SSP, could FNTN do it again? China connection and now a firm date for their new web site opening.
.The response to the announcement regarding our stockholder?s meeting on June 23, 2000 has been overwhelming, and many of you have responded in one form or another regarding the topics for discussion. To that end, we thought it might be beneficial for us to post, and respond to, some of the issues raised regarding the meeting and the proxy material sent. If your question is not addressed below, feel free to e-mail us or ask it at the meeting.
1. We have been asked to approve an additional 50,000,000 common shares - why should we?
The additional shares are extremely important. If we want to raise additional working capital - and we do ? we need to be able to have a currency with which to do so. Stock is that currency. With the stock trading at various levels over the past months, we have used quite a bit of our available shares to raise money for operations. As you can imagine, for companies at our level (development stage with limited access to capital), financing is very expensive, as indicated by the huge charges we have taken over the past several quarters in interest expense. This expense is due to the significant amount of shares we have had to sell to raise the capital we did. In addition, our plan calls for us to grow the business via merger or acquisition, as we did this past March with the Chinese ICP purchase. That, too, requires a currency, and that currency again is common stock.
2. What about the request to authorize preferred shares - isn?t that just another method of diluting the common shareholders?
The use of preferred shares is intended only as additional flexibility to raise funds or use in acquisitions, although a by-product of it may be its dilutive effect to common shareholders. Many investors require that they receive some sort of preferential treatment on return, and using preferred shares is a common method of meeting that requirement. Until now, we have had to use strictly convertible debt which often carries with it a huge discount and corresponding hits to our P&L.
3. Why should we authorize a new stock option plan - isn?t that, too, a ploy to get more shares into executives? pockets even if we feel they don?t deserve them?
What we are asking for now is simply to, in effect, replace the original stock option plan that you had previously approved with a newer one, one that will have more attractive tax effects on recipients who are granted stock pursuant to it. No additional shares are being allocated to it for the officers of the company; the option plan only allows management to award other employees of the company shares as an inducement to join the company and see it through the foreseeable future. Nothing about this request allows for additional shares to be put into officers? hands, as that is up to the Compensation Committee of the Board of Directors; rather, the employees of the company, and those future employees we hope to attract, will benefit from this revised option plan. Typically, companies using stock to attract and maintain employees (virtually all companies these days) reserve about 15% to 20% of their shares for option plans; we have 1,500,000 out of 50,000,000, or 3%. As additional shares are authorized , additional shares are allocated to option pools to get up to that acceptable range. We have not done that in the past; and as we move forward, the additional shares, when calculated with the additional authorized shares we are asking you for, will still put us well under the lower limit.
4. For that matter, why doesn?t management own a significant stake in the company?
Michael Sheppard and Maura Marx have sold a significant portion of their holdings over the past few years both in lieu of taking salary and for raising funds to lend the company money, and Corey Rinker has not yet vested any of his options. Note also that all three officers, in order to get the Chinese ICP acquisition completed, have actually waved their rights to exercise any options that they may have until you approve an increase in the amount of authorized common shares.
5. What about China - what exactly is your game plan?
We purchased Longyin to execute on our global growth and external growth strategies and capitalize both on the emerging China market and the 800,000 subscribers that they have. We think that the subscriber base we inherited with the asset purchase will grow as we implement website development and e-commerce solutions for China?s businesses that they had already begun work on. The services to be offered under these solutions are projected to include:
disseminating global financial information to a huge new pool of investors,
e-commerce consulting, planning, designing and implementing,
website promoting,
on-line marketing for products and services,
website design and database development, and
domain name registration.
6. And what about the acquisition - it looks like one or two shareholders got extremely favorable terms to invest in the company.
Actually, investors were sold shares under the registration statement that was then in effect at the only price we could have received - $.275 per share. When negotiations with the investor began, the market price of our stock actually was much closer to that $.275, it is that price now, and the investors have actually not sold any of their shares. For a brief period at the acquisition date the investors did in fact enjoy a large paper gain, but unfortunately for all of us, as of today, that gain was short lived and coincidental, and they are still supportive of the company.
7. And what is it that FNTN does?
As our website describes in further detail, and as we described in the publication of our initial business plan, from which we have not wavered, we are still working to develop into a global communications and streaming media company that delivers financial information to the financial investment community and content to Internet users. We will bundle broadband network and streaming video services with value-added products previously unavailable to broker/dealers investment advisors, mutual funds and other investment managers, and broad based Internet content to international subscribers worldwide. The distribution of this information, both privately over the Company's Intranet and publicly over FNTN?s website and hotage.com, will utilize streaming media technologies and custom, interactive applications to enable completely new methods of communication.
8. Where is the *#*@&!!! Website?
June 12.
Copyright ¸ 2000, Financial Intranet, Inc.
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