Replies to post #4465 on Competitive Companies Inc. (fka CCOP)

[Cassandra]

CCOP, based upon its 10-K, seems to have decided that the value of the patents purchased from MediaG3 was only $418.00.

The total value consideration for the patents ended up being $23,298 minus the $22,880 impairmemt of assets reported.

After receipt of the valuation report, the stock purchase agreement (“SPA”) provided for a cash payment from CCOP to MDGC of $18,900 plus a warrant given to MDGC to purchase 1,820,110 shares of CCOP stock exercisable for 2 years from the report date at an exercise price of $0.001 per share. The warrant was valued at $4,398 making the total consideration to MediaG3 worth $23,298.

The Company recognized $418 of amortization expense on the combined value of cash and warrants, of $23,298 during the year ended December 31, 2011. The remaining $22,880 was determined to be impaired due to uncertainties in the realization of a future economic benefit from the patents, and was expensed on December 31, 2011. The fair market value of the warrants to purchase 1,820,110 shares at an exercise price of $0.001 was $4,398 as of December 31, 2011.

On November 8, 2011, the Company entered into a stock purchase agreement (“SPA”) with MediaG3, Inc. (“MediaG3”) and its wholly owned subsidiary, Wytec, Incorporated (“Wytec”) (collectively, the “Seller”), pursuant to which CCI agreed to purchase 100% of the outstanding shares of Wytec International, Inc.’s (“Wytec International”) common stock from the Seller in consideration for (1) the issuance of a warrant to MediaG3 to purchase a number of shares of CCI’s common stock equal to a maximum of 45% of CCI’s total issued and outstanding shares of common stock on a fully diluted basis at an exercise price of $0.001 per share, exercisable on a cashless basis, subject to possible downward adjustment (the “Seller Warrant”), and (2) up to $1,000,000 of cash by an investment by CCI into MediaG3 of up to $1,000,000 for shares of the common stock of Media3G in a private placement. The number of shares of CCI common stock underlying the Seller Warrant was determined to be in the amount of 1,820,110 shares on April 9, 2012 (the “Report Date”), based on a market appraisal (the “Valuation Report”) of the intellectual property owned by Wytec (the “Intellectual Property”). The Company has several convertible notes with embedded derivatives which cause the equity environment to be tainted and all convertible notes and warrants are included in the value of the derivative. As such, the warrant payment provided within the asset purchase agreement was included in the determination of our embedded derivative valuation.


Cash component of purchase price

The cash portion of the acquisition was valued at $18,900 based on the Buyer’s Investment Commitment Amount using the fair value of the patents as obtained by a qualified independent valuation specialist. As the fair value of the patents was determined to be less than $10 million, the number of MediaG3 Shares (“MDGC”) which the Company was obligated to purchase was determined by dividing $1 million by 90%of the average closing last sale price of Mediag3, Inc.’s common stock on the five trading days immediately prior to the valuation specialist’s report date, which resulted in a purchase price of $0.00058 per share and 32,586,207 shares of MDGC common stock, which totaled $18,900. The shares have not yet been delivered and there can be no assurance that they will, as a result, the fair value of any common stock receivable from Mediag3’s common stock was disregarded.


Warrant component of purchase price

The number of shares of the Company’s common stock underlying the warrants was determined on the valuation report date based on 45% of the total number of issued and outstanding shares of CCI’s common stock on the valuation report date, subject to certain limitations which adjusted the amount of warrant shares downward on a pro rata basis to be equal to 0.8505% of the Company’s outstanding shares, or 1,820,110 shares, exercisable for 2 years from the report date at an exercise price of $0.001 per share. The fair value of the warrants was determined to be $4,398 using a Lattice model pursuant to embedded derivative valuations.

The fair market value of the warrants to purchase 1,820,110 shares at an exercise price of $0.001 was $4,398 as of December 31, 2011.
Pursuant to the terms of the agreement, the cash portion of the acquisition was valued at $18,900, resulting in a combined purchase price of $23,298. The Company recognized $418 of amortization expense on the combined value of cash and warrants, of $23,298 during the year ended December 31, 2011. The remaining $22,880 was determined to be impaired due to uncertainties in the realization of a future economic benefit from the patents, and was expensed on December 31, 2011. This acquisition established Wytec International, Inc. as a wholly-owned subsidiary of Competitive Companies, Inc. and was accounted for as an asset purchase, given that Wytec’s sole assets consisted of the patent agreements and no other operations had been conducted within Wytec International, Inc. prior to the acquisition. No goodwill was recognized in accordance with accounting for the purchase of an asset.

The Company recognized $418 of amortization expense on the combined value of cash and warrants, of $23,298 during the year ended December 31, 2011. The remaining $22,880 was determined to be impaired due to uncertainties in the realization of a future economic benefit from the patents, and was expensed on December 31, 2011.


As part of the SPA, Wytec agreed to provide Media3G with a royalty free worldwide non-exclusive, non-transferrable, non-assignable, non-sublicensable license to use its patents in perpetuity in consideration for Media3G assisting Wytec with managing past, present, and future research and development of its patents; provided, all patent enhancements, improvements, and derivatives existing on the closing date of the SPA and developed in the future will be owned by Wytec and the Seller agreed to take any and all action necessary to assign such existing and future enhancements, improvements, and derivatives to Wytec.