FORM 10-KSB/A
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: June 30, 2004
For the transition period from July 1, 2003 to June 30, 2004
Commission file number 0-13215
ROAMING MESSENGER, INC.
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(Exact name of registrant as specified in its charter)
Nevada 30-0050402
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(State of Incorporation) (I.R.S. Employer Identification No.)
6144 Calle Real Suite, 200, Santa Barbara, California 93117
(Address of principal executive offices) (Zip Code)
(805) 683-7626
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Registrant's telephone number, including area code
Securities registered pursuant to Section 12(B) of the Act:
Name of Each Exchange On
Title of Each Class Which Registered
COMMON STOCK OTC
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes |X| No |_|
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. |X|
The aggregate market value of voting stock held by non-affiliates of the
registrant was approximately $12,325,246 as of August 31, 2004 (computed by
reference to the last sale price of a share of the registrant's Common Stock on
that date as reported by NASDAQ).
There were 172,399,615 shares outstanding of the registrant's Common Stock as of
August 31, 2004.
TABLE OF CONTENTS
10KSB
PART I..................................................................... 1
ITEM 1..................................................................... 1
ITEM 2..................................................................... 6
ITEM 3..................................................................... 6
ITEM 4..................................................................... 7
PART II.................................................................... 8
ITEM 5..................................................................... 8
ITEM 6..................................................................... 9
ITEM 7..................................................................... 11
ITEM 8..................................................................... 28
ITEM 8A.................................................................... 28
PART III................................................................... 28
ITEM 9..................................................................... 28
ITEM 10.................................................................... 31
ITEM 11.................................................................... 34
ITEM 12.................................................................... 35
ITEM 13.................................................................... 35
ITEM 14.................................................................... 36
SIGNATURES................................................................. 37
CERTIFICATIONS............................................................. 38
PART I
ITEM 1. BUSINESS
Company History
Roaming Messenger, Inc. (the "Company") is a Nevada corporation formerly known
as Latinocare Management Corporation ("LMC"). The Company originally
incorporated in Colorado in July 1983. Effective April 1, 2003, the Company
completed a Plan and Agreement of Reorganization with Warp 9, Inc., a Delaware
corporation ("W9") and effective June 30, 2003, the Company completed a second
Plan and Agreement of Reorganization with W9 (collectively the
"Reorganization"). Pursuant to the Reorganization, LMC acquired all of the
issued and outstanding common stock of W9 in exchange for approximately
131,026,173 newly issued shares of LMC common stock, W9 became a wholly owned
subsidiary of LMC, and the shareholders of W9 became the controlling
shareholders of LMC. Prior to its business combination with W9, LMC had no
tangible assets and insignificant liabilities. Subsequent to the Reorganization
the Company changed its name to Roaming Messenger, Inc.
General
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
We offer a range of gateway servers configured to meet the various mobile
communication demands of users and organizations. All the necessary Roaming
Messenger software is pre-installed in the Gateway Appliances for instant
integration and deployment. We also offer a hosted version of the Roaming
Messenger system where customers can pay a monthly fee to access the
capabilities of Roaming Messenger without large upfront fees.
The entire Roaming Messenger software suite is available for licensing to
strategic VAR and OEM partners for creating customized or private labeled
Roaming Messenger systems.
Applications For Roaming Messenger
Emergency Response.
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. 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.
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.
Sources of Revenue
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 deployment 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 activated for Roaming Messenger communication. Customers will
then be invited to subscribe to an ongoing service plan (optional) that would
provide training, support, maintenance and software upgrades.
On the hosted, or subscription model, customers pay a monthly fee to 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.
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 is
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 ("ASI") model. There are various package levels for
the Warp 9 ICS product. Customers pay anywhere from $1,000/month to
$14,000/month depending on the size of their system configuration and monthly
sales volume through ICS.
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. EMS customers typically pay anywhere from $100/month to $2,000/month
depending the size of their e-mail list and monthly volume on outgoing e-mails.
Most ICS customers also purchase EMS to complement their online commerce
strategy.
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 includes 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. For the fiscal year ended, June 30, 2004, monthly fee from web products
and associated service fees account for 97% 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.
Government Regulation
The Company is subject to various federal, state, and local laws affecting
medical e-commerce and communication businesses. The Federal Trade Commission
and equivalent state agencies regulate advertising and representations made by
businesses in the sale of their products, which apply to the Company. The
Company is also subject to government laws and regulations governing health,
safety, working conditions, employee relations, wrongful termination, wages,
taxes and other matters applicable to businesses in general.
Employees
At the date of this report the Company employs seventeen full time employees,
including the President of the Company. Those full-time employees include six
who are employed in administrative, marketing, and sales positions, and eleven
are technical employees employed in research, development, and technical product
maintenance positions. The Company also employs independent contractors for
sales, marketing and business development efforts who are available to the
company on a half or near full-time basis. The Company projects that during the
next 12 months, the Company's workforce is likely to increase to 30, with four
of the new positions being in the administrative, marketing, and sales areas and
the remaining nine of the new positions being in research, development, and
production positions.
All of the Company's employees have executed agreements that impose
nondisclosure obligations on the employee and assign to the Company (to the
extent permitted by California law) all copyrights and other inventions created
by the employee during his employment with the Company. Additionally, the
Company has a trade secret protection policy in place that management believes
to be adequate to protect the Company's intellectual property and trade secrets.
Seasonality
The Company does not anticipate that its business will be substantially affected
by seasonality.
Trademarks
The Company has not been issued any registered trademarks for its "Roaming
Messenger" trade name. The Company has filed trademark and tradename
applications with the United States Office of Patents and Trademarks for its
proposed tradenames and trademarks.
ITEM 2. PROPERTIES
The Company currently leases approximately 8,605 square feet of office space at
50 Castillian Dr., Suite A, Santa Barbara, California 93117 for approximately
$7,750 per month, triple net, pursuant to a six year lease agreement with rent
commencing on October 1, 2004.
The Company will vacate its old office space of approximately 3,650 square feet,
by September 30, 2004, located at 6144 Calle Real, Suite 200 Santa Barbara,
California 93117 which it will sublease for the remainder of the lease until
March 2007.
ITEM 3. LEGAL PROCEEDINGS
On June 21, 2004, Michael Gilbert, a shareholder, filed a complaint with the
Superior Court of the State of California for the County of Santa Barbara, for
breach of contract, damages and specific performance relating to the removal of
the restrictive legend on his unregistered shares in Roaming Messenger Inc. Mr.
Gilbert accused the Company of refusing to permit him to remove the restrictive
transfer legend on his unregistered shares under Rule 144 of the Securities Act
of 1933, as amended. The Company and the Company's corporate counsel believe
that Mr. Gilbert's claim is without merit and only a result of his
misunderstanding of the Rule 144 process. At no time did the Company object to
Mr. Gilbert's request for legend removal. The Company anticipates that this
complaint will be resolved without lengthy litigation, but will vigorously
defend the lawsuit until it is resolved.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Effective July 10, 2003, the Company adopted the Roaming Messenger, Inc. 2003
Stock Option Plan for Directors, Officers, Employees and Key Consultants (the
"Plan") authorizing the issuance of up to 25,000,000 shares of the Company's
common stock pursuant to the grant and exercise of up to 25,000,000 stock
options. The Board of Directors of the Company unanimously approved the adoption
of the Plan. The holders of 100,140,025 shares or approximately 68.76% of the
total issued and outstanding shares of the Company voted to ratify the adoption
of the Plan. No shares of the Company voted against ratifying the adoption of
the Plan. The remaining outstanding shares abstained.
Effective September 22, 2004, the Company amended its Articles of Incorporation
(the "Amendment") to increase the authorized number of shares of common stock
from 200,000,000 to 495,000,000 and to establish the number of shares of
Preferred Stock at 5,000,000. The Board of Directors of the Company unanimously
approved the adoption of the Amendment. The holders of 99,691,525 shares or
approximately 58% of the total issued and outstanding shares of the Company
voted to ratify the adoption of the Amendment. No shares of the Company voted
against ratifying the adoption of the Amendment. The remaining outstanding
shares abstained.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The Company's common stock trades on the NASD OTC Bulletin Board Market under
the symbol "RMSG." The range of high and low bid quotations for each fiscal
quarter within the last two fiscal years was as follows:
Year Ended June 30, 2004 HIGH LOW
First quarter ended September 30, 2003...............$0.52 $0.27
Second quarter ended December 31, 2003...............$0.45 $0.25
Third quarter ended March 31, 2004...................$3.60 $0.27
Fourth quarter ended June 30, 2004...................$1.90 $0.45
Year Ended June 30, 2003 HIGH LOW
First quarter ended September 30, 2002...............$0.12 $0.12
Second quarter ended December 31, 2002...............$0.12 $0.12
Third quarter ended March 31, 2003...................$0.12 $0.06
Fourth quarter ended June 30, 2003...................$0.75 $0.06
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The above quotations reflect inter-dealer prices, without retail markup,
mark-down, or commission and may not necessarily represent actual transactions.
As of June 30, 2004, there were approximately 500 record holders of the
Company's common stock, not including shares held in "street name" in brokerage
accounts which is unknown. As of June 30 2004, there were approximately
172,399,615 shares of common stock outstanding on record with the Company's
transfer agent, Mountain Share Transfer. Effective September 22, 2004, the
Company amended its Articles of Incorporation to increase the authorized number
of shares of common stock from 200,000,000 to 495,000,000 and to establish the
number of shares of preferred stock at 5,000,000.
The Company has not declared or paid any cash dividends on its common stock and
does not anticipate paying dividends for the foreseeable future.
Effective July 10, 2003, the Company adopted the Roaming Messenger, Inc. 2003
Stock Option Plan for Directors, Officers, Employees and Key Consultants (the
"Plan") authorizing the issuance of up to 25,000,000 shares of the Company's
common stock pursuant to the grant and exercise of up to 25,000,000 stock
options. The Plan has been approved by the holders of the outstanding shares of
the Company. The following table sets forth certain information regarding the
Plan as of June 30, 2004:
Number of securities
Number of securities to be Weighted-average exercise remaining available for
issued upon exercise of price of outstanding stock future issuance under equity
outstanding stock options options compensation plans
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Equity compensation plans 8,297,494 $0.09 14,202,506
approved by security holders
In a series of private placements of the Company's common stock made by the
Company to accredited investors from April 8, 2003 to January 15, 2004 pursuant
to Rule 506 of Regulation D of the Securities Act of 1933, as amended (the
"Act"), the Company sold a total of 5,934,266 shares of common stock for a price
of $0.08 per share, raising gross proceeds of $377,741. This offering was
completed and terminated on January 15, 2004.
In a private placement of the Company's common stock made by the Company to
accredited investors from February 1, 2004 to February 10, 2004 pursuant to Rule
506 of Regulation D of the Act, the Company sold 1,622,500 shares of common
stock at a price of $0.16 per share, which raised gross proceeds of $260,000.
This offering was completed and terminated on February 10, 2004.
In a private placement of the Company's common stock made by the Company to
accredited investors from February 23, 2004 to March 10, 2004 pursuant to Rule
506 of Regulation D of the Act, the Company sold 1,500,000 shares of common
stock at a price of $0.35 per share, which raised gross proceeds of $525,000.
This offering was completed and terminated on March 10, 2004.
In a private placement of the Company's common stock made by the Company to
accredited investors from March 15, 2004 to May 15, 2004 pursuant to Rule 506 of
Regulation D of the Act, the Company intended to sell 2,000,000 shares of common
stock at a price of $0.50 per share. Total gross proceeds from this offering
were $210,000 from the sale of 420,000 shares. This offering was terminated on
June 30, 2004.
In a private placement of the Company's common stock made by the Company from
July 23, 2003 to April 20, 2004 pursuant to Regulation S of the Act at a
variable price equal to 28% of the closing bid price on the date of the purchase
of the stock, the Company raised gross proceeds of approximately $1,096,416 from
the sale of 13,181,027 shares. This offering was terminated on April 20, 2004.
In a private placement of the Company's common stock made by the Company from
November 5, 2003 to March 31, 2004 pursuant to Regulation S of the Act at a
variable price equal to 33% of the closing bid price on the date of the purchase
of the stock, the Company raised gross proceeds of $81,886 from the sale of
446,900 shares. This offering was terminated on June 30, 2004.
For the fiscal year ended June 30, 2004, employees of the Company exercised a
total of 2,400,000 stock options at an exercise price of $0.08 per share. The
Company received gross proceeds of $150,000 for the issuance of 1,875,000 shares
of unregistered common stock and $0 for the issuance of 525,000 shares on a
cashless exercise of 625,000 stock options.
In January 2004, the Company entered into a consulting agreement with an
investor relations firm where the Company issued 400,000 shares of restricted
and unregistered common stock for services rendered.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
Cautionary Statements
This Form 10-KSB contains financial projections and other "forward-looking
statements," as that term is used in federal securities laws, about Roaming
Messenger Inc.'s financial condition, results of operations and business. These
statements include, among others: statements concerning the potential for
revenues and expenses and other matters that are not historical facts. These
statements may be made expressly in this Form 10-KSB. You can find many of these
statements by looking for words such as "believes," "expects," "anticipates,"
"estimates," or similar expressions used in this Form 10-KSB. These
forward-looking statements are subject to numerous assumptions, risks and
uncertainties that may cause the Company's actual results to be materially
different from any future results expressed or implied by the Company in those
statements. The most important facts that could prevent the Company from
achieving its stated goals include, but are not limited to, the following:
(a) volatility or decline of the Company's stock price;
(b) potential fluctuation in quarterly results;
(c) failure of the Company to earn revenues or profits;
(d) inadequate capital and barriers to raising the additional capital or to
obtaining the financing needed to implement its business plans;
(e) inadequate capital to continue business;
(f) changes in demand for the Company's products and services;
(g) rapid and significant changes in markets;
(h) litigation with or legal claims and allegations by outside parties;
(i) insufficient revenues to cover operating costs.
Because the statements are subject to risks and uncertainties, actual results
may differ materially from those expressed or implied by the forward-looking
statements. The Company cautions you not to place undue reliance on the
statements, which speak only as of the date of this Form 10-KSB. The cautionary
statements contained or referred to in this section should be considered in
connection with any subsequent written or oral forward-looking statements that
the Company or persons acting on its behalf may issue. The Company does not
undertake any obligation to review or confirm analysts' expectations or
estimates or to release publicly any revisions to any forward-looking statements
to reflect events or circumstances after the date of this Form 10-KSB or to
reflect the occurrence of unanticipated events.
Current Overview
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.
We have recently rolled out an improved version of the Roaming Messenger
Platform which is being offered as a standalone server product or a hosted
service. We expect to sell and license the Roaming Messenger product to system
integrators and application developers in markets such as emergency response
services, the military and private businesses. For example, we might sell a
Roaming Messenger Gateway server to a systems integrator that is designing an
emergency alert and notification system. We plan to sell Roaming Messenger
through channel partners and value-added resellers (VARs) who are established in
their respective vertical markets.
For the year ended June 30, 2004, we focused our efforts primarily on product
refinement and market development of the Roaming Messenger product. We have
forged a number of partnerships with small to medium sized companies in the
Homeland Security and Public Safety sector. While we have validated the need for
the unique capabilities of Roaming Messenger in these markets, significant
revenue has yet to be derived, due to minimal sales and marketing efforts. Also,
it took much longer than anticipated for federal funds to flow into the
information technology procurement departments of government and public safety
agencies to which most of our channel partners sell.
A large part of our investment capital was used for product development and
infrastructure build-out during the year ended June 30, 2004. However, this will
shift more towards sales, marketing and business development for the upcoming
fiscal year ending June 30, 2005. The homeland security and public safety
markets are still our primary markets as we are beginning to see increased
information technology spending at the state and local government level. While
Roaming Messenger is a horizontal product with application in many markets, our
primary sales and marketing strategy continues to be vertically focused. We will
execute various low-cost horizontal marketing programs, concurrently, to
identify new opportunities in non-primary vertical markets - such as healthcare
or enterprise markets.
Our 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 decide 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 its
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 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 to reverse in the future. Actual results may differ from
those estimates.
Results of Operations for the Years Ended June 30, 2003 and 2004
Total revenue for the twelve month period ended June 30, 2004 increased by
$50,040 to $953,772 from $899,732 in the prior year. 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 clients and products upgrades.
Total costs and expenses for the twelve month period ended June 30, 2004
increased by $682,490 from $1,299,313 in 2003 and consisted primarily of
selling, general and administrative expenses and also include research and
development expenses and depreciation.
Selling, general and administrative expenses increased by $474,972 during the
twelve months ended June 30, 2004 to $1,474,106 from $999,135 in the prior year.
The increase in selling, general and administrative expenses were the primarily
caused by the increased of (i) $84,664 investor relations services, (ii) $18,284
bad debts expenses, (ii) $45,995 legal fees, (iii) $61,939 payments to business
consultants and (iv) $225,583 increased salary expenses as the result of hiring
additional staff. General and administrative expenses for the year ended June
30, 2004 included $132,917 of non-cash expenses of stock option, and stock
compensation in lieu of payment to our consultants and employees. Expense
related to depreciation were $60,231 for the twelve months ended June 30, 2004
as compared to $49,162 for the prior year, and interest expense was $15,031 for
the twelve months ended June 30, 2004 as compared to $24,467 in the prior year.
Research and development expenses increased by $170,057 during the twelve months
ended June 30, 2004 to $315,061 from $145,004. A majority of the increase
occurred in the latter six months as the technical staff grew.
For the twelve months ended June 30, 2004, our consolidated net loss was
$1,035,945 as compared to a consolidated net loss of $424,047 for the twelve
months ended June 30, 2003.
Liquidity and Capital Resources
The Company had consolidated net cash of $1,495,102 at June 30, 2004 as compared
to net cash of $57,408 as of June 30, 2003. The Company had a net working
capital (i.e. the difference between current assets and current liabilities) of
$1,191,108 at June 30, 2004 as compared to a working capital deficit of $316,436
at June 30, 2003. Cash flow provided by operating activities was ($948,193)
during the twelve months ended June 30, 2004 as compared to ($218,120) during
the twelve months ended June 30, 2003. Cash provided by investing activities was
($64,684) during the twelve months ended June 30, 2004 as compared to ($4,683)
during the twelve months ended June 30, 2003. Cash provided by financing
activities was $2,450,571 during the twelve months ended June 30, 2004 compared
to $193,117 during the twelve months ended June 30, 2003. There is no assurance
that the Company will have sufficient capital to finance its growth and business
operations, or that such capital will be available on terms that are favorable
to the Company or at all.
For the twelve months ended, June 30, 2004, the Company's capital needs have
primarily been met from the proceeds of (i) private placements of unregistered
common stock pursuant to Rule 506 of Regulation D of the Securities Act of 1933,
as amended (the "Act"), to accredited investors at prices ranging from $0.08 per
share to $0.50 per share which raised gross proceeds of $1,266,400; (ii) private
placements of common stock made by the Company pursuant to Regulation S of the
Act, at a variable price ranging from 28% to 33% of the closing bid price on the
date of the purchase of the stock, which raised gross proceeds of $1,185,460;
and (iii) stock option and warrant exercises from employee and consultants which
raised gross proceeds of $198,000.
ITEM 7. FINANCIAL STATEMENTS OF ROAMING MESSENGER, INC.
ROAMING MESSENGER, INC.
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2004 AND 2003
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
CONTENTS
PAGE
Report of Independent Auditors.......................................... 12
Consolidated Balance Sheets............................................. 13
Consolidated Statements of Operations................................... 14
Consolidated Statements of Changes in Shareholders' Deficits............ 15
Consolidated Statements of Cash Flows .................................. 16
Notes to Consolidated Financial Statements ............................. 17-27
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Roaming Messenger, Inc.
We have audited the accompanying consolidated balance sheets of Roaming
Messenger, Inc. (a Nevada Corporation) and Subsidiary (collectively referred to
as the "Company") as of June 30, 2004 and 2003 and the related consolidated
statements of operations, shareholders' deficit and cash flows for the years
then ended. These consolidated financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards established by the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audits to obtain reasonable assurance about
whether the consolidated financial statements are free of material misstatement.
An audit also includes examining, on a test basis, evidence supporting the
amounts and disclosures in the consolidated financial statements. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Roaming
Messenger, Inc. and Subsidiary as of June 30, 2004 and 2003, and the
consolidated results of their operations and their cash flows for the years then
ended in conformity with accounting principles generally accepted in the United
States of America.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in note 2 to the
consolidated financial statements, the Company has suffered recurring losses and
negative cash flows from operations that raise substantial doubt about its
ability to continue as a going concern. Management's plans in regard to these
matters are also described in note 2. The consolidated financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
/s/Rose, Snyder & Jacobs
------------------------
Rose, Snyder & Jacobs
A Corporation of Certified Public Accountants
Encino, California
September 10, 2004
ROAMING MESSENGER, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2004 AND 2003
2004 2003
----------- -----------
CURRENT ASSETS
Cash $ 1,495,102 $ 57,408
Accounts receivable, net of allowance for doubtful account of --
$20,000 and $0 116,407 76,898
Prepaids and other current assets 9,944 32,860
----------- -----------
TOTAL CURRENT ASSETS 1,621,453 167,166
----------- -----------
PROPERTY & EQUIPMENT, notes 3 and 4
Furniture, Fixtures & Equipment 83,225 75,658
Computer Equipment 278,715 152,023
Commerce Server 50,048 50,000
Computer Software 3,535 3,535
Leasehold Improvements 42,194 42,194
----------- -----------
457,717 323,410
Less: Accumulated depreciation & amortization (261,370) (200,770)
----------- -----------
NET PROPERTY & EQUIPMENT 196,347 122,640
----------- -----------
OTHER ASSETS
Lease deposit 7,029 7,029
Other assets 2,503 2,261
----------- -----------
TOTAL OTHER ASSETS 9,532 9,290
----------- -----------
TOTAL ASSETS $ 1,827,332 $ 299,096
=========== ===========
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable $ 24,892 $ 45,399
Accrued liabilities 42,093 42,042
Officer salaries payable 243,730 307,366
Staff salaries payable 46,499 23,447
Note payable, note 4 39,500 50,000
Current portion - obligations under capitalized leases, note 3 33,631 15,348
----------- -----------
TOTAL CURRENT LIABILITIES 430,345 483,602
----------- -----------
LONG TERM LIABILITIES
Obligations under capitalized leases, note 3 45,059 17,345
----------- -----------
TOTAL LONG TERM LIABILITIES 45,059 17,345
----------- -----------
TOTAL LIABILITIES 475,404 500,947
----------- -----------
COMMITMENTS AND CONTINGENCIES, note 9
SHAREHOLDERS' DEFICIT, note 7
Capital Stock 172,400 147,912
Additional Paid-in Capital 3,871,738 1,306,502
Accumulated deficit (2,692,210) (1,656,265)
----------- -----------
TOTAL SHAREHOLDERS' DEFICIT 1,351,928 (201,851)
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT $ 1,827,332 $ 299,096
=========== ===========
See independent auditors' report and notes to consolidated financial statements.
ROAMING MESSENGER, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 2004 AND 2003
2004 2003
------------- -------------
REVENUE, notes 2 and 10 $ 953,772 $ 899,732
Cost of revenue, note 2 132,404 106,011
Selling, general and administrative expenses, notes 7 and 8 1,474,106 999,135
Depreciation and amortization 60,231 49,162
Research and development 315,061 145,004
------------- -------------
TOTAL COSTS AND EXPENSES 1,981,802 1,299,312
------------- -------------
OPERATING LOSS (1,028,030) (399,580)
------------- -------------
OTHER INCOME (EXPENSES)
Interest income 7,116 --
Interest expense (15,031) (24,467)
------------- -------------
TOTAL OTHER INCOME (EXPENSES) (7,915) (24,467)
------------- -------------
NET LOSS $ (1,035,945) $ (424,047)
============= =============
Basic and diluted loss per share $ (0.01) $ (0.00)
============= =============
Weighted average number of shares 161,432,015 133,280,601
============= =============
See independent auditors' report and notes to consolidated financial statements.
ROAMING MESSENGER, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT
FOR THE YEARS ENDED JUNE 30, 2004 AND 2003
Additional
Common Paid-in Accumulated
Shares Stock Capital Deficit Total
----------- ----------- ----------- ----------- -----------
Balance, July 1, 2002 128,944,924 $ 128,945 $ 968,628 $(1,232,218) $ (134,645)
Issuance of common stock, note 7 4,363,013 4,363 344,598 -- 348,961
Issuance of warrants, note 8 -- -- 20,000 -- 20,000
Recapitalization, notes 6 and 7 14,604,098 14,604 (26,724) -- (12,120)
Net loss -- -- -- (424,047) (424,047)
----------- ----------- ----------- ----------- -----------
Balance, June 30, 2003 147,912,035 $ 147,912 $ 1,306,502 $(1,656,265) $ (201,851)
Issuance of common stock, note 7 24,487,579 24,488 2,515,236 -- 2,539,724
Issuance of warrants, note 8 -- -- 50,000 -- 20,000
Net loss -- -- -- (1,035,945) (1,035,945)
----------- ----------- ----------- ----------- -----------
Balance, June 30, 2004 172,399,614 $ 172,400 $ 3,871,738 $(2,692,210) $ 1,351,928
=========== =========== =========== =========== ===========
See independent auditors' report and notes to consolidated financial statements.
ROAMING MESSENGER, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 2004 AND 2003
2004 2003
----------- -----------
OPERATING ACTIVITIES
Net loss $(1,035,945) $ (424,047)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation and amortization 60,231 49,161
Expenses paid with shares of common stock 82,917 107,683
Issuance of warrants and stock options 50,000 20,000
Changes in assets - (increase) decrease:
Accounts receivable (39,509) 4,914
Prepaid expenses and other current assets (5,602) (409)
Changes in liabilities - increase (decrease):
Officer salaries payable (63,636) 60,767
Accounts payable (20,506) (52,589)
Staff salaries payable & other liabilities 23,857 16,400
----------- -----------
NET CASH USED BY OPERATING ACTIVITIES (948,193) (218,120)
----------- -----------
INVESTING ACTIVITIES
Purchase of property & equipment (64,684) (4,683)
----------- -----------
NET CASH USED BY INVESTING ACTIVITIES (64,684) (4,683)
----------- -----------
FINANCING ACTIVITIES
Issuance of common stock, net of costs 2,485,324 215,641
Payments on note payable (10,500) --
Payments on capitalized lease obligations (24,253) (22,524)
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 2,450,571 193,117
----------- -----------
NET INCREASE (DECREASE) IN CASH 1,437,694 (29,686)
Cash at beginning of year 57,408 87,094
----------- -----------
Cash at end of year $ 1,495,102 $ 57,408
=========== ===========
Supplemental disclosure of cash flow information
Cash paid during the years for:
Interest $ 15,031 $ 24,467
=========== ===========
Income taxes $ 800 $ 800
=========== ===========
See independent auditors' report and notes to consolidated financial statements.
ROAMING MESSENGER, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2004 AND 2003
1. ORGANIZATION
Roaming Messenger, Inc., formerly known as Latinocare Management
Corporation ("LMC), originally known as JNS Marketing, Inc. was
incorporated in Colorado in 1983, and then reincorporated in Nevada. LMC
was engaged in the business of managing LatinoCare Network Medical Group
("LNMG"), an Independent Physician Association ("IPA") primarily servicing
the growing Latin American community in the United States, and in
particular in California. Due to a dispute with LNMG, LMC was forced to lay
off its employees and close its business.
On April 1, 2003, LMC a publicly traded company, entered into a Plan and
Agreement of Reorganization which resulted in Warp 9, Inc. ("Warp 9")
becoming a wholly-owned subsidiary of LMC. In connection with the
transaction, all officers and directors of LMC resigned and were replaced
by the management team and directors of Warp 9. Subsequently, LMC was
renamed to Roaming Messenger Inc. by the new board of directors. Although
from a legal perspective, Roaming Messenger, Inc. acquired Warp 9, Inc.,
the transaction is viewed as a recapitalization of Warp 9, Inc.,
accompanied by an issuance of stock by Warp 9, Inc. to the shareholders of
Roaming Messenger, Inc. This is because Roaming Messenger, Inc. did not
have operations immediately prior to the transaction, and following the
transaction, Warp 9, Inc. was the operating company.
Warp 9, Inc. was incorporated in the state of Delaware, under the name of
eCommerceland, on August 27, 1999. The Company, based in Goleta,
California, began operations October 1, 1999. Prior to October 1, 1999, the
Company was operated as WARP 9 Technologies, LLC ("LLC"), a California
limited liability company. LLC was merged with and into eCommerceland
effective at its close of business, September 30, 1999, and on December 21,
2000 changed its name to Warp 9, Inc. For accounting and reporting
purposes, the "merger" was considered a continuation of the same business,
under a different type of entity. The operations and ownership of Warp 9,
Inc. were substantially the same as LLC. The Company's primary source of
income is service of their Warp 9 contracts, which relates to Internet data
service and fully hosted web based software products.
Roaming Messenger, Inc. and Warp 9, Inc. (collectively referred to as the
"Company")'s strategy is to provide a proprietary solution for real-time
communication over wired and wireless devices. The Company's flagship
product, Roaming Messenger, is a system for delivering real-time
information for homeland security, emergency response, military and
enterprise applications. Unlike solutions based on existing messaging
technology such as e-mail, text messaging, and voicemail, Roaming Messenger
packages time-critical information into smart messages. These messages
automatically roam throughout the wired and wireless worlds - from mobile
devices to desktop PCs to central servers - tracking down people and
getting responses in real-time.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Going concern
The accompanying consolidated financial statements have been prepared on a
going concern basis of accounting, which contemplates continuity of
operations, realization of assets and liabilities and commitments in the
normal course of business. The accompanying financial statements do not
reflect any adjustments that might result if the Company is unable to
continue as a going concern. The Company's losses and negative cash flows
from operations raise substantial doubt about the Company's ability to
continue as a going concern. The ability of the Company to continue as a
going concern and appropriateness of using the going concern basis is
dependent upon, among other things, additional cash infusion. The Company
has funded its operation through the sale of its common stock through
private offerings. As discussed in note 12, the Company is selling
securities through a Private Placement Memorandum. Management believes, but
there is no assurance, that the Company will obtain the additional working
capital that it needs through the sale of its Common Stock. The Company has
incurred operating deficits since inception, which are expected to continue
until its business model is fully developed.
ROAMING MESSENGER, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2004 AND 2003
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Accounts receivable
The Company extends credit to its customers, who are located primarily in
California. Accounts receivable are customer obligations due under normal trade
terms. The Company performs continuing credit evaluations of its customers'
financial condition. Management reviews accounts receivable on a regular basis,
based on contracted terms and how recently payments have been received to
determine if any such amounts will potentially be uncollected. The Company
includes any balances that are determined to be uncollectible in its allowance
for doubtful accounts. After all attempts to collect a receivable have failed,
the receivable is written off. Based on the information available, management
believes the Company's accounts receivable are all collectible.
Revenue recognition
The Company recognizes income when the service is provided or when product
is delivered. 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 in accordance
with EITF No. 99-19.
The Company also offers professional services such as enhancement services.
The fees for enhancement services constitute a separate unit of accounting
in accordance with EITF No. 00-21, and are recognized as the work is
performed.
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 software and
hardware related costs.
Research and Development
Research and development costs are expensed as incurred. Total research and
development costs were $315,061 and $145,004 for the years ended June 30,
2004 and 2003, respectively.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the accompanying financial
statements. Significant estimates made in preparing these financial
statements include the allowance for doubtful accounts, the estimate of
useful lives of property and equipment, the deferred tax valuation
allowance, and the fair value of stock options. Actual results could differ
from those estimates.
Fair value of financial instruments
The Company's financial instruments, including cash and cash equivalents,
accounts receivable, accounts payable and accrued liabilities are carried
at cost, which approximates their fair value, due to the relatively short
maturity of these instruments. As of June 30, 2004 and 2003, the Company's
capital lease obligations and notes payable have stated borrowing rates
that are consistent with those currently available to the Company and,
accordingly, the Company believes the carrying value of these debt
instruments approximates their fair value.
Property and Equipment
Property and equipment are stated at cost, and are depreciated or amortized
using the straight-line method over the following estimated useful lives:
Furniture, fixtures & equipment 7 Years
Computer equipment 5 Years
Commerce server 5 Years
Computer software 3 - 5 Years
Leasehold improvements Length of the lease
ROAMING MESSENGER, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2004 AND 2003
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Property and Equipment (Continued)
Property and equipment includes assets leased under capitalized leases with
an original cost of $115,084 and $57,660 at June 30, 2004 and 2003,
respectively. Amortization of assets under capitalized leases is included
in depreciation and amortization expense. During the years ended June 30,
2004 and 2003, additions to fixed assets through capitalized leases totaled
$70,250 and $21,701, respectively.
Concentrations of Business and Credit Risk
The Company operates in a single industry segment. The Company
markets its services to companies and individuals in many industries and
geographic locations. The Company's operations are subject to rapid
technological advancement and intense competition in the telecommunications
industry.
Accounts receivable represent financial instruments with potential credit
risk. The Company typically offers its customers credit terms. The Company
makes periodic evaluations of the credit worthiness of its enterprise
customers and other than obtaining deposits pursuant to its policies, it
generally does not require collateral. In the event of nonpayment, the
Company has the ability to terminate services.
Advertising Costs
The Company expenses the cost of advertising and promotional materials when
incurred. Total advertising costs were $20,156 and $21,128 for the years
ended June 30, 2004 and 2003, respectively.
Stock-Based Compensation
The Company accounts for employee stock option grants in accordance with
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees and related interpretations (APB 25), and has adopted the
"disclosure only" alternative described in Statement of Financial
Accounting Standards (SFAS) No. 123, Accounting for Stock-Based
Compensation., amended by SFAS No. 148 Accounting for Stock Based
Compensation-Transition and Disclosure.
Net Loss Per Share
Net loss per common share is computed using the weighted average number of
common shares outstanding during the periods presented. Options to purchase
shares of the Company's stock under its stock option plan and warrants may
have a dilutive effect on the Company's earnings per share in the future
but are not included in the calculation for 2003 and 2002 because they have
an antidilutive effect in these periods.
Income Taxes
The Company uses the liability method of accounting for income taxes.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to financial statements carrying amounts of existing
assets and liabilities and their respective tax bases and operating loss and tax
credit carryforwards. The measurement of deferred tax assets and liabilities is
based on provisions of applicable tax law. The measurement of deferred tax
assets is reduced, if necessary, by a valuation allowance based on the amount of
tax benefits that, based on available evidence, is not expected to be realized.
ROAMING MESSENGER, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2004 AND 2003
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Recent Accounting Pronouncements
In January 2003, the FASB issued Interpretation No. 46 (FIN 46),
Consolidation of Variable Interest Entities. This interpretation of Accounting
Research Bulletin No. 51, Consolidated Financial Statements, addresses
consolidation of variable interest entities. FIN 46 requires certain variable
interest entities to be consolidated by the primary beneficiary if the entity
does not effectively disperse risks among the parties involved. The provisions
of FIN 46 are effective immediately for those variable interest entities created
after January 31, 2003. The provisions are effective for the first period
beginning after June 15, 2003, for those variable interests held prior to
February 1, 2003. The Company has no variable interest entities and accordingly
does not believe the adoption of this Interpretation will have a material impact
on the Company's financial position or results of operations.
In April 2003, the FASB issued SFAS 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities, which amends SFAS 133 for certain
decisions made by the FASB Derivatives Implementation Group. In particular, SFAS
149 (1) clarifies under what circumstances a contract with an initial net
investment meets the characteristic of a derivative, (2) clarifies when a
derivative contains a financing component, (3) amends the definition of
underlying to conform it to language used in FASB interpretation number (FIN)
45, and (4) amends certain other existing pronouncements. SFAS 149 is effective
for contracts entered into or modified after June 30, 2003, and for hedging
relationships designated after June 30, 2003. In addition, most provisions of
SFAS 149 are to be applied prospectively. The Company does not expect that the
provisions of this statement will have a material impact on the Company's
financial statements.
In May 2003, the FASB issued SFAS 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity. SFAS 150
improves the accounting for certain financial instruments that, under previous
guidance, issuers could account for as equity. SFAS 150 requires that those
instruments be classified as liabilities in statements of financial position.
SFAS 150 is effective for interim periods beginning after June 15, 2003. The
Company does not expect this statement to have a material impact on its
financial statements.
In December 2003, the Securities and Exchange Commission (SEC) issued
Staff Accounting Bulletin No. 104 (SAB 104), "Revenue Recognition", which
supersedes SAB 101, "Revenue Recognition in Financial Statements." SAB
104's primary purpose is to rescind the accounting guidance contained in
SAB 101 related to multiple-element revenue arrangements that was
superseded as a result of the issuance of EITF 00-21, "Accounting for
Revenue Arrangements with Multiple Deliverables" and to rescind the SEC's
related "Revenue Recognition in Financial Statements Frequently Asked
Questions and Answers" issued with SAB 101 that had been codified in SEC
Topic 13, "Revenue Recognition." While the wording of SAB 104 has changed
to reflect the issuance of EITF 00-21, the revenue Recognition principles
of SAB 101 remain largely unchanged by the issuance of SAB 104, which was
effective upon issuance. The adoption of SAB 104 did not have a material
effect on the Company's financial position or results of operations.
ROAMING MESSENGER, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2004 AND 2003
3. OBLIGATIONS UNDER CAPITALIZED LEASES
Lessor Description 2004 2003
------ ---------------------------------------- ------- -------
B of A Payable in montly installments of $1513, $46,651 $ --
interest at 6.8%, matures in April, 2007.
GE Payable in montly installments of $710
interest at 12.8%, matures in October, 2006. 16,360 --
C.I.T. Payable in montly installments of $166,
interest at 18%, matures in October, 2003. -- 641
Amano Payable in monthly installments of $285,
interest at 15%, matures in December, 2003. -- 1,374
Avaya Payable in monthly installments of $655,
interest at 16%, matures in December, 2004. 3,753 12,089
GE Payable in monthly installments of $348,
interest at 13%, matured in October 2005. 5,094 8,379
Dell Payable in monthly installments of $200,
interest at 13%, matures in January 2006. 3,407 5,255
Dell Payable in monthly installments of $203,
interest at 21%, matures in February 2006. 3,425 4,955
------- -------
78,690 32,693
Less current portion 33,631 15,348
------- -------
Long-term portion of obligations under
captalized leases $45,059 $17,345
======= =======
Minimum annual lease payments under capitalized lease obligations at
June 30, 2004 are as follows:
Fiscal Year
-----------
2005 $ 39,635
2006 30,699
2007 17,975
---------
88,309
Less amounts representing interest 9,619
---------
78,690
Less current portion 33,631
---------
Long term portion of capitalized lease obligations $ 45,059
=========
4. NOTE PAYABLE
The Company has a note payable to a vendor in the amount of $50,000, bearing
interest at 10%, with monthly interest payment only. The maturity date, which
was originally October 15, 2001, was subsequently amended to March 15, 2002 and
then on demand. At June 30, 2004, the outstanding principal amount on this note
is $39,500. This note is secured by furniture of the Company. See note 9.
ROAMING MESSENGER, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2004 AND 2003
5. INCOME TAXES
At June 30, 2004, the Company has available for federal and state income tax
purposes, net operating loss carryforwards of approximately $6,000,000 and
$1,400,000, respectively, which expire at dates that have not been determined.
The difference between the Company's effective income tax rate and the
statutory federal rate for the years ended June 30, 2004 and 2003 relates
primarily to losses incurred for which no tax benefit was recognized, due to the
uncertainty of its realization. The valuation allowance was $2,300,000 and
$1,960,000 at June 30, 2004 and 2003, respectively, representing an increase of
$340,000 for the year ended June 30, 2004. Because of statutory "ownership
changes" the amount of net operating losses which may be utilized in future
years are subject to significant annual limitations.
A reconciliation of income tax expense that would result from applying the
domestic Federal statutory rate to pre-tax income, with federal income tax
expense presented in the financial statements is as follows:
2004 2003
---- ----
Income tax benefit computed at U.S. federal statutory rate (34%) $ 350,000 $ 135,000
State income taxes, net of benefit federal taxes 63,000 23,000
Other (73,000) --
Less valuation allowance (340,000) (158,000)
--------- ---------
Income tax expense $ -- $ --
========= =========
The deferred income tax benefit at June 30, 2004, and 2003 and reflects the
impact of temporary differences between the amounts of assets and liabilities
recorded for financial reporting purposes and such amounts as measured in
accordance with tax laws. The items, which comprise a significant portion of,
deferred tax assets and liabilities are approximately as follows:
2004 2003
----------- -----------
Depreciation $ 56,000 $ 59,000
Net operating loss carryforwards 2,148,000 1,770,000
Officer salaries payable 96,000 131,000
----------- -----------
2,300,000 1,960,000
Less: valuation allowance (2,300,000) (1,960,000)
----------- -----------
Deferred income tax asset $ -- $ --
=========== ===========
6. RECAPITALIZATION
On April 8, 2003, Warp 9, Inc. consummated a transaction, pursuant to which
shareholders of Warp 9 Inc. exchanged their shares for shares in Roaming
Messenger, Inc., with Warp 9, Inc. surviving as a wholly-owned subsidiary of
Roaming Messenger, Inc. This transaction was recorded as a recapitalization
followed by the issuance of shares by Warp 9, Inc. to the shareholders of
Roaming Messenger, Inc. Prior to the recapitalization transaction, Roaming
Messenger, Inc. was not an operating company, and its assets consisted
principally of cash of approximately $100,000, offset by the same amount of
liabilities. Under the terms of the transaction, Roaming Messenger, Inc. issued
131,026,173 shares of Roaming Messenger, Inc. common stock to the former
shareholders of Warp 9, Inc. in exchange for all the outstanding shares of Warp
9, Inc. (12.5 shares of Roaming Messenger, Inc. for every share of Warp 9,
Inc.). The transaction was consummated in two phases with the first issuance of
122,620,910 shares on April 8, 2003, and 8,405,263 shares on June 30, 2003.
ROAMING MESSENGER, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2004 AND 2003
6. RECAPITALIZATION (Continued)
After the recapitalization, options granted under the Warp 9 Inc.
Employee Stock option plan were cancelled and new options were issued under
a new Roaming Messenger Inc. Employee Stock Option Plan (effective July 10,
2003) to employees in amounts consistent with their Warp 9 options. The
Roaming Messenger options have the same aggregate exercise price as the
Warp 9 options. Most stock options became fully vested on grant date, while
others mirrored the same vesting periods as the Warp 9 Inc. options. The
Roaming Messenger Inc. stock options are presented at June 30, 2003 even
though the effective date was July 10, 2003.
7. SHAREHOLDERS' DEFICIT
The number of shares of common stock of Warp 9, Inc. was retroactively
restated to present the number of shares after their conversion into
Roaming Messenger common stock in the recapitalization transaction. For all
such restatements, a conversion rate of 12.5 shares of Roaming Messenger,
Inc. common stock for every share of Warp 9, Inc. common stock was used.
From the date of the recapitalization, April 8, 2003 through June 30, 2003,
Roaming Messenger, Inc. issued 1,079,263 shares of common stock for a total
cash consideration of $86,341. 1,202,500 shares of common stock were also
issued for $96,200 of services. These consulting services extended beyond
June 30, 2003, therefore $67,683 and $28,517 were recorded as expense for
the years ended June 30, 2003, and 2004, respectively.
For the fiscal year ended, June 30, 2004, the Company issued 23,807,579
shares of restricted common stock for a total cash consideration of
$2,485,324 as a result of a series of private offerings of common stock
ranging from $0.08 per share to $0.50 per share as well as stock options
and warrants exercises. 680,000 shares of restricted common stock were also
issued for $54,400 of services.
The common stock of Roaming Messenger, Inc. has a par value of $0.001, and
200,000,000 shares are authorized to be issued. The Company is also
authorized to issue 2,000,000 shares of preferred stock with a par value of
$0.001. The rights, preferences and privileges of the holders of the
preferred stock will be determined by the Board of Directors prior to
issuance of such shares.
At June 30, 2004, 25,000,000 shares of common stock were reserved for the
issuance of common stock pursuant to the Stock Option Plan, and 300,000
were reserved for the issuance of common stock pursuant to outstanding
warrants. Warp 9, Inc, had 77,213 outstanding warrants at June 30, 2004.
8. STOCK OPTIONS AND WARRANTS
Warp 9, Inc. had a Stock Option Plan that provided for the granting of stock
options to its employees and others providing services to the Company. Options
granted under the Plan could be either Incentive Options or Nonqualified
Options, and were administered by the Company's Board of Directors. Each options
were exercisable in full or in installment and at such time as designated by the
Board. Notwithstanding any other provision of the Plan or of any Option
agreement, each option were to expire on the date specified in the Option
agreement, which date were to be no later than the tenth anniversary of the date
on which the Option was granted (fifth anniversary in the case of an Incentive
Option granted to a greater-than-10% stockholder). The purchase price per share
of the Common Stock under each Incentive Option were to be no less than the Fair
Market Value of the Common Stock on the date the Option was granted (110% of the
Fair Market Value in the case of a greater-than-10% stockholder).
ROAMING MESSENGER, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2004 AND 2003
8. STOCK OPTIONS AND WARRANTS (Continued)
The purchase price per share of the Common Stock under each Nonqualified
Option were to be specified by the Board at the time the Option was granted, and
could be less than, equal to or greater than the Fair Market Value of the shares
of Common Stock on the date such Nonqualified Option was granted, but were to be
no less than the par value of shares of Common Stock. The plan provided specific
language as to the termination of options granted hereunder.
In July 10, 2003, the Warp 9, Inc. Stock Option Plan was terminated, and the
Company adopted the Roaming Messenger, Inc. Stock Option Plan for Directors,
Executive Officers, and Employees of and Key Consultants to Roaming Messenger,
Inc. This Plan, under which 25,000,000 shares of common stock may be issued, has
essentially the same terms and conditions as the Warp 9, Inc. Stock Option Plan
Former holders of employee stock options in the Warp 9 Inc. Stock Option
Plan were granted new options under the Roaming Messenger, Inc. Plan. Most
options became fully vested at grant date, while others mirrored the same
vesting periods as the Warp 9 Inc. options. The Roaming Messenger options have
the same aggregate exercise price as the Warp 9 Inc. options, using a 12.5
conversation rate. The number of stock options below in the summary of stock
option activities has been retroactively restated to reflect the 12.5
conversation rate.
SFAS 123, Accounting for Stock-Based Compensation, requires pro forma
information regarding net income (loss) using compensation that would have been
incurred if the Company had accounted for its employee stock options under the
fair value method of that statement. Options to purchase 2,478,494 shares of
Roaming Messenger, Inc. were granted during the year ended June 30, 2004. The
fair value of options granted during the years ended June 30, 2004 and 2003,
which have been estimated at $159,000 and $6,000, respectively, at the date of
grant were determined using the Black-Scholes Option pricing model with the
following assumptions:
2004 2003
---------- --------
Risk free interest rate 2.79%-3.27% 2.40%
Stock volatility factor 0.01 0.01
Weighted average expected option life 4 years 4 years
Expected dividend yield None None
The pro forma net loss and loss per share had the Company accounted for the
options using FAS 123 would have been as follows:
2004 2003
----------- -----------
Net loss as reported $(1,035,945) $ (424,047)
Basic and diluted net loss per share
as reported (0.01) (0.00)
Add: Stock-based employee compensation
expense included in net reported loss 50,000 --
Deduct: Stock based employee
compensation expense determined under fair value
based method for all awards (134,000) (6,000)
----------- -----------
Pro forma net loss $(1,119,945) $ (430,047)
=========== ===========
Basic and diluted pro forma loss per share $ (0.01) $ (0.00)
=========== ===========
ROAMING MESSENGER, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2004 AND 2003
8. STOCK OPTIONS AND WARRANTS (Continued)
A summary of the Company's stock option activity and related information
follows:
Year ended Year ended
June 30, 2004 June 30, 2003
------------------------- --------------------------
Weighted Weighted
average average
exercise exercise
Options price Options price
--------- ----------- --------- -----------
Outstanding -beginning of year 8,444,000 $ 0.08 7,932,812 $ 0.08
Granted 2,478,494 0.18 675,000 0.08
Exercised 2,500,000 0.08 -- --
Forfeited 125,000 0.08 (163,812) 0.08
--------- ----------- --------- -----------
Outstanding - end of year 8,297,494 $ 0.11 8,444,000 $ 0.08
========= =========== ========= ===========
Exercisable at the end of year 5,720,935 $ 0.09 5,824,469 $ 0.08
========= =========== ========= ===========
Fair value of options granted
during the year $ 159,000 $ 6,000
=========== ===========
The weighted average remaining contractual life of options as of June 30,
2004 was as follows:
Average
Number of remaining
Exercise options contractual
prices outstanding life (years)
-------- ----------- ------------
$ 0.08 7,347,494 4.5
0.35 950,000 3.7
-------- --------- -----
$ 0.11 8,297,494 4.4
======== ========= =====
Stock Warrants
During the year ended June 30, 2004, Roaming Messenger, Inc. issued
warrants to purchase shares of common stock of Roaming Messenger, Inc.
These warrants became exercisable on their grant date. Warrants were
granted as follows:
July 15, 2003 100,000 December 31, 2004 $ 1.00
July 15, 2003 100,000 December 31, 2004 $ 1.75
July 15, 2003 100,000 December 31, 2004 $ 3.00
January 15, 2004 600,000 December 31, 2005 $ 0.08
Total Granted 900,000
During the year ended June 30, 2004, the warrants to purchase 600,000
shares of common stock at $0.08 were exercised. The value of these warrants
was immaterial at their grant date.
At June 30, 2004, warrants to purchase 300,000 shares were outstanding.
ROAMING MESSENGER, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2004 AND 2003
8. STOCK OPTIONS AND WARRANTS (Continued)
During the year ended June 30, 2003, Warp 9 Inc. has issued warrants to
purchase 128,771 shares of Warp 9 Inc. common stock for services. These
warrants were valued at $20,000. During the year ended June 30, 2004, Warp
9 Inc. cancelled 76,750 warrants, resulting in 77,213 total outstanding
warrants.
The following Warp 9 Inc. warrants, which are exercisable, were outstanding
at June 30, 2004:
Number of shares Exercise Price Expiration date
---------------- -------------- ---------------
25,192 $ 1.00 per share December 31, 2005
52,021 $ 1.00 per share June 30, 2007-October 31, 2007
These warrants became exercisable on their grant date. In previously issued
financial statements, the Warp 9 Inc. warrants were mistakenly presented as
if they had been converted into Roaming Messenger, Inc. warrants. The above
warrants have been restated so they are presented as Warp 9, Inc. warrants.
9. COMMITMENTS AND CONTINGENCIES
Operating Leases
The following is a schedule, by years, of future minimum rental
payments required under operating leases for the facilities and equipment.
The lease for one of the facilities expires in 2007, and has 3 options to
renew for each an additional period of one year. The following is a
schedule of minimum lease payments for the next five years.
Year Ending
June 30,
-----------------
2005 $ 173,000
2006 $ 190,000
2007 $ 144,000
2008 $ 95,000
2009 $ 95,000
Total lease expense for the years ended June 30, 2004 and 2003 was $120,832
and $121,562, respectively. The Company is also required to pay its pro rata
share of taxes, building maintenance costs, and insurance.
Loan Default
The note payable has a default clause that allows the lender to assess late
payment charges in the amount of 10% of the delinquency. The delinquent charges
assessed to approximately $15,000 were in dispute, and have not been accrued by
the Company.
Legal Matters
The Company is involved in certain legal actions and claims arising in the
ordinary course of business. It is the opinion of management, based on advice of
legal counsel, that such litigation and claims will be resolved without a
material effect on the Company's financial position.
10. CONCENTRATIONS
For the year ended June 30, 2004, the Company had two customers who
represented approximately 30% of total revenue. For the year ended June 30,
2003, the Company had two customers who represented approximately 28% of
total revenue.
Accounts receivable from two customers represented approximately 55% of
total accounts receivable at June 30, 2004. Accounts receivable from three
customers represented approximately 51% of total accounts receivable at
June 30, 2003.
The Company has a concentration of credit risk for cash by maintaining
deposits with banks, which may at a time exceed insured amounts. At June
30, 2004, the Company had $1,240,000 exceeding the amount insured by the
U.S. Federal Deposit Insurance Corporation (FDIC).
11. RELATED PARTY TRANSACTIONS
During the year ended June 30, 2003, the Company issued 302,500 shares of
common stock to Mr. Tom Djokorvich for a twelve-month contract to serve on
the Company's Board of Directors. $10,939 and $13,261 were recognized as
expense for the years ended June 30, 2003 and 2004, respectively.
12. SUBSEQUENT EVENTS
The Company intends to raise additional working capital by selling
securities through Private Placements pursuant to Regulation D and
Regulation S of the Securities Act of 1993. As of the date of this report,
the Company does not have any concurrent offerings. However, the Company
has entered into a Regulation S transaction with an offshore investment
fund (the "Fund") that is contingent upon the Fund being publicly traded on
the London Stock Exchange. The chance of actual closing is uncertain as of
the date of this report.
The Company has entered in to a new lease for 8,506 sq ft office space. The
Company intends to sublease its current office space.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None
ITEM 8A. CONTROLS AND PROCEDURES
The Company's Chairman, Chief Executive Officer, and Chief Financial Officer has
evaluated the effectiveness of the Company's disclosure controls and procedures
(as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act
of 1934, as amended) as of the end of the period covered by this annual report
and, based on this evaluation, has concluded that the disclosure controls and
procedures are effective.
There have been no changes in the Company's internal control over financial
reporting that occurred during the Company's fourth fiscal quarter that has
materially affected, or is reasonably likely to materially affect, the Company's
internal control over financial reporting.
ITEM 8B. OTHER INFORMATION
None
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF EXCHANGE ACT
The following table lists the executive officers and directors of the Company as
of August 31, 2004:
Name Age Position
------------------ --- ------------------------------------------
Jonathan Lei 32 Chief Executive Officer, President, Chief
Financial Officer, Secretary, and Chairman
Brian Fox 44 Chief Technology Officer
Bryan Crane 45 Vice President of Corporate Development
Harinder Dhillon 31 Vice President of Operations
Louie Ucciferri 44 Director
Tom Djokovich (1) 47 Director
---------------------
(1) Member of Audit Committee.
Jonathan Lei has been the Chairman of the Board of Directors, Chief Executive
Officer, President, Chief Financial Officer, and Secretary of the Company since
April 2003. Mr. Lei received a Bachelor Degree in Electrical and Computer
Engineering from the University of California, Santa Barbara ("UCSB") in 1995
and a Master of Science Degree in Electrical and Computer Engineering from UCSB
in 1996. While at UCSB, he studied and worked in the field of computer aided
design and development of VLSI and ASIC silicon chips. Mr. Lei was employed by
Lockheed Martin in 1993 where he built data acquisition systems for spacecraft
testing. In 1995, he worked for Intel Corporation where he developed the Triton
II Pentium PCI chipset. From 1995 to 1996, Mr. Lei worked for RC Electronics
where he designed PCI based data acquisition systems. Mr. Lei founded Warp 9,
Inc., a Delaware corporation and wholly owned subsidiary of the Company
("Warp"), in 1996 and in 1998, he negotiated a transaction to sell Warp's
consumer ISP division, Sbnet, to MindSpring Enterprises. During that same
period, Mr. Lei co-developed Warp's e-commerce products. He is the visionary
behind the patent pending eCapsule technology and the Company's mobile data
direction. Mr. Lei was an officer and is a lifetime member of Tau Beta Pi, a
national engineering honor society.
Brian Fox has been the Chief Technology Officer of the Company since April 2003.
From 1985 to 1988, Mr. Fox worked for the Massachusetts Institute of Technology
as a research software engineer. From 1988 to 1990, he worked at the University
of California at Santa Barbara as a research software engineer. From 1998 to
2000, Mr. Fox served as the co-founder and Chief Technology Officer of Supply
Solution, Inc., a venture capital backed privately held company engaged in the
business of automotive supply chain management. At Supply Solution, Inc., Mr.
Fox developed the company's flagship product, iSupply, a web based software for
vendor managed inventory tracking. In 1995, prior to co-founding Supply
Solution, Inc. he founded Universal Access, Inc., where he developed the
programming language Meta-HTML. Mr. Fox was the second employee at the Free
Software Foundation (Project GNU). Mr. Fox is the author of BASH, the UNIX
shell, which is widely utilized in modern versions of UNIX.
Bryan Crane has been the Vice President of Corporate Development of the Company
since October 2002. Mr. Crane has spent the last several years in the investor
relations field, working with micro-cap and small-cap public companies. Prior to
joining Roaming Messenger, from 1995 to 2002, he worked for Muir, Crane & Co., a
partnership he co-founded and in which he still maintains an ownership interest.
From 1994 to 1995, Mr. Crane was a Managing Director of Johnson & Co. For most
of his career, Mr. Crane held positions in portfolio management from retail
investments at Prudential-Bache Securities to Vice President of Investments at
A.G. Edwards & Son, where, as a member of the Presidents Council, he managed
debt and equity portfolios for institutional clients. Mr. Crane earned his dual
degree in Political Science and International Economics from San Diego State
University. He is a member of the San Diego Stock Bond Association and the Los
Angeles Chapter of the National Investor Relations Institute (NIRI).
Harinder Dhillon has been our Vice President of Operations since October 2001.
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.
Louie Ucciferri is the founder and President of Westlake Financial Architects,
an investment-banking firm formed in 1995 to provide financial and investment
advisory services to early stage companies. He has raised investment capital for
both private and public companies and has created liquidity for investors in the
form of public offerings. Since November 1998, he has also served as President
of Camden Financial Services, a NASD registered broker dealer that serves as the
dealer manager for a real estate company that has raised in excess of $150
million in equity capital for the acquisition of commercial office properties in
southern California and Arizona.
Tom Djokovich is the Chief Executive Officer of XsunX, Inc., a position he has
held since 2004. From 2003 until 2004, he was an independent technology
consultant. Prior thereto, he was the founder and served from 1995 to 2002 as
the Chief Executive Officer of Accesspoint Corporation, a vertically integrated
provider of electronic transaction processing and e-business solutions for
merchants. Under Mr. Djokovich's guidance, Accesspoint became a member of the
Visa/MasterCard association, the national check processing association NACHA,
and developed one of the payment industry's most diverse set of network based
transaction processing, business management and CRM systems for both Internet
and conventional points of sale. During his tenure, Accesspoint became an early
adopter of WAP based e-commerce capabilities and the industry's first certified
Level 1 Internet payment processing engine. In his last year as executive
manager, Accesspoint grew its processing revenues by over 800% and overall
revenues by nearly 300%. Prior to Accesspoint, Mr. Djokovich founded TMD
Construction and Development where he developed an early business-to-business
ordering system for the construction industry
Under the Nevada General Corporation Law and the Company's Articles of
Incorporation, as amended, the Company's directors will have no personal
liability to the Company or its stockholders for monetary damages incurred as
the result of the breach or alleged breach by a director of his "duty of care".
This provision does not apply to the directors' (i) acts or omissions that
involve intentional misconduct or a knowing and culpable violation of law, (ii)
acts or omissions that a director believes to be contrary to the best interests
of the corporation or its shareholders or that involve the absence of good faith
on the part of the director, (iii) approval of any transaction from which a
director derives an improper personal benefit, (iv) acts or omissions that show
a reckless disregard for the director's duty to the corporation or its
shareholders in circumstances in which the director was aware, or should have
been aware, in the ordinary course of performing a director's duties, of a risk
of serious injury to the corporation or its shareholders, (v) acts or omissions
that constituted an unexcused pattern of inattention that amounts to an
abdication of the director's duty to the corporation or its shareholders, or
(vi) approval of an unlawful dividend, distribution, stock repurchase or
redemption. This provision would generally absolve directors of personal
liability for negligence in the performance of duties, including gross
negligence.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers or persons controlling the Company pursuant
to the foregoing provisions, the Company has been informed that in the opinion
of the Securities and Exchange Commission, such indemnification is against
public policy as expressed in the Act and is therefore unenforceable.
Board Committees
The Board of Directors has appointed an Audit Committee. As of August 31, 2004,
the sole member of the Audit Committee is Tom Djokovich. Mr. Djokovich is
considered independent as defined in Rule 4200 of the National Association of
Securities Dealers' listing standards because he is not employed by the Company,
does not participate in the day-to-day management of the Company, and does not
receive a salary or other employment benefits from the Company. The Board of
Directors has adopted a written charter of the audit committee. The Audit
Committee is authorized by the Board of Directors to review, with the Company's
independent accountants, the annual financial statements of the Company prior to
publication, and to review the work of, and approve non-audit services preformed
by, such independent accountants. The Audit Committee will make annual
recommendations to the Board for the appointment of independent public
accountants for the ensuing year. The Audit Committee will also review the
effectiveness of the financial and accounting functions and the organization,
operations and management of the Company. The Audit Committee was formed on
April 19, 2003. The Audit Committee held four meetings during fiscal year ended
June 30, 2004. As of August 31, 2004, the Company has not yet appointed a
Compensation Committee.
Auditor Independence
General. Rose Snyder & Jacobs, CPAs ("RSJ") is the Company's principal auditing
accountant firm. RSJ has also provided other non-audit services to the Company.
The Audit Committee of the Company's Board of Directors has considered whether
the provisions of non-audit services is compatible with maintaining RSJ's
independence.
Audit Fees. RSJ billed the Company $25,400 for the following professional
services: audit of the annual financial statement of the Company for the fiscal
year ended June 30, 2003, and review of the interim financial statements
included in quarterly reports on Form 10-QSB for the periods ended September 30,
2003, December 31, 2003, and March 31, 2004.
All Other Fees. RSJ billed the Company $3,850 for other services for the fiscal
year ended June 30, 2004.
Report of the Audit Committee
The Company's Audit Committee has reviewed and discussed the Company's audited
financial statements for the fiscal year ended June 30, 2004 with senior
management. The Audit Committee has reviewed and discussed with management the
Company's audited financial statements. The Audit Committee has also discussed
with RSJ, the Company's independent auditors, the matters required to be
discussed by the statement on Auditing Standards No. 61 (Communication with
Audit Committees) and received the written disclosures and the letter from RSJ
required by Independence Standards Board Standard No. 1 (Independence Discussion
with Audit Committees). The Audit Committee has discussed with RSJ the
independence of RSJ as auditors of the Company. Finally, the Audit Committee has
considered whether the independent auditors provision of non-audit services to
the Company is compatible with the auditors' independence. Based on the
foregoing, the Company's Audit Committee has recommended to the Board of
Directors that the audited financial statements of the Company be included in
the Company's Annual Report on Form 10-KSB for the fiscal year ended June 30,
2004 for filing with the United States Securities and Exchange Commission. The
Audit Committee also approved RSJ's engagement to prepare the Company's
consolidated tax returns for its fiscal year ending June 30, 2004. The Company's
Audit Committee did not submit a formal report regarding its findings.
AUDIT COMMITTEE
Tom Djokovich
Notwithstanding anything to the contrary set forth in any of the Company's
previous or future filings under the United States Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, as amended, that might
incorporate this report in future filings with the Securities and Exchange
Commission, in whole or in part, the foregoing report shall not be deemed to be
incorporated by reference into any such filing.
Compliance with Section 16(A) of Exchange Act
Section 16(a) of the Exchange Act requires the Company's officers and directors,
and certain persons who own more than 10% of a registered class of the Company's
equity securities (collectively, "Reporting Persons"), to file reports of
ownership and changes in ownership ("Section 16 Reports") with the Securities
and Exchange Commission (the "SEC"). Reporting Persons are required by the SEC
to furnish the Company with copies of all Section 16 Reports they file.
Based solely on its review of the copies of such Section 16 Reports received by
it, or written representations received from certain Reporting Persons, all
Section 16(a) filing requirements applicable to the Company's Reporting Persons
during and with respect to the fiscal year ended June 30, 2004 have been
complied with on a timely basis.
ITEM 10. EXECUTIVE COMPENSATION
Director Compensation
Directors receive no cash compensation for their services to the Company as
directors, but are reimbursed for expenses actually incurred in connection with
attending meetings of the Board of Directors.
Executive Officer Compensation
The following table and notes set forth the annual cash compensation paid to
officers of the Company.
Long-Term
Compensation
Annual Compensation Awards
--------------------------------------------------------------------------------------------------------------
Securities
Fiscal Other Annual Underlying All Other
Name and Principal Position Year Salary Bonus Compensation Options Compensation
--------------------------- ---- ------ ----- ------------ ---------- ------------
Jonathan Lei............... 2004 $138,000 - 0 - - 0 - -0- - 0 -
President, Chief Financial 2003 $138,000 - 0 - - 0 - -0- - 0 -
Officer, and Secretary 2002 $138,000 - 0 - - 0 - -0- - 0 -
----------------------------------------------------------------------------------------------------------------
Brian Fox.................. 2004 $145,000(1) - 0 - - 0 - - 0 - - 0 -
Chief Technology Officer 2003 $145,000 - 0 - - 0 - 5,987,500(2) - 0 -
2002 $145,000 - 0 - - 0 - -0- - 0 -
----------------------------------------------------------------------------------------------------------------
Harinder Dhillon........... 2004 $125,000 $8,714 - 0 - -0- - 0 -
VP of Operations 2003 $105,000 - 0 - - 0 - 1,875,000 (3) - 0 -
2002 $95,000 - 0 - - 0 - -0- - 0 -
----------------------------------------------------------------------------------------------------------------
Bryan Crane................ 2004 $84,000 - 0 - 878,494 (4) $29,000 (4)
VP of Corporate Development 2003 $84,000 - 0 - 700,000 (4)
---------------------------------------------------------------------------------------------------------------
(1) The Company has an at-will employment agreement with Mr. Fox providing that
upon a termination of his employment by the Company without cause and only after
$5,000,000 of venture or institutional capital has been raised, Mr. Fox would be
entitled to severance pay and continuing health insurance for six months after
termination, and vesting of those of his unvested stock options that would vest
during that six month period.
(2) Consists of options granted under the Company's 2003 Stock Option Plan on
July 15, 2003. These stock options vest pursuant to the following vesting
schedule: 3,367,969 on July 15, 2003, then 1/21 per month until all stock
options have vested. Does not include 5,987,500 options to purchase 5,987,500
shares of the Company's common stock from Jonathan Lei, the President, Chief
Financial Officer, Secretary, and Chairman of the Company, for a purchase price
of $0.08 per share (the "Lei Options").
(3) Consists of options granted under the Company's 2003 Stock Option Plan on
July 15, 2003. These stock options are fully vested at the time of grant.
Options are to purchase unregistered common stock at an exercise price equal to
the fair market value of unregistered common stock at the time of grant, which
was $0.08 per share for these stock options.
(4) 878,494 options were granted under the Company's 2003 Stock Option Plan on
July 15, 2003. These stock options were fully vested at time of grant. Options
are to purchase unregistered common stock at an exercise price equal to the fair
market value of unregistered common stock at the time grant, which was $0.08 per
share for these stock options. On May 20, 2003, 700,000 shares of unregistered
common stock were issued to Mr. Crane in lieu of cash payment for salaries
accrued to that point. A total amount of $29,000 of cash bonus was given to Mr.
Crane, during the fiscal year ending June 30, 2004, for achieving certain
milestones in managing the Company's investment capital efforts.
Options Granted in Last Fiscal Year
The following table sets forth information with respect to options to purchase
common stock of the Company granted to the Company's officers during fiscal year
2004.
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation for
Option Term
---------------------------------------------------------------------------------------------------------------------------
Percent of Total
Options Granted to Exercise
Options Employees in Price Expiration
Name Granted Fiscal Year per Share Date 5% 10%
---- ------- ----------- --------- ---- -- ---
Brian Fox.............. 5,987,500 54% $0.08 Four years from the $1,340,460 $1,712,575
Chief Technology Officer date of vesting
---------------------------------------------------------------------------------------------------------------------------
Bryan Crane........... 878,494 (1)(2) 8% $0.08 Four years from the $303,455 $379,892
VP of Corporate date of grant
Development
---------------------------------------------------------------------------------------------------------------------------
Harinder Dhillon..... 1,875,000 17% $0.08 Four years from the $419,768 $536,296
VP of Operations (1)(2) date of grant
---------------------------------------------------------------------------------------------------------------------------
(1) These stock options are fully vested at the time of grant.
(2) Some or all of these options have been exercised. See Fiscal Year-End Option
Exercises and Option Values.
Fiscal Year-End Option Exercises and Option Values
The following table sets forth information with respect to options to purchase
common stock of the Company held by the Company's executive officers at
August 31, 2004.
Number of Unexercised Value of Unexercised
Options Held at In-the-Money Options
August 31, 2004 at August 31, 2004 (2)
--------------- ----------------------
Shares
Acquired
Upon
Name Exercise Value Realized(1) Exercisable Unexercisable Exercisable Unexercisable
---- -------- ----------------- ----------- ------------- ----------- -------------
Brian Fox............. -0- -0- 4,740,109 1,247,391 $474,011 $124,739
Chief Technology
Officer
------------------------------------------------------------------------------------------------------------------------------
Bryan Crane........... 525,000 $687,750 253,494 -0- $25,349 -0-
VP of Corporate
Development
------------------------------------------------------------------------------------------------------------------------------
Harinder Dhillon...... 1,875,000 $1,912,500 -0- -0- -0- -0-
VP of Operations
------------------------------------------------------------------------------------------------------------------------------
(1) The value realized is the difference between the market price of the common
stock on the date of exercise and the exercise price of the stock option. The
underlying securities held upon exercise are unregistered common stock.
(2) The value of unexercised "in-the-money" options is the difference between
the market price of the common stock on August 31, 2004 ($0.18 per share) and
the exercise price of the option, multiplied by the number of shares subject to
the option. The underlying securities held upon exercise are unregistered common
stock.
Employment Agreements
The Company has not entered into any employment agreements with its executive
officers to date, other than the at-will employment agreement with Brian Fox as
described in footnote one under "EXECUTIVE COMPENSATION-Executive Officer
Compensation." The Company may enter into employment agreements with them in the
future.
Stock Option Plan
On July 10, 2003, the Board of Directors of the Company adopted the 2003 Stock
Option Plan for Directors, Executive Officers, Employees and Key Consultants of
the Company (the "2003 Plan"). The 2003 Plan was ratified by the shareholders of
the Company by written consent effective August 25, 2003. The 2003 Plan
authorizes the issuance of up to 25,000,000 shares of the Company's common stock
pursuant to the grant and exercise of up to 25,000,000 stock options. To date,
10,922,494 options to purchase 10,922,494 shares of common stock at an exercise
price ranging from $0.08 to $0.35 per share have been granted under the 2003
Plan. To date, 2,500,000 options have been exercised and 125,000 options have
been forfeited.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the names the executive officers and directors of
the Company and all persons known by the Company to beneficially own 5% of more
of the issued and outstanding common stock of the Company.
Number of Shares Beneficially Percentage
Name, Title, and Address Owned(1) Ownership(2)
----------------------------------------- ----------------------------- -----------------
Jonathan Lei 95,639,025 (2) 55.48%
President, Chief Financial Officer,
Secretary, and Chairman.....................
--------------------------------------------------------------------------------------------------------------
Brian Fox
Chief Technology Officer.................... 68,000 0.04%
--------------------------------------------------------------------------------------------------------------
Bryan Crane
VP of Corporate Development................. 1,231,500 0.71%
--------------------------------------------------------------------------------------------------------------
Harinder Dhillon
VP of Operations............................ 2,935,000 1.71%
--------------------------------------------------------------------------------------------------------------
Louie Ucciferri
Director.................................... 3,750,000 2.18%
--------------------------------------------------------------------------------------------------------------
Tom Djokovich
Director.................................... 302,500 0.18%
--------------------------------------------------------------------------------------------------------------
All current Executive Officers as a Group... 100,322,025 58.2%
--------------------------------------------------------------------------------------------------------------
All current Directors who are not Executive
Officers as a Group...................... 4,052,500 2.4%
--------------------------------------------------------------------------------------------------------------
(1) Except as pursuant to applicable community property laws, the persons named
in the table have sole voting and investment power with respect to all shares of
common stock beneficially owned. The total number of issued and outstanding
shares and the total number of shares owned by each person does not include
unexercised warrants and stock options, and is calculated as of August 31, 2004.
(2) Includes 5,987,500 shares of common stock which Mr. Lei has set aside in the
event Brian Fox, the Chief Technology Officer of the Company, exercises his
option to purchase such shares for a purchase price of $0.08 per share (the "Lei
Options"). As of August 31, 2004, all Lei Options are vested.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBIT NO. DESCRIPTION
3.1 Articles of Incorporation (1)
3.2 Bylaws (1)
4.1 Specimen Certificate for Common Stock (1)
4.2 Non-Qualified Employee Stock Option Plan (2)
10.1 First Agreement and Plan of Reorganization between
Latinocare Management Corporation, a Nevada
corporation, and Warp 9, Inc., a Delaware
corporation (3)
10.2 Second Agreement and Plan of Reorganization
between Latinocare Management Corporation, a
Nevada corporation, and Warp 9, Inc., a Delaware
corporation (4)
10.3 Exchange Agreement and Representations for
shareholders of Warp 9, Inc.(3)
31.1 Section 302 Certification
32.1 Section 906 Certification
--------------
(1) Incorporated by reference from the exhibits included with the Company's
prior Report on Form 10-KSB filed with the Securities and Exchange Commission,
dated March 31, 2003.
(2) Incorporated by reference from the exhibits included in the Company's
Information Statement filed with the Securities and Exchange Commission, dated
August 1, 2003.
(3) Incorporated by reference from the exhibits included with the Company's
prior Report on Form SC 14F1 filed with the Securities and Exchange Commission,
dated April 8, 2003.
(4) Incorporated by reference from the exhibits included with the Company's
prior Report on Form 8K filed with the Securities and Exchange Commission, dated
May 30, 2003.
(b) The following is a list of Current Reports on Form 8-K filed by the Company
during and subsequent to the last quarter of the fiscal year ended June 30,
2004.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Rose Snyder & Jacobs, CPAs ("RSJ") is the Company's principal auditing
accountant firm. RSJ has also provided other non-audit services to the Company.
The Audit Committee approved the engagement of RSJ before RSJ rendered audit and
non-audit services to the Company.
Audit Fees
RSJ billed the Company $25,400, during the fiscal year ended June 30, 2004, for
the following professional services: audit of the annual financial statement of
the Company for the fiscal year ended June 30, 2003, and review of the interim
financial statements included in quarterly reports on Form 10-QSB for the
periods ended September 30, 2003, December 31, 2003, and March 31, 2004.
Tax Fees
RSJ has not yet provided tax return preparation services for the Company for the
fiscal year ended June 30, 2004, and therefore has not billed the Company for
those services.
All Other Fees
RSJ billed the Company $3,850 for other services, including preparation of the
tax returns for the Company for 2003, during the fiscal year ended June 30,
2004.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
Dated: August 9, 2005 ROAMING MESSENGER, INC.
By: \s\ Jonathan Lei
--------------------------------------
Jonathan Lei, Chairman of the Board, Chief Executive Officer, President Chief
Financial Officer, and Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
\s\ Jonathan Lei Chief Executive Officer, President, Chief August 9, 2005
-------------------------------------- Financial Officer, Secretary, and Chairman
Jonathan Lei
\s\ Louie Ucciferri Director August 9, 2005
--------------------------------------
Louie Ucciferri
\s\ Tom Djokovich Director August 9, 2005
--------------------------------------
Tom Djokovich