As filed with the Securities and Exchange Commission on December 13, 2004
Registration No. 333 -
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
VoIP, Inc.
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(Name of Small Business Issuer as Specified in its Charter)
Texas 3661 75-278/5941
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(State or Other Jurisdiction (Primary Standard (I.R.S. Employer
of Industrial Classification Identification Number)
Incorporation or Organization) Code Number)
12330 SW 53rd Street, Suite 712
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Ft. Lauderdale, FL 33330
(954)434-2000
(Address and Telephone Number of
Principal Executive Offices and Principal Place of Business)
Steven Ivester
President and Chief Executive Officer
VoIP, Inc.
12330 SW 53rd Street, Suite 712
Ft. Lauderdale, FL 33330
(954)434-2000
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(Name, Address and Telephone Number of Agent for Service)
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Copies to:
Ronald L. Brown, Esq.
Andrews Kurth LLP
1717 Main Street, Suite 3700
Dallas, TX 75201
(214) 659-4400
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Approximate date of commencement of proposed
sale to the public: As soon as practicable after the
effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [x]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.[ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434, check
the following box. [ ]
CALCULATION OF REGISTRATION FEE
Proposed Proposed
Maximum Maximum
Title of Each Amount Offering Aggregate Amount of
Class of Securities to be Price Per Offering Registration
to be Registered Registered(1) Share(2) Price Fee
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Common Stock, $0.001 par
value 4,349,000 $1.61 $7,001,890 $859
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(1) In addition, pursuant to Rule 416(c) under the Securities Act of 1933,
as amended (the "Securities Act"), this Registration Statement also
covers an indeterminate number of additional shares that may be
issuable in connection with share splits, share dividends or similar
transactions.
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(2) Estimated pursuant to Rule 457(c) under the Securities Act, solely for
the purpose of calculating the registration fee, based on the average
of the bid and asked prices for the Company's common stock as reported
within five business days prior to the date of this filing.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment that specifically states this Registration Statement shall
thereafter become effective in accordance with Section 8(a) of the Securities
Act of 1933, as amended, or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), may
determine.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE
SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
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SUBJECT TO COMPLETION DATED DECEMBER 13, 2004
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PROSPECTUS
4,349,000
SHARES
VoIP, INC.
COMMON STOCK
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The persons listed in this Prospectus under "Selling Shareholders" may
offer and sell from time to time up to an aggregate of 4,349,000 shares of our
common stock that they have acquired or will acquire from us, including those
shares that may be acquired upon exercise of warrants granted by us. Information
on the selling shareholders, and the times and manner in which they offer and
sell shares of our common stock, is provided under "Selling Shareholders" and
"Plan of Distribution" in this Prospectus.
We will not receive any proceeds fro the sale of the common stock by
the selling shareholders. We will bear the costs and expenses of registering the
common stock offered by the selling shareholders. Selling commissions, brokerage
fees, and applicable transfer taxes are payable by the selling shareholders.
Our common stock is listed on the Over-The-Counter Bulletin Board
("OTCBB") under the symbol "VOII"). On December 07, 2004, the closing bid price
for our common stock on the OTCBB was $1.56 per share.
BEFORE PURCHASING ANY OF THE SHARES COVERED BY THIS PROSPECTUS,
CAREFULLY READ AND CONSIDER THE RISK FACTORS INCLUDED IN THE SECTION ENTITLED
"RISK FACTORS" BEGINNING ON PAGE 5 YOU SHOULD BE PREPARED TO ACCEPT ANY AND ALL
OF THE RISKS ASSOCIATED WITH PURCHASING THE SHARES, INCLUDING A LOSS OF ALL OF
YOUR INVESTMENT.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is _____________, 2004.
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You should rely only on the information contained in this Prospectus.
We have not authorized any other person to provide you with information
different from that contained in this Prospectus. The information contained in
this Prospectus is complete and accurate only as of the date of the front cover
page of this Prospectus, regardless of the time of delivery of this Prospectus
or the sale of any common tock. The Prospectus is not an offer to sell, nor is
it an offer to buy, our common stock in any jurisdiction in which the offer or
sale is not permitted.
We have not taken any action to permit a public offering of our shares
of common stock outside of the United States or to permit the possession or
distribution of this Prospectus outside of the United States. Persons outside of
the United States who came into possession of this Prospectus must inform
themselves about and observe any restrictions relating to the offering of the
shares of common stock and the distribution of this Prospectus outside of the
United States.
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be
read in conjunction with, the more detailed information and financial
statements, including the notes, appearing elsewhere in this Prospectus.
CERTAIN RISKS
Detailed information about the risks of investing in the offering are
set forth in "Risk Factors" beginning on page 5. Potential investors should
specifically be aware of the following:
o We have never achieved a profitable level of operations.
o For the past two fiscal years, our auditors have expressed a
qualified opinion on our financial statements, expressing
substantial doubts about our ability to continue operating as
a going concern.
o Our net losses in 2003 were $352,968.
o Our net losses for the period ending September 30, 2004 were
$4,610,370 versus a loss of $53,621 for the same period in
2003.
o As of September 30, 2004, our working capital deficit was
$348,950 and our accumulated deficit was $5,235,017.
o We have relied upon sales of debt and equity securities, many
to persons related to management, to obtain enough funds to
continue operating. Such sales amounted to $2,170,572 through
November 30, 2004.
o As of November 30, 2004, a total of 6,200,000 shares of common
stock are issuable upon exercise of warrants at rates as low
as $1.00 per share, which will result in additional dilution
to our common shareholders.
o There is an inactive trading market in our common stock, and
the market for our stock is illiquid and volatile.
THE COMPANY
VoIP, Inc., a Texas corporation, is a holding company of businesses
centered on the development and sale of technology, services and products for
Voice-over-Internet Protocol (VOIP), wireless and multimedia applications.
For a more detailed discussion of our history and our business, see
"Business and Properties" beginning on page 16, and "Management Discussion and
Analysis or Plan of Operation," beginning on page 24.
THE OFFERING
Up to 4,349,000 shares of our issued and outstanding common stock are
being offered and sold by the selling shareholders. We will not receive any of
the proceeds from the sale of those shares. Such shares include 2,549,000 shares
sold in private placements to accredited investors from July 2004 until November
11, 2004 and 1,800,000 shares issuable upon exercise of stock purchase warrants
granted in connection with the sale of the common stock, at exercise prices
ranging from $1.20 to $1.75.
PLAN OF DISTRIBUTION
Sales of common stock may be made by or for the account of the selling
shareholders in the over-the-counter market or on any exchange on which our
common stock may be listed at the time of sale. Shares may also be sold in block
transactions or private transactions or otherwise, through brokers or dealers.
Brokers or dealers may be paid commissions or receive sales discounts in
connection with such sales. The selling shareholders must pay their own
commission and absorb the discounts. Brokers or dealers used by the selling
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shareholders will be underwriters under the Securities act of 1933. In addition,
any selling shareholders that are a broker/dealer will be underwriters under the
Securities Act with respect to the common stock offered hereby. In lieu of
making sales through the use of this Prospectus, the selling shareholders may
also make sales of the shares covered by this Prospectus pursuant to Rule 14 4or
Rule 144A under the Securities Act.
SELECTED FINANCIAL INFORMATION
Balance Sheet Data: September 30, December 31,
2004 2003
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(unaudited)
Total assets $8,567,407 $ 259,458
Long-term liabilities, net -- --
Total liabilities 1,896,516 151,166
Shareholders' equity 6,670,891 108,292
Nine Months Ended Year Ended
September 30 December 31,
Statements of Operations Data: 2004 2003 2003 2002
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Revenue $ 1,015,065 $ 5,075 $ 8,678 $ 1,018
Operating (loss)(1) (4,610,370) (53,621) (101,434) (61,926)
Net (loss) (1) (4,610,370) (53,621) (352,968) (61,926)
Net (loss) per common share (0.42) (0.03) (0.20) (0.04)
(1) Includes $3,520,000 non-cash compensation expenses resulting
from the issuance to executive officers of warrants to
purchase 4,400,000 shares of common stock for $1.00 per share.
See "Financial Statements" beginning on Page F-1.
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RISK FACTORS
You should carefully consider each of the following risk factors and
all of the other information in this Prospectus. If any of the following risks
and uncertainties develops into actual events, our business, financial condition
or results of operations could be materially and adversely affected. If that
happens, the trading price of our Shares could decline significantly. The risk
factors below contain forward-looking statements regarding our company. Actual
results could differ materially from those set forth in the forward-looking
statements.
Cautionary Statement Regarding Forward-Looking Statements
This Prospectus contains forward-looking statements relating to events
anticipated to happen in the future. These forward-looking statements are based
on the beliefs of our management, as well as assumptions made by and information
currently available to our management. Forward-looking statements also may be
included in other written and oral statements made or released by us. You can
identify forward-looking statements by the fact that they do not relate strictly
to historical or current facts. The words "believe," "anticipate," "intend,"
"expect," "estimate," "project" and similar expressions are intended to identify
forward-looking statements. Forward-looking statements describe our expectations
today of what we believe is most likely to occur or may be reasonably achievable
in the future, but they do not predict or assure any future occurrence and may
turn out to be wrong. Forward-looking statements are subject to both known and
unknown risks and uncertainties and can be affected by inaccurate assumptions we
might make. Consequently, no forward-looking statement can be guaranteed. Actual
future results may vary materially. We do not undertake any obligation to
publicly update any forward-looking statements to reflect new information or
future events or occurrences. These statements reflect our current views with
respect to future events and are subject to risks and uncertainties about us,
including, among other things:
o our ability to market our services successfully to new
subscribers;
o our ability to retain a high percentage of our customers;
o the possibility of unforeseen capital expenditures and other
upfront investments required to deploy new technologies or to
effect new business initiatives;
o our ability to access markets and finance network developments
and operations;
o our expansion, including consumer acceptance of new price
plans and bundled offerings;
o additions or departures of key personnel;
o competition, including the introduction of new products or
services by our competitors;
o existing and future laws or regulations affecting our business
and our ability to comply with these laws or regulations;
o our reliance on the Regional Bell operating company's systems
and provisioning processes;
o technological innovations;
o the outcome of legal and regulatory proceedings;
o general economic and business conditions, both nationally and
in the regions in which we operate; and
o other factors described in this document, including those
described in more detail below.
We caution you not to place undue reliance on these forward-looking
statements, which speak only as of the date of this document.
RISK FACTORS RELATED TO OUR INDUSTRY
Our business may be adversely affected by developments in the telecommunications
industry.
Through the year 2000, the telecommunications market experienced rapid
growth spurred by a number of factors, including deregulation in the industry,
entry of a large number of new emerging service providers, growth in data
traffic and the availability of significant capital from the financial markets.
Commencing in 2001 and continuing thereafter, the telecommunications industry
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experienced a reversal of some of these trends, marked by a sharp contraction in
the availability of capital, dramatic reductions in capital expenditures by
service providers and financial difficulties and, in some cases, bankruptcies
experienced by service providers. These conditions caused a substantial
reduction in demand for telecommunications equipment.
We expect the developments described above to continue to affect our
business in the following manner:
o our ability to accurately forecast revenues is diminished;
o our revenues could be reduced; and
o we may incur losses because a high percentage of our operating
expenses are and will continue to be fixed in the short-term.
Our business, operating results and financial condition could be
materially and adversely affected by any one or a combination of the above.
The market for VoIP products for the new public network is evolving and our
business will suffer if it does not develop as we expect.
The market for our products is rapidly evolving. Our technology may not
be widely accepted as a platform for voice and a viable market for our products
may not develop or be sustainable. If this market does not develop, or develops
more slowly than we expect, we may not be able to sell our products in
significant volumes, or at all.
If we do not respond rapidly to technological changes or to changes in industry
standards, our products could become obsolete.
The market for VoIP products is likely to be characterized by rapid
technological change and frequent new product introductions. We may be unable to
respond quickly or effectively to these developments. We may experience
difficulties with software development, hardware design, manufacturing or
marketing that could delay or prevent our development, introduction or marketing
of new products and enhancements. The introduction of new products by our
competitors, the market acceptance of products based on new or alternative
technologies or the emergence of new industry standards could render our
existing or future products obsolete. If the standards adopted are different
from those that we have chosen to support, market acceptance of our products may
be significantly reduced or delayed. If our products become technologically
obsolete, we may be unable to sell our products in the marketplace and generate
revenues.
RISKS RELATED TO OUR COMPANY
Our revenues have been generated from a limited number of customers, and we will
not be successful if we do not grow our customer base.
To date, we have sold our products to a limited number of customers. To
be successful, we will need to greatly expand our customer base and users of our
products.
The growth of our customer base could be adversely affected by:
o customer unwillingness to implement our new VoIP products;
o any delays or difficulties that we may incur in completing the
development and introduction of our planned products or
product enhancements;
o new product introductions by our competitors;
o any failure of our products to perform as expected; or
o any difficulty we may incur in meeting customers' delivery
requirements.
If we do not expand our customer base to include additional customers
that deploy our products in all of their applications, our revenues will not
grow significantly, or at all.
We will not retain customers or attract new customers if we do not anticipate
and meet specific customer requirements or if our products do not interoperate
with our customers' existing networks.
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To achieve market acceptance for our products, we must effectively
anticipate, and adapt in a timely manner to, customer requirements and offer
products that meet changing customer demands. Prospective customers may require
product features and capabilities that our current products do not have. The
introduction of new or enhanced products also requires that we carefully manage
the transition from older products in order to minimize disruption in customer
ordering patterns and ensure that adequate supplies of new products can be
delivered to meet anticipated customer demand. If we fail to develop products
and offer services that satisfy customer requirements, or to effectively manage
the transition from older products, our ability to create or increase demand for
our products would be seriously harmed and we may lose current and prospective
customers.
Many of our customers will require that our products be designed to
interface with their existing networks, each of which may have different
specifications. Issues caused by an unanticipated lack of interoperability may
result in significant warranty, support and repair costs, divert the attention
of our engineering personnel from our hardware and software development efforts
and cause significant customer relations problems. If our products do not
interoperate with those of our customers' networks, installations could be
delayed or orders for our products could be cancelled, which would seriously
harm our gross margins and result in loss of revenues or customers.
We may not become profitable.
We have incurred significant losses since our inception and, as of
September 30, 2004, had an accumulated deficit of $5,235,017. We have not
achieved profitability on an annual or quarterly basis and may incur additional
net losses in future quarters and years. Our revenues may not grow and we may
not generate sufficient revenues to sustain profitability.
The unpredictability of our quarterly results may adversely affect the trading
price of our common stock.
Our revenues and operating results will vary significantly from quarter
to quarter due to a number of factors, many of which are outside of our control
and any of which may cause our stock price to fluctuate. The primary factors
that may affect our revenues and results include the following:
o fluctuation in demand for our VoIP products and the timing and
size of customer orders;
o cancellations or deferrals of existing customer orders or the
renegotiations of existing contractual commitments;
o the length and variability of the sales cycle for our
products;
o new product introductions and enhancements by our competitors
and us; o timing of revenues recognition and amount of
deferred revenues;
o changes in our pricing policies, the pricing policies of our
competitors and the prices of the components of our products;
o our ability to develop, introduce and ship new products and
product enhancements that meet customer requirements in a
timely manner;
o the mix of product configurations sold;
o our ability to obtain sufficient supplies of sole or limited
source components;
o our ability to attain and maintain production volumes and
quality levels for our products;
o costs related to acquisitions of complementary products,
technologies or businesses; and
o general economic conditions, as well as those specific to the
telecommunications, networking and related industries.
Our operating expenses are largely fixed in the short-term and, as a
result, a delay in generating or recognizing revenues for the reasons set forth
above, or for any other reason, could cause significant variations in our
operating results. If revenues for a particular quarter are below expectations,
we may not be able to reduce operating expenses proportionally for the quarter.
Any such revenue shortfall would, therefore, have a disproportionate effect on
our operating results for the quarter.
We believe that quarter-to-quarter comparisons of our operating results
are not a good indication of our future performance. It is likely that in some
future quarters, our operating results may be below the expectations of public
market analysts and investors. In this event, the price of our common stock will
probably substantially decrease.
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We have incurred substantial losses resulting from issuance of warrants at
prices below the market value of the common stock.
On August 4th, 2004, the Company issued 4,400,000 warrants to two executives to
acquire 2,200,000 shares at $1.00 per share each. The additional compensation of
$3,520,000, shown in General and Administrative expenses in the Consolidated
Statement of Operations, is the difference between the market price of the
shares and the $1.00 purchase price.
If we fail to retain needed personnel, the implementation of our business plan
could slow or our future growth could halt.
Our business depends upon highly-skilled engineering, sales, marketing
and customer support personnel. Any failure to retain needed qualified personnel
could impair our growth. Our future success depends upon the continued services
of our executive officers who have critical industry experience and
relationships that we rely on to implement our business plan. None of our
officers or key employees is bound by employment agreements for any specific
term. The loss of the services of any of our officers or key employees could
delay the development and introduction of, and negatively impact our ability to
sell, our products.
We may face risks associated with international sales that could impair our
ability to grow our revenues abroad.
We intend to market our products into international markets. This
expansion will require significant management attention and financial resources
to successfully develop direct and indirect international sales and support
channels. In addition, we may not be able to develop international market demand
for our products, which could impair our ability to grow our revenues. We have
limited experience marketing, distributing and supporting our products
internationally and, to do so, we expect that we will need to develop versions
of our products that comply with local standards. Furthermore, international
operations are subject to other inherent risks, including.
o greater difficulty collecting accounts receivable and longer
collection periods;
o difficulties and costs of staffing and managing international
operations;
o the impact of differing technical standards outside the United
States
o the impact of recession in economies outside the United
States;
o unexpected changes in regulatory requirements and currency
exchange rates;
o certification requirements;
o reduced protection for intellectual property rights in some
countries;
o fluctuation in currency exchange rates;
o potentially adverse tax consequences; and
o political and economic instability
We are entirely dependent upon our VoIP products and our future revenues depend
upon their commercial success.
Our future growth depends upon the commercial success of our VoIP
products. We intend to develop and introduce new products and enhancements to
existing products in the future. We may not successfully complete the
development or introduction of these products. If our target customers do not
adopt, purchase and successfully deploy our current or planned products, our
revenues will not grow.
If we fail to compete successfully, our ability to increase our revenues or
maintain profitability will be impaired.
Competition in the telecommunications market is intense. This market
has historically been dominated by large companies that possess greater
resources and operating histories. We will also face competition from other
large telecommunications and networking companies, some of which have entered
our market by acquiring companies that design competing products. In addition,
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several smaller and most private companies have announced products that target
the same market opportunities similar to those we address. Because this market
is rapidly evolving, additional competitors with significant financial resources
may enter these markets and further intensify competition.
Many of our current and potential competitors have significantly
greater selling and marketing, technical, manufacturing, financial and other
resources. Further, some of our competitors sell significant amounts of other
products to our current and prospective customers. Our competitors' broad
product portfolios, coupled with already existing relationships. may cause our
customers to buy our competitors' products or harm our ability to attract new
customers.
To compete effectively, we must deliver products that:
o provide extremely high reliability and voice quality;
o scale easily and efficiently;
o interoperate with existing network designs and other vendors'
equipment;
o provide effective network management;
o are accompanied by comprehensive customer support and
professional services; and
o provide a cost-effective and space-efficient solution for
service providers.
If we are unable to compete successfully against our current and future
competitors, we could experience price reductions, order cancellations, loss of
revenues and reduced gross margins.
We depend upon contract manufacturers and any disruption in these relationships
may cause us to fail to meet the demands of our customers and damage our
customer relationships.
We rely on a small number of contract manufacturers to manufacture our
products according to our specifications and to fill orders on a timely basis.
Our contract manufacturers provide comprehensive manufacturing services,
including assembly of our products and procurement of materials. Each of our
contract manufacturers also builds products for other companies and may not
always have sufficient quantities of inventory available to fill our orders or
may not allocate their internal resources to fill these orders on a timely
basis. We do not have long-term supply contracts with our manufacturers and they
are not required to manufacture products for any specified period. Qualifying a
new contract manufacturer and commencing commercial-scale production is
expensive and time consuming and could result in a significant interruption in
the supply of our products. If a change in contract manufacturers results in
delays of our fulfillment of customer orders or if a contract manufacturer fails
to make timely delivery of orders, we may lose revenues and suffer damage to our
customer relationships.
We and our contract manufacturers rely on a single or limited source(s) for
supply of some components of our products, and if we fail to adequately predict
our manufacturing requirements or if our supply of any of these components is
disrupted, we will be unable to shop our products.
We and our contract manufacturers currently purchase several key
components of our products from single or limited sources. We purchase these
components on a purchase order basis. If we overestimate our component
requirements, we could have excess inventory, which would increase our costs. If
we underestimate our requirements, we may not have adequate supply, which could
interrupt manufacturing of our products and result in delays in shipments and
revenues.
We currently do not have long-term supply contracts with our component
suppliers and they are not required to supply us with products for any specified
periods, in any specified quantities or at any set price, except as may be
specified in a particular purchase order. In the event of a disruption or delay
in supply, or inability to obtain products, we may not be able to develop an
alternate source in a timely manner or at favorable prices, or at all. A failure
to find acceptable alternative sources could hurt our ability to deliver
high-quality products to our customers and negatively affect our operating
margins. In addition, our reliance on our suppliers exposes us to potential
supplier production difficulties or quality variations. Our customers rely upon
our ability to meet committed delivery dates, and any disruption in the supply
of key components would seriously impact our ability to meet these dates and
could result in legal action by our customers, loss of customers or harm to our
ability to attract new customers.
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If we are not able to obtain necessary licenses of third-party technology at
acceptable prices, or at all, our products could become obsolete.
From time to time, we may be required to license technology from third
parties to develop new products or product enhancements. Third-party licenses
may not be available or continue to be available to us on commercially
reasonable terms. The inability to maintain or re-license any third-party
licenses required in our current products, or to obtain any new third-party
licenses to develop new products and product enhancements could require us to
obtain substitute technology of lower quality or performance standards or at
greater cost, and delay or prevent us from making these products or
enhancements, any of which could seriously harm the competitiveness of our
products.
Our ability to compete and our business could be jeopardized if we are unable to
protect our intellectual property or become subject to intellectual property
rights litigation, which could require us to incur significant costs.
We currently rely on a combination of patent, copyright, trademark and
trade secret laws and restrictions on disclosure to protect our intellectual
property rights. Despite our efforts to protect our proprietary rights,
unauthorized parties may attempt to copy or otherwise obtain and use our
products, services or technology. Monitoring unauthorized use of our products is
difficult and we cannot be certain that the steps we have taken will prevent
unauthorized use of our technology, particularly in foreign countries where the
laws may not protect our proprietary rights as fully as in the United States. If
competitors are able to use our technology, our ability to compete effectively
could be harmed.
In addition, we may receive inquiries from other patent holders and may
become subject to claims that we infringe their intellectual property rights.
Any parties asserting that our products infringe upon their proprietary rights
would force us license their patents for substantial royalty payments or to
defend ourselves and possibly our customers or contract manufacturers in
litigation. These claims and any resulting licensing arrangement or lawsuit, if
successful, could subject us to significant royalty payments or liability for
damages and invalidation of our proprietary rights. Any potential intellectual
property litigation also could force us to do one or more of the following:
o stop selling, incorporating or using our products that use the
challenged intellectual property;
o obtain from the owner of the infringed intellectual property
right a license to sell or use the relevant technology, which
license may not be available on reasonable terms, or at all;
or
o redesign those products that use any allegedly infringing
technology.
Any lawsuits regarding intellectual property rights, regardless of
their success, would be time-consuming, expensive to resolve and would divert
our management's time and attention.
Any investments or acquisitions we make could disrupt our business and seriously
harm our financial condition.
We have made four acquisitions, and we intend to consider investing in,
or acquiring, complementary products, technologies or businesses. In the event
of future investments or acquisitions, we could:
o issue stock that would dilute our current shareholders'
percentage ownership;
o incur debt or assume liabilities;
o incur significant impairment charges related to the write-off
of goodwill and purchased intangible assets;
o incur significant amortization expenses related to purchased
intangible assets; or
o incur large and immediate write-offs for in-process research
and development and stock-based compensation.
Our integration of any acquired products, technologies or businesses
will also involve numerous risks, including:
o problems and unanticipated costs associated with combining the
purchased products, technologies or businesses;
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o diversion of management's attention from our core business;
o adverse effects on existing business relationships with
suppliers and customers;
o risks associated with entering markets in which we have
limited or no prior experience; and
o potential loss of key employees, particularly those of the
acquired organizations.
We may be unable to successfully integrate any products, technologies,
businesses or personnel that we might acquire in the future without significant
costs or disruption to our business.
If we are subject to employment claims, we could incur substantial costs in
defending ourselves.
We may become subject to employment claims in connection with employee
terminations. In addition, companies in our industry whose employees accept
positions with competitors frequently claim that their competitors have engaged
in unfair hiring practices. These claims may result in material litigation. We
could incur substantial costs defending ourselves or our employees again those
claims, regardless of their merits. In addition, defending ourselves from those
types of claims could divert our management's attention from our operations. If
we are found liable in connection with any employment claim, we may incur
significant costs that could adversely impact our financial condition and
results of operations.
The Company is substantially controlled by its management.
As of November 30, 2004, the executive officers, key employees and
directors of the Company and their family members and associates beneficially
owned approximately 68% of the shares of outstanding common stock. Accordingly,
and because there is no cumulative voting for directors, our executive officers
and directors will be in a position to influence the election of all the
directors of the Company and to control through their stock ownership the
business of the Company.
RISKS RELATED TO OUR STOCK
We may seek to raise additional capital in the future, which may not be
available to us, and if it is available, may dilute the ownership of our common
stock.
In the future, we may seek to raise additional funds through public or
private debt or equity financings in order to:
o fund ongoing operations and capital requirements;
o take advantage of opportunities, including more rapid
expansion or acquisition of complementary products,
technologies or businesses;
o develop new products; or
o respond to competitive pressures.
Any additional capital raised through the sale of convertible debt or
equity may further dilute an investor's percentage ownership of our common
stock. Furthermore, additional financings may not be available on terms
favorable to us, or at all. A failure to obtain additional funding could prevent
us from making expenditures that may be required to grow or maintain our
operations.
Our stock price has been any may continue to be volatile.
The market for technology stocks in general and our common stock in
particular, has been and will likely continue to be extremely volatile. The
following factors could cause the market price of our common stock to fluctuate
significantly:
o the addition or loss of any major customer;
o changes in the financial condition or anticipated capital
expenditure purchases of any existing or potential major
customer;
o quarterly variations in our operating results;
o changes in financial estimates by securities analysts;
12
o speculation in the press or investment community;
o announcements by us or our competitors of significant
contracts, new products or acquisitions, distribution
partnerships, joint ventures or capital commitments;
o sales of common stock or other securities by us or by our
shareholders in the future;
o securities and other litigation;
o announcement of a stock split, reverse stock split, stock
dividend or similar event;
o economic conditions for the telecommunications, networking and
related industries; and
o worldwide economic instability.
We do not expect to pay dividends.
We do not anticipate paying any cash dividends on our common stock in
the foreseeable future. We intend to retain profits, if any, to fund growth and
expansion.
USE OF PROCEEDS
WE WILL NOT RECEIVE ANY PROCEEDS FROM THE SALE OF THE COMMON STOCK
OFFERED BY THIS PROSPECTUS. THE SELLING SHAREHOLDERS WILL RECEIVE ALL OF THE
PROCEEDS.
We, however, will receive funds upon any exercise of the warrants held
by the selling shareholders. If any of such warrants are exercised, we will
receive the exercise price for the warrants. Any funds received upon exercise of
the warrants will be applied to our working capital needs. There can be no
assurance that any of the warrants will be exercised.
SELLING SHAREHOLDERS
We have agreed to register 4,349,000 shares of our common stock,
beneficially owned by the selling shareholders. These shares were acquired or
will be acquired by the selling shareholders pursuant to private placement
offerings of our securities (the "Placements") completed in November 2004 and
the warrants issued under the Placements. Included in the total number of shares
we are registering for resale up to 1,800,000 shares of common stock and may be
issued upon the exercise of warrants issued to certain of the selling
shareholders. The shares of common stock beneficially owned by each of the
selling shareholders are being registered to permit public secondary trading of
these shares, and the selling shareholders may offer these shares for resale
from time to time. See "Plan of Distribution."
The following table sets forth the names of the selling shareholders,
the number of shares of common stock owned beneficially by each Selling
Shareholder as of November 17, 2004 and the number of shares that may be offered
pursuant to this Prospectus. Except as may be identified in the footnotes to the
table, none of the selling shareholders has, or within the past three years has
had, any position, office or material relationship with us or any of our
predecessors or affiliates. The table has been prepared based upon information
furnished to us by or on behalf of the selling shareholders.
The selling shareholders may decide to sell all, some, or none of the
shares of commons tock listed below. We cannot provide you with any estimate of
the number of shares of common stock that any of the selling shareholders will
hold in the future.
For purposes of this table, beneficial ownership is determined in
accordance with the rules of the SEC, and includes voting power and investment
power with respect to such shares. All percentages are approximate.
As explained below under "Plan of Distribution", we have agreed to bear
certain expenses (other than broker discounts and commissions, if any) in
connection with the registration statement, which includes this Prospectus.
13
Number
of
Shares Number of
Subject Shares Shares Beneficially
Shares Beneficially to Offered Owned After the
Selling Shareholder Owned Prior to Offering Warrants Hereby Offering
------------------- ----------------------- -------- ---------- -----------------
Number Percent Number Percent
----- ------- ------ -------
Alpha Capital AG (1) 1,125,000 4.8% 500,000 1,125,000 0 *
Cordillera Fund Ltd. (2) 1,125,000 4.8% 500,000 1,125,000 0 *
Stuart Kosh (3) 672,727 2.9% 250,000 602,500 70,227 *
Whalehaven Capital Fund (4) 675,000 2.9% 300,000 675,000 0 *
Partnership (5) 562,500 2.4% 250,000 562,500 0 *
Peter Proly 137,500 * 0 40,000 97,500 *
David L. Ebershoff 85,000 * 0 25,000 60,000 *
William Jones 25,000 * 0 25,000 0 *
John H. Trescot Jr 64,000 * 0 25,000 39,000 *
W. W. Gay 65,000 * 0 25,000 40,000 *
Harold E. Gear 85,000 * 0 25,000 60,000 *
Daniel J. Russell 75,000 * 0 10,000 65,000 *
Thomas Reeves 38,461 * 0 12,000 26,461 *
Edward Ruiz 38,461 * 0 5,000 33,461 *
Steve Litton 87,500 * 0 9,000 78,500 *
Donna Wiegel 30,769 * 0 5,000 25,769 *
Jeff Roberts 20,000 * 0 2,500 17,500 *
Larry Doxtater 30,769 * 0 1,000 29,769 *
Chance Litton 12,500 * 0 1,000 11,500 *
Lacey J. Litton 12,500 * 0 1,000 11,500 *
Gordon Roberts 6,000 * 0 2,000 4,000 *
Leigh Trescot 7,000 * 0 2,000 5,000 *
Marvin O'Dell 12,000 * 0 2,000 10,000 *
Tammy Roberts 2,000 * 0 1,000 1,000 *
C. Ben Bates Jr 4,000 * 0 1,000 3,000 *
Nancy J. Trescot 10,000 * 0 1,000 9,000 *
Shauna Masin 5,000 * 0 1,000 4,000 *
Connie Krupka 3,000 * 0 2,000 1,000 *
David H. Arrington 3,300 * 0 1,000 2,300 *
Eliot Appel 5,000 * 0 1,000 4,000 *
Raymond B. Bunton 3,000 * 0 1,000 2,000 *
Ronald E. Clark 3,000 * 0 1,000 2,000 *
Thomas E. Thornhill 3,000 * 0 1,000 2,000 *
Van Noy Thornhill 3,000 * 0 1,000 2,000 *
Scott Taylor 30,769 * 0 1,500 29,269 *
David Rouen 80,000 * 0 4,000 76,000 *
Edward Orski 61,538 * 0 3,000 58,538 *
Willy Wilhelmsen 25,000 * 0 2,000 23,000 *
David S. Trescot 2,000 * 0 1,000 1,000 *
Tom P. Glosser 10,000 * 0 1,000 9,000 *
Nelsen Teague 15,384 * 0 1,000 14,384 *
Shami Inc 15,384 * 0 1,000 14,384 *
Kelley Smith 2,000 * 0 500 1,500 *
Don Jackson 7,692 * 0 500 7,192 *
John Sutton 23,076 * 0 1,000 22,076 *
Raymond Real 7,692 * 0 500 7,192 *
August Lichtner 7,692 * 0 500 7,192 *
Emmett Tedesco 7,692 * 0 500 7,192 *
Rosemarie Miller 15,384 * 0 1,000 14,384 *
Paul Arita 15,384 * 0 1,000 14,384 *
Theodore Bourneuf 11,692 * 0 1,000 10,692 *
Richard Gomrick 7,692 * 0 500 7,192 *
William Tyson 4,615 * 0 500 4,115 *
14
Tyresa Tyson 4,615 * 0 500 4,115 *
Sue Alvis 7,692 * 0 500 7,192 *
Otis Hubbard 15,384 * 0 1,000 14,384 *
Harvey Lowenstein 7,692 * 0 500 7,192 *
John Sutton 23,076 * 0 1,000 22,076 *
Lawrence Broderick 7,692 * 0 500 7,192 *
Jerrrey Butler 9,230 * 0 500 8,730 *
Edwin Spencer 5,000 * 0 500 4,500 *
Charles Obermeyer 5,000 * 0 500 4,500 *
William Bergeron 10,000 * 0 1,000 9,000 *
Muddy Waters 50,000 * 0 1,000 49,000 *
TOTAL 5,533,054 * 1 ,800,000 4,349,000 1,184,054 *
--------------------------
* Less than one percent.
(1) Alpha Capital AG is a Liechtenstein corporation. The shares
beneficially owned consist of 625,000 shares of common stock, 187,500
warrants exercisable at $1.75 per share and 312,500 warrants
exercisable at $1.20 per share. Alpha Capital AG has informed the
Company that Konrad Ackerman has dispositive and voting power for all
of its shares in the Company.
(2) Cordillera Fund Ltd. is a Texas limited partnership. The shares
beneficially owned consist of 625,000 shares of common stock, 187,500
warrants exercisable at $1.75 per share and 312,500 warrants
exercisable at $1.20 per share. Cordillera Fund Ltd. has informed the
Company that James Andrew or Stephen Carter have dispositive and voting
power for all of its shares in the Company.
(3) Consists of 352,500 shares of common stock, 93,750 warrants exercisable
at $1.75 per share, and 156,250 warrants exercisable at $1.20 per
share.
(4) Whalehaven Capital Fund is a Bermuda company. The shares beneficially
owned consist of 375,000 shares of common stock, 112,500 warrants
exercisable at $1.75 per share and 187,500 warrants exercisable at
$1.20 per share. Whalehaven Capital Fund has informed the Company that
Michael Finkelstein has dispositive and voting power for all of its
shares in the Company.
(5) Stonestreet Limited Partnership is a Canada Limited Partnership. The
shares beneficially owned consist of 312,500 shares of common stock,
93,750 warrants exercisable at $1.75 per share and 156,250 warrants
exercisable at 1.20 per share. Stonestreet Limited Partnership has
advised the Company that Michael Finklestein has dispositive and voting
power for all of its shares in the Company.
PLAN OF DISTRIBUTION
The shares may be sold from time to time by the selling shareholders or
by pledges, donees, transferees or other successors in interest. Such sales may
be made in the over-the-counter market or on any stock exchange on which the
common stock of the Company may be listed at the time of sale or otherwise at
prices and terms then prevailing or at prices related to the then current market
price, or in negotiated transactions. The shares may be sold by one or more of
the following:
o ordinary brokerage transactions and transaction in which the
broker-dealer solicits purchasers;
o block trades in which the broker-dealer will attempt to sell
the shares as agent but may position and resell a portion of
the block as principal to facilitate the transaction;
o purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
o an exchange distribution in accordance with the rules of the
applicable exchange;
o privately-negotiated transactions;
o broker-dealers may agree with the selling shareholders to sell
a specified number of such shares at a stipulated price per
share;
15
o a combination of any such methods of sale; and
o any other method permitted pursuant to applicable law.
The selling shareholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus.
Broker-dealers engaged by the selling shareholders may arrange for
other broker-dealers to participate in sales. Broker-dealers may receive
commissions or discounts from the selling shareholders (or, if any broker-dealer
acts as agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. The selling shareholders do not expect these commissions and
discounts to exceed what is customary in the types of transactions involved.
We have agreed to pay for all costs and expenses incident to the
issuance, offer, sale and delivery of the shares of common stock offered by the
selling shareholders, including all expenses and fees of preparing, filing and
printing the registration statement and prospectus and related exhibits,
amendments and supplements thereto and mailing of such items. We will not pay
sales or brokerage commissions or discounts with respect to sales of the shares
offered by the selling shareholders.
Any broker-dealers or agents that are involved in selling the shares
are "underwriters" within the meaning of the Securities Act in connection with
such sales. In such event, any commissions received by such broker-dealers or
agents and any profit on the resale of the shares purchased by them may be
deemed to be underwriting commissions or discounts under the Securities Act. No
selling shareholder is a registered broker dealer.
We are required to pay all fees and expenses incident to the
registration of the shares, including fees and disbursements of counsel to the
selling shareholders, but excluding brokerage commissions or underwriter
discounts. We have agreed to indemnify the selling shareholders against certain
losses, claims, damages and liabilities under the Securities Act.
DIVIDEND POLICY AND MARKET DATA
Dividends
We have no current plans to pay any future cash dividends on the common
stock. Instead, we intend to retain all earnings, other than those required to
be paid to the holders of the preferred stock, to support our operations and
future growth. The payment of any future dividends on the common stock will be
determined by the Board of Directors based upon our earnings, financial
condition and cash requirements, possible restrictions in future financing
agreements, if any, business conditions and such other factors deemed relevant.
Market Information
The common stock is traded on the Over-the-Counter Bulletin Board under
the symbol VOII. The quotations below reflect inter-dealer prices, without
retail markup, markdown or commissions and may not represent actual
transactions. The following table shows the bid price range of our common stock
for the time periods indicated:
FROM TO HIGH LOW
1/1/2002 12/31/2003 * *
1/1/2004 3/31/2004 0.85 0.80
4/1/2004 6/30/2004 6.75 1.35
7/1/2004 9/30/2004 3.20 1.10
---------------------------
*Trading in the shares of our predecessor was sporadic and did not
produce reported quotations.
16
Holders
As of September 30, 2004, there were approximately 220 shareholders of
record and an unknown number of beneficial holders holding through brokers.
BUSINESS AND PROPERTIES
General
VoIP, Inc. a Texas corporation formerly known as Millennia Tea Masters,
Inc. is a development stage holding company for businesses in two segments. The
first segment is the Company's historical business of importing and selling a
line of fine teas, which business we are ceasing. The second segment is the
development and sale of technology, services and products for voice over
Internet (VoIP), wireless and multimedia applications.
To date our sales have been minimal and we are characterized as a
development stage company. Millennia Tea Masters, Inc. began business in 1998
selling its line of teas imported from Sri Lanka. Absence of capital and
personal forced the company to concentrate its order efforts via direct mail and
the Internet. Management of the Company was receptive to an opportunity to
expand its business into one or more activities providing greater opportunities
for growth.
On March 1, 2004, Millennia 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 as described below.
The Company then moved its headquarters from Dallas, Texas to Fort
Lauderdale, Florida and underwent a change in the Board of Directors and
management.
Products and Services
The Company will market its Voice over IP broadband telephony service
to business and residential consumers through its eGlobalphone, Inc. subsidiary.
eGlobalphone service requires that customers have a high-speed Internet
connection to their home or business. A growing number of households and
business both in the United States and abroad have access to these broadband
connections through their local cable or Telephone Company. Broadband
penetration in the United States is about 58 percent and is expected to reach 70
percent by 2007.
The company plans to expand its service footprint in about 25 new
markets monthly concentrating primary on the major United States metropolitan
areas. The company's plans is to launch service in over 200 markets by year's
end as part of VoIP, Inc.'s strategic focus on IP-based communications services.
International markets will be opened in parallel with domestic US markets, but
at a slower pace and only as market demand is evidenced. Due to the nature of IP
telephony, these markets are not significantly more complex to weave into the
existing back-office design, though often there are regulatory issues in each
nation which must be managed appropriately. The Company's goal is to sign up 2.3
million business and consumer customers by 2007, including domestic and
international subscribers.
eGlobalphone plans to support the marketing of eGlobalphone Service
with an extensive communications campaign that will include mass market
advertising on television, radio and in print and through direct mail, viral
marketing and online advertising in addition to an extensive network of
resellers through out the world. We have emphasized on sales in the
international marketplace through resellers and wholesalers, believing that the
need for a less expensive service is vital in many countries globally. 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. A major opportunity for resale is being
17
developed with a private retail wireless vendor, to allow for a very
"high-touch" interaction with customers. This model has proven to be successful
in wireless sales, and it is believed that the same marketing strategy and
distribution channel will be successful for other telephony services that the
company can offer consumers.
Customers can access the eGlobalphone network for long-distance
telephony from any high speed Internet connection anywhere in the world. The
eGlobalphone service provides a two line patent pending MTA (Multimedia Terminal
Adaptor) with built-in router and many enhanced functions such as Quality of
Service (QoS) bandwidth management, failure-resistant backup systems, and
low-bandwidth codec support. The MTA is manufactured by iCable System Co. Ltd. a
Korean company that is contractually tied to VoIP-Solutions, Inc a wholly owned
subsidiary of VoIP, Inc. By having our own propriety MTA with custom designed
enhanced features we feel that we have a distinct advantage over our competition
based on these enhancements and our patent pending 911 emergency access.
eGlobalphone is believed to be the only VoIP (voice over internet protocol)
company offering 911 emergency access and integration with the existing
infrastructure without the use of a third party database. This proprietary
system utilizes an automated switching circuit 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 Service is different than traditional phone services
because through the use of IP-based networks it will offer customers typical
features such as call waiting, three-way calling, and call forwarding, and far
more advanced ones as well. Indeed, consumers will get unprecedented convenience
and control with advanced (and often free) features including: voicemail, caller
ID, call transfer, caller ID blocking, call forwarding, and voicemail-to-email
service. Low-priced directory information (411) services, conference call
capabilities, "follow-me" calling, and other features are offered as additional
line items or per-call products which contribute to the revenue stream for this
product.
There are significant new features that the company will introduce in
the next year which are currently under development. These features will further
extend the abilities of the platform to function as a flexible telephony tool
for end users and not merely be a replacement for traditional telephony. Much in
the same way that cell phone features have driven the successful launch of new
companies in the mobile market, eGlobalphone believes that a combination of
features in the hardware and service will quickly develop the customer base.
The Company's VoIP Solutions, Inc. subsidiary is an emerging global
service provider of Voice over IP based solutions to Internet Service Providers,
Telecommunications Service Providers and Cable Operators in strategic countries
around the world. VoIP, Inc, through its subsidiary, 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. VoIP, Inc. has applied for a patent for its state of the art VoIP
Multimedia Terminal Adaptor which today supports the FCC Commission's desire for
VoIP providers to deliver Emergency 911 Calling and Law Enforcement Access
capabilities to the marketplace.
VoIP, Inc. plans to support marketing of the VoIP-Solutions subsidiary
with an extensive communications campaign that will include mass market
advertising directly to industry leaders, and through direct mail, viral
marketing and online advertising in addition to an extensive network of value
added resellers through out the world. The biggest problem facing small carriers
and cable operators is that they lack the money to build a telephone network.
Prior to this year, getting into voice was considered capital-intensive and out
of reach for small and medium-level operators, thus one of the primary reasons
that VoIP-Solutions has been created. We have entered into the market to offer
the `back office' infrastructure to make voice possible for small and
medium-sized cable companies, IPS's and MSO's.
More and more cable companies want to get into phone service as a way
to remain competitive, especially as satellite companies and even local
telephone carriers are snatching away customers by offering video and high-speed
Internet capability. It's a free-for-all land grab in the home telephone market
and one of the reasons that we have put so much emphasizes on our VSP (Virtual
Service Provider) model. This product is a perfect fit for the small and
medium-sized cable companies, IPS's and MSO's allowing them to maintain customer
ownership and increase revenues while eliminating the cost of network
infrastructure and the learning curve that is sometimes, an expensive lesson.
18
On July 14, 2004 the company announced its first Virtual Service
Provider partner; and continues to establish its products in a niche market with
small- and medium-sized cable companies, IPS's and MSO's. The company plans to
add over 100 Virtual Service Provider partners by the December 31, 2004, year
end.
We have emphasized on sales in the international marketplace through
resellers and wholesalers, believing that the need for a less expensive service
is vital in many countries across the globe. 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.
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) and PCO, (Private Cable 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 recognized 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 VoIP-Solutions MTA product and knowledge.
Services provided in a potential VoIP Solutions package to customer
could 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
The company maintains a stock of all VoIP-Solution's products for sale
to end-users, carriers and resellers. Included is the Flag Ship product "MTA"
(Multimedia Terminal Adaptor) the MTA's are manufactured with varying options to
meet the demands of today's network operators for tomorrows future IP networks,
products include:
VoIP ADSL Modem (SIP)
o MTA-A201C - 1 line VoIP, 1 line PSTN
o MTA-A201W - 2 lines VoIP / LAN (802.11b) or (g)
o MTA-A201CW - 1 line VoIP, 1 line PSTN / LAN (802.11b) or (g)
19
VoIP Cable Modem (SIP)
o MTA-C102 - 2 Line VoIP
o MTA-C101C - 1 Line VoIP, 1 Line PSTN
o MTA-C102W - 2 lines VoIP / LAN (802.11b) or (g)
o MTA-C102CW - 1 line VoIP, 1 line PSTN / LAN (802.11b) or (g)
VoIP MTA (SIP)
o MTA-102 - 2 lines VoIP
o MTA-102C - 1 line VoIP, 1 line PSTN
o MTA-102W - 2 lines VoIP / LAN (802.11b) or (g)
o MTA-102CW - 1 line VoIP, 1 line PSTN / LAN (802.11b) or (g)
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.
DTNet Technologies Inc. is a primary importer and distributor of cable
network components, cable modems, ADSL modems, wireless products and other
Customer Premise Equipment for the cable and Telco industries. Established in
1999, their 1,000 plus clients include AT&T, Comcast, Cox Cable, Bell South,
Time Warner as well as regional and local Multiple Service Operators (MSO's).
DTNet has experienced strong growth sales for the past three years have
increased from approximately $2 million in 2001 to $2.9 million in 2002 and $4.7
million in 2003. With the addition of the products from VoIP, Inc., specifically
the Multi Media Terminal Adaptor and the Virtual Service Provider solution, 2004
sales are projected to reach $7.5 million. DTNet has established itself as a
respected supplier to the cable industry. This includes a strong relationship
with the National Cable Television Cooperative (NCTC) representing over 1000
cable operator members.
VoIP Inc. acquired 100% of DTNet on June 25, 2004 through a stock
purchase. In addition to the existing business and revenues, the acquisition
provided VoIP Inc. with direct access to a valuable market and a nationwide
sales force to sell products and services from other VoIP Inc. companies. There
is also a demand within the group for the existing products distributed by
DTNet. Additionally, the existing customer base of DTNet consists of firms which
are the primary target for other VoIP, Inc. products. This customer base and the
existing relationships that DTNet has developed is one of the primary benefits
of the acquisition strategy.
VoIP, Inc.'s DTNet subsidiary seeks to pursue cable companies for voice
deals: The availability of VoIP hardware and services from other VoIP Inc.
subsidiaries has positioned DTNet to be a leader in marketing VoIP, Inc.
products and services into this channel. The NCTC is in the process of
evaluating DTNet as the preferred VoIP vendor and contracts are in progress with
over 20 members for the supply of outsourced services, Customer Premise
Equipment (CPE), and wholesale long-distance, local, and international call
termination/origination. The desire of cable companies to diversify their
service offerings to increase their revenue and profitability will be the
motivation for interest in the combined offerings of DTNet and VoIP, Inc.'s
newly combined abilities and product lines.
The Company previously announced a joint venture arrangement known as
iMax Solutions with iCable Co., Ltd. to market iCable products in the Western
Hemisphere. Such venture required a $5 million capital contribution from the
20
Company in exchange for sales contracts and leads from iCable that would be
divided 51% to VoIP and 49% to iCable. The Company determined that its resources
would be better utilized by renegotiated the relationship with iCable to a world
wide distribution arrangement.
On August 12, 2004 VoIP Inc. renegotiated the relationship with iCable
to a distribution arrangement for North America and South America. As part of
the new Agreement in principle, iCable is no longer obliged to warrant the sales
revenue of iMax. This increases VoIP Inc.'s holding to 100% of iMax Solutions
Inc. with no further requirement for VoIP Inc. to pay iCable $5 million for the
distribution rights.
The Company has made an agreement in principle with iCable to terminate
the Investors Agreement and instead enter into a Distribution Agreement for
North and South America. Such arrangement will result in (i) elimination of the
VoIP capital contribution, (ii) iMax being owned 100% by VoIP, and (iii) the
elimination of the guarantee of sales from iCable.
VoIP Inc. is actively selling iCable products to a growing number of
OEM customers, resellers, wholesale Virtual Service Providers and uses of the
eGlobalphone VoIP service. The new agreement will not materially change the
forecasted sales of iMax. The joint development of products and features
specifically catering for the U.S. market continues.
Employees; Corporate Headquarters
VoIP, Inc. currently employs 35 persons in the following capacities: 5
executive officers, 8 general administrative, 11 sales and marketing, and 11
technology personnel, respectively. We consider our relations with our employees
to be good. We have never had a work stoppage, and none of our employees is
represented by collective bargaining agreements. We believe that our future
success will depend in part on our ability to attract, integrate, retain and
motivate highly qualified personnel, and upon the continued service of our
senior management and key technical personnel. None of our key personnel are
bound by employment agreements that prohibit them from ending their employment
at any time. Competition for qualified personnel in our industry and
geographical location is intense. We cannot assure you that we will be
successful in attracting, integrating, retaining and motivating a sufficient
number of qualified employees to conduct our business in the future.
Our corporate headquarters are located at: 12330 SW 53rd Street, Ft.
Lauderdale, FL 33330.
Legal Proceedings
VOIP Corp. v. VoIP, Inc., Case No. 04-CA-8140-35, in the Circuit Court
of the Ninth Judicial Circuit, Orange County, Florida. Plaintiff accuses VOIP of
deceptive trade practices and unfair competition in using a name deceptively
similar to Plaintiff's and seeks unspecified damages and injunctive relief. VoIP
intends to defend the case and believes it has meritorious defenses based upon
(i) VoIP, Inc. is qualified to do business in Florida under the name VoIP
Holdings; (ii) VoIP also conducts business in Florida under the name of VoIP
Solutions; (iii) VoIP is a generic and unprotectible term -- every federal
trademark using "VOIP" requires that the applicant disaffirm any protection of
"VOIP"; (iv) there are 24 other Florida companies using the name "VOIP" as part
of its name; and (v) the original Florida corporation know as "VOIP, Inc.",
which predates the Plaintiff's name filing, is now owed by VoIP.
Manufacturing and Sources of Supply
Our products are manufactured by iCable System Co. Ltd. a South Korean
Company. iCableSystem provides offshore inventory and delivery services
worldwide, and large scale orders are shipped directly from Korea to providers
at any destination. iCableSystem has in-house PC board pressing, case design and
manufacturing, and board processing facilities, making them less susceptible to
supply chain dropouts that may cause other manufacturers difficulty.
The primary chipset used in the CPE units is the Broadcom chipset, for
which there is an available supply path and rapid delivery periods. It is not
anticipated that there will be any significant shortfalls in the ability to
produce equipment or deliver equipment, given past experience and current
operating procedures, even under heavy volume sales.
21
Equipment for VoIP Solutions, Inc. which involve a "solution" delivery
for a customer are primarily software driven, and do not involve significant
hardware resources that are manufactured in-house (except for CPE, as
mentioned.)
Inventories
All the inventories are kept in our local facility in Ft. Lauderdale,
Florida. Our local inventory and supply methods provide adequate capacity for
most order volumes, but special orders or multi-thousand unit deliveries are
typically drop-shipped from Korea. All softswitch and "back office" solution
materials are also kept on-site for customer deployment, except in cases where
local purchase of equipment is less difficult or less costly than in-country
sourcing.
The "cascading provisioning" server method that is used in the network
allows for the "out-of-box" configuration and deployment of CPE hardware without
ever being configured on the customer's network. This means that deployment time
can be reduced drastically for field-shipping equipment, and no intermediate
warehouse or customer care steps are required. Devices are delivered from
overseas and can be directly put into production by any of our customers without
manual configuration. This is significantly different than most other hardware
and softswitch providers, in that our solution removes the requirement for
customer configuration of equipment (which is confusing and slow) or two-step
shipping (which is costly and slow.)
Customers
Our initial significant customers include the following: Anew
Broadband, Inc., Cima Telecom, Inc., SpeedVoip, Inc., Voip4U, Inc., eVoice
International, Inc., Acumen Telecommunications, Inc., Virtual Communications,
Inc., Parrot Communications, Inc., and FMC Telecom, Inc.
We also have the following companies testing or in the final field beta
tests of our hardware and various products: IBM, Scientific Atlanta, Sprint,
Alcatel, Quest and DSLI.
Marketing and Business Strategy
eGlobalphone plans to support the marketing of eGlobalphone Service
with an extensive communications campaign that will include mass market
advertising on television, radio and in print and through direct mail, virtual
marketing and online advertising in addition to an extensive network of
resellers through out the world. We have emphasized sales in the international
marketplace through resellers and wholesalers, believing that the need for a
less expensive service is vital in many countries globally. 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. A major opportunity for resale is being developed with a
private retail wireless vendor, to allow for a very "high-touch" interaction
with customers. This model has proven to be successful in wireless sales, and it
is believed that the same marketing strategy and distribution channel will be
successful for other telephony services that the company can offer consumers.
Most competitors are focused on the United States market. While
providing innovative and focused solutions for reseller channels in the United
States, we will be focused on the international market. The highest margin
revenue stream is from the off net termination of international calls from
customers outside the United States. The extensive industry experience and
potential customer and partner contacts of the Company executives will assist
the rapid establishment of competitive services and aggressive international
sales channels.
Each country has domestic and regional markets. Through the use of
multiple web sites, regional rate plans and multi-language support, and
multi-currency billing, we will work with in-country partners to provide local
Points of Presence (POP's) that will permit local telephone and 800 numbers to
be available for local marketing and for the sale to overseas customers.
Interconnection with local carriers and PTT's will in turn reduce the off net
termination costs to that country and open access to the multi-billion dollar
international wholesale minutes market.
22
Competition
At the present time, we believe that no direct competitor offers the
full suite of components that VoIP, Inc. will be able to provide to customers
once all pending acquisitions are completed. Each individual solution is offered
by a wide variety of competitors, most of which are larger and better
capitalized than we.
These primary competitors of each company include the following:
eGlobalphone: Vonage, Packet8, DeltaThree, Voicepulse
VoIP Solutions/iMax: (Hardware): Sipura, Grandstream, Cisco, Mediatrix
VoIP Solutions: (SIP softswitch): Nuera, Broadsoft, Pingtel, Nortel
VoIP Solutions: (integration): Accenture, Hughes Software
Wireless: (Hardware) Cisco, 3 Com, Motorola, Terabeam
Industry Overview
According to Internet World - Stats, the current world market for
telecommunications is estimated at 513 billion dollars and the worth of global
information industry as at least 1.3 trillion dollars.
The advance of broadband delivery into residential and small offices
has opened up a large market for high-speed services to be delivered in a manner
that is independent of the actual wires being connected to each property. Nearly
three out of four households with basic phone service have Internet access, and
of that 75% of all households in the US, almost half have broadband access.
(Source: Nielsen/NetRatings) The penetration of broadband is rising at around
2.5% per month. These growth figures are even higher in other nations, which
have only recently been implementing systems after understanding and modeling
their platforms on what has become the standard in the United States.
An additional factor in the cost savings of VoIP is the relatively
inexpensive nature of IP data at the "core" of the Internet. In the late 90's, a
large amount of capital was invested in fiber connectivity in between major
metropolitan areas. Due to market forces, this fiber became available at
incredibly inexpensive rates, and a "bandwidth glut" or "fiber glut" occurred at
the core of the Internet, driving costs down.
The costs paid by consumers for traditional telephony are still in the
hundreds of billions of dollars. It is possible for VoIP services to undermine
large sections of that revenue and provide significant cost savings by using
packet-switched networks to deliver the same call quality to the same
destinations, but at a heavily discounted rate to the service provider. The
"fiber glut" at the core of the network is fueling this growth by keeping
bandwidth prices low for IP services even over long distances, while traditional
telephony providers are unable to compete against the new model that strips the
usefulness from their antiquated telephony equipment, which is still capitalized
at billions of dollars over its (now) very low value.
Intellectual Property
The Company has developed several important intellectual property
features.
VoIP. The patent pending E911 bypass system developed and integrated
into the CPE is a key differentiator in equipment for VoIP deployment. The
equipment connects to the existing E911 emergency call services platform and
permits 911 calls, even in situations where there is a network failure or power
failure, and requires no configuration by the end user.
The "cascading provisioning server" feature for deployment of
zero-touch hardware deployment is additionally a novel approach with respect to
the end-user device market, and is a new development that is exclusive to VoIP,
23
Inc.'s platform. The system allows each device to auto-provision without any
customer interaction even in situations where there are multiple levels of VAR
or resellers to distribute the product to their customers (to any number of
resale levels.) This allows for installations without any customer service or
technical support time spent in configuration issues.
The company has developed significant software resources in all areas
of it's business. Many of the core features of the Company's services and
deliverables are constructed on software that has been custom-designed and
completely owned by the Company. Hardware inventory control, accounting, least
cost routing, customer records, telephony element management, network monitoring
and administration, billing reconciliation, and internal sales resource tools
are some of the integrated features of the Company's software development
effort.
Regulation
The company currently is operating in unregulated industry segments.
The hardware, integration, softswitch, and wireless portions of the firm are
expected to remain unthreatened by regulation in major nations in which the
Company expects to do business. The eGlobalphone service offering may
potentially experience regulatory pressures as the United States makes changes
in its telecommunications law to encompass VoIP services. The imposition of
government regulation on our business could adversely affect our operations by
requiring additional expense to meet compliance requirements.
1) Regulation is expected to be applied the following areas of our
service: E911, CALEA (law enforcement wiretap) and USF taxation.
a. Our existing E911 service already addresses this concern, and
we are working with industry groups to also address E911
delivery via the network when that technology becomes mature
and affordable. The combined delivery methods should
adequately protect the company against negative regulatory or
economic pressure in the future.
b. CALEA data delivery is already almost complete in the system
for the basics of call status and PIN tapping. The additional
steps of call monitoring and call splitting are yet to be even
defined, though it is not anticipated that their deployment
would require anything other than minor expense for adequate
compliance with these laws, given current technology.
c. USF taxation has been explicitly not required for data
services. The classification of VoIP as a data service has
clearly indicated that it is outside of the USF charter.
2) Comments by FCC staff have indicated that VoIP will be handled in a
relatively "hands-off" manner until the industry is more mature and
capable of competing directly with RBOC and ILEC carriers. This is
anticipated to be at least another two years. Importantly, comments by
the FCC have addressed VOIP traffic as "interstate", which means that
State-specific legislation will most likely have little effect on costs
for calls terminated through VOIP networks.
3) Even with additional regulations if they were to be applied, the costs
of compliance would be significantly lower than those of traditional
telephony, as these regulatory structures are already being considered
and compensated for in design aspects of the network.
4) Our focus on non-US customers should limit our exposure from one
nation's regulatory and tariff environment.
24
MANAGEMENT DISCUSSION AND ANALYSIS
or plan of operation
The information presented in this section should be read in conjunction
with the information contained in the financial statements, including the notes
thereto, and the other financial statements appearing elsewhere in this
Prospectus.
General
The following discussion should be read in conjunction with the
Consolidated Financial Statements and the notes thereto and the other financial
information appearing elsewhere in this Prospectus. Certain statements contained
in this Prospectus 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. A further list and
description of these risks, uncertainties and other matters can be found
elsewhere in this Prospectus. 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.
Balance Sheet Data: September 30, 2004
(unaudited) December 31, 2003
Total assets $ 8,567,407 $ 259,458
Long-term liabilities, net - -
Total liabilities 1,896,516 151,166
Shareholders' equity 6,670,891 108,292
Nine Months Ended Year Ended
September 30, 2004 (unaudited) December 31,
Statements of Operations Data: 2004 2003 2003 2002
Revenue $ 1,015,065 $ 5,075 $ 8,678 $ 1,018
Operating (loss)(1) (4,610,370) (53,621) (101,434) (61,926)
Net (loss) (1) (4,610,370) (53,621) (352,968) (61,926)
Net (loss) per common share (0.42) (0.03) (0.20) (0.04)
(1) Includes $3,520,000 non-cash compensation expenses resulting from the
issuance to executive officers of warrants to purchase 4,400,000 shares
of common stock for $1.00 per share.
See "Financial Statements" beginning on Page F-1.
25
Results of Operations - 2003 compared to 2002.
The Company commenced operations during the fourth quarter of 1998 and
focused significant resources through December 2003 in procuring and importing
its tea inventory and developing sales and distribution channels. Accordingly,
the Company has generated only minimal revenues and experienced cumulative
losses of approximately $624,647 which amount includes the recording of an
inventory reserve of $251,534.
During this start-up phase, the Company was dependent upon cash
advances from affiliates to provide working capital. The Company's continued
existence is dependent upon its ability to generate sufficient cash flows from
operations to supports its daily operations as well as provide sufficient
resources to retire any incurred liabilities and/or obligations on a timely
basis.
Through direct mail advertising, we increased our customer base during
the year, but still at a very low level. Budget constrains limited our campaign
expenditures, thus growth will continue to be limited. We continued to explore
other avenues which may bring us increased revenue and customer base, but the
results are as yet unknown.
Even though tea has unlimited shelf life if kept under proper
conditions, any deterioration of our products, which represents essentially all
of the Company's assets, could become worthless.
For the respective quarters ended September 30, 2004 and 2003, the
Company had revenues of $929,767 and $4,291.
For the respective nine month periods ended September 30, 2004 and
2003, the Company had revenues of $1,015,065 and $5,075.
The significant increase in revenues was provided primarily by
Voipamericas and DTNet. As mentioned in the financial statements, the company
acquired DTNet Technologies, Inc. in June 2004 and Voipamericas in September
2004. DTNet provides customer premises equipment to cable and DSL Internet
providers throughout North America. DTNet sales were approximately $4.7 million
in 2003. Voipamericas revenues for the first nine months of the year were $1.4
million. Management believes that the acquisitions of DTNet and Voipamericas
will provide proven distribution channels and leadership in sales throughout the
Americas. DTNet and Voipamericas complement the company's strategy to deliver
Voice over Internet Protocol over a wireless local loop and deliver service
provider solutions to cable operators.
Net losses for the respective quarters ended September 30, 2004 and
2003 were $4,179,389 and $21,955. Net loss per share was approximately $0.21 and
$0.01 respectively for each period. Total net losses for the respective nine
months ended September 30, 2004 and 2003 were $4,610,370 and $53,621. Net loss
per share was approximately ($0.42) and $(0.03) respectively for each nine month
period. 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. The
difference between the market value and the $1.00 share price is $3,520,000.
Additionally, there is an increase of $884,937 in operating costs attributable
basically to start up operations.
Liquidity and Capital Resources
The Company financed its operations during calendar year 2003 through
cash advances (loans) from its affiliates. The loans that have been received
from affiliates are unsecured. We have not executed any promissory notes or
other instruments, but merely receive the funds based upon a verbal agreement
that we are to repay any and all such loans from any excess cash that we may
have on hand upon sale of products in the future.
Liquidity for the period from inception through September 30, 2004 has
been mainly provided by sales of common stocks through private placements and
borrowing from affiliates. Management has taken actions directly related to the
generation of product sales during calendar 2004 and anticipates that these
efforts will be sufficient to provide sufficient resources to sustain its
operations during 2005.
26
The Company anticipates 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.
In November, 2004, the Company formalized funding in the amount of
$1,550,000 by issuing 2,249,500shares of common stock to five subscribers.
Payments Due by Period
The following table illustrates our outstanding debts and the terms of
that debt as of March 31, 2004:
Less than 1 1-3 3-5 More than
Contractual Obligations Total Year Years Years 5 Years
-----------------------------------------------------------------------------------------------------
Accounts Payable $ 1,169,840 $ 1,169,840 0 0 0
Bank Line Of Credit 350,000 350,000 0 0 0
Other Liabilities 299,157 299,157 0 0 0
Notes Payable 77,519 77,519 0 0 0
-----------------------------------------------------------------------
Total 1,896,516 1,896,516 0 0 0
-----------------------------------------------------------------------
Market Risk
We market investment securities issued by various securities issuers.
The issuers of these products retain all interest rate and default risk.
Recent Developments
We have recently made a number of announcements regarding key business
development milestones that should start to materially contribute to our
revenues and profitability improvement during the last quarter of 2004.
On December 9, 2004, VoIP Inc. announced that it has hired Bill Burbank
as Chief Operating Officer. Burbank joins VoIP, Inc., at a time when the company
is experiencing tremendous growth. Burbank has vast experience working in senior
Business Development and Operations positions with both private and public
companies. He was co-founder of Incite Global Services, a consulting firm
specializing in Business Development, Operations and Crisis Management for
software companies in the communication space. Prior to IGS, he was co-founder
and was President of Foresight Technology. At Foresight, he played an
instrumental role in fostering Foresight's leadership in computer telephone
integration (CTI) and customer premise-based speech recognition products. Prior
to Foresight, Burbank served as Vice President of Worldwide Sales and Marketing
for Registry Magic Inc., where he led the sales of the company's speech
recognition call routing system, which became the leading product in the
industry. As Vice President of Sales for The Automatic Answer Inc., a voice and
unified messaging software company, he drove sales to achieve the growth that
earned the company the distinction of being named one of Inc. Magazine's 500
fastest growing private companies for three consecutive years.
On December 8, 2004, VoIP Inc. announced that it has signed a Virtual
Service Provider (VSP) Agreement with Parrot Communications Ltd., a Hong Kong
company. Service will be first launched in the New Zealand market where Parrot
has a subsidiary and will be expanded into other markets. Under the Agreement,
VoIP Inc. will supply their proprietary Internet Telephony services so that
Parrot can establish services throughout the Asia Pacific region. In addition,
VOIP Inc. will be supplying Multimedia Terminal Adaptors (MTA's) from its wholly
owned subsidiary, VoIP Solutions Inc. ECommerce, web site applications and
customer billing will be outsourced to VoIP Inc. The service will be launched
this month primarily to small and medium size businesses initially in New
Zealand and Australia with plans to expand operations into Japan and China early
next year.
27
On October 19, 2004, VoIP Inc. announced at the Fall VON 2004
conference that it has signed a Virtual Service Provider contract with J & N
Cable Systems a Private Cable Operator (PCO) located in the western US serving
10 cities in 2 states. J & N Cable Systems will offer voice over IP (VoIP)
telephone service to its customer base, allowing those customers to bypass
traditional phone companies, signaling the start of a technological shift that
could change the cable industry--one of the biggest and most important
industries in the US economy.
On October 8, 2004, VoIP Inc. announced the company has been awarded a
VoIP Service Provider Award by Technology Marketing Corporation (TMC(R))'s
INTERNET TELEPHONY(R) magazine at the INTERNET TELEPHONY Conference and EXPO
Fall 2004 in Los Angeles. The three day event is the largest VoIP trade show in
the world. The INTERNET TELEPHONY VoIP Service Provider Award is presented to
companies whose VoIP visions have delivered on the promise of excellence for
their clients in a genuine and measurable way.
On October 7, 2004, VoIP Inc. announced the company has been awarded a
VoIP Service Provider Award by Technology Marketing Corporation (TMC(R))'s
INTERNET TELEPHONY(R) magazine at the INTERNET TELEPHONY Conference and EXPO
Fall 2004 in Los Angeles. The three day event is the largest VoIP trade show in
the world. The INTERNET TELEPHONY VoIP Service Provider Award is presented to
companies whose VoIP visions have delivered on the promise of excellence for
their clients in a genuine and measurable way.
On September 29, 2004, VoIP Inc. announced that VoIP-Americas has been
named to the 2004 "pulver100" - which is the VoIP industry's premiere listing of
growth companies that represent the future of the communications ecosystem.
VoIP-Americas has been named to the list due to its most prestigious listing of
growth companies that represent the future of the communications ecosystem.
On September 24, 2004, VoIP Inc. announced a 1 million minute increase
in its wholesale traffic division VoIP-Americas. VoIP-Americas is a wholly-owned
subsidiary of VoIP, Inc. and comprise the wholesale VoIP traffic division.
On September 15, 2004, VoIP Inc. announced that it's wholly owned
subsidiary, VoIP Solutions, Inc., has received a purchase contract for its
MTA-V102 Multimedia Terminal Adapters valued at more than $1 million (USD) from
FMC Telecom of Davie, Florida.
On August 16, 2004, VoIP Inc. announced the expansion of its
residential and business Voice over Internet Protocol (VoIP) phone service,
eGlobalphone. The expansion includes Texas, Ohio, Washington, Pennsylvania,
North Carolina, Michigan, Minnesota and Missouri. The availability of the
eGlobalphone Service to residents and businesses in 8 additional states marks
the commitment by VoIP, Inc. the parent company of eGlobalphone to meet the
needs of customers globally; offering a high-tech alternative for their
communications needs.
On July 14, 2004, VoIP Inc. announced that it has signed a Virtual
Service Provider (VSP) Agreement with VOIP-4U, a United Kingdom-based Telco.
Under the Agreement, VoIP Inc. will supply their proprietary media gateways for
local Interconnection with British Telecommunications service providers in
addition to supplying MTA's (Multimedia Terminal Adaptors) from its wholly owned
subsidiary, VoIP-Solutions Inc.
MANAGEMENT
Directors, Executive Officers, Promoters and Control Persons
The following table contains information concerning the Company's
executive officers and directors.
Start Date
Name Age Position with Company with Company
-------------------------------------------------------------------------------
Steven Ivester 40 Chairman, Chief Executive Officer, March 2004
Secretary and Sole Director
Clive Raines 45 President of International Operations March 2004
John Todd 33 Chief Technology Officer March 2004
Osvaldo Pitters 45 Chief Financial Officer May 2004
Bill Burbank 46 Chief Operating Officer December 2004
28
Steven Ivester, Chairman, Chief Executive Officer, Secretary and Sole
Director, joined the Company in March 2004 when he made an agreement with prior
management to contribute the assets and intellectual property rights of two
start-up companies, eGlobalphone, Inc. and VoIP Solutions, Inc. Prior to that,
since early 2001, he was a self-employed consultant for other
voice-over-Internet companies. From early 1997 until the present, he has also
been engaged as Chief Executive Officer of Navigator, PC, which supplies
computer-navigation and display equipment to the U.S. military services.
Clive Raines, President of International Operations, developed an
international business model for USA Talks. He was relocated as European CEO in
London, UK from 1998 to 2002. During 2003 he worked with Voiceglo as a Director.
John Todd, Chief Technology Officer, has been involved since 1999 with
Internet companies, including Collocation Corporation, Inc. from September 2001
to December 2002 as network Services Manager; 10-20.com, Inc. from September
2001 to present as President; Onyx Networks.
Osvaldo Pitters, Chief Financial Officer and Treasurer, was employed
from January 2003 to April 2004, as Controller of Cima Telecom Group. From
January 2002 to January 2003, he was the Chief Operating Officer of Price
Waterhouse Coopers-Dominican Republic. He also worked seven years with Price
Waterhouse Chile and two years with Price Waterhouse London, England. He also
worked with Pepsi Co. for several years in several countries within the Latin
American Division.
Bill Burbank, Chief Operating Officer, was co-founder of Incite Global
Services, a consulting firm specializing in Business Development, Operations and
Crisis Management for software companies in the communication space. Prior to
IGS, he was co-founder and was President of Foresight Technology. At Foresight,
he played an instrumental role in fostering Foresight's leadership in computer
telephone integration (CTI) and customer premise-based speech recognition
products. Prior to Foresight, Burbank served as Vice President of Worldwide
Sales and Marketing for Registry Magic Inc., where he led the sales of the
company's speech recognition call routing system, which became the leading
product in the industry. As Vice President of Sales for The Automatic Answer
Inc., a voice and unified messaging software company, he drove sales to achieve
the growth that earned the company the distinction of being named one of Inc.
Magazine's 500 fastest growing private companies for three consecutive years
Executive Compensation
Summary Compensation Table. The following table sets forth the
compensation earned by the Company's Chief Executive Officer for the year ended
December 31, 2003 in salary and bonus for services rendered in all capacities to
the Company for the fiscal years ended December 31, 2003, 2002 and 2001:
Annual Compensation Long-Term Compensation
------------------- ----------------------
Securities
Underlying
Other Annual Options or All Other
Name/Principal Position Year Salary Bonus Compensation Warrants Compensation
Kevin B. Halter, CEO (1) 2003 $ 0 $ 0 $ 0 0 0
2002 $ 0 $ 0 $ 0 0 0
2001 $ 0 $ 0 $ 0 0 0
29
----------------
(1) Mr. Halter resigned in 2004.
Value of Unexercised
Number of Securities Underlying In-the-Money Options at
Unexercised Options at Fiscal Fiscal
Year End Year End
Number of
Shares
Acquired or Realized
Name Exercised Value Exercisable Unexercisable Exercisable Unexercisable
---- --------- ----- ----------- ------------- ----------- -------------
None
Estimated Future Payments under
Non-Stock Price-Based Plans
Number of Performance or
Shares, Under or Other Period Until Threshold Target Maximum
Name Other Rights # Maturation or Payout ($ or #) ($ or #) ($ or #)
---- -------------- --------- -------- -------- --------
None
Stock Option Plan
The Company's Stock Option Plan (the "2004 Option Plan") provides for
the grant to eligible employees 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 Board of Directors administers and interprets the Option Plan and
is authorized to grant options thereunder to all eligible employees of the
Company, including officers. The Board of Directors designates the optionees,
the number of shares subject to the options and the terms and conditions of each
option. Each option granted under the Option Plan must be exercised, if at all,
during a period established in the grant which may not exceed 10 years from the
later of the date of grant or the date first exercisable. An optionee may not
transfer or assign any option granted and may not exercise any options after a
specified period subsequent to the termination of the optionee's employment with
the Company.
Certain Relationships and Related Transactions
The Company was organized by Kevin Halter and members of his family in
1998, when they purchased 1,000,000 shares at its par value. Then in March 2004,
the Company sold 12,500,000 shares of stock to Steven Ivester for par value
($12,500), plus his agreement to contribute two operating companies. Such
companies were contributed in May 2004, effective April 15, 2004.
As of December 31, 2003, the Company had amounts due to affiliated
entities and/or shareholders and/or officers of approximately $151,000. These
advances were unsecured, due upon demand and are non-interest bearing.
Subsequently, in April 2004, the Company issued 339,242 shares of common stock
to satisfy the balance due at December 31, 2003.
Promoters
On February 27, 2004, the Company issued and sold 12,500,000 shares of
common stock to Steven Ivester in exchange for cash of $12,500 and his agreement
to contribute the intellectual property rights and related assets of two
start-up companies formed to engage in the telecommunications industry. The
shares issued represented approximately 88% of the shares outstanding after the
exchange, as a result of which Mr. Ivester became the controlling shareholder of
the Company.
On May 25, 2004 (but effective for all purposes as of April 15, 2004),
the Company completed the acquisition of two Florida-based subsidiaries,
eGlobalphone, Inc. and VoIP Solutions, Inc., both Florida Corporations.
On August 4, 2004, the Company issued warrants to purchase 2,200,000
shares of common stock for an exercise price of $1.00 per share to each of John
Todd and Clive Raines.
Messrs. Ivester, Todd and Raines may be considered to be "promoters" by
the Company.
30
DESCRIPTION OF SECURITIES
General
The following summary is qualified in its entirety by reference to the
Company's Articles of Incorporation and its By-Laws. The Company's authorized
capital stock consists of 100,000,000 shares of common stock, $.001 par value
per share.
Common Stock
As of November 18, 2004, 23,563,982 common shares of the Company's
common stock are held of record by approximately 250 persons. Each share of
common stock entitles the holder of record thereof to cast one vote on all
matters acted upon at the Company's shareholder meetings. Directors are elected
by a plurality vote. Because holders of common stock do not have the cumulative
voting rights, holders or a single holder of more than 50% of the outstanding
shares of common stock present and voting at an annual meeting at which a quorum
is present can elect all of the Company's directors. Holders of common stock
have no preemptive rights and have no right to convert their common stock into
any other securities. All of the outstanding shares of common stock are fully
paid and non-assessable.
Holders of common stock are entitled to receive ratably such dividends,
if any as may be declared from time to time by the Board of Directors in its
sole discretion from funds legally available therefore. In the event the Company
is liquidated, dissolved or wound up, holders of common stock are entitled to
share ratably in the assets remaining after liabilities and all accrued and
unpaid cash dividends are paid.
Transfer Agent
The Company's transfer agent is Securities Transfer Corporation,
Frisco, Texas.
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of our Common Stock as of December 07, 2004, before this
offering and as adjusted to reflect the sale of 4,357,000 shares in this
offering, by all officers and directors and by all those known by us to be
beneficial owners of more than 5% of our Common Stock.
Unless otherwise specified, the business address of the shareholder is
our address as set forth in this memorandum. Beneficial ownership is determined
in accordance with the rules of the Securities and Exchange Commission and
generally means sole or shared power to vote or direct the voting or to dispose
or direct the disposition of any Common Stock. Except as indicated by footnote,
and subject to community property laws where applicable, the persons named in
the table below have sole voting and investment power with respect to all shares
of Common Stock shown as beneficially owned by them.
31
Beneficial
Ownership
Beneficial Ownership(1) After
Before Offering Offering
Beneficial Owner Shares Percentage Percentage
---------------- ------ ---------- ----------
Steven Ivester......................... 11,625,000 49.4% 49.4%
Clive Raines........................... 2,200,000(1) 8.5% 8.5%
John Todd.............................. 2,200,000(1) 8.5% 8.5%
All officers and directors in a group 16,900,000 60.4% 60.4%
(5 persons)............................
------------
(1) Represents warrants to purchase common shares at $1.00 per share.
LEGAL MATTERS
Legal matters in connection with the common stock being offered hereby
will be passed upon for the Company and selling shareholders or by Andrews Kurth
LLP, Dallas, Texas.
EXPERTS
Our financial statements as of December 31, 2003 and 2002, and for the
years then ended, included in this Prospectus have been audited by the firm of
Tschopp, Whitcomb & Orr, P.A., independent certified public accountants, as set
forth in their report therein included, and have been so included in reliance
upon such report being given upon their authority as experts in accounting and
auditing.
AVAILABLE INFORMATION
We have filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form SB-2, together with all
amendments, schedules and exhibits thereto, pursuant to the Securities Act with
respect to the securities offered by this prospectus. This prospectus does not
contain all information set forth in the registration statement and the
exhibits. The statements contained in this prospectus as to the contents of any
contract or other document identified as exhibits in this prospectus are
materially complete, but in each instance, reference is made to a copy of such
contract or document filed as an exhibit to the Registration Statement. For
further information with respect to the Company and the securities offered
hereby, reference is made to the Registration Statement and exhibits which may
be inspected without charge at the Commission's principal office at Judiciary
Plaza, 450 Fifth Street, NW, Washington, D. C. 20549.
We are subject to the reporting requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and in accordance therewith will
file reports, proxy statements and other information with the Commission Such
reports, proxy statements and other information can be inspected and copied at
the public reference facilities of the Commission at 450 Fifth Street, NW,
Washington, D. C. 20549. Copies of such material may also be obtained from the
Public Reference Section of the Commission at prescribed rates. Our Registration
Statement on Form SB-2, as well as any reports to be filed under the Exchange
Act can also be obtained electronically after we have filed such documents with
the Commission through a variety of databases, including among others, the
Commission's Electronic Data Gathering, Analysis and Retrieval ("EDGAR")
program, Knight-Ridder Information, Inc., Federal Filings/Dow Jones and
Lexis/Nexis. Additionally, the Commission maintains a Website (http://www
sec.gov) that contains such information regarding the Company.
We intend to furnish our shareholders with annual reports containing
audited financial statements and such other reports as we deem appropriate or as
may be required by law.
Requests for information may be directed to Steven Ivester, CEO, c/o
the Company at 12330 S.W. 53rd Street, Suite 712, Fort Lauderdale, Florida
33330, telephone (954) 434-2000.
INDEX TO FINANCIAL STATEMENTS
Heading Page
------- ----
Report of Independent Certified Public Accountants F-1
Balance Sheets F-2
Statements of Operations F-3
Statement of Changes in Stockholders Equity F-4
Statements of Cash Flow F-5
Notes to Financial Statements F-6
Consolidated Balance Sheet F-11
Consolidated Statements of Operations and Comprehensive Income F-12
Consolidated Statements of Cash Flows F-13
VoIP, Inc. Notes to Financial Statements F-14
TSCHOPP, WHITCOMB & ORR, P.A.
2600 Maitland Center Parkway, Suite 330
Maitland, FL 32751
Report of Independent Certified Public Accountants
--------------------------------------------------
Board of Directors and Stockholder
Millennia Tea Masters, Inc.
We have audited the accompanying balance sheets of Millennia Tea Masters, Inc.
(a development stage company) as of December 31, 2003 and 2002 and the related
statements of operations, changes in stockholders' equity, and cash flows for
the years then ended and for the cumulative period from August 3, 1998 (date of
inception) through December 31, 2003. 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. The cumulative
statements of operations, changes in stockholders' equity and cash flows for the
period from August 3, 1998 (date of inception) through December 31, 2003 include
amounts for the period from August 3, 1998 (date of inception) through December
31, 2001 which were audited by other auditors whose report has been furnished to
us, and our opinion, insofar as it relates to the amounts included for the
period from August 3, 1998 (date of inception) through December 31, 2001 is
based solely on the report of the other auditors.
We conducted our audits 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 audits provide a
reasonable basis for our opinion.
In our opinion, based on our audits and the report of other auditors, the
financial statements referred to above, present fairly, in all material
respects, the financial position of Millennia Tea Masters, Inc. (a development
stage company) as of December 31, 2003 and 2002, and the results of its
operations and its cash flows for the years then ended and for the cumulative
period from August 3, 1998 (date of inception) through December 31, 2003 in
conformity with accounting principles generally accepted in the United States of
America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in note 2 to the
financial statements, the Company has experienced limited sales and incurred
cumulative operating losses since its inception. The Company has been dependent
upon the proceeds from the sales of common stock and advances from related
parties to provide working capital. This situation raises a substantial doubt
about the Company's ability to continue as a going concern. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
/s/ Tschopp, Whitcomb & Orr, P.A.
January 30, 2004
Maitland, Florida
F-1
MILLENNIA TEA MASTERS, INC
(A Development Stage Company)
Balance Sheets
December 31, 2003 and 2002
2003 2002
--------- ---------
ASSETS
Current assets:
Cash on hand and in bank $ 3,499 $ 9
Inventory (note 4) 251,534 526,161
Prepaid expenses 4,425 4,060
--------- ---------
Total current assets 259,458 530,230
--------- ---------
TOTAL ASSETS $ 259,458 $ 530,230
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Due to affiliates (note 5) $ 151,166 $ 68,970
--------- ---------
Total current liabilities 151,166 68,970
--------- ---------
Commitments (note 6)
Stockholders' equity:
Common stock - $0.001 par value
25,000,000 shares authorized
1,730,939 shares issued and outstanding 1,731 1,731
Additional paid-in capital 731,208 731,208
Deficit accumulated during the development stage (624,647) (271,679)
--------- ---------
Total stockholders' equity 108,292 461,260
--------- ---------
Total liabilities and stockholders' equity $ 259,458 $ 530,230
========= =========
See accompanying notes to financial statements.
32
MILLENNIA TEA MASTERS, INC.
(A Development Stage Company)
Statements of Changes in Stockholders' Equity
Period from August 3, 1998 (date of inception) through December 31, 2003
Deficit
Common Stock Accumulated
-------------------
Additional During The
Number of Paid-in Development
Shares Par Value Capital Stage Total
--------- --------- --------- --------- ---------
Shares issued to founders
at inception 1,000,000 $ 1,000 -- -- 1,000
Sale of common stock 308,565 309 308,256 -- 308,565
Net loss -- -- -- (16,030) (16,030)
--------- --------- --------- --------- ---------
Balances at December 31, 1998 1,308,565 1,309 308,256 (16,030) 293,535
Sale of common stock 422,374 422 422,952 -- 423,374
Net loss -- -- -- (74,482) (74,482)
--------- --------- --------- --------- ---------
Balances at December 31, 1999 1,730,939 1,731 731,208 (90,512) 642,427
Net loss -- -- -- (57,607) (57,607)
--------- --------- --------- --------- ---------
Balances at December 31, 2000 1,730,939 1,731 731,208 (148,119) 584,820
Net loss -- -- -- (61,634) (61,634)
--------- --------- --------- --------- ---------
Balances at December 31, 2001 1,730,939 1,731 731,208 (209,753) 523,186
Net loss -- -- -- (61,926) (61,926)
--------- --------- --------- --------- ---------
Balances at December 31, 2002 1,730,939 1,731 731,208 (271,679) 461,260
Net loss -- -- -- (352,968) (352,968)
--------- --------- --------- --------- ---------
Balances at December 31, 2003 1,730,939 $ 1,731 731,208 (624,647) 108,292
========= ========= ========= ========= =========
See accompanying notes to financial statements.
34
MILLENNIA TEA MASTERS, INC.
(A Development Stage Company)
Statements of Operations
Cumulative
Period From
August 3, 1998
Through
December 31,
2003 2002 2003
----------- ----------- -----------
Revenues $ 8,678 $ 1,018 19,994
Cost of sales 11,213 169 13,917
----------- ----------- -----------
Gross profit (2,535) 849 6,077
----------- ----------- -----------
Operating expenses:
General and administrative expenses 57,469 12,934 156,560
Warehouse rent 41,430 49,841 222,630
----------- ----------- -----------
Total operating expenses 98,899 62,775 379,190
----------- ----------- -----------
Loss from operations (101,434) (61,926) (373,113)
Other expense (note 4) (251,534) -- (251,534)
----------- ----------- -----------
Loss before income taxes (352,968) (61,926) (624,647)
Provision for income taxes -- -- --
----------- ----------- -----------
Net loss $ (352,968) $ (61,926) (624,647)
=========== =========== ===========
Loss per weighted-average share of common
stock outstanding, basic and fully diluted $ (0.20) (0.04)
=========== ===========
Weighted-average number of common shares
outstanding 1,730,939 1,730,939
=========== ===========
See accompanying notes to financial statements.
33
MILLENNIA TEA MASTERS, INC.
(A Development Stage Company)
Statements of Cash Flows
Cumulative
Period From
August 31,
1998 Through
December 31,
2003 2002 2003
--------- --------- ---------
Cash flows from operating activities:
Net loss $(352,968) $ (61,926) (624,647)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Inventory reserve 251,534 -- 251,534
Increase (decrease) in:
Inventory 23,093 201 (503,068)
Accounts payable - trade -- (9,711) --
Prepaid expenses (365) (4,060) (4,425)
--------- --------- ---------
Net cash used in operating activities (78,706) (75,496) (880,606)
--------- --------- ---------
Cash flows from investing activities:
Net cash advanced from affiliates 82,196 73,849 151,166
--------- --------- ---------
Net cash provided by investing activities 82,196 73,849 151,166
--------- --------- ---------
Cash flows from financing activities:
Proceeds from sale of common stock -- -- 732,939
--------- --------- ---------
Net cash provided by financing activities -- -- 732,939
--------- --------- ---------
Increase (decrease) in cash 3,490 (1,647) 3,499
Cash at beginning of period 9 1,656 --
--------- --------- ---------
Cash at end of period $ 3,499 $ 9 3,499
========= ========= =========
See accompanying notes to financial statements.
MILLENNIA TEA MASTERS, INC.
(A Development Stage company)
Notes to Financial Statements
December 31, 2003 and 2002
(1) Organization and Description of Business
Millennia Tea Masters, Inc. (Company) was incorporated on August 3,
1998 under the laws of the State of Texas. The Company was formed to engage
principally in the marketing and sale of imported teas.
The Company has had no substantial operations since inception. Due to
the lack of sustaining operations the Company generated no significant operating
revenues and has incurred cumulative operating losses of approximately $625,000.
Accordingly, the Company is still considered to be in the development stage.
The Company's principal product, imported teas from Sri Lanka, is
processed by a single unrelated Sri Lankan entity. In the event of any
disruption in the availability of imported teas from Sri Lanka, the Company may
experience a negative economic impact. The Company believes that other
processors of imported teas of comparable quality and price are available from
the same region and that no interruption of product availability will occur.
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.
(2) Going Concern Uncertainty
The Company commenced operations during the fourth quarter of 1998 and has
focused significant resources in procuring and importing inventory and
developing sales and distribution channels since that date. Management is
investigating alternative methods to generate product demand and market
acceptance.
The Company has generated only minimal revenues since inception and has incurred
cumulative operating losses of approximately $625,000 which includes an
inventory reserve of $251,534. Since inception, the Company has been dependent
upon the sale of common stock and advances from affiliates to provide working
capital. The Company's continued existence is dependent upon its ability to
generate sufficient cash flows from operations to support its daily operations
as well as provide sufficient resources to retire existing liabilities and
obligations on a timely basis. This situation raises a substantial doubt about
the Company's ability to continue as a going concern.
(Continued)
MILLENNIA TEA MASTERS, INC.
(A Development Stage Company)
Notes to Financial Statements
(2) Going Concern Uncertainty - (Continued)
Management is reviewing the actions to be taken in future periods to generate
operational results sufficient to provide resources to sustain its operations.
Further, management believes that its efforts to raise additional capital
through the sale of equity securities and/or new debt financing will provide
additional cash flows. However, there can be no assurance that the Company will
be able to obtain additional funding or, that such funding, if available, will
be obtained on terms favorable to or affordable by the Company.
(3) 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) Inventory
Inventory consists of imported tea products and is valued at the lower
of cost or market using the first-in, first-out method.
(c) Revenue Recognition
The Company sells it products to the general public through direct
sales on a prepaid basis. 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.
(Continued)
MILLENNIA TEA MASTERS, INC.
(A Development Stage Company)
Notes to Financial Statements
(3) Summary of Significant Accounting Policies - (Continued)
(d) Income Taxes
The Company uses the asset and liability method of accounting for
income taxes. At December 31, 2003 and 2002, the deferred tax asset and
deferred tax 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.
At December 31, 2003 and 2002 deferred tax assets are related solely to
the Company's net operating loss carry forward of approximately
$600,000 which is fully reserved. If these carry forwards are not
utilized, they will begin to expire in 2018.
(e) Earnings (Loss) Per Share
Basic earnings (loss) per share are 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 December
31, 2003 and 2002, the Company had no warrants and/or options
outstanding.
(4) Inventory
During the final quarter of the year ended December 31, 2003, management
recorded an inventory reserve of $251,534. The reserve has been established
primarily as a result of lower than expected levels of sales volume over the
last two years. The relatively small sales volume result from the Company's
limited marketing resources and distribution capabilities. As a result of these
factors management may find it necessary, for working capital purposes, to sell
its inventory at prices substantially below its carrying value. While management
expects sales volume to increase in 2004 there can be no assurance that
projected levels of revenue will be achieved.
MILLENNIA TEA MASTERS, INC.
(A Development Stage Company)
Notes to Financial Statements
(5) Related Party Transactions
As of December 31, 2003, the Company has a net payable to two affiliated
entities of $151,166. These advances are unsecured, due upon demand and are
non-interest bearing.
(6) Commitments
Beginning December 15, 2002, the Company leased an 8,000 sq. ft.
office/warehouse under a lease from a non-related third party scheduled to
expire December 31, 2004. The following summarizes the Company's current
obligations under a three year lease as of December 31, 2002.
Date of lease 12-15-02
Lease term begins 01-01-03
Lease term ends 12-31-04
Renewal option None
Contingent rents No
Initial rent $3,750 per month
Escalation None
Future minimum payments, by years and in the aggregate, under non-cancelable
operating lease with initial or remaining terms of one year or more consisted of
the following at December 31, 2003:
Year Ending December 31, Amount
2004 $ 45,000
MILLENNIA TEA MASTERS, INC.
(A Development Stage Company)
Notes to Financial Statements
(7) Selected Financial Data (Unaudited)
The following is a summary of the quarterly results of operations for the years
ended December 31, 2003 and 2002, respectively:
Quarter Ended Quarter ended Quarter ended Quarter ended Year ended
March 31, June 30, September 30, December 31, December 31,
--------- -------- ------------- ------------ ------------
2003
Net revenues $ 60 724 4,291 3,603 8,678
Net loss (11,747) (19,879) (21,995) (299,347) (352,968)
Basic loss per share (0.01) (0.01) (0.01) (0.17) (0.20)
Weighted-average number of
shares issued and outstanding 1,730,939 1,730,939 1,730,939 1,730,939 1,730,939
2002
Net revenues $ 96 150 276 496 1,018
Net loss (16,265) (12,246) (14,425) (18,990) (61,926)
Basic loss per share (0.01) (0.01) (0.01) (0.01) (0.04)
Weighted-average number of
shares issued and outstanding 1,730,939 1,730,939 1,730,939 1,730,939 1,730,939
VoIP Inc.
Consolidated Balance Sheet
September 30, 2004
(Unaudited)
Sept. 30,
2004
------------
ASSETS
Current Assets
Cash on hand and in bank $ 237,524
Accounts receivable 806,686
Due from related parties --
Inventory 369,944
Other current assets 133,412
------------
Total Current Assets 1,547,566
------------
Property and equipment, net 385,405
Goodwill 6,618,864
Investment DTNet --
Investment Voipamericas --
Other assets 15,572
------------
TOTAL ASSETS $ 8,567,407
============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 1,169,840
Amounts due to affiliates --
Other current liabilities 726,676
------------
Total Liabilities 1,896,516
------------
Commitments and contingencies --
Stockholders' equity Common stock - $0.01 par value 100,000,000 shares
authorized 20,859,434 and 1,730,939 issued
and outstanding respectively 20,859
Additional paid in capital 11,885,049
Accumalitive deficit (5,235,017)
------------
Total stockholders' equity 6,670,891
------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 8,567,407
============
VoIP Inc.
Consolidated Statements of Operations and Comprehensive Income
Nine months ended September 30, 2004 and 2003
(Unaudited)
Nine months Nine months
ended ended
September 30, September 30,
2004 2003
------------ ------------
Revenues $ 1,015,065 $ 5,075
Cost of Sales 737,904 1,268
------------ ------------
Gross Profit 277,161 3,807
Operating expenses
General and administrative expenses 4,887,531 57,428
------------ ------------
Gain (Loss) from operations (4,610,370) (53,621)
Other income (expenses) -- --
------------ ------------
Gain (Loss) before income taxes (4,610,370) (53,621)
Provision for income taxes -- --
------------ ------------
Net Gain (Loss) $ (4,610,370) $ (53,621)
============ ============
Loss per weighted average
share of common stock
outstanding, computerd on net
loss-basic and fully diluted $ (0.42) $ (0.03)
Weighted average number of
shares of common stock
outstanding-basic and fully
diluted10,989,990asic and fully 10,989,990 1,730,939
VoIP Inc.
Consolidated Statements of Cash Flows
Nine months ended September 30, 2004 and 2003
(Unaudited)
Nine months Nine months
ended ended
September 30, September 30,
2004 2003
------------ ------------
Cash flows from operating activities
Net loss $(4,610,370) $ (53,621)
Adjustments to reconcile net loss to net
cash used in operating activities -- --
Depreciation 2,964 --
Common shares issued for services 344,166 --
Warrants issued to employees 3,520,000 --
Changes in operating assets and liabilities
net of assets and liabilities acquired
Accounts receivable (4,583) --
Inventory (37,580) 1,229
Other current assets (76,760) (5,801)
Accounts payable (10,618) --
Other current liabilities 87,949 --
----------- -----------
Net cash used in operating activities (784,832) (58,193)
----------- -----------
Cash flows from investing activities
Cash from acquisitions 104,862 --
Purchase of property and equipment (43,550) --
Purchase of other assets (13,092) --
----------- -----------
Net cash provided by investing activities 48,220 --
----------- -----------
Cash flows from financing activities
Proceeds from sales of common stock 1,121,803 58,896
Due to affiliates (151,166) --
----------- -----------
Net cash flow provided by financing activities 970,637 58,896
----------- -----------
Net increase in cash 234,025 703
Cash at beginning of period 3,499 9
----------- -----------
Cash at end of period $ 237,524 $ 712
=========== ===========
Supplemental cash flow information:
Common stock issued for cash received
by and services to affiliates $ 337,000 $ --
=========== ===========
VoIP, Inc.
Notes to Financial Statements
Note A - 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.
The Company began operations in October 1998 with its initial order of imported
teas from Sri Lanka, has elected a year-end of December 31 and uses the accrual
method of accounting.
On April 13, 2004 the Company changed its name to VoIP, Inc. The Company and its
subsidiaries develop and manufacture innovative IP telephony customer premise
equipment in addition to premium voice over the internet subscriber based
telephony services and state of the art long range WiFi technology solutions,
for residential and enterprise customers, including multimedia applications.
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, eGlobalphone, Inc. and VOIP Solutions, Inc., which occurred
effective April 15, 2004.
On June 25, 2004, the Company closed the acquisition of VCG Technology, Inc.
d/b/a DTNet Technologies, Inc. ("DTNet") a Florida corporation. The acquisition
took the form of the issuance of 2,500,000 shares of VoIP, Inc. restricted
common stock in exchange for all issued and outstanding shares of DTNet common
stock.
On August 4th, 2004, the Company issued 4,400,000 warrants to two executives to
acquire 4,400,000 shares at $1.00 per share.
Effective September 1st, 2004, VoIP Inc. closed the acquisition of Vox
Consulting Group, Inc., d/b/a VoIP Americas, a Florida corporation. The
acquisition took the form of an exchange of 1,000,000 shares of VoIP restricted
common stock in exchange the all issued and outstanding shares of VoIP Americas
common stock.
During interim periods, the Company follows the accounting policies set forth in
its Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 on Form 10-KSB filed with the United States Securities and Exchange
Commission. The information presented herein may not include all disclosures
required by generally accepted accounting principles, and the users of financial
information provided for interim periods should refer to the annual financial
information and footnotes contained in its Annual Report pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934 on Form 10-KSB when reviewing
the interim financial results presented herein.
In the opinion of management, the accompanying interim financial statements,
prepared in accordance with the instructions for Form 10-QSB, are unaudited and
contain all material adjustments, consisting only of normal recurring
adjustments necessary to present fairly the financial condition, results of
operations and cash flows of the Company for the respective interim periods
presented. The current period results of operations are not necessarily
indicative of results which ultimately will be reported for the full fiscal year
ending December 31, 2004.
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.
Note B - Going Concern Uncertainty
The Company commenced operations during the fourth quarter of 1998 and focused
significant resources during prior periods in procuring and importing inventory
and developing sales and distribution channels. Accordingly, the Company had
generated only minimal revenues through first quarter 2004.
Management has taken actions directly related to the acquisition of new business
concept to provide, from their operations, sufficient working capital to
preserve the entity. Management anticipates that the company will attempt to
obtain additional funds from private placements of debt and equity securities.
The revenues through third quarter 2004 are $1,015,065 and show an increase of
19,901% compared to the same period of 2003.
Accordingly, with the acquisitions consummated during last quarters and the
projected results for the year, management considers that the Company is no
longer in the development stage.
Note C - Summary of Significant Accounting Policies
1. Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries, eGlobalphone, Inc., VoIP Solutions, Inc., DTNet
Technologies, Inc., and VoIP Americas from their respective dates of
acquisition. All significant inter-company balances and transactions have been
eliminated in consolidation.
2. Cash and cash equivalents
For Statement of Cash Flows purposes, the Company considers all cash on hand and
in banks, including accounts in book overdraft positions, certificates of
deposit and other highly-liquid investments with maturities of three months or
less, when purchased, 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.
3. Inventory
Inventory consists of finished goods and is valued at the lower of cost or
market using the first-in, first-out method.
4. Organization costs
The Company has adopted the provisions of AICPA Statement of Position 98-5,
"Reporting on the Costs of Start-Up Activities" whereby all organization and
initial costs incurred with the incorporation and initial capitalization of the
Company was charged to operations as incurred.
5. Advertising expenses
Advertising and marketing expenses are charged to operations as incurred.
6. Income Taxes
The Company uses the asset and liability method of accounting for income taxes.
At September 30, 2004 and December 31, 2003, the deferred tax asset and deferred
tax liability accounts, as recorded when material, are entirely the result of
temporary differences. Temporary differences represent differences in the
recognition of assets and liabilities for tax and financial reporting purposes.
At September 30, 2004 and December 31, 2003 deferred tax assets are related
solely to the Company's net operating loss carry forward of approximately
$1,400,000 and $303,000, respectively, which is fully reserved. If these carry
forwards are not utilized, they will begin to expire in 2018.
7. Earnings (loss) per share
Basic earnings (loss) per share are 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.
Note D - Fair Value of Financial Instruments
The carrying amount of cash, accounts receivable, accounts payable and notes
payable, as applicable, approximates fair value due to the short term nature of
these items and/or the current interest rates payable in relation to current
market conditions.
Note E - Related Party Transactions
As of December 31, 2003, the Company has amounts payable to affiliated entities
and/or officers of approximately $151,000. These advances are unsecured, due
upon demand and are non-interest bearing.
Note F - Acquisitions
On May 25, 2004 (but effective for all purposes as of April 15, 2004), the
Company completed the acquisition of two Florida-based subsidiaries,
eGlobalphone, Inc. and VoIP Solutions, Inc. Contribution of these start-up
companies was the basis for the original decision to issue a controlling block
of shares of common stock to Mr. Ivester. eGlobalphone, Inc. and VoIP Solutions
Inc. are both Florida corporations.
In June 2004, the Company acquired DTNet Technologies, Inc. a Florida
Corporation. The acquisition took the form of an exchange of 2,500,000 shares of
the company's common stock in exchange for all issued and outstanding shares of
DTNet common stock. The Goodwill amounting to $5,210,563 is the difference
between the fair market value of the DTNet assets as of the date of acquisition,
and the valuation of 2,500,000 Company shares at market value at that date.
In September 2004, VoIP Inc. closed the acquisition of Vox Consulting Group,
Inc., d/b/a VoIP Americas, a Florida corporation. The acquisition took the form
of an exchange of 1,000,000 shares of VoIP restricted common stock in exchange
for all issues and outstanding shares of VoIP Americas common stock. The
Goodwill amounting to $1,408,301 is the difference between the fair market value
of the VoIP Americas assets as of the date of acquisition, and the valuation of
1,000,000 company shares at market value at that date.
Note G - Warrants
On August 4th, 2004, the Company issued 4,400,000 warrants to two executives to
acquire 2,200,000 shares at $1.00 per share each. The additional compensation of
$3,520,000, shown in General and Administrative expenses in the Consolidated
Statement of Operations, is the difference between the market price of the
shares and the $1.00 purchase price.
Note H - Subsequent Events
On November 11th, 2004, the Company closed a subscription agreement to sell
1,937,500 shares of common stock to four investors for net proceeds to the
Company of approximately $1,400,000. The Company also issued Class A 5 year
warrants to purchase a total of 589,250 shares at an exercise price of $1.75 per
share, and Class B warrants to purchase a total of 968,700 shares for an
exercise price of $1.20 per share during a 30 day period following the
effectiveness of a registration statement to register the resale of all shares
issued.
DAL:529315.2
You may rely on the information contained in this prospectus. We have not
authorized anyone to provide information different from that contained in this
prospectus. Neither the delivery of this prospectus nor the sale of common
shares means that information contained in this prospectus is correct after the
date of this prospectus. This prospectus is not an offer to sell or solicitation
of an offer to buy our common shares in any circumstances under which the offer
or solicitation is unlawful.
----------------------
TABLE OF CONTENTS
Heading Page
Prospectus Summary 2
Risk Factors 6
Use of Proceeds 15
Dividend Policy and Market Data 15
Business and Properties 16
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 25
Management 36
Principal Shareholders 43
Description of Securities 44
Plan of Distribution 48
Investor Suitability Requirement 49
Legal Matters 51
Experts 51
Available Information 51
Index to Financial Statements F-1
Until __________, 2005 (90 days from the date of this Prospectus), all dealers
effecting transactions in the registered securities, whether or not
participating in this distribution, may be required to deliver a Prospectus.
This is in addition to the obligation of dealers to deliver a Prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
UP TO 4,349,000 SHARES
COMMON STOCK
PER SHARE
VoIP, Inc.
------------------
P R O S P E C T U S
------------------
______________, 2004
DAL:529315.2
II-6
PART II
INFORMATION NOT REQUIRED TO BE IN PROSPECTUS
Item 24. Indemnification of Directors and Officers
The Registrant's Articles of Incorporation provide that no director of
the Registrant will be personally liable to the Registrant or any of its
shareholders for monetary damages arising from the director's breach of
fiduciary duty as a director, with certain limited exceptions.
Pursuant to the Texas Business Corporation Act (the "Act"), every Texas
corporation has the power to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding (other than an action by or in the right of the corporation)
by reason of the fact that such person is or was a director, officer, employee
or agent of the corporation or is or was serving in such a capacity at the
request of the corporation for another corporation, partnership, joint venture,
trust or other enterprise, against any and all expenses, judgments, fines and
amounts paid in settlement and reasonably incurred in connection with such
action, suit or proceeding. The power to indemnify applies only if such person
acted in good faith and in a manner such person reasonably believed to be in the
best interests, or not opposed to the best interests, of the corporation and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe his or her conduct was unlawful.
The power to indemnify applies to actions brought by or in the right of
the corporation as well, but only to the extent of defense and settlement
expenses and not to any satisfaction of a judgment or settlement of the claim
itself, and with the further limitation that in such actions no indemnification
shall be made in the event of any adjudication of negligence or misconduct
unless the court, in its discretion, believes that in light of all the
circumstances indemnification should apply. The Registrant's Articles of
Incorporation contain provisions authorizing it to indemnify its officers and
directors to the fullest extent permitted by the Act.
Item 25. Other Expenses of Issuance and Distribution
The estimated expenses of the registration, all of which will be paid
by the Company, are as follows:
SEC Filing fee $ 859
Printing Expenses
Accounting Fees and Expenses 2,500
Legal Fees and Expenses
Blue Sky Fees and Expenses
--------
TOTAL $ 3,359
Item 26. Recent Sales of Unregistered Securities
Common stock - Registrant has sold and issued the shares of common
stock described below within the past three years that were not registered under
the Act.
Effective July 2004, registrant issued 668,688 shares to six individual
existing accredited investors. Also effective July 2004, registrant issued
41,688 shares to four accredited individual investors.
Effective August 2004, registrant issued 50,000 shares to one
individual accredited investor in satisfaction of accounts payable totaling
$50,000.
Effective August 2004, registrant issued 653,319 shares to 46
individual accredited investors.
Effective September 10th, 2004, registrant issued 1,000,000 shares to
acquire all issues and outstanding shares of Voipamericas Inc., common stock.
Effective September 2004, registrant issued 38,461 shares to one
accredited investor.
On November 11, 2004, Registrant issued and sold 1,937,500 shares of common
stock, for a purchase price of $0.80 per share, to four accredited investors in
a private placement pursuant to Rule 506 of SEC Regulation D, for aggregate
proceeds of $1,550,000 (net proceeds of approximately $1,400,000 to Registrant).
The investors also received five-year warrants to purchase a total of 589,250
shares for an exercise price of $1.75 per share, and thirty-day warrants to
purchase 968,750 shares for an exercise price of $1.20 per share.
On November 17, 2004, Registrant issued and sold 312,500 shares of
common stock, for a purchase price of $0.80 per share, to one additional
accredited investor in a private placement pursuant to Rule 506 of SEC
Regulation D, for aggregate proceeds of $250,000 (net proceeds of approximately
$225,000 to Registrant). The investor also received five-year warrants to
purchase a total of 75,000 shares for an exercise price of $1.75 per share, and
thirty-day warrants to purchase 125,000 shares for an exercise price of $1.20
per share.
Item 27. Exhibits
(b) Exhibits
(3) 2.1.1
Stock Contribution Agreement dated May 25, 2004,
between Registrant and Steven Ivester
(1) 3.1.1 Articles of Incorporation ( 3) 3.1.2 Amendment of
Articles of Incorporation
(3) 4.1 Specimen Stock Certificate
(8) 5.1 Opinion of Andrews Kurth LLP (3) 10.1 2004 Stock
Option Plan
(2) 10.2 Stock Purchase Agreement dated February 27, 2004
between Registrant and Steven Ivester
(4) 10.3 Stock Purchase Agreement dated June 25, 2004 among
Registrant, DTNet Technologies and Marc Moore
(5) 10.4 Stock Purchase Agreement among Carlos Rivas, Albert
Rodriguz, Registrant and Vox Consulting Group Inc.
(6) 10.5.1 Subscription Agreement
(6) 10.5.2 Form of Class A Warrant
(6) 10.5.3 Form of Class B Warrant
(7) 21.1 Subsidiaries of the Registrant
(7) 23.1 Consent of Tschopp, Whitaker and Orr
(8) 23.2 Consent of Andrews Kurth LLP
(1) Filed as exhibits to Registrant's Form 10SB filed January 19, 2000
(2) Filed as exhibit to Form 8-K filed March 3, 2004
(3) Filed as exhibit to Form 8-K filed June 9, 2004
(4) Filed as exhibit to Form 8-K filed on July 7, 2001
(5) Filed as exhibit to Form 8-K filed on September 16,2004
(6) Filed as exhibit to form 8-K filed on November 17, 2004
(7) Filed herewith
(8) To be filed by amendment
Item 28. Undertakings
The undersigned Registrant hereby undertakes as follows:
(a) (1) To file, during any period in which it offers or sells
securities, a post-effective amendment to this Registration
Statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information set forth in the Registration Statement. Notwithstanding
the foregoing, any increase or decrease in volume of securities offered
(if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective Registration
Statement; and
(iii) Include any additional or changed material information
on the plan of distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered and the offering of the securities at that time to be the initial bona
fide offering.
(3) File a post-effective amendment to remove from registration any of
the securities being registered that remain unsold at the end of the offering.
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of Fort
Lauderdale, State of Florida, on December 13, 2004.
VoIP, INC.
By: /s/ Steven Ivester
-----------------------------------------
Steven Ivester, President and Chief
Executive Officer
POWER OF ATTORNEY
In accordance with requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates stated:
SIGNATURE TITLE DATE
/s/ Steven Ivester Chairman, Chief Executive Officer, December 13, 2004
--------------------- Director, and President
Steven Ivester
/s/ Osvaldo Pitters Chief Financial Officer December 13, 2004
---------------------
Osvaldo Pitters