USA Talks.com Ends Trendmark Marketing Agreement

USA Talks.com on Tuesday fired Trendmark Inc., a marketing company it hired to bring in customers for its start-up Internet telephone service, citing poor sales.

San Diego-based USA Talks.com in October began marketing long-distance telephone service routed over the Internet. Almost all selling was done by Trendmark, a Memphis-based company whose 15,000 “distributors” sell directly to consumers. Sales through last week totaled $230,000.

“Their sales didn’t meet our expectations,” said Maggie Yates, USA Talks.com’s marketing director. “We wanted tighter control of our sales process.” She said another firm was hired to do selling and that the company will honor sales made by Trendmark before Feb. 1.

Last week, the Securities and Exchange Commission ordered a two-week halt in trading of USA Talks.com stock because “questions have been raised about the accuracy and adequacy of public information on the company.” Regulators said the questions pertain in part to the status and extent of the company’s business operations. It provided no details.

The day before the trading halt, USA Talks.com shares had closed at $52.25, up $5.25, in over-the-counter trading, giving the company a market value of $1.3 billion. The stock had traded as low as $2.50 on Oct. 14.

In September, USA Talks.com said it signed a letter of intent to buy Trendmark in a stock deal that at the time was valued at $8.9 million. The deal would have been worth $144 million at Thursday’s closing stock price.

On Tuesday, USA Talks.com apparently had canceled the acquisition agreement, though it did not mention that in its announcement dismissing Trendmark. Nine days after USA Talks.com signed the acquisition agreement, Trendmark was accused by the Federal Trade Commission of making false claims about its “Thin-Thin” diet program.

Trendmark settled the charges and denied any wrongdoing. “We agreed not to do what we didn’t do,” Robert Gates, chief executive of Trendmark, said in an interview last week. He was not available for comment Tuesday.

Yates said Tuesday that the FTC investigation was not the reason Trendmark was dismissed. She said Allen Portnoy, chief executive, is in Los Angeles meeting with SEC officials.

On Monday, USA Talks.com began charging between $20 and $60 a month for unlimited long-distance calls. Before then, service had been provided free while technical shortcomings were addressed. The only revenue was from customers who paid $100 registration fees to take the service after the free trial period.

William Ervine, USA Talks.com president, said last week in an interview that sales were going well. He said he expects as many as 500,000 customers by year-end and profit of $16 million on revenue of $85 million.

USA Talks.com’s Ervine, an attorney, said last week that he wasn’t aware of the FTC’s action until after he signed the letter of intent to buy Trendmark. “Any violation of any state or federal regulation is of very grave concern to us, and we will not tolerate it,” Ervine said.

In his interview, Gates said USA Talks.com knew about the FTC investigation. “I told them about it early on,” he said.