UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarter ended: June 30, 2014

 

or

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the Transition Period from ___________ to____________

 

Commission File Number: 333-76630

 

Competitive Companies, Inc.

(Exact Name of registrant as specified in its charter)

 

Nevada	65-1146821
(State or other jurisdiction of	(IRS Employer I.D. No.)
incorporation)

 

19206 Huebner Rd., Suite 202

San Antonio, TX 78258

(Address of principal executive offices and Zip Code)

 

(210) 233-8980

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months, and (2) has been subject to such filing requirements for the past 90 days.

Yes ý No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes ý No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:

 

Large accelerated filer ¨	Accelerated filer ¨
Non-accelerated filer ¨	Smaller reporting company ý

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨ No ý

 

As of August 7, 2014, there were 333,258,752 shares outstanding of the registrant’s common stock.

 

 

COMPETITIVE COMPANIES, INC.

 

FORM 10-Q

 

June 30, 2014

 

Table of Contents

 

 

PART I - FINANCIAL INFORMATION
ITEM 1.	FINANCIAL STATEMENTS	3
	Consolidated Balance Sheets as of June 30, 2014 (unaudited) and December 31, 2013	3
	Consolidated Statements of Operations for the Three and Six Months ended June 30, 2014 (unaudited) and June 30, 2013 (unaudited)	4
	Consolidated Statements of Cash Flows for the Six Months ended June 30, 2014 (unaudited) and June 30, 2013 (unaudited)	5
	Notes to Consolidated Financial Statements	6
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	9
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	13
ITEM 4.	CONTROLS AND PROCEDURES	13
PART II - OTHER INFORMATION
ITEM 1.	LEGAL PROCEEDINGS	15
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	15
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	15
ITEM 4.	MINE SAFETY DISCLOSURES	15
ITEM 5.	OTHER INFORMATION	15
ITEM 6.	EXHIBITS	15
	SIGNATURES	16

 

 

See accompanying notes to consolidated financial statements.

 

 

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

 

COMPETITIVE COMPANIES, INC.

CONSOLIDATED BALANCE SHEETS

 

		June 30,				December 31,
		2014				2013
Assets		(Unaudited)				(Audited)
Current assets:
Cash		$	921,782			$	901,785
Accounts receivable, net			5,849				10,658
Equipment held for installation			842,552				714,804
Total current assets			1,770,183				1,627,247
Property and equipment, net			500,371				60,523
Other assets:
Deposits			45,713				10,108
Total assets		$	2,316,267			$	1,697,878
Liabilities and Stockholders' (Deficit)
Current liabilities:
Accounts payable		$	319,865			$	192,048
Accrued expenses			268,313				225,448
Deferred revenues, net of commissions			3,245,000				5,339,480
Notes payable			67,006				67,006
Current portion of convertible debentures, net			732,626				621,522
Total current liabilities			4,632,810				6,445,504
Long-term liabilities:
Convertible debentures, net			–				111,104
Total liabilities			4,632,810				6,556,608
Stockholders' (deficit):
Controlling interest:
Preferred stock, $0.001 par value 100,000,000 shares authorized:
Class A convertible, no shares issued and outstanding with no liquidation value			–				–
Class B convertible, 1,495,436 shares issued and outstanding with no liquidation value			1,495				1,495
Class C convertible, 1,000,000 shares issued and outstanding with no liquidation value			1,000				1,000
Class D convertible, 100,000 shares issued and outstanding with no liquidation value			100				100
Common stock, $0.001 par value, 500,000,000 shares authorized, 335,621,533 and 335,621,533 shares issued and 334,676,533 and 335,151,533 outstanding at June 30, 2014 and  December 31, 2013, respectively			335,621				335,621
Additional paid-in capital			5,904,996				5,443,496
Accumulated (deficit)			(13,603,322	)			(10,619,789	)
Treasury Stock, at cost, 945,000 and 470,000 shares at June 30, 2014 and December 31, 2013, respectively			(39,938	)			(20,653	)
Noncontrolling interest			5,083,505				–
Total stockholders' (deficit)			(2,316,543	)			(4,858,730	)
Total liabilities and stockholders' (deficit)	`	$	2,316,267			$	1,697,878

 

See accompanying notes to consolidated financial statements.

 

 

COMPETITIVE COMPANIES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

		For the Three Months								For the Six Months
		Ended June 30,								Ended June 30,
		2014				2013				2014				2013
Revenue		$	13,552			$	18,950			$	24,841			$	34,533
Cost of sales			13,120				15,740				26,042				29,053
Gross profit (loss)			432				3,210				(1,201	)			5,480
Expenses:
General and administrative			1,831,550				737,105				2,521,501				1,146,271
Salaries and wages			297,658				125,754				525,645				339,251
Depreciation and amortization			24,657				1,036				26,780				2,295
Total operating expenses			2,153,865				863,895				3,073,926				1,487,817
Net operating loss			(2,153,433	)			(860,685	)			(3,075,127	)			(1,482,337	)
Other income (expense):
Interest expense			(23,187	)			(45,367	)			(46,374	)			(101,359	)
Interest income			30				–				106				–
Other income			6,991				3,734				9,367				4,022
Gain on disposal of assets			–				–				–				780
Change in fair market value of derivative liabilities			–				103,006				–				96,642
Total other income (expense)			(16,166	)			61,373				(36,901	)			85
Net loss			(2,169,599	)			(799,312	)			(3,112,028	)			(1,482,252	)
Net loss attributable to the noncontrolling interest			(128,495	)			–				(128,495	)			–
Net loss attributable to Competitive Companies, Inc.		$	(2,041,104	)		$	(799,312	)		$	(2,983,533	)		$	(1,482,252	)
Weighted average number of common shares outstanding - basic and fully diluted			334,676,533				311,384,580				334,762,334				327,695,778
Net loss per share - basic and fully diluted		$	(0.01	)		$	–			$	(0.01	)		$	–

 

 

See accompanying notes to consolidated financial statements.

 

 

 

 

COMPETITIVE COMPANIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

		For the Six Months
		Ended June 30,
		2014				2013
Cash flows from operating activities
Net loss		$	(3,112,028	)		$	(1,482,252	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Amortization of convertible notes payable discounts			–				65,204
Change in fair market value of derivative liability			–				(96,642	)
Stock-based compensation			9,500				96,750
Warrants issued for services			984,000				–
Depreciation			26,780				2,295
Gain on asset disposal			–				(780	)
Decrease (increase) in assets:
Accounts receivable			4,809				(4,376	)
Equipment held for installation			(127,748	)			–
Deposits and other assets			(35,605	)			–
Increase (decrease) in liabilities:
Accounts payable			127,817				138
Accrued expenses			42,865				27,530
Deferred revenues			2,135,520				1,989,480
Net cash provided by operating activities			55,910				597,347
Cash flows from investing activities
Purchases of property and equipment			(16,628	)			(158,461	)
Proceeds from equipment sales			–				3,684
Net cash used in investing activities			(16,628	)			(154,777	)
Cash flows from financing activities
Proceeds from short term and convertible debts			–				50,000
Purchase of treasury stock			(19,285	)			–
Proceeds from exercise of stock warrants			–				3,285
Net cash provided by (used in) financing activities			(19,285	)			53,285
Net increase in cash			19,997				495,855
Cash - beginning			901,785				184,195
Cash - ending		$	921,782			$	680,050
Supplemental disclosures:
Interest paid		$	–			$	–
Income taxes paid		$	–			$	–
Non-cash investing and financing activities:
Issuance of Wytec International, Inc. preferred stock to satisfy subscription payable		$	4,229,480			$	–
Issuance of Wytec International, Inc. preferred stock in exchange for registered links and related equipment		$	450,000			$	–
Value of shares issued for conversion of debentures		$	–			$	90,000
Refinanced convertible debentures		$	–			$	237,500
Accrued interest added to convertible debentures		$	–			$	39,415

 

 

See accompanying notes to consolidated financial statements. 

 

Note 1 – Nature of Business and Basis of Presentation

 

The consolidated interim financial statements included herein, presented in accordance with United States generally accepted accounting principles, have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading.

 

These statements reflect all adjustments, consisting of normal recurring adjustments, which in the opinion of management are necessary for fair presentation of the information contained therein. It is suggested that these consolidated interim financial statements be read in conjunction with the financial statements of the Company for the year ended December 31, 2013 and notes thereto included in the Company's Form 10-K annual report. The Company follows the same accounting policies in the preparation of interim reports.

 

Results of operations for the interim period are not indicative of annual results.

 

Through the Company’s subsidiary, Wireless Wisconsin, LLC, the Company provides high speed wireless Internet connections to residents in rural communities, as well as some dial-up internet services to businesses and residents within various markets throughout rural Wisconsin. The Company operates in both a regulated and non-regulated environment.

 

In the fourth quarter of 2012, the Company began its program of selling FCC registered links (“Registered Links”) and related telecommunication equipment.

 

The consolidated financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern, which contemplate the realization of assets and liquidation of liabilities in the normal course of business. The Company has incurred continuous losses from operations, has an accumulated deficit of $13,603,322 and a working capital deficit of $2,862,627 at June 30, 2014, and has reported negative cash flows from operations in most periods over the last five years. In addition, the Company does not currently have the cash resources to meet its operating commitments for the next twelve months. The Company’s ability to continue as a going concern must be considered in light of the problems, expenses, and complications frequently encountered by entrance into established markets and the competitive nature of the industry in which the Company operates.

 

The Company’s ability to continue as a going concern is dependent on the Company’s ability to generate sufficient cash from operations to meet its cash needs and/or to raise funds to finance ongoing operations and repay debt. There can be no assurance that the Company will be successful in its efforts to raise additional debt or equity capital and/or that cash generated by operations will be adequate to meet the Company’s needs. These factors, among others, indicate that the Company may be unable to continue as a going concern for a reasonable period of time.

 

 

Note 2 – Property and Equipment

 

Property and equipment consist of the following:

 

		June 30,				December 31,
		2014				2013
Telecommunication equipment and computers		$	502,017			$	35,910
Furniture and fixtures			42,344				41,824
			544,361				77,734
Less accumulated depreciation			(43,990	)			(17,211	)
		$	500,371			$	60,523

 

Depreciation expense totaled $26,780 and $2,295 for the six months ending June 30, 2014 and 2013, respectively.

 

Note 3 – Notes Payable

 

Notes payable consists of the following:

 

		June 30,				December 31,
		2014				2013
Unsecured promissory note bearing interest at a rate of 8% per annum, matured on March 2, 2010. Currently in default.		$	30,000			$	30,000
Unsecured promissory note bearing interest at rate of 8% per annum, matured on June 15, 2009. Currently in default.			10,000				10,000
Unsecured promissory note bearing interest at a rate of 8% per annum, matured on June 15, 2009. Currently in default.			10,000				10,000
Unsecured note payable to a stockholder, bearing interest at a rate of 8% per annum, matured on February 23, 2011. Currently in default.			17,006				17,006
Total notes payable		$	67,006			$	67,006

 

Interest continues to accrue on these notes as long as they remain outstanding. The Company recorded interest expense on notes payable in the amount of $2,680 and $2,680 for the six months ended June 30, 2014 and 2013, respectively. The Company intends to pay the outstanding principal and accrued interest when liquidity allows.

 

 

Note 4 – Convertible Debentures

 

The Company has issued unsecured convertible promissory notes at various times from 2008 through 2013. During the six months ended June 30, 2014 and 2013, the Company issued convertible promissory notes totaling $-0- and $50,000, respectively. The notes bear interest at rates at 8% to 12.5% per annum. The notes mature at various times through June 2015. At June 30, 2014, convertible debentures totaling $732,626 were outstanding.

 

The principal balance of each note is convertible into shares of the Company’s common stock. The conversion terms of each note varies, but in general, the notes are convertible at a rate equal to a specified percentage (most range from 80% to 90%) of the Company’s average common stock closing price for a short period of time prior to conversion.

 

Certain convertible promissory notes of Wytec also carry detachable warrants. As of June 30, 2014, detachable warrants to purchase 2,011,100 shares of Wytec’s common stock were outstanding. The warrants have exercise prices ranging from $1.00 to $3.00 per share and are exercisable for a period of two years from the grant date.

 

 

Note 5 – Changes in Stockholders’ Equity (Deficit)

 

In April 2014, Wytec International, Inc. (“Wytec”) issued 24,000,000 shares of common stock to CCI.

 

In April 2014, Wytec International, Inc. issued 2,960,000 shares of Series A Preferred Stock to unrelated parties in exchange for 148 of registered link obligations that were included in deferred revenue.

 

In April 2014, Wytec International, Inc issued 360,000 shares of Series A Preferred Stock to unrelated parties in exchange for 18 registered link obligations and related equipment for which all obligations to the customer had been completed and for which revenue totaling $450,000 had been recognized in prior periods.

 

In April 2014, CCI granted William H. Gray options to purchase 10,000,000 shares of common stock exercisable at $0.025 per share with a two year vesting schedule and an expiration date of five years from the date of grant. For the six month period ended June 30, 2014, the stock-based compensation related to these option grants was $8,500.

 

In June 2013, the Company issued 8,356,988 shares of common stock upon conversion of $90,000 in unsecured convertible promissory notes.

 

In June 2013, the Company issued 405,000 shares of common stock upon exercise of $3,285 in warrants.

 

In October 2012, the Company granted employees options to purchase 3,000,000 shares of common stock exercisable at $0.01 per share with a three year vesting schedule and expiration dates between three years and four years from the date of grant. For the six month periods ended June 30, 2014 and 2013, the stock-based compensation related to these option grants was $1,000 and $1,000, respectively.

 

 

Note 6 – Treasury Stock

 

During the six month period ended June 30, 2014, the Company purchased 475,000 shares of its common stock, from officers of the Company an aggregate cost of $19,285.

 

 

Note 7 – Warrants

 

The Company issued warrants to purchase 12,000,000 shares of the Company’s common stock to unrelated third party vendors for services previously provided, during the six months ended June 30, 2014. The warrants have exercise prices ranging from $0.01 to $0.05 per share and are exercisable for periods of one to two years from the grant dates. The fair value of the warrants is estimated at $452,000 using the Black-Scholes option-pricing model. For the six month period ended June 30, 2014, the general and administrative expenses related to these warrants were $452,000.

 

During the six months ended June 30, 2014, the Company issued 90,000,000 warrants to purchase 90,000,000 shares of CCI stock to the Company’s CEO. The warrants are exercisable at a price of $0.025 per share and vest based upon certain average per share closing prices of the Company’s common stock and certain minimum average trading volumes. The fair value of the warrants is estimated at $1,890,000 using the Black-Scholes option-pricing model. The warrants expire ten years from the grant date. The Company’s management has determined that based on the historical trends of the stock price, 100% of these warrants will be forfeited. The Company will continue to assess the probability of forfeiture at each future reporting period.

 

During the six months ended June 30, 2014, Wytec International, Inc issued 1,000,000 warrants to purchase 1,000,000 shares of Wytec stock to two unrelated service providers. The warrants have an exercise price of $1.25 per share and are exercisable until December 31, 2015. The fair value of the warrants is estimated at $532,000 using the Black-Scholes option-pricing model. For the six month period ended June 30, 2014, the general and administrative expenses related to these warrants were $532,000.

 

 

Note 8 – Subsequent Events

 

In July, 2014, the Company purchased 1,417,871 shares of its common stock from officers of the Company at an aggregate cost of $30,610.

 

In July, 2014, the Company entered into an agreement with a manufacturer to develop equipment for their backhaul network and small cell network.

 

In July, 2014, the Company sold 11 Registered Links for a total of $385,000.

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

You should read the following discussion and analysis of our financial condition and plan of operations together with our financial statements and related notes appearing elsewhere in this Quarterly Report. Various statements have been made in this Quarterly Report on Form 10-Q that may constitute “forward-looking statements.” Forward-looking statements may also be made in Competitive Companies, Inc.’s other reports filed with or furnished to the United States Securities and Exchange Commission (the “SEC”) and in other documents. In addition, from time to time, Competitive Companies, Inc. (“CCI,” “we,” “us,” “our,” or the “Company”) through its management may make oral forward-looking statements. The words “believe,” “expect,” “anticipate,” “optimistic,” “intend,” “plan,” “aim,” “will,” “may,” “should,” “could,” “would,” “likely” and similar expressions are intended to identify forward-looking statements. Forward-looking statements are subject to risks and uncertainties which could cause actual results to differ materially from such statements.   The most important facts that could prevent us from achieving our stated goals include, but are not limited to, the following:

 

(a)

volatility or decline of the Company's stock price;

(b)

potential fluctuation in quarterly results;

(c)

failure of the Company to earn revenues or profits;

(d)

inadequate capital to continue or expand its business, and inability to raise additional capital or financing to implement its business plans;

(e)

failure to further commercialize its technology or to make sales;

(f)

loss of customers and reduction in demand for the Company's products and services;

(g)

rapid and significant changes in markets;

(h)

litigation with or legal claims and allegations by outside parties, reducing revenue and increasing costs;

(i)

insufficient revenues to cover operating costs;

(j)

failure of our Registered Link Program to produce sales, revenues, or profits;

(k)

aspects of our business are not proprietary and in general we are subject to inherent competition;

(l)

further dilution of existing shareholders’ ownership in us;

(m)

uncollectible accounts and the need to incur expenses to collect amounts owed to the Company; and

(n)

the Company does not have an Audit Committee nor any independent directors.

 

There is no assurance that the Company will be profitable, the Company may not be able to successfully develop, manage, or market its products and services, the Company may not be able to attract or retain qualified executives and technology personnel, the Company may not be able to obtain customers for its products or services or successfully compete, the Company’s products and services may become obsolete, government regulation may hinder the Company’s business, additional dilution in outstanding stock ownership may be incurred due to the issuance of more shares, warrants, and stock options and the exercise of outstanding warrants and stock options, or other risks inherent in the Company’s businesses. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. We undertake no obligation to update or revise any forward-looking statements.

 

 

Business

 

Competitive Companies, Inc. (the “Company” or “CCI”) was originally incorporated in the state of Nevada in October 2001 and acts as a holding company for its operating subsidiaries, Wytec International, Inc. (“Wytec”), Wylink, Inc. (“Wylink”), Wireless Wisconsin LLC, Innovation Capital Management, Inc. (“ICM”), Innovation Capital Management LLC (“ICMLLC”), and Capaciti Networks, Inc. (collectively, the “Subsidiaries”). The Company and its Subsidiaries (sometimes collectively referred to as “CCI”) are involved in providing next generation fixed and mobile wireless broadband Internet services nationally and internationally to wholesale, retail and enterprise customers. Due to recent developments in our intellectual property and the continued development of our municipal and governmental relationships along with the addition of key personnel, we believe we will be able to expand our business model to include additional service applications such as an alternative to fiber to the home (FTTH), machine to machine (M2M) and internet protocol television (IPTV) services. Included in the expanded business model are optimization strategies for assisting municipalities in leveraging current assets for maximum utilization related to the provision of telecommunications services.

 

We plan to accomplish these objectives by applying the extended development of our current intellectual property along with utilizing proprietary next generation technology to build our platform networks. We believe the benefits of the platform network is its ability to support multiple mobile communications services including but not limited to public safety, first responder, machine to machine and carrier offload services.

 

CCI is currently in high-level discussions with more than ten U.S. city governments including Columbus, Ohio where we have been developing a 4G Wi-Fi network throughout the central business district of Columbus. CCI’s network infrastructure is capable of delivering bandwidth services up to 1.5 gigabits per second to a wide range of customers including midsize and large corporate operations located in Tier One, Tier Two and Tier Three (the term “Tier” defines the population size of the link location) cities throughout the United States as well as data transport services to carriers, municipalities and energy operations. CCI deploys millimeter wave technology in its backhaul design for supporting its platform networks for its high capacity data throughput objectives.

 

Test results have produced record performance speeds in excess of 110 Mbps to a smart phone and over 200 Mbps to a laptop computer resulting in the drafting of CCI’s first contractual agreement with the city for services rendered. The agreement, when substantially completed, is expected to provide for a footprint covering a substantial portion of the Central Business District (“CBD”) of Columbus, Ohio providing, among other services, direct connections to public safety devices, high capacity Wi-Fi access to commercial enterprises and the extension of the Company’s metro cell deployment designed for carrier offload and machine to machine services.

 

Through the Company’s subsidiary, Wireless Wisconsin, LLC, we provide high speed wireless Internet connections to residents in rural communities, as well as some dial-up internet services to businesses and residents within various markets throughout rural Wisconsin. We operate in both a regulated and non-regulated environment. Our current plan includes the delivery of 4G mobile broadband services via Wi-Fi in urban, suburban and rural markets throughout the United States.

 

Overview of Current Operations

 

We continue to shift our focus away from our past revenue sources, such as web hosting, dial-up, wireless, DSL, and wired internet services and move toward the design, development, and implementation of 4G mobile Wi-Fi networks with an accelerated concentration on the development of our “Smart City” concept. We believe recent national and international relationships have enhanced the progression of our “Smart City” development in conjunction with the growing relationships with city and, most recently, state governments.

 

On November 8, 2011, we acquired Wytec, a Nevada corporation that owns an interest in five U.S. patents related to local multipoint distribution service (“LMDS”) or millimeter technology. LMDS deals primarily in the transmission of point-to-point and point-to-multipoint data distribution utilizing millimeter wave spectrum. Though the patents are currently unusable in our current 4G backhaul configuration, we intend to advance a derivative of the technology for usage in future 4G millimeter backhaul deployments. Millimeter links are now utilized as the predominate choice in gigabyte data transmission in support of 4G network deployments.

 

On September 7, 2012, Wytec entered into a definitive agreement with General Patent Corporation (“GPC”) to form Wytec LLC, a Delaware limited liability company, for the purpose of transferring ownership of our five patents originally owned by Wytec International, Inc. into Wytec LLC. GPC acts as the general manager of the LLC and will assist in the monetization of the five patents.

 

Wytec’s current product development involves the design of a “small cell” transmitter called the LPN-16 designed to meet the stringent bandwidth needs of both government “first responder” services as well as “carrier offload” services. Management believes the LPN-16 transmitter is the first of its kind specifically developed to participate in the Small Cells as a Service (“SCaaS”) market which has been forecasted by SNS Research to reach $15 billion globally by 2020. In addition to the SCaaS market, management believes the LPN-16 transmitter will support the needs of the massive growth of the machine to machine (“M2M”) market forecasted by SNS Research to account for nearly $196 Billion in global revenues by the end of 2020.

 

Wytec’s LPN-16 transmitter is proprietary intellectual property of Wytec for which management has applied for U.S. patent protection rights in the second quarter of 2014 and is a significant part of Wytec’s Intelligent Community Wi-Fi Network (“IWiN”). We intend to file international patent applications for the technology in the near future. Design and engineering of the LPN-16 has been completed with development of the first units to be tested at the 2,000 acre test facilities of Southwest Research in San Antonio, Texas in October of 2014. We expect viewers of the first test to include government entities (federal, state and municipal), mobile service operators (carriers), as well as cable and fiber optic service providers.

 

On June 9, 2012, our wholly owned subsidiary, Wytec, formed a wholly owned subsidiary, Wylink, Inc., a Texas corporation, to market and sell millimeter wave spectrum in the licensed 60 & 90 Gigahertz frequency channels. The Federal Communications Commission (“FCC”) has developed a unique application program giving the ability for qualified applicants to own millimeter spectrum under a program known as the Registered Link Program. We sell point-to-point registered links (“Registered Links”) as part of our backhaul solution in support of our 4G Wi-Fi network. As of August 7, 2014, we have sold 274 Registered Links in four markets for a total of $8,379,480, of which 166 have been acquired by Wytec in exchange for shares of Wytec’s Series A Preferred Stock and a participating net profits interest in Wytec. The cash received from the sale of our Registered Links is recorded as “deferred revenue” and will be recorded as revenue once the telecommunication equipment is installed for the link owners.

 

Management now focuses its primary business on the development of 4G mobile broadband networks capable of delivering 100 Mbps to mobile devices and to be utilized as a multi-carrier “offload” solution.

 

Critical Accounting Policies

 

Our discussion and analysis of our financial condition and results of operations, including the discussion on liquidity and capital resources, are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, management re-evaluates its estimates and judgments, particularly those related to the determination of the estimated recoverable amounts of trade accounts receivable, impairment of long-lived assets, revenue recognition and deferred tax assets. We believe the following critical accounting policies require more significant judgment and estimates used in the preparation of the financial statements.

 

We maintain an allowance for doubtful accounts for estimated losses that may arise if any of our customers are unable to make required payments. Management specifically analyzes the age of customer balances, historical bad debt experience, customer credit-worthiness, and changes in customer payment terms when making estimates of the uncollectability of our trade accounts receivable balances. If we determine that the financial conditions of any of our customers deteriorated, whether due to customer specific or general economic issues, increases in the allowance may be made. Accounts receivable are written off when all collection attempts have failed.

 

We follow the provisions of Staff Accounting Bulletin ("SAB") 101, "Revenue Recognition in Financial Statements" for revenue recognition and SAB 104. Under Staff Accounting Bulletin 101, four conditions must be met before revenue can be recognized: (i) there is persuasive evidence that an arrangement exists, (ii) delivery has occurred or service has been rendered, (iii) the price is fixed or determinable and (iv) collection is reasonably assured.

 

Income taxes are accounted for under the asset and liability method. Under this method, to the extent that we believe that the deferred tax asset is not likely to be recovered, a valuation allowance is provided. In making this determination, we consider estimated future taxable income and taxable timing differences expected in the future. Actual results may differ from those estimates.

 

Result of Operations for the Six Months Ended June 30, 2014 and 2013

 

Revenue for the six months ended June 30, 2014 was $24,841, as compared to revenue of $34,533 for the six months ended June 30, 2013. This decrease in revenue of $9,692 or 28% was primarily due to the loss of market share to competing companies from cellular and satellite based technologies. We are currently expanding our product lines to increase our revenue through alternative means such as, “mobile” 4G services and our Registered Link Program, through which we intend to sell point to point Registered Links between two known GPS coordinates that make up a part of a backhaul network feeding into a microcell mobile broadband network.

 

Cost of sales for the six months ended June 30, 2014 was $26,042, a decrease of $3,011, or 10%, from $29,053 for the six months ended June 30, 2013. Our cost of sales decreased primarily due to reductions in costs related to sales operations.

 

General and administrative expenses were $2,521,501 for the six months ended June 30, 2014, as compared to $1,146,271 for the six months ended June 30, 2013. This resulted in an increase of $1,375,230 or 120% compared to the same period in 2013. The increase in our general and administrative expenses was largely a result of commissions and testing paid to third parties to assist in the setup and registration of Registered Links sold during the six months ended June 30, 2014.

 

Salary and wage expenses were $525,645 for the six months ended June 30, 2014, as compared to $339,251 for the six months ended June 30, 2013, which resulted in an increase of $186,394, or 55% compared to the same period in 2013. The increase in salary and wages is due to increase in the cost of living adjustment and compensation (including stock compensation) of certain current employees.

 

Interest expense for the six months ended June 30, 2014 was $46,374, as compared to $101,359 for the six months ended June 30, 2013. This resulted in a decrease of $54,985 or 54% compared to the same period in 2013. The decrease was primarily due to amortization of debt discount of approximately $65,204 that was recorded in the six-month period ended June 30, 2013 that did not occur in the six-month period ended June 30, 2014.

 

Liquidity and Capital Resources

 

While we have raised capital to meet our working capital and financing needs in the past, additional financing will be required in order to meet our current and projected cash requirements for operations. As of June 30, 2014, we had a working capital deficit of $2,862,627. As of June 30, 2014, $3,245,000 of our current liabilities are deferred revenue on Registered Link sales that have been funded by the customer, for which obligations to the customer have not yet been completed.

 

As of June 30, 2014, $799,632 of our outstanding convertible debentures and notes payable are in default or mature within the next twelve months and are classified as current liabilities in the accompanying consolidated balance sheet. We plan to remedy the defaults through conversions or through repayments once future financing is secured.

 

We anticipate that we will incur operating losses in the next twelve months. Our revenues are not expected to exceed our investment and operating costs in the next twelve months. Our prospects must be considered in light of the risks, expenses, and difficulties frequently encountered by companies in their early stage of operations. To address these risks, we must, among other things, seek growth opportunities through investment and acquisitions, effectively monitor and manage our claims for payments that are owed to us, implement and successfully execute our business strategy, respond to competitive developments, and attract, retain and motivate qualified personnel. We cannot assure that we will be successful in addressing such risks, and the failure to do so could have a material adverse effect on our business prospects, financial condition and results of operations.

 

Satisfaction of our cash obligations for the next 12 months.

 

As of June 30, 2014, our cash balance was $921,782. Our plan for satisfying our cash requirements for the next twelve months is through sales-generated income, private placements of our common stock, third party financing, and/or traditional bank financing. We anticipate sales-generated income during that same period of time, but do not anticipate generating sufficient revenue to meet our working capital requirements. Consequently, we intend to attempt to find sources of additional capital in the future to fund our growth and expansion through additional equity or debt financing or credit facilities. There is no assurance that we would be able to meet our working capital requirements through the private placement of equity or debt or from any other source.

 

Off-Balance Sheet Arrangements

 

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

 

Recently Issued Accounting Standards

 

The Company has reviewed the updates issued by the Financial Accounting Standards Board (“FASB”) during the three month period ended June 30, 2014, and determined that the updates are either not applicable to the Company or will not have a material impact on the Company.

 

Item 3. Quantitative and Qualitative Disclosure About Market Risk.

 

Not Applicable.

 

Item 4. Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures

 

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed by us is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and that such information is accumulated and communicated to our management, including our chief executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure based closely on the definition of “disclosure controls and procedures” in Rule 15d-15(e) under the Exchange Act. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

 

Our chief executive officer and principal financial officer, William H. Gray, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report. Based on this evaluation, our chief executive officer and principal financial officer has concluded that our disclosure controls and procedures were not effective as of June 30, 2014. Specifically, our disclosure controls and procedures were not effective in timely alerting our management to material information relating to us (including our consolidated subsidiaries) required to be included in our periodic SEC filings and ensuring that information required to be disclosed by us in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our chief financial officer, or person performing similar functions, as appropriate to allow timely decisions regarding required disclosure, for the following reasons:

 

·	We do not have an independent board of directors or audit committee or adequate segregation of duties.
·	We do not have an independent body to oversee our internal controls over financial reporting and lack segregation of duties due to the limited nature and resources of the Company.

 

We have begun to rectify these weaknesses by hiring additional accounting personnel and will create an independent board of directors once we have additional resources to do so.

 

Changes in Internal Control Over Financial Reporting

 

There were no changes in our internal control over financial reporting that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 

PART II – OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

The Company may be involved in legal actions and claims arising in the ordinary course of business from time to time. As of the date of this report, there are no ongoing legal matters of which management is aware.

 

Item 2. Unregistered Sales of Equity Securities.

 

In April 2014, Wytec International, Inc. issued 3,320,000 shares of Series A Preferred Stock, pursuant to Rule 506(b) of Regulation D of the Securities Act of 1933, as amended (the “Securities Act”), to unrelated parties in exchange for registered link obligations and related equipment.

 

During the three month period ended June 30, 2014, the Company purchased 475,000 shares of its common stock, pursuant to Rule 506(b) of Regulation D of the Securities Act from two officers of the Company at an aggregate cost of $19,285.

 

Item 3. Defaults Upon Senior Securities.

 

As of June 30, 2014, $183,006 of our outstanding convertible debentures and notes payable are in default

 

Item 4. Mine Safety Disclosures.

 

Not applicable.

 

Item 5. Other Information.

 

None.

 

Item 6. Exhibits.

 

				Incorporated by reference
Exhibit		Exhibit Description	Filed herewith	Form	Period ending	Exhibit	Filing date
2.1		Plan and agreement of reorganization between Huntington Telecommunications Partners, LP and Competitive Companies Holdings, Inc. and Competitive Companies, Inc.		SB-2		2	01/11/02
2.2		Plan and agreement of reorganization between Huntington Telecommunications Partners, LP and Competitive Companies Holdings, Inc. and Competitive Companies, Inc.		SB-2/A		2.2	08/02/02
2.3		Plan and agreement of reorganization between Huntington Telecommunications Partners, LP and Competitive Companies Holdings, Inc. and Competitive Companies, Inc.		SB-2/A		2.2	04/24/03
2.4		Plan and agreement of reorganization between Competitive Companies, Inc. and CCI Acquisition Corp		8-K		10.1	05/09/05
3(i)		Articles of Competitive Companies, as amended		SB-2		3(I)	01/11/02
3(ii)		Bylaws of Competitive Companies		SB-2		3(II)	01/11/02
4		Rights and Preferences of Preferred Stock		SB-2		4	01/11/02
31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act *	X
31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act *	X
32.1		Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act *	X
32.2		Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act *	X
101.INS		XBRL Instance Document *	X
101.SCH		XBRL Schema Document *	X
101.CAL		XBRL Calculation Linkbase Document *	X
101.DEF		XBRL Definition Linkbase Document *	X
101.LAB		XBRL Label Linkbase Document *	X
101.PRE		XBRL Presentation Linkbase Document *	X

 

*

Pursuant to Rule 406T of Regulation S-T, the interactive data files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, and otherwise are not subject to liability under those sections.

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

COMPETITIVE COMPANIES, INC.

 

 

 

By: /S/ William H. Gray                                                                  

William H. Gray, Chairman, Chief Executive Officer,

President, and Chief Financial Officer (Principal

Executive Officer/Principal Accounting Officer)

 

Date: August 7, 2014