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: March 31, 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 May 9, 2014, there were 334,676,533 shares outstanding of the registrant’s common stock.

 

 

COMPETITIVE COMPANIES, INC.

 

FORM 10-Q

 

March 31, 2014

 

Table of Contents

 

 

	PART I - FINANCIAL INFORMATION
	ITEM 1.	FINANCIAL STATEMENTS
		Consolidated Balance Sheets as of March 31, 2014 (unaudited) and December 31, 2013	3
		Consolidated Statements of Operations for the Three Months ended March 31, 2014 and March 31, 2013 (unaudited)	4
		Consolidated Statements of Cash Flows for the Three Months ended March 31, 2014 and March 31, 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	16
	ITEM 4.	CONTROLS AND PROCEDURES	16
	PART II - OTHER INFORMATION
	ITEM 1.	LEGAL PROCEEDINGS	18
	ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	18
	ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	18
	ITEM 4.	MINE SAFETY DISCLOSURES	18
	ITEM 5.	OTHER INFORMATION	18
	ITEM 6.	EXHIBITS	18
		SIGNATURES	19

 

 

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements 

COMPETITIVE COMPANIES, INC.

CONSOLIDATED BALANCE SHEETS

 

		March 31,				December 31,
		2014				2013
Assets		(Unaudited)				(Audited)
Current assets:
Cash		$	575,400			$	901,785
Accounts receivable, net		$	6,908			$	10,658
Equipment held for installation			842,366				714,804
Total current assets			1,424,674				1,627,247
Property and equipment, net			72,119				60,523
Other assets:
Deposits			9,463				10,108
Total assets		$	1,506,256			$	1,697,878
Liabilities and Stockholders' (Deficit)
Current liabilities:
Accounts payable		$	210,344			$	192,048
Accrued expenses			241,745				225,448
Deferred revenues, net of commissions			1,845,000				5,339,480
Stock subscriptions payable			4,229,480				–
Notes payable			67,006				67,006
Current portion of convertible debentures, net			621,522				621,522
Total current liabilities			7,215,097				6,445,504
Long-term liabilities:
Convertible debentures, net			111,104				111,104
Total liabilities			7,326,201				6,556,608
Stockholders' (deficit):
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 March 31, 2014 and  December 31, 2013, respectively			335,618				335,618
Additional paid-in capital			5,443,999				5,443,499
Accumulated (deficit)			(11,562,219	)			(10,619,789	)
Treasury Stock, at cost, 945,000 and 470,000 shares at March 31, 2014 and
December 31, 2013, respectively			(39,938	)			(20,653	)
Total stockholders' (deficit)			(5,819,945	)			(4,858,730	)
Total liabilities and stockholders' (deficit)		$	1,506,256			$	1,697,878

 

See accompanying notes to consolidated financial statements.

 

COMPETITIVE COMPANIES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

               

 

		For the Three Months
		Ended March 31,
		2014				2013
Revenue		$	11,289			$	15,583
Cost of sales			12,922				13,313
Gross profit (loss)			(1,633	)			2,270
Expenses:
General and administrative			689,953				409,166
Salaries and wages			227,987				213,497
Depreciation and amortization			2,122				1,259
Total operating expenses			920,062				623,922
Net operating loss			(921,695	)			(621,652	)
Other income (expense):
Interest expense			(23,187	)			(55,992	)
Interest income			76				–
Other income			2,376				288
Gain on disposal of assets			–				780
Change in fair market value of derivative liabilities			–				(6,364	)
Total other income (expense)			(20,735	)			(61,288	)
Net loss		$	(942,430	)		$	(682,940	)
Weighted average number of common shares outstanding - basic and fully diluted			335,151,533				270,315,514
Net loss per share - basic and fully diluted		$	–			$	–

 

 

See accompanying notes to consolidated financial statements.

 

 COMPETITIVE COMPANIES, INC.

 CONSOLIDATED STATEMENTS OF CASH FLOWS

 (Unaudited)

       

 

		For the Three Months
		Ended March 31,
		2014				2013
Cash flows from operating activities
Net loss		$	(942,430	)		$	(682,940	)
Adjustments to reconcile net loss to  net cash provided by (used in) operating activities:
Amortization of convertible notes payable discounts			–				32,602
Change in fair market value of derivative liability			–				6,364
Stock-based compensation			500				90,750
Depreciation and amortization			2,122				1,259
Gain on asset disposal			–				(780	)
Decrease (increase) in assets:
Accounts receivable			3,750				177
Equipment held for installation			(127,562	)			–
Deposits and other assets			645				–
Increase (decrease) in liabilities:
Accounts payable			18,296				4,530
Accrued expenses			16,297				39,697
Deferred revenues			735,000				562,500
Net cash provided by (used in) operating activities			(293,382	)			54,159
Cash flows from investing activities
Purchases of property and equipment			(13,718	)			(67,266	)
Proceeds from equipment sales			–				3,684
Net cash used in investing activities			(13,718	)			(63,582	)
Cash flows from financing activities
Proceeds from short term and convertible debts			–				50,000
Purchase of treasury stock			(19,285	)			–
Net cash provided by financing activities			(19,285	)			50,000
Net increase (decrease) in cash			(326,385	)			40,577
Cash - beginning			901,785				184,195
Cash - ending		$	575,400			$	224,772
Supplemental disclosures:
Interest paid		$	–			$	–
Income taxes paid		$	–			$	–
Non-cash investing and financing activities:
Stock subscription payable for issuance of subsidary's preferred stock		$	4,229,480			$	–

See accompanying notes to consolidated financial statements.

COMPETITIVE COMPANIES, INC.

Note to Consolidated Financial Statements

March 31, 2014

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 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 $11,562,219 and a working capital deficit of $5,790,423 at March 31, 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:

 

		March 31,				December 31,
		2014				2013
Telecommunication equipment and computers		$	49,628			$	35,910
Furniture and fixtures			41,824				41,824
			91,452				77,734
Less accumulated depreciation			(19,333	)			(17,211	)
		$	72,119			$	60,523

 

Depreciation expense totaled $2,122 and $1,259 for the three months ending March 31, 2014 and 2013, respectively.

 

Note 3 – Stock Subscriptions Payable

 

During the three month period ending March 31, 2014 the Company agreed to issue 2,960,000 shares of Wytec International, Inc. (the “Subsidiary”) Series A Preferred Stock, in exchange for the remaining obligations of 148 registered link sales that were included in deferred revenue. The Company has recorded $4,229,480 as stock subscriptions payable for the Series A Preferred Stock that has not been issued as of March 31, 2014. Deferred revenue has been reduced by the amount of the stock subscriptions payable.

 

There is no current active market for the Wytec International, Inc. stock, so the stock issuance has been valued at the deferred revenue obligation.

 

 

Note 4 – Notes Payable

 

Notes payable consists of the following:

		March 31,				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 $1,340 and $1,340 for the three months ended March 31, 2014 and 2013, respectively. The Company intends to pay the outstanding principal and accrued interest when liquidity allows.

 

 

Note 5 – Convertible Debentures

 

The Company has issued unsecured convertible promissory notes at various times from 2008 through 2013. During the three months ended March 31, 2014 and 2013, the Company issued convertible promissory notes totaling $-0- and $50,000, respectively. The notes bear interest at rates of 8% to 12.5% per annum. The notes mature at various times through June 2015. At March 31, 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 also carry detachable warrants. As of March 31, 2014, warrants to purchase 14,736,100 shares of the Company’s and Subsidiary’s common stock were outstanding. The Company’s warrants have exercise prices ranging from $0.003 to $0.021 per share and are exercisable for a period of two years from the grant date. The Subsidiary’s 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.

 

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. The warrants have exercise prices ranging from $0.01 to $0.05 per share and are exercisable for a period of two years from the grant date.

 

 

Note 6 – Changes in Stockholders’ Equity (Deficit)

 

During the three month period ended March 31, 2013, the Company issued 15,025,000 shares of common stock in exchange for $90,750 of completed services and compensation.

 

On October 10, 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. For the three month periods ended March 31, 2014 and 2013, the stock- based compensation related to these option grants was $500 and $500, respectively.

 

 

Note 7 – Treasury Stock

 

During the three month period ended March 31, 2014, the Company purchased 475,000 shares of its common stock, at an aggregate cost of $19,285 from two officers and directors of the Company.

 

 

Note 8 – Subsequent Events

 

In April 2014, Wytec International, Inc fulfilled its liability and issued 2,960,000 shares of its Series A Preferred Stock in exchange for 148 of registered links that were included in deferred revenue.

 

In April 2014, Wytec International, Inc issued 360,000 shares of Series A Preferred Stock in exchange for 18 registered links 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, Wytec International, Inc issued 24,000,000 shares of common stock to the Company.

 

In April 2014, the Company issued 90,000,000 warrants to purchase 90,000,000 shares of the Company’s common stock to William H. Gray. The warrants are exercisable at a price of $0.025 per share for a period of 10 years from the date of issuance and vest based upon certain average per share closing prices of the Company’s common stock and certain minimum average trading volumes.

 

In April 2014, the Company granted William H. Gray options to purchase 10,000,000 shares of the Company’s common stock at an exercise price of $0.025 per share and exercisable for a period of five years from the date of grant. The options vest pursuant to the following vesting schedule: 4,000,000 on the date of grant, 4,000,000 on April 17, 2015, and 2,000,000 on April 17, 2016. .

 

In May 2014, Wytec International, Inc issued a total of 1,000,000 warrants to purchase 1,000,000 shares of Wytec stock to two unrelated service providers. The warrants are exercisable at a price of $1.25 per share until December 31, 2015.

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 Links Program to produce revenues or profits;

(k)

aspects of our business are not proprietary and in general we is 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 sufficient independent directors.

 

There is no assurance that the Company will be profitable, the Company may not be able to develop, manage or market its products and services successfully, 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, 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 (formerly DiscoverNet, Inc.), Innovation Capital Management, Inc. (“ICM”), and Innovation Capital Management LLC (“ICMLLC”), and Capaciti Networks (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 both 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 addition of key personnel, we are expanding our business model to further develop the “platform network” concept. 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 derivative development of our current intellectual property along with utilizing propriety 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 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 as the backbone in the design of its platform networks in support of 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 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 and 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 now includes the delivery of 4G mobile broadband services via Wi-Fi in urban, suburban and rural markets throughout the United States.

 

Wytec International, Inc., a Nevada corporation (“Wytec”), designs, manufactures, and installs “proprietary” carrier-class Wi-Fi solutions to local government, Mobile Service Operations (“MSOs”), National Telecommunications Operators (“NTOs”), and corporate enterprises. Wytec owns an interest in five patents focused on high capacity millimeter wave technology (the “Patents”), which Wytec holds in a partnership with General Patent Corporation (“GPC”). Wytec is developing the third generation of enhancements to its multi-channeling patented technology known as the LPN-16 and has engaged Southwest Research Institute, one of the largest research facilities in the world, to assist it in, among other projects, the design of its next generation of millimeter wave improvements utilizing multi-channeling technology and other discovered improvements.

 

Wylink Inc., a Texas corporation and wholly owned subsidiary of Wytec, operates and manages a unique sales organization engaged in the sale of Federal Communications Commission (“FCC”) registered links participating in the 70 and 80 gigahertz licensed frequency program (the Program”). The Program allows qualified individuals to own a segment of the “backhaul” infrastructure of the Wytec’s citywide business deployment. A total of eight cities were chosen for initial deployment of the Company’s Registered Link Program. The first market, Columbus, Ohio, sold out of its Registered Links representing 52 Links averaging $25,000 per Link totaling $1,300,000 in sales. Each market is chosen carefully with multiple considerations including local government acceptance and select city participation. Participation includes access point real estate and fiber optics positioning. As of May 9, 2014, Wylink has sold 227 Registered Links in four markets averaging $29,513 per Link totaling $6,699,480 in sales. There is no assurance, however, as to whether or not Wylink will continue to sell more Registered Links or how many Registered Links Wylink will sell in 2014. Furthermore, with each Registered Link it sells, Wylink incurs a liability to provide and install telecommunications equipment at its cost for the Link owner, and monthly lease payments for access to a portion of the Link’s capacity.

 

Capaciti Networks, Inc., a Texas corporation (“CNI”), is a wholly owned subsidiary of CCI, CNI was formed on August 12, 2013. Capaciti provides flexible and customizable wireless internet services for small-to-medium businesses, and commercial and enterprise clients. Capaciti is currently trying a unique marketing and sales approach called Bid for Better Broadband (B4BB). This marketing and sales methodology supports the Company’s intelligent community commitment to city leaders by bringing increased broadband competition while providing competitive pricing and better broadband services. To date, Capaciti is the only wireless service provider in the industry to offer a name your own price approach for broadband services in the United States.  Capaciti officially launched its Bid for Better Broadband website on December 2, 2013 which allows potential customers to use an online automated system for choosing their broadband plan and communicating with Capaciti sales team members.  The Bid for Better Broadband site received its first accepted online bid in January of 2014.

 

Innovation Capital Management, Inc., (“ICM”) operates as the Company’s private equity placement division focused on raising capital and developing joint ventures and acquisitions while Innovation Capital Management, LLC (“ICMLLC”) focuses on structuring strategic marketing relationships for the Company’s products and services. ICM is currently managing an exchange offer with several holders of the Company’s outstanding convertible notes. In the exchange offer, we are offering up to 300,000 of units, each unit consisting of one dollar principal amount of 12.5% convertible promissory note of Wytec (the “Exchange Offer Notes”) and one warrant to purchase one share of Wytec’s common stock (“Exchange Offer Warrants”), in exchange for up to $300,000 of outstanding principal amount and accrued but unpaid interest of the Company’s convertible notes, which will then be cancelled. The security interest in the Exchange Offer Notes is pari pasu with the security interest securing Wytec’s other outstanding notes. The Exchange Offer Warrants are exercisable for a period of two years after the date of issuance at an exercise price of $3.00 per share. To date, Wytec has issued $111,149 of Exchange Offer Notes and 111,145 Exchange Offer Warrants exercisable until various dates ranging from June 30, 2015 to October 18, 2015. ICM is also managing our exchange offer with Registered Link holders, as discussed in the following paragraph. ICM does not receive any remuneration for its managerial services to the Company and its other Subsidiaries.

 

ICM is also managing our $5,374,480 buyback unit offering for Wytec International, Inc. The offering consists of 205 units consisting of 4,100,000 shares of Series A Convertible Preferred Stock and Participating Interest. The units will be exchanged for up to 205 registered links owned by Wytec linkholders. Each unit consists of (1) a pro rata percentage interest in the net profits of the Company, calculated in accordance with generally accepted accounting principles ("GAAP") and distributable on a quarterly basis until the earlier to occur of (a) the date on which the Company becomes a fully reporting company with the Securities and Exchange Commission ("SEC") and its common stock is traded on the NASDAQ Capital Market or higher, or (b) five (5) years from the date of the closing of this offering, and (2) 20,000 shares of the Wytec's Series A Convertible Preferred Stock, each Share of which is convertible into one share of the Wytec's common stock at any time. The Units will share in a total of 33.3% of the Company's net profits. As of May 9, 2014, Wytec had issued 227 units and expects to fully subscribe the offering by August 2014, although there is no assurance as to how many units will be issued.

 

ICM does not receive any remuneration for its managerial services to the Company and its other Subsidiaries.

 

Wireless Wisconsin, LLC, a Wisconsin limited liability company (“Wireless WI”), and managed by Capaciti, provides high speed wireless Internet connections to residents in rural communities to include dial-up, DSL and wireless internet services to businesses and residents within various markets throughout rural Wisconsin. Wireless WI operates in both a regulated and non-regulated environment. The Company is planning to install its high capacity wireless technology and begin offering its high capacity broadband services prior to year end of 2014. Our current plan now includes the delivery of 4G mobile broadband services via WiFi in major and rural markets throughout the United States.

 

CCI generates revenues through the sale of its products and services offered through its subsidiary operations.

  

Products

 

Wireless Wisconsin,LLC

 

CCI, through its wholly owned subsidiary, Wireless Wisconsin LLC, currently provides residential customers in Western Wisconsin dial-up, DSL, and wireless broadband services. Both DSL and dial-up internet are provided via a wholesale relationship with Ikano Wholesale. This wholesale relationship provides multiple territory access to many markets throughout North America and allows CCI to potentially expand its coverage nationwide. The Company’s local “fixed” broadband wireless services are currently restricted to areas located in western Wisconsin with plans to include mobile 4G Internet access and expand to other Wisconsin markets utilizing millimeter wave backhaul technology.

 

Wytec International, Inc.

 

Wytec International, Inc. Wytec International, Inc. is currently developing its next generation of point-to-point and point-to-multipoint millimeter equipment technology in multiple licensed and “limited” licensed frequencies, including the 60, 71-76, 81-86, and 92-95 GHz bands. This technology has most recently come to the forefront as a significant piece in delivering 4G telecommunications services because of its high capacity internet throughput features. These features enable a further high capacity delivery to a microcell or “small cell” network ultimately delivering 100+ Mbps bandwidth to 4G mobile devices such as smartphones, i-pads and laptops. Management believes that the Wytec network design is one of the few 4G networks to comply with the International Mobile Telecommunications Advanced (“IMT-A”) standards of 4G technology in North America. Wytec is currently developing a 4G network in the Central Business District (“CBD”) of Columbus, Ohio and has successfully produced “mobile” speeds in excess of 200 Mbps for a laptop and over 100 Mbps for a smart phone. Management believes the result of these successes has further supported our claim of complying with IMT-A standards and sets Wytec apart as the only live open network meeting these standards in North America.

 

Additionally, Wytec has generated interest in multiple relationships involving key back-end support such as Wytec’s recent contract with Level 3 Communications (“Level 3”). Level 3 operates a Tier 1 network providing core transport, IP, voice, video, and content delivery for most of the Internet carriers in North America, Latin America, Europe, and selected cities in Asia. Level 3 is also the largest competitive local exchange carrier (“CLEC”) in the United States. Wytec’s contractual relationship with Level 3 opens the door for Wytec to market its equipment and services to more than 500 U.S. locations including 55 foreign countries.

 

Wytec’s current product development involves the design of a “small cell” radio 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 radio is the first of its kind specifically developed to participate in the Small Cells as a Service (“SCaaS”) market which management forecasts will exceed $6.5 billion by 2018. In addition to the SCaaS market, management believes the LPN-16 radio will support the needs of the massive growth of the Machine to Machine (“MtoM”) and “wearable technologies” market which management forecasts to exceed $2 trillion within the same time frame.

 

Wytec’s LPN-16 radio is proprietary intellectual property of Wytec for which management filed a provisional patent application on March 12, 2014 for U.S. and International patent protection rights and is a significant part of Wytec’s intelligent community Wi-Fi network. Much of the design and engineering of the LPN-16 radio has been completed and we expect it to be commercially ready during the third quarter of 2014. We expect participants for testing the radio to include government (federal, state and municipal), mobile service operators (carriers), and multiple application service providers.

 

Wylink, Inc.

 

As a subsidiary of Wytec International, Inc., Wylink, Inc. was developed as a partnership with General Patent Corporation (“GPC”) to hold the interest of Wytec’s five (5) world class patents involving multi-channeling technology and to provide protection and enforcement services to the value of its intellectual property. To date, no patent enforcement has been applied to Wytec’s interest in its patent portfolio.

 

Wylink has supported initial Wytec equipment sales through the development of a unique marketing concept called the Registered Link Program. The Registered Link Program generated Wytec product sales through the promotion of a business opportunity afforded under the FCC 70-80 GHz frequency allocation program. Wylink promotes and sells the opportunity to a qualified applicant allowing the applicant to own and operate its own Registered Link established as a part of the Wytec backhaul network. Registered Link owners receive income from subscribers of the Link including Capaciti’s (CCI subsidiary) commitment to support its Wi-Fi network through commercial and enterprise Internet sales. As of May 9, 2014, Wylink has sold 227 Registered Links in five markets averaging $29,513 per Link totaling $6,699,480 in Registered Link sales.

 

Currently Wytec’s primary service product consists of Wylink’s FCC Registered Link application and registration service for the 70 and 80 Gigahertz FCC “protected frequency” supporting the backbone of Wytec’s 4G Wi-Fi network. In addition to supporting its 4G mobile service, the network provides high capacity Internet to fixed wireless commercial Internet service providers. FCC Registered Links are capable of delivering at least one (1) gigabyte or more of data throughput to multiple points throughout the network. This enables each point within the network to deliver 100 Mbps or more to the end user including mobile and fixed wireless customers. Service products on the network include commercial and enterprise fixed wireless customers, mobile 4G Wi-Fi service to individuals, public safety (such as the camera network to the City of Columbus), MSOs, also known as “carriers,” hot spots, hot spot aggregators, hot zones such as special sports events and other large data capacity users. Much of the network capacity will be utilizing the Wytec LPN-16 small cell technology also known as Small Cells as a Service or “SCaaS”.

 

The total global market for equipment sales included in the Wytec portfolio of equipment offerings is estimated at over $5.7 billion by 2018 according to market research performed by Signals and Systems in their publication of the HetNet Bible dated May 10, 2013. CCI has estimated in a five year forecast that Wytec should capture approximately $116,443,000 or 2% of this equipment sales market.

 

Services

 

Wytec Service Offerings

 

Transport and Maintenance Services. Wytec, besides selling equipment including its LPN-16 technology and other proprietary equipment offered through special vendor relationships, will also sell unique services known as “transport” services in consideration for transportation fees, for the use of the small cell portion of its network. This is known as “SCaaS” or Small Cells as a Service and primarily involves the sale of transport to enterprise customers that do not need the use of CCI’s Internet feed such as municipal, state, and federal governments, mobile service operators (Carriers), utility operators and machine to machine (m2m) customers.

 

The total global market for SCaaS sales is estimated at over $6.5 billion by 2018 according to market research performed by Signals and Systems in their publication of the HetNet Bible dated May 10, 2013. CCI has estimated in a five year forecast that Wytec should capture approximately $124,830,000 or 2% of the SCasS sales market. Wytec will also provide equipment maintenance contracts (from the sale of equipment) as a service and estimates the revenues from this service to total approximately $17,466,000 by 2018. Revenues for this service are calculated to be approximately 15% of total equipment sold. Management views this estimated percentage as an industry standard.

 

 

Capaciti Service Offerings

 

Internet Services. Capaciti Networks, Inc. was designed to market Internet services on behalf of the networks being designed and developed by Wytec. The offerings include but are not limited to fixed and mobile wireless service offerings to both residential and commercial Internet customers. In November 2013, Capaciti began selling mobile Wi-Fi through its contractual relationship with Pronto Networks allowing Wi-Fi services to be marketed in the Central Business District of Columbus, Ohio. To date, Capaciti has accepted over 200 mobile Wi-Fi connections and believes this service offering will grow substantially as users discover the record breaking speed of the network, delivering more than 100 Mbps to a smart phone and more than 200 Mbps to a laptop.

 

Capaciti also offers Internet services through its operation in Eau Claire, Wisconsin called Wireless Wisconsin and currently generates sales of approximately $5,000 per month. CCI plans to upgrade the Eau Claire market to provide the same services it currently provides in Columbus by year end 2014. Wireless Wisconsin also offers both DSL and dial-up internet via a wholesale relationship with Ikano Wholesale. This wholesale relationship provides multiple territory access to many markets throughout North America and allows the Company to expand its coverage nationwide.

 

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 the design, development, and implementation of 4G mobile Wi-Fi networks with an accelerated concentration towards 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 International, Inc. (“Wytec”), a non-operational company that owns five U.S. patents related to Local Multipoint Distribution Service (“LMDS”). 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 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 May 9, 2014, Wylink had sold 227 Registered Links for a total of $6,699,480 , 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.

 

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 member of the LLC and will assist in the monetization of the five patents.

 

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 Three Months Ended March 31, 2014 and 2013

 

Revenue for the three months ended March 31, 2014 was $11,289, as compared to revenue of $15,583 for the three months ended March 31, 2013. This decrease in revenue of $4,294 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 Links Program, through which we 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 three months ended March 31, 2014 was $12,922, a decrease of $391, or 3%, from $13,313 for the three months ended March 31, 2013. Our cost of sales decreased primarily due to reductions in costs related to sales operations.

 

General and administrative expenses were $689,953 for the three months ended March 31, 2014, as compared to $409,166 for the three months ended March 31, 2013. This resulted in an increase of $280,787 or 69% 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, and legal and professional fees paid to third parties to assist in the setup and issuance of the Company’s subsidiary stock during the three months ended March 31, 2014.

 

Salary and wage expenses were $227,987 for the three months ended March 31, 2014, as compared to $213,497 for the three months ended March 31, 2013, which resulted in an increase of $14,490, or 7% 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 three months ended March 31, 2014 was $23,187, as compared to $55,992 for the three months ended March 31, 2013. This resulted in a decrease of $32,805 or 59% compared to the same period in 2013. The decrease was primarily due to amortization of debt discount of approximately $33,000 that was recorded in the three-month period ended March 31, 2013 that did not occur in the three-month period ended March 31, 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 March 31, 2014, we had a working capital deficit of $5,790,423. As of March 31, 2014, $1,845,000 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 March 31, 2014, $4,229,480 of our current liabilities are for stock subscriptions payable for the obligation to issue shares of Wytec’s Series A Preferred Stock in exchange for certain Registered Links.

 

 

As of March 31, 2014, $688,528 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.

 

During the three months ended March 31, 2013, the Company received a total of $50,000 from private lenders in exchange for unsecured convertible promissory notes with various maturity dates between December 31, 2014 and September 30, 2015.

 

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 March 31, 2014, our cash balance was $575,400. 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 March 31, 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.

 

Our chief executive officer and principal financial officer, William 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 March 31, 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.
·	All of our financial reporting is generated by our financial consultant.
·	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.

 

Internal Control Over Financial Reporting

 

Our chief executive officer and principal financial officer is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes of accounting principles generally accepted in the United States. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives.

 

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 pending or ongoing legal claims or proceedings of which management is aware.

 

Item 2. Unregistered Sales of Equity Securities.

 

In April 2014, Wytec International, Inc, a wholly owned subsidiary of the Company, issued a total of 3,320,000 shares of its Series A Preferred Stock and related net profits interests in exchange for 166 Registered Links. This exchange was made pursuant to a private placement under Rule 506 of Regulation D of the Securities Act of 1933, as amended. The Registered Links acquired in the exchange were originally sold by Wylink, Inc., a wholly owned subsidiary of Wytec International, Inc., for a total of $4,670,000.

 

In May 2014, Wytec International, Inc issued a total of 1,000,000 warrants to purchase 1,000,000 shares of Wytec stock to two unrelated service providers. The warrants are exercisable at a price of $1.25 per share until December 31, 2015.

 

Item 3. Defaults Upon Senior Securities.

 

None.

 

Item 4. Mine Safety Disclosures.

 

None.

 

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 Incorporation of Competitive Companies, Inc., as amended		SB-2		3(I)	01/11/02
3(ii)		Bylaws of Competitive Companies, Inc.		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

 

* Filed herewith. 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: May 15, 2014