SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report: (Date of earliest event reported) : May 4th, 2005
Commission File No. 000-49628
TELEPLUS ENTERPRISES, INC.
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(Exact name of registrant as specified in its charter)
Nevada 90-0045023
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
7575 Transcanadienne, Suite 305, St-Laurent, Quebec, Canada H4T 1V6
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(Address of principal executive offices)
514-344-0778
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(Issuer telephone number)
465 St. Jean, Suite 601, Montreal, Quebec, Canada H2Y 2R6
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(Former Name and Address)
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ITEM 2.01 ACQUISITION OR DISPOSITION OF ASSETS.
KEDA CONSULTING ACQUISITION:
On April 4th, 2005, Teleplus Enterprises Inc. ("TelePlus") purchased 100%
of the issued and outstanding shares of Keda Consulting Corp. ("Keda"), an
Ontario Company. Keda has been providing a broad range of management consulting
services to the North American Telecommunications industry for over 10 years,
specializing in Business Development, Sales and Marketing and Operations. At the
time of the transaction Keda had no assets or liabilities.
Immediately following the transaction Keda changed its name to TelePlus
Connect Corp. ("TelePlus Connect") and Keda's management have taken over the
operations of TelePlus' prepaid landline and long distance telephone service
division.
TelePlus purchased Keda from the following shareholders who owned 100% of
the issued and outstanding shares of Keda at the time of TelePlus' purchase:
Steve Kerekes, Melanie Kerekes, Jim Oattes, Grace Debrabandere, Jim Reddon,
Monica Reddon, Tom Davis and Jane Davis (collectively referred to herein as the
"Selling Stockholders"). Neither TelePlus nor its affiliates, directors or
officers or associates of TelePlus' directors or officers had a relationship
with the Selling Stockholders or Keda prior to the purchase. The total
consideration payable for the Keda shares is $20,800,000 CDN (the "Purchase
Price") which is payable to Selling Stockholders on an earn-out basis based on
the achievement by TelePlus Connect of specific EBITDA benchmarks during the
next 48 months as set forth below.
TelePlus has the right to pay all or a portion of the Purchase Price by
issuing shares of its common stock to the Selling Stockholders, in which event
the Selling Stockholders have irrevocably, jointly and severally, authorized and
directed TelePlus to sell said shares in the public market pursuant to an
effective registration on Form SB-2 in order to fulfill this provision, and
provided in any event that said shares shall be sold as soon as possible by such
means and that, after giving effect to such sales, TelePlus shall have paid to
the Selling Stockholders an aggregate of $20,800,000 CDN in cash.
The consideration payable to the Selling Stockholders for their Keda
shares shall be allocated, paid and satisfied by payment to the Selling
Stockholders by TelePlus of an amount payable based upon TelePlus Connect
achieving each $25,000 CDN increment in monthly EBITDA (an "EBITDA Target")
until the earlier of: (a) TelePlus Connect has achieved $400,000 CDN in monthly
EBITDA; or (b) 51 months have passed from the date of this Agreement. The amount
payable (the "Purchase Price Installment Payment") upon TelePlus Connect
achieving each EBITDA Target shall be an amount equal to 4.3333 times the EBITDA
for the month in which the applicable EBITDA Target has been achieved, less the
amount of EBITDA for the month during which any previous EBITDA Target has been
achieved, multiplied by 12. In the event that the Purchase Price Installment
Payment based on monthly EBITDA of $400,000 CDN has not been paid to the Selling
Stockholders prior to the date which is 48 months from the Closing Date,
TelePlus shall pay to the Selling Stockholders a pro rated portion of any
balance of consideration payable, if any, based on the monthly EBITDA for the
51st month following the Closing Date. Each Purchase Price Installment Payment
payable to the Selling Stockholders shall be paid as follows:
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(i) a minimum of thirty per cent (30%) of the Purchase Price Installment
Payment shall be paid to the Selling Stockholders on or before the
date which is fifteen (15) calendar days following the end of the
month in which any EBITDA Target is satisfied; and
(ii) the balance of the applicable Purchase Price Installment Payment
shall be paid within six (6) months from the end of the month in
which any EBITDA Target is satisfied.
TelePlus has also covenanted and agreed to cause TelePlus Connect to
satisfy any shortfall in the amounts due under the foregoing paragraph (ii) by
making quarterly (quarterly meaning every three months after the applicable due
date in paragraph (ii) above until paid in full) distributions to the Selling
Stockholders out of the Distributable Net Income of TelePlus Connect. In the
event the amounts due under the foregoing paragraphs (i) and (ii) above are not
paid and received by the Selling Stockholders when due, interest shall accrue
and be payable monthly at a rate of six per cent (6%) per annum on the overdue
amount(s).
If during the first 6 months of any payment period of a Purchase Price
Installment Payment the average EBITDA of TelePlus Connect for such 6 months
falls below 70% of the EBITDA Target associated with such Purchase Price
Installment Payment, the amount of consideration payable applicable to such
period shall be adjusted to be such amount multiplied by the percentage of the
EBITDA Target achieved on average.
TelePlus has also agreed to provide financing to TelePlus Connect
following Closing in accordance with such financing contribution schedule, to a
maximum amount of $8,343,000 CDN, to be contributed by up to $3,921,500 CDN in
shares of the Purchaser and the balance in cash, provided that TelePlus Connect
has at all times achieved and maintained 70% or more of the then applicable
EBITDA target. For greater certainty, in the event that TelePlus Connect's
EBITDA is at any time less than 70% of the then applicable EBITDA target,
TelePlus will have no obligation to provide TelePlus Connect with such
financing. TelePlus Connect shall have a 90 day period in which to cure any
failure to achieve and maintain 70% or more of the then applicable EBITDA target
and, in the event that TelePlus Connect cures such failure to thereafter achieve
and maintain 70% or more of the then applicable EBITDA target during such time,
TelePlus' obligation to provide financing to TelePlus Connect in accordance with
the Agreement shall be renewed.
FREEDOM PHONE LINE ACQUISITION:
Immediately following the acquisition of Keda, TelePlus through its wholly
owned subsidiary TelePlus Connect purchased on April 4th, 2005, 100% of the
issued and outstanding shares of 1523813 ONTARIO LIMITED d.b.a. Freedom Phone
Lines ("Freedom"), an Ontario Company. At the time of the transaction Freedom
had total assets of $347,121 CDN (comprised of $231,274 cash, $85,475 accounts
receivable, $3,291 prepaid expenses and deposits and $27,081 of fixed and other
assets) and total liabilities of $320,792 CDN (comprised of $265,760 accounts
payable and $55,032 deferred revenue payable).
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Immediately following closing Freedom was rolled into TelePlus Connect and
its management joined TelePlus. Freedom currently services 3,300 customers in
Ontario, Canada with local and long distance prepaid telephone services.
TelePlus purchased Freedom from Derek Hooper who owned 100% of the shares of
Freedom prior to the acquisition (referred to herein as the "Seller"). Neither
TelePlus nor its affiliates, directors, or officers or associates of TelePlus'
Directors or officers had a relationship with the Seller or Freedom prior to the
purchase. TelePlus issued to the Seller a combination of cash and stock for the
purchase of 100% of the shares of Freedom.
The aggregate purchase price (the "Freedom Purchase Price") payable by
TelePlus to the Seller for the Freedom Shares shall, subject to adjustment in
accordance with the Agreement, be a maximum of $1,000,000 in lawful money of
Canada, which amount is payable as follows:
(a) $600,000 CDN paid in cash to the Seller at the Time of Closing;
(b) through the issuance to the Seller at the Time of Closing of that
aggregate number of Teleplus Shares as is equal to $400,000 CDN
divided by the average closing price of the Teleplus shares on the
OTCBB for the five business days immediately preceding the Closing
Date.
DESCRIPTION OF THE BUSINESS AND PRINCIPAL PRODUCTS
o Keda Consulting Corp. provides a broad range of management
consulting services to the North American telecommunications
industry, specializing in business development, sales/marketing, and
operations. As part of the acquisition Keda has changed its name to
TelePlus Connect Corp. and Keda's management has taken over the
operations of TelePlus' prepaid landline and long distance telephone
service operations. TelePlus is expected to benefit from Keda's and
Freedom's management teams which have much experience in the
telecommunications industry. The Company believes a seasoned and
experienced management team, familiar with all aspects of the
rapidly growing and changing telecommunications business, is a key
strategic asset.
o Freedom Phone Lines, headquartered in Ontario, Canada, is a Bell
Canada reseller of landline and long distance services, which
services over 3,300 customers in the Ontario area. Through the
acquisition of Freedom, TelePlus now offers prepaid landline, long
distance and internet services to selected individuals in Canada who
cannot obtain basic telecom services from traditional telecom
carriers. These individuals are often called the "unbanked". Current
estimates place the "unbanked" market in North America at 9.5% of
total households and the market size is estimated at over $1
billion.
NO DEPENDENCE ON ONE OR A FEW CUSTOMERS
Neither Keda nor Freedom is currently dependent on any one customer.
However the businesses of Keda and Freedom are dependent on 1 supplier, Bell
Canada which currently represents over 90% of Keda & Freedom's total costs.
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PATENTS, TRADEMARKS & LICENSES
Keda & Freedom do not own any patents, trademarks, licenses or other
intellectual property rights.
NO NEED FOR GOVERNMENT APPROVAL
Keda & Freedom do not need any government approval to operate their business.
EMPLOYEES
Keda & Freedom employ a total of less than 10 employees most being full time.
DESCRIPTION OF PROPERTY
Keda currently has no lease for any property. Freedom currently has 1 lease in
place for its corporate office in Bowmansville, Ontario. The cost of such lease
is $1485.57CDN (tax included) per month and is in place for a period of 13
months.
LEGAL PROCEEDINGS
As of the date of filing of this report, neither Keda nor Freedom was
neither a party to nor aware of any legal proceedings involving any of them.
RELATED PARTY TRANSACTIONS
As part of the respective purchase transactions TelePlus Connect executed
employment agreements with all former key Keda & Freedom executives and
managers.
RISKS:
Business Risk:
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o Churn Risk
The customers in this marketplace have a higher propensity to move or
cancel service than the general residential market.
o Product Replacement
In the future, there is the potential for wireless technology to be a
replacement for landline technology.
o Competition
Currently there are approximately 50 small competitors in the Canadian
marketplace. The barrier to entry in this market is financial and
operating system related and new competitors may surface in the future.
o Price Erosion
As competitors enter the market and attempt to secure marketshare, there
will be the threat of price reductions.
o Integration Challenges
Teleplus' plan is to integrate all the acquisitions onto a single
platform. Failure to accomplish this in an organized, coordinated fashion
could result in a loss of customers
o Technology
New technology could potentially replace landline as a technology for the
reconnect market. If this new technology (i.e., VOIP) is not regulated
then the carriers would have the ability to enter the market.
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Competition
There are currently approximately fifty competitors in the Canadian market,
ranging from 100 to 6,500 customers in size. All but a handful of these
competitors are regional. Freedom Phone Lines is one of the larger players in
the market and is one half the size of the largest provider in the Canadian
market. Freedom has recently expanded its serving areas to include western
Canada and will be entering the East coast market by the end of this summer.
Teleplus Connect's business plan to consolidate the players in this industry
will drastically change the landscape of the marketplace in Canada.
ITEM 8.01 OTHER EVENTS.
As a result of the purchase of Keda & Freedom, Marius Silvasan, TelePlus' Chief
Executive Officer, was appointed President and Chief Executive Officer of
TelePlus Connect.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.
Financial Statements of Keda & Freedom.
(a) Financial Statements of Businesses Acquired - To be Provided on later Date
(b) Pro Forma Financial Information - To be Provided on later Date
(c) Exhibits:
10.1 Stock Purchase Agreement Keda
10.2 Stock Purchase Agreement Freedom
10.3 Amendment to Stock Purchase Agreement Freedom
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Signatures
Pursuant to the requirement 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.
Teleplus Enterprises, Inc.
May 4, 2005 /s/ Marius Silvasan
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Marius Silvasan
Chief Executive Officer
May 4, 2005 /s/ Robert Krebs
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Robert Krebs
Chief Financial Officer
May 4, 2005 /s/ Kelly McLaren
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Kelly McLaren
President & COO