UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                   FORM 10-KSB/A
                               (Amendment No. 1)
                                   (Mark One)

  |X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                                   ACT OF 1934

                   For the fiscal year ended December 31, 2004

                                       OR

    |X| TRANSITION 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                           (I.R.S. Employer
     incorporation or organization)                          Identification No.)

    12330 SW 53rd Street, Suite 712                                 33330
        Ft. Lauderdale, Florida                                  (Zip Code)
(Address of principal executive offices)

         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 (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 |_|

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]

The issuer's revenues for its most recent fiscal year were:  $2,619,393.

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 |_|   No |X|

<PAGE>

                                TABLE OF CONTENTS

PART II........................................................................1

   ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION...........1

   ITEM 7. FINANCIAL STATEMENTS................................................4

   ITEM 8A. CONTROLS AND PROCEDURES - EVALUATION OF DISCLOSURE CONTROLS........4

PART III.......................................................................4

   ITEM 13. EXHIBITS...........................................................5


                                       i
<PAGE>

                                Explanatory Note

VoIP,  Inc. (the  "Company") is filing this Amendment No. 1 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. This Amendment is being filed to restate
the Company's 2004 financial statements to include approximately $1.4 million in
compensation expense relating to warrants and options issued to employees during
2004. This Amendment No. 1 amends (i) Part II, Item 7 - 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. 1; and (iv) the  certifications  required under Rules 13a-15
and 15d-15(e) of the Securities  Exchange Act, as amended,  (the "Exchange Act")
so that they be dated as of a current  date as  required  by Rule  12b-15 of the
Exchange Act.

This Amendment No. 1 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.

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 Prospectus. Certain statements contained
in this Prospectus 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 forecasts  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  for  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. A further list and
description  of  these  risks,  uncertainties  and  other  matters  can be found
elsewhere in this Prospectus. 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
----------------------------------------

         We account 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 we discovered that we did not
recognize  in our 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 4,000,000 stock options issued to employees
in 2004.  The  compensation  expense that was not  recognized  relating to these
options and warrants was $ 1,384,763.  We therefore  decided it  appropriate  to
restate our 2004 financial statements to include this compensation  expense. The
following  table sets forth the impact of the  restatements  on certain  amounts
previously reported in our 2004 financial statements.

<TABLE>
<CAPTION>
Consolidated Balance Sheet                                                    As Previously    As Restated
                                                                                Reported
                                                                               ------------    ------------
<S>                                                                            <C>             <C>
       Additional paid-in capital                                              $ 12,722,565    $ 14,107,328
       Accumulated deficit                                                     $ (4,639,386)   $ (6,024,149)


Consolidated Statement of Operations for the nine months ended September 30,
     2004:

       Compensation and benefits                                               $  2,721,296    $  4,106,059
       Total operating expense                                                 $  4,909,174    $  6,293,937
       Loss from operations                                                    $ (4,160,050)   $ (5,544,813)
       Net loss                                                                $ (4,014,739)   $ (5,399,502)
       Loss per share                                                          $      (0.27)   $      (0.37)
</TABLE>

Comparision of 2004 to 2003

    Balance Sheet Data:             December 31, 2004
                                    -----------------

       Total assets                    $10,215,552
       Long-term liabilities, net      $         0
       Total liabilities               $ 2,108,114
       Shareholders' equity            $ 8,107,438


                                                  Year Ended
                                                 December 31,
                                         --------------------------
      Statements of Operations Data:         2004           2003
                                         -----------    -----------

         Revenue                         $ 2,619,393    $        --
         Operating (loss)                $(5,544,813)   $  (352,968)
         Net loss                        $(5,399,502)   $  (352,968)
         Net loss per share              $     (0.37)   $     (0.20)


                                       1
<PAGE>

         Net revenue totaled $3,028,006 ($2,619,393 from continuing operations),
for the year ended  December  31,  2004 as compared to $8,678 for the year ended
December 31, 2003.  The  $3,019,328  increase in total net revenue was primarily
attributable  entry into the new "VoIP" (Voice over IP) business segment and the
acquisition of Voipamericas, Inc. and DTNet Technologies, Inc. in 2004.

         Revenue  from  the  sale of tea in the  segment  business  that we have
discontinued  was $ 408,613,  or 13.5%,  of total net revenue for the year ended
December 31, 2004,  versus  $8,678,  or 100%, of total net revenue for the prior
year.

         As  mentioned  in  Note  A to the  financial  statements,  the  Company
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
revenues  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  the Company's  strategy to deliver Voice over Internet
Protocol 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  $5,399,502  and  $352,968.   Net  loss  per  share  was  $0.37  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 $6.3
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  employees  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.

         The  comparison of operations for the years ended December 31, 2004 and
2003 is not indicative of the Company's current business model. Whereas,  during
2003 the Company was in the  business  of  importing  and selling a line of fine
teas. The Company has, since  discontinued the tea business,  to focus solely on
VoIP and emerging technologies.


                                       2
<PAGE>

         (b)      Liquidity and Capital Resources

         As of December 31, 2004, we had cash and cash equivalents approximating
$1,141,000. We currently have 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 $5.5 million,  which included non cash items for
warrants and options issued to Company employees amounting to approxumately $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 stocks 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.

         The Company  anticipates 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.


         (c)      Payments Due by Period

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

                                              Less than 1
  Contractual Obligations          Total          Year
---------------------------------------------------------
Long-Term Debt                  $      0.00   $      0.00

Notes Payable to shareholders       560,000   $   560,000
Operating Leases                     35,572   $    35,572
Purchase Obligations                   0.00   $      0.00
                                -------------------------
Total                           $   595,572   $   595,572
                                =========================


         (d)      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.


                                       3
<PAGE>

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

         In connection  with the filing of our 2004 10-KSB on March 31, 2005 the
Company's management,  with the participation of our chief executive officer and
chief  financial  officer  at that  time,  evaluated  the  effectiveness  of our
Disclosure Controls and Procedures as of December 31, 2004.

         We hired a new chief executive  officer and new chief financial officer
in October 2005. The Company's  management,  with the  participation  of our new
chief  executive  officer  and  new  chief  financial  officer,   evaluated  the
effectiveness  of our controls and  procedures in connection  with the filing of
our quarterly report on Form 10-QSB for the quarterly period ended September 30,
2005.  In  connection  with  this  evaluation  and a  review  of  the  financial
information  reported  for  current  and  prior  periods,  we noted  the  errors
resulting in the amended  information  and restated  2004  financial  statements
reported in this  Amendment No. 1 to our 2004 10-KSB.  We have  concluded  these
errors occurred because we did not possess sufficient personnel experienced with
the  implementation  of  Statement  of Financial  Accounting  Standards  No. 123
"Accounting  for  Stock-Based  Compensation"  and with U. S. generally  accepted
accounting  principles.  Based  upon  the  control  deficiency  and  restatement
discussed above, our present chief executive officer and chief financial officer
have concluded that our disclosure controls and procedures at September 30, 2005
were not effective in gathering,  analyzing and disclosing information needed to
satisfy our Company's  disclosure  obligations under the Exchange Act. We expect
to begin to implement measures to improve our disclosure controls beginning with
the quarterly period ending December 31, 2005.


                                       4
<PAGE>

                                    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

Other Material Contracts

23.1     Consent of Tschopp, Whitcomb & Orr, P.A.

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


                                       5
<PAGE>

                                    VoIP INC.

                                TABLE OF CONTENTS

Financial Statements of VoIP, Inc.

                                                                           Page

Reports of Independent Registered Public Accounting Firms                  F-2,3

Financial Statements:

         Consolidated Balance Sheets - December 31, 2004 and 2003          F-4

         Consolidated  Statements  of Operations - Years Ended             F-5
         December 31, 2004 and 2003

         Consolidated Statements of Cash Flows - Years Ended
         December 31, 2004 and 2003                                        F-6

         Consolidated Statements of Shareholders' Equity
         Years Ended December 31, 2004 and 2003                            F-7

         Notes To Consolidated Financial Statements                        F-8

                                      F-1
<PAGE>


             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  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.

/s/ Berkovits, Lago & Company, LLP

Fort Lauderdale, Florida
March 16, 2005 except for Note B as to which the date is November 23, 2005


                                      F-2

<PAGE>

                          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

<PAGE>
<TABLE>
<CAPTION>

                                    VoIP Inc.
                           Consolidated Balance Sheets
                           December 31, 2004 and 2003


                                                          Dec. 31, 2004    Dec. 31, 2003
                                                          -------------    -------------
                                                          (As Restated)
<S>                                                       <C>              <C>
      ASSETS

Current Assets:
      Cash and cash equivalents                           $   1,141,205    $        --
      Accounts receivable, net of allowance of $136,795         818,071             --
      Due from related parties                                  245,402             --
      Inventory                                                 187,451             --
      Assets from discontinued operations                       412,419          259,459
      Other current assets                                       43,702             --
                                                          -------------    -------------
Total Current Assets                                          2,848,250          259,459
                                                          -------------    -------------

Property and equipment, net                                     419,868             --
Intangibles                                                   6,923,854             --
Other assets                                                     23,580             --
                                                          -------------    -------------

TOTAL ASSETS                                              $  10,215,552    $     259,459
                                                          =============    =============


      LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
      Accounts payable and accrued expenses               $   1,224,974    $        --
      Bank loans and note payable                               760,000             --
      Liabilities from discontinued operations                     --            151,167
      Other current liabilities                                 123,140             --
                                                          -------------    -------------
Total Liabilities                                             2,108,114          151,167
                                                          -------------    -------------


Shareholders' equity:
Common stock - $0.001 par value
      100,000,000 shares authorized
      24,258,982 and 1,730,939 issued
      and outstanding respectively                               24,259            1,731
Additional paid-in capital                                   14,107,328          731,208
Accumulated deficit                                          (6,024,149)        (624,647)
                                                          -------------    -------------
Total shareholders' equity                                    8,107,438          108,292
                                                          -------------    -------------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                $  10,215,552    $     259,459
                                                          =============    =============
</TABLE>


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

                                      F-4
<PAGE>
<TABLE>
<CAPTION>

                                    VoIP Inc.
                      Consolidated Statements of Operations
                 For the Years Ended December 31, 2004 and 2003

                                                                   Year ended           Year ended
                                                                December 31, 2004    December 31, 2003
                                                                -----------------    -----------------
                                                                  (As Restated)
<S>                                                             <C>                  <C>
Revenues                                                        $       2,619,393    $            --

Cost of Sales                                                           1,870,269                 --
                                                                -----------------    -----------------

Gross Profit                                                              749,124                 --

Operating expenses
      Compensation and related expenses                                 4,106,059                 --
      General and administrative expenses                               2,187,878                 --
                                                                -----------------    -----------------

Loss from continuing operations before income
      taxes and discontinued operations                                (5,544,813)                --

Provision for income taxes                                                   --                   --
                                                                -----------------    -----------------

Net loss before discontinued operations                                (5,544,813)                --

Income (Loss) from discontinued operations,
      net of income taxes                                                 145,311             (352,968)
                                                                -----------------    -----------------

Net Loss                                                        $      (5,399,502)   $        (352,968)
                                                                =================    =================


Basic and diluted loss per share:

Loss before discontinued operations                             $           (0.38)   $            --

Income (loss) from discontinued operations,
      net of income taxes                                       $            0.01    $           (0.20)
                                                                -----------------    -----------------

Total                                                           $           (0.37)   $           (0.20)
                                                                =================    =================

Weighted average number of shares outstanding                          14,597,312            1,730,939
                                                                =================    =================
</TABLE>


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

                                      F-5
<PAGE>
<TABLE>
<CAPTION>
                                    VoIP Inc.
                      Consolidated Statements of Cash Flows
                     Years ended December 31, 2004 and 2003

                                                               Year ended      Year ended
                                                              December 31,    December 31,
                                                                  2004            2003
                                                              ------------    ------------
                                                             (As Restated)
<S>                                                           <C>             <C>
Cash flows from operating activities:
Continuing operations:
Net loss                                                      $ (5,544,813)   $       --
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            --
    Warrants issued to employees and stock option
     compensation                                                3,320,763            --
    Shares issued for intellectual property                        105,000            --
Changes in operating assets and liabilities
net of assets and liabilities acquired:
    Accounts receivable                                           (555,007)           --
    Due from related parties                                      (245,402)           --
    Inventory                                                      144,913            --
    Other current assets                                             8,531            --
    Accounts payable                                              (296,305)           --
    Other current liabilities                                     (315,587)           --
                                                              ------------    ------------
Net cash used in continuing operating activities                (2,664,114)           --
                                                              ------------    ------------

Discontinued operations:
    Income (loss) from discontinued operations                     145,311        (352,968)
    Changes in assets, liabilities, and net results               (408,000)        274,262
                                                              ------------    ------------
    Net cash used in discontinued operating activities            (262,689)        (78,706)

                                                              ------------    ------------
    Net used in operating activities                            (2,926,803)        (78,706)
                                                              ------------    ------------

Cash flows from investing activities -  continuing operations:
    Cash from acquisitions                                         104,872            --
    Purchase of property and equipment                            (157,881)           --
    Cash for intellectual property                                 (50,000)           --
    Purchase of other assets                                       (21,100)           --
                                                              ------------    ------------
Net cash used in continuing investing activities                  (124,109)           --
                                                              ------------    ------------
Discontinued operations:
    Cash from affiliates                                              --            82,196
                                                              ------------    ------------
Net cash provided by discontinued investing activities                --            82,196
                                                              ------------    ------------
Net cash provided by (used in) investing activities               (124,109)         82,196
                                                              ------------    ------------

Cash 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 investing activities                        4,188,618            --

Net increase in cash                                             1,137,706           3,490

Cash at beginning of year                                            3,499               9
                                                              ------------    ------------

Cash at end of year                                           $  1,141,205    $      3,499
                                                              ============    ============

Non-cash investing and financing activities:
    Common stock issued for services                          $    494,166    $       --
                                                              ============    ============
    Warrants issued to employees                              $  3,320,763    $       --
                                                              ============    ============
    Shares issued for intellectual property                   $    105,000    $       --
                                                              ============    ============
</TABLE>

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

                                      F-6
<PAGE>
<TABLE>
<CAPTION>

                                   VoIP, Inc.
           Consolidated Statements of Changes in Shareholders' Equity
                     Years Ended December 31, 2004 and 2003
                             (As Restated for 2004)


                                                                                      Additional
                                                      Common Stock   Common Stock      Paid-in     Accumulated
                                                         Shares         Amount         Capital       Deficit           Total
                                                      ------------   ------------   ------------   ------------    ------------
<S>                                                   <C>            <C>            <C>            <C>             <C>
Balance as of December 31, 2002                          1,730,939   $      1,731   $    731,208   $   (271,679)   $    461,260

Loss for the for the year                                     --             --             --         (352,968)       (352,968)
                                                      ------------   ------------   ------------   ------------    ------------
Balance as of December 31, 2003                          1,730,939          1,731        731,208       (624,647)        108,292
                                                      ------------   ------------   ------------   ------------    ------------

Common stock issued                                     12,500,000         12,500           --             --            12,500

Common Stock issued for services received                  568,235            568        342,432           --           343,000

Common stock issued to investors for cash received       5,520,566          5,521      3,610,598           --         3,616,119

Common stock issued for services                           339,242            339        150,827           --           151,166

Common Stock issued for acquisition of DTNet Tech        2,500,000          2,500      4,747,500           --         4,750,000

Common Stock issued for acquisition of VoipAmericas      1,000,000          1,000      1,099,000           --         1,100,000

Warrants issued to two company officers and stock
  option compensation                                           --             --      3,320,763           --         3,320,763

Stock issued for intellectual property                     100,000            100        105,000           --           105,100

Loss for the year                                               --             --            --     (5,399,502)      (5,399,502)
                                                      ------------   ------------   ------------   ------------    ------------


 Balance December 31, 2004                              24,258,982   $     24,259   $ 14,107,328   $ (6,024,149)   $  8,107,438
                                                      ============   ============   ============   ============    ============
</TABLE>


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

                                       F-7

<PAGE>

Note A - Organization and Description of Business

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. The following  table sets forth
the impact of the  restatement  on certain  amounts  previously  reported in the
consolidated 2004 financial statements.

<TABLE>
<CAPTION>
Consolidated Balance Sheet at December 31, 2004:                              As Previously    As Restated
                                                                                Reported
                                                                               ------------    ------------
<S>                                                                            <C>             <C>
       Additional paid-in capital                                              $ 12,722,565    $ 14,107,328
       Accumulated deficit                                                     $ (4,639,386)   $ (6,024,149)


Consolidated Statement of Operations for the year ended December 31, 2004:

       Compensation and related expense                                        $  2,721,296    $  4,106,059
       Total operating expense                                                 $  4,909,174    $  6,293,937
       Loss from operations                                                    $ (4,160,050)   $ (5,544,813)
       Net loss                                                                $ (4,014,739)   $ (5,399,502)
       Loss per share                                                          $      (0.27)   $      (0.37)
</TABLE>


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
VoxConsulting  d/b/a/VoIP Americas, Inc. ("VoIP Americas") from their respective
dates of acquisition.  All significant  inter-company  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.


                                      F-8

<PAGE>

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.

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  dilutive  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 dilutive 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


                                      F-9

<PAGE>

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
-------------------------------

VoIP, Inc. 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.

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
December 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.

                                      F-10

<PAGE>

Note D - Property and Equipment, net

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

Office Equipment                   $ 519,810
Furniture & Fixtures                  56,748
Vehicles                               4,769
Leasehold Improvements                 4,562
                                   ---------
Total                                585,889
Less accumulated depreciation       (166,021)
                                   ---------

Total                              $ 419,868
                                   =========


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

Note E - Intangibles

As of December 31, 2004 intangibles consist of the following:

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

Total                                              $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.

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.


                                      F-11

<PAGE>

Note F - Accounts Payables and Accrued Expenses

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


Account Payables Trade             $  988,815
Accrued Expenses                      233,711
Other                                   2,448
                                   ----------

Total                              $1,224,974
                                   ==========

Note G - Bank Loans and Note Payable

As of December 31, 2004 bank loans and note payable consists of the following:

a) Bank Loan:

   Revolving Line of Credit        $  187,000
   Promissory Note                     13,000
                                   ----------
                                      200,000

b) Note Payable                       560,000
                                   ----------

      Total                        $  760,000
                                   ==========

     a)   The  revolving  line of credit with the Bank of Tampa is interest only
          payable at prime plus 1.0% monthly.  The promissory note is payable in
          monthly  installments of approximately  $6,200 including interest at a
          rate of 7.5%. The loans are  collateralized by receivables,  inventory
          and equipment. Both balances were fully paid in January 2005.

     b)   In December 2004 the Company issued a note payable to a shareholder in
          the amount of $560,000  at an  interest  rate of 3.75% with a maturity
          date of December  2005. As mentioned in Note K on January 6, 2005, the
          Company  issued  another note payable  amounting to  $1,040,000 to the
          same  shareholder  under the same terms and conditions as the previous
          one.


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.


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  expense
of $2,217,600, is in the accompanying Consolidated Statement of Operations.


                                      F-12

<PAGE>

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


                                                               2004
                                                  ------------------------------

                                                                     Weighted
                                                                      average
                                                     Warrants     exercise price
                                                  -------------   --------------

Warrants outstanding at beginning of year                  --
Granted to two Company officers                       4,400,000   $         1.00
Granted to third parties                              2,400,000   $         2.58
Expired                                                    --
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 Dec 31
                    ------------------

                    2005     $  52,772
                    2006        15,155
                             ---------
                             $  67,927
                             =========


Note K - Due From Related Parties

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

        DTNet, Inc. (*)           $  134,317
        DTNet International (*)      119,974
        Mozart Communication          21,794
        Com Laser                      5,850
        Due to related parties       (36,533)
                                  ----------
                                  $  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.


                                      F-13

<PAGE>

Note L - Income Taxes

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


                                                       Year ended December 31,
                                                         2004           2003
                                                     -----------    -----------
                                                    (As Restated)
Current Benefits                                     $(1,836,000)      (119,000)
Valuation allowance                                    1,836,000        119,000
                                                     -----------    -----------
Total                                                       --             --
                                                     ===========    ===========

                                                         2004           2003
                                                     -----------    -----------
Long-term deferred tax assets arising from
  net operatiing loss carry forward                  $(1,956,000)   $  (119,000)

Valuation allowance                                    1,956,000        119,000
                                                     -----------    -----------
Total                                                       --             --
                                                     ===========    ===========


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


                                    Year ended December 31
                                       2004         2003
                                    ---------    ---------
Computed 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
$4,486,000  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 - 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  issued  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 P, subsequent
events,  in February  2005,  2,200,000 of warrants were exchanged for restricted
shares.

                                      F-14

<PAGE>

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.

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
investors.

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 N - Discontinued Operations

In December 2004, the Company  decided to exit the tea business and sold all 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:


Assets from discontinued operation:
                                                             2004        2003
                                                          ---------   ---------

Cash                                                      $   4,419   $   3,499
Notes receivable from purchaser of tea
  (non-interest bearing due in four equal                   408,000        --
  installments through December 31, 2005)

Tea inventory at net realizable value                          --       251,534

Other assets                                                   --         4,426
                                                          ---------   ---------

Total                                                     $ 412,419   $ 259,459
                                                          =========   =========

Liabilities from discontinued operations:

Due to related parties                                    $    --     $ 151,167
                                                          ---------   ---------

Total                                                     $    --     $ 151,167
                                                          =========   =========

                                      F-15

<PAGE>

Results from discontinued operations:

Revenues                                                  $ 408,613   $   8,678

Cost of sales                                               263,302      11,213
                                                          ---------   ---------

Gross profit                                                145,311      (2,535)

Other expenses                                                 --       350,433
                                                          ---------   ---------

Income (loss) from discontinued operations:               $ 145,311   $(352,968)
                                                          =========   =========

NOTE O - Stock Options

A total of 4,000,000 shares of common stock has 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:

<TABLE>
<CAPTION>
                                                                               Exercise            Weighted Average
                                                                Number         Price Range         Exercise Price
<S>                                                        <C>               <C>                   <C>
Options outstanding at December 31, 2003                              --

Options granted                                                4,000,000        $0.85 - $1.56            $1.14
Options returned to the plan
   due to terminations                                          (350,000)            $1.10               $1.10
                                                          ---------------    -------------------   -----------------
Options outstanding at December 31, 2004                       3,650,000        $0.85 - $1.56            $1.14
                                                          ===============    ===================   =================

Options exercisable at year-end                                                    903,750
                                                                             =================

Weighted-average fair value of options
   granted during the year                                                        $0.82
                                                                             =================
</TABLE>

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 2004 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

<PAGE>

                                   SIGNATURES


         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
this  Annual  Report  has been  signed  below by the  following  persons  in the
capacities and on the dates indicated.

Name                             Office                           Date

 /s/ B. Michael Adler           Chairman, Chief Executive         11/23/05
------------------------        Officer and Director
B. Michael Adler                (Principal Executive Officer)

 /s/ David Sasnett              Vice President and Chief          11/23/05
------------------------        Financial Officer
David Sasnett                   (Principal Financial and
                                Accounting Officer)