FORM 10-KSB
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: June 30, 2003
For the transition period from July 1, 2002 to June 30, 2003
Commission file number 0-13215
ROAMING MESSENGER, INC.
(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
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 $19,257,097 as of August 31, 2003 (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 152,886,372 shares outstanding of the registrant's Common
Stock as of September 30, 2003.
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...................................................................... 27
ITEM 8A..................................................................... 27
PART III.................................................................... 28
ITEM 9...................................................................... 28
ITEM 10..................................................................... 30
ITEM 11..................................................................... 33
ITEM 12..................................................................... 34
ITEM 13..................................................................... 34
ITEM 14..................................................................... 35
SIGNATURES.................................................................. 36
CERTIFICATIONS.............................................................. 37
PART I
ITEM 1. BUSINESS
COMPANY HISTORY
Roaming Messenger, Inc. (the "Company") is a Nevada corporation
formerly known as Latinocare Management Corporation ("LMC"). The Company
originally incorporated in Colorado in July 1983. Effective April 1, 2003, the
Company completed a Plan and Agreement of Reorganization with Warp 9, Inc., a
Delaware corporation ("W9") and effective June 30, 2003, the Company completed a
second Plan and Agreement of Reorganization with W9 (collectively the
"Reorganization"). Pursuant to the Reorganization, LMC acquired all of the
issued and outstanding common stock of W9 in exchange for approximately
131,026,173 newly issued shares of LMC common stock, W9 became a wholly owned
subsidiary of LMC, and the shareholders of W9 became the controlling
shareholders of LMC. Prior to its business combination with W9, LMC had no
tangible assets and insignificant liabilities. Subsequent to the Reorganization
the Company changed its name to Roaming Messenger, Inc.
GENERAL
The Company has developed a proprietary solution called "Roaming
Messenger" for delivering real-time information for homeland security, emergency
response, military and enterprise applications. Unlike solutions based on
existing messaging technology such as e-mail, text messaging, and voicemail,
Roaming Messenger packages time-critical information into "smart courier"
messages. These messages automatically roam throughout the wired and wireless
worlds - from mobile devices to desktop PCs to central servers - tracking down
people and obtaining responses in real-time.
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ROAMING MESSENGER PRODUCT LINE
The Company offers a range network appliances configured to meet the
various mobile communication demands of users and organizations. All the
necessary Roaming Messenger software are pre-installed in the Gateway Appliances
for instant deployment.
The Company also offers a hosted version of the Roaming Messenger
system where customers can pay a monthly fee to access the capabilities of
Roaming Messenger without large upfront licensing fees
The entire Roaming Messenger software suite is available for licensing
to strategic VAR and OEM partners for creating customized or private labeled
Roaming Messenger systems.
APPLICATIONS FOR ROAMING MESSENGER
Emergency Response. Management believes that Roaming Messenger can be
the mobile messaging extension for any Emergency Response Management system in
automating the notification, authorization, and deployment of an Emergency
Response Team. For example, a response team can be dynamically assembled by
sending off a Roaming Messenger to the mobile devices of Emergency Managers,
informing them of the situation and requesting authorization to deploy a
Response Team. After receiving authorization, Roaming Messenger could then
proceed to all Tier 1 First Responders, get their acknowledgment and also
deliver the emergency incident report.
Security. Roaming Messenger can be integrated with any security
monitoring system to deliver real-time notification with actionable responses.
Notifications regarding security breaches such as fire alarms, HVAC failures,
motion sensors and restricted access can be enhanced by Roaming Messenger.
Responsible personnel are presented with information regarding the breach, as
well as actions such as informing law enforcement, turning on or off mechanisms
to resolve the breach - all from mobile or desktop devices.
Military and Defense. The battlefield is going hi-tech with the goal of
enabling real-time command and control capabilities from the highest to the
lowest tactical echelons. Roaming Messenger can be used for delivering
situational awareness and command and control information to tactical personnel
with wireless mobile devices. Roaming Messenger can facilitate a seamless flow
of battle command information across the battle space by roaming from person to
person.
Healthcare. In the fast-paced healthcare environment, there is no room
for error and delays can be costly. Roaming Messenger can be deployed along side
existing healthcare management systems to improve response time and patient
satisfaction within a hospital. Patient requests or patient monitoring systems
can alert appropriate nurses of problems or escalate accordingly to ensure
timely response. When Roaming Messenger finds the nurse, the nurse accepts that
task or delegates it to an appropriate aide. After the nurse's aid has resolved
the patent 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 needs 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 get approvals to
push the business process along. Whether it is getting an invoice paid, ordering
more parts for the production line, updating a customer management system,
Roaming Messenger can be used as the mobile messaging component.
Manufacturing. In a manufacturing environment, reaching the right
people at the right time and monitoring and assessing critical information from
production lines and security systems can significantly reduce costs and improve
employee safety. Roaming Messenger can be integrated to any manufacturing
monitoring system to deliver actionable notifications regarding equipment
failures, security breaches, chemical spills, and other critical events to
responsible technicians, as well as keep plant managers informed of situation
progress and resolution.
-2-
Mobile Commerce. Roaming Messenger can also facilitate mobile commerce
transactions. For example, wireless mobile vending solutions today require the
physical machine to have a dedicated Internet connection, which makes mass
deployment very difficult and costly. Using Roaming Messenger, a purchase
transaction can be completed with end-to-end security by allowing the vending
machine to piggy-back on the Internet connection of the user's smart phone or
PDA via a local Infrared or Bluetooth connection. Roaming Messenger can be
initiated by the vending machine, to the user's handheld device, request item
and payment selections, interact with an Internet payment server, report
inventory and status to a different server and return back to the vending
machine to complete the transaction in real-time.
MARKETING STRATEGY
The Company intends to enhance, promote and support the idea that
Roaming Messenger is the most compelling and efficient solution available in the
marketplace for mobile messaging. In order to create a favorable environment for
sales, the Company plans to undertake advertising and promotion efforts. These
efforts will be outsourced and will require the services of an advertising firm
and public relations firm. The Company plans to interview various firms and
select those most capable of assisting the Company with comprehensive
advertising and promotion plans. At this time, the company does not intend to
hire additional employees to undertake these efforts.
SALES STRATEGY
After creating a high level of perceived value and building significant
demand for sales through its marketing campaign, the Company intends to
aggressively sell the Roaming Messenger product in the United States.
International sales will follow after achieving initial success in the domestic
marketplace. The Company has no revenue generating customers for the Roaming
Messenger products at this time. The Company's management has identified the
following primary target market segments for the Roaming Messenger solution:
o Homeland Security
o Emergency Response, Public Health and Safety
o Military and Defense
o Enterprises
o Wireless Carriers
DISTRIBUTION CHANNELS
Roaming Messenger is a mobile messaging component with applications in
many markets. The Company plans to sell and license the Roaming Messenger
products to system integrators and application developers in markets such as
Homeland Security, Emergency Response, Military and Enterprise Automation. For
example, the Company might sell a Roaming Messenger Gateway appliance to a
systems integrator that is designing an emergency management system for the
United States Coast Guard. The Company plans to sell Roaming Messenger through
channel partners and value-added resellers (VARs) who are established in their
respective vertical markets.
REVENUE MODEL
Management believes that most of the Company's revenues will come from
the licensing of its Roaming Messenger product, customer training and support,
and software upgrades to application developers and system integrators.
Management has decided to use a deployment pricing model for the
network appliance version of Roaming Messenger based on the number of users
enabled to send and receive Roaming Messengers. Customers will be asked to pay a
one-time license fee for each user that is activated for Roaming Messenger
communication. Customers will then be invited to subscribe to an ongoing service
plan (optional) that would provide training, support, maintenance and software
upgrades.
On the hosted, or subscription model, customers pay a monthly fee to
the Company for access to a Roaming Messenger system hosted and managed by the
Company. The monthly fee is assessed based on the number of users in the
customer's Roaming Messenger deployment, and on monthly message volume.
-3-
DISTRIBUTION STRATEGY
The Company's sales strategy is to conduct high-level direct sales to
application developers, system integrators and in-house IT departments of
enterprise or government agencies. In addition, the Company will develop
relationships with channel partners such as independent software vendors,
information technology consultants, wireless application service providers and
interactive agencies. The Company will also manage its own direct sales force
along with a professional services division to facilitate client solutions.
PROPRIETARY TECHNOLOGY
Self-Contained Business Transaction Capsules was invented by Jonathan
Lei, the Chief Executive Officer, President, Chief Financial Officer, Secretary,
and Chairman of the Company. All rights to this patent were assigned to W9 under
the terms of Mr. Lei's employment agreement. Mr. Lei did not receive
compensation for the assignment. An application for a United States. patent in
the name of Jonathan L. Lei and assigned to W9 for Self-Contained Business
Transaction Capsules (Docket No. 23803-250394) was filed on January 2, 2001, by
the Company's intellectual property counsel, Pillsbury Winthrop, LLP.
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.
Utilizing Mobile Devices as a Communication Proxy for Non-Connected
Terminals was invented by Jonathan Lei, the President, Chief Financial Officer,
Secretary, and Chairman of the Company and Brian Fox, Chief Technology Officer
of the Company. All rights to this patent were assigned to W9 under the terms of
Mr. Lei's and Mr. Fox's employment agreements. Neither Mr. Lei nor Mr. Fox
received compensation for the assignment. An application for a U.S. patent in
the name of Jonathan L. Lei and Brian J. Fox and assigned to Warp 9 for
Utilizing Mobile Devices As A Communication Proxy For Non-Connected Terminals
(Docket No. 23803-277301) was filed on February 21, 2002, by the Company's
intellectual property counsel, Pillsbury Winthrop, LLP.
This invention is a method and system in which terminals, appliances
and machines without dedicated Internet connections can complete Internet based
transactions by piggy-backing on the connection of the user's handheld device.
An example of an application of this invention is a vending machine that can
conduct electronic wireless payments without having an internal wireless device
that communicates with a server on the Internet. Existing solutions require the
vending machine to be equipped with an internal cell phone. Using this
invention, the vending machine can communicate with the consumer's handheld
device via Infrared or Bluetooth and simply uses the handheld device as the
conduit to the Internet for remote payment processing. This invention also
covers many other applications including secured doorways, factory floors and
smart data acquisition sensors.
Competition
The Company will be subject to intense competition. Several large
companies, with greater financial and managerial resources than the Company, and
greater name recognition are offering mobile messaging solutions. The
competition is intense for such a lucrative market. While certain market
overlaps exist between the Company's product and other solutions, the Roaming
Messenger solution is designed to provide unique competitive advantages.
Companies that the Company may compete with in the mobile messaging market
include:
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ViaFone. ViaFone's flagship product, ViaFone OneBridgeTM, delivers
voice and wireless data applications across all popular communications devices
-- land-line, cellular and WAP-enabled phones, PocketPC and Palm handhelds, and
RIM BlackBerry pagers. ViaFone OneBridge, which integrates with e-business and
legacy systems, enables enterprises to extend workplace productivity beyond the
arbitrary boundaries of walls, buildings, and wires. ViaFone OneBridge has a
database-driven architecture that runs on any Java application server. It was
built on a solid foundation of industry software standards including Java,
Extensible Markup Language ("XML"), and Extensible Stylesheet Language ("XSL").
At its core is an open, XML-based framework allowing automatic, device-specific
rendering over any mobile device.
Brience. Brience 3.0 - Mobile Processing Server is a highly scalable
Java and XML based software that operates on a wide range of hardware platforms
and supports a multitude of relational databases, legacy systems, packaged
software or infrastructure software from leaders such as Openwave, Nokia,
Oracle, IBM, BEA, Broadvision, Tibco, Siebel, PeopleSoft, SAP, ATG and several
others. The software platform has support for over 200+ mobile devices that are
commercially available and operate seamlessly across all major service provider
networks.
BroadBeam. BroadBeam provides a wireless software platform called Axio
with the following components: ExpressQ - Wireless messaging server, ExpressWeb
- Wireless content server, Applications Connectors - The Axio platform offers a
number of back-end connectors to enterprise applications, Development Tools -
Broadbeam offers Java, C++ and XML interfaces to enable rapid application
development using familiar programming tools. BroadBeam is a respected big
player in "transcoding" technology. Its solution is highly client/server based,
very much like Brience with the exception of its advanced store-and-forward
messaging server, ExpressQ.
Bonita Software. Bonita Software is a startup, providing Java-based
client/server technologies and applications to wireless service providers and
device manufacturers. Its platform is composed of the following components: ToGo
Client Engine - A Java 2 software that provides data sharing and task switching
features that enable greater functionality and ease-of-use than standalone
J2ME/MIDP applications, and ToGo Server Engine - Java 2 Enterprise Edition
software that sits on the server side and handles incoming commands to complete
operations the client side requests.
ThinAirApps. ThinAirApps offers a product called ThinAir Server
Platform that is client/server based over a real-time live connection between
the client and the server. The server provides a rich execution environment,
capable of supporting access from many different types of wireless devices, and
allowing applications to serve data and interact with the users of these
devices.
MobileSys. MobileSys is a leading wireless infrastructure services
provider that includes a global wireless network and wireless messaging software
and integrations for major enterprise applications. This company's primary
product offerings include: MobileSys MX - an extremely reliable, highly scalable
2-way wireless messaging engine that can be integrated with mission-critical,
enterprise applications, and The MobileSys NetworkTM - a global wireless data
network that links enterprise applications, ASPs, and eBusinesses with
employees, customers, and partners.
OTHER PRODUCTS AND SERVICES
The Company's wholly owned subsidiary, Warp 9 Inc., offers two primary
web-based e-commerce software products to the catalog and direct marketing
industry.
Warp 9 ICS. The Warp 9 ICS is a proprietary and extensible system that
enables any business to expand its operation to the Internet with minimal
investment, overhead and risk. A business does not need to invest in new
hardware or software in order to utilize the Warp 9 ICS, because the product is
offered as a fully managed online catalog solution that includes hosting on the
Warp 9 Web server. It provides project management, development and integration
into a company's existing business processes. The Company has packaged the
process and technology required for complete e-commerce site deployment.
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Warp 9 EMS. Warp 9 EMS is a web-based e-mail campaign and list
management system designed for high performance and reliability. EMS's
sophisticated technology will allow marketers to send targeted e-mail campaigns
that help grow, retain and maximize the lifetime value of their customers.
Through content personalization and list segmentation, campaign efforts will
result in higher response rates, higher conversion rates and improved customer
loyalty. Warp 9 EMS enables unprecedented response rates that are not achievable
through traditional forms of direct marketing.
Revenue Model The Company charges its customers a monthly subscription
fee to the Warp 9 ICS and Warp 9 EMS product using an application service
provider ("ASP") model.
GOVERNMENT REGULATION
The Company is subject to various federal, state, and local laws
affecting medical e-commerce and communication businesses. The Federal Trade
Commission and equivalent state agencies regulate advertising and
representations made by businesses in the sale of their products, which apply to
the Company. The Company is also subject to government laws and regulations
governing health, safety, working conditions, employee relations, wrongful
termination, wages, taxes and other matters applicable to businesses in general.
EMPLOYEES
The Company currently employs eight full time employees, including the
President of the Company. Those eight full-time employees include three who are
employed in administrative, marketing, and sales positions, and five who are
technical employees employed in research, development, and technical product
maintenance positions. The Company projects that during the next 12 months, the
Company's workforce is likely to increase to 25, with seven of the new positions
being in the administrative, marketing, and sales areas and the remaining ten 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 may file 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 3,650 square feet of office
space at 6144 Calle Real, Suite 200 Santa Barbara, California 93117 for
approximately $7,412 per month pursuant to a six year lease agreement which
commenced in March 2001.
ITEM 3. LEGAL PROCEEDINGS
The Company is not currently a party to any material legal proceedings.
-6-
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Effective April 1, 2003, W9 and the Company completed an Agreement and
Plan of Reorganization and effective June 30, 2003 W9 and the Company completed
a second Agreement and Plan of Reorganization (collectively, the
"Reorganization") which resulted in a share exchange between the shareholders of
W9 and the Company. Pursuant to the Reorganization, the Company acquired all of
the issued and outstanding common stock of W9 in exchange for approximately
131,026,173 newly issued shares of the Company's common stock, W9 became a
wholly owned subsidiary of the Company, and the shareholders of W9 became the
controlling shareholders of the Company. Upon completion of the Reorganization
the Company had a total of approximately 147,912,035 shares of its common stock
outstanding. The Boards of Directors of both W9 and the Company unanimously
approved the Reorganization. The holders of 13,471,645 shares or approximately
92.1% of the total issued and outstanding shares of the Company voted for the
Reorganization. The holders of a substantial majority of the outstanding common
stock of W9 voted for the Reorganization and the holders of a small minority of
the outstanding shares abstained. No shares of W9 or the Company voted against
the Reorganization. The members of the Board of Directors of the Company before
the closing of the Reorganization were replaced with members of the W9 Board of
Directors.
Effective May 2, 2003, the officers and directors of the Company were
authorized to amend the Company's Articles of Incorporation to change the
Company's name from Latinocare Management Corporation to a name to be selected
by the board of directors by duly authorized resolution, subject to board
approval, signing, and closing of a reorganization agreement with an operating
company. The Board of Directors of the Company unanimously approved authorizing
the officers and directors of the Company to change the name of the Company to a
name to be selected by them within 90 days of the date of the authorizing
resolutions. The holders of 13,471,645 shares or approximately 92.1% of the
total issued and outstanding shares of the Company voted to authorize the
officers and directors to change the Company's name. No shares of the Company
voted against authorizing the officers and directors of the Company to change
the name of the Company. The remaining outstanding shares abstained. The name of
the Company was subsequently changed by another resolution duly adopted by the
Company's Board of Directors in June 2003 from Latinocare Management Corporation
to Roaming Messenger, Inc.
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.
-7-
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, 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
Year Ended June 30, 2002 HIGH LOW
------------------------ ---- ---
First quarter ended September 30, 2001...............$1.25 $0.375
Second quarter ended December 31, 2001...............$2.50 $0.75
Third quarter ended March 31, 2002...................$1.25 $0.75
Fourth quarter ended June 30, 2002...................$0.75 $0.12
------------------------
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, 2003, there were approximately 215 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 2003, there were approximately
139,316,774 shares of common stock outstanding on record with the Company's
transfer agent, Mountain Share Transfer.
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 July 15, 2003:
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
Equity compensation plans 8,444,000 $0.08 16,556,000
approved by security
holders
-8-
In a private placement of the Company's common stock made by the
Company from April 8, 2003 to September 30, 2003 pursuant to Rule 506 of
Regulation D of the Securities Act of 1933, as amended (the "Act"), the Company
sold 1,079,263 shares of common stock, at a price of $.08 per share, which
raised gross proceeds of approximately $86,341.
In a private placement of the Company's common stock made by the
Company from July 23, 2003 to September 30, 2003 pursuant to Regulation S of the
Act, the Company sold 4,939,346 shares of common stock, at a variable price
equal to 28% of the closing bid price on the date of the purchase of the stock,
which raised gross proceeds of approximately $396,808.
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.
-9-
RESULTS OF OPERATIONS FOR FISCAL YEAR ENDED JUNE 30, 2003 COMPARED TO FISCAL
YEAR ENDED JUNE 30, 2002
Total revenue for the twelve month period ending June 30, 2003
increased by $88,443 to $899,732 from $811,289 in the prior year.
General and administrative expenses decreased by $14,890 during the
twelve months ended June 30, 2003 to $999,135 from $1,014,025 in the prior year.
General and administrative expenses for the year ended June 30, 2003 included
$188,450 of non-cash expenses as follows: (i) $107,683 of stock compensation in
lieu of payment to consultants and employees of the Company, (ii) $20,000 of
expenses for outstanding warrants, and (iii) $60,767 of accrued salaries to the
Company Chairman and Chief Executive Officer, Jon Lei. Expense related to
depreciation was $49,162 for the twelve months ended June 30, 2003 as compared
to $44,297 for the prior year, and interest expense was $24,467 for the twelve
months ended June 30, 2003 as compared to $21,336 in the prior year.
For the twelve months ended June 30, 2003, the Company's consolidated
net loss was $424,047 as compared to a consolidated net loss of $586,630 for the
twelve months ended June 30, 2002.
LIQUIDITY AND CAPITAL RESOURCES
The Company had consolidated net cash of $57,408 at June 30, 2003 as
compared to net cash of $87,094 as of June 30, 2002. The Company had a net
working capital deficit (i.e. the difference between current assets and current
liabilities) of $316,436 at June 30, 2003 as compared to a working capital
deficit of $273,704 at June 30, 2002. Cash flow provided by operating activities
was ($218,120) during the twelve months ended June 30, 2003 as compared to
($316,131) during the twelve months ended June 30, 2002. Cash provided by
investing activities was ($4,683) during the twelve months ended June 30, 2003
as compared to ($6,046) during the twelve months ended June 30, 2002. Cash
provided by financing activities decreased from $360,824 during the twelve
months ended June 30, 2002 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.
Since July 1, 2002, the Company's capital needs have primarily been
met from the proceeds of (i) a private placement of common stock made by the
Company from April 8, 2003 to September 30, 2003 pursuant to Rule 506 of
Regulation D of the Securities Act of 1933, as amended (the "Act"), at a price
of $.08 per share, which raised gross proceeds of $86,341 and (ii) a private
placement of common stock made by the Company from July 23, 2003 to September
30, 2003 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, which raised
gross proceeds of approximately $396,808.
-10-
ITEM 7. FINANCIAL STATEMENTS OF ROAMING MESSENGER, INC.
ROAMING MESSENGER, INC.
(Latinocare Management Corporation)
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2003 AND 2002
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 ............................ 17-26
-11-
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Roaming Messenger, Inc.
We have audited the accompanying consolidated balance sheets of Roaming
Messenger, Inc. (a Nevada Corporation) and Subsidiary (collectively
referred to as the "Company") as of June 30, 2003 and 2002 and the related
consolidated statements of operations, shareholders' deficit and cash flows
for the years then ended. These 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 auditing standards generally
accepted in the United States of America. 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, 2003 and
2002, 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 from operations and has a net capital deficiency 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 19, 2003
-12-
ROAMING MESSENGER, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2003 AND 2002
2003 2002
---------- -----------
CURRENT ASSETS
Cash $ 57,408 $ 87,094
Accounts receivable, net of allowance for doubtful account of $0 76,898 81,812
Advance to shareholder - 5,250
Prepaids and other current assets 32,860 18,934
---------- -----------
TOTAL CURRENT ASSETS 167,166 193,090
---------- -----------
PROPERTY & EQUIPMENT, notes 3 and 4
Furniture, Fixtures & Equipment 75,658 75,127
Computer Equipment 152,023 126,170
Commerce Server 50,000 50,000
Computer Software 3,535 3,535
Leasehold Improvements 42,194 42,194
---------- -----------
323,410 297,026
Less: Accumulated depreciation & amortization (200,770) (151,609)
---------- -----------
NET PROPERTY & EQUIPMENT 122,640 145,417
---------- -----------
OTHER ASSETS
Lease deposit 7,029 7,029
Other assets 2,261 2,261
---------- -----------
TOTAL OTHER ASSETS 9,290 9,290
---------- -----------
TOTAL ASSETS $ 299,096 $ 347,797
========== ===========
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable $ 45,399 $ 97,988
Accrued liabilities 42,042 29,878
Officer salaries payable 307,366 251,849
Staff salaries payable 23,447 19,211
Note payable, note 4 50,000 50,000
Current portion - obligations under capitalized leases, note 3 15,348 17,868
---------- -----------
TOTAL CURRENT LIABILITIES 483,602 466,794
---------- -----------
LONG TERM LIABILITIES
Obligations under capitalized leases, note 3 17,345 15,648
---------- -----------
TOTAL LONG TERM LIABILITIES 17,345 15,648
---------- -----------
TOTAL LIABILITIES 500,947 482,442
---------- -----------
COMMITMENTS AND CONTINGENCIES, note 9
SHAREHOLDERS' DEFICIT, note 7
Capital Stock 147,912 128,945
Additional Paid-in Capital 1,306,502 968,628
Accumulated deficit (1,656,265) (1,232,218)
---------- -----------
TOTAL SHAREHOLDERS' DEFICIT (201,851) (134,645)
---------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT $ 299,096 $ 347,797
========== ===========
See independent auditors' report
and notes to consolidated financial statements.
-13-
ROAMING MESSENGER, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
JUNE 30, 2003 AND 2002
2003 2002
---------------- -------------
REVENUE, notes 2 and 10 $ 899,732 $ 811,289
Cost of revenue, note 2 106,011 176,608
Selling, general and administrative expenses, notes 7 and 8 999,135 1,014,025
Depreciation and amortization 49,162 44,297
Research and development 145,004 145,341
---------------- -------------
TOTAL COSTS AND EXPENSES 1,299,312 1,380,271
---------------- -------------
OPERATING LOSS (399,580) (568,982)
---------------- -------------
OTHER INCOME (EXPENSES)
Interest income - 3,688
Interest expense (24,467) (21,336)
---------------- -------------
TOTAL OTHER INCOME (EXPENSES) (24,467) (17,648)
---------------- -------------
NET LOSS $ (424,047) $ (586,630)
================ =============
Basic and diluted loss per share $ (0.00) $ (0.00)
================ =============
Weighted average number of shares 133,280,601 125,418,673
================ =============
See independent auditors' report
and notes to consolidated financial statements.
-14-
ROAMING MESSENGER, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT
FOR THE YEARS ENDED JUNE 30, 2003 AND 2002
Additional
Common Paid-in Accumulated
Shares Stock Capital Deficit Total
------------ ----------- ------------ ----------- -----------
Balance, July 1, 2001 121,694,261 $ 121,694 $ 479,114 $ (645,588) $ (44,780)
Issuance of common stock, note 7 7,250,663 7,251 489,514 - 496,765
Net loss - - - (586,630) (586,630)
------------ ----------- ------------ ----------- -----------
Balance, June 30, 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)
============ =========== ============ =========== ===========
See independent auditors' report
and notes to consolidated financial statements.
-15-
ROAMING MESSENGER, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 2003 AND 2002
2003 2002
------------ -----------
OPERATING ACTIVITIES
Net loss $ (424,047) $ (586,630)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation and amortization 49,161 44,297
Expenses paid with shares of common stock 107,683 100,000
Issuance of warrants 20,000 -
Changes in assets - (increase) decrease:
Accounts receivable 4,914 42,158
Prepaid expenses and other current assets (409) 6,022
Other assets - 2,206
Changes in liabilities - increase (decrease):
Officer salaries payable 60,767 74,667
Accounts payable (52,589) 6,033
Staff salaries payable & other liabilities 16,400 (4,884)
------------ -----------
NET CASH USED BY OPERATING ACTIVITIES (218,120) (316,131)
------------ -----------
INVESTING ACTIVITIES
Purchase of property & equipment (4,683) (6,046)
------------ -----------
NET CASH USED BY INVESTING ACTIVITIES (4,683) (6,046)
------------ -----------
FINANCING ACTIVITIES
Issuance of common stock, net of costs 215,641 381,765
Payments on capitalized lease obligations (22,524) (20,941)
------------ -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 193,117 360,824
------------ -----------
NET INCREASE (DECREASE) IN CASH (29,686) 38,647
Cash at beginning of year 87,094 48,447
------------ -----------
Cash at end of year $ 57,408 $ 87,094
============ ===========
Supplemental disclosure of cash flow information
Cash paid during the years for:
Interest $ 24,467 $ 21,336
============ ===========
Income taxes $ 800 $ 1,300
============ ===========
See independent auditors' report
and notes to consolidated financial statements.
-16-
ROAMING MESSENGER, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2003 AND 2002
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 "smart courier" 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 courier" 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, negative cash flows from
operations and the working capital deficiency 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. As discussed in note 13, the Company is contemplating a public
offering as well as the sale of securities through a Private Placement
Memorandum. Management believes these offerings will provide the additional
cash needed to meet the Company's obligations as they become due, and will
allow the development of its core of business.
See independent auditors' report.
-17-
ROAMING MESSENGER, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2003 AND 2002
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Accounts receivables
--------------------
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. Most of the
income is generated from monthly fees from clients who subscribe to the
Company's fully hosted web products on terms ranging from six months to one
year. When the term ends, clients normally go on a month-to-month basis or
extend the contract for another six months to one year.
Cost of Revenue
---------------
Cost of revenue includes the direct costs of operating the Company's
network, including telecommunications charges, and software related costs.
Research and Development
------------------------
Research and development costs are expensed as incurred. Total research and
development costs were $145,004 and $145,341 for the years ended June 30,
2003 and 2002, respectively.
Cash and Cash Equivalent
------------------------
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, 2003 and 2002, 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
Leashold improvements Length of the lease
See independent auditors' report.
-18-
ROAMING MESSENGER, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2003 AND 2002
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 $57,660 and $67,474 at June 30, 2003 and 2002,
respectively. Amortization of assets under capitalized leases is included
in depreciation and amortization expense. During the years ended June 30,
2003 and 2002, additions to fixed assets through capitalized leases totaled
$21,701 and $0, 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 $21,128 and $9,002 for the years
ended June 30, 2003 and 2002, 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 2002 and 2003 because they have
an antidilutive effect in these periods. As stated in note 7, the weighted
average number of shares for 2002 has been restated to reflect the
recapitalization transaction that occurred in 2003.
Income Taxes
------------
The Company uses the liability method of accounting for income taxes.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to financial statements carrying amounts of
existing assets and liabilities and their respective tax bases and
operating loss and tax credit carryforwards. The measurement of deferred
tax assets and liabilities is based on provisions of applicable tax law.
The measurement of deferred tax assets is reduced, if necessary, by a
valuation allowance based on the amount of tax benefits that, based on
available evidence, is not expected to be realized.
See independent auditors' report.
-19-
ROAMING MESSENGER, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2003 AND 2002
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Recent Accounting Pronouncements
--------------------------------
In July 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated
with Exit or Disposal Activities, which has an effective date for exit or
disposal activities that are initiated after December 31, 2002. This
statement provides that cost associated with an exit or disposal activity
must be recognized when the liability is incurred. SFAS No. 146 does not
currently impact the Company's financial statements.
In December 2002, the FASB issued Interpretation No. 45 (FIN 45),
Guarantor's Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others. FIN 45 requires a
guarantor to make additional disclosures in its interim and annual
financial statements regarding the guarantor's obligations. In addition,
FIN 45 requires, under certain circumstances, that a guarantor recognize,
at the inception of the guarantee, a liability for the fair value of the
obligation undertaken when issuing the guarantee. The Company did not have
any outstanding guarantees that needed to be recorded upon adoption of FIN
45.
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure" ("SFAS No. 148"), which amends
SFAS No. 123. SFAS No. 148 amends the disclosure requirements in SFAS No.
123 for stock-based compensation for annual periods ending after December
15, 2002 and interim periods beginning after December 15, 2002. The
disclosure requirements apply to all companies, including those that
continue to recognize stock-based compensation under APB No. 25. Effective
for financial statements for fiscal years ending after December 15, 2002,
SFAS No. 148 also provides three alternative transition methods for
companies that choose to adopt the fair value measurement provisions of
SFAS No. 123. The Company continues to recognize stock-based compensation
under APB No. 25.
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 it's financial statements.
See independent auditors' report.
-20-
ROAMING MESSENGER, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2003 AND 2002
3. OBLIGATIONS UNDER CAPITALIZED LEASES
Lessor Description 2003 2002
-------- ------------- -------- ---------
C.I.T. Payable in montly installments of $166,
interest at 18%, matures in October, 2003. $ 641 $ 2,355
Amano Payable in monthly installments of $285,
interest at 15%, matures in December, 2003. 1,374 4,339
Avaya Payable in monthly installments of $655,
interest at 16%, matures in December, 2004. 12,089 16,698
First Federal Payable in montly installments of $463,
interest at 7%, matures in October, 2002. - 4,328
Advanta Payable in monthly installments of $539,
interest at 11%, matured in February, 2003. - 5,796
GE Payable in monthly installments of $348,
interest at 13%, matured in October 2005. 8,379 -
Dell Payable in monthly installments of $200,
interest at 13%, matures in January 2006. 5,255 -
Dell Payable in monthly installments of $203,
interest at 21%, matures in February 2006. 4,955 -
--------- ----------
32,693 33,516
Less current portion 15,348 17,868
--------- ----------
Long-term portion of obligations under
captalized leases $ 17,345 $ 15,648
========= ==========
Minimum annual lease payments under capitalized lease obligations at June 30,
2003 are as follows:
Fiscal Year
------------
2004 $ 18,972
2005 12,950
2006 4,421
--------
36,343
Less amounts representing interest 3,650
--------
32,693
Less current portion 15,348
--------
Long term portion of capitalized lease obligations $ 17,345
========
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. The Company is currently renegotiating the terms (see note
9). This note is secured by furniture of the Company.
See independent auditors' report.
-21-
ROAMING MESSENGER, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2003 AND 2002
5. INCOME TAXES
At June 30, 2003, the Company has available for federal and state income
tax purposes, net operating loss carryforwards of approximately $5,000,000
and $800,000, respectively, which to 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, 2003 and 2002 relates
primarily to losses incurred for which no tax benefit was recognized, due
to the uncertainty of its realization. The valuation allowance was
$1,960,000 and $560,000 at June 30, 2003 and 2002, respectively,
representing an increase of $1,400,000 for the year ended June 30, 2003.
$1,242,000 of this increase is due to the Latinocare management
corporation's loss that was assumed by Roaming Messenger, Inc., with the
reverse merger. 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:
2003 2002
--------- ---------
Income tax benefit computed
at U.S. federal statutory rate (34%) $ 135,000 $ 198,000
State income taxes, net of benefit federal taxes 23,000 35,000
Less valuation allowance (158,000) (233,000)
--------- ---------
Income tax expense $ - $ -
========= =========
The deferred income tax benefit at June 30, 2003, and 2002 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:
2003 2002
----------- -----------
Depreciation $ 59,000 $ 47,000
Net operating loss carryforwards 1,770,000 413,000
Officer salaries payable 131,000 100,000
----------- -----------
1,960,000 560,000
Less: valuation allowance (1,960,000) (560,000)
----------- -----------
Deferred income tax asset $ - $ -
=========== ===========
6. RECAPITALIZATION
On April 8, 2003, Warp 9, Inc. consummated a transaction, pursuant to which
Roaming Messenger, Inc. acquired all the outstanding shares of Warp 9,
Inc., with Warp 9, Inc. surviving as a wholly-owned subsidiary of Roaming
Messenger, Inc. This transaction was recorded as a recapitalization
followed by the issuance of shares by Warp 9, Inc. to the shareholders of
Roaming Messenger, Inc. Prior to the recapitalization transaction, Roaming
Messenger, Inc. was not an operating company, and its assets consisted
principally of cash of approximately $100,000, offset by the same amount of
liabilities. Under the terms of the transaction, Roaming Messenger, Inc.
issued 131,026,173 shares of Roaming Messenger, Inc. common stock to the
former shareholders of Warp 9, Inc. in exchange for all the outstanding
shares of Warp 9, Inc. (12.5 shares of Roaming Messenger, Inc. for every
share of Warp 9, Inc.). The transaction was consummated in two phases with
the first issuance of 122,620,910 shares on April 8, 2003, and 8,405,263
shares on June 30, 2003.
See independent auditors' report.
-22-
ROAMING MESSENGER, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2003 AND 2002
6. RECAPITALIZATION (Continued)
In addition, options and warrants to purchase Warp 9, Inc. common stock
that were outstanding at the date of recapitalization were cancelled, and
new options and warrants to purchase Roaming Messenger, Inc. common stock
were issued (effective July 10, 2003). The replacement options and warrants
have the same aggregate exercise price as the options and warrants being
replaced. Most stock options became fully vested when they were converted,
while others kept the same vesting periods. The stock options and warrants
are presented as if converted during the year ended June 30, 2003 even
though it was effective July 10, 2003, as it was part of the
recapitalization transaction.
7. SHAREHOLDERS' DEFICIT
During the year ended June 30, 2002, Warp 9, Inc. sold 465,053 shares of
common stock for a total of $381,765, net of $83,187 of stock issuance
costs. The Company also issued 115,000 shares of common stock to outside
entities for $115,000 of consulting services for which $100,000 was
expensed during the year ended June 30, 2002, and $15,000 during the year
ended June 30, 2003.
From July 1, 2002 through the date of the recapitalization, Warp 9, Inc.
issued 141,500 shares of common stock for a total cash consideration of
$141,420. The Company also issued 25,000 shares of common stock for $25,000
of consulting services.
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 extend to period
beyond June 30, 2003, therefore only $67,683 was recorded as expense for
the year ended June 30, 2003, and the remaining balance was recorded as
prepaid expenses at June 30, 2003.
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, 2003, also considering the Stock Option Plan effective July 15,
2003, 25,000,000 shares of common stock were reserved for the issuance of
common stock pursuant to the Stock Option Plan, and 1,924,538 were reserved
for the issuance of common stock pursuant to outstanding warrants.
8. STOCK OPTIONS AND WARRANTS
Warp 9, Inc. had a Stock Option Plan that provided for the granting of
stock options to its employees and others providing services to the
Company. Options granted under the Plan could be either Incentive Options
or Nonqualified Options, and were administered by the Company's Board of
Directors. Each options were exercisable in full or in installment and at
such time as designated by the Board. Notwithstanding any other provision
of the Plan or of any Option agreement, each option were to expire on the
date specified in the Option agreement, which date were to be no later than
the tenth anniversary of the date on which the Option was granted (fifth
anniversary in the case of an Incentive Option granted to a
greater-than-10% stockholder). The purchase price per share of the Common
Stock under each Incentive Option were to be no less than the Fair Market
Value of the Common Stock on the date the Option was granted (110% of the
Fair Market Value in the case of a greater-than-10% stockholder).
See independent auditors' report.
-23-
ROAMING MESSENGER, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2003 AND 2002
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, in connection with the recapitalization transaction, 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. Plan
In connection with the recapitalization, the former holders of options and
warrants were granted new options and warrants under the Roaming Messenger,
Inc Plan. Most options became fully vested when they were converted, while
others kept the same vesting periods. The replacement options and warrants
have the same expiration terms and aggregate exercise price as the options
and warrants being replaced. The stock options and warrants are presented
as if converted during the year ended June 30, 2003, as the conversion is
part of the recapitalization transaction. The Warp 9, Inc. stock options
and warrants were converted at the same conversion rate as the shares of
common stock, 12.5 shares of Roaming Messenger, Inc. for every share of
Warp 9, Inc. shares. The number of stock options below in the summary of
stock option activities has been retroactively restated to reflect the
conversion of warp 9, Inc options into Roaming Messenger, Inc. options.
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 675,000
shares of Roaming Messenger, Inc. were granted during the year ended June
30, 2003. The fair value of options granted during the years ended June 30,
2003 and 2002, which have been estimated at $6,000 and $0, respectively, at
the date of grant were determined using the Black-Scholes Option pricing
model with the following assumptions:
2003 2002
----- ----
Risk free interest rate 2.40% 4.57% to 4.97%
Stock volatility factor 0.01 0.01
Weighted average expected option life 4 years 10 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:
2003 2002
----- ----
Net loss as reported $ (424,047) $ (586,630)
Deduct: Total stock based employee
compensation expense determined under fair
value based method for all awards (6,000) -
----------- -----------
Pro forma net loss (430,047) $ (586,630)
=========== ===========
Basic and diluted pro forma loss per share $ 0.00 $ 0.00
=========== ===========
A summary of the Company's stock option activity and related information
follows:
See independent auditors' report.
-24-
ROAMING MESSENGER, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2003 AND 2002
8. STOCK OPTIONS AND WARRANTS (Continued)
Year ended Year ended
June 30, 2003 June 30, 2002
-------------- -------------
Weighted Weighted
average average
exercise exercise
Options price Options price
--------- ---------- ---------- ----------
Outstanding -beginning of year 7,932,812 $ 0.08 7,425,000 $ 0.08
Granted 675,000 0.08 700,000 0.08
Exercised - - - -
Forfeited (163,812) 0.08 (192,188) 0.08
---------- ---------- ---------- ----------
Outstanding - end of year 8,444,000 $ 0.08 7,932,812 $ 0.08
========== =========== ========== ==========
Exercisable at the end of year 5,824,469 $ 0.08 2,455,988 $ 0.08
========== =========== ========== ==========
Weighted average fair value of
options granted during the year $ 6,000 $ -
=========== ==========
The weighted average remaining contractual life of options as of June 30, 2003
was as follows:
Weighted
average
Number of remaining
Exercise options contractual Options
price outstanding life (years) exercisable
-------- ----------- ------------ -----------
$ 0.08 8,444,000 5.27 5,824,469
Stock Warrants
--------------
During the year ended June 30, 2003, Roaming Messenger, Inc. issued
warrants to purchase 1,609,638 shares of common stock for services. These
warrants were valued at $20,000. The following warrants which are
exercisable, were outstanding at June 30, 2003:
Number of shares Exercise Price Expiration date
---------------- ----------------- -------------------------------
314,900 $ 0.08 per share December 31, 2005
1,609,638 $ 0.08 per share June 30, 2007-December 31, 2007
These warrants became exercisable on their grant date.
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 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.
See independent auditors' report.
-25-
ROAMING MESSENGER, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2003 AND 2002
9. COMMITMENTS AND CONTINGENCIES (Continued)
Year Ending
June 30,
-----------
2004 $ 111,700
2005 $ 95,600
2006 $ 94,700
2007 $ 73,100
2008 $ -
Total lease expense for the years ended June 30, 2003 and 2002 was $120,832
and $117,075, respectively. The Company is also required to pay its pro
rata share of taxes, building maintenance costs, and insurance.
Loan Default
------------
The note payable of $50,000 has a default clause that allows the lender to
assess late payment charges in the amount of 10% of the delinquency. At the
date of issuance of these financial statements, it was unknown whether the
creditor would assess such delinquency charges, and if so, what the
delinquency amount it would be based on.
10. CONCENTRATIONS
For the year ended June 30, 2003, the Company had two customers who
represented approximately 28% of total revenue. For the year ended June 30,
2002, the Company had one customer who accounted for approximately 23% of
the total revenue.
Accounts receivable from three customers represented approximately 51% of
total accounts receivable at June 30, 2003. At June 30, 2002, one customer
accounted for approximately 54% of total accounts receivable.
11. RELATED PARTY TRANSACTIONS
In May 2002, the Company entered into a four-month agreement with one of
the Company's directors. According to the agreement the director raised
funds for the Company and expanded the Company's business opportunities. In
return, as compensation for the service rendered under the agreement, the
Company paid the director $10,000 per month.
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 was recognized as expense for the
year ended June 30, 2003.
12. SUBSEQUENT EVENTS
The Company is currently selling securities through a Private Placement
Memorandum.
See independent auditors' report.
-26-
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
In February 2002, the Company engaged Oppenheim & Ostrick to prepare
the Company's financial statements for transition of the Company's fiscal year
end to December 31 and for the fiscal year ending December 31, 2001. At that
time the Company terminated its engagement with Michael B. Johnson & Company.
The Company had no disagreements with Michael B. Johnson & Company on any matter
of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure.
In November 2002, the Company engaged Robert Pacheco, C.P.A. to prepare
the Company's financial statements for the fiscal year ending December 31, 2002.
The Company terminated its engagement with Oppenheim & Ostrick in October 2002.
The Company had no disagreements with Oppenheim & Ostrick on any matter of
accounting principals or practices, financial statement disclosure, or auditing
scope or procedure.
In February 2003, the Company engaged Armando Ibarra, C.P.A. to prepare
the Company's financial statements for the fiscal year ending December 31, 2002.
The Company terminated its engagement with Robert Pacheco, C.P.A. in February
2003. The Company had no disagreements with Robert Pacheco, C.P.A. on any matter
of accounting principals or practices, financial statement disclosure, or
auditing scope or procedure.
In April 2003, the Company engaged Rose Snyder & Jacobs, CPAs of
Encino, California to prepare the Company's financial statements for the fiscal
year ending June 30, 2003. The Company terminated its engagement with Armando C.
Ibarra, CPAs, in April 2003. The Company had no disagreements with Armando C.
Ibarra, CPAs on any matter of accounting principals or practices, financial
statement disclosure, or auditing scope or procedure. Rose Snyder & Jacobs has
been the auditor of the Company's subsidiary, Warp 9 Inc., since January 2002.
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, have 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.
-27-
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 September 30, 2003:
Name Age Position With the Company
--------------------------------------------------------------------------------
Jonathan Lei.................... 31 President, Chief Financial
Officer, Secretary, and Chairman
Brian Fox....................... 43 Chief Technology Officer
Louie Ucciferri................. 43 Director
Tom Djokovich(1)................ 46 Director
------------------
(1) Member of Audit Committee.
JONATHAN LEI has been the President, Chief Executive Officer, 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 Warp'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.
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.
-28-
TOM DJOKOVICH was the founder and served from 1995 to 2002 as the Chief
Executive Officer of Accesspoint Corporation, a vertically integrated provider
of electronic transaction processing and e-business solutions for merchants.
Under Mr. Djokovich's guidance, Accesspoint became a member of the
Visa/MasterCard association, the national check processing association NACHA,
and developed one of the payment industry's most diverse set of network based
transaction processing, business management and CRM systems for both Internet
and conventional points of sale. During his tenure, Accesspoint became an early
adopter of WAP based e-commerce capabilities and the industry's first certified
Level 1 Internet payment processing engine. In his last year as executive
manager, Accesspoint grew its processing revenues by over 800% and overall
revenues by nearly 300%. Prior to Accesspoint, Mr. Djokovich founded TMD
Construction and Development where he developed an early business-to-business
ordering system for the construction industry.
BOARD COMMITTEES
The Board of Directors has appointed an Audit Committee. As of
September 30, 2003, 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, 2003. As of September 30, 2003, 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 $25,700 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, 2002, December 31, 2002, and March 31, 2003.
All Other Fees. RSJ billed the Company $5,150 for other services for
the fiscal year ended June 30, 2003.
-29-
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, 2003 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) and 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,
2003 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, 2003. 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, 2003
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.
-30-
EXECUTIVE OFFICER COMPENSATION
The annual compensation for the executive officers of the Company has
not yet been determined, but is expected to be established by a resolution of
the Company's Board of Directors in the near future. The following table and
notes set forth the annual cash compensation paid to Jonathan Lei, Chairman of
the Board and President of the Company during the fiscal years ended June 30,
2003, 2002, 2001, and 2000, respectively. No other executive officer received
compensation in excess of $100,000 in any such year.
Annual Compensation Long-Term
Compensation
Awards
------
Fiscal Other Annual Securities
Name and Principal Position Year Salary Bonus Compensation Underlying All Other
--------------------------- ---- ------ ----- ------------ Options Compensation
------- ------------
Jonathan Lei............... 2003 $138,000 - 0 - - 0 - -0- - 0 -
President, Chief Financial
Officer, and Secretary
2002 $138,000 - 0 - - 0 - - 0 -
2001 $138,000 - 0 - - 0 - - 0 -
2000 $138,000 - 0 - - 0 - - 0 -
Brian Fox.................. 2003 $145,000(1) - 0 - - 0 - 5,987,500(2) - 0 -
Chief Technology Officer
2002 $145,000 - 0 - - 0 - - 0 -
2001 $145,000 - 0 - - 0 - - 0 -
----------------
(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"), of which 4,823,263 are vested as of September 30,
2003. The remaining Lei Options vest monthly in equal increments over
the next nine months. These options are in fact options to purchase
shares of Warp 9 Inc., converted into options to purchase shares of
Roaming Messenger Inc. as part of the recapitalization.
-31-
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 executive officers
during fiscal year 2003 and through July 15, 2003.
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............. 5,987,000(1) 71.3% $0.08 Four years from the $103,219 $222,285
Chief Technology date of vesting
Officer
---------------------
(1) 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 owned by 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"),
of which 4,490,625 are vested as of July 15, 2003. The remaining Lei
Options vest monthly in equal increments over the next nine months.
These options are in fact options to purchase shares of Warp 9 Inc.,
converted into options to purchase shares of Roaming Messenger Inc. as
part of the recapitalization.
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
July 15, 2003.
Number of Unexercised Value of Unexercised
Options Held at In-the-Money Options
July 15, 2003 at July 15, 2003(2)
------------- -------------------
Shares
Acquired
Upon
Name Exercise Value Realized(1) Exercisable Unexercisable Exercisable Unexercisable
---- -------- ----------------- ----------- ------------- ----------- -------------
Brian Fox............. -0- -0- 3,367,969 2,619,531 $740,953 $576,297
Chief Technology
Officer
--------------------
(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.
(2) The value of unexercised "in-the-money" options is the difference
between the market price of the common stock on July 15, 2003 ($0.30
per share) and the exercise price of the option, multiplied by the
number of shares subject to the option.
-32-
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, 8,444,000 options to purchase 8,444,000 shares of common stock
at an exercise price of $0.08 per share have been granted under the 2003 Plan.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the names and addresses of 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 96,087,525 (2) 65.98%
President, Chief Financial Officer,
Secretary, and Chairman.....................
Louie Ucciferri
Director.................................... 3,750,000 2.57%
Tom Djokovich
Director.................................... 302,500 .21%
All current Executive Officers as a Group... 96,087,525 65.98%
All current Directors who are not Executive 4,052,500 2.78%
Officers as a Group......................
-----------
(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 September 30, 2003.
(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 September 30, 2003,
4,823,263 Lei Options are vested. The remaining Lei Options vest
monthly in equal increments over the next nine months.
-33-
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to a share purchase agreement dated March 17, 2003, Mr. Jose
J. Gonzales purchased all of the shares of Latinocare Management Corporation, a
California corporation ("LMC"), which was a wholly-owned subsidiary of the
Company at that time. The purchase of LMC by Mr. Gonzalez from the Company
closed on March 31, 2003. Mr. Gonzalez was the Chairman, Chief Executive
Officer, President, Chief Financial Officer, and Secretary of the Company until
April 1, 2003, when he resigned from those positions (he remained a director
until April 19, 2003) and is currently the sole owner, officer and director of
LMC.
Effective March 27, 2003, the Company's controlling shareholders at the
time sold a total of 13,401,645 shares of the Company's common stock
(approximately 92% of the then outstanding shares of the Company) for a total
purchase price of $190,000 to one person in contemplation of a business
combination with an operating company. Pursuant to the share purchase agreement,
Mr. Jose J. Gonzalez agreed to be responsible for paying all accounts payable
owed by the Company as of the date of the sale. On April 1, 2003, the business
combination in the form of the first Agreement and Plan of Reorganization
between the Company and Warp 9, Inc. closed pursuant to which Warp 9, Inc.
became a subsidiary of the Company, and the Company eventually changed its name
to Roaming Messenger, Inc. See "Item 4. Submission Of Matters To A Vote Of The
Security Holders."
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, 2003.
Report on Form 8-K/A dated April 9, 2003, relating to the Plan and Agreement of
Reorganization with Warp 9, Inc.
Report on Form 8-K dated April 21, 2003, relating to the appointment of new
directors of the Company.
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Report on Form 8-K dated April 30, 2003, relating to changes in the Company's
certifying accountant.
Report on Form 8-K dated May 5, 2003, relating to the change of the Company's
name to Roaming Messenger, Inc.
Report on Form 8-K dated May 15, 2003, relating to the Plan and Agreement of
Reorganization with Warp 9, Inc. changes in the Company's certifying accountant,
the change of the Company's name to Roaming Messenger, Inc., and the change of
the Company's fiscal year end to June 30.
Report on Form 8-K dated May 30, 2003, relating to the second Plan and Agreement
of Reorganization with Warp 9, Inc.
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 $24,750 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, 2002,
December 31, 2002, and March 31, 2003.
AUDIT RELATED FEES
RSJ billed the Company $3,650 for the certain accounting and reporting
assistance and audit related work in connection with the reorganization of Warp
9, Inc. and Roaming Messenger, Inc. for the fiscal year ended June 30, 2003.
TAX FEES
RSJ has not yet provided tax planning advice and tax return preparation
services for the Company for the fiscal year ended June 30, 2003, and therefore
has not billed the Company for those services.
ALL OTHER FEES
RSJ billed the Company $1,500 for other services, including preparation
of the tax returns for Warp 9, Inc. for 2002, during the fiscal year ended June
30, 2003.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: September 30, 2003 ROAMING MESSENGER, INC.
By: \s\ Jonathan Lei
--------------------------------------
Jonathan Lei, Chairman of the Board,
Chief Executive Officer, President
Chief Financial Officer, and Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By: \s\ Jonathan Lei Dated: September 30, 2003
--------------------------------------
Jonathan Lei, Chairman of the Board,
Chief Executive Officer, President
Chief Financial Officer, and Secretary
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