UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2004
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from _________________ to _________________
Commission file number 0-28985
VoIP, Inc.
(formerly known as Millennia Tea Masters, Inc.)
(Exact name of small business issuer as specified in its charter)
Texas 75-2785941
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
12330 SW 53rd Street, Suite 712, Fort Lauderdale, Florida 33330
(Address of principal executive offices)
(954) 434-2000
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days:
Yes [X] No [ ].
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Check whether the registrant filed all documents and reports required to be
filed by Section l2, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of May 7, 2004: 14,230,939
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
Include whether Registrant is an accelerated filer: Yes [ ] No [X]
VoIP, Inc.
Form 10-QSB for the Quarter ended March 31, 2004
Table of Contents
Page
----
Part I - Financial Information
Item 1 Financial Statements and Notes to Financial Statements 3
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations 10
Part II - Other Information
Item 1 Legal Proceedings 11
Item 2 Changes in Securities 11
Item 3 Defaults Upon Senior Securities 11
Item 4 Submission of Matters to a Vote of Security Holders 11
Item 5 Other Information 11
Item 6 Exhibits and Reports on Form 8-K 11
Signatures 11
Item 1 - Part 1 - Financial Statements
VoIP, Inc.
(a development stage company)
Balance Sheets
March 31, 2004 and December 31, 2003
(Unaudited)
March 31,
2004 December 31,
(Unaudited) 2003
------------ ------------
ASSETS
Current assets
Cash in bank $ -- 3,499
Inventory, net of reserve 251,767 251,534
Prepaid expenses 8,175 4,425
------------ ------------
Total current assets 259,942 259,458
------------ ------------
TOTAL ASSETS $ 259,942 259,458
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses $ 10,308 --
Due to affiliates 151,166 151,166
------------ ------------
Total Liabilities 161,474 151,166
------------ ------------
Commitments and contingencies
Shareholders' equity
Common stock - $0.001 par value
25,000,000 shares authorized 14,230,939 and
1,730,939 issued and outstanding 14,231 1,731
Additional paid-in capital 731,208 731,208
Deficit accumulated during the development stage (646,971) (624,647)
------------ ------------
Total Shareholders' equity 98,468 108,292
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS'EQUITY $ 259,942 259,458
============ ============
The accompanying notes are an integral part of these financial statements.
3
VoIP, Inc.
(a development stage company)
Statements of Operations
Three months ended March 31, 2004 and 2003 and
Period from August 3, 1998 (date of inception) through March 31, 2004
(Unaudited)
Period from
Three months Three months August 3, 1998
ended ended (date of inception)
March 31, March 31, through
2004 2003 March 31, 2004
------------------- ------------------- -------------------
Revenues $ -- 60 19,994
Cost of Sales -- 10 13,917
------------------- ------------------- -------------------
Gross Profit -- 50 6,077
------------------- ------------------- -------------------
Operating expenses
Marketing, promotion
and product development -- -- --
Warehouse rent 11,250 7,713 233,880
General and administrative expenses 11,074 4,084 167,634
------------------- ------------------- -------------------
Total operating expenses 22,324 11,797 401,514
------------------- ------------------- -------------------
Loss from operations (22,324) (11,747) (395,437)
Other expense -- -- 251,534
------------------- ------------------- -------------------
Loss before income taxes (22,324) (11,747) (646,971)
Provision for income taxes -- -- --
------------------- ------------------- -------------------
Net loss $ (22,324) (11,747) (646,971)
=================== =================== ===================
Loss per weighted-average share of
common stock outstanding, computed
on net loss basic and fully diluted $ (0.01) (0.01)
=================== ===================
Weighted-average number of shares
of common stock outstanding
basic and fully diluted 3,814,272 1,730,939
=================== ===================
The accompanying notes are an integral part of these financial statements.
4
VoIP, Inc.
(a development stage company)
Statements of Cash Flows
Three months ended March 31, 2004 and 2003 and
Period from August 3, 1998 (date of inception) through March 31, 2004
(Unaudited)
Period from
Three months Three months August 3, 1998
ended ended (date of inception)
March 31, March 31, through
2004 2003 March 31, 2004
------------------- ------------------- -------------------
Cash flows from operating activities
Net loss for the period $ (22,324) (11,747) (646,971)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities
Inventory reserve -- -- 251,534
Changes in assets and liabilities:
Inventory (233) 10 (503,301)
Prepaid expenses (3,750) -- 10,308
Accounts payable and accrued expenses 10,308 2,298 (8,175)
------------------- ------------------- -------------------
Net cash provided by (used in) operating activities 15,999 (9,439) (896,605)
------------------- ------------------- -------------------
Cash flows from investing activities -- -- --
------------------- ------------------- -------------------
Cash flows from financing activities
Proceeds from sale of common stock 12,500 -- 745,439
Advances from affiliates -- 9,700 151,166
------------------- ------------------- -------------------
Net cash provided by financing activities 12,500 9,700 896,605
------------------- ------------------- -------------------
INCREASE (DECREASE) IN CASH (3,499) 261 --
Cash at beginning of period 3,499 9 --
------------------- ------------------- -------------------
Cash at end of period $ -- 270 --
=================== =================== ===================
Supplemental disclosure of interest
and income taxes paid
Interest paid for the year $ -- -- --
=================== =================== ===================
Income taxes paid for the year $ -- -- --
=================== =================== ===================
The accompanying notes are an integral part of these financial statements.
5
VoIP, Inc.
Notes to Financial Statements
Note A - 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 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.
On February 27, 2004, the Company entered into a stock purchase agreement which
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.
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-SB 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.
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, if any, 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.
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 has
generated only minimal revenues and experienced cumulative losses of
approximately $647,000. The Company's audited financial statements for each year
have contained a statement from its auditors expressing doubts on the Company's
ability to continue as a going concern.
6
VoIP, Inc.
Notes to Financial Statements - Continued
Note B - Going Concern Uncertainty - Continued
Management has taken actions directly related to the acquisition of new business
to provide, from their operations, sufficient working capital to preserve the
entity during this development phase. Additional funds will be obtained from
private placements of debt and equity securities.
Note C - Summary of Significant Accounting Policies
1. Cash and cash equivalents
-------------------------
For 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.
2. Inventory
---------
Inventory consists of imported tea products from Sri Lanka and are valued
at the lower of cost or market using the first-in, first-out method. The
product life of imported teas is approximately five (5) years and,
accordingly, the Company anticipates limited obsolescence or deterioration
in its products' quality.
3 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 were charged to operations as incurred.
4. Advertising expenses
--------------------
Advertising and marketing expenses are charged to operations as incurred.
7
VoIP, Inc.
Notes to Financial Statements - Continued
Note C - Summary of Significant Accounting Policies - Continued
5. Income Taxes
------------
The Company uses the asset and liability method of accounting for income
taxes. At March 31, 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 March 31, 2004 and December 31, 2003 deferred tax assets are related
solely To the Company's net operating loss carryforward of approximately
$647,000 and $625,000, respectively, which is fully reserved. If these
carry forwards are not utilized, they will begin to expire in 2018.
6. Earnings (loss) per share
-------------------------
Basic earnings (loss) per share is computed by dividing the net income
(loss) by the weighted-average number of shares of common stock and common
stock equivalents (primarily outstanding options and warrants). Common
stock equivalents represent the dilutive effect of the assumed exercise of
the outstanding stock options and warrants, using the treasury stock
method. The calculation of fully diluted earnings (loss) per share assumes
the dilutive effect of the exercise of outstanding options and warrants at
either the beginning of the respective period presented or the date of
issuance, whichever is later. As of March 31, 2004 and 2003, the Company
had no warrants and/or options outstanding.
Note D - Fair Value of Financial Instruments
The carrying amounts of cash, accounts receivable, accounts payable and accrued
expenses and due to affiliates, as applicable, approximate fair value due to the
short term nature of these items and/or the current interest rates payable in
relation to current market conditions.
Note E - Related Party Transactions
As of March 31, 2004, the Company has amounts due to affiliated entities and/or
shareholders and/or officers of approximately $151,000. These advances are
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 March 31, 2004.
Note F - Subsequent Events
Effective April 15, 2004 and as described in Note A to the company acquired two
subsidiaries: eGlobalPhone, Inc. and VOIP Solutions, Inc. These subsidiaries
develop and distribute innovative technology, services and solutions for voice
over the Internet protocol, wireless and multimedia applications.
8
Part I - Item 2
Management's Discussion and Analysis of Financial Condition and Results of
Operations
(1) Caution Regarding Forward-Looking Information
This quarterly report contains certain forward-looking statements and
information relating to the Company that are based on the beliefs of the Company
or management as well as assumptions made by and information currently available
to the Company or management. When used in this document, the words
"anticipate," "believe," "estimate," "expect" and "intend" and similar
expressions, as they relate to the Company or its management, are intended to
identify forward-looking statements. Such statements reflect the current view of
the Company regarding future events and are subject to certain risks,
uncertainties and assumptions, including the risks and uncertainties noted.
Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary materially from
those described herein as anticipated, believed, estimated, expected or
intended. In each instance, forward-looking information should be considered in
light of the accompanying meaningful cautionary statements herein.
(2) Results of Operations
The Company is considered a development stage company and as such has generated
no significant operating revenues and has incurred cumulative operating losses
of approximately $647,000.
For the respective three month periods ended March 31, 2004 and 2003, the
Company experienced net sales of approximately $0 and $60. The Company's
expenses during these corresponding periods relate principally to the
maintenance of the Company's inventory and compliance with certain requirements
for quarterly and annual financial reporting.
Total net losses for the respective three month periods ended March 31, 2004 and
2003 were approximately $22,000 and $12,000. Net loss per share was
approximately $.01 for each three month period.
(3) Liquidity and Capital Resources
Liquidity for the period from inception through March 31, 2004 has been provided
from advances from significant stockholders.
(4) Subsequent Events
By the acquisition of eGlobalPhone, Inc. and VoIp Solutions, Inc., the company
has entered the voice over internet "VoIP" business.
The term "VoIP" refers to a category of hardware and software that enables
people to use the Internet as the Transmission medium for telephone calls. For
users who have free, or fixed price Internet Access, Internet telephony hardware
and software essentially provides free telephone calls anywhere in the world.
The clear benefits of this technology can be divided into four categories:
Cost Reduction- Reducing long distance telephone costs provides a competitive
advantage for VoIP. Today flat rate long distance pricing is available with the
Internet and can result in considerable savings for both voice and facsimile.
The sharing of equipment and operations costs across both data and voice users
can also improve network efficiency since excess bandwidth on one network can be
used by the other, thereby creating economies of scale for voice (especially
given the rapid growth in data traffic).
Advanced Applications- Even though basic telephony and facsimile are the initial
applications for VoIP, the longer term benefits are expected to be derived from
multimedia and multi-service applications. For example, internet commerce
solutions can combine WWW access to information with a voice call button that
allows immediate access to a call center agent from the PC. Needless to say,
voice is an integral part of conferencing systems that may also include shared
screens, white boarding, etc. Combining voice and data features into new
applications will provide the greatest returns over the longer term.
Much like the cellular phone industry, VoIP renders traditional motions of
geography irrelevant. Specifically, the Company's products and services allow
any user in the world to make a call through any Internet-connection to any
telephone in the world for free or nearly free. In addition unlike other VoIP
providers, the Company's products and services can be used on any Internet
connection, from dial-up to broadband, due to the Company's patent-pending "call
signaling" technology.
The company has identified that all working capital requirements for the current
annual period will be satisfied from the operation of the newly acquired
businesses and the sales of additional common shares through private placements.
9
ITEM 3. CONTROLS AND PROCEDURES
a) Within the 90-day period prior to the date of this report, we carried out an
evaluation, under the supervision and with the participation of our management,
including the Chief Executive Officer and Chief Financial Officer, of the
effectiveness of the design and operation of our disclosure controls and
procedures pursuant to Rule 13a-14 of the Securities Exchange Act of 1934 (the
"Exchange Act"). Based upon that evaluation, the Chief Executive officer and
Chief Financial Officer concluded that our disclosure controls and procedures
are effective in timely alerting them to material information relating to the
Company required to be included in our Exchange Act filings. The two Executive
Officers responsible for the financial reporting and disclosure are in direct
control of the books and records of the Company and are involved first-hand in
the decision making process for material transactions.
b) There have been no significant changes in our internal controls or in other
factors, which could significantly affect internal controls subsequent to the
date we carried out our evaluation.
Part II - Other Information
Item 1 - Legal Proceedings
None
Item 2 - Changes in Securities
On February 27, 2004, the Company issued and sold 12,500,000 shares of its
common stock to Steven Ivester in exchange for cash of $12,500 and a commitment
to contribute the assets of two affiliated, start-up companies, eGlobalPhone,
Inc. and VoIP Solutions, Inc., which subsequently occurred in April, 2004.
Item 3 - Defaults on Senior Securities
None
Item 4 - Submission of Matters to a Vote of Security Holders
The Company has held no regularly scheduled, called or special meetings of
shareholders during the reporting period.
Item 5 - Exhibits and Reports on Form 8-K
(a) Exhibits
No. Description
------ -----------
31.1 Certification by CEO pursuant to 18 USC Section 1350 as adopted by
Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification by CFO pursuant to 18 USC Section 1350 as adopted by
Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 Certification by CEO pursuant to 18 USC Section 1350 as adopted by
Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 Certification by CFO pursuant to 18 USC Section 1350 as adopted by
Section 906 of the Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K
Form 8-K filed with the SEC on March 3, 2004
Form 8-K filed with the SEC on April 12, 2004
Form 8-K filed with the SEC on April 15, 2004
Form 8-K filed with the SEC on April 19, 2004
--------------------------------------------------------------------------------
10
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
VoIP, Inc.
May 17, 2004
-- /s/ Steven Ivester
----------------------------
Steven Ivester
Chief Executive Officer
/s/ Osvaldo Pitters
----------------------------
Osvaldo Pitters
Chief Financial Officer