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): June 28, 2004
VOIP, INC.
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(Exact name of registrant as specified in its charter)
Texas 0-28985 75-2785941
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(State of Incorporation) (Commission File No.) (IRS Employer
Identification No.)
12330 SW 53rd Street, Suite 712, Ft. Lauderdale, Florida 33330
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(Address of principal execute offices, including zip code)
(954) 434-2000
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(Registrant's telephone number, including area code)
Registrant filed a Form 8K on July 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 financial statements are
being filed by amendment hereby. This Amendment should be read in conjunction
with the Form 8-K filed on July 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 June 28, 2004, VoIP. Inc. closed the acquisition of VCG
Technologies, Inc. d/b/a DTNet Technologies, Inc., a Florida corporation. The
acquisition took the form of an exchange of 2,500,000 shares of VoIP restricted
common stock in exchange for all issues and outstanding shares of DTNet common
stock, which was owned by Mr. Marc Moore, chairman of DTNet and 13 other
shareholder/employees. Mr. Moore will become the second largest shareholder of
VoIP. The purchase price was determined by means of arms-length negotiations
between unrelated parties. DTNet provides customer premise equipment to cable
and DSL Internet providers throughout North America. DTNet sales were
approximately $4.7 million in 2003.
RESULTS OF OPERATION OF DTNET TECHNOLOGIES, INC.
The company was formed to engage principally in the distribution and
sale Of network interface products primarily to companies providing internet
related application services.
For the year ended December 31, 2003 DTNet had Revenues amounting to
$4,779,124 and a gross profit of $984,132.
The General and administrative expenses for the year ended December 31,
2003 were $965,080. Major items are Payroll $560K , Freights and customs $124K,
Commissions $66K and insurance $49K.
The company's income from the operations on that year was $19,052.
PLAN OF OPERATIONS
DTNet Technologies is a primary supplier of cable modems, DSL/ADSL modems and
other customer premise equipment for cable and DSL providers. Working closely
with Taiwanese and Chinese partners, the Company is able to offer excellent
equipment at very competitive prices to providers throughout the United States
and Canada. Our clients include many of the top ten largest Multimedia Service
Operators (MSOs) as well as regional and local providers. Our customer support
specialists are in daily contact with industry members, providing customer
service and staying abreast of industry trends.
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 9.01. Financial Statements and Exhibits
INDEX TO FINANCIAL STATEMENTS
DTNet Technologies, Inc.
VCG TECHNOLOGIES, INC.
d/b/a DTNet Technologies, Inc.
Financial Statements
December 31, 2003
(With Independent Auditors' Report Thereon)
VCG TECHNOLOGIES, INC.
d/b/a DTNet Technologies, Inc.
Table of Contents
Independent Auditors' Report...................................................1
Financial Statements:
Balance Sheet..............................................................2
Statements of Operations...................................................3
Statements of Changes in Stockholders' Deficit.............................4
Statements of Cash Flows...................................................5
Notes to Financial Statements..................................................6
TSCHOPP, WHITCOMB & ORR, P.A.
2600 Maitland Center Parkway, Suite 330
Maitland, FL 32751
Independent Auditors' Report
Board of Directors and Stockholder
VCG Technologies, Inc.
d/b/a DTNet Technologies, Inc.
We have audited the accompanying balance sheet of VCG Technologies, Inc., d/b/a
DTNet Technologies, Inc. as of December 31, 2003 and the related statements of
operations, changes in stockholders' deficit and cash flows for the years ended
December 31, 2003 and 2002. 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 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 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 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 VCG Technologies, Inc., d/b/a
DTNet Technologies, Inc. as of December 31, 2003, and the results of its
operations and its cash flows for the years ended December 31, 2003 and 2002 in
conformity with accounting principles generally accepted in the United States of
America.
/s/ Tschopp, Whitcomb & Orr, P.A.
July 15, 2004
Maitland, Florida
1
VCG TECHNOLOGIES, INC.
d/b/a DTNet Technologies, Inc.
Balance Sheet
December 31, 2003
Assets
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Current assets:
Cash $ 63,188
Accounts receivable, less allowance for doubtful
accounts of $27,000 (notes 6 and 7) 534,812
Due from affiliates (note 3) 338,788
Due from stockholders (note 3) 12,500
Inventory (notes 4, 6 and 7) 110,827
Prepaid expenses and other current assets 27,028
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Total current assets 1,087,143
Property and equipment (notes 5, 6 and 7) 44,594
Other assets, net 37,462
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Total assets $ 1,169,199
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Liabilities and Stockholders' Deficit
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Current liabilities:
Line of credit (note 7) $ 338,200
Accounts payable and accrued expenses 808,685
Due to stockholders (note 3) 55,379
Current installments of long-term debt (note 6) 67,386
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Total current liabilities 1,269,650
Long term debt, less current installments (note 6) 85,180
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Total liabilities 1,354,830
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Stockholders' deficit (note 8):
Common stock - no par value
8,000,000 shares authorized
3,500,000 shares issued and outstanding 317,556
Accumulated deficit (503,187)
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Total stockholders' deficit (185,631)
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Total liabilities and stockholders' deficit $ 1,169,199
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See accompanying notes to financial statements.
2
VCG TECHNOLOGIES, INC.
d/b/a DTNet Technologies, Inc.
Statements of Operations
Years ended December 31, 2003 and 2002
2003 2002
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Revenues $ 4,779,124 3,893,043
Cost of sales 3,794,992 3,043,898
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Gross profit 984,132 849,145
General and administrative expenses 965,080 955,061
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Income (loss) from operations 19,052 (105,916)
Other income (expense):
Interest expense (37,405) (22,520)
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Net loss $ (18,353) (128,436)
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Earnings per weighted-average share of common
stock outstanding, basic and fully diluted $ (0.01) (0.09)
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Weighted-average number of common shares
outstanding 3,500,000 1,380,854
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See accompanying notes to financial statements.
3
VCG TECHNOLOGIES, INC.
d/b/a DTNet Technologies, Inc.
Statements of Changes in Stockholders' Deficit
Years ended December 31, 2003 and 2002
Common Stock
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Number of Accumulated
Shares Amount Deficit Total
----------- ----------- ----------- -----------
Balances at December 31, 2001 1,353,333 $ 140,842 (356,398) (215,556)
Issuance of common stock 2,146,667 176,714 -- 176,714
Net loss -- -- (128,436) (128,436)
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Balances at December 31, 2002 3,500,000 317,556 (484,834) (167,278)
Net loss -- -- (18,353) (18,353)
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Balances at December 31, 2003 3,500,000 $ 317,556 (503,187) (185,631)
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See accompanying notes to financial statements.
4
VCG TECHNOLOGIES, INC.
d/b/a DTNet Technologies, Inc.
Statements of Cash Flows
Years ended December 31, 2003 and 2002
2003 2002
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Cash flows from operating activities:
Net loss $ (18,353) $(128,436)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 40,173 89,142
Common stock issued for compensation and services -- 77,930
Changes in assets and liabilities:
Accounts receivable (170,320) (193,101)
Due from affiliates (205,424) (113,076)
Due from stockholders
1,667 (14,167)
Inventory 167,660 (175,080)
Prepaid expenses (23,369) (3,659)
Accounts payable and accrued expenses 274,336 159,659
Due to stockholders 51,446 (11,697)
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Net cash provided by (used in) operating activities 117,816 (312,485)
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Cash flows from investing activities:
Purchase of property and equipment (9,335) (31,310)
Decrease (increase) in other assets 1,401 (277)
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Net cash used in investing activities (7,934) (31,587)
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Cash flows from financing activities:
Net proceeds (payments) on line of credit (11,800) 151,225
Proceeds from long-term debt 25,000 200,000
Payments of principal on long-term debt (62,480) (9,954)
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Net cash provided by (used in) financing activities (49,280) 341,271
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Increase (decrease) in cash 60,602 (2,801)
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Cash at beginning of period 2,586 5,387
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Cash at end of period $ 63,188 $ 2,586
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Supplemental disclosures of cash flow information:
Cash paid for interest $ 37,405 22,520
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Common stock issued for loan costs $ -- 98,784
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See accompanying notes to financial statements.
5
VCG TECHNOLOGIES, INC.
d/b/a DTNet Technologies, Inc.
Notes to Financial Statements
December 31, 2003
(1) Organization and Description of Business
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VCG Technologies, Inc. (the "Company") was incorporated in 1999 under
the laws of the State of Florida. The Company was formed to engage
principally in the distribution and sale of network interface products
primarily to companies providing internet related application services.
(2) Summary of Significant Accounting Policies
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(a) Cash and Cash Equivalents
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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
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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 December 31, 2003, the balance of the reserve
recorded for uncollectible amounts amounted to approximately
$27,000.
(c) Inventory
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Inventory consists substantially of finished products and is
valued at the lower of cost or market using the first-in,
first-out method.
(Continued)
6
VCG TECHNOLOGIES, INC.
d/b/a DTNet Technologies, Inc.
Notes to Financial Statements
(2) Summary of Significant Accounting Policies - (Continued)
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(d) Property and Equipment
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Property and equipment included in the accompanying balance
sheet is recorded at cost. Depreciation is provided using the
straight-line method over the estimated useful lives of the
related assets which range from 5-7 years.
(e) 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 the consumer.
(f) Income Taxes
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The Company has elected to be taxed under the Subchapter S
provisions of the Internal Revenue Code. These provisions
provide that the taxable income of the Company be included in
the income tax returns of the respective stockholders.
Accordingly, no provision for income taxes has been recorded
in the accompanying financial statements.
(g) Earnings Per Share
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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
December 31, 2003 and 2002, the Company had no warrants or
options outstanding.
(h) 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.
(Continued)
7
VCG TECHNOLOGIES, INC.
d/b/a DTNet Technologies, Inc.
Notes to Financial Statements
(2) Summary of Significant Accounting Policies - (Continued)
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(i) Financial Instruments Fair Value, Concentration of Business
and Credit Risk
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The carrying amount reported in the balance sheet for cash,
accounts receivable, due to stockholders and affiliates
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 $535,000 as of December 31, 2003. The
Company performs periodic credit evaluations of its trade
customers and generally does not require collateral.
(3) Related Party Transactions
--------------------------
The balance due from (to) stockholders represents unsecured advances
which are due on demand and non-interest bearing.
Amounts due from (to) affiliates represent net unsecured advances
to/from affiliated entities which are due on demand and non-interest
bearing.
(4) Inventories
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Inventories consist primarily of network interface cards, cable modems
and related products. Substantially all inventories are finished
products held for sale to third parties.
(5) Property and Equipment
----------------------
At December 31, 2003 property and equipment consist of the following:
Equipment $ 50,839
Furniture and fixtures 35,731
Vehicles 20,000
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106,570
Less accumulated depreciation 61,976
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$ 44,594
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8
VCG TECHNOLOGIES, INC.
d/b/a DTNet Technologies, Inc.
Notes to Financial Statements
(6) Long-Term Debt
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At December 31, 2003 long-term debt consists of the following:
Promissory note payable in monthly installments of $6,231
including interest at 7.5% through October 2005. The note
is secured by inventory, quipment and accounts receivable
of the Company $ 127,566
Other 25,000
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152,566
Less current installments 67,386
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Long-term debt, less current installments $ 85,180
==========
At December 31, 2003, maturities of long-term debt amount to $67,386,
$60,180 and $25,000 in 2004, 2005 and 2008, respectively.
(7) Revolving Line of Credit
------------------------
The Company has entered into a revolving line of credit agreement
subject to maximum borrowings of $350,000. Interest only is payable
monthly at prime plus 1%. The outstanding principal balance and any
unpaid interest is due on demand. The obligation is secured by accounts
receivable, inventory and equipment.
(8) Subsequent Event
----------------
Effective June, 2004, the Company became a wholly-owned subsidiary of
VoIP, Inc. ("VoIP") pursuant to a Purchase Agreement (the "Agreement")
executed between the two formerly unrelated parties. Under provisions
of the Agreement, VoIP acquired 100% of the outstanding common stock of
the Company in exchange for the issuance of 2.5 million shares of VoIP
common stock.
9
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: September 13, 2004 VOIP, INC.
(Registrant)
/s/ Steven Ivester
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President and Chief Executive Officer