As filed with the Securities andExchange Commission on April 12, 2006
Registration Number 333-131326
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 1
to
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
ROAMING MESSENGER, INC.
(Name of Small Business Issuer in its Charter)
Nevada 7372 30-0050402
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
50 Castilian Dr. Suite A, Santa Barbara
California 93117
(805) 683-7626
(Address and telephone number of principal executive offices)
Jonathan Lei
President
Roaming Messenger, Inc.
50 Castilian Dr. Suite A, Santa Barbara
California 93117
(805) 683-7626
(Name, address and telephone number of agent for service)
Copies to:
Gregory Sichenzia, Esq.
Louis A. Brilleman, Esq.
Sichenzia Ross Friedman Ference LLP
1065 Avenue of the Americas, 21st Floor
New York, New York 10018
(212) 930-9700
Approximate date of commencement of proposed sale to the public: From time to
time after the effective date of this Registration Statement.
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. |X|
If this form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_|
If this form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, please check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_| _________
If this form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. |_| _________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
CALCULATION OF REGISTRATION FEE
--------------------------------------------------------------------------------------------------------------
Title of Each Class of Proposed Maximum Proposed Maximum
Securities to be Amount To Be Offering Price Aggregate Offering Amount of
Registered Registered Per Share (1) Price Registration Fee
--------------------------------------------------------------------------------------------------------------
Common Stock, $.0001 par 90,000,000 $ 0.07 $4,900,000 $674.10
value per share (2)
--------------------------------------------------------------------------------------------------------------
Common Stock, $.0001 par 9,500,000 $ 0.07 $ 665,000 $ 71.16
value per share(3)
--------------------------------------------------------------------------------------------------------------
Total 99,500,000 $6,965,000 $745.26*
--------------------------------------------------------------------------------------------------------------
----------------
* Previously paid.
(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(c) under the Securities Act of 1933, as amended. The average of the
high and low price per share of the Registrant's Common Stock on the Over the
Counter Bulletin Board as of January 23, 2006 was $0.07 per share.
(2) Represents shares issuable upon conversion of $1,200,000 principal amount of
convertible debentures at a price per share equal to the lower of (i) $0.15 or
(ii) 80% of the lowest Volume Weighted Average Price of the Common Stock during
the five trading days immediately preceding the conversion date. Pursuant to a
registration rights agreement, Registrant is required to register 90,000,000
shares.
(3) Represents shares issuable upon exercise of warrants.
The registrant hereby amends this registration statement on such date or date(s)
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, as amended, or until the registration statement shall
become effective on such date as the commission acting pursuant to said Section
8(a) may determine.
The information in this prospectus is not complete and may be changed. The
securities may not be sold until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
PROSPECTUS
Subject to Completion, Dated April 12, 2006
ROAMING MESSENGER, INC.
99,500,000 Shares of Common Stock
This prospectus relates to the resale by the selling stockholder of up to
99,500,000 shares of our common stock consisting of (i) 90,000,000 shares of
common stock issuable upon conversion of convertible debentures at a price per
share equal to the lower of (A) $0.15 or (B) 80% of the lowest volume weighted
average price of the Common Stock during the five trading days immediately
preceding the conversion date, (ii) 1,500,000 shares of common stock issuable
upon exercise of warrants at $0.08 per share, (iii) 4,000,000 shares of common
stock issuable upon warrants to at $0.10 per share, and (iv) 4,000,000 shares of
common stock issuable upon exercise of warrants at $0.12 per share. The selling
stockholder may sell common stock from time to time in the principal market on
which the stock is traded at the prevailing market price or in negotiated
transactions.
We are not selling any shares of common stock in this offering and therefore
will not receive any proceeds from this offering. We will, however, receive
proceeds from the exercise of warrants to purchase 9,500,000 shares of our
common stock. All costs associated with this registration will be borne by us.
Our common stock currently trades on the Over the Counter Bulletin Board ("OTC
Bulletin Board") under the symbol "RMSG.OB."
On March 29, 2006, the last reported sale price for our common stock on the OTC
Bulletin Board was $0.07 per share.
The securities offered in this prospectus involve a high degree of risk. See
"Risk Factors" beginning on page 4 of this prospectus to read about factors you
should consider before buying shares of our common stock.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The information in this Prospectus is not complete and may be changed. This
Prospectus is included in the Registration Statement that was filed by Roaming
Messenger, Inc. with the Securities and Exchange Commission. The selling
stockholder may not sell these securities until the registration statement
becomes effective. This Prospectus is not an offer to sell these securities and
is not soliciting an offer to buy these securities in any state where the offer
or sale is not permitted.
The date of this Prospectus is ________, 2006
TABLE OF CONTENTS
Page
Prospectus Summary.......................................................... 1
Risk Factors................................................................ 4
Forward Looking Statements.................................................. 9
Use of Proceeds............................................................. 9
Management's Discussion and Analysis or Plan of Operation................... 11
Business.................................................................... 15
Description of Property..................................................... 20
Legal Proceedings........................................................... 20
Directors and Executive Officers............................................ 21
Executive Compensation...................................................... 23
Market for Common Equity and Related
Stockholder Matters......................................................... 26
Security Ownership of Certain Beneficial Owners
and Management.............................................................. 27
Selling Shareholder......................................................... 28
Certain Relationships and Related Transactions.............................. 28
Description of Securities................................................... 29
Plan of Distribution........................................................ 30
Legal Matters............................................................... 31
Experts..................................................................... 31
Where You Can Find More Information......................................... 32
Disclosure of Commission Position on Indemnification
for Securities Act Liabilities.............................................. 32
Index to Consolidated Financial Statements.................................. F-1
You may only rely on the information contained in this prospectus or that we
have referred you to. We have not authorized anyone to provide you with
different information. This prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any securities other than the common stock
offered by this prospectus. This prospectus does not constitute an offer to sell
or a solicitation of an offer to buy any common stock in any circumstances in
which such offer or solicitation is unlawful. Neither the delivery of this
prospectus nor any sale made in connection with this prospectus shall, under any
circumstances, create any implication that there has been no change in our
affairs since the date of this prospectus or that the information contained by
reference to this prospectus is correct as of any time after its date.
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus. You
should read the entire prospectus carefully, including, the section entitled
"Risk Factors" before deciding to invest in our common stock. Roaming Messenger,
Inc. is referred to throughout this prospectus as "Roaming Messenger," "we" or
"us."
General
We are a software company and have developed a proprietary system that enables
software programs and other business applications to connect to wired and
wireless devices, such as cellular phones, computers and personal digital
assistants. This system, known as the Roaming Messenger Platform, serves as a
gateway to the mobile world for a variety of software programs and other
business applications such as those used in emergency response, homeland
security, logistics, healthcare and financial services.
The Roaming Messenger Platform allows applications to send out smart messages,
or "messengers," to mobile devices. Unlike regular e-mail messages, these
software messengers are encrypted, and have the ability to roam automatically
among mobile devices, trying to get the attention of the user, confirm receipt,
deliver interactive content, and transmit real-time responses back to the
sending application. They also have the ability to move independently to
alternative recipients in an organization's chain of command if the originally
intended recipient does not respond in a timely fashion.
For example, a software messenger may try to locate a person on his or her
computer, and, if there is no response, move to that person's cellular phone,
and subsequently move to that person's personal digital assistants. If still
unanswered, the messenger will travel automatically to the next person with
authority to act on the message, such as the superior of the originally intended
recipient.
We have generated only minimal revenues from the Roaming Messenger Platform. To
date, almost all of our revenues have been generated by Warp 9, Inc., our
wholly-owned subsidiary, that offers web-based e-commerce software products and
services to the catalog and direct marketing industry.
For the year ended June 30, 2005, we generated revenues of $1,184,212 and
incurred a consolidated net loss of $2,479,100. For the three-month period
ending September 30, 2005, we generated revenue of $337,926 and incurred a
consolidated net loss of $509,407. As a result of recurring losses from
operations, a working capital deficit and accumulated deficit, our auditors, in
their report dated September 16, 2005, have expressed substantial doubt about
our ability to continue as a going concern.
Recent Financing
On December 28, 2005, we consummated a securities purchase agreement with
Cornell Capital Partners L.P. providing for the sale by us to Cornell of our 10%
secured convertible debentures in the aggregate principal amount of $1,200,000
of which $400,000 was advanced immediately and the second installment of
$350,000 was advanced on January 30, 2006. The last installment of $450,000 will
be advanced two business days prior to the date the registration statement is
declared effective.
The debentures mature on the third anniversary of the date of issuance and we
are not required to make any payments until the maturity date.
Holders of the debentures may convert at any time amounts outstanding under the
debentures into shares of our common stock at a conversion price per share equal
to the lesser of (i) $0.15 or (ii) 80% of the lowest volume weighted average
price of our common stock during the five trading days immediately preceding the
conversion date as quoted by Bloomberg, LP. Cornell has agreed not to short any
of the shares of Common Stock for as long as any of the debentures remain
outstanding.
We have the right to redeem, upon three-business day notice, a portion or all
amounts outstanding under the debenture prior to the maturity date at a 20%
redemption premium provided that the closing bid price of our common stock is
less than $0.15. In addition, in the event of a redemption, we are required to
issue to Cornell 50,000 shares of common stock for each $100,000 redeemed, which
shares are not being registered herewith. Under the terms of the debenture, the
holder has the right to convert all or part of the debenture within the
three-day period following the delivery of a redemption notice.
We also issued to Cornell five-year warrants to purchase 1,500,000, 4,000,000
and 4,000,000 shares of Common Stock at $0.08, $0.10 and $0.12, respectively.
In connection with the purchase agreement, we also entered into a registration
rights agreement with Cornell providing for the registration of the shares of
common stock issuable upon conversion of the debentures and exercise of the
warrants. We are obligated to use our best efforts to cause the registration
statement to be declared effective no later than April 27, 2006 and to insure
that the registration statement remains in effect until all of the shares of
common stock issuable upon conversion of the debentures and exercise of the
warrants have been sold. In the event of a default of our obligations under the
registration rights agreement, including our agreement to file the registration
statement no later than January 27, 2006, or if the registration statement is
not declared effective by April 27, 2006, we are required to pay to Cornell, as
liquidated damages, for each month that the registration statement has not been
filed or declared effective, as the case may be, either a cash amount or shares
of our common stock equal to 2% of the liquidated value of the Debentures.
1
Our obligations under the purchase agreement are secured by substantially all of
our assets. As further security for our obligations thereunder, Jon Lei, our
Chief Executive Officer, has granted a security interest in 2,000,000 shares of
common stock that he owns.
Also on December 28, 2005, we terminated the Periodic Equity Investment
Agreement dated March 28, 2005 with Wings Fund, Inc. That agreement provided for
the sale to Wings of up to $3,000,000 worth of our common stock at our
discretion in twelve monthly increments of up to $250,000 commencing in
September 2005. On the date of termination of that agreement, we had sold
approximately 4,279,174 shares of common stock for total proceeds of $272,147.
Our principal executive office is located at 50 Castilian Drive, Suite A, Santa
Barbara, California 93117 and our telephone number is (805) 683-7626.
2
This Offering
Shares offered by Selling
Stockholders..................... Up to 99,500,000, consisting of 90,000,000
shares issuable upon conversion of
convertible debentures and 9,500,000 shares
issuable upon conversion of warrants.
Common Stock to be outstanding
after the offering............... 286,331,266 *
Use of Proceeds.................. We will not receive any proceeds from the
sale of the common stock hereunder.
Risk Factors..................... The purchase of our common stock involves a
high degree of risk. You should carefully
review and consider "Risk Factors" beginning
on page 4
OTC Bulletin Board
Trading Symbol................... RMSG.OB
* The above information regarding common stock to be outstanding after the
offering is based on 186,831,266 shares of common stock outstanding as of March
5, 2006.
3
RISK FACTORS
An investment in our shares involves a high degree of risk. Before making an
investment decision, you should carefully consider all of the risks described in
this prospectus. If any of the risks discussed in this prospectus actually
occur, our business, financial condition and results of operations could be
materially and adversely affected. If this were to happen, the price of our
shares could decline significantly and you may lose all or a part of your
investment. The risk factors described below are not the only ones that may
affect us. Our forward-looking statements in this prospectus are subject to the
following risks and uncertainties. Our actual results could differ materially
from those anticipated by our forward-looking statements as a result of the risk
factors below. See "Forward-Looking Statements."
Risks Related to Our Business
We have a history of losses, expect continuing losses and may never achieve
profitability
For the years ended June 30, 2005 and 2004, we generated revenues of $1,184,212
and $953,777, respectively, and incurred consolidated net losses of $2,479,100
and $1,035,945, respectively. For the six-month period ending December 31, 2005,
we generated revenue of $856,072 and incurred a consolidated net loss of
$904,574. We cannot assure you that we can achieve or sustain profitability on a
quarterly or annual basis in the future. Our operations are subject to the risks
and competition inherent in the establishment of a business enterprise. There
can be no assurance that future operations will be profitable. Revenues and
profits, if any, will depend upon various factors, including whether our product
will achieve market acceptance. We may not achieve our business objectives and
the failure to achieve such goals would have an adverse impact on us. These
matters raise substantial doubt about our ability to continue as a going
concern.
Our auditors have included a going concern modification in their opinion
Our auditors have modified their opinion to our financial statements because of
concerns about our ability to continue as a going concern. These concerns arise
from the fact that we have not yet established an ongoing source of revenues
sufficient to cover our operating costs and that we must raise additional
capital in order to continue to operate our business. If we are unable to
continue as a going concern, you could lose your entire investment in us.
We may need to raise additional capital, which may not be available on
acceptable terms or at all
In December 2005, we received $400,000 in debt financing from Cornell Capital
Partners LP. Pursuant to a securities purchase agreement, it has committed to
advance an additional $350,000 at the time of filing of the registration
statement of which this prospectus forms a part and $450,000 at the time of
effectiveness of the registration statement. In the future, we may be required
to raise additional funds, particularly if we exhaust the funds advanced under
that agreement, are unable to generate positive cash flow as a result of our
operations and are required to repay the convertible debentures as a result of
Cornell Capital's failure to convert the debentures into common stock. There can
be no assurance that financing will be available in amounts or on terms
acceptable to us, if at all. The inability to obtain additional capital may
reduce our ability to continue to conduct business operations. If we are unable
to obtain additional financing, we will likely be required to curtail our
research and development plans. Any additional equity financing may involve
substantial dilution to our then existing shareholders.
We may not be able to successfully commercialize our Roaming Messenger
Technology
While we have released a new version of the Roaming Messenger Platform, it has
not generated any significant revenues and we are unable to project when we will
achieve profitability, if at all. As is the case with any new technology, we
expect the development process to continue. We cannot assure that our
engineering resources will be able to modify the product fast enough to meet
market requirements. We can also not assure that our product will gain market
acceptance and that we will be able to successfully commercialize the Roaming
Messenger technology.
Our revenues are dependent upon acceptance of our products by third party
licensors
Our primary sales and distribution model is based on sales to end-users through
distributors. As a result, we will continue to incur substantial operating
losses until such time as we are able to generate revenues from licensing and
service fees for our products through our distribution partners. There can be no
assurance that businesses and customers will adopt our technology and products,
or that businesses and prospective customers will agree to pay the licensing and
service fees for our products. In the event that we are not able to
significantly increase the number of customers that license our products, or if
we are unable to charge the necessary license fees, our financial condition and
results of operations will be materially and adversely affected.
Our success is dependent upon increasing acceptance of wireless access to the
Internet in the United States.
Our services are primarily wireless web based. Therefore, our success is linked
directly to the extent to which users of the Internet in the United States
accept wireless web based technology as a viable means of communication and
increase their use and reliance upon wireless access to the Internet. Currently,
wireless web based technology has limited application and the demand for
wireless access is minimal, and if such demand does not increase, or, if such
demand increases at a pace slower than projected, then our financial condition
and results of operations will be materially and adversely affected.
4
We do not maintain theft or casualty insurance, and only maintain modest
liability and property insurance coverage and therefore we could incur losses as
a result of an uninsured loss.
We do not maintain theft or casualty insurance and we have modest liability and
property insurance coverage, along with workmen's compensation and related
insurance. We cannot assure that we will not incur uninsured liabilities and
losses as a result of the conduct of our business. Any such insured loss or
liability could have a material adverse affect on our results of operations.
If we lose key employees and consultants or are unable to attract or retain
qualified personnel, our business could suffer
Our success is highly dependent on our ability to attract and retain qualified
scientific and management personnel. We are highly dependent on our management,
including Mr. Jonathan Lei who has been critical to the development of our
technologies and business. The loss of the services of Mr. Lei could have a
material adverse effect on our operations. We do not have an employment
agreement with Mr. Lei. Accordingly, there can be no assurance that he will
remain associated with us. The efforts of Mr. Lei will be critical to us as we
continue to develop our technology and as we attempt to transition from a
development state company to a company with commercialized products and
services. If we were to lose Mr. Lei, or any other key employees, we may
experience difficulties in competing effectively, developing our technology and
implementing our business strategies.
Two senior members of our management team are under indictment which may lead to
their departure and damage to our reputation
In February 2006, Jonathan Lei, our Chairman and Chief Executive Officer, along
with Bryan Crane, our Vice President of Corporate Development, were indicted by
a federal grand jury in Florida, alleging that they conspired to commit
securities, mail and wire fraud in connection with an offer for private funding
made to us in February 2005 by a surreptitious investment fund formed by the
Government. The Company was not named in the indictment. This indictment may
have a material adverse impact on our business as result of the possible
departure of these two senior members of our management team and as a result of
damage to our reputation because of the allegations.
If we are unable to protect our intellectual property effectively, we may be
unable to prevent third parties from using our technologies, which would impair
our competitive advantage.
We have not yet been granted patents for our technology and we cannot assure you
that any of our currently pending or future patent applications will result in
issued patents, or that any patents issued to us will not be challenged,
invalidated or held unenforceable. We cannot guarantee you that we will be
successful in defending challenges made in connection with our patent
applications. We rely on trade secret protection, and other contractual
restrictions to protect our proprietary technologies, all of which provide
limited protection and may not adequately protect our rights or permit us to
gain or keep any competitive advantage. If we fail to protect our intellectual
property, we will be unable to prevent third parties from using our technologies
and they will be able to compete more effectively against us.
We cannot guarantee you that any patents issued to us will be broad enough to
provide any meaningful protection nor can we assure you that one of our
competitors may not develop more effective technologies, designs or methods
without infringing our intellectual property rights or that one of our
competitors might not design around our proprietary technologies.
If we are not able to protect our proprietary technology, trade secrets and
know-how, our competitors may use our inventions to develop competing products.
We have applied for certain patents relating to our technology. However, these
patents may not be issued, or if issued, may not protect us against our
competitors, and patent litigation is very expensive. We may not have sufficient
cash available to pursue any patent litigation to its conclusion because
currently we do not generate revenues.
We cannot rely solely on our current patents to be successful. The standards
that the U.S. Patent and Trademark Office and foreign patent offices use to
grant patents, and the standards that U.S. and foreign courts use to interpret
patents, are not the same and are not always applied predictably or uniformly
and can change, particularly as new technologies develop. As such, the degree of
patent protection obtained in the U.S. may differ substantially from that
obtained in various foreign countries. In some instances, patents have issued in
the U.S. while substantially less or no protection has been obtained in Europe
or other countries.
We cannot be certain of the level of protection, if any, that will be provided
by our patents, if issued. If we attempt to enforce them and they are challenged
in court where our competitors may raise defenses such as invalidity,
unenforceability or possession of a valid license. In addition, the type and
extent of any patent claims that may be issued to us in the future are
uncertain. Any patents which are issued may not contain claims that will permit
us to stop competitors from using similar technology.
We are subject to competition from other companies, some of which have greater
financial resources, brand recognition, management experience than we do.
The mobile data technology industry is characterized by intense competition. We
will be subject to competition from other companies, many of which have greater
financial resources, greater name recognition, more management experience, and
longer operating histories than we have. There is no assurance that we will be
able to compete successfully or profitably in the mobile data technology
business.
5
We may not be able to respond to the rapid technological change of the mobile
data industry.
Mobile data is a rapidly evolving technology. Our future success is dependent
upon our ability to adapt rapidly to changes in mobile data technology. To do
so, we must continually improve the performance, features and reliability of our
technology and products. If we fail to maintain a competitive level of
technological expertise, it would have a material adverse effect on our
business, results of operations, and financial condition. In addition, the
widespread adoption of new mobile data technologies or other technological
changes could require substantial expenditures by us to modify or adapt our
services or infrastructure, which could have a material adverse effect on our
business, results of operations, and financial condition.
We may be subject to Internet regulation.
Currently there are few laws or regulations that specifically regulate
communications or commerce on the Internet. Laws and regulations may be adopted
in the future that address issues such as user privacy, pricing, and the
characteristics and quality of products and services. Several telecommunications
companies have petitioned the Federal Communications Commission to regulate
Internet service providers and online services providers in a manner similar to
long distance telephone carriers and to impose access fees on these companies.
Any imposition of access fees could increase the cost of transmitting data over
the Internet. Moreover, it may take years to determine the extent to which
existing laws relating to issues such as property ownership, libel and personal
privacy are applicable to the Internet. Any new laws or regulations relating to
the Internet, or to mobile data technology, could materially adversely affect
our business and results of operations.
We are reliant upon third parties to assist in the operation and maintenance of
our network infrastructure.
We rely on third parties to assist in operating and maintaining our network
infrastructure. If these systems fail, user traffic could be disrupted or
delayed, which could impair our business and damage our reputation. Fire,
floods, earthquakes, power loss, telecommunications failures, break-ins and
similar events could damage these systems and cause interruptions in our
services. Computer viruses, electronic break-ins or other similar disruptive
problems could result in reductions or termination of our services by our
customers or otherwise adversely affect our business. We do not have any backup
systems or a formal disaster recovery plan. Our Web site must be able to
accommodate a high volume of traffic and deliver frequently updated information.
We are dependent upon the operations of the Internet and our Web site for our
business.
Since ours is a web based service, our customers depend on Internet service
providers, online service providers and other Web site operators for access to
our Web site. If our Web site experiences slower response times or decreased
traffic for a variety of reasons, it could have an adverse affect on our
business and results of operations especially as compared to other services that
rely on other communication media as well. Any outages, delays or other Internet
difficulties due to system failures unrelated to our systems could have an
adverse affect on our business and reputation. The Internet network
infrastructure may not be able to support continued growth, which could
adversely affect our business.
Unknown software defects could disrupt our services and harm our business and
reputation.
Our software products are inherently complex. Additionally, our product and
service offerings depend on complex software, both internally developed and
licensed from third parties. Complex software often contains defects or errors
in translation, particularly when first introduced or when new versions are
released or localized for international markets. We may not discover software
defects in our products or that affect new or current services or enhancements
until after they are deployed. Despite testing, it is possible that defects may
occur in the software. These defects could cause service interruptions, which
could damage our reputation or increase service costs, cause us to lose revenue,
delay market acceptance or divert development resources.
If our system security is breached, our reputation could suffer and our revenues
could decline.
A fundamental requirement for online communications is the secure transmission
of confidential information over public networks. As a young company, we have
limited experience protecting ourselves against security breaches and may be
more vulnerable in that respect than other more mature entities. Therefore,
third parties may attempt to breach our security or that of our customers. If
these attempts are successful, customers' confidential information, including
customers' profiles, passwords, financial account information, credit card
numbers or other personal information could be breached. We may be liable to our
customers for any breach in security and a breach could harm our ability to
market and sell our services. We rely on encryption technology licensed from
third parties. Our servers are vulnerable to computer viruses, physical or
electronic break-ins and similar disruptions, which could lead to interruptions,
delays or loss of data. We may be required to expend significant capital and
other resources to license encryption technology and additional technologies to
protect against security breaches or to alleviate problems caused by any breach.
Failure to prevent security breaches may make it difficult to retain and attract
customers and cause us to spend additional resources that could cause our
operating results to decline.
Risks relating to our Convertible Debentures:
There are a large number of shares underlying our convertible notes and warrants
that are being registered in this prospectus and the sale of these shares may
depress the market price of our common stock.
6
As of March 5, , 2006, we had 186,831,266 shares of common stock issued and
outstanding. In connection with the financing arrangements that we entered into
in December 2005, we also have outstanding secured convertible debentures or an
obligation to issue callable secured convertible notes that may be converted
into an estimated 22,000,000 shares of common stock at current market prices,
and outstanding warrants or an obligation to issue warrants to purchase
9,500,000 shares of common stock.
On March 29, 2006, the closing bid price of our common stock was $.07. The
debentures issued in December are convertible at the lower of $0.15 or 80% of
the lowest volume weighted average price of our common stock during the five
trading days immediately preceding the conversion. Therefore, the number of
shares of common stock issuable upon conversion of the secured convertible
debentures may increase if the market price of our stock declines. Upon
effectiveness of the registration statement of which this prospectus forms a
part, all of the shares, including all of the shares issuable upon conversion of
the notes and upon exercise of our warrants, may be sold without restriction.
The sale of these shares may adversely affect the market price of our common
stock.
The variable price feature of our convertible debentures could require us to
issue a substantially greater number of shares, which will cause dilution to our
existing stockholders. The number of shares we will be required to issue upon
conversion of the debentures will increase if the market price of our stock
decreases. This will cause dilution to our existing stockholders.
The following is an example of the amount of shares of our common stock issuable
upon conversion of the entire $1,200,000 in convertible debentures, based on
market prices assumed to be 25%, 50% and 75% below the closing price on March
29, 2006 of $0.07:
------------------------------------------------------------------------------------------
% BELOW MARKET PRICE PER SHARE WITH 20% DISCOUNT NUMBER OF SHARES PERCENTAGE
------------------------------------------------------------------------------------------
25% $0.0525 $0.042 28,571,428 13.3%
------------------------------------------------------------------------------------------
50% $0.035 $0.028 42,857,142 18.7%
------------------------------------------------------------------------------------------
75% $0.0175 $0.014 85,714,285 31.5%
------------------------------------------------------------------------------------------
------------------
* Based upon 186,831,266 shares of common stock outstanding as of March 29,
2006.
The lower the stock price, the greater the number of shares issuable under the
convertible debentures
The number of shares issuable upon conversion of the debentures is determined by
the market price of our common stock prevailing at the time of each conversion.
The lower the market price, the greater the number of shares issuable under the
debentures. Upon issuance of the shares, to the extent that holders of those
shares will attempt to sell the shares into the market, these sales may further
reduce the market price of our common stock. This in turn will increase the
number of shares issuable under the debentures. This may lead to an escalation
of lower market prices and an increasing number of shares to be issued. A larger
number of shares issuable at a discount to a continuously declining stock price
will expose our shareholders to greater dilution and a reduction of the value of
their investment.
A lower stock price will provide an incentive to Cornell to sell additional
shares into the market
The number of shares that Cornell will receive under the convertible debentures
is determined by the market price of our common stock prevailing at the time of
each conversion. The lower the market price, the greater the number of shares
issuable under the debentures. As a result, Cornell will have an incentive to
sell as large a number of shares as possible to obtain a lower conversion price.
This will lead to greater dilution of exiting shareholders and a reduction of
the value of their investment
The issuance of our stock upon conversion of the debentures could encourage
short sales by third parties, which could contribute to the future decline of
our stock price and materially dilute existing stockholders' equity and voting
rights.
The debentures have the potential to cause significant downward pressure on the
price of our common stock. This is particularly the case if the shares being
placed into the market exceed the market's ability to absorb the increased
number of shares of stock. Such an event could place further downward pressure
on the price of our common stock, which presents an opportunity to short sellers
and others to contribute to the future decline of our stock price. If there are
significant short sales of our stock, the price decline that would result from
this activity will cause the share price to decline more so, which, in turn, may
cause long holders of the stock to sell their shares thereby contributing to
sales of stock in the market. If there is an imbalance on the sell side of the
market for the stock, our stock price will decline. If this occurs, the number
of shares of our common stock that is issuable upon conversion of the debentures
will increase, which will materially dilute existing stockholders' equity and
voting rights.
If we are required for any reason to repay our outstanding secured convertible
debentures, we would be required to deplete our working capital, if available,
or raise additional funds. Our failure to repay the secured convertible
debentures, if required, could result in legal action against us, which could
require the sale of substantial assets.
In December 2005, we entered into a Securities Purchase Agreements for the sale
of an aggregate of $1,200,000 principal amount of secured
7
convertible debentures of which to date $400,000 has been funded. Pursuant to a
securities purchase agreement, the investor has committed to advance an
additional $350,000 at the time of filing of the registration statement of which
this prospectus forms a part and $450,000 at the time of effectiveness of the
registration statement. These debentures are due and payable, with interest,
three years from their respective dates of issuance, unless sooner converted
into shares of our common stock. Any event of default such as our failure to
repay the principal or interest when due, our failure to issue shares of common
stock upon conversion by the holder, or our failure to timely file a
registration statement or have such registration statement declared effective,
could require the early repayment of the convertible debentures. We anticipate
that the full amount of the convertible debentures will be converted into shares
of our common stock, in accordance with the terms of these debentures. If we
were required to repay the convertible debentures, we would be required to use
our limited working capital and raise additional funds. If we were unable to
repay the debentures when required, the holders could commence legal action
against us and foreclose on all of our assets to recover the amounts due. Any
such action would require us to curtail or cease operations.
The large number of shares issuable upon conversion of the secured convertible
debentures may result in a change of control
As there is no limit on the number of shares that may be issued upon conversion
of the convertible debentures, these issuances may result in Cornell controlling
us. It may be able to exert substantial influence over all matters submitted to
a vote of the shareholders, including the election and removal of directors,
amendments to our articles of incorporation and by-laws, and the approval of a
merger, consolidation or sale of all or substantially all of our assets. In
addition, this concentration of ownership could inhibit the management of our
business and affairs and have the effect of delaying, deferring or preventing a
change in control or impeding a merger, consolidation, takeover or other
business combination which our shareholder, may view favorably.
The lower the stock price, the greater the number of shares issuable upon
conversion of the convertible debentures
The number of shares that Cornell will receive upon conversion of the
convertible debentures is determined by the market price of our common stock
prevailing at the time of each conversion. The lower the market price, the
greater the number of shares issuable upon conversion. Upon issuance of the
shares, to the extent that Cornell will attempt to sell the shares into the
market, these sales may further reduce the market price of our common stock.
This in turn will increase the number of shares issuable upon subsequent
conversions. This may lead to an escalation of lower market prices and ever
greater numbers of shares to be issued. A larger number of shares issuable at a
discount to a continuously declining stock price will expose our shareholders to
greater dilution and a reduction of the value of their investment.
The following risks relate principally to our common stock and its market value:
There is a limited market for our common stock
Our common stock is quoted on the OTC Bulletin Board under the symbol "RMSG.OB."
There is a limited trading market for our common stock. Accordingly, there can
be no assurance as to the liquidity of any markets that may develop for our
common stock, the ability of holders of our common stock to sell our common
stock, or the prices at which holders may be able to sell our common stock.
Our stock price may be volatile
The market price of our common stock is likely to be highly volatile and could
fluctuate widely in price in response to various factors, many of which are
beyond our control, including:
o technological innovations or new products and services by us or our
competitors;
o additions or departures of key personnel;
o sales of our common stock
o our ability to integrate operations, technology, products and services;
o our ability to execute our business plan;
o operating results below expectations;
o loss of any strategic relationship;
o industry developments;
o economic and other external factors; and
o period-to-period fluctuations in our financial results.
Because we have a limited operating history with limited revenues to date, you
may consider any one of these factors to be material. Our stock price may
fluctuate widely as a result of any of the above.
In addition, the securities markets have from time to time experienced
significant price and volume fluctuations that are unrelated to the operating
performance of particular companies. These market fluctuations may also
materially and adversely affect the market price of our common stock.
We have not paid dividends in the past and do not expect to pay dividends in the
future. Any return on investment may be limited to the value of our common stock
8
We have never paid cash dividends on our common stock and do not anticipate
paying cash dividends in the foreseeable future. The payment of dividends on our
common stock will depend on earnings, financial condition and other business and
economic factors affecting it at such time as the board of directors may
consider relevant. If we do not pay dividends, our common stock may be less
valuable because a return on your investment will only occur if its stock price
appreciates.
Our common stock may be deemed penny stock with a limited trading market
Our common stock is currently listed for trading on the OTC Bulletin Board which
is generally considered to be a less efficient market than markets such as
NASDAQ or other national exchanges, and which may cause difficulty in conducting
trades and difficulty in obtaining future financing. Further, our securities are
subject to the "penny stock rules" adopted pursuant to Section 15 (g) of the
Securities Exchange Act of 1934, as amended, or Exchange Act. The penny stock
rules apply to non-NASDAQ companies whose common stock trades at less than $5.00
per share or which have tangible net worth of less than $5,000,000 ($2,000,000
if the company has been operating for three or more years). Such rules require,
among other things, that brokers who trade "penny stock" to persons other than
"established customers" complete certain documentation, make suitability
inquiries of investors and provide investors with certain information concerning
trading in the security, including a risk disclosure document and quote
information under certain circumstances. Many brokers have decided not to trade
"penny stock" because of the requirements of the penny stock rules and, as a
result, the number of broker-dealers willing to act as market makers in such
securities is limited. In the event that we remain subject to the "penny stock
rules" for any significant period, there may develop an adverse impact on the
market, if any, for our securities. Because our securities are subject to the
"penny stock rules," investors will find it more difficult to dispose of our
securities. Further, for companies whose securities are traded in the OTC
Bulletin Board, it is more difficult: (i) to obtain accurate quotations, (ii) to
obtain coverage for significant news events because major wire services, such as
the Dow Jones News Service, generally do not publish press releases about such
companies, and (iii) to obtain needed capital.
FORWARD-LOOKING STATEMENTS
We and our representatives may from time to time make written or oral statements
that are "forward-looking," including statements contained in this prospectus
and other filings with the Securities and Exchange Commission, reports to our
stockholders and news releases. All statements that express expectations,
estimates, forecasts or projections are forward-looking statements within the
meaning of the Act. In addition, other written or oral statements which
constitute forward-looking statements may be made by us or on our behalf. Words
such as "expects," "anticipates," "intends," "plans," "believes," "seeks,"
"estimates," "projects," "forecasts," "may," "should," variations of such words
and similar expressions are intended to identify such forward-looking
statements. These statements are not guarantees of future performance and
involve risks, uncertainties and assumptions which are difficult to predict.
Therefore, actual outcomes and results may differ materially from what is
expressed or forecasted in or suggested by such forward-looking statements. We
undertake no obligation to update publicly any forward-looking statements,
whether as a result of new information, future events or otherwise. Important
factors on which such statements are based are assumptions concerning
uncertainties, including but not limited to uncertainties associated with the
following:
(a) volatility or decline of our stock price;
(b) potential fluctuation in quarterly results;
(c) our failure 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 our products and services;
(g) rapid and significant changes in markets;
(h) litigation with or legal claims and allegations by outside parties;
(i) insufficient revenues to cover operating costs.
USE OF PROCEEDS
This prospectus relates to shares of our common stock that may be offered and
sold from time to time by selling stockholder. We will receive no proceeds from
the sale of shares of common stock in this offering. However, we will receive
proceeds from the exercise, if any, of the warrants owned by the selling
stockholder. Assuming cash exercise of the warrants, we may receive up to
approximately $1,000,000. We expect to use these funds for working capital
purposes.
9
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion should be read in conjunction with our condensed
consolidated financial statements and notes to those statements. In addition to
historical information, the following discussion and other parts of this
quarterly report contain forward-looking information that involves risks and
uncertainties.
Overview
We are a software company and have developed a proprietary system that enables
software programs and other business applications to connect to wired and
wireless devices, such as cellular phones, computers and personal digital
assistants. This system, known as the Roaming Messenger Platform, serves as a
gateway to the mobile world for a variety of software programs and other
business applications such as those used in emergency response, homeland
security, logistics, healthcare and financial services.
The Roaming Messenger Platform allows applications to send out smart messages,
or "messengers," to mobile devices. Unlike regular e-mail messages, these
software messengers are encrypted, and have the ability to roam automatically
among mobile devices, trying to get the attention of the user, confirm receipt,
deliver interactive content, and transmit real-time responses back to the
sending application. They also have the ability to move independently to
alternative recipients in an organization's chain of command if the originally
intended recipient does not respond in a timely fashion.
For example, a messenger may try to locate a person on his or her computer, and
if there is no response, move to that person's cellular phone, and subsequently
move to that person's personal digital assistants. If still unanswered, the
messenger will travel automatically to the next person with authority to act on
the message, such as a superior of the originally intended recipient.
We have rolled out an improved version of the Roaming Messenger Platform which
is being offered as a standalone server product within an organization or a
hosted service on the Internet. It can be integrated into existing or new
business systems and is distributed primarily via a value-added-reseller ("VAR")
or private labeled model where it is an add-on to existing solutions.
We have forged a number of relationships 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, revenue has
yet to be derived due to the lengthy sales cycles associated with channel sales.
Also, it took much longer than anticipated for federal funds to flow into the
information technology procurement departments of government and public safety
agencies to which most of our channel partners sell.
We have generated only minimal revenues from the Roaming Messenger Platform. To
date, almost all of our revenues have been generated by Warp 9, Inc., our
wholly-owned subsidiary, that offers web-based e-commerce software products and
services to the catalog and direct marketing industry.
As of the date of this report we are actively work with channel partners in the
homeland security and public safety sector. We have also begun preliminary
business development with partners in the healthcare and enterprise mobility
markets. While Roaming Messenger is a horizontal platform with application in
many markets, our primary sales and marketing strategy continues to be
vertically focused.
Our growth strategy consists of three phases:
o During Phase I we will focus our marketing efforts on the Homeland Security
and Public Safety markets o During Phase II we will focus on the enterprise
markets for business process management and communication applications. o During
Phase III we will focus on the consumer markets for application such as mobile
commerce and mobile gaming.
In executing our growth strategy, strategic acquisition of synergistic companies
may be explored. When deciding on potential acquisition candidates, we will
consider whether the candidate offers (i) access to customers and (ii)
complementary products or services.
Critical Accounting Policies
Our discussion and analysis of our financial condition and results of
operations, including the discussion on liquidity and capital resources, are
based upon our financial statements, which have been prepared in accordance with
accounting principles generally accepted in the United States. The preparation
of these financial statements requires us to make estimates and judgments that
affect the reported amounts of assets, liabilities, revenues and expenses, and
related disclosure of contingent assets and liabilities. On an ongoing basis,
management re-evaluates its estimates and judgments, particularly those related
to the determination of the estimated recoverable amounts of trade accounts
receivable, impairment of long-lived assets, revenue recognition and deferred
tax assets. We believe the following critical accounting policies require more
significant judgment and estimates used in the preparation of the financial
statements.
We maintain an allowance for doubtful accounts for estimated losses that may
arise if any of our customers are unable to make required payments. Management
specifically analyzes the age of customer balances, historical bad debt
experience, customer credit-worthiness, and changes in customer payment terms
when making estimates of the uncollectability of our trade accounts receivable
balances. If we determine that the financial conditions of any of our customers
deteriorated, whether due to customer specific or general economic issues,
increases in the
10
allowance may be made. Accounts receivable are written off when all collection
attempts have failed.
We follow the provisions of Staff Accounting Bulletin ("SAB") 101, "Revenue
Recognition in Financial Statements" for revenue recognition and SAB 104. Under
Staff Accounting Bulletin 101, four conditions must be met before revenue can be
recognized: (i) there is persuasive evidence that an arrangement exists, (ii)
delivery has occurred or service has been rendered, (iii) the price is fixed or
determinable and (iv) collection is reasonably assured.
Income taxes are accounted for under the asset and liability method. Under this
method, to the extent that we believe that the deferred tax asset is not likely
to be recovered, a valuation allowance is provided. In making this
determination, we consider estimated future taxable income and taxable timing
differences expected in the future. Actual results may differ from those
estimates.
Results Of Operations
Years Ended June 30, 2005 And 2004
Total revenue for the twelve month period ended June 30, 2005 increased by
$230,440 to $1,184,212 from $953,772 in the prior year. Revenue was derived
principally from our Warp 9 Inc. subsidiary. The increase in revenue was the
result of an increase in Warp 9 Inc.'s client base and reselling of third party
online marketing service.
The cost of revenue, in terms of percentage of revenue, for the twelve month
period ending June 30, 2005 was 34% as compared to 14% for the twelve-month
period ending June 30, 2004. This increase in cost of revenue was primarily due
to the reselling of third party online marketing services.
Total costs and expenses for the twelve month period ended June 30, 2005
increased by $1,397,472 from $1,849,398 in 2004 to $3,246,870 in 2005. They
consisted primarily of selling, general and administrative expenses.
Selling, general and administrative expenses increased by $1,261,784 during the
twelve months ended June 30, 2005 to $2,735,890 from $1,474,106 in the prior
year. The increase in selling, general and administrative expenses were the
primarily caused by the increased of (i) $454,688 sales and marketing salaries
and expenses, (ii) $84,567 in legal expenses, (ii) $90,868 in rent, (iii)
$30,398 in corporate and health insurance premiums (iv) $59,850 in office and
travel expenses, and (v) $459,482 in non-cash expenses. As a result of vacating
its previous office space in October 2004, we recognized a one-time charge of
$122,852 for leasehold improvements and remaining rent expenses under the lease
agreement.
Non-cash expenses for the year ended June 30, 2005 totaled $459,482 in warrant
and stock compensation in lieu of payment to our consultants and independent
contractors for business development and financial advisory services. The value
of the warrants was determined using the Black Scholes model.
Expense related to depreciation were $113,775 for the twelve months ended June
30, 2005 as compared to $60,231 for the prior year, and interest expense was
$26,435 for the twelve months ended June 30, 2005 as compared to $15,031 in the
prior year.
Research and development expenses increased by $82,144 during the twelve months
ended June 30, 2005 to $397,205 from 315,061 in the prior year due to additional
staff.
For the twelve months ended June 30, 2005, our consolidated net loss was
$2,479,100 as compared to a consolidated net loss of $1,035,945 for the twelve
months ended June 30, 2004.
Six-Month Period Ended December 31, 2005 Compared To The Same Period In 2004
Total revenue for the three-month period ending December 31, 2005 was $518,146,
representing an increased of 69% from the three-month period ending December 31,
2004 of $307,228. Almost all the increase is attributed to the revenue growth
from the Warp 9 Inc. operation.
The cost of revenue for the three-month period ending December 31, 2005 was 31%
as compared to 46% for the three-month period ending December 31, 2004. The
decrease in the cost of revenue is a result of the increased sales of higher
margin Warp 9 e-commerce software products and services.
Total operating expenses was $652,964 for the three months ended December 31,
2005 as compared to $725,727 for the three months ended December 31, 2004.
The $652,964 operating expenses includes total non-cash charges of $50,995 which
includes (i) $50,000 expense for the issuance of unregistered common stock for
business development and advisory services, (ii) $995 expense for the issuance
of warrants to business development contractors in lieu of cash payment for
their services. The value of the warrants was determined using the Black Scholes
model. The value of unregistered common stock was the same as closing price of
the Company's public stock at the time of issuance.
11
Operating costs are expected to exceed revenue in the foreseeable future as the
Company continues to increase sales and marketing efforts as well as increasing
staff.
Total other income and expenses was ($101,017) for the three months ended
December 31, 2005, as compared to ($2,657) for the three months ended December
31, 2004. The increase is the result a $100,000 charge for the conversion
feature of the convertible debenture with Cornell Capital on December 28, 2005,
in accordance with EITF 98-5.
For the three months ended December 31, 2005, the Company's consolidated net
loss was ($395,167) as compared to a consolidated net loss of ($562,186) for the
three months ended December 31, 2004.
Liquidity and Capital Resources
The Company had cash at December 31, 2005 of $268,932 as compared to cash of
$237,529 as of June 30, 2005. The Company had net working capital deficit (i.e.
the difference between current assets and current liabilities) of ($408,430) at
December 31, 2005 as compared to a net working capital deficit of ($308,364) at
June 30, 2005. Cash flow utilized by operating activities was ($583,124) for the
six months ended December 31, 2005 as compared to cash utilized for operating
activities of ($846,324) during the six months ended December 31, 2004. Cash
flow used in investing activities was ($26,462) for the six months ended
December 31, 2005 as compared to cash used in investing activities of ($49,065)
during the six months ended December 31, 2004. Cash flow provided by financing
activities was $640,988 for the six months ended December 31, 2005 as compared
to cash used by financing activities of ($4,453) for the six months ended
December 31, 2004.
On August 11, 2005, the Company was approved for a $100,000 revolving line of
credit from Bank of America at an interest of prime plus 4 percentage points.
This line of credit is not secured by assets of the Company. The effective
interest rate of the line of credit at December 31, 2005 was 11%. As of December
31, 2005, $99,658 was borrowed under this line of credit
On December 28, 2005, we consummated a securities purchase agreement with
Cornell Capital Partners L.P. providing for the sale by us to Cornell of our 10%
secured convertible debentures in the aggregate principal amount of $1,200,000
of which $400,000 was advanced immediately. The second installment of $350,000
will be advanced upon filing of the registration statement of which this
prospectus forms a part. The last installment of $450,000 will be advanced two
business days prior to the date the registration statement is declared
effective.
The debentures mature on the third anniversary of the date of issuance and we
are not required to make any payments until the maturity date.
Holders of the debentures may convert at any time amounts outstanding under the
debentures into shares of our common stock at a conversion price per share equal
to the lesser of (i) $0.15 or (ii) 80% of the lowest volume weighted average
price of our common stock during the five trading days immediately preceding the
conversion date as quoted by Bloomberg, LP. Cornell has agreed not to short any
of the shares of Common Stock.
We have the right to redeem, upon three-business day notice, a portion or all
amounts outstanding under the debenture prior to the maturity date at a 20%
redemption premium provided that the closing bid price of our common stock is
less than $0.15. In addition, in the event of a redemption, we are required to
issue to Cornell 50,000 shares of common stock for each $100,000 redeemed, which
shares are not being registered herewith. Under the terms of the debenture, the
holder has the right to convert all or part of the debenture within the
three-day period following a redemption notice.
We also issued to Cornell five-year warrants to purchase 1,500,000, 4,000,000
and 4,000,000 shares of Common Stock at $0.08, $0.10 and $0.12, respectively.
In connection with the purchase agreement, we also entered into a registration
rights agreement with Cornell providing for the registration of the shares of
common stock issuable upon conversion of the debentures and exercise of the
warrants. We are obligated to use our best efforts to cause the registration
statement to be declared effective no later than April 27, 2006 and to insure
that the registration statement remains in effect until all of the shares of
common stock issuable upon conversion of the debentures and exercise of the
warrants have been sold. In the event of a default of our obligations under the
registration rights agreement, including our agreement to file the registration
statement no later than January 27, 2006, or if the registration statement is
not declared effective by April 27, 2006, we are required to pay to Cornell, as
liquidated damages, for each month that the registration statement has not been
filed or declared effective, as the case may be, either a cash amount or shares
of our common stock equal to 2% of the liquidated value of the Debentures.
Our obligations under the purchase agreement are secured by substantially all of
our assets. As further security for our obligations thereunder, Jon Lei, our
Chief Executive Officer, has granted a security interest in 2,000,000 shares of
common stock that he owns.
Also on December 28, 2005, we terminated the Periodic Equity Investment
Agreement dated March 28, 2005 with Wings Fund, Inc. That agreement provided for
the sale to Wings of up to $3,000,000 worth of our common stock at our
discretion in twelve monthly increments of up to $250,000 commencing in
September 2005. On the date of termination of that agreement, we had sold
approximately 4,279,174 shares of common stock for total proceeds of $272,147.
12
We believe that the funds received and to be received from Cornell will be
sufficient to fund and expand our business over a 12 months period. We
anticipate that the full amount of the convertible debentures will be converted
into shares of our common stock, in accordance with the terms of these
debentures. If we were required to repay the convertible debentures, we would be
required to use our limited working capital and raise additional funds. We
anticipate that we will obtain any additional required working capital through
the private placement of Common Stock to domestic accredited investors pursuant
to Regulation D of the Securities Act of 1933, as amended (the "Act"), or to
offshore investors pursuant to Regulation S of the Act. There is no assurance
that we will obtain the additional working capital that we need through the
private placement of Common Stock. In addition, such financing may not be
available in sufficient amounts or on terms acceptable to us.
13
BUSINESS
Company History
We are a Nevada corporation formerly known as Latinocare Management Corporation.
We were originally incorporated in Colorado in July 1983. Effective April 1,
2003, we completed a Plan and Agreement of Reorganization with Warp 9, Inc., a
Delaware corporation and effective June 30, 2003, we completed a second Plan and
Agreement of Reorganization with Warp 9. Pursuant to the such reorganization,
Latinocare acquired all of the issued and outstanding common stock of Warp 9 in
exchange for approximately 131,026,173 newly issued shares of Latinocare common
stock, Warp 9 became a wholly owned subsidiary of Latinocare, and the
shareholders of Warp 9 became the controlling shareholders of Latinocare. Prior
to its business combination with Warp 9, Latinocare had no tangible assets and
insignificant liabilities. Subsequent to the reorganization we changed our name
to Roaming Messenger, Inc.
General
We are a software company and have developed a proprietary system that enables
software programs and other business applications to connect to wired and
wireless devices, such as cellular phones, computers and personal digital
assistants. This system, known as the Roaming Messenger Platform, serves as a
gateway to the mobile world for a variety of software programs and other
business applications such as those used in emergency response, homeland
security, logistics, healthcare and financial services.
The Roaming Messenger Platform allows applications to send out smart messages,
or "messengers," to mobile devices. Unlike regular e-mail messages, these
software messengers are encrypted, and have the ability to roam automatically
among mobile devices, trying to get the attention of the user, confirm receipt,
deliver interactive content, and transmit real-time responses back to the
sending application. They also have the ability to move independently to
alternative recipients in an organization's chain of command if the originally
intended recipient does not respond in a timely fashion.
For example, a software messenger may try to locate a person on his or her
computer, and, if there is no response, move to that person's cellular phone,
and subsequently move to that person's personal digital assistants. If still
unanswered, the messenger will travel automatically to the next person with
authority to act on the message, such as the superior of the originally intended
recipient.
We have generated only minimal revenues from the Roaming Messenger Platform. To
date, almost all of our revenues have been generated by Warp 9, Inc., our
wholly-owned subsidiary, that offers web-based e-commerce software products and
services to the catalog and direct marketing industry. However, in the future,
we believe that a large majority of our revenues will come from the sale of our
Roaming Messenger technology.
Roaming Messenger Product Line
The Roaming Messenger Platform is available in two deployment options:
o Hosted Service - A carrier-grade system, managed and hosted by the Company, is
available to customers over the Internet. Customers do not need to install any
additional hardware or software internally to access Roaming Messenger
technology. Customers pay a monthly or annual subscription fee to access this
service.
o Self-Hosted Gateway - For customers that want total control over their
communications infrastructure, they can license the RM Platform software and
install it on their own hardware and network. Customers pay a one-time license
fee based on the number of users for the Self-Hosted Gateway.
Applications For Roaming Messenger
Emergency Response
We believe 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.
14
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
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
For manufacturing businesses, 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.
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
We intend 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, we plan to
undertake advertising and promotion efforts. These efforts will be outsourced
and will require the services of an advertising firm and public relations firm.
We plan to interview various firms and select those most capable of assisting us
with comprehensive advertising and promotion plans. We have recently commenced
building out our marketing department staff to accelerate these efforts. We have
not yet determined the potential costs of our marketing strategy.
We will continue to invest in small test campaigns before committing to large
promotions or marketing campaigns. Our overall marketing strategy is a
three-pronged approach.
o First, we will market to channel sales partners in our target markets. Channel
partners are application developers and system integrators who we believe can
benefit from integrating Roaming Messenger into their products or solutions to
fulfill their mobile messaging requirements.
o Second, we will execute direct marketing campaigns to potential end users of
our technology and make them aware of the capabilities of our technology. o
Third, we will execute direct marketing campaigns to multiple market segments to
see what other markets have an immediate interest for Roaming Messenger
technology. Once a new market is determined to be a hot market, then we shall
execute the First and Second prong of our three-pronged strategy on that new
market.
15
Sales Strategy
We currently have limited number of customers, which generate nominal revenue.We
intend to aggressively promote the Roaming Messenger product in the United
States. We intend to pursue international sales after establishing sales in the
domestic marketplace. Our 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. We intend 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. We intend to sell
Roaming Messenger through channel partners and value-added resellers (VARs) who
are established in their respective vertical markets.
Revenue Model
Our management believes that most of our revenues will come from the licensing
of our Roaming Messenger product, customer training and support, and software
upgrades to application developers and system integrators.
We have decided to use a user-license pricing model for the gateway server
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 enabled 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 us for
access to a Roaming Messenger system hosted and managed by us. The monthly fee
is assessed based on the number of users in the 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
Our intellectual property portfolio consists of the following patent
applications, which are pending:
Self Contained Business Transaction Capsules
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. The application for this patent was filed on January 2, 2001.
Utilizing Mobile Devices as a Communication Proxy for Non-Connected Terminals
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. The application for this
patent was filed on February 21, 2002.
16
A Method of and System for Transmitting a Mobile Agent for Instruction Execution
This invention relates to transmitting a mobile agent for executing programmable
instructions and, more particularly, to transmitting a virtual machine in a
mobile agent to assist instruction execution. This patent application discloses
the actual system implementation of the Roaming Messenger platform using a
mobile agent approach. The application for this patent was filed on December 7,
2004.
A Method of and Instruction Set for Executing Operations on a Device
This invention relates to executable instructions and, more particularly, to
instructions that are executable on a device that receives a mobile agent. This
patent application discloses the actual implementation of the Roaming Messenger
device engine and messenger instruction sets and modes of execution. The
application for this patent was filed on December 7, 2004.
Competition
The market for our products and services is becoming increasingly competitive.
The widespread adoption of open standards may make it easier for new market
entrants and existing competitors to introduce products that compete against
ours. We believe that we will compete primarily on the basis of our unique
ability to encapsulate data and logic into smart software messengers that can
travel automatically among user devices, track down users, deliver interactive
content, and bring decisions and data back to business applications in
real-time. Because we are smaller than most of our competitors, we believe that
we can be more attentive to the needs of our customers than some of our
competitors. As a provider of next-generation mobile data technology, we assess
potential competitors based primarily on the functionality of their products and
the range of services offered by them, the security and scalability of their
product architecture, their customer base and geographic focus and their
capitalization and other resources.
Our potential competitors may be found among various industries, including:
Mobile Access Gateway Vendors And Messaging Solution Providers: companies in
this category include Openwave Systems, 724 Solutions, LogicaCMG, Comverse,
Materna, Nokia and Ericsson.
Alerts Focused Businesses: companies in this area include Xiam, First Hop,
Materna, and Infospace. These companies are competitive in the time-critical
communication application of our technology.
Our competitors have established, and may establish in the future, strategic
relationships among themselves or with third parties to increase their ability
to address the needs of our current and prospective customers. Through these
relationships or independently, current and potential competitors may be able to
adapt more quickly than we can to new or emerging technologies and changes in
customer requirements, or to devote greater resources to the promotion and sale
of their products to both our existing customers and our potential customers.
There can be no assurance that we will be able to compete successfully with
existing or new competitors, many of which have greater financial resources,
greater name recognition, more management experience, and longer operating
histories than we have.
Other Products and Services
Our 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 software system that enables
catalogers and retailers to expand their 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 products
are offered as a fully managed online catalog solution that includes hosting at
our datacenter. As a total solution, Warp 9 offers project management,
development and integration into a customer's existing business processes. We
charge our customers a monthly subscription fee to the Warp 9 ICS product using
an application service provider ("ASP") model. There are various package levels
for the Warp 9 ICS product.
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
markets 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. Most ICS customers also purchase EMS to complement their online
commerce strategy.
17
Professional Services
Most customers of Warp 9 ICS and Warp 9 EMS are not technology companies and
have very little internal expertise in the areas of e-commerce, online marketing
and web technologies. To provide a complete solution to our customers, we also
offering professional services to help our customers maximize the use of our
technology or other online e-commerce technologies and services in general.
Professional services include but not limited to e-commerce web page template
development, custom system configuration, graphics design, integration to
backend business systems and management of 3rd party online service.
Revenue Model
We charge our customers a monthly subscription fee to the Warp 9 ICS and Warp 9
EMS products using an ASP model. Over half of Warp 9's revenues are from the ICS
product which continues to be a growing product for Warp 9. EMS is a smaller
revenue-generating product and usually sold to customers already on the ICS
product.
Government Regulation
We are 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 us. We are 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
As of February 28, 2006 , we had 16 full time equivalent employees, five of whom
are employed in administrative, marketing, and sales positions, and eleven
technical employees employed in research, development, and technical product
maintenance positions.
We use independent contractors, who are available to us on a half or near full
time basis, counted as full time equivalents, for sales, marketing and business
development efforts. It is our intention during the next 12 months to increase
our workforce to 30 employees, with five of the new positions being in the
administrative, marketing, and sales areas and the remaining seven of the new
positions being in research, development, and production positions.
All of our employees have executed agreements that impose nondisclosure
obligations on the employee and assign to us (to the extent permitted by
California law) all copyrights and other inventions created by the employee
during his employment with us. Additionally, we have a trade secret protection
policy in place that management believes to be adequate to protect our
intellectual property and trade secrets.
Seasonality
We do not anticipate that our business will be substantially affected by
seasonality.
Trademarks
We have registered trademarks for Roaming Messenger(R), Warp 9(R), and
eCapsule(R).
DESCRIPTION OF PROPERTY
We currently lease 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.
We have our old office space of approximately 3,650 square feet located at 6144
Calle Real, Suite 200 Santa Barbara, California 93117 which it has subleased for
the remainder of the lease until March 2007.
LEGAL PROCEEDINGS
In February 2006, Jonathan Lei, our Chairman and Chief Executive Officer, and
Bryan Crane, our Vice President of Corporate Development, were indicted by a
federal grand jury in Florida, alleging that they conspired to commit
securities, mail and wire fraud in connection with an offer for private funding
made to Roaming Messenger Inc. over a year ago, in February 2005, by a
surreptitious investment fund formed by the Government. Specifically, the
indictment alleges that Messrs. Lei and Crane conspired with government agents
posing as fund managers to arrange for an illegal payment to be made to the fund
managers as an inducement to that fund making an investment in the Company. We
did not obtain any funding from the entity or the management company that were
posing as prospective investors. The Company was not named in the indictment.
18
DIRECTORS AND EXECUTIVE OFFICERS
Directors and Executive Officers
The following table lists the executive officers and directors of the Company as
of January 20, 2006:
Name Age Position
-------------------- --- ----------------------------------------
Jonathan Lei 33 Chief Executive Officer, President,
Chief Financial Officer, Secretary,
and Chairman
Harinder Dhillon 32 Senior Vice President
(President of Warp 9 Inc. Subsidiary)
Bryan Crane 46 Vice President of Corporate Development
Michael Chuises 44 Vice President of Engineering
Louie Ucciferri 45 Director
----------
Jonathan Lei has been our Chairman of the Board of Directors, Chief Executive
Officer, President, Chief Financial Officer, and Secretary 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., our wholly
owned subsidiary in 1996 and in 1998, he negotiated a transaction to sell Warp
9's consumer ISP division, Sbnet, to MindSpring Enterprises. Mr. Lei was an
officer and is a lifetime member of Tau Beta Pi, a national engineering honor
society. As described under "Legal Proceedings" on page 18, Mr. Lei was recently
indicted.
Bryan Crane has been our Vice President of Corporate Development since October
2002. 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). As described under "Legal Proceedings" on page 18, Mr. Crane
was recently indicted.
Harinder Dhillon has been our Vice President of Operations since October 2001
and has been the President of Warp 9 Inc. since July 1, 2005. Mr. Dhillon joined
us in July 2000. Prior to joining us, from 1993 to1998, Mr. Dhillon served as
the Chief Information Officer of Informax Data Systems, an enterprise systems
integrator headquartered in Southern California. Thereafter, during 1999 until
he joined us, he worked as an independent technology consultant. 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.
Mike Chuises has been our Vice President of Engineering since October 2004.
Prior thereto, he was our Director of Engineering from December 2003 to October
2004. From 1994 to 2001, Mr. Chuises was the principal engineer for OutBack
Resource Group Inc., a consulting firm located in San Luis Obispo, California,
founded by Mr. Chuises, where he consulted on and implemented services and
software for service providers and commercial software companies such as Wynd
Communications, Inc. In 2001, OutBack was acquired by GoAmerica Communications,
Inc., a wireless service provider, and from 2001 to 2003, Mr. Chuises served as
a lead architect on the Go.Web enterprise wireless messaging platform. Prior to
founding OutBack, Mr. Chuises worked for several commercial software publishers
including Cheyenne Software, XTree Company and Arcada Software. Mr. Chuises
brings many years of disciplined, process-oriented methodologies to full
life-cycle software development.
Louie Ucciferri has been one of our directors since 2003 and is currently the
CEO of Regent Capital Group, a NASD registered broker dealer dedicated to real
estate investments. From 1995 to 2004, Mr. Ucciferri served as the President of
Westlake Financial Architects, an investment-
19
banking firm he founded 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.
Under the Nevada General Corporation Law and the Company's Articles of
Incorporation, as amended, the Company's directors will have no personal
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
Although we do not currently have an audit committee, 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. It is the intention that 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 held
four meetings during fiscal year ended June 30, 2005. As of September 30, 2005,
the Company has not yet appointed a Compensation Committee.
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.
On June 30, 2005, the Company issued 350,000 shares of common stock to Mr. Tom
Djokovich for serving on the Company's Board of Directors through June 30, 2005.
An amount of $56,000 was recognized as an expense for the year ended June 30,
2005 for this issuance of shares. Mr. Djokovich has since resigned his position.
20
EXECUTIVE COMPENSATION
The following summary compensation table sets forth certain information
concerning compensation paid to our Chief Executive Officer and our most highly
paid executive officers (the "Named Executive Officers") whose total annual
salary and bonus for services rendered in all capacities for the year ended June
30, 2005 was $100,000 or more.
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............... 2005 $138,000 - 0 - - 0 - -0- - 0 -
President, Chief Financial 2004 $138,000 - 0 - - 0 - -0- - 0 -
Officer, and Secretary 2003 $138,000 - 0 - - 0 - -0- - 0 -
-------------------------------------------------------------------------------------------------------------------
Harinder Dhillon........... 2005 $125,000 $ 2,894 - 0 - -0- - 0 -
Senior Vice President 2004 $125,000 $ 8,714 - 0 - -0- - 0 -
(President of Warp 9 Inc.) 2003 $105,000 - 0 - - 0 - 1,875,000 (1) - 0 -
-------------------------------------------------------------------------------------------------------------------
Bryan Crane................ 2005 $ 84,000 $ 8,000 (2) - 0 - -0- - 0 -
VP of Corporate Development 2004 $ 84,000 $29,000 (2) - 0 - 878,494 (2) - 0 -
2003 $ 84,000 - 0 - - 0 - 700,000 (2) - 0 -
-------------------------------------------------------------------------------------------------------------------
Michael Chuises............ 2005 $120,000 (3) - 0 - - 0 - 1,000,000 (1) - 0 -
VP of Corporate Development 2004 -0- - 0 - - 0 - -0- - 0 -
2003 -0- - 0 - - 0 - -0- - 0 -
-------------------------------------------------------------------------------------------------------------------
(1) 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.
(2) 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 and $8,000 of cash bonus was
given to Mr. Crane, during the fiscal year ending June 30, 2004 and June 30,
2005, respectively, for achieving certain milestones in managing the Company's
investment capital efforts.
(3) Mr. Chuises was promoted to Vice President of Engineering on October 1,
2004, with a base salary of $120,000. On April 15, 2005, Mr. Chuises was granted
1,000,000 stock options 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 $0.10 per share. Prior to his promotion, Mr. Chuises had
450,000 options at and exercise price of $0.08 and 550,000 options at an
exercise price of $0.17.
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
2005.
------------------------------------------------------------------------------------------------------------------------
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%
---- ------------- ---------------- --------- ----------- --------- ----------
Michael Chuises 550,000 (1) 18% $0.17 Four years from the $20,150 $43,393
VP of Engineering date of grant
1,000,000 (2) 33% $0.10 Four years from the $143,101 $192,820
date of grant
(1) These stock options vest 1/48 over a 48 month period
(2) 25% of these stock options will become fully vested after 12 months of
consecutive employment. The balance will vest 1/36 for 36 months after 12 months
of consecutive employment.
21
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
September 30, 2005.
------------------------------------------------------------------------------------------------------------------------------
Number of Unexercised Value of Unexercised
Options Held at In-the-Money Options
September 30, 2005 at September 30, 2005 (2)
------------------ -------------------------
Shares
Acquired
Upon
Name Exercise Value Realized(1) Exercisable Unexercisable Exercisable Unexercisable
---- -------- ----------------- ----------- ------------- ----------- -------------
Michael Chuises -0- -0- 278,125 1,721,875 $4,219 $19,281
VP of Engineering
Bryan Crane -0- -0- 253,494 -0- $7,605 -0-
VP of Corporate
Development
(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 September 30, 2005 ($0.11 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. 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,
5,209,994 options to purchase 5,209,994 shares of common stock at volume
weighted average price of $0.11 per share granted under the 2003 Plan are
outstanding. To date, 2,775,000 options have been exercised.
22
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information
Our common stock has been quoted on the OTC Bulletin Board under the symbol
"RMSG.OB." The following table shows the reported high and low closing bid
quotations per share for our common stock based on information provided by the
OTC Bulletin Board. Particularly since our common stock is traded infrequently,
such over-the-counter market quotations reflect inter-dealer prices, without
markup, markdown or commissions and may not necessarily represent actual
transactions or a liquid trading market.
Year Ended June 30, 2006 High Low
---- ---
First Quarter ended September 30, 2005 $0.18 $0.10
Second Quarter ended December 31, 2005 $0.11 $0.07
Third Quarter ended March 31, 2006 $0.09 $0.06
Year Ended June 30, 2005 High Low
---- ---
First Quarter ended September 30, 2004 $0.68 $0.04
Second Quarter ended December 31, 2004 $0.75 $0.25
Third Quarter ended March 31, 2005 $0.31 $0.19
Fourth Quarter ended June 30, 2005 $0.23 $0.11
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
Number of Stockholders
As of March 29, 2006, there were 497 holders of record of our common stock.
Dividend Policy
Historically, we have not paid any dividends to the holders of our common stock
and we do not expect to pay any such dividends in the foreseeable future as we
expect to retain our future earnings for use in the operation and expansion of
our business.
23
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table indicates beneficial ownership of our common stock as of
March 29, 2006 by:
o Each person or entity known by us to beneficially own more than 5% of the
outstanding shares of our common stock;
o Each of our executive officers and directors; and
o All of our executive officers and directors as a group.
Except as otherwise indicated, the persons named in the table have sole voting
and investment power with respect to all shares beneficially owned, subject to
community property laws, where applicable. Unless other indicated, the address
of each beneficial owner listed below is c/o Roaming Messenger, Inc. 50
Castilian Drive, Suite A, Santa Barbara, California 93117.
Number of Shares
Name, Title and Address Beneficially Owned (1) Percentage Ownership (1)
----------------------- ---------------------- ------------------------
Jonathan Lei
President, Chief Financial Officer,
Secretary, and Chairman 95,639,025 51.32%
Bryan Crane
VP of Corporate Development 1,231,500 (2) 0.66%
Harinder Dhillon
Senior Vice President
(President of Warp 9 Inc.) 3,185,000 (3) 1.71%
Michael Chuises
Vice President of Engineering 453,994 (4) 0.24%
Louie Ucciferri
Director 3,500,000 1.88%
All current Executive Officers as a Group 100,509,519 53.52%
(1) Applicable percentage ownership as of March 29, 2006 is based upon
186,831,266 shares of common stock outstanding. Beneficial ownership is
determined in accordance with Rule 13d-3 of the Securities Exchange Act of 1934,
as amended. Under Rule 13d-3, shares issuable within 60 days upon exercise of
outstanding options, warrants, rights or conversion privileges ("Purchase
Rights") are deemed outstanding for the purpose of calculating the number and
percentage owned by the holder of such Purchase Rights, but not deemed
outstanding for the purpose of calculating the percentage owned by any other
person. "Beneficial ownership" under Rule 13d-3 includes all shares over which a
person has sole or shared dispositive or voting power.
(2) Includes 235,494 shares of common stock issuable upon the exercise of vested
options.
(3) Includes 250,000 shares of common stock issuable upon the exercise of vested
options
(4) Includes 459,722 shares of common stock issuable upon the exercise of vested
options
24
SELLING SHAREHOLDER
The following table presents information regarding the selling stockholder. A
description of the selling stockholder's relationship to us and how the selling
stockholder acquired the shares to be sold in this offering is detailed in the
information immediately following this table.
Shares Beneficially Owned Shares Beneficially Owned After
Prior to Offering the Offering(2)
Selling Stockholder Number Percent(1) Number Percent(1)
------------------- ------ ---------- ------ ----------
Cornell Capital Partners LP. 9,596,800 (2) 4.9% -0- --
Total 9,596,800 -0- -0-
* less than 1%.
(1) Applicable percentage ownership is based on 186,831,266 shares of common
stock outstanding as of March 29, 2006. Beneficial ownership is determined in
accordance with the rules of the Securities and Exchange Commission and
generally includes voting or investment power with respect to securities. Shares
of common stock that are currently exercisable or exercisable within 60 days of
January 19, 2006 are deemed to be beneficially owned by the person holding such
securities for the purpose of computing the percentage of ownership of such
person, but are not treated as outstanding for the purpose of computing the
percentage ownership of any other person.
(2) Consists of shares issuable upon conversion of convertible debentures. For
purposes of calculating Cornell Capital Partners LP's percentage beneficial
ownership, does not include 89,903,200 registered on behalf of this person, as
follows: (i) 80,403,200 shares issuable upon conversion of convertible
debentures and (ii) 9,500,000 shares issuable upon exercise of warrants.
Pursuant to provisions in the convertible debentures and the warrants, Cornell's
beneficial ownership of our common stock is limited to 4.9% of the total
outstanding, which limitation may only be waived upon 61-day notice. Under the
terms of a registration rights agreement between us and Cornell Capital, we are
required to register 90,000,000 shares that may be issued upon conversion of the
convertible debentures. All investment decisions of, and control of, Cornell
Capital Partners are held by its general partner, Yorkville Advisors, LLC. Mark
Angelo, the managing member of Yorkville Advisors, makes the investment
decisions on behalf of and controls Yorkville Advisors.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the past two years, there has not been, nor is there currently proposed,
any transaction or series of similar transactions to which we were or are to be
a party in which the amount involved exceeded or exceeds $60,000 and in which
any director, executive officer, holder of more than 5% of our common stock or
any member of the immediate family of any of the foregoing persons had or will
have a direct or indirect material interest.
DESCRIPTION OF SECURITIES
The following description of our capital stock and provisions of our articles of
incorporation and bylaws, each as amended, is only a summary. You should also
refer to the copies of our articles of incorporation and bylaws which are
included as exhibits to our Report on 10-KSB filed with the SEC on April 10,
2002. Our authorized capital stock consists of 495,000,000 shares of common
stock, par value $0.001 per share and 5,000,000 shares of preferred stock $0.001
par value per share. As of March 29, 2006, there are 186,831,266 shares of
common stock issued and outstanding and no shares of preferred stock issued and
outstanding.
Common Stock
Holders of our common stock are entitled to one vote for each share held on all
matters submitted to a vote of our stockholders. Holders of our common stock are
entitled to receive dividends ratably, if any, as may be declared by the board
of directors out of legally available funds, subject to any preferential
dividend rights of any outstanding preferred stock. Upon our liquidation,
dissolution or winding up, the holders of our common stock are entitled to
receive ratably our net assets available after the payment of all debts and
other liabilities and subject to the prior rights of any outstanding preferred
stock. Holders of our common stock have no preemptive, subscription, redemption
or conversion rights. The outstanding shares of common stock are fully paid and
nonassessable. The rights, preferences and privileges of holders of our common
stock are subject to, and may be adversely affected by, the rights of holders of
shares of any series of preferred stock which we may designate and issue in the
future without further stockholder approval.
25
Preferred Stock
Our board of directors is authorized without further stockholder approval, to
issue from time to time up to a total of 5,000,000 shares of preferred stock in
one or more series and to fix or alter the designations, preferences, rights and
any qualifications, limitations or restrictions of the shares of each series,
including the dividend rights, dividend rates, conversion rights, voting rights,
term of redemption, redemption price or prices, liquidation preferences and the
number of shares constituting any series or designations of these series without
further vote or action by the stockholders. The issuance of preferred stock may
have the effect of delaying, deferring or preventing a change in control of our
management without further action by the stockholders and may adversely affect
the voting and other rights of the holders of common stock. The issuance of
preferred stock with voting and conversion rights may adversely affect the
voting power of the holders of common stock, including the loss of voting
control to others. Currently, there are no shares of preferred stock outstanding
and we have no present plans to issue any shares of preferred stock.
Convertible Debentures
On December 28, 2005, we consummated a securities purchase agreement with
Cornell Capital Partners L.P. providing for the sale by us to Cornell of our 10%
secured convertible debentures in the aggregate principal amount of $1,200,000
of which $400,000 was advanced immediately. The second installment of $350,000
will be advanced upon filing of the registration statement of which this
prospectus forms a part. The last installment of $450,000 will be advanced two
business days prior to the date the registration statement is declared
effective. The debentures mature on the third anniversary of the date of
issuance and we are not required to make any payments until the maturity date.
Holders of the debentures may convert at any time amounts outstanding under the
debentures into shares of our common stock at a conversion price per share equal
to the lesser of (i) $0.15 or (ii) 80% of the lowest volume weighted average
price of our common stock during the five trading days immediately preceding the
conversion date as quoted by Bloomberg, LP. Cornell has agreed not to short any
of the shares of Common Stock.
We have the right to redeem a portion or all amounts outstanding under the
debenture prior to the maturity date at a 20% redemption premium provided that
the closing bid price of our common stock is less than $0.15. In addition, in
the event of a redemption, we are required to issue to Cornell 50,000 shares of
common stock for each $100,000 redeemed.
Warrants
During the fiscal year ended June 2005 we granted warrants to purchase 788,500
shares of our common stock, all of which remain outstanding as of the date
hereof. 100,500 of such warrants are exercisable at $0.10 per share and are
immediately exercisable and expire on September 30, 2006, 271,000 of such
warrants are exercisable at $0.10 per share and are immediately exercisable and
expire on December 31, 2006, 201,000 of such warrants are exercisable at $0.10
per share and are immediately exercisable and expire on March 31, 2007. 15,000
of such warrants are exercisable at $0.10 per share and are immediately
exercisable and expire on April 30, 2010. 201,000 of these warrants are
exercisable at $0.10 per share and expire on June 30, 2007.
For the quarter ended September 30, 2005 we granted warrants to purchase 213,500
shares of our common stock, all of which remain outstanding as of the date
hereof. 50,000 of such warrants are exercisable at $0.20 per share and are
immediately exercisable and expire on March 31, 2008. 163,500 of such warrants
are exercisable at $0.10 per share and are immediately exercisable and expire on
September 30, 2007.
In December 2005, granted warrants to purchase 321,000 shares of our common
stock at exercisable at $0.10 per share and are immediately exercisable and
expire on December 31, 2007. In addition, we granted five-year warrants to
purchase 9,500,000 shares of our common stock. Of these warrants, 1,500,000 are
exercisable at $0.08 per share, 4,000,000 are exercisable at $0.10 per share and
4,000,000 are exercisable at $0.12 per share.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is Mountain Share
Transfer, located at 1625 Abilene Drive, Broomfield, Colorado 80020.
26
PLAN OF DISTRIBUTION
The selling stockholder, or its pledgees, donees, transferees, or any of its
successors in interest selling shares received from the named selling
stockholder as a gift, partnership distribution or other non-sale-related
transfer after the date of this prospectus (all of whom may be a selling
stockholder) may sell the common stock offered by this prospectus from time to
time on any stock exchange or automated interdealer quotation system on which
the common stock is listed or quoted at the time of sale, in the
over-the-counter market, in privately negotiated transactions or otherwise, at
fixed prices that may be changed, at market prices prevailing at the time of
sale, at prices related to prevailing market prices or at prices otherwise
negotiated. The selling stockholder may sell the common stock by one or more of
the following methods, without limitation:
o Block trades in which the broker or dealer so engaged will attempt to sell
the common stock as agent but may position and resell a portion of the
block as principal to facilitate the transaction;
o An exchange distribution in accordance with the rules of any stock
exchange on which the common stock is listed;
o Ordinary brokerage transactions and transactions in which the broker
solicits purchases;
o Privately negotiated transactions;
o In connection with short sales of company shares;
o Through the distribution of common stock by any selling stockholder to its
partners, members or stockholders;
o By pledge to secure debts of other obligations;
o In connection with the writing of non-traded and exchange-traded call
options, in hedge transactions and in settlement of other transactions in
standardized or over-the-counter options;
o Purchases by a broker-dealer as principal and resale by the broker-dealer
for its account; or
o In a combination of any of the above.
These transactions may include crosses, which are transactions in which the same
broker acts as an agent on both sides of the trade. The selling stockholders may
also transfer the common stock by gift. We do not know of any arrangements by
the selling stockholders for the sale of any of the common stock.
The selling stockholders may engage brokers and dealers, and any brokers or
dealers may arrange for other brokers or dealers to participate in effecting
sales of the common stock. These brokers or dealers may act as principals, or as
an agent of a selling stockholder. Broker-dealers may agree with a selling
stockholder to sell a specified number of the stocks at a stipulated price per
share. If the broker-dealer is unable to sell common stock acting as agent for a
selling stockholder, it may purchase as principal any unsold shares at the
stipulated price. Broker-dealers who acquire common stock as principals may
thereafter resell the shares from time to time in transactions in any stock
exchange or automated interdealer quotation system on which the common stock is
then listed, at prices and on terms then prevailing at the time of sale, at
prices related to the then-current market price or in negotiated transactions.
Broker-dealers may use block transactions and sales to and through
broker-dealers, including transactions of the nature described above. The
selling stockholders may also sell the common stock in accordance with Rule 144
or Rule 144A under the Securities Act, rather than pursuant to this prospectus.
In order to comply with the securities laws of some states, if applicable, the
shares of common stock may be sold in these jurisdictions only through
registered or licensed brokers or dealers.
From time to time, one or more of the selling stockholders may pledge,
hypothecate or grant a security interest in some or all of the shares owned by
them. The pledgees, secured parties or person to whom the shares have been
hypothecated will, upon foreclosure in the event of default, be deemed to be
selling stockholders. The number of a selling stockholder's shares offered under
this prospectus will decrease as and when it takes such actions. The plan of
distribution for that selling stockholder's shares will otherwise remain
unchanged. In addition, a selling stockholder may, from time to time, sell the
shares short, and, in those instances, this prospectus may be delivered in
connection with the short sales and the shares offered under this prospectus may
be used to cover short sales.
To the extent required under the Securities Act, the aggregate amount of selling
stockholders' shares being offered and the terms of the offering, the names of
any agents, brokers, dealers or underwriters, any applicable commission and
other material facts with respect to a particular offer will be set forth in an
accompanying prospectus supplement or a post-effective amendment to the
registration statement of which this prospectus is a part, as appropriate. Any
underwriters, dealers, brokers or agents participating in the distribution of
the common stock may receive compensation in the form of underwriting discounts,
concessions, commissions or fees from a selling stockholder and/or purchasers of
selling stockholders' shares, for whom they may act (which compensation as to a
particular broker-dealer might be less than or in excess of customary
commissions). Neither we nor any selling stockholder can presently estimate the
amount of any such compensation.
27
The selling stockholders and any underwriters, brokers, dealers or agents that
participate in the distribution of the common stock may be deemed to be
"underwriters" within the meaning of the Securities Act, and any discounts,
concessions, commissions or fees received by them and any profit on the resale
of the securities sold by them may be deemed to be underwriting discounts and
commissions. If a selling stockholder is deemed to be an underwriter, the
selling stockholder may be subject to certain statutory liabilities including,
but not limited to Sections 11, 12 and 17 of the Securities Act and Rule 10b-5
under the Exchange Act. Selling stockholders who are deemed underwriters within
the meaning of the Securities Act will be subject to the prospectus delivery
requirements of the Securities Act. The SEC staff is of a view that selling
stockholders who are registered broker-dealers or affiliates of registered
broker-dealers may be underwriters under the Securities Act. We will not pay any
compensation or give any discounts or commissions to any underwriter in
connection with the securities being offered by this prospectus.
A selling stockholder may enter into hedging transactions with broker-dealers
and the broker-dealers may engage in short sales of the common stock in the
course of hedging the positions they assume with that selling stockholder,
including, without limitation, in connection with distributions of the common
stock by those broker-dealers. A selling stockholder may enter into option or
other transactions with broker-dealers, who may then resell or otherwise
transfer those common stock. A selling stockholder may also loan or pledge the
common stock offered hereby to a broker-dealer and the broker-dealer may sell
the common stock offered by this prospectus so loaned or upon a default may sell
or otherwise transfer the pledged common stock offered by this prospectus.
The selling stockholders and other persons participating in the sale or
distribution of the common stock will be subject to applicable provisions of the
Exchange Act, and the rules and regulations under the Exchange Act, including
Regulation M. This regulation may limit the timing of purchases and sales of any
of the common stock by the selling stockholders and any other person. The
anti-manipulation rules under the Exchange Act may apply to sales of common
stock in the market and to the activities of the selling stockholders and their
affiliates. Regulation M may restrict the ability of any person engaged in the
distribution of the common stock to engage in market-making activities with
respect to the particular common stock being distributed for a period of up to
five business days before the distribution. These restrictions may affect the
marketability of the common stock and the ability of any person or entity to
engage in market-making activities with respect to the common stock.
We have agreed to indemnify the selling stockholder and any brokers, dealers and
agents who may be deemed to be underwriters, if any, of the common stock offered
by this prospectus, against specified liabilities, including liabilities under
the Securities Act. The selling stockholder has agreed to indemnify us against
specified liabilities.
The common stock offered by this prospectus was originally issued to the selling
stockholders pursuant to an exemption from the registration requirements of the
Securities Act, as amended. We agreed to register the common stock issued to the
selling stockholders under the Securities Act, and to keep the registration
statement of which this prospectus is a part effective until all of the
securities registered under this registration statement have been sold. We have
agreed to pay all expenses incident to the registration of the common stock held
by the selling stockholders in connection with this offering, but all selling
expenses related to the securities registered shall be borne by the individual
holders of such securities pro rata on the basis of the number of shares of
securities so registered on their behalf.
We cannot assure you that the selling stockholders will sell all or any portion
of the common stock offered by this prospectus. In addition, we cannot assure
you that a selling stockholder will not transfer the shares of our common stock
by other means not described in this prospectus.
LEGAL MATTERS
The validity of the common stock has been passed upon by Sichenzia Ross Friedman
Ference LLP, New York, New York.
EXPERTS
The June 30, 2005 and 2004 financial statements included in the Prospectus have
been audited by Rose, Snyder & Jacobs, a corporation of certified public
accountants to the extent and for the periods set forth in their report
appearing elsewhere herein and are included in reliance upon such report given
upon the authority of said firm as experts in auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
We filed with the SEC a registration statement on Form SB-2 under the Securities
Act for the common stock to be sold in this offering. This prospectus does not
contain all of the information in the registration statement and the exhibits
and schedules that were filed with the registration statement. For further
information with respect to the common stock and us, we refer you to the
registration statement and the exhibits and schedules that were filed with the
registration statement. Statements made in this prospectus regarding the
contents of any contract, agreement or other document that is filed as an
exhibit to the registration statement are not necessarily complete, and we refer
you to the full text of the contract or other document filed as an exhibit to
the registration statement. A copy of the registration statement and the
exhibits and schedules that were filed with the registration statement may be
inspected without charge at the public reference facilities maintained by the
SEC 100 F Street, N.E., Washington, D.C. 20549. Copies of all or any part of the
registration statement may be obtained from the SEC upon payment of the
prescribed fee. Information regarding the operation of the public reference
rooms may be obtained by calling the SEC at 1-800-SEC-0330. The SEC maintains a
web site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the SEC. The
address of the site is http://www.sec.gov.
28
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES
Under the Nevada General Corporation Law and our Articles of Incorporation, as
amended, our directors will have no personal liability to us or our 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 of
1933 may be permitted to our directors, officers and controlling persons
pursuant to the foregoing, or otherwise, we have been advised that in the
opinion of the SEC such indemnification is against public policy as expressed in
the Securities Act of 1933 and is, therefore, unenforceable.
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF NEVADA STATE LAW
We may be or in the future we may become subject to Nevada's control share law.
A corporation is subject to Nevada's control share law if it has more than 200
stockholders, at least 100 of whom are stockholders of record and residents of
Nevada, and it does business in Nevada or through an affiliated corporation.
The law focuses on the acquisition of a "controlling interest" which means the
ownership of outstanding voting shares sufficient, but for the control share
law, to enable the acquiring person to exercise the following proportions of the
voting power of the corporation in the election of directors: (i) one-fifth or
more but less than one-third, (ii) one-third or more but less than a majority,
or (iii) a majority or more. The ability to exercise such voting power may be
direct or indirect, as well as individual or in association with others.
The effect of the control share law is that the acquiring person, and those
acting in association with it, obtains only such voting rights in the control
shares as are conferred by a resolution of the stockholders of the corporation,
approved at a special or annual meeting of stockholders. The control share law
contemplates that voting rights will be considered only once by the other
stockholders. Thus, there is no authority to strip voting rights from the
control shares of an acquiring person once those rights have been approved. If
the stockholders do not grant voting rights to the control shares acquired by an
acquiring person, those shares do not become permanent non-voting shares. The
acquiring person is free to sell its shares to others. If the buyers of those
shares themselves do not acquire a controlling interest, their shares do not
become governed by the control share law.
If control shares are accorded full voting rights and the acquiring person has
acquired control shares with a majority or more of the voting power, any
stockholder of record, other than an acquiring person, who has not voted in
favor of approval of voting rights is entitled to demand fair value for such
stockholder's shares.
Nevada's control share law may have the effect of discouraging takeovers of the
corporation.
In addition to the control share law, Nevada has a business combination law
which prohibits certain business combinations between Nevada corporations and
"interested stockholders" for three years after the "interested stockholder"
first becomes an "interested stockholder" unless the corporation's board of
directors approves the combination in advance. For purposes of Nevada law, an
"interested stockholder" is any person who is (i) the beneficial owner, directly
or indirectly, of ten percent or more of the voting power of the outstanding
voting shares of the corporation, or (ii) an affiliate or associate of the
corporation and at any time within the three previous years was the beneficial
owner, directly or indirectly, of ten percent or more of the voting power of the
then outstanding shares of the corporation. The definition of the term "business
combination" is sufficiently broad to cover virtually any kind of transaction
that would allow a potential acquiror to use the corporation's assets to finance
the acquisition or otherwise to benefit its own interests rather than the
interests of the corporation and its other stockholders.
The effect of Nevada's business combination law is to potentially discourage
parties interested in taking control of us from doing so if it cannot obtain the
approval of our board of directors.
29
ROAMING MESSENGER, INC.
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2005 AND 2004
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
CONTENTS
PAGE
Report of Independent Registered Public Accounting Firm .............. F-2
Consolidated Balance Sheets............................................ F-3
Consolidated Statements of Operations................................. F-4
Consolidated Statements of Changes in Shareholders Equity............. F-5
Consolidated Statements of Cash Flows ................................ F-6
Notes to Consolidated Financial Statements ........................... F-7
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED DECEMBER 31, 2005
Balance Sheets as of December 31, 2005 (unaudited)
and June 30, 2005..................................................... F-18
Statements of Operations for the Six Months ended December 31,
2005 and 2004 (unaudited)............................................. F-19
Statements of Cash Flows for the Six Months ended
December 31, 2005 and 2004 (unaudited)................................ F-20
Notes to Condensed Consolidated Financial Statements
(unaudited)........................................................... F-21
F-1
ROSE, SNYDER & JACOBS
A CORPORATION OF CERTIFIED PUBLIC ACCOUNTANTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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, 2005 and 2004 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, 2005 and 2004, 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 16, 2005
15821 Ventura Boulevard, Suite 490, Encino, California 91436 Phone:
(818) 461-0600 * Fax: (818) 461-0610
F-2
ROAMING MESSENGER, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2005 AND 2004
June 30, June 30,
2005 2004
------------ ------------
CURRENT ASSETS
Cash $ 237,529 $ 1,495,102
Accounts receivable net of allowance for doubtful account of $7,380 and $20,000 178,729 116,407
Prepaid expenses 19,347 9,944
------------ ------------
TOTAL CURRENT ASSETS 435,605 1,621,453
------------ ------------
PROPERTY & EQUIPMENT
Furniture, Fixtures & Equipment 88,341 83,225
Computer Equipment 435,292 278,715
Commerce Server 50,000 50,048
Computer Software 7,960 3,535
Leasehold Improvements -- 42,194
------------ ------------
581,593 457,717
Less: Accumulated depreciation & amortization (331,053) (261,370)
------------ ------------
NET PROPERTY & EQUIPMENT 250,540 196,347
------------ ------------
OTHER ASSETS
Lease deposit 10,237 7,029
Restricted Cash (see note 8) 93,000 --
Other assets 3,935 2,503
------------ ------------
TOTAL OTHER ASSETS 107,172 9,532
------------ ------------
TOTAL ASSETS $ 793,317 $ 1,827,332
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ 121,645 $ 24,892
Accrued liabilities (note 8) 227,420 42,093
Deferred income (note 2) 26,667 --
Officer salary payable 237,981 243,730
Staff salaries payable 50,410 46,499
Note payable (note 4) 30,000 39,500
Current portion - obligations under capitalized leases (note 3) 49,846 33,631
------------ ------------
TOTAL CURRENT LIABILITIES 743,969 430,345
------------ ------------
LONG TERM LIABILITIES
Obligations under capitalized leases (note 3) 89,785 45,059
------------ ------------
TOTAL LONG TERM LIABILITIES 89,785 45,059
------------ ------------
TOTAL LIABILITIES 833,754 475,404
------------ ------------
SHAREHOLDERS' EQUITY (DEFICIT)
Capital Stock 180,807 172,400
Additional Paid-in Capital 4,950,066 3,871,738
Accumulated deficit (5,171,310) (2,692,210)
------------ ------------
TOTAL SHAREHOLDERS' EQUITY (DEFICIT) (40,437) 1,351,928
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) $ 793,317 $ 1,827,332
============ ============
See report of independent registered public accounting firm and notes to
condensed consolidated financial statements.
F-3
ROAMING MESSENGER, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 2005 AND 2004
June 30, 2005 June 30, 2004
-------------- --------------
REVENUE $ 1,184,212 $ 953,772
COST OF REVENUE 399,265 132,404
-------------- --------------
GROSS PROFIT 784,947 821,368
OPERATING EXPENSES
Selling, general and administrative expenses 2,735,890 1,474,106
Research and development 397,205 315,061
Depreciation and amortization 113,775 60,231
-------------- --------------
TOTAL OPERATING EXPENSES 3,246,870 1,849,398
-------------- --------------
OPERATING LOSS (2,461,923) (1,028,030)
-------------- --------------
OTHER INCOME (EXPENSES)
Interest income 9,258 7,116
Interest expense (26,435) (15,031)
-------------- --------------
TOTAL OTHER INCOME (EXPENSES) (17,177) (7,915)
-------------- --------------
NET LOSS $ (2,479,100) $ (1,035,945)
============== ==============
BASIC AND DILUTED LOSS
PER SHARE $ (0.01) $ (0.01)
============== ==============
WEIGHTED AVERAGE
NUMBER OF SHARES 174,247,486 161,432,015
============== ==============
See report of independent registered public accounting firm and notes to
condensed consolidated financial statements.
F-4
ROAMING MESSENGER, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT
FOR THE YEARS ENDED JUNE 30, 2005 AND 2004
Additional
Common Paid-in Accumulated
Shares Stock Capital Deficit Total
------------ ------------ ------------ ------------ ------------
Balance, June 30, 2003 147,912,035 $ 147,912 $ 1,306,502 $ (1,656,265) $ (201,851)
Issuance of common stock, note 6 24,487,579 24,488 2,515,236 -- 2,539,724
Issuance of warrants, note 7 -- -- 50,000 -- 50,000
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
Issuance of common stock, note 6 8,407,477 8,407 949,308 -- 957,716
Issuance of warrants, note 7 129,020 129,020
Net loss -- -- -- (2,479,100) (2,479,100)
------------ ------------ ------------ ------------ ------------
Balance, June 30, 2005 180,807,091 $ 180,807 $ 4,950,066 $ (5,171,310) $ (40,437)
============ ============ ============ ============ ============
See report of independent registered public accounting firm and notes to
condensed consolidated financial statements.
F-5
ROAMING MESSENGER, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 2005 AND 2004
June 30, 2005 June 30, 2004
-------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (2,479,100) $ (1,035,945)
Adjustment to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 111,877 60,231
Warrants issued for services 129,020 50,000
Common stock issued for services 330,462 82,917
Decrease (increase) in account receivable (62,322) (39,509)
Decrease (increase) in prepaid and other assets (14,043) (5,602)
(Decrease) increase in accounts payable 96,752 (20,506)
(Decrease) increase in officer salaries payable (5,749) (63,636)
(Decrease) increase in staff salaries payable 3,911 23,052
(Decrease) Increase in deferred income 26,667 --
(Decrease) increase in other liabilities 185,327 805
-------------- --------------
NET CASH USED IN OPERATING ACTIVITIES (1,677,198) (948,193)
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Restricted Cash (93,000)
Purchase of property & equipment (58,603) (64,684)
-------------- --------------
NET CASH USED IN INVESTING ACTIVITIES (151,603) (64,684)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock 627,254 2,485,324
Payment on note payable (9,500) (10,500)
Payments on capitalized lease obligations (46,526) (24,253)
-------------- --------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 571,228 2,450,571
-------------- --------------
NET INCREASE (DECREASE) IN CASH (1,257,573) 1,437,694
CASH AT BEGINNING OF PERIOD 1,495,102 57,408
-------------- --------------
CASH AT END OF PERIOD $ 237,529 $ 1,495,102
============== ==============
Supplementary disclosures:
Interest paid $ 26,435 $ 15,031
============== ==============
Capitalized leases contracted: $ 107,467 $ 70,250
============== ==============
See report of independent registered public accounting firm and notes to
condensed consolidated financial statements.
F-6
ROAMING MESSENGER, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2005 AND 2004
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.
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. The Company will be selling securities through
private placements and, as discussed in note 11, through its Periodic Equity
Investment Agreement . 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.
F-7
ROAMING MESSENGER, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2005 AND 2004
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. We present revenue, net of customer incentives. Most of the income is
generated from monthly fees from clients who subscribe to the Company's fully
hosted web products on terms averaging 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.
We provide online marketing services that we purchase from third parties. The
gross revenue presented in our statement of operations is in accordance with
EITF No. 99-19.
We also offer professional services such as development services. The fees for
development services constitute a separate unit of accounting in accordance with
EITF No. 00-21, and are recognized as the work is performed.
Upfront fee for development services or other customer services are deferred
until certain implementation or contractual milestones have been achieved.
Deferred income for the fiscal year ended, June 30, 2005, was $26,667.
For the fiscal year ended, June 30, 2005, monthly fee from web products and
associated service fees account for 55% of the Company's total revenues,
professional services account for 23% and the remaining 22% of total revenues
are from resale of third party products and services.
For the fiscal year ended, June 30, 2004, monthly fee from web products and
associated service fees account for 75% of the Company's total revenues,
professional services account for 20% and the remaining 5% of total revenues are
from resale of third party products and services.
RETURNS POLICY
On all service offerings such as web based e-commerce products, or hosted
Roaming Messenger service, there are no returns. Monthly fees are assessed and
revenue is recognized at the end of every month, after service has been
provided. Some higher paying customers may have service level agreements where
we guarantee system uptime such as 99% of the time per month. If we fall below
the agreed upon level of uptime, we shall credit one day of service fee for each
hour our system is down up to a maximum of one monthly fee. This guarantee only
covers downtime as a result of failure in the Company's hardware, software or
gross negligence. Historical, the Company has not had to issue any credits for
such returns.
COST OF REVENUE
Cost of revenue includes the direct costs of operating the Company's network,
including telecommunications charges and internet marketing charges.
F-8
ROAMING MESSENGER, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2005 AND 2004
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
RESEARCH AND DEVELOPMENT
Research and development costs are expensed as incurred. Total research and
development costs were $397,205 and $315,061 for the years ended June 30, 2005
and 2004, 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 and warrants. 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, 2005 and 2004, 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
Property and equipment assets with an original cost of $199,418 and $115,084 at
June 30, 2005 and 2004, respectively were leased under capitalized leases.
Amortization of assets under capitalized leases is included in depreciation and
amortization expense. During the years ended June 30, 2005 and 2004, additions
to fixed assets through capitalized leases totaled $107,467 and $70,250,
respectively.
During the year ended June 30, 2005, the Company vacated its premises on 6144
Calle Real in Santa Barbara. The Company recorded an expense for $23,485,
representing the cost of the abandoned related leasehold improvements,
F-9
ROAMING MESSENGER, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2005 AND 2004
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 $53,147 and $20,156 for the years ended
June 30, 2005 and 2004, 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.
The pro forma net loss and loss per share had the Company accounted for the
options using FAS 123 would have been as follows:
2005 2004
----------- -----------
Net loss as reported $(2,479,100) $(1,035,945)
Basic and diluted net loss per share (0.01) (0.01)
as reported
Add: Stock-based employee compensation -- 50,000
expense included in net reported loss
Deduct: Stock based employee (13,839) (134,000)
compensation expense determined under fair
value based method for all awards
----------- -----------
Pro forma net loss $(2,492,939) $(1,119,945)
=========== ===========
Basic and diluted pro forma loss per share $ (0.01) $ (0.01)
=========== ===========
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 2005 and 2004 because they have an antidilutive
effect in these periods.
F-10
ROAMING MESSENGER, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2005 AND 2004
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.
NEW ACCOUNTING PRONOUNCEMENTS
In December 2004, the Financial Accounting Santdards Board ("FASB") issued
revised Statement 123R, "Share-Based Payment," to be effective for annual
periods beginning after December 15, 2005 for Roaming Messenger, Inc. Statement
123R requires all share-based payments to employees, including grants of
employee stock options, to be recognized as compensation expense in the income
statement. The cost is recognized over the requisite service period based on
fair values measured on grant dates. The new standard may be adopted using
either the modified prospective transition method or the modified retrospective
method. We are currently evaluating our share-based employee compensation
programs, the potential impact of this statement on our consolidated financial
position and results of operations, and the alternative adoption methods.
In November 2004, the FASB issued SFAS No. 151, "Inventory Costs - an amendment
of ARB No. 43, Chapter 4." SFAS No. 151 seeks to clarify the accounting for
abnormal amounts of idle facility expense, freight, handling costs and wasted
material (spoilage) in the determination of inventory carrying costs. The
statement requires such costs to be treated as a current period expense. This
statement is effective for the company on July 2, 2006. The company does not
believe the adoption of SFAS No. 151 will have a material impact on its
financial statements.
3. OBLIGATIONS UNDER CAPITALIZED LEASES
Lessor Description 2005 2004
------------- ---------------------------------------------- ---------- ----------
SBBT Payable in monthly installments of $281
interest at 16%, matures in November, 2009 $ 10,669 $ --
SBBT Payable in monthly installments of $726
interest at 17%, matures in August, 2009 25,760 --
GE Payable in monthly installments of $551
interest at 17%, matures in September, 2008 17,653 --
GE Payable in monthly installments of $1206
interest at 17%, matures in September, 2008 39,745 --
Washoe/BofA Payable in monthly installments of $1513,
interest at 6.8%, matures in April, 2007 31,206 46,651
GE Payable in monthly installments of $710
interest at 12.8%, matures in October, 2006 10,394 16,360
Avaya Payable in monthly installments of $655,
interest at 16%, matures in December, 2004 -- 3,753
GE Payable in monthly installments of $348,
interest at 13%, matured in October 2005 1,357 5,094
Dell Payable in monthly installments of $200,
interest at 13%, matures in January 2006 1,504 3,407
Dell Payable in monthly installments of $203,
interest at 21%, matures in February 2006 1,344 3,425
---------- ----------
139,632 78,690
Less current portion 49,846 20,348
---------- ----------
Long-term portion of obligations under
capitalized leases $ 89,786 $ 58,342
========== ==========
F-11
ROAMING MESSENGER, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2005 AND 2004
Minimum annual lease payments under capitalized lease obligations at June 30,
2005 are as follows:
2006 $ 64,663
2007 51,138
2008 33,168
2009 17,355
2010 2,857
----------
169,181
Less amount representing interest 29,549
----------
139,632
Less current portion 49,846
----------
Long term portion of capitalized lease obligations $ 89,786
==========
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, 2005, the outstanding principal amount on this note
is $30,000. This note is secured by furniture of the Company. See note 8.
5. INCOME TAXES
At June 30, 2005, the Company has available for federal and state income tax
purposes, net operating loss carryforwards of approximately $8,500,000 and
$3,900,000, 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, 2005 and 2004 relates primarily to
losses incurred for which no tax benefit was recognized, due to the uncertainty
of its realization. The valuation allowance was $3,300,000 and $2,300,000 at
June 30, 2005 and 2004, respectively, representing an increase of $1,000,000 for
the year ended June 30, 2005. 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:
F-12
ROAMING MESSENGER, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2005 AND 2004
2005 2004
------------ ------------
Income tax benefit computed
at U.S. federal statutory rate (34%) $ 840,000 $ 350,000
State income taxes, net of benefit federal taxes 144,000 63,000
Other 16,000 (73,000)
Less valuation allowance (1,000,000) (340,000)
------------ ------------
Income tax expense $ -- $ --
------------ ------------
The deferred income tax benefit at June 30, 2005, and 2004 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:
2005 2004
------------ ------------
Property and Equipment $ 55,000 $ 56,000
Net operating loss carryforwards 3,150,000 2,148,000
Officer salaries payable 95,000 96,000
------------ ------------
3,300,000 2,300,000
Less: valuation allowance (3,300,000) (2,300,000)
------------ ------------
Deferred income tax asset $ -- $ --
============ ============
6. SHAREHOLDERS' DEFICIT
For the fiscal year ended, June 30, 2004, the Company issued 23,807,579 shares
of restricted common stock for 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.
For the fiscal year ended, June 30, 2005, the Company issued 6,875,000 shares of
restricted common stock for a net cash consideration of $627,254 as a result of
a series of private offerings of common stock ranging from $0.08 per share to
$0.10 per share as well as exercise of stock options. 1,532,477 shares of
restricted common stock were also issued for $330,462 of services.
On March 28, 2005, the Company entered into a Periodic Equity Investment
Agreement with Wings Fund, Inc. Pursuant to the Periodic Equity Investment
Agreement, the Company may, on a monthly basis
F-13
ROAMING MESSENGER, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2005 AND 2004
commencing after the effective date of the registration statement in connection
with that agreement, periodically sell to Wings Fund, Inc. shares of common
stock for a total purchase price of up to $3,000,000. Such monthly sales are
limited to a maximum aggregate of $250,000. Further, upon execution of the
Periodic Equity Investment Agreement, the Company issued to Wings Fund, Inc. an
aggregate of 5,000,000 shares of common stock at a price of $0.10 per share for
gross proceeds of $500,000 (included in the $627,254 above).
The common stock of Roaming Messenger, Inc. has a par value of $0.001, and
495,000,000 shares are authorized to be issued. The Company is also authorized
to issue 5,000,000 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, 2005, 22,225,000 shares of common stock were reserved for the
issuance of common stock pursuant to the Stock Option Plan, and 838,500 were
reserved for the issuance of common stock pursuant to outstanding warrants.
7. STOCK OPTIONS AND WARRANTS
In July 10, 2003, 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, may issue 25,000,000 shares of common stock.
Options granted under the Plan could be either Incentive Options or Nonqualified
Options, and are administered by the Company's Board of Directors. Each options
may be 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 are to expire on the date specified in the Option
agreement, which date are 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 are 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).
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.
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 3,500,000 shares of
Roaming Messenger, Inc. were granted during the year ended June 30, 2005. The
fair value of options granted during the years ended June 30, 2005 and 2004,
which have been estimated at $131,960 and $159,000, respectively, at the date of
grant were determined using the Black-Scholes Option pricing model with the
following assumptions:
2005 2004
------------ ------------
Risk free interest rate 3.36-4.00% 2.79%-3.27%
Stock volatility factor 0.29-0.81 0.01
Weighted average expected option life 4 years 4 years
Expected dividend yield None None
F-14
ROAMING MESSENGER, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2005 AND 2004
A summary of the Company's stock option activity and related information
follows:
Year ended Year ended
------------ ------------
June 30, 2005 June 30, 2004
------------ ------------
Weighted Weighted
average average
exercise exercise
Options price Options price
----------- ------------ ----------- ------------
Outstanding - beginning of year 8,297,494 $ 0.11 8,444,000 $ 0.08
Granted 3,500,000 0.12 2,478,494 0.18
Exercised 275,000 0.08 2,500,000 0.08
Forfeited 7,287,500 0.12 125,000 0.08
----------- ------------ ----------- ------------
Outstanding - end of year 4,234,994 $ 0.11 8,297,494 $ 0.11
=========== ============ =========== ============
Exercisable at the end of year 972,980 $ 0.09 5,720,935 $ 0.09
=========== ============ =========== ============
Fair value of options granted
during the year $ 131,960 $ 159,000
============ ============
The weighted average remaining contractual life of options as of June 30, 2005
was as follows:
Weighted
Average
Number of remaining
Exercise options contractual
prices outstanding life (years)
--------- ------------ ------------
$ 0.08 1,234,994 2.31
$ 0.10 2,300,000 3.79
$ 0.17 700,000 3.18
Stock Warrants
During the year ended June 30, 2005, Roaming Messenger, Inc. issued warrants for
services valued at $129,020, 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
------------------- ---------------- ------------------ --------------
September 30, 2004 100,500 September 30, 2006 $ 0.10
December 31, 2004 271,000 December 31, 2006 $ 0.10
March 31, 2005 201,000 March 31, 2006 $ 0.10
April 1, 2005 50,000 March 31, 2008 $ 0.20
April 30, 2005 15,000 April 30, 2010 $ 0.10
June 30, 2005 201,000 June 30, 2007 $ 0.10
----------------
Total Granted 838,500
F-15
ROAMING MESSENGER, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2005 AND 2004
At June 30, 2005, warrants to purchase 838,500 shares were outstanding.
During the year ended June 30, 2005, Warp 9 Inc. cancelled 52,021 warrants,
resulting in 25,192 total outstanding warrants.
The following Warp 9 Inc. warrants, which are exercisable, were outstanding at
June 30, 2005:
Number of shares Exercise Price Expiration date
---------------- -------------- ---------------
25,192 $ 1.00 per share December 31, 2005
8. 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 2010. The following is a schedule of minimum
lease payments for the next five years.
Years Ending
June 30, Rent Payment Rent Income
------------ ------------ -----------
2006 $ 196,000 $ 38,000
2007 $ 176,000 $ 29,000
2008 $ 109,000 $ -
2009 $ 108,000 $ -
2010 $ 109,000 $ -
Total lease expense for the years ended June 30, 2005 and 2004 was $193,708 and
$120,832, respectively. The Company is also required to pay its pro rata share
of taxes, building maintenance costs, and insurance in according to the lease
agreement.
During the year ended June 30, 2005, the Company vacated its premises located at
6144 Calle Real, Santa Barbara, California. The lease expires in March 2007,
therefore the Company is obligated to pay the rent under the terms of the lease.
The Company is subleasing these premises at an agreed rent amount lower than the
rent amount per the original lease, which will generate a total cumulative
shortfall of $99,367 by the end of the lease. This shortfall has been recognized
as an expense for the year ended June 30, 2005, and is included in the accrued
liabilities.
LOAN DEFAULT
The note payable (note 4) has a default clause that allows the lender to assess
late payment charges at his option, in the amount of 10% of the delinquency. The
delinquent charges which could amount to approximately $15,000 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
F-16
ROAMING MESSENGER, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2005 AND 2004
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.
RESTRICTED CASH
The Company has restricted cash in the amount of $93,000. This restricted cash
is used to collateralize a standby letter of credit in favor of the landlord as
part of the Company's lease agreement for its current office space at 50
Castilian Dr. Santa Barbara, CA 93117. This cash amount is restricted until the
lease expires on June 30, 2010 or when negotiated down.
9. CONCENTRATIONS
For the year ended June 30, 2005, the Company had two customers who represented
approximately 42% of total revenue. For the year ended June 30, 2004, the
Company had two customers who represented approximately 30% of total revenue.
Accounts receivable from two customers represented approximately 37% of total
accounts receivable at June 30, 2005. Accounts receivable from two customers
represented approximately 55% of total accounts receivable at June 30, 2004.
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, 2005, the
Company had $181,373 exceeding the amount insured by the U.S. Federal Deposit
Insurance Corporation (FDIC).
10. RELATED PARTY TRANSACTIONS
On June 30, 2005, the Company issued 350,000 shares of common stock to Mr. Tom
Djokovich for serving on the Company's Board of Directors through June 30, 2005.
An expense of $56,000 was recorded in connection with the issuance of these
shares.
11. FUNDING AGREEMENT
On March 28, 2005, we entered into a Periodic Equity Investment Agreement with
Wings Fund, Inc. Pursuant to the Periodic Equity Investment Agreement, we may,
on a monthly basis commencing after the effective date of the registration
statement to be filed by us in connection with that agreement, periodically sell
to Wings Fund, Inc. shares of common stock for a total purchase price of up to
$3,000,000. Such monthly sales are limited to a maximum aggregate of $250,000.
The registration statement was filed on May 3, 2005 and declared effective by
the Securities and Exchange Commission on August 11, 2005. We may now sell up to
$250,000 per month worth of registered common stock to Wings Fund, Inc. at our
discretion until August 11, 2006.
F-17
ROAMING MESSENGER, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
ASSETS
(Unaudited)
December 31,
June 30,
2005 2005
---------------- -------------
CURRENT ASSETS
Cash $ 268,932 $ 237,529
Accounts receivable, net of allowance for doubtful account of $3,230 and $7,380 274,434 178,729
Prepaids and other current assets 22,018 19,347
---------------- -------------
TOTAL CURRENT ASSETS 565,384 435,605
---------------- -------------
PROPERTY & EQUIPMENT
Furniture, Fixtures & Equipment 88,341 88,341
Computer Equipment 481,550 435,292
Commerce Server 50,000 50,000
Computer Software 7,960 7,960
---------------- -------------
627,851 581,593
Less: Accumulated depreciation & amortization (378,561) (331,053)
---------------- -------------
NET PROPERTY & EQUIPMENT 249,290 250,540
---------------- -------------
OTHER ASSETS
Lease deposit 9,749 10,237
Restricted Cash 93,000 93,000
Loan Costs 92,500 -
Deferred Costs 67,133
Other assets 2,714 3,935
---------------- -------------
TOTAL OTHER ASSETS 265,096 107,172
---------------- -------------
TOTAL ASSETS $ 1,079,770 $ 793,317
================ =============
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable $ 173,772 $ 121,645
Accrued liabilities 252,760 227,420
Bank line of credit 99,658 -
Deferred Income 48,333 26,667
Accrued officer salary Officer salaries payable 237,981 237,981
Accrued staff salary and related 83,944 50,410
Note payable 30,000 30,000
Current portion - obligations under capitalized leases 47,366 49,846
---------------- -------------
TOTAL CURRENT LIABILITIES 973,814 743,969
---------------- -------------
LONG TERM LIABILITIES
Convertible Debenture 366,433 -
Obligations under capitalized leases 84,928 89,785
---------------- -------------
TOTAL LONG TERM LIABILITIES 451,361 89,785
---------------- -------------
TOTAL LIABILITIES 1,425,175 833,754
---------------- -------------
COMMITMENTS AND CONTINGENCIES, note 5
SHAREHOLDERS' DEFICIT
Capital Stock 186,356 180,807
Additional Paid-in Capital 5,544,123 4,950,066
Accumulated deficit (6,075,884) (5,171,310)
---------------- -------------
TOTAL SHAREHOLDERS' DEFICIT (345,405) (40,437)
---------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT $ 1,079,770 $ 793,317
================ =============
Prepared without audit.
See notes to condensed consolidated financial statements.
F-18
ROAMING MESSENGER, INC. AND SUBSIDIARY
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Six Three Six
months ended months ended months ended months ended
December 31, December 31, December 31, December 31,
2005 2005 2004 2004
----------------- ---------------- --------------- ----------------
REVENUE $ 518,146 $ 856,072 $ 307,228 $ 616,932
COST OF REVENUE (159,332) (266,386) (141,030) (238,588)
----------------- ---------------- --------------- ----------------
GROSS PROFIT 358,814 589,686 166,198 378,344
OPERATING EXPENSES
Selling, general and administrative expense 522,615 1,130,258 637,312 1,130,687
Depreciation and amortization 23,972 47,365 21,777 40,472
Research and development 106,972 212,754 66,638 188,752
----------------- ---------------- --------------- ----------------
TOTAL OPERATING EXPENSES 652,964 1,390,377 725,727 1,359,911
----------------- ---------------- --------------- ----------------
OPERATING LOSS (294,150) (800,691) (559,529) (981,567)
----------------- ---------------- --------------- ----------------
OTHER INCOME (EXPENSES)
Interest income 763 1,779 4,453 6,610
Other Income 9,579 15,965
Interest expense (111,359) (121,627) (7,110) (11,107)
----------------- ---------------- --------------- ----------------
TOTAL OTHER INCOME (EXPENSES) (101,017) (103,883) (2,657) (4,497)
----------------- ---------------- --------------- ----------------
NET LOSS $ (395,167) $ (904,574) $ (562,186) $ (986,064)
================= ================ =============== ================
BASIC AND DILUTED LOSS
PER SHARE $ (0.00) (0.00) $ (0.00) $ (0.01)
================= ================ =============== ================
WEIGHTED AVERAGE NUMBER
OF SHARES 184,151,379 182,798,365 172,530,810 172,488,310
================= ================ =============== ================
Prepared without audit. See notes to consolidated financial statements.
F-19
ROAMING MESSENGER, INC. AND SUBSIDIARY
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Six
months ended months ended
December 31, December 31,
2005 2004
---------------- ---------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (904,574) $ (986,064)
Adjustment to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 47,508 40,472
Warrants and Stock issued for services 2,843 81,062
Common stock issued for services 123,100 17,000
Conversion feature recorded as interest expense 100,000 -
Decrease (increase) in account receivable (95,705) (16,220)
Decrease (increase) in prepaid and other assets (963) (24,545)
(Decrease) increase in accounts payable 52,127 33,229
(Decrease) increase in officer salaries payable - (5,749)
(Decrease) increase in other liabilities 92,540 14,491
---------------- ---------------
NET CASH USED IN OPERATING ACTIVITIES (583,124) (846,324)
---------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Employee advances - (469)
Purchase of property & equipment (26,462) (48,596)
---------------- ---------------
NET CASH USED IN INVESTING ACTIVITIES (26,462) (49,065)
---------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock, net of costs 272,963 6,352
Proceeds from bank line of credit 99,658 -
Proceeds from Convertible Debenture 295,500 -
Deposit for shares of common stock - 19,875
Payments on notes payable - (8,500)
Payments on capitalized lease obligations (27,133) (22,180)
---------------- ---------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 640,988 (4,453)
---------------- ---------------
NET INCREASE (DECREASE) IN CASH 31,402 (899,842)
---------------- ---------------
CASH AT BEGINNING OF PERIOD 237,529 1,495,102
---------------- ---------------
CASH AT END OF PERIOD $ 268,932 $ 595,260
================ ===============
Supplementary disclosures:
Interest paid $ 21,627 $ 11,107
================ ===============
Capitalized leases contracted $ 19,796 $ 107,469
================ ===============
Prepared without audit.
See notes to condensed consolidated financial statements.
F-20
ROAMING MESSENGER, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005
1. BASIS OF PRESENTATION AND GOING CONCERN
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all normal recurring
adjustments considered necessary for a fair presentation have been included.
Operating results for the three-month period ended December 31, 2005 are not
necessarily indicative of the results that may be expected for the year ending
June 30, 2006. For further information refer to the financial statements and
footnotes thereto included in the Company's Form 10K-SB for the year ended June
30, 2005.
The accompanying 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 and the possible impact of the
contingencies described in note 5 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.
2. STOCK OPTIONS AND WARRANTS
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.
SFAS No. 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 1,200,000 and 0 shares
of Roaming Messenger, Inc. were granted during the six months ended December 31,
2005 and 2004, respectively. The fair value of options granted, which have been
estimated at $36,390 and $0, respectively, at the date of grant were determined
using the Black-Scholes Option pricing model with the following assumptions:
2005 2004
---------------- -----------
Risk free interest rate 4.01% - 4.39% 3.60%
Stock volatility factor 0.18 - 0.24 0.40
Weighted average expected option life 4 years 4 years
Expected dividend yield None None
Prepared without audit.
F-21
ROAMING MESSENGER, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005
2. STOCK OPTIONS AND WARRANTS (Continued)
The pro forma net loss and loss per share had the Company accounted for the
options using FAS 123 would have been as follows:
Three Months Six Months Three Months Six Months
Ended Ended Ended Ended
December December December December
31, 2005 31, 2005 31, 2004 31, 2004
-------------- -------------- --------------- --------------
Net loss as reported $ (395,167) (904,574) $ (562,186) (986,064)
Basic and diluted net loss per share as reported (0.00) (0.00) (0.00) (0.01)
Add: Stock based employee compensation
expense included in net reported loss, net of related taxes - -
Deduct: Stock based employee
compensation expense determined under fair value based
method for all awards, net of related taxes (9,383) (40,346) (42,475) (61,445)
-------------- -------------- --------------- --------------
Pro forma net loss $ (404,550) $ (944,920) $ (604,661) $ (1,047,509)
============== ============== =============== ==============
Basic and diluted pro forma loss per share $ (0.00) $ (0.01) $ (0.00) $ (0.01)
============== ============== =============== ==============
During the six month period ended December 31, 2005 (i) 900,000, 200,000 and
100,000 options were granted at an exercise price of $0.13, $0.10 and $0.07 per
share respectively, (ii) 225,000 previously granted options were cancelled
and/or forfeited. At December 31, 2005, total outstanding unexercised options
are 5,209,994.
Warrants
In December 2005, the Company granted warrants to purchase 321,000 shares of
common stocks at $0.10 per share for consulting services. These warrants expire
on December 31, 2007, and were valued at $995. In December 2005, the Company
granted five-year warrants to purchases 1,500,000, 4,000,000 and 4,000,000
shares of common stocks at $0.08, $0.10 and $0.12.respectively to an accredited
investor as an incentive to enter into a convertible debenture agreement. These
warrants were valued at $100,700. One-third of this $100,700 expense amount, or
$33,567, was applied as a discount to the $400,000 convertible debenture entered
into on December 28, 2005. The remaining two-third, $67,133, is deferred as the
remainder of the total $1,200,000 convertible debenture has not been received
from the investor.
At December 31, 2005, total outstanding unexercised warrants are 10,823,000.
3. LINE OF CREDIT
On August 11, 2005, the Company was approved for a $100,000 revolving line of
credit from Bank of America at an interest of prime plus 4 percentage points.
This line of credit is not secured by assets of the Company. The effective
interest rate of the line of credit at December 31, 2005 was 11%. As of December
31, 2005, $99,658 was borrowed under this line of credit
Prepared without audit.
F-21
ROAMING MESSENGER, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005
4. CONVERTIBLE DEBENTURES
On December 28, 2005, we consummated a securities purchase agreement with
Cornell Capital Partners L.P. providing for the sale by us to Cornell of our 10%
secured convertible debentures in the aggregate principal amount of $1,200,000
of which the first installment of $400,000 was advanced immediately. The net
amount of the first installment received by the Company was $295,500 after
paying total fees of $92,500 which included legal, structuring, due diligence,
commitment fees, and prior liability of $12,000. An interest expense of
$100,000, representing the value of the conversion feature in accordance to EITF
98-5, was incurred at the receipt of this first installment.
Holders of the debentures may convert at any time amounts outstanding under the
debentures into shares of our common stock at a conversion price per share equal
to the lesser of (i) $0.15 or (ii) 80% of the lowest volume weighted average
price of our common stock during the five trading days immediately preceding the
conversion date as quoted by Bloomberg, LP. Cornell has agreed not to short any
of the shares of Common Stock.
We have the right to redeem a portion or all amounts outstanding under the
debenture prior to the maturity date at a 20% redemption premium provided that
the closing bid price of our common stock is less than $0.15. In addition, in
the event of a redemption, we are required to issue to Cornell 50,000 shares of
common stock for each $100,000 redeemed.
We also issued to Cornell five-year warrants to purchase 1,500,000, 4,000,000
and 4,000,000 shares of Common Stock at $0.08, $0.10 and $0.12, respectively.
The second installment of $350,000 ($295,000 net of fees) was advanced on
January 27, 2006. The last installment of $450,000 will be advanced two business
days prior to the date the registration statement is declared effective. The
debentures mature on the third anniversary of the date of issuance and we are
not required to make any payments until the maturity date.
5. COMMITMENTS AND CONTINGENCIES
In February 2006, Jonathan Lei, our Chairman and Chief Executive Officer, and
Bryan Crane, our Vice President of Corporate Development, were indicted by a
federal grand jury in Florida, alleging that they conspired to commit
securities, mail and wire fraud in connection with an offer for private funding
made to Roaming Messenger Inc. over a year ago, in February 2005, by a
surreptitious investment fund formed by the Government. Specifically, the
indictment alleges that Messrs. Lei and Crane conspired with government agents
posing as fund managers to arrange for an illegal payment to be made to the fund
managers as an inducement to that fund making an investment in the Company. We
did not obtain any funding from the entity or the management company that were
posing as prospective investors. The Company was not named in the indictment.
The Company may be obligated to indemnify Mr. Lei and Mr. Crane for their
defense costs in theses cases in amounts to be determined. This indictment may
have a material adverse impact on the financial position of the company and its
results of operations as result of (i) the possible defense costs to be
disbursed by the Company, (ii) possible departure of these two senior members of
management and (iii) possible damage to the Company's reputation.
Prepared without audit.
F-23
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 24. INDEMNIFICATION OF OFFICERS AND DIRECTORS
LIMITATION OF LIABILITY: INDEMNIFICATION
Under the Nevada General Corporation Law and our Articles of Incorporation, as
amended, our directors will have no personal liability to us or our 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 of
1933 may be permitted to our directors, officers, and controlling persons
pursuant to the foregoing provisions or otherwise, we have been advised that in
the opinion of the Securities Exchange Commission, such indemnification is
against public policy as expressed in the Securities Act of 1933, and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by us of expenses incurred or paid by
our director, officer, or controlling person in the successful defense of any
action, suit or proceeding) is asserted by such director, officer, or
controlling person in connection with the securities being registered hereunder,
we will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act of 1933 and will be governed by the final
adjudication of such issue.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth an estimate of the costs and expenses payable by
Roaming Messenger, Inc. in connection with the offering described in this
registration statement. All of the amounts shown are estimates except the
Securities and Exchange Commission registration fee:
Securities and Exchange Commission Registration Fee $ 595
Accounting Fees and Expenses $ 5,000*
Legal Fees and Expenses $30,000*
Total $35,595
=======
*Estimated
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
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.
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.
II-1
From April 2003 through October 2003, Roaming Messenger, Inc. issued and sold
2,704,263 shares of common stock at a price of $0.08 per share for aggregate
gross proceeds of $216,341. The shares were issued to 6 accredited investors in
transactions exempt under Rule 506 of Regulation D promulgated under Section
4(2) of the Securities Act of 1933, as amended.
From May 2003 through August 2003, Roaming Messenger, Inc. issued and sold
1,202,500 shares of common stock, at a price of $0.08 per share to 3 consultants
for services valued at $96,200. The shares were issued pursuant to Section 4(2)
of the Securities Act of 1933, as amended.
From October 2003 through January 2004, Roaming Messenger, Inc. issued and sold
2,017,500 shares of common stock at a price of $0.08 per share for aggregate
gross proceeds of $161,400. The shares were issued to 7 accredited investors in
transactions exempt under Rule 506 of Regulation D promulgated under Section
4(2) of the Securities Act of 1933, as amended.
In December 2003, Roaming Messenger, Inc. issued 150,000 shares of common stock
to 4 employees as bonuses. The shares were issued pursuant to Section 4(2) of
the Securities Act of 1933, as amended.
From August 2003 through April 2004, Roaming Messenger, Inc. issued and sold
13,181,027 shares of common stock for aggregate consideration of $1,096,415 to
foreign investors pursuant to Regulation S.
In February 2004, Roaming Messenger, Inc. issued and sold 1,500,000 shares of
common stock at a price of $0.16 per share for aggregate gross proceeds of
$240,400. The shares were issued to 7 accredited investors in transactions
exempt under Rule 506 of Regulation D promulgated under Section 4(2) of the
Securities Act of 1933, as amended.
From December 2003 through June 2004, Roaming Messenger, Inc. issued and sold
497,750 shares of common stock for aggregate consideration of $89,048 to foreign
investors pursuant to Regulation S.
In October 2003 through January 2004, Roaming Messenger, Inc. issued 530,000
shares of common stock at a price of $0.08 per share to 3 consultants for
services. The shares were issued pursuant to Section 4(2) of the Securities Act
of 1933, as amended.
In February 2004, Roaming Messenger, Inc. issued 1,875,000 shares of common
stock upon the exercise of employee options. The shares were issued pursuant to
Section 4(2) of the Securities Act of 1933, as amended.
In March 2004, Roaming Messenger, Inc. issued 600,000 shares of common stock
upon the exercise of a warrant. The shares were issued pursuant to Section 4(2)
of the Securities Act of 1933, as amended.
In April 2004, Roaming Messenger, Inc. issued 525,000 shares of common stock
upon the exercise of an employee option. The shares were issued pursuant to
Section 4(2) of the Securities Act of 1933, as amended.
In March 2004, Roaming Messenger, Inc. issued and sold 1,500,061 shares of
common stock at a price of $0.35 per share for aggregate gross proceeds of
$525,000. The shares were issued to 3 accredited investors in transactions
exempt under Rule 506 of Regulation D promulgated under Section 4(2) of the
Securities Act of 1933, as amended.
In April 2004, Roaming Messenger, Inc. issued and sold 420,000 shares of common
stock at price of $0.50 per share for aggregate gross proceeds of $210,000. The
shares were issued to an accredited investor in a transaction exempt under Rule
506 of Regulation D promulgated under Section 4(2) of the Securities Act of
1933, as amended.
In August 2004, Roaming Messenger, Inc. issued 125,000 shares of common stock
upon the exercise of an employee option. The shares were issued pursuant to
Section 4(2) of the Securities Act of 1933, as amended.
In November 2004, Roaming Messenger, Inc. issued and sold 10,000 shares of
common stock at a price of $0.50 per share to a consultant for services. The
shares were issued pursuant to Section 4(2) of the Securities Act of 1933, as
amended.
In December 2004, Roaming Messenger, Inc. issued 150,000 shares of common stock
upon the exercise of an employee option. In January 2005, Roaming Messenger,
Inc. issued and sold 155,000 shares of common stock at a price of $0.30 per
share to a consultant for services. The shares were issued pursuant to Section
4(2) of the Securities Act of 1933, as amended.
In February 2005, Roaming Messenger, Inc. issued and sold 272,589 shares of
common stock at a price of $0.26 per share to a consultant for services. The
shares were issued pursuant to Section 4(2) of the Securities Act of 1933, as
amended.
In March 2005, Roaming Messenger, Inc. issued and sold 624,000 shares of common
stock at a price of $0.20 per share to two consultants for services. The shares
were issued pursuant to Section 4(2) of the Securities Act of 1933, as amended.
II-2
On March 28, 2005, Roaming Messenger, Inc. issued and sold 5,000,000 shares of
common stock at a price of $0.10 per share for aggregate gross proceeds of
$500,000. The shares were issued to an accredited investor in a transaction
exempt under Rule 506 of Regulation D promulgated under Section 4(2) of the
Securities Act of 1933, as amended.
In April 2005, Roaming Messenger, Inc. issued and sold 1,600,000 shares of
common stock at a price of $0.10 per share for aggregate gross proceeds of
$160,000. The shares were issued to 9 accredited investors in transactions
exempt under Rule 506 of Regulation D ("Regulation D") promulgated under Section
4(2) of the Securities Act of 1933, as amended.
On June 30, 2005 and July 1, 2005, Roaming Messenger issued 470,888 and 400,000
shares of common stock, respectively at $0.16 per share for consulting services.
These shares were issued pursuant to Section 4(2) of the Securities Act of 1933,
as amended.
In August 2005, Roaming Messenger issued 420,000 shares of common stock $0.16
per share for consulting services. These shares were issued pursuant to Section
4(2) of the Securities Act of 1933, as amended.
In September 2005, Roaming Messenger issued and sold 640,000 shares of common
stock at a price of $0.06 per share for aggregate gross proceeds of $40,000 to
Wings Fund Inc. The shares were issued in a transaction exempt under Regulation
D. In October 2005, Roaming Messenger issued 250,000 shares of common stock at
$0.10 per share for consulting services. These shares were issued pursuant to
Section 4(2) of the Securities Act of 1933, as amended.
In October 2005, Roaming Messenger issued and sold 1,580,611 shares of common
stock at a price of $0.06 per share for aggregate gross proceeds of $98,000 to
Wings Fund Inc. The shares were issued in a transaction exempt under Regulation
D. In December 2005, Roaming Messenger issued 250,000 shares of common stock at
$0.10 per share for consulting services. These shares were issued pursuant to
Section 4(2) of the Securities Act of 1933, as amended.
In December 2005, Roaming Messenger issued and sold 300,000 shares of
unregistered common stock at a price of $0.05 per share for aggregate gross
proceeds of $15,000. The shares were issued to 2 accredited investors in
transactions exempt under Rule 506 of Regulation D promulgated under Section
4(2) of the Securities Act of 1933, as amended.
In December 2005, Roaming Messenger issued and sold 2,058,563 shares of common
stock at a price of $0.07 per share for aggregate gross proceeds of $134,147 to
Wings Fund Inc. The shares were issued in a transaction exempt under Regulation
D. On December 28, 2005, Roaming Messenger sold $400,000 in principal amount
convertible debentures to one accredited investor. It also issued to the same
investor five-year warrants to purchase 1,500,000, 4,000,000 and 4,000,000
shares of Common Stock at $0.08, $0.10 and $0.12, respectively. The securities
were issued in a transaction exempt under Rule 506 of Regulation D promulgated
under Section 4(2) of the Securities Act of 1933, as amended.
In January 2006, Roaming Messenger issued 75,000 shares of common stock to a
business development consultant for services performed. The stock was valued at
$0.07. The securities were issued in a transaction exempt under Rule 506 of
Regulation D promulgated under Section 4(2) of the Securities Act of 1933, as
amended.
In February 2006, Roaming Messenger issued 400,000 shares of common stock to an
entity in payment of a $32,000 payable. The securities were issued in a
transaction exempt under Rule 506 of Regulation D promulgated under Section 4(2)
of the Securities Act of 1933, as amended.
II-3
ITEM 27. EXHIBITS
Exhibit 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)
4.3 Convertible Debenture dated December 28, 2005 (3)
4.4 Form of $0.08 Warrant (3)
4.5 Form of $0.10 Warrant (3)
4.6 Form of $0.12 Warrant (3)
5.1 Opinion of Sichenzia Ross Friedman Ference LLP*
10.1 First Agreement and Plan of Reorganization between Latinocare
Management Corporation, a Nevada corporation, and Warp 9, Inc., a
Delaware corporation (4)
10.2 Second Agreement and Plan of Reorganization between Latinocare
Management Corporation, a Nevada corporation, and Warp 9, Inc., a
Delaware corporation (5)
10.3 Exchange Agreement and Representations for shareholders of Warp 9,
Inc.(4)
10.4 Securities Purchase Agreement dated as of March 28, 2005 between
Roaming Messenger, Inc. and Wings Fund, Inc.(6)
10.5 Periodic Equity Investment Agreement dated as of March 28, 2005
between Roaming Messenger, Inc. and Wings Fund, Inc.(5)
10.6 Registration Rights Agreement dated as of March 28, 2005 between
Roaming Messenger, Inc. and Wings Fund, Inc.(6)
10.7 Securities Purchase Agreement dated December 28, 2005 between the
Company and Cornell Capital Partners LLP (3)
10.8 Investor Registration Rights Agreement dated December 28, 2005 (3)
10.9 Insider Pledge and Escrow Agreement dated December 28, 2005 by and
among the Company, Cornell and David Gonzalez as escrow agent (3)
10.10 Security Agreement dated December 28, 2005 by and between the
Company and Cornell (3)
10.10 Escrow Agreement Dated December 28, 2005 by and among the Company,
Cornell and David Gonzalez, as Escrow Agent (3)
10.12 Irrevocable Transfer Agent Instructions (3)
23.1 Consent of Sichenzia Ross Friedman Ference LLP (included in exhibit
5.1)
23.2 Consent of Rose, Snyder & Jacobs*
24.1 Power of Attorney (included on signature page II-6)
----------
(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 in the Company's
Current Report on Form 8-K filed with the Securities and Exchange Commission on
December 29, 2005.
(4) 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.
(5) Incorporated by reference from the exhibits included with the Company's
Current Report on Form 8-K filed with the Securities and Exchange Commission,
dated May 30, 2003.
(6) Incorporated by reference to exhibits filed with the Company's Current
Report on Form 8-K filed with the Securities and Exchange Commission dated March
30, 2005.
* Filed herewith
II-4
ITEM 28. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes to:
(1) file, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by section 10(a)(3) of the Securities Act;
(ii) reflect in the prospectus any facts or events which, individually or
together, represent a fundamental change in the information in the registration
statement; and Notwithstanding the forgoing, any increase or decrease in volume
of securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation From the low or high end of
the estimated maximum offering range may be reflected in the form of prospects
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in the volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement.
(iii) Include any additional or changed material information on the plan of
distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
(3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
(4) For determining liability of the undersigned small business issuer under the
Securities Act to any purchaser in the initial distribution of the securities,
the undersigned undertakes that in a primary offering of securities of the
undersigned small business issuer pursuant to this registration statement,
regardless of the underwriting method used to sell the securities to the
purchaser, if the securities are offered or sold to such purchaser by means of
any of the following communications, the undersigned small business issuer will
be a seller to the purchaser and will be considered to offer or sell such
securities to such purchaser:
(i) Any preliminary prospectus or prospectus of the undersigned
small business issuer relating to the offering required to be filed pursuant to
Rule 424 ;
(ii) Any free writing prospectus relating to the offering prepared
by or on behalf of the undersigned small business issuer or used or referred to
by the undersigned small business issuer;
(iii) The portion of any other free writing prospectus relating to
the offering containing material information about the undersigned small
business issuer or its securities provided by or on behalf of the undersigned
small business issuer; and
(iv) Any other communication that is an offer in the offering made
by the undersigned small business issuer to the purchaser.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
Each prospectus filed pursuant to Rule 424(b) as part of a registration
statement relating to an offering, other than registration statements relying on
Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be
deemed to be part of and included in the registration statement as of the date
it is first used after effectiveness. Provided, however, that no statement made
in a registration statement or prospectus that is part of the registration
statement or made in a document incorporated or deemed incorporated by reference
into the registration statement or prospectus that is part of the registration
statement will, as to a purchaser with a time of contract of sale prior to such
first use, supersede or modify any statement that was made in the registration
statement or prospectus that was part of the registration statement or made in
any such document immediately prior to such date of first use.
II-5
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing on Form SB-2 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Santa Barbara, California, on this 12th day of April,
2006.
ROAMING MESSENGER, INC.
By: /s/ Jonathan Lei
--------------------------
Jonathan Lei
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints Jonathan Lei his true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution for him and in his
name, place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement, and any
subsequent registration statements pursuant to Rule 462 of the Securities Act of
1933 and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agent full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that attorney-in-fact or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated.
Signature Title Date
/s/ Jonathan Lei Chief Executive Officer, President, Chief April 12, 2006
---------------- Financial Officer, Secretary, and Chairman
Jonathan Lei
/s/ Louie Ucciferri Director April 12, 2006
-------------------
Louie Ucciferri
II-6