Troika Media Group, Inc. - Quarter Report: 2009 March (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 March 31, 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
|
(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 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 May 11, 2009 was
267,394,031.
PART
I. FINANCIAL INFORMATION
CONSOLIDATED BALANCE
SHEETS
|
March
31,
2009
(Unaudited)
|
December
31,
2008
|
|||||||
|
ASSETS
|
||||||||
|
Current
assets:
|
||||||||
|
Cash
and cash equivalents
|
$ | 1,546,321 | $ | 1,941,215 | ||||
|
Accounts
receivable, net
|
240,533 | 258,538 | ||||||
|
Lease
receivable, current portion
|
56,896 | 48,578 | ||||||
|
Prepaid
and other current assets
|
45,508 | 29,979 | ||||||
|
Work
in progress
|
20,738 | 173,964 | ||||||
|
Inventory
|
101,076 | 74,930 | ||||||
|
Total
current assets
|
2,011,072 | 2,527,204 | ||||||
|
Property
and equipment, net
|
111,539 | 123,886 | ||||||
|
Lease
receivable, non-current
|
267,783 | 225,582 | ||||||
|
Total
assets
|
$ | 2,390,394 | $ | 2,876,672 | ||||
|
LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT)
|
||||||||
|
Current
liabilities:
|
||||||||
|
Accounts
payable and accrued expenses
|
$ | 395,176 | $ | 434,171 | ||||
|
Accrued
interest
|
34,767 | 35,443 | ||||||
|
Deferred
revenue
|
201,246 | 472,101 | ||||||
|
Total
current liabilities
|
631,189 | 941,715 | ||||||
|
Convertible
debentures
|
1,157,503 | 1,970,810 | ||||||
|
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
|
— | — | ||||||
|
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:
|
||||||||
|
266,003,346
and 158,483,488 shares issued and outstanding,
respectively
|
266,003 | 158,483 | ||||||
|
Additional
paid-in capital
|
23,143,649 | 23,109,501 | ||||||
|
Accumulated
(deficit)
|
(22,951,950 | ) | (23,448,037 | ) | ||||
|
Total
stockholders' equity (deficit)
|
601,702 | (35,853 | ) | |||||
|
Total
liabilities and stockholders' equity (deficit)
|
$ | 2,390,394 | $ | 2,876,672 | ||||
The
accompanying notes are an integral part of these consolidated financial
statements.
CONSOLIDATED STATEMENTS OF
OPERATIONS
for
the Three Months Ended March 31, 2009 and 2008
(Unaudited)
|
2009
|
2008
|
|||||||
|
Revenues:
|
||||||||
|
Sales
|
$ | 681,680 | $ | 377,665 | ||||
|
Cost
of goods sold
|
549,334 | 302,404 | ||||||
|
Gross
profit
|
132,346 | 75,261 | ||||||
|
Operating
expenses:
|
||||||||
|
Operations
|
88,678 | — | ||||||
|
Product
development
|
87,909 | 114,416 | ||||||
|
General
and administrative
|
212,642 | 243,468 | ||||||
|
Depreciation
|
12,931 | 5,879 | ||||||
| 402,160 | 363,763 | |||||||
|
Operating
(loss)
|
(269,814 | ) | (288,502 | ) | ||||
|
Non-operating
income (expense):
|
||||||||
|
Interest
expense
|
(41,931 | ) | (36,382 | ) | ||||
|
Derivative
income
|
820,471 | 238,536 | ||||||
|
Foreign
currency gain (loss)
|
(2,951 | ) | (1,366 | ) | ||||
|
Other
income
|
19,344 | 8,649 | ||||||
| 794,933 | 209,437 | |||||||
|
Income
(loss) before income taxes
|
525,119 | (79,065 | ) | |||||
|
Provision
for income taxes
|
— | — | ||||||
|
Net
income (loss)
|
$ | 525,119 | $ | (79,065 | ) | |||
|
Series
C Preferred dividend
|
29,032 | — | ||||||
|
Net
income (loss) available to common shareholders
|
$ | 496,087 | $ | (79,065 | ) | |||
|
Net
income (loss) per common share:
|
||||||||
|
Basic
|
$ | 0.00 | $ | (0.00 | ) | |||
|
Diluted
|
$ | 0.00 | $ | (0.00 | ) | |||
|
Weighted
average shares outstanding:
|
||||||||
|
Basic
|
168,153,580 | 150,505,155 | ||||||
|
Diluted
|
385,458,857 | 150,505,155 | ||||||
The
accompanying notes are an integral part of these consolidated financial
statements.
CONSOLIDATED STATEMENTS OF
CASH FLOWS
for
the Three Months Ended March 31, 2009 and 2008
(Unaudited)
|
2009
|
2008
|
|||||||
|
Cash
flows from operating activities:
|
||||||||
|
Net
cash (used in) operating activities
|
$ | (343,791 | ) | $ | (193,966 | ) | ||
|
Cash
flows from financing activities
|
— | — | ||||||
|
Cash
flows from investing activities:
|
||||||||
|
Leases
receivable
|
(61,122 | ) | — | |||||
|
Payments
received on leases receivable
|
10,603 | — | ||||||
|
Purchase
of property and equipment
|
(584 | ) | (12,346 | ) | ||||
|
Net
cash (used in) investing activities
|
(51,103 | ) | (12,346 | ) | ||||
|
Net
(decrease) in cash and equivalents
|
(394,894 | ) | (206,312 | ) | ||||
|
Cash
and equivalents at beginning of period
|
1,941,215 | 915,165 | ||||||
|
Cash
and equivalents at end of period
|
$ | 1,546,321 | $ | 708,853 | ||||
|
Supplemental
Cash Flow Information
|
||||||||
|
Cash
paid for interest
|
$ | — | $ | — | ||||
|
Cash
paid for income taxes
|
$ | — | $ | — | ||||
|
Non-cash
investing and financing activities:
|
||||||||
|
Common
stock issued for dividends
|
$ | 91,532 | $ | — | ||||
The
accompanying notes are an integral part of these consolidated financial
statements.
Notes
to Consolidated Financial Statements
March
31, 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 confirm to
the current year presentation.
Per Share Amounts: The Company
computes net income per share under the provisions of SFAS No. 128, “Earnings
per Share” (SFAS 128). Under the provisions of SFAS 128, basic net income 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 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 SFAS 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, 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 $0.01 per share. Because this potential reduction in the conversion
price effectively indexes the return to the investors to a factor other than the
underlying value of our common stock, the embedded conversion option has been
bifurcated and accounted for separately as a derivative instrument
liability.
Pursuant
to the June Purchase Agreement, each purchaser also received an option,
exercisable for a six month period from the Closing under the Purchase
Agreement, to purchase additional Convertible Debentures (“Additional
Convertible Debentures”) in an amount up to 50% of the original amount of
Convertible Debentures purchased. This option has also been accounted for as a
derivative instrument liability. All such options have expired
unexercised.
The
Convertible Debentures bear interest at an annual rate of 6%, payable quarterly,
either in cash or, at the Company’s election, in shares of our capital stock at
two and one-half cents ($.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.
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 March
31, 2009, 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
March 31, 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 risk-free rate of return used was 1.21%, based on constant
maturity rates published by the U.S. Federal Reserve, applicable to the
remaining life of the options.
At March
31, 2009, the following derivative liabilities were outstanding:
|
Conversion/
|
Value
-
|
||||||||||||||||
|
Exercise
Price
|
Value
–
|
March
31,
|
|||||||||||||||
|
Issue
Date
|
Expiry
Date
|
Instrument
|
Per
Share
|
Issue
Date
|
2009
|
||||||||||||
|
June
2007
|
May
2012
|
$2,350,000 | |||||||||||||||
|
Convertible
Debentures
|
$ | 0.02 | $ | 2,338,899 | $ | 1,133,444 | |||||||||||
|
June
2007
|
Convertible
Debentures
|
||||||||||||||||
|
Carrying
Amount
|
— | 24,059 | |||||||||||||||
|
June
2007
|
December
2007
|
Option
to acquire
|
|||||||||||||||
| $1,175,000 | |||||||||||||||||
|
Convertible
Debentures
|
$ | 0.03 | 431,264 | — | |||||||||||||
|
Total
derivative financial instruments
|
$ | 2,770,163 | $ | 1,157,503 | |||||||||||||
4. 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 through March 5,
2009. As of March 31, 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 March 31, 2009, were $136,560; 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 March 31, 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 March 31,
2009 the Company has authorized 1,500,000,000 shares of $0.001 par value common
stock. As of March 31, 2009, there were 266,003,346 shares of common stock
issued and outstanding.
On
January 2, 2009, the Board 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.
Warrants:
On March
31, 2009, the Company had the following outstanding warrants:
|
Remaining
|
Exercise
|
Weighted
|
||||||||||||||||||||
|
Contractual
|
Price
times
|
Average
|
Aggregate
|
|||||||||||||||||||
|
Exercise
|
Number
of
|
Life
(in
|
Number
of
|
Exercise
|
Intrinsic
|
|||||||||||||||||
|
Price
|
Shares
|
years)
|
Shares
|
Price
|
Value
|
|||||||||||||||||
| $ | 0.020 | 15,000,000 | 4.04 | $ | 300,000 | $ | — | |||||||||||||||
| $ | 0.020 | 2,962,500 | 3.20 | 59,250 | — | |||||||||||||||||
| $ | 0.030 | 7,000,000 | 3.20 | 210,000 | — | |||||||||||||||||
| $ | 0.030 | 3,900,000 | 2.75 | 117,000 | — | |||||||||||||||||
| $ | 0.040 | 20,000,000 | 2.31 | 800,000 | — | |||||||||||||||||
| $ | 0.060 | 20,000,000 | 2.31 | 1,200,000 | — | |||||||||||||||||
| $ | 0.075 | 10,963,333 | 0.92 | 822,250 | — | |||||||||||||||||
| 79,825,833 | $ | 3,508,500 | $ |
0.044
|
$ | — | ||||||||||||||||
|
Warrants
|
Number
of Shares
|
Weighted
Average
Exercise
Price
|
Remaining
Contractual
Life
(in
years)
|
Aggregate
Intrinsic
Value
|
|||||||
|
Outstanding
at January 1, 2008
|
24,825,833
|
$
|
0.049
|
||||||||
|
Issued
|
55,000,000
|
0.042
|
|||||||||
|
Exercised
|
—
|
—
|
|||||||||
|
Expired
/ Cancelled
|
—
|
—
|
|||||||||
|
Outstanding
at December 31, 2008
|
79,825,833
|
$
|
0.044
|
||||||||
|
Issued
|
—
|
—
|
|||||||||
|
Exercised
|
—
|
—
|
|||||||||
|
Expired
/ Cancelled
|
—
|
—
|
|||||||||
|
Outstanding
at March 31, 2009
|
79,825,833
|
$
|
0.044
|
2.63
|
$
|
—
|
|||||
|
Exercisable
at March 31, 2009
|
64,825,833
|
$
|
0.050
|
2.50
|
$
|
—
|
|||||
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 March 31, 2009, options to purchase 20,600,000 shares were outstanding. 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 March
31, 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
|
|||||||||||||||
|
$
|
0.026
|
1,000,000
|
3.36
|
$
|
26,000
|
|
—
|
|||||||||||||
|
$
|
0.100
|
500,000
|
0.82
|
50,000
|
|
—
|
||||||||||||||
|
$
|
0.020
|
13,500,000
|
4.64
|
270,000
|
|
—
|
||||||||||||||
|
$
|
0.025
|
1,000,000
|
5.10
|
25,000
|
|
—
|
||||||||||||||
|
$
|
0.015
|
1,050,000
|
5.61
|
15,750
|
|
—
|
||||||||||||||
|
$
|
0.017
|
100,000
|
6.13
|
1,700
|
|
—
|
||||||||||||||
|
$
|
0.020
|
800,000
|
6.31
|
16,000
|
|
—
|
||||||||||||||
|
$
|
0.012
|
800,000
|
6.39
|
9,600
|
|
—
|
||||||||||||||
|
$
|
0.017
|
200,000
|
6.59
|
3,400
|
|
—
|
||||||||||||||
|
$
|
0.010
|
1,650,000
|
6.90
|
16,500
|
|
—
|
||||||||||||||
|
20,600,000
|
$
|
433,950
|
$
|
0.021
|
$
|
—
|
||||||||||||||
|
Options
|
Number
of Shares
|
Weighted
Average
Exercise
Price
|
Weighted
Average
Remaining
Contractual
Life
(in years)
|
Aggregate
Intrinsic
Value
|
||||||||||||
|
Outstanding
at January 1, 2008
|
23,750,000 | $ | 0.022 | |||||||||||||
|
Granted
|
2,300,000 | 0.017 | ||||||||||||||
|
Exercised
|
(4,000,000 | ) | 0.010 | |||||||||||||
|
Expired
/ Cancelled
|
(1,900,000 | ) | 0.040 | |||||||||||||
|
Outstanding
at December 31, 2008
|
20,150,000 | $ | 0.022 | |||||||||||||
|
Granted
|
1,750,000 | 0.010 | ||||||||||||||
|
Exercised
|
— | — | ||||||||||||||
|
Expired
/ Cancelled
|
(1,300,000 | ) | 0.016 | |||||||||||||
|
Outstanding
at March 31, 2009
|
20,600,000 | $ | 0.021 | 5.30 | $ | — | ||||||||||
|
Vested
at March 31, 2009
|
14,814,999 | $ | 0.023 | 4.91 | $ | — | ||||||||||
|
Exercisable
at March 31, 2009
|
14,814,999 | $ | 0.023 | 4.91 | $ | — | ||||||||||
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.
5. Subsequent
Events
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.
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, 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
our revenues primarily 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 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 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.
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. 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 have
successfully completed the installation of three properties, and have signed
contracts to install an additional six. We completed our first pilot programs in
the first quarter of 2009, 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.
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.
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 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 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 March 31,
2009 compared to three months ended March 31, 2008:
Our
revenues for the three months ended March 31, 2009 were $681,680, an increase of
80% over our $377,665 in revenues for the three months ended March 31, 2008. Our
cost of goods sold for the three months ended March 31, 2009 was $549,334 an
increase in 82% over our $302,404 cost of goods sold for the three months ended
March 31, 2008. Our gross profit for the three months ending March 31, 2009 was
$132,346, a 76% increase over the $75,261 gross profit for the three months
ended March 31, 2008. These results are primarily attributable to the
installations and service of our new media and entertainment
products.
Our
operating expenses for the three months ended March 31, 2009 were $402,160
compared to $363,763 for the three months ended March 31, 2008, an increase of
11%. We created a new department in 2009; our operations department had expenses
of $88,678 which consisted primarily of personnel related costs. We reduced our
costs in our product development department to $87,909 during the three months
ended March 31, 2009 from $114,416 in 2008. This decrease was primarily due to a
reduction in personnel costs and a reduction in design and implementation costs
of our media and entertainment products. We also reduced our selling and general
administrative expenses to $225,573 in 2009 from $249,347 in 2008. This decrease
was also attributable to a reduction in personnel costs.
For the
three months ended March 31, 2009, our non-operating income increased to
$794,933 compared to $209,437 during the three months ended March 31, 2008. This
increase is primarily due to derivative income as well as an increase in other
income, which is primarily comprised of interest income on equipment leases to
customers.
For the
three months ended March 31, 2009, we reported net income of $525,119, compared
to a net loss of $79,065 for the three months ended March 31, 2008. The
reduction in costs and the increase in derivative income are the primary factors
in the results
Liquidity
and Capital Resources
As of
March 31, 2009 we had $1,546,321 in cash and cash equivalents, 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 $343,791 for the three months ended March 31,
2009 as compared to $193,966 used for the three months ended March 31, 2008. The
change was primarily due to the effect of derivative income on net income for
the two periods.
Investing
Activities
Net cash
used by investing activities was $51,103 for the three months ended March 31,
2009, primarily attributable to our investment in capital leases, as compared to
$12,346 in investing activity for the three months ended March 31, 2008, used to
purchase property and equipment.
Financing
Activities
There
were no financing activities for the three months ended March 31, 2009 or the
three months ended March 31, 2008.
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 $2,951 for the three months ended March 31,
2009 compared to a loss of $1,366 for the three months ended March 31, 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 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.
(a) Management’s
Evaluation of Disclosure Controls and Procedures
As of the
end of the period covered by this Quarterly Report, we carried out an
evaluation, under the supervision and with the participation of our Chief
Executive Officer and Chief Financial Officer/Principal Accounting Officer, of
the effectiveness of the design and operation of our disclosure controls and
procedures. Based upon this evaluation, our Chief Executive Officer and Chief
Financial Officer/Principal Accounting Officer have concluded that information
required to be disclosed is recorded, processed, summarized and reported within
the time periods specified in the Securities and Exchange Commission’s rules and
forms, and is accumulated and communicated to management, including our Chief
Executive Officer and Chief Financial Officer/Principal Accounting Officer, to
allow for timely decisions regarding required disclosure of material information
required to be disclosed in the reports that we file or submit under the
Exchange Act. Our disclosure controls and procedures are designed to provide
reasonable assurance of achieving these objectives and our Chief Executive
Officer and Chief Financial Officer/Principal Accounting Officer have concluded
that our disclosure controls and procedures are effective to a reasonable
assurance level of achieving such objectives. However, it should be noted that
the design of any system of controls is based in part upon certain assumptions
about the likelihood of future events, and there can be no assurance that any
design will succeed in achieving its stated goals under all potential future
conditions, regardless of how remote.
(b) Management’s
Report on Internal Control over Financial Reporting
Our
Company’s management is responsible for establishing and maintaining adequate
internal control over financial reporting as defined in Rules 13a-15(f) and
15d-15(f) under the Securities Exchange Act of 1934, as amended. The Company’s
internal control over financial reporting is designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally
accepted accounting principles. The Company’s internal control over financial
reporting includes those policies and procedures that:
(i) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect
the transactions and dispositions of the assets of the Company;
(ii) provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted
accounting principles, and that our receipts and expenditures are being made
only in accordance with authorizations of our management and directors;
and
(iii) provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of the Company’s assets that could have a
material effect on the financial
statements.
Because
of the inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
Management
assessed the effectiveness of the Company’s internal control over financial
reporting as of March 31, 2009. In making this assessment, management used the
criteria set forth by the Committee of Sponsoring Organizations of the Treadway
Commission in Internal Control-Integrated Framework. Management’s assessment
included an evaluation of the design of our internal control over financial
reporting and testing of the operational effectiveness of these
controls.
Based on
this assessment, management has concluded that as of March 31, 2009, our
internal control over financial reporting was effective to provide reasonable
assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with U.S. generally
accepted accounting principles.
This
Quarterly Report does not include an attestation report of the Company’s
registered public accounting firm regarding internal control over financial
reporting. Management’s report was not subject to attestation by the Company’s
registered public accounting firm pursuant to temporary rules of the Securities
and Exchange Commission that permit the Company to provide only management’s
report in this annual report.
(c) Changes
in Internal Control over Financial Reporting
There
were no changes in our internal control over financial reporting during our
fiscal quarter ended March 31, 2009 that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.
PART
II - OTHER INFORMATION
None.
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.
None.
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.
|
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:
|
VOTES
|
|||||||||
|
VOTES
|
AGAINST/
|
VOTES
|
|||||||
|
MATTER
|
FOR
|
WITHHELD
|
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
|
191,677,270
|
1,165,610
|
—
|
||||||
|
Judson
Just
|
191,675,270
|
1,167,610
|
—
|
||||||
|
Christopher
Blisard
|
191,675,270
|
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.
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
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
|
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Chief
Executive Officer
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Chief
Financial Officer
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Date:
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4/12/09
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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.
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By:
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/s/
Michael S. Wasik
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Michael
S. Wasik
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Chief
Executive Officer,
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Chief
Financial Officer and Director
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Date:
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4/12/09
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