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 September 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 000-20847
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.)
4126 Delp Street, Memphis, TN 38118
(Address of principal executive office)
Registrants telephone no., including area code (901) 365-7650
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 September 30, 2001
Common Stock, $0.0001 40,722,972
i
TABLE OF CONTENTS
PART 1. FINANCIAL INFORMATION
Heading Page
Item 1. Consolidated Financial Statements 3
Consolidated Balance Sheets September 30, 2001
And December 31, 2000 4-6
Consolidated Statements of Operations nine months
Ended September 30, 2001 and September 30, 2000 7
Consolidated Statement of Stockholders Equity 8-10
Consolidated Statements of Cash Flows nine months
nded September 30, 2001 and September 30, 2000 11
Notes to Consolidated Financial Statements 12-18
Item 2. Managements Discussion and Analysis and
Result of Operations 19-20
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 20
Item 2. Changes in Security 20
Item 3. Defaults Upon Senior Securities 20
Item 4. Submission of Matter to a Vote of 20
Securities Holders
Item 5. Other Information 20
Item 6. Exhibits and Reports on Form 8-K 20
Signatures S-1
ii
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 September 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 nine months ended September 30, 2001 and September 30, 2000 the
statement of stockholders equity for the period from May 4, 1987 through
September 30, 2001 are attached hereto and incorporated herein by this
reference.
Operating results for the quarter ended September 30, 2001 are not
necessarily indicative of the results that can be expected for the year ending
December 31, 2001.
Armando C. Ibarra,
C.P.A.
Members of the California Society of
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 September 30, 2001 and the
related statements of operations, changes in stockholders equity, and cash flows
for the three and nine 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.
_______________________________
ARMANDO C. IBARRA, CPA - APC
November 13, 2001
VoIP TELECOM, INC.
(Formerly Presidents Telecom, Inc.)
ASSETS
Nine Months
Ended Year Ended
September 30, December 31,
2001 2000
CURRENT ASSETS
Cash $ 16,915 $ 50,392
Accounts receivable 402,357 145,852
Receivable-related party 0 1,450
Loan receivable 153,622 153,622
Prepaid expenses 0 2,906
----------------------------------------
Total Current Assets 572,894 354,222
NET PROPERTY & EQUIPMENT 376,840 1,506,720
----------------------------------------
TOTAL ASSETS $ 949,735 $1,860,942
VoIP TELECOM, INC.
(Formerly Presidents Telecom, Inc.)
Consolidated Balance Sheets
LIABILITIES AND STOCKHOLDERS' EQUITY
Nine Months
Ended Year Ended
September 30, December 31,
2001 2000
CURRENT LIABILITIES
Accounts payable $ 993,847 $ 1,236,659
Notes payable 338,411 233,266
Interest payable 3,266 0
Accrued expenses 32,357 0
------------------------------------
Total Current Liabilities 1,367,882 1,469,925
LONG-TERM LIABILITIES
Loan payable-related party 73,412 122,785
------------------------------------
Total Long-Term Liabilities 73,412 122,785
TOTAL LIABILITIES 1,441,294 1,592,710
STOCKHOLDERS' EQUITY
Common stock ($0.0001 par
value, 50,000,000 shares
authorized 32,727,975
and 29,679,195 shares issued
and outstanding for
September 30, 2001 and
December 31, 2000, respectively) 3,273 2,968
Additional paid-in capital 9,424,867 9,142,794
Deficit accumulated
during development stage (95,911) (95,911)
Deficit (9,823,788) (8,781,619)
------------------------------------
Total Stockholders' Equity (491,559) 268,232
TOTAL LIABILITIES
------------------------------------
& STOCKHOLDERS' EQUITY $ 949,735 $ 1,860,942
VoIP TELECOM, INC.
(Formerly Presidents Telecom, Inc.)
Consolidated Statements of Operations
Nine Months Nine Months
Ended Ended
September 30, September 30,
2001 2000
REVENUES
Sales $ 647,471$ 0
-------------------------------------
Total Net Revenues 647,471 0
OPERATING COSTS
Depreciation & amortization 80,297 268,501
Bank charges 1,171 0
Bad debt expense 0 711,790
Administrative expenses 1,882,914 1,693,688
-------------------------------------
Total Operating Costs 1,964,382 2,673,979
OTHER INCOME & (EXPENSES)
Interest income 308 62
Loss on investment (150,260) 0
Other income 0 0
Exchange gain or loss 16 0
Impairment of goodwill 0 (7,031,953)
Gain on disposal of asset 0 0
Other expenses (12,256) 0
Interest expense (63,066) (19,202)
--------------------------------- ------
Total Other Income & (Expenses) (225,258) (7,051,093)
------------------------------- ------
NET INCOME (LOSS) $ (1,542,169)$ (9,725,072)
------------------------------------- ------
===================================== ======
BASIC EARNINGS (LOSS) PER SHARE $ (0.04) $ (0.57)
=====================================
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 34,413,190 17,157,834
Three months Three months
ended ended
September 30 September 30
2001 2000
REVENUES
Sales $ 206,772$ 0
------------------------------------------
Total Net Revenues 206,772 0
OPERATING COSTS
Depreciation & amortization 26,782 268,501
Bank charges 397 0
Bad debt expense 0 711,790
Administrative expenses 1,288,224 1,789,599
---------------------------------------------
Total Operating Costs 1,315,402 2,769,890
OTHER INCOME & (EXPENSES)
Interest income 0 62
Loss on investment 0 0
Other income 0 0
Exchange gain or loss 0 0
Impairment of goodwill 0 (7,031,953)
Gain on disposal of asset 0 0
Other expenses (11,625) 0
Interest expense 0 (19,202)
Total Other Income & (Expenses) (11,625) (7,051,093)
---------------------------------------------
NET INCOME (LOSS) (1,120,255)$ (9,820,983)
---------------------------------------------
BASIC EARNINGS (LOSS) PER SHARE $ (0.03) $ (0.47)
=============================================
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 35,295,252 20,867,534
VoIP TELECOM, INC.
(Formerly Presidents Telecom, Inc.)
Consolidated Statement of Changes in Stockholders' Equity
From May 4, 1987(Inception) through June 30, 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,
1997 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 December 31, 1998
for cash at $ 0.15 per share 1,200,000 120 149,880
Contributed capital - - 67
Common stock issued June 17, 1998
for cash at $ 0.84 per share 108,002 11 89,989
Stock issued for services at $ 1.00
for services valued at $ 0.84 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 on March 31, 2000
for cash at $ 0.54 per share 2,752,276 275 2,752,001
Common stock issued on March 31, 2000
for cash at $ 0.20 per share 3,810,000 381 761,619
Stock offering costs - - (607,928)
Common stock issued on April 20, 2000
for services valued
at $ 3.00 per share 60,000 6 179,994
Common stock issued on April 28, 2000
for services valued
at $ 1.00 per share 1,080,600 108 1,080,492
Common stock issued
on May 17, 2000
for services valued at
$ 0.50 per share 25,000 3 12,497
Stock
Subscription Retained
receivable Earnigns 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 December 31, 1998
for cash at $ 0.15 per share (150,000) - -
Contributed capital - - 67
Common stock issued June 17, 1998
for cash at $ 0.84 per share - - 90,000
Stock issued for services at $ 1.00
for services valued at $ 0.84 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 on March 31, 2000
for cash at $ 0.54 per share - - 2,752,276
Common stock issued on March 31, 2000
for cash at $ 0.20 per share - - 762,000
Stock offering costs - - (607,928)
Common stock issued on April 20, 2000
for services valued
at $ 3.00 per share - - 180,000
Common stock issued on April 28, 2000
for services valued
at $ 1.00 per share - - 1,080,600
Common stock issued on May 17, 2000
for services valued
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 June 30, 2001
Common Additional
Common Stock Paid in
Sahres Amount Capital
continued
Common stock issued
on May 19, 2000
for services valued at
$ 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
on June 30, 2000
for acquisition of ICE
at $ 0.83 per share 3,000,000 300 2,499,700
Common stock issued on
June 30, 2000 for
Access Network Limited
at $ 0.83 per share 4,800,000 480 3,999,520
Common stock issued
on August 30, 2000
for debt settlement
at $ 0.20 per share 2,152,140 215 358,475
Common stock issued on
August 30, 2000
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 on December 27, 2000
for cash at $ 0.10 per share 120,000 12 11,988
Common stock issued
December 27, 2000
for cash at $ 0.10
per share 500,000 50 49,950
Common stock issued on
December 31, 2000
for services valued
at $ 0.17 per share 520,000 52 87,448
Net loss for the year ended
December 31, 2000 - - -
- -------------------------------------------------------------------------------
Balance, December 31, 2000 32,674m192 $ 3,268 $11,642,494
===============================================================================
Stock
Subscription Retained
Receivable Earnings Total
continued
Common stock issued
on May 19, 2000
for services valued
at $ 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 on June 30, 2000
for acquisition of
ICE at $ 0.83 per share - - 2,500,000
Common stock issued on June 30, 2000 for
Access Network Limited
at $ 0.83 per share - - 4,000,000
Common stock issued on August 30, 2000
for debt settlement
at $ 0.20 per share - - 358,690
Common stock issued on August 30, 2000
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 on December 27, 2000
for cash at
$ 0.10 per share - - 12,000
Common stock issued December 27, 2000
for cash at
$ 0.10 per share - - 50,000
Common stock issued on December 31, 2000
for services valued
at $ 0.17 per share - - 87,500
Net loss for the year ended
December 31, 2000 - (11,281,61) (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 June 301, 2001
Common Additional
Common Stock Paid in
Shares Amount Capital
continued
Recission of ICE
at $ 0.10 per share (3,000,000) (300) (299,700)
Common stock issued on January 25, 2001
for services
at $ 0.10 per share 1,800,000 180 179,820
Common stock issued
on February 9, 2001
for debt service
at $ 0.10 per share 628,500 63 62,787
Common stock issued
on February 20, 2001
for services at
$ 0.10 per share 20,280 2 2,026
Common stock issued
on March 9, 2001
for services valued
at $ 0.10 per share 250,000 25 24,975
Common stock issued
March 10, 2001
for services valued
at $ 0.10 per share 100,000 10 9,990
Common stock issued
June 30, 2001 for services
valued at $.10 per share 250,000 25 2,475
Common stock issued
July 17, 2001 at
$.10 per share 8,000,000 800 799,200
Net loss for the
period ended
Septembewr 30, 2001 - - -
Balance September 30, 2001 40,722,972 4,073 $12,424,067
continued
Recission of ICE
at $ 0.10 per share - - (300,000)
Common stock issued on January 25, 2001
for services
at $ 0.10 per share - - 180,000
Common stock issued
on February 9, 2001
for debt service
at $ 0.10 per share - - 62,850
Common stock issued
on February 20, 2001
for services at
$ 0.10 per share - - 2,028
Common stock issued
on March 9, 2001
for services valued
at $ 0.10 per share - - 25,000
Common stock issued
March 10, 2001
for services valued
at $ 0.10 per share - - 10,000
Common stock issued
June 30, 2001 for services
valued at $.10 per share - - 2,500
ommon stock issued
July 17, 2001 at
$.10 per share - - 800,000
Net loss for the
period ended
Septembewr 30, 2001 - (1,542,169) (1,542,169)
Balance June 30, 2001 $ - $(12,919,699) $(491,559)
VoIP TELECOM, INC.
(Formerly Presidents Telecom, Inc.)
Consolidated Statements of Cash Flows
Nine months Nine Months
ended ended
September 30 September 30
2001 2000
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (loss)
from operations $ (1,542,169)$ (9,725,072)$
Depreciation &
Amortization Expense 80,297 268,501
(Increase) in
accounts receivable (255,055) (150,000)
(Increase) in
loans receivable 0 (1,647,426)
Increase in
officers advances 0 (354)
(Increase) /
decrease in prepaid expenses 2,906 0
Increase /
(decrease) in accounts payable (242,812) 580,826
Increase in
interest payable 3,266 0
Increase in
accrued expenses 32,357 0
Impairment
of goodwill 0 7,031,953
Bad debt 0 711,790
Common stock
issued for services 1,082,378 1,091,806
----------------------------------- ------ -
Net cash provided /
(used) by operating activities (838,832) (1,837,976)
CASH FLOWS FROM INVESTING ACTIVITIES
Net purchase of
fixed assets (6,000) (894,846)
Common stock retired
in ICE recission (300,000) 0
Disposal of equipment 1,055,583 0
----------------------------------- ------ -
Net cash provided /
(used) by investing activities 749,583 (894,846)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease)
in loans payable 55,772 (20,687)
Proceeds from
loan payable 0 342,980
Subscription
receivable 0 150,000
Common stock
issued for cash 0 2,376,885
-----------------------------------
Net cash provided /
(used) by financing activities 55,772 2,849,178
---------------------------------
Net increase /
(decrease) in cash (33,477) 116,356
Cash at beginning of period 50,392 156
-----------------------------------
Cash at end of period $ 16,915$ 116,512
Supplemental
Cash Flow Disclosures
Cash paid during
year for interest $ 63,066 19,202
Schedule of
Non-Cash Activities
Common Stock issued
for services $ 282,469$ 1,091,806
Common Stock issued
for acquisition of subsidiaries $ 0 $6,515,000
Common stock retired
in ICE recission $ 0 $ 0
Three months Three months
ended ended
September 30 September 30
2001 2000
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (loss)
from operations $ (1,120,255)$ (9,820,983)
Depreciation &
Amortization Expense 26,782 268,501
(Increase) in
accounts receivable (19,204) (150,000)
(Increase) in
loans receivable 0 (1,647,426)
Increase in
officers advances 0 (354)
(Increase) / decrease
in prepaid expenses 2,906 0
Increase / (decrease)
in accounts payable 144,615 580,826
Increase in
interest payable 0 0
Increase in
accrued expenses (1,669) 0
Impairment
of goodwill 0 7,031,953
Bad debt 0 711,790
Common stock
issued for services 800,000 1,096,806
Net cash provided /
(used) by operating activities (166,825) (1,928,887)
CASH FLOWS FROM INVESTING ACTIVITIES
Net purchase of
fixed assets 0 (894,846)
Common stock
retired in ICE recission 0 0
Disposal of equipment 5,427 0
Net cash provided /
(used) by investing activities 5,427 (894,846)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease)
in loans payable 145,713 (20,687)
Proceeds from
loan payable 0 342,980
Subscription receivable 0 0
Common stock issued for cash 0 2,617,952
Net cash provided /
(used) by financing activities 145,713 2,940,245
Net increase /
(decrease) in cash (15,685) 116,512
Cash at beginning
of period 32,600 0
Cash at end of period $ 16,915$ 116,512
Supplemental
Cash Flow Disclosures
Cash paid during
year for interest $ 0 $19,202
Schedule of Non-Cash Activities
Common Stock issued
for services $ 0 $1,096,806
Common Stock issued fo
r acquisition of subsidiaries $ 0 $6,515,000
Common stock retired
in ICE recission $ 0 $ 0
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 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.
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.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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., and 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.
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.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 nine months-ended 2001 is $ 80,297.
NOTE 3 - INCOME TAXES
September 30, December 31,
2001 2000
Deferred tax assets:
Net operating tax loss carryforwards $ 1,542,169 $ 11,377,530
Other -0- -0-
Valuation allowance (1,542,169) (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.
NOTE 4 - GOING CONCERN
As shown in the accompanying financial statements the Company has incurred
a deficit of $12,919,699 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 5 - 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.
September 30, 2001
--------------------------------
Equipment $ 535,636
Office furniture 34,335
--------------------------------
$ 569,971
Less Accumulated Depreciation (193,131)
--------------------------------
--------------------------------
Net Property and Equipment $ 376,840
================================
NOTE 6 - 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.
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.
NOTE 6 - STOCK TRANSACTIONS (CONTINUTED)
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 ICE 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.
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.
NOTE 6 - STOCK TRANSACTIONS (CONTINUTED)
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 525,000 shares of common stock for
cash valued at $0.17 per share.
On January 1, 2001 the Company recinded the issuance of 3,000,000 shares
for the acquisition of ICE at a value of $0.10.
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 July 17, 2001 the Company issued 8,000,000 shares of common stock for
services valued at $0.10 per share.
As of September 30, 2001 the Company had 40,722,972 shares of common stock
outstanding.
NOTE 7 - 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 where 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
10,170,280 shares were issued for services to management and key employees for
the nine months ended September 30, 2001.
1
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 $(12,919,699) since
inception through September 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 September 30, 2001 the Company has $572,894 in current assets
compared to $354,222 in current assets as of December 31, 2000. The $572,894 in
current assets in compromised of $16,915 in cash, $402,357 in accounts
receivable and $153,622 in loans receivable As of September 30, 2001 the Company
has current liabilities of $1,367,882 compared to $1,469,925 as of December 31,
2000. However, the Company has a net equity of $(491,559) as of September 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 nine months ended September 30, 2001, the Company had revenues of
$647,471 compared to $0 for the same period of 2000. Total operating costs
decreased from $2,673,979 to $1,964,382 for the nine months ended September 30,
2001 compared to September 30, 2000. Bad debt expense decreased $711,790 for the
nine months ended September 30, 2001 compared to the same period the year
before. Depreciation and amortization decreased approximately $188,000 due to
the recission of the ICE Communication acquisition. For the nine months ended
September 30, 2001 the company has a net loss of $(1,542,169) compared to
$9,725,072 for the same period the year before.
For the three months ended September 30, 2001 the Company had revenues of
$1,454,488 compared to $0 for the same period of 2000. Operating expenses
decreased $2,254,488. This is predominately due to a $711,790 decrease in bad
debt expense as of the three months ended September 30, 2001 compared to the
same period of 2000. Also contributing to the drop in the operating costs was a
decrease of $501,375 in administrative costs. For the three months ended
September 30, 2001 the company has a net operating loss of $1,120,255 compared
to a net operating loss if $9,820,983 for the same period of 2000.
Net Operating Loss
The Company has accumulated approximately $12,919,699 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
19 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 July 17, 2001 the Company issued 8,000,000 shares of common stock as
$.10 par value for consulting fees linked to a possible acquisition for
consideration of $800,000.
As of September 30, 2001 the Company had 40,722,972 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 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 July 17, 2001 the Company issued 8,000,000 shares of common stock as
$.10 par value for consulting fees linked to a possible acquisition for
consideration of $800,000.
As of September 30, 2001 the Company had 40,722,972 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.
ITEM 6. EXHIBITS AND REPORTS ON 8-K
a. Form 10Q filed by reference on 7/3/2001
b. Form 10QSB filed by reference on 8/31/2001
c. Form 8K filed by reference on 9/20/2001
20
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: March 20, 2002
By: /S/ Ron Lowe
Ron Lowe
President