Ealixir 10Q 2010 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2010

[ ] 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 001-15569

FLINT TELECOM GROUP, INC.

(Exact name of registrant as specified in its charter)

	Nevada	36-3574355
	(State or other jurisdiction of Incorporation or Organization)	(IRS Employer Identification Number)

7500 College Blvd, Suite 500, Overland Park, KS, 66210

(Address of Principal Executive Offices including zip code)

(561) 962-0230

(Issuer's telephone number)

Former Address: 327 Plaza Real, Suite 319, Boca Raton, FL 33432

(Former name, former address and former fiscal year, if changed since last report)

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 preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ ] No [X]

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 [ ] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, 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 [X]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:

As of May 12, 2010, the Issuer had 104,423,933 Shares of Common Stock outstanding.

FLINT TELECOM GROUP, INC. AND SUBSIDIARIES

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTER ENDED MARCH 31, 2010

TABLE OF CONTENTS
			Page
		PART I - FINANCIAL INFORMATION

ITEM 1.		FINANCIAL STATEMENTS:
	a.	Condensed Consolidated Balance Sheets as of March 31, 2010 (unaudited) and June 30, 2009		4
	b.	Condensed Consolidated Statements of Operations for the three and nine months ended March 31, 2010 and 2009 (unaudited)		6
	c.	Condensed Consolidated Statements of Cash Flows for the nine months ended March 31, 2010 and 2009 (unaudited)		7
	e.	Condensed Consolidated Statement of Stockholders’ Equity (Deficit) and Other Comprehensive Loss for the nine months ended March 31, 2010 (unaudited)		10
	d.	Notes to the Condensed Consolidated Financial Statements (unaudited)		12
ITEM 2.		MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		24
ITEM 3.		QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		26
ITEM 4T.		CONTROLS AND PROCEDURES		26
		PART II - OTHER INFORMATION

ITEM 1.		LEGAL PROCEEDINGS		27
ITEM 1A.		RISK FACTORS		27
ITEM 2.		UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS		27
ITEM 3.		DEFAULTS UPON SENIOR SECURITIES		28
ITEM 4.		SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS		28
ITEM 5.		OTHER INFORMATION		28
ITEM 6.		EXHIBITS		28

		SIGNATURES		29
		CERTIFICATIONS		34

PART I - FINANCIAL INFORMATION

ITEM 1: FINANCIAL STATEMENTS

FLINT TELECOM GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	March 31, 2010			June 30, 2009
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	8,885		$	1,337,002
Accounts receivable, net of allowance for doubtful accounts of $469,852
for March 31, 2010 and $205,397 for June 30, 2009		1,067,657			2,585,875
Notes receivable		--			125,000
Inventories		494,394			886,512
Investment in marketable securities		1,200,000			2,700,000
Due from Flint Telecom, Ltd.		--			258,731
Due from related parties		--			124,174
Prepaid expenses and other current assets		--			8,724
Current assets		2,770,936			8,026,018

Fixed assets:
Equipment		1,930,975			1,851,830
Capitalized leases – equipment		194,839			819,025
Total fixed assets		2,125,814			2,670,855
Less: accumulated depreciation		(1,765,064	)		(687,776	)
Net fixed assets		360,750			1,983,079

Deposit		3,200			3,149
Goodwill		--			2,687,080
Other intangible assets, net		--			10,587,115
Other assets		250,200			--
Total assets	$	3,385,086		$	23,286,441

LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable – trade	$	3,361,226		$	5,140,268
Cash overdraft		59,034			175,096
Other accrued liabilities		414,545			215,898
Accrued interest payable		919,895			545,938
Lease obligations – current		653,309			601,275
Lines of credit		2,034,490			3,143,962
Notes payable		1,600,292			1,525,886
Notes payable – related parties, net of discount		8,589,607			5,440,232
Convertible notes payable, net of discount		989,765			115,000
Convertible notes payable – related parties, net of discount		98,000			94,062
Preferred convertible note payable – related party, net of discount		2,575,551			--
Due to Flint, Ltd.		48,435			--
Redeemable preferred stock		21,575			1,250,000
Total current liabilities		21,365,724			18,247,617


Convertible notes payable – long term - due to related parties, net of discount	--	542,004
Notes payable due to related parties – long term	--	3,021,865
Lease obligations - long-term	--	117,707
Total liabilities	21,365,724	21,929,193

Commitments and contingencies

Stockholders' equity (deficit)
Preferred stock: $0.001 par value; 5,000,000 authorized: 21,575 Series C issued and outstanding at March 31, 2010, 1,250,000 Series C issued and outstanding at June 30, 2009; 302,000 Series E issued and outstanding at March 31, 2010, 0 Series E issued and outstanding at June 30, 2009		--			--
Common stock: $0.01 par value; 200,000,000 authorized, 89,820,958 issued and 88,820,958 outstanding at March 31, 2010, 71,294,702 issued and outstanding at June 30, 2009		888,210			712,947
Common stock issuable		112,556			44,786
Additional paid-in capital		25,620,676			22,085,472
Accumulated other comprehensive loss		(1,950,000	)		(450,000	)
Accumulated deficit		(42,652,080	)		(21,035,957	)
Total stockholders' equity (deficit)		(17,980,638	)		1,357,248
Total liabilities and stockholders’ equity (deficit)	$	3,385,086		$	23,286,441

See accompanying notes to condensed consolidated financial statements.

FLINT TELECOM GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended March 31,						Nine Months Ended March 31,
	2010			2009			2010			2009
Revenues	$	5,025,631		$	11,220,472		$	30,414,547		$	17,432,765

Cost of revenues		4,862,094			10,865,903			28,863,591			17,416,783

Gross profit		163,537			354,569			1,550,956			15,982

Operating expenses:
General and administrative:
Consultants		--			54,951			35,152			626,505
Bad debt expense		211,402			--			500,642			--
Salaries and payroll related expense		383,173			362,395			1,408,544			947,801
Management fee to Flint Telecom, Ltd.		200,000			--			450,000			286,205
Stock compensation and option expense:
Directors and officers		1,062,292			341,001			1,761,684			3,322,169
Consultants		474,600			--			660,161			--
Employees		(28,374	)		103,947			61,250			167,029
Depreciation and amortization expense		27,749			64,967			1,306,995			379,338
Other		54,081			534,599			681,436			975,225
Total operating expenses		2,384,923			1,461,860			6,865,864			6,704,272

Operating loss		(2,221,386	)		(1,107,291	)		(5,314,908	)		(6,688,290	)

Other income (expense)		(37,770	)		1,279,657			574			1,131,956
Interest expense		(1,005,549	)		(465,644	)		(2,953,710	)		(1,626,598	)
Loss on disposal of fixed asset		--			--			(332,023	)		--
Foreign exchange		160,787			--			149,980			--
Discontinued operations, net of tax		--			(953,017	)		--			(1,219,759	)
Impairment of goodwill and other intangible assets		(4,455,172	)		--			(12,215,200	)		(2,538,148	)
Impairment of fixed assets		(950,836	)		--			(950,836	)		--
Net loss	$	(8,509,926	)	$	(1,246,295	)	$	(21,616,123	)	$	(10,940,839	)
Net loss per common share:
Basic	$	(0.10	)	$	(0.02	)	$	(0.27	)	$	(0.24	)
Diluted	$	(0.10	)	$	(0.02	)	$	(0.27	)	$	(0.24	)

Weighted average shares outstanding:
Basic		82,622,085			66,453,447			78,732,539			44,951,130
Diluted		82,622,085			66,453,447			78,732,539			44,951,130

See accompanying notes to condensed consolidated financial statements.

FLINT TELCOM GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

	Nine Months Ended March 31,
	2010			2009
Cash Flows from Operating Activities:
Net loss	$	(21,616,123	)	$	(10,940,839	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		1,306,995			379,338
Other non-cash transactions:
Impairment of goodwill and other intangible assets		12,215,200			2,538,148
Stock and option compensation expense		2,483,095			3,489,198
Loss on purchase of non-convertible notes		--			174,956
Amortization of debt discounts & warrants		1,576,379			610,565
Loss on disposal of fixed assets		332,023			2,032
Impairment of fixed assets		950,836			--
Gain on disposal of Semotus		--			(1,639,767	)
Amortization of debt issuance costs / beneficial conversion feature		352,786			116,059

Changes in assets and liabilities, net of acquisition and disposals:
Accounts receivable		1,518,218			(429,410	)
Prepaid expense		8,724			(181,661	)
Inventories		392,118			--
Deposit		(51	)		--
Accounts payable		(2,883,279	)		1,235,492
Cash overdraft		(116,062	)		--
Other accrued liabilities		198,647			606,118
Net due from Flint Telecom, Ltd.		587,166			--
Deferred revenue		--			--
Accrued interest		640,372			652,344
Net cash used in operating activities		(2,052,956	)		(3,387,428	)

Cash Flows from Investing Activities:
Purchases of fixed assets		(8,532	)		(351,305	)
Cash assumed in acquisition of Semotus		--			(419,932	)
Increase in notes receivable		(125,200	)		--
Net cash used in investing activities		(133,732	)		(771,237	)

Cash Flows From Financing Activities:
Proceeds from lines of credit		18,293			--
Proceeds from related party debt		370,550			150,000
Proceeds from debt		855,000			3,526,060
Payments on debt		(175,000	)		(25,000	)
Investment from Flint Telecom Ltd.		--			(9,702	)
Payments on related party debt		(50,279	)		--
Payments on line of credit		(3,925	)		--
Short term notes repaid		--			(886,000	)
Proceeds from the offering		--			420,000
Payments on lease obligations		(6,088	)		(98,558	)
Net cash provided by financing activities		1,008,551			3,076,800

Cash Flows From Foreign Currency Activities:
Exchange gain (loss) on convertible notes		(149,980	)		(81,697	)
Net increase (decrease) in cash		(1,328,117	)		(1,163,562	)
Cash and cash equivalents, beginning of the period		1,337,002			1,487,021
Cash and cash equivalents, end of the period	$	8,885		$	323,459

See accompanying notes to condensed consolidated financial statements.

FLINT TELECOM GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(unaudited)

	Nine Months March		Ended 31,
	2010		2009
SUPPLEMENTAL CASH FLOW DISCLOSURE:

Cash paid for interest	$	26,000	$	199,134

Cash paid for income taxes	$	--	$	--

SUPPLEMENTAL SCHEDULE OF NONCASH ACTIVITIES:

Assets purchased under capital lease obligations	$	--	$	44,473

Conversion of notes payable and accrued interest (Note 13)	$	127,263	$	--

Discounts – warrants	$	779,091	$	1,132,869

Discounts – beneficial conversion	$	352,786	$	474,433

Payment on lease obligations through issuance of stock	$	36,000	$	--

Capitalization of accrued interest to a note payable	$	266,415	$	--

Due from related party satisfied with redeemable preferred stock	$	1,228,424	$	--

Transfer of due from Flint Telecom, Ltd. to notes payable	$	280,000	$	--

Deferred stock compensation	$	--	$	4,410,468

Common stock issued upon conversion of notes payable and accrued interest	$	--	$	2,267,755

Purchase of marketable securities	$	--	$	8,500,000

Acquisition of Semotus Solutions, Inc.:
Cash		--	$	83,171
Accounts receivable		--		390,712
Prepaid expense		--		18,922
Goodwill		--		2,538,148
Accounts payable		--		(123,036
Accrued liabilities		--		(269,367
Deferred revenue		--		(192,277
		--	$	2,446,273

Disposition of Semotus Solutions, Inc.:
Cash	$	--	$	325,851
Accounts receivable		--		143,874
Prepaid expense		--		12,876
Accounts payable		--		(46,300	)
Accrued liabilities		--		(110,185	)
Deferred revenue		--		(219,389	)

	$	--	$	106,727

Acquisition of CHVC Subsidiaries:
Accounts receivable	$	--	$	1,979,684
Prepaid expense		--		(34,151	)
Inventory		--		289,250
Fixed assets		--		252,124
Investment in marketable securities		--		3,150,000
Goodwill		--		2,687,080
Other intangible asset		--		11,525,000
Cash assumed		--		196,906
Accounts payable		--		(2,133,304	)
Accrued liabilities		--		(891	)
		--		17,980,000
Redeemable preferred stock		--		(1,800,000	)
Cash paid		--		(1,200,000	)
Note payable		--		(7,000,000	)
	$	--	$	7,980,000

See accompanying notes to condensed consolidated financial statements.

FLINT TELECOM GROUP, INC. AND SUBSIDIARIES

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

(Unaudited)

	Common Stock				Common Stock Issuable						Additional			Accumulated
	Shares		Amount		Shares			Amt.			Paid-In Capital			Compre-hensive Loss			Accum. Deficit			Total
Balances at June 30, 2009		71,294,702	$	712,947		4,478,637		$	44,786		$	22,085,472		$	(450,000	)	$	(21,035,957	)	$	1,357,248
Conversion of notes payable		426,411		4,264		--			--			112,999			--			--			117,263
Beneficial conversion feature on convertible notes payable		--		--		--			--			114,786			--			--			114,786
Shares issued to consultants for services		501,515		5,015		--			--			180,546			--			--			185,561
Issuance of warrants to holders of notes payable		--				--			--			708,791			--			--			708,791
Conversion of notes payable into equity		4,063,183		40,632		(4,063,183	)		(40,632	)		--			--			--			--
Stock compensation expense		--		--		--			--			381,688			--			--			381,688
Stock options expense		--		--		--			--			15,609			--			--			15,609
Comprehensive Loss:		--		--		--			--			--			--			--			--
Comprehensive loss		--		--		--			--			--			(750,000	)		--			(750,000	)
Net loss for the three months ended September 30, 2009		--		--		--			--			--			--			(3,052,220	)		(3,052,220	)
Balances at September 30, 2009		76,285,811		762,858		415,454			4,154			23,599,891			(1,200,000	)		(24,088,177	)		(921,275	)
Beneficial conversion feature on convertible notes payable		--		--		--			--			26,786			--			--			26,786
Stock payable issued, net of cancellations		350,000		3,500		(359,818	)		(3,598	)		(5,302	)		--			--			(5,400	)
Shares issued for payments of debt		150,000		1,500		--			--			34,500			--			--			36,000
Issuance of warrants to holders of notes payable		--		--		--			--			70,300			--			--			70,300
Shares issued to officers, directors, employees for vested stock compensation		1,250,000		12,500		--			--			(12,500	)		--			--			--
Stock compensation expense		--		--		--			--			381,688			--			--			381,688
Stock options expense		--		--		--			--			15,432			--			--			15,432
Comprehensive Loss:
Comprehensive loss		--		--		--			--			--			(450,000	)		--			(450,000	)
Net loss for the three months ended December 31, 2009		--		--		--			--			--			--			(10,053,977	)		(10,053,977	)

Balances at December 31, 2009	78,035,811		780,358	55,636		556		24,110,795			(1,650,000	)		(34,142,154	)		(10,900,445	)
Beneficial conversion feature on convertible notes payable	--		--	--		--		211,214			--			--			211,214
Shares issued to consultants for services	2,000,000		20,000	11,000,000		110,000		350,000			--			--			480,000
Shares issued for cashless exercise of warrants	1,963,636		19,637	--		--		(19,637	)		--			--			--
Conversion of notes payable	571,511		5,715	--		--		4,285			--			--			10,000
Shares issued to officers, directors, employees for vested stock compensation	6,250,000		62,500	200,000		2,000		809,125			--			--			873,625
Stock compensation expense	--		--	--		--		139,688			--			--			139,688
Stock options compensation expense	--		--	--		--		15,206			--			--			15,206
Comprehensive loss:
Comprehensive loss	--		--	--		--		--			(300,000	)		--			(300,000	)
Net loss for the three months ended March 31, 2010	--		--	--		--		--			--			(8,509,926	)		(17,980,638	)
Balances at March 31, 2010	88,820,958	$	888,210	11,255,636	$	112,556	$	25,620,676		$	(1,950,000	)	$	(42,652,080	)	$	(17,980,638	)

See accompanying notes to condensed consolidated financial statements.

FLINT TELECOM GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Organization and Formation

Flint Telecom Group, Inc. (“Flint”, “We” or the “Company”), is a Nevada Corporation. We were originally formed in 2005 as Flint Telecom, Inc., a Delaware Corporation, and started operations in April 2006 as a wholly owned subsidiary of Flint Telecom Limited, headquartered in Dublin, Ireland. Flint Telecom Limited is a holding company whose sole operating business in the United States was Flint Telecom, Inc. Flint Telecom Limited was a vehicle for the initial funding of Flint and for the development of proprietary intellectual property.

On October 1, 2008, Semotus Solutions, Inc. (“Semotus”) acquired substantially all of the assets and liabilities of Flint Telecom, Inc. in exchange for 28,460,094 shares of restricted common stock pursuant to a definitive Contribution Agreement dated April 23, 2008. Although Semotus is the legal acquirer, for accounting purposes Flint is the accounting acquirer. The name was changed to Flint Telecom Group, Inc. The existing Semotus operations became a division of Flint, and were subsequently sold in January 2009.

We are headquartered in Overland Park, Kansas and operate in the United States. We operate our business through four wholly-owned subsidiaries, Cable and Voice Corporation, Phone House, Inc., Flint Prepaid, Inc. (previously named Wize Communications, Inc.), and Digital Phone Solutions, Inc. We provide next generation turnkey voice, data and wireless services through partner channels primarily in the United States. We distribute telecommunications services and products through our distribution channels.

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

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

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

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

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

As part of our ongoing emphasis on streamlining our operations and reaching profitability, as of March 31, 2010 we have shut down four of our other wholly owned subsidiaries: CVC Int’l, Phone House Inc. of Florida, Dial-Tone Communications and Starcom Alliance. Consequently, we recognized a loss in the form of a one-time impairment charge of goodwill and other intangibles in the amount of $12,215,200.

2. Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared by us, without audit and in accordance with the instructions to Form 10-Q and Regulation S-X. In the opinion of our management, all adjustments (including normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended March 31, 2010 are not necessarily indicative of the results that may be expected for the year ending June 30, 2010. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. We believe that the disclosures provided are adequate to make the information presented not misleading. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in our SEC Form 10K filed on October 13, 2009.

3. Going Concern

These financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities in the normal course of our business. As reflected in the accompanying financial statements, Flint had a net loss of $21,616,123 and $10,940,839 for the nine months ended March 31, 2010 and 2009, respectively, negative cash flow from operating activities of $2,005,556 for the nine months ended March 31, 2010, an accumulated stockholder’s deficit of $42,652,080 and a working capital deficit of $18,594,788 as of March 31, 2010. Also, as of March 31, 2010, we had limited liquid and capital resources. We are currently largely dependent upon obtaining sufficient short and long term financing in order to continue running our operations.

The foregoing factors raise substantial doubt about our ability to continue as a going concern. Ultimately, our ability to continue as a going concern is dependent upon our ability to attract new sources of capital, exploit the growing telecom services market in order to attain a reasonable threshold of operating efficiency and achieve profitable operations. The financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.

We recently announced significant reductions in our operating costs and are in ongoing discussions with our creditors to restructure our balance sheet and future debt payments. Management expects that the successful outcome of these discussions will allow the Company to become EBITDA positive in the short term and we have secured indicative funding commitments from investors for additional capital following the planned restructure that management believes is sufficient to fund our operating cash flow needs, before debt repayments, for the next twelve months.

4. Acquisition of the CHVC Acquisition Companies

On January 29, 2009, we acquired six U.S. operating subsidiaries of China Voice Holding Corp. (“CHVC”), namely: CVC Int’l Inc., Cable and Voice Corporation, StarCom Alliance Inc, Dial-Tone Communication Inc, Phone House of Florida, Inc., and Phone House, Inc. (of California) (the “Acquisition Companies”), in exchange for 21,000,000 shares of our restricted common stock and $500,000 in cash at Closing and $1,000,000 in deferred payments. As part of the closing of the transaction and in addition to the issuance of the common stock and cash paid as noted above, we also acquired 15,000,000 shares of restricted common stock of CHVC in exchange for deferred payments totaling $1,500,000. Additionally, we issued a Promissory Note to CHVC dated January 29, 2009, in an amount of $7,000,000, pursuant to which we are obligated to make payments as follows: $2,333,333.33 on or before December 31, 2009; $2,333,333.33 on or before July 31, 2010, and $2,333,333.34, plus any remaining balance due on the Note on or before December 31, 2010 (the “Note”). The Note shall not bear any interest pre-default. The Note will bear interest at eighteen percent (18%) per year for any period of time when a payment is past due. As of March 31, 2010 the Note is in default because we were not able to make the first installment payment due on or before December 31, 2009. 15,000,000 shares of CHVC restricted common stock are attached to the Note as collateral, pursuant to a Security Agreement.

On April 25, 2009 the Merger Agreement and Stock Purchase Agreement were amended, to, among other things, extend the payment schedules to CHVC as follows: The First Amendment to the Agreement and Plan of Merger modifies the Agreement and Plan of Merger such that all shares of the Acquisition Companies’ Common Stock are converted into the right to receive a cash payment, paid to CHVC, at the Closing Date equal to $500,000 and $200,000 paid on March 16, 2009. In addition to the aforementioned amounts already paid, we shall issue to CHVC 800,000 shares ($800,000 issue price) of Series C preferred stock, redeemable through the following payment schedule: $275,000 in May of 2009, with the remaining $525,000 redeemable in five equal monthly installment payments of $105,000 each, starting on July 15, 2009. Alternatively, should we close on new funding from a third party, the remaining $525,000 shall be redeemed through one lump sum payment, up to a maximum of twenty five percent (25%) of whatever net amount we actually receive.

Additionally, effective March 16, 2009, we agreed to omit the Acquisition Companies’ future minimum revenue targets and our right of offset; we therefore released to CHVC the 6,300,000 shares of restricted common stock that were being held in escrow pursuant to the Merger Agreement. The First Amendment to the Stock Purchase Agreement modifies the Stock Purchase Agreement such that we shall pay to CHVC $500,000 by no later than April 30, 2009. Additionally, we shall issue to CHVC 1,000,000 shares ($1,000,000 issue price) of Series C preferred stock, redeemable through the following payment schedule: $275,000 in May of 2009, with the remaining $725,000 redeemable in five equal monthly installment payments of $145,000 each, starting on July 15, 2009. Alternatively, should we close on new funding from a third party, the remaining $725,000 shall be redeemed through one lump sum payment, up to a maximum of twenty five percent (25%) of whatever net amount we actually receive. Additionally, we entered into a security agreement with CHVC (the “Security Agreement”) whereby the obligation to redeem the preferred stock issued to CHVC is secured by the capital stock of the Acquisition Companies. Notwithstanding, CHVC agrees to subordinate its security interest in the Acquisition Companies to any future third party funding closed by us, as required by us and approved by CHVC, such approval not to be unreasonably withheld.

We also executed a First Amendment to the Promissory Note issued to CHVC on January 29, 2009 (the “Note”), whereby we agreed to add the following language to the end of Section 2(a) of the Note:“A portion equal to one million dollars (USD$1,000,000) of the balance due on the Note shall be paid by Maker [Flint] through a payment of seven hundred twenty one thousand pound sterling (GBP£721,000) on or before December 31, 2010, regardless of whether the U.S. dollar strengthens or weakens in relation to the GBP pound sterling during the term of the Note and whether there is therefore a foreign currency translation gain or loss for either party.

In the nine months ended March 31, 2010, $1,228,425 was paid to CHVC and 1,228,425 shares of Series C preferred stock was redeemed. As of March 31, 2010, a total of $1,778,425 had been paid to CHVC and 1,778,425 shares of Series C preferred stock had been redeemed by CHVC, in accordance with the agreement, as amended and as described above, leaving $21,575 to be paid to CHVC and 21,575 shares of Series C preferred stock issued and outstanding.

Separate from the Merger Agreement, as a hiring and retention incentive and in lieu of issuing stock options under the Company’s stock option plan, during the previous fiscal year ended June 30, 2009 we issued 3,000,000 shares of restricted common stock, vesting over a period of four years, to executive officers and key employees of the Acquisition Companies. These shares of restricted common stock were valued at $0.38 per share. We recorded $570,000 and $712,500 in expense in the three and nine months ended March 31, 2010, respectively, related to the shares of restricted common stock granted to these executive officers and key employees. During the three months ended March 31, 2010, 2,250,000 of these shares vested and the remaining 750,000 were cancelled. We recorded approximately $167,519 in expense in the three and nine months ended March 31, 2009, related to the shares of restricted common stock granted to these executive officers and key employees

5. Recent Accounting Pronouncements

In January 2010, the FASB issued ASU No. 2010-06 regarding fair value measurements and disclosures and improvement in the disclosure about fair value measurements. This ASU requires additional disclosures regarding significant transfers in and out of Levels 1 and 2 of fair value measurements, including a description of the reasons for the transfers. Further, this ASU requires additional disclosures for the activity in Level 3 fair value measurements, requiring presentation of information about purchases, sales, issuances, and settlements in the reconciliation for fair value measurements. This ASU is effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. We are currently evaluating the impact of this ASU; however, we do not expect the adoption of this ASU to have a material impact on our consolidated financial statements.

In February 2010, the FASB issued ASU No. 2010-09 regarding subsequent events and amendments to certain recognition and disclosure requirements. Under this ASU, a public company that is a SEC filer, as defined, is not required to disclose the date through which subsequent events have been evaluated. This ASU is effective upon the issuance of this ASU. The adoption of this ASU did not have a material impact on our consolidated financial statements.

In April 2010, the FASB issued ASU No. 2010-18 regarding improving comparability by eliminating diversity in practice about the treatment of modifications of loans accounted for within pools under Subtopic 310-30 – Receivable – Loans and Debt Securities Acquired with Deteriorated Credit Quality (“Subtopic 310-30”). Furthermore, the amendments clarify guidance about maintaining the integrity of a pool as the unit of accounting for acquired loans with credit deterioration. Loans accounted for individually under Subtopic 310-30 continue to be subject to the troubled debt restructuring accounting provisions within Subtopic 310-40, Receivables—Troubled Debt Restructurings by Creditors. The amendments in this Update are effective for modifications of loans accounted for within pools under Subtopic 310-30 occurring in the first interim or annual period ending on or after July 15, 2010. The amendments are to be applied prospectively. Early adoption is permitted. We are currently evaluating the impact of this ASU; however, we do not expect the adoption of this ASU to have a material impact on our consolidated financial statements.

In September 2009, in accordance with accounting pronouncements that applies to arrangements with multiple deliverables and provides another alternative for determining the selling price of deliverables. In addition, the residual method of allocating arrangement consideration is no longer permitted under this guidance. The guidance is effective for fiscal years beginning on or after July 15, 2010. We are currently evaluating the potential impact, if any, of the adoption of this guidance on our consolidated financial statements.

In September 2009, in accordance with accounting pronouncements which removes non-software components of tangible products and certain software components of tangible products from the scope of existing software revenue guidance, resulting in the recognition of revenue similar to that for other tangible products. It also requires expanded qualitative and quantitative disclosures. The guidance is effective for fiscal years beginning on or after June 15, 2010. We are currently evaluating the potential impact, if any, of the adoption of this guidance on our consolidated financial statements.

In June 2009, in accordance with accounting pronouncements for determining whether an entity is a variable interest entity (“VIE”) and requires an enterprise to perform an analysis to determine whether the enterprise’s variable interest or interests give it a controlling financial interest in a VIE. Under this guidance, an enterprise has a controlling financial interest when it has a) the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and b) the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the VIE. The guidance also requires an enterprise to assess whether it has an implicit financial responsibility to ensure that a VIE operates as designed when determining whether it has power to direct the activities of the VIE that most significantly impact the entity’s economic performance. The guidance also requires ongoing assessments of whether an enterprise is the primary beneficiary of a VIE, requires enhanced disclosures and eliminates the scope exclusion for qualifying special-purpose entities. The guidance is effective for fiscal years beginning after November 15, 2009. We are currently evaluating the potential impact, if any, of the adoption of this guidance on our consolidated financial statements.

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

6. Accounts Receivable and Concentration of Credit Risk

One customer accounted for 20% of the Company’s revenue for the three months ended March 31, 2010. Two customers accounted for 44% of our revenue for the nine months ended March 31, 2010, comprising 31% and 13% each. Two customers accounted for 14% and 15% of the accounts receivable at March 31, 2010, for a total of 29% of the receivables.

Two customers accounted for 39% and 18% of our revenue, respectively, for the three months ended March 31, 2009. Four customers accounted for 25%, 14%, 14% and 12% of our revenue, respectively, for the nine months ended March 31, 2009. Three customers accounted for 54% of the accounts receivable at March 31, 2009, the largest of which accounted for 25% of the receivables.

7. Investment in Marketable Securities

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

We classify these securities as investments in marketable securities available for sale. These securities are stated at their fair value. Unrealized gains or losses in investments in marketable securities available for sale are recognized as an element of other comprehensive income on a monthly basis based on fluctuations in the fair value of the security as quoted on an exchange or an inter-dealer quotation system. Realized gains or losses are recognized in the consolidated statements of operations when the securities are liquidated.

To date, the securities received from CHVC are quoted on the Pink Sheets. The securities are restricted as to resale. As the securities are restricted, we are unable to liquidate these securities until the restriction is removed. Unrealized gains or losses on marketable securities available for sale are recognized as an element of comprehensive income on a monthly basis based on changes in the fair value of the security as quoted on an exchange or an inter-dealer quotation system. Once liquidated, realized gains or losses on the sale of marketable securities available for sale are reflected in our net income for the period in which the security was liquidated.

Marketable securities are evaluated periodically to determine whether a decline in their value is other than temporary. Management utilizes criteria such as the magnitude and duration of the decline, in addition to the reasons underlying the decline, to determine whether the loss in value is other than temporary. The term “other-than-temporary” is not intended to indicate that the decline is permanent. It indicates that the prospects for a near term recovery of value are not necessarily favorable, or that there is a lack of evidence to support fair values equal to, or greater than, the carrying value of the investment.

8. Goodwill and Other Intangible Assets

In association with the acquisition of CHVC subsidiaries, in accordance with accounting principles regarding goodwill and other intangible assets, we recorded the purchase price in excess of the net assets acquired as of the acquisition date as goodwill. The goodwill was recorded on January 29, 2009, the closing date of the CHVC subsidiaries acquisition (See Note 4, Acquisition of the CHVC Acquisition Companies.) in the amount of $2,687,080. We also acquired identifiable intangible assets which are the customer relationships from the CHVC Acquisition Companies. Under accounting principles, we engaged an independent third party appraiser to value the customer relationships and the value of these identifiable assets were deemed to be $11,400,000 as of June 30, 2009. In accordance with accounting principles, we perform an evaluation of the fair values annually, and more frequently if an event occurs or circumstances change that may indicate that the fair value of a reporting unit is less than the carrying amount. During the nine months ended March 31, 2010, we shut down four of the CHVC subsidiaries, CVC Int’l, Phone House Inc. of Florida, Dial-Tone Communications and Starcom Alliance. Consequently, we performed an evaluation of the fair values of all of the CHVC subsidiaries during the nine months ended March 31, 2010 and determined that the goodwill and intangible assets were impaired in the amount of $12,215,200, which is primarily associated with the disposition of CVC Int’l, Phone House Inc. of Florida, Dial-Tone Communications and Starcom Alliance.

During the nine months ended March 31, 2009, in accordance with accounting principles regarding goodwill and other intangible assets we determined that the goodwill from the Semotus acquisition was impaired due to the disposition of the Semotus Business Division on January 29, 2009. The goodwill was recorded on October 1, 2008, the closing date of the Semotus acquisition in the amount of $2,538,148, and was mainly associated with the Hiplink family of products.

9. Related Party Transactions

Loans:

We have limited access to capital from either banking institutions or the capital markets. Consequently, we have loans from a number of other types of third parties, including related parties, as follows.

Michael Butler Debt Restructure

We had a number of loans outstanding from Mr. Butler, one of our board members as of March 31, 2010, for which we issued various promissory notes, convertible promissory notes, warrants and shares of restricted common stock to him as consideration. As of December 31, 2009, the total outstanding balance on all of Mr. Butler’s loans were approximately $4,100,000. Subject to an agreement that was executed December 31, 2009 that became effective February 5, 2010 we executed a settlement agreement with Mr. Butler in which all of Mr. Butler’s loans to Flint were cancelled in exchange for 302,000 shares of Series E preferred stock of Flint, valued at €10.00 per share, having the following material terms:

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

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

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

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

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

Based on the minimum conversion price, Mr. Butler would receive 10,981,818 shares of common stock if all preferred shares were converted into common stock.

The Preference Shares will be transferable at Mr. Butler’s discretion, after giving Flint a right of first refusal;

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

Mr. Butler has the right to rescind this agreement in the event that we should enter into a voluntary or involuntary bankruptcy. We have therefore classified these shares of Series E Convertible Preferred as a separate line item on our Balance Sheet under current liabilities as “Preferred Convertible Note Payable –related party, net of discount”.

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

SEL Nominess:

On March 8, 2010 SEL Nominees Ltd. (“SEL”) loaned us $58,000 and we issued a $58,000 convertible promissory note accruing interest at a rate of eighteen percent (18%) per annum, with interest only payments due each month and a maturity date of March 2011, and having a variable conversion price of 50% of the Market Price. “Market Price” means the average of the lowest three (3) Trading Prices for the common stock during the ten (10) Trading Day period ending one Trading Day prior to the date the Conversion Notice is sent. The terms and conditions of this Note is qualified in its entirety by reference to the full text of the Note, which was attached as Exhibit 4.3 to our SEC Form 10Q filed on march 25, 2010.

On March 12, 2010 SEL loaned us $40,000 and we issued a $40,000 convertible promissory note accruing interest at a rate of eighteen percent (18%) per annum with interest only payments due each month and a maturity date of March 2011, and having a variable conversion price of 50% of the Market Price. “Market Price” means the average of the lowest three (3) Trading Prices for the common stock during the ten (10) Trading Day period ending one Trading Day prior to the date the Conversion Notice is sent. The terms and conditions of this Note is qualified in its entirety by reference to the full text of the Note, which was attached as Exhibit 4.4 to our SEC Form 10Q filed March 25, 2010. SEL is a related party due to the fact that SEL is controlled by Mr. Butler, one of our board members as of March 31, 2010.

CHVC

On January 29, 2009, we acquired six U.S. operating subsidiaries of China Voice Holding Corp. (“CHVC”), (the “Acquisition Companies”) and 15,000,000 shares of CHVC’s restricted common stock, in exchange for 21,000,000 shares of our restricted common stock, $500,000 in cash at Closing, a $7,000,000 promissory note and $2,500,000 in deferred payments. See Note 4 for more details on this transaction. Bill Burbank, our President and Chief Operating Officer at the time, was and still currently remains the President and Chief Executive Officer of CHVC. As of March 31, 2010, $7,092,192 was due and owing to CHVC.

Flint Telecom Ltd.

Flint Telecom Ltd, which is controlled by Mr. Browne, Flint’s CEO, has a loan balance of $55,325 at March 31, 2010. During the nine months ended March 31, 2010, Flint Telecom Ltd. assigned a portion, $147,175, of its $202,500 promissory note to a number of unrelated third parties. This note has a 15% interest rate and originally matured on March 30, 2009 but was extended to September 30, 2011. The loan does not include charges for management fees earned by Flint Telecom, Ltd., which during the nine months ended March 31, 2010 and 2009 were $450,000 and $286,205, respectively. $280,000 of these management fees were reclassified as note payables and assigned to third parties. See Note 13 for more details on these transactions. The management fees are for the executive, operating and financial services provided by Flint Telecom, Ltd. to us. The loan is for working capital needed for our operations. Flint Telecom, Ltd. was also issued warrants on September 30, 2008 exercisable into 1,202,500 common shares at $0.50 per share which expire on September 30, 2011. Flint Telecom, Ltd. also has a direct equity investment in us.

Misc. Loans from other Officers

During the nine months ended March 31, 2010, Mr. Keaveney, our CFO at the time, loaned $75,000 to us and we issued to him a promissory note in the amount of $75,000, due and payable with a cash fee of $10,000 on or before October 24, 2009. As of the date of this filing, this note has not yet been repaid and Mr. Keaveney is entitled to one additional $10,000 payment for a total of $95,000. Additionally, during the nine months ended March 31, 2010, Mr. Burbank loaned $100,000 to us. This loan bears no interest or contains any additional cash fees. This loan is due on demand by Mr. Burbank. The balance of the loan as of March 31, 2010 was $100,000.

Separation Agreement with Bill Burbank:

Bill Burbank resigned as the President and Chief Operating Officer of the Company, effective February 4, 2010. In connection with Mr. Burbank’s resignation, the Company entered into a Separation Agreement with Mr. Burbank (the “Separation Agreement”), effective February 5, 2010. The Separation Agreement provides that Mr. Burbank will be paid an aggregate of approximately $150,000 in cash and $842,500 worth of shares of restricted common stock, consisting of:

	·	payment for past wages owed, of approximately $45,785;
	·	repayment for various loans made to the Company, in the amount of $100,000;
	·	reimbursement for approved expenses in an amount that has yet to be determined;
	·	all such cash payments as listed above shall be paid in the future as funds become available;

acceleration of 1,500,000 shares of his unvested restricted stock and the grant and issuance of 4,000,000 additional shares of immediately vested restricted common stock, for a total of 5,500,000 shares of restricted common stock. Additionally, 500,000 vested on January 29, 2010. The 2,000,000 previously issued shares that vested were valued at $0.38 per share (date of original grant). The closing price of our common stock on February 5, 2010 was $0.08 per share, and therefore the additional 4,000,000 shares were valued at $320,000, for a total fair market value of these shares was $842,500.

Employment Agreement with Bernard Fried:

Effective February 23, 2010, Bernard A. Fried was elected as President and Chief Operating Officer of the Company, and was appointed as a member of the Board of Directors. Flint entered into an employment agreement with Mr. Fried, effectuating the following: (i) Mr. Fried’s title is President and COO of Flint; (ii) Mr. Fried was appointed as a member of Flint’s Board of Directors, (iii) Mr. Fried will receive a salary in the amount of $186,000 per year, and (iv) Mr. Fried was issued 6,000,000 shares of restricted common stock vesting over a period of four years, such that ¼ of the shares shall vest at the first annual anniversary of the Effective Date, and quarterly thereafter so that 100% of the shares shall be fully vested at his four year anniversary with Flint. The foregoing description of Mr. Fried’s Employment Agreement is qualified in its entirety by reference to the full text of the Employment Agreement, which is attached as Exhibit 10.1 to our SEC Form 10Q filed on March 25, 2010, and is incorporated herein by reference.

10. Capital Leases

We have acquired $819,025 in equipment through capital lease obligations primarily for computer and telephony equipment. During the three months ended March 31, 2010 we wrote down the value of this equipment to approximately $190,000. During the nine months ended March 31, 2010, as part of our debt restructuring plan, we renegotiated the terms of our capital lease with our equipment vendor, which resulted in the disposal of certain assets under this agreement and the restructure of the payment terms for the remaining equipment. However, as of March 31, 2010 we are currently in default because we failed to make the minimum monthly cash payments of principal and interest when due, and the entire outstanding balance of $653,309 is therefore immediately due and payable.

11. Accounts Payable

Accounts payable at March 31, 2010 were $3,361,226. One vendor accounted for 12% of the payables at March 31, 2010. Accounts payable at June 30, 2009 were $5,140,268. Three vendors accounted for 53% of the payables at June 30, 2009, the largest of which accounted for 31% of the payables.

Although we believe that we have adequate alternative vendors to purchase services and products, there can be no assurance of comparability, which could have a detrimental effect on the business. Further, when the vendor provides services for direct access to and call routing for residential or business customers, a reduction in or elimination of that vendor service will probably have a detrimental effect on that portion of our business.

12. Lines of Credit

Effective June 4, 2009, we entered into a Loan and Security Agreement with Thermo Credit LLC (“Thermo”), for a line of credit in an amount not to exceed $2,000,000 (the “Agreement”). Under the terms of the Agreement, we agreed to pay a commitment fee equal to 2% of the amount of the Credit Facility, an unused facility fee of 0.25% per annum and a monitoring fee equal to the greater of $1,500.00 per month, or 0.05% of the Credit Facility per week. The line of credit is evidenced by a Loan and Security Agreement and a Promissory Note in the maximum amount of $2,000,000. The Note carries an interest rate of the greater of the prime rate plus 8%, or 15%. The indebtedness is secured by a pledge and grant to Thermo of a security interest in all of our property or assets, real or personal, tangible or intangible, now existing or hereafter acquired. As of March 31 2010, we owed $2,000,000 under the Thermo line of credit.

The first principal payment was due to Thermo on September 30, 2009 and as of March 31, 2010, payment has not been made. Therefore, as of March 31, 2010 we were in default and the total balance has therefore been classified as a current liability. Flint management and Thermo have reached an oral agreement to extend and restructure the terms of this line of credit, and Flint is therefore no longer in default as of the date of the filing of this quarterly report. An amendment to the existing line of credit agreement is currently still being formalized and will be publicly disclosed once it has been fully executed by both parties.

Upon default, the entire unpaid balance of principal, together with all accrued but unpaid interest thereon, and all other indebtedness owing to Thermo at such time, shall, at the option of Thermo, become immediately due and payable without further notice. In addition, Thermo shall be entitled to foreclose upon its security interests granted

under the Agreement and to cause the Collateral to be immediately seized wherever found and sold with or without appraisal. Collateral consists of any and all of our subsidiaries’ property or assets, real or personal, tangible or intangible, now existing or hereafter acquired, and all supporting obligations, products and proceeds of all of the foregoing.

We had a second line of credit with the Ulster Bank of Ireland in the amount of €800,000, which had a total value as of December 31, 2009 of approximately $1,152,480. As of December 31, 2009, Mr. Butler repaid this line of credit on our behalf, and the amount repaid was restructured into the Series E Convertible Preferred Shares that were subsequently issued to Mr. Butler. As of March 31, 2010 the total value of this line of credit was $1,078,320 and is included in the "Preferred convertible notes payable, related party" line item in the Balance Sheet.

13. Promissory Notes and Convertible Promissory Notes

During the three months ended March 31, 2010, we issued $148,000 principal amount of convertible promissory notes. During the nine months ended March 31, 2010, we issued $1,068,150 principal amount of promissory notes, some with warrants attached and some with shares of restricted common stock. During the nine months ended March 31, 2010 we restructured $540,000 principal amount of promissory notes into U.S. Dollar Convertible Promissory Notes issued with warrants, and restructured $171,850 principal amount of promissory notes originally issued to Flint Telecom, Ltd. into convertible notes, which were assigned to third parties and partially converted into 334,000 shares of restricted common stock. Substantially all of the proceeds have been used for the expansion of our business, including capital expenditures and working capital.

During the year ended June 30, 2009, we issued $7,110,743 principal amount of Promissory Notes, some with warrants and some with shares of restricted common stock, $3,661,646 principal amount of U.S. Dollar Convertible Promissory Notes and €2,322,830 principal amount of Euro Convertible Promissory Notes.

As of March 31, 2010, the following notes were outstanding: $7,092,192 principal amount of a promissory note issued to CHVC, $3,247,705 principal amount of other promissory notes, some issued with warrants and some with shares of restricted common stock, and $1,087,765 principal amount of U.S. Dollar Convertible Promissory Notes. Additionally, we restructured $4,100,000 worth of debt owed to Michael Butler into Series E Convertible Preferred Shares; See Note 9, Related Party Transactions.

Promissory Notes:

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

On October 22, 2009 we were loaned $250,000 and we issued a promissory note in the amount of $250,000, due and payable with a cash fee of $25,000 by no later than the earlier of (i) November 20, 2009, (ii) the day after we receive additional funding from a third party investor, (iii) the issuance of any debt or equity, (iv) in the event of a warrant exercise, or (v) in the event of any other capital invested (the “Note”), and we issued a warrant to purchase up to 250,000 shares of our common stock at $0.50 per share and having a three year term. The Note is currently in default and we received a notice of default on November 23, 2009. The Note is secured by two million (2,000,000) shares of our restricted common stock held directly by Flint Telecom, Ltd. Upon default, the note holder shall have the option of either taking the security of the two million (2,000,000) shares or leaving the Note and fee in place plus interest at the highest legally valid interest rate until the Note is paid in full.

On October 28, 2009 we were loaned $230,000 and we issued a promissory note in the amount of $260,000 including accrued interest of $30,000, due and payable on or before December 28, 2009; Flint has been unable to make this payment. We received a notice of default on March 2, 2010.

As of March 31, 2010, we had a total of $3,247,705 worth of principal amounts outstanding under various promissory notes issued to approximately 10 individuals and entities, with interest rates ranging from 0% to 15%, to be repaid between 30 September 2009 and 30 September 2011. None of the principal under these notes has been repaid as of March 31, 2010 and all of these notes are currently in default. Upon default, the Note holders may declare their notes immediately due and payable and demand payment of all principal and the note holders may proceed to collect such amounts.

Management is in continuing discussions to restructure these notes with all of the above note holders as part of our balance sheet restructuring activities and we believe we will come to a mutual agreement to either extend these notes or convert them to equity.

U.S. Dollar Convertible Promissory Notes:

During the three months ended March 31, 2010, SEL Nominees Ltd. (“SEL”) loaned us a total of $98,000 and we issued SEL two convertible promissory notes accruing interest at a rate of eighteen percent (18%) per annum, with interest only payments due each month and a maturity date of March 2011, and having a variable conversion price of 50% of the Market Price. As of March 31, 2010 the total potential number of common shares to be issued upon conversion of these notes is approximately 10,000,000. See Note 9: Related Party Transactions for more details on these notes. Also during the three months ended March 31, 2010 Flint issued a $50,000 convertible promissory note to an institution with a variable conversion price of 50% of the lowest closing price for Flint’s common stock during the previous 20 trading days. The terms and conditions of these notes are qualified in its entirety by reference to the full text of the notes, which were attached as Exhibits 4.2, 4.3 and 4.4 to our SEC Form 10Q filed on March 25, 2010. $10,000 worth of this note was partially converted in March of 2010 into 571,429 shares of our common stock. Additional conversions were completed after March 31, 2010; See Note 20: Subsequent Events for more details.

During the nine months ended March 31, 2010 Flint Telecom Ltd. assigned a portion of its debt in the amount of $280,000, to certain third parties and we agreed to modify the terms of that debt into convertible promissory notes, $80,000 of which has a set conversion price of $0.04 per share and $50,000 of which has a variable conversion price of 50% of the Market Price, as defined below. Also during the nine months ended March 31, 2010 we were loaned $50,000 by an institution and we issued a $50,000 convertible promissory note accruing interest at a rate of eight percent (8%) per annum with a maturity date of September 2010 and having a variable conversion price of 50% of the Market Price. “Market Price” means the average of the lowest three (3) Trading Prices for the common stock during the ten (10) Trading Day period ending one Trading Day prior to the date the Conversion Notice is sent. As of March 31, 2010, the total potential number of common shares to be issued upon conversion of this note is 5,000,000. The terms and conditions of this Note is qualified in its entirety by reference to the full text of the Note, which was attached as Exhibit 4.1 to our last SEC Form 10Q filed on March 25, 2010, and is incorporated herein by reference.

The other U.S. Dollar Convertible Promissory Notes were issued from December 2007 to June 30, 2008 to approximately 50 different individuals and entities with an interest rate of 12% and maturities ranging from six months to one year. The Notes have a conversion price of $0.275 per share. One Note holder, RedQuartz, having a principal amount as of March 31, 2010 of $55,500, executed an extension to September 30, 2011. The remaining $16,000 in principal is held by one note holder and was due as of December 31, 2008 and has not been repaid. Management is negotiating an extension with this note holder and we believe that he will agree to an extension or convert the note. Upon default, we are required to pay interest in cash to the Note holder, payable on demand, on the outstanding principal balance of the Note from the date of the default until the default is cured at the rate of the lesser of thirty percent (30%) per annum and the maximum applicable legal rate per annum. Upon default, the Note holder may at any time at his option declare the entire unpaid principal balance of the Note, together with all interest accrued hereon, due and payable.

Convertible Promissory Notes issued with Warrants:

As a result of the issuance of the convertible promissory note in the three months ending December 31, 2009, the conversion prices of the already outstanding convertible promissory notes issued in the total principal amount of $1,140,000 have been adjusted to match the variable conversion price in the new note, which, as of March 31, 2010, equals $0.01 per share. Additionally, because Flint was not been able to repay a number of its other promissory notes in accordance with their existing terms and conditions, an event of default occurred on the existing convertible promissory notes and therefore the exercise price of the related warrants issued to purchase up to 4,145,454 shares of Flint’s common stock has been reduced from $0.35 per share to $0.01 per share. Finally, additional warrants to purchase up to 1,036,363 shares of Flint’s common stock at an exercise price of $0.01 per share, having a five year term, were also issued.

As of March 31, 2010, we have $1,140,000 worth in principal amount of subordinated convertible promissory notes outstanding having an interest rate of 10% per annum, convertible at a variable conversion price, which as of March 31, 2010 is $0.01 per share, into an aggregate of 114,000,000 shares of restricted common stock, with a maturity date 18 months after the issuance dates, and warrants to purchase an aggregate of up to 5,181,817 shares of our restricted common stock at a revised exercise price of $0.01 per share, having a five year term and a cashless exercise provision. These holders were also granted a subordinated security interest in all of our assets. In accordance with the terms of the agreements related to these notes, each note holder cannot beneficially own greater than 4.99% of our total issued and outstanding common stock at any given point in time.

For the nine months ended March 31, 2010, the warrant component of the promissory notes was valued at $779,091. For the nine months ended March 31, 2010, $1,576,379 of all debt discounts related to the promissory notes was amortized and included in interest expense. The following are the assumptions used for the Black Scholes calculation:

	Nine Months Ended March 31, 2010
Expected term (in years)	1 ½ – 3 Yrs.
Weighted average volatility		242.96% – 295.54	%
Expected dividend yield		--
Risk-free rate		1.44% – 2.26	%

Debt Schedule:

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

Type of Loan	Total		Current		Long Term: 1-3 Years
Notes payable	$	1,600,290	$	1,600,290	$	--
Convertible notes payable		1,581,500		1,581,500		--
Line of credit		2,034,490		2,034,490		--
Preferred Shares – related parties		3,194,320		3,194,320
Notes payable – related parties		8,852,842		8,852,842		--
Convertible notes payable – related parties		98,000		98,000		--
Total:	$	17,361,442	$	17,361,442	$	--

14. Commitments and Contingencies

We are a party to various legal proceedings in the normal course of business. Based on evaluation of these matters and discussions with counsel, we believe that any potential liabilities arising from these matters will not have a material adverse effect on our consolidated results of operations or financial position.

15. Stockholder’s Equity

Common Stock:

As of March 31, 2010 we had 200,000,000 total shares of common stock authorized, 89,820,958 shares issued and 88,820,958 shares outstanding . There are no special voting or economic rights or privileges. A small portion of the remaining unvested shares vested in January 2010 and the remaining unvested shares were cancelled due to various officer and employee resignations.

Preferred Stock:

As of March 31, 2010, 5,000,000 total shares of preferred stock were authorized and 21,575 shares of Series C preferred stock were issued and outstanding, par value $0.001. These shares are not convertible into common stock and have no voting rights. As of March 31, 2010, 302,000 shares of Series E Convertible Preferred Shares were issued and outstanding, convertible into a maximum potential of 10,981,818 shares of common stock and with other terms, see Note 9: Related Party Transactions for more details. As of March 31, 2010, there were no shares of Series A or B preferred stock issued or outstanding.

Warrants:

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

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

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

Date Issued	Number of Warrants		Per Share Warrant Exercise Price			Expiration Date
11/14/05		21,000	$	6.00		11/14/10
12/08/05		2,250	$	5.60		12/08/10
5/16/06		140,500	$	6.00		5/16/11
10/1/08		250,000	$	0.40		10/01/11
10/1/08		1,752,500	$	0.50		9/18/11
11/10/08		250,000	$	0.50		11/10/11
6/30/09		2,181,818	$	0.01	(1)	6/30/14
6/30/09		152,727	$	0.275		6/30/14
8/18/09		200,000	$	0.50		12/31/12
10/15/09		250,000	$	0.30		10/15/14
12/10/09		545,454	$	0.01	(1)	12/10/14

All warrants are fully exercisable.

(1)

Because Flint has not been able to repay a number of its other promissory notes issued to various third parties on time and under their existing terms and conditions, an event of default has occurred and therefore the exercise price of the warrants issued to purchase up to 4,145,454 shares of Flint’s common stock has been reduced from $0.35 per share to $0.01 per share, and additional warrants to purchase up to 1,036,363 shares of Flint’s common stock were issued, also exercisable at $0.01 per share. Of which, 2,454,545 have been cashlessly exercised into 1,963,636 shares.

2009 Restricted Stock Plan:

The 2009 Restricted Stock Plan (the “2009 Plan”) was adopted by us and our board of directors in October 2009 and on December 2, 2009 the 2009 Plan was approved by our stockholders. The purpose of the 2009 Restricted Stock Plan is to provide the Company’s employees, directors, officers and consultants, whose present and potential contributions are important to the success of the Company, an incentive, through ownership of the Company’s common stock, to encourage the Company’s employees, directors, officers and consultants to accept or continue in service with the Company, and to help the Company compete effectively with other enterprises for the services of qualified individuals. A total of 35,000,000 shares of our common stock has been initially reserved for issuance under the 2009 Plan, subject to adjustment only in the event of a stock split, stock or other extraordinary dividend, or other similar change in the common stock or capital structure of the Company. During the three months ended March 31, 2010, 6,240,000 shares were cancelled due to various employee and officer resignations, 6,000,000 shares vesting over a period of three years were issued to new officers and 13,200,000 shares with immediate vesting and 3,000,000 with three year vesting were issued to various consultants. As of March 31, 2010, 29,510,000 shares are issued and outstanding, of which, 18,635,000 have vested.

The 2009 Restricted Stock Plan provides for the grant of restricted stock, subject to terms, conditions and restrictions as determined by the Board. The Board shall have the power, from time to time, in its discretion, to select those employees, officers, directors or consultants to whom Awards shall be granted under the Plan, to determine the number of Shares to be granted pursuant to each Award, and, pursuant to the provisions of the Plan, to determine the terms and conditions of each Award (which need not be identical) including any additional restrictions applicable to such Shares, including the time or times at which the Shares shall be sellable, and to interpret the Plan's provisions, prescribe, amend and rescind rules and regulations for the Plan, and make all other determinations necessary or advisable for the administration of the Plan. All awards shall be granted within ten years from the date of adoption of the Plan by the Board.

Stock Option Plans:

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

The 2005 Stock Option Plan (the “2005 Plan”) was adopted by Semotus in July 2005 and in September 2005 the 2005 Plan was approved by its shareholders. In September 2007 the 2005 Plan was amended to provide for the granting of stock options to purchase up to 1,150,000 shares of our common stock, subject to adjustment only in the event of a stock split, stock or other extraordinary dividend, or other similar change in the common stock or capital structure. The 2005 Plan expires in July 2015, ten years after its adoption. Under the 2005 Plan, the Option Committee may grant incentive stock options to purchase shares of our common stock only to employees, and may grant non-qualified stock options to purchase shares of our common stock to our directors, officers, consultants and advisers. The Option Committee may grant options to purchase shares of our common stock at prices not less than fair market value, as defined under the 2005 Plan, at the date of grant for all stock options. The Option Committee also has the authority to set exercise dates (no longer than ten years from the date of grant), payment terms and other provisions for each grant. In addition, incentive options may be granted to persons owning more than 10% of the voting power of all classes of stock, at a price no lower than 110% of the fair market value at the date of grant, as determined by the Option Committee. Incentive options granted under the Plan generally vest over three years at a rate of 33% after year one and then equally on a monthly basis over the next two years from the date of grant. Non-qualified options granted under the Plan generally vest 100% immediately. As of December 31, 2009, 1,163,750 options were outstanding under the 2005 Plan. See Note 16: Stock Based Compensation, for stock option activity.

The 1996 Stock Option Incentive Plan (the “Plan”) was originally adopted by Semotus in June 1996. The Plan provided for the granting of stock options to acquire common stock and/or the granting of stock appreciation rights to obtain, in cash or shares of common stock, the benefit of the appreciation of the value of shares of common stock after the grant date. The Plan expired in June of 2006, ten years after its adoption. As of December 31, 2009, 54,975 options remain outstanding and exercisable under the 1996 Plan.

16. Earnings (Loss) Per Share

We report Basic and Diluted Earnings per Share (EPS) as follows: Basic EPS is computed as net income (loss) divided by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur from common shares issuable through stock options, warrants and other convertible securities. Common equivalent shares are excluded from the computation of net loss per share if their effect is anti-dilutive.

Since we incurred a net loss for the three and nine months ended March 31, 2010, 62,359,000 potential shares were excluded from the shares used to calculate diluted EPS as their effect is anti-dilutive. Since we incurred a net loss for the three and nine months ended March 31, 2009, 24,262,188 potential shares were excluded from the shares used to calculate diluted EPS as their effect is anti-dilutive.

We reported a net loss of $8,509,926 and $21,616,123, respectively, for the three and nine months ended March 31, 2010. We reported a net loss of $1,246,295 and $10,940,839, respectively, for the three and nine months ended March 31, 2009.

17. Stock Based Compensation

Stock Options:

As part of the reverse merger with Semotus that closed on October 1, 2008, we assumed Semotus’ 1996 and 2005 Stock Option Plans, as described in Note 15.

We recognize expense related to the fair value of employee stock option awards on a straight line vesting basis over the vesting period of the award. Total stock option expense recognized by us during the three and nine months ended March 31, 2010 was $15,206 and $46,247, respectively.

We have estimated the fair value of our option awards granted on or after October 1, 2008 using the Black-Scholes option valuation model that uses the assumptions noted in the following table. Expected volatilities are based on the historical volatility of our stock. We use actual data to estimate option exercises, forfeitures and cancellations within the valuation model. The expected term of options granted represents the period of time that options granted are expected to be outstanding. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.

	Three Months Ended
Black-Scholes -Based Option Valuation Assumptions	March 31, 2010 4.0 – 7.0 yrs 193.0% - 222.6% 198.13% -- 2.57%
Expected term (in years)
Expected volatility
Weighted average volatility
Expected dividend yield
Risk-free rate

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

Stock Options	Shares (#)		Weighted Average Exercise Price ($)		Weighted Average Remaining Contractual Life		Weighted Average Grant Date Fair Value ($)		Aggregate Intrinsic Value ($)
Outstanding at January 1, 2010		1,218,725		0.64		--		0.34		--
Granted		--		--		--		--		--
Exercised		--		--		--		--		--
Forfeited		--		--		--		--		--
Expired		--		--		--		--		--
Outstanding at March 31, 2010		1,218,725		0.64		4.72		0.34		--
Exercisable at March 31, 2010		957,159		0.69		3.88		0.40		--

The aggregate intrinsic value of outstanding options as of March 31, 2010 was $0, and is calculated as the difference between the exercise price of the underlying options and the market price of our common stock for the shares that had exercise prices that were lower than the $0.02 market price of our common stock at March 31, 2010.

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

18. Exchange Gains and Losses

As of March 31, 2010 have issued and outstanding €3,020,000 worth of Convertible Preferred Series E shares, €100,000 in non-convertible notes payable, and a portion equal to one million dollars (USD$1,000,000) of the balance due on a $7,000,000 note must be paid through a payment of GBP£721,000, regardless of whether the U.S. dollar strengthens or weakens in relation to the GBP pound sterling during the term of the Note and whether there is therefore a foreign currency translation gain or loss. The reporting currency of Flint is the U.S. Dollar so that transactions and balances are translated into dollars. We recorded a $160,787 gain and a $149,980 gain on translation for the three and nine months ended March 31, 2010, respectively.

19. Subsequent Events

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

On April 22, 2010 we were loaned $40,000 by an institution and we issued a $40,000 convertible promissory note accruing interest at a rate of eight percent (8%) per annum with a maturity date of January 22, 2011 and having a variable conversion price of 50% of the Market Price. “Market Price” means the average of the lowest three (3) Trading Prices for the common stock during the ten (10) Trading Day period ending one Trading Day prior to the date the Conversion Notice is sent. As of the date of the filing of this report, the total potential number of common shares to be issued upon conversion of this note is approximately 8,000,000 shares. The terms and conditions of this promissory note is qualified in its entirety by reference to the full text of the Note, which is attached as Exhibit 4.5, and is incorporated herein by reference.

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

In May of 2010 we entered into a settlement agreement with Telmage Consulting LLC (“TelSpace”) in which TelSpace has furnished to us a perpetual software license as consideration for the repayment of the $250,000 promissory note due to us from TelSpace. The terms and conditions of this settlement agreement is qualified in its entirety by reference to the full text of the settlement agreement, which is attached as Exhibit 10.4 and is incorporated herein by reference.

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

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion should be read in conjunction with the attached financial statements and notes thereto. Except for the historical information contained herein, the matters discussed below are forward-looking statements that involve certain risks and uncertainties, including, among others, the risks and uncertainties discussed below.

OVERVIEW

Management’s objective for the three and nine months ended March 31, 2010 was to improve overall operations to reduce the need for external financing in the difficult economic and financial markets. We continued our focus on growing our prepaid card business. We have been actively engaged in seeking additional external financing and other strategic partnerships and relationships to further enhance the scale, depth and profitability of the business.

In the three months ended March 31, 2010, we had a net loss of $8,509,926 ($0.10 per share basic and diluted), as compared to a net loss of $1,246,295 ($0.02 per share basic and diluted) in the three months ended March 31, 2009. We had a net loss of $21,616,123 ($0.27 per share basic and diluted) in the nine months ended March 31, 2010, as compared to a net loss of $10,940,839 ($0.24 per share basic and diluted) in the nine months ended March 31, 2009. The increase in the losses year on year was a direct result of a one time impairment charge of goodwill and other intangibles in the amount of $12,215,200, along with some other exceptional operational costs relating to the closing of non-profitable businesses as of March 31, 2010, that were acquired as part of the CHVC transaction in 2009. Management felt it prudent to revalue the businesses acquired in 2009 at this time based on this action. Without this charge the net loss would have been $4,054,754 for the three months and $9,400,923 for the nine months ended March 31, 2010. Our overall cash decreased by $1,328,117 in the nine months ended March 31, 2010, compared to a decrease by $1,163,562 in the nine months ended March 31, 2009.

RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2010 AND 2009

REVENUES

Revenues for the three months ended March 31, 2010 decreased 55% to $5,025,631 as compared to $11,220,472 for the three months ended March 31, 2009. Revenues for the nine months ended March 31, 2010 increased 75% to $30,414,547 as compared to $17,432,765 for the nine months ended March 31, 2009. This increase is primarily due to the acquisition of the six subsidiaries of China Voice Holding, Corp. (CHVC) and successful launch and growth of our prepaid calling products business.

COST OF REVENUES AND GROSS MARGIN

While the overall gross margin decreased during the three months ended March 31, 2010 versus the three months ended March 31,2009, the overall gross margin percentage has improved substantially in the nine months ended March 31, 2010 versus 2009 due to the launch of our own branded calling cards through one of our subsidiaries, Flint Prepaid, Inc. (formerly named Wize Communications). Our own brand calling cards enable us to increase margin by selling our high margin products through our existing strong distribution channels.

OPERATING EXPENSES

Operating expenses in the three months ended March 31, 2010 increased 63% to $2,384,923 as compared to $1,461,860 in the three month period ended March 31, 2009, and increased 2% to $6,865,864 during the nine month period ending March 31, 2010 as compared to $6,704,272 in the nine month period ended March 31, 2009.

Operating expenses consist of general and administrative expenses, including payroll, accounting, legal, consulting, rent and other overhead costs. This category also includes stock compensation and option expense, the costs associated with being a publicly traded company, including the costs of SEC filings, a management fee payable to Flint, Ltd., investor relations and public relations. These costs have decreased during the three and nine months ended March 31, 2010 versus 2009 due to cost savings that have been achieved by the business following the full integration of the six companies acquired from China Voice Holding Company.

The non-cash charges for compensation consist mainly of the grants of stock issued for services rendered. The common stock issued was valued at its fair market value at the date of issuance and do not represent any cash payments.

INTEREST EXPENSE

Interest expense increased by 116% to $1,005,549 for the three months ended March 31, 2010 as compared to $465,644 in the three months ended March 31, 2009, and increased 82% to $2,953,710 as compared to $1,626,598 during the nine months ended March 31, 2010 versus 2009. Interest expense is related to accrued interest on the convertible and promissory notes, as well as the amortization of the debt discounts related to those notes. The amount of interest charges related to accounting for debt discounts that did not involve the payment of cash amounted to $336,679 and $1,579,379 for the three and nine months ended March 31, 2010, respectively.

LIQUIDITY AND CAPITAL RESOURCES

Overall cash decreased by $1,328,117 for the nine months ended March 31, 2010 due to a continued loss from operations, and delays in the private offerings that only partially closed during 2009, and which we previously expected to fully close prior to December 31, 2009. We were able to cover some of the cash loss through proceeds from convertible and additional promissory note issuances. The sources and uses of cash are summarized as follows (unaudited):

	Nine Months Ended March 31,
	2010			2009
Net cash used in operating activities	$	(2,052,956	)	$	(3,387,428	)
Net cash used in investing activities		(133,732	)		(771,237	)
Net cash provided by financing activities		1,008,551			3,076,800
Net cash used in foreign currency activities		(149,980	)		(81,697	)
Net increase (decrease) in cash and cash equivalents		---------------------------			--------------------
	$	(1,328,117	)	$	(1,163,562	)

During the nine months ended March 31, 2010, cash used in operating activities was $2,052,956 resulting from a gross profit of $1,550,956 and operating expenses of $6,865,864. The loss included non cash charges for stock and option compensation of $2,483,095 and amortization of debt discount of $1,576,379.

During the nine months ended March 31, 2009, cash used in operating activities was $3,387,428 resulting from a gross gain of $15,982 and operating expenses of $6,704,272. The loss included non cash charges for stock and option compensation and impairment of goodwill of $3,489,198 and $2,538,148, respectively. Other non-cash expenses were depreciation and amortization of $379,338 and a loss on the purchase of notes of $174,956.

Other operating activities that increased cash during the nine months ended March 31, 2010 were a decrease in accounts receivable of $1,518,218, decrease of prepaid expenses of $8,724, reduction in inventory of $392,118 and an increase in accrued interest of $640,372. Operating activities that decreased cash included a decrease in cash overdraft of $116,062 and a decrease in accounts payable of $2,883,279.

Cash provided by financing activities for the nine months ended March 31, 2010 consisted of the sale of short term promissory notes, which provided $1,225,550 in cash, and from our line of credit in the amount of $18,293. Cash used in financing activities for the nine month ended March 31, 2010 consisted primarily of repayment of $225,279 to various promissory note holders.

During the nine months ended March 31, 2009, cash used in investing activities consisted of $351,305 of purchases of telephony equipment, $196,906 for the cash assumed in the acquisition of six CHVC subsidiaries and $700,000 cash consideration payment for the acquisition of the six CHVC subsidiaries.

Cash provided by financing activities for the nine months ended March 31, 2009 consisted of the sale of short term promissory notes, which provided $3,526,060 in cash and convertible notes payable in the amount of $150,000, which was offset by the repayment of some short term notes in the amount of $886,000 and payments of $98,558 on certain lease obligations..

As of March 31, 2010, we had cash and cash equivalents of $8,885, a decrease of $1,328,117 from the balance at June 30, 2009, which was $1,337,002. Our working capital deficit increased as of March 31, 2010 to $18,594,788 as compared to a working capital deficit of $10,221,599 at June 30, 2009. We have not yet generated sufficient revenues to cover the costs of continued product and service development and support, sales and marketing efforts and general and administrative expenses.

We are still largely dependent on financing in order to generate cash to maintain its operations. We are currently investigating the capital markets for additional financings. However, there is no assurance that any additional capital will be raised. We closely monitor our cash balances and our operating costs in order to maintain an adequate level of cash.

FORWARD LOOKING STATEMENTS

Certain statements contained in this report may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Statements that are not historical in nature and which may be identified by the use of words like “expects,” “assumes,” “projects,” “anticipates,” “estimates,” “we believe,” “could be,” and other words of similar meaning, are forward-looking statements. These statements are based on management’s expectations and assumptions and are subject to risks and uncertainties that may cause actual results to differ materially from those expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to, risks associated with the integration of businesses following an acquisition, concentration of revenue from one source, competitors with broader product lines and greater resources, emergence into new markets, the termination of any of the Company’s significant contracts or partnerships, the Company’s inability to maintain working capital requirements to fund future operations or the Company’s inability to attract and retain highly qualified management, technical and sales personnel, changes in laws regulating telecommunications providers, changes in laws affecting the telecommunications products and services we provide. We claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. We disclaim any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not Applicable to Smaller Reporting Companies.

ITEM 4T. CONTROLS AND PROCEDURES.

(a) Evaluation of disclosure controls and procedures. We conducted an evaluation, under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this annual report. Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) of the Exchange Act. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

(b) Changes in internal control over financial reporting. There were no changes in our internal control over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q that has materially affected our internal control over financial reporting.

In future filings we will disclose any further change that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

On February 9, 2010 Mr. Thomas Davis and the Davis Group (“Davis”) filed a complaint against us in the United States District Court for the Southern District of New York. This suit alleges three causes of action for payment due under certain promissory notes issued, and four causes of action for breach of contract. The Complaint claims that we failed to make payments as they became due under a number of promissory notes issued by us to Davis and under other loans made by Davis to Flint. Davis seeks damages in the total amount of $1,325,000 plus interest, attorney’s fees and costs. We have not responded to this complaint and expect summary judgment to be entered. However, Mr. Davis is in active discussions with management to restructure the amounts due to him and management is confident that a successful resolution will come from these discussions.

A judgment was entered against us on October 26, 2009 in the amount of $72,852, plus accruing interest from that date at the rate of $20 per day and post judgment costs incurred in enforcing the judgment. A stipulation for judgment was filed by Carmel Solutions, Inc. (Carmel) in the Superior Court of California, Orange County, in accordance with, and upon our default of, a settlement agreement we entered into with Carmel on May 5, 2009.

We are also a defendant in a pending legal proceeding filed by AT&T on December 11, 2009 in the U.S District Court of the District of Connecticut. This suit alleges one cause of action for breach of contract. The Complaint claims that we owe money for services rendered, that we subsequently entered into a settlement agreement with AT&T to settle the amount owed to AT&T, and that we failed to make any payments due under such settlement agreement. AT&T seeks an automatic entry of judgment against us in the amount of $440,672 plus interest, attorney’s fees and costs.

However, because Thermocredit has a first priority secured interest against all of Flint’s assets, Flint expects that Thermocredit will stop the actual collection on any of these judgments, and management hopes to be able to negotiate with these plaintiffs and come to a reasonable settlement.

We are also a party to other legal proceedings in the normal course of business. Based on evaluation of these matters and discussions with counsel, we believe that liabilities arising from these matters will not have a material adverse effect on the consolidated results of our operations or financial position.

ITEM 1A. RISK FACTORS.

Not Applicable to Smaller Reporting Companies.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

We issued securities, which were not registered under the Securities Act of 1933, as amended, as follows:

During the quarter ended March 31, 2010, we issued 16,000,000 shares of restricted common stock to certain consultants, as part of their compensation for services rendered and/or settlement for payments owed. Additionally, 500,000 shares previously issued to certain employees vested on January 29, 2010, the vesting of 2,000,000 shares previously issued were accelerated and 4,200,000 new shares were issued as part of officer and/or director separations. Also, 2,454,545 warrants were cashlessly exercised into 1,963,636 shares and 571,429 shares were issued pursuant to a partial conversion of a convertible promissory note.

With respect to these transactions, we relied on Section 4(2) of the Securities Act of 1933, as amended. The investors are all accredited investors or certain persons outside the United States, and were given complete information concerning us and represented that the shares were being acquired for investment purposes. The issuance was made without general solicitation or advertising. The appropriate restrictive legend was placed on the certificate and stop transfer instructions were issued to the transfer agent.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

None.

ITEM 5. OTHER INFORMATION.

None.

ITEM 6. EXHIBITS

a) Exhibits:

Number		Description	Location
	3.1	Certificate of Amendment to Articles of Incorporation dated January 22, 2010.	Incorporated by reference to Exhibit 3.1 to the Registrant’s Form 10Q filed on March 25, 2010.
	3.2	Certificate of Designation of Series E Preferred Stock	Incorporated by reference to Exhibit 3.1 to the Registrant’s Form 8-K filed on February 11, 2010.
	4.1	$50,000 Convertible Promissory Note issued on December 18, 2009.	Incorporated by reference to Exhibit 4.1 to the Registrant’s Form 10Q filed on March 25, 2010.
	4.2	$50,000 Convertible Promissory Note issued on January 29, 2010	Incorporated by reference to Exhibit 4.2 to the Registrant’s Form 10Q filed on March 25, 2010.
	4.3	$58,000 Convertible Promissory Note issued on March 8, 2010.	Incorporated by reference to Exhibit 4.3 to the Registrant’s Form 10Q filed on March 25, 2010.
	4.4	$40,000 Convertible Promissory Note issued on March 12, 2010.	Incorporated by reference to Exhibit 4.4 to the Registrant’s Form 10Q filed on March 25, 2010.
	4.5	$40,000 Convertible Promissory Note issued on April 22, 2010.	Filed electronically herewith.
	10.1	Settlement Agreement by and among Flint Telecom Group, Inc. and Michael Butler.	Incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed on February 11, 2010.
	10.2	Settlement Agreement by and among Flint Telecom Group, Inc. and Bill Burbank dated February 4, 2010.	Incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed on February 10, 2010.
	10.3	Employment Agreement by and among Flint Telecom Group, Inc. and Bernard A. Fried dated February 23, 2010.	Incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed on February 23, 2010.
	10.4	Settlement Agreement by and among TelSpace and Flint Telecom Group, Inc.	Filed electronically herewith.
	31.1	Certification pursuant to 17 C.F.R. ss.240.15d-14(a) for Vincent Browne.	Filed electronically herewith.
	32.1	Certification pursuant to 18 U.S.C. ss.1350 for Vincent Browne.	Filed electronically herewith.

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.

FLINT TELECOM GROUP, INC.

Date: May 24, 2010 By: /s/ Vincent Browne

---------------------------------------

Vincent Browne,

Chief Executive Officer (Principal

Executive Officer), and Chief Financial

Officer (Principal Financial Officer)

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