UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2004
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT
For the transition period from to
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Commission file number 000-49628
TELEPLUS ENTERPRISES, INC.
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(Exact name of small business issuer as specified in its charter)
NEVADA 98-0045023
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
465 St. Jean, Suite 601, Montreal, Quebec, Canada H2Y 2R6
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(Address of principal executive offices)
(514) 344-0778
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(Registrant's telephone number)
N/A
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(Former name and address)
Check 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.
Yes [X] No [ ]
As of May 17, 2004, 66,907,500 shares of Common Stock of the issuer were
outstanding.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TELEPLUS ENTERPRISES, INC.
CONSOLIDATED BALANCE SHEET
MARCH 31, 2003
ASSETS
Current assets
Cash $ 132,054
Accounts receivable, net of allowance of $8,000 214,200
Inventories 767,324
Prepaid expenses 122,367
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Total current assets 1,235,945
Property and equipment, net 723,147
Other assets 164,612
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Total assets $ 2,123,704
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LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities
Accounts payable $ 1,692,516
Accrued expenses 485,105
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Total current liabilities 2,177,621
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Commitments and Contingencies
SHAREHOLDERS' DEFICIT:
Common stock, $.001 par value, 150,000,000 shares authorized, 66,122,500
shares issued and outstanding 66,123
Additional paid in capital 919,103
Accumulated deficit (1,037,105)
Accumulated other comprehensive income (2,038)
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Total Shareholders' Deficit (53,917)
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TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT $ 2,123,704
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See accompanying summary of accounting policies
and notes to consolidated financial statements.
TELEPLUS ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended
March 31,
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2004 2003
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Net revenues $ 2,382,281 $ 1,464,973
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Cost of revenues 1,880,859 1,122,316
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Gross margin 501,422 342,657
General, administrative and selling 853,367 694,188
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Loss from operations (351,945) (351,531)
Provision for income taxes - -
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Net income (loss) $ (351,945) $ (351,531)
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Net income per share:
Net income - basic and diluted (0.01) (0.01)
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Weighted average shares outstanding:
Basic and diluted 66,122,500 46,312,500
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See accompanying summary of accounting policies
and notes to consolidated financial statements.
TELEPLUS ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended
March 31,
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2004 2003
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CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(351,945) $(351,531)
Adjustments to reconcile net loss to used in operating
activities:
Depreciation and amortization 39,200 33,610
Bad debt expense - -
Changes in assets and liabilities:
Accounts receivable 990,093 123,160
Inventories 76,489 204,683
Prepaid expenses (26,220) (5,236)
Other assets (32,514) (29,421)
Accounts payable (904,282) (462)
Accrued expenses 48,730 (31,927)
Income taxes - (7,170)
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CASH FLOWS USED IN OPERATING ACTIVITIES (160,449) (64,294)
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CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (55,984) -
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CASH FLOWS FROM FINANCING ACTIVITIES
Payments on loans payable - shareholders - (12,789)
Proceeds from issuance of common stock, net 252,448 -
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CASH FLOWS FROM FINANCING ACTIVITIES 252,448 (12,789)
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Effect of Exchange Rate Changes on Cash (4,765) 1,815
NET INCREASE (DECREASE) IN CASH 31,250 (75,268)
Cash, beginning of period 100,804 76,137
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Cash, end of period $ 132,054 $ 869
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SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid $ - $ -
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See accompanying summary of accounting policies
and notes to consolidated financial statements.
TELEPLUS ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NOTE 1 - PRESENTATION
The balance sheet of TELEPLUS ENTERPRISES, INC. ("Teleplus") as of March 31,
2004, the related consolidated statements of operations for the three months
ended March 31, 2004 and 2003 and the consolidated statements of cash flows for
the three months ended March 31, 2004 and 2003 included in the consolidated
financial statements have been prepared by Teleplus without audit. In the
opinion of management, the accompanying consolidated financial statements
include all adjustments (consisting of normal, recurring adjustments) necessary
to summarize fairly Teleplus' consolidated financial position and results of
operations. The consolidated results of operations for the three months ended
March 31, 2004 are not necessarily indicative of the results of operations for
the full year or any other interim period. Notes to the financial statements
which would substantially duplicate the disclosure contained in the audited
financial statements for the most recent fiscal year ended December 31, 2003 to
be reported in Form 10-KSB, have been omitted.
NOTE 2 - COMMON STOCK
In 2004, Teleplus received a $1,000,000 commitment to purchase 1,000,000 shares
of common stock of which $250,000 has been received as of March 31, 2004 and
$250,000 was received in April 2004 and for which an aggregate of 500,000 shares
were issued.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
THIS REPORT CONTAINS FORWARD LOOKING STATEMENTS WITHIN THE MEANING OF
SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED AND SECTION 21E OF THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. THE COMPANY'S ACTUAL RESULTS COULD
DIFFER MATERIALLY FROM THOSE SET FORTH ON THE FORWARD LOOKING STATEMENTS AS A
RESULT OF THE RISKS SET FORTH IN THE COMPANY'S FILINGS WITH THE SECURITIES AND
EXCHANGE COMMISSION, GENERAL ECONOMIC CONDITIONS, AND CHANGES IN THE ASSUMPTIONS
USED IN MAKING SUCH FORWARD LOOKING STATEMENTS.
OVERVIEW
The Company was originally incorporated in Nevada as Terlingua Industries,
Ltd. on April 16, 1999. The Company's business plan was to engage in online
marketing and distribution of organic herbal supplements in an international
market. On January 27, 2000, the Company changed its name to
HerbalOrganics.com, Inc. ("HerbalOrganics"). Prior to the transactions
discussed below, the Company had not generated any revenues from operations and
was considered a development stage enterprise, as defined in Financial
Accounting Standards Board No. 7, whose operations principally involved research
and development, market analysis, securing and establishing a new business, and
other business planning activities.
On October 10, 2003, Visioneer Holdings Group Inc. ("Visioneer") subscribed
to 18,050,000 restricted, newly issued shares of the Company's common stock,
$.001 par value per share. Also on that same date, Visioneer purchased
23,750,000 shares of issued and outstanding common stock from Thomas Whalen, the
Company's former Chief Executive Officer. As a result of the subscriptions and
the purchase, control of the Company shifted to Marius Silvasan, the beneficial
owner of Visioneer.
In September 2003, the Company formed a wholly-owned subsidiary,
Teleplus Retail Services, Inc., a Quebec, Canada Corporation ("Teleplus
Retail"). In October 2003, Teleplus Retail purchased substantially all of the
assets of 3577996 Canada Inc., a Canada Business Corporation
("3577996"), that related to 3577996's "TelePlus Consumer Services" business.
The Company is a provider of wireless and portable communication devices in
Canada. Its products include wireless handsets and services from major Canadian
carriers, international phones, satellites, home phones and other mobile
electronic devices including an exclusive line of international GSM world
phones.
MARKETING STRATEGY
Currently there is a good fit between the Company's resources and the
opportunities and threats posed by its external environment. The Company has a
diversified product mix that is complemented with unique accessory offerings.
The Company has prominently displayed, attractive, strategically located retail
outlets, experienced employees and management and strong supplier relations.
The Company believes that growth will to come in three folds.
GROWTH IN CANADA:
The Company currently operates 28 TelePlus branded stores in two Canadian
provinces. The Company intends to increase to 47 the number of TelePlus branded
stores by 2007. These stores are expected to be located in major metro centers.
The Company recently acquired SMARTCELL see "Recent Business Developments"
section for details. The Company also operates 5 kiosks in SAM's Club
selling a variety of wireless and portable communications devices.
GROWTH IN THE UNITED STATES:
TelePlus intends to deploy a private label wireless program under the
"TelePlus" brand name in the US. TelePlus initiated final development of its
private label wireless service as announced in a news release dated March 17,
2004. TelePlus Wireless Corp. ("TelePlus Wireless"), a wholly-owned subsidiary
of TelePlus Enterprises, Inc. will offer such services on behalf of the Company.
Offering private label wireless services is commonly referred to as creating a
Mobile Virtual Network Operator ("MVNO"). This market was developed first 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. TelePlus intends to make its phone available at superstores and vending
machines throughout the US.
RECENT BUSINESS DEVELOPMENTS
In April 2004, the Company signed a Letter of Intent (the "LOI") to acquire
all of the outstanding shares of SmartCell. The terms of the transaction call
for the Company to pay a combination of cash and stock compensation to the
principals of SmartCell in consideration for all of the outstanding shares of
SmartCell. The Company has since closed the transaction and will release
additional details in the near future.
According to the terms of the Agreement, the Company issued 285,000 shares
of common stock to the SmartCell principals at closing and, beginning 90 days
from closing, will issue an additional 60,000 shares for the next four quarters
(or an aggregate of 240,000 additional shares). The retention of the shares by
the SmartCell principals mentioned above is contingent upon the performance of
SmartCell based on criteria to be determined one-year after closing. The
Company will also issue the SmartCell principals up to 450,000 shares based on
the Company's performance in Western Canada over a five-year period beginning
six-months after closing payable as follows: the Company will issue one share
of common stock for every CDN $30 of gross revenue generated through the
combined sales of TelePlus and SmartCell in Western Canada, and one share of
common stock for every CDN $7 of net profit generated by SmartCell or TelePlus
in Western Canada up to a maximum of 450,000 shares. The shares will be issued
on an annual basis. The Company will also pay the SmartCell principals 60% of
the value of net assets of SmartCell in cash. The Company will file a report on
Form 8-K in the days to follow to report the SmartCell acquisition.
COMPARISON OF OPERATING RESULTS
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2004 COMPARED TO THE
THREE MONTHS ENDED MARCH 31, 2003
Sales revenues for the quarter ended March 31, 2004 increased $917,308 (or
63%) to $2,382,281 as compared to $1,464,973 for the quarter ended March 31,
2003. The increase in sales revenues was due to a 13% increase in same store
sales and the addition of 3 TelePlus branded stores and 5 SAM's Club kiosks
versus the previous year.
Cost of revenues for the quarter ended March 31, 2004 increased $758,543
(or 68%) to $1,880,859 as compared to $1,122,316 for the quarter ended March 31,
2003. The increase in cost of revenues was due to the increase in revenues.
Gross profit as a percentage of sales ("gross profit margin") decreased to
21% for the quarter ended March 31, 2004 from 23% for the quarter ended March
31, 2003. The decrease in gross profit margin was due to the 68% increase in
cost of revenues that trumped the 63% increase in sales revenues.
General, administrative ("G&A") expense for the quarter ended March 31,
2004 increased $159,179 (or 23%) to $853,367 as compared to $694,188 for the
quarter ended March 31, 2003. The increase in G&A was due to the increase in
the number of retail stores.
The Company had a net loss of $351,945 for the quarter ended March 31,
2004, as compared to a net loss of $351,531 for the quarter ended March 31,
2003. The Company's continued support of the SAM's Club initiative
contributed to 26% of the Company's loss in said quarter while SAM's Club
only contributed 3% to the Company's revenues. Historically the first quarter
is the slowest performing quarter of the year.
As of March 31, 2004, the Company had an accumulated deficit of $1,037,105.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2004, total current assets were $1,235,945 which consisted
of $132,054 of cash, $214,200 of accounts receivable, net of an allowance for
doubtful accounts, $767,324 of inventories, and $122,367 of prepaid expenses.
As of March 31, 2004, total current liabilities were $2,177,621 which
consisted of $1,692,516 of accounts payable and $485,105 of accrued expenses.
The Company had negative net working capital at March 31, 2004 of $941,676.
The ratio of current assets to current liabilities was 57%.
The Company had a net increase in cash of $31,250 for the quarter ended
March 31, 2004 as compared to a net decrease in cash of $75,268 for the quarter
ended March 31, 2003. Cash flows from financing activities represented the
Company's principal source of cash for the quarter ended March 31, 2004. Cash
flows from financing activities during the quarter ended March 31, 2004 were
$252,448, all of which came from proceeds from the issuance of common stock.
During the quarter ended March 31, 2003, the Company made $12,789 of payments on
loans payable to shareholder and did not receive any proceeds from the issuance
of common stock.
During the quarter ended March 31, 2004, the Company had $160,449 cash used
in operating activities as compared to the quarter ended March 31, 2003, where
the Company had $64,294 cash used in operating activities. The cash used in
operating activities for the quarter ended March 31, 2004 was due to accounts
payable that decreased by $904,282, prepaid expenses that increased by $26,220,
and other assets that increased by $32,514, which were offset by accounts
receivable that decreased by $990,093 inventories that decreased by $76,489, and
accrued expenses that increased by $48,730. The cash used by operating
activities for the quarter ended March 31, 2003 was due to prepaid expenses that
increased by $5,236, other assets that increased by $29,421, accounts payable
that decreased by $462, accrued expenses that decreased by $31,927 and income
taxes that decreased by $7,170, which were offset by accounts receivable that
decreased by $123,160, and inventories that decreased by $204,683.
Capital expenditures were $55,984 for the quarter ended March 31, 2003.
The Company did not make any capital expenditures in the quarter ended march 31,
2003.
The Company requires $4,300,000 of additional capital to support strategic
acquisitions and its current expansion plans, of which the Company received
$750,000 in December 2003. In March 2004, the Company received a commitment
from Excalibur SA for $1,000,000 in equity financing. As of the filing of this
report on Form 10-KSB, the Company has received $500,000 of such financing. The
Company has no commitments from officers, directors or affiliates to provide
funding. The failure of the Company to obtain adequate additional financing
may require the Company to delay, curtail or scale back some or all of
its expansion plans. Any additional financing may involve dilution to the
Company's then-existing shareholders.
RISK FACTORS
Need for Additional Financing. It is imperative that the Company obtain
debt and/or equity financing of $4,300,000 to implement its business plan and to
expand its business. The Company raised $750,000 through the sale of 750,000
shares of common stock to three entities not affiliated with the Company. In
March 2004, the Company received a commitment for $1,000,000 in equity
financing, $500,000 of which the Company has received as of the date of this
report. The Company is taking steps to raise additional equity capital or to
borrow additional funds. There can be no assurance that any new capital will be
available to the Company or that adequate funds will be sufficient for Company
operations, whether from the Company's financial markets, or other arrangements
will be available when needed or on terms satisfactory to the Company. The
failure of the Company to obtain adequate additional financing may require the
Company to delay, curtail or scale back some or all of its operations and will
hinder its ability to expand its business. Any additional financing may involve
dilution to the Company's then-existing shareholders.
Risk that Funds Will Not Be Received. The Company received a commitment
from Excalibur Investments SCP to purchase 1,000,000 shares for $1,000,000.
As of the date of this report, the Company has received $500,000 and issued
500,000 shares of common stock. The agreement between the parties stated that
the remaining funds would be received by the Company by the end of April 2004
which did not occur. There can be no assurance that the Company will receive
any or all of the $500,000 due the Company pursuant to the agreement.
Reliance on Key Management. Our success is highly dependent upon the
continued services of Marius Silvasan, our Chief Executive Officer, and Robert
Krebs, our Chief Financial Officer, Benoit Bube, our Vice President of Sales,
Darren Lisak, our Director of Procurement and Logistics and David Spencer, our
Director of Development. In addition, Michael Karpheden and Hakan Wretsell
became independent directors of the Company in March 2004. The Company hired
Evens Abellard as its new VP Sales, Direct Channel for TelePlus Wireless Corp.
Smart Cell's success is dependent on the continued support of its 3 key
managers; David Sidhu, Sukhjit Sandher and Raghbir Riarh. If any of the
foregoing persons were to leave us, it could have a materially adverse effect
upon our business and operations.
Dependence on Major Clients. As of March 31, 2004, accounts receivable
due from two customers amounted to 92% of trade accounts receivable and 17%
of total revenues. Should either of these customers run into credit trouble
or leave us, it would have a materially adverse effect upon our business
and operations. We are actively seeking to broaden our customer base and
expand our product and service offerings. We need to continue to broaden
our customer base and product and service offerings. If we are unable to
broaden our customer base, the continued reliance upon our two largest
customers could have a materially adverse effect upon our business and
operations.
Risk of Storefront Provider. As of March 31. 2004, five of our stores
under the banner SAM's Club Canada accounted for 3% of our total revenues and
contributed to 26% of our loss in the first quarter. Should the Company be
unable to improve its SAM's Club kiosks revenues it could adversely affect the
Company's ability to generate profits. We are actively seeking to broaden our
customer base and expand our product and service offerings. If we are unable
to broaden our customer base or improve our SAM's Club revenues, the continued
reliance upon SAM's Club could have a materially adverse effect upon our
business and operations.
Limited duration of agreements in place with major wireless carriers. The
Company's current sales volumes have enabled the Company to build strong
relationships with a variety of wireless and communication partners thus,
minimizing the risks associated with the non-renewal of any of the Company's
agreements.
No product exclusivity. The current market consolidation undertaken by the
major wireless carriers limit the Company's risk associated with no product
exclusivity as new retail players can't readily get access to the products and
services offered by the Company.
Rapid product obsolescence. The wireless and communication market place
faces rapid product obsolescence requiring the Company to maintain short
inventory cycles and technically enabled sales consultants.
Price erosion. The Company is faced with high price elasticity resulting
in the erosion of its margin on certain products. Price war oftentimes occurs
in the industry which has a negative impact on profit margins.
Issuance of a large number of wireless licenses increasing the number of
competitors.
TelePlus' ability to hire and retain experienced industry professionals;
The Company's ability to secure competitive pricing arrangements in a
market dominated by larger retailers with higher financial resources. Profit
margins in the wireless and communication industry are low. The Company's
larger competitors, who have more resources, have the ability to reduce their
prices significantly lower than current prices that would further reduce profit
margins. Should such an event occur and the Company chose not to offer
competitive prices, the Company could lose its market share. If the Company
chose to compete, the reduction in profit margin would have a material adverse
effect on the Company's business and operations. The Company's ability to
achieve economies of scale is critical its long-term viability.
Uncertain growth in market demand: Current market conditions indicate a
strong growth of wireless products in the upcoming years. Nevertheless
technological development and unstable economic growth may affect current
forecast which could have a material adverse affect on the Company's business
and operations.
CRITICAL ACCOUNTING POLICIES
Our discussion and analysis of our financial condition and results of
operations is based upon our audited financial statements, which have been
prepared in accordance with accounting principals generally accepted in the
United States. The preparation of these financial statements requires us to
make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosure of any contingent
assets and liabilities. On an on-going basis, we evaluate our estimates,
including those related to uncollectible receivable, investment values, income
taxes, the recapitalization and contingencies. We base our estimates on various
assumptions that we believe to be reasonable under the circumstances, the
results of which form the basis for making judgments about carrying values of
assets and liabilities that are not readily apparent from other sources. Actual
results may differ from these estimates under different assumptions or
conditions.
We believe the following critical accounting policies affect our more
significant judgments and estimates used in the preparation of our financial
statements:
Impairment of Long-Lived Assets
Property and equipment are stated at cost less accumulated depreciation.
Major renewals and improvements are capitalized; minor replacements, maintenance
and repairs are charged to current operations. Depreciation is computed by
applying the straight-line method over the estimated useful lives of machinery
and equipment (three to seven years). The majority of Teleplus' long-lived
assets are located in Canada. Teleplus performs reviews for the impairment of
long-lived assets whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable.
Revenue Recognition
Teleplus' revenue is generated primarily from the sale of wireless,
telephony products and accessories to end users. Teleplus recognizes revenue
when persuasive evidence of an arrangement exists, delivery has occurred, the
sales price is fixed or determinable, and collectibility is probable.
Teleplus recognizes product sales generally at the time the product is
shipped. Concurrent with the recognition of revenue, Teleplus provides for the
estimated cost of product warranties and reduces revenue for estimated product
returns. Sales incentives are generally classified as a reduction of revenue
and are recognized at the later of when revenue is recognized or when the
incentive is offered. Shipping and handling costs are included in cost of goods
sold.
Teleplus' suppliers generally warrant the products distributed by Teleplus
and allow returns of defective products, including those that have been returned
to Teleplus by its customers. Teleplus does not independently warrant the
products that it distributes, but it does provide warranty services on behalf of
the supplier.
Inventories
Inventories consist of wireless and telephony products and related
accessories and are stated at the lower of cost, determined by average cost
method, or market.
ITEM 3. CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls and procedures. Our chief executive
officer and chief financial officer, after evaluating the effectiveness of the
Company's "disclosure controls and procedures" (as defined in the Securities
Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) as of the end of the period
covered by this quarterly report (the "Evaluation Date"), has concluded that as
of the Evaluation Date, our disclosure controls and procedures were adequate 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 of 1934
is 1) recorded, processed, summarized and reported, within the time periods
specified in the Commission's rules and forms; and 2) accumulated and
communicated to him as appropriate to allow timely decisions regarding required
disclosure..
(b) Changes in internal control over financial reporting. There were no
significant changes in our internal control over financial reporting during our
most recent fiscal quarter that materially affected, or were reasonably likely
to materially affect, our internal control over financial reporting.
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 would have a
materially adverse impact on the Company's business or its results of
operations, nevertheless such proceedings are disclosed.
Goods and Services. TelePlus is currently defending an action instigated
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against it by one of its suppliers. Such supplier claims that the Company
defaulted on the payment of goods sold by supplier to the Company. The Company
claims that it failed to pay the goods sold by supplier because such goods were
purchased contingent on supplier making available to the Company wireless
network access which supplier failed to provide. The Company is unable to sell
these goods at retail and has attempted, without success, to return the goods to
the supplier. The supplier has refused to take the goods back. Total liability
to the Company, if it losses the claim, may reach a maximum of $20,000.
Company Stock. TelePlus is currently defending an action instigated
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against it by two private individuals. Such individuals claim having attempted
to purchase shares of the Company's common stock from one of the Company's
consultants and such transaction failed. These individuals claim having wired
funds to the consultant but consultant failed to provide the individuals with
the shares of common stock. The individuals claim that the Company and its
chief executive officer, Marius Silvasan, are jointly responsible for the failed
transactions. The individuals have filed a claim against the Company and its
chief executive officer for the amount of their investment. The Company and its
chief executive officer claim having no responsibility in the transaction. Such
transaction was to occur between two third parties, one owning some of the
Company's common stock and the other two individuals interested in purchasing
such stock. The fact that the transaction failed to be completed among the
parties does in no way imply any responsibility on the Company or its chief
executive officer. Total liability to the Company, if it losses the claim, may
reach a maximum of $7,500.
Financing. TelePlus is currently defending an action arising out of a
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proposed financing transaction that was never consummated and therefore,
terminated by TelePlus. That transaction contemplated that (i) the Company
would be merged with a subsidiary of a non-operating, publicly owned "shell"
company; (ii) the shareholders of TelePlus would become the controlling
shareholders of the shell company; and (iii) thereafter several prospective
purchasers would purchase shares of stock of such shell company. The
contemplated transactions were to have closed by the later of September 15, 2003
or the delivery of a notice that TelePlus declined such funding. The closing
did not occur on September 15, 2003. Those prospective investors, who are the
complaining parties in this lawsuit, never purchased any shares of the shell
company and never formally offered to otherwise provide funds to the Company.
Accordingly, on September 23, 2003, the Company notified the shell company that
it was not going to proceed with the merger and notified the prospective
investors that it was declining any funding from them. The complaining parties
filed their action against the Company seeking a temporary restraining order and
other injunctive relief. On October 2, 2003, the Court denied the motion for a
temporary restraining order. A hearing on the motion for the other injunctive
relief occurred on October 16, 2003 and such motion was rejected on March 3,
2004. The Company believes that this lawsuit is without any merit and intends to
vigorously defend itself in this lawsuit.
Proposed Tax Assessment. Teleplus is involved in proceedings with the
-----------------------
Minister of Revenue of Quebec ("MRQ"). The MRQ has proposed an assessment of for
the Goods and Services Tax ("GST") and Quebec Sales Tax ("QST") of approximately
CDN$471,000. The proposed tax assessment is for CDN$265,000 for QST and
CDN$346,000 for GST. Teleplus 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. It is possible that cash flows or results
of operations could be materially affected in any particular period by the
unfavorable resolution of one or more of these contingencies.
ITEM 2. CHANGES IN SECURITIES
(a) Effective February 2, 2004, the Company affected a 13:1 forward stock
split, and reauthorized One Hundred Million (100,000,000) shares of common
stock with a par value of $0.001 per share. As a result of the name change, the
Company's common stock will trade under the new stock symbol "EXAG" beginning on
Monday, February 2, 2004. On December 11, 2003, the Company filed articles of
amendment with the Nevada Secretary of State to amend its articles as mentioned
above. The number of shares of the Company outstanding at the time of the
adoption of the foregoing was 3,969,231 pre-split shares and the number of
shares entitled to vote thereon was the same. The number of shares consenting
to the action was 2,769,231 pre-split shares. The shareholders consenting to
the action represented a majority of the issued and outstanding shares.
(c) In January 2004, the Company issued an 10,000 shares of its common
stock, $.001 par value per share which were not registered under the
Securities Act of 1933, as amended (the "Act"), to an unaffiliated entity
in consideration for $10,000. The Company claims an exemption from
registration afforded by Section 4(2) of the Act since the foregoing issuances
did not involve a public offering, the recipients had access to information
that would be included in a registration statement, took the shares for
investment and not resale and the Company took appropriate measures to restrict
transfer.
In February 2004, the Company issued an 25,000 shares of its common stock,
$.001 par value per share which were not registered under the Act to an
unaffiliated entity in consideration for $25,000. The Company claims an
exemption from registration afforded by Section 4(2) of the Act since the
foregoing issuances did not involve a public offering, the recipients had access
to information that would be included in a registration statement, took the
shares for investment and not resale and the Company took appropriate measures
to restrict transfer.
In April 2004, the Company issued 500,000 shares of its common stock, $.001
par value per share which were not registered under the Act to an unaffiliated
entity in exchange for $500,000. The Company claims an exemption from
registration afforded by Section 4(2) of the Act since the foregoing issuances
did not involve a public offering, the recipients had access to information
that would be included in a registration statement, took the shares for
investment and not resale and the Company took appropriate measures to restrict
transfer.
In May 2004, the Company issued an aggregate of 285,000 shares of its
common stock, $.001 par value per share which were not registered under the
Act to the SmartCell principals in connection with the acquisition of SmartCell.
The Company claims an exemption from registration afforded by Section 4(2)
of the Act since the foregoing issuances did not involve a public offering, the
recipients had access to information that would be included in a
registration statement, took the shares for investment and not resale and the
Company took appropriate measures to restrict transfer.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
In April 2004, the Company hired Evens Abellard as its new Vice President of
Sales for Direct Channels for its wholly-owned subsidiary, Teleplus Wireless
Corp. which is engaged in private label wireless services and was incorporated
in March 2004.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
Exhibit No. Description
31.1 Certificate of the Chief Executive
Officer pursuant Section 302 of the
Sarbanes-Oxley Act of 2002 *
31.2 Certificate of the Chief Financial
Officer pursuant Section 302 of the
Sarbanes-Oxley Act of 2002 *
32.1 Certificate of the Chief Executive
Officer pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002 *
32.2 Certificate of the Chief Financial
Officer pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002 *
* Filed Herein.
b) REPORTS ON FORM 8-K
The Company filed the following two reports on Form 8-K during the quarter for
which this report is filed:
(1) Form 8-K/A filed on February 13, 2004, to amend the Form 8-K filed
on October 14, 2003, to report audited financial information of TelePlus
Enterprises, Inc. The Company provided an audited consolidated balance sheet of
TelePlus Enterprises, Inc. as of December 31, 2002, and the related consolidated
statement of operations, stockholders' equity, comprehensive income and cash
flows for each of the two years then ended. The Company also provided an
unaudited consolidated balance sheet of TelePlus Enterprises, Inc. as of
September 30, 2003, the related consolidated statement of operations for the
three and nine months ended September 30, 2003 and 2002, and the related
consolidated statement of cash flows for the nine months ended September 30,
2003 and 2002 as well as an unaudited pro-forma consolidated balance sheet as of
December 31, 2002, as if the acquisition, which was not completed until October
2003, had been completed as of that date.
(2) Form 8-K filed on March 22, 2004, to report the appoint of a Chief
Executive Officer, three outside directors to fill vacancies on the board of
directors, a $1,000,000 commitment for equity financing and the Company's
approval for complete corporate listing by Standard and Poor's.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
TELEPLUS ENTERPRISES, INC.
DATED: May 17, 2004 By: /s/ Marius Silvasan
------------------------
Marius Silvasan
Chief Executive Officer
EXHIBIT 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Marius Silvasan, certify that:
1. I have reviewed this Annual Report on Form 10-QSB of TelePlus Enterprises,
Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the small business issuer as of, and for, the periods presented in this
report;
4. The small business issuer's other certifying officer and I are responsible
for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small
business issuer and have:
a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the small
business issuer, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the
period in which this report is being prepared;
b) Paragraph omitted in accordance with SEC transition instructions
contained in SEC Release No. 33-8238;
c) Evaluated the effectiveness of the small business issuer's disclosure
controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as
of the end of the period covered by this report based on such
evaluation; and
d) Disclosed in this report any change in the small business issuer's
internal control over financial reporting that occurred during the
small business issuer's most recent fiscal quarter (the small business
issuer's fourth fiscal quarter in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect,
the small business issuer's internal control over financial reporting;
and
5. The small business issuer's other certifying officer and I have disclosed,
based on our most recent evaluation of internal control over financial
reporting, to the small business issuer's auditors and the audit committee
of the small business issuer's board of directors (or persons performing
the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the small business issuer's
ability to record, process, summarize and report financial
information; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the small business issuer's
internal control over financial reporting.
Date: May 17, 2004
By: /s/ Marius Silvasan
-------------------------------
Marius Silvasan
Chief Executive Officer
EXHIBIT 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Robert Krebs, certify that:
1. I have reviewed this Annual Report on Form 10-QSB of TelePlus Enterprises,
Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the small business issuer as of, and for, the periods presented in this
report;
4. The small business issuer's other certifying officer and I are responsible
for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small
business issuer and have:
a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the small
business issuer, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the
period in which this report is being prepared;
b) Paragraph omitted in accordance with SEC transition instructions
contained in SEC Release No. 33-8238;
c) Evaluated the effectiveness of the small business issuer's disclosure
controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as
of the end of the period covered by this report based on such
evaluation; and
d) Disclosed in this report any change in the small business issuer's
internal control over financial reporting that occurred during the
small business issuer's most recent fiscal quarter (the small business
issuer's fourth fiscal quarter in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect,
the small business issuer's internal control over financial reporting;
and
5. The small business issuer's other certifying officer and I have disclosed,
based on our most recent evaluation of internal control over financial
reporting, to the small business issuer's auditors and the audit committee
of the small business issuer's board of directors (or persons performing
the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the small business issuer's
ability to record, process, summarize and report financial
information; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the small business issuer's
internal control over financial reporting.
Date: May 17, 2004
By: /s/ Robert Krebs
-------------------------------
Robert Krebs
Chief Financial Officer
EXHIBIT 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Marius Silvasan, certify, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly
Report of TelePlus Enterprises, Inc. on Form 10-QSB for the quarter ended March
31, 2004 fully complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 and that information contained in such Form
10-QSB fairly presents in all material respects the financial condition and
results of operations of TelePlus Enterprises, Inc.
Date: May 17, 2004
By:/s/ Marius Silvasan
--------------------------
Marius Silvasan
Chief Executive Officer
EXHIBIT 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Robert Krebs, certify, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly
Report of TelePlus Enterprises, Inc. on Form 10-QSB for the quarter ended March
31, 2004 fully complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 and that information contained in such Form
10-QSB fairly presents in all material respects the financial condition and
results of operations of TelePlus Enterprises, Inc.
Date: May 17, 2004
By:/s/ Robert Krebs
--------------------------
Robert Krebs
Chief Financial Officer