<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For Quarter Ended June 30, 1999
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.)
4180 La Jolla Village Drive, #570
SAN DIEGO, CALIFORNIA 92121
(Address of principal executive offices)
Registrant's telephone number
including area code
(858) 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
August 15, 1999 was 80,123,456.
<PAGE>
PART 1
ITEM 1 - FINANCIAL STATEMENTS
The financial statements included herein have been prepared by the
Company's management, 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 June 30, 1999, and the results of its operation
and changes in its financial position from January 1, 1999 through June 30,
1999, have been made. The results of its operations for such interim period
are not necessarily indicative of the results to be expected for the entire
year.
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/FORWARD-LOOKING INFORMATION.
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. These
forward-looking statements and information relating to the Company are
based on the beliefs of management as well as assumptions made by and
information currently available to management. Such statements reflect the
current view of the Company regarding future events and are subject to
certain risks and uncertainties as noted below. Should one or more of these
risks or uncertainties materialize, or should underlying assumptions prove
incorrect, actual results may vary materially from those described herein as
anticipated, believed, estimated, expected or intended.
This commentary should be read in conjunction with the Financial
Statements and accompanying notes for a more complete understanding of
USATalks.com's financial position and results of operations.
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QUARTER ENDED JUNE 30, 1999, COMPARED TO
QUARTER ENDED JUNE 30, 1998
USATalks.com, Inc. is a development stage company that had no significant
revenues for its quarter ended June 30, 1999, and had no revenues for its
quarter ended June 30, 1998, as discussed below:
REVENUES
NET REVENUE. For the three months ended June 30, 1999, net revenue of
$65,621 consists solely of fees generated in test markets prior to the
completion of the first phase of our nationwide voice-over-Internet (VOIP)
telephony network. This initial phase was completed in July, 1999 and is
immediately available for originating calls from local access in over 200
cities and terminating anywhere in the continental United States.
COST OF SALES. Cost of sales consists principally of the costs directly
associated with the test marketing conducted. Accordingly, it does not include
costs incurred to establish initial relationships with Internet Service
Providers and local and competitive local exchange carriers, which are reflected
in the accompanying financial statements as part of "Research and Development"
costs.
GROSS PROFIT. Gross profit was $25,774 for the three months ended June
30, 1999 and zero for the three months ended June 30, 1998 (since there were
no sales for the 1998 period).
EXPENSES
Total expenses for the second quarter ended June 30, 1999 were
$5,196,038 as compared to $519,309 for the second quarter ended June 30,
1998. Total expenses for the six months ended June 30, 1999 were $9,169,698
as compared to $823,643 for the six months ended June 30, 1998.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses consist primarily of (i) telemarketing, (ii) market development,
(iii) trade show expenses, (iv) payroll for sales personnel, (v) depreciation
charges, and (vi) general administrative costs. Selling, general and
administrative expenses were $1,846,721 for the three months ended June 30,
1999 and $3,625,846 for the six months ended June 30, 1999. The increase in
selling, general and administrative
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expenses is attributable to the overall expansion of the promotion and
marketing of our services. We expect sales and marketing expenses to increase
significantly in total dollar amounts but to decrease equally significantly
as a percentage of revenues as we endeavor to enhance our market position and
brand recognition.
RESEARCH AND DEVELOPMENT. Research and development expenses consist
primarily of network telephony costs and consulting fees to establish initial
relationships with Internet Service Providers and local and competitive local
exchange carriers and for consultants who design, implement and operate our
VOIP telephony network. Research and development expenses were $2,399,213 for
the three months ended June 30, 1999 and $330,738 for the three months ended
June 30, 1998; and $3,801,641 for the six months ended June 30, 1999 and
$538,777 for the six months ended June 30, 1998. The increase in research and
development expenses is attributable to significant increases in the ongoing
deployment and implementation of our VOIP telephony network and associated
costs related to the completion of the first phase of our build out of our
nationwide network. To date, all research and development costs have been
expensed as incurred. We expect costs for Internet Service Providers and
local and competitive local exchange carriers and for consultants who design,
implement and operate our VOIP telephony network to increase for the
foreseeable future as we continue the build-out of the second phase of our
domestic nationwide network across the Unites States and expand our service
area to and additional 200 markets.
SALARIES AND OTHER COMPENSATION. Salaries and other compensation consist
primarily of compensation to a wide variety of staff personnel in addition to
corporate officers and executives. Salaries and other compensation was
$689,171 for the three months ended June 30, 1999 and $58,196 for the three
months ended June 30, 1998; and $1,246,774 for the six months ended June 30,
1999 and $117,169 for the six months ended June 30, 1998. The increase in
salaries and other compensation was primarily due to significant increases in
overall staff from 4 as of June 30, 1998 to 35 as of June 30, 1999. We expect
salaries and other compensation to increase for the remainder of the year
ending December 31, 1999 and for the foreseeable future as we hire additional
personnel to maintain the expansion of our nationwide network.
LEGAL. Legal expenses consist of attorney fees related to our ongoing
legal requirements including, among others, the SEC investigation and class
action law suits, and mergers and acquisitions. Legal expenses were $286, 707
for the three months ended June 30, 1999 and $89,775 for the three months
ended June 30, 1998; and $495,437 for the six months ended June 30, 1999 and
$90,775 for the six months ended June 30, 1998. We expect legal expenses to
remain at these levels for the remainder of the year ending December 31, 1999
and for the foreseeable future thereafter due to our expansion plans and our
inability to determine when the termination of the SEC investigation and
other lawsuits will occur.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operations was approximately $5.24 million for the
second quarter ended June 30, 1999, compared to $1.9 million for the full
year ended December 31, 1998, reflecting a heightened level of activity in
the establishment of relationships with Internet Service Providers and local
and competitive local exchange carriers; and additional expenses associated
with the design, installation and
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operation our VOIP telephony network; and for accelerated efforts in the
overall marketing strategies for our services. Capital expenditures for the six
months ended June 30, 1999 consumed another $5.65 million compared to $3.1
million for the entire 1998 year, substantially all of which for both periods
was used for equipment purchases and installation costs for the build-out of
our private national VOIP network. As of June 30, 1999, approximately
$2.4 million in equipment purchases and installation costs were in accounts
payable as compared to $2.5 million at December 31, 1998, reflecting purchases
made from primary equipment and service suppliers. Cash on hand at June 30,
1999 was $246,746 compared to $4.338,438 at December 31, 1998..
In order to meet its scheduled build-out and implementation dates over
the next 12-month period, the Company plans to expend additional capital,
subject to the availability of capital resources, for the expansion of its
private VOIP network at the rate of approximately $1 million per month, or up
to an additional $6 million for the balance of 1999; however, we could spend
up to an additional $18 million under a more accelerated plan if sufficient
funds are available on acceptable terms.
In addition, we will incur additional operating losses for the year ending
December 31, 1999 of as much as an estimated $8 million. A substantial portion
of the operating loss projected in 1999 will result from selling and general
and administrative expenses, including staff salaries and the cost of
consulting services required to oversee the network expansion prior to
generating revenues in each new geographic area served. We believe that
revenue generation in any particular service area will follow the commencement
of service by at least 30 days. In addition, substantial operating expenses
will be incurred to lease bandwidth with sufficient capacity to serve what is
expected to be a rapidly growing residential subscriber and commercial client
customer base, for which on-going operating expense also will precede revenue
generation. Working capital requirements are expected to be limited as the
service is extended to the majority of customers on a prepaid basis, thereby
avoiding the illiquidity and collection issues associated with the build-up of
a new customer base.
During the six months ended June 30, 1999, we completed $6.9 million in
private debt and equity financing as compared to $9 million for the year
ended December 31, 1998. Approximately $15 million in additional funds is
needed for our planned capital investments and budgeted operating expenses
for the five months from August, 1999 to December 31, 1999. We anticipate
that the required funds will be obtained through the sale of additional
equity securities, debt financing and/or equipment lease arrangements.
However, our ability to raise capital has been adversely affected by the
trading suspension invoked by the SEC from January 29, 1999 through February
12, 1999, and its aftermath, and may be affected by certain pending class
actions. The on-going SEC investigation may further hinder us from attracting
new equity investors and lenders, and there is no assurance that capital can
be raised through further equity sales, new credit facilities or other
financing on terms that will be acceptable.
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Nevertheless, we believe we will be able to obtain the required capital
from the subsequent sale of equity or through new debt or leasing
arrangements based upon the strong continuing interest of prospective private
investors and others. This interest in the Company is driven by the sound
business fundamentals underlying its VOIP long-distance service, high profit
margins and strong consumer demand for a low-cost, flat-rate long-distance
telephone service. Furthermore, now that the first phase of our nationwide
network is fully operational, we believe that we will be able to generate
substantial funds from on-going operations to help meet our operating
expenses and capital requirements, expansion, implementation and operation of
our VOIP telephony network for the foreseeable future as we continue the
build out of the second phase of our domestic nationwide network across the
Unites States and expand our service area to and additional 200 markets.
Upon completion of the initial phase of the national network, completed
in July, 1999, the monthly cash requirements for recurring network costs will
be approximately $1 million to $1.5 million, and estimated monthly recurring
general and administrative, and employee expenses of an additional $500,000
to $750,000 are expected to be required. Accordingly, early success in
marketing to produce sales revenues to offset these on-going fixed costs will
be critical to preserving capital and facilitating an ensuing accelerated
expansion of the nationwide network There is no assurance that we will be
successful in achieving the level of sales revenues required to provide the
funds necessary to maintain on-going fixed costs.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
PENDING OR THREATENED LITIGATION, CLAIMS OR ASSESSMENTS (EXCLUDING
UN-ASSERTED CLAIMS AND ASSESSMENTS):
During the quarter ended June 30, 1999, there have been no changes in
the pending legal proceedings as reported for the first quarter ended March 31,
1999.
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Item 2. CHANGES IN SECURITIES
On January 15, 1999, the Company announced a four-for-one forward
split of its shares of common stock, payable to shareholders of record on
February 5, 1999.
Our financing activities for the six months ended June 30, 1999,
raised $5,806,250 from the sale of 6,859,864 shares (as adjusted for the
four-for-one split on February 5, 1999) of common stock. These funds were
raised through the private placement of equity securities in reliance upon an
exemption from registration pursuant to Section 4(2) of the Securities Act of
1933 and Rule 506 of Regulation D promulgated thereunder. All of these
investors were "Accredited Investors" as that term is defined in Regulation D.
Also during the six months ended 30, 1999, we received $173,350 in
cash for the exercise of Warrants resulting in the issuance of 7,022,000
shares (as adjusted for the four- for-one split on February 5, 1999) of
common stock. We also issued 1,659,649 shares of common shares to various
unrelated persons in exchange for consulting services valued at $1,306,520.
We did not receive any cash for these shares which were issued in reliance
upon an exemption from registration pursuant to Section 4(2) of the
Securities Act of 1933.
TRISERVE COMMUNICATIONS, INC. ACQUISITION
Pursuant to an Agreement and Plan of Merger and Reorganization
between USA Talks.com, Inc. and TriServe Communications, Inc., ("TriServe"),
a California corporation, effective June 14, 1999, the Company acquired all
of the shares of TriServe for 2,223,144 shares of the Company's common stock,
representing 2.70% of the outstanding shares of the Company after the
acquisition. The transaction was valued on the Company's books at $1,875,778.
The excess of consideration over the fair value of net assets acquired
(goodwill) was valued at $1,848,011 and is being amortized on a straight-line
basis over an estimated useful life of 5 years.
TriServe has acted as a significant facilitator to the Company in the
design, implementation and management of the Company's nationwide Voice Over IP
Telephony network. TriServe's founders have extensive telecommunications
industry experience and important relationships with telecommunications
equipment manufacturers and local and competitive local exchange carriers
throughout the United States.
TRENDMARK, INC. ASSET PURCHASE AGREEMENT
On February 5, 1999, the Company was named as a defendant in a
lawsuit filed by TrendMark, Inc. in the United States District Court for the
Western District of Tennessee. The Company reached an agreement to settle the
lawsuit as originally filed. The resulting agreement effective July 16, 1999,
was an Asset Purchase Agreement under which the Company issued 2,000,000
shares of its common stock for the acquisition of all the net assets of
TrendMark, Inc. In addition, the agreement required the Company to loan
TrendMark, Inc. the sum of $150,000 by September 30, 1999. As security for
repayment of this loan, TrendMark, Inc. has pledged 93,750 shares of the
2,000,000 shares they received in the transaction. As of June 30, 1999 the
Company has loaned TrendMark, Inc. the sum of $41,089 which is to be applied
against the $150,000 loan. Repayment of the loan is due by June 30, 2000.
Item 3. DEFAULTS UPON SENIOR SECURITIES
None
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
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Item 5. OTHER INFORMATION
OUR BUSINESS COULD BE AFFECTED BY YEAR 2000 ISSUES
"Year 2000 Issues" refer generally to the problems that some
software may have in determining the correct century for the year. For
example, software with date-sensitive functions that is not Year 2000
compliant may not be able to distinguish whether "00" means 1900 or 2000,
which may result in failures or the creation of erroneous results. We have
defined Year 2000 compliant as the ability to:
1. Correctly handle date information needed for the December 31,
1999 to January 1, 2000 date change.
2. Function according to the product documentation provided for this
date change, without changes in operation resulting from the
advent of a new century, assuming correct configuration.
3. Respond to two-digit date input in a way that resolves the
ambiguity as to century in a disclosed, defined and predetermined
manner.
4. Store and provide output of date information in ways that are
unambiguous as to century if the date elements in interfaces and
data storage specify the century.
5. Recognize the Year 2000 as a leap year.
We designed our current products to be Year 2000 compliant when
configured and used in accordance with the related documentation, and provided
that the underlying operating system of the host machine and any other software
used with or in the host machine or our products are Year 2000 compliant.
However, we have not tested our products for Year 2000 compliance. We continue
to respond to customer questions about prior versions of our products on a
case-by-case basis.
We have not tested software obtained from third parties. However, we
are seeking assurances from our vendors that licensed software is Year 2000
compliant. Despite assurances from developers of products incorporated into our
products, our products may contain undetected errors or defects associated with
Year 2000 date functions. Known or unknown errors or defects in our products
could result in delay or loss of revenues, diversion of development resources,
damage to our reputation, or increased service and warranty costs, any of which
could seriously harm our business, financial condition and results of
operations. Some commentators have predicted significant litigation regarding
Year 2000 compliance issues, and we are aware of such lawsuits against other
software vendors. Because of the unprecedented nature of such litigation, it is
uncertain whether or to what extent we may be affected by it.
We are assessing our material internal information technology systems,
including both our own software products and third-party software and hardware
technology, but we have not initiated an assessment of our non-information
technology systems. We expect to complete testing of our information technology
systems in 1999. To the extent that we are not able to test the technology
provided by third-party vendors, we are seeking assurances from such vendors
that their systems are Year 2000 compliant.
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We are not currently aware of any significant operational issues or
costs associated with preparing our internal information technology and
non-information technology systems for the Year 2000. However, we may
experience significant unanticipated problems and costs caused by undetected
errors or defects in the technology used in our internal information
technology and non-information technology systems.
We do not currently have any information concerning the Year 2000
compliance status of our customers. Our current or future customers may incur
significant expenses to achieve Year 2000 compliance. If our customers are
not Year 2000 compliant, they may experience material costs to remedy
problems, they may face litigation costs and they may delay purchases or
implementation of our products. Year 2000 issues could reduce or eliminate
the budgets that current or potential customers could have for purchases of
our products and services. As a result, our business, financial condition and
results of operations could be seriously harmed.
We have not directly funded our Year 2000 plan from cash balances
and have not separately accounted for these costs in the past. To date, these
costs have not been significant. We may incur additional costs related to the
Year 2000 plan for administrative personnel to manage the project, outside
contractor assistance, technical support for our products, product
engineering and customer satisfaction. In addition, we may experience
material problems and costs with Year 2000 compliance that could seriously
harm our business, financial condition and results of operations.
We have not yet fully developed a contingency plan to address
situations that may result if we are unable to achieve Year 2000 readiness of
our critical operations. The cost of developing and implementing such a plan
may itself be significant. Finally, we are also subject to external forces
that could seriously harm our business, financial condition and results of
operations.
PURCHASE OF TWO PATENTS ON COMPRESSION TECHNOLOGY
In December, 1998, we advanced the sum of $900,000 to Compression
Technologies, Inc. ("CTI") in connection with the purchase of two patents on
compression technology. Subsequent to December, 1998 we entered into an Asset
Purchase Agreement, subject to the approval of our Board of Directors, with
CTI under which we would acquire the two patents in exchange for a specified
number of shares of our common stock and the forgiveness of the $900,000
loan. Our Board of Directors wishes to acquire the two patents, but, due to
certain possible conflicts of interest with Allen J. Portnoy, CEO, William H.
Erving, Jr., former President, and Spencer Kissell, Vice President, the Board
of Directors is negotiating with the referenced persons in order to ensure
the shareholders that there will be no dilution of shareholder interest. As
of August 15, 1999, the negotiations have not been completed.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
99.1 Press Release June 15, 1999 re acquisition of TriServe
Communications, Inc.
99.2 Press Release June 30, 1999 re Key Executive Appointments
99.3 Press Release July 27, 1999 re Build-out of Nationwide VOIP
Network
99.4 Press Release July 28, 1999 re Sales and Marketing Agreements
99.4 Press Release July 30, 1999 re acquisition of Total
Communications Plus, Inc.
(b) Reports on Form 8K
Acquisition of TriServe Communications, Inc. as reported on Form 8-K
as filed on June 29, 1999.
Asset Purchase Agreement with TrendMark, Inc. as reported on Form 8-K
as filed on July 27, 1999.
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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 authorized officer.
Dated August 15, 1999 USA.Talks.Com, Inc.
/s/ Jack C. Alexander
------------------------------------
Chief Financial Officer
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USA TALKS.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
June 30, 1999 December 31, 1998
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(Unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $246,746 $4,338,438
Note receivable - related party $76,670 -
Prepaid expenses and other current assets 925,606 14,422
----------- -----------
Total current assets $1,249,022 $4,352,860
Furniture and equipment, net 8,128,939 3,166,838
Other assets 832,368 900,000
Intangibles, net 1,817,211 -
----------- -----------
Total assets $12,027,540 $8,419,698
------------ -----------
------------ -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $4,851,567 $2,466,281
Note payable - related party 1,430 1,430
Contract payable - 59,460
Accrued expenses 387,566 28,412
Convertible promissory notes 1,455,000 2,252,500
Notes payable 250,000 -
------------ -----------
Total current liabilities $6,945,563 $4,808,083
------------ -----------
Shareholders' equity:
Common stock, $0.001 par value, 400,000,000 shares
authorized, 82,314,342 (unaudited) and 62,299,648
shares issued and outstanding at June 30, 1999 and
December 31, 1998, respectively 82,314 62,300
Additional paid-in capital 23,312,165 12,691,610
Deficit accumulated during development stage (18,312,502) (9,142,295)
------------ -----------
Total shareholders' equity $5,081,977 $3,611,615
------------ -----------
Total liabilities and shareholders' equity $12,027,540 $8,419,698
------------ -----------
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</TABLE>
The accompanying notes are an integral part of these financial statements.
F-1
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USA TALKS.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the Three For the Three For the Six For the Six Aug 26, 1991
Months Ended Months Ended Months Ended Months Ended (Inception) to
June 30, 1999 June 30, 1998 June 30, 1999 June 30, 1998 June 30, 1999
------------------------------------------------------------------------------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Revenues $65,621 - $123,008 - $123,008
Cost of sales 39,847 - 74,103 - 74,103
------------------------------------------------------------------------------------
Gross profit 25,774 - 48,905 - 48,905
------------------------------------------------------------------------------------
Operating expenses
Selling, general and administrative $1,846,721 $40,600 $3,625,846 $76,922 $8,859,736
Research and development 2,399,213 330,738 3,801,641 538,777 5,845,254
Salaries and other compensation 689,171 58,196 1,246,774 117,169 2,452,561
Legal 286,707 89,775 495,437 90,775 917,005
------------------------------------------------------------------------------------
Total operating expenses 5,221,812 519,309 9,169,698 823,643 18,074,556
------------------------------------------------------------------------------------
Loss from Operations ($5,196,038) ($519,309) ($9,120,793) ($823,643) ($18,025,651)
------------------------------------------------------------------------------------
Other income (expense)
Interest income 700 - 53,375 - 60,722
Interest expense (45,166) (1,070) (101,189) (1,070) (155,173)
------------------------------------------------------------------------------------
Total other income (expense) (44,466) (1,070) (47,814) (1,070) (94,451)
------------------------------------------------------------------------------------
Net loss before provision
for income tax (5,240,504) (520,379) (9,168,607) (824,713) (18,120,102)
Provision for income tax - - 1,600 - 2,400
------------------------------------------------------------------------------------
Net loss ($5,240,504) ($520,379) ($9,170,207) ($824,713) ($18,122,502)
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Basic loss per common share ($0.07) ($0.01) ($0.12) ($0.02) ($0.50)
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Average common shares outstanding 79,437,249 48,591,926 76,845,085 53,416,724 35,900,574
------------------------------------------------------------------------------------
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</TABLE>
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE>
USA TALKS.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
For the Six For the Six Aug 26, 1991
Months Ended Months Ended (Inception) to
June 30, 1999 June 30, 1998 June 30, 1999
------------- ------------- --------------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss for the period ($9,170,207) ($824,713) ($18,122,502)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 686,641 5,950 708,626
Amortization of goodwill 30,800 - 30,800
Issuance of options and warrants - - 3,340,550
Issuance of stock for services rendered 1,308,177 108,350 1,810,244
Issuance of stock for an option to license technology - - 50,000
Issuance of stock for interest on converted
promissory notes 58,264 - 58,264
(Increase) decrease in:
Prepaid expenses and other current assets (911,184) - (925,526)
Other assets 67,632 198 (832,368)
Increase (decrease) in:
Accounts payable 2,385,286 (94,545) 4,851,567
Accrued expenses 299,694 12,716 387,566
------------ ---------- -------------
Net cash used in operating activities ($5,244,897) ($792,044) ($8,642,779)
------------ ---------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of furniture and equipment ($5,648,742) ($6,149) ($8,812,565)
Payment on note receivable - related party (76,670) - (76,670)
Cash acquired from merger (Note 3) 27,767 - 27,767
------------ ---------- -------------
Net cash used in investing activities (5,697,645) (6,149) (8,861,468)
------------ ---------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on notes payable - (23,602) (66,920)
Proceeds from long-term debt 621,250 - 3,049,600
Proceeds from sale of common stock 5,806,250 714,125 14,057,564
Proceeds from capital contribution - - 171,842
Proceeds from sale of warrants - - 115,557
Proceeds from warrants exercised 173,350 - 173,350
Proceeds from short-term debt 250,000 - 250,000
------------ ---------- -------------
Net cash provided by financing activities $6,850,850 $690,523 $17,750,993
------------ ---------- -------------
Net increase (decrease) in cash ($4,091,692) ($107,670) $246,746
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 4,338,438 112,314 -
------------ ---------- -------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $246,746 $4,644 $246,746
------------ ---------- -------------
------------ ---------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
USA TALKS.COM, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1998 AND JUNE 30, 1999 (UNAUDITED)
AND FOR THE PERIOD FROM AUGUST 26, 1991 (INCEPTION) TO JUNE 30, 1999 (UNAUDITED)
AND FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998 (UNAUDITED)
- -------------------------------------------------------------------------------
NOTE 1 - DESCRIPTION OF BUSINESS
USA Talks.com, Inc. was originally incorporated in Delaware on August
26, 1991 under the name Alfine Corporation ("Alfine"). In July 1998,
pursuant to an Agreement and Plan of Reorganization all the assets and
liabilities of Alfine Corporation were acquired by SBB, Inc. solely in
exchange for 95% of the issued and outstanding stock of SBB, Inc.
Concurrent with the reorganization, SBB, Inc. changed its name to USA
Talks.com. Subsequently, Alfine Corporation distributed the stock
received to its shareholders.
For accounting purposes, the transaction has been treated as a
recapitalization of Alfine, with Alfine as the accounting acquirer
(reverse acquisition). The operations of SBB have been included with
those of Alfine from the acquisition date. SBB was incorporated in
Nevada on December 26, 1985 and was a development stage enterprise from
the date of incorporation until its acquisition of Alfine. SBB had no
assets or liabilities at the date of the acquisition and did not have
significant operations prior to the acquisition. Therefore, no pro
forma information is presented.
USA Talks.com, Inc. and subsidiaries (collectively, the "Company") is
publicly held and is trading on the NASDAQ pink sheets under the symbol
USAT.
F-4
<PAGE>
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying consolidated financial statements have been prepared
in conformity with generally accepted accounting principles for interim
information and with the instructions to Form 10-QSB and Regulation
S-X. Accordingly, they do not include all the information and footnotes
required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all normal,
recurring adjustments considered necessary for a fair presentation have
been included. The financial statements should be read in conjunction
with the audited financial statements included in the Company's annual
report on Form 10-KSB for the year ended December 31, 1998. The results
of operations for the six months ended June 30, 1999 are not
necessarily indicative of the results that may be expected for the year
ending December 31, 1999.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of USA
Talks.com, Inc. and its wholly owned subsidiaries, Alfine Technology,
Inc., PhonClub International, Inc. and TriServe Communications, Inc.
All significant intercompany accounts and transactions have been
eliminated.
STOCK SPLIT
On June 12, 1998 and January 21, 1999, the Board of Directors and
shareholders of the Company approved a 2-for-1 and a 4-for-1 stock
split, respectively, of its outstanding common stock. All per share
data presented has been retroactively restated to show the effects of
these stock splits.
REVENUE RECOGNITION
Recurring revenues consists of monthly fees charged to customers for
unlimited, flat rate, long distance service and are recognized over the
period services are provided. Other revenues generally represent
one-time non-refundable registration fees. Such fees are recorded as
earned. The Company bears all risk of credit card chargebacks.
NOTE 3 - TRISERVE COMMUNICATIONS, INC. MERGER
Pursuant to an Agreement and Plan of Merger and Reorganization between
USA Talks.com, Inc. and TriServe Communications, Inc., ("TriServe"), a
California corporation, effective June 14, 1999, the Company acquired
all of the shares of TriServe through a merger transaction in which the
consideration for TriServe's shares was 2,223,144 shares of the
Company's common stock, representing 2.70% of the outstanding shares of
the Company after acquisition. The transaction was valued on the
Company's books at $1,875,778. The excess of consideration over the
fair value of net assets acquired (goodwill) is valued at $1,848,011
and is being amortized on a straight-line basis over an estimated
useful life of 5 years.
TriServe has acted as a significant facilitator to the Company in the
design, implementation and management of the Company's nationwide Voice
Over IP Telephony network. TriServe's founders have extensive
telecommunications industry experience and important relationships with
telecommunications equipment manufacturers and local and competitive
local exchange carriers throughout the United States.
F-5
<PAGE>
NOTE 4 - PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets consisted of the following:
<TABLE>
<CAPTION>
June 30, 1999 December 31, 1998
--------------- -----------------
(unaudited)
<S> <C> <C>
Deposit for local exchange carriers $ 843,522 $ -
Note receivable - TrendMark, Inc. 41,089 -
Other assets 40,995 14,422
--------------- -----------------
TOTAL $ 925,606 $ 14,422
=============== =================
</TABLE>
NOTE 5 - OTHER ASSETS
Other assets consisted of the following:
<TABLE>
<CAPTION>
June 30, 1999 December 31, 1998
--------------- -----------------
(unaudited)
<S> <C> <C>
Note receivable (Note 11) $ 832,368 $ 900,000
--------------- -----------------
TOTAL $ 832,368 $ 900,000
=============== ================
</TABLE>
F-6
<PAGE>
NOTE 6 - NOTE RECEIVABLE - RELATED PARTY
Note receivable - related party at June 30, 1999 is due from an
officer. Principal and interest are due upon demand with interest at
10% per annum and the note is unsecured.
NOTE 7 - INTANGIBLE ASSET
Intangible asset consists of goodwill, net of amortization, of
$1,817,211 and $0 at June 30, 1999 and December 31, 1998, respectively.
NOTE 8 - CONVERTIBLE PROMISSORY NOTES
The terms associated with each series of convertible promissory notes
and the related amounts raised and converted during the six months
ended June 30, 1999 are as follows:
<TABLE>
<CAPTION>
Outstanding Outstanding
as of Raised Converted as of
December 31, During During June 30,
1998 1999 1999 1999
---------------- ------------- ------------- ------------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
10% notes a $ 2,202,500 $ 302,250 $ 1,418,750 $ 1,085,000
9.25% notes b 50,000 - - 50,000
9.5% notes c - 320,000 0 320,000
---------------- ------------- ------------- ------------
TOTAL $ 2,252,500 $ 621,250 $ 1,418,750 $ 1,455,000
---------------- ------------- ------------- ------------
---------------- ------------- ------------- ------------
</TABLE>
a 10% subordinated notes, due October 15, 1999.
b 9.25% notes, due December 30, 2001.
c 9.5% collateralized notes, due between June 23, 2001 and
September 30, 2001.
F-7
<PAGE>
NOTE 9 - EQUIPMENT NOTES PAYABLE
In May and June of 1999, the Company issued 14% and 15% Promissory
Notes aggregating $250,000, secured by a portion of the Company's
network equipment. These notes become due three months from date of
issue, all due by September 11, 1999.
NOTE 10 - COMMITMENTS AND CONTINGENCIES
LITIGATION AND INVESTIGATIONS
On January 28, 1999, the United States Securities and Exchange Commission
("SEC") issued an order directing a private investigation of the
Company. The investigation concerned whether in connection with an offer
for, purchase, or sale of the Company's securities, certain persons or
entities, including the Company, may have violated the securities laws.
The possible violations included, but were not limited to, making false
or misleading statements of material fact or failing to disclose
material facts about the status and extent of the business operation of
the Company. Thereafter, the SEC temporarily suspended the
over-the-counter trading of the securities of the Company. The temporary
suspension was in effect from January 29, 1999 through February 11,
1999. The SEC is currently continuing its investigation of the Company.
Management is not able to predict whether the outcome of the
investigation will be unfavorable to the Company.
The Company is involved with various securities class action lawsuits.
The complaints allege the Company made false or misleading statements
and omitted to state material facts necessary to make other
representations not misleading concerning the Company's products, their
capabilities, and the roll-out schedule of the products. These
complaints were filed immediately after the SEC temporarily suspended
trading on the Company's stock. Management is not able to predict
whether the outcome of any of these lawsuits will be unfavorable to the
Company, nor estimate potential losses due to them.
On January 8, 1999, the Company received a letter threatening litigation
from a former officer and shareholder of the company, alleging the
Company made misrepresentations and breached duties owed him in
connection with the Company's purchase of his outstanding stock.
NOTE 11 - SUBSEQUENT EVENTS
On February 5, 1999, the Company was named as a defendant in a lawsuit
filed by TrendMark, Inc. in the United States District Court for the
Western District of Tennessee. The Company reached an agreement to
settle the lawsuit as originally filed. The resulting agreement,
effective July 16, 1999, was an Asset Purchase Agreement under which the
Company issued 2,000,000 shares of its common stock for the acquisition
of all of the net assets of TrendMark, Inc. In addition, the agreement
required the Company to loan TrendMark, Inc. the sum of $150,000 by
September 30, 1999. As security for repayment of this loan, TrendMark,
Inc. has pledged 93,750 shares of the 2,000,000 shares they received in
the transaction. As of June 30, 1999 the Company has loaned TrendMark,
Inc. the sum of $41,089 (Note 4).
In December, 1998, the Company advanced the sum of $900,000 to
Compression Technologies, Inc. ("CTI") in connection with the purchase
of two patents on compression technology. Subsequent to December, 1998
the Company entered into an Asset Purchase Agreement, subject to the
approval of the Company's Board of Directors, with CTI under which the
Company would acquire the two patents in exchange for a specified number
of shares of common stock and the forgiveness of the $900,000 loan. The
Company's Board of Directors wishes to acquire the two patents, but, due
to certain possible conflicts of interest with Allen J. Portnoy, CEO,
William H. Erving, Jr., former President, and Spencer Kissell, Vice
President, the Board of Directors is negotiating with the referenced
persons in order to ensure the shareholders that there will be no
dilution of shareholder interest. As of August 15, 1999, the
negotiations have not been completed.
F-8
<PAGE>
EXHIBIT 99.1
COMPANY PRESS RELEASE
USATALKS.COM ANNOUNCES STRATEGIC ACQUISITION OF TRISERVE COMMUNICATIONS, INC.
La Jolla, California, June 16, 1999 - USATALKS.com, Inc. (OTC USAT) announced
today that it has acquired TriServe Communications, Inc. of San Juan
Capistrano, California. TriServe has acted as a significant facilitator to
the company in the design, implementation and management of USAT's nationwide
Voice Over IP Telephony network. TriServe's founders have extensive
telecommunications industry experience and important relationships with
telecommunications equipment manufacturers and local and competitive local
exchange carriers throughout the United States. These relationships have
enabled USAT to quickly and economically deploy one of the largest Voice Over
IP Telephony networks to date. USAT and TriServe have deployed major points
of presence (POPS) in ten major metropolitan areas servicing over 100 cities
nationwide by the end of June.
Allen J. Portnoy, USATalks.com Chairman and Chief Executive Officer stated,
"The addition of TriServe's team to the USAT management team will enable USAT
to quickly and efficiently continue the expansion of our network in major
markets throughout the U.S." Mr. Portnoy also announced the election of
Steven Roberts, Founder, President & Chief Executive of TriServe
Communications, Inc., to the USAT board of directors. Mr. Portnoy commented,
"Steve brings years of industry wide experience in marketing, sales,
engineering, operations and general management skills and will be a key
contributor to the USAT management team. Steve will serve as the Senior Vice
President of Network Operations and holds a BA degree in Physics from the
University of California at Riverside and an MBA from California State
University at Fullerton."
The transaction structured as an acquisition of TriServe's assets resulted in
the issuance to TriServe's shareholders of 2,112, 000 million shares of USAT
stock representing 2.57% of the outstanding shares of USAT after acquisition.
This press release contains forward-looking statements relating to future
operating information and their impact on future results. Actual results
could differ materially from conditions, product life cycles, customer delays
in purchasing products, technology shifts, potential difficulties in
introducing new products, competition, price sensitivity and the uncertain
market acceptance of the Company's products by distributors, retailers and
customers.
<PAGE>
EXHIBIT 99.2
COMPANY PRESS RELEASE
USATALKS.COM ANNOUNCES KEY EXECUTIVE APPOINTMENTS AND EXPANSION INTO
INTERNATIONAL MARKETS.
LAJOLLA, CA. JUNE 30, 1999 USATalks.com today announced a restructuring of
its executive management team by adding essential executives to advance the
Company in domestic and international markets. William H. Ervine, Jr. Founder
& President has retired to pursue personal business interests. Mr. Ervine
commented "It as been my pleasure to serve the company and its shareholders
as President since 1991. I've helped get the company to this stage of
development and it is now time to turn the reins over to experienced business
and industry executives." Allen Portnoy, Chairman and Chief Executive Officer
stated, "We thank Mr. Ervine for his accomplishments and wish him well in the
pursuit of his personal interests".
Mr. Portnoy recently organized the company into two operating divisions,
Domestic and International. Stephen A. Storey has accepted the role of
President and Chief Operating Officer of its Domestic Division and James L.
Magruder has been appointed Executive Vice President and Chief Operating
Officer for the International Division.
Mr. Storey has been associated with the Company since 1996 and brings to
USATalks a wealth of strategic and financial business management experience.
Formerly, he was President and CEO of a wholesale distribution operation,
executing industry consolidating business strategy nationwide. Prior to that,
he was a founding member and Executive Vice President of Finance and
Development for Patient First Corporation, an owner and operator of health
care facilities developed under agreements with Johns Hopkins Health System
and Trigon Blue Cross/Blue Shield of Virginia. Before that he held the
position of Vice President and Chief Financial Officer of Kellam Companies,
wholesale distributors of petroleum products and operators of a start-up
chain of retail stores operating in the mid-Atlantic states. Mr. Storey began
his career as a Certified Public Accountant with KPMG Peat Marwick for five
years in Miami, Florida and Raleigh, North Carolina.
Mr. Magruder has more than 32 years of experience in the telecommunications
industry including senior positions with AT&T, MCI, Orion Network Systems and
RCA/Cylix Communications. Mr. Magruder was most recently CEO for FNet, the
network subsidiary of Franklin Teleommunications. Mr. Magruder has
successfully developed venture backed companies, deployed and operated
international voice over IP networks, satellite transmission and data
communications networks. He has also developed extensive relationships with
international telecommunications companies throughout the world. Mr. Magruder
has an MBA degree from Rockhurst University in Kansas City and he attended
the University of Maryland majoring in international business.
In addition, the company has consolidated all of its domestic sales
activities under a newly appointed Vice President, Russ Ketchum. Mr. Ketchum
has more than 20 years in marketing and investment banking with such firms as
Paine Webber, Prudential
<PAGE>
Securities and Raymond James & Associates. The sales and marketing
organization is moving to an additional facility located at 5830 Oberlin
Drive, in San Diego, Calif. 92121. Telephone number (858) 638-9485. The
marketing and sales group will occupy 5,236 square feet, providing the
Company with 11 new offices, two conference facilities and a large meeting
room to facilitate sales and marketing presentations.
This announcement coupled with its recent acquisition of Tri-Serve
Communications has strengthened the Company's entire management team by
adding experienced telecommunications and business executives. Currently, the
company employs over 50 managers, engineers, and marketing and sales
professionals at its three business locations in La Jolla, San Diego and San
Juan Capistrano offices.
<PAGE>
Exhibit 99.3
COMPANY PRESS RELEASE:
USATALKS.COM (USAT) ANNOUNCES BUILD-OUT OF NATIONWIDE VOIP NETWORK
LA JOLLA, CALIF., JULY 27 /PR NEWSWIRE USATALKS.COM, INC. (OTC: USAT)today
announces the completion of the first phase of its nationwide
voice-over-Iintranet (VOIP) telephony network with the installation of the New
York "Super P.O.P". The completed network, available immediately, gives
customers access to unlimited long distance calling for a monthly flat rate,
originating from local access in over 200 cities and terminating anywhere in the
lower 48 for as low as $25 a month. The second phase of the domestic network
expansion, which is currently underway, will add 15 more "Super P.O.P.'s" across
the country and expand the USAT service area to an additional 200 markets.
As planned, by the fall1999 customers in areas representing over two thirds of
the total U.S. population will be able to originate long distance calls in the
USAT service area and terminate anywhere in the U.S. The Company will also be
introducing monthly flat rate domestic long distance calling within Canada and
the United Kingdom, as well as an international monthly flat rate service
between these markets and the U.S. Allen J. Portnoy, Chairman and Chief
Executive Officer of USAT, comments, "Flat rate monthly long distance telephone
service is a reality." Mr. Portnoy adds, "It is a unique product made possible
by rapid developments in technology, the strong demand for communications
products, and the unique infrastructure we have put together.
Additional new products and services are on the horizon and will be deployed as
soon as testing is completed." In conjunction with the completion of phase one,
USAT is rolling out an extensive marketing campaign in support of its monthly
flat rate unlimited long distance service.
The marketing campaign will consist of outbound and inbound telemarketing,
direct sales, an industry agent reseller program, and broadcast media
advertising. For more information about the company, please contact USAT at
858-638-9485. To sign up for service, call 877-756-0000 or visit the Company's
Website at http://www.USATalks.com. Headquartered in San Diego, USATalks has
built the first private national telephone network over which it will offer its
customers unlimited long-distance telephone service at a flat monthly fee. USAT
offers an "all-you-can-talk," telephone-to-telephone long-distance service using
Internet Protocol (IP) with a variety of service and pricing plans from $25
to$90 per month. USATalks' service is designed to meet the long-distance needs
of both residential and business customers. Commercial products for regional and
national accounts will also be offered.
This press release contains forward-looking statements relating to future
operating information and their impact on future results. Actual results could
differ materially from those projected in forward-looking statements as a result
of risk factors such as market conditions, product life cycles, customer delays
in purchasing products, technology shifts, potential difficulties in introducing
new products, competition, price sensitivity, and the uncertain market
acceptance of the Company's products by distributors, retailers and customers.
CONTACT: Patricia Youngquist, Vice President Corporate Communications
ofUSATalks.com, Inc., 858-638-9485.
<PAGE>
EXHIBIT 99.4
COMPANY PRESS RELEASE:
USATALKS.COM (USAT) ANNOUNCES SALES AND MARKETING AGREEMENTS AND LAUNCHES
NATIONAL CAMPAIGN
LA JOLLA, CALIF., JULY 28 /PR NEWSWIRE/ -- USATalks.com, Inc. (OTC: USAT)
announced today the launch of a nationwide sales & marketing campaign with the
build out of its national voice over intranet (VOIP) network, the nation's
first. The Company has entered into various sales and marketing agreements
including contracts with over 40 telecommunication Master Agents, representing
independent sales agents throughout the country.
Reseller contracts have been signed with regional CLECS (alternative local
carriers) such as C2K (LA),Maxcom (MO) and WorldOne (NV), that will re-bill the
USAT long distance service. Outbound and inbound telemarketing companies, such
as Gage MarketingGroup (MN), Telemarketing Concepts (NY), as well as national
affinity groups, including Ameriplan (TX) and APAC Marketing Rzults (IL), have
also entered into agreements with the Company. USAT will soon initiate a
comprehensive television and radio broadcast campaign targeting residential and
small business accounts in selected metropolitan markets. "Our national
marketing campaign is now moving into high gear," stated Allen Portnoy, CEO and
Chairman. "Today, we only need 50,000 customers to break even, but our goal is
to reach one million customer capacity by year-end." USAT will continue to
expand its national network, offering new products to its consumer and
commercial customers over the USAT VOIP network as they are tested.
Currently, USAT is in the process of offering the nation's first
"all-you-can-talk" prepaid calling card with unlimited daily and weekly use.
The Company is negotiating with several national distributors to sell the
card in convenience stores and other retail outlets throughout the
continental United States. Headquartered in San Diego, USAT has built the
first private national telephone network over which it will offer its
customers unlimited long-distance telephone service at a flat monthly fee.
USAT offers an "all-you-can-talk," telephone-to-telephone long-distance service
using Internet Protocol (IP) with a variety of service and pricing plans from
$25 to$90 per month. USAT service is designed to meet the long-distance needs of
both residential and business customers. Commercial products for regional and
national accounts will be offered.
This press release contains forward-looking statements relating to future
operating information and their impact on future results. Actual results could
differ materially from those projected in forward looking statements as a result
of risk factors such as market conditions, product life cycles, customer delays
in purchasing products, technology shifts, potential difficulties in introducing
new products, competition, price sensitivity and the uncertain market acceptance
of the Company's products by distributors, retailers and customers.
CONTACT: Patricia Youngquist, Vice President Corporate Communications of
USATalks.com, Inc., 858-638-9485
<PAGE>
EXHIBIT 99-5
COMPANY PRESS RELEASE:
USATALKS.COM, INC. (USAT) TO ACQUIRE TOTAL COMMUNICATIONS PLUS, INC.
LA JOLLA, CALIF., JULY 30 1999/PRNEWSWIRE/ -- USATALKS.COM, INC. USATalks.com,
Inc. (OTC: USAT) announced today that it has agreed to acquire Total
Communications Plus, Inc. ("TCP") of Easton, Maryland. TCP, a pioneer in the
marketing of IP telephony on the Delmarva Peninsula (Delaware, Maryland and
Virginia Eastern Shore), has built a ten-city voice over intranet (IP) network
and offers flat rate long distance service to the Peninsula's 750,000 permanent
residents. TCP's regional network and customer base will be integrated into
USAT's nationwide network.
TCP has teamed with rural electric cooperatives on the Delmarva Peninsula to
market flat rate telephony service to the population of electric cooperative
customers. Thirty-five thousand customers currently are subscribers to the
regional service and will now have access to the USAT nationwide network. Tony
Brown, TCP's Founder and Chief Executive Officer who developed the relationships
with the rural electric cooperatives, said, "This partnership enables us to
expand and offer a unique and affordable service to residents and businesses of
the Eastern Shore. Monopoly telephony providers have dominated these areas and
have levied inflated prices to these rural customers." Mr. Brown will join the
USAT sales organization and continue to market to the rural electric cooperative
customers on the eastern seaboard and southeast United States.
Allen J. Portnoy, USAT Chairman and Chief Executive Officer, stated, "This
acquisition fits perfectly into our marketing strategy and we are extremely
excited to be able to offer service to these rural customers who would otherwise
be neglected. We will immediately deploy additional network capacity to serve
the residents of the Eastern Shore, which is banded by Wilmington, Delaware,
Annapolis, Maryland, and Norfolk, Virginia." TCP will be acquired for 300,000
USAT common shares, which represents less than one percent of the outstanding
USAT common shares, subject to completion of definitive agreements and USAT
Board approval.
Headquartered in San Diego, USAT is building the first private national
telephone network over which it will offer its customers unlimited long distance
telephone service at a flat monthly fee. USAT offers an "all-you-can-talk,"
telephone-to-telephone long distance service using Internet Protocol (IP) with a
variety of service and pricing plans from $25 to $90 per month. USAT's service
is designed to meet the long distance needs of both residential and business
customers. Commercial products for regional and national accounts will be
offered.
This press release contains forward-looking statements relating to future
operating information and their impact on future results. Actual results could
differ materially from those projected in forward-looking statements as a result
of risk factors such as market conditions, product life cycles, customer delays
in purchasing products, technology shifts, potential difficulties in introducing
new products, competition, price sensitivity, and the uncertain market
acceptance of the Company's products by distributors, retailers and customers.
For more information please contact USATalks.com, Inc. at 858-638-9485. To sign
up for service call toll free 877-756-0000 or visit the Company's Website
http://www.usatalks.com.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 246,746
<SECURITIES> 0
<RECEIVABLES> 76,670
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,249,022
<PP&E> 8,837,565
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0
0
<COMMON> 23,394,479
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<TOTAL-LIABILITY-AND-EQUITY> 12,027,540
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