UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2007
Commission file number 000-49628
| TELEPLUS WORLD, CORP. | |
(Exact Name of Registrant as Specified In Its Charter) |
NEVADA | | 90-0045023 |
(State or Other Jurisdiction of Incorporation or Organization) | | (I.R.S. Employer Identification No.) |
6101 Blue Lagoon Drive, Suite 450, Miami, Florida, 33126 |
(Address of Principal Executive Offices)(Zip Code) |
| (786) 594-3939 | |
(Registrant's Telephone Number, Including Area Code) |
Teleplus Enterprises, Inc.
7575 Transcanadienne, Suite 305, St-Laurent, Quebec, Canada H4T 1V6
(Former Name and Address)
Check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2).
State the number of shares outstanding of each of the registrant's classes of common stock, as of November 01 , 2007:
Class | | Number of Shares | |
Common Stock, $0.001 par value | | | 155,455,090 | |
TABLE OF CONTENTS
| | | |
PART I. FINANCIAL INFORMATION | | |
| | | |
Item 1. | Unaudited Condensed Consolidated Financial Statements | | |
| | | |
| Condensed Consolidated Balance Sheets as of September 30, 2007 (Unaudited) | | 5 |
| | | |
| Condensed Consolidated Statements of Operations and Accumulated Other Comprehensive Income (Loss) for the Nine and Three Months Ended September 30, 2007 and 2006 (Unaudited) | | 6 |
| | | |
| Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2007 and 2006 (Unaudited) | | 7 |
| | | |
| Notes to Condensed Consolidated Financial Statements | | 9 |
| | | |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | | 40 |
| | | |
Item 3. | Controls and Procedures | | 53 |
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PART II. OTHER INFORMATION | | |
| | | |
Item 1. | Legal Proceedings | | 54 |
| | | |
Item 2. | Changes In Securities | | 56 |
| | | |
Item 4. | Submission of Matters To A Vote Of Security Holders | | 57 |
| | | |
Item 5. | Other Information | | 57 |
| | | |
Item 6. | Exhibits | | 57 |
| | | |
SIGNATURES | | | 59 |
This quarterly report on Form 10-QSB contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements include, among other things, business strategy and expectations concerning industry conditions, market position, future operations, margins, profitability, liquidity and capital resources. Forward-looking statements generally can be identified by the use of terminology such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate” or “believe” or similar expressions or the negatives thereof. These expectations are based on management’s assumptions and current beliefs based on currently available information. Although the Company believes that the expectations reflected in such statements are reasonable, it can give no assurance that such expectations will be correct. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this quarterly report on Form 10-QSB. The Company’s operations are subject to a number of uncertainties, risks and other influences, many of which are outside its control, and any one of which, or a combination of which, could cause its actual results of operations to differ materially from the forward-looking statements. Important factors that could cause actual results to differ materially from its expectations are disclosed in Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this quarterly report on Form 10-QSB.
TELEPLUS WORLD, CORP.
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE AND THREE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets as of September 30, 2007 (Unaudited) | | 5 |
| | |
Consolidated Statements of Operations and Accumulated Other Comprehensive Income (Loss) for the Nine and Three Months Ended September 30, 2007 (Unaudited) and 2006 (Unaudited) | | 6 |
| | |
Consolidated Statements of Cash Flows for the Nine and Three Months Ended September 30, 2007 (Unaudited) and 2006 (Unaudited) | | 7 |
| | |
Notes to Consolidated Financial Statements | | 9 |
TELEPLUS WORLD, CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2007 (UNAUDITED)
| | | |
| | | |
ASSETS | | | |
| | IN US$ | |
| | | |
| | SEPTEMBER 30, | |
| | 2007 | |
| | (UNAUDITED) | |
Current Assets: | | | |
Cash and cash equivalents | | $ | 778,464 | |
Accounts receivable, net - trade | | | 1,668,952 | |
Other accounts receivable | | | 424,498 | |
Inventory | | | 90,914 | |
Prepaid expenses and other current assets | | | 267,246 | |
Assets held from discontinued operations | | | 1,884 | |
| | | | |
Total Current Assets | | | 3,231,958 | |
| | | | |
Fixed assets, net of depreciation | | | 732,214 | |
| | | | |
Other Assets: | | | | |
Intangible assets, net | | | 7,094,532 | |
Goodwill | | | 9,532,944 | |
Deferred financing fees, net of amortization | | | 832,036 | |
Deferred connection charges, net of amortization | | | 261,659 | |
Deferred income taxes | | | 41,696 | |
| | | | |
Total Other Assets | | | 17,762,867 | |
| | | | |
TOTAL ASSETS | | $ | 21,727,039 | |
| | | | |
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) | | | | |
| | | | |
LIABILITIES | | | | |
Current Liabilities: | | | | |
Accounts payable and accrued expenses | | $ | 7,702,164 | |
Current portion of accrued acquisition obligations | | | 747,070 | |
Current portion of convertible debentures | | | 1,200,000 | |
Unearned revenue | | | 705,302 | |
Derivative liability | | | 8,027,730 | |
| | | | |
Total Current Liabilities | | | 18,382,266 | |
| | | | |
Long-term Liabilities: | | | | |
Accrued acquisition obligations, net of current portion | | | 1,820,746 | |
Convertible debentures, net of discount | | | 4,843,530 | |
| | | | |
Total Long-term Liabilities | | | 6,664,276 | |
| | | | |
Total Liabilities | | | 25,046,542 | |
| | | | |
SHAREHOLDERS' EQUITY (DEFICIT) | | | | |
Class A Preferred stock, $0.001 Par Value; 10,000,000 shares | | | | |
authorized | | | - | |
Common stock, $0.001 Par Value; 600,000,000 shares authorized | | | | |
and 150,913,027 shares issued and outstanding | | | 150,913 | |
Additional paid-in capital | | | 9,279,381 | |
Accumulated deficit | | | (14,127,303 | ) |
Accumulated other comprehensive income | | | 1,377,506 | |
| | | | |
Total Shareholders' Equity (Deficit) | | | (3,319,503 | ) |
| | | | |
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT | | $ | 21,727,039 | |
The accompanying notes are an integral part of the condensed consolidated financial statements.
TELEPLUS WORLD, CORP. |
CONSOLIDATED STATEMENTS OF OPERATIONS AND |
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) |
FOR THE NINE AND THREE MONTHS ENDED SEPTMBER 30, 2007 AND 2006 |
(UNAUDITED) |
| | IN US$ | |
| | NINE MONTHS ENDED | | THREE MONTHS ENDED | |
| | SEPTEMBER 30 | | SEPTEMBER 30 | |
| | 2007 | | 2006 | | 2007 | | 2006 | |
CONTINUING OPERATIONS: | | | | | | | | | |
OPERATING REVENUES | | | | | | | | | |
Revenues | | $ | 16,397,711 | | $ | 19,073,134 | | $ | 5,695,541 | | $ | 5,825,914 | |
| | | | | | | | | | | | | |
OPERATING COSTS AND EXPENSES | | | | | | | | | | | | | |
Costs of services (exclusive of depreciation and amortization) | | | 11,546,026 | | | 12,102,829 | | | 4,206,554 | | | 4,135,965 | |
Payroll, professional fees and related expenses | | | 3,449,752 | | | 3,093,131 | | | 1,262,375 | | | 1,053,730 | |
Advertising and marketing expenses | | | 243,009 | | | 669,977 | | | 64,486 | | | 154,695 | |
Office rent and expenses | | | 210,782 | | | 224,605 | | | 65,176 | | | 80,493 | |
Other general and administrative expenses | | | 1,463,178 | | | 2,156,823 | | | 214,690 | | | 719,836 | |
Depreciation and amortization | | | 755,827 | | | 739,592 | | | 264,415 | | | 238,828 | |
Loss on goodwill impairment | | | 843,571 | | | - | | | 843,571 | | | - | |
| | | | | | | | | | | | | |
Total Operating Expenses | | | 18,512,145 | | | 18,986,957 | | | 6,921,267 | | | 6,383,547 | |
| | | | | | | | | | | | | |
OPERATING INCOME (LOSS) | | | (2,114,434 | ) | | 86,177 | | | (1,225,726 | ) | | (557,633 | ) |
| | | | | | | | | | | | | |
OTHER INCOME (EXPENSE) | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Amortization of deferred finance fees | | | (312,582 | ) | | (238,959 | ) | | (119,248 | ) | | (96,135 | ) |
Warrant expense | | | - | | | (182,418 | ) | | - | | | - | |
Amortization of debt discount | | | (2,683,788 | ) | | (1,932,545 | ) | | (1,038,686 | ) | | (818,344 | ) |
Interest expense | | | (2,621,320 | ) | | (1,515,463 | ) | | (1,487,851 | ) | | (794,544 | ) |
Gain (loss) on debt extinguishment | | | (65,690 | ) | | - | | | (65,690 | ) | | - | |
Gain (loss) on derivative liability | | | 2,958,254 | | | 1,670,171 | | | 1,389,244 | | | 714,149 | |
| | | | | | | | | | | | | |
Total Other Income (Expense) | | | (2,725,126 | ) | | (2,199,214 | ) | | (1,322,231 | ) | | (994,874 | ) |
| | | | | | | | | | | | | |
NET INCOME (LOSS) BEFORE PROVISION | | | | | | | | | | | | | |
FOR INCOME TAXES | | | (4,839,560 | ) | | (2,113,037 | ) | | (2,547,957 | ) | | (1,552,507 | ) |
Provision for Income Taxes | | | - | | | - | | | - | | | - | |
| | | | | | | | | | | | | |
NET INCOME (LOSS) FROM CONTINUING OPERATIONS | | | (4,839,560 | ) | | (2,113,037 | ) | | (2,547,957 | ) | | (1,552,507 | ) |
Net loss from discontinued operations | | | (9,697 | ) | | (248,608 | ) | | (9,697 | ) | | - | |
| | | | | | | | | | | | | |
NET INCOME (LOSS) | | $ | (4,849,257 | ) | $ | (2,361,645 | ) | $ | (2,557,654 | ) | $ | (1,552,507 | ) |
| | | | | | | | | | | | | |
NET INCOME (LOSS) PER BASIC SHARES | | | | | | | | | | | | | |
From continuing operations | | $ | (0.04 | ) | $ | (0.02 | ) | $ | (0.02 | ) | $ | (0.02 | ) |
From discontinued operations | | $ | - | | $ | - | | $ | - | | $ | - | |
| | $ | (0.04 | ) | $ | (0.02 | ) | $ | (0.02 | ) | $ | (0.02 | ) |
| | | | | | | | | | | | | |
NET INCOME (LOSS) PER DILUTED SHARES | | | | | | | | | | | | | |
From continuing operations | | $ | - | | $ | (0.02 | ) | $ | - | | $ | (0.02 | ) |
From discontinued operations | | $ | - | | $ | - | | $ | - | | $ | - | |
| | $ | - | | $ | (0.02 | ) | $ | - | | $ | (0.02 | ) |
| | | | | | | | | | | | | |
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC | | | 136,021,413 | | | 92,330,744 | | | 146,896,908 | | | 103,058,501 | |
| | | | | | | | | | | | | |
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - DILUTED | | | 968,254,162 | | | 250,587,173 | | | 968,254,162 | | | 250,587,173 | |
| | | | | | | | | | | | | |
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | | | | | | | | | | | | | |
Net income (loss) | | $ | (4,849,257 | ) | $ | (2,361,645 | ) | $ | (2,557,654 | ) | $ | (1,552,507 | ) |
Other comprehensive income (loss) | | | | | | | | | | | | | |
Currency translation adjustments | | | 1,301,528 | | | 518,810 | | | 543,679 | | | (88,749 | ) |
Accumulated other comprehensive income (loss) | | $ | (3,547,729 | ) | $ | (1,842,835 | ) | $ | (2,013,975 | ) | $ | (1,641,256 | ) |
The accompanying notes are an integral part of the condensed consolidated financial statements.
TELEPLUS WORLD, INC. |
CONSOLIDATED STATEMENTS OF CASH FLOWS |
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006 |
(UNAUDITED) |
| | IN US$ | | | |
| | 2007 | | 2006 | |
| | | | (Restated) | |
CASH FLOWS FROM OPERATING ACTIVITIES | | | | | |
Net (loss) from continuing operations | | $ | (4,839,560 | ) | $ | (2,113,037 | ) |
| | | | | | | |
Adjustments to reconcile net (loss) to net cash | | | | | | | |
provided by (used in) operating activities: | | | | | | | |
Depreciation and amortization | | | 186,045 | | | 181,663 | |
Amortization of intangible assets | | | 569,783 | | | 557,929 | |
Goodwill impairment | | | 843,571 | | | | |
Accretion of interest expenes | | | 1,560,942 | | | 717,741 | |
Loss on extinguishment on debt | | | 65,691 | | | - | |
Issuance of common shares for compensation | | | 93,286 | | | 45,125 | |
Employee compensation for stock options | | | 27,597 | | | 5,493 | |
Amortization of deferred finance fees | | | 312,582 | | | 238,959 | |
Warrants issued to raise capital | | | - | | | 182,418 | |
Amortization of convertible debt discount | | | 2,683,788 | | | 1,932,545 | |
(Gain) on derivative liability | | | (2,958,254 | ) | | (1,670,171 | ) |
| | | | | | | |
| | | | | | | |
Changes in assets and liabilities | | | | | | | |
(Increase) decrease in accounts receivable - trade | | | (430,598 | ) | | 62,997 | |
(Increase) in other accounts receivable | | | (201,726 | ) | | (185,346 | ) |
Decrease in income tax receivable | | | - | | | 31,913 | |
(Increase) decrease in inventory | | | 30,341 | | | (160,120 | ) |
(Increase) decrease in prepaid expenses and other current assets | | | 168,225 | | | (371,434 | ) |
Increase in accounts payable and accrued expenses | | | 2,394,829 | | | 2,590,084 | |
Decrease in unearned revenue | | | (91,960 | ) | | (337,719 | ) |
Total adjustments | | | 5,254,142 | | | 3,822,077 | |
| | | | | | | |
Net cash provided by operating activities | | | 414,582 | | | 1,709,040 | |
| | | | | | | |
CASH FLOWS FROM INVESTING ACTIVITIES | | | | | | | |
Acquisitions of business | | | (2,634,182 | ) | | (4,836,259 | ) |
Acquisitions of fixed assets | | | (19,526 | ) | | (129,992 | ) |
(Increase) in deferred connection charges | | | (104,192 | ) | | (116,825 | ) |
| | | | | | | |
Net cash (used in) investing activities | | | (2,757,900 | ) | | (5,083,076 | ) |
| | | | | | | |
CASH FLOWS FROM FINANCING ACTIVITES | | | | | | | |
Payments of finance fees | | | (325,000 | ) | | (32,795 | ) |
Proceeds from Convertibel Debenture (Net) | | | | | | 2,545,620 | |
Proceeds from New Convertibel Debenture | | | 3,000,000 | | | | |
Repayment of debt | | | (200,000 | ) | | | |
| | | | | | | |
Net cash provided (use in) by financing activities | | | 2,475,000 | | | 2,512,825 | |
| | | | | | | |
Effect of foreign currency | | | (408,292 | ) | | 19,485 | |
| | | | | | | |
NET (DECREASE) INCREASE IN CASH AND CASH | | | | | | | |
EQUIVALENTS - CONTINUING OPERATIONS | | | (276,610 | ) | | (841,726 | ) |
| | | | | | | |
CASH USED IN DISCONTINUED OPERATIONS | | | (80,622 | ) | | (179,442 | ) |
| | | | | | | |
CASH AND CASH EQUIVALENTS - | | | | | | | |
BEGINNING OF PERIOD | | | 1,145,393 | | | 2,604,915 | |
| | | | | | | |
CASH AND CASH EQUIVALENTS - END OF PERIOD | | $ | 788,161 | | $ | 1,583,747 | |
| | | | | | | |
CASH PAID DURING THE PERIOD FOR: | | | | | | | |
Interest expense | | $ | 91,514 | | $ | 9,561 | |
The accompanying notes are an integral part of the condensed consolidated financial statements.
TELEPLUS WORLD, INC. |
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) |
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006 |
(UNAUDITED) |
| | IN US$ | |
| | 2007 | | 2006 | |
| | | | (Restated) | |
SUPPLEMENTAL NONCASH INFORMATION: | | | | | |
| | | | | |
Conversion of debentures into 22,828,756 shares of common stock in 2007, 6,855,271 in 2006 | | $ | 1,040,000 | | $ | 1,050,000 | |
Issued 175,000 shares of common stock to directors of Company for services rendered.2007, 180,000 in 2006 | | $ | 10,500 | | $ | 34,200 | |
Issued 656,702 shares of common stock to a non related third party for services rendered.in 2007, 57,500 in 2006 | | $ | 45,092 | | $ | 10,925 | |
Issued 430,000 shares of common stock in connection with company acquisitions in 2006 | | $ | - | | $ | 355,400 | |
Issued 471,150 shares of common stock for employee compensation in 2007 | | $ | 37,692 | | $ | - | |
Issued 20,000,000 shares of common stock in exchange for 2,000,000 Class A preferred shares | | $ | - | | $ | 20,000 | |
Issued 4,000,000 shares of common stock to Cornell Capital Patners in connection with a $3,000,0000 convertible debt issued July 2007, 400,000 to Cornell Capital Patners in connection with $3,000,0000 convertible debt issued July 2006 | | $ | 160,000 | | $ | 64,000 | |
The accompanying notes are an integral part of the condensed consolidated financial statements.
TELEPLUS WORLD, CORP.
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE AND THREE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets as of September 30, 2007 (Unaudited)
Consolidated Statements of Operations and Accumulated Other Comprehensive Income (Loss) for the Nine and Three Months Ended September 30, 2007 (Unaudited) and 2006 (Unaudited)
Consolidated Statements of Cash Flows for the Nine and Three Months Ended
September 30, 2007 (Unaudited) and 2006 (Unaudited)
Notes to Consolidated Financial Statements
TELEPLUS WORLD, CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2007 AND 2006 (UNAUDITED)
NOTE 1- ORGANIZATION AND BASIS OF PRESENTATION
Teleplus Enterprises, Inc. (the “Company”) is a provider of wireless and telecom products and services across North America. The Company’s wholly-owned subsidiaries include TelePlus Connect, Corp., a competitive local exchange carrier (“CLEC”), which provides landline, long distance and Internet services in Canada under the “Telizon”, “Freedom” and “Avenue” brands; and TelePlus Wireless, Corp., which operates a virtual wireless network selling cellular network access to consumers and distributors in the United States.
The Company is a provider of wireless and telecommunications services in Canada and the United States of America. The Company’s products include prepaid and postpaid wireless, landline, long distance and Internet services. The Company distributes their products through their websites, third party websites, select distributors in Canada and the United States of America, and through a variety of direct marketing initiatives.
TELEPLUS WORLD CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2007 AND 2006 (UNAUDITED)
NOTE 1- ORGANIZATION AND BASIS OF PRESENTATION (CONTINUED)
As discussed in Note 4, the Company acquired Keda Consulting Corp., a North American telecommunications industry management consulting service company on April 1, 2005; 1523813 Ontario Limited (Freedom Phone Lines), a Bell Canada reseller of landline and long distance services on April 15, 2005; Avenue Reconnect, Inc. a reseller of landline and long distance services and Internet service provider on June 1, 2005; Telizon, Inc. and 1500536 Ontario, Inc. (One Bill, Inc.), a reseller of landline and long distance service and Internet service provider on July 15, 2005; certain assets of Star Number, Inc., a wholly-owned subsidiary of InPhonic, Inc. related to its Liberty Wireless business on December 29, 2005, effective December 31, 2005; and Maximo Impact, Inc., (“Maximo”) a Cleveland, Ohio based company specializing in marketing and distribution as a Mobile Virtual Network Operator (“MVNO”) in the United States of America. As part of this transaction, Maximo launched its own wireless brand called MX Mobile which caters to mass merchandisers, general retailers and c-channel retailers calling on convenience stores and gas stations.
On January 13, 2006, Retail, filed in Canada a Notice of Intention to Make a Proposal Under the Bankruptcy and Insolvency Act (Canada) (the “Act”). This was done to divest the Company of its retail division. As a result, Retail was deemed to have made an assignment of its assets to its creditors under the Act and discontinued its operations as of February 12, 2006. The retail operations will no longer be a segment of the Company’s business for the year ending December 31, 2006 (see Note 11).
On October 24, 2006, the Company changed its corporate name to Teleplus World, Corp.
TELEPLUS WORLD, CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2007 AND 2006 (UNAUDITED)
NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial statements and with form 10-QSB and Item 310 of Regulation S-B of the Securities and Exchange Commission. Accordingly, they do not contain all the information and footnotes required by accounting principles generally accepted in the United States of America for annual financial statements. The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary. All significant intercompany balances and transactions have been eliminated in consolidation. In the opinion of the Company’s management, the accompanying consolidated financial statements contain all the adjustments necessary (consisting of normal recurring accruals) to make the financial position of the Company as of September 30, 2007 and the results of operation and cash flows for the three and nine months ended September 30 2007 and 2006 not misleading. The consolidated financial statements should be read in conjunction with the audited financial statements for the year ended December 31, 2006 contained in Form 10KSB filed on April 2, 2007.
Operating results for the three and nine months ended September 30, 2007 are not necessarily indicative of results that would be expected for the year ending December 31, 2007.
The Company has filed an amendment to the quarterly report on Form 10-QSB for its nine and three months period ended September 30, 2006 to reflect the management changed its method in accounting for the conversion of debt to equity calculation.
Principles of Consolidation
The condensed consolidated financial statements include the accounts of the Company and all of its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, the Company evaluates its estimates, including, but not limited to, those related to bad debts, income taxes and contingencies. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates.
TELEPLUS WORLD, CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2007 AND 2006 (UNAUDITED)
NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Discontinued Operations
The Company has followed Statement of Financial Accounting Standard No. 144 (“SFAS 144”), “Accounting for the Impairment or Disposal of Long-Lived Assets”. Accordingly, the Company recognized as discontinued operations the results from the retail division that has been abandoned effective in first quarter of 2006. The Company has also written down the assets relating to the retail division to their respective fair values.
Goodwill and Other Intangible Assets
Under SFAS No. 142, “Goodwill and Other Intangible Assets”. (“SFAS 142”), goodwill and other indefinite-lived intangible assets are no longer amortized but instead are reviewed for impairment annually and on an interim basis if events or changes in circumstances between annual tests indicate that an asset might be impaired. Under SFAS 142, indefinite-lived intangible assets are tested for impairment by comparing their fair values to their carrying values. Testing for impairment of goodwill is a two-step process. The first step requires the Company to compare the fair value of its reporting units to the carrying value of the net assets of the respective reporting units, including goodwill. If the fair value of the reporting unit is less than the carrying value, goodwill of the reporting unit is potentially impaired and the Company then completes Step 2 to measure the impairment loss, if any. The second step requires the calculation of the implied fair value of goodwill by deducting the fair value of all tangible and intangible net assets of the reporting unit from the fair value of the reporting unit. If the implied fair value of goodwill is less then the carrying amount of goodwill, an impairment loss is recognized equal to the difference. Intangible assets that do not have indefinite lives are amortized over their useful lives.
Other intangible assets consist of trade names, with an estimated useful life of 20 years and customer lists, with an estimated useful life of 2 to 8 years, of companies acquired by the Company and are reflected below:
TELEPLUS WORLD, CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2007 AND 2006 (UNAUDITED)
NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Goodwill and Other Intangible Assets (Continued)
| | As of September 30, 2007 | |
| | Gross | | | | | |
| | Carrying | | Accumulated | | | |
| | Amount | | Amortization | | Net | |
| | | | | | | |
Amortized Intangible Assets: | | | | | | | |
| | | | | | | |
Trade Names | | $ | 4,243,026 | | $ | 454,829 | | $ | 3,788,197 | |
Customer Lists | | $ | 4,682,536 | | $ | 1,376,201 | | $ | 3,306,335 | |
| | | | | | | | | | |
Amortization Expense: | | | | | | | | | | |
| | | | | | | | | | |
For the nine months ended September 30, 2007 | | | | | $ | 569,783 | | | | |
For the nine months ended September 30, 2006 | | | | | $ | 557,929 | | | | |
TELEPLUS WORLD, CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2007 AND 2006 (UNAUDITED)
NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Goodwill and Other Intangible Assets (Continued)
The changes in goodwill is as follows:
Goodwill: | | | |
| | | |
Balance - January 1, 2007 | | $ | 9,721,975 | |
| | | | |
Increases in goodwill on acquisitions made | | | 34,027 | |
Impairment of goodwill | | | - | |
| | | | |
Balance - March 31, 2007 | | | 9,756,002 | |
| | | | |
Increases in goodwill on acquisitions made | | | 344,689 | |
Impairment of goodwill | | | - | |
| | | | |
Balance - June 30, 2007 | | | 10,100,691 | |
| | | | |
Increases in goodwill on acquisitions made | | | 275,824 | |
Impairment of goodwill | | | (843,571 | ) |
| | | | |
Balance - September 30, 2007 | | | 9,532,944 | |
Based upon an impairment analysis completed in Q3 2007, the Company recorded an impairment charge ($843,571) in goodwill.
TELEPLUS WORLD, CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2007 AND 2006 (UNAUDITED)
NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Convertible Instruments
The Company reviews the terms of convertible debt and equity securities for indications requiring bifurcation, and separate accounting, for the embedded conversion feature. Generally, embedded conversion features where the ability to physical or net-share settle the conversion option is not within the control of the Company are bifurcated and accounted for as a derivative financial instrument. (See Derivative Financial Instruments below). Bifurcation of the embedded derivative instrument requires allocation of the proceeds first to the fair value of the embedded derivative instrument with the residual allocated to the debt instrument. The resulting discount to the face value of the debt instrument is amortized through periodic charges to the amortization of debt discount using the Effective Interest Method.
TELEPLUS WORLD, CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2007 AND 2006 (UNAUDITED)
NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Derivative Financial Instruments
The Company generally does not use derivative financial instruments to hedge exposures to cash-flow or market risks. However, certain other financial instruments, such as warrants or options to acquire common stock and the embedded conversion features of debt and preferred instruments that are indexed to the Company’s common stock, are classified as liabilities when either (a) the holder possesses rights to net-cash settlement or (b) physical or net share settlement is not within the control of the Company. In such instances, net-cash settlement is assumed for financial accounting and reporting, even when the terms of the underlying contracts do not provide for net-cash settlement. Such financial instruments are initially recorded at fair value and subsequently adjusted to fair value at the close of each reporting period. These derivative financial instruments are indexed to an aggregate of 814,432,749 shares of the Company’s common stock as of September 30, 2007 and are carried at fair value of $8,027,730.
Earnings (Loss) Per Share of Common Stock
Basic net earnings (loss) per common share is computed using the weighted average number of common shares outstanding. Diluted earnings per share (EPS) includes additional dilution from common stock equivalents, such as stock issuable pursuant to the conversion of debentures, and exercise of stock options and warrants. Common stock equivalents will not be included in the computation of diluted earnings per share when the Company reports a loss because to do so would be antidilutive for periods presented.
TELEPLUS WORLD, CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2007 AND 2006 (UNAUDITED)
NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Earnings (Loss) Per Share of Common Stock (Continued)
The following is a reconciliation of the computation for basic and diluted EPS:
| | September 30 | | September 30 | |
| | 2007 | | 2006 | |
| | | | | |
Net loss | | $ | (4,849,257 | ) | $ | (2,361,645 | ) |
| | | | | | | |
Weighted-average common shares | | | | | | | |
Outstanding (Basic) | | | 136,021,413 | | | 92,330,744 | |
| | | | | | | |
Weighted-average common stock | | | | | | | |
Equivalents | | | | | | | |
Convertible debentures | | | 671,432,749 | | | 78,571,429 | |
Stock options | | | 11,700,000 | | | 10,685,000 | |
Warrants | | | 149,100,000 | | | 69,000,000 | |
| | | | | | | |
Weighted-average common shares | | | | | | | |
Outstanding (Diluted) | | | 968,254,162 | | | 250,587,173 | |
Stock-Based Compensation
On January 1, 2006, the Company adopted the provisions of FAS No. 123R “Share-Based Payment” (“FAS 123R”) which requires recognition of stock-based compensation expense for all share-based payments based on fair value. Prior to January 1, 2006, the Company measured compensation expense for all of its share-based compensation using the intrinsic value method prescribed by Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”) and related interpretations. The Company has provided pro forma disclosure amounts in accordance with FAS No. 148, “Accounting for Stock-Based Compensation - Transition and Disclosure - an amendment of FASB Statement No. 123” (“FAS 148”), as if the fair value method defined by FAS No. 123, “Accounting for Stock Based Compensation” (“FAS 123”) had been applied to its stock-based compensation.
TELEPLUS WORLD, CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2007 AND 2006 (UNAUDITED)
NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Stock-Based Compensation (Continued)
The Company has elected to use the modified-prospective approach method. Under that transition method, the calculated expense is equivalent to compensation expense for all awards granted prior to, but not yet vested as of January 1, 2006, based on the grant-date fair values estimated in accordance with the original provisions of FAS 123. Stock-based compensation expense for all awards granted after January 1, 2006 is based on the grant-date fair values estimated in accordance with the provisions of FAS 123R. The Company recognizes these compensation costs, net of an estimated forfeiture rate, on a pro rata basis over the requisite service period of each vesting tranche of each award. The Company considers voluntary termination behavior as well as trends of actual option forfeitures when estimating the forfeiture rate.
Recent Accounting Pronouncements
In September 2006, the FASB issued SFAS 157, “Fair Value Measurements.” This standard defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosure about fair value measurements. his statement is effective for financial statements issued for fiscal years beginning after November 15, 2007. Early adoption is encouraged. The adoption of SFAS 157 is not expected to have a material impact on the consolidated financial statements.
In February 2007, the FASB issued FAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities - Including an amendment of FASB Statement No. 115”, (“FAS 159”) which permits entities to choose to measure many financial instruments and certain other items at fair value at specified election dates. A business entity is required to report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. This statement is expected to expand the use of fair value measurement. FAS 159 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years.
In July 2006, the FASB issued Interpretation No. 48 (FIN No. 48), “Accounting for Uncertainty in Income Taxes.” This interpretation requires recognition and measurement of uncertain income tax positions using a “more-likely-than-not” approach. FIN No. 48 is effective for fiscal years beginning after December 15, 2006. The adoption of this standard did not have a material effect on the Company’s financial position.
TELEPLUS WORLD, CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2007 AND 2006 (UNAUDITED)
NOTE 3- FIXED ASSETS
Fixed assets as of September 30, 2007 were as follows :
| | Estimated Useful Lives (Years) | | September 30, 2007 | |
| | | | | |
Equipment | | | 5 | | | 215,110 | |
Furniture and fixtures | | | 7 | | | 149,205 | |
Business software | | | 3-10 | | | 970,493 | |
Computer hardware | | | 5 | | | 408,020 | |
Leasehold improvements | | | 5 | | | 34,336 | |
| | | | | | | |
Total Cost of Fixed Assets | | | | | | 1,777,164 | |
Less: accumulated depreciation | | | | | | 1,044,950 | |
Fixed assets, net | | | | | $ | 732,214 | |
There was $146,373 and $148,830 charged to operations for depreciation expense for the nine months ended September 30, 2007 and 2006 respectively.
TELEPLUS WORLD, CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2007 AND 2006 (UNAUDITED)
NOTE 4- ACQUISITIONS
Keda Consulting Corp.
On April 1, 2005, the Company acquired Keda Consulting Corp., a North American telecommunications industry management consulting service company specializing in business development, sales and marketing and operations. Keda changed its name to TelePlus Connect Corp. and their management took over the operations of the Company’s prepaid landline and long distance telephone service operations. When the Company acquired Freedom Phone Lines, Avenue Reconnect and Telizon, the acquisition price was adjusted to account for the acquisition of Keda, which was to be paid to the former shareholders of Keda on an earn-out basis. The Company recognized additional goodwill and accrued acquisition obligations for this acquisition.
On July 28, 2006, the Company and the former shareholders of Keda negotiated an agreed purchase price and payment terms. The terms call for 60 equal monthly payments of $60,000 (CDN $) for a total note of $3,600,000 (CDN $) which is converted to $3,214,000 (US $). Goodwill and the accrued acquisition obligations were adjusted at that time.
Maximo Impact, Inc.
On June 21, 2006, the Company acquired Maximo Impact, Inc. The total purchase price of these assets were $30,000. Goodwill of $30,000 represents the excess of the purchase price over the carrying value of the net tangible assets acquired. The purchase price to be paid is up to a maximum of $1,000,000 to be earned on an earn out basis.
The results of operations have been included in the Company’s consolidated statement of operations since the completion of the acquisition in June 2006.
TELEPLUS WORLD, CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2007 AND 2006 (UNAUDITED)
NOTE 5- ACCRUED ACQUISITION OBLIGATIONS
The Company has recorded $2,567,816 in accrued acquisition obligations as of September 30, 2007. Included in this amount is $2,458,816 which is payable on an earn-out basis from 2007 operations based on the achievement of specific benchmarks by the 1523813 Ontario Limited, Avenue Reconnect, Inc., and Telizon Inc., and 15000536 Ontario Inc. acquisitions. During the nine months ended September 30, 2007 and 2006, the Company paid out $2,634,182 and $4,836,259, respectively of accrued acquisition obligations.
NOTE 6- CONVERTIBLE DEBENTURES AND DERIVATIVE LIABILITY
On July 12, 2004, the Company secured an $11,000,000 financing commitment from Cornell. The terms of the transaction called for the Company to receive initial funding in the amount of $1,000,000 payable in three (3) installments: $450,000 payable at closing; $400,000 payable upon the filing of a registration statement and the remaining $150,000 payable upon the registration statement becoming effective, which occurred October 1, 2004.
The convertible debentures were secured by all of the Company’s assets, bearing interest at 5% per annum, repayable on their third anniversary dates of July 12, 2007, September 1, 2007, and October 1, 2007, respectively. The Company had the option of converting the principal amounts and all accrued interest before these maturity dates, and has converted the entire amount to common shares.
As part of the transaction, the Company secured a $10,000,000 Standby Equity Distribution Agreement (“SEDA”). The Company could draw these funds under the SEDA over a 24-month period upon the effective registration. The proceeds of the SEDA were used to finance existing and future acquisitions, capital expenditures, increases in inventory and general working capital. The Company issued 258,098 shares of its common stock in connection with the SEDA as financing costs.
The Company received $8,125,000 under three promissory notes. The Company received the initial promissory note of $2,000,000 in the fourth quarter of 2004; the second promissory note of $500,000 was received in the first quarter of 2005; and a third promissory note of $5,625,000 was received in July 2005. The first and second promissory notes were repaid, and the third promissory note was restructured under a new financing agreement dated December 13, 2005.
TELEPLUS WORLD, CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2007 AND 2006 (UNAUDITED)
NOTE 6- CONVERTIBLE DEBENTURES AND DERIVATIVE LIABILITY (CONTINUED)
On December 13, 2005, the Company entered into a certain Securities Purchase Agreement (“SPA”) with Cornell Capital Partners (“Cornell”), pursuant to which Cornell was issued $9,225,000 in secured convertible debentures dated December 13, 2005 under the SPA. Under the SPA, the Company and Cornell entered into various agreements as described below. The convertible debentures are convertible in whole or in part, at any time and from time to time before maturity at the option of the holder at the lesser of $0.275 or ninety-five percent (95%) of the lowest volume weighted price of the common stock for the thirty trading days immediately preceding such conversion date. The convertible debentures which are secured by certain pledged assets of the Company have a term of three (3) years, have piggy-back registration rights and accrue interest at a rate of ten percent (10%) per annum. In connection with the convertible debentures, the Company issued 1,250,000 shares of common stock as financing fees. The amount funded included the restructuring of the third promissory note funded in July 2005 of $5,625,000 plus interest of $225,000 plus an additional funding of $3,375,000.
On July 28, 2006, the Company entered into a second SPA with Cornell Capital Partners, LP (“Cornell”) pursuant to which the Company issued to Cornell $3,000,000 in secured convertible debentures dated as of July 28, 2006. The debentures were fully funded on July 28, 2006, are convertible, in whole or in part, at any time from time to time before maturity at the option of the holder at the lesser of (a) $0.20 or (b) 90% of the lowest volume weighted average price of common stock for thirty trading days immediately preceding the conversion date. The Company has the option to redeem a portion or all of the amounts outstanding under the debentures prior to the maturity date of the debentures. The debentures have a term of three years, piggy-back registration rights and accrue interest at a rate equal to ten percent (10%) per year. The debentures are secured by certain pledged assets of the Company. The parties have also entered into an Investor Registration Rights Agreement, pursuant to which the Company has agreed, if required by Cornell, to provide certain registration rights under the Securities Act of 1933, as amended, and the rules and regulations there under, and applicable state securities laws.
In connection with the SPA, the Company also issued Cornell the following warrants to purchase shares of common stock:
c) | 10,000,000 at $0.15; and |
On July 3, 2007, the Company entered into a third Securities Purchase Agreement ("SPA") with Cornell Capital Partners, LP pursuant to which the Company issued to Cornell Three Million Dollars ($3,000,000) in secured convertible debentures (the "Debentures") of even date with the SPA. The Debentures were fully funded on July 3, 2007. The Debentures are convertible, in whole or in part, at any time and from time to time before maturity at the option of the holder at the lower of (a) $0.035 or (b) ninety-five percent (90%) of the lowest volume weighted average price of common stock for twenty (20) trading days immediately preceding the conversion date. Beginning on August 2, 2007, and continuing on the first Trading Day of each calendar month thereafter, the Company shall make mandatory redemptions ("Mandatory Redemption") consisting of outstanding principal. The principal amount of each Mandatory Redemption shall be equal to $100,000 per calendar month, until all amounts owed under this Debenture have been paid in full. The Debentures have a term of three (3) years, piggy-back registration rights and accrue interest at a rate equal to twelve percent (12%) per year. The Debentures are secured by certain pledged assets of the Company. The Parties have also entered into an Investor Registration Rights Agreement, pursuant to which the Company has agreed, if required by Cornell, to provide certain registration rights under the Securities Act of 1933, as amended, and the rules and regulations thereunder, and applicable state securities laws.
In connection with the SPA the Company also issued Cornell a warrant to purchase 50,000,000 shares of the Company's common stock at an exercise price of $0.03; a warrant to purchase 30,000,000 shares of the Company's common stock at an exercise price of $0.05; and issued 4,000,000 restricted shares of the Company's common stock to Cornell.
TELEPLUS WORLD, CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2007 AND 2006 (UNAUDITED)
NOTE 6- CONVERTIBLE DEBENTURES AND DERIVATIVE LIABILITY (CONTINUED)
Through September 30, 2007 $2,590,000 of the debt has been converted to equity and $200,000 has been repaid. Accordingly, as of September 30, 2007 the Company has $12,435,000 outstanding in convertible debentures. During the nine months ended September 30, 2007, $1,040,000 of convertible debentures were converted into 22,828,756 shares of common stock.
Secured Convertible Debenture. The Company entered into a secured convertible debenture in the principal amount of $9,225,000 dated December 13, 2005 and due December 13, 2008. The debenture carries an interest rate of 10%. The Company has an option to redeem a portion or all amounts outstanding under the amended and restated convertible debenture upon three days advance written notice. The Company shall pay an amount equal to the principal amount being redeemed plus a redemption premium of twenty percent (20%) of the principal amount being redeemed plus accrued and unpaid interest. The Company may not redeem more than $1,500,000 during any fifteen (15) consecutive trading days.
Under the terms of the convertible debenture so long as any principal amount or interest is owed, the Company cannot, without the prior consent of Cornell (i) issue or sell any common or preferred stock with or without consideration, (ii) issue or sell any preferred stock, warrant, option, right, contract or other security or instrument granting the holder thereof the right to acquire common stock with or without consideration, (iii) enter into any security instrument granting the holder of security interest in any of the Company’s assets or (iv) file any registration statement on Form S-8, except for a registration statement on Form S-8 registering up to 2,000,000 shares of common stock under an Employee Stock Option Plan. Under the terms of the convertible debenture there are a series of events of default, including failure to pay principal and interest when due, the Company’s common stock ceasing to be quoted for trading or listing on the OTCBB and shall not again be quoted or listed for trading within five days trading days of such listing, the Company being in default of any other debentures that the Company has issued to Cornell.
Investor Registration Rights Agreement. On December 13, 2005 the Company entered into an investor registration rights agreement with Cornell. Under the terms of the registration rights agreement the Company was obligated to register on Form SB-2 or any other applicable form the shares of its common stock issuable to Cornell upon conversion of at least 235,000,000 shares of common stock under the $9,225,000 convertible debenture, 1,250,000 shares of common stock issued under the SEDA and 33,000,000 shares of common stock issued upon the exercise of the warrant shares to be issued under the warrant to Cornell. The Company filed with the SEC all reports or other documents required under the Securities Act of 1933, as amended and the Securities Exchange Act of 1934, as amended to allow Cornell to take advantage of Rule 144 under the Securities Act of 1933 (as amended).
TELEPLUS WORLD, CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2007 AND 2006 (UNAUDITED)
NOTE 6- CONVERTIBLE DEBENTURES AND DERIVATIVE LIABILITY (CONTINUED)
Amended and Restated Security Agreement. The Company entered into an amended security agreement dated December 13, 2005 with Cornell. This agreement amends the agreement entered into on July 15, 2005 between these two parties.
Amended and Restated Pledge and Escrow Agreement. The Company entered into a pledge and escrow agreement dated December 13, 2005 with Cornell, Visioneer Holding Group, Inc. and David Gonzales, Esq., acting as escrow agent. Under the terms of the pledge and escrow agreement, the Company and Visioneer pledged 30,000,000 of their shares of common stock of the Company to secure the Company’s obligations under the convertible debenture issued to Cornell. These shares are being held by David Gonzales, Esq., who is a principal with Cornell. In the event of default under the pledge and escrow agreement, that includes failure of the Company to comply with any of the agreements between themselves and Cornell, the pledged shares can be sold to cover any of the obligations owed by the Company to Cornell under the various financing agreements discussed here. The pledged shares shall be returned to the parties upon payment in full of all amounts owed to Cornell under the convertible debentures.
Warrant. The Company issued a warrant dated December 13, 2005 for 33,000,000 shares of its common stock (subject to adjustment for stock splits, stock dividends and recapitalizations) to Cornell at exercise prices ranging between $.20 and $0.38 per share. The warrant is exercisable until December 13, 2008. Cornell cannot exercise the warrant if doing so would cause it to beneficially own in excess of 4.99% of the total issued and outstanding shares of the Company’s common stock unless the exercise is made within sixty days prior to December 13, 2008. The shares issued upon excise of the warrant have piggyback and demand registration rights set forth in the registration rights agreement described above.
Securities Purchase Agreement. The Company entered into a securities purchase agreement dated December 13, 2005 with Cornell. The securities purchase agreement relates to the $9,225,000 secured convertible debenture described above. In accordance with the securities purchase agreement, the Company agreed to enter into (i) an amended and restated investor registration rights agreement to provide registration rights under the Securities Act of 1933, as amended, for shares of the Company’s common stock that could be issued upon conversion of the amounts owed for principal and interest under the convertible debentures described above, (ii) an amended and restated security agreement to provide a blanket lien against our property as described above, (iii) an amended and restated pledge and escrow agreement under which the Company and Visioneer pledged his shares of the Company’s common stock to Cornell, and (iv) an amended and restated security agreement among the Company and Cornell. Under the securities purchase agreement the Company agreed to preserve an adequate number of shares to effect any right of conversion exercised by Cornell under the warrant and the convertible debenture described above. The Company also agreed to pay Yorkville Advisors Management, LLC, a company affiliated with Cornell Capital, a fee equal to $342,500.
TELEPLUS WORLD, CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2007 AND 2006(UNAUDITED)
NOTE 6- CONVERTIBLE DEBENTURES AND DERIVATIVE LIABILITY (CONTINUED)
Amended and Restated Subsidiary Security Agreement. The Company entered into an amended and restated subsidiary security agreement dated December 13, 2005. The material terms of the amended and restated subsidiary security agreement are the same as the security agreement that the Company executed with Cornell.
Each of the three convertible debentures meet the definition of hybrid instruments, as defined in SFAS 133, Accounting for Derivative Instruments and Hedging Activities (SFAS No. 133). The hybrid instruments are comprised of a i) a debt instrument, as the host contract and ii) an option to convert the debentures into common stock of the Company, as an embedded derivative. The embedded derivative derives its value based on the underlying fair value of the Company’s common stock. The Embedded Derivative is not clearly and closely related to the underlying host debt instrument since the economic characteristics and risk associated with this derivative are based on the common stock fair value. The Company has separated the embedded derivative from the hybrid instrument and classified the Embedded Derivative as a current liability with an offsetting debit to debt discount, which will be amortized over the term of the debenture based on the effective interest method.
The embedded derivatives do not qualify as a fair value or cash flow hedge under SFAS No. 133. Accordingly, changes in the fair value of the embedded derivative are immediately recognized in earnings and classified as a gain or loss on the embedded derivative financial instrument in the accompanying statements of operations. There was a gain of $2,958,254 and $1,670,171 respectively recognized for the nine months period ended September 30, 2007 and 2006
The Company determines the fair value of the embedded derivatives and records them as a discount to the debt and a derivative liability on the date of issue. The Company recognizes an immediate financing expense for any excess in the fair value of the derivatives over the debt amount.
The allocation of the proceeds of the convertible debenture to the warrants and the conversion feature resulted in discounts to the convertible debenture of $7,779,174, $3,000,000, and $3,000,000 for the $9,225,000, $3,000,000 and $3,000,000 convertible debentures, respectively, on the date of issuance and is being amortized to par using the effective interest method. The amortization for the nine months period ended September, 2007 and 2006 amounted to $2,683,788 and $1,932,545, respectively. Additionally, in July 2007 the Company recognized a financing expense of $871,261 representing the excess of the fair value of the derivative instruments in the July 2007 debentures, over the debt proceeds.
Upon conversion of the debt to equity, any remaining unamortized discount is charged to interest expense
TELEPLUS WORLD, CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2007 AND 2006 (UNAUDITED)
NOTE 6-CONVERTIBLE DEBENTURES AND DERIVATIVE LIABILITY (CONTINUED)
The derivative liability at September 30, 2007 is comprised of the following:
i) The embedded derivative associated with the December 2005 $9,225,000 convertible debenture at fair value of $3,659,051; ii) the embedded derivative associated with the July 2006 $3,000,000 convertible debenture at fair value of $1,792,075; iii) the embedded derivative associated with the July 2007 $3,000,000 convertible debenture at fair value of $1,672,716; iv) 33,000,000 warrants issued in conjunction with the $9,225,000 convertible debenture at fair value of $26,658; v) 30,000,000 warrants issued in conjunction with the July 2007 $3,000,000 convertible debenture at fair value of $60,206; and vi) 80,000,000 warrants issued in conjunction with the $3,000,000 convertible debenture at fair value of $817,022
Interest expense on the convertible debentures was $2,529,808 and $1,478,291 for the nine months period ended September 30, 2007 and 2006. Accrued interest at September 30, 2007 is $2,182,892
The summary of convertible debentures is as follows at September 30, 2007
$9,225,000 Convertible Debenture, net of $2,590,000 conversions and unamortized | | | | |
discount of $1,911,620 at 10% interest per annum due Dec. 2008 | | $ | 4,723,380 | |
| | | | |
$3,000,000 Convertible Debenture, net of unamortized | | | | |
discount of $1,887,463 at 10% interest per annum due July 2009 | | | 1,112,537 | |
| | | | |
$3,000,000 Convertible Debenture, net of $200,000 redemption and unamortized | | | | |
discount of 2,592,387 at 12% interest per annum due July 2010 | | | 207,613 | |
| | | 6,043,530 | |
| | | | |
Less: Current maturities | | | (1,200,000 | ) |
| | | | |
Long-term portion | | $ | 4,843,530 | |
Maturities over the next four years is as follows: | | | |
| | | |
December 31, | | | |
| | | |
2007 | | | 300,000 | |
2008 | | | 7,235,000 | |
2009 | | | 4,200,000 | |
2010 | | | 700,000 | |
| | | | |
| | $ | 12,435,000 | |
TELEPLUS WORLD, CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2007 AND 2006 (UNAUDITED)
NOTE 7- SHAREHOLDERS’ EQUITY
Preferred Stock
The Company has 10,000,000 shares authorized of Class A Preferred Stock with a par value of $0.001. These preferred shares entitle the holders to 10 votes each, are not convertible into shares of any other class or series of stock of the Company, are non-participating, and no dividends can be declared on them.
On July 31, 2006, the Company’s CEO and Visioneer Holdings, Inc. (a company owned 100% by the Company’s CEO) served written notice to the Company of the exercise of the right to exchange all of the 2,000,000 shares of Class A Preferred Stock owned by Visioneer, Inc. into 20,000,000 shares of Common Stock. The right to exchange the shares became effective upon achieving certain milestones contained within the CEO’s employment contract. As a result of the conversion, there are no preferred shares issued and outstanding as of September 30, 2007
Common Stock
January 8, 2007 the Company issued 5,555 shares to an employee in connection with bonus earned. Shares were valued at $445.
January 8, 2007 the Company issued 11,111 shares to an employee in connection with bonus earned. Shares were valued at $890.
January 8, 2007 the Company issued 444,000 shares to a non-related third party in connection to services rendered. Shares were valued at $35,520.
January 30, 2007 the Company issued 1,345,895 shares of common stock to Cornell in connection with the conversion of convertible debentures in the amount of $100,000.
February 22, 2007 the Company issued 1,492,537 shares of common stock to Cornell in connection with the conversion of convertible debentures in the amount of $100,000.
March 5, 2007 the Company issued 3,703,704 shares of common stock to Cornell in connection with the conversion of convertible debentures in the amount of $200,000.
March 21, 2007 the Company issued 1,851,852 shares of common stock to Cornell in connection with the conversion of convertible debentures in the amount of $100,000.
March 28, 2007 the Company issued 454,485 shares in connection with bonuses earned by employees. Shares were valued at $36,359.
April 2, 2007 the Company issued 2,500,000 shares of common stock to Cornell in connection with the conversion of convertible debentures in the amount of $135,000.
April 11, 2007 the Company issued 175,000 shares to its directors for services rendered. Shares were valued at $10,500.
April 12, 2007 the Company issued 2,314,815 shares of common stock to Cornell in connection with the conversion of convertible debentures in the amount of $125,000.
April 26, 2007 the Company issued 106,351 shares to a non-related third party in connection to services rendered. Shares were valued at $5,317.
May 17, 2007 the Company issued 4,166,667 shares of common stock to Cornell in connection with conversion of convertible debentures in the amount of $170,000.
May 18, 2007 the Company issued 106,351 shares to a non-related third party in connection to services rendered. Shares were valued at $4,254.
July 3, 2007 the Company issued 4,000,000 shares to Cornell as a fee in connection with the $3,000,000 loan on July 3, 2007. Shares were valued at $120,000.
July 16, 2007 the Company issued 1,470,588 shares of common stock to Cornell in connection with conversion of convertible debentures in the amount of $35,000.
September 12, 2007 the Company issued 1,173,709 shares of common stock to Cornell in connection with conversion of convertible debentures in the amount of $25,000.
September 26, 2007 the Company issued 2,808,989 shares of common stock to Cornell in connection with conversion of convertible debentures in the amount of $50,000.
October 11, 2007 the Company issued 2,808,989 shares of common stock to Cornell in connection with conversion of convertible debentures in the amount of $42,000.
October 22, 2007 the Company issued 325,000 shares to its directors for services rendered. Shares were valued at $6,500.
October 31, 2007 the Company issued 1,280,000 shares of common stock to Cornell in connection with conversion of convertible debentures in the amount of $16,000.
TELEPLUS WORLD, CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2007 AND 2006 (UNAUDITED)
NOTE 7- SHAREHOLDERS’ EQUITY (CONTINUED)
Stock Options
As of September 30, 2007, the Company has 11,700,000 stock options issued to employees granted and outstanding. Of these options, 2,000,000 were granted in 2007, 985,000 were forfeited in 2007, 2,250,000 were granted in 2006, 3,500,000 were forfeited in 2006.
Balance, January 1, 2007 | | | 10,685,000 | |
| | | | |
Granted | | | 2,000,000 | |
Exercised | | | 0 | |
Forfeited | | | (985,000 | ) |
| | | | |
Balance, September 30, 2007 | | | 11,700,000 | |
| | | | |
Balance, January 1, 2006 | | | 11,935,000 | |
| | | | |
Granted | | | 2,250,000 | |
Exercised | | | 0 | |
Forfeited | | | (3,500,000 | ) |
| | | | |
Balance, December 31, 2006 | | | 10,685,000 | |
TELEPLUS WORLD, CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2007 AND 2006 (UNAUDITED)
NOTE 7- SHAREHOLDERS’ EQUITY (CONTINUED)
Stock Options (Continued)
The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model. The following weighted average assumptions were used in the model:
| | September 30 | | September 30 | |
| | 2007 | | 2006 | |
Dividend yield | | | 0.00 | % | | 0.00 | % |
Expected volatility | | | 42.90 | % | | 47.00 | % |
Risk free interest rates | | | 3.50 | % | | 3.50 | % |
Expected lives (years) | | | 3 | | | 3 | |
Options outstanding as of September 30, 2007 are summarized as follows:
| | Exercise | | Date | | Term | | Vesting | |
Number of Options | | Price | | Issued | | Date | | Date | |
1,500,000 | | $ | 0.36 | | | Nov-04 | | | Dec-07 | | | Dec-04 | |
2,000,000 | | $ | 0.38 | | | Nov-04 | | | Jun-08 | | | Jun-05 | |
2,500,000 | | $ | 0.40 | | | Nov-04 | | | Jun-09 | | | Jun-06 | |
750,000 | | $ | 0.21 | | | Jun-05 | | | Sep-08 | | | Sep-05 | |
100,000 | | $ | 0.21 | | | Jun-05 | | | Dec-08 | | | Dec-05 | |
1,000,000 | | $ | 0.22 | | | Jun-05 | | | Dec-08 | | | Dec-05 | |
1,250,000 | | $ | 0.23 | | | Jun-05 | | | Dec-09 | | | Dec-06 | |
150,000 | | $ | 0.21 | | | Nov-05 | | | May-09 | | | May-06 | |
150,000 | | $ | 0.22 | | | Nov-05 | | | Nov-09 | | | Nov-06 | |
150,000 | | $ | 0.23 | | | Nov-05 | | | May-09 | | | May-07 | |
150,000 | | $ | 0.24 | | | Nov-05 | | | Nov-10 | | | Nov-07 | |
400,000 | | $ | 0.07 | | | Mar-07 | | | Sep-10 | | | Sep-07 | |
400,000 | | $ | 0.08 | | | Mar-07 | | | Mar-11 | | | Mar-08 | |
400,000 | | $ | 0.10 | | | Mar-07 | | | Mar-12 | | | Mar-09 | |
400,000 | | $ | 0.12 | | | Mar-07 | | | Mar-13 | | | Mar-10 | |
400,000 | | $ | 0.15 | | | Mar-07 | | | Mar-14 | | | Mar-11 | |
11,700,000 | | $ | 0.28 | | | | | | | | | | |
| | | | | | | | | | | | | |
Stock options exerciseable - weighted average price | $ | 0.28 | | | | |
TELEPLUS WORLD, CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2007 AND 2006 (UNAUDITED)
The number of stock options that are exercisable as at September 30, 2007 is 11,700,000.
NOTE 7- SHAREHOLDERS’ EQUITY (CONTINUED)
Warrants
The Company granted 33,000,000 warrants to Cornell in connection with the SPA entered into December 13, 2005. The warrants expire December 13, 2008. The Company also granted 30,000,000 warrants to Cornell in connection with the SPA entered into July 28, 2006. These warrants expire July 28, 2009. In addition, the Company issued 2,000,000 warrants for the purpose of trying to raise capital for the Company and 4,100,000 to a consultant of the Company for services rendered. The Company granted 50,000,000 and 30,000,000 of warrants to Yorkville Advisors in connection with the SPA signed July 3, 2007. The warrants expire July 3, 2012. The following is a breakdown of the warrants:
| | Exercise | | Date | | | |
Warrants | | Price | | Issued | | Term | |
9,000,000 | | $ | 0.25 | | | 12/13/2005 | | | 3 years | |
4,000,000 | | $ | 0.20 | | | 12/13/2005 | | | 3 years | |
10,000,000 | | $ | 0.38 | | | 12/13/2005 | | | 3 years | |
10,000,000 | | $ | 0.25 | | | 12/13/2005 | | | 3 years | |
1,000,000 | | $ | 0.45 | | | 1/1/2006 | | | 5 years | |
1,000,000 | | $ | 0.67 | | | 1/1/2006 | | | 5 years | |
5,000,000 | | $ | 0.11 | | | 7/28/2006 | | | 3 years | |
10,000,000 | | $ | 0.13 | | | 7/28/2006 | | | 3 years | |
10,000,000 | | $ | 0.15 | | | 7/28/2006 | | | 3 years | |
5,000,000 | | $ | 0.18 | | | 7/28/2006 | | | 3 years | |
4,100,000 | | $ | 0.15 | | | 9/26/2006 | | | 3 years | |
50,000,000 | | $ | 0.03 | | | 7/3/2007 | | | 5 years | |
30,000,000 | | $ | 0.05 | | | 7/3/2007 | | | 5 years | |
149,100,000 | | | | | | | | | | |
TELEPLUS WORLD, CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2007 AND 2006 (UNAUDITED)
NOTE 8- COMMITMENTS AND CONTINGENCIES
Legal Proceedings
The following proceedings have been instigated against the Company. The Company does not believe that the following legal proceedings have a materially adverse impact on the Company’s business or on its results of its operations.
Proposed Tax Assessment: 3577996 Canada, Inc. which the Company had acquired substantially all of their assets, is involved in proceedings with the Minister of Revenue of Quebec (“MRQ”). The MRQ has proposed an assessment for the Goods and Services Tax (“GST”) and Quebec Sales Tax (“QST”) of approximately $642,000 (CND $) and penalties of approximately $110,000 (CND $). The proposed tax assessment including penalties is for $322,000 (CND $) for QST and $320,000 (CND $) for GST. In mid to late 2006, the MRQ issued Amended Reassessments after the Company contested. These amounts were reduced (including penalties) to approximately QST $350,000 (CND $) and GST $308,000 (CND $). The Company again contested these Amended Reassessments and believes that certain deductions initially disallowed by the MRQ for the QST are deductible and is in the process of compiling the deductions to the MRQ.
Wrongful Dismissal: A former employee of a subsidiary of the Company, has instigated a claim in Quebec Superior Court in the amount of $90,000 (CND $) against the Company for wrongful dismissal. The Company does not believe the claim to be founded and intends to vigorously contest such claim. The parties are in the discovery stages.
Wrongful Dismissal: There is a claim from three individuals in British Columbia in the amount of approximately $147,000 and the issuance of 510,000 shares of common stock for which a letter of demand has been served to the Company. The Company does not believe the claim to be founded and intends to vigorously contest such claim. No court proceedings have been instituted and the Company is presently in discussions with the aforementioned individuals.
Consulting Fee: On April 13, 2005, a lawsuit was filed in the United States District Court, District of New Jersey (Newark) (Case No. 05-2058) by Howard Salamon d/b/a “Salamon Brothers” (as the plaintiff) against the Company. This matter arises out of an alleged agreement between the plaintiff and the Company. The plaintiff is seeking specific performance of the alleged agreement, monetary damages and a declaratory judgment for the payment of a commission allegedly due to the plaintiff in an amount equal to 10% of all funds received by the Company from Cornell. The Company has filed a counterclaim against the plaintiff seeking rescission of the alleged agreement and a refund of $100,000 paid by the Company to the plaintiff. The Company believes that this lawsuit is without merit, that the plaintiff’s claims are unfounded and that the Company has good defenses against the claims asserted by the plaintiff. The Company also believes that it has good claims for the rescission of the agreement and for the refund of the amount paid to the plaintiff. The Company intends to contest and defend against the plaintiff’s claims. The foregoing notwithstanding, total liability to the Company, should it lose the lawsuit, could reach a maximum of 10% of all funds received by Cornell.
TELEPLUS WORLD, CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2007 AND 2006 (UNAUDITED)
NOTE 8- COMMITMENTS AND CONTINGENCIES (CONTINUED)
Legal Proceedings (Continued)
Breach of contract: Former landlord of leased office space in Montreal, Quebec has filed lawsuit in Montreal, Quebec against the Company. The Company effectively terminated the lease March 31, 2007 and is reviewing the merits of said lawsuit and will vigorously defend the case. Company and landlord have settled this case.
The following claim has been instigated by the Company:
On February 1, 2007 the Company’s subsidiary, Teleplus Wireless, Corp. d/b/a Liberty Wireless (“Liberty”) filed a lawsuit against Mobile Technology Services, LLC (“MTS”) alleging that MTS had breached a number of provisions of the Mobile Virtual Network Enabler (“MVNE Agreement”) Services Agreement between Liberty and MTS, despite repeated attempts by Liberty requesting that MTS cure all the breaches under the MVNE Agreement. The lawsuit was filed in the U.S. District Court for the Southern District of Florida. Currently, Liberty has alleged damages in the amount of approximately $975,000. MTS has since filed a counterclaim alleging breach of the MVNE Agreement for failure to pay invoices that have been contested by Liberty. The Company and MTS have settled this case.
Operating Lease
The Company has several non-cancelable operating leases, primarily for office space and storage that expire through March 31, 2011 These leases require the Company to pay all operating costs such as insurance and maintenance.
Future minimum lease payments under the non-cancelable leases as of September 30, 2007 are:
2007 | | $ | 45,055 | |
2008 | | | 80,170 | |
2009 | | | 82,257 | |
2010 | | | 76,315 | |
2011 | | | 19,027 | |
| | $ | 302,824 | |
Rent expense for the nine months ended September 30, 2007 and 2006 was $210,782 and $224,605 respectively.
TELEPLUS WORLD, CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2007 AND 2006 (UNAUDITED)
NOTE 8- COMMITMENTS AND CONTINGENCIES (CONTINUED)
Support Agreement
In June 2006, Liberty Wireless and PeopleSupport, Inc. (“PSPT”) entered into a three-year customer support agreement. Under the agreement, PSPT will provide customer management, transcription and captioning, accounts receivable management and additional business process outsourcing services from its centers in the Philippines, Costa Rica and the United States of America, as its strategic provider of customer management support.
TELEPLUS WORLD, CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2007 AND 2006 (UNAUDITED)
NOTE 9- RELATED PARTY TRANSACTIONS
The Company paid management fees for the nine months ended September 30, 2007 and 2006 to a company owned by a majority shareholder in the amount of $226,827 and $174,500, respectively.
On July 31, 2006, the Company’s CEO and Visioneer Holdings, Inc. (a company owned 100% by the Company’s CEO) served written notice to the Company of the exercise of the right to exchange all of the 2,000,000 shares of Class A Preferred Stock owned by Visioneer, Inc. into shares of Common Stock. The right to exchange the shares became effective upon achieving certain milestones contained within the CEO’s employment contract.
NOTE 10- PROVISION FOR INCOME TAXES
Deferred income taxes are determined using the liability method for the temporary differences between the financial reporting basis and income tax basis of the Company’s assets and liabilities. Deferred income taxes are measured based on the tax rates expected to be in effect when the temporary differences are included in the Company’s tax return. Deferred tax assets and liabilities are recognized based on anticipated future tax consequences attributable to differences between financial statement carrying amounts of assets and liabilities and their respective tax bases.
At September 30, 2007, deferred tax assets relating to the U.S. entities consist of the following:
| | | |
Net operating losses | | $ | 2,948,140 | |
Amortization of goodwill | | | (673,379 | ) |
Valuation allowance | | | (2,274,761 | ) |
| | | | |
| | $ | - | |
At December 31, 2006, the Company had a net operating loss carryforward in the approximate amount of $7,000,000, available to offset future taxable income through 2025. The Company established valuation allowances equal to the full amount of the deferred tax assets due to the uncertainty of the utilization of the operating losses in future periods.
At September 30, 2007 the Company has recorded a deferred tax asset of $41,696 related to one of its Canadian subsidiaries.
TELEPLUS WORLD, CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2007 AND 2006 (UNAUDITED)
NOTE 11- DISCONTINUED OPERATIONS
On January 13, 2006, Retail filed in Canada a Notice of Intention to Make a Proposal Under the Bankruptcy and Insolvency Act (Canada) (the “Act”). This was done to divest the Company of its retail division. As a result, Retail was deemed to have made an assignment of its assets to its creditors under the Act and discontinued its operations as of February 12, 2006. The retail operations will no longer be a segment of the Company’s business for the year ending December 31, 2006. Therefore, the Company reclassified as discontinued operations the operating results of this division.
The following represents the comparative operating results of this division for the nine months ended September 30, 2007 and 2006 that is reflected as discontinued operations.
TELEPLUS WORLD, CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2007 AND 2006 (UNAUDITED)
NOTE 11- DISCONTINUED OPERATIONS (CONTINUED)
| | 2007 | | 2006 | |
| | | | | |
Net revenues | | $ | - | | $ | 282,332 | |
| | | | | | | |
Cost of revenues | | | - | | | 13,299 | |
General, administrative and selling expenses | | | - | | | 493,300 | |
Write down of assets and liabilities | | | 9,697 | | | 24,341 | |
| | | | | | | |
| | | 9,697 | | | 530,940 | |
| | | | | | | |
Loss before income taxes | | | (9,697 | ) | | (248,608 | ) |
| | | | | | | |
Provision for income taxes | | | - | | | - | |
| | | | | | | |
Net loss on discontinued operations | | $ | (9,697 | ) | $ | (248,608 | ) |
The Company will have available loss carryforwards from the remaining business entities of the retail division that have not declared bankruptcy. The Company’s intention is to apply these losses against future profits from its remaining business operations.
The cash flow from Discontinued Operations consists of the following:
TELEPLUS WORLD, CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2007 AND 2006 (UNAUDITED)
NOTE 11- DISCONTINUED OPERATIONS (CONTINUED)
| | 2007 | | 2006 | |
| | | | | |
Net (loss) from discontinued operations | | $ | (9,697 | ) | $ | (248,608 | ) |
| | | | | | | |
Adjustments to reconcile net (loss) to net | | | | | | | |
cash provided by (used in) operating activities | | | | | | | |
| | | | | | | |
Writedown of assets and liabilities | | | - | | | 24,341 | |
Net Change in assets and liabilities | | | (70,925 | ) | | 44,825 | |
| | | | | | | |
Net Cash provided by (used in) operating activities | | | (80,622 | ) | | (179,442 | ) |
| | | | | | | |
Cash flows from investing activities | | | | | | | |
Acquisition of fixed assets | | | - | | | - | |
| | | | | | | |
Cash provided by (used in) Discontinued Operations | | $ | (80,622 | ) | $ | (179,442 | ) |
| | September | |
| | 2007 | |
Assets | | | |
Cash | | $ | 1,335 | |
| | $ | 1,335 | |
| | | | |
Liabilities | | | | |
| | | | |
Accrued expenses | | $ | (549 | ) |
| | | (549 | ) |
| | | | |
Net Assets ( Liabilities ) Remaining | | $ | 1,884 | |
TELEPLUS WORLD, CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2007 AND 2006 (UNAUDITED)
NOTE 12- SEGMENT INFORMATION
The Company’s reportable operating segments include its wireless segment which was acquired on December 29, 2005, but became effective as of January 1, 2006, as well as its traditional land-line based telecommunication services. The Company also has corporate overhead expenses. The Company’s services are all being provided in North America, considered by the Company to be one geographical location. The segment data presented below details the allocation of sales, cost of sales, gross profit (loss), operating expenses, depreciation, amortization and impairment and other income (expense) on the condensed consolidated statements of operations to these segments. In addition the Company details an allocation of fixed assets and total assets to these segments. The Company has one major supplier of services in both the Wireless and Telecom segments. The supplier is not the same for each segment. The discontinued operations have not been included herein.
Operating segment data for the nine months ended September 30, 2007 are as follows:
| | | | Wireless | | Telecom | | | |
| | Corporate | | Services | | Services | | Total | |
| | | | | | | | | |
Revenues | | $ | 1,830 | | $ | 3,831,412 | | $ | 12,564,469 | | $ | 16,397,711 | |
Cost of revenues | | | | | | 2,535,821 | | | 9,010,205 | | | 11,546,026 | |
Gross profit (loss) | | | 1,830 | | | 1,295,591 | | | 3,554,264 | | | 4,851,685 | |
Operating expenses | | | 1,520,195 | | | 1,782,060 | | | 2,064,467 | | | 5,366,722 | |
Depreciation, amortization and impairment | | | 15,411 | | | 955,386 | | | 628,601 | | | 1,599,398 | |
Other income (expense) | | | (2,637,627 | ) | | (1,192 | ) | | (86,307 | ) | | (2,725,126 | ) |
Net income (loss) | | | (4,171,403 | ) | | (1,443,047 | ) | | 774,889 | | | (4,839,561 | ) |
Segment assets | | | 6,069,616 | | | 2,100,254 | | | 13,555,287 | | | 21,725,157 | |
Fixed Assets, net of depreciation | | | 36,967 | | | 63,028 | | | 632,220 | | | 732,215 | |
Operating segment data for the nine months ended September 30, 2006 are as follows:
| | | | Wireless | | Telecom | | | |
| | Corporate | | Services | | Services | | Total | |
| | | | | | | | | |
Revenues | | $ | - | | $ | 7,072,045 | | $ | 12,001,090 | | $ | 19,073,135 | |
Cost of revenues | | | | | | 3,921,405 | | | 8,181,424 | | | 12,102,829 | |
Gross profit (loss) | | | | | | 3,150,640 | | | 3,819,666 | | | 6,970,306 | |
Operating expenses | | | 1,782,253 | | | 2,221,028 | | | 2,323,673 | | | (239,011 | ) |
Depreciation, amortization and impairment | | | 8,496 | | | 91,801 | | | 639,295 | | | 739,592 | |
Other income (expense) | | | (2,015,405 | ) | | 0 | | | (1,391 | ) | | (2,016,796 | ) |
Net income (loss) | | | (3,806,154 | ) | | 837,811 | | | 855,307 | | | (2,113,036 | ) |
Segment assets | | | 5,872,683 | | | 3,171,771 | | | 13,309,327 | | | 22,353,781 | |
Fixed Assets, net of depreciation | | | 48,245 | | | 103,494 | | | 677,289 | | | 829,028 | |
TELEPLUS WORLD, CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2007 AND 2006 (UNAUDITED)
NOTE 13- SUBSEQUENT EVENTS
None
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Company Overview
Teleplus World, Corp. (the “Company”) is a provider of wireless and telecom products and services across North America. The Company’s wholly-owned subsidiaries include TelePlus Connect, Corp., a competitive local exchange carrier (“CLEC”), which provides landline, long distance and Internet services in Canada under the “Telizon”, “Freedom”, “Avenue” and Liberty brands; and Liberty Wireless, Corp., which operates a virtual wireless network (“MVNO”) selling cellular network access to consumers and distributors in the United States under the “Liberty Wireless” and “MX Mobile” brand names.
The Company was originally incorporated in Nevada as Terlingua Industries, Ltd. on April 16, 1999. This company was formed to engage in online marketing and distribution of organic herbal supplements internationally. Terlingua Industries, Ltd. changed its name on January 27, 2000 to HerbalOrganics.com, Inc.
In March 2003, the Company declared a 10:1 forward stock split. In October 2003, the Company declared a 2.375:1 forward stock split. The effects of the stock split have been retroactively reflected in this report unless otherwise stated.
In September 2003, the Company formed a wholly-owned foreign subsidiary, Teleplus Retail Services, Inc. (“Retail”), a Canadian corporation formed under the laws of the province of Quebec. Retail, in October 2003, acquired a significant amount of assets from, and assumed certain liabilities of, 3577996 Canada, Inc., a Canadian Business Corporation (“3577996”) relating to 3577996’s TelePlus Consumer Services business.
Immediately following the Company’s acquisition of 3577996, in October 2003, Visioneer Holdings Group, Inc. (“Visioneer”) acquired control of the Company. Visioneer and 3577996 were controlled by the same shareholders.
For accounting purposes, the transaction was treated as an acquisition of HealthOrganics.com, Inc. and a recapitalization of 3577996 with accounting treatment similar tot hat used in a reverse acquisition. 3577996 emerged as the accounting acquirer and the results of its operations carryover. The Company acquired $11,327 in cash and assumed $700 in liabilities as a result of the transaction. Additionally, the Company changed its name to TelePlus Enterprises, Inc.
Post-reverse merger, the Company is a provider of wireless and telecommunications services in Canada and the United States of America. The Company’s products include prepaid and postpaid wireless, landline, long distance and Internet services. The Company distributes their products through their websites, third party websites, select distributors in Canada and the United States of America, and through a variety of direct marketing initiatives.
The Company acquired Keda Consulting Corp., a North American telecommunications industry management consulting service company on April 1, 2005; 1523813 Ontario Limited (Freedom Phone Lines), a Bell Canada reseller of landline and long distance services on April 15, 2005; Avenue Reconnect, Inc. a reseller of landline and long distance services and Internet service provider on June 1, 2005; and Telizon, Inc. and 1500536 Ontario, Inc. (One Bill, Inc.), a reseller of landline and long distance service and Internet service provider on July 15, 2005.
On January 13, 2006, Retail, filed in Canada a Notice of Intention to Make a Proposal Under the Bankruptcy and Insolvency Act (Canada) (the “Act”). This was done to divest the Company of its retail division. As a result, Retail was deemed to have made an assignment of its assets to its creditors under the Act and discontinued its operations as of February 12, 2006. The retail operations will no longer be a segment of the Company’s business for the year ending December 31, 2006.
On December 29, 2005 the Company purchased certain assets of Star Number, Inc., a wholly-owned subsidiary of InPhonic, Inc., related to its Liberty Wireless business, including customer lists, the "Liberty Wireless" brand and SNI's rights under certain agreements, the whole effective as of December 31, 2005. The purchased assets have been used and will continue to be used to sell pre-paid and post-paid wireless telecommunications services under the name "Liberty Wireless".
On June 21, 2006, the Company purchased all the issued and outstanding shares of Maximo Impact, Inc. (“Maximo”), a Cleveland, Ohio based company, under certain agreements, the whole effective as of that date. Maximo specializes in marketing and distribution as a Mobile Virtual Network Operator (“MVNO”) in the United States of America on June 21, 2006. As part of this transaction, Maximo launched its own wireless brand called MX Mobile which caters to mass merchandisers, general retailers and c-channel retailers calling on convenience stores and gas stations.
In February, 2006, the Company completed its transition from retail operations to wireless and telecom services reselling.
On October 24, 2006 the Company changed its name to TelePlus World, Corp.
Growth in the United States of America
The Company through its wholly owned subsidiary, Liberty Wireless Corp. (f/k/a Teleplus Wireless, Corp.) (“Liberty Wireless”) is offering wireless prepaid services through its Mobile Virtual Network Operator (“MVNO”) agreement with Sprint/Nextel. Liberty Wireless services are primarily, but not exclusively, catered to the “unbanked” or “prepaid” segment of the market. “Unbanked” customers are those customers who are not able to access the carriers’ offers as they don’t qualify under the carriers’ credit policies. Nonetheless, the “unbanked” segment is the fastest growing segment in the wireless and telecom industry. This segment is currently poorly serviced by the incumbents, thus creating an opportunity for Liberty Wireless to take a substantial share of the market. This market was first developed in Europe, where more than 20 MVNO’s can be found. Virgin Mobile of England and Wireless Maingate of Sweden were among the first group of MVNO’s launched in Europe.
To facilitate the rollout of this service in the United States, the Company acquired:
| · | Certain assets of Star Number, Inc., a wholly-owned subsidiary of InPhonic, Inc. related to its Liberty Wireless business on December 29, 2005, effective December 31, 2005, the third largest wireless reseller on the Sprint PCS network, which provided the Company with an established customer base and strong infrastructure; and |
| | |
| · | Maximo Impact, Inc., (“Maximo”) a Cleveland, Ohio based company specializing in marketing and distribution as a Mobile Virtual Network Operator (“MVNO”) in the United States of America on June 21, 2006. As part of this transaction, Maximo launched its own wireless brand called MX Mobile which caters to mass merchandisers, general retailers and c-channel retailers calling on convenience stores and gas stations. |
Growth in Canada
The Company through its wholly owned subsidiary TelePlus Connect Corp. (“TelePlus Connect”) is offering landline and long distance prepaid services to selected individuals in Canada who cannot obtain basic telecom services from traditional telecom carriers. These individuals are often called the “unbanked”.
To facilitate the rollout of this service in Canada, the Company acquired:
| · | Keda Consulting Corp., a North American telecommunications industry management consulting service company on April 1, 2005 specializing in business development, sales and marketing and operations. Following this acquisition, Keda Consulting Corp. changed its name to TelePlus Connect Corp. and their management took over the operations of the Company’s prepaid landline and long distance telephone service operations; |
| · | 1523813 Ontario Limited (Freedom Phone Lines), a Bell Canada reseller of landline and long distance services on April 15, 2005 headquartered in Ontario, Canada which services over 3,300 customers in the Ontario area, generating approximately $2,500,000 in annual revenues; |
| | |
| · | Avenue Reconnect, Inc. a reseller of landline and long distance services and Internet service provider on June 1, 2005 headquartered in Windsor, Ontario which services over 2,000 residential users primarily in Ontario, generating approximately $1,100,000 in annual revenues; and |
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| · | Telizon, Inc. and 1500536 Ontario, Inc. (One Bill, Inc.), a reseller of landline and long distance service and Internet service provider on July 15, 2005 headquartered in Ontario, Canada which services over 18,000 commercial and residential lines in the Ontario area, generating approximately $12,000,000 in annual revenues. |
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| | Current estimates place the “unbanked “ or “prepaid” market in North America at 9.5% of total households and the market size is estimated at over $ 1 billion. |
Recent Business Developments
In June 2006, the Company acquired Maximo Impact, Inc., (“Maximo”) a Cleveland, Ohio based company specializing in marketing and distribution as a Mobile Virtual Network Operator (“MVNO”) in the United States of America. As part of this transaction, Maximo launched its own wireless brand called MX Mobile which caters to mass merchandisers, general retailers and c-channel retailers calling on convenience stores and gas stations.
In June 2006, Liberty Wireless and PeopleSupport, Inc. (“PSPT”) entered into a three-year customer support agreement. Under the agreement, PSPT will provide customer management, transcription and captioning, accounts receivable management and additional business process outsourcing services from its centers in the Philippines, Costa Rica and the United States of America, as its strategic provider of customer management support.
Principal Products and Services
TelePlus World is a provider of wireless and telecommunications services in Canada and the United States. Our products include prepaid and postpaid wireless, landline, long distance and Internet services. To our wireless users, we also provide a full range of handsets and related accessories.
Distribution
We distribute our products through our websites, third party websites, select distributors in the United States and Canada and through a variety of direct marketing initiatives.
Competitive Overview
The wireless industry is a growing industry of the Telecommunications Sector.
As time passes, wireless phones are becoming more and more commonplace. According to EMC, a leading researcher and publisher of intelligence about wireless markets, there are now more than 1 billion wireless phone subscribers worldwide and 50% of all calls in the world will soon be wireless. IDC estimates the total sales of worldwide mobile phones increased 20% in 2004 to 658 million units. Some key trends that investors should be aware of and important in evaluating the industry’s potential growth include the following:
| · | The cost of acquiring and maintaining a wireless plan has dropped over the years as a result of pricing pressures, promotional events by carriers, and increased customer churn (customer churn is defined as the number of clients who cancel their contracts with the carrier prior to the end of the term); |
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| · | The wireless telecommunications industry is experiencing (and will continue to experience) significant technological change, which has led wireless carriers to upgrade their wireless capabilities and rollout new products and service offerings, such as photos, music, and wireless Internet (Wi-Fi); |
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| · | Wireless phone manufacturers, such as Samsung, LG and Pantech, are now marketing their next generation phones with advanced features; |
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| · | The image of wireless devices has changed from a luxury gadget to a business and entertainment tool. Moreover, the Yankee Group has stated that Americans are now looking at wireless services as a utility rather than a novelty; and |
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| · | Wireless numbers portability, which recently took effect, provides customers with more flexibility when choosing a carrier and increases the rate of new activations, and according to J.D. Power, consumers are increasingly more satisfied with their wireless service, call quality and cost. |
American Wireless Industry
The growing nature of the American wireless industry is illustrated by the following statistics:
| · | In a January 2005 Business Week article, Gartner estimated that 2005 wireless revenues will grow 11% to $122.5 billion; |
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| · | Euromonitor, in a July 2003 report, estimated that in 2003 the retail post-paid wireless industry totaled $3.8 billion, and is expected to reach $5.1 billion by 2007. Atlantic-ACM estimated in February 2003, that the pre-paid retail wireless industry will grow from $4.4 billion in 2003 to $9.5 billion in 2007; |
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| · | The Yankee Group stated in an August 2004 report that 50% of 13 to 17 year olds have a wireless phone, a sizable increase from a 2003 survey in which 33% of teens were reported to have a wireless phone; and |
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| · | According to First Global Research, the domestic wireless market is adding 4 to 5 million, net new subscribers each quarter. |
Canadian Wireless Industry
According to industry data more than half of all Canadians will be mobile phone customers. Canadian currently use more than 12 million wireless phones on a daily basis. According to the Canadian Radio-Television and telecommunications Commission, the wireless industry is a key driver of the Canadian Telecommunications sector, consistently posting double-digit sales gains, recently increasing 13% to over $8 billion. The Canadian Wireless Telecommunications Association estimates that in 2004 there were over 13.6 million wireless subscribers, including 10.4 million postpaid and 3.2 million pre-paid customers.
MVNO Market Overview
Mobile Virtual Network Operators (or MVNO’s), which buy mobile services from established wireless operators and resell the service under their own brand names, were first developed in Europe, where there are currently over 20 MVNO’s including Tele2 and Mobilcom of Germany, Virgin Mobile from the UK and Wireless Maingate from Sweden. The last two companies are believed to be two of the early pioneers in this space. Other companies that have or are developing MVNO offerings in North America include AT&T, Boost, ESPN, Tracfone, Qwest and TelePlus World.
The primary advantage of operating as an MVNO is that such an operation requires much less capital and overhead than the operations of a traditional wireless carrier. An MVNO simply utilizes existing networks from established carriers. However, substantial amounts of monies may be needed to build brand recognition and pay for access to a carrier’s network.
A secondary advantage to retail oriented companies, such as TelePlus, is that an MVNO offering may provide opportunity to expand its overall margins as it picks up incremental revenues at higher margins.
Intellectual Property
Teleplus holds the following trademarks:
| · | In Canada: SimplySellular trademark granted January 7, 2005; |
| · | In the United States: |
| | Trademark Ser. No. 78/326,834 Liberty Wireless for All; Register Number 2,979,533 |
| | Trademark Ser. No. 78/371,483 Liberty Wireless; Register Number 2,928,910 |
Need For Government Approval
Teleplus needs the following government approvals to operate:
| · | Section 214 authorization; and |
| · | FCC Form 499 Registration. |
Employees
Teleplus has a total of 48 employees, most of which are employed on a full-time basis.
Description of Property
TelePlus currently has four locations with its principal office (approximately 3031 square feet) located in Miami, Florida. We also have leased office space in Barrie, Canada (6410 square feet) Miami Lakes, Florida and Westlake, Ohio. The Company pays monthly rent of $9,400 for Barire, $5,676 for Miami $2,000 for Miami Lakes and $2,800 for Westlake. Miami has a lease term of 5 years, Miami Lakes of 2 years while the lease for the Barrie and Westlake location will end in the second half of 2007.
Results of Operations and Financial Condition
Nine Months Ended September 30, 2007 versus September 30, 2006
Total Operating Revenues
The Company generated $16,397,711 of revenues for the nine months ended September 30, 2007 as compared to $19,073,134 for the nine months ended September 30, 2006, a decrease of $2,675,423 or 14%. The decrease in revenue for the nine months ended September 30, 2007 compared to the September 30, 2006 is reflective of the initial loss of wireless customers post acquisition of Liberty Wireless and prior to the full integration of that business. The Company initiated the migration to a new operating platform for the U.S. wireless business segment in June 2007 which is still ongoing at this time. The migration has not met the Company’s expectations and as a result has caused a loss to the current customer base, significantly slowed the ability to acquire new wireless customers and negatively impacted gross margins. The Company is working with the vendor to improve the situation, but the migration will continue over the next few months. The Company in Q3 2007 has taken an impairment to the goodwill based on the Company’s fair value for the U.S. wireless business and is considering various alternatives for this division.
Total Operating Costs and Expenses
Total operating costs and expenses for the nine months ended September 30, 2007 were $17,668,574 as compared to $18,986,957 for the nine months ended September 30, 2006. This represented a decrease of $1,318,383 or 7%. Of these amounts $11,546,026 (70% of revenues) and $12,102,829 (63% of revenues), respectively comprised of costs of services. The other operating costs and expenses includes payroll, professional fees and related expenses of $3,449,752 and $3,093,131, advertising and marketing expenses of $243,009 and $669,977 and other general and administrative expenses of $1,463,178 and $2,156,823 is comparable from 2007 to 2006.
Depreciation and amortization expenses include depreciation on the Company’s fixed assets, amortization on the Company’s intangible assets, not including goodwill, and amortization of the Company’s deferred connection charges. The Company determines the fair value of the undiscounted cash flows annually and sooner if circumstances change and determination is required, to value any impairment on its goodwill, intangible assets and long-lived assets. The intangible assets, not including goodwill are currently being amortized over estimated lives ranging from 2 to 20 years.
Other Income (Expense)
Included in other income (expense) is amortization on the deferred financing fees paid to Cornell Captial Partner, LP in association with the Securities Purchase Agreement and Secured Convertible Debenture entered into with Cornell on December 13, 2005, July 28, 2006 and July 3, 2007. The amortization charge for the nine months ended September 30, 2007 and 2006 was $312,582 and $238,959, respectively. The Company incurred no warrant expense in the nine months ended September 30, 2007 as compared to $182,418 for nine months ended September 30, 2006. The Company also recognized amortization of the debt discount on the convertible debenture of $2,683,788 and $1,932,545 for the nine months ended September 30, 2007 based on the Effective Interest Method calculation, and recognized a gain on the valuation of its derivative liability of $2,958,254 and $1,670,171 respectively.
Interest expense was $2,621,320 compared to $1,515,463 for the nine months ended September 30, 2007 and 2006, respectively. The interest expense is primarily due to the convertible debentures.
Net Income (Loss) from Continuing Operations
The Company reported net loss from continuing operations of $4,839,560, or $0.04 per share on a basic and $0.00 per share on diluted basis for the nine months ended September 30, 2007 versus $2,113,037, or $0.02 per share on a basic and $0.02 per share on diluted basis for the nine months ended Septenber 30, 2006. The loss is attributable to the lower revenue volume, higher implementation costs associated with the migration to the new operating platform and the impact of financing costs in connection with our debt issuances, partially offset by the gain on the fair value adjustment to our derivative liabilities associated to the Cornell debt facility.
Provision for Income Taxes
There was no provision for income taxes for the nine months ended September 30, 2007 and 2006, respectively. There was no provision due to the carryforward of approximately $7,000,000 of net operating losses as of September 30, 2007, that the Company has reserved in valuation allowances against this deferred tax asset.
Three Months Ended September 30, 2007 versus September 30, 2006
Total Operating Revenues
The Company generated $5,695,541 of revenues for the three months ended September 30, 2007 as compared to $5,825,914 for the three months ended September 30, 2006, a decrease of $130,373 or 2%. The decrease in revenue for the quarter ending September 30, 2007 compared to the September 30, 2006 quarter end is reflective of the initial loss of wireless customers post acquisition of Liberty Wireless and prior to the full integration of that business. The Company initiated the migration to a new operating platform for the U.S. wireless business segment in June 2007 which is still ongoing at this time. The migration has not met the Company’s expectations and as a result has caused a loss to the current customer base, significantly slowed the ability to acquire new wireless customers and negatively impacted gross margins. The Company is working with the vendor to improve the situation, but the migration will continue over the next few months. The Company has taken an impairment to the goodwill for the U.S. wireless business and is considering various alternatives for this division.
Total Operating Costs and Expenses
Total operating costs and expenses for the three months ended September 30, 2007 were $6,077,696 as compared to $6,383,547for the three months ended September 30, 2006. This represented decrease of $305,851 or 5%. Of these amounts $4,206,554 (74% of revenues) and $4,135,965 (71% of revenues), respectively comprised of costs of services. The other operating costs and expenses includes payroll, professional fees and related expenses of $1,262,375, and $1,053,730, advertising and marketing expenses of $64,486 and $154,695 and other general and administrative expenses of $214,690 and $719,836.
Depreciation and amortization expenses include depreciation on the Company’s fixed assets, amortization on the Company’s intangible assets, not including goodwill, and amortization of the Company’s deferred connection charges. The Company determines the fair value of the undiscounted cash flows annually and sooner if circumstances change and determination is required, to value any impairment on its goodwill, intangible assets and long-lived assets. The intangible assets, not including goodwill are currently being amortized over estimated lives ranging from 2 to 20 years.
Other Income (Expense)
Included in other income (expense) is amortization on the deferred financing fees paid to Cornell Captial Partner, LP in association with the Securities Purchase Agreement and Secured Convertible Debenture entered into with Cornell on December 13, 2005, July 28, 2006 and July 3, 2007. The amortization charge for the three months ended September 30, 2007 and 2006 was $119,248 and $96,135, respectively. The Company also recognized amortization of the debt discount on the convertible debenture of $1,038,686 and $818,344 for the three months ended September 30, 2007) based on the Effective Interest Method calculation, and recognized a gain on the valuation of its derivative liability of $1,389.244 and $714,149 respectively.
Interest expense was $1,487,851 compared to $794,544 for the three months ended September 30, 2007 and 2006, respectively. The interest expense is primarily due to the convertible debentures.
Net Income (Loss) from Continuing Operations
The Company reported net loss from continuing operations of $2,547,957, or $0.02 per share on a basic and $0.00 per share on diluted basis for the three months ended September 30, 2007 versus net loss of $1,552,507, or $0.02 per share on a basic and $0.01 per share on diluted basis for the three months ended September 30, 2006. The loss is attributable to the lower revenue volume, higher implementation costs associated with the migration to the new operating platform and the impact of derivative expenses associated to the Cornell debt facility.
Liquidity and Capital Resources
During the nine-month period ended September 30, 2007, the balance in cash and cash equivalents decreased by $296,004 compared to a decrease of $841,726 for the nine-month period ended September 30, 2006 from continuing operations.
As of September 30, 2007, the Company had $3,231,958 in current assets primarily consisting of $778,464 in cash and cash equivalent, $1,668,952 in accounts receivable - trade, $424,498 in other accounts receivable and prepaid expenses and other current assets of $267,246.
As of September 30, 2007, the Company had $18,382,266 in current liabilities primarily consisting of $7,702,164 in accounts payable and accrued expenses, $1,200,00 in convertible debenture, $747,070 in the current portion of accrued acquisition obligations and $8,027,730 of derivative liabilities resulting from the Securities Purchase Agreement and Secured Convertible Debenture entered into on December 13, 2005, July 28, 2006 and July 3, 2007. A portion of the derivative liability is being converted to equity upon conversion by Cornell to the Company’s common stock. The balance is adjusted based on market adjustments to fair value on a quarterly basis.
As a result, the Company as of September 30, 2007 has a working capital deficiency of $15,150,308 of which includes approximately $8,000,000 of derivative liability that does not have a cash impact.
Cash flow generated from operating activities and proceeds from capital raises are the Company’s primary contributors in reducing the working capital deficiency and fund future operations.
The decrease in cash for the nine months ended September 30, 2007 was primarily attributable to the expenditures of cash used to acquire businesses of $2,634,182, use of cash for capital expenditures of $19,526 and deferred connection charges of $104,192 offset by the increase in accounts payable and accrued expenses of $2,394,829.
The decrease in cash for the nine months ended September 30, 2006 of was primarily attributable to expenditures of cash used to acquire businesses, $4,836,259 use of cash for capital expenditures of $129,992 offset by the increase in accounts payable and accrued expenses of $2,590,084.
On December 13, 2005, the Company entered into a certain Securities Purchase Agreement (“SPA”) with Cornell, pursuant to which Cornell was issued $9,225,000 in secured convertible debentures dated December 13, 2005 under the SPA. Under the SPA, the Company and Cornell entered into various agreements as described below. The convertible debentures are convertible in whole or in part, at any time and from time to time before maturity at the option of the holder at the lesser of $0.275 or ninety-five percent (95%) of the lowest volume weighted price of the common stock for the thirty trading days immediately preceding such conversion date. The convertible debentures which are secured by certain pledged assets of the Company have a term of three (3) years, have piggy-back registration rights and accrue interest at a rate of ten percent (10%) per annum. In connection with the convertible debentures, the Company issued 1,250,000 shares of common stock as financing fees.
On July 28, 2006, the Company entered into a certain SPA with Cornell Capital Partners, LP (“Cornell”) pursuant to which the Company issued to Cornell $3,000,000 in secured convertible debentures dated as of July 28, 2006. The debentures were fully funded on July 28, 2006, are convertible, in whole or in part, at any time from time to time before maturity at the option of the holder at the lesser of (a) $0.20 or (b) 90% of the lowest volume weighted average price of common stock for thirty trading days immediately preceding the conversion date. The Company has the option to redeem a portion or all of the amounts outstanding under the debentures prior to the maturity date of the debentures. The debentures have a term of three years, piggy-back registration rights and accrue interest at a rate equal to ten percent (10%) per year. The debentures are secured by certain pledged assets of the Company.
In connection with the SPA, the Company also issued Cornell the following warrants to purchase shares of common stock:
a) | 5,000,000 at $0.11; |
b) | 10,000,000 at $0.13; |
c) | 10,000,000 at $0.15; and |
d) | 5,000,000 at $0.18 |
On July 3, 2007, the Company entered into a certain Securities Purchase Agreement ("SPA") with Cornell Capital Partners, LP pursuant to which the Company issued to Cornell Three Million Dollars ($3,000,000) in secured convertible debentures (the "Debentures") of even date with the SPA. The Debentures were fully funded on July 3, 2007. The Debentures are convertible, in whole or in part, at any time and from time to time before maturity at the option of the holder at the lower of (a) $0.035 or (b) ninety-five percent (90%) of the lowest volume weighted average price of common stock for twenty (20) trading days immediately preceding the conversion date. Beginning on August 2, 2007, and continuing on the first Trading Day of each calendar month thereafter, the Company shall make mandatory redemptions ("Mandatory Redemption") consisting of outstanding principal. The principal amount of each Mandatory Redemption shall be equal to $100,000 per calendar month, until all amounts owed under this Debenture have been paid in full. The Debentures have a term of three (3) years, piggy-back registration rights and accrue interest at a rate equal to twelve percent (12%) per year. The Debentures are secured by certain pledged assets of the Company. The Parties have also entered into an Investor Registration Rights Agreement, pursuant to which the Company has agreed, if required by Cornell, to provide certain registration rights under the Securities Act of 1933, as amended, and the rules and regulations thereunder, and applicable state securities laws.
In connection with the SPA the Company also issued Cornell a warrant to purchase 50,000,000 shares of the Company's common stock at an exercise price of $0.03; a warrant to purchase 30,000,000 shares of the Company's common stock at an exercise price of $0.05; and issued 4,000,000 restricted shares of the Company's common stock to Cornell.
Critical Accounting Policies
Critical accounting polices include the areas where we have made what we consider to be particularly subjective or complex judgments in making estimates and where these estimates can significantly impact our financial results under different assumptions and conditions.
We prepare our financial statements in conformity with accounting principles generally accepted in the United States of America. As such, we are required to make certain estimates, judgments and assumptions that we believe are reasonable based upon the information available. These estimate, judgments and assumptions affect the reported amounts of assets and liabilities at the date of the financial statement and the reported amounts of revenue and expenses during the periods presented. Actual results could be different than those estimates.
We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our financial statements:
Principles of Consolidation
The condensed consolidated financial statements include the accounts of the Company and all of its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.
Goodwill and Other Intangible Assets
Under SFAS No. 142, “Goodwill and Other Intangible Assets”. (“SFAS 142”), goodwill and other indefinite-lived intangible assets are no longer amortized but instead are reviewed for impairment annually and on an interim basis if events or changes in circumstances between annual tests indicate that an asset might be impaired. Under SFAS 142, indefinite-lived intangible assets are tested for impairment by comparing their fair values to their carrying values. Testing for impairment of goodwill is a two-step process. The first step requires the Company to compare the fair value of its reporting units to the carrying value of the net assets of the respective reporting units, including goodwill. If the fair value of the reporting unit is less than the carrying value, goodwill of the reporting unit is potentially impaired and the Company then completes Step 2 to measure the impairment loss, if any. The second step requires the calculation of the implied fair value of goodwill by deducting the fair value of all tangible and intangible net assets of the reporting unit from the fair value of the reporting unit. If the implied fair value of goodwill is less then the carrying amount of goodwill, an impairment loss is recognized equal to the difference. Intangible assets that do not have indefinite lives are amortized over their useful lives.
Revenue Recognition
The Company recognizes revenue through the resale of residential and commercial telephone lines. The resale of long distance revenues are recorded at the time of customer usage based upon minutes of use. Basic monthly charges for business and residential customers are billed in advance and recorded as unearned revenue and recognized upon the customer receiving the service.
The Company’s revenue is also generated from the sale of wireless, telephony products and accessories to end-users. The Company recognizes this revenue when the criteria for Staff Accounting Bulletin 101 (and as clarified in Staff Accounting Bulletin 104) is achieved. The criteria are as follows: when persuasive evidence of an arrangement exists; delivery has occurred; the sales price is fixed or determinable; and collectibility is probable.
The Company’s suppliers generally warrant the products distributed by the Company and allow returns of defective products, including those that have been returned to the Company by its customers. The Company does not independently warrant the products that it distributes, but it does provide warranty services on behalf of the supplier.
Accounts Receivable
The Company conducts business and extends credit based on an evaluation of the customers’ financial condition, generally without requiring collateral. Exposure to losses on receivables is expected to vary by customer due to the financial condition of each customer. The Company monitors exposure to credit losses and maintains allowances for anticipated losses considered necessary under the circumstances. The criteria for allowance provision are determined based on historical experience and the Company’s assessment of the general financial conditions affecting its customer base. If the Company’s actual collections experience changes, revisions to the allowance may be required.
Stock-Based Compensation
On December 16, 2004, the Financial Accounting Standards Board (“FASB”) published Statement of Financial Accounting Standards No. 123 (Revised 2004), “Share-Based Payment” (“SFAS 123R”). SFAS 123R requires that compensation cost related to share-based payment transactions be recognized in the financial statements. Share-based payment transactions within the scope of SFAS 123R include stock options, restricted stock plans, performance-based awards, stock appreciation rights, and employee share purchase plans. The provisions of SFAS 123R, as amended, are effective for small business issuers beginning as of the first interim period after December 15, 2005. The Company adopted these provisions on January 1, 2006 and the adoption of this pronouncement did not have a material effect on the condensed consolidated financial statements.
Convertible Instruments
The Company reviews the terms of convertible debt and equity securities for indications requiring bifurcation, and separate accounting, for the embedded conversion feature. Generally, embedded conversion features where the ability to physical or net-share settle the conversion option is not within the control of the Company are bifurcated and accounted for as a derivative financial instrument. (See Derivative Financial Instruments below). Bifurcation of the embedded derivative instrument requires allocation of the proceeds first to the fair value of the embedded derivative instrument with the residual allocated to the debt instrument. The resulting discount to the face value of the debt instrument is amortized through periodic charges to interest expense using the Effective Interest Method.
Derivative Financial Instruments
The Company generally does not use derivative financial instruments to hedge exposures to cash-flow or market risks. However, certain other financial instruments, such as warrants or options to acquire common stock and the embedded conversion features of debt and preferred instruments that are indexed to the Company’s common stock, are classified as liabilities when either (a) the holder possesses rights to net-cash settlement or (b) physical or net share settlement is not within the control of the Company. In such instances, net-cash settlement is assumed for financial accounting and reporting, even when the terms of the underlying contracts do not provide for net-cash settlement. Such financial instruments are initially recorded at fair value and subsequently adjusted to fair value at the close of each reporting period.
Recent Accounting Pronouncements
In July 2006, the FASB issued Interpretation No. 48 (FIN No. 48), “Accounting for Uncertainty in Income Taxes.” This interpretation requires recognition and measurement of uncertain income tax positions using a “more-likely-than-not” approach. FIN No. 48 is effective for fiscal years beginning after December 15, 2006. The adoption of this standard did not have a material effect on the Company’s financial position.
In September 2006, the FASB issued SFAS 157, “Fair Value Measurements.” This standard defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosure about fair value measurements. This statement is effective for financial statements issued for fiscal years beginning after November 15, 2007. Early adoption is encouraged. The adoption of SFAS 157 is not expected to have a material impact on the consolidated financial statements.
In February 2007, the FASB issued FAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities - Including an amendment of FASB Statement No. 115”, (“FAS 159”) which permits entities to choose to measure many financial instruments and certain other items at fair value at specified election dates. A business entity is required to report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. This statement is expected to expand the use of fair value measurement. FAS 159 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years.
Item 3. Controls and Procedures.
The Company is responsible for maintaining disclosure controls and procedures designed to ensure that information required to be disclosed in its Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities Exchange Commission’s rules and regulations, and that such information is accumulated and communicated to its management, including its chief executive officer and chief financial officer, as appropriate, to allow for timely decisions regarding required disclosure.
In designing and evaluating the Company’s disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures and implementing controls and procedures based upon the application of management’s judgment.
The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective and designed to ensure that material information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified in the SEC’s rules and regulations and accumulated and communicated to them as appropriate to allow timely decisions regarding required disclosure.
During 2006 in connection with the Restatements of the Company’s 2005 annual financial statements, the Audit Committee has reevaluated certain disclosure controls and procedures and internal control over financial reporting. As a result, the Audit Committee has established additional protocols for certifying officers, senior management and the Company’s accounting and finance staff to monitor closely new accounting pronouncements that impact the Company’s financial statements. This includes continuing education of its staff including review of new pronouncements and awareness of those pronouncements being discussed, and the evaluation of their impact on the financial statements and management’s discussion and analysis.
Additionally, in 2007 the company has moved its headquarters from Montreal, Quebec to Miami, Florida, all key management positions have been transferred to Miami. The company’s CFO was unable to relocate to Miami. The Company and its former CFO had mutually agreed that the company would hire a new CFO located in Miami and an orderly transition would occur. Effective April 16, 2007, the company announced the hiring of new CFO and director which was confirmed by the board of directors.
On March 8, 2007, the Company received an SEC comment letter concerning an 8-K filed regarding the change of auditors. The Company informed in its January 9, 2007 8-K that in connection with the audit of the Company's 2005 financial statements, and in the subsequent interim period, the only issue raised by the Former Accountant was that at the end of the quarter ended September 30, 2006, the Former Accountant advised the Company of what it believed was an accounting error, that while significant in accounting terms, was not material at the time with regards to the Company’s financial result and could, if not corrected, have an estimated negative impact on the Company’s financial statements and may have caused the Former Accountant to have a disagreement at year end - which if unresolved, could have been mentioned in the Former Accountant’s report. Said error relates to the accounting treatment of conversion of convertible debentures and was discussed with the Company’s Audit Committee.
Subsequent to this disclosure, during the preparation of the Company’s 2006 Financial Statements, management changed its method in accounting for the conversion of debt to equity calculation. Our independent auditors agreed with this adjustment and such adjustments have been made in the year end results for year ending December 31, 2006 and had no impact on the prior year ended December 31, 2005. The Company has reviewed the impact on prior reporting periods and has filed an amendment to both the June 30, 2006 10QSB and September 30, 2006 10QSB.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The following proceedings have been instigated against the Company. The Company does not believe that the following legal proceedings have a materially adverse impact on the Company’s business or on its results of its operations.
Proposed Tax Assessment: 3577996 Canada, Inc. which the Company had acquired substantially all of their assets, is involved in proceedings with the Minister of Revenue of Quebec (“MRQ”). The MRQ has proposed an assessment for the Goods and Services Tax (“GST”) and Quebec Sales Tax (“QST”) of approximately $642,000 (CND $) and penalties of approximately $110,000 (CND $). The proposed tax assessment including penalties is for $322,000 (CND $) for QST and $320,000 (CND $) for GST. In mid to late 2006, the MRQ issued Amended Reassessments after the Company contested. These amounts were reduced (including penalties) to approximately QST $350,000 (CND $) and GST $308,000 (CND $). The Company again contested these Amended Reassessments and believes that certain deductions initially disallowed by the MRQ for the QST are deductible and is in the process of compiling the deductions to the MRQ.
Wrongful Dismissal: A former employee of a subsidiary of the Company, has instigated a claim in Quebec Superior Court in the amount of $90,000 (CND $) against the Company for wrongful dismissal. The Company does not believe the claim to be founded and intends to vigorously contest such claim. The parties are in the discovery stages.
Wrongful Dismissal: There is a claim from three individuals in British Columbia in the amount of approximately $147,000 and the issuance of 510,000 shares of common stock for which a letter of demand has been served to the Company. The Company does not believe the claim to be founded and intends to vigorously contest such claim. No court proceedings have been instituted and the Company is presently in discussions with the aforementioned individuals.
Consulting Fee: On April 13, 2005, a lawsuit was filed in the United States District Court, District of New Jersey (Newark) (Case No. 05-2058) by Howard Salamon d/b/a “Salamon Brothers” (as the plaintiff) against the Company. This matter arises out of an alleged agreement between the plaintiff and the Company. The plaintiff is seeking specific performance of the alleged agreement, monetary damages and a declaratory judgment for the payment of a commission allegedly due to the plaintiff in an amount equal to 10% of all funds received by the Company from Cornell. The Company has filed a counterclaim against the plaintiff seeking rescission of the alleged agreement and a refund of $100,000 paid by the Company to the plaintiff. The Company believes that this lawsuit is without merit, that the plaintiff’s claims are unfounded and that the Company has good defenses against the claims asserted by the plaintiff. The Company also believes that it has good claims for the rescission of the agreement and for the refund of the amount paid to the plaintiff. The Company intends to contest and defend against the plaintiff’s claims. The foregoing notwithstanding, total liability to the Company, should it lose the lawsuit, could reach a maximum of 10% of all funds received by Cornell.
Breach of contract: Former landlord of leased office space in Montreal, Quebec has filed lawsuit in Montreal, Quebec against the Company. The Company effectively terminated the lease March 31, 2007 and is reviewing the merits of said lawsuit and will vigorously defend the case. Company and former landlord have since settled in this case.
The following claim has been instigated by the Company:
On February 1, 2007 the Company’s subsidiary, Teleplus Wireless, Corp. d/b/a Liberty Wireless (“Liberty”) filed a lawsuit against Mobile Technology Services, LLC (“MTS”) alleging that MTS had breached a number of provisions of the Mobile Virtual Network Enabler (“MVNE Agreement”) Services Agreement between Liberty and MTS, despite repeated attempts by Liberty requesting that MTS cure all the breaches under the MVNE Agreement. The lawsuit was filed in the U.S. District Court for the Southern District of Florida. Currently, Liberty has alleged damages in the amount of approximately $975,000. MTS has since filed a counterclaim alleging breach of the MVNE Agreement for failure to pay invoices that have been contested by Liberty. Company and MTS have since settled this case.
Item 2. Changes In Securities.
The following represents the total issuances and/or cancellations of common stock for each description for the nine months ended September 30, 2007:
January 8, 2007 the Company issued 5,555 shares to an employee in connection with bonus earned. Shares were valued at $445.
January 8, 2007 the Company issued 11,111 shares to an employee in connection with bonus earned. Shares were valued at $890.
January 8, 2007 the Company issued 444,000 shares to a non-related third party in connection to services rendered. Shares were valued at $35,520.
January 30, 2007 the Company issued 1,345,895 shares of common stock to Cornell in connection with the conversion of convertible debentures in the amount of $100,000.
February 22, 2007 the Company issued 1,492,537 shares of common stock to Cornell in connection with the conversion of convertible debentures in the amount of $100,000.
March 5, 2007 the Company issued 3,703,704 shares of common stock to Cornell in connection with the conversion of convertible debentures in the amount of $200,000.
March 21, 2007 the Company issued 1,851,852 shares of common stock to Cornell in connection with the conversion of convertible debentures in the amount of $100,000.
March 28, 2007 the Company issued 454,485 shares in connection with bonuses earned by employees. Shares were valued at $36,359.
April 2, 2007 the Company issued 2,500,000 shares of common stock to Cornell in connection with the conversion of convertible debentures in the amount of $135,000.
April 11, 2007 the Company issued 175,000 shares to its directors for services rendered. Shares were valued at $10,500.
April 12, 2007 the Company issued 2,314,815 shares of common stock to Cornell in connection with the conversion of convertible debentures in the amount of $125,000.
April 26, 2007 the Company issued 106,351 shares to a non-related third party in connection to services rendered. Shares were valued at $5,317.
May 17, 2007 the Company issued 4,166,667 shares of common stock to Cornell in connection with conversion of convertible debentures in the amount of $170,000.
May 18, 2007 the Company issued 106,351 shares to a non-related third party in connection to services rendered. Shares were valued at $4,254.
July 03, 2007 the Company issued 4,000,000 shares to Cornell as a fee in connection with the $3,000,000 loan on July 3, 2007. Shares were valued at $120,000.
July 16, 2007 the Company issued 1,470,588 shares of common stock to Cornell in connection with conversion of convertible debentures in the amount of $35,000
September 12, 2007 the Company issued 1,173,709 shares of common stock to Cornell in connection with conversion of convertible debentures in the amount of $25,000.
September 26, 2007 the Company issued 2,808,989 shares of common stock to Cornell in connection with conversion of convertible debentures in the amount of $50,000.
October 11, 2007 the Company issued 2,808,989 shares of common stock to Cornell in connection with conversion of convertible debentures in the amount of $42,000.
October 22, 2007 the Company issued 325,000 shares to its directors for services rendered. Shares were valued at $6,500.
October 31, 2007 the Company issued 1,280,000 shares of common stock to Cornell in connection with conversion of convertible debentures in the amount of $16,000.
Item 4. Submissions Of Matters To A Vote Of Security Holders
None
Item 5. Other Information
None.
(a) Exhibits
31.1 | | Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
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31.2 | | Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
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32.1 | | Certification pursuant to 18 U.S.C. Section 1350 | |
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32.2 | | Certification pursuant to 18 U.S.C. Section 1350 | |
(b) Reports on Form 8-K
The Company filed the following report on Form 8-K during the quarter for with the report is filed.
| 1. | Form 8-K filed on January 9, 2007 to describe the change in registrant’s certifying accountant. On January 5, 2007 Mintz & Partners was dismissed at the Company’s independent auditors by decision of the Audit Committee of the Board of Directors of the Company. PKF, Certified Public Accountants, a Professional Corporation (“PKF”) was engaged on January 8, 2007 as the principal accountant to audit the consolidated financial statements of the Company. The decision was to change accountants was recommended by the Audit Committee of the Board of Directors of the Company and approved by the Board of Directors. |
| 2. | Form 8-K filed on February 13, 2007 to describe the lawsuit filed by the Company’s subsidiary, Liberty Wireless, Corp. against Mobile Technology Services, LLC (“MTS”) alleging that MTS had breached a number of provisions of the Mobile Virtual Network Enabler (“MVNE” Agreement) Services Agreement between Liberty and MTS. |
| 3. | Form 8-K filed on April 9, 2007 to describe an SEC comment letter dated March 8, 2007 concerning the change in auditors and an open dispute concerning the accounting upon the conversion of debt calculation. The Company applied this adjustment to the operating results for the year ended December 31, 2006 and will determine if amended 10QSB filings will be necessary for the prior June 30th and September 30, 2006 filing quarters and to announce resignation and replacement of CFO. |
| 4. | Form 8-K filed on June 4, 2007 to describe the resignation of the COO and director due to health reasons and announce the replacement of Board of Directors. |
| 5. | Form 8-K filed on June 26, 2007 to announce the appointment of Worldwide Stock Transfer, LLC of Teaneck, New Jersey as the Company’s new stock transfer agent. |
| 6. | Form 8-K filed July 3, 2007 to announce the Company has entered into certain Security Purchase Agreement (SPA) with Cornell Capital Partners, LP. in the amount of $3,000,000. The Company issued Cornell $3,000,000 in secured convertible debentures of even date with the SPA and the debentures were fully funded on July 3, 2007. |
| 7. | Form 14C filed September 28, 2007 as preliminary information statement to announce the Company’s intent to increase the authorized shares from 600 million to 1.5 billion. |
| 8. | Form 14C filed September 28, 2007 as definitive information statement to announce the Company’s intent to increase the authorized shares from 600 million to 1.5 billion. |
| 9. | Form 8-K filed on October 19, 2007 to announce the resignation of the General Counsel to pursue other business and professional opportunities. He will continue to serve as a Director on the Company’s Board. |
| 10. | Form S8 filed on October 19, 2007 to supplement the Company’s stock option program with 15 million shares. |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized this 14th day of November 2007.
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| TELEPLUS WORLD, CORP. |
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Marius Silvasan |
| Chief Executive Officer |
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