Sichenzia
Ross Friedman Ference LLP
1065
AVENUE OF THE AMERICAS NEW YORK NY 10018
TEL
212 930 9700 FAX 212 930 9725 WEB WWW. SRFF.COM
July
21,
2005
BY
FEDERAL EXPRESS
Securities
and Exchange Commission
450
Fifth
Street, NW
Washington
D.C 20549
| Attention: |
Scott
Anderegg, Esq.
Mail Stop
0308
|
|
|
Re: |
Roaming
Messinger, Inc. (the “Company”)
Form SB-2 File No.
333-124600
|
Dear
Sir:
On
behalf
of the Company, we are hereby enclosing for your review two copies of Amendment
No. 2 (the “Amendment”) to the Company’s registration statement on Form SB-2
(the “Registration Statement”). One of the copies has been marked to show
changes from Amendment No. 1 to the Registration Statement (“Amendment No. 1”).
On the date hereof, we are also filing the Amendment by EDGAR transmission.
The
Registration Statement and Amendment No 1 thereto (“Amendment No. 1”) were filed
on May 3, 2005 and June 23, 2005, respectively. The staff of the Securities
and
Exchange Commission (the “Staff”) issued comments on Amendment No. 1 by letter
dated July 12, 2005. Following are the Company’s responses to the Staff’s
comments. For ease of reference, we have set forth the Staff’s comments in their
entirety.
In
its
letter, the Staff requested that the Company make, to the extent applicable,
corresponding revisions to its Annual Report on Form 10-KSB for the year ended
June 30, 2004 and to its Quarterly Report on Form 10-QSB for the three months
ended March 31, 2005 (Commission File No. 0-13215). As noted in our responses
to
prior comments issued by the Staff on the Registration Statement, the Company
intends to file amendments to those documents upon clearing the Staff’s comments
on the Registration Statement, including Amendment No.1.
Prospectus
Summary
1. Please
refer to comments 4, 16, and 23 in our letter dated June 2, 2005 The summary
still does not appear to describe in plain English what the Roaming Messenger
is
and how it works Please revise further As part of your revisions, please do
not
repeat verbatim the General discussions in the Management’s Discussion and
Analysis and Business sections. Instead, those sections should provide more
detailed disclosure about the financial and business aspects of the Roaming
Messenger.
The
Company has made revisions to the Registration Statement in accordance with
the
Staff’s comment. See page 1 of the Amendment.
Management’s
Discussion and Analysis or Plan of Operation, page 10
Liquidity
and Capital Resources, page 12
2. Please
refer to comment 22 in our letter dated June 2, 2005. Revise your disclosure
here to more fully explain the liquidity risks, including dilution impact,
resulting from periodic equity agreement.
The
Company has made revisions to the Registration Statement in accordance with
the
Staff’s comment. See page 12 of the Amendment.
Directors
and Executive Officers, page 18
3.
Please refer to comment 26 in our letter dated June 2, 2005. While we note
the
changes you have made in response to the comment, please revise to further
disclose the background of Mr. Dhillon for the year 1999 and about Mr. Djokovich
for the year 2003.
The
Company has made revisions to the Registration Statement in accordance with
the
Staff’s comment. See page 19 of the Amendment.
Notes
to Consolidated Financial Statements, page
2.
Summary of Significant Accounting Policies, page F-6
Revenue
Recognition, page F-7
4. We
note your response to comment 33 in our letter dated June 2, 2005. Please tell
us your policy for recognizing one-time license fees associated with customer
activation. Tell us if you recognize the one time fee at inception, defer
recognition until the end of the agreement or allocate the revenue over the
agreement term based on some other systematic approach. In your response include
applicable accounting pronouncements that support your policy and the amount
of
revenue recognized for each statement of operations and deferred as of each
balance sheet date. Additionally, tell us why you record revenue and cost of
revenue for third party online marketing services on a gross basis rather than
net In your response include the indicators of gross revenue reporting outlined
in EITF No. 99-19 or 0l-09, as applicable, and the amount of revenue and cost
of
revenue recognized for each statement of operations. Include these policies
in
your next amendment to Form SB-2.
The
Company advises the Staff supplementally that it does not charge a one-time
license fee associated with customer activation. However, it charges customers
certain fees at inception of the contract for the Warp 9 ICS product. When
customers sign up for Warp 9 ICS monthly service, the Company offers a basic
set
of templates that they may be used for their internet commerce. The Company
also
offers its services to enhance these templates to make their web pages more
attractive to their users. Alternatively, the Company may program the system
to
meet the customer’s unique business processes. These “enhancement” services are
optional. Therefore, customers may use them, do it themselves or use a third
party to enhance the Company’s basic template, or use the basic template as is.
The fees charged at inception of the contracts (which include these
“enhancements” services) have been immaterial in the past, and the Company has
not segregated these “enhancement” services fees from any nominal set up fees,
i.e.
simply
to flip the switch. The Company believes that most (90%) of the fees charged
at
inception are related to “enhancement” services. The Company also incurs and
records the related costs in the period it recognizes the revenue. With respect
to these “enhancement” services fees, the Company’s margins are minimal. As the
fees charged at inception will become more significant in future periods, the
Company intends to segregate the one-time customer activation fee from the
optional “enhancement” fees and amortize the set up fees and related costs over
the length of the underlying contracts, generally six months to one year. The
Company believes that these enhancement service fees are a separate earning
process in accordance with EITF 00-21 for the following reasons:
| · |
these
services have value to the customers on a stand-alone basis since
they may
be performed by a third party;
|
| · |
there
is reliable evidence of fair value of these services since the Company
charges a fee based on the complexity of the projects, i.e.
similar to an hourly rate; and
|
| · |
customers
have a right of return since they approve the page and/or ask for
modifications.
|
The
breakdown of fees charged at inception of contracts is as follows:
| |
|
Year
Ended June 30, 2004
|
|
Three
Months Ended September
30, 2004
|
|
Three
Months Ended December
31, 2004
|
|
Three
Months Ended September
30, 2005
|
|
|
Total
Revenue
|
|
$
|
953,772
|
|
$
|
309,704
|
|
$
|
307,228
|
|
$
|
259,959
|
|
|
Fees
Charged at Inception of Contracts
|
|
$
|
31,350
|
|
$
|
8,000
|
|
$
|
10,000
|
|
$
|
38,000
|
|
The
Company further advises the Staff that it records revenue and cost of revenue
for third party online marketing services on a gross basis. For example, it
purchases packages from major internet sites (for example Google) and resells
them to its customers at a slight markup along with consulting services. The
Company is responsible for the acceptability of the services purchased by its
customers. Upon completion of the transaction, the Company remains responsible
for the quality of the services. Furthermore, the Company assumes the credit
risk for the sales billed to its customers without mitigation from the
suppliers. As a result, in accordance with EITF No. 99-19, we believe that
we
act as principal in these transactions and should record revenue on a gross
basis.
The
Company advises the Staff that it records revenue and cost of revenue related
to
third party online marketing services are as follows:
| |
|
Year
Ended June 30, 2004
|
|
Three
Months Ended September
30, 2004
|
|
Three
Months Ended December
31, 2004
|
|
Three
Months Ended September
30, 2005
|
|
|
Third
Party Online
Marketing Services
Revenue
|
|
$
|
11,300
|
|
$
|
64,758
|
|
$
|
110,267
|
|
$
|
67,987
|
|
|
Cost
of Third
Party Online
Marketing Services
|
|
$
|
9,791
|
|
$
|
64,469
|
|
$
|
108,997
|
|
$
|
67,392
|
|
The
Company presents revenue, net of customer incentives in accordance with EITF
No.
01-09. It has included this policy in the Amendment.
8.
Stock Options and Warrants, pages F-13
5. We
note your response to comment 34 in our letter dated June 2, 2005. We
note
your
representation accelerating the vesting period is a modification of awards;
however, it is unclear how you determined the incremental compensation cost
was
so at the modification date Please tell us the original intrinsic value, the
intrinsic value at the modification date, the number of accelerated awards
and
the amount of compensation expense recorded at each measurement date. Include
your basis for the current price of the underlying stock in determining the
intrinsic value of stock option awards
The
Company advises the Staff that the original intrinsic value of the awards at
the
original date of grant was $0, and the intrinsic value of the awards at the
date
of modification was $0. The exercise price of the awards ($.08) did not change
(except for the adjustment for the ratio for the Roaming Messenger, Inc. stock
price compared to the Warp 9, Inc. stock price, similar to a stock split),
and
the current price of the underlying stock also remained the same (except for
the
ratio discussed above) at $.08 per share. The price of the underlying stock
was
based on the market price of shares being sold by the Company contemporaneously
in an arm’s length private placement of its common stock.
6. We
note your response to comment 35 in
our letter dated June 2, 2005. It still is unclear why the number of warrants
and exercise prices do not reconcile. Please advise or revise your disclosure
on
page 26 and the tabular information in footnote 8 to reconcile and disclose
the
aggregate amount of outstanding warrants. See Rule 4-08(i) of Regulation
S-X.
As
stated
in our response to prior comment 35, and as subsequently explained in a
telephone conference with members of the Staff, the warrant information
contained in the footnotes to the financial statements relates to warrants
that
were granted during the fiscal year ended June 30, 2004. None of those warrants
are currently outstanding. In contrast, warrant information set forth under
the
heading “Description of Securities” relates to warrants that were granted during
the fiscal year ended June 30, 2005. Therefore, the warrant descriptions
contained in these two parts of the Registration Statement bear no relationship
to each other. Nevertheless, the Company has made a revision to the Registration
Statement that it expects will clear up the confusion. See page 26 of
the
Amendment.
In
addition, in accordance with the Staff’s comment, the Company has added
disclosure to footnote 8 setting forth the aggregate number of warrants issued
during the fiscal year ended June 30, 2004 and the total number of warrants
outstanding as of that date.
12.
Subsequent Events page F-17
7 We
note your response to comment 37 in our letter dated June 2, 2005 Please advise
or revise your disclosure to describe the event of default under the
Registration Rights Agreement and state Wing Fund Inc. waived the right to
require you to issue an additional 200,000 common shares as a result of failing
to prepare and file a registration statement by March 28,
2005.
The
Company has made revisions to the Registration Statement in accordance with
the
Staff’s comment. See page F-22 of the Amendment.
Form
10-QSB/A for Fiscal Quarter Ended March 31, 2005
8. As
applicable, please revise to comply with the above
comments
As
noted
in the introduction to this letter, the Company intends to file its revised
Quarterly Report on Form 10-QSB as soon as it clears the Staff’s
comment.
Management’s
Discussion and ana1ysis or Plan of Operation, page 8
Liquidity
and Capital Resources, page 11
9 Please
refer to comment 42 in our letter dated June 2, 2005 Please amend to discuss
the
impact of the periodic equity agreement upon your financial condition. See
also
prior comment 2.
As
noted
in the introduction to this letter, the Company intends to file its revised
Quarterly Report on Form 10-QSB as soon as it clears the Staff’s
comment.
Exhibits
31.1
10.
It
appears this certification is missing paragraph 4(d) Accordingly, please amend
your Form I O-QSB in its entirety with the certification in its correct
form
As
noted
in the introduction to this letter, the Company intends to file its revised
Quarterly Report on Form 10-QSB as soon as it clears the Staff’s
comment.
Please
do
not hesitate to contact the undersigned at 212-981-6766 with any questions
or
comments with respect to the foregoing.
| |
Very
truly yours,
/s/
Louis A. Brilleman
|