Financial Intranet
October 18, 1999
To the Shareholders of Financial Intranet,
As you are aware, our SB-2 filing was finalized on October 8, 1999, at which time
we became effective and are now a fully reporting small business with the SEC. If
you have been one of the many interested shareholders or interested third
parties following this effort over the past six months, you know that it has been of
paramount importance to us in terms of both financial and corporate credibility.
Moving past this milestone will hopefully take us to the next level of corporate
stability and growth. It should also free up valuable time for key executives to
grow the business, but will entail a significant amount of additional, but welcome,
responsibilities for others.
With this registration behind us, we are now in a better position to report on
some of the ongoing business activities we are involved with and on some of our
plans for the near future. Many of you have expressed interest in specific areas of
the company, and we hope that the following discussion addresses most, if not
all, of your questions or concerns. As always, if there are other matters of interest
or concern, feel free to contact us directly at info@fntn.com and we will try to
respond timely either directly or through periodic management communiqu‚s.
But please remember that, though we are a small company, we have over 2,000
shareholders, and at times responding to all shareholder correspondence may
not take precedence over the ongoing issues faced by us on a day-to-day basis.
As we move forward into the next phase out of the "developmental stage" of our
existence, we will be instituting several new policies, both internally and
externally, with respect to shareholder disclosure and correspondence, some of
which may be more evident then others. As a first step, we will try and maintain
the following format for periodic public communications, including a corporate
overview, specific updates on financial, sales and marketing issues and
activities, and other relevant information, all to the extent permissible and in
addition to the required SEC financial disclosures. Please make sure you read
the safe harbor statement at the end of this letter regarding the nature of such
communications.
Overview:
We feel that we have the cutting edge concept, the outline of an infrastructure, the
market timing and the wherewithal to make this company a success. With a little
time, some additional investment, a few key revenue producing and back office
hires, each of which we are working towards obtaining, and some more hard
work, we feel confident that we can turn the corner from being a developmental
stage company generating valuable future net operating loss carryforwards to a
profitable, well-established market leader. Until then, and we hope the timing is
sooner rather then later, we will have to deal with the balancing act of trying to
impress Wall Street analysts and investors on our operating results, which during
this period may be less than favorable, while trying to grow the business from the
start for enhanced shareholder value later.
During this period, the stock price and stock trading volume may or may not
reflect, in our view, an accurate representation of how we feel the company
should be evaluated. Of course we would like to have the company measured in
broader terms, as reflected by a higher stock price, but, to a great extent, this is
something out of our control. We can only work harder to get to a point where our
operating results speak for themselves, and even then may remain at the mercy
of those market forces which, rightly or wrongly, determine fair market value. We
also must keep reminding ourselves that, as a Bulletin Board stock, where the
risks of ownership and measures of marketability are often higher and more
irregular than most, we are often - fairly or not - compared to other companies
situated in more stable, open markets.
Financial Issues:
The registration filed with the SEC and approved last week contemplated
the sale of up to $3,000,000 of Company stock which, at a low price
estimated at $0.27 « per share, indicated a maximum amount of
additional shares being issued of approximately 10,900,000. The exact
amount of shares issued will be based on the amount of money investors
are willing to commit, and the offering may be pulled at any time in
management's discretion.
Initial results of the offering resulted in an investment by one institutional
investor of $700,000. Proceeds of the offering, if no additional investors
commit, will be used primarily for the development of our website, payment
of payables, expansion of our sales efforts, and interim working capital. If
additional funds are raised, sales and marketing efforts will be stepped up.
We do anticipate the need for additional funds to carry us through until cash
flows from operations can sustain the business and fuel its growth.
Of primary concern to us is the effect on existing shareholders of the
issuance and pricing of this stock. Clearly, the timing of the offering was not
the most favorable in the sense that the market price of our stock is falling
well below its price when the offering was first contemplated. However, to
some degree, we were locked in to complete the offering due to cash
constraints and our desire to continue to grow the business and stay off of
the "pink sheets" which many small companies are falling into now as
NASDAQ is tightening up its eligibility criteria for remaining a listed
company. Ultimately, we feel that that the offering, even at its minimum
price, may lead to enhanced shareholder value in the long term as we build
the business, work to increase revenues and lines of business, and start
becoming profitable before the end of next year. We are balancing the
risks of investing for the future against a declining market value; we hope to
work to the point that we can offer operating results that would lead to a
more favorable market rating.
With respect to our status now as a reporting company with the SEC, we
are, starting with the quarter ending September 30, 1999, required to
submit quarterly reports to the SEC on a form 10-QSB and annual reports
on Form 10-KSB. The "SB" simply means that we are considered a "small
business" issuer due to our having revenues of less than $25 million and a
public float (the aggregate market value of voting common stock held by
non-affiliates) of also less than $25 million.
Sales and Marketing Activities:
We are working on a number of initiatives that we hope will lead to
significant sales and marketing progress. Among the projects that are in
process, and with the aid of funding generated from the recent registration
and other potential sources of cash, we hope to complete in the near future,
are:
1.the growth of an infrastructure that will include experienced front-end sales
people and back-end sales support;
2.the redesign of our web site to allow for a new look and feel and a much
more integrated and user-friendly navigation and maneuverability, as well
as a transition from static web pages to a dynamically generated,
database-driven site; and
3.the redesign of our marketing materials to enable us to reach a broader
network of financial, marketing and business executives. Our financial
target market now includes public companies who can use FNTN's
Intranet/Internet services to communicate with both the investing public and
the professional investment industry; and
4.the engagement of a financial public relations firm to allow for easier and
quicker access to a broader source of both business connections and
potential debt or equity investment.
We have recently expanded a major contract with our biggest purchaser of
telecommunication services to enable us to establish a presence in
Hawaii, California, Texas, Colorado, Maryland, Pennsylvania and New
Jersey.
Other:
We are in the process of evaluating additional strategic partners with to
engage for a number of reasons, including the establishment of a
comprehensive convergent billing system, the expansion of our product
offerings, and the expansion of our customer base.
We recently, as announced in an early release, engaged an investment
banking firm for the dual purposes of identifying strategic partners and
additional sources of funds.
We have significantly strengthened the management team with the recent
hire of Corey Rinker as Chief Financial Officer. Mr. Rinker, a CPA and
attorney, brings to the company over 15 years of significant financial,
managerial and business experience honed through senior management
roles at both Big 5 accounting firms and private sector high-tech firms. The
addition of Corey also adds significant credibility of the Company in the
marketplace, with accounting and legal professionals, and through his
previous experience with rating agencies, underwriters and banking
institutions.
Safe Harbor Statement
Certain statements made in this release may contain language describing the
plans, goals, strategies, intentions, forecasts and expectations of Financial
Intranet that may be referred to as "forward-looking statements". The following
important factors could cause actual results to differ materially from those in such
forward-looking statements.
The information technology industry in general, and the Internet and
communication industries in particular, is highly competitive, characterized by
rapid changes, and is generally dominated by companies with greater resources
than the Company. Financial Intranet is still an early stage company in an
emerging industry, which makes sales and earnings forecasts difficult to make,
and can lead to substantial fluctuations in quarterly and annual operating results.
Emerging technology companies, such as Financial Intranet, often encounter
unanticipated obstacles and delays in developing products, service offerings,
and markets. The market for securities of Internet and communications
companies is extremely volatile. If those markets become unfavorable for any
period of time, the Company's ability to demonstrate competitive market
positioning could be materially adversely affected.
In any event, we appreciate your interest in the Company, and look forward to
reporting on additional areas of interest and concern in the near future.
The Management of Financial Intranet
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