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EXHIBIT 99.2
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
DECEMBER 31, 1997
ASSETS
(NOTE 3)
HISTORICAL
SMARTALK
TELESERVICES
------------
Current Assets:
Cash and cash equivalents................................. $ 62,900,673
Trade accounts receivable, net............................ 32,699,249
Receivable from American Express Company.................. 2,570,000
Inventories............................................... 4,301,487
Prepaid expenses.......................................... 1,377,844
Other current assets...................................... 7,637,849
------------
Total current assets.............................. 111,487,102
Non-current assets:
Note Receivable from ACMI................................. 2,234,763
Property and equipment, net............................... 13,805,984
Intangibles, net.......................................... 222,536,934
Other non-current assets.................................. 10,438,043
------------
Total assets...................................... $360,502,826
============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... 15,081,532
Deferred revenue.......................................... 40,248,400
Accrued marketing costs................................... 1,811,817
Accrued interest payable.................................. 2,615,480
Other accrued expenses.................................... 5,571,728
Excise and sales tax payable.............................. 5,565,072
Restructure reserve....................................... 23,943,070
Accrued litigation settlement............................. 4,500,003
Current portion of long term debt......................... 7,285,401
------------
Total current liabilities......................... 106,622,503
Long-term debt, less current portion...................... 150,874,753
------------
Total liabilities................................. 257,497,256
------------
Shareholders' equity:
Preferred stock...........................................
Common stock.............................................. 171,732,584
Accumulated deficit....................................... (68,870,824)
Cumulative translation adjustment......................... 143,810
------------
Total shareholders' equity........................ 103,005,570
------------
Total liabilities and shareholders' equity........ $360,502,826
============
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NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET
NOTE 1
Historical SmarTalk amounts include the following Company amounts as of December
31, 1997:
Accounts receivable, net.............................. $ 2,396,629
Inventory............................................. 1,195,713
Prepaid expenses...................................... 79,264
Other current assets.................................. 135,486
Property, plant and equipment, net.................... 747,211
Goodwill.............................................. 43,716,324
-----------
Total Assets................................ $48,270,627
===========
Accounts payable...................................... $ 1,077,537
Deferred revenue...................................... 2,317,071
Other accrued expenses................................ 1,315,238
-----------
Total Liabilities........................... $ 4,709,846
===========
NOTE 2
The components of Company goodwill at December 31, 1997 are as follows:
Purchase price........................................ $44,000,000
Transaction costs..................................... 1,014,225
Acquired receivable................................... (2,570,000)
-----------
Total purchase price.................................. 42,444,225
Less: Net assets acquired............................. (1,272,099)
-----------
Goodwill.............................................. $43,716,324
===========
NOTE 3
Historical SmarTalk amounts include the balance sheet amounts for the
acquisition of SmarTel Communications, Inc. ("SmarTel"), GTI Telecom, Inc.
("GTI"), Cardinal Voicecard Limited ("Cardinal"), ConQuest Telecommunication
Services Corp. ("ConQuest") and the Company.
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UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
AS ADJUSTED
PRO FORMA HISTORICAL AS ADJUSTED
COMBINED AMEX PRO FORMA PRO FORMA
SMARTALK TELECOM ADJUSTMENTS COMBINED
------------ ----------- ----------- ------------
Revenue............................ $146,054,088 $12,652,561 -- $158,706,649
Cost of revenue.................... 99,862,096 5,085,710 -- 104,947,806
------------ ----------- ----------- ------------
Gross profit............. 46,191,992 7,566,851 -- 53,758,843
Sales and marketing................ 20,932,268 4,419,205 -- 25,351,473
General and administrative......... 38,154,568 2,734,316 2,840,911(a) 43,729,795
Restructuring expense.............. 25,000,000 -- -- 25,000,000
Acquired research and development 39,186,000 -- -- 39,186,000
in process.......................
------------ ----------- ----------- ------------
Operating loss........... (77,080,844) 413,330 (2,840,911) (79,508,425)
Interest income.................... 3,183,585 -- -- 3,183,585
Interest expense................... (4,475,658) (591,105) -- (5,066,763)
------------ ----------- ----------- ------------
Loss before income (78,372,917) (177,775) (2,840,911) (81,391,603)
taxes..................
Provision for income taxes......... -- -- -- --
------------ ----------- ----------- ------------
Net loss................. $(78,372,917) $ (177,775) $(2,840,911) $(81,391,603)
============ =========== =========== ============
Net loss per share................. $ (5.24) $ (5.44)
============ ============
Weighted average number of common 14,951,454 14,951,454
shares outstanding...............
============ ============
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
NOTE 1
The Unaudited Pro Forma Combined Statement of Operations gives effect to the
following pro forma adjustments necessary to reflect the acquisition of the
Company as if the transaction had occurred on January 1, 1997:
(a) To record amortization of goodwill on the Company on a straight line
basis over 20 years.
NOTE 2
As adjusted Pro Forma Combined SmarTalk includes the actual results for SmarTalk
and the pro forma results for SmarTel, GTI, Cardinal and Conquest.
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