<PAGE>
FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For Quarter Ended September 30, 1998
Commission File Number 33-2474-LA
USA Talks.com, Inc.
(Exact name of registration as specified in its charter)
NEVADA 93-0915593
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
4350 Executive Drive, #220
SAN DIEGO, CALIFORNIA 92121
(Address of principal executive offices)
Registrant's telephone number
including area code (619) 546-0550
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 such shorter period that the registrant
was required to file such reports)
Yes X No
and (2) has been subject to such filing requirements for the past 90 days.
Yes X No
The number of shares of Common Stock, $0.001 par value, outstanding as of
November 11, 1998, was 13,067,667.
<PAGE>
PART 1
ITEM 1 - FINANCIAL STATEMENTS
The condensed financial statements included herein have been prepared by
the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although the Company believes that the
disclosures are adequate to make the information presented not misleading.
In the opinion of the Company, all adjustments, consisting of only normal
recurring adjustments, necessary to present fairly the financial position of
the Company as of September 30, 1998, and the results of its operation and
changes in its financial position from January 1, 1998 through September 30,
1998, have been made. The results of its operation for such interim period is
not necessarily indicative of the results to be expected for the entire year.
<PAGE>
USA TALKS.COM, INC.
(A Development Stage Company)
Balance Sheet
<TABLE>
<CAPTION>
Sept 30, 1998 Dec 31, 1997
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $29,900 $112,314
Prepaid expenses and other current assets 16,885 15,220
------------- -----------
Total current assets $46,785 $127,534
Furniture and equipment, net 39,303 42,548
Other assets - 40,198
------------- -----------
Total assets $86,088 $210,280
------------- -----------
------------- -----------
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Accounts payable $476,371 $422,559
Notes payable 36,710 76,772
Contract payable 168,880 0
Accrued expenses 100,357 50,906
------------- -----------
Total current liabilities $782,318 $550,237
------------- -----------
Shareholders' deficit
Common stock: $.001 par value
50,000,000 authorized 13,067,667 and
13,000,000 issued and outstanding, respectively $13,068 $1,577
Additional paid-in capital 4,363,292 3,316,289
Deficit accumulated during development stage (5,072,590) (3,657,823)
------------- -----------
Total shareholders' deficit ($696,230) ($339,957)
------------- -----------
Total liabilities and shareholders' deficit $86,088 $210,280
------------- -----------
------------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
USA TALKS.COM, INC.
(A Development Stage Company)
Statement of Operations
(Unaudited)
<TABLE>
<CAPTION>
For the Three For the Three For the Nine For the Nine
Months Ended Months Ended Months Ended Months Ended
Sept 30, 1998 Sept 30, 1997 Sept 30, 1998 Sept 30, 1997
<S> <C> <C> <C> <C>
Operating expenses:
Legal and accounting $55,134 $75,581 $145,909 $168,796
General and administrative 204,202 199,068 281,124 509,476
Research and development 222,971 107,891 761,748 268,704
Salaries and other compensation 107,264 50,623 224,433 142,640
------------- ------------- ------------- -------------
Total operating expenses $589,571 $433,163 $1,413,214 $1,089,616
------------- ------------- ------------- -------------
Loss from operations ($589,571) ($433,163) ($1,413,214) ($1,089,616)
Other expense:
Interest expense, net 1,916 3,957 2,986 8,164
------------- ------------- ------------- -------------
Net loss for the period ($591,487) ($437,120) ($1,416,200) ($1,097,780)
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Basic loss per common share $ (0.05) $ (0.05) $ (0.12) $ (0.11)
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Average common shares outstanding 11,229,840 9,400,775 11,816,120 10,183,610
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
USA TALKS.COM, INC.
(A Development Stage Company)
Statement of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
For the Nine For the Nine
Months Ended Months Ended
Sept 30, 1998 Sept 30, 1997
<S> <C> <C>
Cash flows from operating activities:
Net loss for the period ($1,416,200) ($1,097,780)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 8,950 7,500
Issuance of stock for services rendered 289,646 0
(Increase) decrease in:
Prepaid expenses and other current assets (4,382) (18,129)
Other assets 198 0
Increase (decrease) in:
Accounts payable 54,683 416,856
Accrued expenses 49,451 (69,480)
------------ ------------
Net cash used in operating activities ($1,017,654) ($761,033)
------------ ------------
Cash flows from investing activities:
Purchase of equipment (5,705) (8,837)
------------ ------------
Net cash used in investing activities ($5,705) ($8,837)
------------ ------------
Cash flows from financing activities:
Payments on notes payable ($30,062) ($12,010)
Payments on contracts payable (81,120) 0
Proceeds from notes payable 20,000 25,000
Proceeds from sale of common stock 1,022,127 913,890
Proceeds from sale of warrants 10,000 0
------------ ------------
Net cash provided by financing activities $940,945 $926,880
------------ ------------
Net increase (decrease) in cash ($82,414) $157,010
Cash and cash equivalents, beginning of period 112,314 32,940
------------ ------------
Cash and cash equivalents, end of period $29,900 $189,950
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
USA TALKS.COM, INC.
(A Development Stage Company)
Notes to the Financial Statements
September 30, 1998
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
General
The condensed financial statements included herein have been prepared by
the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although the Company believes that the
disclosures are adequate to make the information presented not misleading.
In the opinion of the Company, all adjustments, consisting of only normal
recurring adjustments, necessary to present fairly the financial position of the
Company as of September 30, 1998 and the results of its operations and changes
in its financial position from January 1, 1998 through September 30, 1998 have
been made. The results of its operations for such interim period is not
necessarily indicative of the results to be expected for the entire year.
Interim Financial Statements
Management has elected to omit most of the disclosures required by
generally accepted accounting principles for complete interim financial
statements for the quarter ended September 30, 1998. Management believes it has
made all the necessary adjustments to present accurate financial statements for
the nine months presented.
Reorganization and Name Change
USA Talks.com, Inc., was formed on July 28, 1998, by SBB Inc. upon
completion of a corporate reorganization with Alfine Corporation. Alfine was a
development stage company formed in 1991, and owns the exclusive worldwide
licensing and marketing rights for its Audio Compression and Speaker
Identification and Speaker Verification technologies.
Effective July 28, 1998, the Company issued 12,350,000 (over 90%) for all
of the assets of Alfine Corporation.
Effective July 31, 1998, the Company filed an S-8 registration statement
reporting issuance of 453,323 shares in connection with the Company's Stock
Bonus Agreement, which increased the total shares of common stock issued and
outstanding to 13,000,000 as of July 31, 1998.
<PAGE>
Effective August 3, 1998, the Company changed its name to USA Talks.com,
Inc.
NOTE 2 - NET LOSS PER SHARE
Net loss per share is computed in accordance with SFAS No. 128, "Earnings
per Share." Basic earnings per share includes no dilution and is computed by
dividing net loss available to common stockholders by the weighted-average
number of common shares outstanding for the period. Diluted earnings per share
is computed similar to basic earnings per share except that the denominator is
increased to include the number of additional common shares that would have been
outstanding if the potential common shares had been issued and if the additional
common shares were dilutive. Because the Company has incurred net losses, the
effect of conversion of outstanding stock options and warrants are not included
since they would be anti-dilutive.
As of September 30, 1998, there were issued and outstanding 13,067,667
Common shares. Additionally, certain Warrants and Stock Options are also
outstanding as of September 30, 1998:
<TABLE>
<S> <C>
Common Shares issued and outstanding 13,067,667
Warrants to purchase Common Shares 4,794,488
Stock Options granted 4,100.000
----------
Total 21,962,155
----------
----------
</TABLE>
ITEM 2 -
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995.
The following "Management's Discussion and Analysis of Financial Condition
and Results of Operations" contains "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995 concerning,
among other things, the Company's prospects, developments and business
strategies for its operations, including the development and sales of certain
new and established products. These forward-looking statements are identified
by their use of such terms and phrases as "believes" and "expects" and are
subject to risks and uncertainties and represent the Company's present
expectations or beliefs concerning future events. The Company cautions that the
forward-looking statements are qualified by important factors that could cause
actual results to differ materially from those in the forward-looking
statements. Results actually achieved thus may differ materially from expected
results included in these statements.
<PAGE>
THE CORPORATE COMBINATION AND REORGANIZATION WITH SBB, INC.
This Quarterly Report on Form 10-QSB for the quarter ended September 30,
1998, represents the first report of USA Talks.com, Inc. (formerly SBB, Inc.)
following the acquisition by SBB, Inc. of all the assets and liabilities of
Alfine Corporation. The acquisition of Alfine was consummated on July 28, 1998
(the "Acquisition Date") and was accounted for as a purchase, and the name of
the Company was immediately changed to USATalks.com, Inc. Accordingly, the
Company's results as described in this "Management's Discussion and Analysis of
Financial Condition and Results of Operations" refers to (I) Alfine and SBB,
Inc. collectively for all periods ending on or before the Acquisition Date.
GENERAL
USA Talks.com, Inc. is the parent company for two wholly owned
subsidiaries: Alfine Technologies, Inc., which owns all intellectual property
and technology, and PhonClub International, Inc. Alfine has developed
proprietary technology for Audio Compression and Speaker Identification and
Speaker Verification. These technologies will provide a vehicle for
implementation and the use in the rapidly expanding Internet long distance
telephone service industry.
The service provided to the consumer will be "telephone to telephone" with
no computer required by the subscriber, and will provide "toll grade" quality
calls, making the delivery system transparent to the user. The long distance
service will be marketed as a monthly flat-rate, unlimited usage plan, with
access controlled by the Company's proprietary "speaker verification" software.
The monthly flat-rate unlimited usage concept will differentiate USA Talks.,com,
Inc. from its competitors based upon the proprietary technologies.
LIQUIDITY AND CAPITAL RESOURCES
USA Talks,com, Inc. (and predecessor Alfine Corporation formed in 1991) was
a development stage company from inception. All activities of the Company from
inception, totaling more than $5 million, represent accumulated losses and
have been considered as part of the Company's development stage activities.
These activities have been financed through private sources, primarily
individual accredited investors.
As of September 30, 1998, the Company's current liabilities exceeded its
current assets by $696,230, which is also the total Shareholders deficit. The
Company is devoting substantially all of its present efforts to establish the
Internet long distance telephone service, and expects that revenue from
operations will commence in the fourth quarter of 1998. The Company believes
that operations in 1999 and future years will become profitable.
Until the Company's operations become profitable, its ability to continue
as a going concern is dependent upon its continued ability to provide capital
from private sources, primarily individual accredited investors. The Company
expects that it will be successful in providing the necessary capital to
continue as a going concern, and that revenues from operations will increase in
amounts to help offset the costs of its activities.
PLAN OF OPERATIONS
<PAGE>
The Company plans to market its long distance Internet phone service as
a monthly flat-rate, unlimited usage service sold to individual subscribers,
with access controlled by its proprietary voice/speaker identification
software. Unlimited long distance usage between service areas will be offered
for a small sign-up fee and a monthly flat-rate fee for each subscriber.
Although a flat-rate for unlimited use has proven immensely popular for basic
Internet access, the Company knows of no telephone company that currently
offers unlimited long distance telephone services for a flat monthly fee.
The Company believes that a flat-rate plan should have high appeal to
business owners. When this market is established, the Company expects to
direct its marketing efforts toward the household consumer market. The
marketing approach will include both direct mail and a strategic alliance
with TrendMark International, Inc., a network marketing company.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings. None
Item 2. Changes in Securities.
The Company's financing activities raised approximately $225,000 from the
sale of 52,167 shares of Common Stock for the three-month period ended
September 30, 1998. These funds were raised primarily through the private
placement of equity securities in reliance upon exemptions from registration
pursuant to Sections 3(a)(9) and 4(2) of the Securities Act and Rule 506 of
Regulation D promulgated thereunder. All of these investors were "Accredited
Investors" as that term is defined in Regulation D.
During the quarter ended September 30, 1998, the Company also issued 15,500
restricted common shares to a private company pursuant to the exemptions
provided by section 4(2) of the Securities Act and Regulation D for services
rendered, valued at approximately $85,000. A restriction legend was placed on
the certificates.
The amount of money raised during a given period is dependent upon ancial
market conditions, the technological progress and the Company's projected
funding requirements. The Company anticipates that future financing activities
will be influenced by these factors.
As noted previously, significant financing activities will be required to
fund future operations and investing activities, and to maintain operations.
While the Company is engaged in continuing negotiations to secure additional
capital and financing, there is no assurance such funding will be available or
if received will be adequate.
Item 3. Defaults Upon Senior Securities. None
Item 4. Submission of Matters to a Vote of Security Holders. None
Item 5. Other Information None
Item 6. Exhibits and Reports on Form 8-K. None
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1998
<CASH> 29,900
<SECURITIES> 0
<RECEIVABLES> 16,885
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 46,785
<PP&E> 54,533
<DEPRECIATION> (15,230)
<TOTAL-ASSETS> 86,088
<CURRENT-LIABILITIES> 782,318
<BONDS> 0
0
0
<COMMON> 4,376,360
<OTHER-SE> (5,072,590)
<TOTAL-LIABILITY-AND-EQUITY> 86,088
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 589,571
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,916
<INCOME-PRETAX> (591,487)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (591,487)
<EPS-PRIMARY> (0.05)
<EPS-DILUTED> (0.05)
</TABLE>
