UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., 20549
FORM 10-Q SB
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarter report ended June 30, 2001
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to ___________
Commission File number 000-28581
VOIP TELECOM, INC.
(Exact name of small business issuer as registrant as specified in charter)
Nevada 86-0880742
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
350 West 9th Ave., Suite 104, Escondido, CA 92025
(Address of principal executive office)
Registrants telephone no., including area code (760) 291-1710
N/A
(Former name, changed since last report)
Check whether the registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), Yes [X] No [ ] and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuers classes
of common stock, as of the last practicable date.
Class Outstanding as of June 30, 2001
Common Stock, $0.0001 35,732,972
TABLE OF CONTENTS
PART 1. FINANCIAL INFORMATION
Heading Page
Item 1. Consolidated Financial Statements 3
Consolidated Balance Sheets December 31, 2000
And June 30, 2001 4-6
Consolidated Statements of Operations six months
Ended June 30, 2001 and June 30, 2000 7
Consolidated Statement of Stockholders Equity 8-10
Consolidated Statements of Cash Flows six months
Ended June 30, 2000 and June 30, 2001 11-12
Notes to Consolidated Financial Statements 13
Item 2. Managements Discussion and Analysis and
Result of Operations 14-15
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 2. Changes in Security 16
Item 3. Defaults Upon Senior Securities 16
Item 4. Submission of Matter to a Vote of 16
Securities Holders
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 17
Signatures S-1
PART 1 FINANCIAL INFORMATION
Item 1. Financial Statement
The accompanying unaudited financial statements have been prepared in
accordance with the instructions for Form 10-Q pursuant to the rules and
regulations of the Securities and Exchange Commission and, therefore, do not
include all information and footnotes necessary for a complete presentation of
the financial position, results of operations, cash flows, and stockholders
equity in conformity with generally accepted accounting principles. In the
opinion of management, all adjustments considered necessary for a fair
presentation of the results of operations and financial position have been
included and all such adjustments are of a normal recurring nature.
The unaudited balance sheet of the Company as of June 30, 2001, and balance
sheet of the Company as of December 31, 2000, derived from the Companys audited
financial statements, the unaudited statement of operations and cash flows for
the six months ended June 30, 2001 and June 30, 2000 the statement of
stockholders equity for the period from May 4, 1997 through June 30, 2001 are
attached hereto and incorporated herein by this reference.
Operating results for the quarter ended June 30, 2001 are not necessarily
indicative of the results that can be expected for the year ending December 31,
2001.
350 E Street, Chula Vista, CA 91910
Tel: (619) 422-1348 Fax: (619) 422-1465
ARMANDO C. IBARRA
CERTIFIED PUBLIC ACCOUNTANTS
( A Professional Corporation)
Armando C. Ibarra,
C.P.A.
Members of the California Society of
Armando Ibarra, Jr.,
C.P.A.
Certified Public Accountants
To the Board of Directors
VoIP Telecom, Inc.
(Formerly Presidents Telecom, Inc.)
We have reviewed the accompanying consolidated balance sheets of VoIP
Telecom, Inc. (Formerly Presidents Telecom, Inc.) as of June 30, 2001 and
December 31, 2000 and the related statements of operations, changes in
stockholders equity, and cash flows for the three and six months then ended, in
accordance with Statements on Standards for Accounting Review Services issued by
the American Institute of Certified Public Accountants. All information included
in these financial statements is the representation of the management of VoIP
Telecom, Inc.
A review consists principally of inquiries of company personnel and
analytical procedures applied to financial data. It is substantially less in
scope than an audit in accordance with generally accepted auditing standards,
the objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any modifications that should be
made to the accompanying financial statements in order for them to be in
conformity with generally accepted accounting principles.
/S/ Armando C. Ibarra
ARMANDO C. IBARRA, CPA - APC
August 20, 2001
VoIP TELECOM, INC.
(Formerly Presidents Telecom, Inc.)
Consolidated Balance Sheets
ASSETS
Six Months
Ended Year Ended
June 30, December 31,
2001 2000
CURRENT ASSETS
Cash $ 32,600 $ 50,392
Accounts receivable 381,703 145,852
Receivable-related party 1,450 1,450
Loan receivable 153,622 153,622
Prepaid expenses 2,906 2,906
Total Current Assets 572,281 354,222
NET PROPERTY & EQUIPMENT 409,049 1,506,720
TOTAL ASSETS $ 981,330 $1,860,942
VoIP TELECOM, INC.
(Formerly Presidents Telecom, Inc.)
Consolidated Balance Sheets
LIABILITIES AND STOCKHOLDERS' EQUITY
Six Months
Ended Year Ended
June 30, December 31,
2001 2000
CURRENT LIABILITIES
Accounts payable $ 849,232 $ 1,236,659
Loans payable 266,110 233,266
Interest payable 3,266 0
Accrued expenses 34,026 0
Total Current Liabilities 1,152,634 1,469,925
LONG-TERM LIABILITIES
Loan payable-related party 0 122,785
Total Long-Term Liabilities 0 122,785
TOTAL LIABILITIES 1,152,634 1,592,710
STOCKHOLDERS' EQUITY
Common stock ($0.0001 par value, 50,000,000 shares
authorized 35,732,972 and 32,674,192 shares
issued
and outstanding for June 30, 2001 and
December 31, 2000, respectively) 3,574 3,268
Additional paid-in capital 11,924,657 11,642,494
Deficit accumulated during development stage (11,377,530) (11,377,530)
Retained Earnings (722,005) 0
Total Stockholders' Equity (171,304) 268,232
TOTAL LIABILITIES
& STOCKHOLDERS' EQUITY $ 981,330 $ 1,860,942
VoIP TELECOM, INC.
(Formerly Presidents Telecom, Inc.)
Consolidated Statements of Operations
Six Months Six Months
Ended Ended
June 30, June 30,
2001 2000
REVENUES
Sales $ 440,699 $ 0
Total Net Revenues 440,699 0
OPERATING COSTS
Depreciation & amortization 53,515 80,175
Bank charges 774 0
Bad debt expense 1,306,998 2,611,955
Administrative expenses 594,690 1,852,923
Total Operating Costs 1,955,977 4,545,053
OTHER INCOME & (EXPENSES)
Interest income 308 16
Loss on investment (12,867) (15,000)
Exchange gain or loss 16 0
Gain on disposal of asset 869,605 333,046
Other expenses (723) 0
Interest expense (63,066) (18,202)
Total Other Income & (Expenses) 793,273 299,860
NET INCOME (LOSS) $ (722,005) $ (4,245,193)
BASIC EARNINGS (LOSS) PER SHARE $ (0.0207) $ (0.2474)
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 34,946,725 17,157,834
Three months Three months
Ended Ended
June 30 June 30
2001 2000
REVENUES
Sales $ 256,070 0
Total Net Revenues 256,070 0
OPERATING COSTS
Depreciation & amortization 26,762 80,175
Bank charges 84 0
Bad debt expense 0 1,607,745
Administrative expenses 194,375 (229,659)
Total Operating Costs 221,221 1,458,261
OTHER INCOME & (EXPENSES)
Interest income 301 16
Loss on investment (12,867) 0
Exchange gain or loss 1 0
Gain on disposal of asset 0 333,046
Other expenses (723) 0
Interest expense (216) (18,202)
Total Other Income & (Expenses) (13,504) 314,860
NET INCOME (LOSS) $ 21,345 $ (1,143,401)
BASIC EARNINGS (LOSS) PER SHARE $ 0.0006 $ (0.0548)
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 35,475,549 20,867,534
VoIP TELECOM, INC.
(Formerly Presidents Telecom, Inc.)
Consolidated Statement of Changes in Stockholders' Equity
From May 4, 1987(Inception) through March 31, 2001
Common Additional
Common Stock Paid-In
Shares Amount Capital
Inception, May 4, 1987 - $ - $ -
Common stock issued for cash 12,000,000 1,200 (200)
Net loss from inception on May 4,
1987 through December 31, 1997 - - -
Balance, December 31, 1997 12,000,000 1,200 (200)
Net loss for the year ended December
31, 1998 - - -
Balance, December 31, 1998 12,000,000 1,200 (200)
Common stock issued for cash
at $ 0.15 per share 1,200,000 120 149,880
Contributed capital - - 67
Stock issued for cash at $ 1.00 per
share 108,002 11 89,989
Stock issued for services at $ 1.00
per share 6,000 1 4,999
Net loss for the year ended
December 31, 1999 - - -
Balance, December 31, 1999 13,314,002 1,332 244,735
Common stock issued for cash
at $ 0.54 per share 2,752,276 275 2,752,001
Common stock issued for cash
at $ .20 per share 3,810,000 381 761,619
Stock offering costs - - (607,928)
Common stock issued for services
at $ 3.00 per share 60,000 6 179,994
Common stock issued for services
at $ 1.00 per share 1,080,600 108 1,080,492
Common stock issued for services
at $ 0.50 per share 25,000 3 12,497
Stock
Subscription Retained
Receivable Earnings Total
Inception, May 4, 1987 $ - $ - $ -
Common stock issued for cash - - 1,000
Net loss from inception on May 4,
1997 through December 31, 1997 - (1,000) (1,000)
Balance, December 31, 1997 0 (1,000) 0
Net loss for the year ended December
31, 1998 - (1,450) (1,450)
Balance, December 31, 1998 - (2,450) (1,450)
Common stock issued for cash
at $ 0.15 per share (150,000) - 0
Contributed capital - - 67
Stock issued for cash at $ 1.00 per
share - - 90,000
Stock issued for services at $ 1.00
per share - - 5,000
Net loss for the year ended
December 31, 1999 - (93,461) (93,461)
Balance, December 31, 1999 (150,000) (95,911) 156
Common stock issued for cash
at $ 0.54 per share - - 2,752,276
Common stock issued for cash
at $ .20 per share - - 762,000
Stock offering costs - - (607,928)
Common stock issued for services
at $ 3.00 per share - - 180,000
Common stock issued for services
at $ 1.00 per share - - 1,080,600
Common stock issued for services
at $ 0.50 per share - - 12,500
VoIP TELECOM, INC.
(Formerly Presidents Telecom, Inc.)
Consolidated Statement of Changes in Stockholders' Equity
From May 4, 1987(Inception) through March 31, 2001
Common Additional
Common Stock Paid in
Shares Amount Capital
continued
Common stock issued for services
t $ 0.17 per share 172,834 17 28,788
Common stock issued to acquire 100%
of Central America Fuel Technologies,
Inc. on March 15, 2000 6,000 1 14,999
Options exercised at $ 0.42 per share 75,000 7 31,243
Options exercised at $ 0.21 per share 60,000 6 12,494
Options exercised at $ 0.21 per share 60,000 6 12,494
Common stock issued for ICE at
$ 0.83 per share 3,000,000 300 2,499,700
Common stock issued for Access
Network Limited at $ 0.83 per share 4,800,000 480 3,999,520
Common stock issued for debt
settlement at $ 0.20 per share 2,152,140 215 358,475
Common stock issued for debt
settlement at $ 0.83 per share 109,340 11 90,741
Receipt of subscription receivable - - -
Options exercised at $ 0.2084 12,000 1 2,499
Options exercised at $ 0.4167 42,600 4 17,746
Options exercised at $ 0.4167 2,400 1 999
Common stock issued for cash
at $ 0.10 per share 120,000 12 11,988
Common stock issued fot cash
at $ 0.10 per share 500,000 50 49,950
Common stock issued for services
at $ 0.16827 per share 520,000 52 87,448
Net loss for the year ended
December 31, 2000 - - -
Balance, December 31, 2000 32,674,192 $ 3,268 $11,642,494
Stock
Subscription Retained
Receivable Earnings Total
Common stock issued for services
t $ 0.17 per share - - 28,805
Common stock issued to acquire 100%
of Central America Fuel Technologies,
Inc. on March 15, 2000 - - 15,000
Options exercised at $ 0.42 per share - - 31,250
Options exercised at $ 0.21 per share - - 12,500
Options exercised at $ 0.21 per share - - 12,500
Common stock issued for ICE at
$ 0.83 per share - - 2,500,000
Common stock issued for Access
Network Limited at $ 0.83 per share - - 4,000,000
Common stock issued for debt
settlement at $ 0.20 per share - - 358,690
Common stock issued for debt
settlement at $ 0.83 per share - - 90,752
Receipt of subscription receivable 150,000 - 150,000
Options exercised at $ 0.2084 - - 2,500
Options exercised at $ 0.4167 - - 17,750
Options exercised at $ 0.4167 - - 1,000
Common stock issued for cash
at $ 0.10 per share - - 12,000
Common stock issued for cash
at $ 0.10 per share - - 50,000
Common stock issued for services
at $ 0.16827 per share - - 87,500
Net loss for the year ended
December 31, 2000 - (11,281,619)(11,281,619)
Balance, December 31, 2000 $ - $(11,377,530) 268,232
VoIP TELECOM, INC.
(Formerly Presidents Telecom, Inc.)
Consolidated Statement of Changes in Stockholders' Equity
From May 4, 1987(Inception) through March 31, 2001
Common Addtional
Common Stock Paid in
shares Amount Capital
continued
Common stock issued for services
at $ 0.10 per share 1,800,000 180 179,820
Common stock issued for services
at $ 0.10 per share 100,000 10 9,990
Common stock issued for services
at $ 0.10 per share 20,280 2 2,026
Common stock issued for services
at $ 0.10 per share 250,000 25 24,975
Common stock issued for debt service
at $ 0.10 per share 628,500 63 62,787
Common stock issued for services
at $ 0.01 per share 250,000 25 2,475
Common stock issued for finders fees
at $ 0.01 per share 10,000 1 90
Net loss for the period ended
June 30, 2001 - - -
Balance, June 30, 2001 35,732,972 $ 3,574 $11,924,657
Stock
Subscription Retained
Receivable Earnings Total
Common stock issued for services
at $ 0.10 per share - - 180,000
Common stock issued for services
at $ 0.10 per share - - 10,000
Common stock issued for services
at $ 0.10 per share - - 2,028
Common stock issued for services
at $ 0.10 per share - - 25,000
Common stock issued for debt service
at $ 0.10 per share - - 62,850
Common stock issued for services
at $ 0.01 per share - - 2,500
Common stock issued for finders fees
at $ 0.01 per share - - 91
Net loss for the period ended
June 30, 2001 - (722,005) (722,005)
Balance, June 30, 2001 $ - $(12,099,535) $ (171,304)
VoIP TELECOM, INC.
(Formerly Presidents Telecom, Inc.)
Consolidated Statements of Cash Flows
Six months Six months
ended ended
June 30 June 30
2001 2000
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (loss) from operations $ (722,005) $ (4,245,193)
Depreciation & Amortization Expense 53,515 80,175
(Increase) in accounts receivable (235,851) (619,218)
(Increase) in loans receivable 0 (1,267,918)
Increase in officers advances 0 19,052
Increase / (decrease) in accounts payable (387,427) 54,320
Increase in interest payable 3,266 0
Increase in accrued expenses 34,026 0
Bad debt 0 1,887,135
Common stock issued for services 282,469 0
Net cash provided / (used) by operating (972,007) (4,091,647)
CASH FLOWS FROM INVESTING ACTIVITIES
Net purchase of fixed assets (6,000) (143,088)
Disposal of equipment 1,050,156 0
Net cash provided / (used) by investing 1,044,156 (143,088)
activities
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in loans payable (89,941) 452,739
APIC 0 3,760,760
Subscription receivable 0 150,000
Common stock issued for cash 0 95
Net cash provided / (used) by financing (89,941) 4,363,594
activities
Net increase (decrease) in cash (17,792) 128,859
Cash at beginning of period 50,392 156
Cash at end of period $ 32,600 $ 129,015
Supplemental Cash Flow Disclosures
Cash paid during year for interest 63,066 18,202
Schedule of Non-Cash Activities
Common Stock issued for services $ 282,469 $ 0
Common Stock issued for acquisition of $ 0 $ 15,000
Three months Three months
ended ended
June 30 June 30
2001 2000
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (loss) from operations $ 21,345 $ (1,143,401)
Depreciation & Amortization Expense 26,762 80,175
(Increase) in accounts receivable (202,567) (619,219)
(Increase) in loans receivable 0 (867,916)
Increase in officers advances 0 19,052
Increase / (decrease) in accounts payable 156,220 54,320
Increase in interest payable 3,266 0
Increase in accrued expenses 34,026 0
Bad debt 0 1,887,135
Common stock issued for services 2,591 0
Net cash provided / (used) by operating 41,643 (589,854)
activities
CASH FLOWS FROM INVESTING ACTIVITIES
Net purchase of fixed assets 0 (143,088)
Disposal of equipment (3,440) 0
Net cash provided / (used) by investing (3,440) (143,088)
activities
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in loans payable (45,960) 324,808
APIC 0 333,103
Subscription receivable 0 150,000
Common stock issued for cash 0 311
Net cash provided / (used) by financing (45,960) 808,222
activities
Net increase (decrease) in cash (7,758) 75,280
Cash at beginning of period 40,358 53,735
Cash at end of period $ 32,600 $ 129,015
Supplemental Cash Flow Disclosures
Cash paid during year for interest 216 18,202
Schedule of Non-Cash Activities
Common Stock issued for services $ 2,591 $ 0
Common Stock issued for acquisition of $ 0 $ 0
subsidiaries
NOTE 1. ORGANIZATION AND DESCRIPTION OF BUSINESS
VoIP Telecom, Inc. (the Company) was incorporated, May 4, 1987, under the laws
of the state of Nevada, as Energy Realty Corporation. On July 31, 1993 the
Companys name changed to Balcor International and on December 18, 1998 the name
was again changed to Dimension House, Inc. As of December 31, 1998 the Company
had no operations and in accordance with SFAS # 17 was considered a development
stage company. As of December 31, 1998 the Company was authorized to issue
100,000,000 shares of $0.0001 par value of which 10,000,000 shares were
outstanding. On October 28, 1999 the Company changed its name to Presidents
Telecom, Inc.
Pursuant to an acquisition agreement and plan of merger dated as of March 15,
2000 between the Company then known as Presidents Telecom, Inc. and Central
America Fuel Technology, Inc. (CAFT), a Nevada corporation, all the outstanding
common shares of CAFT were exchanged for 5,000 restricted common shares of VoIP.
On April 1, 2000, the Company acquired 100% of the issued and outstanding shares
of International Communications and Equipment, Inc. (ICE) in exchange for
3,000,000 shares of VoIPs common stock. ICE is establishing an International
telecommunications network using the Voice Over Internet Protocol. ICE has
recently received approval for a Russian joint venture, which will be serviced
through a whollyowned German subsidiary using the latest in Clarent technology
and equipment.
ICE was founded in 1996. Under a joint venture agreement negotiated with the
Crosna Group, a banking-satellite-telecom conglomerate in Moscow, ICE shall own
50% of the Crosna project and shall be the managing venture partner. The joint
venture will provide the Company long distance carrier serves for the 89
regional carriers serving the Russian Federation over a landline and satellite
network. The Companys initial equipment configuration, already installed, will
offer telephony long distance calling services to people in Moscow, St.
Petersburg, Yaroslavl, Volgograd and outbound to other countries.
On April 1, 2000, the Company acquired 100% of the issued and outstanding shares
of Access Network Limited in exchange for 4,800,000 shares of the Companys
common stock. The Company provides long distance voice communication services.
On April 17, 2000, the Company changed its name to VoIP Telecom, Inc.
On January 1, 2001, the Company rescinded the acquisition of International
Communications and Equipment, Inc. (ICE). The Company removed the assets and
liabilities of ICE from the consolidated statement. VoIP recorded income in the
amount of $ 869,605 that derived from the rescinded deal with ICE.
NOTE 1. ORGANIZATION AND DESCRIPTION OF BUSINESS (CONTINUED)
Through subsidiaries, the Company delivers international long distance services
via flexible, server-based networks consisting of re-sale arrangements with
other long distance providers, various foreign termination relationships, VoIPs
own international servers and leased/owned transmission facilities. Employing
digital switching and transmission technologies supported by comprehensive
monitoring and technical support personnel, the Company provides services in
foreign countries.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Accounting Method
The Companys financial statements are prepared using the accrual method of
accounting. The company has elected a December 31, year end.
b. Basic Loss per Share
In February 1997, the FASB issued SFAS No. 128, Earnings Per Share, which
specifies the computation, presentation and disclosure requirements for earnings
(loss) per share for entities with publicly held common stock. SFAS No. 128
supersedes the provisions of APB No. 15, and requires the presentation of basic
earnings (loss) per share and diluted earnings (loss) per share. The Company has
adopted the provisions of SFAS No. 128 effective December 6, 1993 (inception).
Basic net loss per share excludes dilution and is computed by dividing net loss
by the weighted average number of common shares outstanding during the reported
periods. Diluted net loss per share reflects the potential dilution that could
occur if a stock option and other commitments to issue common stock were
exercised.
c. Basis of Consolidation
The consolidated financial statements of VoIP Telecom, Inc. include those
accounts of VoIP Telecom, Inc., Access Network Limited. All significant
intercompany transactions have been eliminated.
d. Cash Equivalents
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
e. Estimates and Adjustments
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.
f. Basis of Presentation and Considerations Related to Continued Existence
(going concern)
The Companys financial statements have been presented on the basis that it is a
going concern, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business.
The Companys management intends to raise additional operating funds through
operations and/or debt offerings.
g. Income Taxes
The Company accounts for income taxes using the asset and liability method.
Under the asset and liability method, deferred income taxes are recognized for
the tax consequences of temporary differences by applying enacted statutory
tax rates applicable to future years to differences between the financial
statement carrying amounts and the tax bases of existing assets and liabilities.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of
management, it is more likely than not that some portion or all of the deferred
tax assets will not be realized. See note 3 regarding income tax benefit.
h. Property & Equipment
Property and equipment are recorded at cost. Minor additions renewals are
expensed in the year incurred. Major additions and renewals are capitalized and
depreciated over their estimated useful lives. Depreciation and amortization is
calculated using straight-line and accelerated methods for income tax purposes
(five years for vehicles and equipment, and seven years for office furniture).
Total depreciation for the six months ended 2001 is $ 53,515.
NOTE 3 - INCOME TAXES
June 30, December 31,_
2001 2000
Deferred tax assets:
Net operating loss carryforwards $ 722,005 $ 11,377,530
Other -0- -0-
Valuation allowance (722,005) (11,377,530)
Net deferred tax assets $ -0- $ -0-
Realization of deferred tax assets is dependent upon sufficient future taxable
income during the period that deductible temporary differences and carryforwards
are expected to be available to reduce taxable income. As the achievement of
required future taxable income is uncertain, the Company recorded a valuation
allowance.
NOTE 4 - NOTES PAYABLE
Notes payable as of June 30, 2001, consist of the following:
Unsecured promissory note of $165,000 dated November 2, 2000 with an interest
rate at the annual floating rate of US Prime+ 4%. The maturity date is November
2, 2001.
Unsecured promissory note of $15,000 dated November 13, 2000 with an interest
rate at 10%. The maturity date is November 2, 2001.
Unsecured promissory note of $50,000 dated November 22, 2000 with an interest
rate at 10% per annum. The maturity date is November 22, 2001, or under the
terms of a funding commitment to fund up to $4,000,000 by way of a convertible
debenture. Conversion can be exercised at a price of $0.25 per share.
NOTE 5 - GOING CONCERN
As shown in the accompanying financial statements the Company has incurred a
deficit of $12,099,535 since its inception in 1987. The ability of the Company
to continue as a going concern is dependent on the significant generation of
revenue from the Companys international long distance services. The financial
statements do not include any adjustments that might be necessary if the Company
is unable to continue as a going concern.
NOTE 6 - PROPERTY & EQUIPMENT
Property is stated at cost. Additions, renovations, and improvements are
capitalized. Maintenance and repairs, which do not extend asset lives, are
expensed as incurred. Depreciation is provided on a straight-line basis over the
estimated useful lives ranging from 27.5 years for commercial rental properties,
5 years for tenant improvements, and 5 - 7 years on furniture and equipment.
June 30, 2001
--------------------------------
--------------------------------
Equipment $ 535,240
------------------------------------------
------------------------------------------
Office furniture 18,728
----------------------------------------------------------------
$ 575,481
------------------------------------------
Less Accumulated Depreciation (144,918)
--------------------------------
--------------------------------
------------------------------------------
------------------------------------------
Net Property and Equipment $ 409,049
================================
NOTE 7 - RELATED PARTY TRANSACTIONS
a. On September 1, 2000 the Company entered into a twelve month consulting
agreement. Alexander Anderson will serve the Company in the capacity of
consultant in consideration of which the Company will pay to the consultant the
sum of $10,000 monthly or such greater sum as may be approved by the Board of
Directors of the Company.
b. The Company has received advances of $ 184,785 from a stockholder as of
June 30, 2001. As of June 30, 2001 the Company has not established specific
repayment terms.
NOTE 8 - STOCK TRANSACTIONS
As of December 31, 1998 the Company had 12,000,000 shares outstanding. On June
17, 1998, the Company issued 1,200,000 shares of common stock valued at $0.15
per share for cash.
On June 17, 1998 the Company issued 108,002 shares of common stock for cash
valued at $1.00 per share.
On June 17, 1998. The Company issued 6,000 shares of common stock for services
valued at $1.00 per share.
As of December 31, 1999 the Company had 13,314,002 shares of common stock
outstanding.
NOTE 8 - STOCK TRANSACTIONS (CONTINUTED)
On March 31, 2000, the Company issued 2,752,276 shares of common stock for cash
valued at $0.54 per share.
On March 31, 2000, the Company issued 3,810,000 shares of common stock for cash
valued at $0.20 per share.
On April 20, 2000 the Company issued 60,000 shares of common stock for services
valued at $3.00 per share.
On April 28, 2000, the Company issued 1,080,600 shares of common stock for
services valued at $1.00 per share.
On May 17, 2000, the Company issued 25,000 shares of common stock for services
valued at $0.50 per share.
On May 19, 2000, the Company issued 172,834 shares of common stock for services
valued at $0.17 per share.
On June 2, 2000 the Company issued 6,000 shares of common stock to acquire 100%
of Central America Fuel Technologies, Inc. valued at $2.50 per share.
On June 30, 2000 the Company had 75,000 shares of common stock exercised valued
at $0.42 per share.
On June 30, 2000 the Company had 60,000 shares of common stock exercised valued
at $0.21 per share.
On June 30, 2000 the Company had 60,000 shares of common stock exercised valued
at $0.21 per share.
On June 30, 2000 the Company issued 3,000,000 shares of common stock to acquire
International Communication & Equipment valued at $0.83 per share.
On June 30, 2000 the Company issued 4,800,000 shares of common stock to acquire
Access Network Limited valued at $0.83 per share.
On August 30, 2000 the Company issued 2,152,140 shares of common stock for debt
settlement valued at $0.20 per share.
NOTE 8 - STOCK TRANSACTIONS (CONTINUTED)
On August 30, 2000 the Company issued 109,340 shares of common stock for debt
settlement valued at $0.83 per share.
On October 1, 2000 the Company had 12,000 shares of common stock exercised
valued at $0.2084 per share.
On October 4, 2000 the Company had 42,600 shares of common stock exercised at
$0.4167 per share.
On October 12, 2000 the Company had 2,400 shares of common stock exercised
valued at $0.4167 per share.
On December 27, 2000 the Company issued 120,000 shares of common stock for cash
valued at $0.10 per share.
On December 27, 2000 the Company issued 500,000 shares of common stock for cash
valued at $0.10 per share.
On December 31, 2000 the Company issued 520,000 shares of common stock for cash
valued at $0.16827 per share.
On January 25, 2001 the Company issued 1,800,000 shares of common stock for
services valued at $0.10 per share.
On February 9, 2001 the Company issued 628,500 shares of common stock for debt
settlement valued at $0.10 per share.
On February 20, 2001 the Company issued 20,280 shares of common stock for
services valued at $0.10 per share.
On March 9, 2001 the Company issued 100,000 shares of common stock for services
valued at $0.10 per share.
On March 10, 2001 the Company issued 250,000 shares of common stock for services
valued at $0.10 per share. As of March 31, 2001 there were 35,472,972 shares of
common stock outstanding.
On June 30, 2001 the Company issued 250,000 shares of common stock for services
valued at $0.01 per share.
On June 30, 2001 the Company issued 10,000 shares of common stock for services
valued at $0.10 per share.
NOTE 9 - ISSUANCE OF SHARES FOR SERVICES STOCK OPTIONS
The company has a nonqualified stock option plan, which provides for the
granting of options to key employees, consultants, and nonemployees directors of
the Company. The valuations of shares for services are based on the fair market
value of services. The Company has elected to account for the stock option plan
in accordance with paragraph 30 of SFAS 123 were the compensation to employees
should be recognized over the period(s) in which the related employee services
are rendered. In accordance with paragraph 19 of SFAS 123 the fair value of a
stock option granted is estimated using an option-pricing model.
A total of 2,170,280 shares were issued for services to management and key
employees for the six months ended June 30, 2001.
350 E. Street, Chula Vista, CA 91910
Tel: (619) 422-1348 Fax: (619) 422-1465
ARMANDO C. IBARRA
CERTIFIED PUBLIC ACCOUNTANTS
(A Professional Corporation)
Armando C. Ibarra,
C.P.A.
Members of the California Society of
Armando Ibarra, Jr.,
C.P.A.
Certified Public
Accounts
August 28, 2001
To Whom It May Concern:
The firm of Armando C. Ibarra, Certified Public Accountant, APC consents to the
inclusion of my report of August 20, 2001, on the financial statements of VoIP
Telecom, Inc., as of June 30, 2001, in any filings that are necessary now or in
the near future with the U.S. Securities and Exchange Commission.
Very truly yours,
/S/ Armando Ibarra
ARMANDO IBARRA, C.P.A.
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Going Concern and Ability of the Company to Continue
The Company has a net operating loss carry forward of $(12,099,535) since
inception through June 30, 2001.
The Companys consolidated financial statements are prepared using generally
accepted accounting principles applicable to a going concern which contemplates
the realization of assets and liquidation of liabilities in the normal course of
business. The Company has not established revenues sufficient to cover its
operating costs and allow it to continue as a going concern. Management believes
that the Company will soon be able to generate revenues sufficient to cover its
operating costs. In the interim, the Company intends to raise additional capital
through private placements of its common stock.
Liquidity and Capital Resources
As of June 30, 2001 the Company has $572,281 in current assets compared to
$354,222 in current assets as of December 31, 2000. The $572,281 in current
assets in compromised of $32,600 in cash, $381,703 in accounts receivable,
$155,072 in loans receivable and prepaid expenses in the amount of $2,906. As of
June 30, 2001 the Company has current liabilities of $1,152,634 compared to
$1,469,925 as of December 31, 2000. However, the Company has a net equity of
$(171,304) as of June 30, 2001 compared to $268,232 as of December 31, 2000.
Management realizes the Companys operations do not generate sufficient
revenues to cover operating costs. The Companys auditors have also expressed the
Companys going concern and ability of the Company to continue in the reviewed
financial statement.
Results of Operations
For the six months ended June 30, 2001, the Company had revenues of
$440,699 compared to $0 for the same period of 2000. Total operating costs
decreased from $4,545,053 to $1,955,977 for the six months ended June 30, 2001
compared to June 30, 2000. Bad debt expense decreased $1,304,957 predominately
due to the recission of the ICE acqusition. Also, administrative costs decreased
$1,258,233 for the period ending
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June 30, 2001 compared to the same period of 2000. This again can be attributed
to the ICE recission and the Company expensed the access and ICE acquisition
costs in 2000. This again can be attributed to the ICE recission and also due to
the fact the Company expensed the access and ICE acquisition costs in 2000.
Depreciation and amortization decreased approximately $26,500 for the 6 months
ended June 30, 2001 compared to the same period of 2000, due to equipment of ICE
not being on the books as per the recission. The Company had a gain of $869,605
on the disposal of ICE division compared to a gain of $333,406 in 2000 on the
sale of an asset. Interest expense also increased $44,864 for the six months of
2001 compared to 2000.
For the three months ended June 30, 2001 the Company had revenues of
$256,070 compared to $0 for the same period of 2000. Operating expenses
decreased $1,237,040. This is predominately due to a $1,607,745 decrease in bad
debt expense as of the three months ended June 30, 2001 compared to the same
period of 2000. The Company had total other expenses of $13,504 compared to
total other income of $314,860 for the three months ended June 30, 2001 compared
to the same period of 2000. The other income in 2000 was largely derived from a
gain of $333,046 from the disposal of an asset.
Net Operating Loss
The Company has accumulated approximately $12,099,535 of net operating
losses caryforwards as of June 30, 2001, which maybe offset against taxable
income and income taxes in future years. The use of these to losses to reduce
future income taxes will depend on the generation of sufficient taxable income
prior to the expiration of the net loss carryforwards. The carryforwards expire
in the year 2021. In the event of certain changes in control of the Company,
there will be an annual limitation on the amount of carryforwards, which can be
used.
Sale of Common Capital Stock
On June 10, 2001 the Company issued 250,000 shares of common stock at $.01
for a total of $2,500 to Common House Publishing, Inc., for consulting services.
The Company also issued 10,000 shares of common stock at $.01 to Brent Purin as
a finder fee for a total of $100. The above issued shares were issued under
Section 4(2) and 4(6) of the 1933 Securities Act.
As of June 30, 2001 the Company had 35,732,972 shares of common stock
outstanding.
Risk Factors and Cautionary Statements
Forward-looking statements in this report are made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995. The
Company
22
wished to advise readers that actual results may differ substantially from such
forward-looking statements. Forward-looking statements involve risks and
uncertainties that could cause actual results to differ materially from those
expressed on or implied by the statements, including, but not limited to, the
following: the ability of the Company to successfully meet its cash and working
capital needs, the ability of the Company to successfully market its product,
and other risks detailed in the Companys periodic report filings with the
Securities and Exchange Commission.
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are presently no pending legal proceedings to which the Company or
any of its subsidiaries are a party, to the best of knowledge of the Company. No
actions against the Company are contemplated or threatened.
ITEM 2. CHANGES IN SECURITIES
On June 10, 2001 the Company issued 250,000 shares of common stock at $.01
for a total of $2,500 to Common House Publishing, Inc., for consulting services.
The Company also issued 10,000 shares of common stock at $.01 to Brent Purin as
a finder fee for a total of $100. The above issued shares were issued under
Section 4(2) and 4(6) of the 1933 Securities Act.
As of June 30, 2001 the Company had 35,732,972 shares of common stock
outstanding.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO BE A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
23
ITEM 6. EXHIBITS AND REPORTS ON 8-K
a. Form 10K SB filed by reference on April 18, 2001.
24
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Report to be signed in its behalf by the
undersigned hereto duly authorized.
VOIP TELECOM, INC.
Dated: August 30, 2001
By:__________________
Michael Tan
President
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