Troika Media Group, Inc. - Quarter Report: 2009 September (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 September 30, 2009
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
incorporation or organization) |
(I.R.S. Employer
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 x No o
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 November 2, 2009 was 387,190,259.
ROOMLINX, INC.
|
PART I. FINANCIAL INFORMATION
Recent Accounting Pronouncements
PART II. OTHER INFORMATION
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PART I. FINANCIAL INFORMATION
|
September 30, |
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|
2009 |
December 31, |
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|
(Unaudited) |
2008 |
|||||||
|
ASSETS |
||||||||
|
Current assets: |
||||||||
|
Cash and cash equivalents |
$ | 701,035 | $ | 1,941,215 | ||||
|
Accounts receivable, net |
319,937 | 258,538 | ||||||
|
Lease receivable, current portion |
129,250 | 48,578 | ||||||
|
Prepaid and other current assets |
43,151 | 29,979 | ||||||
|
Work in progress |
77,735 | 173,964 | ||||||
|
Inventory |
150,127 | 74,930 | ||||||
|
Total current assets |
1,421,235 | 2,527,204 | ||||||
|
Property and equipment, net |
258,534 | 123,886 | ||||||
|
Lease receivable, non-current |
350,127 | 225,582 | ||||||
|
Total assets |
$ | 2,029,896 | $ | 2,876,672 | ||||
|
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) |
||||||||
|
Current liabilities: |
||||||||
|
Accounts payable and accrued expenses |
$ | 242,103 | $ | 434,171 | ||||
|
Accrued interest |
33,812 | 35,443 | ||||||
|
Capital lease, current portion |
9,437 | - | ||||||
|
Deferred revenue |
278,876 | 472,101 | ||||||
|
Total current liabilities |
564,228 | 941,715 | ||||||
|
Convertible debentures |
- | 1,970,810 | ||||||
|
Capital lease, non-current |
17,609 | - | ||||||
|
Line of credit |
340,000 | - | ||||||
| 357,609 | 1,970,810 | |||||||
|
Stockholders' equity (deficit): |
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Preferred stock - $0.20 par value, 5,000,000 shares authorized: |
||||||||
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Class A - 720,000 shares authorized, issued and outstanding |
144,000 | 144,000 | ||||||
|
Series B - 2,000,000 shares authorized; none issued and outstanding |
- | - | ||||||
|
Series C - 1,400 shares authorized; none and 1,000 shares issued |
||||||||
|
and outstanding, respectively |
- | 200 | ||||||
|
Common stock - $0.001 par value, 1,500,000,000 shares authorized: |
||||||||
|
386,188,847 and 158,483,488 shares issued and outstanding, respectively |
386,189 | 158,483 | ||||||
|
Additional paid-in capital |
26,671,033 | 23,109,501 | ||||||
|
Accumulated (deficit) |
(26,093,163 | ) | (23,448,037 | ) | ||||
|
Total stockholders' equity (deficit) |
1,108,059 | (35,853 | ) | |||||
|
Total liabilities and stockholders' equity (deficit) |
$ | 2,029,896 | $ | 2,876,672 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
2
Roomlinx, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
for the Three and Nine Months Ended September 30, 2009 and 2008
(Unaudited)
|
For the Three Months Ended |
For the Nine Months Ended |
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September 30 |
September 30 |
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2009 |
2008 |
2009 |
2008 |
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Revenues: |
||||||||||||||||
|
Sales |
$ | 553,957 | $ | 582,304 | $ | 1,662,656 | $ | 1,384,361 | ||||||||
|
Cost of goods sold |
380,952 | 565,284 | 1,147,179 | 1,098,245 | ||||||||||||
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Gross profit |
173,005 | 17,020 | 515,477 | 286,116 | ||||||||||||
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Operating expenses: |
||||||||||||||||
|
Operations |
133,748 | - | 327,042 | - | ||||||||||||
|
Product development |
65,511 | 183,665 | 237,965 | 429,609 | ||||||||||||
|
General and administrative |
360,021 | 831,792 | 898,288 | 1,327,112 | ||||||||||||
|
Depreciation |
15,890 | 6,792 | 44,978 | 19,711 | ||||||||||||
| 575,170 | 1,022,249 | 1,508,273 | 1,776,432 | |||||||||||||
|
Operating (loss) |
(402,165 | ) | (1,005,229 | ) | (992,796 | ) | (1,490,316 | ) | ||||||||
|
Non-operating income (expense): |
||||||||||||||||
|
Interest expense |
(176,677 | ) | (39,011 | ) | (263,140 | ) | (112,916 | ) | ||||||||
|
Financing expense |
(99 | ) | (15,000 | ) | (99 | ) | (15,000 | ) | ||||||||
|
Derivative income (expense) |
122,263 | 125,858 | (1,409,356 | ) | (1,032,717 | ) | ||||||||||
|
Foreign currency (loss) |
(210 | ) | (2,071 | ) | (5,594 | ) | (6,286 | ) | ||||||||
|
Other income |
19,915 | 15,689 | 54,891 | 26,568 | ||||||||||||
| (34,808 | ) | 85,465 | (1,623,298 | ) | (1,140,351 | ) | ||||||||||
|
(Loss) before income taxes |
(436,973 | ) | (919,764 | ) | (2,616,094 | ) | (2,630,667 | ) | ||||||||
|
Provision for income taxes |
- | - | - | - | ||||||||||||
|
Net (loss) |
$ | (436,973 | ) | $ | (919,764 | ) | $ | (2,616,094 | ) | $ | (2,630,667 | ) | ||||
|
Series C Preferred dividend |
- | 25,000 | 29,032 | 25,000 | ||||||||||||
|
Net (loss) available to common shareholders |
$ | (436,973 | ) | $ | (944,764 | ) | $ | (2,645,126 | ) | $ | (2,655,667 | ) | ||||
|
Net (loss) per common share: |
||||||||||||||||
|
Basic and diluted |
$ | (0.00 | ) | $ | (0.01 | ) | $ | (0.01 | ) | $ | (0.02 | ) | ||||
|
Weighted average shares outstanding: |
||||||||||||||||
|
Basic and diluted |
303,900,388 | 156,067,018 | 247,859,026 | 152,833,251 | ||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
|
2009 |
2008 |
|||||||
|
Cash flows from operating activities: |
||||||||
|
Net cash (used in) operating activities |
$ | (1,208,680 | ) | $ | (773,095 | ) | ||
|
Cash flows from investing activities: |
||||||||
|
Leases receivable |
(234,391 | ) | - | |||||
|
Payments received on leases receivable |
29,174 | - | ||||||
|
Purchase of property and equipment |
(163,329 | ) | (87,231 | ) | ||||
|
Net cash (used in) investing activities |
(368,546 | ) | (87,231 | ) | ||||
|
Cash flows from financing activities: |
||||||||
|
Proceeds from sale of equity |
- | 2,500,000 | ||||||
|
Payments on capital lease |
(2,954 | ) | - | |||||
|
Proceeds from line of credit |
340,000 | - | ||||||
|
Payments on officer and stockholder notes payable |
- | (12,500 | ) | |||||
|
Net cash provided by financing activities |
337,046 | 2,487,500 | ||||||
|
Net increase (decrease) in cash and equivalents |
(1,240,180 | ) | 1,627,174 | |||||
|
Cash and equivalents at beginning of period |
1,941,215 | 915,165 | ||||||
|
Cash and equivalents at end of period |
$ | 701,035 | $ | 2,542,339 | ||||
|
Supplemental Cash Flow Information |
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Cash paid for interest |
$ | 129,000 | $ | - | ||||
|
Cash paid for income taxes |
$ | - | $ | - | ||||
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Non-cash investing and financing activities: |
||||||||
|
Purchase of property and equipment in exchange for capital lease |
$ | 30,000 | $ | - | ||||
|
Conversion of series C preferred stock to common stock |
$ | 100,000 | $ | - | ||||
|
Common stock issued for debentures |
$ | 3,411,362 | $ | - | ||||
The accompanying notes are an integral part of these consolidated financial statements.
Notes to Consolidated Financial Statements
September 30, 2009
(Unaudited)
1. Overview and Summary of Significant Accounting Policies
Description of Business: Roomlinx, Inc. (the “Company”) is incorporated under the laws of the state of Nevada. The Company sells, installs, and services 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 Hollywood, adult, and specialty content, business applications, national and local advertising, and concierge services. The Company also 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, resorts, and time share locations. The Company installs and creates services that address the productivity
and communications needs of hotel, resort and time share guests. 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-K as of and for the year ended December 31, 2008.
Reclassification: Certain amounts in the 2008 financial statements have been reclassified to conform to the current year presentation.
Per Share Amounts: The Company computes earnings per share under Accounting Standards Codification subtopic 260-10, Earnings Per Share (“ASC 260-10”). Net earnings (losses) per common share is computed by dividing net income (loss) by the weighted
average number of shares of common stock and dilutive common stock equivalents outstanding during the period. Dilutive common stock equivalents consist of shares issuable upon conversion of convertible preferred shares and the exercise of the Company's stock options and warrants
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.
5
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 Codification ASC
450-10 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. Line of Credit
On June 5, 2009, the Company, entered into a Revolving Credit, Security and Warrant Purchase Agreement (the “Credit Agreement") with Cenfin LLC, a Delaware limited liability company (“Cenfin”), pursuant to which Cenfin agreed to make revolving loans to Roomlinx from time to time in a maximum outstanding amount of $5,000,000
and pursuant to which, upon the making of each such Revolving Loan, Roomlinx will issue to Cenfin a Revolving Credit Note evidencing such Revolving Loan and a Warrant to purchase a number of shares of Roomlinx Common Stock equal to 50% of the principal amount funded in respect of such Revolving Loan divided by $.02 per share. Each Revolving Credit Note will bear interest at a rate of 9% per annum and mature on the fifth anniversary of its issuance. Each Warrant will be exercisable for a three year period from
its issuance at an initial exercise price of $.02 per share. At September 30, 2009 $340,000 was borrowed against this line. As of September 30, 2009, the Company was in default under its Credit Agreement as a result of the Company's failure to obtain duly executed account control agreements with respect to its primary depositary and disbursement accounts as required by the Credit Agreement. On November 10, 2009, Cenfin LLC waived such default and the Company and Cenfin LLC amended the Credit Agreement
to delete that requirement from the Credit Agreement on a going-forward basis.
3. Convertible Debentures
On June 11, 2007 and June 13, 2007, the Company sold an aggregate of $2,350,000 principal amount of Convertible Debentures due May 2012 (the “Convertible Debentures”) to a number of investors pursuant to a Securities Purchase Agreement (the “June Purchase Agreement”). $2,300,000 of the debentures were
purchased with cash and $50,000 was converted from a note payable.
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 $0.01 per share. Because this potential reduction in the conversion price effectively indexes the return to
the investors to a factor other than the underlying value of our common stock, the embedded conversion option has been bifurcated and accounted for separately as a derivative instrument liability.
Pursuant to the June Purchase Agreement, each purchaser also received an option, exercisable for a six month period from the Closing under the Purchase Agreement, to purchase additional Convertible Debentures (“Additional Convertible Debentures”) in an amount up to 50% of the original amount of Convertible Debentures purchased. This
option has also been accounted for as a derivative instrument liability. All such options have expired unexercised.
6
The Convertible Debentures bear interest at an annual rate of 6%, payable quarterly, either in cash or, at the Company’s election, in shares of our capital stock at two and one-half cents ($.025) per share of common stock or a 10% discounted stock price from the average market price for the 20 business days preceding the interest
payment date, whichever is greater. All interest to date has been settled in shares of common stock.
On May 14 2009, $100,000 of the debentures were converted into 5 million shares of Common Stock at a conversion price of $0.02 per share, the conversion price specified in the Debentures.
On July 9, 2009, $100,000 of the debentures were converted into 5 million shares of Common Stock at a conversion price of $0.02 per share, the conversion price specified in the Debentures.
On September 9, 2009 $280,200 of the debentures were converted into 14,010,000 shares of common stock at a conversion price of $0.02 per share, the conversion price specified in the Debentures.
On September 9, 2009, the Company eliminated the majority of its outstanding debt and all convertible debentures by entering into a Debt Conversion Agreement (the “Conversion Agreement”) with Lewis Opportunity Fund, L.P., the holder of a majority of the then outstanding principal amount of Convertible Debentures issued by the
Company on June 12, 2007 (the “Debentures”). Pursuant to the Conversion Agreement, all then outstanding Debentures (in an aggregate principal amount of $1,869,800) were converted into an aggregate of 93,490,000 shares of Roomlinx common stock at a conversion price of $0.02 per share, the conversion price specified in the Debentures. Pursuant to the Conversion Agreement, the Company has agreed to pay to the converting Debenture holders an aggregate of $112,188, an amount equal
to interest that would have accrued on the converted principal amount of Debentures over a one (1) year period if the Debentures would not have been converted.
4. 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 September 30, 2009, 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 aggregate risk-free rate of return used was 1.48%, based on constant maturity rates published by the U.S. Federal Reserve, applicable to the remaining life of the options.
Pursuant to the Debt Conversion Agreement discussed above, the need to account for the embedded conversion option in our convertible debentures as a derivative instrument ceased when the debentures were converted.
7
At September 30, 2009, the following derivative liabilities were outstanding:
|
Issue Date |
Expiry Date |
Instrument |
Conversion/
Exercise Price
Per Share |
Value –
Issue Date |
Value -
September 30, 2009 | |
|
June 2007 |
May 2012 |
$2,350,000
Convertible Debentures |
$0.02 |
$2,338,899 |
$- | |
|
June 2007 |
Convertible Debentures
Carrying Amount |
- |
- | |||
|
June 2007 |
December 2007 |
Option to acquire
$1,175,000
Convertible Debentures |
$0.03 |
431,264 |
- | |
|
Total derivative financial instruments |
$2,770,163 |
$- | ||||
5. Stockholders' Equity (Deficit)
Preferred Stock: The Company has authorized 5,000,000 preferred shares with a $0.20 par value. There are three designations of the class of preferred shares: Class A, Series B, and Series C 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. 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 stock. As of September 30, 2009, there were 720,000 shares of Class A Preferred Stock, no
shares of Series B Preferred Stock, and no shares of Series C Preferred Stock issued and outstanding. Class A dividends accrued and unpaid as of September 30, 2009, were $143,040; these dividends have not been declared by the board so they are not included in accrued expenses. Series C dividends accrued and unpaid as of September 30, 2009, were $0.
On March 31, 2009 the Company’s board of directors approved the conversion of 1,000 shares of Series C Preferred Stock into 100,000,000 shares of Common Stock per the July 31, 2008 securities purchase agreement.
Common Stock: As of September 30, 2009 the Company has authorized 1,500,000,000 shares of $0.001 par value common stock. As of September 30, 2009, there were 386,188,847 shares of common stock issued and outstanding.
On January 2, 2009, the Board approved and issued 1,417,707 shares of our common stock with a fair value of $35,443, as interest for the fourth quarter of 2008, pursuant to the clauses outlined in the convertible debenture agreements of June 11, 2007.
On March 5, 2009, the stockholders approved an amendment and restatement of the Company’s Articles of Incorporation to increase the number of authorized shares of the Company’s Common Stock from 245,000,000 to 1,500,000,000.
On March 31, 2009 the Company’s board of directors approved the conversion of 1,000 shares of Series C Preferred Stock into 100,000,000 shares of Common Stock per the July 31, 2008 securities purchase agreement.
On March 31, 2009 the Company’s board of directors approved and issued 6,102,151 shares of common stock with a fair value of $91,532 for the payment of Series C Preferred Stock Dividends.
On April 1, 2009, the Board of Directors approved and issued 1,390,685 shares of our common stock with a fair value of $34,767, as interest for the first quarter of 2009, pursuant to the clauses outlined in the convertible debenture agreements of June 11 and June 13, 2007.
8
On May 14, 2009 $100,000 in convertible debentures was converted to 5,000,000 shares of common stock pursuant to the clauses outlined in the convertible debenture agreements of June 11 and June 13, 2007. This conversion had a fair value of $197,376.
On July 1, 2009, the Board of Directors approved and issued 1,294,815 shares of our common stock with a fair value of $34,364, as interest for the second quarter of 2009, pursuant to the clauses outlined in the convertible debenture agreements of June 11 and June 13, 2007.
On July 9, 2009, Heller Capital Investments converted $100,000 principal amount of Roomlinx Convertible Debentures into 5,000,000 shares of Roomlinx common stock pursuant to the terms of the Convertible Debentures.
On September 9, 2009, LAM Opportunity Fund LTD converted $280,200 principal amount of Roomlinx Convertible Debentures into 14,010,000 shares of Roomlinx common stock pursuant to the terms of the Convertible Debentures.
On September 9, 2009, Roomlinx entered into a Debt Conversion Agreement with respect to the conversion of all remaining outstanding Roomlinx Convertible Debentures pursuant to which an aggregate of 93,490,000 shares of Roomlinx common stock were issued.
Warrants:
On June 14, 2009, 8,500,000 warrants were granted pursuant to the clauses outlined in the securities purchase agreement dated June 5, 2009. Such warrants were issued at an exercise price of $0.02 per share and vest immediately; the warrants expire 3 years from the date of issuance.
On September 30, 2009, 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 |
Aggregate
Intrinsic Value |
||||||||||||||
| $ | 0.020 | 2,962,500 | 2.70 | $ | 59,250 | $ | 28,144 | ||||||||||||
| $ | 0.030 | 7,000,000 | 2.70 | 210,000 | - | ||||||||||||||
| $ | 0.030 | 3,900,000 | 2.24 | 117,000 | - | ||||||||||||||
| $ | 0.040 | 20,000,000 | 1.81 | 800,000 | - | ||||||||||||||
| $ | 0.060 | 20,000,000 | 1.81 | 1,200,000 | - | ||||||||||||||
| $ | 0.075 | 10,963,333 | 0.42 | 822,250 | - | ||||||||||||||
| $ | 0.020 | 8,500,000 | 2.72 | 170,000 | 80.750 | ||||||||||||||
| 73,325,833 | $ | 3,378,500 |
$ 0.046 |
$ | 108,894 | ||||||||||||||
|
Warrants |
Number
of Shares |
Weighted Average
Exercise Price |
Remaining Contractual
Life (in years) |
Aggregate
Intrinsic Value |
|||||||||||
|
Outstanding at January 1, 2009 |
79,825,833 | $ | 0.044 | ||||||||||||
|
Issued |
8,500,000 | 0.020 | |||||||||||||
|
Exercised |
- | - | |||||||||||||
|
Expired / Cancelled |
15,000,000 | 0.020 | |||||||||||||
|
Outstanding at September 30, 2009 |
73,325,833 | $ | 0.046 | 2.060 | $ | 108,894 | |||||||||
|
Exercisable at September 30, 2009 |
73,325,833 | $ | 0.046 | 2.060 | $ | 108,894 | |||||||||
9
Options: The Company adopted a long term incentive stock option plan (the "Stock Option Plan"). The Stock Option Plan provides for the issuance of 120,000,000 shares of common stock upon exercise of options which may be granted pursuant to the Stock Option Plan.
As of September 30, 2009, options to purchase 17,833,333 shares were vested. The options vest as determined by the Board of Directors and are exercisable for a period of no more than 10 years.
On February 23, 2009, the Company’s Board of Directors approved the grant of an aggregate of 350,000 Incentive Stock Options and an aggregate of 200,000 Non-Qualified Stock Options. Such options were issued at an exercise price of $0.01 per share and vest one-third (1/3) on each of the first three anniversaries of the grant
date; the options expire 7 years from the date of issuance or upon termination of employment with the company. 100,000 of the qualified options terminated prior to the end of the quarter due to termination of employment.
On February 23, 2009, the Registrant’s Board of Directors approved the grant of an aggregate of 1,200,000 Non-Qualified Stock Options. Such options were issued at an exercise price of $0.01 per share and vest in 12 equal installments over 12 months; the options expire 7 years from the date of issuance or upon termination
of employment with the company.
On March 5, 2009, the Stockholders approved an amendment to the Company’s Long Term Incentive Plan to increase the number of shares of Common Stock available for issuance there under from 25,000,000 to 120,000,000.
On June 5, 2009 the Company’s Board of Directors approved a grant of 10,000,000 Incentive Stock Options to an officer and board member, pursuant to his employment agreement dated June 5, 2009. Such options were issued at an exercise price of $0.033 per share and vest one-half (1/2) on each of the first two anniversaries
of the grant date; the options expire 7 years from the date of issuance or upon termination of employment with the company.
On July 9, 2009, the Company’s Board of Directors approved the grant of an aggregate of 450,000 Incentive Stock Options. Such options were issued at an exercise price of $0.025 per share and vest one-third (1/3) on each of the first three anniversaries of the grant date; the options expire 7 years from the date of issuance
or upon termination of employment with the company. 100,000 of the qualified options terminated prior to the end of the quarter due to termination of employment.
On September 30, 2009, the Company had the following outstanding options:
|
Exercise Price |
Number of Shares |
Remaining Contractual Life (in years) |
Exercise Price times Number
of Shares |
Weighted Average Exercise Price |
Aggregate Intrinsic
Value |
||||||||||||||
| $ | 0.025 | 350,000 | 6.78 | $ | 8,750 | $ | 1,575 | ||||||||||||
| $ | 0.033 | 10,000,000 | 6.68 | 330,000 | - | ||||||||||||||
| $ | 0.010 | 1,650,000 | 6.40 | 16,500 | 32,175 | ||||||||||||||
| $ | 0.017 | 200,000 | 6.09 | 3,400 | 2,500 | ||||||||||||||
| $ | 0.012 | 800,000 | 5.89 | 9,600 | 14,000 | ||||||||||||||
| $ | 0.020 | 800,000 | 5.51 | 16,000 | 7,600 | ||||||||||||||
| $ | 0.015 | 950,000 | 5.11 | 14,250 | 13,775 | ||||||||||||||
| $ | 0.025 | 1,000,000 | 4.59 | 25,000 | 4,500 | ||||||||||||||
| $ | 0.020 | 13,500,000 | 4.14 | 270,000 | 128,250 | ||||||||||||||
| $ | 0.026 | 1,000,000 | 2.86 | 26,000 | 3,500 | ||||||||||||||
| $ | 0.100 | 500,000 | 0.32 | 50,000 | - | ||||||||||||||
| 30,750,000 | $ | 769,500 |
$ 0.025 |
$ | 207,875 | ||||||||||||||
|
Options |
Number of
Shares |
Weighted Average Exercise Price |
Remaining Contractual
Life (in years) |
Aggregate Intrinsic
Value |
||||||||||||
|
Outstanding at January 1, 2009 |
20,150,000 | $ | 0.022 | |||||||||||||
|
Issued |
12,200,000 | 0.031 | ||||||||||||||
|
Exercised |
- | - | ||||||||||||||
|
Expired / Cancelled |
1,600,000 | 0.016 | ||||||||||||||
|
Outstanding at September 30, 2009 |
30,750,000 | $ | 0.025 | 5.21 | $ | 207,875 | ||||||||||
|
Vested at September 30, 2009 |
17,833,333 | $ | 0.022 | 4.79 | $ | 165,600 | ||||||||||
|
Exercisable at September 30, 2009 |
17,833,333 | $ | 0.022 | 4.79 | $ | 165,600 | ||||||||||
The Company recorded deferred compensation expense of $10,602 in connection with options granted during the quarter ended September 30, 2009. 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 140%, risk-free interest rate of 3.25% and no dividend yield. The weighted average fair value at the date of grant for options granted during the quarter ended September 30, 2009, averaged $0.03 per option.
The Company recorded deferred compensation expense of $312,270 in connection with options granted during the quarter ended June 30, 2009. 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 142%, risk-free interest rate of 3.25% and no dividend yield. The weighted average fair value at the date of grant for options granted during the quarter ended June 30, 2009, averaged $0.03 per option.
The Company recorded deferred compensation expense of $16,354 in connection with options granted during the quarter ended March 31, 2009. 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 139%, risk-free interest rate of 2.22% and no dividend yield. The weighted average fair value at the date of grant for options granted during the quarter ended March 31, 2009, averaged $0.009 per option.
6. Related Party Transactions
With respect to the Revolving Credit, Security and Warrant Purchase Agreement (the “Credit Agreement”) entered into by Roomlinx with Cenfin LLC on June 5, 2009 and disclosed in its Current Report on Form 8-K filed on June 11, 2009, the persons who control Cenfin LLC are relatives of Judson Just, a Roomlinx
director. The Credit Agreement was approved by a majority of the members of the Roomlinx board of directors, excluding Judson Just.
7. Subsequent Events
On October 1, 2009, the Board of Directors approved and issued 1,001,412 shares of our common stock with a fair value of $25,093, as interest for the third quarter of 2009, pursuant to the clauses outlined in the convertible debenture agreements of June 11 and June 13, 2007.
As of September 30, 2009, the Company was in default under its Revolving Credit, Security and Warrant Purchase Agreement with Cenfin LLC, dated as of June 5, 2009 (the "Credit Agreement"), as a result of the Company's failure to obtain duly executed account control agreements with respect to its primary depositary and disbursement
accounts as required by the Credit Agreement. On November 10, 2009, Cenfin LLC waived such default and the Company and Cenfin LLC amended the Credit Agreement to delete that requirement from the Credit Agreement on a going-forward basis.
11
All subsequent events as of November 11, 2009, the date the financial statements were available to be issued, have been evaluated by the Company and disclosed above.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
FORWARD-LOOKING STATEMENTS
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.
GENERAL
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, resorts, and , timeshare, 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 revenues from the installation of the wired and wireless networks we provide to hotels, resorts, and time share properties. 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 product and services 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 high definition and
standard definition 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.
12
The Company provides proprietary software an LCD television (optional), a media console (consisting of a DVD player, CD 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 selling our proprietary hardware and software to hotels, resorts and time share locations as well as delivering content and providing security and support of the media and entertainment product. 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. There is no assurance that we will be successful in our efforts.
We have successfully completed the installation of multiple properties, and have signed contracts to install additional properties.
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 2008 annual report on Form 10-K, as well as our reports on Form 8-K and other SEC filings.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
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.
13
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 are provided.
Media and Entertainment product revenue primarily consists of media and entertainment equipment purchases, installation of that equipment, software and content license fees, and maintenance fees related to the upkeep of the system. Revenue on the equipment and installations is recognized when the installation is complete and
the customer has accepted such installation. Revenue on the service and maintenance is recognized as invoiced per the individual contracts.
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, software, and labor which has been incurred 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.
The Company follows ASC 718-10, “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 ASC 718-10. 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.
14
Three months ended September 30, 2009 compared to three months ended September 30, 2008:
Our revenues for the three months ended September 30, 2009 were $553,957, a decrease of 5% over our $582,304 in revenues for the three months ended September 30, 2008. The third quarter 2009 revenues consisted of approximately 50% high speed internet products and services and 50% media and entertainment products and services.
The 2008 revenues were based solely on high speed internet products and services.
Our cost of goods sold for the three months ended September 30, 2009 was $380,952 a decrease of 33% over our $565,284 cost of goods sold for the three months ended September 30, 2008. These results are primarily attributable to the lower costs of our recurring revenue stream related to our media and entertainment products and
a reduction in our higher-cost high-speed internet upgrades.
Our gross profit for the three months ended September 30, 2009 was $173,005, an increase of $155,985 over the $17,020 gross profit for the three months ended September 30, 2008. These results are primarily due to the higher gross profit margins of our recurring revenue stream related to our media and entertainment products and
services, and an increase in gross profit margins on the sale of our high speed internet access equipment.
Our operating expenses for the three months ended September 30, 2009 were $575,170 compared to $1,022,249 for the three months ended September 30, 2008, a decrease of 44%. We created a new department in 2009 to handle our internal operations; this operations department had expenses of $133,748 which consisted primarily of personnel
related costs. We reduced our costs in our product development department by $118,154 to $65,511 during the three months ended September 30, 2009 from $183,665 in 2008. This decrease was primarily due to the fact that we have completed the design and development of our media and entertainment product causing a reduction in personnel costs and a reduction in design and development costs of our media and entertainment products. Our general and administrative expenses decreased to $360,021
in 2009 from $831,792 in 2008. This decrease is primarily attributable to the decrease in stock compensation expense to $48,301 in 2009 from $578,830 in 2008.
Our operating loss decreased to $402,165 during the three months ended September 30, 2009 compared to $1,005,229 during the three months ended September 30, 2008; an improvement of 60%. Our cost reduction efforts along with a decrease in stock compensation and our increased sales and higher gross profit margins relating to our
media and entertainment product and services are primary factors in these results.
Non-operating expense was $34,808 for the three months ended September 30, 2009, compared to non-operating income of $85,465 for the three months ended September 30, 2008. This change is primarily due to a one time interest expense incurred as part of the conversion agreement on the convertible debentures. Due to our
conversion of the convertible debentures we will no longer incur a 6% per annum interest expense going forward.
For the three months ended September 30, 2009, we reported a net loss of $436,973, compared to a net loss of $944,764 for the three months ended September 30, 2008. This improvement is attributable to our cost reduction efforts along with a decrease in stock compensation and our increased sales and higher gross profit margins
relating to our media and entertainment product and services are primary factors in these results.
Nine months ended September 30, 2009 compared to nine months ended September 30, 2008:
Our revenues for the nine months ended September 30, 2009 were $1,662,656, an increase of 21% over our $1,384,361 in revenues for the nine months ended September 30, 2008. This increase is due to the sales and recurring revenue generated by our new media and entertainment products and services. This is a strong validation
of our shift in efforts towards maximizing revenues resulting from this new product offering.
15
Our cost of goods sold for the nine months ended September 30, 2009 was $1,147,179 an increase of 5% over our $1,098,245 cost of goods sold for the nine months ended September 30, 2008. This increase is due to the increase in product sales during the nine months.
Our gross profit for the nine months ended September 30, 2009 was $515,477, an 81% increase over the $286,116 gross profit for the nine months ended September 30, 2008. These results are primarily due to the higher gross profit margins of our recurring revenue stream related to our media and entertainment products and services.
Another contributing factor is our increase in gross profit margins on the sale of our high speed internet access equipment.
Our operating expenses for the nine months ended September 30, 2009 were $1,508,273 compared to $1,776,432 for the nine months ended September 30, 2008, a decrease of 15%. We created a new department in 2009 to handle our internal operations; this operations
department had expenses of $327,042 which consisted primarily of personnel related costs. We reduced our costs in our product development department to $237,965 during the nine months ended September 30, 2009 from $429,609 in 2008. This decrease was primarily due to the fact that we have completed the design and development of our media and entertainment product causing a reduction in personnel costs and a reduction in design and development costs of our media and entertainment products. Our
general and administrative expenses decreased to $898,288 during the nine months from $1,327,112 in 2008. This decrease is primarily attributable to the decrease in stock compensation expense to $181,569 for 2009 from $578,830 in 2008.
Our operating loss decreased to $992,796 during the nine months ended September 30, 2009 compared to $1,490,316 during the nine months ended September 30, 2008; this is an improvement of 33%. Our cost reduction efforts along with a decrease in stock compensation and our increased sales and higher gross profit margins relating
to our media and entertainment product and services are primary factors in these results.
For the nine months ended September 30, 2009, our non-operating income increased to $54,891 compared to $26,568 during the nine months ended September 30, 2008. This increase is primarily comprised of interest income on equipment leases to customers.
Our non-operating expenses for the nine months ended September 30, 2009 increased to $1,678,189 from $1,166,919 during the nine months ended September 30, 2008. This increase is primarily due to the increase of $376,639 in non-cash derivative expense on the convertible debentures as well as the one time interest expense incurred
as part of the conversion agreement on the convertible debentures. Due to our conversion of the convertible debentures we will no longer incur the non-cash derivative gains or losses nor a 6% per annum interest expense going forward.
For the nine months ended September 30, 2009, we reported a net loss of $2,645,126, compared to a net loss of $2,655,667 for the nine months ended September 30, 2008. An increase in derivative expense of $376,639 and an increase in interest expense of $150,224, offset by our cost
reduction efforts along with a decrease in stock compensation and our increased sales and higher gross profit margins relating to our media and entertainment product and services are primary factors in these results.
Liquidity and Capital Resources
As of September 30, 2009 we had $701,035 in cash and cash equivalents, which amount, in addition to the financing discussed below is sufficient to fund operating activities, new product installations, and to continue investing in our new media and entertainment product through 2009 and 2010.
Operating Activities
Net cash used by operating activities was $1,208,680 for the nine months ended September 30, 2009 as compared to $773,095 used for the nine months ended September 30, 2008. The change was primarily due to the effect of derivative expense and stock compensation expense.
16
Investing Activities
Net cash used by investing activities was $368,546 for the nine months ended September 30, 2009, primarily attributable to our investment in capital leases for our media and entertainment product installations and purchases of property and equipment also for media and entertainment product installations, as compared to $87,231 in investing
activity for the nine months ended September 30, 2008, used to purchase property and equipment for development.
Financing Activities
Net cash gained by financing activities was $337,046 for the nine months ended September 30, 2009, primarily attributable to a draw down on our line of credit for media and entertainment product installations; as compared to the $2,487,500 gain from financing activities for the nine months ended September 30, 2008, which was primarily attributable
to the $2,500,000 equity raise in July of 2008.
As of September 30, 2009, the Company was in default under its Revolving Credit, Security and Warrant Purchase Agreement with Cenfin LLC, dated as of June 5, 2009 (the "Credit Agreement"), as a result of the Company's failure to obtain duly executed account control agreements with respect to its primary depositary and disbursement
accounts as required by the Credit Agreement. On November 10, 2009, Cenfin LLC waived such default and the Company and Cenfin LLC amended the Credit Agreement to delete that requirement from the Credit Agreement on a going-forward basis.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
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 $5,594 for the nine months ended September 30, 2009 compared to a loss of $6,286 for the nine months ended September 30, 2008. 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 ten 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 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Principal Financial Officer, is responsible for evaluating the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this report. As defined by the rules of the SEC, disclosure controls and procedures
are controls and other procedures that are designed to ensure that information required to be disclosed in the reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time period specified in the SEC’s rules and forms and include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our
Chief Executive Officer and Principal Financial Officer, to allow timely decisions regarding required disclosure. As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Principal Financial Officer, of the effectiveness of our disclosure controls and procedures. Pursuant to this evaluation, the Company’s Chief Executive Officer and Principal Financial Officer concluded that
our disclosure controls and procedures were effective at September 30, 2009.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting identified in connection with our evaluation of these controls as required by paragraph (d) of §2401.13a-15 or §2401.13a-15 that occurred during our fiscal quarter ended September 30, 2009 that has materially
affected, or is reasonably likely to materially affect, our internal control over financial reporting.
17
PART II - OTHER INFORMATION
18
Item 1. Legal Proceedings
None.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On January 2, 2009, the Board of Directors approved and issued 1,417,707 shares of our common stock, as interest for the fourth quarter of 2008, pursuant to the clauses outlined in the convertible debenture agreements of June 11, 2007.
On March 5, 2009, the Stockholders approved an Amendment and Restatement of the Company’s Articles of Incorporation to increase the number of authorized shares of the Company’s Common Stock from 245,000,000 to 1,500,000,000.
On March 31, 2008 the Company’s Board of Directors approved the conversion of 1,000 shares of Series C Preferred Stock into 100,000,000 shares of Common Stock per the July 31, 2008 securities purchase agreement.
On March 31, 2008 the Company’s Board of Directors approved and issued 6,102,151 shares of common stock for the payment of Series C Preferred Stock Dividends.
On April 1, 2009, the Board of Directors approved and issued 1,390,685 shares of our common stock, as interest for the first quarter of 2009, pursuant to the clauses outlined in the convertible debenture agreements of June 11 and June 13, 2007.
On May 14, 2009 $100,000 in convertible debentures was converted to 5,000,000 shares of common stock pursuant to the clauses outlined in the convertible debenture agreements of June 11 and June 13, 2007.
On July 1, 2009, the Board of Directors approved and issued 1,294,815 shares of our common stock with a fair value of $34,364, as interest for the second quarter of 2009, pursuant to the clauses outlined in the convertible debenture agreements of June 11 and June 13, 2007.
On July 7, 2009, Heller Capital Investments converted $100,000 principal amount of Roomlinx Convertible Debentures into 5,000,000 shares of Roomlinx common stock pursuant to the terms of the Convertible Debentures.
On September 9, 2009, LAM Opportunity Fund LTD converted $280,200 principal amount of Roomlinx Convertible Debentures into 14,010,000 shares of Roomlinx common stock pursuant to the terms of the Convertible Debentures.
On September 9, 2009, Roomlinx entered into a Debt Conversion Agreement with respect to the conversion of all remaining outstanding Roomlinx Convertible Debentures pursuant to which an aggregate of 93,490,000 shares of Roomlinx common stock were issued. A description of the material terms of the Debt Conversion Agreement is contained
in Item 1.01 above and incorporated by reference herein in its entirety.
On October 1, 2009, the Board of Directors approved and issued 1,001,411 shares of our common stock with a fair value of $25,093, as interest for the third quarter of 2009, pursuant to the clauses outlined in the convertible debenture agreements of June 11 and June 13, 2007.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
The annual meeting of the stockholders of Roomlinx, Inc. (the “Company”) was held on March 5, 2009 at the offices of the Company, 2150 W. 6th Ave., Unit H, Broomfield, CO 80020.
More than 50% of the Company’s shares of Common Stock (treating convertible Preferred Stock on an “as converted” to Common Stock basis) were represented in person or by proxy, being a majority of the shares entitled to vote required by the Company’s By-laws for a quorum.
19
The purposes of the meeting were:
|
1. |
To elect Directors to hold office until the next Annual Meeting and until their successors are elected and qualified. |
|
2. |
To approve an amendment to the Company’s Long Term Incentive Plan to increase the number of shares of Common Stock available for issuance there under from 25,000,000 to 120,000,000. |
|
3. |
To approve the amendment and restatement of the Company’s Articles of Incorporation to increase the number of authorized shares of the Company’s Common Stock from 245,000,000 to 1,500,000,000. |
|
4. |
To approve the amendment of the Company’s Articles of Incorporation effecting a 1-for-200 reverse stock split of the Company’s Common Stock and a simultaneous decrease in the number of authorized shares of the Company’s Common Stock to 200,000,000. |
|
5. |
To ratify the appointment of Stark Winter Schenkein & Co., LLP as independent auditors of the Company for the fiscal year ended December 31, 2008. |
|
6. |
To consider and act upon such other business as may properly come before the meeting. |
The number of shares issued, outstanding and entitled to vote at the meeting was 259,901,195 shares of Common Stock and Series C Preferred Stock convertible into Common Stock. The number of stockholders present at the meeting held 192,842,880 shares of Common Stock and Series C Preferred Stock convertible into Common Stock,
constituting a quorum. The number of votes being cast for, against, and abstaining on each matter are as follows:
|
MATTER |
VOTES
FOR |
VOTES
AGAINST/
WITHHELD |
VOTES
ABSTAINING |
|
To elect the following Directors to hold office until the next Annual Meeting and until their successors are elected and qualified:
Michael S. Wasik
Judson Just
Christopher Blisard |
191,677,270
191,675,270
191,675,270 |
1,165,610
1,167,610
1,167,610 |
-
-
- |
|
To approve an amendment to the Company’s Long Term Incentive Plan to increase the number of shares of Common Stock available for issuance there under from 25,000,000 to 120,000,000 |
143,784,123 |
4,978,771 |
44,079,986 |
|
To approve the amendment and restatement of the Company’s Articles of Incorporation to increase the number of authorized shares of the Company’s Common Stock from 245,000,000 to 1,500,000,000 |
180,528,171 |
11,576,498 |
738,211 |
|
To approve the amendment of the Company’s Articles of Incorporation effecting a 1-for-200 reverse stock split of the Company’s Common Stock and a simultaneous decrease in the number of authorized shares of the Company’s Common Stock to 200,000,000 |
48,232,992 |
144,178,182 |
431,706 |
|
To ratify the appointment of Stark Winter Schenkein & Co., LLP as independent auditors of the Company for the fiscal year ended December 31, 2008 |
191,141,664 |
1,615,114 |
86,102 |
The Report of the Inspector of Election showed that: (i) Messrs. Wasik, Just and Blisard had been elected as Directors until the next Annual Meeting and until their successors have been elected and qualified; (ii) the amendment to the Company’s Long Term Incentive Plan to increase the number of shares of Common Stock available for
issuance there under from 25,000,000 to 120,000,00 had been approved; (iii) the amendment and restatement of the Company’s Articles of Incorporation to increase the number of authorized shares of the Company’s Common Stock from 245,000,000 to 1,500,000,000 had been approved; (iv) the amendment of the Company’s Articles of Incorporation effecting a 1-for-200 reverse stock split of the Company’s Common Stock and a simultaneous decrease in the number of authorized shares of the Company’s
Common Stock to 200,000,000 had NOT been approved; and (v) the appointment of Stark Winter Schenkein & Co., LLP as independent auditors of the Company for the fiscal year ended December 31, 2008 had been ratified.
20
Item 5. Other Information
None.
3.1 Amended and Restated Articles of Incorporation of the registrant is incorporated by reference to Exhibit 3.1 to the registrant's 8k filed on March 10, 2009.
10.1 Roomlinx, Inc. Long Term Incentive Plan is incorporated by reference to Annex A to the definitive proxy statement filed by the registrant. with the SEC on January 30, 2009
10.2 Roomlinx, Inc. Convertible Debenture conversion documents are incorporated by reference to the 8K filed by the registrant. with the SEC on September 9, 2009
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.
21
Signatures
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: | 11/11/09 |
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: | 11/11/09 |