1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
---------------
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-11616
FRANKLIN TELECOMMUNICATIONS CORP.
(Exact Name of Registrant as Specified in its Charter)
---------------
California 95-3733534
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
733 Lakefield Road, Westlake Village, California 91361
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (805) 373-8688
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange
------------------- ---------------------
Common stock, American Stock Exchange
without par value
Securities registered pursuant to Section 12(g) of the Act: None
---------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's class of
common stock, as of the latest practicable date:
TITLE OF EACH CLASS OF COMMON STOCK OUTSTANDING AT FEBRUARY 09, 2001
----------------------------------- --------------------------------
Common Stock, no par value 42,480,796
2
Index
Franklin Telecommunications Corp.
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets -
December 31, 2000 (Unaudited) and June 30, 2000
Consolidated Statements of Operations (Unaudited) -
Three months and six months ended December 31, 2000 and 1999
Consolidated Statements of Cash Flows (Unaudited) -
Six months ended December 31, 2000 and 1999
Notes to Consolidated Financial Statements (Unaudited)
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
3
Item 1. Financial Statements
FRANKLIN TELECOMMUNICATIONS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2000 (UNAUDITED) AND JUNE 30, 2000
DECEMBER 31, JUNE 30,
2000 2000
------------ ------------
(UNAUDITED)
ASSETS
Current assets
Cash and cash equivalents .......................................................... $ 608,000 $ 1,275,000
Accounts receivable, less allowance for doubtful accounts of $40,000 (unaudited) and
$50,000, respectively ............................................................ 151,000 136,000
Other receivables .................................................................. 13,000 8,000
Note receivable (a portion due from a related party) ............................. 60,000 64,000
Inventories (Note 2) ............................................................... 2,401,000 2,698,000
Prepaid expenses ................................................................... 71,000 80,000
------------ ------------
Total current assets ............................................................. 3,304,000 4,261,000
------------ ------------
Property and equipment
Machinery and equipment ............................................................ 1,578,000 1,562,000
Furniture and fixtures ............................................................. 280,000 280,000
Computers and software ............................................................. 1,667,000 1,607,000
------------ ------------
3,525,000 3,449,000
Less accumulated depreciation ...................................................... 1,599,000 1,291,000
------------ ------------
Total property and equipment ..................................................... 1,926,000 2,158,000
------------ ------------
Other assets ......................................................................... 697,000 738,000
------------ ------------
Total assets ..................................................................... $ 5,927,000 $ 7,157,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current portion of capital lease obligations ..................................... $ 31,000 $ 34,000
Accounts payable ................................................................... 220,000 407,000
Accrued liabilities (Note 3) ....................................................... 918,000 1,028,000
------------ ------------
Total current liabilities ........................................................ 1,169,000 1,469,000
Long-term debt, (majority due to a related party) .................................... 762,000 762,000
Capital lease obligations, net of current portion .................................... 5,000 20,000
------------ ------------
Total liabilities ................................................................ 1,936,000 2,251,000
------------ ------------
Contingencies (Note 4)
Shareholders' equity
Preferred stock, no par value 10,000,000 shares authorized, Convertible Series C -0-
(unaudited) and -0- shares issued and outstanding ................................ -0- -0-
Common stock, no par value 90,000,000 shares authorized 42,206,080 (unaudited) and
34,247,013 shares issued and outstanding ......................................... 34,984,000 32,270,000
Common stock committed, no par value 74,716 (unaudited) and 74,716 shares
committed but not yet issued ..................................................... 82,000 82,000
Accumulated deficit ................................................................ (31,075,000) (27,446,000)
------------ ------------
Total shareholders' equity ....................................................... 3,991,000 4,906,000
------------ ------------
Total liabilities and shareholders' equity ....................................... $ 5,927,000 $ 7,157,000
============ ============
The accompanying notes are an integral part of these financial statements.
4
FRANKLIN TELECOMMUNICATIONS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS AND SIX MONTHS ENDED DECEMBER 31, 2000 AND 1999 (UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
------------------------------- -------------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
Sales
Product ..................................... $ 191,000 $ 245,000 $ 313,000 $ 550,000
Telephone and Internet services ............. 290,000 641,000 599,000 1,111,000
------------ ------------ ------------ ------------
Total sales ............................ 481,000 886,000 912,000 1,661,000
------------ ------------ ------------ ------------
Cost of sales
Product ..................................... 296,000 286,000 574,000 555,000
Telephone and Internet services ............. 364,000 893,000 712,000 1,306,000
------------ ------------ ------------ ------------
Total cost of sales .................... 660,000 1,179,000 1,286,000 1,861,000
------------ ------------ ------------ ------------
Gross profit (loss) .............................. (179,000) (293,000) (374,000) (200,000)
------------ ------------ ------------ ------------
Operating expenses
Research and development expenses ........... 445,000 410,000 887,000 884,000
Selling, general, and administrative
Expenses ................................. 1,099,000 1,179,000 2,368,000 3,818,000
------------ ------------ ------------ ------------
Total operating expenses ............... 1,544,000 1,589,000 3,255,000 4,702,000
------------ ------------ ------------ ------------
Loss from operations ............................. (1,723,000) (1,882,000) (3,629,000) (4,902,000)
------------ ------------ ------------ ------------
Other income (expense)
Interest income ............................. 8,000 6,000 15,000 14,000
Interest expense ............................ (1,000) -- (2,000) (1,000)
Loss on disposal of property and equipment... (3,000) (6,000) (3,000) (30,000)
Other income (expense) ...................... 1,000 4,000 (10,000) 6,000
------------ ------------ ------------ ------------
Total other income (expense) ........... 5,000 4,000 -- (11,000)
------------ ------------ ------------ ------------
Net loss ......................................... $ (1,718,000) $ (1,878,000) $ (3,629,000) $ (4,913,000)
============ ============ ============ ============
Basic and diluted net loss per common share ...... $ (.04) $ (.07) $ (.10) $ (.19)
============ ============ ============ ============
Weighted average common shares
Outstanding used to compute basic
loss per common share ........................ 40,614,645 28,629,848 37,913,388 27,561,831
============ ============ ============ ============
The accompanying notes are an integral part of these financial statements.
5
FRANKLIN TELECOMMUNICATIONS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED DECEMBER 31, 2000 AND 1999 (UNAUDITED)
SIX MONTHS ENDED
DECEMBER 31,
-----------------------------
2000 1999
----------- -----------
(UNAUDITED) (UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss ......................................... $(3,629,000) $(4,913,000)
Adjustments to reconcile net loss to net cash
Used in operating activities
Depreciation and amortization ............... 376,000 352,000
Provision for loss on obsolete inventory .... 193,000 --
Provision for loss on doubtful accounts ..... 9,000 --
Stock issued for services rendered .......... 225,000 82,000
Loss on disposal of property and equipment .. -- 24,000
Write-off of accounts receivable ............ -- 1,529,000
(Increase) decrease in
Accounts receivable ......................... (24,000) 86,000
Other receivables ........................... (1,000) 66,000
Inventories ................................. 104,000 (90,000)
Prepaid expenses ............................ 9,000 (14,000)
Increase (decrease) in
Accounts payable ............................ (187,000) (103,000)
Accrued liabilities ......................... (110,000) (741,000)
----------- -----------
Net cash used in operating activities ............ (3,035,000) (3,722,000)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment .............. (75,000) (579,000)
Disposal of property and equipment ............... (3,000) 16,000
Other assets ..................................... (25,000) (104,000)
----------- -----------
Net cash used in investing activities ............ (103,000) (667,000)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from convertible notes payable .......... -- 2,500,000
Proceeds from exercise of stock options and
warrants ....................................... 4,000 (69,000)
Proceeds from sale of Company stock .............. 2,485,000 2,080,000
Payments on notes payable ........................ (18,000) --
Proceeds from sale of minority stock in
consolidated subsidiary ........................ -- 53,000
----------- -----------
Net cash provided by financing activities ........ 2,471,000 4,564,000
----------- -----------
Net increase (decrease) in cash .................. (667,000) 175,000
Cash and cash equivalents, beginning of the period 1,275,000 1,637,000
----------- -----------
Cash and cash equivalents, end of the period ..... $ 608,000 $ 1,812,000
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
2000 1999
----------- -----------
(unaudited) (unaudited)
Interest paid .................................... $ 2,000 $ --
=========== ===========
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
During the six months ended December 31, 2000, the Company issued 200,000 shares
(unaudited) of common stock for services valued at $225,000 (unaudited).
During the six months ended December 31, 1999, The Company repossessed equipment
from a customer who was in arrears on payments for said equipment at a cost of
$868,000 (unaudited).
The accompanying notes are an integral part of these financial statements.
6
FRANKLIN TELECOMMUNICATIONS CORP. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
NOTE 1--GENERAL AND SUMMARY OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Business and Organization
Franklin Telecommunications Corp. ("Franklin") and its subsidiaries
(collectively the "Company") manufacture and distribute data and telephony
communications, access and connectivity products for IP Telephony networks, T-1
and X.25 wide-area networks and provide IP Telephony and Internet services
through its majority-owned subsidiary, FNet Corp. ("FNet"). The Company's
customers are located predominantly in the United States, Canada, Australia,
South America and parts of Europe in a wide range of industries including
financial services, government, telephone services and manufacturing.
Basis of Presentation
The accompanying consolidated financial statements have been prepared in
conformity with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all normal, recurring adjustments considered
necessary for a fair presentation have been included. The financial statements
should be read in conjunction with the audited financial statements included in
the Company's annual report on Form 10-K for the fiscal year ended June 30,
2000. The results of operations for the six months ended December 31, 2000 are
not necessarily indicative of the results that may be expected for the fiscal
year ending June 30, 2001.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
Franklin Telecommunications Corp. and its wholly-owned or majority owned
subsidiaries. All significant intercompany balances and transactions have been
eliminated.
Impairment of Long-Lived Assets
The Company reviews its long-lived assets for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. Recoverability of assets to be held and used is measured
by a comparison of the carrying amount of the assets to future net cash flows
expected to be generated by the assets. If the assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount exceeds the fair value of the assets. During the six months
ended December 31, 2000, the Company determined that no assets were impaired.
7
Loss Per Common Share
The Company calculates loss per common share in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per
Share." Basic loss per share is computed by dividing the loss available to
common shareholders by the weighted-average number of common shares outstanding.
Diluted loss per share is computed similar to basic loss per share, except that
the denominator is increased to include the number of additional common shares
that would have been outstanding if the potential common shares had been issued
and if the additional common shares were dilutive. The following potential
common shares have been excluded from the computation of diluted net loss per
share for all periods presented because the effect would have been
anti-dilutive:
For the Six Months Ended
December 31,
--------------------------
2000 1999
----------- -----------
(unaudited) (unaudited)
Options outstanding under the Company's stock
option plans 1,940,250 3,295,626
Options granted outside the Company's stock
option plans 3,755,000 1,112,500
Convertible notes payable 200,000 --
Warrants issued in conjunction with convertible
notes payable 1,000,000 1,000,000
Warrants issued in conjunction with various private
placements 5,800,267 224,375
Warrants issued as offering costs for convertible
notes payable 100,000 100,000
Income Taxes
The Company accounts for income taxes under the asset and liability method.
Under this method, deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date. A valuation allowance is
required when it is less likely than not that the Company will be able to
realize all or a portion of its deferred tax assets.
NOTE 2--INVENTORIES
Inventories consisted of the following:
DECEMBER 31, JUNE 30,
2000 2000
------------ ----------
(UNAUDITED)
Raw materials....... $1,359,000 $1,314,000
Work in process..... 212,000 222,000
Finished goods...... 830,000 1,162,000
---------- ----------
Total.......... $2,401,000 $2,698,000
========== ==========
8
NOTE 3--ACCRUED LIABILITIES
Accrued liabilities consisted of the following:
DECEMBER 31, JUNE 30,
2000 2000
------------ ----------
(UNAUDITED)
Salaries and related expense ...... $ 581,000 $ 690,000
Customer deposits ................. 24,000 80,000
License payable ................... -- 100,000
Other accrued liabilities ......... 313,000 158,000
---------- ----------
Total ................... $ 918,000 $1,028,000
========== ==========
NOTE 4--COMMITMENTS AND CONTINGENCIES
Service Agreement
During the six months ended December 31, 2000, FNet entered into a
five-year service agreement with a satellite service provider to operate uplink
and downlink earth stations between the United States and the Balkan region. The
estimated fee for the project is $1,236,000 (unaudited).
Litigation
The Company is involved in certain legal proceedings and claims which
arise in the normal course of business. Management does not believe that the
outcome of these matters will have a material adverse effect on the Company's
consolidated financial position or results of operations.
NOTE 5--RECENT SALE OF EQUITY SECURITIES
During the three months ended December 31, 2000, the Company completed
the following significant common stock transactions of previously unissued
common shares:
Issued 7,500 shares of common stock in connection with the exercise of
stock options for cash of $3,300.
In connection with a private placement in March 2000, the Company issued
warrants to the investors that were designed to protect the investors against
short-term declines in the value of the Company's common stock during the period
between the date of the purchase and the effective date of a Registration
Statement covering the shares sold. The warrants are triggered if the market
price of the Company's shares is below $1.50 on the effective date. If the
warrants are triggered, the investors would be entitled to acquire additional
shares for $0.01 per share. The registration statement for the shares became
effective in November 2000, at which time the market price of the Company's
common stock was below $1.50. As a result, warrants for 2,011,350 shares became
exercisable. In addition, 1,927,797 shares of common stock were issued by the
Company in a cashless exercise of the warrants, and 50,000 shares of common
stock were issued for cash of $500.
In connection with a private placement in March 2000, the Company was
obligated to effect the registration of the shares within a specified time
period, with penalties due to the investors if the deadline was not met. As the
deadline was not met, the Company became obligated to pay the penalties, and it
had the option to pay the penalties in shares of common stock. Accordingly, the
Company issued a total of 480,812 shares to these investors in November 2000.
In connection with a private placement, the Company issued 850,000
shares for gross proceeds of $425,000. The Company paid fees and expenses of
$13,140 in connection with the private placement.
NOTE 6--SUBSEQUENT EVENT
On February 1, 2001, the Company announced that its subsidiary FNet
Corp. is shutting down its satellite telephone network in the Balkan region. The
closure is a cost-saving measure, in that rising costs kept the operation from
achieving the level of profitability that had been forecast.
9
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
OVERVIEW
Franklin Telecommunications Corp. ("Company") designs, manufactures and sells
Internet Telephony equipment, also called Voice Over Internet Protocol equipment
("VOIP") and other high speed communications products and subsystems. Our
products are marketed through Original Equipment Manufacturers ("OEMs") and
distributors, as well as directly to end users. In addition, through our
majority-owned subsidiary, FNet Corp. ("FNet"), we provide traditional switched
network and Internet Protocol telephony services, and Internet access to
businesses and individuals. The Company's customers are located throughout the
world in a wide range of industries including financial services, government,
telephone services and manufacturing.
The Company offers a suite of Internet Telephony solutions that enable business
communications over data networks. From the small office home office (SOHO) to
the branch office and headquarters operations of medium to large scale
corporations, the Company offers a cost-effective call handling solution. From
the enterprise to the carrier market, the Company offers converged network
solutions; managing the connectivity and integration of voice, data, fax and
video. Where ever possible, the Company offers a turnkey solution that can be
"owned" by its customers. When equipment sales are not in the best interest of a
particular customer's business communications solution, the Company plans to
provide that solution as a "service" that can be leased. The Company aims to be
a leading edge supplier of Internet Telephony solutions as a result of its
flexibility in providing on net and off net business communication solutions as
customer owned equipment or Franklin provided services on a global basis. The
Company's products and services enable connectivity and e-commerce.
The Company is both an equipment supplier and a service provider, offering
turn-key business communications solutions to both the carrier and enterprise
segments of the Internet Telephony market. The Company produces gateways,
gatekeepers and edge servers that provide advanced packet switching solutions
that significantly reduce the infrastructure costs associated with
communications networks. The Company's products are designed, developed and
manufactured by the Company.
In addition to manufactured solutions, the Company maintains a Network
Operations Center that provides both "on-net" and "off-net" connectivity for
the Company's equipment customers. The Network Operations Center interconnects
the Company's customers on a global basis. The Network Operations Center
includes Internet access facilities and a Class 4 circuit switch. The center
interconnects with three International Record Carriers and is capable of
completing a voice call to any phone in the world. The Company's equipment and
services customers will in the future be offered the opportunity to access the
circuit switched facilities and to interconnect with each other, using the
Company to enable "settlement" between the networks. This interconnection can be
either "free" through the Internet, or delivered through private leased lines.
As a result of the Company's expertise in network operations, the Company is
also able to provide additional assistance to its customers by offering design,
installation and network management services. The company believes that this
strategy of combining network operations and equipment design is a significant
product differentiation strategy, uniquely positioning the Company. Many of the
Company's customers elect to interconnect with the Network Operations center.
Much like the Internet, the Company is growing with each additional gateway
sale.
Forward-looking statements in this Management's Discussion and Analysis of
Financial Condition and Results of Operations, including statements regarding
the Company's entrance into the Telephone and Internet business, newly
introduced products, development of "VOIP" service capabilities over the
Internet, net sales, gross profit, operating expenses, other income and
expenses, liquidity and cash needs and the Company's plans and strategies are
all based on current expectations, and the Company assumes no obligation to
update this information. Numerous factors could cause actual results to differ
from those described in the forward-looking statements.
As with any line of business, there can be no assurance that the DVG VOIP
products will gain widespread market acceptance or be profitable. In addition,
there can be no assurance that new hardware products and services developed by
others will not render the Company's hardware products and services
noncompetitive or obsolete.
10
RESULTS OF OPERATIONS
Three Months Ended December 31, 2000 Compared To Three Months Ended December
31, 1999
Net Sales. Net sales decreased by $405,000, or 46%, from $886,000 in the
three months ended December 31, 1999 to $481,000 in the three months ended
December 31, 2000. The decrease is due both to a reduction of DVG hardware
systems sales and reduced service revenue, primarily from the Balkan operation.
The revenue mix for the three months ended December 31, 2000 consisted of 60%
Telephone and Internet services revenue and 40% hardware product sales.
Gross Loss. Gross loss increased as a percentage of net sales to a loss of
37% for the three months ended December 31, 2000, from a gross loss of 33% of
net sales for the corresponding period of 1999. The gross loss percentage
increase can be attributed to fixed hardware and service overhead expenses
spread over a smaller sales base.
Operating Expenses. Operating expenses decreased by $45,000, or 3%, from
$1,589,000 in the three months ended December 31, 1999 to $1,544,000 in the
three months ended December 31, 2000. The decrease was primarily attributable to
reduced salaries.
Other Income (Expense). Interest income increased by $2,000, or 33%, from
$6,000 in the three months ended December 31, 1999 to $8,000 in the three months
ended December 31, 2000, due to increased cash balances available to earn
interest. Interest expense was $1,000 for the three months ended December 31,
2000, with no interest during the same period in 1999. Other components of other
income (expense) were immaterial and were due to various non operating items.
Six Months Ended December 31, 2000 Compared To Six Months Ended December 31,
1999
Net Sales. Net sales decreased by $749,000, or 45%, from $1,661,000 in the
six months ended December 31, 1999 to $912,000 in the six months ended December
31, 2000. The decrease is due both to a reduction of DVG hardware systems sales
and reduced service revenue, primarily from the Balkan operation. The revenue
mix for the six months ended December 31, 2000 consisted of 66% Telephone and
Internet services revenue and 34% hardware product sales.
Gross Loss. Gross loss increased as a percentage of net sales to a loss of
41% for the six months ended December 31, 2000, from a gross loss of 12% of net
sales for the corresponding period of 1999. The gross loss percentage increase
can be attributed to fixed hardware and service overhead expenses spread over a
smaller sales base.
Operating Expenses. Operating expenses decreased by $1,447,000, or 31%,
from $4,702,000 in the six months ended December 31, 1999 to $3,255,000 in the
six months ended December 31, 2000. The decrease was primarily attributable to a
one time bad debt expense of $1,284,000 occurring in the six month period ending
December 31, 1999.
Other Income (Expense). Interest income increased by $1,000, or 7%, from
$14,000 in the six months ended December 31, 1999 to $15,000 in the six months
ended December 31, 2000, due to increased cash balances available to earn
interest. Interest expense increased by $1,000, from $1,000 in the six months
ended December 31, 1999 to $2,000 in the six months ended December 31, 2000.
Other components of other income (expense) were immaterial and were due to
various non operating items.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents and net working capital totaled $608,000 and
$2,135,000, respectively, as of December 31, 2000. The primary source of cash
has been net proceeds generated from equity and debt financings. The Company has
relied on sales of new shares, loan proceeds and the exercise of warrants and
options to fund operations for an extended period of time. The Company received
$10,589,000 and $2,471,000 in equity financing for the year ended June 30, 2000,
and the six months ended December 31, 2000, respectively. Its subsidiary, FNet,
raised $53,000 for the year ended June 30, 2000 and $-0- for the six months
ended December 31, 2000. The Company and its subsidiary FNet have continued to
experience losses due to low sales results.
The Company anticipates that its primary uses of working capital in future
periods will be for increases in product development, expansion of its marketing
plan, general working capital and funding of increases in accounts receivable.
11
The Company believes that existing cash and cash equivalents, cash flow
from operations and cash raised through future anticipated private placements
will be sufficient to meet the Company's presently anticipated working capital
needs for at least the next twelve months and the foreseeable future. The
Company is currently having difficulty raising additional capital due to the low
trading price of its common shares. If the Company is unable to obtain
sufficient private placement financing, it may be unable to continue as a going
concern. To the extent the Company uses its cash resources for acquisitions, the
Company may be required to obtain additional funds, if available, through
borrowings or equity financings. There can be no assurance that such capital
will be available on acceptable terms.
12
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Not applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable
ITEM 5. OTHER INFORMATION
Not applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
None
13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934. The
registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
FRANKLIN TELECOMMUNICATIONS CORP.
By /s/ THOMAS L. RUSSELL
------------------------------------
Thomas L. Russell
Vice President
Chief Financial Officer
Dated: February 12, 2001