Judith,
You seem to be one of the few people on the thread who posts
actual information about what is going on with this company. I started drafting this post yesterday, intending to ask you to set out for the benefit of the thread, the information you have on why one should hold this stock. I had bought some FTEL, and was looking for reasons to hold, despite some doubts. However, in putting together my own summary of public information on the company, I came to believe that the situation was far worse than I realised. I have therefore delayed posting this until after selling all my FTEL stock - and I consider myself lucky to have escaped with a profit.
My reading of SEC filings convinced me that even in the most optimistic business scenarios, minority shareholders in this company will be, indeed are being raped by management, notably Frank Peters.
Most of the following comes from the following two documents:
10Q 2/6/98
sec.gov
S1 12/9/97
sec.gov
First, a quick, rough summary of some key financials for those unfamiliar.
The number of shares in issue as at 9/30/97 was 13.5M. There are 6.6M Convertible Prefs, and the same number of warrants that have been issued. At the current price, the market value of the company is clearly above $50M. (The options, prefs, and warrants will create substantial dilution in the future)
1995 1996 1997
Sales 1,481 430 1,735
Net (loss) (260) (1,467) (2,824)
Most of these sales are, it notes, on outdated lines of equipment with high concentration on a few customers. None of the existing customers cited as generating significant recent sales are telecoms carriers.
Now for Frank Peters' relationship to the company.
* compensation in 1996 was $275,056 and in 1997 1997 $291,556
plus a $100,000 bonus in both years.
* compensation from 1/1/98 is $27,000 per month, $324,000 per year
* parts of the above were deferred, paid as notes. $140,000 from '95
was paid as a convertible note, at $0.10 a share, 1.4M shares
* in 1996, 21% of FNet shares (4.2M) were transferred to FP and
another director in cancellation of notes payable worth $63,000,
reducing the parent's stake to 79%. Stock issuance to other parties
has now reduced this to 67%
* at 6/30/97 outstanding notes of $229,000 were converted into
promissory notes; half this amount is convertible into common
stock at 50% of market value at date of conversion
* at 9/30/97 the company had outstanding debt owing to FP of
$637,000 "secured by substantially all of the Company's assets"
* in 1995, 2M shares were issued to FP, their excercise (at $0.07)
paid by the cancellation of notes and accrued interest of $134,000
* At 11/13/97, FP had a beneficial interest in 4.6M shares, 30% of
the company, including unexcercised options, of which he held 3M as
at 9/30/97 (but not including convertible notes). 1.3M options were
excercised in Oct 97 at $0.10 per share.
The conversion terms at well below market value of the shares of the various notes contrasts with the option plan where, as is normal, options may not be issued at a price of less than 100% of fair market value (or 110% for a 10% stock holder).
FTEL's ownership of FNet stands at 67%. The drop from 79% of Franklin's holdings down to this level results from the issuing of stock to various creditors and in consideration for acquisitions. At 6/30/97 FNet had 2.6M outstanding excercisable options, which appears to be about 11% of Fnet's shares in issue. FNet's 3-month revenue to 9/30/98 of $168,000 would equate to under 3,000 customers at a notional $20 per month.
Quote from the S1:
"..the growth of FNet... may have an adverse effect on the Company's principal business in the short term due to competing demands on the Company's resources and management. Also, the fact that members of the Company's management, including its President, hold a direct interest in FNet may pose conflicts of interest over the long term."
I think it unnecessary to add to this my own analysis of what this says about the way the company is being run. The facts from published documents speak for themselves it seems to me.
There is lots more of this in the SEC documents for anyone who cares to look.
For those who decide to remain invested in this company, I wish you luck, you'll probably need it.
Regards, Roger. |
