Commission File Number:
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0-13215
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WARP 9, INC.
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(Exact name of registrant as specified in its charter)
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CALIFORNIA
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30-0050402
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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6500 Hollister Avenue, Suite 120, Santa Barbara, CA 93117
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(Address of principal executive offices) (Zip Code)
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(805) 964-3313
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Registrant's telephone number, including area code
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(Former name, former address and former fiscal year, if changed since last report)
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Yes
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[__]
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No
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[_X_]
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Yes
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[__]
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No
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[_X_]
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Large accelerated filer
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[___]
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Accelerated filer
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[___]
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Non-accelerated filer
(Do not check if a smaller reporting company)
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[___]
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Smaller reporting company
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[_X_]
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Yes
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[__]
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No
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[_X_]
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PART I – FINANCIAL INFORMATION
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Page
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Item 1.
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Consolidated Financial Statements
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2
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Consolidated Balance Sheets as of March 31, 2011 (unaudited) and June 30, 2010 (audited)
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3
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Consolidated Statements of Operations for the Three Months and Nine Months ended March 31, 2011 and March 31, 2010 (unaudited)
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4
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Consolidated Statement of Shareholders’ Equity for the Nine Months ended March 31, 2011 (unaudited)
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5
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Consolidated Statements of Cash Flows for the Nine Months ended March 31, 2011 and March 31, 2010 (unaudited)
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6
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Notes to Consolidated Financial Statements (unaudited)
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7
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Item 2.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
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10
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Item 3.
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Quantitative and Qualitative Disclosures About Market Risk
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14
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Item 4T.
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Controls and Procedures
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15
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PART II - OTHER INFORMATION
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Item 1.
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Legal Proceedings
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16
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Item 2.
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Unregistered Sales of Equity Securities and Use of Proceeds
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16
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Item 3.
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Defaults Upon Senior Securities
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16
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Item 4.
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(Removed and Reserved)
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16
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Item 5.
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Other Information
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16
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Item 6.
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Exhibits
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17
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Signatures
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18
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(Unaudited)
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||||||||
March 31, 2011
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June 30, 2010
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|||||||
ASSETS
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||||||||
CURRENT ASSETS
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||||||||
Cash
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$ | 546,913 | $ | 733,737 | ||||
Accounts Receivable, net
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170,215 | 121,494 | ||||||
Prepaid and Other Current Assets
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23,176 | 11,888 | ||||||
Current Portion of Deferred Tax Asset
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48,376 | 162,500 | ||||||
TOTAL CURRENT ASSETS
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788,680 | 1,029,619 | ||||||
PROPERTY & EQUIPMENT, at cost
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||||||||
Furniture, Fixtures & Equipment
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89,485 | 89,485 | ||||||
Computer Equipment
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630,620 | 625,032 | ||||||
Computer Software
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20,973 | 20,033 | ||||||
Leasehold Improvements
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18,696 | 19,746 | ||||||
759,774 | 754,296 | |||||||
Less accumulated depreciation
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(674,467 | ) | (654,435 | ) | ||||
NET PROPERTY AND EQUIPMENT
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85,307 | 99,861 | ||||||
OTHER ASSETS
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||||||||
Lease Deposit
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8,244 | 16,449 | ||||||
Internet Domain, net
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1,573 | 1,753 | ||||||
Long Term Deferred Tax Asset
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2,008,848 | 1,874,539 | ||||||
TOTAL OTHER ASSETS
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2,018,665 | 1,892,741 | ||||||
TOTAL ASSETS
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$ | 2,892,652 | $ | 3,022,221 | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY
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||||||||
CURRENT LIABILITIES
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||||||||
Accounts Payable
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$ | 24,329 | $ | 74,049 | ||||
Credit Cards Payable
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- | 2,664 | ||||||
Accrued Expenses
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60,343 | 61,600 | ||||||
Deferred Income
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42,343 | 20,667 | ||||||
Deferred Operating Lease Liability
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3,418 | - | ||||||
Note Payable, Other
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39,839 | 37,082 | ||||||
Customer Deposit
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33,298 | 34,198 | ||||||
TOTAL CURRENT LIABILITIES
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203,570 | 230,260 | ||||||
LONG TERM LIABILITIES
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||||||||
Note payable, Other
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- | 2,778 | ||||||
TOTAL LONG TERM LIABILITIES
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- | 2,778 | ||||||
TOTAL LIABILITIES
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203,570 | 233,038 | ||||||
SHAREHOLDERS' EQUITY
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||||||||
Common Stock, $0.001 Par Value;
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||||||||
495,000,000 Authorized Shares;
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||||||||
340,579,815 and 340,579,815 Shares Issued and Outstanding , respectively
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340,579 | 340,579 | ||||||
Additional Paid In Capital
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6,971,404 | 6,906,525 | ||||||
Accumulated Deficit
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(4,622,901 | ) | (4,457,921 | ) | ||||
TOTAL SHAREHOLDERS' EQUITY
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2,689,082 | 2,789,183 | ||||||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
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$ | 2,892,652 | $ | 3,022,221 | ||||
Three Months Ended
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Nine Months Ended
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|||||||||||||||
March 31, 2011
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March 31, 2010
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March 31, 2011
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March 31, 2010
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|||||||||||||
REVENUE
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$ | 228,281 | $ | 299,624 | $ | 728,004 | $ | 1,188,165 | ||||||||
COST OF SERVICES
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14,176 | 27,610 | 54,871 | 103,115 | ||||||||||||
GROSS PROFIT
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214,105 | 272,014 | 673,133 | 1,085,050 | ||||||||||||
OPERATING EXPENSES
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||||||||||||||||
Selling, general and administrative expenses
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220,428 | 332,012 | 795,897 | 979,738 | ||||||||||||
Research and development
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29,178 | 5,000 | 75,443 | 15,000 | ||||||||||||
Stock option expense
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63 | 2,126 | 265 | 7,565 | ||||||||||||
Depreciation and amortization
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6,762 | 7,387 | 20,212 | 21,750 | ||||||||||||
TOTAL OPERATING EXPENSES
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256,431 | 346,525 | 891,817 | 1,024,053 | ||||||||||||
INCOME FROM OPERATIONS BEFORE OTHER INCOME (EXPENSES)
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(42,326 | ) | (74,511 | ) | (218,684 | ) | 60,997 | |||||||||
OTHER INCOME/(EXPENSE)
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||||||||||||||||
Interest income
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6,087 | 9,654 | 24,236 | 27,163 | ||||||||||||
Other income
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7,500 | 218 | 15,000 | 16,537 | ||||||||||||
Penalties
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(98 | ) | - | (98 | ) | (453 | ) | |||||||||
Interest expense
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(1,403 | ) | (1,669 | ) | (3,415 | ) | (5,786 | ) | ||||||||
TOTAL OTHER INCOME
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12,086 | 8,203 | 35,723 | 37,461 | ||||||||||||
INCOME/(LOSS) FROM OPERATIONS BEFORE PROVISION FOR TAXES
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(30,240 | ) | (66,308 | ) | (182,961 | ) | 98,458 | |||||||||
PROVISION FOR INCOME (TAXES)/BENEFIT
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||||||||||||||||
Income tax (provision)/benefit
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11,473 | 26,200 | 17,981 | (40,521 | ) | |||||||||||
PROVISION FOR INCOME (TAXES)/BENEFIT
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11,473 | 26,200 | 17,981 | (40,521 | ) | |||||||||||
NET INCOME/(LOSS)
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$ | (18,767 | ) | $ | (40,108 | ) | $ | (164,980 | ) | $ | 57,937 | |||||
BASIC AND DILUTED EARNINGS PER SHARE
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$ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | $ | 0.00 | |||||
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING
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||||||||||||||||
BASIC AND DILUTED
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340,579,815 | 340,579,815 | 340,579,815 | 340,579,815 | ||||||||||||
Additional
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||||||||||||||||||||
Common
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Paid-in
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Accumulated
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||||||||||||||||||
Shares
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Stock
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Capital
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Deficit
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Total
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||||||||||||||||
Balance, June 30, 2010
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340,579,815 | 340,579 | 6,906,525 | (4,457,921 | ) | 2,789,183 | ||||||||||||||
Contributed services (Unaudited)
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- | - | 64,614 | - | 64,614 | |||||||||||||||
Stock compensation expense (Unaudited)
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- | - | 265 | - | 265 | |||||||||||||||
Net loss for the nine months ended March 31, 2011 (Uuaudited)
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- | - | - | (164,980 | ) | (164,980 | ) | |||||||||||||
Balance, March 31, 2011 (Unaudited)
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340,579,815 | $ | 340,579 | $ | 6,971,404 | $ | (4,622,901 | ) | $ | 2,689,082 | ||||||||||
For the Nine Months Ended
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||||||||
March 31, 2011
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March 31, 2010
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|||||||
CASH FLOWS FROM OPERATING ACTIVITIES:
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||||||||
Net income/(loss)
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$ | (164,980 | ) | $ | 57,937 | |||
Adjustment to reconcile net income/(loss) to net cash
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||||||||
provided/(used) by operating activities
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||||||||
Depreciation and amortization
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20,212 | 21,750 | ||||||
Bad debt expense
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(48,165 | ) | (39,228 | ) | ||||
Cost of stock compensation recognized
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265 | 7,565 | ||||||
Contributed services
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64,614 | - | ||||||
Change in assets and liabilities:
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||||||||
(Increase) Decrease in:
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||||||||
Accounts receivable
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(556 | ) | 97,352 | |||||
Prepaid and other assets
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(11,288 | ) | (7,734 | ) | ||||
Deferred tax asset/(benefit)
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(20,185 | ) | 41,952 | |||||
Deferred operating lease liability
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3,418 | - | ||||||
Deposits
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8,205 | (7,251 | ) | |||||
Increase (Decrease) in:
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||||||||
Accounts payable
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(52,384 | ) | (28,207 | ) | ||||
Accrued expenses
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(1,257 | ) | (26,643 | ) | ||||
Deferred income
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21,676 | - | ||||||
Other liabilities
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(900 | ) | (6,900 | ) | ||||
NET CASH PROVIDED/(USED) IN OPERATING ACTIVITIES
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(181,325 | ) | 110,593 | |||||
CASH FLOWS FROM INVESTING ACTIVITIES:
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||||||||
Purchase of property and equipment
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(5,478 | ) | (13,118 | ) | ||||
NET CASH USED IN INVESTING ACTIVITIES
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(5,478 | ) | (13,118 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES:
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||||||||
Payment on notes payable, other
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(21 | ) | (24,861 | ) | ||||
Payments on capitalized leases
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- | (6,713 | ) | |||||
NET CASH USED IN FINANCING ACTIVITIES
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(21 | ) | (31,574 | ) | ||||
NET INCREASE/(DECREASE) IN CASH
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(186,824 | ) | 65,901 | |||||
CASH, BEGINNING OF PERIOD
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733,737 | 849,508 | ||||||
CASH, END OF PERIOD
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$ | 546,913 | $ | 915,409 | ||||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
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||||||||
Interest paid
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$ | 432 | $ | 5,785 | ||||
Taxes paid
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$ | 2,204 | $ | 1,928 | ||||
1.
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BASIS OF PRESENTATION
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2.
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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Management reviewed accounting pronouncements issued during the three months ended March 31, 2011, and no pronouncements were adopted during the period.
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3.
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CAPITAL STOCK
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03/31/11
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||||||||
Options
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Weighted average
exercise
price
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|||||||
Outstanding -beginning of period
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3,040,000 | $ | 0.01 | |||||
Granted
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- | - | ||||||
Exercised
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- | - | ||||||
Forfeited
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- | - | ||||||
Outstanding - end of period
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3,040,000 | $ | 0.01 | |||||
Exercisable at the end of period
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2,978,938 | $ | 0.01 | |||||
Weighted average fair value of options granted during the year
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$ | - |
4.
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STOCK OPTIONS AND WARRANTS (Continued)
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Average
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||||||||||
Number of
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remaining
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|||||||||
Exercise
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options
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contractual
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||||||||
prices
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outstanding
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life (years)
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||||||||
$ | 0.010 | 2,500,000 | 0.55 | |||||||
$ | 0.080 | 50,000 | 0.76 | |||||||
$ | 0.070 | 100,000 | 2.75 | |||||||
$ | 0.010 | 250,000 | 3.57 | |||||||
$ | 0.008 | 100,000 | 7.09 | |||||||
$ | 0.010 | 40,000 | 7.33 | |||||||
3,040,000 | ||||||||||
5.
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SUBSEQUENT EVENT
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Management has evaluated subsequent events according to the requirements of ASC TOPIC 855, and has reported the following:
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On April 6, 2011, the Company received an investment of $84,057 in cash and issued 140,095,815 shares of common stock at a price of $0.0006 per share (pre-reverse split) with warrants attached to purchase 28,019,037 shares of common stock (post-reverse split). The board approved a one-for-five reverse split, and expects to record it with the Nevada Secretary of State on or about June 27, 2011. Therefore, the split is not yet legally binding and accordingly no impact of the reverse split has been incorporated into the financial statements. The warrants will be issued no later than 15 business days following the effected date for the one-for-five reverse stock split of its common stock, and will be exercisable for a period of five years from date of issuance at an exercise price of $0.003 per share.
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Item 2.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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·
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statements concerning the potential benefits that Warp 9, Inc. (“W9” or the “Company”) may experience from its business activities and certain transactions it contemplates or has completed; and
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·
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statements of W9’s expectations, beliefs, future plans and strategies, anticipated developments and other matters that are not historical facts. These statements may be made expressly in this Form 10-Q. You can find many of these statements by looking for words such as “believes,” “expects,” “anticipates,” “estimates,” “opines,” or similar expressions used in this Form 10-Q. These forward-looking statements are subject to numerous assumptions, risks and uncertainties that may cause W9’s actual results to be materially different from any future results expressed or implied by W9 in those statements. The most important facts that could prevent W9 from achieving its stated goals include, but are not limited to, the following:
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(a)
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volatility or decline of the Company's stock price;
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(b)
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potential fluctuation in quarterly results;
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(c)
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failure of the Company to earn revenues or profits;
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(d)
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inadequate capital to continue or expand its business, and inability to raise additional capital or financing to implement its business plans;
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(e)
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failure to further commercialize its technology or to make sales;
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(f)
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reduction in demand for the Company's products and services;
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(g)
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rapid and significant changes in markets;
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(h)
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litigation with or legal claims and allegations by outside parties, reducing revenue and increasing costs;
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(i)
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insufficient revenues to cover operating costs;
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(j)
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failure of the re-licensing or other commercialization of the Roaming Messenger technology to produce revenues or profits;
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(k)
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aspects of the Company’s business are not proprietary and in general the Company is subject to inherent competition;
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(l)
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further dilution of existing shareholders' ownership in Company;
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(m)
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uncollectible accounts and the need to incur expenses to collect amounts owed to the Company;
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(n)
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the Company does not have an Audit Committee nor sufficient independent directors.
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EXHIBIT NO.
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DESCRIPTION
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31.1
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Section 302 Certification
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31.2
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Section 302 Certificcation
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32.1
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Section 906 Certification
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32.2
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Section 906 Certification
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Dated: June 6, 2011
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WARP 9, INC.
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(Registrant)
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By: \s\William E. Beifuss
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William E. Beifuss, Chief Executive Officer and President
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By: \s\Louie Ucciferri
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Dated: June 6, 2011
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Louie Ucciferri, Corporate Secretary, Acting Chief Financial Officer
(Principal Financial / Accounting Officer)
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By: \s\William E. Beifuss
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Dated: June 6, 2011
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William E. Beifuss, Chief Executive Officer and President (Principal Executive Officer)
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1.
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I have reviewed this Quarterly Report on Form 10-Q of Warp 9, Inc.
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report.
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report.
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4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
b.
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;
|
|
c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
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5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (of persons performing the equivalent functions):
|
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of Warp 9, Inc.
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report.
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report.
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;
|
|
c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation.
|
|
d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (of persons performing the equivalent functions):
|
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: June 6, 2011
|
|
By: \s\William E. Beifuss
|
|
William E. Beifuss, Chief Executive Officer and President
|
|
(Principal Executive Officer)
|
Date: June 6, 2011
|
|
By: \s\Louie Ucciferri
|
|
Louie Ucciferri, Corporate Secretary, Acting Chief Financial Officer
|
|
(Principal Financial/Accounting Officer)
|