at the time, 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.

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to one additional $10,000 payment for a total of $95,000.

Additionally, during the nine months ended March 31, 2010, Mr.

Burbank loaned $100,000 to us.

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

This loan is due on demand by Mr.

The balance of the loan as of March 31, 2010 was $100,000.

Separation Agreement with Bill Burbank:

Bill Burbank resigned as the President and Chief Operating Officer of the Company, effective February 4, 2010.

In connection with Mr.

Burbank’s resignation, the Company entered into a Separation Agreement with Mr.

Burbank (the “Separation Agreement”), effective February 5, 2010.

The Separation Agreement

provides that Mr.

Burbank will be paid an aggregate of approximately $150,000 in cash and $842,500 worth of shares of restricted common stock, consisting of:

payment for past wages owed, of approximately $45,785;

repayment for various loans made to the Company, in the amount of $100,000;

reimbursement for approved expenses in an amount that has yet to be determined;

all such cash payments as listed above shall be paid in the future as funds become available;

acceleration of 1,500,000 shares of his unvested restricted stock and the grant and issuance of 4,000,000 additional shares of immediately vested restricted common stock, for a total of 5,500,000 shares of restricted common stock.

Additionally, 500,000 vested on January 29, 2010.

The 2,000,000 previously issued shares that vested

were valued at $0.38 per share (date of original grant).

The closing price of our common stock on February 5, 2010 was $0.08 per share, and therefore the additional 4,000,000 shares were valued at $320,000, for a total fair market value of these shares was $842,500.

Employment Agreement with Bernard Fried:

Effective February 23, 2010, Bernard A.

Fried was elected as President and Chief Operating Officer of the Company, and was appointed as a member of the Board of Directors.

Flint entered into an employment agreement with Mr.

Fried, effectuating the following:

Fried’s title is President and COO of Flint;

was appointed as a member of Flint’s Board of Directors, (iii) Mr.

Fried will receive a salary in the amount of $186,000 per year, and (iv) Mr.

Fried was issued 6,000,000 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 vested at his four year anniversary with Flint.

The foregoing description of Mr.

Fried’s Employment

Agreement is qualified in its entirety by reference to the full text of the Employment Agreement, which is attached as Exhibit 10.1 to our SEC Form 10Q filed on March 25, 2010, and is incorporated herein by reference.

Capital Leases

We have acquired $819,025 in equipment through capital lease obligations primarily for computer and telephony equipment.

During the three months ended December 31, 2009, as part of our debt restructuring plan, we renegotaited the terms of our capital lease with our equipment vendor, which resulted in the disposal of certain

assets under this agreement and the restructure of the payment terms for the remaining equipment.

The future minimum payments under these capital leases are $222,500 for the remainder of fiscal 2010, $210,000 in fiscal 2011 and $260,891 in fiscal 2012.

The lease terms expire from November 2010 to June 2011.

The interest rates range from 9.1% to 21.8%.

During the three months ended March 31, 2010 we wrote down the value of this equipment to approximately $190,000.

During the nine months ended March 31, 2010, as part of our debt restructuring

plan, we renegotiated the terms of our capital lease with our equipment vendor, which resulted in the disposal of certain assets under this agreement and the restructure of the payment terms for the remaining equipment.

However, as of March 31, 2010 we are currently in default because we failed to make the minimum monthly cash payments of principal and interest when due, and the entire outstanding balance of $653,309 is therefore immediately due and payable.

Accounts Payable

Accounts payable at December 31, 2009 were $4,026,450.

Six vendors accounted for 51% of the payables at December 31, 2009, the largest of which accounted for 15% of the payables.

Accounts payable at March 31, 2010 were $3,361,226.

One vendor accounted for 12% of the payables at March 31, 2010.

Accounts payable at June 30, 2009 were $5,140,268.

Three vendors accounted for 53% of the payables at June 30, 2009, the largest

of which accounted for 31% of the payables.

Three vendors accounted for 53% of the payables at June 30, 2009, the largest of which accounted for 31% 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.

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now existing or hereafter acquired.

As of December 31 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 December 31, 2009, payment has not been made.

Therefore, as of December 31, 2009 we were in default and the total balance has therefore been classified as a current liability.

However, management has subsequently reached an agreement with Thermo to extend

and restructure the terms of this line of credit, and Flint is therefore no longer in default as of the date of the filing of this quarterly report;

see Note 19, “Subsequent Events”.

As of March 31 2010, 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 March 31, 2010, payment has not been made.

Therefore, as of March 31, 2010 we were in default and the total balance has therefore been classified as a current liability.

Flint management and Thermo have reached an oral agreement to extend and restructure

the terms of this line of credit, and Flint is therefore no longer in default as of the date of the filing of this quarterly report.

An amendment to the existing line of credit agreement is currently still being formalized and will be publicly disclosed once it has been fully executed by both parties.

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, shall, at the option of Thermo, become immediately due and payable without further notice.

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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.

all of the foregoing.

We had a second line of credit with the Ulster Bank of Ireland in the amount of €800,000, which had a total value as of December 31, 2009 of approximately $1,152,480.

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that were subsequently issued to Mr.

Butler, See Note 19, “Subsequent Events”.

As of March 31, 2010 the total value of this line of credit was $1,078,320 and is included in the "Preferred convertible notes payable, related party" line item in the Balance Sheet.

Promissory Notes and Convertible Promissory Notes

During the three months ended December 31, 2009, we issued $665,150 principal amount of promissory notes, some with warrants attached and some with shares of restricted common stock.

During the six months ended December 31, 2009, we issued $920,150 principal amount of promissory notes, some with warrants attached and some with shares

of restricted common stock.

During the six months ended December 31, 2009 we restructured $540,000 principal amount of promissory notes into U.S.

During the three months ended March 31, 2010, we issued $148,000 principal amount of convertible promissory notes.

During the nine months ended March 31, 2010, we issued $1,068,150 principal amount of promissory notes, some with warrants attached and some with shares of restricted common stock.

During the nine months

ended March 31, 2010 we restructured $540,000 principal amount of promissory notes into U.S.

Dollar Convertible Promissory Notes issued with warrants, and restructured $171,850 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 December 31, 2008, we issued $250,000 principal amount of Promissory Notes, principal amount of U.S.

into convertible notes, which were assigned to third parties and partially 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 year ended June 30, 2009, we issued $7,110,743 principal amount of Promissory Notes, some with warrants and some with shares of restricted common stock, $3,661,646 principal amount of U.S.

Dollar Convertible Promissory Notes and €2,322,830 principal amount of Euro Convertible Promissory Notes.

As of March 31, 2010, the following notes were outstanding:

$7,092,192 principal amount of a promissory note issued to CHVC, $3,247,705 principal amount of other promissory notes, some issued with warrants and some with shares of restricted common stock, and $1,087,765 principal amount of U.S.

Dollar Convertible Promissory Notes.

As of December 31, 2009, $7,147,976 principal amount of a promissory note issued to CHVC, $3,331,783 principal amount of other promissory notes, some issued with warrants and some with shares of restricted common stock, $121,500 principal amount of U.S.

Dollar Convertible Promissory Notes, $2,619,530 principal amount of U.S.

Dollar Convertible

Promissory Notes issued with warrants, were outstanding.

Additionally,

we restructured $4,100,000 worth of debt owed to Michael Butler into Series E Convertible Preferred Shares;

See Note 9, Related Party Transactions.

Promissory Notes:

During the three months ended December 31, 2009, the following promissory notes were issued by Flint:

During the nine months ended March 31, 2010, the following promissory notes were issued by Flint:

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

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Flint has been unable to make this payment.

See Note 19, “Subsequent Events”;

We received a notice of default on March 2, 2010.

As of December 31, 2009, we had a total of $3,331,783 worth of principal amounts outstanding under various promissory notes issued to approximately 10 individuals and entities, with interest rates ranging from 0% to 15%, to be repaid between 30 September 2009 and 30 September 2011.

None of the principal under these notes has been

repaid as of December 31, 2009 and all of these notes are currently in default.

As of March 31, 2010, we had a total of $3,247,705 worth of principal amounts outstanding under various promissory notes issued to approximately 10 individuals and entities, with interest rates ranging from 0% to 15%, to be repaid between 30 September 2009 and 30 September 2011.

None of the principal under these notes has been repaid

as of March 31, 2010 and all of these notes are currently in default.

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.

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Dollar Convertible Promissory Notes:

On December 18, 2009 we were loaned $50,000 by an institution and we issued a $50,000 convertible promissory note accruing interest at a rate of eight percent (8%) per annum with a maturity date of September 2010 and having a variable conversion price of 50% of the Market Price.

“Market Price” means the average of the lowest three

(3) Trading Prices for the common stock during the ten (10) Trading Day period ending one Trading Day prior to the date the Conversion Notice is sent.

The terms and conditions of this Note is qualified in its entirety by reference to the full text of the Note, which is attached hereto as Exhibit 4.1, and is incorporated herein by reference.

During the three months ended March 31, 2010, SEL Nominees Ltd.

(“SEL”) loaned us a total of $98,000 and we issued SEL two convertible promissory notes accruing interest at a rate of eighteen percent (18%) per annum, with interest only payments due each month and a maturity date of March 2011, and having a variable conversion price

of 50% of the Market Price.

As of March 31, 2010 the total potential number of common shares to be issued upon conversion of these notes is approximately 10,000,000.

Related Party Transactions for more details on these notes.

Also during the three months ended March 31, 2010 Flint issued a $50,000 convertible promissory note to an institution with a variable conversion price of 50% of the lowest closing price for Flint’s common stock during the previous 20 trading days.

and conditions of these notes are qualified in its entirety by reference to the full text of the notes, which were attached as Exhibits 4.2, 4.3 and 4.4 to our SEC Form 10Q filed on March 25, 2010.

$10,000 worth of this note was partially converted in March of 2010 into 571,429 shares of our common stock.

Additional conversions were completed after March 31, 2010;

Subsequent Events for more details.

During the nine months ended March 31, 2010 Flint Telecom Ltd.

assigned a portion of its debt in the amount of $280,000, to certain third parties and we agreed to modify the terms of that debt into convertible promissory notes, $80,000 of which has a set conversion price of $0.04 per share and $50,000 of which has a variable

conversion price of 50% of the Market Price, as defined below.

Also during the nine months ended March 31, 2010 we were loaned $50,000 by an institution and we issued a $50,000 convertible promissory note accruing interest at a rate of eight percent (8%) per annum with a maturity date of September 2010 and having a variable conversion price of 50% of the Market Price.

“Market Price” means the average of the lowest three (3) Trading Prices for the common stock during the ten (10) Trading Day period

ending one Trading Day prior to the date the Conversion Notice is sent.

As of March 31, 2010, the total potential number of common shares to be issued upon conversion of this note is 5,000,000.

The terms and conditions of this Note is qualified in its entirety by reference to the full text of the Note, which was attached as Exhibit 4.1 to our last SEC Form 10Q filed on March 25, 2010, and is incorporated herein by reference.

The other U.S.

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

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 December 31, 2009 of $55,500, executed an extension to September 30, 2011.

One Note holder, RedQuartz, having a principal amount

as of March 31, 2010 of $55,500, 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, 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 December 31, 2009, a total of $121,500 worth of principal in U.S.

Convertible promissory notes was outstanding.

Convertible Promissory Notes issued with Warrants:

As a result of the issuance of the convertible promissory note in the three months ending December 31, 2009, the conversion prices of the already outstanding convertible promissory notes issued in the total principal amount of $1,140,000 have been adjusted to match the variable conversion price in the new note, which, as of December 31, 2009,

equals $0.01 per share.

Additionally, because Flint was not been able to repay a number of its other promissory notes in accordance with their existing terms and conditions, an event of default occurred on the existing convertible promissory notes and therefore the exercise price of the related warrants issued to purchase up to 4,145,454 shares of Flint’s common stock has been reduced from $0.35 per share to $0.01 per share.

Finally, additional warrants to purchase up to 1,036,363 shares of

Flint’s common stock at an exercise price of $0.01 per share, having a five year term, were also issued.

As of December 31, 2009, we have $1,740,000 worth in principal amount of subordinated convertible promissory notes outstanding having an interest rate of 10% per annum, convertible at a variable conversion price, which as of December 31, 2009 is $0.09 per share, into an aggregate of 19,333,333 shares of restricted common stock, with a maturity

Finally, additional warrants to purchase up to 1,036,363 shares of Flint’s

common stock at an exercise price of $0.01 per share, having a five year term, were also issued.

As of March 31, 2010, we have $1,140,000 worth in principal amount of subordinated convertible promissory notes outstanding having an interest rate of 10% per annum, convertible at a variable conversion price, which as of March 31, 2010 is $0.01 per share, into an aggregate of 114,000,000 shares of restricted common stock, with a maturity

date 18 months after the issuance dates, and warrants to purchase an aggregate of up to 5,181,817 shares of our restricted common stock at a revised exercise price of $0.01 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.

However, $600,000 worth in principal amount of these notes were held by Mr.

Butler and were subsequently restructured into Shares of Series E Convertible Preferred

Stock along with the remaining $879,530 Notes that did not carry this feature;

see Note 19, “Subsequent Events”.

Also, in accordance with the terms of the agreements related to these notes, each note holder cannot beneficially own greater than 4.99% of our total issued and outstanding common stock at any given point in time.

For the three and six months ended December 31, 2009, the warrant component of the promissory notes was valued at $913,012 and $2,375,537, respectively.

The value was recorded as a discount to the promissory note and $70,300 and $779,091 was expensed in the three and six months ending December 30, 2009, respectively.

The following are the

assumptions used for the Black Scholes calculation:

Six Months Ended

December 31, 2009

In accordance with the terms of the agreements related to these notes, each note holder cannot beneficially own greater than 4.99% of our total issued and outstanding

common stock at any given point in time.

For the nine months ended March 31, 2010, the warrant component of the promissory notes was valued at $779,091.

For the nine months ended March 31, 2010, $1,576,379 of all debt discounts related to the promissory notes was amortized and included in interest expense.

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

Nine Months Ended

March 31, 2010

Expected term (in years)

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Line of credit

Preferred Shares – related parties

Notes payable – related parties

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Common Stock:

Effective December 2, 2009, as approved by our stockholders at our annual stockholders meeting, we filed an amendment to our articles of incorporation increasing our total authorized shares of common stock to 200,000,000.

As of December 31, 2009, we had 200,000,000 total shares of common stock authorized and 89,285,975 shares were issued and outstanding, however, 11,250,082 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 December 31, 2009, 78,035,893 shares were issued and outstanding.

There is no special voting or economic rights or privileges.

A small portion of the remaining unvested shares vested in January 2010 and the remaining unvested shares were cancelled due to various officer and employee resignations, See Note 19, “Subsequent Events”.

As of March 31, 2010 we had 200,000,000 total shares of common stock authorized, 89,820,958 shares issued and 88,820,958 shares outstanding .

There are no special voting or economic rights or privileges.

A small portion of the remaining unvested shares vested in January 2010 and the remaining unvested shares were cancelled due to

various officer and employee resignations.

Preferred Stock:

As of December 31, 2009, 5,000,000 total shares of preferred stock were authorized.

864,385 shares of Series C preferred stock were issued and outstanding, par value $0.001.

As of March 31, 2010, 5,000,000 total shares of preferred stock were authorized and 21,575 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 December 31, 2009, there are no shares of Series A or B preferred stock issued or outstanding.

shares of Series E Convertible Preferred Shares were issued in February, 2010 pursuant to a settlement agreement signed on December 31, 2009 with Michael Butler, one of our board members;

Subsequent Events for more details.

As of March 31, 2010, 302,000 shares of Series E Convertible Preferred Shares were

issued and outstanding, convertible into a maximum potential of 10,981,818 shares of common stock and with other terms, see Note 9:

Related Party Transactions for more details.

As of March 31, 2010, there were 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 December 31, 2009:

During the three months ended March 31, 2010, 2,454,545 warrants issued on September 1, 2009 were cashlessly exercised into 1,963,636 shares.

The following summarizes the information relating to all warrants issued and outstanding as of March 31, 2010:

Number of Warrants

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All warrants are fully exercisable.

Because Flint has not been able to repay a number of its other promissory notes issued to various third parties on time and under their existing terms and conditions, an event of default has occurred and therefore the exercise price of the warrants issued to purchase up to 4,145,454 shares of Flint’s common stock has been reduced from $0.35 per share to $0.01 per share, and additional warrants to purchase up to

1,036,363 shares of Flint’s common stock were issued.

$0.35 per share to $0.01 per share, and additional warrants to purchase up to 1,036,363 shares of Flint’s common stock were issued, also exercisable at $0.01 per share.

Of which, 2,454,545 have been cashlessly exercised into 1,963,636 shares.

2009 Restricted Stock Plan:

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

As of December 31, 2009, 11,500,000 shares have been issued, of which, 1,250,000 have vested as of October 6, 2009.

During the three months ended March 31, 2010, 6,240,000 shares were cancelled due to various employee and officer resignations, 6,000,000 shares vesting over a period of three years were issued to new officers and 13,200,000 shares with immediate vesting and 3,000,000 with three year vesting were issued to various consultants.

31, 2010, 29,510,000 shares are issued and outstanding, of which, 18,635,000 have vested.

The 2009 Restricted Stock Plan provides for the grant of restricted stock, subject to terms, conditions and restrictions as determined by the Board.

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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 and six months ended December 31, 2009, 12,930,818 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 six months ended December 31, 2008,

Since we incurred a net loss for the three and nine months ended March 31, 2010, 62,359,000 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, 2009,

24,262,188 potential shares were excluded from the shares used to calculate diluted EPS as their effect is anti-dilutive.

We reported a net loss of $10,093,977 and $13,106,197, respectively, for the three and six months ended December 31, 2009.

We reported a net loss of $8,548,596 and $9,694,543, respectively, for the three and six months ended December 31, 2008.

We reported a net loss of $8,509,926 and $21,616,123, respectively, for the three and nine months ended March 31, 2010.

We reported a net loss of $1,246,295 and $10,940,839, respectively, for the three and nine months ended March 31, 2009.

Stock Based Compensation

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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 option expense recognized by us during the three and six months ended December 31, 2009 was $15,432 and $31,141, respectively.

Total stock option expense recognized by us during the three and nine months ended March 31, 2010 was $15,206 and $46,247, respectively.

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.

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Black-Scholes -Based Option Valuation Assumptions

December 31, 2009

March 31, 2010

4.0 – 7.0 yrs

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Risk-free rate

The following table summarizes the stock option transactions for the three months ended December 31, 2009 based upon a closing stock price of $0.09 per share as of December 31, 2009:

The following table summarizes the stock option transactions for the three months ended March 31, 2010 based upon a closing stock price of $0.02 per share as of March 31, 2010:

Stock Options

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Intrinsic Value ($)

Outstanding at October 1, 2009

Outstanding at December 31, 2009

Exercisable at December 31, 2009

The aggregate intrinsic value of outstanding options as of December 31, 2009 was $0, 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 $0.09 market price of our common stock at December 31, 2009.

No options were exercised during the three months ended December 31, 2009 or 2008.

Restricted Common Stock:

During the three months ended December 31, 2009, 1,250,000 shares of unvested restricted common stock issued to employees under our 2009 Restricted Stock Plan vested, and we recorded approximately $381,688 and $763,374 in expense for the three and six months ended December 31, 2009, respectively, related to the vesting of these shares.

also issued a total of 501,515 shares of restricted stock to consultants as settlements for services rendered during the six months ended December 31, 2009.

We recorded $0 and $185,561 in expense for the three and six months ended December 31, 2009, respectively, related to these shares of restricted common stock granted to these consultants.

Outstanding at January 1, 2010

Outstanding at March 31, 2010

Exercisable at March 31, 2010

The aggregate intrinsic value of outstanding options as of March 31, 2010 was $0, 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 $0.02 market price of our common stock at March 31, 2010.

No options were exercised during the three months ended March 31, 2010 or 2009.

Exchange Gains and Losses

We maintain certain bank accounts denominated in Euros and as of December 31, 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.

As of March 31, 2010 have issued and outstanding €3,020,000 worth of Convertible Preferred Series E shares, €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.

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Dollar so that transactions and balances are translated into dollars.

We recorded a $10,807 loss and a $245,883 gain on translation for the three and six months ended December 31, 2009 and 2008, respectively.

We recorded a $160,787 gain and a $149,980 gain on translation for the three and nine months ended March 31, 2010, respectively.

Subsequent Events

We have evaluated subsequent events through March 25, 2010, which is the date the financial statements were issued.

On January 29, 2010 Flint issued a $50,000 convertible promissory note to an institution with a variable conversion price of 50% of the lowest closing price for Flint’s common stock during the previous 20 trading days.

The terms and conditions of this Note is qualified in its entirety by reference to the full text of the Note, which

is attached hereto as Exhibit 4.2, and is incorporated herein by reference.

As a result of this issuance, the conversion prices of the outstanding convertible promissory notes issued in June and September 2009, having a total combined principal amount of $1,140,000, have been adjusted to match the above variable conversion price calculation, which, as of the date of this filing, equals $0.02 per share and could result in a maximum total potential issuance of 57,000,000 shares.

However, in accordance with the

terms of the agreements related to these notes, each note holder cannot beneficially own greater than 4.99% of our total issued and outstanding common stock at any one point in time.

On March 8, 2010 SEL Nominees Ltd.

(“SEL”) loaned us $58,000 and we issued a $58,000 convertible promissory note accruing interest at a rate of eighteen percent (18%) per month, with interest only payments due each month and a maturity date of March 2011, and having a variable conversion price of 50% of the Market Price.

Price” means the average of the lowest three (3) Trading Prices for the common stock during the ten (10) Trading Day period ending one Trading Day prior to the date the Conversion Notice is sent.

The terms and conditions of this Note is qualified in its entirety by reference to the full text of the Note, which is attached hereto as Exhibit 4.3, and is incorporated herein by reference.

On March 12, 2010 SEL loaned us $40,000 and we issued a $40,000 convertible promissory note accruing interest at a rate of eighteen percent (18%) per month with interest only payments due each month and a maturity date of March 2011, and having a variable conversion price of 50% of the Market Price.

“Market Price” means the average

of the lowest three (3) Trading Prices for the common stock during the ten (10) Trading Day period ending one Trading Day prior to the date the Conversion Notice is sent.

The terms and conditions of this Note is qualified in its entirety by reference to the full text of the Note, which is attached hereto as Exhibit 4.4, and is incorporated herein by reference.

SEL is a related party due to the fact that SEL is controlled by Mr.

Butler, one of our board members.

Resignation of Certain Officers

In order to pursue other interests, effective February 4, 2010, Steve Keaveney resigned as the Chief Financial Officer and as a Director, and Tali Durant resigned as Chief Legal Officer and Corporate Secretary of Flint Telecom Group, Inc.

(the “Company”).

Keaveney and Ms.

Durant have been retained as consultants.

effective February 4, 2010, John Iacovelli resigned as the Chief Technology Officer and Jose Ferrer resigned as the Vice President of Business Development of the Company.

Vincent Browne, the CEO of the Company, has been appointed to serve as CFO and Corporate Secretary for the foreseeable future.

Additionally, Bill Burbank resigned as the President and Chief Operating Officer of the Company, effective February 4, 2010.

In connection with Mr.

Burbank’s resignation, the Company entered into a Separation Agreement with Mr.

Burbank (the “Separation Agreement”), effective February 5, 2010.

The Separation

Agreement provides that Mr.

Burbank will be paid an aggregate of approximately $150,000 in cash and $495,000 worth of shares of restricted common stock, consisting of:

payment for past wages owed, of approximately $45,785;

repayment for various loans made to the Company, in the amount of $100,000;

reimbursement for approved expenses in an amount that has yet to be determined;

all such cash payments as listed above shall be paid in the future as funds become available;

The closing price of our common stock on February 5, 2010 was $0.09 per share, and therefore the total fair market value of these shares as of February 5, 2010 was $495,000.

Resignation of Certain Directors

Effective February 4, 2010, Bill Burbank resigned as a Director.

Effective February 17, 2010, Anthony LaPine resigned as the Chairman of the Board of Flint, and Robert Lanz resigned as a Director and as Chairman of the Audit Committee.

In connection with Mr.

Lanz’s resignation, the Company issued Mr.

Lanz 200,000 shares of restricted common stock.

Vincent Browne, the CEO of the

Company, has been appointed to serve as Chairman of the Board.

Election of Director and Officer

Effective February 23, 2010, Bernard A.

Fried was elected as President and Chief Operating Officer of the Company, and was appointed as a member of the Board of Directors.

Flint entered into an employment agreement with Mr.

Fried, effectuating the following:

Fried’s title is President and COO of Flint;

Fried was appointed as a member of Flint’s Board of Directors, (iii) Mr.

will receive a salary in the amount of $186,000 per year, and (iv) Mr.

The foregoing description of Mr.

Fried’s Employment

Agreement is qualified in its entirety by reference to the full text of the Employment Agreement, which is attached hereto as Exhibit 10.1 and is incorporated herein by reference.

The following is a description of the business experience of Mr.

Fried for at least the past five years:

Fried, age 64.

Fried currently serves as managing member of FCI Companies, LLC, a successor company to Fried Consulting, Inc.

Previously, he served as Vice President and Managing Director of Condado Group, Inc., a customer relationship management and call

center consulting firm.

Prior to joining Condado Group, Mr.

Fried was President of Fried Consulting, Inc, a call center and telecommunications consulting firm.

During his career, he has held numerous executive positions in the call center, telecommunications, and biometric industries.

Fried currently also serves on the Board of Directors of the United States Internet Industry Association, and is a former board member of Ascent (which merged into Comptel), one of the primary associations for the wholesale telecommunications industry.

Fried also currently teaches management and leadership courses in

the School of Professional and Graduate Studies at Baker University in Kansas.

Fried received his MBA, with distinction, from Pace University in New York.

Michael Butler Debt Restructure

Subject to an agreement that was executed December 31, 2009 that became effective February 5, 2010 we executed a settlement agreement with Mr.

Butler in which all of Mr.

Butler’s loans to Flint were cancelled in exchange for 302,000 shares of Series E preferred stock of Flint, valued at €10.00 per share, having the following material terms:

Yielding a 14% annual dividend payment, payable monthly in Euros, from February 28, 2010;

Convertible at any time into that number of shares of Common Stock as is determined by the quotient of (i) €10.00 over (ii) the Conversion Price in effect at the time of conversion.

The Conversion Price has a 20% discount to the Market Price at time of conversion and subject to a minimum conversion price of $0.275 per Common Share

Market Price means the average closing price of Flint’s common stock over the twenty trading days preceding the conversion request date

The common stock issued at the time of conversion will be restricted stock and subject to SEC 144 Rule

Based on the minimum conversion price, Mr.

Butler would receive 10,981,818 shares of common stock if all preferred shares were converted into common stock.

The Preference Shares will be transferable at Mr.

Butler’s discretion, after giving Flint a right of first refusal;

A penalty rate of 0.5% per month on the total amount outstanding will apply for dividend payments that are more than 10 days late, and will continue to apply until default payments are caught up.

Thermocredit Line of Credit Restructure

Flint management and Thermo have reached an agreement to extend and restructure the terms of the Thermo line of credit, and Flint is therefore no longer in default as of the date of the filing of this quarterly report.

An amendment to the existing line of credit agreement is currently being formalized and will be publicly disclosed

once it has been fully executed by both parties.

Legal Proceedings.

On February 9, 2010 Mr.

Thomas Davis and the Davis Group (“Davis”) filed a complaint against us in the United States District Court for the Southern District of New York.

This suit alleges three causes of action for payment due under certain promissory notes issued, and four causes of action for breach of contract.

Complaint claims that we failed to make payments as they became due under a number of promissory notes issued by us to Davis and under other loans made by Davis to Flint.

Davis seeks damages in the total amount of $1,325,000 plus interest, attorney’s fees and costs.

We have not responded to this complaint and expect summary judgment to be entered.

Davis is in active discussions with management to restructure the amounts due to him and management is confident that a successful resolution

will come from these discussions.

We have evaluated subsequent events through May 24, 2010, which is the date the financial statements were issued.

On April 22, 2010 we were loaned $40,000 by an institution and we issued a $40,000 convertible promissory note accruing interest at a rate of eight percent (8%) per annum with a maturity date of January 22, 2011 and having a variable conversion price of 50% of the Market Price.

“Market Price” means the average of the lowest three

(3) Trading Prices for the common stock during the ten (10) Trading Day period ending one Trading Day prior to the date the Conversion Notice is sent.

As of the date of the filing of this report, the total potential number of common shares to be issued upon conversion of this note is approximately 8,000,000 shares.

The terms and conditions of this promissory note is qualified in its entirety by reference to the full text of the Note, which is attached as Exhibit 4.5, and is incorporated herein by reference.

In May of 2010, a third party institution that holds a convertible promissory note partially converted $20,000 of its $50,000 note into 3,347,339 shares.

In May of 2010 we entered into a settlement agreement with Telmage Consulting LLC (“TelSpace”) in which TelSpace has furnished to us a perpetual software license as consideration for the repayment of the $250,000 promissory note due to us from TelSpace.

The terms and conditions of this settlement agreement is qualified

in its entirety by reference to the full text of the settlement agreement, which is attached as Exhibit 10.4 and is incorporated herein by reference.

Effective May 14, 2010 Michael Butler resigned as a Director.

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