UNITED STATES
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): February 14, 2006
Rapid Link, Incorporated
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(Exact name of Registrant as specified in its charter)
Delaware 0-22636 75-2461665
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(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation File Number) Identification No.)
17383 Sunset Boulevard, Suite 350
Los Angeles, California 90272
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(Address of principal executive offices, including Zip Code)
Registrant's telephone number, including area code (310) 566-1700
Not Applicable
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(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any
of the following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities
Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange
Act (17 CFR 230.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under
the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under
the Exchange Act (17 CFR 240.13e-4(c))
Item 1.01 Entry into a Material Definitive Agreement
On February 14, 2006, Rapid Link, Incorporated entered into a binding letter
of intent to acquire all of the issued and outstanding shares of capital
stock of Telenational Communications Inc., a privately owned Delaware
corporation that is a provider of domestic and international long distance
services. Pursuant to the terms of the letter of intent, in payment of the
purchase price, we will issue common stock and cash consideration to the
shareholders of Telenational as follows:
(a) $1.0 million in cash and 9,587,500 shares of our common stock,
within five days of the closing of the acquisition, provided
that Telenational's monthly retail and wholesale gross margin
combined averages at least $300,000 per month ("Average Gross
Margin") for the calendar year ended December 31, 2005. If
the actual gross margin is less than the Average Gross Margin,
the stock portion of the purchase price will be reduced
proportionately;
(b) $500,000 in cash, payable within 90 days of closing, provided
that the actual gross margin during this 90-day period is
greater than the Average Gross Margin. If the actual gross
margin is less than the Average Gross Margin, this cash payment
will be reduced proportionately;
(c) 9,587,500 shares immediately following the 12-month anniversary
of the closing, provided gross margin for the 12-month period
is not less than $3.6 million ("Target Gross Margin"), subject
to adjustment based on any shortfall as determined in accordance
with (a) above. The purchase price (adjusted downward for this
calculation by 25%) will be proportionately reduced by the
percentage shortfall of the actual gross margin achieved against
the Target Gross Margin. Any reduction in the adjusted purchase
price will be applied against this stock portion of the purchase
price.
At the closing date of this acquisition, the shareholders of Telenational
will provide a working capital loan to our Company in the amount of
$200,000. This loan will be payable in 12 equal monthly installments of
principal and interest. The loan will accrue interest at the rate of eight
percent per annum and will mature on the 12-month anniversary of the closing
of this transaction.
We have also agreed to grant piggy-back registration rights to Telenational,
whereby we will register the common stock issued in connection with the
acquisition if our Company files a registration statement after the closing
date, subject to certain approvals and customary conditions and limitations.
The closing date is expected to occur no later than April 30, 2006, unless
postponed by mutual consent of the parties. The acquisition is subject to
the execution of a definitive acquisition agreement with mutually acceptable
terms and is subject to customary closing conditions. In the event either
party terminates the letter of intent prior to the execution of a definitive
agreement, it must pay the other party a break-up fee in the amount of
$150,000, payable in cash. However, neither party will be required to pay a
break-up fee if the letter of intent is terminated prior to the execution of
a definitive agreement due to a breach of the letter of intent for any
reason beyond the control of either party, or by us if certain conditions
are not met, including our ability to obtain financing necessary to fund the
cash portion of the purchase price.
c) Exhibits
Exhibit Number Description
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10.1 Letter of Intent to acquire Telenational
Communications, Inc.
99.1 Press release dated February 15, 2006
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Rapid Link, Incorporated
Date: February 16, 2006 By: /s/ Allen Sciarillo
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Allen Sciarillo
Chief Financial Officer, Secretary,
(Principal Accounting Officer and
Principal Financial Officer) and Director