FORM 10-KSB
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: June 30, 2004
For the transition period from July 1, 2003 to June 30, 2004
Commission file number 0-13215
ROAMING MESSENGER, INC.
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(Exact name of registrant as specified in its charter)
Nevada 30-0050402
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(State of Incorporation) (I.R.S. Employer Identification No.)
6144 Calle Real Suite, 200, Santa Barbara, California 93117
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(Address of principal executive offices) (Zip Code)
(805) 683-7626
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Registrant's telephone number, including area code
Securities registered pursuant to Section 12(B) of the Act:
Name of Each Exchange On
Title of Each Class Which Registered
COMMON STOCK OTC
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 by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. |X|
The aggregate market value of voting stock held by non-affiliates of
the registrant was approximately $12,325,246 as of August 31, 2004 (computed by
reference to the last sale price of a share of the registrant's Common Stock on
that date as reported by NASDAQ).
There were 172,399,615 shares outstanding of the registrant's Common
Stock as of August 31, 2004.
TABLE OF CONTENTS
10KSB
PART I..................................................................... 1
ITEM 1..................................................................... 1
ITEM 2..................................................................... 6
ITEM 3..................................................................... 6
ITEM 4..................................................................... 7
PART II.................................................................... 8
ITEM 5..................................................................... 8
ITEM 6..................................................................... 9
ITEM 7..................................................................... 11
ITEM 8....................................................................... 28
ITEM 8A...................................................................... 28
PART III..................................................................... 28
ITEM 9....................................................................... 28
ITEM 10...................................................................... 31
ITEM 11...................................................................... 34
ITEM 12...................................................................... 35
ITEM 13...................................................................... 35
ITEM 14...................................................................... 36
SIGNATURES................................................................... 37
CERTIFICATIONS............................................................... 38
PART I
ITEM 1. BUSINESS
Company History
Roaming Messenger, Inc. (the "Company") is a Nevada corporation
formerly known as Latinocare Management Corporation ("LMC"). The Company
originally incorporated in Colorado in July 1983. Effective April 1, 2003, the
Company completed a Plan and Agreement of Reorganization with Warp 9, Inc., a
Delaware corporation ("W9") and effective June 30, 2003, the Company completed a
second Plan and Agreement of Reorganization with W9 (collectively the
"Reorganization"). Pursuant to the Reorganization, LMC acquired all of the
issued and outstanding common stock of W9 in exchange for approximately
131,026,173 newly issued shares of LMC common stock, W9 became a wholly owned
subsidiary of LMC, and the shareholders of W9 became the controlling
shareholders of LMC. Prior to its business combination with W9, LMC had no
tangible assets and insignificant liabilities. Subsequent to the Reorganization
the Company changed its name to Roaming Messenger, Inc.
General
The Company has developed a proprietary solution called "Roaming
Messenger" for delivering real-time information for homeland security, emergency
response, military and enterprise applications. Unlike solutions based on
existing messaging technology such as e-mail, text messaging, and voicemail,
Roaming Messenger packages time-critical information into smart messages. These
messages automatically roam throughout the wired and wireless worlds - from
mobile devices to desktop PCs to central servers - tracking down people and
obtaining responses in real-time.
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Roaming Messenger Product Line
The Company offers a range network appliances configured to meet the
various mobile communication demands of users and organizations. All the
necessary Roaming Messenger software is pre-installed in the Gateway Appliances
for instant integration and deployment.
The Company also offers a hosted version of the Roaming Messenger
system where customers can pay a monthly fee to access the capabilities of
Roaming Messenger without large upfront fees.
The entire Roaming Messenger software suite is available for licensing
to strategic VAR and OEM partners for creating customized or private labeled
Roaming Messenger systems.
Applications For Roaming Messenger
Emergency Response. Management believes that Roaming Messenger can be
the mobile messaging extension for any Emergency Response Management system in
automating the notification, authorization, and deployment of an Emergency
Response Team. For example, a response team can be dynamically assembled by
sending off a Roaming Messenger to the mobile devices of Emergency Managers,
informing them of the situation and requesting authorization to deploy a
Response Team. After receiving authorization, Roaming Messenger could then
proceed to all selected Tier 1 First Responders, get their acknowledgment and
also deliver the emergency incident report.
Security. Roaming Messenger can be integrated with any security
monitoring system to deliver real-time notification with actionable responses.
Notifications regarding security breaches such as fire alarms, HVAC failures,
motion sensors and restricted access can be enhanced by Roaming Messenger.
Responsible personnel are presented with information regarding the breach, as
well as actions such as informing law enforcement, turning on or off mechanisms
to resolve the breach - all from mobile or desktop devices.
Military and Defense. The battlefield is going hi-tech with the goal of
enabling real-time command and control capabilities from the highest to the
lowest tactical echelons. Roaming Messenger can be used for delivering
situational awareness and command and control information to tactical personnel
with wireless mobile devices. Roaming Messenger can facilitate a seamless flow
of battle command information across the battle space by roaming from person to
person.
Healthcare. In the fast-paced healthcare environment, there is no room
for error and delays can be costly. Roaming Messenger can be deployed along side
existing healthcare management systems to improve response time and patient
satisfaction within a hospital. Patient requests or patient monitoring systems
can alert appropriate nurses of problems or escalate accordingly to ensure
timely response. When Roaming Messenger finds the nurse, the nurse accepts that
task or delegates it to an appropriate aide. After the nurse's aide has resolved
the patient request, Roaming Messenger can go back to the nurse, inform the
nurse of the resolution and if appropriate log the incident into the hospital's
central patient monitoring system. Communication processes at the doctor's level
can also be automated in the same way.
Real-time Enterprise. The essence of a Real-time Enterprise is
event-driven. When something happens, the people who care about it need to
respond. As the workforce becomes increasingly mobile, Enterprise information
systems need to be able to securely and efficiently contact them. Roaming
Messenger is an ideal mobile extension to any Enterprise system by providing an
intelligent message that can track down appropriate people and obtain approvals
to push along the business process. Whether it is getting an invoice paid,
ordering more parts for the production line or updating a customer management
system, Roaming Messenger can be used as the mobile messaging component.
Manufacturing. In a manufacturing environment, reaching the right
people at the right time and monitoring and assessing critical information from
production lines and security systems can significantly reduce costs and improve
employee safety. Roaming Messenger can be integrated to any manufacturing
monitoring system to deliver actionable notifications regarding equipment
failures, security breaches, chemical spills, and other critical events to
responsible technicians, as well as keep plant managers informed of situation
progress and resolution.
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Mobile Commerce. Roaming Messenger can also facilitate mobile commerce
transactions. For example, wireless mobile vending solutions today require the
physical machine to have a dedicated Internet connection, which makes mass
deployment very difficult and costly. Using Roaming Messenger, a purchase
transaction can be completed with end-to-end security by allowing the vending
machine to piggy-back on the Internet connection of the user's smart phone or
PDA via a local Infrared or Bluetooth connection. Roaming Messenger can be
initiated by the vending machine to the user's handheld device, request item and
payment selections, interact with an Internet payment server, report inventory
and status to a different server and return back to the vending machine to
complete the transaction in real-time.
Marketing Strategy
The Company intends to enhance, promote and support the idea that
Roaming Messenger is the most compelling and efficient solution available in the
marketplace for mobile messaging. In order to create a favorable environment for
sales, the Company plans to undertake advertising and promotion efforts. These
efforts will be outsourced and will require the services of an advertising firm
and public relations firm. The Company plans to interview various firms and
select those most capable of assisting the Company with comprehensive
advertising and promotion plans. At the date of this report, the Company has
begun building out its marketing department staff to accelerate these efforts.
Sales Strategy
After creating a high level of perceived value and building significant
demand for sales through its marketing campaign, the Company intends to
aggressively sell the Roaming Messenger product in the United States.
International sales will follow after achieving initial success in the domestic
marketplace. The Company has nominal revenue generating customers for the
Roaming Messenger products at this time. The Company's management has identified
the following primary target market segments for the Roaming Messenger solution:
o Homeland Security
o Emergency Response, Public Health and Safety
o Military and Defense
o Enterprises
o Wireless Carriers
Distribution Channels
Roaming Messenger is a mobile messaging component with applications in
many markets. The Company plans to sell and license the Roaming Messenger
products to system integrators and application developers in markets such as
Homeland Security, Emergency Response, Military and Enterprise Automation. For
example, the Company might sell a Roaming Messenger Gateway appliance to a
systems integrator that is designing an emergency alert and notification system.
The Company plans to sell Roaming Messenger through channel partners and
value-added resellers (VARs) who are established in their respective vertical
markets.
Revenue Model
Management believes that most of the Company's revenues will come from
the licensing of its Roaming Messenger product, customer training and support,
and software upgrades to application developers and system integrators.
Management has decided to use a deployment pricing model for the
network appliance version of Roaming Messenger based on the number of users
enabled to send and receive Roaming Messengers. Customers will be asked to pay a
one-time license fee for each user that is activated for Roaming Messenger
communication. Customers will then be invited to subscribe to an ongoing service
plan (optional) that would provide training, support, maintenance and software
upgrades.
On the hosted, or subscription model, customers pay a monthly fee to
the Company for access to a Roaming Messenger system hosted and managed by the
Company. The monthly fee is assessed based on the number of users in the
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customer's Roaming Messenger deployment, and on monthly message volume. The
hosted version of Roaming Messenger is in essence a messaging service
infrastructure for applications that are integrated into it.
Proprietary Technology
The Company's intellectual property portfolio consists of the following patents,
which are pending:
Patent #1:
Self-Contained Business Transaction Capsules was invented by Jonathan
Lei, the Chief Executive Officer, President, Chief Financial Officer, Secretary,
and Chairman of the Company. All rights to this patent were assigned to W9 under
the terms of Mr. Lei's employment agreement. Mr. Lei did not receive
compensation for the assignment. An application for a United States patent in
the name of Jonathan L. Lei and assigned to W9 for Self-Contained Business
Transaction Capsules (Docket No. 23803-250394) was filed on January 2, 2001, by
the Company's intellectual property counsel, Pillsbury Winthrop, LLP, Los
Angeles, California.
A self-contained business transaction capsule, or eCapsule, is a small
electronic capsule that contains all the necessary data and logic to complete a
business transaction. The eCapsule is a "thin" and "lightweight" small
computer-readable file that is device independent. The eCapsule allows a
business, for example, to encapsulate an individual product or offer into an
intelligent object that is capable of completing entire transactions. The
eCapsule includes data about the product or service being provided, such as the
product price, a textual description, or options of the product or service (a
transaction description). The eCapsule also includes transaction logic or
business logic capable of completing the transaction, such as billing and
shipping information, order routing information, order status information,
shipping status information, and any other transaction rules necessary to
process the transaction. Moreover, the eCapsule is adapted to be broadcasted to,
and stored on, a portable electronic device, such as a mobile wireless-enabled
device, like a cellular telephone, a personal digital assistant (PDA) or a
laptop computer.
Patent #2:
Utilizing Mobile Devices as a Communication Proxy for Non-Connected
Terminals was invented by Jonathan Lei, the President, Chief Financial Officer,
Secretary, and Chairman of the Company and Brian Fox, Chief Technology Officer
of the Company. All rights to this patent were assigned to W9 under the terms of
Mr. Lei's and Mr. Fox's employment agreements. Neither Mr. Lei nor Mr. Fox
received compensation for the assignment. An application for a U.S. patent in
the name of Jonathan L. Lei and Brian J. Fox and assigned to Warp 9 for
Utilizing Mobile Devices As A Communication Proxy For Non-Connected Terminals
(Docket No. 23803-277301) was filed on February 21, 2002, by the Company's
intellectual property counsel, Pillsbury Winthrop, LLP.
This invention is a method and system in which terminals, appliances
and machines without dedicated Internet connections can complete Internet based
transactions by piggy-backing on the connection of the user's handheld device.
An example of an application of this invention is a vending machine that can
conduct electronic wireless payments without having an internal wireless device
that communicates with a server on the Internet. Existing solutions require the
vending machine to be equipped with an internal cell phone. Using this
invention, the vending machine can communicate with the consumer's handheld
device via Infrared or Bluetooth and simply uses the handheld device as the
conduit to the Internet for remote payment processing. This invention also
covers many other applications including secured doorways, factory floors and
smart data acquisition sensors.
Competition
The Company will be subject to intense competition as the wireless
industry continues to grow. Large companies with greater financial and
managerial resources than the Company, and greater name recognition are offering
mobile messaging solutions. The competition is intense for such a lucrative
market. While certain market overlaps exist between the Company's product and
other solutions, the Roaming Messenger solution is designed to provide unique
competitive advantages. As the market for wireless continues to mature, new
players may enter the market competing directly or indirectly with the Company.
Roaming Messenger is a messaging technology component that needs to be
integrated into a vertical market application to derive full value. It is
possible that the vertical marketing application providers may decide to develop
their own mobile messaging functionality instead of licensing Roaming Messenger.
Other Products and Services
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The Company's wholly owned subsidiary, Warp 9 Inc., offers two primary
web-based e-commerce software products to the catalog and direct marketing
industry.
Warp 9 ICS. The Warp 9 ICS is a proprietary and extensible system that
enables any business to expand its operation to the Internet with minimal
investment, overhead and risk. A business does not need to invest in new
hardware or software in order to utilize the Warp 9 ICS, because the product is
offered as a fully managed online catalog solution that includes hosting at the
Company's datacenter. As a total solution, Warp 9 offers project management,
development and integration into a customer's existing business processes. Warp
9 has packaged the process and technology required for complete e-commerce site
deployment and management.
Warp 9 EMS. Warp 9 EMS is a web-based e-mail campaign and list
management system designed for high performance and reliability. EMS's
sophisticated technology will allow marketers to send targeted e-mail campaigns
that help grow, retain and maximize the lifetime value of their customers.
Through content personalization and list segmentation, campaign efforts will
result in higher response rates, higher conversion rates and improved customer
loyalty. Warp 9 EMS enables unprecedented response rates that are not achievable
through traditional forms of direct marketing.
Revenue Model The Company charges its customers a monthly subscription
fee to the Warp 9 ICS and Warp 9 EMS product using an application service
provider ("ASP") model.
Government Regulation
The Company is subject to various federal, state, and local laws
affecting medical e-commerce and communication businesses. The Federal Trade
Commission and equivalent state agencies regulate advertising and
representations made by businesses in the sale of their products, which apply to
the Company. The Company is also subject to government laws and regulations
governing health, safety, working conditions, employee relations, wrongful
termination, wages, taxes and other matters applicable to businesses in general.
Employees
At the date of this report the Company employs seventeen full time
employees, including the President of the Company. Those full-time employees
include six who are employed in administrative, marketing, and sales positions,
and eleven are technical employees employed in research, development, and
technical product maintenance positions. The Company also employs independent
contractors for sales, marketing and business development efforts who are
available to the company on a half or near full-time basis. The Company projects
that during the next 12 months, the Company's workforce is likely to increase to
30, with four of the new positions being in the administrative, marketing, and
sales areas and the remaining nine of the new positions being in research,
development, and production positions.
All of the Company's employees have executed agreements that impose
nondisclosure obligations on the employee and assign to the Company (to the
extent permitted by California law) all copyrights and other inventions created
by the employee during his employment with the Company. Additionally, the
Company has a trade secret protection policy in place that management believes
to be adequate to protect the Company's intellectual property and trade secrets.
Seasonality
The Company does not anticipate that its business will be substantially
affected by seasonality.
Trademarks
The Company has not been issued any registered trademarks for its
"Roaming Messenger" trade name. The Company has filed trademark and tradename
applications with the United States Office of Patents and Trademarks for its
proposed tradenames and trademarks.
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ITEM 2. PROPERTIES
The Company currently leases approximately 8,605 square feet of office
space at 50 Castillian Dr., Suite A, Santa Barbara, California 93117 for
approximately $7,750 per month, triple net, pursuant to a six year lease
agreement with rent commencing on October 1, 2004.
The Company will vacate its old office space of approximately 3,650
square feet, by September 30, 2004, located at 6144 Calle Real, Suite 200 Santa
Barbara, California 93117 which it will sublease for the remainder of the lease
until March 2007.
ITEM 3. LEGAL PROCEEDINGS
On June 21, 2004, Michael Gilbert, a shareholder, filed a complaint
with the Superior Court of the State of California for the County of Santa
Barbara, for breach of contract, damages and specific performance relating to
the removal of the restrictive legend on his unregistered shares in Roaming
Messenger Inc. Mr. Gilbert accused the Company of refusing to permit him to
remove the restrictive transfer legend on his unregistered shares under Rule 144
of the Securities Act of 1933, as amended. The Company and the Company's
corporate counsel believe that Mr. Gilbert's claim is without merit and only a
result of his misunderstanding of the Rule 144 process. At no time did the
Company object to Mr. Gilbert's request for legend removal. The Company
anticipates that this complaint will be resolved without lengthy litigation, but
will vigorously defend the lawsuit until it is resolved.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Effective July 10, 2003, the Company adopted the Roaming Messenger,
Inc. 2003 Stock Option Plan for Directors, Officers, Employees and Key
Consultants (the "Plan") authorizing the issuance of up to 25,000,000 shares of
the Company's common stock pursuant to the grant and exercise of up to
25,000,000 stock options. The Board of Directors of the Company unanimously
approved the adoption of the Plan. The holders of 100,140,025 shares or
approximately 68.76% of the total issued and outstanding shares of the Company
voted to ratify the adoption of the Plan. No shares of the Company voted against
ratifying the adoption of the Plan. The remaining outstanding shares abstained.
Effective September 22, 2004, the Company amended its Articles of
Incorporation (the "Amendment") to increase the authorized number of shares of
common stock from 200,000,000 to 495,000,000 and to establish the number of
shares of Preferred Stock at 5,000,000. The Board of Directors of the Company
unanimously approved the adoption of the Amendment. The holders of 99,691,525
shares or approximately 58% of the total issued and outstanding shares of the
Company voted to ratify the adoption of the Amendment. No shares of the Company
voted against ratifying the adoption of the Amendment. The remaining outstanding
shares abstained.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The Company's common stock trades on the NASD OTC Bulletin Board Market
under the symbol "RMSG." The range of high and low bid quotations for each
fiscal quarter within the last two fiscal years was as follows:
Year Ended June 30, 2004 HIGH LOW
First quarter ended September 30, 2003...............$0.52 $0.27
Second quarter ended December 31, 2003...............$0.45 $0.25
Third quarter ended March 31, 2004...................$3.60 $0.27
Fourth quarter ended June 30, 2004...................$1.90 $0.45
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Year Ended June 30, 2003 HIGH LOW
First quarter ended September 30, 2002...............$0.12 $0.12
Second quarter ended December 31, 2002...............$0.12 $0.12
Third quarter ended March 31, 2003...................$0.12 $0.06
Fourth quarter ended June 30, 2003...................$0.75 $0.06
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The above quotations reflect inter-dealer prices, without retail
markup, mark-down, or commission and may not necessarily represent actual
transactions.
As of June 30, 2004, there were approximately 500 record holders of the
Company's common stock, not including shares held in "street name" in brokerage
accounts which is unknown. As of June 30 2004, there were approximately
172,399,615 shares of common stock outstanding on record with the Company's
transfer agent, Mountain Share Transfer. Effective September 22, 2004, the
Company amended its Articles of Incorporation to increase the authorized number
of shares of common stock from 200,000,000 to 495,000,000 and to establish the
number of shares of preferred stock at 5,000,000.
The Company has not declared or paid any cash dividends on its common
stock and does not anticipate paying dividends for the foreseeable future.
Effective July 10, 2003, the Company adopted the Roaming Messenger,
Inc. 2003 Stock Option Plan for Directors, Officers, Employees and Key
Consultants (the "Plan") authorizing the issuance of up to 25,000,000 shares of
the Company's common stock pursuant to the grant and exercise of up to
25,000,000 stock options. The Plan has been approved by the holders of the
outstanding shares of the Company. The following table sets forth certain
information regarding the Plan as of June 30, 2004:
Number of securities
Number of securities to be Weighted-average exercise remaining available for
issued upon exercise of price of outstanding stock future issuance under equity
outstanding stock options options compensation plans
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Equity compensation plans 8,297,494 $0.09 14,202,506
approved by security holders
In a series of private placements of the Company's common stock made by
the Company to accredited investors from April 8, 2003 to January 15, 2004
pursuant to Rule 506 of Regulation D of the Securities Act of 1933, as amended
(the "Act"), the Company sold a total of 5,934,266 shares of common stock for a
price of $0.08 per share, raising gross proceeds of $377,741. This offering was
completed and terminated on January 15, 2004.
In a private placement of the Company's common stock made by the
Company to accredited investors from February 1, 2004 to February 10, 2004
pursuant to Rule 506 of Regulation D of the Act, the Company sold 1,622,500
shares of common stock at a price of $0.16 per share, which raised gross
proceeds of $260,000. This offering was completed and terminated on February 10,
2004.
In a private placement of the Company's common stock made by the
Company to accredited investors from February 23, 2004 to March 10, 2004
pursuant to Rule 506 of Regulation D of the Act, the Company sold 1,500,000
shares of common stock at a price of $0.35 per share, which raised gross
proceeds of $525,000. This offering was completed and terminated on March 10,
2004.
In a private placement of the Company's common stock made by the
Company to accredited investors from March 15, 2004 to May 15, 2004 pursuant to
Rule 506 of Regulation D of the Act, the Company intended to sell 2,000,000
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shares of common stock at a price of $0.50 per share. Total gross proceeds from
this offering were $210,000 from the sale of 420,000 shares. This offering was
terminated on June 30, 2004.
In a private placement of the Company's common stock made by the
Company from July 23, 2003 to April 20, 2004 pursuant to Regulation S of the Act
at a variable price equal to 28% of the closing bid price on the date of the
purchase of the stock, the Company raised gross proceeds of approximately
$1,096,416 from the sale of 13,181,027 shares. This offering was terminated on
April 20, 2004.
In a private placement of the Company's common stock made by the
Company from November 5, 2003 to March 31, 2004 pursuant to Regulation S of the
Act at a variable price equal to 33% of the closing bid price on the date of the
purchase of the stock, the Company raised gross proceeds of $81,886 from the
sale of 446,900 shares. This offering was terminated on June 30, 2004.
For the fiscal year ended June 30, 2004, employees of the Company
exercised a total of 2,400,000 stock options at an exercise price of $0.08 per
share. The Company received gross proceeds of $150,000 for the issuance of
1,875,000 shares of unregistered common stock and $0 for the issuance of 525,000
shares on a cashless exercise of 625,000 stock options.
In January 2004, the Company entered into a consulting agreement with
an investor relations firm where the Company issued 400,000 shares of restricted
and unregistered common stock for services rendered.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
Cautionary Statements
This Form 10-KSB contains financial projections and other
"forward-looking statements," as that term is used in federal securities laws,
about Roaming Messenger Inc.'s financial condition, results of operations and
business. These statements include, among others: statements concerning the
potential for revenues and expenses and other matters that are not historical
facts. These statements may be made expressly in this Form 10-KSB. You can find
many of these statements by looking for words such as "believes," "expects,"
"anticipates," "estimates," or similar expressions used in this Form 10-KSB.
These forward-looking statements are subject to numerous assumptions, risks and
uncertainties that may cause the Company's actual results to be materially
different from any future results expressed or implied by the Company in those
statements. The most important facts that could prevent the Company from
achieving its stated goals include, but are not limited to, the following:
(a) volatility or decline of the Company's stock price;
(b) potential fluctuation in quarterly results;
(c) failure of the Company to earn revenues or profits;
(d) inadequate capital and barriers to raising the additional
capital or to obtaining the financing needed to implement its
business plans;
(e) inadequate capital to continue business;
(f) changes in demand for the Company's products and services;
(g) rapid and significant changes in markets;
(h) litigation with or legal claims and allegations by outside
parties;
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(i) insufficient revenues to cover operating costs.
Because the statements are subject to risks and uncertainties, actual
results may differ materially from those expressed or implied by the
forward-looking statements. The Company cautions you not to place undue reliance
on the statements, which speak only as of the date of this Form 10-KSB. The
cautionary statements contained or referred to in this section should be
considered in connection with any subsequent written or oral forward-looking
statements that the Company or persons acting on its behalf may issue. The
Company does not undertake any obligation to review or confirm analysts'
expectations or estimates or to release publicly any revisions to any
forward-looking statements to reflect events or circumstances after the date of
this Form 10-KSB or to reflect the occurrence of unanticipated events.
Current Overview
The Company has developed a proprietary solution called "Roaming
Messenger" for delivering real-time information to wired and wireless devices
for homeland security, emergency response, military and enterprise applications.
Unlike solutions based on existing messaging technology such as e-mail, text
messaging, and voicemail, Roaming Messenger packages time-critical information
into smart messages. These messages automatically roam throughout the wired and
wireless worlds - from mobile devices to desktop PCs to central servers -
tracking down people and obtaining responses in real-time.
We expect to sell and license the Roaming Messenger product to system
integrators and application developers in markets such as Homeland Security,
Emergency Response, Military and Enterprise Automation. For example, we might
sell a Roaming Messenger Gateway appliance to a systems integrator that is
designing an emergency alert and notification system. We plan to sell Roaming
Messenger through channel partners and value-added resellers (VARs) who are
established in their respective vertical markets.
For the year ended June 30, 2004, we have been in product refinement
and market development mode on the Roaming Messenger product. We have forged a
number of partnerships with small to medium sized companies in the Homeland
Security and Public Safety sector. While we have validated the need for the
unique capabilities of Roaming Messenger in these markets, significant revenue
has yet to be derived, due to minimal sales and marketing efforts. Also, it took
much longer than anticipated for federal funds to flow into the information
technology (IT) procurement departments of government and public safety agencies
to which most of our channel partners sell.
A large part of our investment capital was used for product development
and infrastructure build-out during the year ended June 30, 2004. However, this
will shift more towards sales, marketing and business development for the
upcoming fiscal year ending June 30, 2005. The Homeland Security and Public
Safety markets are still our primary markets as we are beginning to see
increased IT spending at the state and local government level. While Roaming
Messenger is a horizontal product with application in many markets, our primary
sales and marketing strategy continues to be vertically focused. We will execute
various low-cost horizontal marketing programs, concurrently, to identify new
opportunities in non-primary vertical markets - such as healthcare or enterprise
markets.
Our overarching growth strategy remains a three phase strategy. Phase I
is the Homeland Security and Public Safety markets. Phase II is the enterprise
markets for business process management and communication applications. Phase
III is the consumer markets for application such as mobile commerce and mobile
gaming.
In executing our growth strategy, strategic acquisition of synergistic
companies will be explored. Acquisition synergy shall be based on two primary
factors (i) access to install based of customers (ii) complementary product or
service offerings.
RESULTS OF OPERATIONS FOR FISCAL YEAR ENDED JUNE 30, 2004 COMPARED TO FISCAL
YEAR ENDED JUNE 30, 2003
Total revenue for the twelve month period ended June 30, 2004 increased
by $50,040 to $953,772 from $899,732 in the prior year.
Research and development expenses increased by $170,057 during the
twelve months ended June 30, 2004 to $315,061 from $145,004. A majority of the
increase occurred in the latter six months as the technical staff grew.
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Selling, general and administrative expenses increased by $474,972
during the twelve months ended June 30, 2004 to $1,474,106 from $999,135 in the
prior year. General and administrative expenses for the year ended June 30, 2004
included $132,917 of non-cash expenses of stock option, and stock compensation
in lieu of payment to consultants and employees of the Company. Expense related
to depreciation was $60,231 for the twelve months ended June 30, 2004 as
compared to $49,162 for the prior year, and interest expense was $15,031 for the
twelve months ended June 30, 2004 as compared to $24,467 in the prior year.
For the twelve months ended June 30, 2004, the Company's consolidated
net loss was $1,035,945 as compared to a consolidated net loss of $424,047 for
the twelve months ended June 30, 2003.
Liquidity and Capital Resources
The Company had consolidated net cash of $1,495,102 at June 30, 2004 as
compared to net cash of $57,408 as of June 30, 2003. The Company had a net
working capital (i.e. the difference between current assets and current
liabilities) of $1,191,108 at June 30, 2004 as compared to a working capital
deficit of $316,436 at June 30, 2003. Cash flow provided by operating activities
was ($948,193) during the twelve months ended June 30, 2004 as compared to
($218,120) during the twelve months ended June 30, 2003. Cash provided by
investing activities was ($64,684) during the twelve months ended June 30, 2004
as compared to ($4,683) during the twelve months ended June 30, 2003. Cash
provided by financing activities was $2,450,571 during the twelve months ended
June 30, 2004 compared to $193,117 during the twelve months ended June 30, 2003.
There is no assurance that the Company will have sufficient capital to finance
its growth and business operations, or that such capital will be available on
terms that are favorable to the Company or at all.
For the twelve months ended, June 30, 2004, the Company's capital needs
have primarily been met from the proceeds of (i) private placements of
unregistered common stock pursuant to Rule 506 of Regulation D of the Securities
Act of 1933, as amended (the "Act"), to accredited investors at prices ranging
from $0.08 per share to $0.50 per share which raised gross proceeds of
$1,266,400; (ii) private placements of common stock made by the Company pursuant
to Regulation S of the Act, at a variable price ranging from 28% to 33% of the
closing bid price on the date of the purchase of the stock, which raised gross
proceeds of $1,185,460; and (iii) stock option and warrant exercises from
employee and consultants which raised gross proceeds of $198,000.
-10-
ITEM 7. FINANCIAL STATEMENTS OF ROAMING MESSENGER, INC.
ROAMING MESSENGER, INC.
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2004 AND 2003
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
CONTENTS
PAGE
Report of Independent Auditors.......................................... 12
Consolidated Balance Sheets............................................. 13
Consolidated Statements of Operations................................... 14
Consolidated Statements of Changes in Shareholders'
Deficits............................................................... 15
Consolidated Statements of Cash Flows .................................. 16
Notes to Consolidated Financial Statements ............................. 17-27
-11-
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Roaming Messenger, Inc.
We have audited the accompanying consolidated balance sheets of Roaming
Messenger, Inc. (a Nevada Corporation) and Subsidiary (collectively
referred to as the "Company") as of June 30, 2004 and 2003 and the related
consolidated statements of operations, shareholders' deficit and cash flows
for the years then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with the standards established by
the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audits to obtain reasonable
assurance about whether the consolidated financial statements are free of
material misstatement. An audit also includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of Roaming Messenger, Inc. and Subsidiary as of June 30, 2004 and
2003, and the consolidated results of their operations and their cash flows
for the years then ended in conformity with accounting principles generally
accepted in the United States of America.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in
note 2 to the consolidated financial statements, the Company has suffered
recurring losses and negative cash flows from operations that raise
substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in note 2.
The consolidated financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
/s/Rose, Snyder & Jacobs
------------------------
Rose, Snyder & Jacobs
A Corporation of Certified Public Accountants
Encino, California
September 10, 2004
-12-
ROAMING MESSENGER, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2004 AND 2003
2004 2003
------------ ------------
CURRENT ASSETS
Cash $ 1,495,102 $ 57,408
Accounts receivable, net of allowance for doubtful account of -
$20,000 and $0 116,407 76,898
Prepaids and other current assets 9,944 32,860
------------ ------------
TOTAL CURRENT ASSETS 1,621,453 167,166
------------ ------------
PROPERTY & EQUIPMENT, notes 3 and 4
Furniture, Fixtures & Equipment 83,225 75,658
Computer Equipment 278,715 152,023
Commerce Server 50,048 50,000
Computer Software 3,535 3,535
Leasehold Improvements 42,194 42,194
------------ ------------
457,717 323,410
Less: Accumulated depreciation & amortization (261,370) (200,770)
------------ ------------
NET PROPERTY & EQUIPMENT 196,347 122,640
------------ ------------
OTHER ASSETS
Lease deposit 7,029 7,029
Other assets 2,503 2,261
------------ ------------
TOTAL OTHER ASSETS 9,532 9,290
------------ ------------
TOTAL ASSETS $ 1,827,332 $ 299,096
============ ============
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable $ 24,892 $ 45,399
Accrued liabilities 42,093 42,042
Officer salaries payable 243,730 307,366
Staff salaries payable 46,499 23,447
Note payable, note 4 39,500 50,000
Current portion - obligations under capitalized leases, note 3 33,631 15,348
------------ ------------
TOTAL CURRENT LIABILITIES 430,345 483,602
------------ ------------
LONG TERM LIABILITIES
Obligations under capitalized leases, note 3 45,059 17,345
------------ ------------
TOTAL LONG TERM LIABILITIES 45,059 17,345
------------ ------------
TOTAL LIABILITIES 475,404 500,947
------------ ------------
COMMITMENTS AND CONTINGENCIES, note 9
SHAREHOLDERS' DEFICIT, note 7
Capital Stock 172,400 147,912
Additional Paid-in Capital 3,871,738 1,306,502
Accumulated deficit (2,692,210) (1,656,265)
------------ ------------
TOTAL SHAREHOLDERS' DEFICIT 1,351,928 (201,851)
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT $ 1,827,332 $ 299,096
============ ============
See independent auditors' report
and notes to consolidated financial statements.
-13-
ROAMING MESSENGER, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 2004 AND 2003
2004 2003
--------------- --------------
REVENUE, notes 2 and 10 $ 953,772 $ 899,732
Cost of revenue, note 2 132,404 106,011
Selling, general and administrative expenses, notes 7 and 8 1,474,106 999,135
Depreciation and amortization 60,231 49,162
Research and development 315,061 145,004
--------------- --------------
TOTAL COSTS AND EXPENSES 1,981,802 1,299,312
--------------- --------------
OPERATING LOSS (1,028,030) (399,580)
--------------- --------------
OTHER INCOME (EXPENSES)
Interest income 7,116 -
Interest expense (15,031) (24,467)
--------------- --------------
TOTAL OTHER INCOME (EXPENSES) (7,915) (24,467)
--------------- --------------
NET LOSS $ (1,035,945) $ (424,047)
=============== ==============
Basic and diluted loss per share $ (0.01) $ (0.00)
=============== ==============
Weighted average number of shares 161,432,015 133,280,601
=============== ==============
See independent auditors' report
and notes to consolidated financial statements.
-14-
ROAMING MESSENGER, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT
FOR THE YEARS ENDED JUNE 30, 2004 AND 2003
Additional
Common Paid-in Accumulated
Shares Stock Capital Deficit Total
------------ ----------- ------------ ----------- -----------
Balance, July 1, 2002 128,944,924 $128,945 $968,628 $(1,232,218) $ (134,645)
Issuance of common stock, note 7 4,363,013 4,363 344,598 - 348,961
Issuance of warrants, note 8 - - 20,000 - 20,000
Recapitalization, notes 6 and 7 14,604,098 14,604 (26,724) - (12,120)
Net loss - - - (424,047) (424,047)
------------ ----------- ------------ ----------- -----------
Balance, June 30, 2003 147,912,035 $ 147,912 $ 1,306,502 $(1,656,265) $ (201,851)
Issuance of common stock, note 7 24,487,579 24,488 2,515,236 - 2,539,724
Issuance of warrants, note 8 - - 50,000 - 20,000
Net loss - - - (1,035,945) (1,035,945)
------------ ----------- ------------ ----------- -----------
Balance, June 30, 2004 172,399,614 $ 172,400 $ 3,871,738 $(2,692,210) $1,351,928
============ =========== ============ =========== ===========
See independent auditors' report
and notes to consolidated financial statements.
-15-
ROAMING MESSENGER, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 2004 AND 2003
2004 2003
------------- -----------
OPERATING ACTIVITIES
Net loss $ (1,035,945) $ (424,047)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation and amortization 60,231 49,161
Expenses paid with shares of common stock 82,917 107,683
Issuance of warrants and stock options 50,000 20,000
Changes in assets - (increase) decrease:
Accounts receivable (39,509) 4,914
Prepaid expenses and other current assets (5,602) (409)
Changes in liabilities - increase (decrease):
Officer salaries payable (63,636) 60,767
Accounts payable (20,506) (52,589)
Staff salaries payable & other liabilities 23,857 16,400
------------- -----------
NET CASH USED BY OPERATING ACTIVITIES (948,193) (218,120)
------------- -----------
INVESTING ACTIVITIES
Purchase of property & equipment (64,684) (4,683)
------------- -----------
NET CASH USED BY INVESTING ACTIVITIES (64,684) (4,683)
------------- -----------
FINANCING ACTIVITIES
Issuance of common stock, net of costs 2,485,324 215,641
Payments on note payable (10,500) -
Payments on capitalized lease obligations (24,253) (22,524)
------------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 2,450,571 193,117
------------- -----------
NET INCREASE (DECREASE) IN CASH 1,437,694 (29,686)
Cash at beginning of year 57,408 87,094
------------- -----------
Cash at end of year $ 1,495,102 $ 57,408
============= ===========
Supplemental disclosure of cash flow information
Cash paid during the years for:
Interest $ 15,031 $ 24,467
============= ===========
Income taxes $ 800 $ 800
============= ===========
See independent auditors' report
and notes to consolidated financial statements.
-16-
ROAMING MESSENGER, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2004 AND 2003
1. ORGANIZATION
Roaming Messenger, Inc., formerly known as Latinocare Management
Corporation ("LMC), originally known as JNS Marketing, Inc. was
incorporated in Colorado in 1983, and then reincorporated in Nevada. LMC
was engaged in the business of managing LatinoCare Network Medical Group
("LNMG"), an Independent Physician Association ("IPA") primarily servicing
the growing Latin American community in the United States, and in
particular in California. Due to a dispute with LNMG, LMC was forced to lay
off its employees and close its business.
On April 1, 2003, LMC a publicly traded company, entered into a Plan and
Agreement of Reorganization which resulted in Warp 9, Inc. ("Warp 9")
becoming a wholly-owned subsidiary of LMC. In connection with the
transaction, all officers and directors of LMC resigned and were replaced
by the management team and directors of Warp 9. Subsequently, LMC was
renamed to Roaming Messenger Inc. by the new board of directors. Although
from a legal perspective, Roaming Messenger, Inc. acquired Warp 9, Inc.,
the transaction is viewed as a recapitalization of Warp 9, Inc.,
accompanied by an issuance of stock by Warp 9, Inc. to the shareholders of
Roaming Messenger, Inc. This is because Roaming Messenger, Inc. did not
have operations immediately prior to the transaction, and following the
transaction, Warp 9, Inc. was the operating company.
Warp 9, Inc. was incorporated in the state of Delaware, under the name of
eCommerceland, on August 27, 1999. The Company, based in Goleta,
California, began operations October 1, 1999. Prior to October 1, 1999, the
Company was operated as WARP 9 Technologies, LLC ("LLC"), a California
limited liability company. LLC was merged with and into eCommerceland
effective at its close of business, September 30, 1999, and on December 21,
2000 changed its name to Warp 9, Inc. For accounting and reporting
purposes, the "merger" was considered a continuation of the same business,
under a different type of entity. The operations and ownership of Warp 9,
Inc. were substantially the same as LLC. The Company's primary source of
income is service of their Warp 9 contracts, which relates to Internet data
service and fully hosted web based software products.
Roaming Messenger, Inc. and Warp 9, Inc. (collectively referred to as the
"Company")'s strategy is to provide a proprietary solution for real-time
communication over wired and wireless devices. The Company's flagship
product, Roaming Messenger, is a system for delivering real-time
information for homeland security, emergency response, military and
enterprise applications. Unlike solutions based on existing messaging
technology such as e-mail, text messaging, and voicemail, Roaming Messenger
packages time-critical information into smart messages. These messages
automatically roam throughout the wired and wireless worlds - from mobile
devices to desktop PCs to central servers - tracking down people and
getting responses in real-time.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GOING CONCERN
The accompanying consolidated financial statements have been prepared on a
going concern basis of accounting, which contemplates continuity of
operations, realization of assets and liabilities and commitments in the
normal course of business. The accompanying financial statements do not
reflect any adjustments that might result if the Company is unable to
continue as a going concern. The Company's losses and negative cash flows
from operations raise substantial doubt about the Company's ability to
continue as a going concern. The ability of the Company to continue as a
going concern and appropriateness of using the going concern basis is
dependent upon, among other things, additional cash infusion. The Company
has funded its operation through the sale of its common stock through
private offerings. As discussed in note 12, the Company is selling
securities through a Private Placement Memorandum. Management believes, but
there is no assurance, that the Company will obtain the additional working
capital that it needs through the sale of its Common Stock. The Company has
incurred operating deficits since inception, which are expected to continue
until its business model is fully developed.
See independent auditors' report.
-17-
ROAMING MESSENGER, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2004 AND 2003
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
ACCOUNTS RECEIVABLE
The Company extends credit to its customers, who are located primarily in
California. Accounts receivable are customer obligations due under normal
trade terms. The Company performs continuing credit evaluations of its
customers' financial condition. Management reviews accounts receivable on a
regular basis, based on contracted terms and how recently payments have
been received to determine if any such amounts will potentially be
uncollected. The Company includes any balances that are determined to be
uncollectible in its allowance for doubtful accounts. After all attempts to
collect a receivable have failed, the receivable is written off. Based on
the information available, management believes the Company's accounts
receivable are all collectible.
REVENUE RECOGNITION
The Company recognizes income when the service is provided or when product
is delivered. Most of the income is generated from monthly fees from
clients who subscribe to the Company's fully hosted web products on terms
ranging from six months to one year. When the term ends, clients normally
go on a month-to-month basis or extend the contract for another six months
to one year.
COST OF REVENUE
Cost of revenue includes the direct costs of operating the Company's
network, including telecommunications charges, and software and hardware
related costs.
RESEARCH AND DEVELOPMENT
Research and development costs are expensed as incurred. Total research and
development costs were $315,061 and $145,004 for the years ended June 30,
2004 and 2003, respectively.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the accompanying financial
statements. Significant estimates made in preparing these financial
statements include the allowance for doubtful accounts, the estimate of
useful lives of property and equipment, the deferred tax valuation
allowance, and the fair value of stock options. Actual results could differ
from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments, including cash and cash equivalents,
accounts receivable, accounts payable and accrued liabilities are carried
at cost, which approximates their fair value, due to the relatively short
maturity of these instruments. As of June 30, 2004 and 2003, the Company's
capital lease obligations and notes payable have stated borrowing rates
that are consistent with those currently available to the Company and,
accordingly, the Company believes the carrying value of these debt
instruments approximates their fair value.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost, and are depreciated or amortized
using the straight-line method over the following estimated useful lives:
Furniture, fixtures & equipment 7 years
Computer equipment 5 years
Commerce server 5 years
Computer software 3-5 years
Leasehold improvements Length of the lease
See independent auditors' report.
-18-
ROAMING MESSENGER, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2004 AND 2003
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
PROPERTY AND EQUIPMENT (CONTINUED)
Property and equipment includes assets leased under capitalized leases with
an original cost of $115,084 and $57,660 at June 30, 2004 and 2003,
respectively. Amortization of assets under capitalized leases is included
in depreciation and amortization expense. During the years ended June 30,
2004 and 2003, additions to fixed assets through capitalized leases totaled
$70,250 and $21,701, respectively.
CONCENTRATIONS OF BUSINESS AND CREDIT RISK
The Company operates in a single industry segment. The Company markets its
services to companies and individuals in many industries and geographic
locations. The Company's operations are subject to rapid technological
advancement and intense competition in the telecommunications industry.
Accounts receivable represent financial instruments with potential credit
risk. The Company typically offers its customers credit terms. The Company
makes periodic evaluations of the credit worthiness of its enterprise
customers and other than obtaining deposits pursuant to its policies, it
generally does not require collateral. In the event of nonpayment, the
Company has the ability to terminate services.
ADVERTISING COSTS
The Company expenses the cost of advertising and promotional materials when
incurred. Total advertising costs were $20,156 and $21,128 for the years
ended June 30, 2004 and 2003, respectively.
STOCK-BASED COMPENSATION
The Company accounts for employee stock option grants in accordance with
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees and related interpretations (APB 25), and has adopted the
"disclosure only" alternative described in Statement of Financial
Accounting Standards (SFAS) No. 123, Accounting for Stock-Based
Compensation., amended by SFAS No. 148 Accounting for Stock Based
Compensation-Transition and Disclosure.
NET LOSS PER SHARE
Net loss per common share is computed using the weighted average number of
common shares outstanding during the periods presented. Options to purchase
shares of the Company's stock under its stock option plan and warrants may
have a dilutive effect on the Company's earnings per share in the future
but are not included in the calculation for 2003 and 2002 because they have
an antidilutive effect in these periods.
INCOME TAXES
The Company uses the liability method of accounting for income taxes.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to financial statements carrying amounts of
existing assets and liabilities and their respective tax bases and
operating loss and tax credit carryforwards. The measurement of deferred
tax assets and liabilities is based on provisions of applicable tax law.
The measurement of deferred tax assets is reduced, if necessary, by a
valuation allowance based on the amount of tax benefits that, based on
available evidence, is not expected to be realized.
See independent auditors' report.
-19-
ROAMING MESSENGER, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2004 AND 2003
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
RECENT ACCOUNTING PRONOUNCEMENTS
In January 2003, the FASB issued Interpretation No. 46 (FIN 46),
Consolidation of Variable Interest Entities. This interpretation of
Accounting Research Bulletin No. 51, Consolidated Financial Statements,
addresses consolidation of variable interest entities. FIN 46 requires
certain variable interest entities to be consolidated by the primary
beneficiary if the entity does not effectively disperse risks among the
parties involved. The provisions of FIN 46 are effective immediately for
those variable interest entities created after January 31, 2003. The
provisions are effective for the first period beginning after June 15,
2003, for those variable interests held prior to February 1, 2003. The
Company has no variable interest entities and accordingly does not believe
the adoption of this Interpretation will have a material impact on the
Company's financial position or results of operations.
In April 2003, the FASB issued SFAS 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities, which amends SFAS 133 for
certain decisions made by the FASB Derivatives Implementation Group. In
particular, SFAS 149 (1) clarifies under what circumstances a contract with
an initial net investment meets the characteristic of a derivative, (2)
clarifies when a derivative contains a financing component, (3) amends the
definition of underlying to conform it to language used in FASB
interpretation number (FIN) 45, and (4) amends certain other existing
pronouncements. SFAS 149 is effective for contracts entered into or
modified after June 30, 2003, and for hedging relationships designated
after June 30, 2003. In addition, most provisions of SFAS 149 are to be
applied prospectively. The Company does not expect that the provisions of
this statement will have a material impact on the Company's financial
statements.
In May 2003, the FASB issued SFAS 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity. SFAS 150
improves the accounting for certain financial instruments that, under
previous guidance, issuers could account for as equity. SFAS 150 requires
that those instruments be classified as liabilities in statements of
financial position. SFAS 150 is effective for interim periods beginning
after June 15, 2003. The Company does not expect this statement to have a
material impact on its financial statements.
In December 2003, the Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin No. 104 (SAB 104), "Revenue Recognition", which
supersedes SAB 101, "Revenue Recognition in Financial Statements." SAB
104's primary purpose is to rescind the accounting guidance contained in
SAB 101 related to multiple-element revenue arrangements that was
superseded as a result of the issuance of EITF 00-21, "Accounting for
Revenue Arrangements with Multiple Deliverables" and to rescind the SEC's
related "Revenue Recognition in Financial Statements Frequently Asked
Questions and Answers" issued with SAB 101 that had been codified in SEC
Topic 13, "Revenue Recognition." While the wording of SAB 104 has changed
to reflect the issuance of EITF 00-21, the revenue Recognition principles
of SAB 101 remain largely unchanged by the issuance of SAB 104, which was
effective upon issuance. The adoption of SAB 104 did not have a material
effect on the Company's financial position or results of operations.
See independent auditors' report.
-20-
ROAMING MESSENGER, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2004 AND 2003
3. OBLIGATIONS UNDER CAPITALIZED LEASES
Lessor Description 2004 2003
-------- ------------- -------- ---------
B of A Payable in monthly installments of $1513,
interest at 6.8%, matures in April, 2007. $ 46,651 $ -
GE Payable in monthly installments of $710,
interest at 12.8%, matures in October 2006. 16,360 -
C.I.T. Payable in monthly installments of $166,
interest at 18%, matures in October, 2003. - 641
Amano Payable in monthly installments of $285,
interest at 15%, matures in December, 2003. - 1,374
Avaya Payable in monthly installments of $655,
interest at 16%, matures in December, 2004. 3,753 12,089
GE Payable in monthly installments of $348,
interest at 13%, matured in October 2005. 5,094 8,379
Dell Payable in monthly installments of $200,
interest at 13%, matures in January 2006. 3,407 5,255
Dell Payable in monthly installments of $203,
interest at 21%, matures in February 2006. 3,425 4,955
--------- ----------
78,690 32,693
Less current portion 33,631 15,348
--------- ----------
Long-term portion of obligations under
capitalized leases $ 45,059 $ 17,345
========= ==========
Minimum annual lease payments under capitalized lease obligations at June
30, 2004 are as follows:
Fiscal Year
------------
2005 $ 39,635
2006 30,699
2007 17,975
--------
88,309
Less amounts representing interest 9,619
--------
78,690
Less current portion 33,631
--------
Long term portion of capitalized lease obligations $ 45,059
========
4. NOTE PAYABLE
The Company has a note payable to a vendor in the amount of $50,000,
bearing interest at 10%, with monthly interest payment only. The maturity
date, which was originally October 15, 2001, was subsequently amended to
March 15, 2002 and then on demand. At June 30, 2004, the outstanding
principal amount on this note is $39,500. This note is secured by furniture
of the Company. See note 9.
See independent auditors' report.
-21-
ROAMING MESSENGER, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2004 AND 2003
5. INCOME TAXES
At June 30, 2004, the Company has available for federal and state income
tax purposes, net operating loss carryforwards of approximately $6,000,000
and $1,400,000, respectively, which expire at dates that have not been
determined.
The difference between the Company's effective income tax rate and the
statutory federal rate for the years ended June 30, 2004 and 2003 relates
primarily to losses incurred for which no tax benefit was recognized, due
to the uncertainty of its realization. The valuation allowance was
$2,300,000 and $1,960,000 at June 30, 2004 and 2003, respectively,
representing an increase of $340,000 for the year ended June 30, 2004.
Because of statutory "ownership changes" the amount of net operating losses
which may be utilized in future years are subject to significant annual
limitations.
A reconciliation of income tax expense that would result from applying the
domestic Federal statutory rate to pre-tax income, with federal income tax
expense presented in the financial statements is as follows:
2004 2003
--------- ---------
Income tax benefit computed
at U.S. federal statutory rate (34%) $ 350,000 $ 135,000
State income taxes, net of benefit federal taxes 63,000 23,000
Other (73,000) -
Less valuation allowance (340,000) (158,000)
--------- ---------
Income tax expense $ - $ -
========= =========
The deferred income tax benefit at June 30, 2004, and 2003 and reflects the
impact of temporary differences between the amounts of assets and
liabilities recorded for financial reporting purposes and such amounts as
measured in accordance with tax laws. The items, which comprise a
significant portion of, deferred tax assets and liabilities are
approximately as follows:
2004 2003
----------- -----------
Depreciation $ 56,000 $ 59,000
Net operating loss carryforwards 2,148,000 1,770,000
Officer salaries payable 96,000 131,000
----------- -----------
2,300,000 1,960,000
Less: valuation allowance (2,300,000) (1,960,000)
----------- -----------
Deferred income tax asset $ - $ -
=========== ===========
6. RECAPITALIZATION
On April 8, 2003, Warp 9, Inc. consummated a transaction, pursuant to which
shareholders of Warp 9 Inc. exchanged their shares for shares in Roaming
Messenger, Inc., with Warp 9, Inc. surviving as a wholly-owned subsidiary
of Roaming Messenger, Inc. This transaction was recorded as a
recapitalization followed by the issuance of shares by Warp 9, Inc. to the
shareholders of Roaming Messenger, Inc. Prior to the recapitalization
transaction, Roaming Messenger, Inc. was not an operating company, and its
assets consisted principally of cash of approximately $100,000, offset by
the same amount of liabilities. Under the terms of the transaction, Roaming
Messenger, Inc. issued 131,026,173 shares of Roaming Messenger, Inc. common
stock to the former shareholders of Warp 9, Inc. in exchange for all the
outstanding shares of Warp 9, Inc. (12.5 shares of Roaming Messenger, Inc.
for every share of Warp 9, Inc.). The transaction was consummated in two
phases with the first issuance of 122,620,910 shares on April 8, 2003, and
8,405,263 shares on June 30, 2003.
See independent auditors' report.
-22-
ROAMING MESSENGER, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2004 AND 2003
6. RECAPITALIZATION (Continued)
After the recapitalization, options granted under the Warp 9 Inc. Employee
Stock option plan were cancelled and new options were issued under a new
Roaming Messenger Inc. Employee Stock Option Plan (effective July 10, 2003)
to employees in amounts consistent with their Warp 9 options. The Roaming
Messenger options have the same aggregate exercise price as the Warp 9
options. Most stock options became fully vested on grant date, while others
mirrored the same vesting periods as the Warp 9 Inc. options. The Roaming
Messenger Inc. stock options are presented at June 30, 2003 even though the
effective date was July 10, 2003.
7. SHAREHOLDERS' DEFICIT
The number of shares of common stock of Warp 9, Inc. was retroactively
restated to present the number of shares after their conversion into
Roaming Messenger common stock in the recapitalization transaction. For all
such restatements, a conversion rate of 12.5 shares of Roaming Messenger,
Inc. common stock for every share of Warp 9, Inc. common stock was used.
From the date of the recapitalization, April 8, 2003 through June 30, 2003,
Roaming Messenger, Inc. issued 1,079,263 shares of common stock for a total
cash consideration of $86,341. 1,202,500 shares of common stock were also
issued for $96,200 of services. These consulting services extended beyond
June 30, 2003, therefore $67,683 and $28,517 were recorded as expense for
the years ended June 30, 2003, and 2004, respectively.
For the fiscal year ended, June 30, 2004, the Company issued 23,807,579
shares of restricted common stock for a total cash consideration of
$2,485,324 as a result of a series of private offerings of common stock
ranging from $0.08 per share to $0.50 per share as well as stock options
and warrants exercises. 680,000 shares of restricted common stock were also
issued for $54,400 of services.
The common stock of Roaming Messenger, Inc. has a par value of $0.001, and
200,000,000 shares are authorized to be issued. The Company is also
authorized to issue 2,000,000 shares of preferred stock with a par value of
$0.001. The rights, preferences and privileges of the holders of the
preferred stock will be determined by the Board of Directors prior to
issuance of such shares.
At June 30, 2004, 25,000,000 shares of common stock were reserved for the
issuance of common stock pursuant to the Stock Option Plan, and 300,000
were reserved for the issuance of common stock pursuant to outstanding
warrants. Warp 9, Inc, had 77,213 outstanding warrants at June 30, 2004.
8. STOCK OPTIONS AND WARRANTS
Warp 9, Inc. had a Stock Option Plan that provided for the granting of
stock options to its employees and others providing services to the
Company. Options granted under the Plan could be either Incentive Options
or Nonqualified Options, and were administered by the Company's Board of
Directors. Each options were exercisable in full or in installment and at
such time as designated by the Board. Notwithstanding any other provision
of the Plan or of any Option agreement, each option were to expire on the
date specified in the Option agreement, which date were to be no later than
the tenth anniversary of the date on which the Option was granted (fifth
anniversary in the case of an Incentive Option granted to a
greater-than-10% stockholder). The purchase price per share of the Common
Stock under each Incentive Option were to be no less than the Fair Market
Value of the Common Stock on the date the Option was granted (110% of the
Fair Market Value in the case of a greater-than-10% stockholder).
See independent auditors' report.
-23-
ROAMING MESSENGER, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2004 AND 2003
8. STOCK OPTIONS AND WARRANTS (Continued)
The purchase price per share of the Common Stock under each Nonqualified
Option were to be specified by the Board at the time the Option was
granted, and could be less than, equal to or greater than the Fair Market
Value of the shares of Common Stock on the date such Nonqualified Option
was granted, but were to be no less than the par value of shares of Common
Stock. The plan provided specific language as to the termination of options
granted hereunder.
In July 10, 2003, the Warp 9, Inc. Stock Option Plan was terminated, and
the Company adopted the Roaming Messenger, Inc. Stock Option Plan for
Directors, Executive Officers, and Employees of and Key Consultants to
Roaming Messenger, Inc. This Plan, under which 25,000,000 shares of common
stock may be issued, has essentially the same terms and conditions as the
Warp 9, Inc. Stock Option Plan.
Former holders of employee stock options in the Warp 9 Inc. Stock Option
Plan were granted new options under the Roaming Messenger, Inc. Plan. Most
options became fully vested at grant date, while others mirrored the same
vesting periods as the Warp 9 Inc. options. The Roaming Messenger options
have the same aggregate exercise price as the Warp 9 Inc. options, using a
12.5 conversation rate. The number of stock options below in the summary of
stock option activities has been retroactively restated to reflect the 12.5
conversation rate.
SFAS 123, Accounting for Stock-Based Compensation, requires pro forma
information regarding net income (loss) using compensation that would have
been incurred if the Company had accounted for its employee stock options
under the fair value method of that statement. Options to purchase
2,478,494 shares of Roaming Messenger, Inc. were granted during the year
ended June 30, 2004. The fair value of options granted during the years
ended June 30, 2004 and 2003, which have been estimated at $159,000 and
$6,000, respectively, at the date of grant were determined using the
Black-Scholes Option pricing model with the following assumptions:
2004 2003
----- ----
Risk free interest rate 2.79%-3.27% 2.40%
Stock volatility factor 0.01 0.01
Weighted average expected option life 4 years 4 years
Expected dividend yield None None
The pro forma net loss and loss per share had the Company accounted for the
options using FAS 123 would have been as follows:
2004 2003
----- ----
Net loss as reported $(1,035,945) $ (424,047)
Basic and diluted net loss per share
as reported (0.01) (0.00)
Add: Stock-based employee compensation
expense included in net reported loss 50,000 -
Deduct: Stock-based employee
compensation expense determined under fair
value based method for all awards (134,000) (6,000)
----------- -----------
Pro forma net loss $(1,119,945) $ (430,047)
=========== ===========
Basic and diluted pro forma loss per share $ (0.01) $ (0.00)
=========== ===========
A summary of the Company's stock option activity and related information
follows:
See independent auditors' report.
-24-
ROAMING MESSENGER, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2004 AND 2003
8. STOCK OPTIONS AND WARRANTS (Continued)
Year ended Year ended
June 30, 2004 June 30, 2003
-------------- -------------
Weighted Weighted
average average
exercise exercise
Options price Options price
--------- ---------- ---------- ----------
Outstanding -beginning of year 8,444,000 $ 0.08 7,932,812 $ 0.08
Granted 2,478,494 0.18 675,000 0.08
Exercised 2,500,000 0.08 - -
Forfeited 125,000 0.08 (163,812) 0.08
---------- ---------- ---------- ----------
Outstanding - end of year 8,297,494 $ 0.11 8,444,000 $ 0.08
========== =========== ========== ==========
Exercisable at the end of year 5,720,935 $ 0.09 5,824,469 $ 0.08
========== =========== ========== ==========
Fair value of options granted
during the year $ 159,000 $ 6,000
=========== ==========
The weighted average remaining contractual life of options as of June 30,
2004 was as follows:
Average
Number of remaining
Exercise options contractual
prices outstanding life (years)
-------- ----------- ------------
$ 0.08 7,347,494 4.5
0.35 950,000 3.7
------- ---------- ------------
$0.11 8,297,494 4.4
======= ========== ============
STOCK WARRANTS
During the year ended June 30, 2004, Roaming Messenger, Inc. issued
warrants to purchase shares of common stock of Roaming Messenger, Inc.
These warrants became exercisable on their grant date. Warrants were
granted as follows:
Date Number of shares Maturity Date Exercise Price
July 15, 2003 100,000 December 31, 2004 $1.00
July 15, 2003 100,000 December 31, 2004 $1.75
July 15, 2003 100,000 December 31, 2004 $3.00
January 15, 2004 600,000 December 31, 2005 $0.08
During the year ended June 30, 2004, the warrants to purchase 600,000
shares of common stock at $0.08 were exercised. The value of these warrants
was immaterial at their grant date.
See independent auditors' report.
-25-
ROAMING MESSENGER, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2004 AND 2003
8. STOCK OPTIONS AND WARRANTS (Continued)
During the year ended June 30, 2003, Warp 9 Inc. has issued warrants to
purchase 128,771 shares of Warp 9 Inc. common stock for services. These
warrants were valued at $20,000. During the year ended June 30, 2004, Warp
9 Inc. cancelled 76,750 warrants, resulting in 77,213 total outstanding
warrants.
The following Warp 9 Inc. warrants, which are exercisable, were outstanding
at June 30, 2004:
Number of shares Exercise Price Expiration date
---------------- ----------------- -------------------------------
25,192 $ 1.00 per share December 31, 2005
52,021 $ 1.00 per share June 30, 2007-December 31, 2007
These warrants became exercisable on their grant date. In previously issued
financial statements, the Warp 9 Inc. warrants were mistakenly presented as
if they had been converted into Roaming Messenger, Inc. warrants. The above
warrants have been restated so they are presented as Warp 9, Inc. warrants.
9. COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
The following is a schedule, by years, of future minimum rental payments
required under operating leases for the facilities and equipment. The lease
for one of the facilities expires in 2007, and has 3 options to renew for
each an additional period of one year. The following is a schedule of
minimum lease payments for the next five years.
Year Ending
June 30,
-----------
2005 $ 173,000
2006 $ 190,000
2007 $ 144,000
2008 $ 95,000
2009 $ 95,000
Total lease expense for the years ended June 30, 2004 and 2003 was $120,832
and $121,562, respectively. The Company is also required to pay its pro
rata share of taxes, building maintenance costs, and insurance.
LOAN DEFAULT
The note payable has a default clause that allows the lender to assess late
payment charges in the amount of 10% of the delinquency. The delinquent
charges assessed to approximately $15,000 were in dispute, and have not
been accrued by the Company.
LEGAL MATTERS
The Company is involved in certain legal actions and claims arising in the
ordinary course of business. It is the opinion of management, based on
advice of legal counsel, that such litigation and claims will be resolved
without a material effect on the Company's financial position.
10. CONCENTRATIONS
For the year ended June 30, 2004, the Company had two customers who
represented approximately 30% of total revenue. For the year ended June 30,
2003, the Company had two customers who represented approximately 28% of
total revenue.
See independent auditors' report.
-26-
ROAMING MESSENGER, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2004 AND 2003
10. CONCENTRATIONS (Continued)
Accounts receivable from two customers represented approximately 55% of
total accounts receivable at June 30, 2004. Accounts receivable from three
customers represented approximately 51% of total accounts receivable at
June 30, 2003.
The Company has a concentration of credit risk for cash by maintaining
deposits with banks, which may at a time exceed insured amounts. At June
30, 2004, the Company had $1,240,000 exceeding the amount insured by the
U.S. Federal Deposit Insurance Corporation (FDIC).
11. RELATED PARTY TRANSACTIONS
During the year ended June 30, 2003, the Company issued 302,500 shares of
common stock to Mr. Tom Djokovich for a twelve-month contract to serve on
the Company's Board of Directors. $10,939 and $13,261 were recognized as
expense for the years ended June 30, 2003 and 2004, respectively.
12. SUBSEQUENT EVENTS
The Company intends to raise additional working capital by selling
securities through Private Placements pursuant to Regulation D and
Regulation S of the Securities Act of 1993. As of the date of this report,
the Company does not have any concurrent offerings. However, the Company
has entered into a Regulation S transaction with an offshore investment
fund (the "Fund") that is contingent upon the Fund being publicly traded on
the London Stock Exchange. The chance of actual closing is uncertain as of
the date of this report.
The Company has entered in to a new lease for 8,506 sq ft office space. The
Company intends to sublease its current office space.
See independent auditors' report.
-27-
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None
ITEM 8A. CONTROLS AND PROCEDURES
The Company's Chairman, Chief Executive Officer, and Chief Financial
Officer has evaluated the effectiveness of the Company's disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934, as amended) as of the end of the period covered by this
annual report and, based on this evaluation, has concluded that the disclosure
controls and procedures are effective.
There have been no changes in the Company's internal control over
financial reporting that occurred during the Company's fourth fiscal quarter
that has materially affected, or is reasonably likely to materially affect, the
Company's internal control over financial reporting.
ITEM 8B. OTHER INFORMATION
None
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF EXCHANGE ACT
The following table lists the executive officers and directors of the
Company as of August 31, 2004:
Name Age Position
------------------ --- ------------------------------------------
Jonathan Lei 32 Chief Executive Officer, President, Chief
Financial Officer, Secretary, and Chairman
Brian Fox 44 Chief Technology Officer
Bryan Crane 45 Vice President of Corporate Development
Harinder Dhillon 31 Vice President of Operations
Louie Ucciferri 44 Director
Tom Djokovich (1) 47 Director
---------------------
(1) Member of Audit Committee.
Jonathan Lei has been the Chairman of the Board of Directors, Chief
Executive Officer, President, Chief Financial Officer, and Secretary of the
Company since April 2003. Mr. Lei received a Bachelor Degree in Electrical and
Computer Engineering from the University of California, Santa Barbara ("UCSB")
in 1995 and a Master of Science Degree in Electrical and Computer Engineering
from UCSB in 1996. While at UCSB, he studied and worked in the field of computer
aided design and development of VLSI and ASIC silicon chips. Mr. Lei was
employed by Lockheed Martin in 1993 where he built data acquisition systems for
spacecraft testing. In 1995, he worked for Intel Corporation where he developed
the Triton II Pentium PCI chipset. From 1995 to 1996, Mr. Lei worked for RC
Electronics where he designed PCI based data acquisition systems. Mr. Lei
founded Warp 9, Inc., a Delaware corporation and wholly owned subsidiary of the
Company ("Warp"), in 1996 and in 1998, he negotiated a transaction to sell
Warp's consumer ISP division, Sbnet, to MindSpring Enterprises. During that same
-28-
period, Mr. Lei co-developed Warp's e-commerce products. He is the visionary
behind the patent pending eCapsule technology and the Company's mobile data
direction. Mr. Lei was an officer and is a lifetime member of Tau Beta Pi, a
national engineering honor society.
Brian Fox has been the Chief Technology Officer of the Company since
April 2003. From 1985 to 1988, Mr. Fox worked for the Massachusetts Institute of
Technology as a research software engineer. From 1988 to 1990, he worked at the
University of California at Santa Barbara as a research software engineer. From
1998 to 2000, Mr. Fox served as the co-founder and Chief Technology Officer of
Supply Solution, Inc., a venture capital backed privately held company engaged
in the business of automotive supply chain management. At Supply Solution, Inc.,
Mr. Fox developed the company's flagship product, iSupply, a web based software
for vendor managed inventory tracking. In 1995, prior to co-founding Supply
Solution, Inc. he founded Universal Access, Inc., where he developed the
programming language Meta-HTML. Mr. Fox was the second employee at the Free
Software Foundation (Project GNU). Mr. Fox is the author of BASH, the UNIX
shell, which is widely utilized in modern versions of UNIX.
Bryan Crane has been the Vice President of Corporate Development of the
Company since October 2002. Mr. Crane has spent the last several years in the
investor relations field, working with micro-cap and small-cap public companies.
Prior to joining Roaming Messenger, from 1995 to 2002, he worked for Muir, Crane
& Co., a partnership he co-founded and in which he still maintains an ownership
interest. From 1994 to 1995, Mr. Crane was a Managing Director of Johnson & Co.
For most of his career, Mr. Crane held positions in portfolio management from
retail investments at Prudential-Bache Securities to Vice President of
Investments at A.G. Edwards & Son, where, as a member of the Presidents Council,
he managed debt and equity portfolios for institutional clients. Mr. Crane
earned his dual degree in Political Science and International Economics from San
Diego State University. He is a member of the San Diego Stock Bond Association
and the Los Angeles Chapter of the National Investor Relations Institute (NIRI).
Harinder Dhillon has been the Vice President of Operations of the
Company since October 2001. Mr. Dhillon joined the Company in July 2000. Prior
to joining the Company, from 1993 to1998, Mr. Dhillon served as the Chief
Information Officer of Informax Data Systems, an enterprise systems integrator
headquartered in Southern California. He has designed, managed, and led the
development and deployment of multi-million dollar enterprise Internet, Intranet
and integration projects for Fortune 500 companies and various government units.
His client list included Department of Justice, Immigration and Naturalization
Services, US Navy, US Air Force, and the City of Los Angeles. His projects
included enterprise work flow automation, real-time field services,
infrastructure build out, and network and systems integration. Mr. Dhillon
received a Bachelor degree in Electrical and Computer Engineering from the
University of California at Santa Barbara in 1996.
Louie Ucciferri is the founder and President of Westlake Financial
Architects, an investment-banking firm formed in 1995 to provide financial and
investment advisory services to early stage companies. He has raised investment
capital for both private and public companies and has created liquidity for
investors in the form of public offerings. Since November 1998, he has also
served as President of Camden Financial Services, a NASD registered broker
dealer that serves as the dealer manager for a real estate company that has
raised in excess of $150 million in equity capital for the acquisition of
commercial office properties in southern California and Arizona.
Tom Djokovich was the founder and served from 1995 to 2002 as the Chief
Executive Officer of Accesspoint Corporation, a vertically integrated provider
of electronic transaction processing and e-business solutions for merchants.
Under Mr. Djokovich's guidance, Accesspoint became a member of the
Visa/MasterCard association, the national check processing association NACHA,
and developed one of the payment industry's most diverse set of network based
transaction processing, business management and CRM systems for both Internet
and conventional points of sale. During his tenure, Accesspoint became an early
adopter of WAP based e-commerce capabilities and the industry's first certified
Level 1 Internet payment processing engine. In his last year as executive
manager, Accesspoint grew its processing revenues by over 800% and overall
revenues by nearly 300%. Prior to Accesspoint, Mr. Djokovich founded TMD
Construction and Development where he developed an early business-to-business
ordering system for the construction industry.
Under the Nevada General Corporation Law and the Company's Articles of
Incorporation, as amended, the Company's directors will have no personal
-29-
liability to the Company or its stockholders for monetary damages incurred as
the result of the breach or alleged breach by a director of his "duty of care".
This provision does not apply to the directors' (i) acts or omissions that
involve intentional misconduct or a knowing and culpable violation of law, (ii)
acts or omissions that a director believes to be contrary to the best interests
of the corporation or its shareholders or that involve the absence of good faith
on the part of the director, (iii) approval of any transaction from which a
director derives an improper personal benefit, (iv) acts or omissions that show
a reckless disregard for the director's duty to the corporation or its
shareholders in circumstances in which the director was aware, or should have
been aware, in the ordinary course of performing a director's duties, of a risk
of serious injury to the corporation or its shareholders, (v) acts or omissions
that constituted an unexcused pattern of inattention that amounts to an
abdication of the director's duty to the corporation or its shareholders, or
(vi) approval of an unlawful dividend, distribution, stock repurchase or
redemption. This provision would generally absolve directors of personal
liability for negligence in the performance of duties, including gross
negligence.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or persons controlling the Company
pursuant to the foregoing provisions, the Company has been informed that in the
opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Act and is therefore unenforceable.
Board Committees
The Board of Directors has appointed an Audit Committee. As of August
31, 2004, the sole member of the Audit Committee is Tom Djokovich. Mr. Djokovich
is considered independent as defined in Rule 4200 of the National Association of
Securities Dealers' listing standards because he is not employed by the Company,
does not participate in the day-to-day management of the Company, and does not
receive a salary or other employment benefits from the Company. The Board of
Directors has adopted a written charter of the audit committee. The Audit
Committee is authorized by the Board of Directors to review, with the Company's
independent accountants, the annual financial statements of the Company prior to
publication, and to review the work of, and approve non-audit services preformed
by, such independent accountants. The Audit Committee will make annual
recommendations to the Board for the appointment of independent public
accountants for the ensuing year. The Audit Committee will also review the
effectiveness of the financial and accounting functions and the organization,
operations and management of the Company. The Audit Committee was formed on
April 19, 2003. The Audit Committee held four meetings during fiscal year ended
June 30, 2004. As of August 31, 2004, the Company has not yet appointed a
Compensation Committee.
Auditor Independence
General. Rose Snyder & Jacobs, CPAs ("RSJ") is the Company's principal
auditing accountant firm. RSJ has also provided other non-audit services to the
Company. The Audit Committee of the Company's Board of Directors has considered
whether the provisions of non-audit services is compatible with maintaining
RSJ's independence.
Audit Fees. RSJ billed the Company $25,400 for the following
professional services: audit of the annual financial statement of the Company
for the fiscal year ended June 30, 2003, and review of the interim financial
statements included in quarterly reports on Form 10-QSB for the periods ended
September 30, 2003, December 31, 2003, and March 31, 2004.
All Other Fees. RSJ billed the Company $3,850 for other services for
the fiscal year ended June 30, 2004.
-30-
Report of the Audit Committee
The Company's Audit Committee has reviewed and discussed the Company's
audited financial statements for the fiscal year ended June 30, 2004 with senior
management. The Audit Committee has reviewed and discussed with management the
Company's audited financial statements. The Audit Committee has also discussed
with RSJ, the Company's independent auditors, the matters required to be
discussed by the statement on Auditing Standards No. 61 (Communication with
Audit Committees) and received the written disclosures and the letter from RSJ
required by Independence Standards Board Standard No. 1 (Independence Discussion
with Audit Committees). The Audit Committee has discussed with RSJ the
independence of RSJ as auditors of the Company. Finally, the Audit Committee has
considered whether the independent auditors provision of non-audit services to
the Company is compatible with the auditors' independence. Based on the
foregoing, the Company's Audit Committee has recommended to the Board of
Directors that the audited financial statements of the Company be included in
the Company's Annual Report on Form 10-KSB for the fiscal year ended June 30,
2004 for filing with the United States Securities and Exchange Commission. The
Audit Committee also approved RSJ's engagement to prepare the Company's
consolidated tax returns for its fiscal year ending June 30, 2004. The Company's
Audit Committee did not submit a formal report regarding its findings.
AUDIT COMMITTEE
Tom Djokovich
Notwithstanding anything to the contrary set forth in any of the
Company's previous or future filings under the United States Securities Act of
1933, as amended, or the Securities Exchange Act of 1934, as amended, that might
incorporate this report in future filings with the Securities and Exchange
Commission, in whole or in part, the foregoing report shall not be deemed to be
incorporated by reference into any such filing.
Compliance with Section 16(A) of Exchange Act
Section 16(a) of the Exchange Act requires the Company's officers and
directors, and certain persons who own more than 10% of a registered class of
the Company's equity securities (collectively, "Reporting Persons"), to file
reports of ownership and changes in ownership ("Section 16 Reports") with the
Securities and Exchange Commission (the "SEC"). Reporting Persons are required
by the SEC to furnish the Company with copies of all Section 16 Reports they
file.
Based solely on its review of the copies of such Section 16 Reports
received by it, or written representations received from certain Reporting
Persons, all Section 16(a) filing requirements applicable to the Company's
Reporting Persons during and with respect to the fiscal year ended June 30, 2004
have been complied with on a timely basis.
ITEM 10. EXECUTIVE COMPENSATION
Director Compensation
Directors receive no cash compensation for their services to the
Company as directors, but are reimbursed for expenses actually incurred in
connection with attending meetings of the Board of Directors.
-31-
Executive Officer Compensation
The following table and notes set forth the annual cash compensation
paid to officers of the Company.
Long-Term
Compensation
Annual Compensation Awards
--------------------------------------------------------------------------------------------------------------
Securities
Fiscal Other Annual Underlying All Other
Name and Principal Position Year Salary Bonus Compensation Options Compensation
--------------------------- ---- ------ ----- ------------ ---------- ------------
Jonathan Lei............... 2004 $138,000 - 0 - - 0 - -0- - 0 -
President, Chief Financial 2003 $138,000 - 0 - - 0 - -0- - 0 -
Officer, and Secretary 2002 $138,000 - 0 - - 0 - -0- - 0 -
--------------------------------------------------------------------------------------------------------------
Brian Fox.................. 2004 $145,000(1) - 0 - - 0 - - 0 - - 0 -
Chief Technology Officer 2003 $145,000 - 0 - - 0 - 5,987,500(2) - 0 -
2002 $145,000 - 0 - - 0 - -0- - 0 -
--------------------------------------------------------------------------------------------------------------
Harinder Dhillon.................2004 $125,000 $8,714 - 0 - -0- - 0 -
VP of Operations 2003 $105,000 - 0 - - 0 - 1,875,000 (3) - 0 -
2002 $95,000 - 0 - - 0 - -0- - 0 -
--------------------------------------------------------------------------------------------------------------
Bryan Crane......................2004 $84,000 - 0 - 878,494 (4) $29,000 (4)
VP of Corporate Development 2003 $84,000 - 0 - 700,000 (4)
--------------------------------------------------------------------------------------------------------------
------------------
(1) The Company has an at-will employment agreement with Mr. Fox providing
that upon a termination of his employment by the Company without cause
and only after $5,000,000 of venture or institutional capital has been
raised, Mr. Fox would be entitled to severance pay and continuing
health insurance for six months after termination, and vesting of those
of his unvested stock options that would vest during that six month
period.
(2) Consists of options granted under the Company's 2003 Stock Option Plan
on July 15, 2003. These stock options vest pursuant to the following
vesting schedule: 3,367,969 on July 15, 2003, then 1/21 per month until
all stock options have vested. Does not include 5,987,500 options to
purchase 5,987,500 shares of the Company's common stock from Jonathan
Lei, the President, Chief Financial Officer, Secretary, and Chairman of
the Company, for a purchase price of $0.08 per share (the "Lei
Options").
(3) Consists of options granted under the Company's 2003 Stock Option Plan
on July 15, 2003. These stock options are fully vested at the time of
grant. Options are to purchase unregistered common stock at an exercise
price equal to the fair market value of unregistered common stock at
the time of grant, which was $0.08 per share for these stock options.
(4) 878,494 options were granted under the Company's 2003 Stock Option Plan
on July 15, 2003. These stock options were fully vested at time of
grant. Options are to purchase unregistered common stock at an exercise
price equal to the fair market value of unregistered common stock at
the time grant, which was $0.08 per share for these stock options. On
May 20, 2003, 700,000 shares of unregistered common stock were issued
to Mr. Crane in lieu of cash payment for salaries accrued to that
point. A total amount of $29,000 of cash bonus was given to Mr. Crane,
during the fiscal year ending June 30, 2004, for achieving certain
milestones in managing the Company's investment capital efforts.
-32-
Options Granted in Last Fiscal Year
The following table sets forth information with respect to options to
purchase common stock of the Company granted to the Company's officers during
fiscal year 2004.
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation for
Option Term
-------------------------------------------------------------------------------------------------------------------------
Percent of Total
Options Granted to Exercise
Options Employees in Price Expiration
Name Granted Fiscal Year per Share Date 5% 10%
---- ------- ----------- --------- ---- -- ---
Brian Fox.............. 5,987,500 54% $0.08 Four years from the $1,340,460 $1,712,575
Chief Technology Officer date of vesting
-------------------------------------------------------------------------------------------------------------------------
Bryan Crane........... 878,494 (1)(2) 8% $0.08 Four years from the $303,455 $379,892
VP of Corporate date of grant
Development
-------------------------------------------------------------------------------------------------------------------------
Harinder Dhillon..... 1,875,000 17% $0.08 Four years from the $419,768 $536,296
VP of Operations (1)(2) date of grant
-------------------------------------------------------------------------------------------------------------------------
----------------
(1) These stock options are fully vested at the time of grant.
(2) Some or all of these options have been exercised. See Fiscal
Year-End Option Exercises and Option Values.
Fiscal Year-End Option Exercises and Option Values
The following table sets forth information with respect to options to
purchase common stock of the Company held by the Company's executive officers at
August 31, 2004.
Number of Unexercised Value of Unexercised
Options Held at In-the-Money Options
August 31, 2004 at August 31, 2004 (2)
--------------- ----------------------
Shares
Acquired
Upon
Name Exercise Value Realized(1) Exercisable Unexercisable Exercisable Unexercisable
---- -------- ----------------- ----------- ------------- ----------- -------------
Brian Fox............. -0- -0- 4,740,109 1,247,391 $474,011 $124,739
Chief Technology
Officer
------------------------------------------------------------------------------------------------------------------------------
Bryan Crane............ 525,000 $687,750 253,494 -0- $25,349 -0-
VP of Corporate
Development
------------------------------------------------------------------------------------------------------------------------------
Harinder Dhillon....... 1,875,000 $1,912,500 -0- -0- -0- -0-
VP of Operations
------------------------------------------------------------------------------------------------------------------------------
----------------
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(1) The value realized is the difference between the market price of the common
stock on the date of exercise and the exercise price of the stock option.
The underlying securities held upon exercise are unregistered common stock.
(2) The value of unexercised "in-the-money" options is the difference between
the market price of the common stock on August 31, 2004 ($0.18 per share)
and the exercise price of the option, multiplied by the number of shares
subject to the option. The underlying securities held upon exercise are
unregistered common stock.
Employment Agreements
The Company has not entered into any employment agreements with its
executive officers to date, other than the at-will employment agreement with
Brian Fox as described in footnote one under "EXECUTIVE COMPENSATION-Executive
Officer Compensation." The Company may enter into employment agreements with
them in the future.
Stock Option Plan
On July 10, 2003, the Board of Directors of the Company adopted the
2003 Stock Option Plan for Directors, Executive Officers, Employees and Key
Consultants of the Company (the "2003 Plan"). The 2003 Plan was ratified by the
shareholders of the Company by written consent effective August 25, 2003. The
2003 Plan authorizes the issuance of up to 25,000,000 shares of the Company's
common stock pursuant to the grant and exercise of up to 25,000,000 stock
options. To date, 10,922,494 options to purchase 10,922,494 shares of common
stock at an exercise price ranging from $0.08 to $0.35 per share have been
granted under the 2003 Plan. To date, 2,500,000 options have been exercised and
125,000 options have been forfeited.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the names the executive officers and
directors of the Company and all persons known by the Company to beneficially
own 5% of more of the issued and outstanding common stock of the Company.
Number of Shares Beneficially Percentage
Name, Title, and Address Owned(1) Ownership(2)
----------------------------------------- ----------------------------- -----------------
Jonathan Lei 95,639,025 (2) 55.48%
President, Chief Financial Officer,
Secretary, and Chairman.....................
--------------------------------------------------------------------------------------------------------------
Brian Fox
Chief Technology Officer....................... 68,000 0.04%
--------------------------------------------------------------------------------------------------------------
Bryan Crane
VP of Corporate Development................. 1,231,500 0.71%
--------------------------------------------------------------------------------------------------------------
Harinder Dhillon
VP of Operations................................. 2,935,000 1.71%
--------------------------------------------------------------------------------------------------------------
Louie Ucciferri
Director.................................... 3,750,000 2.18%
--------------------------------------------------------------------------------------------------------------
Tom Djokovich
Director.................................... 302,500 0.18%
--------------------------------------------------------------------------------------------------------------
All current Executive Officers as a Group... 100,322,025 58.2%
--------------------------------------------------------------------------------------------------------------
All current Directors who are not Executive
Officers as a Group...................... 4,052,500 2.4%
--------------------------------------------------------------------------------------------------------------
-----------
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(1) Except as pursuant to applicable community property laws, the persons
named in the table have sole voting and investment power with respect
to all shares of common stock beneficially owned. The total number of
issued and outstanding shares and the total number of shares owned by
each person does not include unexercised warrants and stock options,
and is calculated as of August 31, 2004.
(2) Includes 5,987,500 shares of common stock which Mr. Lei has set aside
in the event Brian Fox, the Chief Technology Officer of the Company,
exercises his option to purchase such shares for a purchase price of
$0.08 per share (the "Lei Options"). As of August 31, 2004, all Lei
Options are vested.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBIT NO. DESCRIPTION
3.1 Articles of Incorporation (1)
3.2 Bylaws (1)
4.1 Specimen Certificate for Common Stock (1)
4.2 Non-Qualified Employee Stock Option Plan (2)
10.1 First Agreement and Plan of Reorganization between
Latinocare Management Corporation, a Nevada
corporation, and Warp 9, Inc., a Delaware
corporation (3)
10.2 Second Agreement and Plan of Reorganization
between Latinocare Management Corporation, a
Nevada corporation, and Warp 9, Inc., a Delaware
corporation (4)
10.3 Exchange Agreement and Representations for
shareholders of Warp 9, Inc.(3)
31.1 Section 302 Certification
32.1 Section 906 Certification
--------------
(1) Incorporated by reference from the exhibits included with the Company's
prior Report on Form 10-KSB filed with the Securities and Exchange
Commission, dated March 31, 2003.
(2) Incorporated by reference from the exhibits included in the Company's
Information Statement filed with the Securities and Exchange
Commission, dated August 1, 2003.
(3) Incorporated by reference from the exhibits included with the Company's
prior Report on Form SC 14F1 filed with the Securities and Exchange
Commission, dated April 8, 2003.
(4) Incorporated by reference from the exhibits included with the Company's
prior Report on Form 8K filed with the Securities and Exchange
Commission, dated May 30, 2003.
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(b) The following is a list of Current Reports on Form 8-K filed by the Company
during and subsequent to the last quarter of the fiscal year ended June 30,
2004.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Rose Snyder & Jacobs, CPAs ("RSJ") is the Company's principal auditing
accountant firm. RSJ has also provided other non-audit services to the Company.
The Audit Committee approved the engagement of RSJ before RSJ rendered audit and
non-audit services to the Company.
Audit Fees
RSJ billed the Company $25,400, during the fiscal year ended June 30,
2004, for the following professional services: audit of the annual financial
statement of the Company for the fiscal year ended June 30, 2003, and review of
the interim financial statements included in quarterly reports on Form 10-QSB
for the periods ended September 30, 2003, December 31, 2003, and March 31, 2004.
Tax Fees
RSJ has not yet provided tax return preparation services for the
Company for the fiscal year ended June 30, 2004, and therefore has not billed
the Company for those services.
All Other Fees
RSJ billed the Company $3,850 for other services, including preparation
of the tax returns for the Company for 2003, during the fiscal year ended June
30, 2004.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: September 30, 2004 ROAMING MESSENGER, INC.
By: \s\ Jonathan Lei
--------------------------------------
Jonathan Lei, Chairman of the Board,
Chief Executive Officer, President
Chief Financial Officer, and Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By: \s\ Jonathan Lei Dated: September 30, 2004
--------------------------------------
Jonathan Lei, Chairman of the Board,
Chief Executive Officer, President
Chief Financial Officer, and Secretary
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