UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2010 (Mark One)
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QUARTERLY REPORT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended September 30, 2010 OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from to
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New York
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4814
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01-0671426
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State or Other Jurisdiction of Incorporation
of Organization
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Primary Standard
Industrial Code
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(I.R.S. Employer Identification No.)
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(Name of Small Business Issuer in its Charter)
VGTel, Inc.
Ron Kallus, CEO
2 Ingrid Road
Setauket, NY 11733-2218
Tel: 631-458-1120
Address, including zip code, and telephone number, including area code, of registrant's principal executive office)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
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Large accelerated filer ¨
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Accelerated filer ¨
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Non-accelerated filer ¨
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Smaller reporting company x
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes x No Ё
Transitional Small Business Disclosure Format (check one): Yes ¨ No x
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes No x
As of November 4, 2010 6,434,000 shares of common stock were outstanding.
Transitional Small Business Disclosure Format (check one): Yes No x
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VGTEL, INC.
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FINANCIAL STATEMENTS
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September 30, 2010
(unaudited)
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TABLE OF CONTENTS
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PART I FINANCIAL INFORMATION
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Notes to Financial Statements
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Management Discussion & Analysis
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Financial Controls & Procedures
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PART II OTHER INFORMATION
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Default Upon Senior Securities
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Submission of Matters to a Vote of Securities Holders
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Exhibits And Reports on Form 8K
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2
Item: 1. Financial Statements
VGTel, Inc.
Balance Sheets
(unaudited)
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Cash and cash equivalents
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$ |
1,333 |
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$ |
1,331 |
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1,000 |
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1,031 |
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2,333 |
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2,361 |
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Intellectual property, net
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1,450 |
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4,350 |
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$ |
3,783 |
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$ |
6,711 |
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LIABILITIES AND STOCKHOLDERS' DEFICIT
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Accounts payable & accrued liabilities
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$ |
2,400 |
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7,045 |
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Due to shareholders/others
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27,230 |
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19,730 |
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Due to shareholder/officer
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31,323 |
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31,323 |
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Total Current Liabilities
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60,953 |
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58,098 |
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Preferred Stock, $.001 par value,
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Authorized 10,000,000 shares, none issued
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Common stock, $ .0001 par value ,
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Authorized 200,000,000 shares, Issued &
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outstanding 6,433,900 and 6,433,900
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643 |
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643 |
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Additional paid in capital
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396,723 |
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368,053 |
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(454,536 |
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(420,083 |
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Total Stockholders' Deficit
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(57,170 |
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(51,387 |
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Total Liabilities and Stockholders' Deficit
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$ |
3,783 |
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$ |
6,711 |
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The accompanying notes are an integral part of these financial statements
VGTel, Inc.
Statements of Operations
(Unaudited)
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Three Month Period Ending
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General and administrative
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Imputed Officers' compensation & Rent
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Depreciation and amortization
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INCOME (LOSS) PER COMMON SHARE-
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The accompanying notes are an integral part of these financial statements.
VGTel, Inc.
Statements of Cash Flows
(Unaudited)
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Nine months ended
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Nine months ended
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September 30, 2010
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September 30, 2009
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Cash flows from operating activities
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Adjustments to reconcile net loss to net
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cash used by operating activities:
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Imputed Officer's Compensation & Rent
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Depreciation and amortization
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Changes in assets and liabilities:
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Net cash used by operating activities
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Cash flows from financing activities
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Proceeds from Shareholder - Related Party
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Net increase (decrease ) in cash
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Cash and cash equivalents, beginning of period
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Cash and cash equivalents, end of period
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Supplemental disclosures of cash flow information:
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Cash paid for income taxes
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The accompanying notes are an integral part of these financial statements.
VGTel, Inc.
Notes to Financial Statements
September 30, 2010
NOTE 1 – Basis of Presentation
The unaudited interim consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q of Article 10 of Regulations S-X in the United States of America and are presented in United States dollars. They do not include all information and footnotes required by United States generally accepted accounting principles for complete financial statements. However, except as disclosed herein, there has been no material changes in the information disclosed in the notes to the consolidated financial statements for the year ended March 31, 2010 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission.
The interim unaudited consolidated financial statements should be read in conjunction with those consolidated financial statements included in Form 10-K. In the opinion of Management, all adjustments considered necessary for fair presentation, consisting solely of normal recurring adjustments, have been made. Operating results for the six months ended September 30, 2010 are not necessarily indicative of the results that may be expected for the year ending March 31, 2011.
NOTE 2 – GOING CONCERN
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company has recurring losses and a working capital deficit. This raises substantial doubt about the Company’s ability to continue as a going concern. Without realization of additional capital, it would be unlikely for the Company to continue as a going concern. The financial statements do not include any adjustments that might result from this uncertainty.
The Company’s activities to date have been supported by equity financing and loans from shareholders. Management plans to seek funding from its shareholders and other qualified investors to pursue its business plan. In the alternative, the Company may be amenable to a sale, merger or other acquisition in the event such transaction is deemed by management to be in the best interests of the shareholders.
NOTE 3 – DUE TO SHAREHOLDERS/OTHERS
On April 13, 2010, the Hyett Group Ltd., a related shareholder loaned the Company $6,000. The loan is payable on demand
and can be extended by mutual consent of both parties. The loan is interest free.
On July 16, 2010, the Hyett Group Ltd., a related shareholder, loaned the Company $1,500. The loan is payable on demand and can be extended by mutual consent of both parties. The loan is interest free.
NOTE 4 – SUBSEQUENT EVENTS
On October 18, 2010, the Hyett Group Ltd., a related shareholder, loaned the Company $1,500. The loan is payable on demand and can be extended by mutual consent of both parties. The loan is interest free.
Item 2. Management Discussion & Analysis
We developed a telemarketing campaign product called Global Messaging Gateway (GMG). This product is designed to enable a single User of the System to set up a telemarketing campaign to distribute messages to bulk lists of recipients in the medium of text, voice, Fax or multimedia. Messages can be delivered from one control center (one location) to thousands of clients anywhere in the world simultaneously using the internet instead of traditional telephone equipment.
The GMG system is a cost effective alternative to the current traditional telemarketing campaign products that distinguishes itself in several ways, including, fixed equipment costs, per message usage costs, and personnel costs to drive the campaign. The current traditional telemarketing tools functions on actual special call-center equipment, with human agents behind each call, which sets the cost per call to a significantly higher level than the cost associated with the same call using the GMG product. The GMG product utilizes the internet instead of physical phone lines and several concurrent campaigns can be administered by a single user.
In order to send the Voice messages to the destinations over the internet, we use the Voice Over Internet Protocol (VOIP) technology, which allows us to stream the voice message on the internet, in a similar way it is done over the regular phone line. The main difference is that the voice is being converted from analog signal to digital, and compressed in order to use as little space as possible on the internet. We don’t provide VOIP services; we are using VOIP technology to transmit the voice messages on the internet network.
The GMG System's cost structure allows a User to initiate and control such a campaign from the Company's website at www.vgtel.com in which we charge the customer only for completed calls at a very attractive rate. As an example, we plan to charge for a US domestic call $0.03 this charge includes the dialing and delivering the message. We do not charge for line or equipment charges.
In September 2008 our website was upgraded to allow Multi-language support, currently it supports English and Hebrew, while Russian will be the next language to be supported.
In spite of our efforts to add clients for our services, our only current client is Platin Ltd. located in Israel. Platin is a Public Relations (PR) company which handles clients, from various market segments mostly located in the State of Israel. Their largest clients that make use of our telemarketing services are supermarkets, Credit cards providers, Non-Profit Charity organizations, and Pets’ food suppliers. We provide our services to Platin, and although the campaigns are being conducted for Platin's clients, we only have a direct relationship with Platin who subcontracts our services for use by their clients. We do not have any relationship with their clients who are using our system. Therefore Platin is our only client to date and Platin and their clients are located in the State of Israel. Consequently, we are currently only doing business in Israel.
Platin Ltd. is a related party. Israel Hason is the Chief Marketing Officer of our Company and a Director. Mr. Hason is also the managing partner and principal shareholder of Platin Ltd. Israel. Mr. Hason has agreed to recuse himself from any corporate decision relating to Platin Ltd business relationship with VGTel, Inc.
We currently depend on Platin, Israel for our total revenues. Unfortunately, to date Platin has provided only minimal revenues and we are unable to attract additional clients for our services. The revenues we generate from Platin are not sufficient to cover our general and administrative expenses consequently we have relied on shareholders loans to meet our expenses.
As of September 30, 2010 we generated only minimum revenues from Platin which is insufficient to enable us to launch a broad marketing campaign to attract clients for our services in order to become a viable business. Furthermore, we failed in our attempts to raise capital to enable us to advertise and become a viable business. As of September 2010, we had $1,333 in cash available to us. We do not have sufficient funds to continue to operate and must either find an acquisition target or cease operations entirely.
During the month of September 2010, in an attempt to increase shareholder value, management has begun to initiate merger discussions with a potential merger candidate. As of September 30, 2010 no agreements have been entered into. Furthermore, there is no assurance that any agreement will be entered into, or even if we enter into an agreement for an acquisition, that such company would be successful in generating revenues and increasing shareholder value.
Results of Operations:
Total operating expenses for the three months period ended September 30, 2010 was $19,485 as compared to $21,187 for the three month period ending September 30, 2009. Total operating expenses for the six months period ended September 30, 2010 was $39,783 as compared to $45,138 for the six month period ending September 30, 2009. Our only customer Platin, who is a related party has been experiencing a decrease in referable business. We have not been able to attract additional clients.
The Company reported a net loss for the three month period ending September 30, 2010 of $17,180 as compared to $16,723 for the three month period ending September 30, 2009. The Company reported a net loss for the six month period ending September 30, 2010 of $34,453 as compared to $37,902 for the three month period ending September 30, 2009.
The Company incurred $2,690 additional development expenses during the quarter ending September 30, 2010 as compared to $4,110 the corresponding period ended September 30, 2009. The Company incurred $5,420 additional development expenses during the six month period ending September 30, 2010 as compared to $7,540 the corresponding period ended September 30, 2009.
Revenues during the three month ended September 30, 2010 was $3,000 compared to $4,800 for the corresponding period ending September 30, 2009. Revenues during the six month ended September 30, 2010 was $6,000 compared to $7,900 for the corresponding period ending September 30, 2009. The increase in net loss is attributable to the decrease in revenues and increase in expenses.
As reflected in the accompanying financial statements, we had a negative cash flow from operations and recurring losses. This raises substantial doubt about our ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company's ability to raise additional capital and implement its business plan. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
Liquidity and Capital Resources:
As of September 30, 2010 the Company had $1,333 cash, compared to $ 1,331 as of March 31, 2010.
Net cash used in operating activities was $7,498 for the six month period ended September 30, 2010 compared to $6,108 for the period ended September 30, 2009.
Net cash provided by financing activities for the six month period ended September 30, 2010 was $7,500 as compared to $4,000 for the corresponding period ending September 30, 2009
During the month of September 2010, in an attempt to increase shareholder value, management has initiated merger discussions with a potential merger candidate. As of September 31, 2010 no agreements have been entered into. Furthermore, there is no assurance that any agreement will be entered into, or even if we enter into an agreement for an acquisition, that such company would be successful in generating revenues and increasing shareholder value.
At the current level of revenues and expenses, in conjunction with the committed loan from our President, we anticipate we will not have sufficient funding to operate for the next 12 months. Additionally, we will need to raise substantial funds in order to launch a broad marketing campaign to attract clients for our product in order to become a viable business. We cannot offer assurances that any additional funds will be raised when we require them or that we will be able to raise funds on suitable terms. Failure to obtain such financing when needed could delay or prevent our planned development and our marketing effort which is necessary for our business to become viable.
If the Company fails to raise additional funds to execute its expansion plan, it is likely that the Company will not be able to operate as a viable entity and may be forced to go out of business.
Material Commitments
All of our contracts and agreements, (See Contracts, Agreements & Relationships) have termination clauses allowing us to terminate the agreements with advance written notice. We control the pace of the development activities. We have the ability to curtail these activities to reduce our expenses and preserve our cash as needed.
We have an ongoing commitment to pay the costs accounting and administration, and management believes it will have the capital resources to meet these expenses.
The Company does not plan any purchases of significant Equipment in the next 12 months.
Item 3. Controls & Procedures:
The Company’s Chief Executive Officer who is also the Chief Financial Officer has evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of September 30, 2010 covered by this Quarterly Report on Form 10-Q. Based upon such evaluation, the Chief Executive Officer has concluded that, as of the end of such period, the Company’s disclosure controls and procedures were not effective as required under Rules 13a-15(e) and 15d-15(e) under the Exchange Act. This conclusion by the Company’s Chief Executive Officer does not relate to reporting periods after September 30, 2010
Changes in Internal Control over Financial Reporting
No change in the Company’s internal control over financial reporting occurred during the quarter ended September 30, 2010, that materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1 Legal Proceedings.
The Company is currently not a party to any pending legal proceedings and no such action by, or to the best of its knowledge, against the Company has been threatened.
Item 1A: Risk Factors:
Our operations and financial results are subject to various risks and uncertainties that could adversely affect our business, financial condition, results of operations, and trading price of our common stock. Please refer to our annual report on Form 10-K for fiscal year 2010 for additional information concerning these and other uncertainties that could negatively impact the Company.
Item 2. Unregistered Sale of Securities
None
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted during the quarter ending September 30, 2010 covered by this report to a vote of the Company’s shareholders, through the solicitation of proxies or otherwise.
Item 5. Other Information.
None
Item 6. Exhibits and Reports of Form 8-K.
Exhibit 31.1 Sarbanes Oxley Certification
Exhibit 32.1 Sarbanes Oxley Certification
SIGNATURES
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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VGTEL, INC.
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/s/ Ron Kallus
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RON KALLUS
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Title:
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Chairman, Chief Executive Officer
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Dated: November 5, 2010
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(principal executive officer)
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/s/ Ron Kallus
Date: November 5, 2010
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RON KALLUS
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Title:
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Chief Financial Officer
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(principal financial officer)
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10