UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): May 25, 2004
VOIP, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Texas 0-28985 75-2785941
------------------------ -------------------- -------------------
(State of Incorporation) (Commission File No.) (IRS Employer
Identification No.)
12330 SW 53rd Street, Suite 712, Ft. Lauderdale, Florida 33330
--------------------------------------------------------------
(Address of principal executive offices, including zip code)
(954) 434-2000
----------------------------------------------------
(Registrant's telephone number, including area code)
Registrant filed a Form 8K on June 9, 2004, describing in Items 1 and 2
a material acquisition and resulting change of control. Pursuant to Item 7(a)(4)
of Form 8-K, the Management's Decision and Analysis or Plan of Operation,
financial statements of the acquired businesses and pro forma financial
statements are being filed by amendment hereby. This Amendment should be read in
conjunction with the Form 8-K filed on June 9, 2004.
Item 2. Management's Discussion and Analysis of Financial Conditions and Results
of Operations
The following discussion should be read in conjunction with and
qualified in its entirety by the financial statements and related notes included
elsewhere in this report. This section contains forward-looking statements that
involve risks and uncertainties. Our actual results could differ materially from
those we anticipate in these forward-looking statements.
OVERVIEW
VoIP, INC. ("VoIP" or the "Company") was incorporated in Texas in 1998
under the name "Millennia Tea Masters, Inc." In March 2000, VoIP became a
reporting company when a Form 10SB filed with the Securities and Exchange
Commission became effective. In April, 2004, the Company began trading on the
NASD Over-the-Counter Bulletin Board market after satisfying all requirements of
the OTCBB. The Company maintains a website at www.voipincorporated.com, and
intends to publish all SEC reports on the website.
On March 1, 2004, the Company announced that it had accepted an
unsolicited offer to issue a controlling block of common stock to an investor
wishing to contribute his business assets, intellectual property and sales
opportunities to a publicly-traded company. On February 27, 2004, the Company
issued 12,500,000 shares representing 87.8% of shares outstanding in exchange
for $12,500 with the agreement to contribute two companies to engage in a
specialty telecommunications business. eGlobalphone, Inc., a Florida
corporation, and VoIP Solutions, Inc., a Florida corporation, were contributed
to VoIP, Inc. effective April 15, 2004, pursuant to the terms of the Stock
Contribution Agreement dated May 25, 2004 and filed with the original Form 8-K
amended hereby. Both companies are development-stage start-up companies that
commenced operations in February 2004.
RESULTS OF OPERATION OF eGLOBALPHONE, INC.
Period from February 20, 2004 (date of inception) through March 31,
2004.
In its initial 40 days of operation, eGlobal had no revenues and concerned
itself primarily with organizing activities, including the following:
o Negotiated connectivity contracts for IP (internet protocol) transit
and future peering fabric cross connects at a large international IX
(Internet Exchange) site, based in Miami
o Installed server equipment at the IX, including core Cisco 7200
peering and transit routers, out-of-band and remote management
equipment, backup servers, web servers, testbed platforms, TDM (time
division multiplexing) interconnect system, voicemail platform,
billing and OSS systems
o Developed preliminary architecture and code for hardware and inventory
database
o Developed preliminary architecture and code for e.164 (phone number)
tracking system for scalability across international phone networks
o Developed in-house extensions to open-source platforms for evaluation
and integration in both customer and internal VOIP applications
o Reviewed, purchased, and began integration with third-party
least-cost-routing, billing, and call control platform which works in
conjunction with in-house tools and gateway systems
o Developed basic IT (information technology) infrastructure for
corporate support (website, trouble tracking system, etc.)
o Examined competitive landscape for product placement, marketing,
advertising and channel strategies
The company incurred $64,279 of general and administrative expense
during the period, consisting of salaries expenses, legal and professional
expenses, lease expenses, utilities expenses, office expenses and other
expenses.
LIQUIDITY
eGlobalphone obtained a $337,000 loan from VoIP, Inc, an affiliate,
which it used to purchase equipment ($224,096) and to advance $31,063 to VoIP
Solutions, Inc. for the inventory purchase. The company had cash reserves of
$75,438 at March 31, 2004. The company will depend upon financing from its
parent, VoIP, Inc. for future development.
PLAN OF OPERATIONS
The Company will market VoIP solutions to residential and business
consumers through its eGlobalphone, Inc. subsidiary. eGlobalphone uses any DSL,
cable modem, wireless or other broadband Internet connection anywhere in the
world to access its network for long-distance telephony. eGlobalphone provides a
two line MTA (telephone/PBX adapter) manufactured by iCable System Co. Ltd. Once
a call is delivered to eGlobalphone's network and equipment, high quality Tier
One carriers are used to terminate calls internationally.
eGlobalphone is believed to be the only VoIP (voice over internet
protocol) company offering 911 emergency access without using another party's
database. This proprietary system has been filed for patent protection as the
911-PSTN (public switch telephone network). It utilizes an automated switching
service to route the call to the user's local emergency service provider (911
call center) and will also "fail safe" in the event of a power outage or
Internet service interruption.
eGlobalphone markets its products through OEM (original equipment
manufacturer) resellers, principally via the Internet but also to a limited
number of retailers. We will emphasize sales in the global marketplace,
believing that the U.S. market is too saturated with competitors. We will seek
marketing partners in each country that is identified as a potential market, in
order to provide a local presence. Manuals, interfaces, voice prompts, and
operators will be tailored for the primary language of the nationality, and the
sales force will operate locally to provide "high-touch" comfort to these
localized markets.
eGlobalphone features in addition to unlimited long distance via the
Internet the following features: voicemail, caller ID, call waiting, call
transfer, caller ID blocking, call forwarding, three-way conference and
three-way calling. Low-priced directory information (411) services, conference
call capabilities, "follow-me" calling, and many more features are offered as
additional line items or per-call products which contribute to the income stream
for this product.
RESULTS OF OPERATION OF VOIP SOLUTIONS, INC.
Period from February 20, 2004 (date of inception) through March 31,
2004.
VoIP Solutions generated minimal revenue of $19,510 in its initial 40
days of operation and is still considered a development-stage company. The
company also incurred a minimal amount of expenses.
LIQUIDITY
VoIP Solutions obtained a non-interest bearing demand loan of $31,062
from eGlobalphone, an affiliate. The company will depend upon financing from its
parent, VoIP, Inc. for future development.
PLAN OF OPERATIONS
The Company's VoIP Solutions, Inc. subsidiary integrates software,
hardware, and project management services for the growing industry of Internet
Telephony Service Providers. Our experience in the IP networking and VoIP
technology arenas allow us to offer rapid project assessment and subsequent
deployment of a voice services infrastructure to a customer with an existing IP
network such as an ISP (Internet Service Provider), CLEC (Competitive Local
Exchange Company), PTT (Public Telephone and Telegraph or cable plant operator.)
Our solutions involve delivery of portions of a SIP-based infrastructure
(cost-effective media gateways, transcoding solutions, SIP proxies) or a full
turn-key system with components that are custom designed to work with each other
(billing system, invoice system, least-cost-routing, rate import/exports, etc.)
Our combined technology, expertise, resources within the telephony community,
and ability to provide right-priced solutions comprise a strong value
combination for our customers as they bring their existing base of Internet
users into a VoIP product line.
Our strategy is to be a worldwide leader in providing IP telephony,
customer premise equipment in addition to premium voice over the Internet
subscriber based telephony services and innovated wireless fidelity ("WiFi")
technology solutions for residential and enterprise customers.
With the new benefits of wireless networks, VoIP Solutions can leverage
the use of the eGlobalphone MTA product and knowledge. Services provided
include:
o Billing systems/Platform
o Customer Premise Equipment (CPE)
o Service and application design
o Network design
o Switching platforms
o Back Office/OSS systems
o Web site design and back office integration
o Telephone number management applications
o Auto CPE provisioning systems
o Wholesale call termination
o Installation and training
o Support agreements
o Consultancy
VoIP Solutions will maintain a stock of all iMax products for sale to
end-users, carriers and resellers. This will include MTA's, DSL VoIP modems,
ADSL VoIP modems and other products sources from third parties.
The Company has developed intellectual property and software for the
soft switch platform and associated applications developed for the eGlobalphone
service. This includes the source code for the switching servers and related
application servers. An agreement with Porta One provides access to software
source code and database schemas that permit custom application, layer
development and integration. Along with the billing and back office application,
VoIP Solutions can supply all of the components, services and customization to
fully equip a VoIP Telco.
As software development projects are completed by VoIP Solutions for
eGlobalphone, each module will be documented and effectively turned into a
"product" that can be sold to other carrier customers and new market entrants.
Ultimately, the VoIP Telco solution will consist of the following
modules:
o Soft switch with SIP (session initiation protocol) Proxy
(authentication and call control)
o Media gateways (to connect T1 and E1 lines and special
services)
o Billing (pre paid, post paid, WiFi Hotspot and call shop)
o Web Site Integration (sign up, payments, account management)
o Telephone number inventory management
o CPE (customer premises equipment) stock control and logistics
o CPE auto provisioning (remote programming and updates)
Together with wireless network and back office specialists from within
the group, VoIP Solutions personnel can also offer a full range of consulting
and integration services to the industry.
The company has identified that all working capital requirements for
the current annual period will be satisfied from the operation of the newly
acquired business and the sales of additional common shares through private
placements
Forward Looking Statements
Certain statements contained in this Report and other written material
and oral statements made from time to time by us do not relate strictly to
historical or current facts. As such, they are considered "forward-looking
statements" that provide current expectations or forecasts of future events.
Such statements are typically characterized by terminology such as "believe,"
anticipate," "should," "intend," "plan," "will," "expect," "estimate,"
"project," "strategy" and similar expressions. Our forward-looking statements
generally relate to the prospects for future sales of our products, the success
of our marketing activities, and the success of our strategic corporate
relationships. These statements are based upon assumptions and assessments made
by our management in light of its experience and its perception of historical
trends, current conditions, expected future developments and other factors our
management believes to be appropriate. These forward-looking statements are
subject to a number of risks and uncertainties, including the following: our
ability to achieve profitable operations and to maintain sufficient cash to
operate its business and meet its liquidity requirements; our ability to obtain
financing, if required, on terms acceptable to it, if at all; the success of our
research and development activities; competitive developments affecting our
current products; our ability to successfully attract strategic partners and to
market both new and existing products; exposure to lawsuits and regulatory
proceedings; our ability to protect our intellectual property; governmental laws
and regulations affecting operations; our ability to identify and complete
diversification opportunities; and the impact of acquisitions, divestitures,
restructurings, product withdrawals and other unusual items. Except as required
by applicable law, we undertake no obligation to update any forward-looking
statements, whether as a result of new information, future events or otherwise.
Item 7. Financial Statements and Exhibits
INDEX TO FINANCIAL STATEMENTS
eGLOBALPHONE, INC.
VoIP SOLUTIONS, INC.
PRO FORMA FINANCIAL STATEMENTS
Pro Forma balance sheet - March 31, 2004
Pro Forma Statement of Operations - Three months ended March 31, 2004
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: August 6, 2004 VOIP, INC.
(Registrant)
/s/ Steven Ivester
-------------------------------------
President and Chief Executive Officer
TSCHOPP, WHITCOMB & ORR, P.A.
2600 Maitland Center Parkway, Suite 330
Maitland, FL 32751
Independent Auditors' Report
----------------------------
Board of Directors and Stockholder
eGlobalphone, Inc.
We have audited the accompanying balance sheet of eGlobalphone, Inc. (a
development stage company) as of March 31, 2004 and the related statements of
operations, changes in capital deficit, and cash flows for the period from
January 26, 2004 (date of inception) through March 31, 2004. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides 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 eGlobalphone, Inc. (a
development stage company) as of March 31, 2004, and the results of its
operations and its cash flows for the period from January 26, 2004 (date of
inception) through March 31, 2004 in conformity with accounting principles
generally accepted in the United States of America.
/s/ Tschopp, Whitcomb & Orr, P.A.
June 4, 2004
Maitland, Florida
EGLOBALPHONE, INC.
(A Development Stage Company)
Balance Sheet
March 31, 2004
Assets
------
Current assets:
Cash $ 75,438
Due from affiliate (note 3) 31,063
Other current assets 12,980
---------
Total current assets 119,418
Property and equipment, net (note 4) 223,081
Other assets 2,480
---------
Total assets $ 345,042
=========
Liabilities and Capital Deficit
-------------------------------
Current assets:
Accounts payable $ 72,315
Due to affiliate (note 5) 337,000
---------
Total current liabilities 409,315
---------
Commitments (note 6)
Capital deficit (note 7):
Common stock - no par value
100,000,000 shares authorized
100,000 shares issued and outstanding --
Deficit accumulated during the development stage (64,273)
---------
Total capital deficit (64,273)
---------
Total liabilities and capital deficit $ 345,042
=========
See accompanying notes to financial statements.
EGLOBALPHONE, INC.
(A Development Stage Company)
Statement of Operations
Period from January 26, 2004 (date of inception)
through March 31, 2004
Revenues $ --
Cost of sales --
---------
Gross profits --
---------
General and administrative expenses 64,273
---------
Loss before income taxes (64,273)
Provision for income taxes --
---------
Net loss $ (64,273)
=========
Loss per weighted-average share of common
stock outstanding, basic and fully diluted $ (0.64)
=========
Weighted-averted number of common shares
outstanding $ 100,000
=========
See accompanying notes to financial statements.
EGLOBALPHONE, INC.
(A Development Stage Company)
Statement of Changes in Capital Deficit
Period from January 26, 2004 (date of inception)
through March 31, 2004
Common Stock
------------------------- Deficit
Accumulated
During The
Number of Development
Shares Amount Stage Total
----------- ----------- ----------- -----------
Shares issued to founder
at inception 100,000 $ -- -- -_
Net loss -- $ -- (64,273) (64,273)
----------- ----------- ----------- -----------
Balances at March 31, 2004 100,000 $ -- (64,273) (64,273)
=========== =========== =========== ===========
See accompanying notes to financial statements.
EGLOBALPHONE, INC.
(A Development Stage Company)
Statement of Cash Flow
Period from January 26, 2004 (date of inception) through March 31, 2004
Cash flows from operating activities $ (64,273)
Net loss
Adjustments to reconcile net loss to net cash
used in operating activities
Depreciation 1,015
Changes in assets and liabilities:
Due from affiliate (31,063)
Other current assets (12,980)
Other assets (2,480)
Accounts payable 72,315
---------
Net cash used in operating activities (37,466)
---------
Cash flows from investing activities:
Purchase of property and equipment (224,096)
---------
Net cash used in investing activities (224,096)
---------
Cash flows from financing activities:
Due to affiliate 337,000
---------
Net cash provided by financing activities 337,000
---------
Increase in cash 75,438
Cash at beginning of period --
---------
Cash at end of period $ 75,438
=========
See accompanying notes to financial statements.
EGLOBALPHONE, INC.
(A Development Stage Company)
Notes to Financial Statements
March 31, 2004
(1) Organization and Description of Business
----------------------------------------
eGlobalphone, Inc. (the "Company") was incorporated on January 26, 2004
under the laws of the State of Florida. The Company was formed to
market voice over internet protocol solutions to residential and
business consumers.
The Company has had minimal operations since inception. Due to the lack
of sustaining operations, the Company generated no operating revenues
and has incurred a net loss of approximately $60,000. Accordingly, the
Company is still considered to be in the development stage.
(2) Summary of Significant Accounting Policies
------------------------------------------
(a) Cash and Cash Equivalents
-------------------------
For purposes of reporting cash flows, the Company considers
all cash on hand, in banks, including accounts in book
overdraft positions, certificates of deposit and other highly
liquid debt instruments with a maturity of three months or
less at the date of purchase to be cash and cash equivalents.
Cash overdraft positions may occur from time to time due to
the timing of making bank deposits and releasing checks, in
accordance with the Company's cash management policies.
(b) Property and Equipment
----------------------
Property and equipment are stated at cost. Depreciation is
provided over the estimated useful lives of the assets, three
to five years, using the straight-line method for financial
reporting purposes and accelerated methods for income tax
purposes.
(c) Revenue Recognition
-------------------
The Company sells it products to the general public through
direct sales. Accordingly, the Company recognizes revenue at
the point of shipment to its customers. Sales allowances are
recorded concurrent with the related sale of product. Sales
returns are recorded at the time and point that products are
received from a dissatisfied consumer.
(d) Income Taxes
------------
The Company uses the asset and liability method of accounting
for income taxes. As of March 31, 2004, the deferred tax asset
and deferred liability accounts, as recorded when material to
the financial statements, are entirely the result of temporary
differences. Temporary differences represent differences in
the recognition of assets and liabilities for tax and
financial reporting purposes.
As of March 31, 2004, deferred tax assets are related solely
to the Company's net operating loss carryforward of
approximately $60,000 which is fully reserved. If these
carryforwards are not utilized, they will begin to expire in
2024.
(e) Earnings Per Share
------------------
Basic earnings (loss) per share is computed by dividing the
net income (loss) by the weighted-average number of shares of
common stock and common stock equivalents (primarily
outstanding options and warrants). Common stock equivalents
represent the dilutive effect of the assumed exercise of the
outstanding stock options and warrants, using the treasury
stock method. The calculation of fully diluted earnings (loss)
per share assumes the dilutive effect of the exercise of
outstanding options and warrants at either the beginning of
the respective period presented or the date of issuance,
whichever is later. As of March 31, 2004, the Company had no
warrants or options outstanding.
(f) Estimates
---------
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those
estimates.
(g) Financial Instruments Fair Value, Concentration of Business
--------------------------------------------------------------
and Credit Risks
----------------
The carrying amount reported in the balance sheet for cash,
due from affiliate, accounts payable and due to affiliate
approximates fair value because of the immediate or short-term
maturity of these financial statements. Financial instruments,
which potentially subject the Company to concentrations of
credit risk, consist principally of amounts due from affiliate
of $31,063 and amounts due to affiliate of $337,000 as of
March 31, 2004.
(3) Due from Affiliate
------------------
As of March 31, 2004, the Company has made certain advances to an
affiliated entity amounting to $31,063. These advances are unsecured,
due upon demand and non-interest bearing.
(4) Property and Equipment
----------------------
As of March 31, 2004, property and equipment consist of the following:
Office Equipment $215,836
Furniture and fixtures 6,798
Leasehold improvements 1,462
--------
224,096
Less accumulated depreciation 1,015
--------
$223,081
(5) Due to Affiliate
----------------
As of March 31, 2004, the Company has an amount due to an affiliated
entity totaling $337,000. This obligation is unsecured, due upon demand
and non-interest bearing.
(6) Commitments
-----------
The Company is obligated under non-cancelable operating leases for its
office facilities and an apartment used by its employees. Future
minimum lease payments under the Company's non-cancelable operating
lease as of March 31, 2004 are as follows:
March 31, 2004, property and equipment consist of the following:
Year ending March 31,
2005 $47,446
2006 36,759
2007 9,279
Total rent expense for the period ended March 31, 2004 was $1,569.
(7) Subsequent Event
----------------
Effective April 15, 2004, the Company became a wholly-owned subsidiary
of VoIP, Inc. ("VoIP") when the Company's stockholder contributed all
of the outstanding shares of the Company's common stock to VoIP
pursuant to the terms of a stock contribution agreement entered into on
May 25, 2004.
TSCHOPP, WHITCOMB & ORR, P.A.
2600 Maitland Center Parkway, Suite 330
Maitland, FL 32751
Independent Auditors' Report
----------------------------
Board of Directors and Stockholder
VoIP Solutions, Inc.
We have audited the accompanying balance sheet of VoIP Solutions, Inc. (a
development stage company) as of March 31, 2004 and the related statements of
operations, changes in stockholder's equity, and cash flows for the period from
February 20, 2004 (date of inception) through March 31, 2004. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides 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 VoIP Solutions, Inc. (a
development stage company) as of March 31, 2004, and the results of its
operations and its cash flows for the period from February 20, 2004 (date of
inception) through March 31, 2004 in conformity with accounting principles
generally accepted in the United States of America.
/s/ Tschopp, Whitcomb & Orr, P.A.
June 4, 2004
Maitland, Florida
VOIP SOLUTIONS, INC.
(A Development Stage Company)
Balance Sheet
March 31, 2004
Assets
------
Current assets:
Cash $ --
Accounts receivable 19,510
Inventory 14,469
Other current assets 3,000
--------
Total current assets $ 36,979
========
Liabilities and Stockholder's Equity
------------------------------------
Current liabilities:
Due to affiliate (note 3) $ 31,062
Due to affiliate (note 5) 930
--------
Total current liabilities 31,992
--------
Stockholder's equity (note 4):
Common stock - no par value
100,000,000 shares authorized
100,000 shares issued and outstanding --
Retained earnings accumulated during the
development stage 4,987
--------
Total stockholder's equity 4,987
--------
Total liabilities and stockholder's equity $ 36,979
========
See accompanying notes to financial statements.
VOIP SOLUTIONS, INC.
(A Development Stage Company)
Statement of Operations
Period from February 20, 2004 (date of inception)
through March 31, 2004
Revenues $ 19,510
Cost of sales 12,031
--------
Gross profit 7,479
--------
General and administrative expenses 1,562
--------
Income before income taxes 5,917
Provision for income taxes 930
--------
Net income $ 4,987
========
Earnings per weighted-average share of common stock outstanding,
basic and fully diluted $ 0.50
========
Weighted-average number of common shares outstanding $100,000
========
See accompanying notes to financial statements.
VOIP SOLUTIONS, INC.
(A Development Stage Company)
Statement of Changes in Stockholder's Equity
Period from February 20, 2004 (date of inception)
through March 31, 2004
Common Stock
------------------------- Deficit
Accumulated
During The
Number of Development
Shares Amount Stage Total
----------- ----------- ----------- -----------
Shares issued to founder
at inception 100,000 $ -- -- --
Net income -- $ -- 4,987 4,987
----------- ----------- ----------- -----------
Balances at March 31, 2004 100,000 $ -- (64,273) 4,987
=========== =========== =========== ===========
See accompanying notes to financial statements.
VOIP SOLUTIONS, INC.
(A Development Stage Company)
Statement of Cash Flows
Period from February 20, 2004 (date of inception) through March 31, 2004
Cash flows from operating activities: $ 4,987
Net income
Adjustments to reconcile net income to net cash
provided by operating activities
Changes in assets and liabilities:
Accounts receivable (19,510)
Inventory (14,469)
Other current assets (3,000)
Due to affiliate 31,062
Income taxes payable 930
--------
Net cash provided by operating activities --
Cash at beginning of period --
--------
Cash at end of period $ --
--------
See accompanying notes to financial statements.
VOIP SOLUTIONS, INC.
(A Development Stage company)
Notes to Financial Statements
March 31, 2004
(1) Organization and Description of Business
----------------------------------------
VoIP Solutions, Inc. (the "Company") was incorporated on February 20,
2004 under the laws of the State of Florida. The Company was formed to
engage principally in integrating software, hardware and project
management services for the internet telephony services industry.
The Company has had minimal operations since inception. Due to the
nature of operations, the Company has not generated significant
operating revenues and income. Accordingly, the Company is still
considered to be in the development stage.
(2) Summary of Significant Accounting Policies
------------------------------------------
(a) Cash and Cash Equivalents
-------------------------
For purposes of reporting cash flows, the Company considers
all cash on hand, in banks, including accounts in book
overdraft positions, certificates of deposit and other highly
liquid debt instruments with a maturity of three months or
less at the date of purchase to be cash and cash equivalents.
Cash overdraft positions may occur from time to time due to
the timing of making bank deposits and releasing checks, in
accordance with the Company's cash management policies.
(b) Accounts Receivable
-------------------
Accounts receivable are stated at the amount management
expects to collect from outstanding balances. Management
provides for probable uncollectible amounts using the reserve
method based on its assessment of the current status of the
individual receivables and after using reasonable collection
efforts. As of March 31, 2004, no reserve was recorded for
uncollectible amounts.
(c) Inventory
---------
Inventory consists of finished goods and is valued at the
lower of cost or market using the first-in, first-out method.
(d) Revenue Recognition
-------------------
The Company sells it products to the general public through
direct sales. Accordingly, the Company recognizes revenue at
the point of shipment to its customers. Sales allowances are
recorded concurrent with the related sale of product. Sales
returns are recorded at the time and point that products are
received back from a dissatisfied consumer.
(e) Income Taxes
------------
The Company uses the asset and liability method of accounting
for income taxes. Deferred tax asset and liability accounts
are the result of temporary differences. Temporary differences
represent differences in the recognition of assets and
liabilities for tax and financial reporting purposes. As of
March 31, 2004, there were no deferred tax assets or
liabilities.
(f) Earnings Per Share
------------------
Basic earnings per share is computed by dividing the net
income by the weighted-average number of shares of common
stock and common stock equivalents (primarily outstanding
options and warrants). Common stock equivalents represent the
dilutive effect of the assumed exercise of the outstanding
stock options and warrants, using the treasury stock method.
The calculation of fully diluted earnings per share assumes
the dilutive effect of the exercise of outstanding options and
warrants at either the beginning of the respective period
presented or the date of issuance, whichever is later. As of
March 31, 2004, the Company had no warrants or options
outstanding.
(g) Estimates
---------
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those
estimates.
(h) Financial Instruments Fair Value, Concentration of Business
--------------------------------------------------------------
and Credit Risk
---------------
The carrying amount reported in the balance sheet for cash,
accounts receivable, and due to affiliate approximates fair
value because of the immediate or short-term maturity of these
financial statements. Financial statements, which potentially
subject the Company to concentrations of credit risk, consist
principally of accounts receivable which amount to
approximately $20,000 as of March 31, 2004. The Company
performs periodic credit evaluations of its trade customers
and generally does not require collateral.
(3) Due to Affiliate
----------------
As of March 31, 2004, the Company has a net payable to an affiliated
entity amounting to $31,062. This obligation is unsecured, due upon
demand and non-interest bearing.
(4) Subsequent Event
----------------
Effective April 15, 2004, the Company became a wholly-owned subsidiary
of VoIP, Inc. ("VoIP") when the Company's stockholder contributed all
of the outstanding shares of the Company's common stock to VoIP
pursuant to the terms of a stock contribution agreement entered into on
May 25, 2004.
PRO FORMA FINANCIAL INFORMATION
Unaudited Pro Forma Financial Statements
The following unaudited pro forma financial statements give effect to the
acquisition by VoIP , Inc. of eGlobalPhone, Inc. and VoIP Solutions, Inc., two
Florida-based subsidiaries , in a transaction to be accounted for using the
purchase method of accounting. The unaudited pro forma balance sheet is based on
the historical balance sheets of VoIP, Inc., eGlobalPhone, Inc and VoIP
Solutions, Inc. The unaudited pro forma statements of operations are based on
the historical statement of operations of VoIP, Inc., eGlobalPhone,Inc. and VoIP
Solutions, Inc. and combine the results of operations of VoIP, Inc,
eGlobalPhone, Inc. and VoIP Solutions, Inc. for the three months period ended
March 31, 2004 as if the acquisition occurred on April 15, 2004.
The unaudited pro forma information is presented for illustrative purposes only.
VoIP,Inc. will account for the acquisition of eGlobalPhone, Inc and VoIP
Solutions, Inc. using the purchase method of accounting.
VoIP, Inc.
Unaudited Pro Forma Consolidated Balance Sheet
March 31, 2004
Assets
------
VoIP Proforma
VoIP, Inc eGlobalphone Solutions Adjustment Proforma
---------------------------------------------------------------------
Current assets:
Cash $ -- 75,438 -- -- 75,438
Accounts receivable -- -- 19,510 -- 19,510
Due from affiliate (2) -- 31,063 -- (31,063) --
Inventory 251,767 -- 14,469 -- 266,236
Other current assets 8,175 12,980 3,000 -- 24,155
---------------------------------------------------------------------
Total current assets 259,942 119,481 36,979 (31,063) 385,339
Property and equipment, net -- 223,081 -- -- 223,081
Due from eGlobalPhone, Inc (3) 272,727 -- -- (272,727) --
Investment in Voip Solutions, Inc.(4) 4,987 -- -- (4,987) --
Other assets -- 2,480 -- -- 2,480
---------------------------------------------------------------------
Total assets $ 537,656 345,042 36,979 (308,777) 610,900
=====================================================================
Liabilities and Stockholder's Equity
------------------------------------
Current liabilities:
Accounts payable $ 10,308 72,315 -- -- 82,623
Income taxes payable -- -- 929 -- 929
Due to affiliates 151,166 -- 31,063 (31,063) 151,166
---------------------------------------------------------------------
Total current liabilities 161,474 72,315 31,992 (31,063) 234,718
---------------------------------------------------------------------
Stockholders' equity
Common stock - $.001 no par value
100,000,000 shares authorized
1,730,939 shares issued and outstanding -- -- -- -- --
Common stock - $.001 par value
14,230,939 shares issued and outstand1g 14,231 -- -- -- 14,231
Additional paid-in capital 1,008,922 272,727 4,987 (277,714) 1,008,922
Deficit accumulated during the development stage (646,971) -- -- -- (646,971)
---------------------------------------------------------------------
Total Stockholder's Equity 376,182 272,727 4,987 (277,714) 376,182
---------------------------------------------------------------------
Total Liabilities and Stockholder's Equity $ 537,656 345,042 36,979 (308,777) 610,900
=====================================================================
VoIP, Inc.
Unaudited Pro Forma Consolidated Statement of Operations
Three months eneded March 31, 2004
Revenues $ -- -- 19,510 -- 19,510
Cost of sales -- -- 12,031 -- 12,031
----------- ----------- ----------- ----------- -----------
Gross profit -- -- 7,479 -- 7,479
General and administrative expenses 22,324 64,273 1,562 -- 88,159
----------- ----------- ----------- ----------- -----------
(Loss)/Profit before income taxex (22,324) (64,273) 5,917 -- (80,680)
Provision for income taxes (5) -- -- 930 -- 930
----------- ----------- ----------- ----------- -----------
Net loss $ (22,324) (64,273) 4,987 -- (81,610)
----------- ----------- ----------- ----------- -----------
Loss per weighted-average share of common
stock outstanding, basic and fully diluted $ (0.01) -- -- -- $ (0.02)
Weighted-average number of common shares
outstanding 3,814,272 -- -- -- 3,814,272
Footnotes
1) Historical Financial Results for VoIp, Inc.
2) Adjustment to eliminate advances to affiliated entity.
3) Adjustment to eliminate intercompanies account.
4) Represents the elimination of the investment on VoIP Solution Inc.
5) Represents estimate of taxes for VoIp Solutions, Inc.