UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(X)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
OR
( ) TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 0-28330
TALK VISUAL CORPORATION
(Exact name of registrant as specified in its charter)
Nevada 95-4561156
------ ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
information or organization)
3550 Biscayne Blvd, Ste. 704
Miami, Florida 33137
(Address of principal executive offices) (Zip Code)
One Canal Park, 3rd Floor
Cambridge, Massachusettes 02141
(Former Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code): (305) 572-0575
(Registrant's former telephone number, including area code) (617) 679-0300
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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
--- ---
There were 28,914,463 shares outstanding of the registrant's Common Stock, par
value $.001 per share, as of November 8, 1999.
Transitional Small Business Disclosure Format (check one):
Yes No X
--- ---
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TALK VISUAL CORPORATION
INDEX
Page No.
PART I - FINANCIAL INFORMATION
Item l. Financial Statements (Unaudited):
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Condensed Balance Sheets at September 30, 1999
and December 31, 1998. 3
Condensed Statements of Operations for the three
months ended September 30, 1999 and 1998 and
the nine months ended Sept. 30, 1999 and 1998. 4
Condensed Statements of Cash Flows for the nine
months ended September 30, 1999 and 1998. 5
Notes to Condensed Financial Statements 7
Item 2. Management's Discussion and Analysis or Plan
Of Operations 13
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 22
Item 2. Changes in Securities 23
Item 3. Defaults Upon Senior Securities 23
Item 4. Submission of Matters to a Vote of Security Holders 23
Item 5. Other Information 23
Item 6. Exhibits and Reports on Form 8-K 23
Signatures 24
Exhibits
Exhibit 11 25
Exhibit 27 26
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2
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TALK VISUAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30 DECEMBER 31
1999 1998
--------- ---------
(unaudited)
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalents $57,711 $153,608
Accounts receivable, net of allowances
for doubtful accounts of $12,500 and $12,500 79,960 31,243
Inventory 16,989 8,250
Other receivables 263,226 70,000
Advances - related parties 470,134 -
Subscriptions receivable - 1,743,000
Marketable securities 229,688 89,210
Other current assets 165,257 6,746
--------- ---------
Total current assets 1,282,966 2,102,057
--------- ---------
Product development costs, net 381,604 381,604
Property and equipment, net 11,394,252 18,500
Payment in excess of fair value for acquisition, net 2,370,000 -
Other assets 484,384 1,400
--------- ---------
Total assets $15,913,206 $2,503,561
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $1,021,133 $ 129,968
Accrued expenses 269,800 16,685
Other current liabilities 67,989 -
Notes payable and current portion of long-term debt 1,500,000 281,066
--------- ---------
Total current liabilities 2,858,922 427,719
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LONG-TERM DEBT, net of current portion 5,332,498 75,000
--------- ---------
Total Liabilities 8,191,420 502,719
--------- ---------
COMMITMENTS -- --
STOCKHOLDERS' EQUITY
Preferred Stock, par value $.001 per share, 25,000,000
shares authorized; 975,000 and -0- issued and outstanding 975 --
Common Stock, par value $.001 per share, 100,000,000
shares authorized: 28,914,463 and 1,393,417 shares
issued and outstanding 28,914 1,393
Stock Subscribed -- 382
Additional paid in capital 21,960,669 10,000,719
Accumulated deficit (11,273,663) (7,829,760)
Accumulated other comprehensive loss (149,443) (14,892)
Stock Subscriptions receivable (2,845,666) (157,000)
--------- ---------
Total stockholders' equity 7,721,786 2,000,842
--------- ---------
Total Liabilities and Stockholders' Equity $15,913,206 $2,503,561
========== =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
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TALK VISUAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED SEPT 30, NINE MONTHS ENDED SEPT 30,
--------------------------- --------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
REVENUE
<S> <C> <C> <C> <C>
Royalties $ -- $ 11,216 $ 2,887 $ 203,726
Telecommunication Services
And Product sales 1,568 -- 1,568 --
Software sales -- 22,830 -- 38,587
Equipment sales, net -- -- 12,373 --
Corporate services -- 18,500 -- 80,000
Real estate revenue 272,500 -- 388,748 --
------------ ------------ ------------ ------------
Total revenue 274,068 52,546 405,576 322,313
------------ ------------ ------------ ------------
COSTS AND EXPENSES
Cost of royalties -- 604,253 3,204 631,034
Telecommunication/Retail Costs 144,435 144,435
Cost of software sales -- 14,598 -- 28,798
Depreciation and amortization 83,497 20,141 103,069 60,595
Research & product development 24,903 17,512 33,510 24,731
Real estate operations 124,317 -- 174,499 --
General & administrative 352,817 216,807 597,545 494,011
Consulting services 166,295 20,687 1,701,908 73,318
Legal and Professional 42,396 32,701 769,095 89,167
Marketing 48,189 31,278 62,437 75,852
------------ ------------ ------------ ------------
Total costs and expenses 986,849 957,977 3,589,702 1,477,506
------------ ------------ ------------ ------------
LOSS FROM OPERATIONS (712,781) (905,431) (3,184,126) (1,155,193)
INTEREST EXPENSE (165,850) (495) (206,189) (43,591)
INTEREST INCOME 3 -- 443 --
OTHER INCOME -- 147,935 -- 147,935
------------ ------------ ------------ ------------
LOSS BEFORE EXTRAORDINARY ITEM $ (878,628) $ (757,001) $ (3,389,872) $ (1,050,849)
EXTRAORDINARY ITEM -- 300,000 -- 300,000
------------ ------------ ------------ ------------
NET LOSS $ (878,628) $ (457,001) $ (3,389,872) $ (750,849)
============ ============ ============ ============
NET LOSS PER COMMON SHARE
BASIC AND DILUTED
BEFORE EXTRAORDINARY ITEM $ (0.03) $ (0.63) $ (0.26) $ (1.06)
EXTRAORDINARY ITEM -- .25 -- .30
AFTER EXTRAORDINARY ITEM $ (0.03) $ (0.38) $ (0.26) $ (0.76)
WEIGHTED AVERAGE COMMON STOCK
SHARES OUTSTANDING
BASIC AND DILUTED 28,305,767 1,206,403 13,205,625 993,310
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
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TALK VISUAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
1999 1998
----------- -----------
Cash flows from operating activities:
<S> <C> <C>
Net loss $(3,389,871) $ (750,849)
Adjustments to reconcile net loss to net
cash used in operating activities:
Amortization of product development costs -- 636,712
Depreciation and amortization 103,069 60,596
Due former co-development partner -- (300,000)
(Gain) loss on stock exchanged for debt 1,563 --
(Gain) on sale of assets and debt assumption -- (147,935)
Common stock issues for services 2,251,387 --
Increase (decrease) in cash from changes in:
Accounts receivable, net 28,446 109,225
Other receivables (25,973) 21,016
Prepaid expenses 59,459 --
Inventories (8,739) 5,723
Other assets 11,978 (1,354)
Accounts payable 440,661 86,276
Accrued expenses 95,097 --
Deferred revenues -- (40,284)
Other current liabilities 12,478 --
----------- -----------
Net cash from operating activities (420,445) (320,874)
----------- -----------
Cash flows from investing activities:
Purchase of property and equipment (254,397) (4,617)
Proceeds from disposition of equipment 1,364
Disposal of marketable securities 89,210
Additions to organization costs (868) --
Advances-related parties (1,698,336) --
Investment in production joint ventures (78,647)
----------- -----------
Net cash used in investing activities (1,864,391) (81,900)
----------- -----------
Cash flows from financing activities:
Product development advances -- 44,317
Payments on notes payable and long term debt (50,565) (42,501)
Payment of cash dividends (23,156) --
Collection of stock subscriptions receivable 1,842,545 --
Proceeds from private placement for Common Stock -- 2,305,000
Obligation for equipment sold 70,115 --
Net borrowing on term debt 350,000
Exercise of Common Stock Warrants -- 75,000
Due to former co-development partner -- 20,000
----------- -----------
Net cash provided by financing activities 2,188,939 2,381,816
----------- -----------
Increase (decrease) in cash and cash equivalents (95,897) 1,979,042
Cash and cash equivalents, at beginning of period 153,608 14,464
Cash and cash equivalents, at end of period $ 57,711 $ 1,993,506
----------- -----------
Supplemental disclosure of cash flow information
a. Cash paid during the period for:
Interest $ 157,684 $ 43,591
----------- -----------
Income Taxes $ 800 --
----------- -----------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
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TALK VISUAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(continued)
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
1999 1998
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<S> <C> <C>
b. Non-cash transactions
Purchase of Toronto real estate in exchange for 975,000 shares of
Convertible Preferred Stock with a value of $975,000, assumption
of a mortgage and other debts in the amount of $966,743 $1,941,743 --
600,000 shares issued under agreement in connection with the
acquisition of Videocall International as a commission $2,250,000 --
20,000 shares issued in cancellation of a note payable in the
amount of $75,000 $ 77,500 --
7,500 shares issued in cancellation of an advance payable in
the amount of $30,000 $ 29,063 --
19,841,400 shares issued pursuant to the merger of
Videocall International Corporation with Talk Visual
Corporation as
approved by the shareholders $5,462,458 --
Sale of assets of $59,800 and issue of a note for
$108,099, less Assumption of $315,834 of debt by a third
party
-- $ 147,935
Reduction of debt by former co-development partner -- $ 300,000
</TABLE>
See accompanying notes to condensed consolidated financial statements.
6
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TALK VISUAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) Basis of presentation
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and the instructions to Form 10-QSB. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting of only normal recurring accruals) considered necessary for a fair
presentation of the Company's financial position at September 30, 1999, the
results of operations for the three and nine months ended September 30, 1999 and
September 30, 1998, and the cash flows for the nine months ended September 30,
1999 and September 30, 1998 are included. Operating results for the three and
nine month period ended September 30, 1999 are not necessarily indicative of the
results that may be expected for the year ending December 31, 1999.
The information contained in this Form 10-QSB should be read in conjunction with
audited financial statements as of December 31, 1998 filed as part of the
Company's Annual Report on Form 10-KSB.
The Balance Sheet at December 31, 1998, does not reflect the rental property
assets acquired February 24, 1999, nor the assets and liabilities of Videocall
International Corporation and Subsidiaries merged effective June 18, 1999. When
viewing the respective comparative financial information, the reader is advised
to take into consideration the inclusion or exclusion of the rental and other
assets acquired.
(2) Acquisition of Videocall International Corporation
Pursuant to an Agreement and Plan of Merger ("Merger"), dated September 14,
1998, a merger was consummated between Videocall International Corporation
("Videocall") and a newly formed, wholly owned subsidiary of the Company on June
18, 1999. The stock-for-stock transaction was approved by the stockholders of
both companies, after which the subsidiary into which Videocall was merged was
merged with and into the Company, with Talk Visual being the survivor. Each
share of Videocall's common stock was converted into either 3 shares, 1 share
and/or options exercisable at $1.00 per share, depending on the shareholder's
purchase date of the holdings. In effecting the Merger, the Company is obligated
to issue 19,841,400 shares of common stock to the Videocall shareholders, and
has granted 13,688,475 three year options for one share of stock each, at an
exercise price of $1.00 per share. The transaction was valued at $0.275 per
share for a total purchase price of $5,462,458. The Videocall merger was
accounted for using the purchase method of accounting and accordingly the
purchase price has been allocated to the assets purchased and liabilities
assumed based on the fair market values at the date of the acquisition as
follows:
7
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TALK VISUAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(2) Acquisition of Videocall International Corporation (continued)
Current assets $888,655
Land, buildings and other fixed assets 9,328,383
Other assets 2,391,621
Liabilities (7,146,201)
---------
Total purchase price $5,462,458
==========
Videocall, at the time of the merger, was a development stage company formed to
provide videocalling services to businesses and consumers.
(3) Financial Condition and Liquidity
The Company has ceased its' CD-ROM software development activities, and is
currently focusing entirely on Videocall operations.
As of September 30, 1999, the Company had never achieved operating profits. The
Company is dependent on revenues from the real estate operations, investor stock
subscriptions, short term and long term borrowings and retail videocalling sales
for working capital needs, until the videocalling operations generate sufficient
cash flow to fund the Company.
As part of the Videocall International Merger, the Company acquired a 119,119
square foot, two story, strip center retail and office complex located in
Sacramento California. The property has been appraised at $11,000,000. Prior to
the financing described below, the property had encumbrances totaling
$5,241,000. The Company has been in discussion with several financial
institutions to borrow an additional $2,500,000 on the property. The proceeds of
any borrowings on the property would be used to recoup the equity investment
represented by the property and would be employed to fund working capital needs
and expansion of the videocalling operations.
On August 24, 1999, the Company executed a promissory note, secured by the
Sacramento property, in the amount of $1,000,000. The Company has drawn $350,000
of the total note as of September 30, 1999. The note matures September 1, 2000,
and bears an interest rate of 9% per annum. The Company is obligated to issue up
to 20% of the face amount of the note in Convertible Preferred shares, based on
a price of the lower of the average closing bid price for a five day period
prior to the loan closing date or the two lowest closing bid prices in the
twenty trading day period prior to the loan closing date.
Management anticipates that the promissory note, in conjunction with the
refinancing of the Sacramento property, should provide sufficient capital to
meet the needs of the Company for the next twelve months.
8
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TALK VISUAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
On February 24, 1999, the Company acquired a 22,622 square foot property in
Toronto, Canada in exchange for 975,000 shares of Class A Preferred stock, $.001
par value, paying dividends of $.095 per share per annum, payable on a monthly
basis. The Company has not made any payment of dividends since the April 24,
1999 monthly installment. This building was acquired as an investment and for
future consideration for the needs of the videocalling operations.
On April 7, 1999, the Company was notified by The Nasdaq Stock Market, Inc.
("Nasdaq") that the Company was not in compliance with the requirements for
continued listing on The Nasdaq SmallCap Market(SM), as set forth in the Nasdaq
Listing Qualifications Panel decision dated January 20, 1999. Accordingly, the
Company's securities were delisted from The Nasdaq SmallCap Market(SM)effective
April 7, 1999 and are currently listed under the symbol "TVCP" on the OTC
Bulletin Board.
(4) Equity Transactions
On January 19,1999, the Company issued 175,000 shares of common stock to an
entity for services related to obtaining financing sources. This transaction was
priced at $3.625 per share for a total expense of $634,375.
On January 25, 1999, the Company issued 600,000 shares of common stock pursuant
to the agreement with the parties responsible for the introduction of Videocall
to the Company. This transaction was priced at $3.75 per share for a total cost
of $2,250,000. The Company is also obligated under the agreement, to issue
options, exercisable at $0.25 per share, to the same parties. See the discussion
under the June 18,1999 equity transaction noted below.
On January 25, 1999, the Company issued 190,000 shares common stock for
consulting services at $3.75 per share for a total expense of $712,500.
On February 1, 1999, the Company issued 5,000 shares common stock for legal
services at $3.25 per share for a total expense of $16,250.
On February 2, 1999, the Company issued 40,000 shares common stock for
consulting services at $3.25 per share for a total expense of $130,000.
On February 24, 1999, the Company acquired a 22,622 square foot office facility
in Ontario, Canada with the issuance of 975,000 shares of Class A Preferred
Stock, Series 1999-A, $.001 par value, and the assumption of a first mortgage in
the amount of $935,450 along with various minor obligations totaling $31,293.
The Preferred shares have a stated value of $975,000 ($1.00 per share), are
non-voting, and pay a cumulative dividend of $0.095 per share. The total
acquisition price of the property was $1,941,743. The property was appraised at
$1,854,000. Included in other assets is $87,743 representing the excess purchase
price paid over the fair value of the acquisition.
9
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TALK VISUAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(4) Equity Transactions (continued)
On March 5, 1999, the Company issued 27,500 shares common stock in exchange for
$105,000 of notes payable and accrued interest at $3.875 per share. The market
value of the shares issued on the date of exchange exceeded the obligations
recorded on the books of the Company by $1,562.
On March 16, 1999, the Company issued 1,128 shares common stock for services
rendered at $4.00 per share for a total expense of $4,512.
On April 9, 1999, the Company issued 30,000 shares of common stock for legal
services at $3.375 per share for a total expense of $101,250. On that same date,
the Company set aside 200,000 shares in escrow for the former owners of
Sacramento Results, Inc., the subsidiary of Videocall which holds the Town and
Country Plaza real estate. This stock was set aside as collateral for the note
payable from Videocall to the former owners of Sacramento Results, Inc. as part
of the original purchase agreement.
On June 8, 1999, the Company issued 50,000 shares of common stock to the
President of the Company as a bonus. The Company also issued 220,000 shares in
payment for legal services and set aside 20,000 for a consultant, to be released
at a later date. The shares were issued at a price of $2.25, for a total expense
of $652,500.
On June 18, 1999, as a result of the Videocall merger, each share of Videocall
common was converted into the right to receive either one share, three shares,
and/or options of Talk Visual Common Stock or, 19,841,400 shares and 15,608,477
options in the aggregate. The options are exercisable at $1.00 per share and
expire three years from their issue date. The transaction was valued at $0.275
per share for a total purchase price of $5,462,458. In connection with the
merger, the Company also issued 1,800,000 options, in addition to the options to
the shareholders previously noted, at an exercise price of $0.25 per share for a
three year period, to third parties who were responsible for the introduction of
the Company and Videocall.
On July 16, 1999, the Company issued 4,000,000 shares of common stock under a
private placement subscription dated July 7, 1999. The shares were issued at a
subscribed price of $0.25 per share, based on the trading price for the day at a
twenty percent discount.
(5) Segment Information
Effective with the June 18, 1999 Merger, the Company has two reportable
segments, videocalling/telecommunication services and real estate rental
activities. Software development and sales have been discontinued, excluding
10
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TALK VISUAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(5) Segment Information (continued)
minor incidental sales. The Rental activity results from the ownership of the
Toronto property acquired in the first quarter of the year, and the ownership of
Town and Country Plaza West, acquired in the Videocall merger. The Company's
reportable segments are separate business units with their individual reporting
systems. Rental activity is delineated on the Consolidated Statements of
Operations under rental revenue and cost of operations - real estate operations.
Videocalling and telecommunication product sales and expenses are delineated
under the heading Telecommunication.
(6) Contingencies
The Company is involved in certain claims arising in the normal course of
business. An estimate of the possible loss resulting from these matters cannot
be made; however, the Company believes that the ultimate resolution of these
matters will not have a material adverse effect on its financial position or
results of operations.
(7) Subsequent Events
On October 27, 1999 and November 2, 1999, the Company reached an agreement
with two vendors to satisfy outstanding invoices in the amount of $158,000 with
shares of common stock, at an average price of $0.076 per share, based on the
ten day period average trading price. This will result in the Company issuing an
additional 2,063,741 shares of common stock.
Both vendors are existing shareholders and are related to officers of the
Company.
(8) Earnings Per Share
The Company adopted SFAS No. 128, "Earnings Per Share", during 1997. SFAS
No. 128 requires presentation of basic and diluted earnings per share. Basic
earnings per share is computed by dividing income available to common
stockholders by the weighted average number of common shares outstanding for the
reporting period. Diluted earnings per share reflects the potential dilution
that could occur if securities or other contracts, such as stock options, to
issue common stock were exercised or converted into common stock. For the nine
months ended September 30, 1999, all outstanding options and warrants were not
included in diluted earnings per share since they were antidilutive.
11
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TALK VISUAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(9) Year 2000 Compliance (continued)
The Company has reviewed its computer systems in order to evaluate if
any modifications are necessary for the year 2000. The Company currently does
not anticipate that any material modifications or expenditures will be required
in its computer systems to bring the systems into compliance with the
computational needs for the year 2000. The Company has been advised by its major
external vendors that their systems are in compliance with year 2000 issues.
12
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Except for historical information contained herein, the statements in this
report (including without limitation, statements indicating that the Company
"expects," "estimates," anticipates," or "believes" and all other statements
concerning future financial results, product offerings, proposed acquisitions or
combinations or other events that have not yet occurred) are forward-looking
statements that are made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995, Section 21E of the Securities Exchange
Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as
amended. Forward-looking statements involve known and unknown factors, risks and
uncertainties which may cause the Company's actual results in future periods to
differ materially from forecasted results.
PROPOSED ACQUISITIONS
On March 22, 1999, the Company signed a letter of intent with Proximity,
Inc., subject to Board approval, to acquire all of it's outstanding stock.
Proximity, Inc. is an international full spectrum provider of videoconferencing
services with public access to over 2,000 videoconferencing sites. In addition
to videoconferencing access, Proximity provides High Impact Videoconferencing
Productions, multipoint bridge coordination, satellite uplink/downlink services,
corporate videoconferencing outsourcing and consulting services.
The letter of intent calls for a purchase price of $4,250,000, to be paid
$250,000 in cash and the balance with the Company's common stock. In recognition
of the price fluctuation of the Company's stock following the merger of
Videocall International Corporation, both the Company and Proximity have agreed
to withdraw the letter of intent pending stabilization of the stock price.
MERGER OF VIDEOCALL
On September 8, 1998, the Company and Videocall announced that the two
companies had entered into a Letter of Intent for the Company to purchase the
common shares of Videocall in exchange for the Company's common and preferred
stock. On September 14, 1998 the two companies signed the Merger Plan detailing
the terms of the transaction whereby Videocall will merge with a newly formed
wholly owned subsidiary of the Company. The Company held a special shareholders'
meeting June 15, 1999, whereupon the stockholders approved the Merger plan. On
June 18, 1999 the Merger was effected.
Videocall was a development stage company in the area of providing
videocalling services to businesses and consumers. At the time of the Merger,
Videocall was in the process of developing international locations through
strategic partnerships and through vendor relationships. The Company has ceased
its' CD-ROM software development activities, and is currently focusing entirely
on Videocall operations. Since the date of the Merger, the videocalling
operations have matured from the development stage to implementation and are
currently being offered through the Company's retail centers and joint venture
partners.
13
<PAGE>
The Company has issued 600,000 shares of stock and 1,800,000 options to
parties responsible for the introduction of the Company to Videocall. The
options are exercisable at twenty five cents per share and expire three years
from the issue date. Additionally, Videocall issued 1,200,000 shares in
connection with the Merger Plan to those same parties.
On June 18, 1999, as a result of the Videocall merger, each share of Videocall
common was converted into the right to receive either one share, three shares,
and/or options of Talk Visual Common Stock or 19,841,400 shares and 15,608,477
options in the aggregate. The options are exercisable at $1.00 per share and
expire three years from their issue date. The transaction was valued at $0.275
per share for a total purchase price of $5,462,458. The Videocall merger was
accounted for using the purchase method of accounting and accordingly the
purchase price has been allocated to the assets purchased and liabilities
assumed based on the fair market values at the date of the acquisition as
follows:
Current assets $888,655
Land, buildings and other fixed assets 9,328,383
Other assets 2,391,621
Liabilities (7,146,201)
---------
Total purchase price $5,462,458
==========
The amounts paid by the Company in stock, to the third parties, as
compensation for the introduction of Videocall, has been capitalized as amounts
paid in excess of fair value. This amount, totaling $2,370,000 for the combined
entities, is considered an intangible asset to be amortized over forty years.
RISK FACTORS
As of September 30, 1999, the Company had never achieved operating profits.
The Company has ceased its software development and sales activities and is
wholly dependent on the videoconferencing and real estate rental activities for
its future revenues. Because Videocalling is a new business activity for the
Company, there can be no assurance that the Company will achieve profitability
and, even if achieved, that such profitability will be consistent on a quarterly
or annual basis. The Company's ability to integrate and organize new businesses
and successfully manage growth requires significant expansion in its
operational, financial and management systems. There is no assurance that the
Company will be able to address these requirements in a satisfactory manner, and
the failure to do so could have a material adverse effect on the Company's
results of operations, financial condition and business.
Management of Growth; Uncertainties Relating to Acquisitions, Business
Combinations and New Businesses. The Company has pursued, is currently pursuing
and, in the future may pursue, new technologies and businesses internally and
through acquisitions and combinations which involve significant risks. Any such
acquisition or combination may involve, among other things, the issuance of
equity securities, the payment of cash, the incurrence of contingent liabilities
and the amortization of expenses related to goodwill and other intangible
assets, and transaction costs, which have adversely affected, or may adversely
14
<PAGE>
affect, the Company's business, results of operations and financial condition.
The Company's ability to integrate and organize any new businesses and/or
products, whether internally developed or obtained by acquisition or
combination, will likely require significant expansion of the Company's
operations. There is no assurance that the Company will have or be able to
obtain the necessary resources to satisfactorily effect such expansion, and the
failure to do so could have a material adverse effect on the Company's business,
financial condition and results of operations. In addition, future acquisitions
and or combinations by the Company involve risks of, among other things,
entering markets or segments in which the Company has no or limited prior
experience, the potential loss of key employees of the acquired company and/or
difficulty, delay or failure in the integration of the operations, management,
personnel and business of any such new business with the Company's business and
operating and financial difficulties of any new or newly combined operations,
any of which could have a materially adverse effect on the Company's business,
financial condition and results of operations. Moreover, there can be no
assurance that the anticipated benefits of any specific acquisition or of any
internally developed new business segment or business combination will be
realized.
RESULTS OF OPERATIONS
For the three months ended September 30, 1999 compared to the three
-----------------------------------------------------------------------
months ended September 30, 1998.
- --------------------------------
For the three months ended September 30, 1999, revenues increased from $52,546
for the three months ended September 30, 1998 to $274,068 for the three months
ended September 30, 1999. This $221,522 increase was due to the change from
software sales and support to real estate activities and the sale of
videocalling services, cell phones and pagers in the retail outlets owned by the
company.
Costs associated with royalty income for the three months ended September 30,
1998 in the amount of $604,253, includes a charge of $600,000 to the product
development costs associated with the DA Pursuit of Justice title based on lower
forecasted sales of the title, at that time. Costs of royalties for the three
months ended September 30, 1999 are not significant and therefore are not
reflected in the cost and expense schedule. As a result of the cessation of
gaming software development and sales activities, the Company has not recognized
any cost of software sales nor has the Company incurred any product development
costs. Research and product development expense of $24,903 for the three months
ended September 30, 1999 represent amounts incurred for videocalling systems
after the June 18, 1999 merger with Videocall International Corp. The amount of
$17,512 for the three months ended September 30, 1998 represents software
development costs incurred by the Company for development of its former product
line.
Telecommunication/Retail costs of $144,435 for the three month period ending
September 30, 1999 are those costs associated with operations in the Company's
six wholly owned videocalling outlets.
Depreciation and amortization increased $63,356, from 20,141 for the three month
period ended September 30, 1998, compared to $83,497, the three month period
ended September 30, 1999, primarily as a result of the real estate held and the
investment in equipment and facilities for retail videocalling centers.
15
<PAGE>
Expenses of $124,317 were incurred for the Toronto real estate operation
acquired February 24, 1999 and the Sacramento real estate acquired as part of
the Videocall merger June 18,1999. Rental income, as noted above, was $272,500,
yielding net rental earnings of $148,183 before interest and depreciation for
the three months ending September 30, 1999.
General and administrative expenses increased $136,010 from $216,807 for the
three months ended September 30, 1998 to $352,817, for the three months ended
September 30, 1999. This resulted from the Company's support of the videocalling
activities. Of the $352,817, administrative and officer salaries constituted
$105,361, and costs associated with public filings and the annual shareholder
meeting totaled $57,982.
Consulting services, not related to software development or sales, for the three
months ended September 30, 1999 were $166,295, compared to $20,687 for the three
months ended September 30, 1998. Of this amount, the contracting vendor for
$110,000 has agreed to be paid in shares of the Company's common stock, as noted
earlier, and $56,295 was paid in cash. The majority of the consulting services
were for assistance in financing, investor relations, management services and
public relation services.
Legal and professional expense increased from $32,701 for the three months ended
September 30, 1998 to $42,396 for the three months ended September 30, 1999.
Legal and professional expenses for both periods relate primarily to general
corporate matters, costs related to public companies and funds spent on
potential acquisitions.
The Company's marketing expenses for the three months ended September 30, 1999,
amounted to $48,189, compared to $31,278 of expenses for the three months ended
September 30, 1998. Marketing expenses in the three month period ending
September 30, 1999 related to videocall activities, verses marketing expenses in
the prior year for the same period related to educational software products.
Interest expense increased $165,355 from $495 for the three months ended
September 30, 1998 to $165,850 for the three months ended September 30, 1999.
Interest expense in the current reporting period resulted from the mortgages
held on the rental properties and debt on videocalling activity financing,
whereas interest expense in the comparative prior year period resulted from
financing corporate software production and sales activities.
Other income of $147,935 for the three months ended September 30, 1999, resulted
from the sale of certain assets and the assumption of certain debt by Legacy
Interactive, Inc., a company formed by the former President of the Company, as
part of the Agreement and Plan of Merger dated September 14, 1998, between the
Company and Videocall International Corporation.
The extraordinary income for the three months ended September 30, 1998 is due to
the cancellation of debt of $300,000 as a result of the Company and IBM signing
a Payment Agreement relating to the licensing and distribution agreements
between the two companies.
16
<PAGE>
For the nine months ended September 30, 1999 compared to the nine
-----------------------------------------------------------------------
months ended September 30, 1998.
- --------------------------------
For the nine months ended September 30, 1999, revenues increased from $322,313
for the nine months ended September 30, 1998 to $405,576 for the nine months
ended June 30, 1999. This $83,263 increase was due to the change from software
sales and support to real estate activities, the sale of videocalling equipment
to foreign joint venture partners and cell phones and pagers in the retail
outlets owned by the company. The Company invoices a fee for the sale of the
equipment separate from the equipment cost. Accordingly, revenue from equipment
sales represents only the fee portion of the sale.
As a result of the cessation of gaming software development and sales
activities, the Company has recognized minimal costs of software sales and has
not incurred any product development costs. Costs associated with royalty income
for the six months ended September 30, 1998 in the amount of $631,034, includes
a charge of $600,000 to the product development costs associated with the DA
Pursuit of Justice title based on lower forecasted sales of the title, at that
time. Research and product development expense of $33,510 for the nine months
ended September 30, 1999 represent amounts incurred for videocalling systems
development after the June 18, 1999 merger with Videocall International Corp.
The amount of $24,731 for the nine months ended June 30, 1998 represents
software development costs incurred by the Company for development of its former
product line.
Expenses of $174,499 were incurred for the Toronto real estate operation
acquired February 24, 1999 and the Sacramento real estate acquired as part of
the Videocall merger June 18,1999. Rental income, was $388,748, yielding net
rental earnings of $214,249 before interest and depreciation.
General and administrative expenses increased $103,534 from $494,011 for the
nine months ended September 30, 1998 to $597,545, for the nine months ended
September 30, 1999. For the nine months ended September 30, 1998, the Company
incurred general and administrative expenses to support the administration and
marketing of the educational software products. For the nine months ended
September 30, 1999, all general and administrative expenses were incurred in
support of the videocalling business activities.
Consulting services, not related to software development or sales, for the nine
months ended September 30, 1999 were $1,701,908, compared to $73,318 for the
nine months ended September 30, 1998. This amount represents $1,526,387 paid in
shares of the Company's common stock and $175,521 paid in cash. The majority of
the consulting services were for assistance in financing, investor relations and
public relation services. The amount charged to expense is a function of the
market share price at the time the stock is issued to the consultant under the
terms of the consulting agreement.
Legal and professional expense increased from $89,167 for the nine months ended
September 30, 1998 to $769,095 for the nine months ended September 30, 1999. The
increase of $679,928 resulted primarily from legal costs incurred in the
preparation of the proxy related to the Merger; legal costs incurred in security
matters, legal work performed in relation to the filings as a result of the
merger and legal costs incurred to defend assets of the company, for the Toronto
17
<PAGE>
subsidiary acquisition and the issuance of preferred stock. The expense is a
function of the market price of the stock at the time of issue. Of the $769,095
expense, $612,500 was paid for with common stock of the Company.
The Company's marketing expenses for the nine months ended September 30, 1999,
amounted to $62,437, compared to $75,852 of expenses for the nine months ended
September 30, 1998. Marketing expenses in the nine month period ending September
30, 1999 related to videocall activities, verses marketing expenses in the prior
year for the same period related to educational software products.
Interest expense decreased $3,801 from $44,140 for the nine months ended
September 30, 1998 to $40,339 for the nine months ended September 30, 1999.
Interest expense in the current reporting period resulted from the mortgages
held on the rental properties, whereas interest expense in the comparative prior
year period resulted from financing corporate software production and sales
activities.
Other income of $147,935 for the nine months ended September 30, 1999, resulted
from the sale of certain assets and the assumption of certain debt by Legacy
Interactive, Inc., a company formed by the former President of the Company, as
part of the Agreement and Plan of Merger dated September 14, 1998, between the
Company and Videocall International Corporation.
The extraordinary income for the nine months ended September 30, 1998 is due to
the cancellation of debt of $300,000 as a result of the Company and IBM signing
a Payment Agreement relating to the licensing and distribution agreements
between the two companies.
Liquidity and Capital Resources
The Company had $420,445 in cash outflows from operating activities for
the nine months ended September 30, 1999 compared to cash outflows of $320,874
for the nine months ended September 30, 1998. The increase in net outflows of
$99,571 between 1999 and 1998 operating cash flow, primarily resulted from the
following: a increase of $980,311 in the net loss from operations after
adjustments for non-cash items; a decrease in the change of deferred revenue of
$40,284; a decrease in the change in accounts receivable of $80,779; an increase
in the change in other receivables of $42,473; a increase in the change in
inventory of $14,462; an increase in the change in accounts payable of $354,385;
an increase in the change in accrued expenses of $95,097 and an increase in
other assets of $13,332; an increase in the change in other current liabilities
of $12,478. This increase in net outflows is primarily due to the Company's
assumption of videocalling activities following the merger with Videocall
International Corporation.
Investing activities in the first nine months ended September 30, 1999
consisted of the purchase of the Toronto property, which required cash payments
of $37,390; purchase of computer equipment, leasehold improvement and software
for $254,397 compared to the purchase of computer equipment in the six months
ended June 30, 1998, for $4,617; conversion of the marketable securities to cash
for $89,210; additional expenditures for organization costs of $868; and net
advances to related parties of $1,698,336 compared to investment in joint
ventures for the nine months ended September 30, 1999 of $78,647.
18
<PAGE>
The acquisition of the Toronto, Ontario Canada property was accomplished with
the issuance of 975,000 shares of Class A Preferred Stock, Series 1999-A, $.001
par value, and the assumption of a first mortgage in the amount of $935,450
along with various minor obligations totaling $31,293. The Preferred shares have
a stated value of $975,000 ($1.00 per share), are non-voting, and pay a
cumulative dividend of $0.095 per share. The total acquisition price of the
property was $1,941,743. The property was appraised at $1,854,000. Included in
other assets is $87,743 representing the excess purchase price paid over the
fair value of the acquisition. The property is held by a subsidiary of the
Company, The Ontario International Property Corporation.
The Company has cash inflows of $2,188,939 from financing activities
for the first nine months of 1999 compared to cash inflows of $2,381,816 for the
first nine months of 1998. Financing activities for the nine months ended June
30, 1999 included collection of stockholder's and stock subscriptions receivable
of $1,842,545; payment on notes payable of $50,565, recording of obligation for
equipment sold but not owned by the Company of $70,115, net borrowing on short
term debt of $350,000, and payment of cash dividends on the preferred stock of
$23,156. This compares to the nine months ended September 30, 1998 financing
activities which included advances received on product development costs;
proceeds on private placements of $2,305,000; exercise of common stock warrants
for $75,000; payment due to former co-developer of $20,000, offset by payments
of $42,501 on notes payable.
On August 24, 1999, the Company executed a promissory note with a private
lender, secured by the Sacramento property, in the amount of $1,000,000. The
Company has drawn $350,000 of the total note as of September 30, 1999, leaving
$650,000 available to the Company. The note matures September 1, 2000, and bears
an interest rate of 9% per annum. The Company is obligated to issue up to 20% of
the face amount of the note in Convertible Preferred shares, based on a price of
the lower of the average closing bid price for a five day period prior to the
loan closing date or the two lowest closing bid prices in the twenty trading day
period prior to the loan closing date. Management intends to retire this debt
upon the refinancing of the property as described below.
The Company has been in discussion with several financial institutions to borrow
up to $2,500,000 in addition to the existing debt (which would be retired with
this refinancing) on the Sacramento property. The property has been appraised at
$11,000,000 and as of September 30, 1999, there is $5,241,000 of existing debt
against the property. The proceeds of any borrowings on the property would be
used to recoup the equity investment represented by the property and would be
employed to fund working capital needs and expansion of the videocalling
operations.
On July 13, 1999, the Company announced that a private placement
funding of $1,000,000 was subscribed to by a group of existing shareholders. The
Company has received a portion of the funds under this subscription and
anticipates receiving the balance by the end of the fourth quarter.
On October 27, 1999 and November 2, 1999, the Company reached an
agreement with two vendors to satisfy outstanding invoices in the amount of
19
<PAGE>
$158,000 with shares of common stock, at an average price of $0.076 per share,
based on the ten day period average trading price. This will result in the
Company issuing an additional 2,063,741 shares of common stock. Both vendors are
existing shareholders and are related to officers of the Company. The Company is
pursuing additional agreements with other vendors to convert obligations
existing prior to the merger to equity investments based on the current trading
price of the common stock on the date of the conversion agreement. Management
anticipates that common stock issued under any agreements will be subject to
lock up periods as appropriate to mitigate any influence of these shares on the
trading price of the stock.
Effective September 1, 1999, the Company occupied its new headquarters
located in Miami Florida, relocating from Cambridge Massachusetts. The Company
has reduced its annual office rental costs by $43,152 as a result of this
relocation.
Commencing August 24, 1999, the Company has rolled out several
promotional programs for the videoconferencing services. These programs have
started to generate cash flow from the retail operations of the Company. The
Company has also perfected high quality videocalls over the internet protocol.
The Company will begin deploying this technology to its retail facilities and
joint venture partners. It is anticipated this technology will result in
substantial cost savings for the transport of the communication signals and
permit the Company to offer extremely competitive rates for videocalls.
The Company anticipates adding voice over internet protocol traffic to
its videocalling facilities. The deployment of this service, particularly with
respect to international traffic, is expected to enhance the revenue base and
profitability of the videocalling centers owned and partnered by the Company.
Additionally, the Company has entered into agreements with MCI-Worlcom, Westcon
Corporation (resellers and suppliers of Picturetel Corporation videoconferencing
equipment) and National Leasing, Inc. to market a turnkey videocalling packages
to specific market segments. The Company will become a national ISDN reseller
under the program. This will enhance the Company's revenue from equipment sales
and telecommunication traffic.
Management feels that based on contributed capital amounts, conversion
of obligations as previously described, cost saving operational moves,
additional product offerings and anticipated refinancing of the Sacramento
property, the Company will be able to operate for the coming twelve months. It
is anticipated that videocalling and related telecommunication product revenue
will be sufficient to fund the working capital needs of the Company after that
period.
EQUITY ISSUES
The Company has been made aware of private negotiations to purchase and
hold for investment, a substantial number of the shares issued to consultants
and issued as finder's fees. The acquiring group has indicated that they will
purchase up to $1,000,000 from these shareholders and will purchase an
additional amount of stock on the open market. The private group of shareholders
believes that its actions will allow the share price to return to a value more
reflective of the Company's assets and business activities. In addition to this
activity, a number of the Company's major shareholders have agreed to lock-up
20
<PAGE>
their shareholding for periods between six and twelve months. Management
anticipates that with the private purchase and the shareholder agreements not to
sell for a six to twelve month period, the market price of the common stock
should stabilize and better reflect the value of the business activities of the
Company.
YEAR 2000 ISSUES
The Company has reviewed its computer systems in order to evaluate if any
modifications are necessary for the year 2000. The Company currently does not
anticipate that any material modifications or expenditures will be required in
its computer systems to bring the systems into compliance with the computational
needs for the year 2000. The Company has been advised by its major external
vendors that their systems are in compliance with year 2000 issues.
21
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On August 18, 1997, the U.S. Securities and Exchange Commission ("SEC")
issued a subpoenas deces tecum to the Custodian of Records of the Company and
other parties. The subpoenas were issued in connection with the SEC's formal
investigation entitled In the Matter of Reynolds Kendrick Stratton, Inc., File
No. LA-752 (the "Investigation"). The Investigation appears to center around
activities of JB Oxford Holdings, Inc., a broker-dealer, which is the successor
to Reynolds Kendrick Stratton, Inc., and was the underwriter of the Company's
initial public offering. The SEC has indicated that it expects to take the
testimony of the Company and other parties at some point in the future. The
Company has no reason to conclude that it is a target of the Investigation.
The Company filed a lawsuit in Los Angeles, California against the former
Chairperson, Ariella Lehrer, the D&A Lehrer Children Trust and other related
entities. In that action, the Company alleged that Lehrer breached her fiduciary
duties to the Company through various actions that, according to the Complaint,
"undertook to burden an already weakened Legacy with unreasonable, unnecessary
and unfair obligations that primarily benefited her personally." The Company
also claims that Lehrer's actions were "taken in bad faith and were... not in
the best interest of Plaintiff Legacy or its shareholders." The Company also
alleges that Lehrer fraudulently backdated documents for her personal benefit,
and "deliberately and maliciously misrepresented the financial condition of
plaintiff Legacy..." The company claims that the misrepresentations created
substantial and unnecessary legal exposure for the Company, particularly with
the Company's listing on the Nasdaq SmallCap Stock Market. The Company seeks to
recover substantial damages, for Lehrer's actions and also seeks injunctive
relief requiring Lehrer to return to the Company significant assets. Legal
counsel has advised the Company that the matter is currently in arbitration.
The Company filed a lawsuit in Los Angeles, California, claiming a total of
$30,000,000 in damages against DCI Telecommunications, Inc., its officers and
Directors and several of its shareholders. The lawsuit alleged that during the
period February 1998 to April, 1999, the defendants conspired jointly to libel,
slander and falsely accuse the Chairman of the Company of wrong doing by posting
messages on the internet. As a result of an official SEC investigation and
suspension of trading of DCI Telecommunications, Inc. stock from the NASD OTC
bulletin board listing and changes in the California law relating to
jurisdictional issues involving actions relating to internet postings, the
Company decided to formally withdraw its litigation and claims against DCI
Telecommunications, Inc. in the California courts. The Company has advised the
defendants that it reserves all rights for future actions.
The Company is not currently involved in any litigation that is expected to
have a material adverse effect on the Company's business or financial position.
22
<PAGE>
There can be no assurance, however, that third parties will not assert
infringement or other claims against the Company in the future which, regardless
of the outcome, could have an adverse impact on the Company as a result of
defense costs, diversion of management resources and other factors.
ITEM 2. CHANGES IN SECURITIES.
Not Applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
The Company has failed to pay the June through September,
1999, dividend on the Class A Preferred Stock, Series 1999-A, in the amount of
$30,875.
The Company has not made the June and September payments due to IBM
under the renegotiated agreement dated September 14, 1998, totaling $50,000.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not Applicable.
ITEM 5. OTHER INFORMATION.
Not Applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) The following exhibits are included herewith:
Exhibit 11 - Weighted Average of Common Stock Shares
Outstanding
Exhibit 27 - Financial Data Schedule
(b) The Company did not file any reports on Form 8-K during the quarter for
which this form is filed.
23
<PAGE>
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 thereunto duly authorized.
Date: November 12, 1999 TALK VISUAL CORPORATION
/s/ C. HAROLD SNYDER
----------------------------------
C. Harold Snyder
Chief Financial Officer
(Duly Authorized Officer and Principal
Financial and Accounting Officer)
EXHIBIT 11
<TABLE>
TALK VISUAL CORPORATION
COMPUTATION OF WEIGHTED AVERAGE
COMMON STOCK SHARES OUTSTANDING
<CAPTION>
Three Months Nine Months
Total Number Ended Ended
of Shares Sept 30, 1999 Sept 30, 1999
----------- ----------- -----------
<S> <C> <C> <C>
Outstanding shares as of January 1, 1999 1,393,418 1,393,418 1,393,418
Issue of 2,040,816 shares as part of private
placement 09/22/99 on 01/12/99 1,122,449 1,122,449 1,077,056
Issue of common shares in private placements
12/31 on 01/14/99 200,000 200,000 190,441
Issue of common shares for services on 01/19/99 175,000 175,000 163,419
Issue of common shares for investment on 12/18
on 01/19/99 52,051 52,051 48,606
Issue of common shares for services on 01/25/99 790,000 790,000 720,294
Issue of common shares for services on 02/01/99 45,000 45,000 39,871
Issue of common shares in exchange for debt on
12/31 on 03/05/99 27,500 27,500 21,131
Issue of common shares for services on 03/16/99 1,128 1,128 821
Issue of 2,040,816 shares as part of private
Placement 09/22/99 on 03/18/99 918,367 918,367 661,764
Issue of common shares for services 4/9/99 30,000 30,000 19,191
Issue of common shares in exchange for debt
On 12/31/98 issued 5/12/99 28,150 28,150 14,592
Issue of common shares for services on 6/8/99 290,000 290,000 121,544
Issue per rights under merger with Videocall
International Corp on 6/18/99 19,841,400 19,841,400 7,586,418
Issue of common shares in private placement
Dated 7/14/99 4,000,000 3,391,304 1,147,059
----------- ----------- -----------
Total Weighted Average Shares Outstanding 28,914,463 28,305,767 13,205,625
=========== =========== ===========
Net Loss (878,628) (3,389,872)
Net Loss per common share(1) $ (0.03) $ (0.26)
(1) The effect of common stock options and warrants are excluded as their
inclusion would be anti-dilutive. For the three month periods ending June
30, 1999 and 1998 fully diluted net loss per common share does not differ
from primary net loss per common share.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM TALK VISUAL CORPORATION'S BALANCE SHEET AS OF
SEPTEMBER 30, 1999 AND THE STATEMENTS OF OPERATIONS,
STOCKHOLDERS' EQUITY AND CASH FLOWS FOR THE PERIOD THEN
ENDED, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 57711
<SECURITIES> 0
<RECEIVABLES> 79960
<ALLOWANCES> 12500
<INVENTORY> 16989
<CURRENT-ASSETS> 1282966
<PP&E> 11602042
<DEPRECIATION> 207790
<TOTAL-ASSETS> 15913206
<CURRENT-LIABILITIES> 2858922
<BONDS> 0
0
975
<COMMON> 28914
<OTHER-SE> 7691897
<TOTAL-LIABILITY-AND-EQUITY> 15913206
<SALES> 16828
<TOTAL-REVENUES> 405576
<CGS> 3204
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3586944
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 206189
<INCOME-PRETAX> (3389872)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3389872)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3389872)
<EPS-BASIC> (0.26)
<EPS-DILUTED> (0.26)
</TABLE>
