(1)
|
Title
of each class of securities to which transaction applies:
|
||
(2)
|
Aggregate
number of securities to which transaction applies:
|
||
|
|
(3)
|
Per
unit price or other underlying value of transaction computed pursuant
to
Exchange Act Rule 0-11 (set forth the amount on which the filing
fee is
calculated and state how it was determined):
|
||
|
|
(4)
|
Proposed
maximum aggregate value of transaction:
|
||
|
|
(5)
|
Total
fee paid:
|
||
|
|
o
|
Fee
paid previously with preliminary materials.
|
||
|
|
(1)
|
Amount
Previously Paid:
|
||
|
|
(2)
|
Form,
Schedule or Registration Statement No.:
|
||
|
|
(3)
|
Filing
Party:
|
||
|
|
(4)
|
Date
Filed:
|
||
|
|
|
|
|
|
|
|
|
By
Order of the Board of Directors
|
|
|
|
|
|
|
|
|
|
|
|
Robert
V. Staats,
|
|
|
|
Secretary
|
SUMMARY
|
|
1
|
|
|
|
INFORMATION
ABOUT SOLICITATION AND VOTING
|
|
1
|
|
|
|
INFORMATION
ABOUT THE ANNUAL MEETING
|
|
1
|
|
|
|
PROPOSAL
NO. ONE: ELECTION OF DIRECTORS
|
|
5
|
|
|
|
CORPORATE
GOVERNANCE AND BOARD OF DIRECTORS' MATTERS
|
|
6
|
|
|
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
|
|
7
|
|
|
|
MANAGEMENT
|
|
9
|
|
|
|
EXECUTIVE
COMPENSATION
|
|
10
|
|
|
|
TRANSACTIONS
WITH RELATED PERSONS, PROMOTORS AND CERTAIN CONTROL
PERSONS
|
|
15
|
|
|
|
STOCK
PERFORMANCE GRAPH
|
|
16
|
|
|
|
PROPOSAL
NO. TWO: TO APPROVE THE COMPANY'S 2006 EQUITY INCENTIVE
PLAN
|
|
17
|
|
|
|
PROPOSAL
NO. THREE: TO APPROVE THE COMPANY'S AMENDED AND RESTATED
|
|
|
ARTICLES
OF INCORPORATION TO AUTHORIZE 25,000,000 SHARES OF PREFERRED
STOCK
|
|
20
|
|
|
|
PROPOSAL
NO. FOUR: TO APPROVE THE COMPANY'S AMENDED AND RESTATED
|
|
|
ARTICLES
OF INCORPORATION TO INCREASE THE NUMBER OF SHARES OF COMMON STOCK
THAT THE COMPANY IS AUTHORIZED TO ISSUE TO 400,000,000 SHARES OF
COMMON STOCK
|
|
32
|
|
|
|
PROPOSAL
NO. FIVE: TO APPROVE THE SELECTION OF BERKOVITS,
|
|
|
LAGO
& COMPANY LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR
2006
|
|
37
|
|
|
|
INCORPORATION
OF CERTAIN INFORMATION BY REFERENCE
|
|
38
|
|
|
|
AVAILABLE
INFORMATION
|
|
38
|
·
|
“FOR”
the election of the four directors to serve for 2007 and until their
successors are elected and
qualified;
|
·
|
“FOR”
the approval of the Company's 2006 Equity Incentive
Plan;
|
·
|
“FOR”
the approval of the Amended and Restated Articles of Incorporation
of the
Company to authorize 25,000,000 shares of preferred stock (which
approval
does not extend to the approval of any issuances of shares of preferred
stock);
|
·
|
“FOR”
the approval of the Amended and Restated Articles of Incorporation
of the
Company to increase the number of shares of common stock that the
Company
is authorized to issue to 400,000,000 shares of common stock (which
approval does not extend to the approval of any issuances of shares
of
common or preferred stock); and
|
·
|
“FOR”
the approval of the selection of Berkovits, Lago & Company, LLP as the
Company's independent auditors for
2006.
|
·
|
The
election of Anthony Cataldo, Gary Post, Stuart Kosh, and Nicholas
A.
Iannuzzi, Jr to the board of directors for 2007 will require an
affirmative vote of the majority of the votes cast in person or by
proxy,
provided that a quorum is present at the annual meeting. Therefore,
an
abstention or withholding of a vote will not be counted for the purpose
of
determining whether the requisite vote has been obtained and will
have no effect on the outcome of the
vote.
|
·
|
The
adoption of the 2006 Equity Incentive Plan will require an affirmative
vote of the majority of the votes cast in person or by proxy, provided
that a quorum is present at the annual meeting. Therefore, an abstention
or withholding of a vote will not be counted for the purpose of
determining whether the requisite vote has been obtained and will
have no effect on the outcome of the
vote.
|
·
|
The
proposal to approve the selection of Berkovits, Lago & Company, LLP as
the Company's independent auditors for 2006 will require the majority
of
the votes cast in person or by proxy, provided that a quorum is present
at
the annual meeting. Therefore, an abstention or withholding of a
vote will
not be counted for the purpose of determining whether the requisite
vote has been obtained and will have no effect on the outcome of the
vote.
|
·
|
The
proposal to approve the Amended and Restated Articles of Incorporation
to
authorize 25,000,000 shares of preferred stock (which approval does
not
extend to the approval of any issuances of shares of preferred stock)
and
the proposal to approve the Amended and Restated Articles of Incorporation
to increase the number of authorized shares of the Company's common
stock
to 400,000,000 shares (which approval does not extend to the approval
of
any issuance of shares of common stock) require the affirmative vote
of at
least a majority of the Company's outstanding shares of Common
Stock. Therefore, any abstentions, “broker non-votes” (shares held by
brokers or nominees as to which they have no discretionary authority
to
vote on a particular matter and have received no instructions from
the
beneficial owners or persons entitled to vote thereon), or other
limited
proxies will have the effect of a vote against the proposals to approve
the Amended and Restated Articles of
Incorporation.
|
Name
|
|
Age
|
|
Position
with Company
|
|
Director
Since
|
|
|
|
|
|
|
|
Anthony
Cataldo
|
|
55
|
|
Chairman
and Chief Executive Officer
|
|
September
2006
|
|
|
|
|
|
|
|
Gary
Post
|
|
58
|
|
Director
|
|
May
2006
|
|
|
|
|
|
|
|
Stuart
Kosh
|
|
50
|
|
Director
|
|
January
2006
|
|
·
|
Each
person known by the Company to own beneficially more than five percent
of
our outstanding common stock;
|
|
·
|
Each
director and prospective director of the
Company;
|
|
·
|
The
Company's Chief Executive Officer and each person who serves as an
executive officer of the Company;
and
|
|
·
|
All
executive officers and directors of the Company as a
group.
|
Name
of Beneficial Owner
|
Shares
of Common Stock Beneficially Owned (1)
|
Ownership
of Common Stock (1,2)
|
|||||
WQN,
Inc. (3)
|
20,949,241
|
18.2
|
%
|
||||
14911
Quorum Drive, Suite 140
|
|||||||
Dallas,
Texas 75240
|
|||||||
Nicholas
Iannuzzi**
|
7,355
|
*
|
|||||
Stuart
Kosh (4)
|
2,009,727
|
2.0
|
%
|
||||
Shawn
Lewis (5)
|
7,035,857
|
6.9
|
%
|
||||
Gary
Post (6)
|
3,300,000
|
3.2
|
%
|
||||
Robert
Staats (7)
|
275,000
|
*
|
|||||
Anthony
Cataldo (5)
|
-
|
*
|
|
||||
All
directors and executive officers as a
|
12,620,584
|
11.9
|
%
|
||||
group
(5 persons) (8)
|
(1)
|
The
Company has issued 99,943,034 shares of common stock; and a total
of
100,000,000 shares are authorized. Additional assumed issuances of
common
stock resulting from the exercise of options and/or warrants and/or
the
conversion of debt are subject to the authorized
limit.
|
(2)
|
Based
upon 99,943,034 shares of common stock issued and outstanding as
of
February 5,
2007.
|
(3)
|
Consists
of 5,787,429 shares of common stock and 15,161,812 shares issuable
upon
conversion of a convertible promissory note. Conversion shares were
calculated by dividing (i) the sum of the note principal of $3,700,000
and
interest at 6% from 1/3/06 through 2/5/07 by (ii) the effective common
share conversion price of $0.26 per
share.
|
(4)
|
Consists
of (a) 1,347,227 shares of common stock; (b) currently exercisable
options
to purchase 156,250 shares of common stock; and (c) warrants to purchase
506,250 shares of common stock.
|
(5)
|
As
previously disclosed, on September 14, 2006, VoIP, Inc. (“the Company”)
entered into employment agreements with Anthony J. Cataldo, the
Company's
Chairman and Chief Executive Officer, and Shawn Lewis, the Company's
Chief
Operating and Technology Officer. These agreements provided for,
among other things, the award of 10,000,000 stock options each
to Messrs.
Cataldo and Lewis upon sufficient underlying shares of common stock
being
authorized and available. The options were to be exercisable to
purchase
10,000,000 shares of the Company's common stock each for Messrs.
Cataldo
and Lewis at an exercise price of $0.01 per share for a period
of five (5)
years. The options were to contain a cashless exercise provision
and cost
free piggyback registration rights with respect to the common stock
underlying the options. Messrs. Cataldo and Lewis were also to
receive
sufficient additional options under the same terms to assure that
they
have the right to exercise options to maintain a minimum of 5%
and 8%
beneficial ownership, respectively, of the Company's issued and
outstanding common stock.
A
number of the Company's current financing agreements contain “favored
nations” provisions that require convertible debt conversion prices and
stock warrant exercise prices to be repriced (reduced) in the event
that,
among other things, options are granted at exercise prices less
than the
Company's quoted common stock market price at grant date. However,
these favored nations repricing provisions are not triggered upon
issuing
employee stock grants. Accordingly, in lieu of the stock options to
be granted to Messrs. Cataldo and Lewis, the Board of Directors on
January 24, 2007 resolved to issue stock grants for 10,000,000
common shares each, subject to sufficient increased shares of common
stock
being authorized and available for issuance, which will require
shareholder approval. The stock grants are to have the same 5%
and 8%
anti-dilution provisions and piggyback registration rights as the
options
were to have.
Accordingly,
these shares are not included with the shares, if any, reported
as
beneficially owned herein.
|
(6)
|
Consists
of (a) 300,000 shares of common stock; and (b) warrants to purchase
3,000,000 shares of common stock.
|
(7)
|
Consists
of warrants to purchase 125,000 shares of common stock and currently
exercisable options to purchase 150,000 shares of common
stock.
|
(8)
|
Represents
the combined beneficial ownership as of
February 5,
2007, of the executive officers and the Company’s
three directors (a total of five
persons).
|
Name
|
|
Age
|
|
Position
with Company
|
|
Dates
|
|
|
|
|
|
|
|
Anthony
Cataldo
|
|
55
|
|
Chairman
and Chief Executive Officer
|
|
September
2006 to present
|
|
|
|
|
|
|
|
Shawn
M. Lewis
|
|
38
|
|
Chief
Operating Officer; Chief Technology Officer
|
|
May
2005 to present
|
|
|
|
|
|
|
|
Robert
V. Staats
|
|
52
|
|
Chief
Accounting Officer
|
|
May
2006 to present
|
· |
reward
performance that drives substantial increases in shareholder value,
as
evidenced through both future operating profits and increased market
price
of our common shares; and
|
· |
attract,
hire and retain well qualified executives given our competitive industry,
startup nature, and risk profile.
|
Name
and
|
Stock
|
Option
|
All
Other
|
|||||||||||||||||||
Principal
Position
|
Year
|
Salary
|
Bonus
|
Awards
|
Awards
(1)
|
Compensation
|
Total
|
|||||||||||||||
Anthony
Cataldo (2)
|
2006
|
$
|
83,333
|
$
|
23,750
|
$
|
-
|
$
|
-
|
$
|
6,000
|
$
|
113,083
|
|||||||||
Chairman
and Chief Executive Officer
|
||||||||||||||||||||||
(Principal
Executive Officer)
|
||||||||||||||||||||||
Shawn
M. Lewis (3)
|
2006
|
214,584
|
64,808
|
1,080,000
|
-
|
35,429
|
1,394,821
|
|||||||||||||||
Chief
Operating Officer;
|
||||||||||||||||||||||
Chief
Technology Officer
|
||||||||||||||||||||||
Robert
V. Staats (4)
|
2006
|
132,597
|
5,692
|
-
|
133,000
|
-
|
271,289
|
|||||||||||||||
Chief
Accounting Officer
|
||||||||||||||||||||||
(Principal
Financial Officer)
|
||||||||||||||||||||||
Gary
Post (5)
|
2006
|
72,668
|
-
|
300,000
|
930,000
|
241,672
|
1,544,340
|
|||||||||||||||
Former
President, Chief Executive
|
||||||||||||||||||||||
Officer
and Chairman (6)
|
||||||||||||||||||||||
Michael
Adler
|
2006
|
60,923
|
-
|
-
|
-
|
-
|
60,923
|
|||||||||||||||
Former
Chairman and Chief
|
||||||||||||||||||||||
Executive
Officer (7)
|
||||||||||||||||||||||
David
Sasnett
|
2006
|
54,375
|
-
|
-
|
-
|
-
|
54,375
|
|||||||||||||||
Former
Chief Financial Officer (8)
|
(1) |
Includes
awards of stock warrants where applicable. Values are computed
in
accordance with Statement of Financial Accounting Standards number
123R.
|
(2) |
Mr.
Cataldo's 2006 salary and bonus represent the contractual monthly
amounts
($20,833 and $5,000, respectively) earned since September 2006,
plus a
discretionary bonus of $3,750. All
Other Compensation represents Mr. Cataldo's monthly vehicle allowance
since September 2006. Mr. Cataldo's employment agreement is effective
through September 2009, and will thereafter automatically renew
for
successive one-year periods unless either party provides a 90-day
notice
of termination. See
Compensation Discussion and Analysis for a description of certain
stock
options and stock grants pertaining to Mr. Cataldo. Since those
stock
options were not granted, they are not reflected in the Summary
Compensation Table.
|
(3) |
Mr.
Lewis' 2006 salary and bonus represent his contractual monthly
amounts
($20,833 and $5,000, respectively, since September 2006) earned,
plus a
discretionary bonus of $4,808. On November 8, 2006, Mr. Lewis
was granted
options to purchase 3,000,000 common shares at $0.36 per share
(closing
market price at the grant date). On November 9, 2006, the Company
settled
Mr. Lewis' claims against the Company for alleged breaches of
his
employment agreement, and for nonregistration of the Company's
common
shares he holds pursuant to the Caerus merger agreement dated
May 31,
2005, for $1,080,000. Also on November 9, 2006, Mr. Lewis exercised
his
options to purchase 3,000,000 common shares, and the $1,080,000
proceeds
were credited toward the settlement of his claims. All Other
Compensation
represents Mr. Lewis' $1,500 monthly vehicle allowance since
July 2006,
plus discretionary expense reimbursement treated as compensation.
Mr.
Lewis' employment agreement is effective through September 2009.
See
Compensation Discussion and Analysis for a description of certain
stock
options and stock grants pertaining to Mr. Lewis. Since those
stock
options were not granted, they are not reflected in the Summary
Compensation Table.
|
(4) |
Mr.
Staats' 2006 salary ($11,667 per month at December 31, 2006,
increasing to
$12,917 in January 2007) represents his contractual monthly amounts
earned. His bonus amount was discretionary. Mr. Staats' employment
agreement also provides for the award of 100,000 options and
100,000
warrants, subject to approval by the Company's Board of Directors.
The
options and warrants will each be exercisable to purchase 100,000
shares
of the Company's common stock at $1.02 a share until May 2011,
and were
valued at a combined $133,000 in May 2006. Mr. Staats' employment
agreement is effective through May 2009, and will thereafter
automatically
renew for successive one-year periods unless terminated at least
90 days
prior to the expiration of each current existing twelve-month
period. Mr.
Staats may terminate his employment agreement upon 30 days' prior
notice.
|
(5) |
Mr.
Post's 2006 salary represents his contractual monthly amount
earned from
May to September 2006. Subject to approval by the Company's board
of
directors, Mr. Post's employment agreement provides for the issuance
of
300,000 common shares, then valued at $300,000. Mr. Post's employment
agreement also provided for the award of options and warrants
to purchase
a total of 3,000,000 shares of the Company's common stock at
$1.00 a share
until May 2011. On December 12, 2006 these options and warrants
were
converted to warrants to purchase 3,000,000 of the Company's
common shares
at $0.475 per share, exercisable until December 2016. These new
warrants
were valued at $930,000. Mr. Post's employment agreement also
provides for
certain post-employment compensation totaling approximately $241,672,
listed under All Other
Compensation.
|
(6) |
Mr.
Post resigned his position as President, Chief Executive Officer
and
Chairman in September, 2006.
|
(7) |
Mr.
Adler resigned his position as Chairman and Chief Executive Officer
in May
2006.
|
(8) |
Mr.
Sasnett resigned his position as Chief Financial Officer in May
2006.
|
Option
and Warrant Awards
|
|||||||||||||
Number
of Securities Underlying Unexercised Options and Warrants
|
Option
or Warrant Exercise Price
|
Option
or Warrant Expiration Date
|
|||||||||||
Exercisable
|
Unexercisable
|
||||||||||||
Name
and
|
|||||||||||||
Principal
Position
|
|||||||||||||
Anthony
Cataldo (1)
|
|
|
|
|
|||||||||
Chairman
and Chief Executive Officer
|
|
|
|
||||||||||
(Principal
Executive Officer)
|
|||||||||||||
Shawn
M. Lewis (2)
|
|
|
|
|
|
||||||||
Chief
Operating Officer;
|
|||||||||||||
Chief
Technology Officer
|
|||||||||||||
Robert
V. Staats
|
190,625
|
59,375(9
|
)
|
$
|
1.02
|
5/17/11
|
|||||||
Chief
Accounting Officer
|
62,500
|
38,500(9
|
)
|
$
|
1.12
|
6/3/10
|
|||||||
Gary
Post (3)
|
3,000,000
|
-
|
$
|
0.475
|
12/12/16
|
||||||||
Former
President, Chief Executive
|
|||||||||||||
Officer
and Chairman (6)
|
|||||||||||||
Michael
Adler (4)
|
500,000
|
-
|
$
|
1.56
|
10/18/10
|
||||||||
Former
Chairman and Chief
|
500,000
|
-
|
$
|
1.50
|
10/18/10
|
||||||||
Executive
Officer (7)
|
|||||||||||||
David
Sasnett
(5)
|
450,000
|
$
|
1.53
|
10/18/10
|
|||||||||
Former
Chief Financial Officer (8)
|
(1) |
See
Compensation Discussion and Analysis for a description of certain
stock
options and stock grants pertaining to Mr. Cataldo. Since those
stock
options were not granted, they are not reflected in the Outstanding
Equity
Awards at Fiscal Year-End
table.
|
(2) |
See
Compensation Discussion and Analysis for a description of certain
stock
options and stock grants pertaining to Mr. Lewis. Since those
stock
options were never granted, they are not reflected in the Outstanding
Equity Awards at Fiscal Year-End
table.
|
(3) |
Mr.
Post's employment agreement provided for the award of options and
warrants
to purchase a total of 3,000,000 shares of the Company's common
stock at
$1.00 a share until May 2011. On December 12, 2006 these options
and
warrants were converted to warrants to purchase 3,000,000 of the
Company's
common shares at $0.475 per share, exercisable until December
2016.
|
(4) |
Mr.
Adler's options and warrants were issued in 2005 in conjunction
with his
employment agreement.
|
(5) |
Mr.
Sasnett's's warrants were issued in 2005 in conjunction with his
employment agreement.
|
(6) |
Mr.
Post resigned his position as President, Chief Executive Officer
and
Chairman in September, 2006.
|
(7) |
Mr.
Adler resigned his position as Chairman and Chief Executive Officer
in
May, 2006.
|
(8) |
Mr.
Sasnett resigned his position as Chief Financial Officer in May,
2006.
|
(9) |
Mr.
Staats' remaining 59,375 and 38,500 options vest ratably until
May 2009
and June 2008, respectively.
|
Option
Awards (1)
|
Stock
Awards
|
||||||||||||
Number
of Shares Acquired on Exercise
|
Value
Realized on Exercise
|
Number
of Shares Acquired on Vesting
|
Value
Realized on Vesting
|
||||||||||
Name
and
|
|||||||||||||
Principal
Position
|
|||||||||||||
Anthony
Cataldo
|
-
|
$
|
-
|
-
|
$
|
-
|
|||||||
Chairman
and Chief Executive Officer
|
|||||||||||||
(Principal
Executive Officer)
|
|||||||||||||
Shawn
M. Lewis (2)
|
3,000,000
|
$
|
-
|
-
|
$
|
-
|
|||||||
Chief
Operating Officer;
|
|||||||||||||
Chief
Technology Officer
|
|||||||||||||
Robert
V. Staats
|
-
|
$
|
-
|
-
|
$
|
-
|
|||||||
Chief
Accounting Officer
|
|||||||||||||
Gary
Post (3)
|
-
|
$
|
-
|
300,000
|
$
|
300,000
|
|||||||
Former
President, Chief Executive
|
|||||||||||||
Officer
and Chairman (4)
|
|||||||||||||
Michael
Adler
|
-
|
$
|
-
|
-
|
$
|
-
|
|||||||
Former
Chairman and Chief
|
|||||||||||||
Executive
Officer (5)
|
|||||||||||||
David
Sasnett
|
-
|
$
|
-
|
-
|
$
|
-
|
|||||||
Former
Chief Financial Officer (6)
|
(1)
|
Includes
awards of stock warrants, where applicable. Values are computed
in
accordance with Statement of Financial Accounting Standards No.
123R.
|
||||||||
(2)
|
On
November 8, 2006, Mr. Lewis was granted options to purchase 3,000,000
common shares at $0.36 per share (closing market price at the grant
date).
On November 9, 2006, the Company settled Mr. Lewis' claims against
the
Company for alleged breaches of his employment agreement, and for
nonregistration of the Company's common shares he holds pursuant
to the
Caerus merger agreement dated May 31, 2005, for $1,080,000. Also
on
November 9, 2006, Mr. Lewis exercised his options to purchase 3,000,000
common shares, and the $1,080,000 proceeds were credited toward
the
settlement of his claims.
|
||||||||
(3)
|
Subject
to approval by the Company's board of directors, Mr. Post's employment
agreement provides for the issuance of 300,000 common shares, then
valued
at $300,000.
|
||||||||
(4)
|
Mr.
Post resigned his position as President, Chief Executive Officer
and
Chairman in September, 2006.
|
||||||||
(5)
|
Mr.
Adler resigned his position as Chairman and Chief Executive Officer
in
May, 2006.
|
||||||||
(6)
|
Mr.
Sasnett resigned his position as Chief Financial Officer in May,
2006.
|
Director
Compensation
|
||||
Stock
Awards
|
||||
Name
of Director
|
||||
Anthony
Cataldo
|
$
|
-
|
||
Gary
Post (1)
|
$
|
105,000
|
||
Stuart
Kosh (1)
|
$
|
105,000
|
(1)
|
On
December 12, 2006 non-employee directors were each awarded 300,000
of the
Company's common shares, subject to sufficient authorized shares
being
approved by shareholders, as annual board member compensation.
The fair
value of the stock awards was based on the Company's closing common
stock
price of $0.35 per share on the grant
date.
|
Name
and Position/Group
|
|
Dollar
Value ($)
|
|
Number
of Units
|
|
|
|
|
|
Anthony
Cataldo
|
|
(1)
(2)
|
|
(1)
(2)
|
|
|
|
|
|
Shawn
M. Lewis
Chief
Technology Officer, Chief Operating Officer
|
|
(1)
(2)
|
|
(1)
(2)
|
|
|
|
|
|
Robert
Staats
Chief
Accounting Officer
|
|
(1)
(2)
|
|
(1)
(2)
|
(1)
|
The
granting of Awards is discretionary, and we cannot now determine
the
number or type of Awards we will grant in the future to our executive
officers. We expect that from time to time, in our discretion, we
will
grant Awards to our executive officers under the 2006 Plan under
such
terms consistent with the plan as we deem appropriate at the time
of those
grants.
|
(2)
|
All
of these options will be granted with an exercise price equal to
the fair
market value of our common stock on the date of
grant.
|
· |
Unlimited
local, long distance and international calling to 50 countries, for
a low
monthly fee;
|
· |
The
ability to use a mobile phone to access WQN, Inc.'s network for high
quality unlimited international
calls;
|
· |
Free
in-network calling;
|
· |
Free
features including Caller-ID, Call-Waiting, Call-Forwarding, 3-Way
Calling, Voice Mail, and more; and
|
· |
A
total calling solution enabling travelers to make and receive phone
calls
from anywhere in the world using a personal computer and high-speed
Internet access, including Wi-Fi
hotspots.
|
· |
Pinless
dialing;
|
· |
Can
be used from registered home, office and mobile
phones;
|
· |
Access
to personal on-line account management tools which enables customers
to
view their call history and purchase information 24 hours a
day;
|
· |
Recharge
their accounts on-line or through our Interactive VoiceResponse System
(IVR);
|
· |
Update,
modify and change their account information including credit card
details;
and
|
· |
Communicate
with customer service representatives by email, live chat or by calling
a
customer service number.
|
· |
No
monthly fees or contracts;
|
· |
International
call forwarding;
|
· |
The
ability to recharge the number on-line at any time;
and
|
· |
Access
to personal on-line account management tools which enables customers
to
view account balance and call history 24 hours a
day.
|
Website
Address
|
|
Website
Description
|
www.wqn.com
|
|
EasyTalk
service and Corporate website
|
www.rocketVOIP.com
|
|
RocketVOIP
service
|
www.my800online.com
|
|
Personal
800 service
|
www.valucomonline.com
|
|
High-end
Indian consumers
|
www.valumaxonline.com
|
|
Indian
market
|
www.card2asia.com
|
|
Indian
market
|
www.supertel.com
|
|
Iranian
market (1)
|
www.metrotelcom.net
|
|
Iranian
market (1)
|
www.wqnwireless.com
|
|
Prepaid
wireless plans
|
www.rocketmobile.net
|
|
International
calling for mobile phone users
|
Years
Ended December 31,
|
Nine
Months Ended September
30,
|
|||||||||||||||||||||
2001
(2)
|
2002
(2)
|
2003
(2)
|
2004
(2)
|
2005
(2)
|
2005
|
2006
|
||||||||||||||||
Revenues
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
1,020,285
|
$
|
13,878,097
|
$
|
4,337,717
|
$
|
25,220,303
|
||||||||
Gross
profit (loss)
|
-
|
-
|
-
|
265,687
|
(1,196,624
|
)
|
(299,652
|
)
|
136,121
|
|||||||||||||
Operating
expenses
|
-
|
-
|
-
|
5,573,575
|
21,159,717
|
13,297,337
|
25,215,592
|
|||||||||||||||
Loss
from continuing
operations
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
(5,307,888
|
)
|
$
|
(23,788,646
|
)
|
$
|
(13,617,347
|
)
|
$
|
(30,343,179
|
)
|
||||
Net
loss
|
$
|
(61,634
|
)
|
$
|
(61,926
|
)
|
$
|
(352,968
|
)
|
$
|
(5,862,120
|
)
|
$
|
(28,313,333
|
)
|
$
|
(13,833,503
|
)
|
$
|
(31,311,440
|
)
|
|
Net
loss per share:
|
||||||||||||||||||||||
Loss
from continuing
operations
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
(0.36
|
)
|
$
|
(0.57
|
)
|
$
|
(0.38
|
)
|
$
|
(0.43
|
)
|
||||
Net
loss
|
$
|
(0.04
|
)
|
$
|
(0.04
|
)
|
$
|
(0.20
|
)
|
$
|
(0.40
|
)
|
$
|
(0.67
|
)
|
$
|
(0.39
|
)
|
$
|
(0.45
|
)
|
|
Summary
cash flow data:
|
||||||||||||||||||||||
Net
cash used in operating
activities
|
$
|
-
|
$
|
-
|
$
|
(78,706
|
)
|
$
|
(3,330,574
|
)
|
$
|
(17,301,611
|
)
|
$
|
(8,642,847
|
)
|
$
|
(10,998,391
|
)
|
|||
Net
cash provided by
(used in) investing
activities
|
52,902
|
73,849
|
82,196
|
479,594
|
(4,395,997
|
)
|
(737,585
|
)
|
(104,724
|
)
|
||||||||||||
Net
cash provided by financing
activities
|
-
|
-
|
-
|
3,988,618
|
23,785,216
|
11,478,168
|
8,425,119
|
|||||||||||||||
Balance
sheet data (at
period end) cash
|
1,656
|
9
|
3,499
|
1,141,137
|
3,228,745
|
3,238,873
|
550,749
|
|||||||||||||||
Property
and equipment
|
-
|
-
|
-
|
389,528
|
10,141,872
|
8,309,161
|
7,090,973
|
|||||||||||||||
Goodwill
and other intangible
assets
|
-
|
-
|
-
|
1,713,301
|
38,404,271
|
29,996,814
|
35,894,985
|
|||||||||||||||
Total
assets
|
532,897
|
530,230
|
259,459
|
8,672,548
|
56,244,161
|
43,118,352
|
44,974,923
|
|||||||||||||||
Long
term obligations
|
-
|
-
|
-
|
-
|
245,248
|
776,565
|
236,974
|
|||||||||||||||
Total
liabilities
|
9,711
|
68,970
|
151,167
|
1,027,727
|
27,018,241
|
19,683,913
|
36,902,188
|
|||||||||||||||
Total
shareholders' equity
|
523,186
|
461,260
|
108,292
|
7,644,821
|
29,225,920
|
23,434,439
|
8,072,735
|
|||||||||||||||
Book
value per share
|
$
|
0.34
|
$
|
0.30
|
$
|
0.06
|
$
|
0.32
|
$
|
0.48
|
$
|
0.50
|
$
|
0.11
|
||||||||
Cash
dividends per share (1)
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
(1) |
No
cash dividends have been paid or
declared.
|
(2) |
Operations
relating to Millennia Tea Masters and DTNet Technologies were discontinued
in 2004 and 2006, respectively. Operating results prior to these
events
were reclassified as discontinued
operations
|
Nine
Months Ended
|
||||||||||||||||||||||
Years
Ended December 31,
|
September
30,
|
|||||||||||||||||||||
2001
(2)
|
2002
(2)
|
2003
(2)
|
2004
(2)
|
2005
(2)
|
2005
|
2006
|
||||||||||||||||
Revenues
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
1,020,285
|
$
|
13,878,097
|
$
|
4,337,717
|
$
|
25,220,303
|
||||||||
Gross
profit (loss)
|
-
|
-
|
-
|
265,687
|
(1,196,624
|
)
|
(299,652
|
)
|
136,121
|
|||||||||||||
Operating
expenses
|
-
|
-
|
-
|
5,573,575
|
21,159,717
|
13,297,337
|
25,215,592
|
|||||||||||||||
Loss
from continuing
operations
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
(5,307,888
|
)
|
$
|
(23,788,646
|
)
|
$
|
(13,617,347
|
)
|
$
|
(30,343,179
|
)
|
||||
Net
loss
|
$
|
(61,634
|
)
|
$
|
(61,926
|
)
|
$
|
(352,968
|
)
|
$
|
(5,862,120
|
)
|
$
|
(28,313,333
|
)
|
$
|
(13,833,503
|
)
|
$
|
(31,311,440
|
)
|
|
Net
loss per share:
|
||||||||||||||||||||||
Loss
from continuing
operations
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
(0.36
|
)
|
$
|
(0.57
|
)
|
$
|
(0.38
|
)
|
$
|
(0.43
|
)
|
||||
Net
loss
|
$
|
(0.04
|
)
|
$
|
(0.04
|
)
|
$
|
(0.20
|
)
|
$
|
(0.40
|
)
|
$
|
(0.67
|
)
|
$
|
(0.39
|
)
|
$
|
(0.45
|
)
|
|
Summary
cash flow data:
|
||||||||||||||||||||||
Net
cash used in operating
activities
|
$
|
-
|
$
|
-
|
$
|
(78,706
|
)
|
$
|
(3,330,574
|
)
|
$
|
(17,301,611
|
)
|
$
|
(8,642,847
|
)
|
$
|
(10,998,391
|
)
|
|||
Net
cash provided by (used
in) investing activities
|
52,902
|
73,849
|
82,196
|
479,594
|
(4,395,997
|
)
|
(737,585
|
)
|
(104,724
|
)
|
||||||||||||
Net
cash provided by financing
activities
|
-
|
-
|
-
|
3,988,618
|
23,785,216
|
11,478,168
|
8,425,119
|
|||||||||||||||
Balance
Sheet Data (at
period end)
|
||||||||||||||||||||||
Cash
|
1,656
|
9
|
3,499
|
1,141,137
|
3,228,745
|
3,238,873
|
550,749
|
|||||||||||||||
Property
and equipment
|
-
|
-
|
-
|
389,528
|
10,141,872
|
8,309,161
|
7,090,973
|
|||||||||||||||
Goodwill
and other intangible
assets
|
-
|
-
|
-
|
1,713,301
|
38,404,271
|
29,996,814
|
35,894,985
|
|||||||||||||||
Total
assets
|
532,897
|
530,230
|
259,459
|
8,672,548
|
56,244,161
|
43,118,352
|
44,974,923
|
|||||||||||||||
Long
term obligations
|
-
|
-
|
-
|
-
|
245,248
|
776,565
|
236,974
|
|||||||||||||||
Total
liabilities
|
9,711
|
68,970
|
151,167
|
1,027,727
|
27,018,241
|
19,683,913
|
36,902,188
|
|||||||||||||||
Total
shareholders' equity
|
523,186
|
461,260
|
108,292
|
7,644,821
|
29,225,920
|
23,434,439
|
8,072,735
|
|||||||||||||||
Book
value per share
|
$
|
0.34
|
$
|
0.30
|
$
|
0.06
|
$
|
0.32
|
$
|
0.48
|
$
|
0.50
|
$
|
0.11
|
||||||||
Cash
dividends per share (1)
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
(1) |
No
cash dividends have been paid or
declared.
|
(2) |
Operations
relating to Millennia Tea Masters and DTNet Technologies were discontinued
in 2004 and 2006, respectively. Operating results prior to these
events
were reclassified as discontinued
operations
|
Quarter
Ended
|
||||||||||||||||||||||||||||||||||
Mar
31,
|
Jun
30,
|
Sep
30,
|
Dec
31,
|
Mar
31,
|
Jun
30,
|
Sep
30,
|
Dec
31,
|
Mar
31,
|
Jun
30,
|
Sep
30,
|
||||||||||||||||||||||||
2004
|
2004
|
2004
|
2004
|
2005
|
2005
|
2005
|
2005
|
2006
|
2006
|
2006
|
||||||||||||||||||||||||
(Unaudited)
|
||||||||||||||||||||||||||||||||||
Revenues
|
$
|
-
|
$
|
39,945
|
$
|
333,309
|
$
|
647,031
|
$
|
1,006,111
|
$
|
1,589,857
|
$
|
1,776,155
|
$
|
9,505,974
|
$
|
9,994,548
|
$
|
9,003,742
|
$
|
6,222,013
|
||||||||||||
Gross
profit (loss)
|
-
|
11,379
|
(24,615
|
)
|
278,924
|
8,222
|
528,602
|
(922,381
|
)
|
(811,067
|
)
|
(619,033
|
)
|
230,145
|
525,009
|
|||||||||||||||||||
Income
(loss) from continuing operations
|
(22,324
|
)
|
(417,024
|
)
|
(5,499,670
|
)
|
631,130
|
(1,559,518
|
)
|
(3,482,529
|
)
|
(8,833,168
|
)
|
(9,913,430
|
)
|
(13,808,215
|
)
|
(5,169,917
|
)
|
(12,312,707
|
)
|
|||||||||||||
Net
income (loss)
|
(22,324
|
)
|
(408,658
|
)
|
(5,647,736
|
)
|
216,598
|
(1,555,398
|
)
|
(3,536,104
|
)
|
(8,742,001
|
)
|
(14,479,830
|
)
|
(14,754,694
|
)
|
(5,191,699
|
)
|
(12,312,707
|
)
|
|||||||||||||
Per
share:
|
||||||||||||||||||||||||||||||||||
Net
loss from continuing operations
|
$
|
(0.01
|
)
|
$
|
(0.03
|
)
|
$
|
(0.28
|
)
|
$
|
(0.01
|
)
|
$
|
(0.06
|
)
|
$
|
(0.12
|
)
|
$
|
(0.18
|
)
|
$
|
(0.67
|
)
|
$
|
(0.20
|
)
|
$
|
(0.07
|
)
|
$
|
(0.17
|
)
|
|
Net
loss
|
$
|
(0.01
|
)
|
$
|
(0.03
|
)
|
$
|
(0.29
|
)
|
$
|
0.02
|
$
|
(0.06
|
)
|
$
|
(0.12
|
)
|
$
|
(0.18
|
)
|
$
|
(0.67
|
)
|
$
|
(0.22
|
)
|
$
|
(0.07
|
)
|
$
|
(0.17
|
)
|
(1) |
These
quarterly results reflect the merger in May 2005 of Caerus and the
acquisition in October 2005 of the VoIP-related assets of
WQN.
|
(2) |
The
results for the quarter ended September 30, 2004 include expenses
of $4.9
million related to the issuance of stock
warrants.
|
(3) |
Operations
relating to Millennia Tea Masters and DTNet Technologies were discontinued
in 2004 and 2006, respectively. Operating results prior to these
events
were reclassified as discontinued
operations.
|
· |
substantially
enhanced our international VOIP
business;
|
· |
the
Acquisition provided us with an additional 60,000 retail customers
using
various VOIP services that could be integrated onto our VoiceOne
network;
|
· |
the
average margin at the time on the $30 million in revenue from WQN
was 3%,
primarily because of outsourced network cost and the lack of network
ownership, and by moving that traffic to our Voice One(R) proprietary
technology network, we anticipated increasing our
margins.
|
· |
the
customer service personnel that we acquired enable us to provide
additional services to our service
providers.
|
·
|
The
amount due and owing under the Notes shall be reset to the principal
amount due under the Notes in the amount of $8,318,284, together
with
interest due under the Notes in the amount of $207,957.09, and liquidated
damages provided in the Notes in the amount of $374,322.77, for a
total
amount of $9,781,719.
|
·
|
The
plaintiffs agreed to surrender $4,940,000 of the Notes Claims, on
a pro
rata basis, to the Company in exchange for 19,000,000 shares of the
Company’s common stock, par value $0.001 per share, through the issuance
of freely trading securities issued pursuant to Section 3(a)(10)
of the
Act.
|
·
|
Four
of the plaintiffs agreed to surrender their Warrant Claims to the
Company
in exchange for 2,500,000 shares of the Company’s common stock, par value
$0.001 per share, through the issuance of freely trading securities
issued
pursuant to Section 3(a)(10) of the
Act.
|
·
|
The
plaintiffs agreed to retain the balance of their Notes Claims and
the
Company agreed to reset the conversion rate for the remaining balance
under the Notes to $0.26 per share, which shall retain all rights.
|
·
|
The
Company agreed to reduce the exercise price of the un-exercised warrants
purchased by the plaintiffs in connection with the Notes to
$0.475.
|
·
|
The
Company agreed to amend its Certificate of Incorporation and take
all
steps necessary, including obtaining shareholder approval, to authorize
at
least an additional 18,621,997 shares of common stock, as well as
sufficient shares to cover the un-exercised warrants issued to the
plaintiffs under the Notes and hold such shares in reserve for the
plaintiffs’ benefit in connection with the balance by the Investors herein
on or before November 30, 2006.
|
·
|
The
plaintiffs agreed that none of the plaintiffs shall sell more than
its
pro-rata allocation of thirty percent (30%) of the daily trading
volume in
the Company’s common stock, provided however, any Investor may cumulate
the daily trading volume in any given calendar week to compute their
leak-out amount; provided further, that the aforementioned cumulative
trading volume resets every Monday. This Investors’ Leak-Out provision
does not apply to any sale of the Company’s common stock at a price above
$0.75 per share.
|
·
|
With
respect to the balance of the claims retained by the plaintiffs under
the
Notes, the plaintiffs retained all rights granted to them in Notes
that
were not specifically waived in settlement agreement.
|
·
|
The
Company and the plaintiffs agreed to execute a mutual release upon
the
plaintiffs’ receipt of the shares issued pursuant to Section
3(a)(10).
|
·
|
The
amount due and owing under the Notes shall be reset to the principal
amount due under the Notes in the amount of $911,781, together with
interest due under the Notes in the amount of $34,192 and liquidated
damages provided in the Notes in the amount of $41,030, for a total
amount
of $987,003.
|
·
|
The
plaintiffs agreed to surrender $498,460 of the Notes Claims, on
a pro rata
basis, to the Company in exchange for 1,917,153 shares of the Company’s
common stock, par value $0.001 per share, through the issuance
of freely
trading securities issued pursuant to Section 3(a)(10) of the
Act.
|
·
|
The
plaintiffs agreed to retain the balance of their Notes Claims, and
the
Company agreed to reset the conversion rate for the remaining balance
under the Notes to $0.26 per share, which shall retain all
rights.
|
·
|
The
Company agreed to amend its Certificate of Incorporation and take
all
steps necessary, including obtaining shareholder approval, to authorize
at
least an additional 1,879,011 shares of common stock and hold such
shares
in reserve for plaintiffs’ benefit in connection with the balance of
the Notes retained by plaintiffs herein on or before November 30,
2006.
|
·
|
The
plaintiffs agreed that none of the plaintiffs shall sell more
than their
pro-rata allocation of thirty percent (30%) of the daily trading
volume in
the Company’s common stock, provided however, any Investor may cumulate
the daily trading volume in any given calendar week to compute
their
leak-out amount; provided further, that the aforementioned
cumulative
trading volume resets every Monday. This Leak-Out provision
does not apply
to any sale of the Company’s common stock at a price above $0.75 per
share.
|
·
|
With
respect to the balance of the claims retained by the plaintiffs
under the
Notes, the plaintiffs retained all rights granted to them
in Notes that
were not specifically waived in the Settlement
Agreement.
|
·
|
The
Company and the plaintiffs agreed to execute a mutual release
upon the
Investors’ receipt of the shares issued pursuant to Section
3(a)(10).
|
|
Additional
Common Stock Issuable
Upon
Conversion/Exercise 1
|
Additional
Reservation
Requirements 2
|
Current
Obligations
|
Minimim
Total
Additional
|
||||||||||||||||||||||||
Convertible
|
Convertible
|
To
Issue
|
Authorized
|
|||||||||||||||||||||||||
Notes
|
Warrants
|
Options
|
Subtotal
|
Notes
|
Options
|
Subotal
|
Shares
3
|
Shares
Required
|
||||||||||||||||||||
May
2005 private placement
|
-
|
2,207,751
|