UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
Amendment No. 1
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
For quarterly period ended December 31, 2014
or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the Transition period from _______________ to ______________
Commission File Number: 0-13215
WARP 9, INC.
-----------------------------------------------------------------
(Exact name of registrant as specified in its charter)
NEVADA 30-0050402
-------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1933 CLIFF DRIVE, SUITE 11, SANTA BARBARA, CA 93109
-----------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(805) 964-3313
-----------------------------------------------------------------
Registrant's telephone number, including area code
-----------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the proceeding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
--------------------------------------------------------------------------------
Yes[_X_] No[__]
--------------------------------------------------------------------------------
Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (ss.232.405 of
this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files).
--------------------------------------------------------------------------------
Yes[_X_] No[__]
--------------------------------------------------------------------------------
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
definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act. (Check One).
--------------------------------------------------------------------------------
Large accelerated filer [___] Accelerated filer [___]
--------------------------------------------------------------------------------
Non-accelerated filer [___] Smaller reporting company [_X_]
(Do not check if a smaller
reporting company)
--------------------------------------------------------------------------------
Indicate by check mark whether the Registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
--------------------------------------------------------------------------------
Yes[__] No[_X_]
--------------------------------------------------------------------------------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
As of February 13, 2015, the number of shares outstanding of the registrant's
class of common stock was 105,790,195.
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION PAGE
------
Item 1. Consolidated Financial Statements 3
Consolidated Balance Sheets as of December 31, 2014
(unaudited) and June 30, 2014 3
Consolidated Statements of Operations for the six months
ended December 31, 2014 and December 31, 2013 (unaudited) 4
Consolidated Statement of Shareholders' Equity/(Deficit)
for the six months ended December 31, 2014 (unaudited) 5
Consolidated Statements of Cash Flows for the six months
ended December 31, 2014 and December 31, 2013 (unaudited) 6
Notes to Consolidated Financial Statements (unaudited) 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 13
Item 3. Quantitative and Qualitative Disclosures About Market Risk 17
Item 4. Controls and Procedures 17
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 18
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 18
Item 3. Defaults Upon Senior Securities 18
Item 4. Mine Safety Disclosures 18
Item 5. Other Information 18
Item 6. Exhibits 18
Signatures 20
EXPLANATORY NOTE
Warp 9, Inc., (the "Company"), is filing this Amendment to its Quarterly Report
on Form 10-Q/A for the period ended December 31, 2014 filed with the Securities
and Exchange Commission on February 14, 2015, for the sole purpose of included
Exhibit 10.18 under Item 6.
This Amendment does not reflect events occurring after the Original Filing
except as noted above. Except for the foregoing amended information, this Form
10-Q/A continues to speak as of the date of the Original Filing and the Company
has not otherwise updated disclosures contained therein or herein to reflect
events that occurred at a later date.
-2-
PART I. - FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
-----------------------------------------
WARP 9, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Unaudited)
December 31, 2014 June 30, 2014
------------------ -------------------
(unaudited)
ASSETS
CURRENT ASSETS
Cash $ 41,548 $ 50,041
Accounts Receivable, net 42,235 101,393
Prepaid and Other Current Assets 2,421 5,440
------------------ -------------------
TOTAL CURRENT ASSETS 86,204 156,874
------------------ -------------------
PROPERTY & EQUIPMENT, at cost
Furniture, Fixtures & Equipment 10,533 10,533
Computer Equipment 26,337 23,982
Computer Software 1,904 1,904
------------------ -------------------
38,774 36,419
Less accumulated depreciation (26,307) (24,033)
------------------ -------------------
NET PROPERTY AND EQUIPMENT 12,467 12,386
------------------ -------------------
OTHER ASSETS
Lease Deposit 5,955 5,955
------------------ -------------------
TOTAL OTHER ASSETS 5,955 5,955
------------------ -------------------
TOTAL ASSETS $ 104,626 $ 175,215
================== ===================
LIABILITIES AND SHAREHOLDERS' EQUITY/(DEFICIT)
CURRENT LIABILITIES
Accounts Payable $ 64,805 $ 69,946
Accrued Expenses 80,275 134,611
Accrued Interest - 11,932
Deferred Income 1,450 3,300
Convertible Notes Payable, current, net 310,843 140,008
Derivative Liability 1,608,677 2,169,051
Note Payable, Other - 37,867
Customer Deposit 4,848 6,846
------------------ -------------------
TOTAL CURRENT LIABILITIES 2,070,898 2,573,561
------------------ -------------------
LONG TERM LIABILITIES
Convertible Notes Payable, net 62,847 10,528
Accrued Expenses, long term 220,053 222,153
------------------ -------------------
TOTAL LONG TERM LIABILITIES 282,900 232,681
------------------ -------------------
TOTAL LIABILITIES 2,353,798 2,806,242
------------------ -------------------
SHAREHOLDERS' EQUITY/(DEFICIT)
Preferred Stock, $0.001 Par Value;
5,000,000 Authorized Shares; no shares issued and outstanding - -
Common Stock, $0.001 Par Value;
495,000,000 Authorized Shares;
105,790,195 and 100,878,825 Shares Issued and Outstanding , respectively 105,790 100,879
Additional Paid In Capital 7,531,499 7,466,090
Accumulated Deficit (9,886,461) (10,197,996)
------------------ -------------------
TOTAL SHAREHOLDERS' EQUITY/(DEFICIT) (2,249,172) (2,631,027)
------------------ -------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY/(DEFICIT) $ 104,626 $ 175,215
================== ===================
The accompanying notes are an integral part of these
consolidated financial statements.
-3-
WARP 9, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Six Months Ended
December 31, 2014 December 31, 2013 December 31, 2014 December 31, 2013
----------------- ----------------- ----------------- -----------------
REVENUE $ 126,203 $ 376,179 $ 240,983 $ 611,495
COST OF SERVICES 15,245 101,938 29,282 168,623
----------------- ----------------- ----------------- -----------------
GROSS PROFIT 110,958 274,241 211,701 442,872
----------------- ----------------- ----------------- -----------------
OPERATING EXPENSES
Selling, general and administrative expenses 305,270 248,258 614,994 504,299
Stock option expense 5,692 5,825 11,384 11,664
Depreciation and amortization 1,125 1,228 2,274 40,424
----------------- ----------------- ----------------- -----------------
TOTAL OPERATING EXPENSES 312,087 255,311 628,652 556,387
----------------- ----------------- ----------------- -----------------
LOSS FROM OPERATIONS BEFORE OTHER INCOME AND TAXES (201,129) 18,930 (416,951) (113,515)
----------------- ----------------- ----------------- -----------------
OTHER INCOME/(EXPENSE)
Other income 300 - 300 5,000
Gain on sale of fixed assets - 9,358 - 9,778
Gain on extinguishment of debt 6,945 - 118,492 -
Gain on changes in derivative liability 145,632 - 854,138 -
Interest expense (132,372) (8,168) (242,844) (16,332)
----------------- ----------------- ----------------- -----------------
TOTAL OTHER INCOME (EXPENSE) 20,505 1,190 730,086 (1,554)
----------------- ----------------- ----------------- -----------------
EARNINGS/(LOSS) FROM OPERATIONS BEFORE PROVISION
FOR TAXES (180,624) 20,120 (313,135) (115,069)
----------------- ----------------- ----------------- -----------------
PROVISION FOR INCOME TAXES
Income taxes paid - - (1,600) (2,753)
----------------- ----------------- ----------------- -----------------
PROVISION FOR INCOME TAXES - - (1,600) (2,753)
----------------- ----------------- ----------------- -----------------
NET INCOME/(LOSS) $ (180,624) $ 20,120 $ 311,535 $ (117,822)
================= ================= ================= =================
EARNINGS/(LOSS) PER SHARE
BASIC $ (0.00) $ 0.00 $ 0.00 $ (0.00)
================= ================= ================= =================
DILUTED $ (0.00) $ 0.00 $ 0.00 $ (0.00)
================= ================= ================= =================
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING
BASIC 105,790,195 96,135,126 105,790,195 96,135,126
================= ================= ================= =================
DILUTED 105,790,195 96,135,126 263,304,224 96,135,126
================= ================= ================= =================
The accompanying notes are an integral part of these
consolidated financial statements.
-4-
WARP 9, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY/(DEFICIT)
(Unaudited)
Additional
Preferred Stock Common Stock Paid-in Accumulated
Shares Value Shares Value Capital Deficit Total
----------- ----------- --------------- ------------- ------------- ------------- --------------
Balance, June 30, 2014 - $ - 100,878,825 $ 100,879 $ 7,466,090 $(10,197,996) $ (2,631,027)
Stock compensation expense
(unaudited) - - - - 11,384 - 11,384
Note conversions (unaudited) - - 4,911,370 4,911 54,025 - 58,936
Net Income (unaudited) - - - - - 311,535 311,535
----------- ----------- --------------- ------------- ------------- ------------- --------------
Balance, December 31, 2014
(unaudited) - $ - 105,790,195 $ 105,790 $ 7,531,499 $ (9,886,461) $ (2,249,172)
=========== =========== =============== ============= ============= ============= ==============
The accompanying notes are an integral part of these
consolidated financial statements.
-5-
WARP 9, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
December 31, 2014 December 31, 2013
------------------ ------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income/(loss) $ 311,535 $ (117,822)
Adjustment to reconcile net loss to net cash
(used) by operating activities
Depreciation and amortization 2,274 40,424
Bad debt expense 8,588 -
Cost of stock compensation recognized 11,384 11,664
Amortization of debt discount 211,361 5,745
Gain on sale of fixed assets - (9,778)
Gain on settlement of debt (118,492) -
Gain on change in derivative liability (854,138) -
Change in assets and liabilities:
(Increase) Decrease in:
Accounts receivable 50,570 (7,731)
Prepaid and other assets 1,021 (12,819)
Other assets - 5,000
Increase in:
Accounts payable (5,141) 42,376
Accrued expenses 36,750 13,986
Deferred income (1,850) -
Other liabilities - (1,131)
------------------ ------------------
NET CASH (USED) IN OPERATING ACTIVITIES (346,138) (30,086)
------------------ ------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (2,355) (3,162)
Proceeds from sale of fixed assets - 9,778
------------------ ------------------
NET CASH (USED)/PROVIDED IN INVESTING ACTIVITIES (2,355) 6,616
------------------ ------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of notes payable 340,000 35,000
------------------ ------------------
NET CASH PROVIDED IN FINANCING ACTIVITIES 340,000 35,000
------------------ ------------------
NET INCREASE/(DECREASE) IN CASH (8,493) 11,530
CASH, BEGINNING OF YEAR 50,041 12,636
------------------ ------------------
CASH, END OF PERIOD $ 41,548 $ 24,166
================== ==================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid $ 44 $ -
================== ==================
Taxes paid $ 1,600 $ -
================== ==================
The accompanying notes are an integral part of these
consolidated financial statements.
-6-
WARP 9, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
DECEMBER 31, 2014
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all normal recurring adjustments considered necessary for a fair
presentation have been included. Operating results for the six months ended
December 31, 2014 are not necessarily indicative of the results that may be
expected for the year ending June 30, 2015. For further information refer
to the financial statements and footnotes thereto included in the Company's
Form 10K for the year ended June 30, 2014.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of Warp 9, Inc. is
presented to assist in understanding the Company's financial statements.
The financial statements and notes are representations of the Company's
management, which is responsible for their integrity and objectivity. These
accounting policies conform to accounting principles generally accepted in
the United States of America and have been consistently applied in the
preparation of the financial statements.
The Consolidated Financial Statements include the Company and its
majority-owned subsidiary ("Warp 9, Inc., a Delaware corporation"). All
significant inter-company transactions are eliminated in consolidation.
ACCOUNTS RECEIVABLE
The Company extends credit to its customers, who are located nationwide.
Accounts receivable are customer obligations due under normal trade terms.
The Company performs continuing credit evaluations of its customers'
financial condition. Management reviews accounts receivable on a regular
basis, based on contracted terms and how recently payments have been
received to determine if any such amounts will potentially be uncollected.
The Company includes any balances that are determined to be uncollectible
in its allowance for doubtful accounts. After all attempts to collect a
receivable have failed, the receivable is written off. The balance of the
allowance account at December 31, 2014 and June 30, 2014 are $4,808 and
$24,907 respectively.
REVENUE RECOGNITION
The Company recognizes income when the service is provided or when product
is delivered. We present revenue, net of customer incentives. Most of the
income is generated from professional services and site development fees.
We provide online marketing services that we purchase from third parties.
The gross revenue presented in our statement of operations is in accordance
with ASC 605-45.
We also offer professional services such as development services. The fees
for development services with multiple deliverables constitute a separate
unit of accounting in accordance with ASC 605-25, which are recognized as
the work is performed.
Upfront fees for development services or other customer services are
deferred until certain implementation or contractual milestones have been
achieved. The deferred revenue as of December 31, 2014 and June 30, 2014
was $1,450 and $3,300, respectively.
For the quarter ended, December 31, 2014, monthly recurring fees for mobile
and desktop e-commerce development account for 25% of the Company's total
revenues, professional services account for 71% and the remaining 4% of
total revenues are from resale of third party products and services.
For the quarter ended, December 31, 2013, monthly recurring fees for mobile
and desktop e-commerce development account for 25% of the Company's total
revenues, professional services account for 74% and the remaining 1% of
total revenues are from resale of third party products and services.
STOCK-BASED COMPENSATION
The Company addressed the accounting for share-based payment transactions
in which an enterprise receives employee services in exchange for either
equity instruments of the enterprise or liabilities that are based on the
fair value of the enterprise's equity instruments or that may be settled by
the issuance of such equity instruments. The transactions are
-7-
WARP 9, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
DECEMBER 31, 2014
accounted for using a fair-value-based method and recognized as expenses in
our statement of income. There was no material impact on the Company's
financial statement of operations.
Stock-based compensation expense recognized during the period is based on
the value of the portion of stock-based payment awards that is ultimately
expected to vest. Stock-based compensation expense recognized in the
consolidated statement of operations during the quarter ended December 31,
2014, included compensation expense for the stock-based payment awards
granted prior to, but not yet vested, as of December 31, 2014 based on the
grant date fair value estimated. Stock-based compensation expense
recognized in the statement of operations for the quarter ended December
31, 2014 is based on awards ultimately expected to vest, or has been
reduced for estimated forfeitures. Forfeitures are estimated at the time of
grant and revised, if necessary, in subsequent periods if actual
forfeitures differ from those estimates. The stock-based compensation
expense recognized in the consolidated statements of operations during the
six months ended December 31, 2014 and 2013 was $11,384 and $11,664,
respectively.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
Management reviewed accounting pronouncements issued during the three
months ended December 31, 2014, and no pronouncements were adopted during
the period.
3. LIQUIDITY AND OPERATIONS
The Company had net income of $311,535 and net loss of $117,822 for the six
months periods ended December 31, 2014 and 2013, respectively, and net cash
used in operating activities of $346,138 and $30,086 for the same periods,
respectively.
While Warp 9 expects that its capital needs in the foreseeable future may
be met by cash-on-hand and projected positive cash-flow, there is no
assurance that the Company will be able to generate enough positive cash
flow or have sufficient capital to finance its growth and business
operations, or that such capital will be available on terms that are
favorable to the Company or at all. In the current financial environment,
it could become difficult for the Company to obtain equipment leases and
other business financing. There is no assurance that Warp 9 would be able
to obtain additional working capital through the private placement of
common stock or from any other source.
GOING CONCERN
The accompanying financial statements have been prepared on a going concern
basis of accounting, which contemplates continuity of operations,
realization of assets and liabilities and commitments in the normal course
of business. The accompanying financial statements do not reflect any
adjustments that might result if the Company is unable to continue as a
going concern. The Company does not generate significant revenue, and has
negative cash flows from operations, which raise substantial doubt about
the Company's ability to continue as a going concern. The ability of the
Company to continue as a going concern and appropriateness of using the
going concern basis is dependent upon, among other things, an additional
cash infusion. The Company has obtained funds from its shareholders since
its inception through December 31, 2014. It is management's plan to
generate additional working capital from increasing sales from its desktop
and Warp 9 Mobile service offerings, and then continue to pursue its
business plan and purposes.
4. CONVERTIBLE NOTES PAYABLE
On March 25, 2013, the Company entered into a convertible promissory note
(the "March 2013 Note") in the amount of $100,000, at which time an initial
advance of $50,000 was received to cover operational expenses. The lender
advanced an additional $20,000 on April 16, 2013, an additional $15,000 on
May 1, 2013 and an additional $15,000 on May 16, 2013, for a total draw of
$100,000. The terms of the March 2013 Note allow the lender to convert all
or part of the outstanding balance plus accrued interest, at any time after
the effective date, at a conversion price of the lower of (a) $0.015 per
share, or (b) 50% of the lowest trade price of Common Stock recorded on any
trade day after the effective date of the agreement. The March 2013 Note
bears interest at a rate of 10% per year and matures on September 25, 2015.
On May 23, 2014, the lender converted $17,000 of the $100,000 outstanding
balance and accrued interest of $1,975 into 4,743,699 shares of common
stock. On October 14, 2014, the lender converted $17,000 of the $83,000
outstanding balance and accrued interest of $2,645 into 4,911,370 shares of
common stock. The balance of the March 2013 Note, as of December 31, 2014
is $66,000.
-8-
WARP 9, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
DECEMBER 31, 2014
On May 16, 2013, the Company signed a convertible promissory note (the "May
2013 Note") in the amount of $100,000, at which time an initial advance of
$10,000 was received to cover operational expenses. The lender advanced an
additional $20,000 on June 3, 2013, an additional $25,000 on July 2, 2013,
an additional $10,000 on September 3, 2013 and an additional $35,000 on
February 18, 2014, for a total draw of $100,000. The terms of the May 2013
Note allow the lender to convert all or part of the outstanding balance
plus accrued interest, at any time after the effective date, at a
conversion price of the lower of (a) $0.015 per share, or (b) 50% of the
lowest trade price of Common Stock recorded on any trade day after the
effective date of the agreement. The Company recognized a discount on the
May 2013 Note in the amount of $20,000, due to the beneficial conversion
feature. This discount is being recognized over twelve months, beginning on
the date of each tranche payment. For the quarter ended December 31, 2014,
the Company included $23,669 in interest expense related to the discount.
The debt discount related to the conversion feature of the May 2013 Note is
fully amortized, as of December 31, 2014. The May 2013 Note bears interest
at a rate of 10% per year and matures on November 16, 2015.
On March 4, 2014, the Company entered into a convertible promissory note
(the "March 2014 Note") in the amount of $250,000, at which time an initial
advance of $25,000 was received to cover operational expenses. The lender
advanced an additional $20,000 on March 17, 2014 and an additional $30,000
on April 2, 2014, for a total draw of $75,000. The terms of the March 2014
Note allow the lender to convert all or part of the outstanding balance
plus accrued interest, at any time after the effective date, at a
conversion price of the lower of (a) $0.012 per share, or (b) 50% of the
lowest trade price of Common Stock recorded on any trade day after the
effective date of the agreement. The Company recorded a debt discount of
$46,929 related to the beneficial conversion feature of the March 2014
Note, along with derivative liabilities. This discount is recognized over
18 months, beginning on the date of each tranche payment. For the quarter
ended December 31, 2014, the Company included $12,577 in interest expense
related to the discount. The March 2014 Note bears interest at a rate of
10% per year and matures 18 months from the effective date of each advance.
On April 16, 2014, the Company entered into a convertible promissory note
(the "April 2014 Note") in the amount of $300,000, at which time an initial
advance of $40,000 was received to cover operational expenses. The lender
advanced an additional $55,000 on April 30, 2014, an additional $40,000 on
May 16, 2014, an additional $40,000 on June 2, 2014, an additional $35,000
on June 30, 2014, an additional $40,000 on July 18, 2014, and an additional
$50,000 on August 15, 2014, for a total draw of $300,000. The terms of the
April 2014 Note allow the lender to convert all or part of the outstanding
balance plus accrued interest, at any time after the effective date, at a
conversion price of the lower of (a) $0.012 per share, or (b) 50% of the
lowest trade price of Common Stock recorded on any trade day after the
effective date of the agreement. The Company recorded a debt discount of
$201,669 related to the conversion feature of the April 2014 Note, along
with derivative liabilities. This discount is recognized over 18 months,
beginning on the date of each tranche payment. For the quarter ended
December 31, 2014, the Company included $50,325 in interest expense related
to the discount. The April 2014 Note bears interest at a rate of 10% per
year and matures 18 months from the effective date of each advance.
On September 5, 2014, the Company entered into a convertible promissory
note (the "September 2014 Note") in the amount of $250,000, at which time
an initial advance of $40,000 was received to cover operational expenses.
The lender advanced an additional $10,000 on September 17, 2014, an
additional $30,000 on October 1, 2014, an additional $40,000 on October 16,
2014, an additional $40,000 on October 31, 2014, an additional $40,000 on
November 18, 2014 and an additional $50,000 on December 16, 2014, for a
total draw of $250,000. The terms of the September 2014 Note allow the
lender to convert all or part of the outstanding balance plus accrued
interest, at any time after the effective date, at a conversion price of
the lower of (a) $0.015 per share, or (b) 50% of the lowest trade price of
Common Stock recorded on any trade day after the effective date of the
agreement. The Company recorded a debt discount of $220,022 related to the
conversion feature of the April 2014 Note, along with derivative
liabilities. For the quarter ended December 31, 2014, the Company included
$27,912 in interest expense related to the discount. The September 2014
Note bears interest at a rate of 10% per year and matures 18 months from
the effective date of each advance.
ASC Topic 815 provides guidance applicable to convertible debt issued by
the Company in instances where the number into which the debt can be
converted is not fixed. For example, when a convertible debt converts at a
discount to market based on the stock price on the date of conversion, ASC
Topic 815 requires that the embedded conversion option of the convertible
debt be bifurcated from the host contract and recorded at their fair value.
In accounting for derivatives under accounting standards, the Company
recorded a liability of $1,608,677 representing the estimated present value
of the conversion feature considering the historic volatility of the
Company's stock, and a discount of $468,620 representing the imputed
interest associated with the embedded derivative. The discount is amortized
over the life of the convertible debt, and the derivative liability is
adjusted periodically according to stock price fluctuations. At the time of
conversion, any remaining derivative liability will be charged to
additional paid-in capital.
-9-
WARP 9, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
DECEMBER 31, 2014
For purpose of determining the fair market value of the derivative
liability, the Company used Black Scholes option valuation model. The
significant assumptions used in the Black Scholes valuation of the
derivative are as follows:
Stock price on the valuation dates $ 0.011
Conversion price for the debt $ 0.004 - 0.00745
Dividend yield 0%
Months to maturity 9 months - 18 months
Risk free rate 0.23% - 0.46%
Expected volatility 140.11% - 150.73%
Following is the five year maturity schedule for our convertible notes
payable:
Year ended June 30, Principle Discount Net Book Value
------------------- -------------- ----------- --------------
2015 $ - $ - $ -
2016 $ 842,310 $ (468,620) $ 373,690
2017 $ - $ - $ -
2018 $ - $ - $ -
2019 $ - $ - $ -
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments, including cash and cash equivalents,
accounts receivable, accounts payable and accrued liabilities are carried
at cost, which approximates their fair value, due to the relatively short
maturity of these instruments. As of December 31, 2014 and 2013, the
Company's capital lease obligations and notes payable have stated borrowing
rates that are consistent with those currently available to the Company
and, accordingly, the Company believes the carrying value of these debt
instruments approximates their fair value.
Fair value is defined as the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. ASC Topic 820 established a
three-tier fair value hierarchy which prioritizes the inputs used in
measuring fair value. The hierarchy gives the highest priority to
unadjusted quoted prices in active markets for identical assets or
liabilities (level 1measurements) and the lowest priority to unobservable
inputs (level 3 measurements). These tiers include:
o Level 1, defined as observable inputs such as quoted prices for
identical instruments in active markets;
o Level 2, defined as inputs other than quoted prices in active markets
that are either directly or indirectly observable such as quoted
prices for similar instruments in active markets or quoted prices for
identical or similar instruments in markets that are not active; and
o Level 3, defined as unobservable inputs in which little or no market
data exists, therefore requiring an entity to develop its own
assumptions, such as valuations derived from valuation techniques in
which one or more significant inputs or significant value drivers are
unobservable.
We measure certain financial instruments at fair value on a recurring
basis. Assets and liabilities measured at fair value on a recurring basis
are as follows at December 31, 2014:
Total (Level 1) (Level 2) (Level 3)
------------- --------- --------- ----------
Assets $ - $ - $ - $ -
------------- --------- --------- ----------
Total assets measured at fair value $ - $ - $ - $ -
------------- --------- --------- ----------
Liabilities
Derivative liability 1,608,677 - - 1,608,677
Convertible notes, net of discount 373,690 - - 373,690
------------- --------- --------- ----------
Total liabilities measured at
fair value $ 1,982,367 $ - $ - $1,982,367
============= ========= ========= ==========
-10-
WARP 9, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
DECEMBER 31, 2014
Assets and liabilities measured at fair value on a recurring basis are as
follows at December 31, 2013:
Total (Level 1) (Level 2) (Level 3)
---------- ---------- ----------- ----------
Assets $ - $ - $ - $ -
---------- ---------- ----------- ----------
Total assets measured at fair value $ - $ - $ - $ -
---------- ---------- ----------- ----------
Liabilities
Derivative liability - - - -
Convertible notes, net of discount 168,856 - - 168,856
---------- ---------- ----------- ----------
Total liabilities measured at
fair value $ 168,856 $ - $ - $ 168,856
========== ========== =========== ==========
5. RELATED PARTIES
During the quarter ended December 31, 2014, there were no related party
transactions.
6. CAPITAL STOCK
At December 31, 2014 and 2013, the Company's authorized stock consists of
495,000,000 shares of common stock, par value $0.001 per share. The Company
is also authorized to issue 5,000,000 shares of preferred stock, par value
of $0.001 per share. The rights, preferences and privileges of the holders
of the preferred stock will be determined by the Board of Directors prior
to issuance of such shares. On May 23, 2014, the March 2013 Note holder
converted $17,000 out of the $100,000 balance along with accrued interest
of $1,975 into 4,743,699 shares of common stock. On October 14, 2014, the
March 2013 Note holder converted $17,000 of the $83,000 outstanding balance
and accrued interest of $2,645 into 4,911,370 shares of common stock.
7. STOCK OPTIONS AND WARRANTS
STOCK OPTIONS
Our 2003 Stock Option Plan for Directors, Officers, Employees and Key
Consultants (the "2003 Plan") authorizing the issuance of up to 5,000,000
shares of our common stock pursuant to the grant and exercise of up to
5,000,000 stock options terminated upon the expiration of the remaining
options granted under the 2003 Plan on May 24, 2014. In the future, we plan
to establish a new management stock option plan pursuant to which stock
options may be authorized and granted to our executive officers, directors,
employees and key consultants. We expect to authorize up to 10% of our
issued and outstanding Common Stock for future issuance under such plan. We
believe that stock option awards motivate our employees to work to improve
our business and stock price performance, thereby further linking the
interests of our senior management and our stockholders. The board
considers several factors in determining whether awards are granted to an
executive officer, including those previously described, as well as the
executive's position, his or her performance and responsibilities, and the
amount of options, if any, currently held by the officer and their vesting
schedule. Our policy prohibits backdating options or granting them
retroactively. As of December 31, 2014, 13,000,000 stock options granted
outside of the Plan are outstanding.
The weighted average remaining contractual life of options outstanding as
of December 31, 2014 was as follows:
Weighted
Average
Number of remaining
Exercise options contractual
prices outstanding life (years)
------------------- ------------------ ------------------
$ 0.005 12,500,000 4.62
$ 0.004 500,000 6.79
------------------
13,000,000
==================
-11-
WARP 9, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
DECEMBER 31, 2014
A summary of the Company's stock option activity and related information
follows:
Quarter ended
December 31, 2014
--------------------------------
Weighted
average
exercise
Options price
----------------- --------------
Outstanding -beginning of period 13,000,000 $ 0.005
Granted - $ -
Exercised - $ -
Forfeited - $ -
----------------- --------------
Outstanding - end of period 13,000,000 $ 0.005
================= ==============
Exercisable at the end of the period 10,334,247 $ 0.005
================= ==============
Weighted average fair value of
options granted during the year $ -
==============
WARRANTS
During the quarter ended December 31, 2014, the Company issued no warrants
for services. A summary of the Company's warrant activity and related
information follows:
Quarter Ended
December 31, 2014
---------------------------------------------------
Weighted
Weighted Average
average remaining
exercise contractual
Warrants price life (years)
------------------ --------------- ----------------
Outstanding/exercisable -
beginning of period 28,019,163 $ 0.003 0.003
Granted - -
Exercised - -
Forfeited - -
------------------ --------------- ----------------
Outstanding/exercisable -
end of period 28,019,163 $ 0.003 0.01.27
================== =============== ================
8. SUPPLEMENTAL STATEMENT OF CASH FLOWS INFORMATION
During the period ended December 31, 2014, we had the following non-cash
financing activities:
o Decreased notes payable by $19,645, increased common stock by $4,911
and additional paid-in capital by $54,025 for common shares as a
result of a partial conversion of the March 2013 Note.
9. SUBSEQUENT EVENTS
Management has evaluated subsequent events according to the requirements of
ASC TOPIC 855, and has reported the following events:
On January 5, 2015, the Company entered into a convertible promissory note
(the "January 2015 Note") in the amount of $250,000, at which time an
initial advance of $30,000 was received to cover operational expenses. The
lender advanced an additional $45,000 on January 20, 2015, an additional
$45,000 on February 2, 2015, for a total draw of $120,000. The terms of the
January 2015 Note allow the lender to convert all or part of the
outstanding balance plus accrued interest, at any time after the effective
date, at a conversion price of the lower of (a) $0.015 per share, or (b)
50% of the lowest trade price of Common Stock recorded on any trade day
after the effective date of the agreement. The January 2015 Note bears
interest at a rate of 10% per year and matures 18 months from the effective
date of each advance.
On February 3, 2015, the Company granted 63,000,000 non-qualified stock
options at a strike price of $0.0131. The options vest 1/36th monthly and
expire February 3, 2022.
-12-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
--------------------------------------------------------------------------------
CAUTIONARY STATEMENTS
This Form 10-Q contains financial projections and other "forward-looking
statements," as that term is used in federal securities laws, about Warp 9,
Inc.'s ("Warp 9," "we," "us," or the "Company") financial condition, results of
operations, and business. These statements include, among others:
o statements concerning the potential for benefits that Warp 9 may
experience from its business activities and certain transactions it
contemplates or has completed; and
o statements of Warp 9's expectations, 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," or similar
expressions used in this Form 10-Q. These forward-looking statements
are subject to numerous assumptions, risks, and uncertainties that may
cause the Company's actual results to be materially different from any
future results expressed or implied by the Company in those
statements. The most important facts that could prevent the Company
from achieving its stated goals include, but are not limited to, the
following:
(a) volatility or decline of the Company's stock price;
(b) potential fluctuation in quarterly results;
(c) failure of the Company to earn revenues or profits;
(d) inadequate capital to continue or expand its business, and
inability to raise additional capital or financing to
implement its business plans;
(e) failure to further commercialize its technology or to make
sales;
(f) reduction in demand for the Company's products and services;
(g) rapid and significant changes in markets;
(h) litigation with or legal claims and allegations by outside
parties;
(i) insufficient revenues to cover operating costs;
(j) aspects of the Company's business are not proprietary and in
general the Company is subject to inherent competition;
(k) further dilution of existing shareholders' ownership in
Company;
(l) uncollectible accounts and the need to incur expenses to
collect amounts owed to the Company; and
(m) lack of an Audit Committee and a sufficient number of
independent directors.
There is no assurance that the Company will be profitable. The Company may
not be able to successfully develop, manage, or market its products and
services. The Company may not be able to attract or retain qualified executives
and technology personnel. The Company may not be able to obtain customers for
its products or services. The Company's products and services may become
obsolete. Government regulation may hinder the Company's business. Additional
dilution in outstanding stock ownership may be incurred due to the issuance of
more shares, warrants and stock options, the exercise of outstanding warrants
and stock options.
Because these statements are subject to risks and uncertainties, actual
results may differ materially from those expressed or implied by forward-looking
statements. The Company cautions you not to place undue reliance on these
statements, which speak only as of the date of this Form 10-Q. The cautionary
statements contained or referred to in this section should be considered in
connection with any subsequent written or oral forward-looking statements that
the Company or persons acting on its behalf may issue. The Company does not
undertake any obligation to review or confirm analysts' expectations or
estimates or to release publicly any revisions to any forward-looking statements
to reflect events or circumstances after the date of this Form 10-Q or to
reflect the occurrence of unanticipated events.
-13-
The following discussion should be read in conjunction with our condensed
consolidated financial statements and notes to those statements. In addition to
historical information, the following discussion and other parts of this
quarterly report contain forward-looking information that involves risks and
uncertainties.
CURRENT OVERVIEW
We are a provider of mobile and e-commerce solutions for midsize online
sellers in the retail and business to business ("B2B") industries. Our solutions
and services are designed to help multi-channel retailers maximize digital
commerce revenues by applying our technologies and solutions for mobile
e-commerce, desktop e-commerce, e-mail marketing, social media, and other
digital avenues. Offered as an outsourced and fully managed
Software-as-a-Service ("SaaS") model, our solutions allow customers to focus on
their core business, rather than technical implementations and software and
hardware architecture, design, and maintenance. We also offer professional
services to our clients which include graphic design, store management, new
feature development, promotion management, search engine optimization ("SEO"),
social media management, merchandizing, integration to third party payment
processing and fulfillment systems, analytics, custom reporting, and strategic
consultation.
We believe our products and services allow our clients to lower costs and
focus on promoting and marketing their brand, product line, and website while
leveraging the investments we have made in technology and infrastructure to
operate a dynamic digital presence.
A portion of the Company's revenues are from monthly recurring fees for
mobile and desktop development. During the quarter ended December 31, 2014,
these products accounted for approximately 25% of our gross revenue. During the
quarter ended December 31, 2014, professional services accounted for
approximately 71% of our gross revenue.
CRITICAL ACCOUNTING POLICIES
Our discussion and analysis of our financial condition and results of
operations, including the discussion on liquidity and capital resources, are
based upon 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 us to make estimates and judgments that
affect the reported amounts of assets, liabilities, revenues and expenses, and
related disclosure of contingent assets and liabilities. On an ongoing basis,
management re-evaluates its estimates and judgments, particularly those related
to the determination of the estimated recoverable amounts of trade accounts
receivable, impairment of long-lived assets, revenue recognition, and deferred
tax assets. We believe the following critical accounting policies require more
significant judgment and estimates used in the preparation of the financial
statements.
We maintain an allowance for doubtful accounts for estimated losses that
may arise if any of our customers are unable to make required payments.
Management specifically analyzes the age of customer balances, historical bad
debt experience, customer credit-worthiness, and changes in customer payment
terms when making estimates of the uncollectability of our trade accounts
receivable balances. If we determine that the financial conditions of any of our
customers has deteriorated, whether due to customer specific or general economic
issues, increases in the allowance may be made. Accounts receivable are written
off when all collection attempts have failed.
We follow the provisions of ASC 605-10-25, that four conditions must be met
before revenue can be recognized: (i) there is persuasive evidence that an
arrangement exists, (ii) delivery has occurred or service has been rendered,
(iii) the price is fixed or determinable, and (iv) collection is reasonably
assured.
Income taxes are accounted for under the asset and liability method.
Under this method, to the extent that we believe that the deferred tax asset is
not likely to be recovered, a valuation allowance is provided. In making this
determination, we consider estimated future taxable income and taxable timing
differences expected in the future. Actual results may differ from those
estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments, including cash and cash equivalents,
accounts receivable, accounts payable and accrued liabilities are carried at
cost, which approximates their fair value, due to the relatively short maturity
of these instruments. As of December 31, 2014 and 2013, the Company's capital
lease obligations and notes payable have stated borrowing rates that are
consistent with those currently available to the Company and, accordingly, the
Company believes the carrying value of these debt instruments approximates their
fair value.
Fair value is defined as the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. ASC Topic 820 established a three-tier
fair value hierarchy which prioritizes the inputs used in measuring fair value.
-14-
The hierarchy gives the highest priority to unadjusted quoted prices in active
markets for identical assets or liabilities (level 1measurements) and the lowest
priority to unobservable inputs (level 3 measurements). These tiers include:
o Level 1, defined as observable inputs such as quoted prices for
identical instruments in active markets;
o Level 2, defined as inputs other than quoted prices in active markets
that are either directly or indirectly observable such as quoted
prices for similar instruments in active markets or quoted prices for
identical or similar instruments in markets that are not active; and
o Level 3, defined as unobservable inputs in which little or no market
data exists, therefore requiring an entity to develop its own
assumptions, such as valuations derived from valuation techniques in
which one or more significant inputs or significant value drivers are
unobservable.
We measure certain financial instruments at fair value on a recurring
basis. Assets and liabilities measured at fair value on a recurring basis are as
follows at December 31, 2014:
Total (Level 1) (Level 2) (Level 3)
------------- --------- --------- ----------
Assets $ - $ - $ - $ -
------------- --------- --------- ----------
Total assets measured at fair value $ - $ - $ - $ -
------------- --------- --------- ----------
Liabilities
Derivative liability 1,608,677 - - 1,608,677
Convertible notes, net of discount 373,690 - - 373,690
------------- --------- --------- ----------
Total liabilities measured at
fair value $ 1,982,367 $ - $ - $1,982,367
============= ========= ========= ==========
Assets and liabilities measured at fair value on a recurring basis are as
follows at December 31, 2013:
Total (Level 1) (Level 2) (Level 3)
---------- ---------- ----------- ----------
Assets $ - $ - $ - $ -
---------- ---------- ----------- ----------
Total assets measured at fair value $ - $ - $ - $ -
---------- ---------- ----------- ----------
Liabilities
Derivative liability - - - -
Convertible notes, net of discount 168,856 - - 168,856
---------- ---------- ----------- ----------
Total liabilities measured at
fair value $ 168,856 $ - $ - $ 168,856
========== ========== =========== ==========
-15-
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED DECEMBER 31, 2014, COMPARED TO
THE SIX MONTHS ENDED DECEMBER 31, 2013.
REVENUE
Total revenue for the six months ended December 31, 2014 decreased by
$370,976 to $240,983, compared to $611,495 for the six months ended December 31,
2013. The decrease was primarily due to a decline of our mobile website
development revenue during the current period. During the prior year, the
Company maintained numerous mobile sites for Moovweb, which added significant
mobile revenue. However, due to a strategy change at Moovweb, that mobile
maintenance work was re-directed to other sources, contributing to the lower
current year mobile revenue.
COST OF REVENUE
The cost of revenue for the six months ended December 31, 2014 decreased by
$139,341 to $29,282, compared to $168,623 for the six months ended December 31,
2013. The overall decrease was primarily due to a change in our sourcing for
development projects. Outsourced contractor expenses are reported as a cost of
revenue and in-house employees are reported in salary expense, a component of
selling, general and administrative expenses. During the quarter, the Company
primarily used in-house employees to produce mobile and desktop websites, which
shifted the expense from cost of revenue to selling, general and administrative.
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES
Selling, general, and administrative ("SG&A") expenses six months ended
December 31, 2014 increased $110,695 to $614,994, compared to $504,299 for the
six months ended December 31, 2013. The overall increase in SG&A expenses was
primarily due sourcing for development projects, as noted above in the
explanation of the change in cost of revenue.
RESEARCH AND DEVELOPMENT
Research and development expenses for the six months ended December 31,
2014 and December 31, 2013 were both zero.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization expenses for the six months ended December
31, 2014 decreased $38,150 to $2,274, compared to $40,424 for the six months
ended December 31, 2013. The decrease was due to the Company decommissioning its
data center and disposing of the data center equipment in the prior period, some
of which had not been fully depreciated.
OTHER INCOME AND EXPENSE
Total other income (expense) for the six months ended December 31, 2014
increased $731,640 to net other income of $730,086, compared to net other
expense of $1,554 for the six months ended December 31, 2013. The increase was
primarily due to gain on extinguishment of debt and gain on the changes in
derivative liability.
NET INCOME/(LOSS)
The consolidated net income for the six months ended December 31, 2014 was
$311,535, compared to the consolidated net loss of ($117,822) for the six months
ended December 31, 2013. The increase in net income for the period was primarily
due to non-cash gains on extinguishment of debt and changes in derivative
liability.
LIQUIDITY AND CAPITAL RESOURCES
The Company had a net working capital deficit (i.e. the difference between
current assets and current liabilities) of ($1,984,694) at December 31, 2014
compared to a net working capital deficit of ($2,416,687) at June 30, 2014. The
decrease in net working capital deficit at December 31, 2014 was caused by a
decrease in derivative liability.
Cash flow used in operating activities was ($346,138) for the six months
ended December 31, 2014, compared to cash flow used in operating activities of
($30,086) for the six months ended December 31, 2013. The increase in cash flow
used in operating activities of $316,052 was primarily due to a gain on
settlement of debt and a gain on changes in derivative liability, partially
offset by an increase in net income.
Cash flow used in investing activities was ($2,355) for the six months
ended December 31, 2014, compared to cash flow provided in investing activities
-16-
of $6,616 for the six months ended December 31, 2013. The increase in cash flow
used in investing activities of $8,971 during the current period, was primarily
due to the purchase of computer equipment.
Cash flow provided in financing activities was $340,000 for the six months
ended December 31, 2014 compared to $35,000 for the six months ended December
31, 2013. The increase in cash flow provided in financing activities of $305,000
was due to proceeds received by the Company from a convertible promissory note.
While we expect that our capital needs in the foreseeable future will be
met by cash-on-hand and existing cash flow, there is no assurance that we will
generate any or sufficient positive cash flows, or have sufficient capital, to
finance our growth and business operations, or that such capital will be
available on terms that are favorable to us or at all. The Company has recently
been incurring operating losses and experiencing negative cash flow. In the
current financial environment, it could become difficult for the Company to
obtain business leases and other equipment financing. There is no assurance that
we would be able to obtain additional working capital through the private
placement of common stock or from any other source.
OFF-BALANCE SHEET ARRANGEMENTS
None.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
------------------------------------------------------------------
Not Applicable.
ITEM 4. CONTROLS AND PROCEDURES
-------------------------------
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
We maintain disclosure controls and procedures that are designed to ensure
that information required to be disclosed by Warp 9 in the reports that it files
under the Securities Exchange Act of 1934, as amended (the "Exchange Act") is
recorded, processed, summarized and reported within the time periods specified
in the rules and forms of the Securities and Exchange Commission. Disclosure
controls and procedures include, without limitation, controls and procedures
designed to ensure that information required to be disclosed by an issuer that
it files under the Exchange Act is accumulated and communicated to the issuer's
management, including its principal executive officer and principal financial
officers, or persons performing similar functions as appropriate to allow timely
decisions regarding required disclosure. The Company's Chairman, Chief Executive
Officer, and Chief Financial Officer are responsible for establishing and
maintaining disclosure controls and procedures for the Company.
Management has evaluated the effectiveness of the Company's disclosure
controls and procedures as of December 31, 2014 (under the supervision and with
the participation of the Company's Chairman, Chief Executive Officer, and Chief
Financial Officer) pursuant to Rule 13a-15(e) under the Securities Exchange Act
of 1934, as amended. As part of such evaluation, management considered the
matters discussed below relating to internal control over financial reporting.
Based on this evaluation, the Company's Chairman, Chief Executive Officer, and
Chief Financial Officer have concluded that the Company's disclosure controls
and procedures are effective as of December 31, 2014.
INTERNAL CONTROL OVER FINANCIAL REPORTING
The Company's management is responsible for establishing and maintaining
adequate internal control over financial reporting, (as defined in Rule
13a-15(f) under the Securities Exchange Act of 1934). The Company's internal
control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes of accounting principles generally
accepted in the United States. Because of its inherent limitations, internal
control over financial reporting may not prevent or detect misstatements.
Therefore, even those systems determined to be effective can provide only
reasonable assurance of achieving their control objectives. Furthermore,
projections of any evaluation of effectiveness to future periods are subject to
the risk that controls may become inadequate due to change in conditions, or the
degree of compliance with the policies or procedures may deteriorate. After
evaluating the Company's internal controls over financial reporting, the
Company's Chairman, Chief Executive Officer, and Chief Financial Officer have
concluded that the internal controls over financial reporting are effective as
of December 31, 2014.
CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING
There have been no changes in the Company's internal control over financial
reporting that occurred during our most recent fiscal quarter that have
materially affected, or are reasonably likely to materially affect, the
Company's internal control over financial reporting.
-17-
PART II. - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
-------------------------
There are no current legal proceedings as of this time.
The Company may be involved in legal actions and claims arising in the
ordinary course of business from time to time in the future.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
-------------------------------------------------------------------
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
---------------------------------------
None.
ITEM 4. MINE SAFETY DISCLOSURES
------------------------------
Not applicable.
ITEM 5. OTHER INFORMATION
-------------------------
None
ITEM 6. EXHIBITS
----------------
(a) Exhibits
EXHIBIT NO. DESCRIPTION
---------------- ------------------------------------------------------------
3.1 Articles of Incorporation (1)
3.2 Bylaws (1)
4.1 Specimen Certificate for Common Stock (1)
4.2 Non-Qualified Employee Stock Option Plan (2)
4.3 Convertible Debenture dated December 28, 2005 (3)
4.4 Form of $0.08 Warrant (3)
4.5 Form of $0.10 Warrant (3)
4.6 Form of $0.12 Warrant (3)
10.1 First Agreement and Plan of Reorganization between
Latinocare Management Corporation, a Nevada corporation, and
Warp 9, Inc., a Delaware corporation (4)
10.2 Second Agreement and Plan of Reorganization between
Latinocare Management Corporation, a Nevada corporation, and
Warp 9, Inc., a Delaware corporation (5)
10.3 Exchange Agreement and Representations for shareholders of
Warp 9, Inc.(4)
10.4 Securities Purchase Agreement dated as of March 28, 2005
between Roaming Messenger, Inc. and Wings Fund, Inc.(6)
10.5 Periodic Equity Investment Agreement dated as of March 28,
2005 between Roaming Messenger, Inc. and Wings Fund, Inc.(6)
10.6 Registration Rights Agreement dated as of March 28, 2005
between Roaming Messenger, Inc. and Wings Fund, Inc.(6)
10.7 Securities Purchase Agreement dated December 28, 2005
between the Company and Cornell Capital Partners LLP (3)
10.8 Investor Registration Rights Agreement dated December 28,
2005 (3)
10.9 Insider Pledge and Escrow Agreement dated December 28, 2005
by and among the Company, Cornell and David Gonzalez as
escrow agent (3)
10.10 Security Agreement dated December 28, 2005 by and between
the Company and Cornell (3)
10.11 Escrow Agreement Dated December 28, 2005 by and among the
Company, Cornell and David Gonzalez, as Escrow Agent (3)
10.12 Irrevocable Transfer Agent Instructions (3)
10.13 Exclusive Technology License Agreement, dated September 18,
2006 (8)
-18-
10.14 Subscription Agreement with Zingerang Inc., dated September
18, 2006 (8)
10.15 Termination of License Agreement with Carbon Sciences, Inc.,
dated April 2, 2007 (9)
10.16 Completion of Securities Purchase Agreement dated December
28, 2005 between the Company and Cornell Capital Partners
LLP (10)
10.17 Form of convertible note, dated January 5, 2015
10.18 Form of stock option agreement
21.1 List of Subsidiaries (7)
31.1 Section 302 Certification
31.2 Section 302 Certification
32.1 Section 906 Certification
32.2 Section 906 Certification
EX-101.INS XBRL INSTANCE DOCUMENT*
EX-101.SCH XBRL TAXONOMY EXTENSION SCHEMA DOCUMENT*
EX-101.CAL XBRL TAXONOMY EXTENSION CALCULATION LINKBASE*
EX-101.DEF XBRL TAXONOMY EXTENSION DEFINITION LINKBASE*
EX-101.LAB XBRL TAXONOMY EXTENSION LABELS LINKBASE*
EX-101.PRE XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE*
----------------
(1) Incorporated by reference from the exhibits included with the Company's
prior Report on Form 10-KSB filed with the Securities and Exchange
Commission, dated March 31, 2002.
(2) Incorporated by reference from the exhibits included in the Company's
Information Statement filed with the Securities and Exchange
Commission, dated August 1, 2003.
(3) Incorporated by reference from the exhibits included in the Company's
Current Report on Form 8-K filed with the Securities and Exchange
Commission on December 29, 2005.
(4) Incorporated by reference from the exhibits included with the Company's
prior Report on Form SC 14F1 filed with the Securities and Exchange
Commission, dated April 8, 2003.
(5) Incorporated by reference from the exhibits included with the Company's
prior Report on Form 8K filed with the Securities and Exchange
Commission, dated May 30, 2003.
(6) Incorporated by reference to exhibits filed with the Company's Current
Report on Form 8-K filed with the Securities and Exchange Commission
dated March 30, 2005.
(7) Incorporated by reference to the exhibits filed with the Company's
prior Annual Report on Form 10-KSB/A filed with the Securities and
Exchange Commission, dated October 12, 2007.
(8) Incorporated by reference to exhibits filed with the Company's Current
Report on Form 8-K filed with the Securities and Exchange Commission,
dated September 22, 2005.
(9) Incorporated by reference to exhibits filed with the Company's Current
Report on Form 8-K filed with the Securities and Exchange Commission,
dated May 8, 2007.
(10) Incorporated by reference to exhibits filed with the Company's Current
Report on Form 8-K filed with the Securities and Exchange Commission,
dated June 10, 2008.
* Furnished herewith. Pursuant to Rule 406T of Regulation S-T, the interactive
data files on Exhibit 101 hereto are deemed not filed or part of a registration
statement or prospectus for purposes of Sections 11 or 12 of the Securities Act
of 1933, as amended, and otherwise are not subject to liability under those
sections.
-19-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
WARP 9, INC.
--------------------------
(Registrant)
Dated: February 17, 2015 By: /s/ Andrew Van Noy
-------------------------------------
Andrew Van Noy,
Chief Executive Officer and President
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By: /s/ Andrew Van Noy Dated: February 17, 2015
-------------------------------------------------------
Andrew Van Noy, Chief Executive Officer and President
(Principal Executive Officer)
By: /s/ Gregory Boden Dated: February 17, 2015
-------------------------------------------------------
Gregory Boden, Chief Financial Officer
(Principal Financial/Accounting Officer)
-20-