Filed Pursuant to Rule 424(b)(3)
Registration No. 333-43806
TALK VISUAL CORPORATION
Supplement No. 2 dated November 20, 2000
To Prospectus Dated October 31, 2000
You should read this prospectus supplement and the related prospectus
carefully before you invest. Both documents contain information you should
consider when making your investment decision.
Investing in Talk Visual Corporation common stock involves a high
degree of risk. See "Risk Factors" beginning on page 5 of our prospectus dated
October 31, 2000 to read about factors you should consider before buying shares
of our common stock.
On October 31, 2000, we issued a drawdown notice to Evertrend Holdings
Limited in connection with the common stock purchase agreement dated July 27,
2000, evidencing an equity draw down facility between us and Evertrend. This
notice offered to sell up to $700,000 of our common stock to Evertrend based on
the formula in the stock purchase agreement, during the 22 day period beginning
on November 1, 2000 and ending on December 1, 2000. During the second 6 days,
Evertrend purchased a total of 1,621,165 shares of our common stock at an
average purchase price of $0.1570 per share. These purchases resulted in
aggregate proceeds of $184,181 being paid and released from escrow to us by
Evertrend. Ladenburg Thalmann & Co. Inc. received $20,364 in placement fees and
$50,000 in non-accountable expense fees in connection with this drawdown.
The attached prospectus relates to the resale of shares acquired by
Evertrend pursuant to the stock purchase agreement and pursuant to the exercise
of warrants held by Evertrend and the resale of shares acquired by Ladenburg
pursuant to the exercise of warrants held by Ladenburg. Because Evertrend may
sell some or all of these shares, and because there are currently no agreements,
arrangements or understandings with respect to the sale of any of these shares,
we cannot estimate the actual amount of shares that they will hold after the
completion of the offering.
We will not receive any of the proceeds from this sale of shares by
Evertrend. However, we will receive the sale price of common stock sold to
Evertrend and upon the exercise of the warrants issued to Evertrend and
Ladenburg in connection with the stock purchase agreement. We expect to use the
proceeds of the sale of common stock and exercise of the warrants for general
working capital purposes.
Neither the Securities and Exchange Commission nor any other regulatory body has
approved or disapproved of these securities or passed upon the accuracy or
adequacy of the related prospectus. Any representation to the contrary is a
criminal offense.
<PAGE>
The date of this prospectus supplement is November 20, 2000
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain information included and incorporated by reference herein may
contain forward-looking statements within the meaning of Section 27A of the
Securities Act and Section 21E of the Exchange Act, and as such may involve
known and unknown risks, uncertainties and other factors which may cause the
actual results, performance or achievements of our company to be materially
different from future results, performance or achievements expressed or implied
by such forward-looking statements. Forward-looking statements, which are based
on certain assumptions and describe our future plans, strategies and
expectations are generally identifiable by use of the words "may," "will,"
"should," "expect," "anticipate," "estimate," "believe," "intend" or "project"
or the negative thereof or other variations thereon or comparable terminology.
Factors which could have a material adverse effect on the operations and future
prospects of our company are described under "Risk Factors" beginning on page 5
of our prospectus dated October 31, 2000. These risks and uncertainties should
be considered in evaluating any forward-looking statements contained or
incorporated by reference herein. Our actual results may differ significantly
from the results discussed in the forward-looking statements.
RESULTS OF OPERATIONS
For the three months ended September 30, 2000 compared to the three
---------------------------------------------------------------
months ended September 30, 1999.
-------------------------------
Prior to August 24, 1999, the Company was considered a development stage
company. On August 24, 1999, the Company became operational with the launch of
its videocalling services. Additionally, during the fourth quarter of 1999 and
continuing into the current year, the Company commenced selling other
telecommunications services and equipment through its retail outlets and over
the internet. Effective July 20, 2000, the Company took ownership of eleven
retail stores in the New York and New Jersey market. These stores added
substantial sales activities to the retail operations.The increase in sales of
$772,672 for the three months ended September 30, 2000 in comparison to the
three months ended September 30, 1999, reflected sales activities in the
existing retail stores, the acquired retail stores and equipment sales of the
TV225, which did not exist in the prior year.
Cost of equipment sales, telecommunication services and retail operation
expenses totaled $1,193,095 for the three months ended September 30, 2000. This
amount represents costs associated with the Company's eighteen wholly owned
retail stores, cost of equipment sold and the beeperforabuck web sales
activities.
There were no research and product development costs during the third quarter in
2000 as compared to an expense of $24,903 in the same period in 1999. During
1999, the Company was in the process of developing its world wide web based
reservation system and other software and hardware needs of the videocalling
<PAGE>
operation. By the August, 1999 operational date, a substantial amount of the
development work had been completed and accordingly expenses were minimal in the
current year.
General and administrative expenses (which include marketing expenses) in the
three month period ended September 30, 2000, were $161,556 higher than the
expenses incurred during the same period ended September 30, 1999. This resulted
from increased marketing activities and increased salary expense from staff
expansion due to business activity expansion.
For the nine months ended September 30, 2000 compared to the nine
-----------------------------------------------------------------
months ended September 30, 1999.
-------------------------------
Telecommunication services, software and product sales increased $867,451 for
the nine months ended September 30, 2000 compared to the nine months ended
September 30, 1999. As previously stated, effective July 20, 2000, the Company
took ownership of eleven retail stores in the New York and New Jersey market.
These stores added substantial sales activities to the retail operations. The
increase in sales reflected sales activities in the existing retail stores, the
acquired retail stores and equipment sales of the TV225, which was not a product
the Company sold in the prior year.
Real estate revenue increased $151,561 for the comparative periods ended
September 30, 2000 and 1999, as a result of higher occupancy at the Sacramento
building and ownership for the full nine months in 2000 of the Canadian property
compared to six months of ownership in 1999. Occupancy at the Sacramento
property currently stands at 90%, compared to 71% in 1999.
Cost of equipment sales, telecommunication and retail operation expenses were
$1,522,141 for the nine months ended September 30, 2000, compared to $147,639
for the nine months ended September 30, 1999. This increase reflects the
operation of the Company's newly acquired retail locations, cost of equipment
sold and the beeperforabuck web sales activities, which did not exist in 1999.
The increase of $133,798 of depreciation expense for the nine months ended
September 30, 2000 in comparison to the same period ended September 30, 1999,
represents capital assets acquired and put in service following the commencement
of operations after August, 1999, improvements to the real estate in Sacramento,
the New York/New Jersey store acquisition and equipment acquired as part of the
network buildout.
General and administrative expenses incurred in the nine months ended September
30, 1999 totaled $3,960,952 and for the nine months ended September 30, 2000,
totaled $2,472,217, for a decrease of $1,488,735. Consulting services paid for
in 1999 that were not incurred in 2000 totaled $1,535,613. The majority of the
1999 consulting services were for assistance in financing, investor relations
and public relations services and were paid for with common stock.
In connection with the acquisition of the Sacramento property, the Company
incurred a short term non-interest bearing obligation of $1,000,000. The short
term obligation to the seller of $1,000,000 was renegotiated and partially paid
down on February 19, 1999. Under the renegotiated note, the Company paid an
<PAGE>
advance against leasehold improvements in the amount of $350,000 and a principal
payment of $107,000, leaving a balance due of $893,000 on the renegotiated note,
adjusted for certain offsets. On March 29, 2000, the holder of the note signed a
settlement agreement in which it accepted a cash payment of $450,000 and 100,000
shares of common stock in full payment of this obligation. The net result of
this transaction resulted in the recognition of a gain on debt forgiveness
totaling $122,347. This is reported as an extraordinary item in the Condensed
Consolidated Statements of Operations for the nine months ended September 30,
2000.
LIQUIDITY AND CAPITAL RESOURCES
The Company had $3,667,489 in cash outflows from operating activities for the
nine months ended September 30, 2000, compared to cash outflows of $1,072,337
for the nine months ended September 30, 1999. This increase in outflows of
$2,595,152 primarily resulted from the payment of accounts payable and the
increases in inventory and accounts receivable over the balances carried at the
end of the same period in 1999.
Cash used in investing activities for the nine months ended September 30, 2000,
totaled $1,135,421, compared to $1,212,500, for the same period in 1999. The
Company purchased less property and equipment during the first nine months of
the current year compared to the same nine months in 1999, but invested $350,000
in cash in the New York/New Jersey store acquisition.
Net cash from financing activities increased in the nine months ended September
30, 2000, by $3,037,629, over the nine months ended September 30, 1999. This
increase resulted from the receipt of option exercise proceeds, receipt of
$3,045,000 of private placement proceeds offset by an increase in payments on
long term debt over the amount paid in the same prior year period.
We collected $1,929,293 of its subscriptions receivable, $591,000 in option
exercise payments, $3,045,000 in private placement funds and $446,900 due from
the Chairman, during the nine months ended September 30, 2000. These receipts
total $6,012,193. These receipts total $6,012,193. These funds were used to
retire long term debt, purchase property, equipment, and inventory and
consummate the acquisition of the eleven retail stores.
We had an operating cash utilization (or "burn") rate of about $415,900 per
month for the three months ended September 30, 2000. This compares to a burn
rate of $308,700 for the prior six months ended June 30, 2000. The increase for
the three months ended September 30, 2000, was due primarily to the integration
of the eleven newly acquired stores, the hiring of telecom engineers for the
network expansion and the expansion of the sales and marketing team to implement
higher sales volume. The efforts of these expenditures are showing signs of
paying off, and management anticipates reducing the increased burn rate
significantly during the fourth quarter of 2000.
We are pursuing refinancing of the Sacramento property in the amount of
$6,250,000 of first mortgage financing. This refinancing is anticipated to close
during the first week of December, 2000. The property currently carries
$4,500,000 of existing debt and has a value of $11,000,000 based on an
independent appraisal.
<PAGE>
We have entered into a placement agreement with an investment banking firm for a
proposed offering of equity securities to provide capital to the Company. In
connection with the proposed offering, the Company signed a Common Stock
Purchase Agreement with a private investor for an amount of up to $15 Million,
on July 28, 2000. The registration statement in connection with the Common Stock
Purchase Agreement became effective on October 31, 2000, and we have begun to
draw funds under the agreement.
The preferred shareholders have agreed to purchase one dollar of common stock
for each share of common stock received on the conversion of the preferred to
common after the first 3,348,500 shares for a total commitment of $13,365,881.
As of September 30, 2000, there remains $10,348,791 due to us under this
commitment.
Based upon the current cash utilization rate and management's plan for expansion
and new products/joint ventures/acquisitions, the refinancing of the Sacramento
property, the preferred shareholders' subscription commitment, and the equity
financing agreement, Management believes that there should be sufficient capital
to meet our needs for short and long term growth.
<PAGE>
TALK VISUAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, DECEMBER 31,
2000 1999
---------- -----------
(unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 485,766 $ 287,156
Accounts receivable, net of allowances 149,887 46,031
Inventory 147,168 25,853
Other receivables 555,575 530,319
Stock subscriptions receivable -- 1,908,790
Marketable securities 65,150 180,043
Other current assets 299,545 56,172
----------- -----------
Total current assets 1,703,091 3,034,364
PROPERTY AND EQUIPMENT, net 11,966,995 11,477,805
ADVANCES TO RELATED ENTITIES 609,329 675,102
OTHER ASSETS 2,485,689 451,118
----------- -----------
TOTAL $16,765,104 $15,638,389
=========== ===========
See notes to condensed consolidated financial statements.
<PAGE>
TALK VISUAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(continued)
SEPTEMBER 30, DECEMBER 31,
2000 1999
---------- -----------
(unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable and current portion
of long-term debt $ 290,493 $ 1,571,634
Accounts payable 917,721 918,780
Accrued expenses 175,394 248,824
Other current liabilities 86,959 52,828
---------- -----------
Total current liabilities 1,470,567 2,792,066
LONG-TERM DEBT, net of current portion 5,397,026 5,372,001
---------- -----------
TOTAL LIABILITIES 6,867,593 8,164,067
---------- -----------
COMMITMENTS AND CONTINGENCIES -- --
STOCKHOLDERS' EQUITY
Series A convertible redeemable
preferred stock - liquidation value
$1 per share, par value $.001 per
share, 25,000,000 shares authorized; 186,452
and 975,000 shares issued and outstanding 187 975
Common Stock, par value $.001 per share,
100,000,000 shares authorized; 64,202,416
and 32,060,977 shares issued and outstanding 64,202 32,061
Common stock subscribed 1,803 4,241
Additional paid in capital 22,175,577 16,409,119
Accumulated deficit (10,677,074) (7,221,561)
Accumulated other comprehensive loss (803,430) (688,537)
Stock subscriptions receivable (863,757) (1,061,976)
----------- -----------
Total Stockholders' Equity 9,897,511 7,474,322
----------- -----------
TOTAL $16,765,104 $15,638,389
=========== ===========
See notes to condensed consolidated financial statements.
<PAGE>
TALK VISUAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPT 30, NINE MONTHS ENDED SEPT 30,
--------------------------- -------------------------
2000 1999 2000 1999
--------- --------- --------- -----------
<S> <C> <C> <C> <C>
REVENUE
Telecommunication services, software
and product sales $ 774,241 $ 1,569 $ 884,280 $ 16,829
Real estate revenue 324,581 272,500 954,430 802,869
Other income 8,762 -- 8,762 --
--------- --------- --------- -----------
Total revenue 1,107,584 274,068 1,847,472 819,697
--------- --------- --------- -----------
COSTS AND EXPENSES
Cost of equipment sales, telecommunication
and retail operation expenses 1,193,095 144,435 1,669,780 147,639
Depreciation and amortization 130,941 83,497 315,953 182,155
Research & product development -- 24,903 10,000 143,227
Real estate operations 218,643 124,317 461,818 415,275
General & administrative 771,254 609,698 2,472,217 3,960,952
--------- --------- --------- -----------
Total costs and expenses 2,313,933 986,850 4,929,768 4,849,248
--------- --------- --------- -----------
LOSS FROM OPERATIONS (1,206,349) (712,782) (3,082,296) (4,029,551)
--------- --------- --------- -----------
OTHER INCOME (EXPENSE)
INTEREST EXPENSE (172,460) (165,850) (496,346) (489,546)
INTEREST INCOME 184 3 783 6,209
--------- --------- --------- -----------
(172,276) (165,847) (495,563) (483,337)
LOSS BEFORE EXTRAORDINARY ITEM (1,378,625) (878,629) (3,577,859) (4,512,888)
EXTRAORDINARY ITEM - DEBT RESTRUCTURING -- -- 122,347 --
--------- --------- --------- -----------
NET LOSS (1,378,625) (878,629) (3,455,512) (4,512,888)
DIVIDENDS ON PREFERRED STOCK -- 23,156 -- 30,875
--------- --------- --------- -----------
NET LOSS APPLICABLE TO COMMON SHARES $(1,378,625) $(901,785) $(3,455,512) $(4,543,763)
========= ========= ========= ===========
NET LOSS PER COMMON SHARE BASIC (1)
BEFORE EXTRAORDINARY ITEM ($0.02) ($0.03) ($0.08) ($0.18)
EXTRAORDINARY ITEM -- -- $0.00 -
($0.02) ($0.03) ($0.08) (0.18)
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING DURING THE PERIOD 57,011,342 28,305,767 45,302,236 25,460,607
</TABLE>
(1) The effect of common stock options and warrants is excluded from diluted
earnings per share as its inclusion would be anti-dilutive for the three month
and nine month periods ended September 30, 2000 and 1999.
See notes to condensed consolidated financial statements.
<PAGE>
TALK VISUAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPT 30,
--------------------------
2000 1999
-------- --------
<S> <C> <C>
Cash Flows From Operating Activities:
Net Loss $(3,455,512) $(4,512,888)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 315,879 182,155
Amortization of product development costs 12,000 --
(Gain) loss on stock exchanged for debt (122,347) 1,563
Issuance of common stock in exchange for services 150,799 2,251,387
Increase (decrease) in cash from changes in:
Accounts receivable, net (103,856) 63,037
Inventory (121,315) (8,739)
Other receivables (25,256) (25,973)
Other current assets (243,373) 71,437
Accounts payable (35,209) 789,047
Accrued expenses (73,430) 95,097
Other current liabilities 34,131 21,539
--------- ---------
Net Cash from Operating Activities (3,667,489) (1,072,337)
--------- ---------
Cash Flows From Investing Activities:
Purchase of property and equipment (757,440) (1,217,307)
Disposal of marketable securities -- 89,210
Advances - related parties 65,773 (83,535)
Acquisition of retail stores (350,000) --
Deposits and other (93,754) (868)
--------- ---------
Net Cash from Investing Activities (1,135,421) (1,212,500)
--------- ---------
Cash Flows from Financing Activities:
Borrowings on debt 111,533 350,000
Payments on notes payable and long term debt (549,537) (275,624)
Proceeds from exercise of options on common stock 593,500 -
Collections on stock subscriptions receivable 1,921,290 1,900,000
Proceeds from private placements of common stock 3,045,000 --
Cash dividend payments -- (30,875)
Other (120,270) 20,390
--------- ---------
Net Cash from Financing Activities 5,001,520 1,963,891
--------- ---------
Increase (decrease) in cash and cash equivalents 198,610 (320,947)
Cash and cash equivalents at beginning of period 287,156 378,658
--------- ---------
Cash and cash equivalents at end of period $ 485,766 $ 57,711
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE>
TALK VISUAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(continued)
NINE MONTHS ENDED SEPT 30,
--------------------------
Supplemental disclosure of cash flow information: 2000 1999
---- ----
a. Cash paid during the period for:
interest $ 423,681 $ 441,041
--------- ----------
income taxes $ 5,970 $ 800
--------- ----------
b. Noncash investing and financing transactions:
For the period ended September 30, 1999:
Purchase of Canadian real estate in exchange for 975,000 shares of
convertible preferred stock and assumption of a mortgage in the amount of
$987,755.
Issuance of 55,650 shares of common stock in satisfaction of notes payable
in the amount of $129,009.
Issuance of 600,000 shares of common stock as a commission with respect to
the acquisition of Videocall International Corp., total value of $2,250,000.
Cancellation of an advance payable in the amount of $30,000 in exchange for
7,500 shares of common stock.
Issuance of 19,841,400 shares of common stock pursuant to the merger of
Videocall International Corp. with Talk Visual Corporation.
For the period ended September 30, 2000:
Conversion of the Convertible Discounted Loan Notes into 495,000 shares of
common stock, previously issued, for the outstanding balance of the note in the
amount of $386,100.
Cashless exercise of an Option to purchase 900,000 shares of common stock
at $0.25 per share, at a market price of $3.875 for a total issue of 841,935
shares.
Exercise of Options to purchase 1,750,000 shares of common stock at $0.4375
per share in exchange for notes receivable in the amount of $765,625.
Issuance of 3,000,000 shares of common stock pursuant to a joint venture
agreement with EnterTech Media Group for 3,333,333 shares of EnterTech Media
common stock at a total value of $1,078,200.
Issuance of 1,066,718 shares of common stock under the terms of the
acquisition of eleven retail stores in New York and New Jersey from Various
Business Management Corporation at a total value of $550,000.
<PAGE>
TALK VISUAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
(1) General and Summary of Business and Significant Accounting Policies
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 and Regulation S-B. 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, 2000, the results of operations for the nine months ended
September 30, 2000 and September 30, 1999, and the cash flows for the nine
months ended September 30, 2000 and September 30, 1999 are included. Operating
results for the nine month period ended September 30, 2000 are not necessarily
indicative of the results that may be expected for the year ending December 31,
2000.
The information contained in this Form 10-QSB should be read in conjunction with
the audited financial statements as of December 31, 1999, filed as part of the
Company's Annual Report on Form 10-KSB.
Prior Period Restatement
The Company, prior to February, 1999, was known as Legacy Software, Inc., a
developer of educational entertainment software. In September of 1998, an
agreement and plan of merger between Legacy Software, Inc. ("Legacy")and
Videocall International Corp. ("Videocall") was announced, but didn't take
effect until June of 1999. Videocall was a development stage company in the
telecommunications industry. During the fourth quarter of 1998, key officers of
Videocall were elected as directors and officers of Legacy, and effective at the
end of December, the business activity of Legacy was changed to focus on the
business activity of Videocall. Even though the stock-for-stock merger was
approved by the stockholders of both companies in June of 1999, as a result of
the common control and change of business activities, these financial
statements, as reflected in the December 31, 1999 Form 10-KSB, report the
combined operations of both companies as if the merger had occurred at December
31, 1998.
A summary of the adjusted amounts for the nine months ended September 30, 1999,
in comparison to amounts reported on the September 30, 1999 Form 10-QSB is as
follows:
Reported on
9/30/99 Form 10-QSB Restated
-------------- -----------
Total Revenue $ 405,576 $ 819,697
Total Expenses 3,589,702 4,849,248
Loss From Operations (3,184,126) (4,029,551)
Net Loss Applicable to
Common Shares (3,389,872) (4,543,763)
Net Loss per Common Share
Basic and Diluted ($0.26) ($0.18)
<PAGE>
(2) Financial Condition and Liquidity
Since inception, the Company has incurred significant net losses and expects to
continue to incur losses through year end. The Company is dependent on revenues
from the real estate operations, investor stock subscriptions, and short term
and long term borrowings to supplement retail videocalling and telecommunication
product sales for working capital needs, until the operating activities generate
sufficient cash flow to fund the Company.
The Company collected $1,929,293 of its subscriptions receivable, $591,000 in
option exercise payments, $3,045,000 in private placement funds and $446,900 due
from the Chairman, during the nine months ended September 30, 2000. The Company
is pursuing refinancing of the Sacramento property in the amount of $6,250,000
of first mortgage financing. This refinancing is anticipated to close during the
first week of December, 2000. The property currently carries $4,500,000 of
existing debt and has a value of $11,000,000 based on an independent appraisal.
Additionally, the Chairman of the Company has made a guarantee to fund or obtain
funding to meet the obligations and working capital needs of the Company not met
by other funding sources. The Company also has a funding agreement by the
preferred stockholders to purchase one dollar of common shares per preferred
share converted to common shares after the first 3,348,500, for a total
commitment of $13,365,881. At September 30, 2000, the preferred shareholders had
contributed $3,045,000 toward that commitment. Finally, the Company signed a
Common Stock Purchase Agreement with a private investor for an amount of up to
$15 Million, on July 28, 2000, pursuant to an equity funding agreement. See the
discussion below for more information. Based upon the current cash utilization
rate and Management's plan for expansion and new products/joint
ventures/acquisitions, the Chairman's funding obligation, the preferred
shareholders' conversion commitment and the Common Stock Purchase Agreement
under the equity offering, Management believes that there should be sufficient
capital to meet the needs of the Company for a period exceeding the next twelve
months.
On August 24, 2000, the Company signed a proposal from RCC Finance Group, Ltd.,
for a Master Lease Line in the amount of $1,000,000. Upon acceptance, the
Company plans on utilizing this lease line to acquire switching and bridging
equipment as part of the network buildout.
(3) Recent Sale of Equity Securities
The Company has issued and sold unregistered securities that have not been
previously reported as set forth below. An underwriter was not utilized in any
of these transactions. The recipients of securities in each transaction
represented their intention to acquire the securities without a view to the
distribution thereof. All the issued securities were restricted securities,
under Rule 144, or Reg S regulations, and appropriate restrictive legends were
affixed to the securities in each transaction.
The Company issued 2,896,371 shares of common stock under various private
placement subscriptions pursuant to the agreement of the preferred shareholders
to contribute $1.00 per converted common share received after the first
3,348,500 common shares. The shares were issued at prices ranging from $0.2774
to $0.5517 per share, based on the average closing price for the three days
prior to the funding, at a twenty five percent discount. Included in the
subscriptions, were 317,187 shares to the Chairman of the Company.
<PAGE>
The Company issued 1,066,718 shares of common stock to Various Business
Management Corporation as part of the acquisition of eleven New York and New
Jersey retail stores on July 20, 2000. The issued shares were valued at $0.5156
per share, for a total of $550,000.
On August 28, 2000, the Company issued 1,750,000 shares of common stock upon the
exercise of options, at $0.4375 per common share. The options were exercised by
two officers of the Company.
On September 27, 2000, the Company issued 3,000,000 shares of common stock in
exchange for 3,666,000 shares of common stock of EnterTech Media Group, Inc.,
pursuant to a joint venture agreement dated April 1, 2000. The transaction had a
value of $1,078,000 or $0.3594 per Talk Visual common share.As a result of this
stock exchange, the Company owns 20.3% of EnterTech Media Group, Inc.
On September 29, 2000, the Company issued 2,500 shares of common stock to an
employee pursuant to an employment letter of agreement, at a price of $0.3594
per common share for a total value of $899.
At September 30, 2000, the Company had received $845,000 against various stock
subscriptions for common stock at prices ranging from $0.3594 to $0.4336 per
share. The Company is obligated to issue 1,962,957 shares under these stock
subscriptions.
(4) Segment Information
The Company's reportable operating segments consist of real estate and
telecommunication services. The summary of the operating segment information is
as follows:
Rental Telecom Total
---------- ---------- ----------
September 30, 2000
Net revenue $ 954,430 $ 893,042 $1,847,472
Depreciation/amortization 182,372 133,507 315,879
Income (loss)before
extraordinary item (199,840) (3,378,019) (3,577,859)
Assets, net 10,964,029 5,801,075 16,765,104
September 30, 1999
Net revenue 802,868 16,829 819,697
Depreciation/amortization 140,298 41,857 182,155
Loss (255,329) (4,257,559) (4,512,888)
Assets, net 11,078,694 4,834,512 15,913,206
(5) 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.
(6) Subsequent Events
On July 28, 2000, the Company signed a Common Stock Purchase Agreement with a
private equity investor pursuant to an equity line agreement. The private
investor has committed to purchase up to $15 million of the Company's common
stock, subject to the effectiveness of a Registration Statement to be filed with
the Securities and Exchange Commission. The issuance of the common stock to be
sold to the private investor under the Common Stock Purchase Agreement will not
be registered under the Securities Act of 1933. However, the Company filed a
Registration Statement on Form SB-2 covering the resale of the shares by the
investor. On October 31, 2000, the Registration Statement became effective.
Draws under the Common Stock Purchase Agreement may be in increments of up to
$1.5 million. The Company has requested an initial draw in the amount of
$700,000.
