UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C.  20549





Form
10-K





x ANNUAL REPORT UNDER
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934





For
the fiscal year ended December 31,
2008





 ̈ TRANSITION REPORT UNDER
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934





Commission
file number: 333-76630





COMPETITIVE
COMPANIES, INC.








Nevada
            
            65-1146821(State
      or other jurisdiction of incorporation or organization)
            
            (I.R.S.
      Employer Identification No.)





3751
      Merced Drive, Suite ARiverside,
      CA
            
            92503(Address
      of principal executive offices)
            
            (Zip
      Code)





Registrant's
telephone number:     (951)
687-6100





Copies
of Communications to:


Stoecklein
Law Group


402
West Broadway


Suite
690


San
Diego, CA 92101


(619)
704-1310


Fax
(619) 704-1325





Securities
registered under Section 12(b) of the Act:  None





Securities
registered under Section 12(g) of the Act:





Common
Stock, $0.001 par value








Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.


Yes
 ̈  No
x





Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.


Yes
 ̈  No
x





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
x  No
 ̈





Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§229.405) is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.   ̈





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





Large
      accelerated filer   ̈
            Accelerated
      filer   ̈Non-accelerated
      filer   ̈ (Do not check if
      a smaller reporting company)
            Smaller
      reporting company  x





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


Yes
 ̈ No
x





The
aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity was
sold, or the average bid and asked price of such common equity, as of June 30,
2008 (the last business day of the registrant's most recently completed second
fiscal quarter) was $1,807,774 based on a share value of $0.04.





The
number of shares of Common Stock, $0.001 par value, outstanding on April 3, 2009
was 67,409,910 shares.












COMPETITIVE
COMPANIES, INC.


FOR
THE FISCAL YEAR ENDED


DECEMBER
31, 2008





Index
to Report


on
Form 10-K





PART
      I
            PageItem
      1.
            Business
            2Item
      1A.
            Risk
      Factors
            10Item
      1B.
            Unresolved
      Staff Comments
            14Item
      2.
            Properties
            15Item
      3.
            Legal
      Proceedings
            15Item
      4.
            Submission
      of Matters to a Vote of Security Holders
            15PART
      IIItem
      5.
            Market
      for Registrant's Common Equity and Related Stockholder Matters and Issuer
      Purchases of Equity Securities
            16Item
      6.
            Selected
      Financial Data
            20Item
      7.
            Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
            20Item
      7A.
            Quantitative
      and Qualitative Disclosures About Market Risk
            26Item
      8.
            Financial
      Statements and Supplementary Data
            26Item
      9.
            Changes
      in and Disagreements With Accountants on Accounting and Financial
      Disclosure
            26Item
      9A (T)
            Control
      and Procedures
            26Item
      9B.
            Other
      Information
            28PART
      IIIItem
      10.
            Directors,
      Executive Officers and Corporate Governance
            29Item
      11.
            Executive
      Compensation
            35Item
      12.
            Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters
            36Item
      13.
            Certain
      Relationships and Related Transactions, and Director
      Independence
            37Item
      14
            Principal
      Accounting Fees and Services
            38PART
      IVItem
      15.
            Exhibits,
      Financial Statement Schedules
            39





FORWARD-LOOKING
STATEMENTS





This
document contains “forward-looking statements”.  All statements other
than statements of historical fact are “forward-looking statements” for purposes
of federal and state securities laws, including, but not limited to, any
projections of earnings, revenue or other financial items; any statements of the
plans, strategies and objections of management for future operations; any
statements concerning proposed new services or developments; any statements
regarding future economic conditions or performance; any statements or belief;
and any statements of assumptions underlying any of the foregoing.





Forward-looking
statements may include the words “may,” “could,” “estimate,” “intend,”
“continue,” “believe,” “expect” or “anticipate” or other similar words. These
forward-looking statements present our estimates and assumptions only as of the
date of this report. Accordingly, readers are cautioned not to place undue
reliance on forward-looking statements, which speak only as of the dates on
which they are made. Except for our ongoing securities laws, we do not intend,
and undertake no obligation, to update any forward-looking
statement.  Additionally, the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995 most likely do not apply to our
forward-looking statements as a result of being a penny stock
issuer.  You should, however, consult further disclosures we make in
future filings of our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q
and Current Reports on Form 8-K.





Although
we believe the expectations reflected in any of our forward-looking statements
are reasonable, actual results could differ materially from those projected or
assumed in any of our forward-looking statements.  Our future
financial condition and results of operations, as well as any forward-looking
statements, are subject to change and inherent risks and
uncertainties.  The factors impacting these risks and uncertainties
include, but are not limited to:





·
            Our
      current deficiency in working
capital;


·
            Increased
      competitive pressures from existing competitors and new
      entrants;


·
            Our
      ability to market our services to new
  subscribers;


·
            Inability
      to locate additional revenue sources and integrate new revenue sources
      into our organization;


·
            Adverse
      state or federal legislation or regulation that increases the costs of
      compliance, or adverse findings by a regulator with respect to existing
      operations;


·
            Changes
      in U.S. GAAP or in the legal, regulatory and legislative environments in
      the markets in which we operate;


·
            Consumer
      acceptance of price plans and bundled offering of our
      services;


·
            Loss
      of customers or sales weakness;


·
            Technological
      innovations;


·
            Inability
      to efficiently manage our
operations;


·
            Inability
      to achieve future sales levels or other operating
  results;


·
            Inability
      of management to effectively implement our strategies and business
      plan


·
            Key
      management or other unanticipated personnel
  changes;


·
            The
      unavailability of funds for capital expenditures;
  and


·
            The
      other risks and uncertainties detailed in this
  report.





1


For
a detailed description of these and other factors that could cause actual
results to differ materially from those expressed in any forward-looking
statement, please see “Item 1A. Risk Factors” in this document.





Throughout
this Annual Report references to “CCI”, “the Company”, “we,” “us,” and “our” and
similar terms refer to COMPTETIVE COMPANIES, INC. and its wholly owned
subsidiaries





AVAILABLE
INFORMATION





Any
annual, quarterly, special reports and other information filed with the SEC can
be inspected and copied at the public reference facility maintained by the SEC
at 100 F Street, N.E., Room 1580, Washington, D.C. 20549-0405. Information
regarding the public reference facilities may be obtained from the SEC by
telephoning 1-800-SEC-0330. The Company’s filings are also available through the
SEC’s Electronic Data Gathering Analysis and Retrieval System which is publicly
available through the SEC’s website (www.sec.gov). Copies of such materials may
also be obtained by mail from the public reference section of the SEC at 100 F
Street, N.E., Room 1580, Washington, D.C. 20549-0405 at prescribed
rates.





PART
I





ITEM
1.                      BUSINESS





General
Business Development





Competitive
Companies, Inc.(“CCI”)was
originally incorporated in the state of Nevada in March 1998. CCI currently acts
as a holding company for its operating subsidiaries, Competitive Communications,
Inc. (“Competitive Communications”), which is an approved and regulated local
and long distance telephone company, and CCI Residential Services Inc. (“CCI
Residential”), which is a non-regulated telephone company providing local and
long distance telephone service, high-speed Internet and cable television
service to large apartment complexes.  CCI, Competitive Communications
and CCI Residential (collectively referred to as the “Company”) provide
telephone, cable television, long distance/inter - exchange, and dial up and
high-speed Internet connections and e-mail services, mainly to customers who
live in multi-tenant residential buildings.





On
May 5, 2005, the Company merged with CA Networks, Inc. (“CAN”), which was a
development stage enterprise in the process of developing a business model in
the same industry as CCI. CAN was formed under the laws of the state of Wyoming
in 2004 and provided retail local and long distance telephone service and DSL
Internet service in Kentucky.   The combined companies maintained
the name of CCI.  During the second quarter of 2006, we discontinued
operations within Kentucky that were originally incorporated with the CAN merger
and have focused on continuing the operations of providing telecommunications
services to California, Alabama, and Mississippi.  During the second
quarter of 2008, we discontinued services in Mississippi and now currently
operate in only California and Alabama.





2


Current
Business Operations





During
the year ended December 31, 2008, we provided telecommunications products and
services that included local telephone services, domestic and international long
distance services, and enhanced voice, data and Internet services, and Cable TV
service primarily to residents of apartment complexes, retail businesses and
residential users.  We operate in both a regulated and non-regulated
environment.  It is our intention in the future to provide bundled
services to our customers as well as expand to customers beyond apartment
complexes and additional revenue sources in the telecommunications
industry.





Principal Products and
Services





During
the year ended December 31, 2008, CCI provided telecommunications services
primarily to residents of apartment complexes, retail businesses and residential
users, in primary and secondary metropolitan areas of California and Alabama, as
well as, Mississippi for the first two quarters of 2008. CCI provided telephone
service to approximately 398 customers at 7 apartment complexes, provided
television service to approximately 439 customers at 4 properties, and provided
DSL services to approximately 209 customers at 5 properties.





During
the year ended December 31, 2008, CCI operated as a regulated Competitive Local
Exchange Carrier (“CLEC”) and as an Interexchange Carrier (“IXC”), owning and
operating Class 4 tandem switches and providing telephone service to residences,
businesses, and Shared Tenant Services (“STS”) providers using a Hub
Concept.





Under
the Telecommunications Act of
1996, CCI’s regulated subsidiary, Competitive Communications, receives
significantly discounted prices from the existing or traditional local phone
companies and long distance carriers, thereby reducing their
costs.  As a regulated telecommunications provider, the company is
required to negotiate agreements for resale services from the local exchange
carriers, to file telephone rate tariffs with state public utilities
commissions, and is subject to the state public utilities commission rules
regarding telecommunications carriers.  The company is currently
approved as an operating telephone company in California and Alabama, and
operates as an approved public utility by each state’s Public Service
Commissions.  Competitive Communications has completed wholesale
interconnect agreements with SBC, now known as “AT&T”, Verizon, BellSouth,
and QWEST.  These agreements allow us to purchase wholesale local and
long distance telephone service and nationwide Internet service at discounted
prices and resell those services at retail rates to businesses and residential
users.





The
subsidiary, CCI Residential,operates under shared
tenant services provisions within each state and is a non-regulated
company.  As such, it is not required to file tariffs with state
public utilities commissions and does not have to comply with commission rules
regarding local exchange carriers, thus legally avoiding the more onerous rate
filing requirements of the regulated subsidiaries and other regulated
carriers.  CCI Residentialcan sign individual
agreements with property owners allowing for commission payments to the property
owner consisting of a portion of the revenue the subsidiary receives from
apartment complex residents on the owner’s property.  As a shared
tenant service provider, CCI Residentialis required by each
state’s public utilities commission to provide regulated carriers with equal
access to the apartment complexes it services.





3


It
is anticipated that CCI will begin to introduce new products and services as it
is able to complete the anticipated closings with the recently executed
LOIs.  During the last six months of 2008 and the first quarter of
2009, the Company executed LOIs with Innovation Capital Management, Inc.,
Worldwide Communications, and IBFA Acquisition LLC.  The Company
intends to negotiate definitive agreements to create new strategic alliances and
acquisitions that would provide new services and
products.  Specifically, the Company hopes to provide wireless high
speed internet, nationwide dial-up, broadband DSL, broadband satellite, web
design services, discount cellular services, VoIP services and other similar
services in the telecommunications industry.





Competitive Communications,
Inc.





This
subsidiary offered the following services in most of their markets during the
year ended December 31, 2008:  local and long distance telephone
services, toll-free or 800 service, and dedicated Internet and DSL services to
business and non-apartment complex residential customers.





To
offer these services, Competitive Communications must secure certification from
a state regulator and typically must file rates or price lists for the services
that it will offer.  The certification process varies from state to
state; however, the fundamental requirements are largely the
same.  State regulators require new entrants to demonstrate that they
have secured adequate financial resources to establish and maintain good
customer service.  New entrants must show that they possess the
knowledge and ability required to establish and operate a telecommunications
network.   CCI currently has all necessary agreements in place in
California and Alabama.





Services
are sold as bundled or unbundled, depending on the customer’s preference.
Presently, services are sold directly to business and residential
customers.  Competitive Communicationsalso sells services to
CCI Residential,which then sells these
services to apartment residents under shared tenant services
provisions.  Presently, nearly all of Competitive Communications’
sales are attributed to CCI Residential, and only a small portion is from direct
sales of telephone and Internet services to retail residential and business
customers.





CCI Residential
Services





CCI
Residentialprovides the following
products and services: local and long distance services, high-speed Internet,
cable television, and toll-free or 800 service in California and
Alabama.





To
offer these services to apartment complex customers, CCI Residential must sign a
contract with the apartment owner.  These multi-year contracts
normally range from 5 to 20 years.  They provide for the apartment
owner to share in a percentage of the revenue received from servicing the
complex.  The percentage received may vary from 0 percent to 11
percent, based on the total revenue received, the types of services provided,
the term of the contract and other negotiated factors.  If the complex
is under construction, CCI Residential must plan for, have approved, and install
underground cabling.  If the complex is already built, it must survey
the cabling needs and negotiate the use of the cable with the
owner.  It must secure state approval to conduct business in the state
and establish service from Competitive Communications, if available, or if
Competitive Communications is not yet certified, from the traditional local
telephone companies.  CCI Residential markets to the MDU
(multiple-dwelling units) market as it is able to provide bundled services in a
cost effective manner.





4


Services
sold by CCI Residential can be bundled or unbundled depending on the customer’s
preference.  Competitive Communications sells unbundled telephone,
cable television, and Internet services to CCI Residential at, or marginally
above, Competitive Communications’ cost.  CCI Residential then sells
these services to apartment complex customers at competitive market
prices.  By having all outside service agreements under Competitive
Communications, it will be possible in the future to negotiate better terms and
discounts based on the combined volume of the customer bases of Competitive
Communications and CCI Residential.





When
tenants move into an apartment complex serviced by CCI Residential, the leasing
agent informs them that the complex has a private telephone service provider and
a private cable television provider (in those locations where CCI provides the
cable television service).  Tenants must contact CCI Residential in
order to activate their telephone and cable television service.  Those
tenants who prefer to receive service from the local telephone company may do
so; however, their telephone line must be cross-connected from CCI Residential
to the local telephone company.  This may take the telephone company
from a few days to two weeks to accomplish and the installation charges will be
assessed to the tenant.   The telephone service for those tenants
who select CCI Residential for their service, in most cases, will be activated
while they are still on the line placing their orders.  On average,
more than 30% of tenants decide to use CCI Residential telephone service when
offered at the complex.  Those who do not use the CCI Residential can
select a local carrier, use their cell phones only, or choose not to have any
telephone service.  Over 70% of tenants use CCI Residential to provide
cable television service at those complexes where CCI Residential offers the
service.  Those who do not use CCI Residential either use satellite
television dishes for service or do not have television service at
all.  Approximately 20% of tenants use DSL Internet service provided
by CCI Residential.





Of
the total revenue generated by CCI Residential, approximately 40% is from
telephone-related service, approximately 40% is from cable television service,
and approximately 20% is from internet service to tenants of apartment complexes
serviced by the company.  It is anticipated that the percentage of
revenues from internet services will increase in the future as the company plans
to expand its internet services to additional complexes and as the Company looks
to utilize other methods to penetrate the under serviced rural
markets.





As
CCI Residential purchases its services from Competitive Communications, CCI
Residentialdoes
not need or have the same connection services agreements required of Competitive
Communications.





5


Long Distance
Services





The
company offers a full range of domestic and international long distance
services. These services include “1+” outbound calling and inbound toll free
service.





Competitive
Communications, Inc. has negotiated an agreement with QWEST Communications for
volume discounts for long distance resale.  Prior to signing with
QWEST, the company had long distance service providers that were more expensive
than QWEST and provided inferior service.  Periodically the company
reviews proposals from other long distance providers to ensure that it is
receiving the best possible rates.  Should better rates with
comparable service be found, a request revision of the QWEST agreement would be
initiated or the more cost effective provider would be selected and transition
made to the new provider.





The
agreement with QWEST allows CCI to offer long distance telephone service in all
50 states.





Internet
Services





CCI
has been installing and offering high-speed internet service to selected
apartment complex customers since May of 2002.  It offers high-speed
internet access services via digital subscriber line, (DSL).  After
accepting bids from other carriers, based on price and service quality, QWEST
was selected as the carrier to provide internet service telephone lines at
selected apartment complexes.





If
and when, definitive agreements are executed with the entities that we have
executed LOIs, we hope to be able to integrate and expand our current internet
services by providing “wireless” broadband internet services as well web design
services and network design services.  This expansion would allow us
to reach a much broader market than we currently service.





Voice-over-Internet
Protocol





VoIP uses the traditional technology of
sending data packets over the internet to now transmit voices, through the
compression of sound into data packets which are transmitted over data
networks.  Instead of establishing a specific connection between two
devices and sending a message in “one piece”, VoIP separates the message into
smaller fragments called packets.  These packets are transmitted
separately over a decentralized network and upon reaching its final destination,
are reassembled into the original message.





Discount Cellular
Services





In addition to expanding our current
services, we anticipate being able to expand our services to include cellular
services as a result of the recently executed LOIs.  We anticipate
being able to offer AT&T, Verizon and T-mobile cellular services, if and
when definitive agreements are executed with those entities that we have
executed LOIs.





6


Principal
Suppliers





During the year ended December 31,
2008, CCI had various suppliers for its telephone, cable television, long
distance/inter - exchange, and dial up and high-speed internet connections and
e-mail services.  More specifically, it contracts with QWEST to supply
its long distance and DSL services, AT&T for local telephone services, and
Direct TV for cable services.





Competition and Market
Overview





The telecommunications industry is
highly competitive, rapidly evolving and subject to technology
changes.  Additionally, there are numerous telecommunications service
companies that conduct extensive advertising campaigns to capture market share.
CCI believes that the principal competitive factors affecting its business will
be pricing levels and clear pricing policies, customer service, and the variety
of services offered.  Its ability to compete effectively will depend
upon its continued ability to maintain high-quality, market-driven services at
prices generally equal to or below those charged by competitors. To maintain a
competitive posture, CCI believes that it must be in a position to reduce its
prices in order to meet reductions in rates, if any, by others.  Any
such reductions could reduce revenues.  Many of CCI’s current and
potential competitors have financial, personnel, and other resources, including
brand name recognition as well as other competitive advantages.





CCI competes principally with
traditional local phone companies serving an area, such as AT&T, BellSouth,
and Verizon.  While these types of providers have name recognition,
CCI markets its ability to offer lower pricing and bundled packages of services
with one bill and one point of contact.





CCI has not achieved and does not
expect to achieve a significant market share for any of its resale services.
Recent regulatory initiatives allow newer local phone companies such as our
subsidiary, Competitive Communications, to connect with traditional local phone
company facilities. Although this provides increased business opportunities for
CCI, such connection opportunities have been, and likely will continue to be,
accompanied by increased pricing flexibility for and relaxation of regulatory
oversight of the traditional local telephone companies.





Traditional local telephone companies
have long-standing relationships with regulatory authorities at the federal and
state levels.  While recent FCC administrative decisions and
initiatives provide for increased business opportunities to telecommunication
providers such as CCI, they also provide the traditional local telephone
companies with increased pricing flexibility for their private line, special
access and switched access services. However, wireless internet and VoIP
services are currently non-regulated and cost much less than the standard
hardwire services offered by the local phone companies. Therefore, CCI hopes to
be able to move the majority of its business from the regulated arena and
compete competitively with the traditional companies.





Voice-over-Internet
Protocol





VoIP
services first emerged in the mid 1990s but were not typically used for
transmitting voice signals due to the potential for data packets to be delayed
or lost, preventing a real-time transmission and possibly resulting in poor
sound quality.   Due to these glitches, VoIP did not receive a
positive response early on and most consumers were not attracted to the idea of
VoIP.  However, as bandwidth increased and improvements in the packet
technology occurred, the quality and reliability of VoIP were
enhanced.





7


With new improvements, VoIP now allows
a much higher volume of telecommunications traffic to flow at much higher speeds
than do traditional circuits, while at a significantly lower
cost.  VoIP networks are less capital intensive to construct and much
less expensive to maintain.  VoIP networks are based on internet
protocol and therefore can interface with web-based services, such as virtual
portals, interactive voice response, and unified messaging
packages.  A VoIP network utilizes intellectual property to transmit a
call from its origination point to CCI’s servers.  The ability to
minimize the use of established telecommunication lines reduces the cost of
transmitting telephone calls for CCI and ultimately the customer.





Today,
VoIP is increasingly used by residential and business users and offered through
a wide array of service providers.  Vonage and Skype are the most
advertised and well-known of these VoIP providers.  Some other
providers are long distance phone companies, cable companies, and internet
service providers.  These types of providers differ in the type of
networks used and the characteristics and features offered for VoIP
communications services.  However, we believe future competition could
come from a variety of enterprises both in the internet and telecommunications
industry and the existing competitors are likely to continue to expand their
service offerings.





Customers





During the year ended December 31,
2008, two apartment complexes that we service accounted for approximately 70% of
our annual sales.  The complex of Colonial Village in Trussville,
Alabama accounted for 50%, or $285,000 in revenue and the complex of Durham
Greens in Fremont, California accounted for 20%, or $134,000 in
revenue.





Intellectual
Property





CCI’s
Hartline system enters, schedules, provisions, and tracks a customer’s order
from the point of sale to the installation and testing of service.  It
also interfaces with trouble management, inventory, billing, collection and
customer service systems.





Personnel





As
of December 31, 2008, we had four full-time employees.  Currently,
there are no organized labor agreements or union agreements between us and our
employees.





Assuming
we are able to pursue additional revenue through acquisitions and/or strategic
alliances with those companies we have executed LOIs, we anticipate an increase
of personnel and may need to hire additional employees.  In the
interim, we intend to use the services of independent consultants and
contractors to perform various professional services when appropriate. We
believe the use of third-party service providers may enhance our ability to
control general and administrative expenses and operate
efficiently.





8


Governmental Approval and
Regulation





CCI
generally is subject to all of the government regulations that regulate
businesses generally such as compliance with regulatory requirements of federal,
state, and local agencies and authorities, including regulations concerning
workplace safety, labor relations, and disadvantaged
businesses.   In addition, the Company’s operations are affected
by federal and state laws relating to marketing practices in the
telecommunications industry.





More
specifically, CCI’s telecommunication services business offered during the year
ended December 31, 2008, were subject to state and local
regulation.  Traditionally, telephone services have been subject to
extensive state regulation, while internet services have been subject to much
less regulation.  VoIP has elements that resemble traditional
telephone companies as well as those that resemble the
internet.  Therefore, VoIP did not fit into either existing framework
of regulation and until recently operated in an environment that was largely
free of regulation.





However, the Federal Communications
Commission (“FCC”), U.S. Congress, and various state regulatory bodies have
begun to assert regulatory authority over VoIP providers and on a continuous
basis are evaluating how VoIP will be regulated in the future.  Some
of the existing regulations for VoIP are applicable to the entire industry,
while other rulings are limited to specific companies and/or categories of
service.  At this point in time, the application of rules to CCI and
its competitors is speculative.





Federal
Regulation





The
FCC has authority to regulate and implement provisions of the Telecommunications
Act of 1996.  One of the provisions enacted by the FCC was the
Universal Service Order, which requires telecommunications carriers providing
interstate telecommunications services to periodically contribute to universal
service support programs administered by the FCC.  The periodic
contribution requirements to the Universal Service Funds are currently assessed
based on a percentage of each contributor’s interstate end user
telecommunications revenues reported to the FCC.  The contribution
rate factors are determined quarterly and carriers are billed for their
contribution requirements each month based on projected interstate and
international end-user telecommunications revenues, subject to periodic
reconciliation.  We pass these contributions through as a part of our
services.





The
FCC is considering several proposals that would fundamentally alter the basis
upon which the Universal Service Fund contributions are determined and the means
by which contributions can be recovered from customers.  This may
impact our service fees and the ability to recoup these contributions from our
customers.





State
Regulation





State regulatory agencies have
jurisdiction when facilities and services are used to provide intrastate
services. A portion of CCI’s current traffic may be classified as intrastate and
therefore subject to state regulation.  CCI expects to offer more
intrastate services as its business and product lines expand and state
regulations are modified to allow increased local services competition. For
other than shared tenant services, in order to provide intrastate services, CCI
generally must obtain a certificate of public convenience and necessity from the
state regulatory agency and comply with state requirements for
telecommunications utilities, including state rate requirements.





9


State agencies require that CCI file
periodic reports, pay various fees and assessments, and comply with rules
governing quality of service, consumer protection, and similar issues. Although
the specific requirements vary from state to state, they tend to be more
detailed than the FCC’s regulation because of the strong public interest in the
quality of basic local exchange service.  CCI will comply with all
applicable state regulations, and as a general matter does not expect that these
requirements of industry-wide applicability will harm the business. However, new
regulatory burdens in a particular state may affect the profitability of
services in that state.





Local
Regulation





CCI’s networks are subject to numerous
local regulations such as building codes and licensing.  Such
regulations vary on a city-by-city and county-by-county basis.  If CCI
decides in the future to install its own fiber optic transmission facilities, it
will need to obtain rights-of-way to publicly owned land.  Since CCI
is an approved public utility, such rights-of-way may
be   available to the company on economically reasonable or
advantageous terms.





ITEM
1A.                   RISK
FACTORS





Risks Relating with Our
Business and Marketplace





We
have incurred losses since inception and expect to incur losses for the
foreseeable future. In addition, our poor financial condition raises substantial
doubt about our ability to continue as a going concern.





Our
net operating losses for the years ended December 31, 2008 and 2007 was $420,556
and $435,510, respectively. As of December 31, 2008, we only had $23,340 in
cash available to finance our operations and a working capital deficit of
$154,726.  Capital requirements have been and will continue to be
significant, and our cash requirements have exceeded cash flow from operations
since inception.  We are in need of additional capital to continue our
operations and have been dependent on the proceeds of private placements of
securities and recent loans to from an officer to satisfy working capital
requirements.  We will continue to be dependent upon the proceeds of
future offerings or public offerings to fund development of products, short-term
working capital requirements, marketing activities and to continue implementing
the current business
strategy.  There  can  be  no  assurance  that  we  will  be  able  to  raise
the necessary  capital to continue operations.





Our
ability to continue as a going concern is dependent on our ability to raise
funds to finance ongoing operations; however we may not be able to raise
sufficient funds to do so. Our independent auditors have indicated that there is
substantial doubt about our ability to continue as a going concern over the next
twelve months.  Because of these factors, an investor cannot determine
if and when we will become profitable and therefore runs the risk of losing
their investment.





10


If
we are unable to obtain additional funding, our business operations will be
harmed and if we do obtain additional financing our then existing stockholders
may suffer substantial dilution.





We will require additional funds to
expand our operations and believe the current cash on hand and the other sources
of liquidity will not be sufficient enough to fund our operations through fiscal
2009.  We anticipate that we will require approximately $1,000,000 to
$2,000,000 to fund our continued operations for fiscal 2009 as well as be able
to close on the intended acquisitions, depending on revenue from
operations.





Additional
capital will be required to effectively support the operations and to otherwise
implement our overall business strategy.  There can be no assurance
that financing will be available in amounts or on terms acceptable to us, if at
all.  The inability to obtain additional capital will restrict our
ability to grow and may reduce our ability to continue to conduct business
operations.  If we are unable to obtain additional financing, we will
likely be required to curtail our marketing and development plans and possibly
cease our operations.  Any additional equity financing may involve
substantial dilution to our then existing stockholders.





We
may acquire assets or other businesses in the future.





We
may consider acquisitions of assets or other business as recently noted with
executed LOIs. Any acquisition involves a number of risks that could fail to
meet our expectations and adversely affect our profitability. For
example:





·
            The
      acquired assets or business may not achieve expected
    results;


·
            We
      may incur substantial, unanticipated costs, delays or other operational or
      financial problems when integrating the acquired
  assets;


·
            We
      may not be able to retain key personnel of an acquired
      business;


·
            Our
      management’s attention may be diverted;
or


·
            Our
      management may not be able to manage the acquired assets or combined
      entity effectively or to make acquisitions and grow our business
      internally at the same time.





If
these problems arise we may not realize the expected benefits of an
acquisition.





Without
realization of additional capital, it would be unlikely for us to continue as a
going concern.





As
a result of our deficiency in working capital at December 31, 2008 and other
factors, our auditors have included an explanatory paragraph in their audit
report regarding substantial doubt about our ability to continue as a going
concern.  The financial statements do not include any adjustments as a
result of this uncertainty.  The going concern qualification may
adversely impact our ability to raise the capital necessary for the continuation
of operations.





11


Our
limited resources may prevent us from retaining key employees or inhibit our
ability to hire and train a sufficient number of qualified management,
professional, technical and regulatory personnel.





Our
success may also depend on our ability to attract and retain other qualified
management and personnel familiar in telecommunications
industry.  Currently, we have a limited number of personnel that are
required to perform various roles and duties as a result of our limited
financial resources.  We intend to use the services of independent
consultants and contractors to perform various professional services, when
appropriate to help conserve our capital.  However, if and when we
determine to acquire additional personnel, we will compete for such persons with
other companies and other organizations, some of which have substantially
greater capital resources than we do.  We cannot provide any assurance
that we will be successful in recruiting or retaining personnel of the requisite
caliber or in adequate numbers to enable us to conduct our
business.





Competition
from companies with already established marketing links and brand recognition to
our potential customers may adversely affect our ability to introduce and market
our products.





The telecommunications industry is
highly competitive. Many of our current and potential competitors have
financial, personnel and other resources, including brand name recognition,
substantially greater than ours, as well as other competitive advantages over
us.  Certain competitors may be able to secure product from vendors on
more favorable terms, devote greater resources to marketing and promotional
campaigns, and adopt more aggressive pricing than we will.  There can
be no assurance we will be able to compete successfully against these
competitors, which ultimately may have a materially adverse effect on our
business, results of operations, financial condition and potential products in
the future.





We
may not be able to provide our products and services if we do not connect or
continue to connect with the traditional carriers, our primary
competitors.





As
a competitive carrier, we must coordinate with traditional carriers so that we
can provide local service to customers on a timely and competitive basis. The
Telecommunications Act created incentives for regional Bell operating companies
to cooperate with competitive carriers and permit access to their facilities by
denying such companies the ability to provide in-region long distance services
until they have satisfied statutory conditions designed to open their local
markets to competition. The regional Bell operating companies in our markets are
not yet permitted by the FCC to offer long distance services. These companies
may not be accommodating once they are permitted to offer long distance service.
Currently AT&T is permitted to offer both local and long distance service in
some our mutual service areas, but we have not yet noticed any impact on our
markets.





Many
competitive carriers, including us, have experienced difficulties in working
with traditional carriers with respect to initiating, connecting, and
implementing the systems used by these competitive carriers to order and receive
network elements and wholesale services and locating equipment in the offices of
the traditional carriers.





12


If
we cannot obtain the cooperation of a regional Bell operating company in a
region, whether or not we have been authorized to offer long distance service,
our ability to offer local services in such region on a timely and
cost-effective basis will be harmed.





Risks Relating To Our Common
Stock





If
we fail to remain current on our reporting requirements, we could be removed
from the OTC Bulletin Board which would limit the ability of broker-dealers to
sell our securities and the ability of stockholders to sell their securities in
the secondary market.





Companies
trading on the OTC Bulletin Board, such as us, must be reporting issuers under
Section 12 of the Securities Exchange Act of 1934, as amended, and must be
current in their reports under Section 13, in order to maintain price quotation
privileges on the OTC Bulletin Board.  More specifically, FINRA has
enacted Rule 6530, which determines eligibility of issuers quoted on the OTC
Bulletin Board by requiring an issuer to be current in its filings with the
Commission.  Pursuant to Rule 6530(e), if we file our reports late
with the Commission three times in a two-year period or our securities are
removed from the OTC Bulletin Board for failure to timely file twice in a
two-year period then we will be ineligible for quotation on the OTC Bulletin
Board for one year.  As a result, the market liquidity for our
securities could be severely adversely affected by limiting the ability of
broker-dealers to sell our securities and the ability of stockholders to sell
their securities in the secondary market.





Our
internal controls may be inadequate, which could cause our financial reporting
to be unreliable and lead to misinformation being disseminated to the
public.





Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting. As defined in Exchange Act Rule 13a-15(f),
internal control over financial reporting is a process designed by, or under the
supervision of, the principal executive and principal financial officer and
effected by the board of directors, management and other personnel, to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles and includes those policies and
procedures that: (i) pertain to the maintenance of records that in reasonable
detail accurately and fairly reflect the transactions and dispositions of the
assets of Competitive Companies; (ii) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that
receipts and expenditures of Competitive Companies are being made only in
accordance with authorizations of management and directors of Competitive
Companies, and (iii) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of Competitive
Companies’ assets that could have a material effect on the financial
statements.





13


We
have a limited number of personnel that are required to perform various roles
and duties. Furthermore, we have one individual, our CEO, who is responsible for
monitoring and ensuring compliance with our internal control procedures. As a
result, our internal controls may be inadequate or ineffective, which could
cause our financial reporting to be unreliable and lead to misinformation being
disseminated to the public. Investors relying upon this misinformation may make
an uninformed investment decision.





Because
our common stock is deemed a low-priced “Penny” Stock, an investment in our
common stock should be considered high risk and subject to marketability
restrictions.





Since our common stock is a penny
stock, as defined in Rule 3a51-1 under the Securities Exchange Act, it will be
more difficult for investors to liquidate their investment of our common stock.
Until the trading price of the common stock rises above $5.00 per share, if
ever, trading in the common stock is subject to the penny stock rules of the
Securities Exchange Act specified in rules 15g-1 through 15g-10. Those rules
require broker-dealers, before effecting transactions in any penny stock,
to:





Deliver
to the customer, and obtain a written receipt for, a disclosure
document;


·
            Disclose
      certain price information about the
stock;


·
            Disclose
      the amount of compensation received by the broker-dealer or any associated
      person of the broker-dealer;


·
            Send
      monthly statements to customers with market and price information about
      the penny stock; and


·
            In
      some circumstances, approve the purchaser’s account under certain
      standards and deliver written statements to the customer with information
      specified in the rules.





Consequently, the penny
stock rules may restrict the ability or willingness of broker-dealers to sell
the common stock and may affect the ability of holders to sell their common
stock in the secondary market and the price at which such holders can sell any
such securities. These
additional
procedures could also limit our ability to raise additional capital in the
future.





FINRA
sales practice requirements may also limit a stockholder’s ability to buy and
sell our stock.





In addition to the “penny stock” rules
described above, FINRA has adopted rules that require that, in recommending an
investment to a customer, a broker-dealer must have reasonable grounds for
believing that the investment is suitable for that customer. Prior to
recommending speculative low priced securities to their non-institutional
customers, broker-dealers must make reasonable efforts to obtain information
about the customer’s financial status, tax status, investment objectives and
other information. Under interpretations of these rules, the FINRA believes that
there is a high probability that speculative low priced securities will not be
suitable for at least some customers. The FINRA requirements make it more
difficult for broker-dealers to recommend that their customers buy our common
stock, which may limit your ability to buy and sell our stock and have an
adverse effect on the market for our shares.





ITEM
1B.                   UNRESOLVED
STAFF COMMENTS





None.


14


ITEM
2.                      PROPERTIES





Our
corporate headquarters are in Riverside, California, where we lease
approximately 2,134 square feet of office and warehouse space for approximately
$2,460 per month.  The lease is for five years and expires in December
2011.  Pursuant to the lease we have minimal annual rental increase
for the duration of the five years, culminating at $2,945 for the last year of
the lease.





We
do not intend to renovate, improve, or develop properties.  However,
if and when definitive agreements are executed with potential acquisitions, we
may expand our office space and/or locations.





We
are not subject to competitive conditions for property and currently have no
property to insure.  We have no policy with respect to investments in
real estate or interests in real estate and no policy with respect to
investments in real estate mortgages.  Further, we have no policy with
respect to investments in securities of or interests in persons primarily
engaged in real estate activities.





ITEM
3.                      LEGAL
PROCEEDINGS





From time to time, we may become
involved in various lawsuits and legal proceedings which arise in the ordinary
course of business. However, litigation is subject to inherent uncertainties,
and an adverse result in these or other matters may arise from time to time that
may harm our business. We are not presently a party to any material litigation,
nor to the knowledge of management is any litigation threatened against us,
which may materially affect us.





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





We
did not submit any matters to a vote at a stockholders meeting of our security
holders during the fiscal year ended December 31, 2008.





However,
subsequent to the year ended December 31, 2008, we held a stockholders
meeting.  Business conducted at the meeting included the following
proposals:





1.
            To
      amend and restate the Company’s Articles of Incorporation to (i) increase
      the number of authorized shares of the Company’s common stock, par value
      $0.001 per share, from 70,000,000 shares to 500,000,000 shares and (ii) to
      increase the number of authorized shares of the Company’s preferred stock,
      par value $0.001 per share, from 10,000,000 shares to 100,000,000
      shares;


2.
            To
      elect a new Board of Directors for CCI, to hold office until the next
      annual meeting, (the current nominations are for Jerald Woods, David
      Hewitt, William H. Gray, Ray Powers, Larry Griffin, Michael Benbow, and
      Tonni Lyn Smith-Atkins);


3.
            To
      reaffirm the appointment of Lawrence Scharfman & Co., CPA, P.C. as
      CCI’s independent auditors for the next
year





15


Each
share of Common Stock was entitled to one vote. Only stockholders of record at
the close of business on December 24, 2008, were entitled to vote.  The
number of outstanding shares at the time was 64,287,630. The required quorum of
stockholders was present at this meeting.





Votes to approve an amendment to the
Company’s Articles of Incorporation to increase capitalization were as
follows:





Proposal
      1
            For
            Against
            Withheld
      or Broker Non-VotesApproval
      to increase capitalization
            32,558,526
            713,000
            809,600





Votes
on the election of a new director were as follows:





Director
            For
            Against
            Withheld
      or Broker Non-VotesJerald
      Woods
            32,309,126
            952,400
            819,600David
      Hewitt
            31,656,626
            952,400
            1,472,100William
      Gray
            32,597,026
            12,000
            1,472,100Ray
      Powers
            32,256,026
            353,000
            1,472,100Larry
      Griffin
            32,264,026
            345,000
            1,472,100Michael
      Benbow
            32,256,026
            353,000
            1,472,100Tonni
      Smith-Atkins
            31,664,626
            944,400
            1,471,100





Votes to reaffirm the appointment of
Larry Scharfman & CO., CPA, P.C. as auditors for the next year were as
follows:





Proposal
      3
            For
            Against
            Withheld
      or Broker Non-VotesReaffirm
      of independent auditors
            32,259,126
            10,000
            1,812,000





PART
II


ITEM
5.                      MARKET
FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS ISSUER
PURCHASE OF EQUITY SECURITIES


Market
Information





CCI’s
Common Stock was approved for trading on the Financial Industry Regulatory
Authority’s Over-the-Counter Bulletin Board market (OTC:BB) under the symbol
CCOP on March 8, 2006.  Our common stock has traded infrequently on
the OTC:BB, which severely limits our ability to locate accurate high and low
bid prices for each quarter within the last two fiscal years. Therefore, the
following table lists the quotations for the high and low bid prices as reported
by a Quarterly Trade and Quote Summary Report of the OTC Bulletin
Board.  The quotations from the OTC Bulletin Board reflect
inter-dealer prices without retail mark-up, mark-down, or commissions and may
not represent actual transactions.




16





December
      31, 2008
            
            
            December
      31, 2007High
            
            
            Low
            
            
            High
            
            
            Low1st
      Quarter
            
            $
            0.05
            
            
            $
            0.02
            
            
            $
            0.31
            
            
            $
            0.112nd
      Quarter
            
            $
            0.05
            
            
            $
            0.015
            
            
            $
            0.19
            
            
            $
            0.073rd
      Quarter
            
            $
            0.055
            
            
            $
            0.015
            
            
            $
            0.09
            
            
            $
            0.044th
      Quarter
            
            $
            0.20
            
            
            $
            0.007
            
            
            $
            0.63
            
            
            $
            0.04





Holders
of Common Stock





As
of April 3, 2009, we had approximately 400 stockholders of the 67,409,910 shares
outstanding.





Dividends





We
have never declared or paid dividends on our Common Stock.  We intend
to follow a policy of retaining earnings, if any, to finance the growth of the
business and do not anticipate paying any cash dividends in the foreseeable
future.  The declaration and payment of future dividends on the Common
Stock will be at the sole discretion of the Board of Directors and will depend
on our profitability and financial condition, capital requirements, statutory
and contractual restrictions, future prospects and other factors deemed
relevant.





Any
cash dividends in the future to common stockholders will be payable when, as and
if declared by our Board of Directors, based upon the Board’s assessment
of:




·
            our
      financial condition;·
            earnings;


·
            need
      for funds;·
            capital
      requirements;


·
            prior
      claims of preferred stock to the extent issued and  outstanding;
      and·
            other
      factors, including any applicable
laws.




Therefore,
there can be no assurance that any dividends on the common stock will ever be
paid.





Securities
Authorized for Issuance under Equity Compensation Plans





Consultant and Employee
Stock Compensation Plan





We
currently maintain a stock incentive plan in which common stock may be granted
to employees, directors and consultants.  During the year ended
December 31, 2005, we cancelled 3,435,000 options which were previously
outstanding as of December 31, 2004 and adopted our 2005 Stock Option Plan,
whereby we then reissued 3,435,000 options plus an additional 3,237,000
options.  All of the options, totaling 6,672,000, vest immediately
with an exercise price of $0.10 per share and are exercisable through December
15, 2015.  The stock option plan was adopted by our board of directors
and has not been approved by our stockholders. The following table sets forth
information as of December 31, 2008 regarding outstanding options granted under
the plan and options reserved for future grant under the plan.




17





Plan
      Category
            
            Number
              of
      shares to be issued upon exercise of outstanding options, warrants and
      rights
              (a)
            
            Weighted-average
      exercise price of outstanding options, warrants and rights
              (b)
            
            Number
      of shares remaining available for future issuance under equity
      compensation plans (excluding shares reflected in column (a))
              (c)Equity
      compensation plans approved by stockholders
            
            -0-
            
            -0-
            
            -0-Equity
      compensation plans not approved by stockholders
            
            6,672,000
            
            $0.10
            
            3,328,000Total
            
            6,672,000
            
            $0.10
            
            3,328,000





Under
CCI’s Employee Stock Incentive Plan, adopted on December 2, 2005, an aggregate
of 10,000,000 shares of common stock are reserved for issuance. This plan is
intended to encourage directors, officers, employees and consultants to acquire
ownership of CCI’s common stock. The opportunity is intended to foster in
participants a strong incentive to put forth maximum effort for the Company’s
continued success and growth, to aid in retaining individuals who put forth such
effort, and to assist in attracting the best available individuals to CCI in the
future. As of December 31, 2008, 3,328,000 shares remain available for issuance
under this stock option plan.





Recent
Sales of Unregistered Securities





During
the fourth quarter of 2008 the Company conducted a private placement of its
shares to accredited investors.  The Company sold its shares at a
price of $0.05 per share and sold a total of 2,580,280 for a total of
$124,014.  Approximately 1,980,280 shares of the shares sold during
the fourth quarter of 2008 had not been issued by December 31, 2008 and have
been noted as subscription payables.





We
believe the issuance of the shares is exempt from the registration and
prospectus delivery requirement of the Securities Act of 1933 by virtue of
Section 4(2) and/or Regulation D, Rule 506.  The shares were issued
directly by us and did not involve a public offering or general
solicitation.  The recipients of the shares were afforded an
opportunity for effective access to our files and records of that contained the
relevant information needed to make their investment decision, including our
financial statements and 34 Act reports. We reasonably believed that the
recipients had such knowledge and experience in the Company’s financial and
business matters that they were capable of evaluating the merits and risks of
his investment.





18


Issuance pursuant to Form
S-8





On
August 14, 2008, we filed a registration statement on Form S-8, whereby we
registered a total of 7,730,580 shares of our common stock, of which 5,500,000
shares are to be issued to consultants and 2,230,580 are to be issued as payment
for professional legal and accounting services. The following list shows the
shares issued from that Registration Statement on Form S-8 during the fourth
quarter of 2008.  Previously a total of 2,230,580 shares were issued
for professional legal and accounting services and a total of 4,000,000 shares
were issued to consultants.  As of the date of this filing, we have
500,000 shares of our common stock available to be issued under the Consultant
Stock Plan.





Person
      Issued to
            Number
      of SharesThomas
      Mahoney
            1,000,000





Subsequent
Issuances





During the first quarter of 2009, the
Company sold a total of 1,142,000 shares of its common stock for proceeds of
approximately $55,958 to a total of 5 accredited investors.





Additionally,
the Company sold 793,480 shares of its common stock for proceeds of
approximately $39,674 to a total number of 5 accredited
investors.  However, these shares had not been issued as of the period
ended March 31, 2009.





We
believe the issuance of the shares is or will be exempt from the registration
and prospectus delivery requirement of the Securities Act of 1933 by virtue of
Section 4(2) and/or Regulation D, Rule 506.  The shares were or will
be issued directly by us and did not involve a public offering or general
solicitation.  The recipients of the shares were afforded an
opportunity for effective access to our files and records of that contained the
relevant information needed to make their investment decision, including our
financial statements and 34 Act reports. We reasonably believed that the
recipients had such knowledge and experience in the Company’s financial and
business matters that they were capable of evaluating the merits and risks of
his investment.





Issuer
Purchases of Equity Securities





The Company did not repurchase any of
its equity securities during the fourth quarter ended December 31,
2008.


19


ITEM
6.                      SELECTED
FINANCIAL DATA





Not applicable.





ITEM
7.                      MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS


OVERVIEW





CCI
is a Nevada corporation that acts as a holding company for its operating
subsidiaries, Competitive Communications, Inc. (“Competitive Communications”),
which is an approved and regulated local and long distance telephone company,
and CCI Residential Services Inc. (“CCI Residential”), which is a non-regulated
telephone company providing local and long distance telephone service,
high-speed Internet and cable television service to large apartment
complexes.





The
telecommunications products and services provided by the company and its
subsidiaries include local telephone services, domestic and international long
distance services, and enhanced voice, data and Internet services, and Cable TV
service primarily to residents of apartment complexes, retail businesses and
residential users.  It is our intention in the future to provide
bundled services to our customers as well as expand to customers beyond
apartment complexes by providing additional services and options than our
current products.





OVERVIEW
OF CURRENT OPERATIONS





Since
the beginning of 2008 the Company has attempted to locate new revenue sources
with the hopes to create a wider customer base from that of just servicing large
apartment complexes.  During the second half of 2008, the Company
entered into two Letters of Intent to help potentially expand its revenues
sources.  The first Letter of Intent is with Innovation Capital
Management, Inc. (“ICM”) whereby the Company intends to merge with ICM’s
operations and proprietary technology to expand the wireless Internet services
to rural America.  The original estimated closing was to close in
October 2008; however, due to delays in the due diligence process the closing
did not occur and the closing has been extended and is anticipated to close
during the second quarter of 2009.





The
second Letter of Intent is with Worldwide Communications, Inc. whereby the
Company intends to acquire 40 carrier-grade microwave towers, which the Company
hopes will further expand its operations in providing wireless internet services
to rural markets in America.  The terms of the proposed agreement
specify that the Company will issue two million issued Convertible Preferred
Shares at a price of $1 per share, with 10% or 200,000 shares to be placed
immediately in escrow upon the signing of the completed Asset Purchase
Agreement.  The closing was originally anticipated to occur in
November of 2008; however, due to delays involving the inspection of the towers
the agreement has been extended.  Again, it is anticipated that the
closing will occur in the second quarter of 2009.





20


During
the first quarter of 2009, we entered into two more Letter of Intents; one with
International Telecom, Inc. and the other with IBFA Acquisition, LLC
(“IBFA”).  As of the date of this filing, the Company has decided to
not pursue its LOI with International Telecom, Inc. but does intend to move
forward with IBFA, although the specific terms of the proposed agreement have
yet to be determined.





For the years ended December 31, 2008
and 2007, we incurred net losses of $428,606 and $438,436,
respectively.  Our accumulated deficit at the end of December 31, 2008
was $3,199,577.  These conditions raise substantial doubt about our
ability to continue as a going concern over the next twelve months.





Result
of Operations for the Years Ended December 31, 2008 and 2007





The
following income and operating expenses tables summarize selected items from the
statement of operations for the year ended December 31, 2008 compared to the
year ended December 31, 2007.





INCOME:





The
      Year Ended
              December
      31,
            
            
            Increase/
              (Decrease)2008
            
            
            2007
            
            
            %Revenues
            
            $
            665,144
            
            
            $
            884,999
            
            
            
            (25
            %)Cost
      of Sales
            
            
            389,590
            
            
            
            453,129
            
            
            
            (14
            %)Gross
      Profit
            
            $
            275,554
            
            
            $
            431,870
            
            
            
            (36
            %)Gross
      Profit Percentage of Revenue
            
            
            41
            %
            
            
            49
            %
            
            
            (8
            %)





Revenues





Revenues
for the year ended December 31, 2008 was $665,144 compared to revenues of
$884,999 for the year ended December 31, 2007. This resulted in a decrease in
revenues of $219,855, or 25%.





During
2007, regulations governed by the Federal Communications Commission were changed
that allowed direct competitors to our telephone and cable services to compete
with our customers in the apartment complexes that we service.  As a
result, we were unable to remain competitive with larger competitors and some of
our customers have switched providers and ultimately, we have begun to
experience a decrease in revenues.





Due
to this change in the regulatory environment of our traditional business
operations, we have begun to pursue and investigate alternative revenue
sources.  During the second quarter of 2008, we located potential
other revenues sources of providing wireless internet services to rural markets
by executing Letters of Intent with a couple of
entities.  Additionally, we executed an LOI during the first quarter
of 2009, which should also provide additional revenue streams in the
future.  We hope these services will provide additional revenues while
maintaining a continuous focus on our core business; however, there can be no
assurance that we will be able successfully execute definitive agreements or
properly integrate the entities that we have signed Letters of Intent
with.  As of the year ended December 31, 2008, we had not received any
revenue from newly identified sources.





21


Cost
of sales





Cost
of sales for the year ended December 31, 2008 was $389,590, a decrease of
$63,539, or 14%, from $453,129 for the year ended December 31,
2007.  Beginning in 2007, we began eliminating underutilized circuits
and have made continued efforts to continually manage and reduce costs, where
applicable.  Overall during the year ended December 31, 2008, we
experienced decreased revenues which reduced some of our cost of
sales.  In addition, some of our contracts with apartment complexes
expired, which has reduced some commission expenses.





Gross
profit





Gross
profit as a percentage of revenue decreased from 49% for the year ended December
31, 2007 to 41% for the year ended December 31, 2008.  Our gross
profit has decreased as a result of not being able to better manage our cost of
sales in relation to our overall decrease in revenues.





OPERATING
EXPENSES:





The
      Year Ended
              December
      31,
            
            
            Increase/
              (Decrease)2008
            
            
            2007
            
            
            %General
      and administrative expenses
            
            $
            326,065
            
            
            $
            424,609
            
            
            
            (23
            %)Salaries
      and wages
            
            
            200,048
            
            
            
            357,553
            
            
            
            (44
            %)Consulting
      fees
            
            
            122,208
            
            
            
            12,012
            
            
            
            917
            %Depreciation
            
            
            33,296
            
            
            
            33,392
            
            
            
            **Bad
      Debt
            
            
            14,493
            
            
            
            39,814
            
            
            
            (64
            %)Net
      operating (loss)
            
            $
            (420,556
            )
            
            $
            (435,510
            )
            
            
            (3
            %)


**Denotes
less than 1%.





General
and Administrative expenses





General
and administrative expenses were for the year ended December 31, 2008, was
$326,065 as compared to $424,609 for the year ended December 31,
2007.  This resulted in a decrease of $98,544 or 23%.  The
decrease was due primarily to a decrease in the Company’s advertising and
promotional costs, as well as, an overall effort to trim non-essential overhead
costs.





22


Salaries
and Wages





Salary
and wage expenses were $200,048 for the year ended December 31, 2008 versus
$424,609 of salary and wage expenses for the year ended December 31, 2007, which
resulted in a decrease of 44%.  During the first six months of 2007,
we had increased management’s salaries, which the Company has since ceased
payment of as a result of no longer having the same management as of
2007.  Additionally, our Chief Executive Officer during the year ended
December 31, 2008, did not have an employment agreement in place and therefore
we have not paid any compensation to him during the 2008
year.  Subsequent to the year ended December 31, 2008, we appointed a
new Chief Executive Officer and President of the Company.  We expect
that we may need to increase our personnel in the future and ultimately
experience higher salaries and wages as we expand our operations and finalize
potential acquisitions and alternative revenue sources.





Consulting
Fees





Consulting fees were $122,208 for the
year ended December 31, 2008 compared to $12,012 consulting fees for the
year ended December 31, 2007.  The significant increase in
consulting fees was a result of result of stock-based compensation being paid
for professional services in the pursuit of finding financing and merger &
acquisition candidates as well as a significant increase in professional fees
during the third quarter of 2008, which we did not similarly experience in
2007.





Depreciation





Depreciation
expenses were $33,296 for the year ended December 31, 2008 versus $33,392 for
the year ended December 31, 2007.  During the 2007 year we acquired
some assets which account for the depreciation expenses and at this point in
time we anticipate our depreciation expenses to remain stable.





Bad
Debt





Bad
debt expenses for the year ended December 31, 2008 were $14,493 as compared to
$39,814 for the same period of 2007, which resulted in a decrease of
$25,321.  We were able to decrease our allowance of bad debt as a
result of having fewer accounts likely being sent to a third party collection
agency and the ability to actually collect on debt previously deemed to not be
recoverable.





Net
Operating (Loss)





The
net operating loss for the year ended December 31, 2008 was $420,556, versus a
net operating loss of $435,510 for the year ended December 31,
2007.  This resulted in a slight decrease of 3% when compared to the
same period of 2007.  Although we had a significant increase in our
consulting fees during the 2008 year, we were able to still decrease our overall
operating loss with our reduction in all other
expenses.





23


Liquidity
and Capital Resources





The
following table summarizes total current assets, liabilities and working capital
at December 31, 2008 compared to December 31, 2007.





December
      31,
            
            
            December
      31,
            
            
            Increase / (Decrease)2008
            
            
            2007
            
            
            $
            
            
            
            %Current
      Assets
            
            $
            108,851
            
            
            $
            95,894
            
            
            $
            12,957
            
            
            
            14
            %Current
      Liabilities
            
            $
            263,577
            
            
            $
            205,653
            
            
            $
            57,924
            
            
            
            28
            %Working
      (Deficit)
            
            $
            (154,726
            )
            
            $
            (109,759
            )
            
            $
            44,967
            
            
            
            41
            %





While
we have raised capital to meet our working capital and financing needs in the
past, additional financing is required in order to meet our current and
projected cash flow deficits from operations and development of alternative
revenue sources.  As of December 31, 2008, we had a working capital
deficit of $154,726.  Our poor financial condition raises substantial
doubt about our ability to continue as a going concern and we have incurred
losses since inception and may incur future losses.  In the past, we
have conducted private placements of equity shares and during the fourth quarter
of 2008 we received approximately $124,014 in proceeds from a private placement
of our shares.





From
time to time we have received loans from our then Chief Executive Officer,
Jerald Woods.  These unsecured loans carry an 18% interest rate and
have been due upon demand.  As of the year ended December 31, 2008, we
entered into an unsecured note payable with our Chief Executive Officer totaling
$4,500.  Additionally, we had unsecured notes payable in the amount of
$15,676 to a stockholder of the Company as December 31, 2008.





During
the fourth quarter of 2008, we executed two unsecured promissory notes for a
total of $15,000.  The notes carry an 8.75% interest rate and mature
during the second quarter of 2009.  The principal is convertible into
shares of common stock at the discretion of the note holder at a price equal to
80% of the volume weighted average price of the Company’s common stock for the
22 days prior to conversion.





However,
should we not be able to continue to secure additional financing when needed, we
may be required to slow down or suspend our growth or reduce the scope of our
current operations, any of which would have a material adverse effect on our
business.





Our
future capital requirements will depend on many factors, including the expansion
of our wireless internet services in rural markets; VoIP services; additional
marketing of the (800) services; the cost and availability of third-party
financing for development; addition of new revenue sources; and administrative
and legal expenses.





We
anticipate that we will incur operating losses in the next twelve months. Our
prospects must be considered in light of the risks, expenses and difficulties
frequently encountered by companies in their early stage of
development.  Such risks for us include, but are not limited to, an
evolving and unpredictable business model; recognition of additional revenue
sources; and the management of growth. To address these risks, we must, among
other things, expand our customer base, implement and successfully execute our
business and marketing strategy, respond to competitive developments, and
attract, retain and motivate qualified personnel.  There can be no
assurance that we will be successful in addressing such risks, and the failure
to do so can have a material adverse effect on our business prospects, financial
condition and results of operations.





24


Going
Concern





Our
consolidated financial statements are prepared using accounting principles
generally accepted in the United States of America applicable to a going
concern, which contemplate the realization of assets and liquidation of
liabilities in the normal course of business. We have incurred continuous losses
from operations, have an accumulated deficit of $3,199,577 and a working capital
deficit of $154,726 at December 31, 2008, and have reported negative cash flows
from operations over the last three years.  In addition, we do not
currently have the cash resources to meet our operating commitments for the next
twelve months.  The Company’s ability to continue as a going concern
must be considered in light of the problems, expenses, and complications
frequently encountered by entrance into established markets and the competitive
nature in which we operate.





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





Off-Balance
Sheet Arrangements





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





Recently
Issued Accounting Standards





During
May 2008, the FASB issued Statement of Financial Accounting Standards
No. 162, The Hierarchy of
Generally Accepted Accounting Principles (“FAS 162”). FAS 162
identifies the sources of accounting principles and the framework for selecting
principles to be used in the preparation and presentation of financial
statements in accordance with generally accepted accounting principles. This
statement will be effective 60 days after the Securities and Exchange
Commission approves the Public Company Accounting Oversight Board’s amendments
to AU Section 411, The
Meaning of ‘Present Fairly in Conformity With Generally Accepted Accounting
Principles’. The Company does not anticipate that the adoption of
FAS 162 will have an effect on its consolidated financial
statements.




25


During
March 2008, the FASB issued Statement of Financial Accounting Standards
No. 161, Disclosures
About Derivative Instruments and Hedging Activities — an amendment of FASB
Statement No. 133(“FAS 161”). This new standard requires
enhanced disclosures for derivative instruments, including those used in hedging
activities. It is effective for fiscal years and interim periods beginning after
November 15, 2008, and will be applicable to the Company in the first
quarter of fiscal 2009. The Company is currently evaluating the impact, if any,
the adoption of FAS 161 will have on its consolidated financial
statements.





ITEM
7A.  QUANTITATIVE AND
QUALITATIVE DISCLOSURES ABOUT MARKET RISK





Not
applicable.





ITEM
8.                      FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA





See
Index to Financial Statements and Financial Statement Schedules appearing on
page F-1 through F-22 of this Form 10-K.




ITEM
9.                      CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE


We
have had no disagreements with our independent auditors on accounting or
financial disclosures.





ITEM
9A(T).              CONTROLS
AND PROCEDURES





Our
Chief Executive Officer and Principal Financial Officer during the year ended
December 31, 2008, Jerald Woods, evaluated the effectiveness of our disclosure
controls and procedures (as defined in Rule 13a-15(e) under the Securities
Exchange Act of 1934, as amended) as of the end of the period covered by this
Report.  Subsequently, Mr. Woods resigned as the Chief Executive
Officer and Mr. William Gray was appointed as the Company’s Chief Executive
Officer and Principal Accounting Officer and evaluated the effectiveness of our
disclosure controls and procedures upon his appointment.  Based on
that evaluation, Mr. Gray concluded that our disclosure controls and procedures
are not effective, which are discussed below in more detail, in timely alerting
him to material information relating to us required to be included in our
periodic SEC filings and in ensuring that information required to be disclosed
by us in the reports that we file or submit under the Act is accumulated and
communicated to our management, including our principal executive and principal
financial officer, or persons performing similar functions, as appropriate to
allow timely decisions regarding required disclosure.





26


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





Management’s
Report on Internal Control Over Financial Reporting





Our
management is responsible for establishing and maintaining adequate internal
control, as is defined in the Securities Exchange Act of 1934.  These
internal controls are designed to provide reasonable assurance that the reported
financial information is presented fairly, that disclosures are adequate and
that the judgments inherent in the preparation of financial statements are
reasonable.  There are inherent limitations in the effectiveness of
any system of internal controls, including the possibility of human error and
overriding of controls.  Consequently, an effective internal control
system can only provide reasonable, not absolute, assurance with respect to
reporting financial information.





Our
internal control over financial reporting includes policies and procedures that:
(i) pertain to maintaining records that in reasonable detail accurately and
fairly reflect our transactions; (ii) provide reasonable assurance that
transactions are recorded as necessary for preparation of our financial
statements in accordance with generally accepted accounting principles and the
receipts and expenditures of company assets are made and in accordance with our
management and directors authorization; and (iii) provide reasonable assurance
regarding the prevention or timely detection of unauthorized acquisition, use or
disposition of assets that could have a material effect on our financial
statements.





Management
has undertaken an assessment of the effectiveness of our internal control over
financial reporting based on the framework and criteria established in the
Internal Control – Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (“COSO”).  Based upon this
evaluation, management concluded that our internal control over financial
reporting was not effective as of December 31, 2008 for the following
reasons.





·
            The
      Company does not have an independent board of directors or audit committee
      or adequate segregation of duties;


·
            All
      of our financial reporting is carried out by our financial
      consultant;


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





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





The
material weaknesses identified did not result in the restatement of any
previously reported financial statements or any other related financial
disclosures, nor does management believe that it had any effect on the accuracy
of our financial statements for the current reporting period.





27


This
annual report does not include an attestation report of our registered public
accounting firm regarding internal control over financial
reporting.  Management’s report was not subject to attestation by our
registered public accounting firm pursuant to the temporary rules of the
Securities and Exchange Commission that permit the company to provide only
management’s report in this annual report.





ITEM
9B.                   OTHER
INFORMATION





Item
5.02 Departure of Directors or Principal Officers; Election of Directors;
Appointments of Principal Officers.





(a)  Resignation
of a Director





On March 17, 2009, Ms. Tonni
Smith-Atkins submitted her resignation of her position on the Company’s Board of
Directors.  Ms. Smith-Atkins resignation was not a result of any
disagreement with management or the Board of Directors.  Currently,
Ms. Smith-Atkins position on the Board of Directors remains vacant.





(b)  Resignation
of an Officer





On February 10, 2009, Jerald Woods
submitted his resignation as Chief Executive Officer of the
Company.  Mr. Woods remains as a Director on the Company’s Board of
Directors.





(c)  Appointment
of Officers





Upon the submittal of Mr. Woods’
resignation, Mr. William Gray was appointed as the Company’s Chief Executive
Officer and Principal Accounting Officer.  Additionally, Dr. Ray
Powers was appointed as the Company’s President.  Both Mr. Gray and
Dr. Powers are members of the Company’s Board of Directors.





Item
8.01                      Other
Events





On November 25, 2008, the Company
issued a press release announcing its ability to poise itself to access of
government funding through the acquisition of carrier-grade microwave towers
from Worldwide Communications, Inc.  A copy of the press release is
attached hereto as Exhibit 99.1.





On December 10, 2008, the Company
issued a press release announcing the appointment of Dr. Ray Powers to the Board
of Directors.  A copy of the press release is attached hereto as
Exhibit 99.2.





On January 6, 2009, the Company issued
a press release announcing it had engaged Worldwide Capital Group, LLC as its
financial advisor to the Company.  A copy of the press release is
attached hereto as Exhibit 99.3.





28


On February 11, 2009, the Company
issued a press release announcing it had executed a sales contract with a
wholesale distribution channel to provide T-mobile network operating
procedures.  A copy of the press release is attached hereto as Exhibit
99.4.





On February 11, 2009, the Company
issued another press release announcing its contract with MLM Marketing Company
for the purchase of 5,000 T-mobile SIMS cards.  A copy of the press
release is attached hereto as Exhibit 99.5.





On February 19, 2009, the Company
issued a press release announcing it had executed a Letter of Intent to acquire
International Telecom, Inc.  A copy of the press release is attached
hereto as Exhibit 99.6.





On March 17, 2009, the Company issued a
press release announcing the resignation of Ms. Tonni Smith-Atkins from the
Company’s Board of Directors.  A copy of the press release is attached
hereto as Exhibit 99.7.





On April 9, 2009, the Company issued a
press release announcing the execution of a vendor financing agreement for the
acquisition and marketing of IPTV services.  A copy of the press
release is attached hereto as Exhibit 99.8.





PART
III




ITEM
10.                                DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE




The
members of the Board of Directors of the Company will serve until the next
annual meeting of stockholders, or until their successors have been
elected.  The officers serve at the pleasure of the Board of
Directors.  Officers are elected by the Board and their terms of
office are, except to the extent governed by employment contract, at the
discretion of the Board.  Information as to the directors and
executive officers of the Company is as follows:





NAME
            AGE
            POSITIONHenri
      Hornby (1)
            52
            Former
      Chief Executive Officer, Secretary, Treasurer, Principal Accounting
      Officer, Former DirectorJerald
      Woods (2)
            60
            Former
      Chief Executive Officer, Current DirectorZachary
      Bluestein (3)
            24
            Former
      Chief Technical OfficerDavid
      Hewitt
            63
            DirectorWilliam
      Gray (4)
            58
            Current
      Chief Executive Officer and Principal Accounting Officer,
      DirectorRay
      Powers (5)
            62
            Current
      President and DirectorLarry
      Griffin
            56
            DirectorMichael
      Benbow
            66
            DirectorTonni
      Smith-Atkins (6)
            37
            Director


(1)
            Mr.
      Henri Hornby served as the Chief Executive Officer, Secretary, Treasurer,
      Principal Accounting Officer and Director from March 28, 2006 to November
      12, 2007.  Mr. Hornby resigned due to health
      reasons.  During the year ended December 31, 2008, the Company
      reappointed Mr. Hornby to the Board of Directors.  On November
      4, 2008 Mr. Hornby resigned from the Board of
  Directors.


(2)
            Upon
      Mr. Hornby’s resignation, the Board of Directors appointed Mr. Jerald
      Woods to serve as the Interim Chief Executive Officer.  On
      February 10, 2009, Mr. Woods resigned from his position as Chief Executive
      Officer.


(3)
            During
      the year ended December 31, 2008, the Company appointed Zachary Bluestein
      as the Chief Technical Officer; however, Mr. Bluestein as of October 1,
      2008, is no longer affiliated with the
Company.


(4)
            Mr.
      William Gray was appointed to fill the vacancy left by Mr. Hornby on the
      Company’s Board of Directors on November 4, 2008.  Mr. Gray was
      appointed as Chief Executive Officer and Principal Accounting Officer upon
      Mr. Woods resignation.


(5)
            Dr.
      Ray Powers was appointed to the Board of Directors on November 24, 2008
      and appointed President on February 10,
2009.


(6)
            Ms.
      Tonni Smith Atkins was elected to the Board of Directors at the annual
      shareholders meeting held on January 30, 2009; however on March 17, 2009
      Ms. Smith Atkins submitted her resignation from the Board of
      Directors.





29


Duties,
Responsibilities and Experience





Jerald
Woods served as the Chief Executive Officer from November 2007 to
February 2009.  Prior to becoming the CEO, Mr. Woods was the Vice
President and Director of CA Networks, Inc. and subsequent to the merger of CCI
and CA Networks, Inc. he had remained in those positions.  Prior to
the merger, Mr. Woods served as a telecommunications consultant for Competitive
Companies.  Additionally, Mr. Woods has been a director of CCI since
1998.  From 1994 to 2000 he was an Officer and Director of APMSAFE.COM
(American Privacy Management, Inc.), a private company engaged in the computer
encryption business.  From 1988 to 1994, he was Chairman and Director
for American Digital Communications, Inc.  From 1984 to 1989, he
hosted and produced “Breakthroughs in Technology,” an investment program
specializing in high technology companies.  He currently is President
of JLW Communications Services.  Mr. Woods has served as a director
for several private companies as well as owning his own investment banking and
advertising companies.





David
Hewitt has been a Director since December 2001 and became a director
as a result of the merger with Huntington Telecommunications
Partners.  Prior to joining the Company through the merger with
Huntington Telecommunications, Inc., he was the Co-Founder and President of
Huntington Partners, Inc., which was a development and investment company
providing capital and management for real estate and business venture
investments as well as an affiliate to the general partner of Huntington
Telecommunicaitons.  Currently, Mr. Hewitt is the Managing Member of
Southwind Realty Group, LLC, which focuses on the acquisition and redevelopment
of infill residential properties in Southern California.  From 1999 to
2005, Mr. Hewitt was a founder, Chairman, and a Director of Silverwood
Investments, LLC, a real estate investment company focused on apartment property
development throughout California.  From 1989 to 1992, he was
Co-Founder and Managing Director of Trilateral Company, a real estate firm. He
has an MBA with Distinction from Amos Tuck School of Business Administration at
Dartmouth College and a BA from University of Rochester.





William
Gray became a Director upon the resignation of Mr. Henri Hornby in
November 2008.  Mr. Gray became the Company’s Chief Executive Officer
on February 10, 2009 upon the resignation of Mr. Woods.  Additionally,
Mr. Gray is the founder of Innovation Capital Management, Inc. (ICM), a Delaware
Corporation that was incorporated in May 2008.  ICM is involved in
managing investment securities design and development.  ICM is also
the owner of ICM LLC and DiscoverNet, Inc.  DiscoverNet, Inc. is a
full service Internet Service Provider currently deploying wireless broadband
Internet throughout western Wisconsin and was incorporated in July of
1996.  Mr. Gray has been the President and Chief Executive Officer of
DiscoverNet since May of 1997 and has been chiefly responsible for the funding
of DiscoverNet since inception.  Most recently, the Company has
developed a proprietary propagation software capable of designing tier one
wireless networks via the web.  ICM intends to offer this unique
software to other Wireless Internet Service Providers (WISP) as part of its
planned investment and acquisition program.  Mr. Gray is highly
skilled and experienced in designing investment securities, developing financial
forecast, structuring mergers and acquisitions, writing business plans and
drafting private placement memorandum.  Mr. Gray has managed
investment securities exceeding $100 million.





30


Dr.
Ray Powers was appointed to the Company’s Board of Directors on November
25, 2008 and later President on February 10, 2009.  Mr. Powers’ business
leadership experience spans over 30 years in a Fortune 200 corporate environment
of AT&T/US West/Quest followed by accomplishments in a variety of enterprise
scenarios.  Dr. Powers began his career at AT&T in 1965 and continued
to work in various capacities for AT&T and its successors until 1996. 
Currently, Dr. Powers is the chief consultant for Strategic Alliance
Enterprises, Inc., which provides new technology communications products and
services and serves in a consulting role in project management, development of
business plans and process improvement initiatives.  Prior to his
consulting work, from 2004 to 2006, Dr. Powers served as the Executive Vice
President and Chief Operating Officer of Corban Networks, Inc., which is a
communications industry service provider specializing in wireless
communications.  From 1998 to 2004, Dr. Powers served as the President and
Chief Executive Officer of Compass Corporate Holdings, Inc., which through its
subsidiaries provided technology services, technology management and project
management consulting.  Dr. Powers has served on several companies’ Board
of Directors and currently sits on the Board of Strategic Alliance Enterprises,
Inc., Worldwide Communications Associates, Inc., and the Executive Initiative
Institute.  Dr. Powers holds a Bachelor of Science from Arizona State
University, a MBA in Technology Management and a Doctorate in Educational
Leadership from the University of Phoenix.  Dr. Powers is also an adjunct
professor for both undergraduate and graduate level courses at the University of
Phoenix.





Larry
Griffin has been the IT Director for Diamondback Management, Inc. since
2005 and prior to that worked as an independent contractor from 1998 to
2005.  Additionally, he was the Director of Network Development O.S.
for WorldCom from 1988 to 1997.  At WorldCom, Mr. Griffin was
responsible for WorldCom’s redesign and development of its integrated billing
systems during the Company’s accelerated telecom acquisitions in the mid
1990’s.  Mr. Griffin was the chief architect with the sub-system of
the DEX (Digital Switch) switches to allow account codes to be validated against
a common database from any switch in the DEX network.  He led the
design and development of a switch update and CDR collection systems for the DEX
network.  Mr. Griffin hopes to advise CCI on its integrated billing
systems for future subscriber acquisitions.





Michael
Benbow has over 43 years of experience in engineering management, design,
and project management.  Mr. Benbow is currently the Chief Executive
Officer of M S Benbow and Associates, a full-service engineering company,
whereby he has held this role since 1986.  Mr. Benbow has also assisted
other entities as a Founding Director such as: Compass Telecommunications, a
nation-wide integrated communications provider, started in 1998; Computerized
Processes Unlimited, a software and systems integration company, started in
1985; and of Omni Technologies, a telecommunications research and development
facility, started in 1994.  Additionally, Mr. Benbow is a Registered
Professional Electrical and Mechanical Engineer in the State of Louisiana;
Registered Professional Control Systems Engineer in the State of California; and
a Registered Professional Engineer in the State of Mississippi.  Mr. Benbow
has a BSME from Purdue University and JD from Loyola University.  Mr.
Benbow also belongs to American Society of Mechanical Engineers, Louisiana
Engineering Society, Louisiana Bar Association, Instrument Society of America,
where he was the past president of the New Orleans Section, and University of
New Orleans Engineering Advisory Council, where he served as the Past
Chairman.





31


Election of Directors and
Officers.





Directors
are elected to serve until the next annual meeting of stockholders and until
their successors have been elected and qualified. Officers are appointed to
serve until the meeting of the Board of Directors following the next annual
meeting of stockholders and until their successors have been elected and
qualified.





Involvement
in Certain Legal Proceedings





No
Executive Officer or Director of the Corporation has been the subject of any
Order, Judgment, or Decree of any Court of competent jurisdiction, or any
regulatory agency permanently or temporarily enjoining, barring suspending or
otherwise limiting him from acting as an investment advisor, underwriter, broker
or dealer in the securities industry, or as an affiliated person, director or
employee of an investment company, bank, savings and loan association, or
insurance company or from engaging in or continuing any conduct or practice in
connection with any such activity or in connection with the purchase or sale of
any securities.





No
Executive Officer or Director of the Corporation has been convicted in any
criminal proceeding (excluding traffic violations) or is the subject of a
criminal proceeding which is currently pending.





No
current Executive Officer or Director of the Corporation is the subject of any
pending legal proceedings.





Section
16(a) Beneficial Ownership Reporting Compliance





Section
16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
requires executive officers and directors, and persons who beneficially own more
than ten percent of an issuer's common stock, which has been registered under
Section 12 of the Exchange Act, to file initial reports of ownership and reports
of changes in ownership with the SEC.  Executive officers, directors
and greater-than-ten-percent beneficial owners are required by SEC regulations
to furnish us with copies of all Section 16(a) forms they file. Based upon a
review of the copies of such forms furnished to us and written representations
from our executive officers and directors, we believe that as of December 31,
2008, they were not all current in their filings.





32


Code
of Ethics





A
code of ethics relates to written standards that are reasonably designed to
deter wrongdoing and to promote:




·
              Honest
      and ethical conduct, including the ethical handling of actual or apparent
      conflicts of interest between personal and professional
      relationships;
 ·
              Full,
      fair, accurate, timely and understandable disclosure in reports and
      documents that are filed with, or submitted to, the Commission and in
      other public communications made by an
issuer;
 ·
              Compliance
      with applicable governmental laws, rules and
  regulations;
 ·
              The
      prompt internal reporting of violations of the code to an appropriate
      person or persons identified in the code;
and
 ·
              Accountability
      for adherence to the code.




On
December 18, 2005, we adopted a written code of ethics that governs all of our
officers, and more specifically our principal executive officer, principal
financial officer and principal accounting officer directors, employees and
contractors. The code of ethics relates to written standards that are reasonably
designed to deter wrongdoing and to promote the above mentioned
objectives.  Anyone can obtain a copy of the Code of Ethics by
contacting the Company.  The Company will post any amendments to the
Code of Ethics, as well as any waivers that are required to be disclosed by the
rules of either the Securities and Exchange Commission of the National
Association of Dealers.





Corporate
Governance





Director
Independence





The
Board of Directors has analyzed the independence of each director and has
concluded that currently Messrs. Hewitt, Griffin, and Benbow are considered
independent directors in accordance with the director independence standards of
the American Stock Exchange, and has determined that they have not had a
material relationship with CCI that would impair their independence from
management.





Nominating
Committee





We
do not have a Nominating Committee or Nominating Committee
Charter.  Our Board of Directors performs some of the functions
associated with a Nominating Committee.  We elected not to have a
Nominating Committee during the year ended December 31, 2008 in that we had
limited operations and resources.





33


Director Nomination
Procedures





Generally,
nominees for Directors are identified and suggested by the members of the Board
or management using their business networks.  The Board has not
retained any executive search firms or other third parties to identify or
evaluate director candidates in the past and does not intend to in the near
future.  In selecting a nominee for director, the Board or management
considers the following criteria:





1.
            whether
      the nominee has the personal attributes for successful service on the
      Board, such as demonstrated character and integrity; experience at a
      strategy/policy setting level; managerial experience dealing with complex
      problems; an ability to work effectively with others; and sufficient time
      to devote to the affairs of the
Company;


2.
            whether
      the nominee has been the chief executive officer or senior executive of a
      public company or a leader of a similar organization, including industry
      groups, universities or governmental
  organizations;


3.
            whether
      the nominee, by virtue of particular experience, technical expertise or
      specialized skills or contacts relevant to the Company’s current or future
      business, will add specific value as a Board member;
  and


4.
            whether
      there are any other factors related to the ability and willingness of a
      new nominee to serve, or an existing Board member to continue his
      service.





The
Board or management has not established any specific minimum qualifications that
a candidate for director must meet in order to be recommended for Board
membership.  Rather, the Board or management will evaluate the mix of
skills and experience that the candidate offers, consider how a given candidate
meets the Board’s current expectations with respect to each such criterion and
make a determination regarding whether a candidate should be recommended to the
stockholders for election as a Director.  During 2008, the Company
received no recommendation for Directors from its stockholders.





Audit
Committee





Currently,
we do not have an Audit Committee.  At this time, the board of
directors will perform the necessary functions of an Audit Committee, such as:
recommending an independent registered public accounting firm to audit the
annual financial statements; reviewing the independence of the independent
registered public accounting firm; review of the financial statements and other
required regulatory financial reporting; and reviewing management’s policies and
procedures in connection with its internal control over financial
reporting.





Additionally,
we do not have a financial expert. We believe the cost related to retaining a
financial expert at this time is prohibitive.  However, at such time
the Company has the financial resources a financial expert will be
hired.





Compensation
Committee





We
currently do not have a compensation committee of the board of
directors.  Until a formal committee is established our board of
directors will review all forms of compensation provided to our executive
officers, directors, consultants and employees, including stock
compensation.  The Board makes all compensation decisions for the
Executives and approves recommendation regarding equity awards to all elected
officers of CCI. Decisions regarding the non-equity compensation of other
executive officers are made by the Board.





34


Shareholder
Communications





Any
shareholder communications to the Board should be forwarded to the attention of
the Company’s Secretary at our offices at 3751 Merced Drive, Suite A, Riverside,
California 92503.  Our Secretary will review any communication
received from a stockholder, and all material communications from stockholders
will be forwarded to the Chairman of the Board, the Board of Directors, or other
individual directors as appropriate.





ITEM
11.                    EXECUTIVE
COMPENSATION





The
following table sets forth the compensation of our executive officers for the
years ended December 31, 2008 and 2007 respectively.





Summary
      Compensation TableName
      and Principal Position
            Year
            Salary
            All
      Other Compensation
            TotalHenri
      Hornby, Former CEO and/or Principal Executive Officer, Director (1)
            2008
              2007
            $-0-
              $45,000
            $-0-
              $-0-
            $-0-
              $45,000Jerald Woods,  Former
      Chief Executive Officer, Director(2)
            2008
              2007
            $-0-
              $-0-
            $-0-
              $-0-
            $-0-
              $-0-Janice
      Gordon, Former President (3)
            2007
            $56,000
            $3,692
            $59,692


(1)
            Mr.
      Henri Hornby served as the Chief Executive Officer, Secretary, Treasurer,
      Principal Accounting Officer and Director from March 28, 2006 to November
      12, 2007.  During the year ended December 31, 2007, the Company
      re-appointed Mr. Hornby to serve on its Board of Directors; however, on
      November 4, 2008 Mr. Hornby resigned from the Board of
      Directors.


(2)
            Upon
      Mr. Hornby’s resignation, the Board of Directors appointed Mr. Jerald
      Woods to serve as the Interim Chief Executive Officer.  On
      February 10, 2009, Mr. Woods resigned from his position as Chief Executive
      Officer.


(3)
            Ms.
      Janice Gordon served as the Company’s President from January 27, 2006
      through July 2007.





Employment
Agreement





We have no written employment
agreements with our officers; however, during the 2007 year we had
understandings in place regarding Mr. Hornby and Ms. Gordon for their
compensation.  Starting in February 2007 through July 2007, Mr. Hornby
was compensated approximately $8,000 per month.  Upon Ms. Gordon
joining CCI in 2006 we agreed to compensate her at a rate of $4,000 per
month.  In October 2006, the Board of Directors authorized an increase
for Ms. Gordon and she was to receive a total of $8,000 a month in compensation,
which she began receiving in November 2006 until her termination in July
2007.  In addition to the monthly compensation, Ms. Gordon received an
additional $3,692 at the time of termination for her unused vacation
time.





35


During the year ended December 31, 2008
we did not have any employment agreements or understandings in place with our
executive officers.





Termination
of Employment





There
are no compensatory plans or arrangements, including payments to be received
from the Company, with respect to any person associated with the Company which
would in any way result in payments to any such person because of his
resignation, retirement, or other termination of such person’s employment with
the Company or its subsidiaries, or any change in control of the Company, or a
change in the person’s responsibilities following a change in control of the
Company.





Compensation
Committee





We
currently do not have a compensation committee on the board of
directors.  Until a formal committee is established our entire board
of directors will review all forms of compensation provided to our executive
officers, directors, consultants, and employees, including stock
compensation.





Equity
Awards





During
the year ended December 31, 2008, we did not grant any equity awards to our
officers and/or directors.





Director
Compensation and Other Arrangements





As
a result of having limited resources during most of 2008, we did not provide
compensation to our board of directors.




ITEM
12.                    SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS


The
following table presents information, to the best of our knowledge, about the
beneficial ownership of our common stock on April 3, 2009, held by those persons
known to beneficially own more than 5% of our capital stock and by our directors
and executive officers.  The percentage of beneficial ownership for
the following table is based on 67,409,910 shares of common stock outstanding as
of April 3, 2009.





Beneficial
ownership is determined in accordance with the rules of the Securities and
Exchange Commission and does not necessarily indicate beneficial ownership for
any other purpose. Under these rules, beneficial ownership includes those shares
of common stock over which the stockholder has sole or shared voting or
investment power. It also includes (unless footnoted) shares of common stock
that the stockholder has a right to acquire within 60 days after April 3, 2009
through the exercise of any option, warrant or other right. The percentage
ownership of the outstanding common stock, however, is based on the assumption,
expressly required by the rules of the Securities and Exchange Commission, that
only the person or entity whose ownership is being reported has converted
options or warrants into shares of our common stock.




36





Name
      of Officer or Director (1)
            
            Number
              of
      Common Shares
            
            Percent
      Beneficially Owned (2)Henri
      Hornby, Former Chief Executive Officer, Secretary, Treasurer and Director
      (3)
            
            10,266,666
            
            15%Jerald
      Woods, Former Chief Executive Officer, Current Director
(4)
            
            7,248,886
            
            11%William
      Gray, Current Chief Executive Officer and Director (5)
            
            100,000
            
            **Ray
      Powers (6)
            
            0
            
            0%David
      Hewitt
            
            1,000,000
            
            1%Larry
      Griffin
            
            0
            
            0%Michael
      Benbow
            
            0
            
            0%All
      Officers and Directors as a Group
            
            18,615,552
            
            28%


**
Denotes less than 1%.


(1)
            As
      used in this table, “beneficial ownership” means the sole or shared power
      to vote, or to direct the voting of, a security, or the sole or shared
      investment power with respect to a security (i.e., thepower to dispose
      of, or to direct the disposition of, a security).  The address
      of each person is in the care of the
Company.


(2)
            Figures
      are rounded to the nearest percent.


(3)
            Mr.
      Henri Hornby served as the Chief Executive Officer, Secretary, Treasurer,
      Principal Accounting Officer and Director from March 28, 2006 to November
      12, 2007.  During the year ended December 31, 2007, the Company
      re-appointed Mr. Hornby to serve on its Board of Directors; however, on
      November 4, 2008 Mr. Hornby resigned from the Board of
      Directors


(4)
            Upon
      Mr. Hornby’s resignation, the Board of Directors appointed Mr. Jerald
      Woods to serve as the Interim Chief Executive Officer.  On
      February 10, 2009, Mr. Woods resigned from his position as Chief Executive
      Officer.


(5)
            On
      November 4, 2008, Mr. Hornby resigned from the Board of
      Directors.  Mr. William Gray was appointed to fill the vacancy
      left by Mr. Hornby.  On February 10, 2009, Mr. Gray was
      appointed the Company’s Chief Executive Officer upon Mr. Woods’
      resignation.  Innovation Capital Management, Inc. purchased
      100,000 shares pursuant to a private placement.  Mr. William
      Gray has the authority to exercise dispositive and voting power over the
      shares of common stock for Innovation Capital Management,
    Inc.


(6)
            Dr.
      Ray Powers was appointed to the Board of Directors on November 24, 2008
      and appointed as the Company’s President on February 10,
    2009.





Name
      of Beneficial Owners (1)
            Number
      Of Common Shares
            Percent
      Beneficially
              Owned
      (3)Russell
      Preston
              1200
      Otter Creek
              Vine
      Grove, KY 40175
            3,600,000
            5%Total
      Beneficial Owners
            3,600,000
            5%





ITEM
13.                    CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE





CCI’s
Chief Executive Officer during the year ended December 31, 2008, Mr. Woods,
loaned the Company $4,500 and $25,000 during the 2008 and 2007 year,
respectively.  The Company has outstanding notes payable with him and
these notes accrue interest at a rate of 18% per annum and are payable upon
demand. The Company recorded interest expense to Mr. Woods in the amount of
$5,133 and $863 for the years ended December 31, 2008 and 2007.





37


On August 26, 2008, the Company
executed a non-binding Letter of Intent with Innovation Capital Management, Inc.
regarding the acquisition of 100% of the outstanding capital stock and ownership
interest of ICM and its affiliated companies of ICM, LLC and DiscoverNet,
Inc.  The terms of the proposed agreement specify that CCI will issue
31,816,191 shares of its common stock in exchange for 100% of the assets and
liabilities of ICM and its affiliated companies.  On February 10,
2009, the Chief Executive Officer of ICM was elected and appointed Chief
Executive Officer of CCI, thereby creating a related party with intended
acquisition.





ITEM
14.                    PRINCIPAL
ACCOUNTING FEES AND SERVICES





(1)
AUDIT FEES





The aggregate fees billed for
professional services rendered by Lawrence Scharfman & Co., CPA P.C., for
the audit of our annual financial statements and review of the financial
statements included in our Form 10-Q or services that are normally provided by
the accountant in connection with statutory and regulatory filings or
engagements for fiscal years 2008 and 2007 were $27,500 and $30,000,
respectively.





(2)
AUDIT-RELATED FEES





The
aggregate fees billed by Lawrence Scharfman & Co., CPA P.C., for assurance
and related services by the principal accountant that are reasonably related to
the performance of the audit or review of the registrant’s financial statements
for the fiscal years 2008 and 2007 were $-0- and $-0-,
respectively.





(3)
TAX FEES





The
aggregate fees billed by Lawrence Scharfman & Co., CPA P.C. for professional
services rendered by the principal accountant for the fiscal years 2008 and 2007
were $-0- and $-0-, respectively.





(4)
ALL OTHER FEES





There
were no other fees to be billed by Lawrence Scharfman & Co., CPA P.C. for
the fiscal years 2008 and 2007 other than the fees described above.





(5)
AUDIT COMMITTEE POLICIES AND PROCEDURES





We
do not have an audit committee.





38


(6)
If greater than 50 percent, disclose the percentage of hours expended on the
principal accountant's engagement to audit the registrant's financial statements
for the most recent fiscal year that were attributed to work performed by
persons other than the principal accountant's full-time, permanent
employees.





Not
applicable.


PART
IV





ITEM
15.                    EXHIBITS,
FINANCIAL STATEMENT SCHEDULES





(a)





1.
            The
      financial statements listed in the "Index to Financial Statements" at page
      F-1 are filed as part of this
report.





2.
            Financial
      statement schedules are omitted because they are not applicable or the
      required information is shown in the financial statements or notes
      thereto.





3.
            Exhibits
      included or incorporated herein: See index to
  Exhibits.





(b)           Exhibits





Incorporated
      by referenceExhibit
            Exhibit
      Description
            Filed
      herewith
            Form
            Period
      ending
            Exhibit
            Filing
      date2.1
            Plan
      and agreement of reorganization between Huntington Telecommunications
      Partners, LP and Competitive Companies Holdings, Inc. and Competitive
      Companies, Inc.
            
            SB-2
            
            2
            01/11/022.2
            Plan
      and agreement of reorganization between Huntington Telecommunications
      Partners, LP and Competitive Companies Holdings, Inc. and Competitive
      Companies, Inc.
            
            SB-2/A
            
            2.2
            08/02/022.3
            Plan
      and agreement of reorganization between Huntington Telecommunications
      Partners, LP and Competitive Companies Holdings, Inc. and Competitive
      Companies, Inc.
            
            SB-2/A
            
            2.2
            04/24/032.4
            Plan
      and agreement of reorganization between Competitive Companies, Inc. and
      CCI Acquisition Corp
            
            8-K
            
            10.1
            05/09/053(i)
            Articles
      of Competitive Companies, as amended
            
            SB-2
            
            3(I)
            01/11/023(ii)
            Bylaws
      of Competitive Companies
            
            SB-2
            
            3(II)
            01/11/024
            Rights
      and Preferences of Preferred Stock
            
            SB-2
            
            4
            01/11/0231
            Certification
      of William Gray pursuant to Section 302 of the Sarbanes-Oxley
      Act
            X32
            Certification
      of William Gray pursuant to Section 906 of the Sarbanes-Oxley
      Act
            X99.1
            Press
      Release Announcing the Company’s access to government funding with the
      acquisition of carrier-grade microwave towers.
            X99.2
            Press
      Release Announcing the Appointment of Dr. Ray Powers to the Board of
      Directors
            X99.3
            Press
      Release Announcing the engagement of Worldwide Capital Group,
      LLC
            X99.4
            Press
      Release Announcing the sales contract with a wholesale distributor of
      T-mobile network operating procedures
            X99.5
            Press
      Release Announcing its contract with MLM Marketing Company for the
      purchase of 5,000 T-mobile SIMS cards
            X99.6
            Press
      Release Announcing a Letter of Intent to acquire International Telecom,
      Inc.
            X99.7
            Press
      Release Announcing the resignation of Ms. Tonni
    Smith-Atkins
            X99.8
            Press
      Release Announcing the vendor financing agreement for the acquisition and
      marketing of IPTV services
            X


39


SIGNATURES





Pursuant to the requirements of Section
13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly
caused the report to be signed on its behalf by the undersigned, thereunto duly
authorized.





COMPETITIVE
COMPANIES, INC.








By:  /s/ William Gray


William
Gray, Chief Executive Officer





Date:
April 15, 2009





Pursuant to the requirements of the
Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.





Signature
            Title
            Date/s/ William
      Gray
            Current
      Chief Executive Officer, Principal Accounting Officer and
      Director
            April
      15, 2009William
      Gray/s/ Ray
      Powers
            Current
      President and Director
            April
      15, 2009Ray
      Powers/s/ Jerald
      Woods
            Director
            April
      15, 2009Jerald
      WoodsDirector
            April
      15, 2009David
      Hewitt/s/ Larry
      Griffin
            Director
            April
      15, 2009Larry
      Griffin/s/ Michael
      Benbow
            Director
            April
      15, 2009Michael
      Benbow


40


COMPETITIVE
COMPANIES, INC





INDEX
TO FINANCIAL STATEMENTS





YEARS
ENDED DECEMBER 31, 2008 AND 2007





PAGESREPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
            F-2CONDENSED
      CONSOLIDATED BALANCE SHEETS
            F-3CONDENSED
      CONSOLIDATED STATEMENTS OF OPERATIONS
            F-4CONDENSED
      CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
            F-5CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS
            F-6NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
            F-7
      – F-22


F-1


Lawrence
Scharfman & Co., CPA P.C.


Certified
Public Accountants





18
      E. SUNRISE HIGHWAY, #203
            9608
      HONEY BELL CIRCLEFREEPORT,
      NY 11520
            BOYNTON
      BEACH, FL 33437TELEPHONE:
      (516) 771-5900
            TELEPHONE:
      (561) 733-0296FACSIMILE:
      (516) 771-2598
            FACSIMILE:
      (561) 740-0613





REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





We
have audited the accompanying consolidated balance sheets of Competitive
Companies, Inc. as of December 31, 2008 and 2007 and the related consolidated
statements of operations, stockholders’ equity, and cash flows for the years
then ended. These consolidated financial statements are the responsibility of
the Company’s management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.





We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial
reporting. Accordingly, we express no such opinion. Our audits of the financial
statements include examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.





In
our opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Competitive Companies, Inc. as of
December 31, 2008 and 2007, and the results of its operations, stockholders’
equity and cash flows for the years then ended, in conformity with accounting
principles generally accepted in the United States of America.





The
accompanying financial statements have been prepared assuming that Competitive
Companies, Inc. will continue as a going concern. As discussed in Note 2 to the
financial statements, Competitive Companies, Inc. suffered recurring losses from
operations and has a working capital deficiency, which raises substantial doubt
about its ability to continue as a going concern. Management’s plans regarding
those matters also are described in Note 2. The financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.







/s/
Lawrence Scharfman


Lawrence
Scharfman, CPA


Boynton
Beach Florida


April
14, 2009


-
LICENSED IN FLORIDA & NEW YORK -






F-2





Competitive
      Companies, Inc.Consolidated
      Balance SheetsDecember
      31,
            
            
            December
      31,2008
            
            
            2007AssetsCurrent
      assets:Cash
            
            $
            23,340
            
            
            $
            3,909Account
      receivable, net of allowance of $77,472 and $75,913
            
            
            82,514
            
            
            
            89,424Prepaid
      expenses
            
            
            2,997
            
            
            
            2,561Total
      current assets
            
            
            108,851
            
            
            
            95,894Property
      and equipment, net
            
            
            56,425
            
            
            
            88,081Other
      assets:Deposits
            
            
            1,366
            
            
            
            1,366Total
      assets
            
            $
            166,642
            
            
            $
            185,341Liabilities
      and Stockholders' EquityCurrent
      liabilities:Accounts
      payable
            
            $
            162,812
            
            
            $
            117,363Accrued
      expenses
            
            
            32,025
            
            
            
            12,782Customer
      deposits
            
            
            44,670
            
            
            
            43,860Current
      maturities of long term debt, net of discounts of $2,630and
      $-0- at December 31, 2008 and 2007, respectively
            
            
            24,070
            
            
            
            31,648Total
      current liabilities
            
            
            263,577
            
            
            
            205,653Long
      term debt, less current maturities
            
            
            8,476
            
            
            
            15,675Stockholders'
      equity:Preferred
      stock, $0.001 par value 10,000,000 sharesauthorized:Class
      A convertible, no shares issued andoutstanding
      with no liquidation value
            
            
            -
            
            
            
            -Class
      B convertible, 1,495,436 shares issued andoutstanding
      with no liquidation value
            
            
            1,495
            
            
            
            1,495Class
      C convertible, 1,000,000 shares issued andoutstanding
      with no liquidation value
            
            
            1,000
            
            
            
            1,000Common
      stock, $0.001 par value, 500,000,000 and 70,000,000shares
      authorized, 64,187,630 and 56,707,050 shares issuedand
      outstanding at December 31, 2008 and 2007, respectively
            
            
            64,188
            
            
            
            56,707Subscription
      payable (2,180,280 and 140,000 shares)
            
            
            114,014
            
            
            
            14,000Additional
      paid-in capital
            
            
            2,913,469
            
            
            
            2,661,782Accumulated
      (deficit)
            
            
            (3,199,577
            )
            
            
            (2,770,971
            )(105,411
            )
            
            
            (35,987
            )$
            166,642
            
            
            $
            185,341The
      accompanying notes are an integral part of these financial
      statements.





F-3





Competitive
      Companies, Inc.Consolidated
      Statements of OperationsFor
      the years endedDecember
      31,2008
            
            
            2007Revenue
            
            $
            665,144
            
            
            $
            884,999Cost
      of sales
            
            
            389,590
            
            
            
            453,129Gross
      profit
            
            
            275,554
            
            
            
            431,870Expenses:General
      and administrative
            
            
            326,065
            
            
            
            424,609Salaries
      and wages
            
            
            200,048
            
            
            
            357,553Consulting
      fees
            
            
            122,208
            
            
            
            12,012Depreciation
            
            
            33,296
            
            
            
            33,392Bad
      debt
            
            
            14,493
            
            
            
            39,814Total
      operating expenses
            
            
            696,110
            
            
            
            867,380Net
      operating (loss)
            
            
            (420,556
            )
            
            
            (435,510
            )Other
      income (expenses):Other
      income
            
            
            -
            
            
            
            25Interest
      expense
            
            
            (8,050
            )
            
            
            (2,951
            )Total
      other income (expenses)
            
            
            (8,050
            )
            
            
            (2,926
            )Net
      (loss)
            
            $
            (428,606
            )
            
            $
            (438,436
            )Weighted
      average number of common sharesoutstanding
      - basic and fully diluted
            
            
            59,409,944
            
            
            
            55,176,201Net
      (loss) per share - basic and fully diluted
            
            $
            (0.01
            )
            
            $
            (0.01
            )The
      accompanying notes are an integral part of these financial
      statements.


F-4


Competitive
      Companies, Inc.Consolidated
      Statement of Stockholders' EquityClass
      A
            
            
            Class
      B
            
            
            Class
      C
            
            
            
            
            
            
            
            
            
            
            
            TotalCommon
      Stock
            
            
            Preferred
      Stock
            
            
            Preferred
      Stock
            
            
            Preferred
      Stock
            
            
            Additional
            
            
            Subscriptions
            
            
            Accumulated
            
            
            Stockholders'Shares
            
            
            Amount
            
            
            Shares
            
            
            Amount
            
            
            Shares
            
            
            Amount
            
            
            Shares
            
            
            Amount
            
            
            Paid-in
            
            
            Payable
            
            
            (Deficit)
            
            
            EquityBalance,
      December 31, 2006
            
            
            52,197,050
            
            
            $
            52,197
            
            
            
            -
            
            
            $
            -
            
            
            
            1,495,436
            
            
            $
            1,495
            
            
            
            1,000,000
            
            
            $
            1,000
            
            
            $
            2,241,292
            
            
            $
            -
            
            
            $
            (2,332,535
            )
            
            
            (36,551
            )Shares
      issued for cash
            
            
            3,890,000
            
            
            
            3,890
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            385,110
            
            
            
            14,000
            
            
            
            -
            
            
            
            389,000Shares
      issued for services
            
            
            620,000
            
            
            
            620
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            35,380
            
            
            
            -
            
            
            
            -
            
            
            
            36,000Net
      loss for the year endedDecember
      31, 2007
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (438,436
            )
            
            
            (438,436
            )Balance,
      December 31, 2007
            
            
            56,707,050
            
            
            $
            56,707
            
            
            
            -
            
            
            $
            -
            
            
            
            1,495,436
            
            
            $
            1,495
            
            
            
            1,000,000
            
            
            $
            1,000
            
            
            $
            2,661,782
            
            
            $
            14,000
            
            
            $
            (2,770,971
            )
            
            $
            (49,987
            )Shares
      issued for cash
            
            
            1,250,000
            
            
            
            1,250
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            67,250
            
            
            
            100,014
            
            
            
            -
            
            
            
            68,500Shares
      issued for services
            
            
            6,230,580
            
            
            
            6,231
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            180,687
            
            
            
            -
            
            
            
            -
            
            
            
            186,918Beneficial
      conversion of convertible debt
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            3,750
            
            
            
            -
            
            
            
            -
            
            
            
            3,750Net
      loss for the year endedDecember
      31, 2008
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (428,606
            )
            
            
            (428,606
            )Balance,
      December 31, 2008
            
            
            64,187,630
            
            
            $
            64,188
            
            
            
            -
            
            
            $
            -
            
            
            
            1,495,436
            
            
            $
            1,495
            
            
            
            1,000,000
            
            
            $
            1,000
            
            
            $
            2,913,469
            
            
            $
            114,014
            
            
            $
            (3,199,577
            )
            
            $
            (219,425
            )The
      accompanying notes are an integral part of these financial
      statements.


F-5


Competitive
      Companies, Inc.Consolidated
      Statements of Cash FlowsFor
      the years endedDecember
      31,2008
            
            
            2007Cash
      flows from operating activitiesNet
      (loss)
            
            $
            (428,606
            )
            
            $
            (438,436
            )Adjustments
      to reconcile net (loss) tonet
      cash (used in) operating activities:Depreciation
            
            
            33,296
            
            
            
            33,392Share-based
      compensation
            
            
            186,918
            
            
            
            36,000Provision
      for bad debt
            
            
            14,493
            
            
            
            39,814Amortization
      of beneficial conversion feature
            
            
            1,120
            
            
            
            -Decrease
      (increase) in assets:Accounts
      receivable
            
            
            (7,583
            )
            
            
            (17,529
            )Prepaid
      expenses
            
            
            (436
            )
            
            
            (129
            )Increase
      (decrease) in liabilities:Accounts
      payable
            
            
            45,449
            
            
            
            (58,582
            )Accrued
      expenses
            
            
            19,243
            
            
            
            (12,976
            )Customer
      deposits
            
            
            810
            
            
            
            6,360Net
      cash (used in) operating activities
            
            
            (135,296
            )
            
            
            (412,086
            )Cash
      flows from investing activitiesPurchase
      of equipment
            
            
            (1,640
            )
            
            
            (10,203
            )Net
      cash provided by investing activities
            
            
            (1,640
            )
            
            
            (10,203
            )Cash
      flows from financing activitiesProceeds
      from long term debt
            
            
            15,000
            
            
            
            -Principal
      payments on long term debt
            
            
            (27,147
            )
            
            
            (6,139
            )Proceeds
      from sale of common stock
            
            
            168,514
            
            
            
            403,000Payments
      for repurchase of preferred stock
            
            
            -
            
            
            
            25,000Net
      cash provided by financing activities
            
            
            156,367
            
            
            
            421,861Net
      (decrease) in cash
            
            
            19,431
            
            
            
            (428
            )Cash
      - beginning
            
            
            3,909
            
            
            
            4,337Cash
      - ending
            
            $
            23,340
            
            
            $
            3,909Supplemental
      disclosures:Interest
      paid
            
            $
            2,733
            
            
            $
            2,088Income
      taxes paid
            
            $
            -
            
            
            $
            -Non-cash
      investing and financing activities:Shares
      issued for services
            
            $
            186,918
            
            
            $
            36,000The
      accompanying notes are an integral part of these financial
      statements.


F-6
 Competitive
Companies, Inc
 Notes
to Financial Statements


Note
1 – Summary of Accounting Policies





Competitive
Companies, Inc. ("CCI") was originally incorporated under the laws of the state
of Nevada in March 1998, and shortly thereafter acquired all of the assets and
assumed all of the liabilities of Competitive Communications, Inc. ("COMM"),
which was incorporated under the laws of the state of California in February
1996. In January 2000, CCI Residential Services, Inc. ("CCIR") was formed. This
entity, which is also a wholly owned subsidiary of CCI, was formed to expand on
the residential services currently being provided by COMM, while COMM focused on
developing revenue streams from other services.





CCI,
COMM and CCIR (collectively referred to as the "Company") provide telephone,
cable television, long distance/inter - exchange, and dial up and high-speed
Internet connections and e-mail services, mainly to customers who live in
multi-tenant residential buildings. The Company's operations are located in
Riverside, California and substantially all of its customers are California
residents.





On
May 5, 2005 the Company merged with CA Networks, Inc. ("CAN"), which was a
development stage enterprise that was in the process of developing a business
model in the same industry as Competitive. CAN was formed under the laws of the
state of Wyoming on January 14, 2004. The combined companies maintained the name
of CCI.





On
the date of the transaction (the "Effective Date") the Company issued 40,599,999
shares of its common stock to the shareholders of CAN in exchange for the
40,599,999 outstanding shares of CAN. In effect, each of CAN's shares that were
issued and outstanding immediately before the merger was exchanged for one share
of the Company's common stock. Although CCI was the legal acquirer and surviving
entity, because the shareholders of CAN received the majority of the voting
rights in the combined entity, for accounting purposes the acquisition was
treated as a recapitalization of CAN with CAN being reflected as the acquirer of
CCI (a reverse acquisition).  Accordingly, the 5,912,061 common shares
held by the Company's shareholders were deemed to have been issued by CAN in
exchange for the Company's net liabilities at the date of the acquisition. Upon
such acquisition date, the purchase price consisted of the
following:





Estimated value of 5,912,061 shares of
common stock of CCI deemed to have been issued,


at estimated value of $0.10 per
share   $  591,206





Direct costs of the
business
combination                        19,717





Net liabilities
assumed                                                   167,077





Total         $
 778,000





Because
the net book value of CCI's assets and liabilities approximated their fair
values on the date of acquisition, the purchase price above has been reflected
as an impairment expense on the Company's books and records.





F-7
 Competitive
Companies, Inc
 Notes
to Financial Statements


In
connection with this transaction, we agreed to file a registration statement
with the Securities and Exchange Commission to register the shares of restricted
common stock issued to CAN's shareholders who own less than 5% of the total
outstanding shares of the merged entity. The merged company (collectively "we",
"us", "ours") continued to be a provider of local telephone, long distance
service and high speed internet service through Wireless Internet networks in
all states it operates in, and will also offer cellular service
nationwide.





Reclassifications


Certain
reclassifications have been made to prior year amounts to conform to the current
year presentation.





Use of
Estimates


The
preparation of consolidated financial statements in accordance with
accounting   principles generally accepted in the United States
of America requires us to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosures of contingent assets
and liabilities at the date of the consolidated financial statements. The
reported amounts of revenues and expenses during the reporting period may be
affected by the estimates and assumptions we are required to make. Actual
results could differ significantly from our estimates.





Cash and cash
equivalents


CCI
maintains a cash balances in interest and non-interest-bearing accounts, which
do not currently exceed federally insured limits. For the purpose of the
statements of cash flows, all highly liquid investments with an original
maturity of three months or less are considered to be cash
equivalents.





Basis of
Accounting


Our
consolidated financial statements are prepared using the accrual method of
accounting.





Principles of
Consolidation




The
consolidated financial statements include the accounts of CCI, and its
wholly-owned subsidiaries, COMM and CCIR. All significant inter-company balances
and transactions have been eliminated.  CCI, COMM and CCIR will be
collectively referred herein to as the “Company”.





Revenue
Recognition


Our
revenue recognition policy is consistent with the criteria set forth in Staff
Accounting Bulletin 104 - Revenue Recognition in Financial Statements ("SAB
104") for determining when revenue is realized or realizable and earned. In
accordance with the requirements of SAB 104 we recognize revenue when (1)
persuasive evidence of an arrangement exists; (2) delivery of our services has
occurred; (3) our price to our customer is fixed or determinable; and (4)
collectability of the sales price is reasonably assured. As such, we recognize
revenues in the month in which we provide services. Services provided but not
billed by the end of the year are reflected as unbilled receivables in the
accompanying consolidated balance sheet.





F-8
 Competitive
Companies, Inc
 Notes
to Financial Statements


Allowance for Doubtful
Accounts


We
evaluate the allowance for doubtful accounts on a regular basis through periodic
reviews of the collectability of the receivables in light of historical
experience, adverse situations that may affect our customers' ability to repay,
and prevailing economic conditions. This evaluation is inherently subjective as
it requires estimates that are susceptible to significant revision as more
information becomes available. Accounts receivable are determined to be past due
based on how recently payments have been received and those considered
uncollectible are charged against the allowance account in the period they are
deemed uncollectible. The allowance for doubtful accounts was $77,472 and
$75,913 at December 31, 2008 and 2007, respectively.





Fixed
assets


Fixed
assets are stated at the lower of cost or estimated net recoverable amount. The
cost of property, plant and equipment is depreciated using the straight-line
method based on the lesser of the estimated useful lives of the assets or the
lease term based on the following life expectancy:




Furniture andfixtures
            5
      yearsTelecommunication
      equipment and computers
            5-10
      yearsLeasehold
      Improvements
            7
      years




Repairs
and maintenance expenditures are charged to operations as incurred. Major
improvements and replacements, which have extend the useful life of an asset,
are capitalized and depreciated over the remaining estimated useful life of the
asset. When assets are retired or sold, the cost and related accumulated
depreciation and amortization are eliminated and any resulting gain or loss is
reflected in operations.





Impairment of long-lived
assets


Long-lived
assets held and used by Competitive are reviewed for possible impairment
whenever events or circumstances indicate the carrying amount of an asset may
not be recoverable or is impaired. Recoverability is assessed using undiscounted
cash flows based upon historical results and current projections of earnings
before interest and taxes. Impairment is measured using discounted cash flows of
future operating results based upon a rate that corresponds to the cost of
capital. Impairments are recognized in operating results to the extent that
carrying value exceeds discounted cash flows of future operations. The Company
did not incur any impairment losses for the years ended December 31, 2008 and
2007.





Basic and diluted loss per
share


The
basic net loss per common share is computed by dividing the net loss by the
weighted average number of common shares outstanding.  Diluted net
loss per common share is computed by dividing the net loss adjusted on an “as if
converted” basis, by the weighted average number of common shares outstanding
plus potential dilutive securities.  For 2008 and 2007, potential
dilutive securities had an anti-dilutive effect and were not included in the
calculation of diluted net loss per common share.





F-9
 Competitive
Companies, Inc
 Notes
to Financial Statements


Goodwill and Other
Intangible Assets


Goodwill
and indefinite life intangible assets are recorded at fair value and not
amortized, but are reviewed for impairment annually or more frequently if
impairment indicators arise, as required by SFAS No. 142.  As of
December 31, 2008 and 2007 we had no goodwill or other intangible
assets.  The Company did not incur any impairment losses for the years
ended December 31, 2008 and 2007.





Income
taxes




CCI
recognizes deferred tax assets and liabilities based on differences between the
financial reporting and tax bases of assets and liabilities using the enacted
tax rates and laws that are expected to be in effect when the differences are
expected to be recovered.  CCI provides a valuation allowance for
deferred tax assets for which it does not consider realization of such assets to
be more likely than not.




Stock-based
compensation


In
December 2004, the FASB issued SFAS No. 123 (revised 2004) Share-Based Payment,
which is a revision of SFAS No. 123, Accounting for Stock-Based Compensation.
SFAS No. 123(R) supersedes APB Opinion No. 25, Accounting for Stock Issued to
Employees and amends SFAS No. 95, Statement of Cash Flows. Generally, the
approach in SFAS No. 123(R) is similar to the approach described in SFAS No.
123. However, SFAS No. 123(R) requires all share-based payments to employees,
including grants of employee stock options, to be recognized in the income
statement based on their fair values. Pro forma disclosure is no longer an
alternative.  CCI adopted SFAS No. 123 (R) during
2005.  Stock issued for services totalled $186,918 and $36,000 for the
years ended December 31, 2008 and 2007, respectively.





Advertising


We
expense advertising costs as they are incurred. These expenses approximated $-0-
and $127,500 for the years ended December 31, 2008 and 2007,
respectively.





Recently Adopted Accounting
Pronouncements


During
September 2006, the FASB issued Statement of Financial Accounting Standards
No. 157, Fair Value
Measurements(“FAS 157”). FAS 157 defines fair value,
establishes a framework for measuring fair value and requires enhanced
disclosures about fair value measurements. FAS 157 requires companies to
disclose the fair value of financial instruments according to a fair value
hierarchy as defined in the standard. In February 2008, the FASB issued FASB
Staff Position 157-1, Application of FASB Statement
No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements
That Address Fair Value Measurements for Purposes of Lease Classification or
Measurement under Statement 13(“FSP 157-1”) and FSP 157-2,
Effective Date of FASB
Statement No. 157(“FSP 157-2”). FSP 157-1 amends
FAS 157 to remove certain leasing transactions from its scope.
FSP 157-2 delays the effective date of FAS 157 for all non-financial
assets and non-financial liabilities, except for items that are recognized or
disclosed at fair value in the financial statements on a recurring basis, until
fiscal years beginning after November 15, 2008. These nonfinancial items
include assets and liabilities such as reporting units measured at fair value in
a goodwill impairment test and nonfinancial assets acquired and liabilities
assumed in a business combination. FAS 157 is effective for financial
statements issued for fiscal years beginning after November 15, 2007 and
was adopted by the Company, as it applies to its financial instruments,
effective January 1, 2008. The Company has considered the guidance provided by
FSP 157-3 in its determination of estimated fair values as of December 31, 2008,
and assessed there was no impact (See Note 10).





F-10
 Competitive
Companies, Inc
 Notes
to Financial Statements


Recently Issued Accounting
Pronouncement


During
May 2008, the FASB issued Statement of Financial Accounting Standards
No. 162, The Hierarchy of
Generally Accepted Accounting Principles (“FAS 162”). FAS 162
identifies the sources of accounting principles and the framework for selecting
principles to be used in the preparation and presentation of financial
statements in accordance with generally accepted accounting principles. This
statement will be effective 60 days after the Securities and Exchange
Commission approves the Public Company Accounting Oversight Board’s amendments
to AU Section 411, The
Meaning of ‘Present Fairly in Conformity With Generally Accepted Accounting
Principles’. The Company does not anticipate that the adoption of
FAS 162 will have an effect on its consolidated financial
statements.




During
March 2008, the FASB issued Statement of Financial Accounting Standards
No. 161, Disclosures
About Derivative Instruments and Hedging Activities — an amendment of FASB
Statement No. 133(“FAS 161”). This new standard requires
enhanced disclosures for derivative instruments, including those used in hedging
activities. It is effective for fiscal years and interim periods beginning after
November 15, 2008, and will be applicable to the Company in the first
quarter of fiscal 2009. The Company is currently evaluating the impact, if any;
the adoption of FAS 161 will have on its consolidated financial
statements.





In
December 2007, the FASB issued SFAS No. 160, “Non-controlling Interests in
Consolidated Financial Statements”. This statement amends ARB 51 to establish
accounting and reporting standards for the non-controlling (minority) interest
in a subsidiary and for the de-consolidation of a subsidiary. It clarifies that
a non-controlling interest in a subsidiary is equity in the consolidated
financial statements. SFAS No. 160 is effective for fiscal years and interim
periods beginning after December 15, 2008. The adoption of SFAS 160 is not
expected to have a material impact on the Company’s financial position, results
of operation or cash flows.





In
December 2007, the FASB issued SFAS No. 141 (Revised), “Business Combinations”.
SFAS 141 (Revised) establishes principals and requirements for how an acquirer
of a business recognizes and measures in its financial statements, the
identifiable assets acquired, the liabilities assumed, and any non-controlling
interest in the acquiree. This statement also provides guidance for recognizing
and measuring the goodwill acquired in the business combination and determines
what information to disclose to enable users of the financial statements to
evaluate the nature and financial effects of the business combination. The
guidance will become effective for the fiscal year beginning after December 15,
2008. The Company is currently evaluating the impact, if any; the adoption of
FAS 141 will have on its consolidated financial
statements.





F-11
 Competitive
Companies, Inc
 Notes
to Financial Statements


Note
2 – Going Concern





Our
consolidated financial statements are prepared using accounting principles
generally accepted in the United States of America applicable to a going
concern, which contemplate the realization of assets and liquidation of
liabilities in the normal course of business. We have incurred continuous losses
from operations, have an accumulated deficit of $3,199,577 and a working capital
deficit of $154,726 at December 31, 2008, and have reported negative cash flows
from operations over the last five years. In addition, we do not currently have
the cash resources to meet our operating commitments for the next twelve months,
and we expect to have ongoing requirements for capital investment to implement
our business plan. Finally, our ability to continue as a going concern must be
considered in light of the problems, expenses and complications frequently
encountered by entrance into established markets and the competitive environment
in which we operate.





Since
inception, our operations have primarily been funded through private equity
financing, and we expect to continue to seek additional funding through private
or public equity and debt financing.





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





Our
consolidated financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts, or the amounts and
classification of liabilities that might be necessary should we be unable to
continue as a going concern.





F-12
 Competitive
Companies, Inc
 Notes
to Financial Statements


Note
3 – Related Party





From
time to time the Company has received loans from the Officer, Jerald L. Woods.
The total of the unsecured loans carry an 18% interest rate and are due on
demand (See Note 5).





On
March 13, 2008, Zachary Bluestein was hired as Chief Technical Officer. Mr.
Bluestein’s immediate task is to implement a marketing program and establish an
internet presence to promote the Company and advance product sales.





On
March 31, 2008, Mr. Henri Hornby, our former CEO, was appointed as
director.





Note
4 – Property and equipment





Property
and equipment consist of the following:





December
      31,2008
            
            
            2007Telecommunication
      equipment and computers
            
            $
            274,419
            
            
            $
            277,557Furniture
      and fixtures
            
            
            -
            
            
            
            3,353Leasehold
      improvements
            
            
            -
            
            
            
            13,539274,419
            
            
            
            294,449Less
      accumulated depreciation
            
            
            (217,994
            )
            
            
            (206,368
            )$
            56,425
            
            
            $
            88,081


Depreciation
expense totaled $33,296 and $33,392 for 2008 and 2007, respectively. During 2008
the Company disposed of $21,670 of fully depreciated assets that were no longer
in service. No gain or loss resulted from the disposal.





Note
5 – Long Term Debt





Notes
payable consists of the following at December 31, 2008 and 2007,
respectively:





December
      31,2008
            
            
            2007Unsecured
      convertible promissory note carries an 8.75% interest rate, maturing on
      May 11, 2009. The principal is convertible into shares of common stock at
      the discretion of the note holder at a price equal to eighty percent (80%)
      of the volume weighted average price of the Company’s common stock for the
      twenty two (22) trading days prior to the conversion date.
            
            $
            10,000
            
            
            $
            -Unsecured
      convertible promissory note carries an 8.75% interest rate, maturing on
      April 30, 2009. The principal is convertible into shares of common stock
      at the discretion of the note holder at a price equal to eighty percent
      (80%) of the volume weighted average price of the Company’s common stock
      for the twenty two (22) trading days prior to the conversion
      date.
            
            
            5,000
            
            
            
            -Related
      party, unsecured promissory note carries an 18% interest rate, due on
      demand. Interest expense of $5,133 and $863 accrued during the years ended
      December 31, 2008 and 2007, respectively and remains unpaid as of December
      31, 2008 (See Note 3).
            
            
            4,500
            
            
            
            25,000Unsecured
      note payable to a stockholder, with interest at 8%, and monthly principal
      and interest payments of $683, maturing on February 23,
    2011.
            
            
            15,676
            
            
            
            22,323Total
      debt
            
            
            35,176
            
            
            
            47,323Less:
      discount on beneficial conversion feature
            
            
            2,630
            
            
            
            -Less:
      current portion
            
            
            24,070
            
            
            
            31,648Long-term
      debt, less current portion
            
            $
            8,476
            
            
            $
            15,675





F-13
 Competitive
Companies, Inc
 Notes
to Financial Statements


In
accordance with EITF No. 98-5, “Accounting for Convertible Securities with
Beneficial Conversion Features or Contingently Adjustable Conversion
Ratios”(“EITF 98-5”) and EITF No. 00-27, “Application of Issue No. 98-5 to
Certain Convertible Instruments” (“EITF 00-27”), the Company recognized and
measured the embedded beneficial conversion feature present in the convertible
debt, by allocating a portion of the proceeds equal to the intrinsic value of
the feature to additional paid-in-capital. The intrinsic value of the feature
was calculated on the commitment date using the effective conversion price of
the convertible debt. This intrinsic value is limited to the portion of the
proceeds allocated to the convertible debt.





The
aforementioned accounting treatment resulted in a total debt discount equal to
($3,750). The discount is amortized over a six month period, from the date of
issuance until the stated redemption date of the debt.





According
to the terms of the Convertible Promissory Notes, the number of shares that
would be received upon conversion was 160,392 shares at December 31,
2008.





During
the years ended December 31, 2008 and 2007, the Company recorded financial
expenses in the amount of $1,120 and $-0-, respectively, attributed to the
amortization of the aforementioned debt discount.





As
of December 31, 2008, no shares were issued pursuant to debt
conversion.





The
Company recorded interest expense on long term debt in the amount of $8,050 and
$2,951 for the years ended December 31, 2008 and 2007, respectively. Accrued
interest was $6,180 and $863 at December 31, 2008 and December 31, 2007,
respectively.





Scheduled
maturities of long-term debt as of December 31, 2008 are as
follows:




Years
            Amounts2009
            24,0702010
            7,7972011
            679Thereafter
            -




F-14
 Competitive
Companies, Inc
 Notes
to Financial Statements


Note
6 – Commitments and contingencies





We
lease our operating facility in Riverside California under a non-cancelable
5-year operating lease expiring December 14, 2011.  The lease provides
for increases in future minimum annual rental payments based on defined annual
increases beginning with monthly payments of $2,433 and culminating in a monthly
payment of $2,945 in 2011.  Lease expense totaled $38,256 and $35,053
during 2008 and 2007, respectively.





Future minimum lease
payments required are as follow:










Year
            
            Amount2009
            
            $
            33,3942010
            
            
            33,9312011
            
            
            32,394Total
            
            $
            98,719




On
November 3, 2008 the Company entered into a non-binding Letter of Intent with
Worldwide Communications, Inc. concerning the acquisition of forty (40)
microwave towers (“Asset Purchase Agreement”). The terms of the proposed
agreement specify that CCI issue two million newly issued Convertible Preferred
Shares at a price of $1 per share, with 10% or 200,000 shares to be placed
immediately in escrow upon the signing of the completed Asset Purchase
Agreement, of which the proposed closing date was November 28, 2008. Due to
delays involving the inspection of the towers the closing did not occur on the
original closing date, and the agreement has been extended indefinitely. CCI
expects to close on the acquisition during the second quarter of 2009. The
conversion terms have not yet been determined. In addition, the terms of the
agreement include a purchaser buy-back arrangement whereby, upon acceptable
financing, CCI intends to buy back a total of two hundred thousand of the
Convertible Preferred Shares in exchange for two hundred thousand dollars
($200,000).





On
August 26, 2008 the Company entered into a non-binding Letter of Intent with
Innovation Capital Management, Inc. (“ICM”) concerning the acquisition of one
hundred percent (100%) of the outstanding capital stock, or ownership interest
of ICM, and associated companies of ICM, LLC and DiscoverNet, Inc., collectively
all communications company organized under the laws of the State of Delaware,
Texas and Wisconsin, respectively. The terms of the proposed agreement specify
that CCI issue 31,816,191 shares of common stock, valued at an estimated
$1,344,335, in exchange for 100% of the assets and liabilities of ICM, ICM LLC,
and DiscoverNet, Inc, of which the proposed closing date was October 1, 2008.
Due to delays in the due diligence process the closing did not occur as planned
on October 1, 2008, and the agreement has been extended indefinitely. CCI
expects to finalize the due diligence and close on the acquisition during the
second quarter of 2009. The proposed purchase agreement is contingent on CCI
conducting a proxy vote to increase the total authorized shares of common stock,
which occurred on January 30, 2009. On February 10, 2009 the CEO of ICM was
elected and appointed as CEO of CCI commensurate with the resignation of Jerald
Woods. Jerald Woods continued to serve as a Board of Director with CCI after his
resignation (See Note 11).





F-15
 Competitive
Companies, Inc
 Notes
to Financial Statements


On
March 4, 2009 the Company entered into a non-binding Letter of Intent with IBFA
Acquisition, LLC. (“IBFA”) concerning the acquisition of one hundred percent
(100%) of the outstanding capital stock, or ownership interest of IBFA, a
communications company organized under the laws of the State of Illinois. The
terms of the proposed agreement are yet to be determined, and may include a cash
down payment and a portion payable in common stock and/or an earn-out feature
limited to a twelve month period paid quarterly based on earnings
results.





Note
7 – Stockholders’ equity





Convertible Class A
Preferred Stock


In
consummation of the merger in Note 1, the Company repurchased 4,000,000 Class
“A” preferred stock for $40,000 during 2005. Therefore, there was no outstanding
Class “A” preferred stock at December 31, 2008 or 2007,
respectively.





Common
stock


On
various dates between December 10, 2008 and December 19, 2008, CCI received a
total of $99,014 in exchange for 1,980,280 shares of its $.001 par value common
stock from five different individual investors. As of December 31, 2008 the
shares had not yet been issued. Accordingly, the $99,014 received has been
presented as Subscriptions Payable at December 31, 2008.





On
December 8, 2008, CCI received $5,000 in exchange for 100,000 shares of its
$.001 par value common stock from an individual investor.





On
December 6, 2008, CCI received $10,000 in exchange for 200,000 shares of its
$.001 par value common stock from an individual investor.





On
December 5, 2008, CCI received $5,000 in exchange for 100,000 shares of its
$.001 par value common stock from an individual investor.





On
December 3, 2008, CCI received $5,000 in exchange for 200,000 shares of its
$.001 par value common stock from an individual investor. As of December 31,
2008 the shares had not yet been issued.  Accordingly, the $5,000
received has been presented as Subscriptions Payable at December 31,
2008.





On
November 18, 2008 the Company issued 40,000 shares of common stock to an
investor that had purchased the Company’s common stock on April 16, 2007, which
was previously recorded as a stock subscription payable in the amount of
$4,000.





On
October 1, 2008, the Company issued 1,000,000 unrestricted, S-8 shares under the
2008 Non-Qualified Consultants Stock Compensation Plan to a consultant for
consulting services rendered in the pursuit of obtaining a potential merger
candidate over the three month period ending December 31, 2008. The fair market
value of the shares was $30,000.





F-16
 Competitive
Companies, Inc
 Notes
to Financial Statements


On
September 10, 2008, CCI received $20,000 in exchange for 400,000 shares of its
$.001 par value common stock from an individual investor.





On
September 2, 2008, CCI received $5,000 in exchange for 100,000 shares of its
$.001 par value common stock from an individual investor.





On
August 14, 2008, CCI filed a form S-8 with the United States Securities and
Exchange Commission which authorizes the Company to issue a total of 7,730,580
unrestricted shares of the Company’s common stock, of which, 5,500,000 are to be
issued to consultants and 2,230,580 are to be issued as payment for professional
services rendered.





On
July 30, 2008, the Company issued 1,230,580 of these S-8 shares for legal
services rendered. The fair market value of the shares was $36,918.





On
July 30, 2008, the Company issued 1,000,000 of these S-8 shares to a consulting
firm for accounting services rendered. The fair market value of the shares was
$30,000.





On
July 30, 2008, the Company granted 3,000,000 of these S-8 shares to a consultant
for consulting services rendered in the pursuant of obtaining a potential merger
candidate. The fair market value of the shares was $90,000.





On
May 14, 2008, CCI received $6,500 in exchange for 130,000 shares of its $.001
par value common stock from an individual investor.





On
April 16, 2008, CCI received $5,000 in exchange for 50,000 shares of its $.001
par value common stock from the Company’s CEO.





On
April 1, 2008, CCI received $3,000 in exchange for 30,000 shares of its $.001
par value common stock from an individual investor.





During
2007 CCI issued 3,890,000 shares of its $.001 par value common stock for cash
totaling $403,000.  As of December 31, 2008 100,000 shares had not yet
been issued.  Accordingly, the $10,000 received has been presented as
Subscriptions Payable at December 31, 2008.





During
December of 2007 CCI issued 450,000 shares of its $.001 par value common stock
to Accuity Financial, Inc. for professional services valued at a price of $0.05
per share, totaling $22,500, the fair market value of the underlying
shares.





During
December of 2007 CCI issued 70,000 shares of its $.001 par value common stock to
Stoecklein Law Group for professional services valued at a price of $0.05 per
share, totaling $3,500, the fair market value of the underlying
shares.





F-17
 Competitive
Companies, Inc
 Notes
to Financial Statements


During
February of 2007 CCI issued 100,000 shares of its $.001 par value common stock
for consulting services valued at a price of $0.10 per share, totaling $10,000,
the fair market value of the underlying shares.





Note
8 – Common stock options





During
the year ended December 31, 2005, Company cancelled 3,435,000 options
outstanding at December 31, 2004 and adopted 2005 Stock Option Plan (the
“Plan”). The Plan authorizes the issuance of stock options and other awards to
acquire up to a maximum 10,000,000 shares of the Company’s common stock (less
the number of shares issuable upon exercise of options granted by the Company
under all other stock incentive plans on the date of any grant under the Plan).
The Plan provides for the grant of incentive stock options (within the meaning
of Section 422 of the Internal Revenue Code of 1986, as amended), options that
are not incentive stock options, stock appreciation rights and various other
stock-based grants.





On
December 15, 2005, the Company granted employees and directors options to
purchase 6,672,000 shares of common stock exercisable at $0.10 with a ten-year
life.  Because the Company stock was not trading at the grant date,
and the Company issued all shares at $.10 in 2005, which was equal to the
exercise price.  No further options were granted during 2008 and
2007.





Shares
      UnderlyingShares
      Underlying Options Outstanding
            
            Options
      ExercisableWeightedShares
            Average
            Weighted
            
            Shares
            
            WeightedUnderlying
            Remaining
            Average
            
            Underlying
            
            AverageRange
      of
            Options
            Contractual
            Exercise
            
            Options
            
            ExerciseExercise
      Prices
            Outstanding
            Life
            Price
            
            Exercisable
            
            Price$
            0.10
            
            6,672,000
            10
            $
            0.10
            
            
            6,672,000
            
            
            $
            0.10








The
following is a summary of activity of outstanding stock options under the 2005
Stock Option Plan:


WeightedAverageNumber
            
            ExerciseOf
      Shares
            
            PriceBalance,
      December 31, 2006
            
            
            6,672,000
            
            
            $
            0.10Options
      cancelled
            
            
            -
            
            
            
            -Options
      granted
            
            
            -
            
            
            
            -Options
      exercised
            
            
            -
            
            
            
            -Balance,
      December 31, 2007
            
            
            6,672,000
            
            
            $
            0.10Options
      cancelled
            
            
            -
            
            
            
            -Options
      granted
            
            
            -
            
            
            
            -Options
      exercised
            
            
            -
            
            
            
            -Balance,
      December 31, 2008
            
            
            6,672,000
            
            
            $
            0.10Exercisable,
      December 31, 2008
            
            
            6,672,000
            
            
            $
            0.10





F-18
 Competitive
Companies, Inc
 Notes
to Financial Statements


Note
9 – Income taxes





The
Company accounts for income taxes under Statement of Financial Accounting
Standards No. 109, “Accounting for Income Taxes” (“SFAS No. 109”), which
requires use of the liability method. SFAS No. 109 provides that deferred tax
assets and liabilities are recorded based on the differences between the tax
bases of assets and liabilities and their carrying amounts for financial
reporting purposes, referred to as temporary differences.





For
the years ended December 31, 2008 and 2007, the Company incurred net operating
losses and, accordingly, no provision for income taxes has been
recorded.  In addition, no benefit for income taxes has been recorded
due to the uncertainty of the realization of any tax assets. At December 31,
2008, the Company had approximately $4,555,000 of federal and state net
operating losses. The net operating loss carry forwards, if not utilized, will
begin to expire in 2025.





The
components of the Company’s deferred tax asset are as follows:





As
      of December 31,
            
            
            As
      of December 31,2008
            
            
            2007Deferred
      tax assets:Net
      operating loss carry forwards
            
            $
            1,594,250
            
            
            $
            950,000Total
      deferred tax assets
            
            
            1,594,250
            
            
            
            950,000Net
      deferred tax assets before valuation allowance
            
            
            1,594,250
            
            
            
            950,000Less:
      Valuation allowance
            
            
            (1,594,250
            )
            
            
            (950,000
            )Net
      deferred tax assets
            
            $
            -0-
            
            
            $
            -0-





Based
on the available objective evidence, including the Company’s history of its
loss, management believes it is more likely than not that the net deferred tax
assets will not be fully realizable. Accordingly, the Company provided for a
full valuation allowance against its net deferred tax assets at December 31,
2008 and 2007.





A
reconciliation between the amounts of income tax benefit determined by applying
the applicable U.S. and State statutory income tax rate to pre-tax loss is as
follows:





2008
            
            
            2007Federal
      and state statutory rate
            
            
            35
            %
            
            
            35
            %Change
      in valuation allowance on deferred tax assets
            
            
            (35
            %)
            
            
            (35
            %)-0-
            
            
            
            -0-





F-19
 Competitive
Companies, Inc
 Notes
to Financial Statements


Note
10 – Fair value of financial instruments





The
Company adopted SFAS 157 on January 1, 2008. SFAS 157 defines fair value as the
price that would be received to sell an asset or paid to transfer a liability in
an orderly transaction between market participants at the measurement date (an
exit price). The standard outlines a valuation framework and creates a fair
value hierarchy in order to increase the consistency and comparability of fair
value measurements and the related disclosures. Under GAAP, certain assets and
liabilities must be measured at fair value, and SFAS 157 details the disclosures
that are required for items measured at fair value.





The
Company has various financial instruments that must be measured under the new
fair value standard including: cash and debt. The Company currently does not
have non-financial assets or non-financial liabilities that are required to be
measured at fair value on a recurring basis, with the exception of intangible
assets. The Company’s financial assets and liabilities are measured using inputs
from the three levels of the fair value hierarchy. The three levels are as
follows:




Level
1 - Inputs are unadjusted quoted prices in active markets for identical assets
or liabilities that the Company has the ability to access at the measurement
date. The fair value of the Company’s cash is based on quoted prices and
therefore classified as Level 1.






Level
2 - Inputs include quoted prices for similar assets and liabilities in active
markets, quoted prices for identical or similar assets or liabilities in markets
that are not active, inputs other than quoted prices that are observable for the
asset or liability (e.g., interest rates, yield curves, etc.), and inputs that
are derived principally from or corroborated by observable market data by
correlation or other means (market corroborated inputs).






Level
3 - Unobservable inputs that reflect our assumptions about the assumptions that
market participants would use in pricing the asset or liability.




The
following table provides a summary of the fair values of assets and liabilities
under SFAS 157:
  Fair
      Value Measurements atDecember
      31, 2008CarryingValueDecember31,2008
              
              
              Level
      1
              
              
              Level
      2
              
              
              Level
      3Assets:Cash
              
              $
              23,340
              
              
              $
              23,340
              
              
              $
              -
              
              
              $
              -Liabilities:Current
      maturities of long term debt
              
              $
              24,070
              
              
              $
              -
              
              
              $
              -
              
              
              $
              24,070Long
      term debt
              
              
              8,476
              
              
              
              
              
              
              
              
              
              
              
              8,476Total
              
              $
              32,546
              
              
              $
              -
              
              
              $
              -
              
              
              $
              32,546
 
 F-20
 Competitive
Companies, Inc
 Notes
to Financial Statements
 As
the majority of the debts were issued late in 2008, the Company believes that
the market rate of interest as at December 31, 2008 was not materially different
to the rate of interest at which the debts were issued. Accordingly, the Company
believes that the fair value of the debt approximated their carrying value at
December 31, 2008





Note
11 – Subsequent Events





During
the three months ending March 31, 2009 the Company issued a total of 2,080,280
shares of common stock to six individual investors that had purchased the
Company’s common stock during the three month period ending, December 31, 2008,
which was previously recorded as stock subscriptions payable in the total amount
of $104,014.





During
the three months ending March 31, 2009, CCI received $55,958 in exchange for a
total of 1,142,000 shares of its $.001 par value common stock from a total of
five individual investors.





During
the three months ending March 31, 2009, CCI received $39,674 in exchange for a
total of 793,480 shares of its $.001 par value common stock from a total of five
individual investors. The shares have not been issued as of the filing of this
report.





On
March 4, 2009 the Company entered into a non-binding Letter of Intent with IBFA
Acquisition, LLC. (“IBFA”) concerning the acquisition of one hundred percent
(100%) of the outstanding capital stock, or ownership interest of IBFA, a
communications company organized under the laws of the State of Wisconsin. The
terms of the proposed agreement are yet to be determined, and may include a cash
down payment and a portion payable in common stock and/or an earn-out feature
limited to a twelve month period paid quarterly based on earnings
results.





On
February 10, 2009 the Board of Directors accepted the resignation of Jerald
Woods as CEO, and confirmed the appointments of Dr. Ray Powers as the
Registrant’s President and Mr. William Gray as the Registrant’s Chief Executive
Officer and Chief Financial Officer.





On
January 30, 2009, the shareholders of the Registrant voted to increase the
authorized common shares of the Registrant from 70,000,000 authorized shares of
common stock to 500,000,000 authorized shares of common
stock.  Additionally, the shareholders voted to increase the
authorized preferred shares of the Registrant from 10,000,000 authorized shares
of preferred stock to 100,000,000 authorized shares of preferred stock. As a
result of this vote, the Registrant filed an amendment to its Articles of
Incorporation to reflect this change.





On
January 30, 2009 the Company held a shareholder’s meeting whereby seven
directors were elected to the Company’s Board of Directors. The following list
is those directors elected at the meeting: Jerald Woods, David Hewitt, William
H. Gray, Ray Powers, Larry Griffin, Michael Benbow, and Tonni Lyn
Smith-Atkins.





F-21
 Competitive
Companies, Inc
 Notes
to Financial Statements


On
January 29, 2009 the Company entered into a non-binding Letter of Intent with
International Telecom, Inc. (“ITI”) concerning the acquisition of one hundred
percent (100%) of the outstanding capital stock, or ownership interest of ITI, a
communications company organized under the laws of the State of Alaska.
Subsequently management has decided to forego the acquisition of ITI and no
further actions will be pursued by CCI.





F-22