SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
Ammendment No. 1
Current Report
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report: (Date of earliest event reported) : September 22nd, 2005
Commission File No. 000-49628
TELEPLUS ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
Nevada 90-0045023
- ---------------------------------------- ------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
7575 Transcanadienne, Suite 305, St-Laurent, Quebec, Canada H4T 1V6
- --------------------------------------------------------------------------------
(Address of principal executive offices)
514-344-0778
--------------------------------------
(Issuer telephone number)
465 St. Jean, Suite 601, Montreal, Quebec, Canada H2Y 2R6
- --------------------------------------------------------------------------------
(Former Name and Address)
This amended Form 8-k (to 8-k filed 20 July 2005) is filed to provide the
audited financial statements of Telizon, Inc ("Telizon"), recently acquired by
TelePlus Connect Corp ("TelePlus Connect"), a fully owned subsidiary of TelePlus
Enterprises, Inc. ("TelePlus"). Also included in this amended pro forma
financials between Telizon and TelePlus.
2
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.
Item 9.01 is amended in its entirety to read as follows:
Financial Statements of Telizon.
3
(a) Financial Statements of Businesses Acquired
Auditor's Report
To the Shareholders of
Telizon Inc.
We have audited the consolidated balance sheet of Telizon Inc. as at June 30,
2005 and the consolidated statements of operations and retained earnings and
cash flows for the eleven months then ended. These consolidated financial
statements are the responsibility of the company's management. Our
responsibility is to express an option on these consolidated financial
statements based our audit.
We conducted our audit in accordance with Canadian generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the consolidated financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall consolidated
financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the company as at June 30, 2005 and
results of its operations and its cash flows for the eleven months then in
accordance with Canadian generally accepted accounting principles.
BDO Dunwoody LLP
Chartered Accountants
Barrie, Ontario
August 12, 2005
4
Telizon Inc.
Consolidated Balance Sheet
June 30, July 31,
2005 2004
-------------- --------------
(note 9)
Assets
Current
Cash (note 1) $ 756,859 $ 1,157,063
Accounts receivable 1,282,435 1,468,160
Unbilled accounts receivable 238,949 310,232
Income taxes recoverable 24,915 5,233
Prepaid expenses 50,574 6,106
-------------- --------------
2,353,732 2,946,794
-------------- --------------
Capital assets (note 2) 133,278 235,079
-------------- --------------
Future income taxes (note 8) 41,400 38,400
-------------- --------------
$ 2,528,410 $ 3,220,273
-------------- --------------
Liabilities and Shareholders' Equity
Current
Accounts payable and accrued charges $ 1,590,332 $ 2,275,715
Unearned revenue 433,315 440,376
-------------- --------------
2,023,647 2,716,091
-------------- --------------
Shareholders' equity
Share capital (note 3) 900 900
Retained earnings 503,863 503,282
-------------- --------------
504,763 504,182
-------------- --------------
$ 2,528,410 $ 3,220,273
============= ==============
The accompanying summary of significant accounting policies and notes are an
integral part of these financial statements
5
Telizon Inc.
Consolidated Statement of Operations
and Retained Earnings
For the
eleven month For the year
period ended ended
June 30, July 31,
2005 2004
-------------- --------------
(note 9)
Revenue $ 13,053,273 $ 13,525,472
Direct costs 9,365,111 9,835,482
-------------- --------------
Gross margin 3,688,162 3,689,990
-------------- --------------
Expenses
Advertising and promotion 20,320 47,105
Bad debs 46,712 51,567
Bank charges (Interest Income) (26,993) (26,530)
Billing system 51,788 79,251
Commissions 159,897 215,252
Insurance 43,241 45,703
Office 213,626 261,428
Professional fees 72,552 33,821
Repairs and maintenance 13,147 16,559
Salaries and benefits 1,328,097 1,752,016
Subcontractors 147,177 405,269
Telephone 6,238 19,145
Travel and entertainment 9,719 18,871
Utilities 1,201 3,424
Vehicle 3,030 8,108
Loss (gain) on disposal of capital assets 7,880 (1,532)
-------------- --------------
2,097,632 2,929,457
-------------- --------------
Income from operations before other items 1,590,530 760,533
-------------- --------------
Amortization 131,721 307,678
Other expenses (note 4) 32,699 225,438
Management fees and bonuses 1,421,729 140,000
-------------- --------------
Income before income taxes 4,381 87,417
-------------- --------------
Income taxes (note 8)
Current 6,800 59,033
Future (3,000) (40,000)
3,800 19,033
-------------- --------------
Net income for the period 581 68,384
-------------- --------------
Retained earnings, beginning of period 503,282 434,898
============= ==============
Retained earnings, end of period $ 503,863 $ 503,282
The accompanying summary of significant accounting policies and notes are an
integral part of these financial statements
6
Telizon Inc.
Consolidated Statement
of Cash Flows
For the
eleven month For the year
period ended ended
June 30, July 31,
2005 2004
-------------- --------------
(note 9)
Cash flows from operating activities
Net income for the period $ 581 $ 68,384
Adjustments for
Amortization 131,721 307,678
Loss (gain) on disposal of capital assets 7,880 (1,532)
Future income taxes (3,000) (40,000)
-------------- --------------
137,182 334,530
Charges in non - cash working capital balances
Accounts receivable 185,725 (319,127)
Unbilled accounts receivable 71,283 (72,620)
Income taxes recoverable (19,682) (5,233)
Prepaid expenses (44,468) 39,796
Accounts payable and accrued charges (685,383) 187,147
Income taxes payable -- (34,594)
Unearned revenue (7,061) 56,848
-------------- --------------
(362,404) 186,747
Cash Flows from investing activities
Proceeds on disposal of capital assets 4,476 55,163
Purchase of capital assets (42,276) (129,646)
-------------- --------------
(37,800) (74,483)
-------------- --------------
Increase (decrease) in cash during the period (400,204) 112,264
Cash, beginning of period 1,157,063 1,044,799
-------------- --------------
Cash, end of year period $ 756,859 $ 1,157,063
============= ==============
Additional information
Income taxes paid of net of refunds received $ 26,490 $ 98,198
============= ==============
The accompanying summary of significant accounting policies and notes are an
integral part of these financial statements
7
Telizon Inc.
Summary of Significant Accounting Policies
For the eleven months ended June 30, 2005
- --------------------------------------------------------------------------------
Nature of Business Telizon Inc., ("Telizon" or "the company") is a local
and long distance reseller providing commercial
telephone services at discounted rates to customers in
Simcoe and Quinte Counties. It is also an internet
service provider
Basis of Consolidation The consolidated financial
statements of the company have been prepared in
accordance with Canadian generally accepted accounting
principles, on a basis consistent with that of the
preceding year
Basis of Presentation The consolidated financial statements of Telizon Inc.
include the accounts of Telizon Inc. and Telizon
Internet Services Inc. ("TISI"), a wholly-owned
subsidiary. All intercompany balances and transactions
are eliminated upon consolidation.
Capital Assets Capital assets are recorded at cost less accumulated
amortization. Amortization is provided on the
straight-line basis over three years commencing when the
asset is placed into service.
Future Income Taxes Future income tax assets and liabilities are recognized
for the future income tax consequences attributable to
differences between the financial statement carrying
amounts of existing assets and liabilities and their
respective income tax bases. Future income tax assets
and liabilities are measured using the enacted tax rates
expected to apply to taxable income in the years in
which those temporary differences are expected to be
recovered or settled. The effect on future income tax
assets and liabilities of a change in tax rates is
recognized in operations in the year in which the change
occurs.
Use of Estimates The preparation of financial statements in accordance
with Canadian generally accepted accounting principles
requires management to make estimates and assumptions
that affect the reported amounts of assets and
liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the
period. Actual results could differ from managements
best estimates as additional information becomes
available in the future.
Revenue Recognition The company records revenue using the following recognition
policies:
a.) The resale of long-distance revenues are recorded at
the time of customer usage based upon minutes of use.
b.) Basic monthly charges for business lines are billed
in advance and revenue is recognized when the customer
receives service.
8
Telizon Inc.
Summary of Significant Accounting Policies
For the eleven months ended June 30, 2005
- --------------------------------------------------------------------------------
Direct Costs Direct costs include network costs that consist of the
cost of long distance services, processing costs, line
access and usage costs. These costs are recognized when
incurred. From time to time, the company negotiates
adjustments to rates charged in prior periods by its
carriers. Reduction to these rates is recorded when the
adjustment is agreed and credited by the carrier.
Financial Instruments The company carries various forms of
financial instruments. Unless otherwise noted it is
management's option that the company is not exposed to
significant interest, currency or credit risks arising
from these financial instruments. The fair values of
these financial instruments approximate their carrying
values.
- --------------------------------------------------------------------------------
9
Telizon Inc.
Notes to the Consolidated Financial Statements
For the eleven months ended June 30, 2005
- --------------------------------------------------------------------------------
1. Cash
The company's bank accounts are held at three chartered banks. Interest is
charged at a variable rate dependant on the monthly minimum balances.
- --------------------------------------------------------------------------------
2. Capital Assets
June 30, 2005 July 31, 2004
Accumulated ------------------ -------------------
Cost Amortization Net Book Value Net Book Value
------------------ ------------------- ------------------ -------------------
Centrex and multi-frequency lines $ 424,314 $ 395,259 $ 29,055 $ 55,329
Computer hardware 239,236 191,628 47,608 71,751
Computer Software 100,582 71,262 29,320 24,159
Internet access equipment 83,384 75,156 8,228 29,475
Equipment and Furniture 189,454 175,575 13,879 44,432
Leasehold Improvements 21, 193 16,005 5,188 9,933
------------------ ------------------- ------------------ --------------------
$ 1,058,163 $ 924,885 $ 133,278 $ 235,079
------------------ ------------------- ------------------ --------------------
- -----------------------------------------------------------------------------------------------------------------
3. Share Capital
Authorized
Unlimited number of common shares
Issued: June 30, 2005 July 31, 2004
------------------ --------------------
9 Common shares $ 900 $ 900
------------------ --------------------
10
Telizon Inc.
Notes to the Consolidated Financial Statements
For the eleven months ended June 30, 2005
- --------------------------------------------------------------------------------
4. Other Expenses
The company has incurred other expenses during the year as follows:
June 30, 2005 July 31, 2004
------------------ --------------------
CRTC contribution payments $ 32,699 $
52,842
Restructuring - 149,596
Retail Sales Tax Audit - 23,000
------------------ --------------------
$ 32,699 $ 225,438
------------------ --------------------
- --------------------------------------------------------------------------------
5. Operating Leases
The minimum annual lease payments required over the next two years for
equipment and premises leases are as follows:
2006 $ 62,197
2007 87,386
- --------------------------------------------------------------------------------
6. Related Party Transactions
In the previous year, the company concluded an agreement with One Bill Inc.
("One Bill") under which One Bill would provide a license for Telizon for the
use of certain billing software.
During the period, the company has reflected a charge of $38,916 (2004 -
$58,531) for the use of the software, which is included in the billing system
expense.
One Bill is owned by three shareholders of Telizon representing 45% of its
ownership.
- --------------------------------------------------------------------------------
7. Contractual Commitments
Telizon Internet Services Inc., has entered into contracts with Bell Canada
("Bell"). The details of the contracts are as follows:
Master Wholesale Agreement
Under the Master Wholesale Agreement, Bell through TISI, will support Telizon
Inc.'s internet customers by providing a dial-up network, the necessary computer
hardware and software, a customer call centre and technical support. The initial
term of the agreement is three years commencing October 15, 2003 and terminating
October 15, 2006. TISI has the option to renew for successive periods of one
year each.
11
Telizon Inc.
Notes to the Consolidated Financial Statements
For the eleven months ended June 30, 2005
- --------------------------------------------------------------------------------
7. Contractual Commitments (continued)
TISI has committed to Bell to achieve a minimum monthly volume of 3,000 user
months or 108,000 user months over the initial term at the initial rate. The fee
structure for payment to Bell per user month is as follows:
Volume of End Users Per end User per
month $
- ------------------------------------------------------------ -------------------
Up to 5,000 end users 10.50
5,001 - 10,000 12.50
If greater than 10,000 users in total:
5,001 - 20,000 end users 12.25
If greater than 20,000 users in total:
5,001 - 30,000 end users 12.00
If greater than 30,000 users in total:
Over 5,001 end users 11.75
- ------------------------------------------------------------ -------------------
Since the inception of this contract TISI has provided 59,230 user months.
Private Label Internet Service Agreement
Under the Private Label Internet Service Agreement, TISI will provide Bell with
Back-Office, a customer call centre and report management services. The initial
term of the agreement is three years commencing October 15, 2003 and terminating
October 15, 2006. TISI has the option to renew for successive periods of one
year each.
The fee structure of TISI per user month is as follows:
Aggregate # of users per month Charge/user $
- ------------------------------------------------------------ -------------------
0 - 10,000 5.00
10,001 - 20,000 4.90
20,001 - 30,000 4.80
30,001 + 4.70
- ------------------------------------------------------------ -------------------
Bell has committed to a minimum of 300,000 user months at the entry level rates
over the initial terms. This volume indicates the commitment of 108,000 user
months from TISI to Bell required under the Master Wholesale Agreement.
Since the inception of this contract Bell has provided no users months other
than those provided by TISI.
Both contracts will be settled at the end of the contract period.
- --------------------------------------------------------------------------------
12
Telizon Inc.
Notes to the Consolidated Financial Statements
For the eleven months ended June 30, 2005
- --------------------------------------------------------------------------------
8. Income Taxes
The combined basic Federal and Provincial income tax rate and surtax for 2005 is
18.6% (2004 -20.4%). The company's income tax provision is calculated as
follows:
June 30, 2005 July 31, 2004
------------------ --------------------
Income before income taxes $ 4,381 $ 87,417
Amortization in excess of CCA 20,193 180,682
Non-deductible expenses 4,092 11,690
Disposal of capital assets 7,880 9,273
------------------ --------------------
$ 36,546 $ 289,062
------------------ --------------------
Income taxes current $ 6,800 $ 59,033
------------------ --------------------
The components of the future income tax accounts are as follows:
June 30, 2005 July 31, 2004
------------------ -------------------
Future income tax assets
Capital assets $ 41,400 $ 38,400
------------------ -------------------
- --------------------------------------------------------------------------------
9. Subsequent Event
Effective June 30, 2005 the company has been sold. Accordingly, the figures
presented for the current period reflect operations for the eleven months ended
June 30, 2005 and the comparative figures reflect operations for the year ended
July 31, 2004.
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED AUDITORS ON RECONCILIATION FROM CANADIAN
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES TO UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES
To the Board of Directors of Telizon Inc.
The consolidated balance sheets of Telizon Inc. (the "Company") as of June 30,
2005 and July 31, 2004, and the related consolidated statements of operations
and retained earnings and cash flows for the periods then ended were prepared in
conformity with accounting principles generally accepted in Canada and reported
upon by BDO Dunwoody LLP (Barrie Office) who expressed an opinion without
reservation on these statements in their reports dated August 12, 2005 and
February 10, 2005.
We have compared the Canadian generally accepted accounting principles disclosed
as having being used in the preparation of the Telizon Inc. consolidated
financial statements, as reported upon by BDO Dunwoody LLP (Barrie Office), with
those that would be applicable under United States generally accepted accounting
principles. This supplemental information is the responsibility of the Company's
management. Our responsibility is to express an opinion on the "Reconciliation
of Canadian and United States Generally Accepted Accounting Principles
("GAAP")".
13
In our opinion, such supplemental information is fairly stated in all material
respects, when considered in relation to the basic consolidated financial
statements expressed in Canadian dollars of Telizon Inc. as of and for the
periods ended June 30, 2005 and July 31, 2004, taken as a whole.
We have not audited or reviewed the consolidated financial statements of Telizon
Inc. for the above periods and accordingly do not express any opinion on the
financial statements for those periods.
Toronto, Canada "Mintz & Partners LLP"
September 9, 2005 Chartered Accountants
Reconciliation of Canadian and United States generally accepted accounting
principles ("GAAP")
The consolidated financial statements of Telizon Inc. have been prepared in
accordance with generally accepted accounting principles ("GAAP") in Canada.
Except as set out below, these financial statements also comply, in all material
aspects, with accounting principles generally accepted in the United States.
Differences between Canadian and U.S. GAAP and additional disclosures.
a/ Recent Accounting Pronouncements
U.S. GAAP (Securities and Exchange Commission Staff Accounting Bulletin
74) requires that recently enacted pronouncements that may have an impact
on financial statements be discussed and the impact if known , disclosed .
Accordingly under U.S. GAAP, the following disclosures are required:
In November 2004, the FASB ratified the Emerging Issues Task Force
("EITF") consensus on Issue 03-13, Applying the Conditions in Paragraph 42
of FASB STATEMENT NO 144, "Accounting for the impairment or disposal of
Long - Lived ASSETS," in Determining Whether to Report Discontinued
Operations, which is effective for us at the beginning of fiscal 2005. The
Adoption of the new pronouncements will not have a material impact on our
financial position or results of operations.
In May 2005, the FASB issued SFAS No. 154 "Accounting changes and Error
Corrections" ("SFAS No.154") which supersedes APB Opinion No. 20,
"Accounting Changes" and SFAS No. 3 "Reporting Accounting Changes in
Interim Financial Statements". SFAS No. 154 changes the requirements for
accounting and reporting of changes in accounting principle. The statement
requires the retroactive application to prior periods' financial
statements of changes in accounting principles, unless it is impracticable
to determine either the period specific effects or the cumulative effects
of the change. SFAS No.154 does not change the guidance of reporting the
correction of an error in previously issued financial Statements or the
change in accounting estimate. SFAS No.154 is effective for accounting
changes and Corrections of errors made in fiscal years beginning after
December 15, 2005. The company does not believe SFAS No. 154 will have a
significant impact on its consolidated financial position or result of
operations.
b/ Advertising
Costs incurred in connection with advertising are charged to expense as
incurred. Advertising expense was approximately $15,000 and $41,000 for
2005 and 2004, respectively.
c/ Accounts Receivable
The consolidated financial statements include accounts receivable, net of
an allowance of doubtful accounts. In accordance with U.S. GAAP the
allowance for doubtful accounts should be separately disclosed in the
financial statements. Accordingly the following information is presented.
14
2005 2004
----------- ------------
Accounts receivable $1,299,124 $1,484,218
Less: Allowance for doubtful accounts ( 16,689) ( 16,058)
------------ -----------
Net accounts receivable under U.S. GAAP $1,282,435 $1,468,160
========== ==========
d/ Differences in various accounting terms used in Canadian GAAP and U.S. GAAP
In Canadian GAAP some of the accounting terms used differ from U.S. GAAP. The following is a summary:
------------------------------------------------------- -----------------------------------------------------
Canadian GAAP U.S. GAAP
------------------------------------------------------- -----------------------------------------------------
Amortization of property and equipment Depreciation of property and equipment
------------------------------------------------------- -----------------------------------------------------
Future income taxes Deferred income taxes
------------------------------------------------------- -----------------------------------------------------
Capital Assets Property and Equipment
------------------------------------------------------- -----------------------------------------------------
Changes in non - cash working capital balances Changes in non -cash operating items
------------------------------------------------------- -----------------------------------------------------
15
(b) Pro Forma Financial Information
TELEPLUS ENTERPRISES INC
PRO-FORMA INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 2004
Teleplus Consolidated
Enterprise Telizon Pro - forma
Inc. Inc. Adjustments Pro-forma
Net Revenues 12,180,501 10,846,619 - 23,027,120
Cost of revenues 8,882,478 7,840,536 - 16,723,014
---------------------------------------------------------------- ---------------
Gross Margin 3,298,023 3,006,082 -- 6,304,105
General, Administrative and selling 3,975,318 2,779,849 -902,319 (NOTE 3) 5,852,848
---------------------------------------------------------------- ---------------
Income (loss) before interest, income taxes,
Depreciation and amortization -677,295 226,233 902,319 451,257
Depreciation of property and
Equipment 267,300 185,684 -- 452,984
Amortization of intangible assets 57,471 0 -- 57,471
Interest Expense 71,904 0 -- 71,904
---------------------------------------------------------------- ---------------
Income (loss) before income taxes -1,073,970 40,549 902,319 -131,102
Provision for income taxes 0 9,880 180,464 (NOTE 3) 190,344
---------------------------------------------------------------- ---------------
Net income (loss ) -1,073,970 30,669 721,855 -321,446
---------------------------------------------------------------- ---------------
Net income (loss) per share -0.02 -0.01
================= ===============
Weighted average shares
outstanding
72,459,817 72,459,817
================= ===============
16
TELEPLUS ENTERPRISES INC
PRO-FORMA INCOME STATEMENT
FOR THE SIX MONTH PERIOD ENDED JUNE 30, 2005
Teleplus Consolidated
Enterprise Telizon Pro - forma
Inc. Inc. Adjustments Pro-forma
Net Revenues 6,418,799 5,788,591 -- 12,207,390
Cost of revenues 4,445,166 4,153,043 -- 8,598,209
- ----------------------------------------------------------------------------------------- -------------
Gross Margin 1,973,633 1,635,549 -- 3,609,182
General, Administrative and selling 2,881,082 1,575,193 -652,473 3,803,802
Net Revenues 6,418,799 5,788,591 -- 12,207,390
Cost of revenues 4,445,166 4,153,043 -- 8,598,209
- ----------------------------------------------------------------------------------------- -------------
Gross Margin 1,973,633 1,635,549 -- 3,609,182
General, Administrative and selling 2,881,082 1,575,193 -652,473 3,803,802
- ----------------------------------------------------------------------------------------- -------------
Income (loss) before interest, income taxes,
Depreciation and amortization -907,449 60, 356 652,473 -194,620
Depreciation of property and
equipment 189,929 58,413 -- 248,342
Amortization of intangible assets 138,431 0 -- 138,431
Interest Expense 90,041 0 -- 90,041
- ----------------------------------------------------------------------------------------- -------------
Income (loss) before income taxes -1,325,850 1,943 652,473 -671,434
Provision for income taxes 0 1,685 130,494 132,179
- ------------------------------------------------------------------------------------------ ------------
Net income (loss ) -1,325,850 258 521,979 -803,613
=========================================================================================== ============
Net income (loss) per share -0.02 -0.01
============ ============
Weighted average shares
outstanding 72,459,817 72,459,817
============ ============
17
TELEPLUS ENTERPRISES
INC
PRO-FORMA BALANCE SHEET
AS AT JUNE 30, 2005
Teleplus Consolidated
Enterprise Telizon Pro - forma
Inc. Inc. Adjustments Pro-forma
ASSETS
Current
Cash 403,188 616,335 -- 1,019,523
Trade Accounts Receivable 545,739 1,044,328
1,590,067
Other Receivable 136,283 214,873 351,156
Inventories 721,956 0 721,956
Prepaid Expenses 475,345 41,184 -- 516,529
---------- ----------
2,282,511 1,916,720 0 4,199,231
---------- ----------
Property and Equipment 1,174,911 108,533
-- 1,283,444
Goodwill 4,095,712 0 8,302,310 (NOTE 2) 12,398,022
Deferred Financing Fees 96,058 0 96,058
Other Assets 2,763 33,713
-- 36,476
---------- ----------
7,651,955 2,058,966 8,302,310 18,013,231
---------- ----------
LIABILITIES
Current
Accounts Payable 2,263,256 1,295,059 3,558,315
Accrued Expenses 890,184 352,862 -- 1,243,046
Accrued Acquisition Obligations 667,403 0 977,199 (NOTE 2) 1,644,602
Promissory Note 900,000 0 3,342,079 (NOTE 2) 4,242,079
Note Payable Acquisition 318,400 0 318,400
Other Payables 134,430 0 -- 134,430
---------- ----------
5,173,673 1,647,921 4,319,278 11,140,872
---------- ----------
Convertible Debenture 235,413 0 235,413
Accrued Acquisition Obligations 1,376,897 0 4,394,077 (NOTE 2) 5,770,974
---------- ----------
6,785,983 1,647,921 8,713,355 17,147,259
---------- ----------
SHAREHOLDERS'EQUITY
Common Stock 79,168 733 -733 (NOTE 2) 79,168
Additional Paid in Capital 3,918,257
0 3,918,257
Accumulated Deficit -3,084,980 410,312 -410,312 (NOTE 2) -3,084,980
Accumulated other
Comprehensive Income -46,473 0 -46,473
---------- ----------
865,972 411,045 -411,045 865,972
---------- ----------
7,651,955 2,058,966 8,302,310 18,013,231
---------- ----------
TELEPLUS ENTERPRISES INC.
NOTES TO THE PRO-FORMA FINANCIAL STATEMENTS
DECEMBER 31, 2004 AND JUNE 30, 2005
Note 1 BASIS OF PRESENTATION
The accompanying pro - forma financial statements give effect to the
acquisition of Telizon Inc ( " Telizon" ) and 1500536 Ontario Inc. ( " One
bill " ) by Teleplus Enterprises Inc ("Teleplus Enterprises") on July 1,
2005..
The unaudited pro -forma financial statements of Teleplus Enterprises
included herein have been prepared by management of Teleplus Enterprise in
accordance with the generally accepted accounting principles of the United
States of America. They have been prepared from information derived from
the June 30, 2005 ( unaudited) and December 31, 2004 ( audited) financial
statements of Teleplus Enterprise and June 30, 2005 ( audited ) financial
statements and July 31, 2004 ( audited) financial statements of Telizon ,
together with other information available to the corporation.
The pro - forma condensed statement of income of Telizon for the year
ended December 31, 2004 has been prepared by adding the unaudited results
of operations for the 7 months ended July 31, 2004 to the audited
statement of income from the eleven month period ended June 30, and
deducting the unaudited results of operations for the 6 months ended June
30, 2005 from those statements.
In the opinion of management of Teleplus Enterprise , these unaudited pro
-forma financial statements include all the adjustments necessary for fair
presentation of the acquisitions of Telizon by Teleplus Enterprise as
described below.
The unaudited pro - forma financial statements should be read in
conjunction with the historical financial statements and notes thereto of
Teleplus Enterprise and Telizon referred to above and included elsewhere
in this form 8-K/A. The unaudited pro -forma financial statements of
operations gives the effect to the acquisition of Telizon as if it had
occurred at the start of the fiscal period beginning on January 1, 2004.
These unaudited pro- forma financial statements are not necessarily
indicative of the financial positionor results of operations, which would
have resulted if the combination and related transactions had actually
occurred on those dates.
The financial statements of Telizon have been converted from Canadian
dollars ("CDN") To United States dollars ("US") as follows:
o Revenue and expenses for the year ended December 31, 2004 and the
six months period ended June 30, 2005 at the historical average rate
of exchange in effect for both.
o Asset and liabilities as of June 30, 2005 at the rate in effect at
June 30, 2005.
Note 2 BUSINESS ACQUISITION
19
TELIZON INC.
On July 1, 2005 Teleplus Enterprises Inc acquired all of the issued and
outstanding common shares of Telizon and One Bill. The preliminary purchase
price was $8,713,355. ($ 10,700,000 CDN)
The business combination is accounted for using the purchase method. The fair
value of the assets and liabilities acquired are as follows:
Current assets $ 1,916,720
Capital assets 108,533
Other assets 33,713
Current Liabilities (1,647,921)
-----------
Net assets acquired at fair values $ 411,045
-----------
Total consideration:
Payable on closing $ 3,342,079
Payable within one year 977,199
Payable in more than one year 4,394,077
-----------
$ 8,713,355
Goodwill $ 8,302,310
-----------
The excess of purchase price over net assets has been temporarily allocated to
goodwill.
NOTE 3 - PRO - FORMA ADJUSTMENTS - INCOME STATEMENT
The unaudited pro -forma statements include the following adjustments:
The general, administrative, and selling expenses include an adjustment to
salaries and management bonuses reflecting amounts paid to previous
Telizon shareholders who will no longer be working with the company
following the acquisition.The management bonuses were discretionary
amounts paid to previous Telizon shareholders for income tax purposes
only. It has also been determined that the work being performed by the
previous shareholders in Telizon prior to the acquisition will not be
required after the acquisition.
The general, administrative, and selling expenses include related party
charge from One Bill to Telizon for use of the computer licenses of the
software presently being used by Telizon. Since One Bill has been acquired
by Telizon , this charge has been reversed.
The income tax provision has been adjusted to reflect the impact of the
above adjustments made to the pro - forma financial statements.
NOTE 4 -1500536 ONTARIO INC ("ONE BILL")
One Bill was acquired on the same date as Telizon. The company owns the
rights to the computer software licenses that are presently being used by
Telizon. Other than a related party charge for use of these licenses, as
disclosed in the pro - forma adjustments to the income statement in Note
3, there exists no other transactions that could have a significant impact
on the pro -forma financial statements that were prepared for the year
ended December 31, 2004 and the six month period ended June 30, 2005.
Therefore since there are no other significant transactions other than the
related party charge for use of computer licenses, pro -forma financial
statements do not include the financial statements of One Bill.
20
(c) Exhibits:
10.1 Stock Purchase Agreement Telizon
10.2 General Security Agreement
10.3 Guarantee
10.4 Share Pledge Agreement
One Bill:
(a) Exhibits:
10.5 Stock Purchase Agreement One Bill
10.6 General Security Agreement
10.7 Promissory Note
10.8 Share Pledge Agreement
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.
September 22, 2005 /s/ Marius Silvasan
--------------------------
Marius Silvasan
Chief Executive Officer
September 22, 2005 /s/ Robert Krebs
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Robert Krebs
Chief Financial Officer
September 22, 2005 /s/ Kelly McLaren
--------------------------
Kelly McLaren
President & COO