**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**FORM
      10-KSB/A**


**(Amendment
      No. 2)**


(Mark
      One)





**xANNUAL
      REPORT PURSUANT
      TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**





For
      the
      fiscal year ended December 31, 2004





**oTRANSITION
      REPORT PURSUANT TO SECTION 13
      OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934**





For
      the
      transition period ____________to____________


*Commission
      file number 000-28985*








**VOIP,
      INC.**


(Name
      of
      small business issuer in its charter)





Texas
            75-2785941(State
                or other jurisdiction of incorporation or organization)
            (I.R.S.
                Employer Identification No.)





12330
                SW 53rdStreet, Suite 712Fort
                Lauderdale, Florida
            33330(Address
                of principal executive offices)
            (ZIP
                Code)





Issuer's
      telephone number, including area code: (954) 434-2000





**Securities
      registered pursuant to Section 12(b) of the Act: None.**





**Securities
      registered pursuant to Section 12(g) of the Act: Common Stock, par value
      $0.001.**





Check
      whether the issuer is not required to file reports pursuant to Section 13 or
      15(d) of the Exchange Act. o





Check
      whether the issuer (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Securities Exchange Act of 1934 during the past 12 months (or
      for
      such shorter period that the issuer was required to file such reports), and
      (2)
      has been subject to such filing requirements for the past 90 days. YES x NO o





Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B contained herein, and none will be contained, to the best of
      registrant's knowledge, in definitive proxy or information statements
      incorporated by reference in Part III of this Form 10-KSB or any amendment
      to
      this Form 10-KSB. x





Indicate
      by a check mark whether the registrant is a shell company (as defined by
      Rule12b-2 of the Exchange Act). YES oNO x




The
      issuer's revenues for its most recent fiscal year were: $1,828,193.




The
      aggregate market value of the voting common stock held by non-affiliates of
      the
      issuer, based on the average bid and asked price of such stock, was $98,248,877
      at December 31, 2004.




At
      March
      18, 2005, the registrant had outstanding 26,378,132 shares of par value $.001
      common stock.





**DOCUMENTS
      INCORPORATED BY REFERENCE**


None.





Transitional
      Small Business Disclosure Format (Check one): Yes o; No x










**VOIP,
      INC.**





**FORM
      10-KSB/A FOR THE YEAR ENDED DECEMBER 31, 2004**





**TABLE
      OF CONTENTS**





PART
                II
            4ITEM
                6. MANAGEMENT'S
                DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONAND
                RESULTS OF OPERATIONS AND PLAN OF OPERATION
            4ITEM
                7. FINANCIAL STATEMENTS
            6ITEM
                8A. CONTROLS AND PROCEDURES - EVALUATION OF DISCLOSURE
                CONTROLS
            6PART
                III
            9ITEM
                13. EXHIBITS
            9








2





**Explanatory
      Note**





VoIP,
      Inc. (the "Company") is filing this Amendment No. 2 to its Annual Report on
      Form
      10-KSB for the year ended December 31, 2004 (the "2004 10-KSB"), which was
      originally filed on March 30, 2005, and amended on November 23, 2005. This
      Amendment No. 2 is being filed to restate the Company's financial statements
      for
      the year ended December 31, 2004, which were misstated, resulting in overstated
      revenues, expenses, receivables and payables, and understated net loss. This
      misstatement was discovered by the senior financial management personnel that
      commenced their employment with the Company in the fourth quarter of 2005,
      during their review and analysis in connection with the preparation of the
      Company’s 2005 annual financial statements. This misstatement occurred in the
      financial statements of the Company's consolidated subsidiary VCG Technologies,
      Inc., doing business as DTNet Technologies (“DTNet”), which was acquired in June
      2004. The Company has therefore decided to restate its 2004 consolidated
      financial statements to correct these misstatements. Adjustments are made to
      reduce: (a) the overstatements of revenues and receivables; (b) the
      overstatement of cost of goods sold; and (c) the understatement of net loss,
      which aggregated $791,200, $498,123, and $462,618, respectively, for the year
      ended December 31, 2004.


The
        Company’s amended Annual Report on Form 10-KSB/A filed on November 23, 2005
        previously restated the Company's 2004 consolidated financial statements
        to
        include approximately $1.4 million in compensation expense relating to warrants
        and options issued to employees during 2004. In addition, certain
        reclassifications have been made to the 2004 financial statements presented
        herein to conform to the presentation as filed in the Company’s Annual Report on
        Form 10-KSB for the year ended December 31, 2005 which was filed on April
        17,
        2006.
 
 This
        Amendment No. 2 amends (i) Part II, Item 6 - Management's Discussion and
        Analysis of Financial Condition and Results of Operations and Plan of Operation
        to reflect the restated results of operations for 2004; (ii) Part II, Item
        8 -
        Financial Statements to provide the restated financial statements and notes
        thereto for 2004; (iii) Part II Item 8A - Controls and Procedures - Evaluation
        of Disclosure Controls and Procedures to report management's assessment of
        the
        Company's disclosure controls as of the date of the filing of this Amendment
        No.
        2; and (iv) the certifications required under Rules 13a-15 and 15d-15(e)
        of the
        Securities Exchange Act of 1934, as amended, (the "Exchange Act") so that
        they
        can be dated as of a current date as required by Rule 12b-15 of the Exchange
        Act.


This
      Amendment does not reflect events occurring after the filing of the 2004 10-KSB,
      and does not update or modify the disclosures therein in any way other than
      as
      required to reflect the amendments described above.




3





**PART
      II**





**ITEM
        6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF
        OPERATIONS AND PLAN OF OPERATION**





The
      information presented in this section should be read in conjunction with the
      information contained in the financial statements, including the notes thereto,
      and the other financial statements appearing elsewhere in this
      report.





**General**





The
      following discussion should be read in conjunction with the Consolidated
      Financial Statements and the notes thereto and the other financial information
      appearing elsewhere in this Annual Report on Form 10-KSB/A. Certain statements
      contained in this Annual Report on Form 10-KSB/A and other written material
      and
      oral statements made from time to time by us do not relate strictly to
      historical or current facts. As such, they are considered "forward-looking
      statements" that provide current expectations or forecast of future events.
      Such
      statements are typically characterized by terminology such as "believe,"
      "anticipate," "should," "intend,” "plan," "will," "expect," "estimate,"
      "project," "strategy" and similar expressions. Our forward-looking statements
      generally relate to the prospects or future sales of our products, the success
      of our marketing activities, and the success of our strategic corporate
      relationships. These statements are based upon assumptions and assessments
      made
      by our management in light of its experience and its perception of historical
      trends, current conditions, expected future developments and other factors
      our
      management believes to be appropriate. These forward-looking statements are
      subject to a number of risks and uncertainties, including the following: our
      ability to achieve profitable operations and to maintain sufficient cash to
      operate its business and meet its liquidity requirements; our ability to obtain
      financing, if required, on terms acceptable to it, if at all; the success of
      our
      research and development activities; competitive developments affecting our
      current products; our ability to successfully attract strategic partners and
      to
      market both new and existing products; exposure to lawsuits and regulatory
      proceedings; our ability to protect our intellectual property; governmental
      laws
      and regulations affecting operations; our ability to identify and complete
      diversification opportunities; and the impact of acquisitions, divestitures,
      restructurings, product withdrawals and other unusual items. Except as required
      by applicable law, we undertake no obligation to update any forward-looking
      statements, whether as a result of new information, future events or
      otherwise.





**Restatement
      of 2004 Financial Statements**


On
        March
        22, 2006, we concluded that our consolidated financial statements for the
        year
        ended December 31, 2004 were misstated, resulting in overstated revenues,
        expenses, receivables and payables, and understated net loss. These
        misstatements were discovered by the senior financial management personnel
        that
        commenced their employment with the Company in the fourth quarter of 2005,
        during their review and analysis in connection with the preparation of the
        2005
        annual financial statements. The misstatements occurred in the financial
        statements of our consolidated subsidiary, DTNet, which was acquired in June
        2004. We have therefore decided to restate our 2004 consolidated financial
        statements to correct these misstatements. Adjustments to reduce: (a) the
        overstatements of revenues and receivables; (b) the overstatement of cost
        of
        goods sold; and (c) the understatement of net loss, aggregated $791,200,
        $498,123, and $462,618, respectively, for the year ended December 31,
        2004.
 
 Our
        amended Annual Report on Form 10-KSB/A filed on November 23, 2005 previously
        restated our 2004 consolidated financial statements to include approximately
        $1.4 million in compensation expense relating to warrants and options issued
        to
        employees during 2004.
 
 In
        addition, certain reclassifications have been made to the 2004 financial
        statements contained herein, to conform to the 2004 presentation as filed
        in our
        Annual Report on Form 10-KSB for the year ended December 31, 2005, which
        was
        filed on April 17, 2006.
  The
        following table sets forth the impact of these restatements on certain amounts
        previously reported in our consolidated financial statements for the year
        ended
        December 31, 2004:




4


Balance
                  Sheet Data
              
              As
                  of December 31, 2004As
                  Originally
                Reported
              
              As
                  Previously Restated in Amendment No.1
              
              As
                  Restated HereinAccounts
                  receivable
              
              $
              818,071
              
              $
              818,071
              
              $
              166,239Inventory
              
              
              187,451
              
              
              187,451
              
              
              324,185Accounts
                  payable
              
              
              1,224,974
              
              
              1,224,974
              
              
              1,148,833Additional
                  paid-in capital
              
              
              12,722,565
              
              
              14,107,328
              
              
              14,107,328Accumulated
                  deficit
              
              
              (4,639,386
              )
              
              (6,024,149
              )
              
              (6,486,767
              )Statement
                  of Operations Data
              
              
              Year
                  Ended December 31, 2004As
                  Originally
                Reported
              
              
              As
                  Previously Restated in Amendment No.1
              
              
              As
                  Restated HereinRevenue
              
              $
              2,619,393
              
              $
              2,619,393
              
              $
              1,828,193Cost
                  of goods sold
              
              
              1,870,269
              
              
              1,870,269
              
              
              1,372,146Compensation
                  and related expenses
              
              
              2,721,296
              
              
              4,106,059
              
              
              4,106,059General
                  and administrative expenses
              
              
              2,187,878
              
              
              2,187,878
              
              
              2,357,419Loss
                  from continuing operations before incometaxes
                  and discontinued operations
              
              
              (4,160,050
              )
              
              (5,544,813
              )
              
              (6,007,431
              )Net
                  loss
              
              
              (4,014,739
              )
              
              (5,399,502
              )
              
              (5,862,120
              )Net
                  loss per share
              
              
              (0.27
              )
              
              (0.37
              )
              
              (0.40
              )


For
        discussion of the impact of these restatements on current management’s
        evaluation of disclosure controls and procedures, the separate Board of
        Directors investigation of these misstatements and the steps we are taking
        to
        address the issues associated with these misstatements, see Item 8A. “Controls
        and Procedures.”
 
 **Results
        of Operations**
 
 Net
        revenue totaled $2,236,806 ($1,828,193 from continuing operations) for the
        year
        ended December 31, 2004 as compared to $8,678 for the year ended December
        31,
        2003. The $2,228,128 increase in total net revenue was primarily attributable
        to
        our entry into the new voice over internet protocol ("VoIP") business segment
        and the acquisition of Vox Consulting Group, Inc., doing business as
        VoipAmericas, and DTNet in 2004.
 
 Revenue
        from the sale of tea in the segment business that we have discontinued was
        $408,613, or 18.3%, of total net revenue for the year ended December 31,
        2004,
        versus $8,678, or 100%, of total net revenue for the prior year.
 
 We
        acquired DTNet in June 2004 and VoipAmericas in September 2004. DTNet provides
        customer premises equipment to cable and DSL Internet providers throughout
        North
        America. DTNet sales were approximately $4.7 million in 2003. VoipAmericas’
revenue for the first nine months of 2004 were $1.4 million. Management believes
        that the acquisitions of DTNet and VoipAmericas will provide proven distribution
        channels and leadership in sales throughout the Americas. DTNet and VoipAmericas
        complement our strategy to deliver VoIP services over a wireless local loop
        and
        deliver service provider solutions to cable operators.
 
 Net
        losses for the respective years ended December 31, 2004 and 2003 were $5,862,120
        and $352,968, respectively. Net loss per share was $0.40 and $0.20,
        respectively, for each period.
 
 Operating
        expenses consist of salaries and related personnel costs, outside legal and
        professional fees, directors and officers insurance, bad debt expenses and
        general corporate overhead costs. Operating expenses were approximately $6.5
        million for the year ended December 31, 2004. Operating expenses for 2003
        have
        been reclassified and included in the loss from discontinued operations for
        2003
        of $352,968. Compensation and related expenses for 2004 include approximately
        $2.2 million in compensation costs for warrants issued to employee and
        approximately $1.1 million in compensation costs for stock options issued
        to
        employees and also reflect increases in headcount and related personnel
        expenses. The general and administrative expenses for 2004 reflect the Company's
        new line of business, VoIP telephony services.


5




The
      comparison of operations for the years ended December 31, 2004 and 2003 is
      not
      indicative of our current business model, since during 2003, we were in the
      business of importing and selling a line of fine teas. We have since
      discontinued the tea business, to focus solely on VoIP and emerging
      technologies.





**Liquidity
      and Capital Resources**





As
      of
      December 31, 2004, we had cash and cash equivalents approximating $1,141,000.
      We
      had two borrowing arrangements, one for $200,000 with a local bank and one
      for
      $560,000 with a note payable to a shareholder. Cash used in operating activities
      of $2.9 million in fiscal year 2004 was primarily attributable to the net loss
      of $5.9 million, which included non cash items for warrants and options issued
      to Company employees amounting to approximately $3.3 million recorded as
      compensation in the Consolidated Statement of Operations. Cash provided by
      financing activities in fiscal 2004 consisted primarily of $3.6 million of
      proceeds resulting from the sale of common stock to investors in private
      placement transactions during the whole year and, as above-mentioned, proceeds
      from issuance of note payable of $560,000.





Liquidity
      for the period from inception through December 31, 2004 has been mainly provided
      by sales of common stock through private placements and borrowing from
      affiliates. Management has taken actions directly related to the generation
      of
      product sales during calendar 2004 and anticipates that these efforts will
      be
      sufficient to provide reasonable resources to sustain its operations during
      2005.





We
      anticipate that all working capital requirements for the current annual period
      will be satisfied from the operation of the newly acquired business and the
      sales of additional common shares through private placements.





**Payments
      Due by Period**





The
      following table illustrates our outstanding debts and the terms of that debt
      as
      of December 31, 2004:





Contractual
                Obligations
            
            Total
            
            Less
                than 1 YearLoans
                payable
            
            $
            200,000
            
            $
            200,000Due
                to related parties
            
            
            560,000
            
            
            560,000Operating
                leases
            
            
            35,572
            
            
            35,572Purchase
                obligations
            
            
            —
            
            
            —Total
            
            $
            795,572
            
            $
            795,572




**Market
        Risk**





We
      own
      market investment securities issued by various securities issuers. The issuers
      of these products retain all interest rate and default risk.





**Available
      Information**





We
      maintain a corporate Internet website with the address www.voipincorporated.com.
      The contents of this website are not incorporated in or otherwise to be regarded
      as part of this report. We file reports with the Securities and Exchange
      Commission, or SEC, which are available on our website free of charge. These
      reports include Annual Reports on Form 10-KSB, Quarterly Reports on Form 10-QSB,
      current reports on Form 8-K and amendments to such reports, each of which is
      provided on our website as soon as reasonably practicable after we
      electronically file such materials with or furnish them to the SEC. You can
      also
      read and copy any materials we file with the SEC at the SEC's Public Reference
      Room at 100 F Street, NE, Washington, DC 20549. In addition, the SEC maintains
      a
      website (www.sec.gov) that contains reports, proxy and information statements,
      and other information regarding issuers that file electronically with the SEC,
      including us.





**ITEM
      7. FINANCIAL STATEMENTS**





The
        financial statements required by this item begin at Page F-1
        hereof.





**ITEM
      8A.CONTROLS AND PROCEDURES**





Evaluation
      of Disclosure Controls and Procedures




6


As
        required by Rule 13a-15(b) under the Exchange Act, as of the end of the
        period covered by this Annual Report, our management conducted an evaluation
        with the participation of our Chief Executive Officer and Chief Financial
        Officer (collectively, the “Certifying Officers”) regarding the effectiveness of
        the design and operation of the Company’s disclosure controls and procedures (as
        defined in Rules13a-15(e) and 15d-15(e) under the Exchange Act). Our management,
        with the participation of the Certifying Officers, also conducted an evaluation
        of our Company’s internal control over financial reporting and identified three
        control deficiencies, which in combination resulted in a material weakness.
 
 A
        significant deficiency is a control deficiency, or combination of control
        deficiencies, that adversely affects the Company’s ability to initiate,
        authorize, record, process or report external financial data reliably in
        accordance with generally accepted accounting principles such that there
        is more
        than a remote likelihood that a misstatement of the Company’s annual or interim
        financial statements that is more than inconsequential will not be prevented
        or
        detected. A material weakness is a significant deficiency, or combination
        of
        significant deficiencies, that results in more than a remote likelihood that
        a
        material misstatement of a company’s annual or interim financial statements will
        not be prevented or detected. The control deficiencies identified by our
        management and the Certifying Officers that existed at December 31, 2004,
        which
        in combination resulted in a material weakness were: (a)  misstatements in
        amounts reported for a consolidated subsidiary, and (b) insufficient
        personnel resources with appropriate accounting expertise.
 
 Based
        on this evaluation and in accordance with the requirements of Auditing Standard
        No. 2 of the Public Company Accounting Oversight Board, our Certifying
        Officers conclude that the Company’s disclosure controls and procedures were
        ineffective as of December 31, 2004.
  Our
        management, including the Certifying Officers, does not expect that our
        disclosure controls and procedures will prevent all errors and all improper
        conduct. A control system, no matter how well conceived and operated, can
        provide only reasonable, not absolute assurance that the objectives of the
        control system are met. Further, a design of a control system must reflect
        the
        fact that there are resource constraints, and the benefits of controls must
        be
        considered relative to their costs. Because of the inherent limitations in
        all
        control systems, no evaluation of controls can provide absolute assurance
        that
        all control issues and instances of improper conduct, if any, have been
        detected. These inherent limitations include the realities that judgments
        and
        decision-making can be faulty, and that breakdowns can occur because of simple
        error or mistake. Additionally, controls can be circumvented by the individual
        acts of some persons, by collusion of two or more persons, or by management
        override of the control. Further, the design of any system of controls is
        also
        based in part upon assumptions about the likelihood of future events, and
        there
        can be no assurance that any design will succeed in achieving its stated
        goals
        under all potential future conditions. Over time, controls may become inadequate
        because of changes in conditions, or the degree of compliance with the policies
        or procedures may deteriorate. Because of the inherent limitations and a
        cost-effective control system, misstatements due to error or fraud may occur
        and
        may not be detected.


Our
      management is responsible for establishing and maintaining adequate internal
      control over financial reporting, as such term is defined in Rule 13a-15(f)
      under the Exchange Act. The Company’s 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, and
      includes those policies and procedures that:




·
            pertain
                to the maintenance of records that, in reasonable detail accurately
                and
                fairly reflect the transactions and dispositions of the assets of
                the
                Company;





·
            provide
                reasonable assurance that transactions are recorded as necessary
                to permit
                preparation of financial statements in accordance with generally
                accepted
                accounting principles and, that receipts and expenditures of the
                Company
                are being made only in accordance with authorization of management
                and
                directors of the Company; and





·
            provide
                reasonable assurance regarding prevention or timely detection of
                unauthorized acquisition, use or disposition of the Company’s assets that
                could have a material effect on the financial
                statements.





Our
      management, including the Certifying Officers, assessed the effectiveness of
      the
      Company’s internal control over financial reporting as of December 31, 2004, and
      have concluded that the Company had the following control deficiencies that,
      when combined, resulted in a material weakness:


(a)
            In
                March 2006, during their review and analysis of 2005 results and
                financial
                condition in connection with the preparation of the 2005 financial
                statements and the 2005 Form 10-KSB, our senior financial management
                discovered certain overstatements of the revenues, expenses and
                receivables reported, and understatement of net loss, for our consolidated
                subsidiary DTNet. Based upon an assessment of the impact of the
                adjustments to our financial results arising from this matter, we
                have
                restated the financial information presented in this Form 10-KSB/A
                for the
                period ended December 31, 2004. Adjustments to reduce: (a) the
                overstatements of revenues and receivables; (b) the overstatement
                of cost
                of goods sold; and (c) the understatement of net loss, aggregated
                $791,200, $498,123, and $462,618, respectively, for the year ended
                December 31, 2004.


7


(b)
            During
                the preparation of the financial statements for the period ended
                September
                30, 2005, the Company discovered that it did not recognize in its
                2004
                financial statements the full amount of compensation expense that
                should
                have been recognized on warrants issued to employees, or the compensation
                expense for the vested portion of approximately 4,000,000 stock options
                issued to employees, during the three months ended September 30,
                2004, in
                accordance with Statement of Financial Accounting Standards No. 123,
                "Accounting for Stock-Based Compensation." The compensation expense
                that
                was not recognized relating to these options and warrants was $1,384,763.
                The Company therefore restated its related 2004 financial information,
                as
                filed in its Quarterly Report on Form 10-QSB/A filed May 11, 2006
                for the
                period ended September 30, 2004, and in its amendment to its Annual
                Report
                on Form 10-KSB/A filed November 23, 2005 for year ended December
                31, 2004,
                to correct this misstatement. 
 (c)
            The
                Company does not have sufficient personnel resources at corporate
                headquarters with appropriate accounting expertise or experience
                in
                financial reporting for public companies. Management, with the
                participation of the Certifying Officers, determined that the potential
                magnitude of a misstatement arising from this deficiency is more
                than
                inconsequential to the annual and/or interim financial statements. 
 Management
        has concluded that the above deficiencies when combined together have resulted
        in a material weakness in its internal control over financial reporting because
        the quantitative effect of any errors resulting from these deficiencies when
        taken together could result in a material misstatement of the Company’s interim
        and annual financial reports. Based on this evaluation and in accordance
        with
        the requirements of Auditing Standard No. 2 of the Public Company
        Accounting Oversight Board, the Chief Executive Officer and Chief Financial
        Officer concluded that the Company did not maintain effective internal control
        over financial reporting as of December 31, 2004.
 
 Remediation
        Steps to Address Control Deficiencies
 
 The
        Company is in the process of addressing the identified material weakness
        by
        remediating the control deficiencies in the Company’s internal control over
        financial reporting which comprise this material weakness as follows:
 
 (a)
            In
                March 2006 the Company’s Board of Directors retained counsel to conduct a
                thorough investigation of the accounting misstatements of the Company’s
                DTNet subsidiary. Such counsel, in turn, retained an independent
                forensic
                accounting firm to assist its investigation. Based on this investigation,
                the Company’s Board of Directors and management have concluded that these
                intentional overstatements of revenues, expenses and receivables
                were
                limited to the unauthorized actions of two individuals. One of these
                individuals was employed at corporate headquarters and the other
                was
                employed at DTNet’s headquarters. The individual employed at corporate
                headquarters resigned shortly after the initiation of the investigation
                and the Company terminated the employment of the other individual
                immediately following the receipt of the preliminary findings of
                the
                investigation in early April 2006. On April 19, 2006 the Company
                sold
                DTNet to a former officer of the Company.  (b)
            The
                Company continues to seek to improve its in-house accounting resources.
                During the fourth quarter of 2005 the Company hired a new CFO with
                significant accounting and public company experience. During the
                first
                quarter of 2006, the Company did not hire any new accounting personnel,
                However, the Company significantly supplemented its internal accounting
                resources during these three months by using independent accounting
                and
                financial consulting firms. Management expects to continue to use
                such
                third parties until such time as the Company is able to hire sufficient
                in-house accounting expertise. In April 2006 the Company promoted
                the
                former Finance Director of one of its recently acquired subsidiaries
                to
                the position of Corporate Controller. This individual has significant
                financial experience (including five years with the audit department
                of
                the accounting firm of KPMG Peat Marwick), has served as the CFO
                and/or
                controller of various companies (including a public registrant),
                and is a
                Certified Public Accountant.




Changes
      in Control Over Financial Reporting




There
      were no changes in the Company’s internal control over financial reporting
      identified in connection with the evaluation of such internal control that
      occurred during the Company’s last fiscal quarter that have materially affected,
      or are reasonably likely to materially affect, the Company’s internal control
      over financial reporting.




8








**PART
      III**





**ITEM
      13. EXHIBITS**





(a)
      The
      following documents are filed as part of this Annual Report on Form
      10-KSB/A:





1.
            Financial
                Statements: The financial statements filed as part of this report
                are
                listed in the "Index to Financial Statements" on Page F-1
                hereof.





2.
            Exhibits
                required to be filed by Item 601 of Regulation
                10-KSB





31.1
            Certification
                of Chief Executive Officer under Section 302 of the Sarbanes-Oxley
                Act of
                2002





31.2
            Certification
                of the Chief Financial Officer under Section 302 of the Sarbanes-Oxley
                Act
                of 2002





32.1
            Certification
                of Chief Executive Officer under 18 U.S.C. ss. 1350, as adopted pursuant
                to Section 906 of the Sarbanes-Oxley Act of
                2002





32.2
            Certification
                of Chief Financial Officer under 18 U.S.C. ss. 1350, as adopted pursuant
                to Section 906 of the Sarbanes-Oxley Act of
                2002





9




**VOIP,
                  INC.****TABLE
                  OF CONTENTS**
 PageReports
                  of Independent Certified Public Accountants
              F-2,
                  3Consolidated
                  Balance Sheets December 31, 2004 (As Restated) and 2003
              F-4Consolidated
                  Statements of Operations for Years Ended December 31, 2004 (As
                  Restated)
                  and 2003
              F-5Consolidated
                  Statements of Cash Flow for Years Ended December 31, 2004 (As Restated)
                  and 2003
              F-6Consolidated
                  Statement of Changes in Shareholders Equity for years Ended December
                  31,
                  2004 (As Restated) and 2003
              F-7Notes
                  to Consolidated Financial Statements for Year Ended December 31,
                  2004
              F-8




F-1




REPORT
        OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 
 Board
        of
        Directors
 VoIP,
        Inc. and Subsidiaries
 Fort
        Lauderdale, Florida
 
 We
        have
        audited the accompanying consolidated balance sheet of VoIP, Inc. and
        Subsidiaries (“the Company”) as of December 31, 2004, and the related
        consolidated statements of operations, shareholders’ equity, and cash flows for
        the year ended December 31, 2004. These consolidated financial statements
        are
        the responsibility of the Company’s management. Our responsibility is to express
        an opinion on these consolidated 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 has determined
        that it
        is not required 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 do not express such an 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 consolidated financial statements referred to above presents
        fairly, in all material respects, the consolidated financial position of
        VoIP,
        Inc. and its Subsidiaries, as of December 31, 2004, and the results of
        operations and cash flows for the year then ended in conformity with accounting
        principles generally accepted in the United States of America.
 
 As
        discussed in Note B to the consolidated financial statements, the accompanying
        consolidated balance sheet and related consolidated statements of operations,
        shareholders’ equity and cash flows have been restated to reflect the accounting
        for certain stock warrants and options awarded to employees during 2004,
        as well
        as misstatements which occurred in the financial statements of the Company’s
        consolidated subsidiary doing business as DTNet Technologies.
 
 /s/
        Berkovits, Lago & Company, LLP
 
 
 Fort
        Lauderdale, Florida
 March
        16,
        2005 except for
 Note
        B as
        to which the date
 is
        May 8,
        2006






F-2




**TSCHOPP,
      WHITCOMB & ORR, P.A.**


2600
      Maitland Center Parkway, Suite 330


Maitland,
      FL 32751





**Report
      of Independent Certified Public Accountants**





Board
      of
      Directors and Stockholder


Millennia
      Tea Masters, Inc.





We
      have
      audited the accompanying balance sheet of Millennia Tea Masters, Inc. as of
      December 31, 2003 and the related statements of operations, changes in
      stockholders' equity, 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 auditing standards generally accepted
      in
      the United States of America. Those standards require that we plan and perform
      the audit to obtain reasonable assurance about whether the financial statements
      are free of material misstatement. 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 Millennia Tea Masters, Inc. as
      of
      December 31, 2003, and the results of its operations and its 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. The Company has experienced limited sales
      and
      incurred cumulative operating losses since its inception through December 31,
      2003. The Company has been dependent upon the proceeds from the sales of common
      stock and advances from related parties to provide working capital. This
      situation raises a substantial doubt about the Company's ability to continue
      as
      a going concern. The financial statements do not include any adjustments that
      might result from the outcome of this uncertainty.





*/s/
                Tschopp, Whitcomb & Orr, P.A.*
              
              *January
                30, 2004*
              *Maitland,
                Florida*






F-3




**VoIP
                  Inc.****Consolidated
                  Balance Sheets**
  December
                  31, 2004
              
              December
                  31, 2003(As
                  Restated)ASSETSCurrent
                  assets:Cash
                  and cash equivalents
              
              $
              1,141,137
              
              $
              —Accounts
                  receivable, net of allowance of $136,795
              
              
              166,239
              
              
              —Due
                  from related parties
              
              
              245,402
              
              
              —Inventory
              
              
              324,185
              
              
              —Assets
                  from discontinued operations
              
              
              412,419
              
              
              259,459Total
                  current assets
              
              
              2,289,382
              
              
              259,459Property
                  and equipment, net
              
              
              419,868
              
              
              —Goowill
                  and other intangibles
              
              
              6,923,854
              
              
              —Other
                  assets
              
              
              23,580
              
              
              —TOTAL
                  ASSETS
              
              $
              9,656,684
              
              $
              259,459LIABILITIES
                  AND SHAREHOLDERS' EQUITYCurrent
                  liabilities:Accounts
                  payable and accrued expenses
              
              $
              1,148,833
              
              $
              —Loans
                  payable
              
              
              200,000
              
              
              —Due
                  to related parties
              
              
              560,000Liabilities
                  from discontinued operations
              
              
              —
              
              
              151,167Other
                  current liabilities
              
              
              103,031
              
              
              —Total
                  liabilities
              
              
              2,011,864
              
              
              151,167Shareholders'
                  equity:Common
                  stock - $0.001 par value100,000,000
                  shares authorized24,258,982
                  and 1,730,939 issuedand
                  outstanding respectively
              
              
              24,259
              
              
              1,731Additional
                  paid-in capital
              
              
              14,107,328
              
              
              731,208Accumulated
                  deficit
              
              
              (6,486,767
              )
              
              (624,647
              )Total
                  shareholders' equity
              
              
              7,644,820
              
              
              108,292TOTAL
                  LIABILITIES AND SHAREHOLDERS' EQUITY
              
              $
              9,656,684
              
              $
              259,459The
                  accompanying notes are an integral part of these consolidated financial
                  statements.




F-4




**VoIP
                  Inc.****Consolidated
                  Statements of Operations**
  Year
                    Ended December 312004
                
                2003(As
                    Restated)Revenues
                
                $
                1,828,193
                
                $
                —Cost
                    of sales
                
                
                1,372,146
                
                
                —Gross
                    profit
                
                
                456,047
                
                
                —Operating
                    expensesCompensation
                    and related expenses
                
                
                4,106,059
                
                
                —General
                    and administrative expenses
                
                
                2,357,419
                
                
                —Loss
                    from continuing operations before incometaxes
                    and discontinued operations
                
                
                (6,007,431
                )
                
                —Provision
                    for income taxes
                
                
                —
                
                
                —Net
                    loss before discontinued operations
                
                
                (6,007,431
                )
                
                —Income
                    (loss) from discontinued operations,net
                    of income taxes
                
                
                145,311
                
                
                (352,968
                )Net
                    loss
                
                $
                (5,862,120
                )
                $
                (352,968
                )Basic
                    and diluted loss per share:Loss
                    before discontinued operations
                
                $
                (0.41
                )
                $
                —Income
                    (loss) from discontinued operations,net
                    of income taxes
                
                
                0.01
                
                
                (0.20
                )Net
                    loss per share
                
                $
                (0.40
                )
                $
                (0.20
                )Weighted
                    average number of shares outstanding
                
                
                14,597,312
                
                
                1,730,939The
                    accompanying notes are an integral part of these consolidated
                    financial
                    statements.




F-5




**VoIP,
                  Inc.****Consolidated
                  Statements of Cash Flows**
  Year
                    Ended December 31,2004
                
                2003Cash
                    flows from operating activities:
                
                
                (As
                    Restated
                )Continuing
                    operations:Net
                    loss from continuing operations
                
                $
                (6,007,431
                )
                $
                —Adjustments
                    to reconcile net loss to net cash used in operating activities:Depreciation
                
                
                82,832
                
                
                —Provision
                    for bad debt
                
                
                136,795
                
                
                —Common
                    shares issued for services
                
                
                494,166
                
                
                —Options
                    and warrants issued for services and compensation
                
                
                3,320,763
                
                
                —Shares
                    issued for intellectual property
                
                
                105,100Changes
                    in operating assets and liabilities, net of assets & liabilities
                    acquired:Accounts
                    receivable
                
                
                96,825
                
                
                —Due
                    from related parties
                
                
                (245,402
                )
                
                —Inventory
                
                
                8,179
                
                
                —Other
                    current assets
                
                
                52,233
                
                
                —Accounts
                    payable
                
                
                (372,446
                )
                
                —Other
                    current liabilities
                
                
                (335,696
                )
                
                —Net
                    cash used in continuing operating activities
                
                
                (2,664,082
                )
                
                —Discontinued
                    operations:Income
                    (loss) from discontinued operations
                
                
                145,311
                
                
                (352,968
                )Changes
                    in assets, liabilities, and net results
                
                
                (408,000
                )
                
                274,262Net
                    cash used in discontinued operating activities
                
                
                (262,689
                )
                
                (78,706
                )Net
                    cash used in operating activities
                
                
                (2,926,771
                )
                
                (78,706
                )Cash
                    flows from investing activities - continuing operatons:Cash
                    from acquisitions
                
                
                104,872
                
                
                —Purchase
                    of property and equipment
                
                
                (157,881
                )
                
                —Cash
                    for intellectual property
                
                
                (50,000
                )
                
                —Purchase
                    of other assets
                
                
                (21,200
                )
                
                —Net
                    cash used in continuing investing activities
                
                
                (124,209
                )
                
                —Discontinued
                    operations:Cash
                    from affiliates
                
                
                —
                
                
                82,196Net
                    cash provided by discontinued investing activities
                
                
                —
                
                
                82,196Net
                    cash provided by (used in) investing activities
                
                
                (124,209
                )
                
                82,196Cash
                    flows from financing activities:Proceeds
                    from issuance of notes payable
                
                
                560,000
                
                
                —Proceeds
                    from sales of common stock
                
                
                3,628,618
                
                
                —Net
                    cash provided by financing activities
                
                
                4,188,618
                
                
                —Net
                    increase in cash
                
                
                1,137,638
                
                
                3,490Cash
                    and cash equivalents at beginning of year
                
                
                3,499
                
                
                9Cash
                    and cash equivalents at end of year
                
                $
                1,141,137
                
                $
                3,499The
                    accompanying notes are an integral part of these consolidated
                    financial
                    statements.




F-6




**VoIP,
                  Inc.****Consolidated
                  Statements of Changes in Shareholders' Equity****Years
                  Ended December 31, 2004 and 2003****(As
                  Restated for 2004)**
  AdditionalCommon
                    Stock
                
                Paid-In
                
                AccumulatedShares
                
                Amount
                
                Capital
                
                Deficit
                
                TotalBalance
                    as of December 31, 2002
                
                
                1,730,939
                
                $
                1,731
                
                $
                731,208
                
                $
                (271,679
                )
                $
                461,260Loss
                    for the year ended December 31, 2003
                
                
                -
                
                
                -
                
                
                -
                
                
                (352,968
                )
                
                (352,968
                )Balance
                    as of December 31, 2003
                
                
                1,730,939
                
                
                1,731
                
                
                731,208
                
                
                (624,647
                )
                
                108,292Common
                    stock issued
                
                
                12,500,000
                
                
                12,500
                
                
                -
                
                
                -
                
                
                12,500Common
                    stock issued for services received
                
                
                568,235
                
                
                568
                
                
                342,432
                
                
                -
                
                
                343,000Common
                    stock issued to investors for cashreceived
                
                
                5,520,566
                
                
                5,521
                
                
                3,610,598
                
                
                -
                
                
                3,616,119Common
                    stock issued for services
                
                
                339,242
                
                
                339
                
                
                150,827
                
                
                -
                
                
                151,166Common
                    stock issued for acquisition ofDTNet
                    Technologies
                
                
                2,500,000
                
                
                2,500
                
                
                4,747,500
                
                
                -
                
                
                4,750,000Common
                    stock issued for acquisition ofVoIPAmericas
                
                
                1,000,000
                
                
                1,000
                
                
                1,099,000
                
                
                -
                
                
                1,100,000Warrants
                    issued to two company officersand
                    stock option compensation
                
                
                -
                
                
                -
                
                
                3,320,763
                
                
                -
                
                
                3,320,763Stock
                    issued for intellectual property
                
                
                100,000
                
                
                100
                
                
                105,000
                
                
                -
                
                
                105,100Loss
                    for the year ended December 31, 2004
                
                
                -
                
                
                -
                
                
                -
                
                
                (5,862,120
                )
                
                (5,862,120
                )Balance
                    as of December 31, 2004
                
                
                24,258,982
                
                $
                24,259
                
                $
                14,107,328
                
                $
                (6,486,767
                )
                $
                7,644,820


The
        accompanying notes are an integral part of these consolidated financial
        statements.




F-7





**NOTE
      A - ORGANIZATION AND DESCRIPTION OF BUSINESSS** ****





The
      Company was incorporated on August 3, 1998 under its original name of Millennia
      Tea Masters, Inc. under the laws of the State of Texas.





The
      Company began operations in October 1998 with its initial order of imported
      teas
      from Sri Lanka.





On
      February 27, 2004 the Company entered into a stock purchase agreement that
      provided for the sale of 12,500,000 shares of its common stock in exchange
      for
      $12,500 and a commitment by the purchaser to contribute the assets of two
      start-up companies in the telecommunications business, eGlobalphone, Inc. and
      VOIP Solutions, Inc. into the Company.





On
      April
      13, 2004 the Company changed its name to VoIP, Inc. and began to develop and
      manufacture innovative IP telephony customer premise equipment, provide premium
      voice over the internet subscriber based telephony services and state of the
      art
      long range WiFi technology solutions, for residential and enterprise customers,
      including multimedia applications.





During
      December 2004 the Company decided to exit the tea import business in order
      to
      focus its efforts and resources in the "Voice over Internet Protocol" (VoIP)
      telecommunications industry. In connection with the decision, the Company sold
      its imported tea inventory and began to wind down its tea import operations.
      The
      assets, liabilities, and results of operations of the imported tea business
      has
      been classified as discontinued operations on the accompanying consolidated
      financial statements.





The
      Company offers quality Voice over IP (VoIP) based solutions offering residential
      and business customers more user friendly and affordable ways to communicate.
      VoIP, Inc. also manufactures products and provides services to Internet Service
      Providers, Telecommunication Service Providers and Cable Operators in strategic
      countries around the world. VoIP, Inc., through its subsidiaries, provides
      a
      comprehensive portfolio of IP multimedia-based solutions ranging from subscriber
      based voice services, to SIP based infrastructure design and deployment, to
      broadband customer premise equipment design and implementation services, as
      well
      as engineering design, manufacturing and distribution of wireless broadband
      technology.





The
      Company's operations consist of one segment.





**NOTE
      B - RESTATEMENT OF FINANCIAL STATEMENTS**





The
      Company accounts for options and warrants issued to employees in accordance
      with
      Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
      Compensation." During the preparation of the financial statements for the
      quarterly period ended September 30, 2005 the Company discovered that it did
      not
      recognize in its 2004 financial statements the full amount of compensation
      expense that should have been recognized on warrants issued to employees in
      2004
      or the compensation expense for the vested portion of approximately 4,000,000
      stock options issued to employees during the year ended December 31, 2004.
      The
      compensation expense that was not recognized relating to these options and
      warrants was $1,384,763 (see Notes I, L and O). The Company therefore decided
      that it would be appropriate to restate its financial statements for the year
      ended December 31, 2004.





On
      March
      22, 2006, the Company concluded that its consolidated financial statements
      for
      the year ended December 31, 2004 were further misstated, resulting in overstated
      revenues, expenses, receivables and payables, and understated net loss. These
      misstatements were discovered by the senior financial management personnel
      that
      commenced their employment with the Company in the fourth quarter of 2005 during
      their review and analysis in connection with the preparation of the 2005 annual
      financial statements. The misstatements occurred in the financial statements
      of
      the Company's consolidated subsidiary doing business as DTNet Technologies,
      which was acquired in June 2004. The Company therefore restated its 2004
      consolidated financial statements to correct these misstatements. Adjustments
      to
      reduce: (a) the overstatements of revenues and receivables; (b) the
      overstatement of cost of goods sold; and (c) the understatement of net loss,
      aggregated $791,200, $498,123, and $462,618, respectively, for the year ended
      December 31, 2004.





The
      following table sets forth the impact of these restatements on certain amounts
      previously reported in our consolidated financial statements for the three
      and
      nine months ended September 30, 2004:




F-8




Balance
                  Sheet Data
              
              As
                  of December 31, 2004As
                  Originally
                Reported
              
              As
                  RestatedAccounts
                  receivable
              
              $
              818,071
              
              $
              166,239Inventory
              
              
              187,451
              
              
              324,185Accounts
                  payable
              
              
              1,224,974
              
              
              1,148,833Additional
                  paid-in capital
              
              
              12,722,565
              
              
              14,107,328Accumulated
                  deficit
              
              
              (4,639,386
              )
              
              (6,486,767
              )Statement
                  of Operations Data
              
              
              Year
                  Ended December 31, 2004As
                  Originally
                Reported
              
              
              As
                  RestatedRevenue
              
              $
              2,619,393
              
              $
              1,828,193Cost
                  of goods sold
              
              
              1,870,269
              
              
              1,372,146Compensation
                  and related expenses
              
              
              2,721,296
              
              
              4,106,059General
                  and administrative expenses
              
              
              2,187,878
              
              
              2,357,419Loss
                  from continuing operations before incometaxes
                  and discontinued operations
              
              
              (4,160,050
              )
              
              (6,007,431
              )Net
                  loss
              
              
              (4,014,739
              )
              
              (5,862,120
              )Net
                  loss per share
              
              
              (0.27
              )
              
              (0.40
              )





**NOTE
      C - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**





**Principles
      of Consolidation**





The
      consolidated financial statements include the accounts of the Company and its
      wholly owned subsidiaries, eGlobalphone, Inc. ("eGlobal") , VoIP Solutions,
      Inc., VCG Technologies d/b/a DTNet Technologies ("DTNet"), Inc., and Vox
      Consulting d/b/a/VoIP Americas, Inc. ("VoIP Americas") from their respective
      dates of acquisition. All significant intercompany balances and transactions
      have been eliminated in consolidation.





**Use
      of Estimates**





The
      preparation of financial statements in conformity with generally accepted
      accounting principles requires management to make estimates and assumptions
      that
      affect the reported amounts of assets and liabilities; disclosure of contingent
      assets and liabilities at the date of the financial statements; and the reported
      amounts of revenues and expenses. Actual results could differ from those
      estimates.





**Cash
      and cash equivalents**





For
      purposes of reporting cash flows, the Company considers all cash on hand, in
      banks, including amounts in book overdraft positions, certificates of deposit
      and other highly liquid debt instruments with a maturity of three months or
      less
      at the date of purchase to be cash and cash equivalents. Cash overdraft
      positions may occur from time to time due to the timing of making bank deposits
      and releasing checks, in accordance with the Company's cash management policies.





**Accounts
      Receivable**





Accounts
      receivable are stated at the amount management expects to collect from
      outstanding balances. Management provides for probable uncollectible amounts
      using the reserve method based on its assessment of the current status of the
      individual receivables and after using reasonable collection efforts. As of
      December 31, 2004 the balance of the allowance for uncollectible accounts
      amounted to $136,795. There was no allowance as of December 31, 2003.




F-9





**Inventory**





Inventory
      consists of finished goods and is valued at the lower of cost or market using
      the first-in, first-out method.





**Advertising
      expenses**





Advertising
      and marketing expenses are charged to operations as incurred.





**Income
      Taxes**





Income
      taxes - The Company and its subsidiaries file consolidated federal and state
      income tax returns. The Company has adopted Statement of Financial Accounting
      Standards No. 109 in the accompanying consolidated financial statements. The
      only temporary differences included therein are attributable to differing
      methods of reflecting depreciation for financial statement and income tax
      purposes.





**Earnings
      (loss) per share**





Basic
      earnings (loss) per share is computed by dividing the net income (loss) for
      the
      year by the weighted-average number of shares of common stock outstanding.
      The
      calculation of fully diluted earnings (loss) per share assumes the diluted
      effect of the exercise of outstanding options and warrants at either the
      beginning of the respective period presented or the date of issuance, whichever
      is later. Common stock equivalents represent the diluted effect of the assumed
      exercise of the outstanding stock options and warrants, using the treasury
      stock
      method.





**Fair
      Value of Financial Instruments**





The
      carrying amount of cash, accounts receivable, accounts payable and notes
      payable, as applicable, approximates fair value due to the short term nature
      of
      these items and/or the current interest rates payable in relation to current
      market conditions.





**Revenue
      Recognition**





Revenue
      from product sales is recognized when persuasive evidence of an arrangement
      exists, delivery to customer has occurred, the sales price is fixed and
      determinable, and collectibility of the related receivable is probable.





The
      recognition of revenues from Internet telephony services are deferred for new
      subscribers of eGlobalphone and Voipsolutions until it deems that the customer
      has accepted the service. Subsequent revenues are recognized at the beginning
      of
      each customer's month.





**Property,
      plant, and equipment**





Property,
      plant, and equipment are stated at cost. Depreciation is provided over the
      estimated useful lives of the related assets using the straight line method.
      The
      useful life of assets ranges from three to five years. The leasehold
      improvements are amortized over the life of the related lease.





**Business
      combinations**





The
      Company accounts for business combinations in accordance with Statement of
      Financial Accounting Standard No. 141 Business Combinations ("SFAS No. 141").
      SFAS No. 141 requires that the purchase method of accounting be used for all
      business combinations. SFAS No. 141 requires that goodwill and intangible assets
      with indefinite useful lives no longer be amortized, but instead be tested
      for
      impairment at least annually by comparing carrying value to the respective
      fair
      value in accordance with the provisions of Statement of Financial Accounting
      Standards No. 142, "Goodwill and Other Intangible Assets" ("SFAS No. 142").
      This
      pronouncement also requires that the intangible assets with estimated useful
      lives be amortized over their respective estimated useful lives.





**Impairment
      of long-lived assets**





The
      Company reviews the recoverability of its long-lived assets, such as plant,
      equipment and intangibles when events or changes in circumstances occur that
      indicate that the carrying value of the asset group may not be recoverable.
      The
      assessment of possible impairment is based on the Company's ability to recover
      the carrying value of the asset or asset group from the expected future pre-tax
      cash flows (undiscounted and without interest charges) of the related
      operations. If these cash flows are less than the carrying value of such asset,
      an impairment loss is recognized for the difference between estimated fair
      value
      and carrying value. The measurement of impairment requires management to
      estimate future cash flows and the fair value of long-lived assets.




F-10





**Recent
      accounting pronouncements**





In
      November 2004, FASB issued Statement No. 151, "Inventory Costs - an amendment
      of
      ARB No. 43, Chapter 4." Statement No. 151 requires that abnormal amounts of
      costs, including idle facility expense, freight, handling costs and spoilage,
      should be recognized as current period charges. The provisions of this Statement
      are effective for inventory costs incurred during fiscal years beginning after
      June 15, 2005. The Company does not expect the adoption of this Statement to
      have a material impact on its financial statements.





In
      December 2004, FASB issued Statement No. 153, "Exchanges of Nonmonetary Assets
      -
      an amendment of Accounting Principles Board ("APB") Opinion No. 29." Statement
      No. 153 amends APB Opinion No. 29 to eliminate the exception for nonmonetary
      exchanges of similar productive assets and replaces it with a general exception
      for exchanges of nonmonetary assets that do not have a commercial substance.
      A
      nonmonetary exchange has commercial substance if the future cash flows of the
      entity are expected to change significantly as a result of the exchange. The
      provisions of this Statement are effective for nonmonetary exchanges occurring
      in fiscal periods beginning after June 15, 2005. The Company does not expect
      the
      adoption of this Statement to have a material impact on its financial
      statements.





In
      December 2004, FASB issued Statement No. 123R, "Share-Based Payment." Statement
      No. 123R revises Statement No. 123, supersedes APB Opinion No. 25 and amends
      Statement No. 95. Statement No. 123R requires the cost of employee services
      received in exchange for an award of equity instruments be recognized over
      the
      period during which an employee is required to provide service in exchange
      for
      the award. The provisions of this Statement are effective for public entities
      that do not file as small business issuers as of the beginning of the first
      interim period or annual reporting period that begins after June 15, 2005.
      The
      Company does not expect the adoption of this Statement to have a material impact
      on its financial statements.





**Stock
      Based Compensation**





The
      Company applies the fair value method of Statement of Financial Accounting
      Standards No. 123, "Accounting for Stock Based Compensation" ("SFAS No. 123")
      in
      accounting for its stock options. This standard states that compensation cost
      is
      measured at the grant date based on the value of the award and is recognized
      over the service period, which is usually the vesting period. The fair value
      for
      each option granted is estimated on the date of the grant using the
      Black-Scholes option pricing model. The fair value of all vested options granted
      has been charged to salaries, wages, and benefits in accordance with SFAS No.
      123.





**NOTE
      D - PROPERTY AND EQUIPMENT, NET**





As
      of
      December 31, 2004 property and equipment consists of the following:


2004Equipment
              
              $
              519,810Furniture
                  & Fixtures
              
              
              56,748Vehicles
              
              
              4,769Leasehold
                  improvements
              
              
              4,562Total
              
              
              585,889Less
                  accumulated depreciation
              
              
              (166,021
              )Total
              
              $
              419,868




Depreciation
                  expense for 2004 amounted to $82,832. There was no depreciation
                  expense
                  for 2003.




**NOTE
      E - INTANGIBLE ASSETS**





As
      of
      December 31, 2004 intangible assets consist of the following:


Goodwill-acquisition
                  of DTNet Technologies, Inc.
              
              $
              5,210,553Goodwill-acquisition
                  of Voipamericas, Inc.
              
              
              1,408,301Intellectual
                  property
              
              
              305,000Total
              
              $
              6,923,854





The
      goodwill on the acquisition of DTNet Technologies, Inc. ("DTNet") represents
      the
      fair market value of DTNet liabilities as of the date of the acquisition plus
      $4,750,000 which represents the market value of 2,500,000 shares of Company
      stock issued pursuant to this acquisition.




F-11





The
        goodwill on the acquisition of VoipAmericas, Inc. (VoIP Americas) represents
        the
        fair market value of VoipAmericas liabilities as of the date of the acquisition
        plus $1,100,000 which represents the market value of 1,000,000 shares of
        the
        Company's stock issued pursuant to this acquisition.





Intellectual
      property is carried at cost which is comprised of $50,000 paid in cash in 2004,
      $150,000 due in the first quarter of 2005, and the value assigned to 100,000
      Company common shares and 400,000 warrants issued pursuant to this transaction.
      The valuation of the shares was $1.05 while the value was $105,000. The value
      of
      the warrants was determined using the Black-Scholes model calculated as of
      October 14, 2004. As these warrants were not "in the money", these warrants
      have
      been assigned a value of zero. This model uses the annualized deviation
      calculation and utilizes industry averages as a comparison for adequate
      statistical results in the valuation. This is a standard financial model that
      considers the statistical annual volatility of the market changes in a stock
      price. (See Note H)





Intellectual
      property consists of the following:





a)
      all
      rights of the Company of Record in the telephone numbers 1(800)TALKTIME,
      1(888)TALKTIME, and 1(877)TALKTIME.COM





b)
      all
      rights to the URL's (domain names) 800TALKTIME.COM, 1800TALKTIME.COM, and
      1-800-TALKTIME.COM





c)
      all
      rights to U.S. Trademark Registration No. 2,209,316 directed to the mark
      1-800-TALKTIME and the goodwill associated therewith.





**NOTE
      F - ACCOUNTS PAYABLES AND ACCRUED EXPENSES**





As
      of
      December 31, 2004 accounts payables and accrued expenses consist of the
      following:


2004(As
                  Restatetd)Accounts
                  payable-trade
              
              $
              912,674Accrued
                  expenses
              
              
              233,711Other
              
              
              2,448Total
              
              $
              1,148,833




**NOTE
      G - BANK LOANS AND NOTE PAYABLE**





As
      of
      December 31, 2004 loans payable consist of: (i) a $187,000 balance of a
      revolving line of credit with the Bank of Tampa, with interest only payable
      at
      prime plus 1.0% monthly; and (ii) a $13,000 promissory note, payable in monthly
      installments of approximately $6,200 including interest at a rate of 7.5%.
      These
      loans are collateralized by receivables, inventory and equipment. Both balances
      were fully paid in January 2005.





**NOTE
      H - ACQUISITIONS**





On
      May
      25, 2004 (but effective for all purposes as of April 15, 2004), the Company
      completed the acquisition of two Florida-based entities, (eGlobalphone, Inc.
      and
      VoIP Solutions, Inc.). Contribution of these start-up companies was the basis
      for the original decision to issue a controlling block of shares of common
      stock
      to Mr. Ivester. eGlobalphone, Inc. and VoIP Solutions Inc. are both Florida
      corporations.





In
      June
      2004, the Company acquired DTNet Technologies, Inc. a Florida Corporation.
      The
      acquisition was financed through the issuance of 2,500,000 shares of the
      Company's common stock with a value of $4,750,000 in exchange for all issued
      and
      outstanding shares of DTNet common stock.





In
      September 2004, the Company closed the acquisition of VoIP Americas, a Florida
      corporation. The acquisition was financed through the issuance of 1,000,000
      shares of the Company's restricted common stock with the value of $1,100,000
      in
      exchange for all issues and outstanding shares of VoIP Americas.




F-12





**NOTE
      I - WARRANTS**





On
      August
      4th, 2004, the Company issued 4,400,000 warrants to two executives to acquire
      2,200,000 Company common shares at $1.00 each. The compensation expenses of
      $2,217,600 is in the accompanying Consolidated Statement of Operations.





A
      summary
      of the Company's warrants as of December 31, 2004 is presented below:


Warrants
              
              Weighted
                  average
                exercise
                  priceWarrants
                  outstanding at beginning or year
              
              
              —Granted
                  to company officers
              
              
              4,400,000
              
              $
              1.00Granted
                  to third parties
              
              
              2,400,000
              
              
              2.58Expired
              
              
              —
              
              
              —Exercised
              
              
              —
              
              
              —Warrants
                  outstanding at end of year
              
              
              6,800,000
              
              $
              1.59




**NOTE
      J - COMMITMENTS**





The
      Company is obligated under non-cancelable operating leases for its office
      facilities and two apartments used by its employees. Future minimum lease
      payments under the Company's non-cancelable operating lease as of December
      31,
      2004 are as follows:


Year
                  ending December 31:2005
              
              $
              52,7722006
              
              
              15,155Total
              
              $
              67,927





**NOTE
      K - DUE FROM RELATED PARTIES**





As
      of
      December 31, 2004 the amount due from related parties consists of the following:


2004DTNet,
                  Inc.
              
              $
              134,317DTNet
                  International
              
              
              119,974Mozart
                  Communication
              
              
              21,794Com
                  Laser
              
              
              5,850Other
              
              
              (36,533
              )Total
              
              $
              245,402




The
      above
      entities are related to a shareholder of the Company. These advances are
      unsecured, due upon demand and are non-interest bearing.





**NOTE
      L - INCOME TAXES**





The
      components of the Company's consolidated income tax provision are as follows:




F-13




Year
                    ended December 31,2004
                
                2003(As
                    Restated)Current
                    benefit
                
                $
                (1,993,121
                )
                $
                (119,000
                )Valuation
                    allowance
                
                
                1,993,121
                
                
                119,000Total
                
                $
                —
                
                $
                —Long-term
                    deferred tax assets arising fromnet
                    operating loss carryforward
                
                $
                (2,113,121
                )
                $
                (119,000
                )Valuation
                    allowance
                
                
                2,113,121
                
                
                119,000Total
                
                $
                —
                
                $
                —


The
      reconciliation of income tax provision at statutory rate to the reported income
      tax expense is as follows:


Year
                    ended December 31,2004
                
                2003Computed
                    at statutory rate
                
                
                34
                %
                
                34
                %State
                    tax net of federal benefits
                
                
                —
                
                
                —Valuation
                    allowance
                
                
                (34
                %)
                
                (34
                %)Total
                
                
                —
                
                
                —


At
        December 31, 2004 and December 31, 2003 deferred tax assets are related solely
        to the Company's net operating loss carry forward of approximately $4,172,029
        and $303,000, respectively, which have been reduced by a valuation allowance.
        If
        these carry forwards are not utilized, they will begin to expire in 2018.
 
 **NOTE
        M - DISCONTINUED OPERATIONS**





In
      December 2004, the Company decided to exit the tea business and sold all of
      its
      tea inventory. Therefore, those transactions have been presented as discontinued
      operations for the years ended December 31, 2004 and 2003.





Assets,
      liabilities, and results of the discontinued tea operations of the Millennia
      Tea
      Master division are as follows:


2004
                
                2003(As
                    Restated)Assets
                    from discontinued operations:Cash
                
                $
                4,419
                
                $
                3,499Notes
                    receivable from purchaser of tea (non-interest bearingdue
                    in four equal installments through December 31, 2005)
                
                
                408,000
                
                
                —Tea
                    inventory at net realizable value
                
                
                —
                
                
                251,534Other
                    assets
                
                
                —
                
                
                4,426Total
                
                $
                412,419
                
                $
                259,459Liabilities
                    from discontinued operations:Due
                    to related parties
                
                $
                —
                
                $
                151,167Total
                
                $
                —
                
                $
                151,167Results
                    from discontinued operations:Revenues
                
                $
                408,613
                
                $
                8,678Cost
                    of sales
                
                
                263,302
                
                
                11,213Gross
                    Profit
                
                
                145,311
                
                
                (2,535
                )Other
                    expenses
                
                
                —
                
                
                350,433Income
                    (loss) from discontinued operations
                
                $
                145,311
                
                $
                (352,968
                )




F-14




**NOTE
      N - STOCK OPTIONS**





A
      total
      of 4,000,000 shares of common stock have been reserved for issuance under the
      Company's 2004 Employee Stock Option Plan. The Company accounts for the fair
      value of its grants under its 2004 Stock Option Plan in accordance with SFAS
      No.
      123. The compensation cost that has been charged against income for the 2004
      Option Plan was approximately $1,117,000 in 2004. The activity in this 2004
      Option Plan for the year ended December 31, 2004 is as follows:




Number
              
              Exercise
                  Price Range
              
              Weighted
                  Average
                Exercise
                  PriceOptions
                  outstanding at December 31, 2003
              
              
              —Options
                  granted
              
              
              4,000,000
              
              $
              0.85 -
                  $1.56
              
              $
              1.14Options
                  returned to the plan dueto
                  employee terminations
              
              
              (350,000
              )
              $
              1.10
              
              
              1.10Options
                  outstanding at December 31, 2004
              
              
              3,650,000
              
              $
              0.85
                  - $1.56
              
              $
              1.14Options
                  exercisable at year end
              
              
              
              
              
              903,750Weighted-average
                  fair value of optionsgranted
                  during the year
              
              
              
              
              $
              0.82




**NOTE
        O - STOCKHOLDERS' EQUITY**
 
 On
        February 27, 2004, the Company issued and sold 12,500,000 shares of common
        stock
        to Steven Ivester in exchange for cash of $12,500 and his agreement to
        contribute the intellectual property rights and related assets of two start-up
        companies formed to engage in the telecommunications industry. The shares
        issued
        represented approximately 88% of the shares outstanding after the exchange,
        as a
        result of which Mr. Ivester became the controlling shareholder of the Company.
 
 On
        April
        1, 2004, the Company issued 142,902 shares to two accredited investors in
        satisfaction of accounts payable totaling $71,421.
 
 In
        May
        2004, the Company issue 1,143,250 shares to twenty-two individual accredited
        investors.
 
 In
        May
        2004, the Company issued 168,235 shares to one individual accredited investor
        in
        exchange for services.
 
 In
        May,
        2004, the Company issued 67,300 shares to fourteen individual accredited
        investors at a price of $3.00 per share.
 
 On
        May
        19, 2004, the Company issued 196,340 shares to two accredited investors in
        satisfaction of accounts payable totaling $79,745.
 
 On
        June
        25, 2004, the Company closed the acquisition of DTNet Technologies, Inc.
        ("DTNet") a Florida corporation. The acquisition was effective through the
        issuance of 2,500,000 shares of VoIP, Inc. restricted common stock in exchange
        for all issued and outstanding shares of DTNet common stock.
 
 In
        July
        2004, the Company issued 668,688 shares to six individual existing accredited
        investors. Also effective July 2004, registrant issued 41,688 shares to four
        accredited individual investors.
 
 On
        August
        4, 2004, the Company issued 4,400,000 warrants to two executives to acquire
        4,400,000 shares at $1.00 per share. As explained in Note J, subsequent events,
        in February 2005, 2,200,000 of warrants were exchanged for restricted shares.
 
 In
        August
        2004, the Company issued 50,000 shares to one individual accredited investor
        in
        satisfaction of accounts payable totaling $50,000.
 
 In
        August
        2004, the Company issued 653,319 shares to forty-six individual accredited
        investors.




F-15




In
        September 2004, the Company issued 38,461 shares to one accredited investor.
 
 On
        September 1st, 2004, the Company closed the acquisition of VoIP Americas,
        a
        Florida corporation. The acquisition took the form of an exchange of 1,000,000
        shares of VoIP restricted common stock in exchange the all issued and
        outstanding shares of VoIP Americas common stock.
 
 In
        October 2004, the Company issued 251,831 shares to twelve accredited investors.
 
 In
        October 2004, the Company issued 100,000 shares to one individual accredited
        investor.
 
 In
        November 2004, the Company issued of 2,249,500 to five accredited investors.
 
 In
        November 2004, the Company issued 318,500 shares to twelve accredited investors.
 
 In
        December 2004, the Company issued 79,659 shares to five accredited investors.
 
 In
        December 2004, the Company issued 400,000 shares to sixteen accredited
        investors.
 
 **NOTE
        P - SUBSEQUENT EVENTS**
 
 On
        January 6, 2005, the Company issued a Note Payable to its controlling
        shareholder in the amount of $1,040,000 at an interest rate of 3.75%, maturing
        in December 2005.
 
 On
        January 26, 2005, the Company filed a Form S-8 registration statement in
        connection with the Company's Stock Option Plan. The plan provides for the
        grant
        to eligible employees and directors of options for the purchase of Common
        Stock.
        The Option Plan covers, in the aggregate, a maximum of 4,000,000 shares of
        Common Stock and provides for the granting of both incentive stock options
        (as
        defined in Section 422 of the Internal Revenue Code of 1986) and nonqualified
        stock options (options which do not meet the requirements of Section 422).
        Under
        the Option Plan, the exercise price may not be less than the fair market
        value
        of the Common Stock on the date of the grant of the option.
 
 On
        February 14, 2005, an officer exercised a Stock Purchase Warrant to purchase
        2,200,000 shares of VoIP, Inc. common stock by surrendering such Warrant,
        and,
        based upon an agreement with the Company, receiving in return 750,000 shares
        of
        restricted common stock in a net exercise.
 
 On
        February 23, 2005, VoIP, Inc. and its subsidiary eGlobalPhone, Inc. executed
        an
        Asset Purchase Agreement for the purchase of certain intellectual property
        rights associated with the trade names TALKTIME and TALKTIME.COM. In exchange
        for the rights, the Registrant issued 100,000 shares of restricted common
        stock,
        warrants to purchase 400,000 shares at $1.70 per share, and agreed to pay
        $200,000 cash. Negotiations started during the last quarter of 2004, therefore
        all the cash disbursements, liabilities, shares issued, and commitments were
        recorded in that period.






F-16




**SIGNATURES**




Pursuant
      to the requirements of the Securities Act, the Company has duly caused this
      Annual Report to be signed on its behalf by the undersigned, thereunto duly
      authorized, in the City of Fort Lauderdale, State of Florida, on May 11, 2006.




**VOIP,
              INC.**By:
            /s/
              B.
              Michael AdlerB.
              Michael AdlerChief
              Executive Officer