Troika Media Group, Inc. - Quarter Report: 2008 June (Form 10-Q)
U.S.
SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Form
10-Q
(Mark
One)
x Quarterly Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
For
the quarterly period ended June 30, 2008
o Transition Report
pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
For
the transition period from______________ to _______________
Commission
File No. 000-26213
ROOMLINX,
INC.
(Exact
name of registrant as specified in its charter)
|
Nevada 83-0401552
(State
or other jurisdiction
of (I.R.S.
Employer
incorporation
or
organization) Identification
No.)
2150
– W. 6th
Ave., Unit H Broomfield, Colorado 80020
(Address
of principal executive offices)
(303)
544-1111
(Issuer's
telephone number)
|
Indicate
by check mark whether the registrant (1) 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 o No x
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.
Large
accelerated filer o Accelerated
filer o
Non-accelerated
filer o Smaller
reporting company x
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
Yes o No x
The
number of shares outstanding of the Issuer's common stock as of October 21, 2008
was 158,483,488.
ROOMLINX,
INC.
|
RoomLinX,
Inc.
|
||||||||
|
June 30,
|
||||||||
|
2008
|
December
30,
|
|||||||
|
ASSETS
|
(Unaudited)
|
2007
|
||||||
|
Current
assets:
|
||||||||
|
Cash and cash
equivalents
|
$ | 550,918 | $ | 915,165 | ||||
|
Accounts receivable,
net
|
220,090 | 358,794 | ||||||
|
Prepaid and other current
assets
|
25,516 | 37,721 | ||||||
|
Work in
progress
|
61,499 | 382 | ||||||
|
Total current
assets
|
858,023 | 1,312,062 | ||||||
|
Property and equipment,
net
|
68,010 | 49,822 | ||||||
|
Total
assets
|
$ | 926,033 | $ | 1,361,884 | ||||
|
LIABILITIES
AND STOCKHOLDERS' (DEFICIT)
|
||||||||
|
Current
liabilities:
|
||||||||
|
Accounts payable and accrued
expenses
|
$ | 321,423 | $ | 399,782 | ||||
|
Officer and stockholder note
payable
|
12,500 | 12,500 | ||||||
|
Accrued
interest
|
35,057 | 35,926 | ||||||
|
Deferred
revenue
|
339,570 | 238,124 | ||||||
|
Total current
liabilities
|
708,550 | 686,332 | ||||||
|
Convertible
debentures
|
3,264,103 | 2,101,352 | ||||||
|
Stockholders'
(deficit):
|
||||||||
|
Preferred stock - $0.20 par value,
5,000,000 shares authorized:
|
||||||||
|
Class A - 720,000 shares
authorized, issued and outstanding
|
144,000 | 144,000 | ||||||
|
Series B - 2,000,000 shares
authorized; none issued and outstanding
|
- | - | ||||||
|
Common stock - $0.001 par value,
245,000,000 shares authorized:
|
||||||||
|
151,892,050 and 149,068,107 shares
issued and outstanding
|
151,892 | 149,068 | ||||||
|
Additional paid-in
capital
|
20,261,818 | 19,920,259 | ||||||
|
Deferred stock
compensation
|
(313,634 | ) | (59,335 | ) | ||||
|
Accumulated
(deficit)
|
(23,290,696 | ) | (21,579,792 | ) | ||||
|
Total stockholders'
(deficit)
|
(3,046,620 | ) | (1,425,800 | ) | ||||
|
Total liabilities and
stockholders' (deficit)
|
$ | 926,033 | $ | 1,361,884 | ||||
The
accompanying notes are an integral part of these consolidated financial
statements.
|
RoomLinX,
Inc.
|
||||||||||||||||
|
(Unaudited)
|
||||||||||||||||
|
for the Three Months
Ended
|
for the Six Months
Ended
|
|||||||||||||||
|
June 30,
|
June 30,
|
|||||||||||||||
|
2008
|
2007
(Restated)
|
2008
|
2007
(Restated)
|
|||||||||||||
|
Revenues
|
||||||||||||||||
|
System sales and
installation
|
$ | 109,049 | $ | 332,738 | $ | 200,179 | $ | 498,219 | ||||||||
|
Service, maintenance and
usage
|
315,343 | 323,164 | 601,879 | 667,984 | ||||||||||||
| 424,392 | 655,902 | 802,058 | 1,166,203 | |||||||||||||
|
Costs and
expenses
|
||||||||||||||||
|
System sales and
installation
|
27,365 | 137,954 | 65,614 | 245,876 | ||||||||||||
|
Service, maintenance and
usage
|
203,192 | 277,140 | 467,347 | 598,680 | ||||||||||||
|
Sales and
marketing
|
71,662 | 58,281 | 136,697 | 105,583 | ||||||||||||
|
Product
development
|
131,528 | 76,258 | 245,944 | 76,258 | ||||||||||||
|
General and administrative stock
compensation
|
3,636 | 248,614 | 19,486 | 278,240 | ||||||||||||
|
General and
administrative
|
176,555 | 112,440 | 339,138 | 225,376 | ||||||||||||
|
Depreciation
|
7,039 | 2,029 | 12,918 | 4,057 | ||||||||||||
| 620,977 | 912,716 | 1,287,144 | 1,534,070 | |||||||||||||
|
Operating
(loss)
|
(196,585 | ) | (256,814 | ) | (485,086 | ) | (367,867 | ) | ||||||||
|
Other income
(expense)
|
||||||||||||||||
|
Interest
expense
|
(37,523 | ) | (22,566 | ) | (73,906 | ) | (118,547 | ) | ||||||||
|
Financing
expense
|
- | (374,707 | ) | - | (402,207 | ) | ||||||||||
|
Derivative
expense
|
(1,397,111 | ) | (1,128,348 | ) | (1,158,575 | ) | (1,128,348 | ) | ||||||||
|
Foreign currency gain
(loss)
|
(2,849 | ) | (1,987 | ) | (4,215 | ) | (7,854 | ) | ||||||||
|
Other income
(expense)
|
1,238 | 1,813 | 9,887 | (2,527 | ) | |||||||||||
|
Income from discharge of
indebtedness
|
992 | 1,465,206 | 992 | 1,465,206 | ||||||||||||
| (1,435,253 | ) | (60,589 | ) | (1,225,817 | ) | (194,277 | ) | |||||||||
|
(Loss) before income
taxes
|
(1,631,838 | ) | (317,403 | ) | (1,710,903 | ) | (562,144 | ) | ||||||||
|
Provision for income
taxes
|
- | - | - | - | ||||||||||||
|
Net (loss)
|
$ | (1,631,838 | ) | $ | (317,403 | ) | $ | (1,710,903 | ) | $ | (562,144 | ) | ||||
|
Net (loss) per common
share:
|
||||||||||||||||
|
Basic and
diluted
|
$ | (0.01 | ) | $ | (0.00 | ) | $ | (0.01 | ) | $ | (0.00 | ) | ||||
|
Weighted average shares
outstanding:
|
||||||||||||||||
|
Basic and
diluted
|
151,892,045 | 139,868,381 | 151,198,600 | 132,868,381 | ||||||||||||
The
accompanying notes are an integral part of these consolidated financial
statements.
|
RoomLinX,
Inc.
|
||||||||
|
for
the Six Months Ended June 30, 2008 and
2007
|
||||||||
|
(Unaudited)
|
||||||||
|
2007
|
||||||||
|
2008
|
(Restated)
|
|||||||
|
Cash flows from operating
activities:
|
||||||||
|
Net cash (used in) operating
activities
|
$ | (333,141 | ) | $ | (526,475 | ) | ||
|
Cash flows from investing
activities:
|
||||||||
|
Purchase of property and
equipment
|
(31,106 | ) | (8,959 | ) | ||||
|
Net cash (used in) investing
activities
|
(31,106 | ) | (8,959 | ) | ||||
|
Cash flows from financing
activities:
|
||||||||
|
Cash proceeds from convertible
debentures
|
- | 2,300,000 | ||||||
|
Principal payments on convertible
debenture
|
- | (525,000 | ) | |||||
|
Principal payments on notes
payable
|
- | (277,500 | ) | |||||
|
Principal payments on officer and
stockholder notes payable
|
- | (75,103 | ) | |||||
|
Net cash provided by financing
activities
|
- | 1,422,397 | ||||||
|
Net increase (decrease) in cash
and equivalents
|
(364,247 | ) | 886,963 | |||||
|
Cash and equivalents at beginning
of period
|
915,165 | 144,540 | ||||||
|
Cash and equivalents at end of
period
|
$ | 550,918 | $ | 1,031,503 | ||||
|
Supplemental Cash Flow
Information
|
||||||||
|
Cash paid for
interest
|
$ | - | $ | 3,016 | ||||
|
Cash paid for income
taxes
|
$ | - | $ | - | ||||
|
Non-cash investing and financing
activities:
|
||||||||
|
Notes payable converted to
convertible debentures
|
$ | - | $ | (50,000 | ) | |||
|
Accounts payable and accrued
expenses forgiven
|
$ | 992 | $ | 4,200 | ||||
|
Convertible debt
forgiven
|
$ | - | $ | 550,000 | ||||
|
Notes payable
forgiven
|
$ | - | $ | 37,500 | ||||
|
Interest and penalties
forgiven
|
$ | - | $ | 457,192 | ||||
|
Shareholder payables
forgiven
|
$ | - | $ | 3,000 | ||||
|
Shareholder notes
forgiven
|
$ | - | $ | 137,397 | ||||
|
Shareholder interest and penalties
forgiven
|
$ | - | $ | 104,553 | ||||
|
Capital lease
forgiven
|
$ | - | $ | 418,418 | ||||
The
accompanying notes are an integral part of these consolidated financial
statements.
Roomlinx,
Inc.
June
30, 2008
(Unaudited)
1. Overview
and Summary of Significant Accounting Policies
Roomlinx,
Inc. (the “Company”) is incorporated under the laws of the state of
Nevada. The Company sells, installs and services hardware for wired
networking solutions and wireless fidelity networking solutions, also known as
Wi-Fi, for high-speed internet access to hotels, convention centers, corporate
apartments and special events locations. The Company installs and creates
services that address the productivity and communications needs of hotel guests,
convention center exhibitors, corporate apartment customers and individual
consumers. The Company utilizes third party contractors to install such hardware
and software.
Basis of Presentation: The
accompanying unaudited financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America
for interim financial information. They do not include all of the
information and footnotes required by accounting principles generally accepted
in the United States of America for complete financial statements. In
the opinion of management, all adjustments, consisting only of normal recurring
adjustments considered necessary for a fair presentation, have been included in
the accompanying unaudited financial statements. Operating results
for the periods presented are not necessarily indicative of the results that may
be expected for the full year. For further information, refer to the
financial statements and notes thereto, included in the Company's Form 10-KSB as
of and for the year ended December 31, 2007.
Restatement: The 2007
financial statements have been restated to reflect a capital contribution from
the forgiveness of shareholder payables and notes payable in the amount of
$244,950. This adjustment resulted in an increase in the net loss for
the three months and six months ended June 30, 2007 of $241,950 and $244,950,
respectively. There was no effect on previously reported net loss per
share.
Per Share Amounts: The Company
computes net income (loss) per share under the provisions of SFAS No. 128,
“Earnings per Share” (SFAS 128). Under the provisions of SFAS 128,
basic net income (loss) per share is computed by dividing the Company’s net
income for the period by the weighted-average number of shares of common stock
outstanding during the period. Diluted net income (loss) per share
excludes potential common shares if the effect is
anti-dilutive. Diluted net income (loss) per share is determined in
the same manner as basic net income per share except that the number of shares
is increased assuming exercise of dilutive stock options and warrants using the
treasury stock method and shares issuable upon conversion of convertible debt
and adding back to net income the related interest expense.
Derivative financial
instruments: We do not use derivative instruments to hedge
exposures to cash flow, market, or foreign currency risks.
We review
the terms of convertible debt instruments we issue to determine whether there
are embedded derivative instruments, including the embedded conversion option,
that are required to be bifurcated and accounted for separately as a derivative
financial instrument. In circumstances where the convertible instrument contains
more than one embedded derivative instrument, including the conversion option,
that is required to be bifurcated, the bifurcated derivative instruments are
accounted for as a single, compound derivative instrument. Also, in connection
with the sale of convertible debt, we may issue freestanding options or warrants
that may, depending on their terms, be accounted for as derivative instrument
liabilities, rather than as equity. We may also issue options or warrants to
non-employees in connection with consulting or other services they
provide.
When the
ability to physical or net-share settle the conversion option or the exercise of
the freestanding options or warrants is deemed to be not within the control of
the company or if the conversion option, options or warrants are not indexed
only to the underlying common stock, the embedded conversion option or
freestanding options or warrants may be required to be accounted for as a
derivative financial instrument liability.
Derivative
financial instruments are initially measured at their fair value. For derivative
financial instruments that are accounted for as liabilities, the derivative
instrument is initially recorded at its fair value and is then re-valued at each
reporting date, with changes in the fair value reported as charges or credits to
income. For option-based derivative financial instruments, we use the
Cox-Ross-Rubinstein binomial model to value the derivative
instruments. To the extent that the initial fair values of the
freestanding and/or bifurcated derivative instrument liabilities exceed the
total proceeds received, an immediate charge to income is recognized, in order
to initially record the derivative instrument liabilities at their fair
value.
The
discount from the face value of the convertible debt instruments resulting from
allocating some or all of the proceeds to derivative instruments, together with
the stated interest on the instrument, is amortized over the life of the
instrument through periodic charges to income, using the effective interest
method.
Certain
instruments, including convertible debt and freestanding options or warrants
issued, may be subject to registration rights agreements, which may impose
penalties for failure to register the underlying common stock by a defined
date. Any such penalties are accounted for in accordance with FAS 5
and are accrued when they are deemed probable.
The
classification of derivative instruments, including whether such instruments
should be recorded as liabilities or as equity, is re-assessed periodically,
including at the end of each reporting period. If re-classification is required,
the fair value of the derivative instrument, as of the determination date, is
re-classified. Any previous charges or credits to income for changes in the fair
value of the derivative instrument are not reversed. Derivative instrument
liabilities are classified in the balance sheet as current or non-current based
on whether or not net-cash settlement of the derivative instrument could be
required within 12 months of the balance sheet date.
2. Convertible
Debentures
On June
11, 2007 and June 13, 2007, we sold an aggregate of $2,300,000 principal amount
of Convertible Debentures due May 2012 (the “Convertible Debentures”) to a
number of investors in reliance on Section 4(2) of the Securities Act, and
pursuant to a Securities Purchase Agreement with certain investors (the “June
Purchase Agreement”). In addition, a note payable in the amount of
$50,000 was converted into a convertible debenture.
The
Convertible Debentures are initially convertible into Series B Preferred Stock,
which Series B Preferred Stock will not be convertible into Common Stock until
such time as the Company has sufficient number of shares of Common Stock
authorized to permit the conversion of the Convertible Debentures into Common
Stock, at which time the Convertible Debentures will automatically be
convertible into Common Stock and not Series B Preferred Stock. The
conversion price into shares of Common Stock of the Convertible Debentures is
$0.02 per share, subject to certain standard anti-dilution
adjustments. In the event that the Convertible Debentures are not
repaid when due, the conversion price will be reduced to $0.01 per
share. Because this potential reduction in the conversion price
effectively indexes the return to the investors to a factor other than the
underlying value of our common stock, the embedded conversion option has been
bifurcated and accounted for separately as a derivative instrument
liability.
Pursuant
to the June Purchase Agreement, each purchaser also received an option,
exercisable for a six month period from the Closing under the Purchase
Agreement, to purchase additional Convertible Debentures (“Additional
Convertible Debentures”) in an amount up to 50% of the original amount of
Convertible Debentures purchased. This option was also accounted for
as a derivative instrument liability. All such options expired
unexercised.
The
Convertible Debentures bear interest at an annual rate of 6%, payable quarterly,
either in cash or, at the Company’s election, in shares of our capital
stock. As of October 22, 2008, accrued interest aggregating $183,591
through September 30, 2008, has been settled in shares of our common
stock.
Pursuant
to the terms of the June Purchase Agreement, we are obligated to register the
shares of Common Stock issuable on conversion of the Convertible Debentures
within one year of the Closing under the June Purchase Agreement or as soon as
our Common Stock is listed on the Over-the-Counter Bulletin Board, whichever is
sooner. The June Purchase Agreement does not provide for any specific
penalties for not complying with this requirement, which has not yet been
met. At October 21, 2008, the Company has not accrued any penalties
that may ultimately be paid, as it does not believe any penalties are probable
as of that date.
3. Derivative
Financial Instruments
As
discussed above, the embedded conversion option in our Convertible Debentures
and options issued to the investors to acquire additional debentures have been
accounted for as derivative instrument liabilities.
We use
the Cox-Ross-Rubinstein binomial model to value warrants, and the embedded
conversion option components of any bifurcated embedded derivative instruments
that are recorded as derivative liabilities. See Note 2 related to embedded
derivative instruments that have been bifurcated from our Convertible Debentures
and the options to acquire additional Convertible Debentures held by the
investors. The options and conversion options can be exercised by the
holders at any time. The options held by the investors to acquire
additional Convertible Debentures expired in December 2007.
In
valuing the embedded conversion option components of the bifurcated embedded
derivative instruments and the options, at the time they were issued and at June
30, 2008, we used the market price of our common stock on the date of valuation,
an expected dividend yield of 0%, an estimated volatility of 250% based on a
review of our historical volatility and the remaining period to the expiration
date of the option or repayment date of the convertible debt
instrument. The risk-free rate of return used was 4.23%, based on
constant maturity rates published by the U.S. Federal Reserve, applicable to the
remaining life of the options.
At June
30, 2008, the following derivative liabilities were outstanding:
|
Issue
Date
|
Expiry
Date
|
Instrument
|
Conversion/
Exercise
Price
Per Share |
Value
–
Issue
Date
|
Value
-
June
30,
2008 |
|||||||||
|
June
2007
|
May
2012
|
$2,350,000
Convertible
Debentures
|
$ | 0.02 | $ | 2,338,899 | $ | 3,255,894 | ||||||
|
June
2007
|
Convertible
Debentures
Carrying Amount |
8,209 | ||||||||||||
|
June
2007
|
December
2007
|
Option
to acquire
$1,175,000
Convertible
Debentures
|
$ | 0.03 | 431,264 | 0 | ||||||||
|
Total
derivative financial instruments
|
$ | 2,770,163 | $ | 3,264,103 | ||||||||||
4. Stockholders'
(Deficit)
Preferred
Stock: The Company has authorized 5,000,000
preferred shares with a $0.20 par value. There are two designations
of the class of preferred shares: Class A and Series B Preferred
Stock. The Class A preferred stock is entitled to receive cumulative
annual dividends at the rate of 9%, payable in either cash or additional shares
of Class A Preferred Stock, at the option of the Company. The Series
B Preferred Stock is not entitled to any dividends. As of June 30,
2008, there were 720,000 shares of Class A Preferred stock and no shares of
Class B Preferred Stock issued and outstanding. Dividends accrued and
unpaid as of June 30, 2008, were $126,840.
Common
Stock: The Company has authorized 245,000,000
shares of $0.001 par value common stock. As of June 30, 2008, there
were 151,892,050 shares of common stock issued and outstanding.
On
January 1, 2008, the Board approved issuance of 1,437,048 shares of our common
stock, valued at $0.025 per share for accrued interest of $35,926 for the fourth
quarter of 2007, pursuant to the clauses outlined in the convertible debenture
agreements of June 11, 2007.
On April
1, 2008, the Board approved issuance of 1,386,890 shares of our common stock,
valued at $0.025 per share for accrued interest of $34,672 for the first quarter
of 2008, pursuant to the clauses outlined in the convertible debenture
agreements of June 11, 2007.
Warrants: On
April 14, 2008, we issued to Creative Hospitality Associates (“CHA”) a Warrant
pursuant to a sales agent Agreement with CHA (the “Agreement”).
The
Warrant is initially exercisable for Series B Preferred Stock. At such
time as we have a sufficient number of shares of Common Stock authorized to
permit the exercise of the Warrant for Common Stock (the “Triggering Event”),
the Warrant will automatically be exercisable for Common Stock and not Series B
Preferred Stock. The maximum number of shares of Common Stock for which
the Warrant is ultimately exercisable for is 15,000,000 and the ultimate
exercise price per share of Common Stock for which the Warrant is exercisable is
$0.02 per share, each of which is subject to adjustment and the conditions
contained in the Warrant. The Warrant becomes ultimately exercisable for
such 15,000,000 shares of Common Stock pursuant to a vesting schedule as set
forth in the Warrant that provides that the Warrant becomes ultimately
exercisable for 500,000 shares of Common Stock with each 1,000 rooms in a hotel
or other property that CHA or its affiliate introduces to us and in which our
Media and Entertainment System is installed.
At June
30, 2008, the Company had the following outstanding warrants:
|
Exercise
Price
|
Number
of
Shares |
Remaining
Contractual Life (in years) |
Exercise
Price
times Number of Shares |
Weighted
Average Exercise Price |
|||||||||||
|
$
|
0.020 | 15,000,000 |
4.8
|
$ | 300,000 | ||||||||||
|
$
|
0.020 | 2,962,500 |
4.0
|
59,250 | |||||||||||
|
$
|
0.030 | 7,000,000 |
4.0
|
210,000 | |||||||||||
|
$
|
0.030 | 3,900,000 |
3.5
|
117,000 | |||||||||||
|
$
|
0.075 | 10,963,333 |
1.7
|
822,250 | |||||||||||
| 39,825,833 | $ | 1,508,500 |
$0.038
|
||||||||||||
|
Warrants
|
Number
of
Shares
|
Weighted
Average Exercise Price
|
||||||
|
Outstanding
at January 1, 2008
|
24,825,833
|
$ | 0.049 | |||||
|
Issued
|
15,000,000
|
0.020 | ||||||
|
Exercised
|
-----
|
----- | ||||||
|
Expired
/ Cancelled
|
-----
|
----- | ||||||
|
Outstanding
at June 30, 2008
|
39,825,833
|
$ | 0.038 | |||||
|
Exercisable
at June 30, 2008
|
24,825,833
|
$ | 0.049 | |||||
The
Company recorded deferred compensation expense of $270,555 in connection with
warrants granted during the quarter ended June 30, 2008. The fair value of the
warrant grants was estimated on the date of grant utilizing the Black-Scholes
option pricing model with the following weighted average assumptions for grants:
expected life of warrants of 5 years, expected volatility of 144%, risk-free
interest rate of 4% and no dividend yield. The weighted average fair value at
the date of grant for warrants granted during the quarter ended June 30, 2008,
approximated $0.018 per warrant.
Options: The
Company adopted a long term incentive stock option plan (the "Stock Option
Plan"). The Stock Option Plan provides for the issuance of 25,000,000 shares of
common stock upon exercise of options which may be granted pursuant to the Stock
Option Plan. As of June 30, 2008, options to purchase 22,950,000 shares were
outstanding and 2,050,000 shares are available for future grants of options. The
options vest as determined by the Board of Directors and are exercisable for a
period of no more than 10 years.
On May
15, 2008, the Registrant’s Board of Directors approved the grant to employees
and consultants, under the Registrant’s Long-Term Incentive Plan, of an
aggregate of 100,000 Incentive Stock Options and an aggregate of 100,000
Non-Qualified Stock Options. Such options were issued at an exercise
price of $0.017 per share and vest one-third (1/3) on each of the first three
anniversaries of the employment date.
At June 30, 2008, the Company had the
following outstanding stock options:
|
Exercise
Price
|
Number
of
Shares |
Remaining
Contractual Life (in years) |
Exercise
Price
times Number of Shares |
Weighted
Average Exercise Price |
|||||||||||
| $ | 0.026 | 1,000,000 |
7.1
|
$ | 26,000 | ||||||||||
| $ | 0.010 | 4,000,000 |
5.8
|
40,000 | |||||||||||
| $ | 0.100 | 1,000,000 |
1.6
|
100,000 | |||||||||||
| $ | 0.020 | 13,600,000 |
5.4
|
272,000 | |||||||||||
| $ | 0.025 | 1,000,000 |
5.9
|
25,000 | |||||||||||
| $ | 0.015 | 2,150,000 |
6.4
|
32,250 | |||||||||||
| $ | 0.017 | 200,000 |
6.9
|
3,400 | |||||||||||
| 22,950,000 | $ | 498,650 |
$0.022
|
||||||||||||
|
Options
|
Number
of
Shares
|
Weighted
Average Exercise Price
|
||||||
|
Outstanding
at January 1, 2008
|
23,750,000
|
$ | 0.025 | |||||
|
Granted
|
200,000
|
0.017 | ||||||
|
Exercised
|
-
|
- | ||||||
|
Expired
|
(1,000,000)
|
0.02 | ||||||
|
Outstanding
at June 30, 2008
|
22,950,000
|
$ | 0.022 | |||||
The
Company recorded deferred compensation expense of $3,230 in connection with
options granted during the quarter ended June 30, 2008. The fair value of the
option grants was estimated on the date of grant utilizing the Black-Scholes
option pricing model with the following weighted average assumptions for grants:
expected life of options of 7 years, expected volatility of 144%, risk-free
interest rate of 4% and no dividend yield. The weighted average fair value at
the date of grant for options granted during the quarter ended June 30, 2008,
approximated $0.016 per option.
5.
Subsequent Events
On July
1, 2008, the Board approved issuance of 1,402,302 shares of our common stock,
valued at $0.025 per share for accrued interest of $35,057 for the period April
1 through June 30, 2008, pursuant to the clauses outlined in the convertible
debenture agreements of June 11, 2007.
On July
15, 2008 Aaron Dobrinsky exercised 4,000,000 options at $0.01 per share on a
cashless basis resulting in the net issuance of 2,571,429 shares of common
stock.
On July
21, 2008, the Registrant’s Board of Directors approved the grant, under the
Registrant’s Long-Term Incentive Plan, of an aggregate of 400,000 Incentive
Stock Options and an aggregate of 600,000 Non-Qualified Stock
Options. Such options were issued at an exercise price of $0.02 per
share and vest one-third (1/3) on each of the first three anniversaries of the
employment date.
On July
28, 2008, the Company’s board of directors approved the issuance of 1,400 share
of Series C Preferred Stock. The Series C stock accrues dividends at
an annual rate of 6% per year, payable quarterly, either in cash or, at the
Company’s election, shares of common. There are no redemption rights
associated with the Series C Stock. Each holder of Series C stock is
entitled to voting rights on an “as converted” to common stock basis together
with the holders of common stock.
On July
31, 2008 we entered into a Securities Purchase Agreement (the “Purchase
Agreement”) with an investor
group, and certain
affiliated trusts (collectively, the “Investors”), pursuant to which we
simultaneously sold and issued to the Investors an aggregate of $2,500,000 of
Series C Preferred Stock (“Series C Stock”). In connection with the
Purchase Agreement, the Registrant also issued Warrants to the Investors for the
purchase of additional shares of Series C Stock or Common Stock and entered into
a Registration Rights Agreement with the Investors.
Each
share of Series C Stock is convertible into such number of shares of Common
Stock as is determined by dividing $2,500 by the initial conversion price of
$0.025 per share (or 100,000 shares of Common Stock for each share of Series C
Stock converted). However, the Series C Stock is not convertible into Common
Stock until such time as the Company has a sufficient number of shares of Common
Stock authorized to permit the conversion of all of the Series C Stock into
Common Stock, at which time the Series C Stock will automatically convert into
Common Stock.
The
Series C Stock accrues dividends at an annual rate of 6% per year, payable
quarterly, either in cash or, at the Registrant’s election, shares of the
Registrant’s capital stock. There are no redemption rights associated
with the Series C Stock. Each holder of Series C stock is entitled to
voting rights on an “as converted” to Common Stock basis together with the
holders of Common Stock.
Pursuant
to the Purchase Agreement, the Investors also received (i) Series C-1 Warrants
to purchase an aggregate of 200 shares of Series C Stock, at an initial exercise
price of $4,000 per share of Series C Stock, and (ii) Series C-2 Warrants to
purchase an aggregate of 200 shares of Series C Stock, at an initial exercise
price of $6,000 per share of Series C Stock. The Warrants are
immediately exercisable and expire on the third anniversary of their date of
issuance. At such time as the Company has a sufficient number of
shares of Common Stock authorized to permit the conversion of all Series C Stock
into Common Stock, each Warrant will no longer be exercisable for shares of
Series C Stock but instead will be exercisable for the number of shares of
Common Stock into which the Series C Stock that the Warrant could have been
exercised for prior thereto would have been convertible into, at an initial
exercise price of $.04 per share of Common Stock under the Series C-1 Warrants
and at initial exercise price of $.06 per share of Common Stock under the Series
C-2 Warrants.
In
connection with the Purchase Agreement, the Registrant entered into a
Registration Rights Agreement. Pursuant to the Registration Rights Agreement,
the Registrant is obligated to register for resale under the Securities Act the
shares of Common Stock issuable upon conversion of the Series C Stock and
exercise of the Warrants beginning by April 30, 2009.
On August
19, 2008, the Registrant’s Board of Directors approved the grant, under the
Registrant’s Long-Term Incentive Plan, of an aggregate of 300,000 Incentive
Stock Options. Such options were issued at an exercise price of
$0.012 per share and vest one-third (1/3) on each of the first three
anniversaries of the grant date.
On August
19, 2008, the Company granted under our Long-Term Incentive Plan, an aggregate
of 500,000 Non-Qualified Stock Options (“NQOs”). The NQOs were
granted to Christopher Blisard with respect to his service as a member of the
Board of Directors during 2008 and 2009 and vest on December 31,
2009. The options were issued at an exercise price of $0.012 per
share, representing the closing price of the Company’s common stock on such
date.
On August
19, 2008, the Company issued 1,200,000 shares as Board of Director compensation
for the year ended December 31, 2007. 800,000 of the shares were issued to Peter
Bordes and 400,000 of the shares were issued to Herbert Hunt. The
shares were valued at $0.025 per share for a fair market value of
$30,000. This compensation was accrued for in 2007.
On
October 1, 2008, the Board approved issuance of 1,417,707 shares of our common
stock, valued at $0.025 per share for accrued interest of $35,443 for the period
July 1 through September 30, 2008, pursuant to the clauses outlined in the
convertible debenture agreements of June 11, 2007.
This Form
10-Q contains or incorporates by reference “forward-looking statements,” as that
term is used in federal securities laws, about our financial condition, results
of operations and business. These statements include, among
others:
-
statements concerning the benefits that we expect will result from our business
activities and results of exploration that we contemplate or have completed,
such as increased revenues; and
-
statements of our expectations, beliefs, future plans and strategies,
anticipated developments and other matters that are not historical
facts.
These
statements may be made expressly in this document or may be incorporated by
reference to other documents that we will file with the SEC. You can
find many of these statements by looking for words such as “believes,”
“expects,” “anticipates,” “estimates” or similar expressions used in this report
or incorporated by reference in this report.
These
forward-looking statements are subject to numerous assumptions, risks and
uncertainties that may cause our actual results to be materially different from
any future results expressed or implied in those statements. Because
the statements are subject to risks and uncertainties, actual results may differ
materially from those expressed or implied. We caution you not to put
undue reliance on these statements, which speak only as of the date of this
report. Further, the information contained in this document or
incorporated herein by reference is a statement of our present intention and is
based on present facts and assumptions, and may change at any time and without
notice, based on changes in such facts or assumptions.
Roomlinx, Inc., a Nevada corporation ("We," "Us" or the
"Company"), provides two core products and
services:
1. Wired networking solutions and
wireless fidelity networking solutions, also known as Wi-Fi, for high
speed internet access to hotels, convention centers, corporate apartments and
special events locations. The Company installs and creates services that address
the productivity and communications needs of hotel guests, convention center exhibitors and
corporate apartment customers. We specialize in providing advanced Wi-Fi
wireless services such as the wireless standards known as
802.11a/b/g.
Hotel customers sign long-term service
agreements, where we provide the maintenance for the networks, as well as the
right to provide value added services over the network.
We derive our revenues primarily from
the installation of the wired and wireless networks we provide to hotels,
convention centers and apartment buildings. We derive additional revenue from the
maintenance of these networks. Customers typically pay a one-time fee for the
installation of the network and then pay monthly maintenance fees for the upkeep
and support of the network. During 2008 we made a fundamental
change in our business
model pertaining to our on-site support. We are no longer including on-site support in the base price for maintenance; these services are
either billed for at the time of service or the base price is increased.
2. In-room media and entertainment solutions for hotels, resorts, and time-share properties. The
Company develops software and integrates hardware to facilitate the distribution
of entertainment, business applications, national and local advertising, and
content. The content consists of adult, Hollywood, and specialty programming, music,
internet based television programming, digital global newspapers, global radio
and television stations, business applications (allowing the guest to use
Microsoft Office programs), and hotel-specific services and
advice.
The Company provides proprietary
software an LCD television, a media console (consisting of a DVD player, CD/DVD
burner, and numerous input jacks for the hotel guest), a wireless keyboard with
built-in mouse, and a remote control.
The Company installs and supports these
components.
Hotel customers sign long-term service
agreements, where we provide the maintenance for the networks, as well as the
right to provide value added services over the network.
We derive our revenues primarily from charging the hotels a
monthly fee for the usage of our software and proprietary media and
entertainment system. We derive additional revenue from the
rental of movies, printing service, advertising and sale of products through our
system. We began marketing this product in
September 2007. Since June 2007, we have invested significant capital
to develop our software, integrate our hardware, and develop significant product
and content partnerships.
We have
incurred operating losses since our inception. We will need to
increase our installation and maintenance revenues and improve our gross margins
to become profitable and sustain profitability on a quarterly and annual
basis. We recently completed development of our Media and
Entertainment solution and have commenced marketing it. There is no
assurance that we will be successful in our efforts. We are not able
to predict with any certainty when, if ever, we will attain profitable
operations.
We
currently have our media and entertainment product installed into a boutique
hotel in Downtown Denver as a pilot. We have signed agreements to install into
select rooms, as pilots, with a select service property in the Denver
Technological Center, managed and owned by a large hotel corporation, and with a
full service hotel located in Chicago, IL, which is also owned by a large hotel
corporation. We have signed an exclusive contract to provide our media and
entertainment and HSIA products and services to a Management and Ownership
group, of high end properties, out of Florida. We have signed contracts to
install into a resort in Asheville, NC and into select rooms of hotels in
Merryville, IN and Lexington, KY. We also have a signed contract to install 120
rooms of a full service hotel in the Chicago, IL vicinity.
Management’s
Discussion and Analysis (MD&A) is designed to provide the reader of the
financial statements with a narrative discussion of our results of operations;
financial position; liquidity and capital resources; critical accounting
policies and significant estimates; and the impact of recently issued accounting
standards. Our MD&A is presented in five sections:
|
·
|
Critical
Accounting Policies
|
|
·
|
Results
of Operations
|
|
·
|
Recent
Accounting Pronouncements
|
|
·
|
Financial
Condition
|
|
·
|
Forward-Looking
Statements
|
This
discussion should be read in conjunction with our consolidated financial
statements and accompanying Notes included in this report and in the 2007 annual
report on Form 10-KSB, as well as our reports on Form 8-K and other SEC
filings.
Management's Discussion and Analysis of
Financial Condition and Results of Operations discuss our financial statements,
which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial
statements requires management to make estimates and judgments that affect the
reported amounts of assets, liabilities, revenues and expenses, and the related
disclosures of contingent assets and liabilities. On an
on-going basis, management evaluates its estimates and judgments, including
those related to revenue recognition, allowance for doubtful accounts and
property and equipment valuation. Management bases its estimates and
judgments on historical experience and on
various other factors that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily
apparent from other sources. Actual results
may differ from these estimates under different assumptions and
conditions.
Management believes the following
critical accounting policies, among others, affect its more significant
judgments and estimates used in the preparation of its consolidated
financial statements.
Our system sales and installation
revenue primarily consists of wired and wireless network equipment and
installation fees associated with the network and is recognized as revenue when
the installation is
completed and the customer has accepted such installation. Our service,
maintenance and usage revenue, which primarily consists of monthly maintenance
fees related to the upkeep of the network, is recognized on a monthly basis as
services
provided.
We estimate the collectability of our
trade receivables. A considerable amount of judgment is required in assessing
the ultimate realization of these receivables, including analysis of historical
collection rates and the current credit-worthiness of significant customers.
Work in progress represents the cost of
hardware and software which has been purchased by us for installation at our
customers’ facilities, but has not been accepted
by the customer.
We capitalize and subsequently
depreciate our property and
equipment over the estimated useful life of the asset. In assessing the
recoverability of our long-lived assets, including goodwill, we must make
certain assumptions regarding the useful life and contribution to the estimated
future cash flows. If such assumptions change in the future, we
may be required to record impairment charges for these assets not previously
recorded.
Since inception, we have accumulated
substantial net operating loss carry forwards for tax purposes. There
are statutory limitations
on our ability to realize any future benefit from these potential tax assets and
we are uncertain as to whether we will ever utilize the tax loss carry
forwards. Accordingly, we have recorded a valuation allowance to
offset the deferred tax asset.
We implemented SFAS No. 123(R),
“Share-Based
Payment,” which requires us
to provide compensation costs for our stock option plans determined in
accordance with the fair value based method prescribed in SFAS No.
123(R). We estimate the fair value of each stock option at the grant date by using
the Black-Scholes option-pricing model and provide for expense recognition over
the service period, if any, of the stock option.
In
connection with the sale of debt or equity instruments, we may sell options or
warrants to purchase our common stock. In certain circumstances, these options
or warrants may be classified as derivative liabilities, rather than as equity.
Additionally, the debt or equity instruments may contain embedded derivative
instruments, such as conversion options, which in certain circumstances may be
required to be bifurcated from the associated host instrument and accounted for
separately as a derivative instrument liability.
The
identification of, and accounting for, derivative instruments is complex. Our
derivative instrument liabilities are re-valued at the end of each reporting
period, with changes in the fair value of the derivative liability recorded as
charges or credits to income, in the period in which the changes occur. For
options, warrants and bifurcated conversion options that are accounted for as
derivative instrument liabilities, we determine the fair value of these
instruments using the Cox-Ross-Rubinstein binomial option pricing model. That
model requires assumptions related to the remaining term of the instruments and
risk-free rates of return, our current common stock price and expected dividend
yield, and the expected volatility of our common stock price over the life of
the instruments. The identification of, and accounting for,
derivative instruments and the assumptions used to value them can significantly
affect our financial statements.
Three months ended June 30,
2008 compared to three months ended June 30, 2007:
For the three months ended June 30, 2008, we reported a net loss of $1,631,838, compared to a net loss of $317,403 for the three months ended June 30, 2007. Our operating loss for the three months ended June 30, 2008 was $196,585, an improvement in operating results of $60,229 compared to the operating loss of $256,814 that we reported for the three months ended June 30, 2007. As discussed below, in 2008 we continued investing significant capital in the
design, production, and marketing of our new media and entertainment
product.
System
sales and
installation revenue.
System sales and installation revenue decreased 67% to $109,049 during the three months ended June 30, 2008 from $332,738 during the three months ended June 30, 2007. We completed upgrades on four existing customers during the three months ended June 30, 2008, compared to four new installations and eleven upgrades during the three months ended June 30, 2007. This component of our
revenue stream is dependent upon the acquisition of new customers and the upgrade needs of
existing
customers, which can vary
from year to year. Our shift in focus away from the HSIA
product and services to the Media and Entertainment products and services was
also an attributing factor in this decrease.
Service,
maintenance and usage revenue. Service, maintenance and usage revenue
decreased 2% to $315,343 for the three months ended June 30, 2008 from $323,164 for the three months ended June 30, 2007. The decrease was due to a decrease in
the number of customers we service on a recurring basis to a total of 147 customers compared to 175 customers as of June 30, 2007, offset by an increase in billing for on-site support.
Cost of system sales and
installation. Cost of system sales and installation decreased 80% to
$27,365 for the three months ended June 30, 2008 from $137,954 for the three
months ended June 30, 2007. The decrease was attributable to the decreased
corresponding revenue during the period as well as the lowered cost of upgrades
versus installations.
Cost of
service, maintenance and usage. Cost of service, maintenance and usage
decreased 27% to $203,192 for the three months ended June 30, 2008 from $277,140 for the three months ended June 30, 2007. The decrease was
attributable to the decrease in customers from 175 in 2007 to 147 in 2008, as
well as operational efficiencies created by network upgrades.
Sales and
marketing. Sales and marketing expense increased by $13,381 to $71,662 during the three months ended June 30, 2008 from $58,281 for the three months ended June 30, 2007. During 2008, we continued marketing our new media and
entertainment product. Our personnel and personnel related
costs decreased by $9,646 to $45,866 in 2008 from $55,512 in 2007; travel expenses increased by $2,811 to $5,304 in 2008 from $2,493 in 2007; and advertising expense increased by $20,216 to $20,492 in 2008 from $276 in 2007.
Product
Development. In
June 2007, we created a new department to handle
the majority of the design, production, and promotion of our new media and
entertainment product. This new department incurred costs of
$131,528 during the three months ended
June 30, 2008, compared to $76,258 during the three
months ended June 30, 2007. This cost included
$117,873 in labor and personnel
expense in 2008 compared to $40,624 in
2007, and $13,655 in equipment, supplies and test licensing costs in 2008 compared to $35,634 in
2007.
Stock
compensation. For the three
months ended June
30, 2008, the Company
recorded $3,636 of amortization of deferred
compensation related to stock options, compared to $11,868 for the three months ended June 30,
2007. In addition, the Company recorded stock compensation expense
of $220,799 for the fair
market value warrants and
$15,947 for the fair market value of options issued during the three months ended
June 30,
2007.
General and
administrative. General and
administrative expense increased by $64,115 to $176,555 for the three months ended June 30, 2008 from $112,440 for the three months ended June 30, 2007. During 2008, personnel and personnel related costs
increased $11,935 to $66,015 in 2008 from $54,080 in 2007; office related costs such as rent,
telephone, and insurance increased $10,071 to $32,831 in 2008 from $22,760 in 2007; travel expenses increased $5,525 to $5,525 in 2008 from $0 in 2007; professional fees, SEC fees, and investor relations
fees increased $14,827 to $44,997 in 2008 from $30,170 in 2007; and bad debt expense increased $21,757 to $27,188 for 2008 from $5,431 in 2007.
Depreciation. Depreciation of property and equipment
increased to $7,039 for the three months ended June 30, 2008 as compared to $2,029 for the three months ended June 30, 2007. This increase is attributable to the Company purchasing capital assets
for our new media and entertainment product. Depreciation expense is
computed each year based
upon our estimate of the remaining useful lives of the assets. Our
estimates of useful lives are periodically reviewed and the shorter of the
actual life or the economic life of the assets are used.
Interest
expense. Interest expense
increased $14,957 to $37,523 for the three months ended June 30, 2008 as compared to $22,566 for the three months ended June 30, 2007. The Company issued convertible
debentures on June 11, 2007, and the increase is attributable to accrued interest for a full quarter in
2008, compared to 18 days of accrued interest in 2007.
Income from
discharge of indebtedness. During the three months ended June 30,
2007, the Company negotiated settlements with several vendors and realized
discharge of indebtedness income of $1,465,206. The Company had
corresponding income during the three months ended June 30, 2008 of
$992.
Derivative income (expense),
net. Derivative instruments expense of $1,397,111 represents the net
unrealized (non-cash) change during the three months ended June 30, 2008, in the
fair value of our derivative instrument liabilities related to certain embedded
derivatives in our convertible debt that have been bifurcated and accounted for
separately. The derivative instruments expense for the three months
ended June 30, 2007 was $1,128,348.
Six months ended June 30,
2008 compared to six months ended June 30, 2007:
For the six months ended June 30, 2008, we reported a net loss of $1,710,903, compared to a net loss of $562,144 for the six months ended June 30, 2007. Our operating loss for the six months ended June 30, 2008 was $485,086, a decline in operating results of $117,219 compared to the operating loss of
$367,867 that we reported for the six months ended June 30,
2007. As discussed below, in 2008 we continued investing significant capital in the
design, production, and marketing of our new media and entertainment
product.
System sales
and installation revenue.
System sales and installation revenue decreased 60% to $200,179 during the six months ended June 30, 2008 from $498,219 during the six months ended June 30, 2007. We completed upgrades on seven existing customers during the six months ended June 30, 2008, compared to seven new installations and eleven upgrades during the six months ended June 30, 2007. This component of our revenue stream
is dependent upon the acquisition of new customers and the upgrade needs of existing
customers, which can vary
from year to year. Our shift in focus away from the HSIA
product and services to the Media and Entertainment products and services was also
an attributing factor in this decrease.
Service,
maintenance and usage revenue. Service, maintenance and usage revenue
decreased 10% to $601,879 for the six months ended June 30, 2008 from $667,984 for the six months ended June 30, 2007. The decrease was due to a decrease in
the number of customers we service on a recurring basis to a total of
147 customers compared to 175 customers as of June 30, 2007, offset by an increase in billing for
on-site support.
Cost of system sales and
installation. Cost of system sales and installation decreased 73% to
$65,614 for the six months ended June 30, 2008 from $245,876 for the six months
ended June 30, 2007. The decrease was attributable to the decreased
corresponding revenue during the period as well as the lowered cost of upgrades
versus installations.
Cost of
service, maintenance and usage. Cost of service, maintenance and usage
decreased 22% to $467,347 for the six months ended June 30, 2008 from $598,680 for the six months ended June 30, 2007. The decrease was
primarily attributable to the decreased corresponding revenue during the period.
The decrease was attributable to the decrease in customers from 175 in 2007 to
147 in 2008, as well as operational efficiencies created by network
upgrades.
Sales and
marketing. Sales and marketing expense increased by $31,114 to $136,697 during the six months ended June 30, 2008 from $105,583 for the six months ended June 30, 2007. During 2008, we continued marketing our new media and
entertainment
product. Our
personnel and personnel
related costs decreased by $5,786 to $96,011 in 2008 from $101,797 in 2007; travel expenses increased by $4,936 to $8,275 in 2008 from $3,339 in 2007; and advertising expense increased by $31,964 to $32,410 in 2008 from $447 in 2007.
Product
Development. In
June 2007, we created a new department to handle
the majority of the design, production, and promotion of our new media and
entertainment product. This new department incurred costs of
$245,944 during the six months ended June 30, 2008, compared to $76,258 during the six
months ended June 30, 2007. These costs included $212,858 in labor and personnel
expense in 2008 compared to
$40,624 in 2007, and $33,086 in equipment, supplies and test licensing costs in 2008 compared to $35,634 in
2007.
Stock
compensation. For the
six months ended June 30, 2008, the Company recorded
$19,486 of amortization of deferred
compensation related to stock options, compared to $41,494 for the six months ended June 30,
2007. In addition, the Company
recorded stock compensation
expense of $220,799 for the
fair market value warrants
and $15,947 for the fair market value of options issued during the six months ended June
30, 2007.
General and
administrative. General and
administrative expense
increased by $113,762 to $339,138 for the six months ended June 30, 2008 from $225,376 for the six months ended June 30, 2007. During 2008, personnel and personnel related costs
increased $34,100 to $132,545 in 2008 from $98,444 in 2007; office related costs such as rent,
telephone, and insurance increased $16,312 to $64,137 in 2008 from $47,825 in 2007; travel expenses increased $6,327 to $11,208 in 2008 from $4,882 in 2007; professional fees, SEC fees, and investor
relations fees increased $33,949 to $97,050 in 2008 from $63,101 in 2007; and bad debt expense increased $23,074 to $34,198 for 2008 from $11,124 in 2007.
Depreciation. Depreciation of property and equipment
increased to $12,918 for the six months ended June 30, 2008 as compared to $4,057 for the six months ended June 30, 2007. This increase is attributable to the Company purchasing capital assets
for our new media and entertainment product. Depreciation expense is
computed each year based upon our estimate of the remaining useful lives of the assets. Our
estimates of useful lives are periodically reviewed and the shorter of the
actual life or the economic life of the assets are used.
Interest
expense. Interest expense
decreased $44,641 to $73,906 for the six months ended June 30, 2008 as compared to $118,547 for the six months ended June 30, 2007. The decrease is attributable to the settlement of outstanding and defaulted
debt during the six months ended June 30, 2007, offset by accrued interest for a full quarter, on
the convertible debentures, in 2008 compared to 18 days of accrued interest in
2007.
Income from
discharge of indebtedness. During the six months ended June 30,
2007, the Company negotiated settlements with several vendors and realized
discharge of indebtedness income of $1,465,206. The Company had
corresponding income during the six months ended June 30, 2008 of
$992.
Derivative income (expense),
net. Derivative instruments expense of $1,158,575 represents the net
unrealized (non-cash) change during the six months ended June 30, 2008, in the
fair value of our derivative instrument liabilities related to certain embedded
derivatives in our convertible debt that have been bifurcated and accounted for
separately. The derivative instruments expense for the six months
ended June 30, 2007 was $1,128,348.
Liquidity
and Capital Resources
As of June 30, 2008 we had $550,918 in cash and cash
equivalents. In
July 2008, we sold $2,500,000 of Series C
Preferred Stock, which amount is sufficient to fund operating activities and continue
investing in our new media and entertainment product through 2009 and into
2010.
Operating
Activities
Net cash
used by operating activities was $333,141 for the six months ended June 30, 2008
as compared to $526,475 used for the six months ended June 30,
2007.
Investing
Activities
Net cash
used by investing activities was $31,106, used to purchase capital assets, for
the six months ended June 30, 2008, as compared to net cash used for investing
activity of $8,959 for the six months ended June 30, 2007.
Financing
Activities
There
were no financing activities for the six months ended June 30, 2008 as compared
to net cash provided by financing activities of $1,422,397 for the six months
ended June 30, 2007.
We are exposed to risk from potential
changes in the U.S./Canadian currency exchange rates as they relate to our
services and purchases for our Canadian customers.
Foreign exchange gain / (loss)
Foreign transactions resulted in a
loss of $4,215 for the six months ended June 30, 2008 compared to a loss of $7,854 for the six months ended June 30, 2007. The amount of gain (loss) will vary
based upon the volume of foreign currency denominated transactions and fluctuations in the value of the
Canadian dollar vis-à-vis
the US dollar.
Translation of Financial
Results
Because we translate a portion of our
financial results from Canadian dollars to U.S. dollars, fluctuations in the
value of the Canadian dollar have a direct affect on our reported
consolidated results. We do not hedge against the possible impact of
this risk. A 10 percent adverse change in the foreign currency
exchange rate would not have a significant impact on our consolidated results of
operations or financial
position.
Item
4T. Controls and Procedures
(a) Our
Management supervised and participated in an evaluation of the effectiveness of
the design and operation of our disclosure controls and procedures as of
June 30, 2008. Based on that evaluation, our management,
including our principal executive and financial officer,
concluded that our disclosure controls and procedures were effective to ensure
that information required to be disclosed in the reports filed or submitted by
the Company under the
Securities Exchange Act of 1934, as amended, is recorded, processed, summarized
and communicated to our management, including our principle executive and
financial officer, as appropriate, to allow timely decisions regarding required
disclosure within the time periods specified in
the SEC’s rules and forms.
Internal
control systems, no matter how well designed, have inherent
limitations. Therefore, even those systems that are determined to be
effective by provide only reasonable assurance with respect to financial
statement preparation and presentation. Also, projections of any
evaluation of effectiveness to future periods are subject to risk that controls
may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
(b) There were no changes in
our internal control over financial reporting during the period ended
June 30, 2008, that materially affected, or are
reasonably likely to materially affect, our internal controls over financial
reporting.
PART
II - OTHER INFORMATION
None
On
January 1, 2008, the Board approved issuance of 1,437,041 shares of our common
stock, as interest for the fourth quarter of 2007, pursuant to the clauses
outlined in the convertible debenture agreements of June 11, 2007.
On April
1, 2008, the Board approved issuance of 1,386,885 shares of our common stock, as
interest for the first quarter of 2008, pursuant to the clauses outlined in the
convertible debenture agreements of June 11, 2007.
None
None
None
|
(a) Exhibits.
3.1 Certificate
of Designation of Series C Preferred Stock, incorporated by reference to
Exhibit 3.1 of the Form 8-K filed by the Registrant on August 5,
2008.
3.2
Form of Series C-1 Warrant, incorporated by reference to Exhibit 3.2 of
the Form 8-K filed by the Registrant on August 5, 2008.
3.3
Form of Series C-2 Warrant, incorporated by reference to Exhibit 3.3 of
the Form 8-K filed by the Registrant on August 5, 2008.
10.1
Form of Securities Purchase Agreement among the Registrant and
Matthew Hulsizer and Jennifer Just, jointly, and certain affiliated
trusts, dated July 31, 2008, incorporated by reference to Exhibit
10.1 of the Form 8-K filed by the Registrant on August 5,
2008.
10.2
Form of Registration Rights Agreement among the Registrant and the
parties to the Securities Purchase Agreement identified in Exhibit 10.1
above, dated July 31, 2008, incorporated by reference to Exhibit 10.2 of
the Form 8-K filed by the Registrant on August 5, 2008.
31.1
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
for the Chief Executive and Chief Financial Officers.
32.1
Certification of the Chief Executive and Chief Financial Officers pursuant
to Section 906 of the Sarbanes-Oxley Act of
2002.
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
|
Roomlinx,
Inc.
|
|||
| By: | /s/ Michael S. Wasik | ||
| Michael S. Wasik | |||
| Chief Executive Officer | |||
| Chief Financial Officer | |||
| Date: | 10/23/08 | ||
Pursuant
to the requirements of the Securities Exchange Act of 1934, 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/ Michael S. Wasik | ||
| Michael S. Wasik | |||
| Chief Executive Officer, | |||
| Chief Financial Officer and Director | |||
| Date: | 10/23/08 |