Item 1: Description of Business
We are currently testing a newly developed 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.
The actual dialing servers are located in different parts of the country, allowing off-loading the physical phone infrastructure preventing possible congestion, or power interruption which can interfere with any running telemarketing campaign.
Our Products and Services:
GMG Commercial Telemarketing Services:
In June 2008 our website was upgraded to allow Multilanguage support, currently it support English and Hebrew, while Russian will be the next language to be supported.
Our only current customer is Platin Ltd. located in Israel. Platin is a Public Relations (PR) company which handles many 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.
The telemarketing activity generated from Platin's clients is administered by Platin on behalf of their clientele, consisting of providers of products and services and is used for the purpose of announcing, exposing, alerting and informing prospective consumers to their products and services including discounts, sales, promotions and special deals. Platin is also using our GMG system on behalf of their political clients to conduct campaigns for political candidates in the State of Israel.
We currently depend on Platin, Israel for our total revenues. We believe they will remain our only client until the GMG product is further developed and refined and ready to serve many clients. We started negotiating with other companies in Kazakhstan, Turkey and Romania.
.GMG Alert Notification Services.
We identified four possible types of alert notification areas that our GMG system will be capable of accommodating:
a.
Weather: The service can be used by counties and other local organizations to alert residents on evacuation requirement and traffic directions.
b.
Terror: This service can be used by Homeland security and similar organizations to address residents in specific areas to stay away from a suspected terror threat.
c.
Industrial: Any large processing plant (Chemical, Nuclear, and Refinery) can use the service to alert residents around the plant of any event which might cause harm to their life or property.
In parallel with the on going testing and development effort for our GMG telemarketing campaign product, which is currently being used by Platin, we recently undertook the initiative to begin developing a set of Web Services API’s (Application Processing Interface) allowing CRM (Customer Relations Management) systems to use the GMG services without any manual intervention. This will open our services to many clients who currently have limited communications with their customers because the need to manually make the actual calls and follow-ups.
GMG Global Franchise Partners:
We plan to establish global partners to operate franchises of our GMG system. The global target market consists of many countries each has its own regulations and local methods of operating their businesses. Our goal is to establish 4 franchises within 18 months, and thereafter slowly build additional franchises. Using our personal and commercial network we have identified and contacted specific entities in the following countries: Kazakhstan, Turkey, Romania , Israel, and Russia. Each one of them expressed an interest in using the GMG system for their clients. All of these are small to medium companies which currently use traditional PSTN which stands for Public Switched Telephone Network. It is the same thing as POTS (Plain Old Telephone System) and is simply the worldwide telephone network referring to the old phone system which uses analog data. In contrast, VoIP uses digital data. Due to competition, most of them cannot raise the price for the services, and looking to lower the cost to stay in business. The GMG system provides this opportunity with no upfront investment.
The Company plans to have the domestic market handled directly through its own office, while each of the foreign operations will be run by a local franchiser under its general framework.
Although we are in discussions with certain entities regarding our franchise opportunity, to date we have not entered into any franchising contracts with any of these entities. Nor have we decided on the terms of each contract which will be determined in accordance with the demand of our GMG system. We expect that it will take one year for each franchise to get itself established.
Phase II
VGTel’s Products & Services:
Depending on our ability to raise additional funds, we anticipate our Phase II of our Products and Services will be implemented in 2010-2011.
Having built the VOIP based server, and the application builder tool, the Company will offer a variety of additional services such as:
1. Tele-Shir
The service enables customers to select a greetings occasion, and choose, from a list of played tunes, the one he would like to be sent. Then the system allows the customer to record his own greetings, set time+date and a phone number to dial. All the information is stored in a data base, and retrieved on time to be routed to the desired destination.The system support tunes for the following occasions:
·
General Salutations Get well
·
Greeting to a loved one (Male or Female)
·
Holiday greetings
·
Birthday
·
Wedding
·
Popular Songs
·
Patriotic Songs
2. Dating Service
This is a platform for single people to find a matching date. Each subscriber will receive a mailbox in which he describes himself, indicating his preferences, and get permission to listen to other mail-boxes according to his specific interest. Once he finds an interesting match, he can contact this person directly to schedule a date. There are many options for subscribing to the service, and all rendered services are prepaid using credit cards.
3. Fund Raising
This is a complete telemarketing support tool, to help candidates who are running for any elective position, to gather public awareness and support for their candidacy.
The Market for our Products & Services:
Our target market consists of businesses, non-profit organizations, and political organizations which employ call centers, including telemarketing firms, and any person or entity who seeks to reach out to sizable audiences, quickly, efficiently utilizing the most cost effective approach via voice or fax.
The VGTel system is configured to achieve global coverage using the internet as its core infrastructure facility which is easy to reach from almost any place, and free from most regulatory agencies that regulate the use of the standard telephone facilities. The primary products sold by VGTel consist of the capability to disseminate Voice, Text, Fax, Multimedia, messages to a vast number of clients simultaneously at a fraction of the cost of traditional mass marketing campaigns.
In today’s information driven society, where most people don’t have to be at home or in their office to be reached, and have less and less time to devote for any one interesting issue, the short, direct to the point marketing message, will be the best way to attract the attention of any potential global customer. The immediate and direct way to convey commercial information to the end user via telecommunications means dramatically increases the use of telemarketing as the main tool to raise the awareness and promoting products and services.
This is a significant market which will dramatically grow when the Chinese and Indian economies start targeting their domestic market with middle class consumer products.
The growing numbers of communities which are threatened by natural or man-made disasters, along with the availability of more sophisticated early warning sensors, create a significant demand for a method to convey warnings and alert notices to the affected neighborhoods in a timely manner in order to enable an orderly, and safe evacuation.
Many Governments, States, Counties, Cities, and commercial plants spend millions of dollars to maintain early-warning calling systems to support their constituencies. The VGTel system provides an efficient and cost effective alternative over new and existing systems in which a substantial portion of the costs associated with maintaining the system capabilities is currently being spent on leasing/renting phone lines from the local telecom providers.
2. Distribution Methods of the Products or Services.
Our only current customer is Platin Ltd. located in Israel. Platin is a Public Relations (PR) company which handles many 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.
Our objective is to develop multiple markets for our products and services. We plan to implement a marketing plan to enable us to attract Users to our GMG System.
Our Marketing Plan:
Our target market consists of supermarkets, discount chains, vendors of services, real estate brokers, political candidates, organizations, social planners, schools, municipalities, and other providers of alerts, messages, telemarketing, warnings, etc.
We plan to compile lists of targets consisting of:
·
Political parties for national, and local offices of government
·
Schools Charity collecting organizations
·
Providers of products such as supermarkets, chain stores,
·
Public Relations Companies on behalf of their clients Companies currently using telemarketing campaign products
·
Companies currently providing telemarketing campaign products.
Beginning in December 2010, we plan to announce our services using our GMG system to the aforementioned targets in the US, Canada and Israel. We plan to target customers that will use our system to support their already established clients who will provide us with a quicker market penetration. Additionally we plan to target direct users of our system to use the system for their own purposes.
In General, we plan to charge a lower rate for our services to wholesale providers who will use our system for their clients. We plan to charge a higher rate for direct clients who are direct users of our system. As of this date, we have not yet determined the actual fee structure that we will charge, as we believe it will determined in accordance with the market and what our clients will be willing to pay.
3. Status of any publicly announced new Product or Service.
No new product has recently been publicly announced.
4. Competition: business conditions, competitors, and methods of competition.
Management is not aware of any other internet based call-center with similar technology. We believe the uniqueness of this service positions VGTel to an excellent starting point in becoming a leading global service provider of a powerful Web-based marketing tool. We anticipate that the cost effectiveness, ease of use, coupled with unlimited capacity will make GMG a popular tool within a short period of time.
We anticipate that being first to present this concept will give us an advantage over competitors who have not yet begun to exploit this market. We do anticipate that we will nonetheless face extensive competition from a variety of internet providers and from traditional telemarketing organizations as well. In addition, nearly all established firms that choose to compete with us will have greater brand recognition, longer operating histories, larger customer bases and significantly greater financial, marketing and other resources than we will have. New technologies and the continued enhancement of existing technologies may also increase competitive pressures upon us.
5. Sources and Availability of raw materials and the names of principal suppliers.
The Company does not use raw materials in its products and services.
The Company has entered into various relationships with third party vendors. (See Management Discussion & Analysis, under the sub heading Contracts, Agreements and Relationships).
6. Dependence on one or a few customers.
Our only current customer is Platin Ltd. located in Israel. Platin is a Public Relations (PR) company which handles many 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. The telemarketing activity generated from Platin's clients is administered by Platin on behalf of their clientele, consisting of providers of products and services and is used for the purpose of announcing, exposing, alerting and informing prospective consumers to their products and services including discounts, sales, promotions and special deals. Platin is also using our GMG system on behalf of their political clients to conduct campaigns for political candidates in the State of Israel. 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.
We currently depend on Platin, Israel for our total revenues. We believe they will remain our only client until the GMG product is further developed and refined and ready to serve many clients. We anticipate that we will reach this stage in September 2010, when we will slowly start adding a few additional customers. We believe that by December 2010 our product will be well enough refined and developed with many additional features and capabilities and will be ready to serve unlimited number of customers requiring telemarketing services.
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.
The Company budgeted $5,000 for marketing in the next 12 months which will be used primarily to purchase mailing list of entities in various industries which the Company plans to target. The Company plans to use its GMG System to broadcast to selected target lists information about our services in hope of attracting users to the GMG System.
The Company objective is to have a diversified clientele in many sectors across a broad range of industries and in various geographical locations. We will need to raise substantial funds to enable us to aggressively market our product through public relations firms and massive advertising. There is no assurance we will be successful in raising additional funds.
7. Patents, trademarks, licenses, franchises, concessions, royalty agreements, or labor contracts, including their duration.
The Company has applied for a Provisional Patent on its core technology process.
Provisional Patent preserves the rights to apply for a regular patent within 12 months, while recognizing the application’s date to the date in which the provisional patent application was submitted. Thus, we will get a priority on any one who will apply for a similar patent during this year. Failure to file for the full patent protection within the one year period terminates the priority rights acquired through the provisional patent application. The cost of applying for a full patent is approximately $3,500. Filing for a full patent does not insure that a patent will be granted. The Company has not filed for a full patent; consequently the provisional patent has expired. The Company plans to file for a full patent when it is successful in raising additional funds.
8. The need for government approval of principal products or services.
Our business is subject, to privacy laws and regulations enacted in the United States and other jurisdictions around the world that govern the collection and use of personal data of our customers and our ability to contact our customers and prospective customers, including through telephone or facsimile. We are subject to U.S. federal privacy regulation, including the federal Telemarketing Sales Rule with its “do not call” and “do not fax” provisions, and state privacy regulations. Many states have laws and regulations regarding telemarketing laws, telephone solicitation laws, including “do not call” and “do not fax” regulations. Our Service Agreements with our clients require our clients to comply with all relevant privacy and telemarketing sales rules and further require they indemnify us against any regulatory actions caused by their breach of these laws. Additionally we require for our clients using our GMG product for telemarketing campaigns to provide us the recipient list for pre-screening to identify prospective recipients whose name appear on the "do not call" and "do not fax" list which we automatically delete. Violations of certain provisions of these laws by our clients will also limit our ability to accept certain clients for our services. Additionally, the United States and other jurisdictions are in the process of considering passing additional laws and regulations to protect the privacy of customers and prospective customers. In light of these and any future laws and regulations, there can be no assurance that we will be able to continue to market our services efficiently.
9. Technology:
We use commercially available software, as well as our own developed proprietary software. Our systems combine our proprietary technologies and commercially available, licensed technologies. Our current strategy is to license commercially available technology to augment internally developed solutions. Our Internet content delivery will be provided by a variety of servers.
10. Employees:
The business of VGTel, Inc. is managed by Mr. Kallus, our CEO. Our future success depends in large part upon our ability to attract and retain highly qualified employees. Competition for such personnel is intense, and there can be no assurance that we will be able to retain our senior management or other key employees or that we will be able to attract and retain additional qualified personnel in the future.
2: Description of Properties:
As of June 25, 2008 our administrative office is located at:
2 Ingrid Road
Setauket, NY 11733-2218
Tel: 631-458-1120
Our CEO has agreed to provide his home office for administrative use by the Company free of charge. The office is equipped with standard office equipment including computers, scanners, copiers, and fax machine and office space.
Item 3: Legal Proceedings
Neither us, nor any of our officers or directors is a part’ to any material legal proceeding or litigation and such persons know of no material legal proceeding or contemplated or threatened litigation. There are no judgments against us or our officers or directors. None of our officers or directors has been convicted of a felony or misdemeanor relating to securities or performance in corporate office.
Item 4: Submission of Matters to a Vote of Security Holders:
None.
PART II
Item 5: Market for Registrants Common Equity and Related Stockholder Matters
The Company’s Common Stock is quoted on the Over The Counter Bulletin Board. The table below sets forth the high and low prices for the Company’s Common Stock. Quotations reflect inter-dealer prices, without retail mark-up, mark-down commission, and may not represent actual transactions. Since the Company's common stock trades sporadically, there is not an established active public market for its common stock. No assurance can be given that an active market will exist for the Company's common stock and the Company does not expect to declare dividends in the foreseeable future since the Company intends to utilize its earnings, if any, to finance its future growth, including possible acquisitions. The company has 6,433,900 shares outstanding as of March 31, 2010 and has approximately 43 shareholders.
Item 6: Selected Financial Data
As a small reporting company, we are not required to provide Selected Financial Data.
Item 2.
Item 2. Management Discussion & Analysis
We are currently testing a newly developed telemarketing campaign product called Global Messaging Gateway (GMG). The GMG system is designed to enable the User of the system to set up telemarketing campaigns to distribute messages to bulk lists of recipients. Messages can be delivered in the medium of text, voice, Fax or multimedia. Messages can be delivered from one control center to thousands of clients anywhere in the world simultaneously. The GMG System uses the internet instead of traditional telephone equipment.
The Global Messaging Gateway (GMG) is currently the first and only product of the Company. We currently have only one User that is using our system. Since inception, we generated an aggregate of $82,543. Platin pays a monthly fee for the lines and a per call fee for each successful call placed. 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.
Ongoing Development of our GMG Systems.
Our development activities include adding features, fixing problems and integrating new customer driven ideas. Each new feature is being integrated into the commercial operating environment and gets tested immediately under real commercial conditions. During the next 12 months we will require further development costs of $15,000. However, we do not have the funds available for additional development costs. Further development of the GMG system and other products is dependent on our ability to raise additional funds.
The Company plans to raise additional funds in order to expand its business and fully execute its Plan of Operations. To date, the company has been unsuccessful in raising additional funds. There is no assurance that the Company will be successful in raising sufficient funds to execute its expansion agenda. If additional capital is raised through the sale of additional equity or convertible securities, substantial dilution to our stockholders is likely to occur which may result in a partial or substantial loss to your investment in our common stock.
If we are successful in raising additional funds, we plan to hire and train key individuals for positions which include global management, marketing, and administrative. The number of employees hired will be dependent upon a variety of factors including our progress in implementing our business plan and available capital. By the first quarter of 2010, we expect to require approximately 5 employees and anticipate incurring $30,000 per month for payroll. The hiring of employees will be an ongoing process during the company’s existence. Additionally, the Company plans to utilize outside marketing and public relations firms to facilitate strategic alliances with potential franchisers and telemarketers. Depending on the availability of funds, the Company plans to spend $50,000 in advertising and marketing of its products and services during the second Phase of our operations.
On January 2009 the Israeli Parliament passed an anti spam law which allows telemarketing campaign to call only customers who agreed to receive calls (OPT-IN), while assessing a high fine for any violation. This change affected the entire telemarketing activity and as a result, our services to Platin diminished. Together with Platin we are looking for ways to overcome this issue, but so far without any success. We are currently in need of immediate cash to continue our business. However, the current status of the global market leave us with less hope to obtain the required financial backup needed for executing our market plan and we will concentrate to use our limited resources to further strengthening the system features and improving its ruggedness.
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.
The Company intends to meet its long-term liquidity needs through available cash and cash flow as well as through additional financing from outside sources. The Company anticipates raising additional funds from the possible exercise of Warrants or equity financing with private investors following effectiveness of the Registration Statement. As of the date of this Prospectus no agreements have been undertaken to obtain any funding. The Warrants are exercisable at an exercise price of $0.25 per share. The Company does not expect that warrants will be exercised if the prevailing price of the Common Stock at such time of exercise is below or at the exercise price.
Additional issuances of equity or convertible debt securities will result in dilution to the current shareholders. Further, such securities might have rights, preferences or privileges senior to our common stock. Additional financing may not be available upon acceptable terms, or at all. If adequate funds are not available or are not available on acceptable terms, we may not be able to fully execute our Plan of Operations to expand our business, which could significantly and materially restrict our business operations. If additional capital is raised through the sale of additional equity or convertible securities, substantial dilution to our stockholders is likely to occur which may result in a partial or substantial loss to your investment in our common stock.
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.
Results of Operations:
Fiscal Year Ended March 31, 2010 and March 31, 2009
Revenues:
Revenues for the fiscal year ending March 31, 2010 were $15,100 compared to $25,896 for the fiscal year ended March 31, 2009. Revenues decreased by 42%. The decrease of revenues was offset by a decrease in expenses and resulted from the Company no longer providing hosting services thereby not incurring both the income and expense for those services.
We continued to provide the services to Platin Ltd. during the twelve month period ended March 31, 2010.
Platin, our only client to date is currently testing our system and providing feedback to improve our product. 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.
Expenses:
Total operating expenses for the fiscal year ended March 31, 2010 were $92,047 as compared to $125,144 for the fiscal year ended March 31, 2009, a decrease of approximately 26 %. Expenses included General and Administrative expense of $16,067 as compared to $30,434 for fiscal year ending March 31, 2009. Additionally, the company incurred no stock compensation for services rendered in the fiscal year ended March 31, 2010 as compared to $16,850 in stock based compensation for services rendered to the Company during the period ending March 31, 2009. Officers Compensation & Rent amounted to $56,000 during the fiscal year ended March 31, 2010 as compared to from $56,000 during the fiscal year ended March 31, 2009. Additional Paid in Capital has been credited for these amounts. Depreciation and Amortization was $5,800 for the fiscal year ended March 31, 2010 compared to $5,800 for the period ending March 31, 2009. The decrease in expenses in the fiscal year ended March 31, 2010 was offset by a decrease in revenues resulted from the Company no longer providing hosting services thereby not incurring both the income and expense for those services.
Research and development expenses for the fiscal year ended December 31, 2010 decreased to $14,180 as compared to $16,060 for the fiscal year ended March 31, 2009.
Net loss
The Company reported a net loss for the twelve month period ending March 31, 2010 of $78,281 as compared to of $100,260 for the fiscal year period ending March 31, 2009.
The Company had a cumulative net losses since its inception of $420,083 in the fiscal year ended March 31, 2010 as compared to $341,802 for the period ending March 31, 2009. The increase in net loss is attributable to the additional losses we incurred during the period ending March 31, 2010.
Liquidity and Capital Resources:
For the Fiscal Year Ended March 31, 2010 and March 31, 2009.
As of March 31, 2010 the Company had $1,331 as compared to $3,063 in cash, as at March 31, 2009.
Net cash used by operating activities for the fiscal year period ended March 31, 2010 was $8,732 as compared to $41,063 for the fiscal year ended March 31, 2009.
Net cash provided by financing activities during fiscal year ending March 31, 2010 was $7,000 as compared to $24,000 for sales of Units and $15,000 loaned to the Company by Ron Kallus the previous twelve months period ended March 31, 2009. A related party provided short term interest free loans to the company for $7,000 for the period ending March 31, 2010.
Various funds had been advanced by the CEO, Mr. Ron Kallus to the company. As of March 31, 2010 and 2009 Mr. Kallus has advanced an aggregate of $31,323. The advances are non-interest bearing and due on March 31, 2011. Interest has been imputed on these advances at 4.25% and charged to additional paid-in capital. During fiscal 2010 and 2009, Mr. Kallus loaned $0 and $15,000 to the Company.
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.
The Company intends to meet its long-term liquidity needs through available cash and cash flow as well as through additional financing from outside sources. The Company anticipates raising additional funds from the possible exercise of Warrants or equity financing with private investors following effectiveness of the Registration Statement. As of the date of this Prospectus no agreements have been undertaken to obtain any funding. The Warrants are exercisable at an exercise price of $0.25 per share. The Company does not expect that warrants will be exercised if the prevailing price of the Common Stock at such time of exercise is below or at the exercise price.
Additional issuances of equity or convertible debt securities will result in dilution to the current shareholders. Further, such securities might have rights, preferences or privileges senior to our common stock. Additional financing may not be available upon acceptable terms, or at all. If adequate funds are not available or are not available on acceptable terms, we may not be able to fully execute our Plan of Operations to expand our business, which could significantly and materially restrict our business operations. If additional capital is raised through the sale of additional equity or convertible securities, substantial dilution to our stockholders is likely to occur which may result in a partial or substantial loss to your investment in our common stock.
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.
Results of Operations:
Fiscal Year Ended March 31, 2010 and March 31, 2009
Revenues:
Revenues for the fiscal year ending March 31, 2010 was $15,100 compared to $25,896 for the fiscal year ended March 31, 2009. Revenues decreased by 42%. The decrease of revenues was offset by a decrease in expenses and resulted from the Company no longer providing hosting services thereby not incurring both the income and expense for those services.
We continued to provide the services to Platin Ltd. during the twelve month period ended March 31, 2010.
Platin, our only client to date is currently testing our system and providing feedback to improve our product. 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.
Expenses:
Total operating expenses for the fiscal year ended March 31, 1010 was 72,281 as compared to $125,144 for the fiscal year ended March 31, 2010, a decrease of approximately 42 %. Expenses included General and Administrative expense of $16,067 as compared to $30,434 for fiscal year ending March 31, 2009. Additionally, the company incurred no stock compensation for services rendered in the fiscal year ended March 31, 2010 as compared to $16,850 in stock based compensation for services rendered to the Company during the period ending March 31, 2009. Officers Compensation & Rent amounted to $56,000 during the fiscal year ended March 31, 2010 as compared to from $56,000 during the fiscal year ended March 31, 2009. Additional Paid in Capital has been credited for these amounts. Depreciation and Amortization was $5,800 for the fiscal year ended March 31, 2010 compared to $5,800 for the period ending March 31, 2009. The decrease in expenses in the fiscal year ended March 31, 2010 was offset by a decrease in revenues resulted from the Company no longer providing hosting services thereby not incurring both the income and expense for those services.
Research and development expenses for the fiscal year ended December 31, 2010 decreased to $14,180 as compared to $16,060 for the fiscal year ended March 31, 2009.
Net loss
The Company reported a net loss for the twelve month period ending March 31, 2010 of $72,281 as compared to of $100,260 for the fiscal year period ending March 31, 2009.
The Company had a cumulative net losses since its inception of $420,083 in the fiscal year ended March 31, 2010 as compared to $341,802 for the period ending March 31, 2009. The increase in net loss is attributable to the additional losses we incurred during the period ending March 31, 2010.
Liquidity and Capital Resources:
For the Fiscal Year Ended March 31, 2010 and March 31, 2009.
As of March 31, 2010 the Company had $1,331 as compared to $3,063 in cash, as at March 31, 2009.
Net cash used by operating activities for the fiscal year period ended March 31, 2010 was (8,732) as compared to (41,063) for the fiscal year ended March 31, 2009.
Net cash provided by investing activities during the fiscal year ending March 31, 2010 was 0 for the period ended March 31, 2010 and 2009 respectively.
Net cash provided by financing activities during fiscal year ending March 31, 2010 was 0 as compared to $24,000 for sales of Units and $15,000 loaned to the Company by Ron Kallus the previous twelve months period ended March 31, 2009. Additionally a related party provided short term interest free loans to the company for $7,000 for the period ending March 31, 2010 as compared to 0 for the corresponding period ending March 31, 2009,
Various funds had been advanced by the CEO, Mr. Ron Kallus to the company. As of March 31, 2010 and 2009 Mr. Kallus has advanced an aggregate of $31,323. The advances are non-interest bearing and due on March 31, 2011. Interest has been imputed on these advances at 4.25% and charged to additional paid-in capital. During fiscal 2010 and 2009, Mr. Kallus loaned $0 and $15,000 to the Company.
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.
The Company intends to meet its long-term liquidity needs through available cash and cash flow as well as through additional financing from outside sources. The Company anticipates raising additional funds from the possible exercise of Warrants or equity financing with private investors following effectiveness of the Registration Statement. As of the date of this Prospectus no agreements have been undertaken to obtain any funding. The Warrants are exercisable at an exercise price of $0.25 per share. The Company does not expect that warrants will be exercised if the prevailing price of the Common Stock at such time of exercise is below or at the exercise price.
Additional issuances of equity or convertible debt securities will result in dilution to the current shareholders. Further, such securities might have rights, preferences or privileges senior to our common stock. Additional financing may not be available upon acceptable terms, or at all. If adequate funds are not available or are not available on acceptable terms, we may not be able to fully execute our Plan of Operations to expand our business, which could significantly and materially restrict our business operations. If additional capital is raised through the sale of additional equity or convertible securities, substantial dilution to our stockholders is likely to occur which may result in a partial or substantial loss to your investment in our common stock.
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.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We do not currently hold any market risk sensitive instruments entered into for hedging transaction risks related to foreign currencies. In addition, we have not entered into any transactions with derivative financial instruments for trading purposes.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Pages -
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
On January 19, 2010, VGTel, Inc. (the “Company”) was notified that the audit practice of Kempisty & Company Certified Public Accountants, P.C., the Company’s independent registered public accounting firm (“K&Co”), was assumed by MaloneBailey, LLP (“MB”) effective as of January 1, 2010. On January 19, 2010, K&Co resigned as the independent registered public accounting firm of the Company and, with the approval of the Company’s Board of Directors, MB was engaged as the Company’s independent registered public accounting firm.
K&Co performed audit of the Company’s financial statements for the fiscal year ended March 31, 2009. K&Co’s report did not contain an adverse opinion or a disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope, or accounting principles.
During the fiscal years ended March 31, 2009 and the subsequent interim period up through the January 19, 2010, there were no (i) disagreements between the Company and K&Co on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to its satisfaction, would have caused K&Co to make reference to the subject matter of such disagreements in connection with its report, or (ii) “reportable events,” as described in Item 304(a)(1)(v) of Regulation S-K.
On January 19, 2010, the Company furnished K&Co with a copy of this report prior to filing with the Securities and Exchange Commission (“SEC”) and requested that K&Co furnish it with a letter addressed to the SEC stating whether or not it agreed with the statements made by the Company in this report insofar as they relate to K&Co’s audit services and engagement as the Company’s independent registered public accounting firm. K& Co has furnished a letter addressed to the SEC dated January 19, 2010, a copy of which is attached hereto as Exhibit 16.
As noted above, on January 19, 2010, the Company engaged the services of MB as the independent registered public accounting firm of the Company. During the fiscal years ended March 31, 2009 and 2008 and from March 31, 2009 through the engagement of MB as the Company’s independent registered public accounting firm, neither the Company nor anyone on its behalf consulted MB with respect to any accounting or auditing issues involving the Company. In particular, there was no discussion with the Company regarding the application of accounting principles to a specified transaction, the type of audit opinion that might be rendered on the financial statements, or any matter that was either the subject of a disagreement, as described in Item 304 of Regulation S-K, with K&Co, or a “reportable event” as described in Item 304(a)(1)(v) of Regulation S-K.
ITEM 9A
ITEM 9A T. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures . Under the supervision of our principal executive officer who is also the principal financial officer, we have evaluated the effectiveness of the design and operation of the Company's “disclosure controls and procedures,” as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this annual report (the “Evaluation Date”).
Based on that evaluation, our principal executive officer concluded that our disclosure controls and procedures were not effective because of certain deficiencies involving internal controls which constituted a material weakness as discussed below. The material weakness identified did not result in the restatement of any previously reported financial statements or any other related financial disclosures, nor does management believe that it had any effect on the accuracy of our financial statements for the current reporting period.
Management’s Annual Report on Internal Control over Financial Reporting. Our management is responsible for establishing and maintaining “internal control over financial reporting,” as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, a system of internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only a reasonable assurance of achieving their control objectives.
Under the supervision and with the participation of our management, including our principal executive officer who is also the principal financial officer, we have evaluated the effectiveness of our internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on its evaluation, our principal executive officer who is also our principal financial officer concluded that our controls are not effective and there is a material weakness in our internal control over financial reporting. A material weakness is a deficiency, or a combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
The material weakness relates to the monitoring and review of work performed by our limited accounting staff in the preparation of financial statements, footnotes and financial data provided to our independent registered public accounting firm in connection with the annual audit. More specifically, the material weakness in our internal control over financial reporting is due to the fact that:
• The Company lacks proper segregation of duties. We believe that the lack of proper segregation of duties is due to our limited resources.
• The Company does not have a comprehensive and formalized accounting and procedures manual.
Management has concluded that until we have sufficient financial resources to supplement our accounting personnel, this material weakness will continue.
This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our independent registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only management’s report in this annual report.
This report shall not be deemed to be filed for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section, and is not incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
Changes in Internal Control Over Financial Reporting
No change in the Company’s internal control over financial reporting occurred during the quarter ended June 30, 2009 that materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
ITEM 9B
ITEM 9B OTHER INFORMATION
None
PART III
Directors Officers and Promoters:
The following table sets forth, as of June 12, 2009 the names and ages of all of our directors and executive officers; and all positions and offices held. The director will hold such office until the next annual meeting of shareholders and until his or her successor has been elected and qualified.
Item 10:
Item 10: Directors, Executive Officers,
The following sets forth our directors, executive officers, promoters and control persons, their ages, and all offices and positions held. Directors are elected for a period of two years and thereafter serve until their successor is duly elected by the shareholders. Officers and other employees serve at the will of the Board of Directors.
Officers & Directors:
Ron Kallus, Age 60 Chairman, CEO, Treasurer
Mr. Kallus was appointed as Chairman, CEO and Treasurer on January 18, 2006. Mr. Kallus is also president of NYN International LLC, since August 2004 and he is Chief Operations Officer for Digital Power Technologies, Inc., a private R&D company in Texas since July 2005. From June 2003 until July 2004, he was employed by NovoLink Communications, in Texas where he held the position of VP-Business development. From August 2002 to May 2003 Mr. Kallus was a self employed consultant in Berkeley CA. From January 2001 until July 2002 Mr. Kallus was employed by IPI Ltd. in Haifa, Israel where he held the position of General Manager In the prior period, Mr. Kallus worked at Intermetrics of Cambridge, Massachusetts for 10 years, where he acted as the head scientist in the field of industrial systems and was responsible for the development and sale of computerized management systems (PMS). He later established Eurometrics, in which he developed the first Personal Computer -based PMS system. Mr. Kallus sold the company and established IPI, a technological consultation and Research Company.
Educational Background:
Israel Institute of Technology, Haifa, Israel
B.Sc. Electrical Engineering, 1975
Massachusetts Institute of Technology, Cambridge, Mass., USA
Graduate work, Artificial Intelligence, 1977
North Eastern University, Boston, Mass., USA
Graduate work, Technical Management, 1981
Israel Hason Age 44 Chief Marketing Officer, Director
On January 18, 2006, Israel Hason was appointed Chief Marketing officer and Director. Mr. Hason has been General Manager and principal shareholder of Platin Ltd Israel since 1989 where he is responsible for overseeing three daughter companies Platin - Investment - owner of the Messer-Phone, and other registered trade marks. Platin - Marketing and Advertisement (1989) Ltd., operating a commercial advertisement office, and Style - Manages & Operates several customers clubs for major credit cards companies like AMX and Mastercard each has around 500,000 members. Mr. Hason brings expertise in business and marketing, with a strong emphasis on the Israeli markets for the VGTel products. Mr. Hason is a related party.
Mr. Hason's Educational Background:
Technicum, Givataim, Israel
B.Sc. Architecture 1983
Niva Kallus, Age 25 Corporate Secretary , Director.
On January 18, 2006 Niva Kallus was appointed as Corporate Secretary, and Director. Niva is the daughter of Ron Kallus. Niva has just completed her Pre-med Undergraduate studies (Psychology Major) at the University of Massachusetts, From Sep. 2002 to July 2003 Niva studied, to become a registered EMS at Oakland CA. From (August) 2001 to (August) 2002, Niva established a new Scout organization in Kiryat-Gat, Israel From (Sep.) 1996 - -(June) 2001 She attended Zevulun-Carmel High School, Kibbutz Yagur, Israel (Graduation June 2001.) Niva has no prior business experience.
Educational Background:
·
University of Massachusetts, Lowell, MA. 2008
·
First Aid, Emergency Medical Services Authority, CA (2002)
·
CPR, American Heart Association (2002)
·
EMT training program, Merritt College, Oakland, CA (2003)
·
CPR Instructor course, Chelmsford police Department (2004)
Item 11:
Item 11: Executive Compensation:
(1) Ron Kallus received 750,000 shares of our common stock pursuant to the acquisition agreement between Tribeka Tek, Inc. and NYN International LLC. Such shares were not for services rendered or to be rendered by Kallus. Additionally each of Mr. Kallus' sons, Yoav Kallus and Nathan Kallus respectively received 420,000 shares of stock pursuant to the acquisition agreement between Tribeka Tek, Inc. and NYN International LLC. Such shares were not for services rendered or to be rendered by Mr. Kallus or his sons. Neither Yoav Kallus nor Nathan Kallus are officers or directors of the Company.
(2) Israel Hason received 750,000 shares of our common stock pursuant to the acquisition agreement between Tribeka Tek, Inc. and NYN International LLC. Such shares were not for services rendered or to be rendered by Mr. Hason.
(3) Niva Kallus received 420,000 shares of our common stock pursuant to the acquisition agreement between Tribeka Tek, Inc. our predecessor firm and NYN International LLC. Such shares were not for services rendered or to be rendered by Niva Kallus. Niva Kallus is the daughter of Ron Kallus.
(4) The sums of $56,000 and $56,000 respectively were officers compensation and rent expenses incurred, but not paid out. These sums were credited to Additional Paid in Capital. ( See Financial Statements Note 9.)
Option/SAR Grants
We do not currently have a stock option plan. No individual grants of stock options, whether or not in tandem with stock appreciation rights known as SARs or freestanding SARs have been made to any executive officer or any Director since our inception; accordingly, no stock options have been granted or exercised by any of the officers or Directors since we were founded.
Long-Term Incentive Plans and Awards
We do not have any long-term incentive plans that provide compensation intended to serve as incentive for performance. No individual grants or agreements regarding future payouts under non-stock price-based plans have been made to any executive officer or any Director or any employee or consultant since our inception; accordingly, no future payouts under non-stock price-based plans or agreements have been granted or entered into or exercised by any of the officers or Directors or employees or consultants since we were founded.
Compensation of Directors
There are no arrangements pursuant to which Directors are or will be compensated in the future for any services provided as a Director.
Employment Contracts, Termination of Employment, Change-in-Control Arrangements
There are currently no employment or other contracts or arrangements with officers or Directors. There are no compensation plans or arrangements, including payments to be made by us, with respect to our officers, Directors or consultants that would result from the resignation, retirement or any other termination of such Directors, officers or consultants from us. There are no arrangements for Directors, officers, employees or consultants that would result from a change-in-control.
Item 12:
Item 12: Security Ownership of Certain Beneficial Owners and Management and Related Transactions:
The following table sets forth information regarding the beneficial ownership of shares of the Company's Common Stock as of June 9, 2009 by
(1) all directors and executive officers of the Company, individually and collectively as a group
(2) all stockholders known to the Company to be beneficial owners of more than five percent (5%) of the outstanding Common Stock;
(1) (2) Niva Kallus is the daughter of Ron Kallus.
(1) (2) Yoav Kallus is the son of Ron Kallus.
(1) (2) Nathan Kallus is the son of Ron Kallsu
(3) Hyman & Ethel Schwartz owned 542,510 shares since 2002. On May 27, 2008 the Company sold shares 960,000 to The Hyett Group Ltd. for a total value of $24,0000. Hyman is the president and principal officer of The Hyett Group, Ltd. On May 27, 2008 the company issued 674,000 shares to Ethel Schwartz for accounting and edgarizing services rendered.
Israel Hason is the Chief Marketing Officer. He is also a managing partner and principal of Platin Ltd. Israel. Platin Ltd. is a telemarketing company that is currently the only customer of VGTel Inc. Mr. Hason has agreed to recuse himself from any corporate decision relating to Platin Ltd business relationship with VGTel, Inc.
Pursuant to the rules and regulations of the Securities and Exchange Commission, shares of Common Stock that an individual or entity has a right to acquire within 60 days pursuant to the exercise of options or warrants are deemed to be outstanding for the purposes of computing the percentage ownership of such individual or entity, but are not deemed to be outstanding for the purposes of computing the percentage ownership of another person or entity shown in the table.
None of the principals have outstanding options or warrants or other securities convertible into the Common Stock of the Company.
Item 13:
Item 13: Certain Relationships and Related Transactions
Niva Kallus is the corporate secretary and the daughter of Ron Kallus, the CEO of the Company.
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. Platin Ltd. is a telemarketing company that is our only customer to date. In March 2006 Platin Ltd. placed an order for our telemarketing services for the election in Israel which was scheduled for March 28, 2006. Platin has been using our System ever since for both political campaigns and for commercial telemarketing services they provide to a variety of their clients. We charge Platin a monthly per line cost of $3.0 plus a usage fee of $0.012 per message while the GMG system is in the testing phase. We generated an aggregate of $82,543 since inception from Platin of which $15,100 was generated during the fiscal year ended March 31, 2010. Platin pays a monthly fee for the lines and a per call fee for each successful call placed. Platin 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.
Ron Kallus, the Company Chief Executive Officer and Principal shareholder provided a credit facility to the Company up to a maximum of $20,000 which may be drawn down anytime from March 1, 2006 until May 18, 2007. This unsecured facility is payable May 18, 2007 and bears an interest rate of prime plus one (1) calculated on an annual basis payable annually in arrears with first payment due March 1, 2007 and second payment due May 18, 2007, unless extended by mutual consent of the parties. On July 18, 2006, Mr. Kallus executed an amendment to the March 1, 2006 credit facility increasing the total amount of the credit facility from $20,000 to $50,000 and extending payable date from May 18, 2007 to December 31, 2007 with the first interest payment due July 1, 2007 and second payment due December 31, 2007. During the period ending March 31, 2007, Mr. Kallus advanced $12,100 compared to $4,223 in the corresponding period ending March 31, 2006 for an aggregate of $16,323 from inception. No funds were advanced by Mr. Kallus during the period ending March 31, 2010 and $15,000 were advanced during the period ending March 31, 2009. The aggregate of the loan advanced by Mr. Kallus is $31,323. The Officer has forgiven his right to the interest for the March 31, 2006 loan thus no interest has been charged or accrued.
Yoav Kallus, the son of Ron Kallus provided Research & Develpment services for the Company aggregating $6,250 which expense is part of accrued expenses. Yoav Kallus has agreed to waive payment of his outstanding fees until the company has sufficient financial resources available.
NYN International LLC provides hosting and internet services to the Company and bills the Company for $2160 for each quarter. Ron Kallus is the principal of NYN International LLC. The Accounts Payable includes the sum of $6,480 owed for hosting and internet services provided by NYN International LLC.
On May 28, 2008 the Registrant issued 674,000 shares for services rendered valued at $16,850 to Ethel Schwartz for edgarizing and accounting services in lieu of cash. The shares issued are restricted shares and are subject to Rule 144. On May 28, 2008 the Registrant sold in a private placement transaction an aggregate $24,000 of Series A Units of its securities, at a price of $.025 per unit. The shares were sold to Hyett Group Ltd. Ethel is a VP of Hyett Group Ltd.
Ethel Schwartz former President and Ron Kallus current CEO are both officers and directors of a private R&D company, Digital Power Technologies, Inc. There are no business relationships or synergies between Digital Power Technologies and VGTel Inc. Both of these entities operate in different industries and sectors that have no relationship with each other. There is no plan for the companies to have relationships in the future.
The Hyett Group, Ltd. made short term loans to the Company interest free. During the period ending March 31, 2010 the loaned an aggregate of $7,000 to the Company.
Except as provided herein, the Company has not entered into any transactions with a related party. Management does not know of any other transaction it will be entering into with related parties.
The Company has had no transactions with any promoter or promoters since its inception. Nothing of value, including money, property, contracts, options or rights of any kind has been received or will be received by a promoter, director or indirectly from the Company which is not disclosed.
Item 14:
Item 14: Principal Accountant Fees & Services:
(a) Audit Fees. During the year ended March 31, 2010 fees billed by the Company's auditors, MaloneBailey LLP for services rendered for the audit of our annual financial statements and estimated fees for the audit of our financial statements was $7,500.
(a) Audit Fees. During the years ended March 31, 2009 fees billed by the Company's auditors, Kempisty & Company CPA for services rendered for the audit of our annual financial statements and estimated fees for the audit of our financial statements was $5.000.
(b) Audit-Related Fees. During years ended March 31, 2010 and 2009, our auditors did not receive any fees for any audit-related services other than as set forth in paragraph (a) above.
(c) Tax Fees. Our auditors received $0 in fees related to preparing and filing the Tax returns for 2010-2009.
PART IV
Item 15:
Item 15: Exhibits and Financial Statement Schedules
(a) Exhibits on Form 8K
On January 19, 2010, VGTel, Inc. (the “Company”) was notified that the audit practice of Kempisty & Company Certified Public Accountants, P.C., the Company’s independent registered public accounting firm (“K&Co”), was combined with MaloneBailey, LLP (“MB”) effective as of January 1, 2010. On January 19, 2010, K&Co resigned as the independent registered public accounting firm of the Company and, with the approval of the Company’s Board of Directors, MB was engaged as the Company’s independent registered public accounting firm.
K&Co performed audit of the Company’s financial statements for the fiscal year ended March 31, 2009. K&Co’s report did not contain an adverse opinion or a disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope, or accounting principles.
During the fiscal years ended March 31, 2009 and the subsequent interim period up through the January 19, 2010, there were no (i) disagreements between the Company and K&Co on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to its satisfaction, would have caused K&Co to make reference to the subject matter of such disagreements in connection with its report, or (ii) “reportable events,” as described in Item 304(a)(1)(v) of Regulation S-K.
On January 19, 2010, the Company furnished K&Co with a copy of this report prior to filing with the Securities and Exchange Commission (“SEC”) and requested that K&Co furnish it with a letter addressed to the SEC stating whether or not it agreed with the statements made by the Company in this report insofar as they relate to K&Co’s audit services and engagement as the Company’s independent registered public accounting firm. K& Co has furnished a letter addressed to the SEC dated January 19, 2010, a copy of which is attached hereto as Exhibit 16.
As noted above, on January 19, 2010, the Company engaged the services of MB as the independent registered public accounting firm of the Company. During the fiscal years ended March 31, 2009 and 2008 and from March 31, 2009 through the engagement of MB as the Company’s independent registered public accounting firm, neither the Company nor anyone on its behalf consulted MB with respect to any accounting or auditing issues involving the Company. In particular, there was no discussion with the Company regarding the application of accounting principles to a specified transaction, the type of audit opinion that might be rendered on the financial statements, or any matter that was either the subject of a disagreement, as described in Item 304 of Regulation S-K, with K&Co, or a “reportable event” as described in Item 304(a)(1)(v) of Regulation S-K.
(b) Financial Statements Schedules and Notes
Exhibits (b) Filed with this Form 10K
Exhibit 31-1
Exhibit 32-1
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, there unto duly authorized.
VGTel Inc.
Registrant
VGTel, Inc.,
VGTEL, INC.
INDEX
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors
VGTel, Inc.
Setauket, NY 11733
We have audited the accompanying balance sheet of VGTel, Inc. as of March 31, 2010 and the related statements of operations, stockholders' deficit and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required at this time, to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of VGTel, Inc. as of March 31, 2010 and the results of its operations and cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has had recurring net losses and has working capital deficit as of March 31, 2010. These factors raise substantial doubt about its ability to continue as a going concern. Management’s plans concerning this matter are also described in Note 2. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.
MaloneBailey LLP
Certified Public Accounting Firm
New York, New York
www.malonebailey.com
May 4,
KEMPISTY & COMPANY
CERTIFIED PUBLIC ACCOUNTANTS, P.C.
MAIDEN LANE - SUITE 1003 - NEW YORK, NY 10038 - TEL (212) 406-7272 - FAX (212) 513-1930
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors
VGTel, Inc.
We have audited the accompanying balance sheet of VGTel, Inc. as of March 31, 2009 and the related statements of operations, stockholders' deficit and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required at this time, to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of VGTel, Inc. as of March 31, 2009 and the results of its operations and cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has had recurring net losses and has working capital deficit as of March 31, 2009. This raises substantial doubt about its ability to continue as a going concern. Management’s plans concerning this matter are also described in Note 2. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Kempisty & Company
Certified Public Accountants PC
New York, New York
June 2, 2009
VGTel, Inc.
Balance Sheets
The accompanying notes are an integral part of these financial statements.
VGTel, Inc.
Statements of Operations
The accompanying notes are an integral part of these financial statements.
VGTel, Inc.
Statements of Changes in Stockholder’s Deficit
For the years ended March 31, 2010 and 2009
The accompanying notes are an integral part of these financial statements.
VGTel, Inc.
Statements of Cash Flows
The accompanying notes are an integral part of these financial statements.
VGTel, Inc.
Notes to Financial Statements
March 31,
NOTE 1 - GENERAL ORGANIZATION AND BUSINESS
VGTel Inc. (Company) was organized on February 5, 2002 in New York. On January 18, 2006, the Company purchased the GMG System, a telemarketing campaigning product and is now operating in the telemarketing sector of the telecommunications industry.
NOTE 2 - GOING CONCERN
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company has had recurring net losses and a working capital deficit as of March 31, 2010 and 2009. These factors raise 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 shareholder loans. 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 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents
For the purpose of the statements of cash flows, cash equivalents include all highly liquid investments with maturity of three months or less.
Stock Based Compensation
Under ASC 718 (formerly SFAS No. 123(R)), the Company measures the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognize the costs in the financial statements over the respective vesting periods of the option grant.
Income Taxes
The Company provides for income taxes under ASC 740 “Accounting for Income Taxes”. ASC 740 requires the use of an asset and liability approach in accounting for income taxes.
ASC 740 requires the reduction of deferred tax assets by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. No provision for income taxes is included in the financial statements due to its immaterial amount.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 revenue and expenses during the reporting period. Actual results could differ from those estimates.
Net Income (Loss) per Common Share
Net income (loss) per common share is computed based on the weighted average number of common shares outstanding and common stock equivalents, if not anti-dilutive. The Company has not issued any potentially dilutive securities.
Revenue and Cost Recognition
The Company recognizes revenue on arrangements in accordance with ASC 605. In all cases, revenue is recognized only when the price is fixed or determinable, persuasive evidence of an arrangement exists, the service is performed and collectibles is reasonably assured.
Intellectual Properties
The Company has adopted the provisions of ASC 356-50 (formerly Emerging Issues Task Force 00-2), “Accounting for Web Site Development Costs.” Costs incurred in the planning stage of a website are expensed as research and development while costs incurred in the development stage are capitalized and amortized over the life of the asset, estimated to be five years. Expenses subsequent to the launch will be expensed as research and development expenses. The Company will expense upgrades and revisions to its websites as incurred.
Impairment of Long-Lived Assets
In accordance with ASC 350-10 (formerly Statement of Financial Accounting Standards (SFAS) No. 144,) "Accounting for the Impairment or Disposal of Long-Lived Assets", the Company periodically reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. The Company recognizes an impairment loss when the sum of expected undiscounted future cash flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference between the asset's estimated fair value and its book value.
Recent Accounting Pronouncements
The Company does not expect any recent account pronouncements to have a significant impact on its financial position or results of operations.
NOTE 4 - INTANGIBLE ASSETS
The Company developed the intellectual properties known as Group Messaging Gateway. As of March 31, 2010, total costs associated with the development of the GMG System was $95,500. Of this amount, $29,000 had been incurred after technological feasibility has been reached. All costs prior to technological feasibility have been expensed. All post development costs have been expensed in the periods incurred. The asset valued at $29,000 is being amortized over a 60-month period.
Intangible assets consist of GMG System which are recorded at cost and amortized over a straight-line basis. The amortization expenses for the years ended March 31, 2010 and 2009 are $5,800 respectively.
NOTE 5 - OFFICERS’ COMPENSATION
The officer has taken no actual compensation since inception. Officer's compensation has been charged $50,000 during the years ended March 31, 2010 and 2009 and credited to additional paid in capital.
NOTE 6 - DUE TO SHAREHOLDER/OFFICER
Various funds had been advanced by the CEO, Mr. Ron Kallus to the company. As of March 31, 2010 and 2009 Mr. Kallus has advanced an aggregate of $31,323. The advances are non-interest bearing and due on March 31, 2011. Interest has been imputed on these advances at 4.25% and charged to additional paid-in capital. During fiscal 2010 and 2009, Mr. Kallus loaned $0 and $15,000 to the Company.
NOTE 7 - DUE TO SHAREHOLDERS/OTHERS
Yoav Kallus, the son of Ron Kallus, the Company CEO, provided research & development services to the Company for $6,250 during the period ended March 31, 2006. As of March 31, 2010 and 2009, no payment has been made to Yoav Kallus, and the amount is accrued.
NYN International provides hosting and internet services to the Company. Ron Kallus, the CEO of the Company is also the president of NYN International LLC. As of March 31, 2010 and 2009, NYN International LLC is owed $6,480.
On July 6, 2009, The Hyett Group, Ltd., a related shareholder loaned the company $4,000. The loan has a term of 90 days and can be extended by mutual consent of both parties. The loan is interest free.
On October 18, 2009, The Hyett Group, Ltd., a related shareholder loaned the company $1,500. The loan has a term of 90 days and can be extended by mutual consent of both parties. The loan is interest free.
On January 12, 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.
On January 19, 2010 the company entered into an addendum to loan agreements dated July 6, 2009 and October 18, 2009 to amend the terms of repayment to payable on demand.
NOTE 8 - COMMITMENTS AND CONTINGENCIES
The Company is occupying the premises of its President rent free. The Company has charged $6,000 to paid-in capital for rent for the years ended March 31, 2010 and 2009.
In addition the Company is providing its services to a telemarketing company in Israel that is distributing the services to telemarketing clients in Israel. The services are being provided to Platin, which is a related party to the Company.
NOTE 9 - STOCKHOLDERS' DEFICIT
Additional paid in capital has been credited $56,000 in each of the periods ended March 31, 2010 and 2009 respectively for officer's compensation and rent.
Additional paid in capital has been credited $1,334 and $1,012 respectively for the years ended March 31, 2010 and 2009 for imputed interest for a loan from Ron Kallus.
No preferred shares have been issued. It is within the discretion of the Board of Directors to determine the preferences of the preferred stock. The Company has not yet determined the preferences of the preferred stock.
On May 28, 2008 the Registrant sold in a private placement transaction, an aggregate of $24,000 of Series A Units of its securities, at a price of $.025 per unit. Each Series A unit consists of one common share, one Series A Warrant, one Series B Warrant, one Series C Warrant and one Series D Warrant. Each of the four series of warrants entitles the holder to purchase one common share at $0.25 per Share. The Company evaluated the warrants above to determine if they were derivatives pursuant to “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company's Own Stock,” codified within ASC 815 and determined that equity classification was appropriate.
On May 28, 2008 the Registrant issued 674,000 shares for services rendered valued at $16,850 in lieu of cash.
The summary of the status of the Company’s outstanding warrant for the year ended March 31, 2010 and 2009 is as follows:
NOTE 10 - RELATED PARTY TRANSACTIONS
Platin Ltd. is a telemarketing company that is our only customer to date. 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 Hason has agreed to recuse himself from any corporate decision relating to Platin Ltd business relationship with VGTel, Inc.
NYN International LLC provides hosting and internet services to the Company and bills the Company for $2,160 for each quarter. Ron Kallus is the principal of NYN International LLC. The due to related shareholders includes the sum of $6,480 owed for hosting and internet services provided by NYN International LLC.
NOTE 11 - INCOME TAXES
Below is a chart showing the estimated corporate federal net operating loss (NOL) and the year in which it will expire.
The total deferred tax asset due to net operating losses was $92,418 and $75,196 at March 31, 2010 and 2009. The Company has recorded a full valuation allowance for its deferred tax assets as of March 31, 2010 and
NOTE 12 - SUBSEQUENT EVENTS
On April 13, 2010, the Hyett Group Ltd., a related shareholder loaned the company $3,000. The loan is payable on demand and is interest free.