UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB/A
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(Mark one)
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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For the quarterly period ended June 30, 2005
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
OF 1934
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For the transition period from _________ to ________
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Commission File Number: 000-28985
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VoIP, Inc.
(Exact name of small business issuer as specified in its charter)
Texas 75-2785941
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(State of incorporation) (IRS Employer ID Number)
12330 SW 53rd Street, Suite 712, Fort Lauderdale, FL 33330
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(Address of principal executive offices)
(954) 434-2000
(Issuer's telephone number)
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Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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
State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date: August 2, 2005: 47,750,975.
Transitional Small Business Disclosure Format (check one): YES NO X
Registrant is an accelerated filer (check one): YES NO X
VoIP, Inc.
Form 10-QSB for the Quarter ended June 30, 2005
Table of Contents
Page
Part I - Financial Information
Report of Independent Registered Public Accounting Firm 3
Item 1 Financial Statements 4
Item 2 Management's Discussion and Analysis of Financial Condition,
Results of Operations and Plan of Operation 15
Item 3 Controls and Procedures 24
Part II - Other Information
Item 1 Legal Proceedings 25
Item 2 Changes in Securities 25
Item 3 Defaults upon Senior Securities 25
Item 4 Submission of Matters to a Vote of Security Holders 25
Item 5 Other Information 25
Signatures 26
2
Report of Independent Registered Public Accounting Firm
To The Board of Directors and Stockholders
VoIP, Inc.
We have reviewed the accompanying consolidated balance sheet of VoIP, Inc. and
Subsidiaries (the "Company") as of June 30, 2005 and the consolidated statements
of operations and cash flows for the six and three month periods ended June 30,
2005 and 2004. These interim financial statements are the responsibility of the
Company's management.
We conducted our review in accordance with standards of the Public Company
Accounting Oversight Board (United States). A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with the standards of the Public Company Accounting Oversight Board, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying interim financial statements for them to be in
conformity with accounting principles generally accepted in the United States.
We have previously audited, in accordance with auditing standards of the Public
Company Accounting Oversight Board (United States), the consolidated balance
sheet of the Company as of December 31, 2004, and the related consolidated
statements of operations, changes in stockholders' equity and cash flows for the
year then ended (not presented herein); and in our report dated March 16, 2005,
we expressed an unqualified opinion on those financial statements. In our
opinion, the information set forth in the accompanying condensed consolidated
balance sheet as of December 31, 2004 is fairly presented in all material
respects, in relation to the balance sheet from which it has been derived.
Ft. Lauderdale, Florida
August 15, 2005 except for
Notes A, D, E, and J as to which the date
is October 7, 2005
3
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
VoIP, Inc.
Consolidated Balance Sheets
June 30, 2005 and December 31, 2004
(Unaudited)
June 30, 2005 Dec. 31, 2004
------------- -------------
ASSETS
Current assets:
Cash and cash equivalents $ 1,068,514 $ 1,141,205
Accounts receivable, net of allowance of
$99,047 and $136,795 respectively 1,023,226 818,071
Due from related parties 169,537 245,402
Inventory 889,373 187,451
Assets from discontinued operations less valuation
allowance of $200,000 in 2005 192,000 412,419
Other current assets 209,884 43,702
------------- -------------
Total current assets 3,552,534 2,848,250
Property and equipment, net 8,637,267 419,868
Goodwill and other intangible assets 30,765,594 6,923,854
Other assets 294,884 23,580
------------- -------------
TOTAL ASSETS $ 43,250,279 $ 10,215,552
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 10,472,720 $ 1,224,974
Notes payable 7,736,929 760,000
Other current liabilities 2,333,343 123,140
------------- -------------
Total current liabilities 20,542,992 2,108,114
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Shareholders' equity:
Common stock - $0.001 par value
100,000,000 shares authorized
47,166,380 and 24,258,982 shares issued
and outstanding, respectively 47,167 24,259
Additional paid-in capital 32,332,943 12,722,565
Accumulated deficit (9,672,823) (4,639,386)
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Total shareholders' equity 22,707,287 8,107,438
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 43,250,279 $ 10,215,552
============= =============
The accompanying notes are an integral part of these
consolidated financial statements.
4
VoIP, Inc.
Consolidated Statements of Operations
Six Months Ended June 30, 2005 and 2004
And Three Months Ended June 30, 2005 and 2004
(Unaudited)
Six Months Ended Six Months Ended Three Months Ended Three Months Ended
June 30, 2005 June 30, 2004 June 30, 2005 June 30, 2004
---------------- ---------------- ---------------- ----------------
Revenues $ 3,916,920 $ 85,298 $ 1,909,773 $ 85,298
Cost of sales 3,104,846 58,923 1,303,911 58,923
---------------- ---------------- ---------------- ----------------
Gross profit 812,074 26,375 605,862 26,375
Operating expenses 5,845,511 457,356 4,132,002 435,033
---------------- ---------------- ---------------- ----------------
Loss from operations (5,033,437) (430,981) (3,526,140) (408,658)
Provision for income taxes -- -- -- --
---------------- ---------------- ---------------- ----------------
Net loss $ (5,033,437) $ (430,981) $ (3,526,140) $ (408,658)
================ ================ ================ ================
Basic and diluted loss per share: $ (0.19) $ (0.05) $ (0.12) $ (0.03)
================ ================ ================ ================
Weighted average number of
shares outstanding 26,940,458 8,255,570 30,012,632 16,233,813
================ ================ ================ ================
The accompanying notes are an integral part of these
consolidated financial statements.
5
VoIP, Inc.
Consolidated Statements of Cash Flows
Six Months Ended June 30, 2005 and 2004
(Unaudited)
Six Months Six Months
Ended June 30, Ended June 30,
2005 2004
-------------- --------------
Cash flows from operating activities:
Net loss $ (5,033,437) $ (430,981)
Adjustments to reconcile net loss to net
cash (used in) operating activities
Depreciation and amortization 540,400 293
Provision for bad debt 99,047 --
Provision on assets from discontinued operations 200,000 --
Common shares issued for services 748,325 143,000
Stock option plan 127,238 --
Common shares exchanged for warrants 239,500 --
Changes in operating assets and liabilities
net of assets and liabilities acquired:
Accounts receivable (174,591) --
Inventory (701,922) (2,460)
Other current assets 342,534 (33,719)
Accounts payable (134,456) 83,455
Other current liabilities (836,286) --
-------------- --------------
Net cash (used in) operating activities (4,583,648) (240,412)
-------------- --------------
Cash flows from investing activities:
Cash from acquisitions -- (173,182)
Purchase of property and equipment (37,779) (20,231)
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Net cash used in investing activities (37,779) (193,413)
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Cash flows from financing activities:
Proceeds from issuance of notes payable 2,615,339 --
Payments on notes payables (769,228) --
Proceeds from sales of common stock 2,702,625 591,400
-------------- --------------
Net cash provided by financing activities 4,548,736 591,400
Change in cash and cash equivalents (72,691) 157,575
Cash and cash equivalents at beginning of period 1,141,205 3,499
-------------- --------------
Cash and cash equivalents at end of period $ 1,068,514 $ 161,074
============== ==============
Non-cash investing and financing activities:
Goodwill and intangible assets recorded on acquisition $ (24,101,000) $ --
Issuance of common stock and warrants
on acquisitions $ 13,819,119 $ --
Issuance of stock for debt conversion $ 1,996,478 $ --
Net liabilities assumed net of cash $ 8,285,403 $ --
============== ==============
The accompanying notes are an integral part of these
consolidated financial statements.
6
VoIP, Inc.
Notes to Financial Statements
NOTE A - AMENDMENT TO PREVIOUSLY FILED FORM 10-QSB
This Form 10-QSB amends the previously filed Form 10-QSB for the quarterly
period ended June 30, 2005, filed by the Company on August 19, 2005, to reflect
the purchase price of the assets purchased, in connection with the acquisition
of Caerus, Inc., on May 31, 2005 and to reflect the amortization of certain
identifiable intangible assets recorded in connection with this acquisition for
the period June 1, 2005 to June 30, 2005. The differences between the amounts
reported herein and those reported in the previous 10-QSB for this quarterly
period are attributable to the allocation of the purchase price to certain
identifiable intangible assets, the application of a marketability discount
applied to the value of the stock issued in connection with the purchase and
amortization of certain intangible assets. A comparison of the amounts reported
herein that differ from amounts previously reported, is as follows:
7
As
Previously
Reported Adjustments As Amended
------------ ------------ ------------
Consolidated Balance Sheet
At June 30, 2005:
Goodwill and intangible assets $ 36,598,411 $(36,598,411) $ --
Goodwill $ -- $ 16,919,853 $ 16,919,853
Intangible assets $ -- $ 13,845,741 $ 13,845,741
Total assets $ 49,083,095 $ (5,832,816) $ 43,250,279
Additional paid-in capital $ 37,906,499 $ (5,573,556) $ 32,332,943
Total shareholders' equity $ 28,540,102 $ (5,832,815) $ 22,707,287
Accumulated deficit $ (9,413,564) $ (259,259) $ (9,672,823)
Total liabilities and shareholders' equity $ 49,083,095 $ (5,832,816) $ 43,250,279
Consolidated Statement of Operations
for the Six Months Ended June 30, 2005:
Operating expenses $ 5,586,252 $ 259,259 $ 5,845,511
Loss from operations $ (4,774,178) $ (259,259) $ (5,033,437)
Net loss $ (4,774,178) $ (259,259) $ (5,033,437)
Loss per share $ (0.18) $ (0.01) $ (0.19)
Consolidated Statement of Operations
for the Three Months Ended June 30, 2005:
Operating expenses $ 3,872,743 $ 259,259 $ 4,132,002
Loss from operations $ (3,266,881) $ (259,259) $ (3,526,140)
Net loss $ (3,266,881) $ (259,259) $ (3,526,140)
Loss per share $ (0.11) $ (0.01) $ (0.12)
8
NOTE B - ORGANIZATION AND DESCRIPTION OF BUSINESS
The Company was incorporated on August 3, 1998 under its original name of
Millennia Tea Masters, Inc. under the laws of the State of Texas.
On February 27, 2004 the Company entered into a stock purchase agreement that
provided for the sale of 12,500,000 shares of its common stock in exchange for
$12,500 and a commitment by the purchaser to contribute the assets of two
start-up companies in the telecommunications business, eGlobalphone, Inc. and
VOIP Solutions, Inc.
On April 13, 2004 the Company changed its name to VoIP, Inc. and began to
develop and manufacture internet protocol telephony customer premise equipment,
provide voice over the internet subscriber based telephony services and long
range WiFi technology solutions for residential and enterprise customers
including multimedia applications.
During December 2004 the Company decided to exit the tea import business in
order to focus its efforts and resources in the voice over internet protocol
(VoIP) telecommunications industry. In connection with the decision the Company
sold its imported tea inventory and began to wind down its tea import
operations. The assets, liabilities, and results of operations of the imported
tea business have been classified as discontinued operations in the accompanying
consolidated financial statements.
On May 31, 2005 the Company acquired 100 percent of Caerus, Inc. and its wholly
owned subsidiaries Volo Communications, Inc., Caerus Networks, Inc., and Caerus
Billing, Inc. in exchange for 16.9 million of the Company's common shares.
Volo Communications, Inc. is a licensed facilities-based Competitive Local
Exchange Carrier and Inter Exchange Carrier. Volo Communications, Inc. markets
its network products and services under the VoiceOne brand name. It has Network
Access Points operating in Orlando, Atlanta, New York, Dallas and Los Angeles.
Caerus Networks, Inc. is a technology research and development subsidiary, and
Caerus Billing, Inc. is a billing and mediation subsidiary.
The Company offers quality (VoIP) based solutions, providing residential and
business customers more user friendly and affordable ways to communicate. The
Company also manufactures products and provides services to Internet Service
Providers, Telecommunication Service Providers and Cable Operators in strategic
countries around the world. The Company, through its subsidiaries, provides a
comprehensive portfolio of IP multimedia-based solutions ranging from subscriber
based voice services, to SIP based infrastructure design and deployment, to
broadband customer premise equipment design and implementation services, as well
as engineering design, manufacturing and distribution of wireless broadband
technology.
The Company's operations consist of one segment.
NOTE C - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries, Caerus, Inc. (after its May 31, 2005
acquisition), eGlobalphone, Inc., VoIP Solutions, Inc., DTNet Technologies,
Inc., and VoIP Americas, Inc. from their respective dates of acquisition. All
significant inter-company balances and transactions have been eliminated in
consolidation.
Unaudited Consolidated Interim Financial Statements
The accompanying consolidated financial statements for the three and six months
periods ended June 30, 2005 and 2004 are unaudited but, in the opinion of
management, include all necessary adjustments (consisting of normal, recurring
in nature) for a fair presentation of the financial position, results of
operations and cash flows for the interim periods presented. Interim results are
not necessarily indicative of results for a full year. Therefore, the results of
operations for the three and six month periods ended June 30, 2005 are not
necessarily indicative of operating results to be expected for 2005.
Use of 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, the disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenues and expenses. Actual results could differ from
those estimates.
9
Cash and Cash Equivalents
For purposes of reporting cash flows, the Company considers all cash on hand, in
banks, including amounts 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.
Our subsidiary, Caerus, Inc. has cash restrictions to support letters of credit
which in turn support operating license bonds required by several states'
regulatory agencies. The amount of restricted cash as of June 30, 2005 was
$60,000.
Accounts Receivable
Accounts receivable are stated at the amount management expects to collect from
outstanding balances. Management provides for probable uncollectible amounts
based on its assessment of the current status of the individual receivables and
after using reasonable collection efforts. As of June 30, 2005 and December 31,
2004 the balance of the allowance for uncollectible accounts amounted to $99,047
and $136,795, respectively.
Inventory
Inventory consists of finished goods and is valued at the lower of cost or
market using the first-in, first-out method.
Advertising Expenses
Advertising and marketing expenses are charged to operations as incurred.
Income Taxes
The Company and its subsidiaries file consolidated federal and state income tax
returns. The Company has adopted Statement of Financial Accounting Standards No.
109 in the accompanying consolidated financial statements. The only temporary
differences included therein are attributable to differing methods of reflecting
depreciation for financial statement and income tax purposes.
Earnings (loss) per Share
Basic earnings (loss) per share is computed by dividing the net income (loss)
for the period by the weighted-average number of shares of common stock
outstanding. 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. Common stock equivalents represent the dilutive effect of
the assumed exercise of the outstanding stock options and warrants, using the
treasury stock method.
Fair Value of Financial Instruments
The carrying amounts of cash, accounts receivable, accounts payable and notes
payable, as applicable, approximate fair value due to the short term nature of
these items and/or the current interest rates payable in relation to current
market conditions.
Revenue Recognition
Revenue from product sales is recognized when persuasive evidence of an
arrangement exists, delivery to customer has occurred, the sales price is fixed
and determinable, and collectibility of the related receivable is probable. The
recognition of revenues from Internet telephony services are deferred for new
subscribers of eGlobalphone and VoIP Solutions until it deems that the customer
has accepted the service. Subsequent revenues are recognized at the beginning of
each customer's month. The recognition of revenue from Internet telephony
services are recorded as rendered. Revenues related to long distance, carrier
access service and certain other usage-driven charges are billed monthly in
arrears and the associated revenues are recognized during the month of service.
Property, Plant, and Equipment
Property, plant, and equipment are stated at cost. Depreciation is provided over
the estimated useful lives of the related assets using the straight line method.
The useful life of assets ranges from three to five years. The leasehold
improvements are amortized over the life of the related lease.
10
Under the Statement of Position ("SOP") 98-1, "Accounting for the Cost of
Computer Software Developed or Obtained for Internal Use," the Company expenses
computer software costs related to internal-use software that is incurred in the
preliminary project stage. When the capitalization criteria of SOP 98-1 have
been met, costs of developing or obtaining internal-use computer software are
capitalized. Amortization of internal-use software over a 5-year estimated
useful life commenced upon the software being placed in service beginning
January 1, 2004. Amortization of internal-use software for the period ended June
30, 2005 was approximately $77,000.
Business Combinations
The Company accounts for business combinations in accordance with Statement of
Financial Accounting Standard No. 141 Business Combinations ("SFAS No. 141").
SFAS No. 141 requires that the purchase method of accounting be used for all
business combinations. SFAS No. 141 requires that goodwill and intangible assets
with indefinite useful lives no longer be amortized, but instead be tested for
impairment at least annually by comparing carrying value to the respective fair
value in accordance with the provisions of Statement of Financial Accounting
Standards No. 142, "Goodwill and Other Intangible Assets" ("SFAS No. 142"). This
pronouncement also requires that the intangible assets with estimated useful
lives be amortized over their respective estimated useful lives.
Impairment of Long-Lived Assets
The Company reviews the recoverability of its long-lived assets, such as plant,
equipment and intangibles when events or changes in circumstances occur that
indicate that the carrying value of the asset group may not be recoverable. The
assessment of possible impairment is based on the Company's ability to recover
the carrying value of the asset or asset group from the expected future pre-tax
cash flows (undiscounted and without interest charges) of the related
operations. If these cash flows are less than the carrying value of such asset,
an impairment loss is recognized for the difference between estimated fair value
and carrying value. The measurement of impairment requires management to
estimate future cash flows and the fair value of long-lived assets.
Concentration of Credit Risk
Financial instruments that may subject the Company to concentrations of credit
risk consist principally of cash and cash equivalents and accounts receivable.
The Company has investment policies and procedures that are reviewed
periodically to minimize credit risk.
One customer represented approximately 98% of our subsidiary Caerus, Inc.'s
accounts receivable as of June 30, 2005 and approximately 91% of Caerus, Inc.'s
revenues for the six months ended June 30, 2005.
NOTE D - ACQUISITION OF CAERUS, INC.
On May 31, 2005 the Company acquired 100 percent of Caerus, Inc. and its wholly
owned subsidiaries Volo Communications, Inc., Caerus Networks, Inc., and Caerus
Billing, Inc. in exchange for 16.9 million of the Company's common shares. The
acquisition was accounted for as a business combination in accordance with
Statement of Financial Accounting Standard No. 141 "Business Combinations"
("SFAS No. 141").
The purchase price was allocated to the identifiable net assets acquired
including the identifiable intangible assets based on their estimated fair
market values at the date of acquisition. The goodwill, intangible assets and
property recorded for the acquisition of Caerus, Inc. (Caerus) represent the
fair market value of liabilities as of the date of acquisition, plus $13,819,118
which represents the value of the Company's common stock and options issued
pursuant to the acquisition, plus acquisition-related costs. The common stock
issued to acquire Caerus was valued at the closing market price of the stock on
the date of the acquisition, less a 25% discount due to restrictions on the
shares. The amortizable lives of the intangible assets recorded for Caerus range
from one to nine years.
11
The fair market value of the assets acquired on May 31, 2005 is as follows:
Fair Value of
Assets Acquired
---------------
Cash $ 66,485
Accounts receivable 285,578
Deposits 108,500
Other current assets 156,659
Property and equipment, net 8,451,763
Other assets 271,609
Accounts payable (9,382,323)
Note payable (6,960,818)
Customer deposits (1,026,750)
Other current liabilities (2,252,703)
---------------
Sub total (10,282,000)
Intangible assets 13,800,000
Goodwill 10,301,000
---------------
Sub total 24,101,000
---------------
Purchase price $ 13,819,000
===============
NOTE E - GOODWILL AND OTHER INTANGIBLE ASSETS
a) As of June 30, 2005 goodwill consisted of the following: Amount
-----------
Acquisition of Caerus, Inc. $10,301,000
Acquisition of DTNet Technologies, Inc. 5,210,553
Acquisition of Voipamericas, Inc. 1,408,301
-----------
Sub total 16,919,854
-----------
b) As of June 30, 2005 intangible assets consisted of the following:
Ingangibles with finite lives: Useful Life Years Amount
----------------- -----------
Technology - Caerus, Inc. 4.0 $ 6,000,000
Customer relationships - Caerus, Inc. 6.0 5,800,000
Trade names - Caerus, Inc. 9.0 1,300,000
Non-compete agreements - Caerus, Inc. 1.0 500,000
Carrier licenses - Caerus, Inc. Unamortized 200,000
-----------
Sub total 13,800,000
Less accumulated amortization (259,260)
-----------
Sub total 13,540,740
Ingangibles with indefinite lives:
Intellectual property 305,000
Sub total 13,840,740
-----------
Total $30,765,594
===========
The goodwill on the acquisition of DTNet Technologies, Inc. (DTNet) represents
the fair market value of DTNet liabilities as of the date of the acquisition
plus $4,750,000 which represents the market value of 2,500,000 shares of Company
stock issued pursuant to its acquisition.
The goodwill on the acquisition of Voipamericas represents the fair market value
of Voipamericas liabilities as of the date of the acquisition plus $1,100,000
which represents the market value of 1,000,000 shares of the Company's stock
pursuant to this acquisition.
12
Intellectual property is carried at cost which is comprised of $200,000 paid in
cash and the value assigned to 100,000 Company common shares and 400,000
warrants issued pursuant to this transaction. The valuation of the shares was
$1.05 while the value was $105,000. The value of the warrants was determined
using the Black-Scholes model calculated as of October 14, 2004. This model uses
the annualized deviation calculation and utilized industry averages as a
comparison for adequate statistical results in the valuation. This is a standard
financial model that considers the statistical annual volatility of the market
changes in a stock price.
Intellectual property consists of the following:
a) all rights of the Company of Record in the telephone numbers
1(800)TALKTIME, 1(888)TALKTIME, AND 1(877)TALKTIME.COM
b) all rights to the URL's (domain names) 800TALKTIME.COM,
1800TALKTIME.COM, and 1-800-TALKTIME.COM
c) all rights to U.S. Trademark Registration No. 2,209,316 directed to
1-800-TALKTIME and the goodwill associated therewith.
NOTE F - EXCHANGE OF WARRANTS FOR SHARES
In February, 2005 an executive of the Company and the Company agreed to exchange
his 2,200,000 warrants for 750,000 restricted shares of the Company. This
created additional compensation of $239,500, shown in the compensation and
related expenses in the consolidated statement of operations, which is the
difference between the market price on the date of exchange and the value on the
date of the issuance of the warrants.
NOTE G - STOCK OPTION PLAN
On January 26, 2005, the Company filed a Form S-8 registration statement in
connection with the Company's Stock Option Plan. The plan provides for the grant
to eligible employees, consultants, and directors of options for the purchase of
Common Stock. The Option Plan covers, in the aggregate, a maximum of 4,000,000
shares of Common Stock and provides for the granting of both incentive stock
options (as defined in Section 422 of the Internal Revenue Code of 1986) and
nonqualified stock options (options which do not meet the requirements of
Section 422). Under the Option Plan, the exercise price may not be less than the
fair market value of the Common Stock on the date of the grant of the option.
The Company uses the fair value method of Statement of Financial Accounting
Standards No. 123, "Accounting for Stock Based Compensation" ("SFAS No. 123") in
accounting for its stock options. This standard states that compensation cost is
measured at the grant date based on the value of the award and is recognized
over the service period, which is usually the vesting period. The fair value for
each option granted is estimated on the date of the grant using the minimum
value method.
The vested options as of June 30, 2005 amounting to $127,238 are shown under the
compensation and related expenses on the Consolidated Statement of Operation.
NOTE H - NOTES PAYABLE
As of June 30, 2005 Notes Payable consist of the following:
a. Note Payable to Shareholder $1,053,196
b. Note Payable - Convertible 1,427,925
c. Note Payable - Convertible 125,000
d. Note Payable to lending institution 5,130,818
----------
Notes Payable Total $7,736,939
==========
a. Represents the balance due a shareholder at an interest rate of 3.75% with
a maturity date of December 31, 2005.
b. Represents 8% notes issued pursuant to a subscription agreement,
convertible into 1,784,895 shares of common stock. In connection with
these notes the holders received warrants to purchase 829,447 shares of
common stock at $1.60 per share and 892,448 shares of common stock at
$1.43 per share. The subscription agreement for these notes requires the
issuance of an additional $1,427,916 of these 8% notes, convertible into
1,784,895 shares of common stock, within five business days following the
effective date of a Company registration statement on Form SB-2. In
connection with these notes the Company will issue warrants for the
purchase of 892,447 shares of common stock at $1.60 per share and 892,448
shares of common stock at a per share price equal to 110% of the volume
weighted average price for the five business days immediately preceding
the effective date of the Form SB-2.
13
c. This note bears interest at 12% and in July, 2005 was converted into
166,667 shares of common stock.
d. Represents the balance of a loan payable by Caerus, Inc. These borrowings
are repayable over a three-year period and bear interest at 12.5% per
annum. Additional borrowings under this facility are contingent upon,
among other things, the Company raising certain levels of additional
equity financing. The loan agreement contains customary covenants and
restrictions and provides the lender the right to a perfected
first-priority, secured interest in all of the Caerus, Inc.'s assets, as
well as rights to preferred stock warrants. Caerus, Inc. is currently in
violation of certain requirements of the debt facility. Accordingly, the
full amount of the note at June 30, 2005 has been classified as current.
No default on this loan has been declared.
NOTE I - LITIGATION
On April 8, 2005, Volo Communications, Inc. ("Volo") (a wholly-owned subsidiary
of Caerus, Inc.) filed suit against MCI Worldcom Network Services, Inc. d/b/a
UUNET ("MCI"). Volo alleges that MCI engaged in a pattern and practice of
over-billing Volo for the telecommunications services it provided pursuant to
the parties' Services Agreement, and that MCI refused to negotiate such
overcharges in good faith. Volo also seeks damages arising out of MCI's
fraudulent practice of submitting false bills by, among other things, re-routing
long distance calls over local trunks to avoid access charges, and then billing
Volo for access charges that were never incurred. On April 4, 2005, MCI declared
Volo in default of its obligations under the Services Agreement, claiming that
Volo owes a past due amount of $8,365,980, and threatening to terminate all
services to Volo within 5 days. By this action Volo alleges claims for (1)
breach of contract; (2) fraud in the inducement; (3) primary estoppel; and (4)
deceptive and unfair trade practices. Volo also seeks a declaratory judgment
that (1) MCI is in breach of the Services Agreement; (2) $8,365,980 billed by
MCI is not "due and payable" under that agreement; and (3) MCI's default letter
to Volo is in violation of the Services Agreement. Volo seeks direct, indirect
and punitive damages in an amount to be determined at trial.
On May 26, 2005, MCI filed an Answer, Affirmative Defenses, Counterclaim and
Third-Party Complaint naming Caerus, Inc. as a third-party defendant. MCI
asserts a breach of contract claim against Volo, a breach of guarantee claim
against Caerus, Inc., and a claim for unjust enrichment against both parties,
seeking an amount to be determined at trial. On July 11, 2005, Volo and Caerus,
Inc. answered the counterclaim and third-party complaint, and filed a
third-party counterclaim against MCI for declaratory judgment, fraud in the
inducement, and breach of implied duty of good faith and fair dealing. Volo and
Caerus, Inc. seek direct, indirect, and punitive damages in an amount to be
determined at trial. Discovery should commence shortly. The Company is currently
unable to assess the likelihood of a favorable or unfavorable outcome.
NOTE J - SUBSEQUENT EVENTS
On October 6, 2005, the Company through a wholly owned subsidiary, purchased
substantially all of the assets of WQN, Inc. relating to WQN's "Voice over
Internet Protocol" business.
Pursuant to the Asset Purchase Agreement, Acquisition Sub purchased the Assets
for a purchase price consisting of (1) a Convertible Promissory Note, in the
principal amount of $3,700,000 and convertible into 3,557,692 shares of the
Company's common stock (the "Purchase Note"), (2) 1,250,000 restricted shares of
the Company's common stock, par value $0.001 per share (the "Common Stock") and
(3) a warrant (the "Purchase Warrant") to purchase 5,000,000 shares of Common
Stock for $0.001 per share. In addition, the Asset Purchase Agreement provides
that, in the event that the accounts payable of WQN transferred to the Company
in the Asset Purchase exceed the accounts receivable transferred to the Company
in the Asset Purchase, WQN will pay the Company the difference. If WQN is
required to pay such difference, the Company will issue additional shares of
Common Stock at the rate of one share per dollar of such excess, up to 500,000
shares.
14
ITEM 2. Management's Discussion and Analysis of Financial Condition, Results of
Operations and Plan of Operation
Caution Regarding Forward-Looking Information
This quarterly report contains certain forward-looking statements and
information relating to the Company that are based on the beliefs of the Company
or management as well as assumptions made by and information currently available
to the Company or management. When used in this document, the words
"anticipate," "believe," "estimate," "expect" and "intend" and similar
expressions, as they relate to the Company or its management, are intended to
identify forward-looking statements. Such statements reflect the current view of
the Company regarding future events and are subject to certain risks,
uncertainties and assumptions, including the risks and uncertainties noted.
Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary materially from
those described herein as anticipated, believed, estimated, expected or
intended. In each instance, forward-looking information should be considered in
light of the accompanying meaningful cautionary statements herein.
Amendment of Previously Filed Form 10-QSB for the Quarterly Period Ended June
30, 2005
This Form 10-QSB amends the previously filed Form 10-QSB for the quarterly
period ended June 30, 2005, filed by the Company on August 19, 2005, to reflect
the purchase price of the assets purchased, in connection with the acquisition
of Caerus, Inc., on May 31, 2005 and to reflect the amortization of certain
identifiable intangible assets recorded in connection with this acquisition for
the period June 1, 2005 to June 30, 2005. The differences between the amounts
reported herein and those reported in the previous 10-QSB for this quarterly
period are attributable to the allocation of the purchase price to certain
identifiable intangible assets, the application of a marketability discount
applied to the value of the stock issued in connection with the purchase and
amortization of certain intangible assets. A comparison of the amounts reported
herein that differ from amounts previously reported, is as follows:
15
As
Previously
Reported Adjustments As Amended
------------ ------------ ------------
Consolidated Balance Sheet
At June 30, 2005:
Goodwill and intangible assets $ 36,598,411 $(36,598,411) $ --
Goodwill $ -- $ 16,919,853 $ 16,919,853
Intangible assets $ -- $ 13,845,741 $ 13,845,741
Total assets $ 49,083,095 $ (5,832,816) $ 43,250,279
Additional paid-in capital $ 37,906,499 $ (5,573,556) $ 32,332,943
Total shareholders' equity $ 28,540,102 $ (5,832,815) $ 22,707,287
Accumulated deficit $ (9,413,564) $ (259,259) $ (9,672,823)
Total liabilities and shareholders' equity $ 49,083,095 $ (5,832,816) $ 43,250,279
Consolidated Statement of Operations
for the Six Months Ended June 30, 2005:
Operating expenses $ 5,586,252 $ 259,259 $ 5,845,511
Loss from operations $ (4,774,178) $ (259,259) $ (5,033,437)
Net loss $ (4,774,178) $ (259,259) $ (5,033,437)
Loss per share $ (0.18) $ (0.01) $ (0.19)
Consolidated Statement of Operations
for the Three Months Ended June 30, 2005:
Operating expenses $ 3,872,743 $ 259,259 $ 4,132,002
Loss from operations $ (3,266,881) $ (259,259) $ (3,526,140)
Net loss $ (3,266,881) $ (259,259) $ (3,526,140)
Loss per share $ (0.11) $ (0.01) $ (0.12)
Financial Condition and Results of Operations
On May 31 2005, we completed the acquisition of Caerus, Inc. and immediately
began the process of merging operations. As part of the agreement, we acquired
100 percent of the business of Caerus, Inc. and its wholly owned subsidiaries
Volo Communications, Inc., Caerus Networks, Inc., and Caerus Billing, Inc. in
exchange for 16.9 million of the Company's common shares.
Volo Communications, Inc. is a licensed facilities-based CLEC (Competitive Local
Exchange Carrier) and IXC (Inter Exchange Carrier). Caerus Networks, Inc. is a
technology research and development subsidiary, and Caerus Billing, Inc. is a
billing and mediation subsidiary. Caerus, Inc. and its three subsidiaries
(collectively referred to herein as Caerus) generated revenues during calendar
year 2004 that totaled $14 million.
Through the wholesale-only model Volo is a "carrier's carrier," and will
continue its focus on the broadband voice marketplace, marketing its network
products and services under the VoiceOne brand name.
Volo currently has Network Access Points (NAPs) operating in Orlando, Atlanta,
New York, Dallas and Los Angeles. A total of 22 NAPs are planned to be
operational by the end of 2005 that will be capable of addressing the top 100
metropolitan areas.
Caerus' VoiceOne Network Operations Center (NOC) is a fully manned, 24 x 7
operation and is the heartbeat of Volo Communications. The NOC is where the
company monitors all aspects of the technical environment, from its nationwide
OC-12 backbone to network routers, SIP proxies and numerous routing gateways,
soft switches and other aspects of its VOIP infrastructure. Fully redundant
technologies are deployed in a scalable network environment that enables the
company to compete in the ever-evolving and demanding IP telecommunications
marketplace. The VoiceOne network incorporates a (Multi-Protocol Label
Switching) architecture which is designed and operated to offer world-class
services to carriers and service providers. VoiceOne features direct
interconnection facilities with multiple LECs (Local Exchange Carriers), CLECs,
IXCs, service providers, cable operators, wireless carriers and resellers.
16
In June 2004 we acquired DTNet Technologies, Inc. and in September 2004 we
acquired VoIP Americas. DTNet provides customer premises equipment to cable and
DSL Internet providers throughout North America. VoIP Americas provides
International and domestic wholesale terminations. Management believes that
these acquisitions complement the company's strategy to deliver Voice over
Internet Protocol over a wireless local loop and deliver service provider
solutions to cable operators and small to medium size carriers and Virtual
Service Providers. DTNet has the distribution channels for the end users and
VoIP Americas has the market knowledge, systems, and turn key solutions for
today's sophisticated end users.
For the six months ended June 30, 2005 and 2004 the Company had revenues of
$3,916,886 and $85,298 respectively. For the three months ended June 30, 2005
and 2004 the Company had revenues of $1,909,739 and $85,298 respectively. Most
of the revenue increase for both the six months and three months ended June 30,
2005 compared to the same periods in the prior year were due to the acquisitions
of DTNet and Caerus. Revenues from Caerus and DTNet were $649,499 and
$1,471,090, respectively, for the six months ended June 30, 2005 and $649,499
and $1,000,044 respectively, for the three months ended June 30, 2005.
The cost of sales consists primarily of purchases, assembly and testing of
customer premise equipment performed by third party vendors. Additionally, cost
of sales includes the direct costs associated with the origination and
termination of international/domestic wholesale minutes.
The gross profit amount of approximately $812,040 represents a gross margin of
21%. We anticipate that the gross profit margin percentage will improve with
growth in revenue. We are pursuing volume discounts from our suppliers and
believe that these discounts will continue to materialize our sales strategy is
deployed throughout our different product lines. All of the increase in gross
profit for the six months ended June 30, 2005 and 35% of the increase for the
three months ended June 30, 2005 compared to the same periods in the prior year
were due to the acquisition of DTNet.
Operating expenses consist primarily of salaries and related personnel costs,
general corporate functions including finance, human resources, facilities,
legal and professional fees, insurance and general corporate overhead costs.
Total operating expenses for the six months ended June 30, 2005 and June 30,
2004 were $5,845,477 and $457,356 respectively. The principal components for
2005 are general and administrative expenses ($2,029,223), wages and salaries
($1,690,579), commissions ($1,173,136), and professional fees ($611,211). The
expense increases were primarily due to the Company's entrance into the VoIP
business, expansion via marketing as well as acquisition, and the related legal
and professional costs of operating a public company.
Net losses for the respective quarters ended June 30, 2005 and 2004 were
$3,526,140 and $408,658, respectively, and the net loss per share was $0.12 and
$0.03, respectively. This included the one time event of the issuance of
4,400,000 warrants to two executives to acquire 2,200,000 Company shares at
$1.00 for each during 2004. The difference between the market value and the
$1.00 share price is $1,936,000. This included a one time event in the exchange
of company shares for warrants issued to an executive. The market value of the
shares amounting to approximately $239,500 as of the transaction date was
recognized as compensation expense in the consolidated statement of operations.
Total assets at June 30, 2005 were $43,250,279, up $33,034,727 from December 31,
2004. This increase in assets and the corresponding increase in accounts payable
and other current liabilities are almost entirely related to the acquisition of
Caerus on May 31, 2005. We recorded significant amounts of goodwill and
intangible assets in connection with the acquisition of Caerus and for the
acquisition of DTNet. Goodwill and intangible assets comprised 71% of our total
assets at June 30, 2005. We expect to record additional amounts of goodwill and
intangible assets in connection with our WQN, Inc. acquisition, which was
completed on October 6, 2005.
17
Under SFAS 142 we are required to periodically evaluate the carrying value of
our goodwill and intangible assets. If in the future such carrying values exceed
fair market value, we will be required to record an impairment charge in our
statement of operations. Such an impairment charge could have a significant
adverse impact on both our operating results and stock price.
Liquidity and Capital Resources
As of June 30, 2005, we had cash and cash equivalents of $1,068,514, as compared
to $1,141,205 at December 31, 2004. Cash and cash equivalents decreased by
$72,691 for the six months ended June 30, 2005. We used $4,583,648 in cash for
our operating activities. We funded our operating activities through private
placements of notes payable and common stock. These financing activities
provided us with net cash of $4,548,736 for the six months ended June 30, 2005.
Liquidity for the period from inception through June 30, 2005 has been mainly
provided by sales of common stock through private placements and borrowing from
affiliates. We anticipate that we will continue to experience negative cash
flows from operations. We expect that we will continue to depend upon sales of
common stock or debt securities to continue operations. However, we may not be
successful in obtaining further equity or debt financing for our business.
Payments Due by Period
The following table illustrates our outstanding debt and the terms of that
debt as of June 30, 2005:
Less than 1-3 3-5
Contractual Obligations Total 1 Year Years Years
--------------------------------------------------------------------------------
Long-Term Debt $ 0 $ 0 $ 0 $ 0
Notes Payable $7,736,929 $7,736,929 $ 0 $ 0
Operating Leases $ 594,905 $ 149,905 $ 445,000 $ 0
Purchase Obligations $ 0 $ 0 $ 0 $ 0
-------------------------------------------------------
Total $8,331,834 $7,886,834 $ 445,000 $ 0
=======================================================
Plan of Operations
The Company has incurred losses since its inception and, as of June 30, 2005,
has an accumulated deficit of $9,672,823. We have not achieved profitability on
an annual or quarterly basis and may incur additional net losses in future
quarters and years.
We anticipate that the revenue growth will be achieved by acquisitions and the
launch of new products and services.
We do not expect material research and development expenses during the year or
the purchase of substantial equipment.
We currently have 55 employees and do not expect a significant change in the
number of employees other than the addition of new employees as a result of the
WQN acquisition.
We are constantly exploring acquisitions, and any material acquisition could
have a substantial impact on these plans.
18
VOIP, INC. AND SUBSIDIARIES
UNAUDITED PRO FROMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
The following unaudited pro forma condensed combined statements of operations
are derived from and should be read in conjunction with the historical
consolidated financial statements and related notes of VOIP, INC. ("VOIP" or the
"Company"), and CAERUS, INC. ("CAERUS"). On June 1, 2005, the Company, and
Caerus announced the closing of the merger of Volo Acquisition Corp., a
wholly-owned subsidiary of the Company with and into Caerus, with Caerus as the
surviving corporation (the "Merger"). The Merger was completed pursuant to an
Agreement and Plan of Merger (the "Merger Agreement'), executed on May 31, 2005.
The unaudited pro forma condensed statements of operations for the three months
ended June 30, and six months ended June 30, 2005, give effect to the merger of
Caerus and the Company with the conversion of all Caerus capital stock into
16,434,470 shares of common stock, par value $0.001, of the Company.
The unaudited pro forma condensed combined statements of operations assume that
the Merger was consummated on January 1, 2005.
The unaudited pro forma condensed combined Statement of Operations have been
prepared based on currently available information and assumptions that are
deemed appropriate by the Company's management. The pro forma information is for
informational purposes only and is not intended to be indicative of the actual
consolidated results that would have been reported had the transactions occurred
on the dates indicated, nor does the information represent a forecast of the
consolidated financial position at any future date or the combined financial
results of the Company and Caerus for any future period.
19
VoIP Inc.
Proforma Consolidated Statement of Operations (Unaudited)
Three Months Ended June 30, 2005
VoIP, Inc. Caerus, Inc. Adjustments Consol
------------ ------------ ------------ ------------
Revenues $ 1,260,274 $ 2,289,399 $ -- $ 3,549,673
Cost of Sales 638,369 2,785,740 -- 3,424,109
------------ ------------ ------------ ------------
Gross Profit (Loss) 621,905 (496,341) -- 125,564
Operating expenses 3,133,639 2,246,261 518,518 5,898,418
------------ ------------ ------------ ------------
Loss from operations (2,511,734) (2,742,602) (518,518) (5,772,854)
Provision for income taxes -- -- -- --
------------ ------------ ------------ ------------
Net Loss $ (2,511,734) $ (2,742,602) $ (518,518) $ (5,772,854)
============ ============ ============ ============
Basic and diluted loss per share: $ (0.19)
============
Weighted average number of shares outstanding 30,012,632
============
The accompanying notes are an integral part of this
pro forma consolidated statement of operations.
20
VoIP Inc.
Proforma Consolidated Statement of Operations (Unaudited)
Six Months Ended June 30, 2005
VoIP, Inc. Caerus, Inc. Adjustments Consol
------------ ------------ ------------ ------------
Revenues $ 3,267,421 $ 7,284,244 $ -- $ 10,551,665
Cost of Sales 2,439,304 9,143,457 -- 11,582,761
------------ ------------ ------------ ------------
Gross Profit (Loss) 828,117 (1,859,213) -- (1,031,096)
Operating expenses 4,847,148 4,098,918 1,296,295 10,242,361
------------ ------------ ------------ ------------
Loss from operations (4,019,031) (5,958,131) (1,296,295) (11,273,457)
Provision for income taxes -- -- -- --
------------ ------------ ------------ ------------
Net Loss $ (4,019,031) $ (5,958,131) $ (1,296,295) $(11,273,457)
============ ============ ============ ============
Basic and diluted loss per share: $ (0.42)
============
Weighted average number of shares outstanding 26,940,458
============
The accompanying notes are an integral part of this
proforma consolidated statement of operations.
21
VoIP Inc.
Proforma Consolidated Statement of Operations (Unaudited)
Three Months Ended June 30, 2004
VoIP, Inc. Caerus, Inc. Adjustments Consol
------------ ------------ ------------ ------------
Revenues $ 85,298 $ 2,332,453 $ -- $ 2,417,751
Cost of Sales 58,923 2,700,914 -- 2,759,837
------------ ------------ ------------ ------------
Gross Profit (Loss) 26,375 (368,461) -- (342,086)
Operating expenses 435,033 1,793,909 777,777 3,006,719
------------ ------------ ------------ ------------
Loss from operations (408,658) (2,162,370) (777,777) (3,348,805)
Provision for income taxes -- -- -- --
------------ ------------ ------------ ------------
Net Loss $ (408,658) $ (2,162,370) $ (777,777) $ (3,348,805)
============ ============ ============ ============
Basic and diluted loss per share: $ (0.10)
============
Weighted average number of shares outstanding 32,668,283
============
The accompanying notes are an integral part of this
pro forma consolidated statement of operations.
22
VoIP Inc.
Proforma Consolidated Statement of Operations (Unaudited)
Six Months Ended June 30, 2004
VoIP, Inc. Caerus, Inc. Adjustments Consol
------------ ------------ ------------ ------------
Revenues $ 85,298 $ 5,369,624 $ -- $ 5,454,922
Cost of Sales 58,923 5,348,592 -- 5,407,515
------------ ------------ ------------ ------------
Gross Profit (Loss) 26,375 21,032 -- 47,407
Operating expenses 457,356 2,746,438 1,555,554 4,759,348
------------ ------------ ------------ ------------
Loss from operations (430,981) (2,725,406) (1,555,554) (4,711,941)
Provision for income taxes -- -- -- --
------------ ------------ ------------ ------------
Net Loss $ (430,981) $ (2,725,406) $ (1,555,554) $ (4,711,941)
============ ============ ============ ============
Basic and diluted loss per share: $ (0.19)
============
Weighted average number of shares outstanding 24,690,040
============
The accompanying notes are an integral part of this
proforma consolidated statement of operations.
23
VOIP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS
(1) VoIP, Inc. Basis of Presentation
Historical financial information for VoIP, Inc. for the three and
six months ended June 30, 2005 has been derived from VoIP, Inc.
historical statements.
(2) Caerus, Inc. Basis of Presentation
Financial information for Caerus, Inc. as of and for the three and
six months ended June 30, 2005 has been derived from Caerus, Inc's
historical financial statements.
(3) VoIP, Inc. and Caerus, Inc. Merger
On June 1, 2005, the Company, and Caerus, Inc. announced the closing
of the merger of Volo Acquisition Corp., a wholly-owned subsidiary
of the Company with and into Caerus, Inc. with Caerus, Inc. as the
surviving corporation (the "Merger"). The Merger was completed
pursuant to an Agreement and Plan of Merger (the "Merger
Agreement"), executed on May 31, 2005 by the conversion of all
Caerus, Inc. capital stock into 16,434,470 shares of common stock,
par value $0.001, of the Company. See NOTE D in the Financial
Statements.
(4) Pro Forma Statements of Operations Adjustments
Adjustments to the Pro Forma Statements of Operations represent
amortization of certain intangible assets recorded in connection
with the acquisition.
Item 3. Controls and Procedures
Within the 90 days prior to the filing date of this report, the Company
performed an evaluation of the effectiveness of the design and operation of its
disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. This
evaluation was done under the supervision and with the participation of the
Company's President and Chief Financial Officer. Based upon that evaluation,
they concluded that the Company's disclosure controls and procedures are
effective in gathering, analyzing and disclosing information needed to satisfy
the Company's disclosure obligations under the Exchange Act. The two executive
officers responsible for the financial reporting and disclosure are also in
control of the books and records of the Company and are involved first hand in
the decision making process of material transactions.
24
Part II - OTHER INFORMATION
Item 1 - Legal Proceedings
The Company is involved from time to time in legal proceedings and litigation
incidental to the conduct of its business.
See Financial Statement NOTE I for litigation between Volo Communications, Inc
(a wholly-owned subsidiary of Caerus, Inc.) and MCI WorldCom Network Services,
Inc. d/b/a UUNET.
Item 2 - Changes in Securities
The following unregistered securities have been issued during the second
quarter of 2005:
Effective April 2005, registrant issued 166,250 shares of common stock
for cash of $125,000.
Effective April 2005, registrant issued 166,250 shares of common stock
for cash of $125,000.
Effective May 2005, registrant issued 93,750 shares of common stock for
cash of $75,000.
Effective June 2005, registrant issued 1,196,875 shares of common stock
for cash of $949,500.
Effective June 2005, registrant issued 1,440,000 shares of common stock
for services provided to the company.
Effective June 2005, registrant issued 16,434,470 shares of common
stock for the acquisition of Caerus, Inc. and its subsidiaries.
Effective June 2005, registrant issued 1,623,153 shares of common stock
for a subsidiary debt conversion.
All such shares were issued pursuant to exemptions provided by Section
4(2) of the Securities Act of 1933 and Regulation D.
On August 12, 2005 the Company filed a Registration Statement for the
resale of up to 15,377,245 shares by 185 selling shareholders.
Item 3 - Defaults on Senior Securities
None
Item 4 - Submission of Matters to a Vote of Security Holders
The Company has held no regularly scheduled, called or special meetings of
shareholders during the reporting period.
Item 5 - Other Information
None
Item 6 - Exhibits
(a) Exhibits
No. Description
31.1 Certification by CEO pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
31.2 Certification by CFO pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
32.1 Certification by CEO pursuant to 18 USC Section 1350 as
adopted by Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 Certification by CFO pursuant to 18 USC Section 1350 as
adopted by Section 906 of the Sarbanes-Oxley Act of 2002.
25
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
VoIP, INC.
October 07, 2005 /s/ Steven Ivester
---------------------------------
Steven Ivester
President and CEO
/s/ Osvaldo Pitters
---------------------------------
Osvaldo Pitters
Chief Financial Officer
26