MPHASE TECHNOLOGIES, INC. - Quarter Report: 2002 December (Form 10-Q)

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     Research and development. Research and development expenses consist principally of payments made to GTRC and Microphase Corporation for development of the Traverser™ product. All research and development costs are expensed as incurred.

     General and administrative. Selling, general and administrative expenses consist primarily of salaries and related expenses for personnel engaged in direct marketing of the Traverser™, the POTS Splitter Shelves and other DSL component products, as well as support functions including executive, legal and accounting personnel. Certain administrative activities are outsourced on a monthly fee basis to Microphase Corporation. Finally, mPhase leases the principal office from Microphase Corporation.

     Non–cash compensation charge. The Company makes extensive use of stock options and warrants as a form of compensation to employees, directors and outside consultants.

From inception (October 2, 1996) through December 31, 2002, the Company has incurred cumulative (a) development stage losses and has an accumulated deficit of $104,787,682 and (b) negative cash flow from operations of $43,023,712. The auditors report for the fiscal year ended June 30, 2002 includes the statement that “there is substantial doubt of the Company’s ability to continue as a going concern”. Management estimates that the Company needs to raise approximately $1,500,000 during the next 12 months to continue operations. As of December 31, 2002 the Company had a negative net worth of $1,849,403 up from a negative net worth of $42,849 as a result of continuing net losses incurred after June 30, 2002.

In fiscal 2001, the Company had anticipated that the sales of its component products would be able to supplement the underwriting of the completion of our flagship product, the Traverser. In fiscal 2002 these sales declined with the overall decline of DSL deployments and spending in the telephone industry. The Company believes its new IPOTS product will capture some of the existing DSL deployments, providing increases in revenue in the fourth quarter of fiscal 2003 and the first half of fiscal 2004. Until such time such revenues are realized, the Company intends on maintaining its reduced cost structure to minimize its losses, which management believes will permit the Company to sustain its development process and ultimately achieve profitability.

The Company believes that significant deployments and resulting revenues from these deployments of its flagship product, the Traverser, are not expected until the first half of fiscal year 2004. The Company further believes that an increase in capital expenditures in the telecommunications industry will also increase sales and improve the Company’s margins as well as increase the probability that the Company will attain profitability.

THREE MONTHS ENDED DECEMBER 31, 2002 VS. DECEMBER 31, 2001

REVENUE

     Total revenues were $561,760 for the three months ended December 31, 2002 compared to $545,546 for the three months ended December 31, 2001. The slight decrease was primarily attributable to continued slow sales of the Company’s POTS Splitter product line, caused by the continuing downturn in the telecommunications market, including among customers that order component products from the Company. The Company continues to believe that its line of POTS Splitter products is positioned to be competitively priced with high reliability and connectivity, and as such has the potential to be a significant part of DSL deployment worldwide. The Company cannot say when the demand for telecommunication equipment will resume.

COST OF REVENUES

     Cost of sales was $546,711 for the three months ending December 31, 2002 as compared to $530,413 in the prior period, representing 97% of gross revenues, for each of the quarters ended December 31, 2002 and 2001 respectively. Our margins have contracted dramatically over the past two years as spending among the telecommunications providers has contracted, coupled with downward pressures related to the supply and demand of telecommunications products.

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RESEARCH AND DEVELOPMENT

     Research and development expenses were $752,848 for the three months ending December 31, 2002 as compared to $1,257,014 during the comparable period in 2001 or a decrease of $504,166 for the comparable period in 2001. Such expenditures include $0 incurred with GTRC for the three months ended December 31, 2002 as compared to $100,000 during the comparable period in 2001. In addition, the balance of $752,848 was incurred with Microphase and additional expenses with other strategic vendors (including Lucent Technologies, Inc. in connection with the cost-reduction and enhancement of the mPhase Digital Set Top Box part of the Traverser product) for the three months ending December 31, 2002 when compared to $1,157,014 during the comparable period in 2001, resulting in a decrease of $404,166 of such research costs to other than GTRC. This decrease is primarily due to the Company’s abandonment of certain research projects on DSL components, which the Company believed were no longer commercially viable at this time. This decrease in research and development is equivalent to approximately $425,000.

     The decrease in research expenditures incurred with GTRC is due to the Company’s nearing completion of the design and manufacture of prototypes of the set top box and the central office equipment associated with its Traverser™ product in 2002.

     Research expenditures incurred with Microphase were related to the continuing development of the Company’s DSL component products, including the Company’s line of POTS Splitters and Microfilters and the Company’s newest products, the iPOTS™ and the mPhase Stretch. We believe the mPhase iPOTS™ offers a much needed solution for the DSL industry; the iPOTS™ enables telcos to remotely and cost–effectively perform loop management and maintenance including line testing, qualification and troubleshooting. Prior to the introduction of the iPOTS™, loop management could not be remotely performed through a conventional POTS Splitter without the use of expensive cross connects or relay banks because of the mandatory DC blocking capacitors in traditional POTS splitters, as required by the ITU, ANSI and ETSI. The unique (patent pending) iPOTS™ circuit allows most test heads to perform both narrow and wideband testing of the local loop through the central office POTS Splitter without having to physically disconnect the POTS Splitter, thereby eliminating the need to dispatch personnel and a truckroll. The Company anticipates future demand for this product, as it significantly reduces the cost of deploying and maintaining DSL services. Also recently developed is the DSL loop extender product called mPhaseStretch. This product extends the service distance for the mPhase Traverser™ and can be used in conjunction with other DSL services. The Company anticipates future demand for the Stretch loop extender product as it addresses a primary issue in DSL services.

GENERAL AND ADMINISTRATIVE EXPENSES

     Selling, general and administrative expenses were $729,993 for the three months ending December 31, 2002 down from $1,470,908 or a decrease of $740,915 for the comparable period in 2001. The decrease in the selling, general and administrative costs included a decrease of non–cash charges relating to the issuance of common stock and options to consultants, which totaled $256,655 for the three months ended December 31, 2002 as compared to $761,897 or a decrease of $505,242 of such charges.

NET LOSS

     The Company recorded a net loss of $1,629,338 for the three months ended December 31, 2002 as compared to a loss of $3,088,567 for the three months ended December 31, 2001. This represents a loss per common share of $.03 for the three month period ended December 31, 2002 as compared to a loss

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per common share of $.07 for the three months ending December 31, 2001 based upon weighted average common shares outstanding of 65,914,466 and 44,645,458 during the periods ending December 31, 2002 and December 31, 2001, respectively.

     The Company believes the initial major deployments and the resultant revenues of its Flagship product, the Traverser, are not expected until the first half of fiscal year 2004, which along with any upturn of spending in the telephone industry will also increase sales and improve the Company’s margins and provide the Company with the opportunities to attain profitability.

SIX MONTHS ENDED DECEMBER 31, 2002 VS. DECEMBER 31, 2001

REVENUE

     Total revenues were $771,837 for the six months ended December 31, 2002 compared to $1,082,554 for the six months ended December 31, 2001. Despite the nominal increase in the current quarter as compared to the same period last year. The decrease was attributable to slowing sales in the first quarter of fiscal year 2003 of the Company’s POTS Splitter product line, caused by the general downturn in the telecommunications market, including customers that order component products from the Company. The Company continues to believe that its line of POTS Splitter products is positioned to be competitively priced with high reliability and connectivity, and as such has the potential to be a significant part of DSL deployment worldwide. The Company cannot say when the demand for telecommunication equipment will resume.

COST OF REVENUES

     Cost of sales was $744,030 for the six months ending December 31, 2002 as compared to $987,112 in the prior period, representing 96% and 91%, for the quarters ended December 31, 2002 and 2001 respectively, of gross revenues. The margins have contracted dramatically as spending among the telecommunications providers has contracted, coupled with downward pressures related to the supply and demand of telecommunications products.

RESEARCH AND DEVELOPMENT

     Research and development expenses were $1,566,142 for the six months ending December 31, 2002 as compared to $2,368,430 during the comparable period in 2001 or a decrease of $802,288 for the comparable period in 2001. Such expenditures include $100,000 incurred with GTRC for the six months ended December 31, 2002 as compared to $350,000 during the comparable period in 2001. In addition, we incurred $1,446,142 with Microphase and additional expenses with other strategic vendors for the six months ending December 31, 2002 as compared to $2,018,430 during the comparable period in 2001 resulting in a decrease of $572,288 of these research costs other than GTRC.

     Other elements attributing to the decrease in research and development expenses included a decrease in the operations of the Company's joint venture, mPhase Television.net. The major costs incurred by the joint venture were payroll expenses attributable to research and development of the Company's transmission capabilities and acquisition of television content. Costs incurred by the joint venture during the six months ending December 31, 2001 were $227,000 as compared to $31,000 for the six months ending December 31, 2002. Additionally, this decrease can be attributed to the Company abandoning certain research projects on DSL components the Company believed were no longer commercially viable at this time, this approximated $425,000.

     The decrease in research expenditures incurred with GTRC is due to the Company’s nearing completion of the design and manufacture of prototypes of the set top box and the central office equipment associated with its Traverser™ product in 2002.

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     Research expenditures incurred with Microphase were related to the continuing development of the Company’s DSL component products, including the Company’s line of POTS Splitters and Microfilters and the Company’s newest products, the iPOTS™ and the mPhase Stretch. We believe the mPhase iPOTS™ offers a much needed solution for the DSL industry; the iPOTS™ enables telcos to remotely and cost–effectively perform loop management and maintenance including line testing, qualification and troubleshooting. Prior to the introduction of the iPOTS™, loop management could not be remotely performed through a conventional POTS Splitter without the use of expensive cross connects or relay banks because of the mandatory DC blocking capacitors in traditional POTS splitters, as required by the ITU, ANSI and ETSI. The unique (patent pending) iPOTS™ circuit allows most test heads to perform both narrow and wideband testing of the local loop through the central office POTS Splitter without having to physically disconnect the POTS Splitter, thereby eliminating the need to dispatch personnel and a truckroll. The Company anticipates future demand for this product, as it significantly reduces the cost of deploying and maintaining DSL services. Also recently developed is the DSL loop extender product called mPhaseStretch. This product extends the service distance for the mPhase Traverser™ and can be used in conjunction with other DSL services. The Company anticipates future demand for the Stretch loop extender product as it addresses a primary issue in DSL services.

GENERAL AND ADMINISTRATIVE EXPENSES

     Selling, general and administrative expenses were $1,600,255 for the six months ending December 31, 2002, down from $4,114,996 or a decrease of $2,514,741 for the comparable period in 2001. The decrease in the selling, general and administrative costs included a decrease of non–cash charges relating to the issuance of common stock and options to consultants, which totaled $460,435 for the six months ended December 31, 2002 as compared to $1,704,252 during the comparable period in 2001, a decrease of $1,243,817 of such charges. Other elements contributing to the decrease in selling, general and administrative expenses included; a decrease in payroll from approximately $750,000 to $470,000; reduced usage of outside consultants from approximately $627,000 to $279,000, reduced marketing expense such as trade shows from $385,000 to $25,000, all of which combined to an approximated decrease of $1,000,000.

NET LOSS

     The Company recorded a net loss of $3,421,396 for the six months ended December 31, 2002 as compared to a loss of $7,151,900 for the six months ended December 31, 2001. This represents a loss per common share of $.06 for the six month period ended December 31, 2002 as compared to a loss per common share of $.17 for the six months ending December 31, 2001 based upon weighted average common shares outstanding of 63,397,799 and 43,306,699 during the periods ending December 31, 2002 and December 31, 2001, respectively.

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CRITICAL ACCOUNTING POLICIES

REVENUE RECOGNITION

     All revenue included in the accompanying consolidated statements of operations for all periods presented relates to sales of mPhase’s POTS Splitter Shelves and DSL component products.

     As required, mPhase has adopted the Securities and Exchange Commission (“SEC”)Staff Accounting Bulletin (“SAB”) No. 101, “Revenue Recognition in Financial Statements”, which provides guidelines on applying generally accepted accounting principals to revenue recognition based upon the interpretations and practices of the SEC. The Company recognizes revenue for its POTS Splitter Shelf and Other DSL component products at the time of shipment, at which time, no other significant obligations of the Company exist, other than normal warranty support.

RESEARCH AND DEVELOPMENT

     Research and development costs are charged to operations as incurred in accordance with Statement of Financial Accounting Standards (“SFAS”), No.2, “Accounting for Research and Development Cost.”

INCOME TAXES

     mPhase accounts for income taxes using the asset and liability method in accordance with SFAS No.109 “Accounting for Income Taxes.” Under this method, deferred tax assets and liabilities are measured using currently enacted tax rates. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in results of operations in the period that includes the enactment date. Because of the uncertainty as to their future realizability, net deferred tax assets, consisting primarily of net operating loss carryforwards, have been fully reserved for. Accordingly, no income tax benefit for the net operating loss has been recorded in the accompanying financial statements.

     Utilization of net operating losses generated through June 30, 2002 may be limited due to “changes in control” of our common stock that occurred.

STOCK–BASED COMPENSATION

     The Company follows the disclosure–only provisions of SFAS No. 123 “Accounting for Stock–based Compensation”. SFAS No 123 encourages, but does not require companies to record compensation expense for stock–based employee compensation at fair value. As permitted, the Company has elected to continue to account for stock–based compensation to employees using the intrinsic value method presented in Accounting Principles Board (”APB”) Opinion No.25 “Accounting for Stock Issued to Employees” and provide pro forma net income and pro forma earnings per share disclosures for employee stock option grants as if the fair valued–based method, as defined, had been applied. Compensation expense is generally measured on the date of grant only if the current market price of the underlying stock exceeded the exercise price.

     The Company accounts for non–employee stock based awards in which goods or services are the consideration received for the equity instruments issued based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more readily determinable.

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INVENTORY RESERVE AND VALUATION ALLOWANCE

     The Company carries its inventory at the lower of cost, determined on a first–in, first–out basis, or market. Inventory consists mainly of the Company’s POTS Splitter Shelf and Filters. In determining the lower of cost or market, the Company periodically reviews and estimates a valuation allowance to reserve for technical obsolescence and marketability. The allowance represents management’s assessment and reserve for the technical obsolescence based upon the inter–operability of its component products, primarily filters and splitters, with presently deployed and next generation DSL infrastructures as well as a reserve for marketability based upon current prices and the overall demand for the individual inventory items. Material changes in either the technical standards of future DSL deployments or further erosion in the demand for deployments of DSL infrastructures could affect the estimates and assumptions resulting in the amounts reported. Actual results could differ from these estimates

MATERIAL RELATED PARTY TRANSACTIONS

     The Company records material related party transactions. The Company incurs costs for engineering, design and production of prototypes and certain administrative functions from Microphase Corporation and the purchase of finished goods, primarily consisting of DSL splitter shelves and filters, from Janifast Limited. The Company has incurred costs for obtaining transmission rights. This enabled the Company to obtain re–transmission accreditation to proprietary television content that the Company plans to provide with its flagship product, the Traverser within its incorporated joint venture mPhase Television.net, in which the Company owns a 56.5% interest.

     The Company has also incurred charges for beta testing and on–site marketing, including the display of a live working model at Hart Telephone. In addition, the Company has entered into a supply agreement with Hart Telephone, which is scheduled to commence upon the commercial production of the Traverser. A member of mPhase’s board of directors is employed by Lintel, Inc., the parent corporation of Hart Telephone.

     Mr. Durando, the President and CEO of mPhase, owns a controlling interest and is a director of Janifast Limited. Mr. Durando and Mr. Dotoli are officers of Microphase Corporation. Mr. Ergul, the chairman of the board of mPhase, owns a controlling interest and is a director of Microphase Corporation. Microphase, Janifast, Hart Telephone and Lintel Corporation are significant shareholders of mPhase. Microphase, Janifast and Hart Telephone have converted significant liabilities to equity in fiscal years June 30, 2001, 2002 and in the current fiscal year. Management believes the amounts charged to the Company by Microphase, Janifast, mPhase Television.net and Hart Telephone are commensurate to amounts that would be incurred if outside parties were used. The Company believes Microphase, Janifast and Hart Telephone have the ability to fulfill their obligations to the Company without further support from the Company.

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LIQUIDITY AND CAPITAL RESOURCES

     At December 31, 2002 mPhase had working capital deficit of $1,658,120 as compared to working capital of $399,321 at June 30, 2002. Through December 31, 2002, the Company had incurred development stage losses totaling approximately $104,787,682. At December 31, 2002, the Company had approximately $9,913 of cash, cash equivalents and approximately $342,639 of trade receivables to fund short–term working capital requirements. The Company’s ability to continue as a going concern and its future success is dependent upon its ability to raise capital in the near term to: (1) satisfy its current obligations, (2) continue its research and development efforts, and (3) the successful wide scale development, deployment and marketing of its products.

     Historically, mPhase has funded its operations and capital expenditures primarily through private placements of common stock. Management expects that its ongoing financial needs will be provided by financing activities and believes that the sales of its line of POTS Splitter products and other related DSL component products will provide some offset to cashflow used in operations, although there can be no assurance as to the level and growth rate of such sales in future periods as seen with quarter to quarter fluctuations in component sales. At December 31, 2002, the Company had cash and cash equivalents of $9,913 compared to $47,065 at June 30, 2002, accounts receivable of $342,639 and inventory of $2,712,479. This compared to $273,780 of accounts receivable and $3,342,716 of inventory at June 30, 2002.

     Cash used in operating activities was $621,017 during the six months ending December 31, 2002. The cash used by operating activities principally consists of the net loss, the net decrease in inventory, the net decrease in accounts receivable offset by the increase in depreciation and amortization, and by non–cash charges for common stock options and warrants issued for services and increased accrued expenses.

     The Company has entered into various agreements with GTARC, pursuant to which the Company receives technical assistance in developing the Digital Video and Data Delivery System. The Company has incurred expenses in connection with technical assistance from GTARC totaling approximately $350,000, $100,000, for the six month period ending December 31, 2001 and 2002, respectively, and $13,524,300 from the period from inception through December 31, 2002. The Company and GTRC entered into a Memorandum of Intent, on October 14, 2002 and revised on November 12, 2002, which would result in the settlement of all amounts outstanding and the exchange of mutual releases in consideration for two term Notes totaling approximately $624,000 with varied payments through 2007 and warrants to purchase shares of the Company’s common stock through 2007.The Company and GTARC are continuing negotiation of final documentation based upon such Memorandum of Intent. mPha se is the sole, worldwide licensee of the technology developed by GTARC in conjunction with the Traverser™ product line. Upon completion of the commercial product, GTRC may receive a royalty of up to 5% of product sales.

     During the six months ending December 31, 2002, certain strategic vendors and related parties converted approximately $1,525,517 of accounts payable and accrued expenses into 4,873,333 shares of the Company’s common stock and 2,491,800 warrants.

     As of December 31, 2002, mPhase had no material commitments for capital expenditures.

LOSSES DURING THE DEVELOPMENT STAGE AND MANAGEMENT’S PLANS

     From inception (October 2, 1996) through December 31, 2002 the Company had incurred development stage losses and has an accumulated deficit of approximately $104.8 million and a stockholder’s deficit of $1,849,403. Cumulatively, through December 31, 2002, the Company had negative cash flow from operations of $621,017. The report of the Company’s outside auditor’s

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Rosenberg, Rich, Baker,Berman and Company with respect to its latest audited 10k for the fiscal year ended June 30,2002 stated that “there is substantial doubt of the Company’s ability to continue as a going concern”. Management estimates that the Company will need to raise approximately $1,500,000 during the next 12 months to continue operations.

     We continue our efforts to raise additional funds through private placements of our common stock and strategic alliances, the proceeds of which are required to fund continuing expenditures and the controlled development stage rollout of our Traverser™ Digital Video and Data Delivery System. However, there can be no assurance that mPhase will generate sufficient revenues to provide positive cash flows from operations or that sufficient capital will be available, when needed or at terms that we deem to be reasonable.

     We have evaluated our cash requirements for fiscal year 2003 based upon certain assumptions, including our ability to raise additional financing and increased sales of our POTS splitter. The Company anticipates that it will need to raise approximately $1,500,000 primarily in private placements of its common stock with accredited investors, during the next 12 months, or alternatively we will need to curtail certain expenses as incurred at the present levels including marketing and research and development expenses. Additional investment in technology design to reduce the cost of the Traverser™ will be necessary over the next 12 months. In the long–term, the Company may invest additional funds annually on research and development of the Traverser™ product line based upon sales levels, changes to technology and the overall success of the Company attaining sufficient financing until such time as it achieves profitable operations.

     Should these cash flows not be available to us, we believe we would have the ability to revise our operating plan and make certain further reductions in expenses, so that our resources available at June 30, 2002, plus financing to be secured during fiscal year 2003, and expected POTS splitter revenues, will be sufficient to meet our obligations until the end of fiscal year 2003. We have continued to experience operating losses and negative cash flows. To date, we have funded our operations with a combination of component sales debt conversions with related parties and strategic vendors, and private equity offerings. Management believes that we will be able to secure the necessary financing in the short–term to fund our operations into our next fiscal year. However, failure to raise additional funds, or generate significant cash flows through revenues, could have a material adverse effect on our ability to achieve our intended business objectiv es.

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ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The Company is not exposed to changes in interest rates as the Company has no debt arrangements and no investments in certain held–to–maturity securities. Under our current policies, we do not use interest rate derivative instruments to manage exposure to interest rate changes. A hypothetical 100 basis point adverse move in interest rates along the entire interest rate yield curve would not materially affect the fair value of any financial instruments at December 31, 2002.

ITEM 4.   CONTROLS AND PROCEDURES

     The Company’s chief executive officer and chief financial officer have evaluated the controls and procedures within 90 days of the filing date of this quarterly report and concluded that the Company’s disclosure controls and procedures were effective. There were no significant changes in the Company’s internal controls subsequent to the date of the evaluation by such officers.

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PART II OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS

     mPhase was advised in April 2002 that following an investigation by the staff of the Securities and Exchange Commission, the staff intended to recommend that the Commission file a civil injunctive action against Packetport.com, Inc. (“Packetport”) and its Officer’s and Directors. Such recommendation related to alleged civil violations by Packetport and such Officers and Directors of various sections of the Federal Securities Laws. The staff has alleged civil violations of Sections 5 and 17(a) of the Securities Act of 1933 and Sections 10(b) and 13(d) of the Securities Exchanges Act of 1034. As noted in other public filings of mPhase, the CEO and COO of mPhase also serve as Directors and Officers of Packetport. At that time these persons advised mPhase that they deny any violation of law on their part and intend to vigorously contest such recommendation or action, if any. To date no action has been filed against Packetport, its Office rs or Directors. mPhase is not named as a party in connection with this matter.

     From time to time mPhase may be involved in various legal proceedings and other matters arising in the normal course of business.

ITEM 2.   CHANGES IN SECURITIES

     Effective for the six–month period ended December 31, 2002 the Company issued the following unregistered securities:

     During the six months ending December 31, 2002, the Company granted 251,500 shares of its common stock to consultants for services performed. Additionally, effective for the six months ended December 31, 2002, the Company issued 4,873,333 shares of the Company’s common stock and 2,491,800 warrants in connection with the extinguishments of debt.

ITEM 3.   DEFAULTS UPON SENIOR SECURITIES

     None.

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     None.

ITEM 5.   OTHER INFORMATION

None.

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8–K

	(a)	EXHIBITS.
	None.
	(b)	Reports on Form 8–K.

		Reported on February 7, 2003–Notification of Withdrawal of Rights Offering
		Reported on February 12, 2003-Agreement with Lucent Technologies, Inc. for cost reduction and enhanced features of mPhase Digital Set Top Box.

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SIGNATURES

     Pursuant to the requirements of the Section 13 or 15(d) 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.

		mPHASE TECHNOLOGIES, INC.
Dated: February 14, 2003		By: /s/ Martin S. Smiley
		Martin S. Smiley Chief Financial Officer

 

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mPHASE TECHNOLOGIES, INC.

Certification of Principal Executive Officer Pursuant to 18 U.S.C. 1350
(Section 906 of the Sarbanes–Oxley Act of 2002)

 

I, Ronald A. Durando, President and Chief Executive Officer (principal executive officer) of mPhase Technologies, Inc. (the “Registrant”), certify that to the best of my knowledge, based upon a review of the Quarterly Report on Form 10–Q for the period ended December 31, 2002 of the Registrant (the “Report”):

(1) The Report fully complies with the requirements of Section 13(a)[15(d)] of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

 

/s/   Ronald A. Durando
Name:	Ronald A. Durando President and Chief Executive Officer
Date:	February 14, 2003

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mPHASE TECHNOLOGIES, INC.

Certification of Principal Executive Officer Pursuant to 18 U.S.C. 1350
(Section 906 of the Sarbanes–Oxley Act of 2002)

 

I, Martin S. Smiley, Chief Financial Officer (principal executive officer) of mPhase Technologies, Inc. (the “Registrant”), certify that to the best of my knowledge, based upon a review of the Quarterly Report on Form 10–Q for the period ended December 31, 2002 of the Registrant (the “Report”):

(1) The Report fully complies with the requirements of Section 13(a)[15(d)] of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

 

/s/   Martin S. Smiley
Name:	Martin S. Smiley President and Chief Executive Officer
Date:	February 14, 2003

 

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mPHASE TECHNOLOGIES, INC.

Certification of Procedures Followed in Connection
with Sarbanes–Oxley Act Certification

 

     The undersigned, the Chief Executive Officer of mPhase Technologies Inc., a New Jersey Corporation (the “Company”) hereby certifies, for purposes of documenting the steps followed by the officer in connection with the execution and delivery to the Securities and Exchange Commission of the attached certification, as follows:

     (1) I reviewed in detail the Quarterly Report on Form 10–Q for the quarter ended December 31, 2002(the “Report”) shortly before the certification was provided.

     (2) I discussed the substance of the Report with each of the Company’s outside auditors and the Chief Financial Officer. These discussions took place at various times and covered principally the financial statement portions of the reports (including the notes which are an integral part of the financial statements) and related financial disclosures. These discussions included my verifying that the financial statements included in the report are accurate and complete, and are properly prepared and consolidated. I confirmed that each of the outside auditors and Chief Financial Officer were satisfied that the notes to the financial statements read clearly and that the notes fairly explain the company’s significant accounting principles and significant estimates, as well as disclose all material contingencies and “off balance sheet” transactions and commitments known to them. In addition, my discussions with outside auditors included a discussion of any material issues that came up in their review of the financial statements and the resolution of those issues. I also verified with the outside auditors and Chief Financial Officer that internal controls are in place and operating to warrant reliance upon the financial and business information provided to me by management.

     (3) I confirmed that the consolidated financial statements included in the Report are accurate and complete in all material respects, reflect all transactions of the Company during and for the statement period following accounting principles consistent with those applied in prior periods, and that all period end adjustments have been made in a manner consistent with the accounting principles in prior periods (other than usual and customary year end adjustments in the case of interim statements).

     (4) I informed the heads of the Company’s primary business units and divisions, as well as any officers of those business units or divisions who have the primary financial reporting responsibility that I would be providing a certification regarding the accuracy of the Report and confirmed orally and in writing with each such head and financial officer that insofar as they knew, the Report did not include any untrue statement of a material fact or omit to state a material fact.

     (5) The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–14 and 15d–14) for the registrant and we have:

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     a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

     b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

     c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

     (6) The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the

     equivalent function):

     a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

     b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

     (7) The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any correction actions with regard to significant deficiencies and material weaknesses.

     (8) As a result of the foregoing procedures, I concluded that, to the best of my knowledge, I was able to provide the certification without exception.

     I have executed this certification as of the 14th day of February 2003.

/s/   Ronald A. Durando

Name: Ronald A. Durando Chief Executive Officer

 

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mPhase Technologies Inc.

Certification of Procedures Followed in Connection
with Sarbanes–Oxley Act Certification

 

     The undersigned, Chief Financial Officer of mPhase Technologies Inc., a New Jersey Corporation (the “Company”) hereby certifies, for purposes of documenting the steps followed by the officer in connection with the execution and delivery to the Securities and Exchange Commission of the attached certification, as follows:

     (1) I reviewed in detail the Quarterly Report on Form 10–Q for the quarter ended December 31, 2002, (the “Report”) shortly before the certification was provided.

     (2) I discussed the substance of the Report with each of the Company’s outside auditors and assistant controller. These discussions took place at various times and covered principally the financial statement portions of the reports (including the notes which are an integral part of the financial statements) and related financial disclosures. These discussions included my verifying that the financial statements included in the report are accurate and complete, and are properly prepared and consolidated. I confirmed that each of the outside auditors and acting controller were satisfied that the notes to the financial statements read clearly and that the notes fairly explain the Company’s significant accounting principles and significant estimates, as well as disclose all material contingencies and “off balance sheet” transactions and commitments known to them. In addition, my discussions with outside auditors included a discussion of any material issues that came up in their review of the financial statements and the resolution of those issues. I also verified with the outside auditors and assistant controller that internal controls are in place and operating to warrant reliance upon the financial and business information provided to me by management.

     (3) I confirmed that the consolidated financial statements included in the Report are accurate and complete in all material respects, reflect all transactions of the Company during and for the statement period following accounting principles consistent with those applied in prior periods, and that all period end adjustments have been made in a manner consistent with the accounting principles in prior periods (other than usual and customary year end adjustments in the case of interim statements).

     (4) I informed the heads of the Company’s primary business units and divisions, as well as any officers of those business units or divisions who have the primary financial reporting responsibility, that I would be providing a certification regarding the accuracy of the Report and confirmed orally and in writing with each such head and financial officer that insofar as they knew, the Report did not include any untrue statement of a material fact or omit to state a material fact.

     (5) As a result of the foregoing procedures, I concluded that, to the best of my knowledge, I was able to provide the certification without exception.

     I have executed this certification as of the 14th day of February 2003.

/s/   Martin S. Smiley
Name: Martin S. Smiley Chief Financial Officer

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