UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2013
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number: 000-185669
SPRIZA,
INC.
(Exact name of registrant as
specified in its charter)
Nevada | 90-0888324 |
(State or other jurisdiction of | (I.R.S. Employer |
incorporation or organization) | Identification No.) |
111 Penn Street, El Segundo, CA 90245
(Address of
principal executive offices, including zip code)
(650) 204-7903
(Telephone
number, including area code)
_______________________________________________
(Former name or former address, if
changed since last report)
Securities registered pursuant to
Section 12(b) of the Act:
None
Securities registered pursuant to
Section 12(g) of the Act:
None
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.
Yes [ ] No [X]
Indicate by check mark if the registrant
is not required to file reports pursuant to Section 13 or 15(d) of the Exchange
Act.
Yes [ ] No [X]
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 preceding 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
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 (§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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] | Accelerated filer [ ] |
Non-accelerated filer [ ] (Do not check if a smaller reporting company) | Smaller reporting company [X] |
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
Yes [ ] No [X]
The aggregate market value of the voting stock held by non-affiliates of the issuer on October 31, 2013, the first day the shares were publicly traded, based upon the $0.50 per share closing price of such stock on that date, was $12,175,000.
As of March 31, 2014, there were 67,483,277 shares of our common stock issued and outstanding.
Documents Incorporated by Reference: None.
SPRIZA, INC.
ANNUAL REPORT ON FORM 10K FOR THE FISCAL YEAR ENDED DECEMBER 31, 2013
Table of Contents
CAUTIONARY NOTICE REGARDING FORWARD LOOKING STATEMENTS
This Annual Report on Form 10-K (the “Report”) contains a number of forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and that reflect management’s current views and expectations with respect to our business, strategies, products, future results and events, and financial performance. All statements made in this Report other than statements of historical fact, including statements that address operating performance, the economy, events or developments that management expects or anticipates will or may occur in the future, including statements related to potential strategic transactions, distributor channels, volume growth, revenues, profitability, new products, adequacy of funds from operations, cash flows and financing, our ability to continue as a going concern, statements regarding future operating results and non-historical information, are forward-looking statements. In particular, the words such as “believe,” “expect,” “intend,” “anticipate,” “estimate,” “may,” “will,” “can,” “plan,” “predict,” “could,” “future,” variations of such words, and similar expressions identify forward-looking statements, but are not the exclusive means of identifying such statements and their absence does not mean that the statement is not forward-looking.
Readers should not place undue reliance on these forward-looking statements, which are based on management’s current expectations and projections about future events, are not guarantees of future performance, are subject to risks, uncertainties and assumptions and apply only as of the date of this Report. Our actual results, performance or achievements could differ materially from historical results as well the results expressed in, anticipated or implied by these forward-looking statements. Except as required by law, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
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In particular, our business, including our financial condition and results of operations may be impacted by a number of factors, including, but not limited to, the following:
For a discussion of some of the factors that may affect our business, results and prospects, see “Item 1A. Risk Factors” Readers are also urged to carefully review and consider the various disclosures made by us in this Report and in our other reports we file with the Securities and Exchange Commission, including our periodic reports on Form 10-Q and current reports on Form 8-K, and those described from time to time in our press releases and other communications, which attempt to advise interested parties of the risks and factors that may affect our business, prospects and results of operations.
REFERENCES
As used in this Report: (i) the terms “we”, “us”, “our”, “Spriza” and the “Company” mean Spriza, Inc.; (ii) “SEC” refers to the Securities and Exchange Commission; (iii) “Securities Act” refers to the United States Securities Act of 1933, as amended; (iv) “Exchange Act” refers to the United States Securities Exchange Act of 1934, as amended; and (v) all dollar amounts refer to United States dollars unless otherwise indicated.
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PART I
ITEM 1. BUSINESS
Overview
On September 17, 2012 we were incorporated as Level20 Inc. in the State of Nevada. On October 25, 2013 we changed our name to Spriza, Inc.
On October 17, 2012, we entered into an Asset Purchase Agreement with Raptify Marketing Systems Ltd. (“Raptify”), whereby we acquired certain assets from Raptify in exchange for 5,000,000 shares of our common stock, 3,000,000 shares of which were received by Raptify and 2,000,000 shares of which were received by certain other stakeholders of Raptify.
Our principal executive offices are located at 111 Penn Street, El Segundo, CA 90245, and our telephone number at this address is (650) 204-7903. Our website is www.spriza.com. Information contained on our website is not a part of this Annual Report on Form 10-K. We completed our initial public offering on June 12, 2013. On November 4, 2013, our common stock was quoted under the symbol “SPRZ” on the OTC BB operated by the Financial Industry Regulatory Authority, Inc. (“FINRA”).
Our Business and Intellectual Property
We own and operate the patent-pending proprietary SPRIZA™ contest marketing platform. We filed the US Patents, filing No. 12753864 and submitted the Canadian filings, No. 2261/P1551CA00. We acquired these assets through an Asset Purchase Agreement and we currently hold patent pending status for both jurisdictions.
Trademarks pertaining to SPRIZA™ and its Star Icon logo as well as our tagline “Win, Laugh, Live” have been applied for in the United States and Canada. Currently all trademarks listed above are in a pending status.
Our intellectual property is a fully developed, commercially operational incentive contest marketing system and platform that builds brand awareness and generates qualified targeted leads for any size of business through a patent-pending online contest marketing solution trademarked as “SPRIZA™”. SPRIZA™ taps into the power of shared interests and personal relationships within targeted markets producing traceable and quantifiable results at every stage of the contest. It provides deep, real-time analytics and reporting, through robust tools that measure marketing and advertising budgets for real time return on investment analysis and demographic profiling. SPRIZA™ leverages social media strategies based on business objectives enabling our clients “Branders” to measure results of marketing efforts. The result is a network of subscribers that participate in contest promotions centered around their personal and shared interests. SPRIZA™ produces quantifiable and verifiable participant data results, which can be used for ongoing marketing purposes with targeted demographics. SPRIZA™ data results assess how many consumers responded, whom they shared the contest with, the level of engagement, how many other contest participants were influenced and sales value generated. SPRIZA™ is designed to work with most social media engines including Facebook, Twitter and Pinterest and offers full mobile capability to engage popular mobile applications including iPhone, Android, Blackberry and Windows mobile operating systems.
We seek patent protection for those inventions and technologies for which we believe such protection is suitable and is likely to provide a competitive advantage to us. Because patent applications in the United States are maintained in secrecy until either the patent application is published or a patent is issued, we may not be aware of third-party patents, patent applications and other intellectual property relevant to our products that may block our use of our intellectual property or may be used in third-party products that compete with our products and processes. In the event a competitor or other party successfully challenges our products, processes, patents or licenses or claims that we have infringed upon their intellectual property, we could incur substantial litigation costs defending against such claims, be required to pay royalties, license fees or other damages or be barred from using the intellectual property at issue, any of which could have a material adverse effect on our business, operating results and financial condition.
We also rely substantially on trade secrets, proprietary technology, nondisclosure and other contractual agreements, and technical measures to protect our technology, application, design, and manufacturing know-how, and work actively to foster continuing technological innovation to maintain and protect our competitive position. We cannot assure you that steps taken by us to protect our intellectual property and other contractual agreements for our business will be adequate, that our competitors will not independently develop or patent substantially equivalent or superior technologies or be able to design around patents that we may receive, or that our intellectual property will not be misappropriated.
Spriza.com – Contest Portal
Delivery and distribution to the consumer of all contest offerings will be based upon user profile by location, interests and other preferences. Our web site www.spriza.com aggregates all contests, while segmenting distribution based upon the means of client submission and their branding strategy to specifically determine which offerings are available nationally and regionally. Post marketing opportunities will occur within this platform to drive affiliate revenue and secondary sales.
Small/Medium Business Contest Creation Tool
We offer a low cost entry platform targeting small to mid-sized businesses wishing to promote themselves through self-directed contests on a local or regional level. This portal offers a comprehensive toolkit and tutorials to initiate, register and administer a fully-compliant contest or sweepstake, providing basic templates and customization options to uniquely brand their efforts and monitor their results using fundamental reporting tools. This option may not require or include any 3rd party intervention but does provide limited access to support and assistance through our administration team.
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Advertising Agency Contest Creation Tool
Our enterprise solution is a backend system providing every available tool and customization option to those agencies and marketing firms wishing to offer our products to their corporate clients in a closed loop campaign as a standalone offering or as integration to existing programs and marketing efforts. This option is expected to provide full support and assistance to the agency behind the scenes. We anticipate that utilities and reporting tools will be comprehensive and customizable, allowing for white-labeling to their own client base. We expect that this solution will be best suited to major national brands rolling out a complete North American campaign.
International Licensing & Site Mirrors
For international expansion we anticipate that International Licensed Affiliates wishing to duplicate our offerings in foreign countries will have the opportunity to acquire exclusive licensing through our international release of mirror programs, enabling them to tailor a solution to their local market’s culture, currency, language and compliance to legal requirements. We have finalized our international licensing model and we are currently identifying licensees for international expansion in Asia, Europe and South America.
Sales and Marketing
Our SPRIZA™ technology is designed to integrate seamlessly within existing social media platforms. We expect to grow our revenues through multiple streams including contest revenue, lead generation, ecommerce conversion and ongoing marketing initiatives.
Traditional marketing efforts to promote contests or corporate promotional giveaways have included direct mail, newspaper, radio, television and some have included online efforts but they have generally not successfully leveraged the viral nature of social media such as Facebook or Twitter. Our patent-pending solution rewards a company with a competition advantage based on its ability to drive viral distribution and participation towards sales and lead generation. There are other online contesting companies such as Strutta and WildfireApp that are more focused on driving interest to social pages. This brand engagement dies at the closing of that promotional offer and usually only incentivizes a limited amount of the participants.
Our patent-pending method of contest distribution uses incentive based, viral marketing where participants are rewarded for sharing the contest with like-minded family, friends and associates. Participants’ odds increase with the more people they invite as does their chances of sharing in that winning experience with that chain of winners. This incentive based marketing creates a new and proprietary way for brands to attract and identify customers, brand influencers and ambassadors to sell goods and services.
The contest subscriber website is www.spriza.com where users will be able to create an account, set personal preferences, link to their social media profiles and consume, share and engage in branded contests throughout North America. This site has three main sections: open contests they are participating in, closed contests they previously participated in and current and available contests that can be searched or screen based on personal preferences. Within each section individuals will be served promotional materials, deals, and advertising relevant to that brand and personal preference. Each section will likely contain short videos on the brand experience, to explain what the brand experience offers if customers win and a video of the winners sharing and consuming the winning brand experience.
We intend to email our www.Spriza.com subscribers contest offers that are targeted by location and personal preferences. Consumers can also access our contests directly through our website and mobile applications. We expect that new subscribers will be driven to Spriza™ through all digital advertising efforts such as paid, search, social, mobile, location, email and, where essential, traditional methods. All contests will initially be seeded throughout our database of subscribers but also promoted through our client’s social media assets and client lists thus driving up our total subscribers.
A typical contest might offer an all-inclusive weekend at a brand name hotel in Las Vegas and a set of brand name golf clubs. Contests would immediately be pushed out and shared by golf lovers and enthusiasts from one personal contact to another. The advantage of our SPRIZA™ platform is that each contestant in the winning referral chain is a winner and in this example goes on the trip and all share the experience together. We anticipate that this experience will be documented and distributed through social media to all the contestants that participated as a further means of advertising for our clients. We believe that seeing winning participants consume the incentive adds further validation and credibility to our SPRIZA™ platform and capabilities and allows our clients to further leverage their media assets. We plan to earn upfront fees from the brands for the campaign, online advertising fees and additional affiliate revenue by promoting “after-campaign” deals and incentives to this group throughout the year.
Regardless if we are running a contest for a national brand throughout North America or a local merchant within a single city, they all must strictly adhere to the rules, regulatory and compliance specified by the government and governing bodies in each jurisdiction. Age, eligibility, terms and conditions, bonding, insurance and many other finite details are part of our core competencies and our commitment when delivering campaigns to our clients. We anticipate SPRIZA™ evolving to include a campaign creation toolbox that allows for dynamic contest creation, where an agency, brand manager or our employee can map out a campaign quickly with proper terms conditions, contracts, approval sign off and a compliance checklist.
Competition
The digital and mobile technology business is highly fragmented and extremely competitive and subject to rapid change. The market for customers is intensely competitive and such competition is expected to continue to increase. We believe that our ability to compete depends upon many factors within and beyond our control, including the timing and market acceptance of new solutions and enhancements to existing businesses developed by us, our competitors, and their advisers. SPRIZA™ is an online contest platform that utilizes digital media and technology to distribute and feature local and national branded promotional campaigns. Many consumers maintain simultaneous relationships with multiple digital brands and products and can easily shift consumption from one provider to another.
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Our competitors are in segments such as the following:
Our SPRIZA™ contest platform is both promotional “Promotional Platform” and social “Social Platform”.
Our principal competitors, when comparing “Promotional Platforms” are: Wildfire by Google, Strutta, Prizelogic, HelloWorld (formerly ePrize), and Prizeo. Our SPRIZA™ contest platform differs, in most part, from these competitors by seamlessly integrating our promotion platform and the social experience into a channel that can provide both the brand/cause experience to drive engagement and link that activity directly to online and offline commerce. Through our SPRIZA™ platform, we build a referral network of like-minded consumers who actively participate with the brands they love and it allows us to retarget and entertain our subscribers based on their specific preferences and activity.
Our principal competitors, when comparing “Social Platforms” are: Pinterest, Twitter, Facebook, WhatsApp and Groupon. Our SPRIZA™ contest platform differs, in most part, from these competitors by not only building a large subscriber base but establishing a unique referral network that has the means to engage, reward, remarket and incentivize its user base to foster new connections and ongoing commerce activity.
In addition, new competitors may be able to launch new businesses at relatively low cost. In addition, either existing or new competitors may develop new technologies, and our existing and potential customers may shift their mass branding campaigns to these new technologies. Therefore, we cannot be sure that we will be able to successfully implement our business strategy in the face of such competition.
Business goals and milestones
We have completed or advanced, over the past few months, the following business goals and milestones:
we contracted a San Francisco consulting firm with development capabilities in the Philippines to develop SPRIZA™. We have completed this project and launched our site on March 18, 2014. This new version includes: contest portal, contest profiles, contest functionality, contest subscriber ability, subscriber portal, subscriber account setup and profiles, user functionality, and sharing capabilities database architecture, with querying, reporting and analytics. During the year ended December 31, 2013 we spent $227,596 on this project and have allocated the cost to intellectual property; we are working on: mobile device support, do-it-yourself platform and tools;
Business strategy
Secure Necessary Funds
We have approximately $450,000 in cash at March 31, 2014 and may require further capital to achieve our 2014 operating plan.
Drive client growth and revenue through contest campaigns
To drive client growth, we plan to expand the number of ways in which subscribers can discover contests through our marketplace. As revenue is recognized we plan to continue investments into our sales force and partnership networks to further client relationships and acquire local expertise. Retention will be focused on providing our clients with a positive campaign experience and offering targeted placement of their contest campaigns to our subscribers, tools to manage these campaigns more effectively and superior customer service. Current efforts are focused on developing a sponsorship campaign that is centered on the 18-25 year old demographic offering four year college tuitions as the contest incentive. We are also in negotiations with Fortune 500 companies to run online contests. The sponsorship fees associated with a contest driven advertising campaign of this size is estimated at $1.5 million with 70% of this amount to be campaign costs, and 30% would be our profit. Additionally, securing contracts directly with brands and established advertising agencies will be necessary to achieve desired growth. We are establishing the go-to-market strategy and digital marketing initiatives essential to engage with prospective clients to secure contracts and achieve this milestone.
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Drive the growth of our subscriber base
We plan to invest significant effort to acquire subscribers through online marketing initiatives. Our goal will be to retain existing and acquire new subscribers by providing preference driven and targeted contests, quality subscriber service and expanding the number of contest offerings through both local and national brands. Activity has commenced on the development and release of our digital marketing strategy to encourage subscriber sign up and generate brand participation.
Expand affiliate and business development partnerships
We intend to establish an online reseller network of commissioned agents and strategic partners. We hope to sign partnership agreements with online companies such as Google, Microsoft, Yahoo and Facebook. These intended partners could display, promote and distribute our contests to their users in exchange for a share of the revenue generated from our campaigns. We currently have no such agreements or arrangements with Google, Microsoft, Yahoo or Facebook. We intend to maintain ongoing efforts to expand our business with strategic affiliates and business development partnerships.
Increase our product offering through innovation
We intend to develop new versions and product releases to increase the number of subscribers and clients that transact business through our SPRIZA™ online contest marketing platform. We believe our network of subscribers will be a focal point for companies to promote their brands and showcase all of their contests. Expansion from an online presence into all mobile, tablet and operating systems is an essential innovation for us.
Establish our presence in the marketplace as the leading Online Contesting Platform
All efforts will be made to firmly establish us as the leader in the delivery, fulfillment and distribution of brand driven online contests to a subscriber base. In addition to the traditional and digital marketing efforts it is not uncommon for these efforts to be supported by viral sharing and word of mouth marketing that is prevalent with many online subscriber based communities. This behavior is often encouraged through referral or loyalty incentives.
Research and Development
On May 15, 2013 we contracted a San Francisco consulting firm with technology development capabilities in the Philippines to complete the redevelopment of our technology platform. On December 1, 2013 we completed SPRIZA™ and on March 18, 2014 unveiled it to the public with real-time contests being run. During the year ended December 31, 2013 we spent $227,596 on completion of this project and have allocated the cost to intellectual property.
Segment Information
We have one operating segment: contest marketing; and one geographic segment: North America.
Regulation
We are subject to the laws and regulations of those jurisdictions in which we conduct client contests, which are generally applicable to business operations, such as business licensing requirements, income taxes and payroll taxes. In general, conducting client contests in the United States, Canada, and other jurisdictions are subject to certain regulatory and/or supervisory requirements. Certain jurisdictions within the United States and Canada require registration of the client contests, bonding, insurance and secondary language inclusion. These do not apply to all jurisdictions and in most cases only one or none of the above is mandatory. As an example, Rhode Island asks that if our client has a local presence it must register the contest; New York and Florida require bonding and registration, and Quebec, Canada requires registration, bonding and the inclusion of the French language.
We are also subject to a number of foreign and domestic laws and regulations that affect companies conducting business on the Internet. As a company in a new and rapidly innovating industry, we are exposed to the risk that many of these laws may evolve or be interpreted by regulators or in the courts in ways that could materially affect our business. These laws and regulations may involve taxation, unclaimed property, intellectual property, product liability, travel, distribution, electronic contracts and other communications, competition, consumer protection, the provision of various online payments and point of sale services, employee, merchant and customer privacy and data security or other areas.
Seasonality
Our business is not a seasonal business.
Employees
As of March 31, 2014, we had 14 employees including 2 contractors and 4 directors.
Available Information
We electronically file reports with the SEC. The public may read and copy any materials we have filed with the SEC at the SEC's Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an Internet site (www.sec.gov) that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. Copies of our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are also available free of charge through our website (www.spriza.com), as soon as reasonably practicable after electronically filing with or otherwise furnishing such information to the SEC, and are available in print to any stockholder who requests it. The Company's Code of Conduct, Corporate Governance Guidelines and committee charters are also posted on the site.
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ITEM 1A. RISK FACTORS
An investment in our common stock involves a high degree of risk. You should carefully consider the following risks, as well as the other information contained in this Form 10-K, before investing. If any of the following risks actually occurs, our business, business prospects, financial condition, cash flow and results of operations could be materially and adversely affected. In this case, the trading price of our common stock could decline, and you might lose part or all of your investment. We may amend or supplement the risk factors described below from time to time by other reports we file with the SEC in the future.
Risks Related to Our Company
If we do not obtain additional financing, our business expansion plans will be delayed and we may not achieve profitable operations.
We will require additional capital to achieve our 2014 operating plan. We intend to seek additional funds through private placements of our common stock or other securities. Our business plan calls for incurring ongoing expenses in staff, administration and marketing. If no additional financing is secured, we may have to significantly curtail our 2014 operating plan. If that is the case, our business will not grow as desired. Our ability to raise additional financing is unknown. We do not have any formal commitments or arrangements for the advancement of funds. Consequently, there can be no assurance that we will be able to obtain continued access to capital as and when needed or, if so, that the terms of any available financing will be subject to commercially, reasonable terms. If we are unable to raise suitable financing, our business expansion plans may be delayed and we may be unable to achieve profitable operations.
Since we have a limited operating history and insignificant revenues to date, we may be unable to achieve or maintain profitability. The likelihood of our success must be considered in light of the problems, expenses, difficulties, complications and delays frequently encountered by an emerging growth company.
We have limited financial resources and limited revenues to date. The likelihood of our success must be considered in light of the problems, expenses, difficulties, complications and delays frequently encountered by an emerging growth company starting a new business enterprise and the highly competitive environment in which we will operate. Since we have a limited operating history, we cannot assure you that our business will be profitable or that we will ever generate sufficient revenues to fully meet our expenses and totally support our anticipated activities.
Our ability to continue as a business and implement our business plan will depend on our ability to raise sufficient funds. There is no assurance that any debt or equity offerings will be successful or that we will remain in business or be able to implement our business plan if the offerings are not successful.
Since there is substantial doubt as to our ability to continue as a going concern, as noted in L.L. Bradford & Company, LLC’s opinion for the year ended December 31, 2013, it may be difficult for us to effectuate our business plan.
We have incurred losses since our inception on September 17, 2012 totaling $605,606 and we have not yet been successful in establishing profitable operations. Our financial statements have been prepared on a going concern basis. Unanticipated costs and expenses, or the inability to generate revenues, could require additional financing; which would be sought through the issuance of equity or debt instruments. The fact that there are going concern considerations may make raising additional funds or obtaining loans more difficult. To the extent financing is not available, we may not be able to, or may be delayed in, implementing our business plan or meeting our obligations. This could result in the entire loss of any investment in shares of our common stock. We will continue to evaluate our projected expenditures relative to our available cash and to evaluate additional means of financing in order to satisfy our working capital and other cash requirements. Details regarding these concerns are included in Note 3 to the financial statements included in this Report.
Risks Related to Our Business
If we are unable to successfully market our products or our products do not perform as expected, our business and financial condition will be adversely affected.
We are subject to the risks generally associated with new product introductions and applications, including lack of market acceptance, delays in commercial implementation, and failure of products to perform as expected. In order to introduce and market new or enhanced products successfully with minimal disruption in customer purchasing patterns, we must manage the transition from existing products in the market. There can be no assurance that we will be successful in developing and marketing, on a timely basis, product enhancements or products that respond to technological advances by others, that our new products will adequately address the changing needs of the market or that we will successfully manage product transitions. Further, failure to generate sufficient cash from operations or financing activities to develop or obtain improved products and technologies could have a material adverse effect on our results of operations and financial condition.
Because of pressures from competitors with more resources, we may fail to implement our business strategy profitably.
The digital and mobile technology business is highly fragmented and extremely competitive and subject to rapid change. The market for customers is intensely competitive and such competition is expected to continue to increase. We believe that our ability to compete depends upon many factors within and beyond our control, including the timing and market acceptance of new solutions and enhancements to existing businesses developed by us, our competitors, and their advisers. SPRIZA™ is an online contest platform that utilizes digital media and technology to distribute and feature local and national branded promotional campaigns. Many consumers maintain simultaneous relationships with multiple digital brands and products and can easily shift consumption from one provider to another. Our principal competitors are in segments such as the following:
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In addition, new competitors may be able to launch new businesses at relatively low cost. In addition, either existing or new competitors may develop new technologies, and our existing and potential customers may shift their mass branding campaigns to these new technologies. Therefore, we cannot be sure that we will be able to successfully implement our business strategy in the face of such competition.
If our product does not achieve market acceptance, we may not have sufficient financial resources to fund our operations or further development.
While we believe that a viable market exists for our products, there can be no assurance that our SPRIZA™ technology will prove to be an attractive alternative to conventional or competitive products in the markets that we have identified for exploitation. In the event that a viable market for our products cannot be created as envisaged by our business strategy or our products do not achieve market acceptance, we may need to commit greater resources than are currently available to develop a commercially viable and competitive product. There can be no assurance that we would have sufficient financial resources to fund such development or that such development would be successful. In addition, if our product does not generate sufficient revenues, or we are unable to raise additional capital, we may be unable to fund our operations. Our ability to raise additional funds will depend on financial, economic and other factors, many of which are beyond our control. There can be no assurance that, when required, sufficient funds will be available to us on satisfactory terms.
Our business will suffer if our network systems fail or become unavailable.
A reduction in the performance, reliability and availability of our network infrastructure would harm our ability to distribute our products to our users, as well as our reputation and ability to attract and retain customers. Our systems and operations could be damaged or interrupted by fire, flood, power loss, telecommunications failure, Internet breakdown, earthquake and similar events. Our systems could also be subject to viruses, break-ins, sabotage, acts of terrorism, acts of vandalism, hacking, cyber-terrorism and similar misconduct. We might not carry adequate business interruption insurance to compensate us for losses that may occur from a system outage. Any system error or failure that causes interruption in availability of our product or an increase in response time could result in a loss of potential customers, which could have a material adverse effect on our business, financial condition and results of operations. If we suffer sustained or repeated interruptions, then our products and services could be less attractive to our users and our business would be materially harmed.
If our clients do not meet the needs and expectations of our subscribers, our business could suffer.
Our business depends on our reputation for providing high-quality contests, and our brand and reputation may be harmed by actions taken by clients that are outside our control. Any perceived shortcomings of one or more of our clients, particularly with respect to an issue affecting the quality of the prize offered or the products or services sold, may be attributed by our subscribers to us, thus damaging our reputation, brand value and potentially affecting our results of operations. In addition, negative publicity and subscriber sentiment generated as a result of fraudulent or deceptive conduct by our clients could damage our reputation, reduce our ability to attract new subscribers or retain our current subscribers, and diminish the value of our brand.
We plan on continually making efforts to improve our systems to identify suspicious activity, detect fraud and improve our defenses. However, if fraudulent or other malicious activity is perpetrated, and we are unable to detect and prevent it, the affected customers’ campaigns may experience or perceive a reduced return on their investment. This may lead to high levels of dissatisfaction with our advertising services, refusals to pay, refund demands or withdrawal of future business.
If fraudulent or other malicious activity occurs, and we are unable to detect and prevent it, we could also experience increased costs relating to remuneration or losses as a result of these activities. Any of these occurrences could damage our brand and lead to a loss of customers and revenue and increased costs.
We may be unable to protect our intellectual property rights from third-party claims and litigation, which could be expensive, divert management's attention, and harm our business.
Our success is dependent in part on obtaining, maintaining and enforcing our proprietary rights and our ability to avoid infringing on the proprietary rights of others.
We seek patent protection for those inventions and technologies for which we believe such protection is suitable and is likely to provide a competitive advantage to us. Because patent applications in the United States are maintained in secrecy until either the patent application is published or a patent is issued, we may not be aware of third-party patents, patent applications and other intellectual property relevant to our products that may block our use of our intellectual property or may be used in third-party products that compete with our products and processes. In the event a competitor or other party successfully challenges our products, processes, patents or licenses or claims that we have infringed upon their intellectual property, we could incur substantial litigation costs defending against such claims, be required to pay royalties, license fees or other damages or be barred from using the intellectual property at issue, any of which could have a material adverse effect on our business, operating results and financial condition.
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We also rely substantially on trade secrets, proprietary technology, nondisclosure and other contractual agreements, and technical measures to protect our technology, application, design, and manufacturing know-how, and work actively to foster continuing technological innovation to maintain and protect our competitive position. We cannot assure you that steps taken by us to protect our intellectual property and other contractual agreements for our business will be adequate, that our competitors will not independently develop or patent substantially equivalent or superior technologies or be able to design around patents that we may receive, or that our intellectual property will not be misappropriated.
If we are unable to manage growth, our operations could be adversely affected.
Our progress is expected to require the full utilization of our management, financial and other resources, which to date has occurred with limited working capital. Our ability to manage growth effectively will depend on our ability to improve and expand operations, including our financial and management information systems, and to recruit, train and manage sales personnel. There can be no absolute assurance that management will be able to manage growth effectively.
If we do not properly manage the growth of our business, we may experience significant strains on our management and operations and disruptions in our business. Various risks arise when companies and industries grow quickly. If our business or industry grows too quickly, our ability to meet customer demand in a timely and efficient manner could be challenged. We may also experience development delays as we seek to meet increased demand for our products. Our failure to properly manage the growth that we or our industry might experience could negatively impact our ability to execute on our operating plan and, accordingly, could have an adverse impact on our business, our cash flow and results of operations, and our reputation with our current or potential customers.
We are an “emerging growth company” and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors.
We are an “emerging growth company,” as defined in the Jumpstart our Business Startups Act of 2012, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We cannot predict if investors will find our common stock less attractive because we will rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.
Under the Jumpstart Our Business Startups Act, “emerging growth companies” can delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have irrevocably elected not to avail ourselves to this exemption from new or revised accounting standards and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not “emerging growth companies.”
Because we are subject to additional regulatory compliance requirements as a result of becoming a public company, which includes Section 404 of the Sarbanes-Oxley Act of 2002, and our management has limited experience managing a public company, the failure to comply with these regulatory requirements could harm our business.
Our management and outside professionals will need to devote a substantial amount of time to new compliance initiatives and to meeting the obligations that are associated with being a public company and we may not successfully or efficiently manage this transition. Christopher Robbins, our Chief Financial Officer, joined us on October 25, 2013. We will also rely on legal counsel and accounting professionals to help with our future SEC reporting requirements. This will likely divert needed capital resources away from the objectives of implementing our business plan. These expenses could be more costly than we are able to bear and could result in us not being able to successfully implement our business plan.
We expect rules and regulations such as the Sarbanes-Oxley Act of 2002 to increase our legal and accounting compliance costs and make some activities more time-consuming than in the past. We may need to hire a number of additional employees with public accounting and disclosure experience in order to meet our ongoing obligations as a public company.
As a smaller reporting company, our management will be required to provide a report on the effectiveness of our internal controls over financial reporting, but will not be required to provide an auditor’s attestation regarding such report and management’s report need not be provided until our second annual report. Section 404 compliance efforts may divert internal resources and will take a significant amount of time and effort to complete. We may not be able to successfully complete the procedures and certification of Section 404 by the time we will be required to do so. If we fail to do so, or if in the future our management determines that our internal control over financial reporting is not effective, we could be subject to sanctions or investigations by the SEC or other regulatory authorities. Furthermore, investor perceptions of our company may suffer, and this could cause a decline in the market price of our stock. Furthermore, whether or not we comply with Section 404, any failure of our internal control over financial reporting could have a material adverse effect on our stated results of operations and harm our reputation. If we are unable to implement necessary procedures or changes effectively or efficiently, it could harm our operations, financial reporting or financial results.
Compensation may be paid to our officers, directors and employees regardless of our profitability, which may limit our ability to finance our business plan and adversely affect our business.
Rob Danard, our Chief Executive Officer, will be receiving compensation and any other current or future employees of our company may be entitled to receive compensation, payments and reimbursements regardless of whether we operate at a profit or a loss. Any compensation received by Mr. Danard or any other executive in the future will be determined from time to time by the board of directors. Such obligations may negatively affect our cash flow and our ability to finance our business plan, which could cause our business to fail.
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Our business and growth may suffer if we are unable to attract and retain key employees.
Our success depends on the expertise and continued service of our Chief Executive Officer, Robert Danard and certain other key technical personnel. These individuals are a significant factor in our growth and ability to meet our business objectives. It may be difficult to find a sufficiently qualified individual to replace Mr. Danard or other key technical personnel in the event of death, disability or resignation, resulting in our being unable to implement our business plan and even a complete cessation of our operations, which would likely result in the total loss of an investor's investment
Furthermore, our ability to expand operations to accommodate our anticipated growth will also depend on our ability to attract and retain qualified media, management, finance, marketing, sales and technical personnel. However, competition for these types of employees is intense due to the limited number of qualified professionals. Our ability to meet our business development objectives will depend in part on our ability to recruit, train and retain top quality people with advanced skills who understand our technology and business. We hope that we will be able to attract competent employees, but no assurance can be given that we will be successful in this regard. If we are unable to engage and retain the necessary personnel, our business may be materially and adversely affected.
Risks Related to Our Common Stock
Penny Stock” rules may make buying or selling our securities difficult.
Trading in our securities is subject to the SEC’s “penny stock” rules and it is anticipated that trading in our securities will continue to be subject to the penny stock rules for the foreseeable future. The SEC has adopted regulations that generally define a penny stock to be any equity security that has a market price of less than $5.00 per share, subject to certain exceptions. These rules require that any broker-dealer who recommends our securities to persons other than prior customers and accredited investors must, prior to the sale, make a special written suitability determination for the purchaser and receive the purchaser’s written agreement to execute the transaction. Unless an exception is available, the regulations require the delivery, prior to any transaction involving a penny stock, of a disclosure schedule explaining the penny stock market and the risks associated with trading in the penny stock market. In addition, broker-dealers must disclose commissions payable to both the broker-dealer and the registered representative and current quotations for the securities they offer. The additional burdens imposed upon broker-dealers by such requirements may discourage broker-dealers from recommending transactions in our securities, which could limit the liquidity and adversely affect the market price for our common stock.
Our securities are traded on the Pink OTC Markets as a QB issuer, which may not provide us much liquidity for our investors as national securities exchanges such as the NYSE MKT and NASDAQ.
Our securities are quoted on the Pink OTC Markets under the QB tier (“the OTC markets”). The OTC markets are inter-dealer, over-the-counter markets that provide significantly less liquidity than the NASDAQ Stock Market or other national securities exchanges. Securities traded on these OTC markets are usually thinly traded, highly volatile, have fewer market makers and tend not to be followed by analysts. The SEC’s order handling rules, which apply to NASDAQ-listed securities, do not apply to securities quoted on the OTC markets. Quotes for stocks included on the OTC markets are not listed in newspapers. Therefore, prices for securities traded solely on the OTC markets may be difficult to obtain and holders of our securities may be unable to resell their securities at or near their original acquisition price, or at any price.
A sale of a substantial number of shares of our common stock may cause the price of our common stock to decline.
If our stockholders sell substantial amounts of our common stock in the public market, the market price of our common stock could fall.
Any future equity or debt issuances by us may have dilutive or adverse effects on our existing shareholders.
We may issue additional shares of common due to warrants or options being exercised that could dilute your ownership in our company. Moreover, any issuances by us of equity securities may be at or below the prevailing market price of our common stock and in any event may have a dilutive impact on our shareholders, which could cause the market price of our common stock to decline.
We have not paid dividends in the past and do not expect to pay dividends in the future. Any returns on investment may be limited to the value of our common stock.
We have never paid cash dividends on our common stock and do not anticipate paying cash dividends in the foreseeable future. The payment of dividends on our common stock will depend on earnings, financial condition and other business and economic factors affecting us. If we do not pay dividends, our common stock may be less valuable.
Our stock price is volatile and you may not be able to sell your shares for more than what you paid.
Our stock price has been subject to significant volatility, and you may not be able to sell shares of common stock at or above the price you paid for them. The trading price of our common stock has been subject to fluctuations in the past. During the year ended December 31, 2013, our common stock traded at prices as low as $0.25 per share and as high as $0.75 per share.
The market price of the common stock could continue to fluctuate in the future in response to various factors, including, but not limited to:
11
The stock market in general has continued to experience volatility which may further affect our stock price.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
Our principal executive offices are located at 111 Penn Street, El Segundo, CA 90245. We lease these facilities on a month-to-month basis at a cost of $252 per month. We also have a Canadian office located at Ste. 202 1107 17th Ave SW, Calgary, Alberta, Canada T2T 0B5. We lease these facilities at a cost of $3,000 per month. We believe these facilities are suitable for our current needs. We housed 5 technical developers in Manila, Philippines; the lease space came at a cost of $1000 per month, which was inclusive in our contract that concluded January 2014.
ITEM 3. LEGAL PROCEEDINGS
In the ordinary course of business, we may be involved in legal proceedings from time to time. As of the date hereof, except as set forth herein, there are no known legal proceedings against the Company. No governmental agency has instituted proceedings, served, or threatened us with any complaints.
ITEM 4. MINE SAFETY DISCLOSURE
Not Applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Prior to November 4, 2013, there was no public trading market for our securities. On November 4, 2013, our common stock was quoted under the symbol “SPRZ” on the OTC BB operated by FINRA.
The following table sets forth the range of high and low bid prices for our common stock for each applicable quarterly period. The table reflects inter-dealer prices without retail mark-up, mark-down or commissions and may not represent actual transactions.
Fiscal Year Ended December 31, 2013:
Low($) | High($) | |
First Quarter | nil | nil |
Second Quarter | nil | nil |
Third Quarter | nil | nil |
Fourth Quarter | $0.25 | $0.75 |
The closing price of our common stock on the OTC BB on March 28, 2014 was $0.75 per share.
The shares quoted are subject to the provisions of Section 15(g) and Rule 15g-9 of the Securities Exchange Act of 1934, as amended (the Exchange Act"), commonly referred to as the "penny stock" rule.
The SEC generally defines penny stock to be any equity security that has a market price less than $5.00 per share, subject to certain exceptions.
For transactions covered by these rules, broker-dealers must make a special suitability determination for the purchase of such securities and must have received the purchaser's written consent to the transaction prior to the purchase. Additionally, for any transaction involving a penny stock, unless exempt, the rules require the delivery, prior to the first transaction, of a risk disclosure document relating to the penny stock market. A broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered representative, and current quotations for the securities. Finally, the monthly statements must be sent disclosing recent price information for the penny stocks held in the account and information on the limited market in penny stocks. Consequently, these rules may restrict the ability of broker dealers to trade and/or maintain a market in the company’s common stock and may affect the ability of shareholders to sell their shares.
Number of Shareholders
As of March 31, 2014 there were 67,483,277 shares of our common stock issued and outstanding and approximately 70 shareholders. The transfer agent of our common stock is Empire Stock Transfer Inc. 1859 Whitney Mesa Drive, Henderson, NV 89014.
Dividends
We have never paid cash dividends or distributions to our equity owners. We do not expect to pay cash dividends on our common stock, but instead, intend to utilize available cash to support the development and expansion of our business. Any future determination relating to our dividend policy will be made at the discretion of our Board of Directors and will depend on a number of factors, including but not limited to, future operating results, capital requirements, financial condition and the terms of any credit facility or other financing arrangements we may obtain or enter into, future prospects and in other factors our Board of Directors may deem relevant at the time such payment is considered. There is no assurance that we will be able or will desire to pay dividends in the near future or, if dividends are paid, in what amount.
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Stock Repurchases
There were no shares repurchased during the year ended December 31, 2013.
Securities Issued in Unregistered Transactions
During the quarter ended December 31, 2013, we issued the following securities in unregistered transactions:
On November 1, 2013 we issued a total 749,093 common shares to two foreign accredited investors for gross proceeds of $224,728 pursuant to the exercise of warrants at $0.30 per share. We relied upon Rule 506 of Regulation D and/or Regulation S of the Securities Act as these securities were issued to foreign investors who are “accredited investors,” as such term is defined in Rule 501(a) under the Securities Act in offshore transactions (as defined in Rule 902 under Regulation S of the Securities Act), based upon representation made by such investors.
On November 1, 2013 we issued 1,500,201 units (each a “Unit”) to seven foreign accredited investors for gross proceeds of $225,030 pursuant to our $0.15 Unit non-brokered private placement which closed October 31, 2013. Each Unit contained one common share and one common share purchase warrant to acquire an additional share at $0.30 per share expiring November 1, 2016. We relied upon Rule 506 of Regulation D and/or Regulation S of the Securities Act as these securities were issued to foreign investors who are “accredited investors,” as such term is defined in Rule 501(a) under the Securities Act in offshore transactions (as defined in Rule 902 under Regulation S of the Securities Act), based upon representation made by such investors.
Subsequent Sales of Unregistered Securities
Subsequent to December 31, 2013, we issued the following securities in unregistered transactions:
On February 5, 2014 we issued 992,800 Units at $0.25 per Unit to 9 foreign accredited investors for gross proceeds of $248,200 pursuant to our $0.25 Unit non-brokered private placement. We relied upon Rule 506 of Regulation D and/or Regulation S of the Securities Act as these securities were issued to foreign investors who are “accredited investors,” as such term is defined in Rule 501(a) under the Securities Act in offshore transactions (as defined in Rule 902 under Regulation S of the Securities Act), based upon representation made by such investors.
On March 10, 2014 we issued 548,000 Units at $0.25 per Unit to 4 foreign accredited investors for further gross proceeds of $137,000 pursuant to our $0.25 Unit non-brokered private placement. This offering closed March 15, 2014.We relied upon Rule 506 of Regulation D and/or Regulation S of the Securities Act as these securities were issued to foreign investors who are “accredited investors,” as such term is defined in Rule 501(a) under the Securities Act in offshore transactions (as defined in Rule 902 under Regulation S of the Securities Act), based upon representation made by such investors.
ITEM 6. SELECTED FINANCIAL DATA
Not applicable.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR RESULTS OF OPERATIONS
The discussion that follows is derived from our audited balance sheets as of December 31, 2013 and 2012 and the audited statements of operations and cash flows for the year ended December 31, 2013 (“2013”) and the period from September 17, 2012 (Inception) to December 31, 2012 (“2012”).
Results of Operations for the year ended December 31, 2013 and the period from September 17, 2012 (Inception) to December 31, 2012
The net loss for 2013 increased by $464,457 to $484,398 (2012 - $19,941). This increase was due to a full twelve months of operations and development during 2013 as compared to incurring only professional fees to organize our company and obtain a public listing.
During 2013 we generated $7,000 in revenues (2012 - $nil). We expect to generate significant revenues during fiscal 2014.
During 2013 we incurred $482,421 in operating expenses (2012 - $19,941). During 2013 operating expenses consisted of: $79,479 (2012 - $nil) of stock-based compensation due to implementing our 2013 Incentive Award Plan; $180,424 (2012 - $nil) in consulting fees and salaries including $69,831 (2012 - $nil) paid to our Chief Executive Officer; $37,745 (2012 - $nil) in branding and marketing; $22,974 (2012 - $770) in regulatory fees including DTC eligibility costs, $89,709 (2012 - $17,823) in professional fees including legal and audit, $43,262 (2012 - $593) in travel and $22,321 (2012 - $755) in office expenses. We incurred $6,507 (2012 - $nil) in depreciation and amortization of property and equipment ($4,271) and intangible assets ($2,236). We expect that operating expenses will increase as we are able to raise capital and further business operations.
During 2013 we accrued $8,977 of interest payable on $395,000 of short-term loans. On September 6, 2013 short-term loans, plus accrued interest of $8,977, were converted into 2,693,183 Units at $0.15 per Unit. Each unit contained one common share and one common share purchase warrant exercisable at $0.30 for a three year period. We do not expect to incur interest expense in the future.
LIQUIDITY AND CAPITAL RESOURCES
As at December 31, 2013, working capital was $451,205. Our cash on hand was $493,539.
During 2013 we increased our cash position by $491,099 to $493,539 (2012 - $2,440). Subsequent to December 31, 2013, we received a further $182,700 pursuant to our $0.25 Unit offering.
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The following table sets forth the major sources and uses of cash for our last two fiscal years ended December 31, 2013 and 2012:
2013 $ |
2012 $ |
|||||
Net cash used in operating activities | (350,881 | ) | (16,160 | ) | ||
Net cash used in investing activities | (290,278 | ) | - | |||
Net cash provided by financing activities | 1,132,258 | 18,600 | ||||
Net increase (decrease) in cash | 491,099 | 2,440 |
Cash Used in Operating Activities
During 2013 operating activities used $350,881 in cash (2012 - $16,160). Use of cash was primarily attributable to funding the net loss of $484,398 offset by a non-cash charge of $6,507 (2012 - $nil) for depreciation and amortization and a non-cash charge of $79,479 for stock-based compensation. Our suppliers financed $47,531 of the net loss.
Cash Used in Investing Activities
During 2013 we used $290,278 (2012 - $nil) in investing activities. On May 15, 2013 we contracted a San Francisco consulting firm with development capabilities in the Philippines to develop SPRIZA™. On December 1, 2013 we completed the SPRIZA™ technology and on March 18, 2014 SPRIZA™ was unveiled to the public with real-time contests being run. Our SPRIZA™ contest marketing platform includes: subscriber portal, mobile device support, do-it-yourself platform and tools allowing us to develop a database of concurrent customers and users. During 2013 we spent $232,846 on completion of this project and have allocated the cost to intellectual property. We spent $44,711 on our corporate and contest website and $8,811 on trademarks. We also spent $3,910 on office furniture and computers.
Cash from Financing Activities
During 2013 financing activities provided $1,132,258 in cash consisting of:
Subsequent to December 31, 2013 we received an additional $182,700 towards our $0.25 per Unit non-brokered private placement and, together with $202,500 received as at December 31, 2013, we issued a total of 1,540,800 Units at $0.25 per Unit.
Need for Additional Capital
We have approximately $450,000 in cash at March 31, 2014 and may require further capital to achieve our 2014 operating plan.
OFF BALANCE-SHEET ARRANGEMENTS
We have not had, and at December 31, 2013, do not have, any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our discussion and analysis of our financial condition and results of operations are based upon our financial statements that have been prepared in accordance with generally accepted accounting principles in the United States of America ("US GAAP"). This preparation requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities. US GAAP provides the framework from which to make these estimates, assumption and disclosures. We choose accounting policies within US GAAP that management believes are appropriate to accurately and fairly report our operating results and financial position in a consistent manner. Management regularly assesses these policies in light of current and forecasted economic conditions. In December 2001, the SEC requested that all registrants list their most “critical accounting polices” in the Management’s Discussion and Analysis. The SEC indicated that a “critical accounting policy” is one which is both important to the portrayal of a company’s financial condition and results, and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.
Intangible Assets
Intangible assets are comprised primarily of the cost of trademarks and intellectual property. We evaluate our trademarks annually for impairment or earlier if there is an indication of impairment. If there is an indication of impairment of identified intangible assets not subject to amortization, we compare the estimated fair value with the carrying amount of the asset. An impairment loss is recognized to write-down the intangible asset to its fair value if it is less than the carrying amount. The fair value is calculated using the income approach. However, preparation of estimated expected future cash flows is inherently subjective and is based on our best estimate of assumptions concerning expected future conditions. Based on our impairment analysis performed for the year ended December 31, 2013 and the period from September 17, 2012 (Inception) to December 31, 2012, the estimated fair values of trademarks and other intangible assets exceeded their respective carrying values. Amortization is computed on a straight-line basis over the estimated useful lives of the assets which are estimated to be five years.
14
Stock-based Compensation
We account for stock-based payments to employees in accordance with ASC 718, “Stock Compensation” (“ASC 718”). Stock-based payments to employees include grants of stock, grants of stock options and issuance of warrants that are recognized in the statement of operations based on their fair values at the date of grant.
We account for stock-based payments to non-employees in accordance with ASC 718 and Topic 505-50, “Equity-Based Payments to Non-Employees.” Stock-based payments to non-employees include grants of stock, grants of stock options and issuances of warrants that are recognized in the consolidated statement of operations based on the value of the vested portion of the award over the requisite service period as measured at its then-current fair value as of each financial reporting date.
We calculate the fair value of option grants and warrant issuances utilizing the Black-Scholes pricing model. The amount of stock-based compensation recognized during a period is based on the value of the portion of the awards that are ultimately expected to vest. ASC 718 requires forfeitures to be estimated at the time stock options are granted and warrants are issued to employees and non-employees, and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The term “forfeitures” is distinct from “cancellations” or “expirations” and represents only the unvested portion of the surrendered stock option or warrant. We estimate forfeiture rates for all unvested awards when calculating the expense for the period. In estimating the forfeiture rate, we monitor both stock option and warrant exercises as well as employee termination patterns.
The resulting stock-based compensation expense for both employee and non-employee awards is generally recognized on a straight-line basis over the requisite service period of the award.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
There have been no recently issued Accounting Pronouncements that impact us.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
15
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of
Directors and
Stockholders of Spriza, Inc. (formerly Level20 Inc.)
(A Development
Stage Company)
We have audited the accompanying balance sheets of Spriza, Inc. (formerly Level20 Inc.) (A Development Stage Company) (the “Company”) as of December 31, 2013 and 2012, and the related statements of operations, stockholders’ equity, and cash flows for the year ended December 31, 2013 and the period from September 17, 2012 (Inception) to December 31, 2012 and the period from September 17, 2012 (Inception) to December 31, 2013. The Company’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits of the financial statements include examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2013 and 2012, and the results of its operations, stockholders’ equity, and cash flows for the year ended December 31, 2013 and the period from September 17, 2012 (Inception) to December 31, 2012 and the period from September 17, 2012 (Inception) to December 31, 2013 in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company has suffered recurring losses and had negative cash flows from operations that raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ L.L. Bradford & Company, LLC
L.L. Bradford & Company, LLC
Las
Vegas, Nevada
March 31, 2014
16
Spriza,
Inc. (formerly Level20 Inc.)
(A
Development Stage Company)
Balance
Sheets
December 31, 2013 $ |
December 31, 2012 $ |
|||||
ASSETS | ||||||
Current Assets | ||||||
Cash | 493,539 | 2,440 | ||||
Total Current Assets | 493,539 | 2,440 | ||||
Property and equipment, net of accumulated depreciation of $4,271 (Note 4) | 24,638 | 24,999 | ||||
Other assets | ||||||
Intangible assets, net of accumulated amortization of $2,236 (Note 4) | 284,132 | 1 | ||||
Total Other Assets | 284,132 | 1 | ||||
Total Assets | 802,309 | 27,440 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||
Current Liabilities | ||||||
Accounts payable | 42,334 | 3,781 | ||||
Short-term debt (Note 5) | - | 15,000 | ||||
Total Current Liabilities | 42,334 | 18,781 | ||||
Contingencies (Note 3) | ||||||
Stockholders’ Equity | ||||||
Preferred Stock, 10,000,000 shares authorized, none issued | - | - | ||||
Common Stock, 190,000,000 shares authorized, $0.0001 par value 65,942,477 and 41,0000,000 issued and outstanding, respectively (Note 6) | 6,594 | 4,100 | ||||
Additional Paid in Capital | 1,257,720 | 24,500 | ||||
Deficit Accumulated During the Development Stage | (504,339 | ) | (19,941 | ) | ||
Total Stockholders’ Equity | 759,975 | 8,659 | ||||
Total Liabilities and Stockholders’ Equity | 802,309 | 27,440 |
(See Notes to Financial Statements)
17
Spriza,
Inc. (formerly Level20 Inc.)
(A
Development Stage Company)
Statements
of Operations
For the Year ended December 31, 2013 $ |
Period from September 17, 2012 (Date of Inception)
to December 31, 2012 $ |
Period from September 17, 2012 (Date of Inception)
to December 31, 2013 $ |
|||||||
Revenue | 7,000 | - | 7,000 | ||||||
Expenses | |||||||||
Branding and marketing | 37,745 | - | 37,745 | ||||||
Consulting | 97,588 | - | 97,588 | ||||||
Consulting – related party | 82,836 | - | 82,836 | ||||||
Depreciation and amortization | 6,507 | - | 6,507 | ||||||
Office | 22,321 | 755 | 23,076 | ||||||
Professional fees | 89,709 | 17,823 | 107,532 | ||||||
Regulatory fees | 22,974 | 770 | 23,744 | ||||||
Stock-based compensation | 79,479 | - | 79,479 | ||||||
Travel | 43,262 | 593 | 43,855 | ||||||
Total Operating Expenses | (482,421 | ) | (19,941 | ) | (502,362 | ) | |||
Net Loss before Other Expense | (475,421 | ) | - | (495,362 | ) | ||||
Other Expense | |||||||||
Interest expense | (8,977 | ) | - | (8,977 | ) | ||||
Net Loss | (484,398 | ) | (19,941 | ) | (504,339 | ) | |||
Net Loss Per Share – Basic and Diluted | - | - | - | ||||||
Weighted Average Shares Outstanding – Basic and Diluted | 53,300,000 | 27,734,000 |
(See Notes to Financial Statements)
18
Spriza,
Inc. (formerly Level20 Inc.)
(A
Development Stage Company)
Statements
of Cash Flows
For the Year Ended December 31, 2013 $ |
Period from September 17, 2012 (Date of Inception)
to December 31, 2012 $ |
Period from September 17, 2012 (Date of Inception)
to December 31, 2013 $ |
|||||||
Operating Activities | |||||||||
Net loss | (484,398 | ) | (19,941 | ) | (504,339 | ) | |||
Add back non-cash items: | |||||||||
Depreciation and amortization | 6,507 | - | 6,507 | ||||||
Stock-based compensation | 79,479 | - | 79,479 | ||||||
Changes in operating assets and liabilities: | |||||||||
Increase in accounts payable and accruals | 47,531 | 3,781 | 51,312 | ||||||
Net Cash Used in Operating Activities | (350,881 | ) | (16,160 | ) | (367,041 | ) | |||
Investing Activities | |||||||||
Acquisition of equipment | (3,910 | ) | - | (3,910 | ) | ||||
Acquisition of intangible assets | (286,368 | ) | - | (286,368 | ) | ||||
Net Cash Used in Investing Activities | (290,278 | ) | - | (290,278 | ) | ||||
Financing Activities | |||||||||
Short-term loan proceeds | 405,000 | 15,000 | 420,000 | ||||||
Repayment of short-term loans | (25,000 | ) | - | (25,000 | ) | ||||
Proceeds from common stock | 752,258 | 3,600 | 755,858 | ||||||
Net Cash Provided by Financing Activities | 1,132,258 | 18,600 | 1,150,858 | ||||||
Increase in Cash | 491,099 | 2,440 | 493,539 | ||||||
Cash - Beginning of Year | 2,440 | - | - | ||||||
Cash - End of Year | 493,539 | 2,440 | 493,539 | ||||||
Non-cash Financing and Investing Activities: | |||||||||
Short-term loans and interest settled for shares | 403,977 | - | 403,977 | ||||||
Acquisition of assets for common shares | - | 25,000 | 25,000 | ||||||
Supplemental Disclosures: | |||||||||
Interest paid | - | - | - | ||||||
Income taxes paid | - | - | - |
(See Notes to Financial Statements)
19
Spriza,
Inc. (formerly Level20 Inc.)
(A
Development Stage Company)
Statement
of Stockholders’ Equity
Shares # |
Amount $ |
Additional
Paid-in Capital $ |
Deficit $ |
Total $ |
|
Balance – September 17, 2012 (Inception) | - | - | - | - | - |
Shares issued for cash at $0.0001 per share | 36,000,000 | 3,600 | - | - | 3,600 |
Shares issued for asset acquisition | 5,000,000 | 500 | 24,500 | - | 25,000 |
Net loss | - | - | - | (19,941) | (19,941) |
Balance – December 31, 2012 | 41,000,000 | 4,100 | 24,500 | (19,941) | 8,659 |
Shares issued for cash at $0.005per share pursuant to an S-1Registration Statement | 20,000,000 | 2,000 | 98,000 | - | 100,000 |
Shares issued for conversion of short-term loans and interest at $0.15 per share | 2,693,183 | 269 | 403,708 | - | 403,977 |
Shares issued for cash at $0.15 per share | 1,500,201 | 150 | 224,880 | - | 225,030 |
Shares issued for cash at $0.30 per share pursuant to warrants exercised | 749,093 | 75 | 224,653 | - | 224,728 |
810,000 common shares subscribed for cash at $0.25 per share | - | - | 202,500 | 202,500 | |
Stock-based compensation | - | - | 79,479 | - | 79,479 |
Net loss | - | - | - | (484,398) | (484,398) |
Balance – December 31, 2013 | 65,942,477 | 6,594 | 1,257,720 | (504,339) | 759,975 |
(See Notes to Financial Statements)
20
Spriza,
Inc. (formerly Level20 Inc.)
(A
Development Stage Company)
Notes
to Financial Statements
1. | Nature of Operations |
On September 17, 2012 we were incorporated as Level20 Inc. in the State of Nevada. On October 25, 2013 we changed our name to Spriza, Inc. |
On October 17, 2012, we entered into an Asset Purchase Agreement with Raptify Marketing Systems Ltd. (“Raptify”), whereby we acquired certain intellectual property and related assets from Raptify in exchange for 5,000,000 shares of our common stock, 3,000,000 shares of which was received by Raptify and 2,000,000 shares of which were received by certain other stakeholders of Raptify (See Note 4). |
Our intellectual property is a fully developed, commercially operational incentive contest marketing system and platform that builds brand awareness and generates qualified targeted leads for any size of business through a patent-pending online contest marketing solution trademarked as “SPRIZA™”. SPRIZA™ taps into the power of shared interests and personal relationships within targeted markets producing traceable and quantifiable results at every stage of the contest. It provides deep, real-time analytics and reporting, through robust tools that measure marketing and advertising budgets for real time return on investment analysis and demographic profiling. SPRIZA™ leverages social media strategies based on business objectives enabling our clients “Branders” to measure results of marketing efforts. The result is a network of subscribers that participate in contest promotions centered and shared around their personal and shared interests. SPRIZA™ produces quantifiable and verifiable participant data results, which can be used for ongoing marketing purposes with targeted demographics. SPRIZA™ data results assess how many consumers responded, whom they shared the contest with, the level of engagement, how many other contest participants were influenced and sales value generated. SPRIZA™ is designed to work with most social media engines including Facebook, Twitter and Pinterest and offers full mobile capability to engage popular mobile applications including iPhone, Android, Blackberry and Windows mobile operating systems. |
2. | Summary of Significant Accounting Policies |
Use of Estimates |
The preparation of financial statements in accordance with US GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses in the reporting period. We regularly evaluate estimates and assumptions related to the useful life and recoverability of long-lived assets, stock-based compensation, and deferred income tax asset valuation allowances. We base our estimates and assumptions on current facts, historical experience and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by us may differ materially and adversely from our estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected. |
Cash and Cash Equivalents |
Cash and cash equivalents include cash on deposit in overnight deposit accounts and investments in money market accounts. |
Property and Equipment |
Property and equipment are all stated at historical cost less accumulated depreciation. Depreciation is computed on a straight-line basis over the estimated useful lives of the assets which are estimated to be five years. |
Long-Lived Assets |
We account for long-lived assets in accordance with ASC Topic 360-10-05, “Accounting for the Impairment or Disposal of Long-Lived Assets.” ASC Topic 360-10-05 requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the historical cost carrying value of an asset may no longer be appropriate. We assess recoverability of the carrying value of an asset by estimating the future net cash flows expected to result from the asset, including eventual disposition. If the future net cash flows are less than the carrying value of the asset, an impairment loss is recorded equal to the difference between the asset’s carrying value and fair value or disposable value. As of December 31, 2013 and 2012, we have no impaired long-lived assets. |
Intangible Assets |
Intangible assets are comprised primarily of the cost of trademarks and intellectual property. We evaluate our trademarks annually for impairment or earlier if there is an indication of impairment. If there is an indication of impairment of identified intangible assets not subject to amortization, we compare the estimated fair value with the carrying amount of the asset. An impairment loss is recognized to write-down the intangible asset to its fair value if it is less than the carrying amount. The fair value is calculated using the income approach. However, preparation of estimated expected future cash flows is inherently subjective and is based on our best estimate of assumptions concerning expected future conditions. Based on our impairment analysis performed for the year ended December 31, 2013 and the period from September 17, 2012 (Inception) to December 31, 2012, the estimated fair values of trademarks and other intangible assets exceeded their respective carrying values. Amortization is computed on a straight-line basis over the estimated useful lives of the assets which are estimated to be five years. |
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Revenue Recognition |
Revenue is recognized in accordance with Staff Accounting Bulletin (“SAB”) No. 101, Revenue Recognition in Financial Statements, as revised by SAB No. 104. We recognize revenue when the following criteria are met: persuasive evidence of an arrangement exists; delivery has occurred; the selling price is fixed or determinable; and collection is reasonably assured. |
Fair Value |
We comply with the provisions of ASC 820, “Fair Value Measurements and Disclosures” (“ASC 820”), which defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements required under other accounting pronouncements. See Note 11. |
Financial Instruments |
We have financial instruments whereby the fair value of the financial instruments could be different from that recorded on a historical basis. Our financial instruments consist of cash, accounts and loans receivables, accounts payable and accrued expenses. The carrying amounts of our financial instruments approximate their fair values as of December 31, 2013 and 2012 due to their short-term nature. |
Income Taxes |
We follow ASC subtopic 740-10 for recording the provision for income taxes. ASC 740-10 requires the use of the asset and liability method of accounting for income taxes. Under the asset and liability method, deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled. Deferred income tax expenses or benefits are based on the changes in the asset or liability each period. If available evidence suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely than not to be realized. Future changes in such valuation allowance are included in the provision for deferred income taxes in the period of change. |
Deferred income taxes may arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods. Deferred taxes are classified as current or non-current, depending on the classification of assets and liabilities to which they relate. Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse. |
Stock-based Compensation |
We account for stock-based payments to employees in accordance with ASC 718, “Stock Compensation” (“ASC 718”). Stock-based payments to employees include grants of stock, grants of stock options and issuance of warrants that are recognized in the statement of operations based on their fair values at the date of grant. |
We account for stock-based payments to non-employees in accordance with ASC 718 and Topic 505-50, “Equity-Based Payments to Non-Employees.” Stock-based payments to non-employees include grants of stock, grants of stock options and issuances of warrants that are recognized in the consolidated statement of operations based on the value of the vested portion of the award over the requisite service period as measured at its then-current fair value as of each financial reporting date. |
We calculate the fair value of option grants and warrant issuances utilizing the Black-Scholes pricing model. The amount of stock-based compensation recognized during a period is based on the value of the portion of the awards that are ultimately expected to vest. ASC 718 requires forfeitures to be estimated at the time stock options are granted and warrants are issued to employees and non-employees, and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The term “forfeitures” is distinct from “cancellations” or “expirations” and represents only the unvested portion of the surrendered stock option or warrant. We estimate forfeiture rates for all unvested awards when calculating the expense for the period. In estimating the forfeiture rate, we monitor both stock option and warrant exercises as well as employee termination patterns. |
The resulting stock-based compensation expense for both employee and non-employee awards is generally recognized on a straight-line basis over the requisite service period of the award. |
Basic and Diluted Net Income (Loss) Per Share |
Net loss per share is computed in accordance with ASC subtopic 260-10. We present basic loss per share (“EPS”) and diluted EPS on the face of our statements of operations. Basic EPS is computed by dividing reported earnings by the weighted average shares outstanding. Diluted EPS is computed by adding to the weighted average shares the dilutive effect if common stock was issued upon the exercise of stock options and warrants. For the year ended December 31, 2013 and the period from September 17, 2012 (Inception) to December 31, 2012, the denominator in the diluted EPS computation is the same as the denominator for basic EPS due to the anti-dilutive effect of outstanding warrants on our net loss. Total potentially dilutive common share equivalents relating to stock purchase warrants and options granted or issued, as at December 31, 2013 and 2012 is 4,581,791 and nil, respectively. |
Recent Pronouncements |
We continually assess any new accounting pronouncements to determine their applicability to us. Where it is determined that a new accounting pronouncement affects our financial reporting, we undertake a study to determine the consequence of the change to our financial statements and assure that there are proper controls in place to ascertain that our financial statements properly reflect the change. |
22
3. | Going Concern |
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. We have begun operations but have not generated significant revenue to date. These conditions give rise to doubt about our ability to continue as a going concern. These financial statements do not include adjustments relating to the recoverability and classification of reported asset amounts or the amount and classification of liabilities that might be necessary should we be unable to continue as a going concern. Our continuation as a going concern is dependent upon our ability to obtain additional financing and to generate profits and positive cash flow. We will require a cash injection of $1,000,000 over the next twelve months to continue to grow our business. |
In December of 2013 we offered 2,000,000 units (each a “Unit”) at $0.25 per Unit to raise an additional $500,000. Each Unit contained one common share and one common share purchase warrant exercisable at $0.50 per share for one year. We raised $202,500 as at December 31, 2013 and a further $182,500 subsequently. We have issued these shares and warrants and have closed this offering. |
4. | Property and Equipment and Intangible Assets |
On October 17, 2012, we entered into an Asset Purchase Agreement with Raptify Marketing Systems Ltd. (“Raptify”), whereby we acquired certain assets from Raptify in exchange for 5,000,000 shares of our common stock, 3,000,000 shares of which were received by Raptify and 2,000,000 shares of which were received by certain other stakeholders of Raptify. The fair value of the assets acquired was $25,000 which was allocated to identifiable assets as follows: intellectual property $1 and computer systems, $24,999. |
On May 15, 2013 we contracted a San Francisco consulting firm with technology development capabilities in the Philippines to complete the redevelopment of our technology platform. On December 1, 2013 we completed SPRIZA™ and on March 18, 2014 unveiled it to the public with real-time contests being run. SPRIZA™ includes: subscriber portal, mobile device support, do-it-yourself platform and tools allowing us to develop a database of concurrent customers and users. During the year ended December 31, 2013 we spent $227,596 on completion of this project and have allocated the cost to intellectual property. |
5. | Short-term Debt |
We received 6% interest bearing, secured short-term loans of $395,000 during the year ended December 31, 2013. On September 6, 2013 these loans, plus accrued interest of $8,977, were converted into 2,693,183 Units at $0.15 per Unit. Each Unit contained one common share and one common share purchase warrant exercisable at $0.30 for a three year period. |
We also received a further $10,000 pursuant to a non-interest bearing short-term loan for a total of $25,000 which was repaid on April 19, 2013. |
6. | Common Stock |
We filed a registration statement on Form S-1 with the United States Securities Commission (the “S-1”). The S-1 registered 20,000,000 common shares to be sold at $0.005 per common share for proceeds of $100,000. The S-1 was declared effective on April 22, 2013 and the 20,000,0000 shares registered thereunder were sold on June 12, 2013 for gross proceeds of $100,000. |
On September 6, 2013 all outstanding short-term loans, plus accrued interest of $8,977, were converted into 2,693,183 Units at $0.15 per Unit. Each unit contained one common share and one common share purchase warrant exercisable at $0.30 for a three year period. |
On October 25, 2013 we increased our authorized capital stock from 100,000,000 to 200,000,000. We now have the authority to issue 190,000,000 common shares and 10,000,000 preferred shares. |
On November 1, 2013 we issued a total of 1,500,201 units for proceeds of $225,030 pursuant to our $0.15 Unit Offering which closed October 31, 2013. Each Unit contained one common share and one common share purchase warrant exercisable at $0.30 for a three year period. |
On November 1, 2013 we issued a total 749,093 shares for proceeds of $224,728 pursuant to the exercise of $0.30 warrants. |
7. | Warrants |
As at December 31, 2013 we had 3,444,291 common share purchase warrants outstanding having an average exercise price of $0.30 per common share and having an average expiration date of 2.75 years. |
8. | Stock-based Compensation |
On October 29, 2013, we granted 4,550,000 stock options to directors, officers and employees to acquire 4,550,000 common shares at $0.15 per share having an option life of five years. A total of 25% vest on April 30, 2014, with a further 25% vesting on each of October 31, 2014, April 30, 2015 and October 31, 2015. During the year ended December 31, 2013, we recorded stock-based compensation of $79,479 (2012 - $nil). |
The weighted average grant date fair value of stock options granted during the year ended December 31, 2013 was $0.10. |
The fair value of stock options granted was calculated using the Black-Scholes option-pricing model based on the following assumptions: |
Risk-Free Interest Rate: Based on the implied yield currently available on U.S. Treasury zero-coupon issues with a remaining term equivalent to the expected term of the options being valued. |
Dividend Yield: Based on the projection of future stock prices and dividends expected to be paid. |
Expected Term: Represents the period of time that stock options are expected to be outstanding based on historic exercise behavior. |
23
Expected Volatility: Due to our limited trading history, we do not have sufficient history to estimate the volatility of our common stock price for the expected life of the options. We calculate expected volatility based on reported data for similar publicly traded companies for which historical information is available and will continue to do so until the historical volatility of our common stock is sufficient to measure expected volatility for future option grants. |
The weighted average assumptions used for each of the year ended December 31, is as follows: |
2013 | 2012 | ||
Expected dividend yield | 0% | - | |
Risk-free interest rate | 1.29% | - | |
Expected volatility | 82% | - | |
Expected option life (in years) | 5.00 | - |
The following table summarizes the continuity of our stock options: |
Number of Options |
Weighted Average Exercise Price |
Weighted-Average
Remaining Contractual Term (years) |
Aggregate Intrinsic Value |
||
$ | $ | ||||
Outstanding, December 31, 2012 | - | - | |||
Granted | 4,550,000 | 0.15 | |||
Outstanding, December 31, 2013 | 4,550,000 | 0.15 | 4.83 | 2,684,500 | |
Exercisable, December 31, 2013 | - | - | - | - |
A summary of the changes of the Company’s non-vested stock options is presented below: |
Number of
Options |
Weighted Average Grant Date Fair Value |
||
$ | |||
Non-vested at December 31, 2012 | - | - | |
Granted | 4,550,000 | 0.10 | |
Vested | - | - | |
Non-vested at December 31, 2013 | 4,550,000 | 0.10 |
As at December 31, 2013, there was $363,949 of unrecognized compensation cost related to non-vested stock options expected to be recognized over a weighted average period of 1.83 years. |
9. | Related Party Transactions |
The President and Chief Executive Officer of the Company was paid a total of $69,831 during the year (2012 - $nil). As at December 31, 2013 there were no employment agreements in place for any of the named executive officers or employees. |
10. | Income Taxes |
Deferred income tax assets and liabilities are computed annually for differences between financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is the tax payable or refundable for the period plus or minus the change during the period in deferred tax assets and liabilities. |
The effective tax rate on the net loss before income taxes differs from the U.S. statutory rate as follows: |
24
December 31, | ||||
2013 | 2012 | |||
U.S statutory rate | 35% | 35% | ||
Less valuation allowance | (35)% | (35)% | ||
Effective tax rate | 0% | 0% |
The significant components of deferred tax assets and liabilities are as follows: | ||||
December 31, | ||||
Deferred tax assets | 2013 | 2012 | ||
Stock-based compensation | $ | 27,818 | - | |
Net operating losses | 106,261 | 6,979 | ||
Deferred tax liability | ||||
Depreciation expense | (28,909) | - | ||
Net deferred tax assets | 105,170 | 6,979 | ||
Less valuation allowance | (105,170) | (6,979) | ||
Deferred tax asset - net valuation allowance | $ | - | $ | - |
The net change in the valuation allowance for the year ended December 31, 2013 was $98,191. |
We have a net operating loss carryover of approximately $303,601 available to offset future income for income tax reporting purposes, which will expire in various years through 2033, if not previously utilized. |
We adopted the provisions of ASC 740-10-50, “Accounting for Uncertainty in Income Taxes”. We had no material unrecognized income tax assets or liabilities for the year ended December 31, 2013 and the period from September 17, 2012 (Inception) to December 31, 2012. |
Our policy regarding income tax interest and penalties is to expense those items as general and administrative expense but to identify them for tax purposes. During the year ended December 31, 2013 and the period from September 17, 2012 (Inception) to December 31, 2012 there was no income tax or related interest and penalty items in the income statement, or liabilities on the balance sheet. We file income tax returns in the U.S. federal jurisdiction and various state jurisdictions. We are not currently involved in any income tax examinations. |
11. | Fair Value Measurements |
ASC Topic 820-10 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). ASC Topic 820-10 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability. The three levels of the fair value hierarchy under ASC Topic 820-10 are described below: |
Level 1 – Valuations based on quoted prices in active markets for identical assets or liabilities that an entity has the ability to access. |
Level 2 – Valuations based on quoted prices for similar assets and liabilities in active markets, quoted prices for identical assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities. |
Level 3 – Valuations based on inputs that are supportable by little or no market activity and that are significant to the fair value of the asset or liability. Our level 3 assets consist of our intellectual property fair valued at $284,132 and $1 at December 31, 2013 and 2012, respectively. |
12. | Subsequent Events |
a) | We have evaluated all subsequent events through the date these financial statements were issued and determined that there are no subsequent events to record or to disclose except as follows: we received an additional $182,700 towards our $0.25 per Unit non-brokered private placement and, together with $202,500 received as at December 31, 2013, we issued a total of 1,540,800 Units at $0.25 per Unit. |
b) | We have received $40,697 pursuant to 135,657 warrants exercised at $0.30 per share. |
25
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
During the last two fiscal years, we have had no disagreements with our accountants on accounting and financial disclosure.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Rob Danard, who is our chief executive officer and Christopher Robbins, who is our chief financial officer, are responsible for establishing and maintaining our disclosure controls and procedures. Disclosure controls and procedures means controls and other procedures that are designed to ensure that information we are required to disclose in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and to ensure that information required to be disclosed by us in those reports is accumulated and communicated to management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our chief executive officer and chief financial officer evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of December 31, 2013. Based on that evaluation our chief executive officer and our chief financial officer concluded that our disclosure controls and procedures were effective as of December 31, 2013.
Changes in internal controls
There were no changes in our internal controls over financial reporting that occurred during the quarter ended December 31, 2013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Management's Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting and for the assessment of the effectiveness of internal control over financial reporting. As defined by the SEC, internal control over financial reporting is a process designed by, or under the supervision of our principal executive officer and principal financial officer and implemented by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our financial statements in accordance with U.S. generally accepted accounting principles.
Our internal control over financial reporting includes those policies and procedures that:
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
As of December 31, 2013 we conducted an evaluation, under the supervision and with the participation of our chief executive officer (our principal executive officer) and our chief financial officer (also our principal financial and accounting officer) of the effectiveness of our internal control over financial reporting based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, or the COSO Framework. Management's assessment included an evaluation of the design of our internal control over financial reporting and testing of the operational effectiveness of those controls.
Based upon this assessment, management concluded that our internal control over financial reporting was effective.
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to an exemption for smaller reporting companies set forth in Section 989G of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
ITEM 9B. OTHER INFORMATION
None.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Executive Officers and Directors
The names, ages, and respective positions of our directors and executive officers are set forth below:
26
Name | Age | Present Positions |
Rob Danard | 41 | President and Chief Executive Officer and a Director |
Christopher Robbins | 55 | Chief Financial Officer, Treasurer and Secretary and a Director |
Russell Krywolt | 40 | Director |
Justin Sather | 39 | Director |
Rob Danard
Danard is our President and Chief Executive Officer as well as a director and has served in those positions since September 17, 2012. Mr. Danard resigned his positions as Chief Financial Officer, Secretary and Treasurer on October 25, 2013. Mr. Danard had served in these positions since September 17, 2012. Mr. Danard began his career in 1998, while studying Business at the University of Calgary. In 2009, Mr. Danard operated WealthMates Inc., a privately held corporation where he held the position of President providing business development and consulting services. During this time at WealthMates he assisted in the business with product development and client engagement. In 2010 he and his partner Kent Speakman founded Engageia Inc. a digital marketing agency. Engageia was involved with digital strategy, advisory, consulting, social media, community engagement, application development, event activation and start-up incubation. Engageia was nominated as the top digital agency in North America in social media by iMedia Connection. There is no current business activity in Engageia, Inc.; it is more of a tombstone of past work accomplished by Mr. Danard and his business partner, Mr. Speakman. It currently has taken no new clients and is simply maintenance of the corporation and brand. Throughout 2010 to present, as a senior enterprise sales associate with Cortex Business Solutions, he sold oil and gas procurement software to the energy industries top oil and gas producers. Mr. Danard is also a Director of Cana Venture Capital Corporation, a publically listed Toronto Venture Exchange listed capital pool corporation. Mr. Danard is qualified to be a director based on his extensive experience in the social media industry.
Christopher Robbins
Mr. Robbins was elected to our board and appointed Chief Financial Officer, Secretary and Treasurer on October 25, 2013. Mr. Robbins has experience with financial reporting for public companies and will have an active role in our ongoing operations. Mr. Robbins has over 20 years of public company experience in the areas of financing, corporate governance, audit and disclosure requirements for both US and Canadian public companies. As Chief Financial Officer he is also responsible for overseeing the financial reporting for review by the audit committee and liaison with our auditors. Mr. Robbins has had financial reporting experience in the medical, mining exploration, telecommunications and internet based industries. Mr. Robbins’ expertise spans a wide range of corporate and financial issues including stock exchange listings and listings maintenance within Canada and maintaining compliance as a reporting issuer with the Securities and Exchange Commission in the United States. His experience spans public and private financings, pre-IPO venture financings, secondary offerings and prospectus exempt offerings, stock option and share compensation plans.
Mr. Robbins’ responsibilities over the years include corporate, legal, regulatory affairs and compliance issues. As Chief Financial Officer he is also responsible for overseeing the financial reporting for review by the audit committee and liaisons with external auditors.
Mr. Robbins is also a director of Cana Venture Capital Corporation, a publically listed Toronto Venture Exchange listed capital pool corporation and Anglo Swiss Resources Inc., a publicly listed Toronto Venture Exchange company. Mr. Robbins is qualified to be a director based on his extensive experience in financial reporting for public companies.
Russell Krywolt
Mr. Krywolt was elected to our board on October 25, 2013. Mr. Krywolt has started and operated various businesses in various industries. Mr. Krywolt has been an advisor and board member of private companies. From 2005 onward he has been the owner and President of Photaris Technology Solutions Inc., a company that provides software development, network and systems administration, consulting, and other information technology services to multiple clients. In 2009, Mr. Krywolt founded Raptify Marketing Systems Ltd. to develop and market a social relationship marketing program, and was President and CEO of that company until the intellectual property and technology assets were acquired by us pursuant to an Asset Purchase Agreement. Also, during the past number of years, Mr. Krywolt has served as Director and CTO of IPE Investment Pitch Enterprises Ltd. Mr. Krywolt is qualified to be a director of the Company based on his extensive experience in developing software platforms and operating in the social media industry.
Justin Sather
Mr. Sather was elected to our board on October 25, 2013. Mr. Sather is an active scout for the New York Rangers Hockey Organization. Mr. Sather’s years as a professional sports agent have given him an extensive background in sales and negotiating. Mr. Sather has a degree in Public Relations and Advertising from Gonzaga University. Mr. Sather is qualified to be a director of the Company based on his extensive experience in business.
Our directors serve until our next annual stockholders meeting or until their successors are duly elected and qualified. Officers hold their positions at the will of the board of directors.
Family Relationships
None.
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Board Independence
We are not required to have any independent members of the Board of Directors. The board of directors has determined that (i) each of Rob Danard and Christopher Robbins, has a relationship which, in the opinion of the board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and is not an “independent director” as defined in the Marketplace Rules of The NASDAQ Stock Market and (ii) Russel Krywolt and Justin Sather are each an independent director as defined in the Marketplace Rules of The NASDAQ Stock Market.
Meetings and Committees of the Board of Directors
During the fiscal year ended December 31, 2013, our board of directors held four meetings and approved certain actions by unanimous written consent. We expect our directors to attend all board and committee meetings and to spend the time needed and meet as frequently as necessary to properly discharge their responsibilities.
Committees
On October 29, 2013 our Board of Directors adopted our audit, nominating and corporate governance, and compensation committee charters.
Audit Committee
Our Audit Committee consists of Justin Sather and Russel Krywolt, with Mr. Sather elected as Chairman of the Committee. Our Board of Directors has determined that each of Messrs. Sather and Krywolt are “independent” as that term is defined under applicable SEC rules and under the current listing standards of the NASDAQ Stock Market. Due to our relatively small size the audit committee currently does not have a financial expert as defined in Sections 406 and 407 of the Sarbanes-Oxley Act of 2002. The audit committee will rely on legal counsel and accounting professionals to help with our ongoing SEC reporting requirements.
Our Audit Committee’s responsibilities include: (i) reviewing the independence, qualifications, services, fees, and performance of the independent auditors, (ii) appointing, replacing and discharging the independent auditor, (iii) pre-approving the professional services provided by the independent auditor, (iv) reviewing the scope of the annual audit and reports and recommendations submitted by the independent auditor, and (v) reviewing our financial reporting and accounting policies, including any significant changes, with management and the independent auditor. The Audit Committee has reviewed and discussed with management the Company’s audited financial statements for the year ended December 31, 2012. Based on the reviews and discussions referred to above, the Audit Committee has recommended to the Board of Directors that the financial statements referred to above be included in this Form 10-K.
Nominating and Corporate Governance Committee
Our Governance and Nominating Committee consists of Rob Danard and Christopher Robbins, with Mr. Robbins elected as Chairman of the Committee. The Board of Directors has determined that none of the members is “independent” under the current listing standards of the NASDAQ Stock Market.
Our Governance and Nominating Committee has responsibility for assisting the Board in, among other things, effecting the organization, membership and function of the Board and its committees. The Governance and Nominating Committee shall identify and evaluate the qualifications of all candidates for nomination for election as directors. In addition, the Governance and Nominating Committee is responsible for developing, recommending and evaluating corporate governance standards and a code of business conduct and ethics.
Compensation Committee
Our Compensation Committee consists of Rob Danard and Justin Sather, with Mr. Danard elected as Chairman of the Committee. Our Board of Directors has determined that Justin Sather is “independent” under the current listing standards of the NASDAQ Stock Market. Our Board of Directors has adopted a written charter setting forth the authority and responsibilities of the Compensation Committee.
Our Compensation Committee has responsibility for assisting the Board of Directors in, among other things, evaluating and making recommendations regarding the compensation of our executive officers and directors, assuring that the executive officers are compensated effectively in a manner consistent with our stated compensation strategy, producing an annual report on executive compensation in accordance with the rules and regulations promulgated by the SEC, periodically evaluating the terms and administration of our incentive plans and benefit programs and monitoring of compliance with the legal prohibition on loans to our directors and executive officers.
Involvement in Certain Legal Proceedings
None of our directors or executive officers: (i) has been involved as a general partner or executive officer of any business which has filed a bankruptcy petition; (ii) has been convicted in any criminal proceeding nor is subject to any pending criminal proceeding; (iii) has been subjected to any order, judgment or decree of any court permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; and (iv) has been found by a court, the SEC or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law.
Code of Ethics
The Company has adopted a formal code of ethics that applies to our directors, officers or employees as at March 1, 2014.
ITEM 11. EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth the compensation earned by Executive Officers during the last two fiscal years:
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Name and Principal Position | Year |
Salary ($) |
Bonus ($) |
Stock Awards ($) |
Option Awards ($) |
Non-Equity Incentive Plan Compensation ($) |
Nonqualified Deferred Compensation Earnings ($) |
All Other Compensation ($) |
Total ($) |
Rob
Danard, President and Chief Executive Officer |
2013 | 82,836 | Nil | Nil | 34,936 | Nil | Nil | Nil | 117,772 |
2012 | Nil | Nil | Nil | Nil | Nil | Nil | Nil | Nil | |
Christopher
Robbins, Chief Financial Officer, Treasurer and Secretary |
2013 | Nil | Nil | Nil | 17,468 | Nil | Nil | Nil | 17,468 |
2012 | Nil | Nil | Nil | Nil | Nil | Nil | Nil | Nil |
Performance Awards
We do not maintain any plans in respect of the retirement of our directors and executive officers.
Stock Incentive Plan
Pursuant to a Board of Director Meeting, held on October 29, 2013, the Board reviewed and adopted the 2013 Incentive Award Plan (the “Plan”) to award stock options to our directors, officers, employees and consultants. On October 29, 2013 the board approved the allocation of up to 6,300,000 stock options to acquire 6,300,000 common shares. The initial grant, effective October 29, 2013, is for 4,550,000 options set at an exercise price of $0.15 being the then current fair market value. A total of 25% vest April 30, 2014 with a further 25% scheduled to vest on each of October 31, 2014, April 30, 2015 and October 31, 2015.
The table below summarizes all unexercised options, stock that has not vested, and equity incentive plan awards for each named executive officer as of December 31, 2013:
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
OPTION AWARDS | STOCK AWARDS | ||||||||
Name |
Number of Securities Underlying Unexercised Options (#) Exercisable |
Number of Securities Underlying Unexercised Options (#) Unexercisable |
Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) |
Option Exercise Price ($) |
Option Expiry Date |
Number of Shares or Units of Stock That Have Not Vested (#) |
Market Value of Shares or Units of Stock That Have Not Vested ($) |
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) |
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested (#) |
Rob Danard | - | 2,000,000 | Nil | 0.15 | 10/29/2018 | Nil | Nil | Nil | Nil |
Christopher Robbins | - | 1,000,000 | Nil | 0.15 | 10/29/2018 | Nil | Nil | Nil | Nil |
Compensation of Directors
The table below summarizes all compensation paid to our directors during the year ended December 31, 2013:
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DIRECTOR COMPENSATION
Name |
Fees Earned or Paid in Cash ($) |
Stock Awards ($) |
Option Awards ($) |
Non-Equity
Incentive Plan Compensation ($) |
Non-Qualified Deferred Compensation Earnings ($) |
All
Other Compensation ($) |
Total ($) |
Russ Krywolt | Nil | Nil | 3,494 | Nil | Nil | Nil | 3,494 |
Justin Sather | Nil | Nil | 6,987 | Nil | Nil | Nil | 6,987 |
We did not pay our directors, Rob Danard and Christopher Robbins, who also act as senior officers, any fees or other compensation for acting as a director during our fiscal year ended December 31, 2013.
Our directors are reimbursed for reasonable travel and other out-of-pocket expenses incurred in attending meetings of the board.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth certain information concerning the number of shares of our common stock owned beneficially as of March 31, 2014 by: (i) each person (including any group) known to us to own more than 5% of any class of our voting securities, (ii) each of our directors, (iii) each of our officers and (iv) our officers and directors as a group. Except as otherwise indicated, each shareholder listed possess sole voting and investment power with respect to the shares shown. Except as otherwise noted, each shareholder’s address is care of the Company at 111 Penn Street, El Segundo, CA 90245.
Name and address |
Amount and nature of beneficial ownership |
Percent of class¹ |
Rob Danard | 3,000,000 | 4.4% |
Christopher Robbins | - | - |
Russ Krywolt² | 3,000,000 | 4.4% |
Justin Sather | 342,374 | * |
All executive officers and directors as a group (4 persons) | 6,342,374 | 9.4% |
Shareholders of Greater than 5% of Issued and Outstanding Stock | ||
Adrian Ansell³ | 33,000,000 | 48.9% |
* Less than one percent.
¹Based on 67,483,277 shares of common stock issued and outstanding as of March 31, 2014. Under Rule 13d-3 of the Exchange Act a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (i) voting power, which includes the power to vote, or to direct the voting of shares; and (ii) investment power, which includes the power to dispose or direct the disposition of shares. Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire the shares (for example, upon exercise of an option) within 60 days of the date as of which the information is provided. In computing the percentage ownership of any person, the amount of shares outstanding is deemed to include the amount of shares beneficially owned by such person (and only such person) by reason of these acquisition rights.
²Consists of the of 3,000,000 shares owned by Raptify Marketing Systems Ltd. located at 525 Seymour Street, Ste 735, Vancouver, BC, Canada V6B 3H7, of which Mr. Krywolt is the control person.
³Mr. Ansell’s address is16 Stella Street, Bel Air III, Makati, Philippines.
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Securities Authorized For Issuance under Compensation Plans
The table set forth below present’s information relating to our equity compensation plans as of the date of December 31, 2013:
Plan Category |
Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (a) |
Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights (b) |
Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (excluding column (a)) |
2013 Incentive Award Plan | 4,550,000 | $0.15 | 1,750,000 |
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Related Party Transactions
During 2013 we paid Rob Danard, our President and Chief Executive Officer, a total of $82,836 (2012 - $nil). As at December 31, 2013 there were no employment agreements in place for any of the named executive officers or employees. As at the date of this report the Company paid Rob Danard, our President and Chief Executive Officer, a total of $28,734 in 2014 and $5,000 to Chris Robbins, our Chief Financial Officer.
Review, Approval and Ratification of Related Party Transactions
Our Board of Directors has responsibility for establishing and maintaining guidelines relating to any related party transactions between us and any of our officers or directors. Any conflict of interest between a director or officer and us must be referred to the non-interested directors, if any, for approval. We intend to adopt written guidelines for the board of directors which will set forth the requirements for review and approval of any related party transactions.
Director Independence
We periodically review the independence of each director. Pursuant to this review, our directors and officers, on an annual basis, are required to complete a detailed questionnaire to determine if there are any transactions or relationships between any of the directors or officers (including immediate family and affiliates) and us. If any transactions or relationships exist, we then consider whether such transactions or relationships are inconsistent with a determination that the director is independent.
Conflicts Relating to Officers and Directors
To date, we do not believe that there are any conflicts of interest involving our officers or directors. With respect to transactions involving real or apparent conflicts of interest, we have adopted policies and procedures which require that: (i) the fact of the relationship or interest giving rise to the potential conflict be disclosed or known to the directors who authorize or approve the transaction prior to such authorization or approval, (ii) the transaction be approved by a majority of our disinterested outside directors, and (iii) the transaction be fair and reasonable to us at the time it is authorized or approved by our directors.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following is a summary of the fees billed to us by L.L. Bradford & Company, LLC during 2013 and 2012 for professional services rendered for the fiscal year ended December 31, 2013 and the period from September 17, 2012 (Date of Inception) to December 31, 2012:
Fee Category | 2013 Fees |
2012 Fees |
||||
Audit Fees | $ | $ | ||||
L.L. Bradford & Company, LLC | 17,275 | 10,250 | ||||
Audit-Related Fees | 5,225 | - | ||||
Tax Fees | - | - | ||||
All Other Fees | - | - | ||||
Total Fees | $ | 22,500 | $ | 10,250 |
Audit Fees consist of fees billed for professional services rendered for the audit of our company’s financial statements and review of our interim financial statements included in quarterly reports and services that are normally provided by our auditors in connection with statutory and regulatory filings or engagements.
Audit Related Fees consist of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements and are not reported under "Audit Fees".
Tax Fees consist of fees billed for professional services for tax compliance, tax advice and tax planning.
All Other Fees consist of fees for products and services other than the services reported above. There were no management consulting services provided in fiscal 2013 or 2012.
Pre-Approval Policies and Procedures
Our Audit Committee’s policy is to pre-approve all audit and permissible non-audit services provided by the independent auditors. These services may include audit services, audit-related services, tax services and other services. Pre-approval is generally provided for up to one year and any pre-approval is detailed as to the particular service or category of services and is generally subject to a specific budget. The independent auditors and management are required to periodically report to the our Board of Directors regarding the extent of services provided by the independent auditors in accordance with this pre-approval, and the fees for the services performed to date. Our Board of Directors may also pre-approve particular services on a case-by-case basis.
Our Board of Directors has considered whether the provision of non-audit services is compatible with maintaining the principal accountant's independence.
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PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
Documents filed as part of this Report are as follows:
(A) Financial Statements: The financial statements, related notes and report of independent registered public accounting firm are included in Item 8 of Part II of this 2013 A
nnual Report on Form 10-K.
(B) Exhibits: The required exhibits are included at the end of this Report and are described in the exhibit index.
EXHIBIT INDEX
Exhibit No. | Description of Exhibit |
2.1 | Asset Purchase Agreement dated October 17, 2012 (1) |
3.1 | Articles of Incorporation (2) |
3.2 | Certificate of Amendment to Articles of Incorporation (3) |
3.3 | Bylaws (2) |
10.1 | 2013 Incentive Award Plan* |
14 | Code of Ethics* |
31.1 | Certification of Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a)/15d-14(a)* |
31.2 | Certification of Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a)/15d-14(a)* |
32.1 | Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350* |
101 .INS | XBRL Instance Document* |
101 .SCH | XBRL Taxonomy Extension Schema Document* |
101 .CAL | XBRL Taxonomy Calculation Linkbase Document* |
101 .DEF | XBRL Taxonomy Extension Definition Linkbase Document* |
101 .LAB | XBRL Taxonomy Label Linkbase Document* |
101 .PRE | XBRL Taxonomy Presentation Linkbase Document* |
1. | Incorporated herein by reference to the Registration Statement on Form S-1/A filed on February 14, 2013. |
2. | Incorporated herein by reference to the Registration Statement on Form S-1 filed on December 24, 2012. |
3. | Incorporated herein by reference to the Current Report on Form 8-K filed on October 29, 2013. |
* Filed herewith
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SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: March 31, 2014
Spriza, Inc. By: /s/ Rob Danard |
In accordance with the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature | Title | Date |
Rob Danard | President, Chief Executive Officer and Director | March 31, 2014 |
Christopher Robbins | Chief Financial Officer, Treasurer, Secretary and Director | March 31, 2014 |
Russ Krywolt | Director | March 31, 2014 |
Justin Sather | Director | March 31, 2014 |
SPRIZA, INC.
2013 INCENTIVE AWARD PLAN
ARTICLE 1.
PURPOSE
The purpose of the Spriza, Inc. 2013 Incentive Award Plan (the “Plan”) is to promote the success and enhance the value of Spriza, Inc. (the “Company”) by linking the personal interests of the members of the Board, Employees, and Consultants to those of the Company’s stockholders and by providing such individuals with an incentive for outstanding performance to generate superior returns to Company stockholders. The Plan is further intended to provide flexibility to the Company in its ability to motivate, attract, and retain the services of members of the Board, Employees, and Consultants upon whose judgment, interest, and special effort the successful conduct of the Company’s operation is largely dependent.
ARTICLE 2.
DEFINITIONS AND CONSTRUCTION
Wherever the following terms are used in the Plan they shall have the meanings specified below, unless the context clearly indicates otherwise. The singular pronoun shall include the plural where the context so indicates.
2.1 “Award” means an Option, a Restricted Stock award, a Stock Appreciation Right award, a Performance Share award, a Performance Stock Unit award, a Dividend Equivalents award, a Stock Payment award, a Deferred Stock award, a Restricted Stock Unit award, or a Performance-Based Award granted to a Participant pursuant to the Plan.
2.2 “Award Agreement” means any written agreement, contract, or other instrument or document evidencing an Award, including through electronic medium.
2.3 “Board” means the Board of Directors of the Company.
2.4 “Change in Control” means and includes each of the following:
(a) A transaction or series of transactions (other than an offering of Stock to the general public through a registration statement filed with the Securities and Exchange Commission) whereby any “person” or related “group” of “persons” (as such terms are used in Sections 13(d) and 14(d)(2) of the Exchange Act) (other than the Company, any of its subsidiaries, an employee benefit plan maintained by the Company or any of its subsidiaries or a “person” that, prior to such transaction, directly or indirectly controls, is controlled by, or is under common control with, the Company) directly or indirectly acquires beneficial ownership (within the meaning of Rule 133 under the Exchange Act) of securities of the Company possessing more than 50% of the total combined voting power of the Company’s securities outstanding immediately after such acquisition; or
(b) The consummation by the Company (whether directly involving the Company or indirectly involving the Company through one or more intermediaries) of (x) a merger, consolidation, reorganization, or business combination or (y) a sale or other disposition of all or substantially all of the Company’s assets in any single transaction or series of related transactions or (z) the acquisition of assets or stock of another entity, in each case other than a transaction:
(i) Which results in the Company’s voting securities outstanding immediately before the transaction continuing to represent (either by remaining outstanding or by being converted into voting securities of the
1
Company or the person that, as a result of the transaction, controls, directly or indirectly, the Company or owns, directly or indirectly, all or substantially all of the Company’s assets or otherwise succeeds to the business of the Company (the Company or such person, the “Successor Entity”)) directly or indirectly, at least a majority of the combined voting power of the Successor Entity’s outstanding voting securities immediately after the transaction, and
(ii) After which no person or group beneficially owns voting securities representing 50% or more of the combined voting power of the Successor Entity; provided, however, that no person or group shall be treated for purposes of this Section 2.4(b)(ii) as beneficially owning 50% or more of combined voting power of the Successor Entity solely as a result of the voting power held in the Company prior to the consummation of the transaction.
The Committee shall have full and final authority, which shall be exercised in its discretion, to determine conclusively whether a Change in Control of the Company has occurred pursuant to the above definition, and the date of the occurrence of such Change in Control and any incidental matters relating thereto.
2.5 “Code” means the Internal Revenue Code of 1986, as amended.
2.6 “Committee” means the committee of the Board described in Article 12.
2.7 “Consultant” means any consultant or adviser if: (a) the consultant or adviser renders bona fide services to the Company or any Subsidiary; (b) the services rendered by the consultant or adviser are not in connection with the offer or sale of securities in a capital-raising transaction and do not directly or indirectly promote or maintain a market for the Company’s securities; and (c) the consultant or adviser is a natural person.
2.8 “Covered Employee” means an Employee who is, or could be, a “covered employee” within the meaning of Section 162(m) of the Code.
2.9 “Deferred Stock” means a right to receive a specified number of shares of Stock during specified time periods pursuant to Section 8.5.
2.10 “Director” means a member of the Board, or as applicable, a member of the board of directors of a Subsidiary.
2.11 “Disability” means that the Participant qualifies to receive long-term disability payments under the Company’s long-term disability insurance program, as it may be amended from time to time.
2.12 “Dividend Equivalents” means a right granted to a Participant pursuant to Section 8.3 to receive the equivalent value (in cash or Stock) of dividends paid on Stock.
2.13 “Effective Date” shall have the meaning set forth in Section 13.1.
2.14 “Eligible Individual” means any person who is an Employee, a Consultant or an Independent Director, as determined by the Committee.
2.15 “Employee” means any officer or other employee (as defined in accordance with Section 3401(c) of the Code) of the Company or any Subsidiary.
2.16 “Equity Restructuring” shall mean a nonreciprocal transaction between the Company and its stockholders, such as a stock dividend, stock split, spin-off, rights offering or recapitalization through a large, nonrecurring cash dividend, that affects the shares of Stock (or other securities of the Company) or the share price of Stock (or other securities) and causes a change in the per share value of the Stock underlying outstanding Awards.
2
2.17 “Exchange Act” means the Securities Exchange Act of 1934, as amended.
2.18 “Fair Market Value” means, as of any given date, (a) if Stock is traded on any established stock exchange, the closing price of a share of Stock on the first trading date during which a sale occurred immediately prior to such given date as reported in the Wall Street Journal (or such other source as the Company may deem reliable for such purposes); or (b) if Stock is not traded on an exchange but is quoted on a national market or other quotation system, the last sales price on the date on which sales prices are reported immediately prior to such given date; or (c) if Stock is not publicly traded, the fair market value established by the Committee acting in good faith.
2.19 “Incentive Stock Option” means an Option that is intended to meet the requirements of Section 422 of the Code or any successor provision thereto.
2.20 “Independent Director” means a Director of the Company who is not an Employee.
2.21 “Non-Employee Director” means a Director of the Company who qualifies as a “Non-Employee Director” as defined in Rule 16b-3(b)(3) under the Exchange Act, or any successor rule.
2.22 “Non-Qualified Stock Option” means an Option that is not intended to be an Incentive Stock Option.
2.23 “Option” means a right granted to a Participant pursuant to Article 5 of the Plan to purchase a specified number of shares of Stock at a specified price during specified time periods. An Option may be either an Incentive Stock Option or a Non-Qualified Stock Option.
2.24 “Participant” means any Eligible Individual who, as a member of the Board, Consultant or Employee, has been granted an Award pursuant to the Plan.
2.25 “Performance-Based Award” means an Award granted to selected Covered Employees which is subject to the terms and conditions set forth in Article 9.
2.26 “Performance Criteria” means the criteria that the Committee selects for purposes of establishing the Performance Goal or Performance Goals for a Participant for a Performance Period. The Performance Criteria that will be used to establish Performance Goals are limited to the following: net sales, revenue, revenue growth or product revenue growth, operating income (before or after taxes, pre- or after- tax income (before or after allocation of corporate overhead and bonus), net earnings, earnings per share, net income (before or after taxes), return on equity, total shareholder return, return on assets or net assets, appreciation in and/or maintenance of share price, market share, gross profits, earnings (including earnings before taxes, earnings before interest and taxes or earnings before interest, taxes depreciation and amortization), economic value-added models or equivalent metrics, comparisons with various stock market indices, reductions in costs, cash flow or cash flow per share (before or after dividends), return on capital (including return on total capital or return on invested capital, cash flow return on investment, improvement in or attainment of expense levels, operating margins, gross margins or cash margin, year-end cash, debt reductions, shareholder equity, market share, regulatory achievements, and implementation, completion or attainment of measurable objectives with respect to research, development, products or projects and recruiting and maintaining personnel. The Committee shall define in an objective fashion the manner of calculating the Performance Criteria it selects to use for such Performance Period for such Participant.
2.27 “Performance Goals” means, for a Performance Period, the goals established in writing by the Committee for the Performance Period based upon the Performance Criteria. Depending on the Performance Criteria used to establish such Performance Goals, the Performance Goals may be expressed in terms of overall Company performance or the performance of a division, business unit, or an individual. The Committee, in its discretion, may, within the time prescribed by Section 162(m) of the Code, adjust or modify the calculation of
3
Performance Goals for such Performance Period in order to prevent the dilution or enlargement of the rights of Participants (a) in the event of, or in anticipation of, any unusual or extraordinary corporate item, transaction, event, or development, or (b) in recognition of, or in anticipation of, any other unusual or nonrecurring events affecting the Company, or the financial statements of the Company, or in response to, or in anticipation of, changes in applicable laws, regulations, accounting principles, or business conditions.
2.28 “Performance Period” means the one or more periods of time, which may be of varying and overlapping durations, as the Committee may select, over which the attainment of one or more Performance Goals will be measured for the purpose of determining a Participant’s right to, and the payment of, a Performance-Based Award.
2.29 “Performance Share” means a right granted to a Participant pursuant to Section 8.1, to receive Stock, the payment of which is contingent upon achieving certain Performance Goals or other performance-based targets established by the Committee.
2.30 “Performance Stock Unit” means a right granted to a Participant pursuant to Section 8.2, to receive Stock, the payment of which is contingent upon achieving certain Performance Goals or other performance-based targets established by the Committee.
2.31 “Plan” means this Spriza, Inc. 2013 Incentive Award Plan, as it may be amended from time to time.
2.32 “Qualified Performance-Based Compensation” means any compensation that is intended to qualify as “qualified performance-based compensation” as described in Section 162(m)(4)(C) of the Code.
2.33 “Restricted Stock” means Stock awarded to a Participant pursuant to Article 6 that is subject to certain restrictions and may be subject to risk of forfeiture.
2.34 “Restricted Stock Unit” means an Award granted pursuant to Section 8.6.
2.35 “Securities Act” shall mean the Securities Act of 1933, as amended.
2.36 “Stock” means the common stock of the Company, par value $0.0001 per share, and such other securities of the Company that may be substituted for Stock pursuant to Article 11.
2.37 “Stock Appreciation Right” or “SAR” means a right granted pursuant to Article 7 to receive a payment equal to the excess of the Fair Market Value of a specified number of shares of Stock on the date the SAR is exercised over the Fair Market Value on the date the SAR was granted as set forth in the applicable Award Agreement.
2.38 “Stock Payment” means (a) a payment in the form of shares of Stock, or (b) an option or other right to purchase shares of Stock, as part of any bonus, deferred compensation or other arrangement, made in lieu of all or any portion of the compensation, granted pursuant to Section 8.4.
2.39 “Subsidiary” means any “subsidiary corporation” as defined in Section 424(f) of the Code and any applicable regulations promulgated thereunder or any other entity of which a majority of the outstanding voting stock or voting power is beneficially owned directly or indirectly by the Company.
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ARTICLE 3.
SHARES SUBJECT TO THE PLAN
3.1 Number of Shares.
(a) Subject to Article 11 and Section 3.1(b), the aggregate number of shares of Stock which may be issued or transferred pursuant to Awards under the Plan is the sum of (i) 6,300,000 shares.
(b) To the extent that an Award terminates, expires, or lapses for any reason, any shares of Stock subject to the Award shall again be available for the grant of an Award pursuant to the Plan. Additionally, any shares of Stock tendered or withheld to satisfy the grant or exercise price or tax withholding obligation pursuant to any Award shall again be available for the grant of an Award pursuant to the Plan. To the extent permitted by applicable law or any exchange rule, shares of Stock issued in assumption of, or in substitution for, any outstanding awards of any entity acquired in any form of combination by the Company or any Subsidiary shall not be counted against shares of Stock available for grant pursuant to this Plan. The payment of Dividend Equivalents in cash in conjunction with any outstanding Awards shall not be counted against the shares available for issuance under the Plan. Notwithstanding the provisions of this Section 3.1(b), no shares of Common Stock may again be optioned, granted or awarded if such action would cause an Incentive Stock Option to fail to qualify as an incentive stock option under Section 422 of the Code.
3.2 Stock Distributed. Any Stock distributed pursuant to an Award may consist, in whole or in part, of authorized and unissued Stock, treasury Stock or Stock purchased on the open market.
3.3 Limitation on Number of Shares Subject to Awards. Notwithstanding any provision in the Plan to the contrary, and subject to Article 11, the maximum number of shares of Stock with respect to one or more Awards that may be granted to any one Participant during any calendar year shall be no greater than 5% of the issued and outstanding share capital or 3,150,000 as at the date of execution of this Plan.
ARTICLE 4.
ELIGIBILITY AND PARTICIPATION
4.1 Eligibility. Each Eligible Individual shall be eligible to be granted one or more Awards pursuant to the Plan.
4.2 Participation. Subject to the provisions of the Plan, the Committee may, from time to time, select from among all Eligible Individuals, those to whom Awards shall be granted and shall determine the nature and amount of each Award. No Eligible Individual shall have any right to be granted an Award pursuant to this Plan.
4.3 Foreign Participants. Notwithstanding any provision of the Plan to the contrary, in order to comply with the laws in other countries in which the Company and its Subsidiaries operate or have Eligible Individuals, the Committee, in its sole discretion, shall have the power and authority to: (i) determine which Subsidiaries shall be covered by the Plan; (ii) determine which Eligible Individuals outside the United States are eligible to participate in the Plan; (iii) modify the terms and conditions of any Award granted to Eligible Individuals outside the United States to comply with applicable foreign laws; (iv) establish subplans and modify exercise procedures and other terms and procedures, to the extent such actions may be necessary or advisable (any such subplans and/or modifications shall be attached to this Plan as appendices); provided, however, that no such subplans and/or modifications shall increase the share limitations contained in Sections 3.1 and 3.3 of the Plan; and (v) take any action, before or after an Award is made, that it deems advisable to obtain approval or comply with any necessary local governmental regulatory exemptions or approvals. Notwithstanding the foregoing, the Committee may not take any actions hereunder, and no Awards shall be granted, that would violate the Exchange Act, the Code, any securities law or governing statute or any other applicable law.
5.
ARTICLE 5.
STOCK OPTIONS
5.1 General. The Committee is authorized to grant Options to Eligible Individuals on the following terms and conditions:
(a) Exercise Price. The exercise price per share of Stock subject to an Option shall be determined by the Committee and set forth in the Award Agreement; provided that the exercise price for any Option shall not be less than the Fair Market Value of a share of Stock on the date of grant.
(b) Time and Conditions of Exercise. The Committee shall determine the time or times at which an Option may be exercised in whole or in part; provided that the term of any Option granted under the Plan shall not exceed ten years. The Committee shall also determine the performance or other conditions, if any, that must be satisfied before all or part of an Option may be exercised.
(c) Payment. The Committee shall determine the methods by which the exercise price of an Option may be paid, the form of payment, including, without limitation: (i) cash, (ii) shares of Stock held for such period of time as may be required by the Committee in order to avoid adverse accounting consequences and having a Fair Market Value on the date of delivery equal to the aggregate exercise price of the Option or exercised portion thereof, or (iii) other property acceptable to the Committee (including through the delivery of a notice that the Participant has placed a market sell order with a broker with respect to shares of Stock then issuable upon exercise of the Option, and that the broker has been directed to pay a sufficient portion of the net proceeds of the sale to the Company in satisfaction of the Option exercise price; provided that payment of such proceeds is then made to the Company upon settlement of such sale). The Committee shall also determine the methods by which shares of Stock shall be delivered or deemed to be delivered to Participants. Notwithstanding any other provision of the Plan to the contrary, no Participant who is a Director or an “executive officer” of the Company within the meaning of Section 13(k) of the Exchange Act shall be permitted to pay the exercise price of an Option, or continue any extension of credit with respect to the exercise price of an Option with a loan from the Company or a loan arranged by the Company in violation of Section 13(k) of the Exchange Act.
(d) Evidence of Grant. All Options shall be evidenced by an Award Agreement between the Company and the Participant. The Award Agreement shall include such additional provisions as may be specified by the Committee.
5.2 Incentive Stock Options. Incentive Stock Options shall be granted only to Employees and the terms of any Incentive Stock Options granted pursuant to the Plan, in addition to the requirements of Section 5.1, must comply with the provisions of this Section 5.2.
(a) Exercise Price. The exercise price per share of Stock shall be set by the Committee; provided that subject to Section 5.2(d), the exercise price for any Incentive Stock Option shall not be less than 100% of the Fair Market Value on the date of grant.
(b) Expiration. Subject to Section 5.2(d), an Incentive Stock Option shall expire and may not be exercised to any extent by anyone after the first to occur of the following events:
(i) Ten years from the date it is granted, unless an earlier time is set in the Award Agreement;
(ii) Three months after the Participant’s termination of employment as an Employee; and
(iii) One year after the date of the Participant’s termination of employment or service on account of Disability or death. Upon the Participant’s Disability or death, any Incentive Stock Options exercisable at the Participant’s Disability or death may be exercised by the Participant’s legal representative or representatives, by the person or persons entitled to do so pursuant to the Participant’s last
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will and testament, or, if the Participant fails to make testamentary disposition of such Incentive Stock Option or dies intestate, by the person or persons entitled to receive the Incentive Stock Option pursuant to the applicable laws of descent and distribution.
(c) Dollar Limitation. The aggregate Fair Market Value (determined as of the time the Option is granted) of all shares of Stock with respect to which Incentive Stock Options are first exercisable by a Participant in any calendar year may not exceed $100,000 or such other limitation as imposed by Section 422(d) of the Code, or any successor provision. To the extent that Incentive Stock Options are first exercisable by a Participant in excess of such limitation, the excess shall be considered Non-Qualified Stock Options.
(d) Ten Percent Owners. An Incentive Stock Option shall be granted to any individual who, at the date of grant, owns stock possessing more than ten percent of the total combined voting power of all classes of Stock of the Company only if such Option is granted at a price that is not less than 110% of Fair Market Value on the date of grant and the Option is exercisable for no more than five years from the date of grant.
(e) Notice of Disposition. The Participant shall give the Company prompt notice of any disposition of shares of Stock acquired by exercise of an Incentive Stock Option within (i) two years from the date of grant of such Incentive Stock Option or (ii) one year after the transfer of such shares of Stock to the Participant.
(f) Right to Exercise. During a Participant’s lifetime, an Incentive Stock Option may be exercised only by the Participant.
(g) Failure to Meet Requirements. Any Option (or portion thereof) purported to be an Incentive Stock Option, which, for any reason, fails to meet the requirements of Section 422 of the Code shall be considered a Non-Qualified Stock Option.
5.3 Automatic Grants to Independent Directors. Each Independent Director shall be granted under the Plan on the date of such person’s first election to the Board, Non-Qualified Stock Options to purchase up to 50,000 shares of Stock, 50% of which shall be exercisable after one year from the date of the grant and 100% of which shall be exercisable after two years from the date of the grant. Each Independent Director will also be granted on the anniversary of such Independent Director’s initial election to the Board, Non-Qualified Stock Options to purchase up to 50,000 shares of Stock which shall be vested and exercisable immediately on the date of grant. Each such Option shall expire ten years after the date of grant and shall be subject to earlier termination as provided in the Plan. Notwithstanding the foregoing, if at any time during the last six (6) months of the term of any Option granted pursuant to this Section 5.3, the holder thereof is precluded from selling shares of Stock underlying such Option solely by reason of the application to such Independent Director of the policies contained in the Company’s Insider Trading Compliance Manual (or any similar successor policies), the term of such Option shall be deemed automatically extended by a period equal to six (6) months beginning with the first day during which such Independent Director shall no longer be so precluded; provided, however, that in no event shall such term be extended beyond the tenth anniversary of the date of grant of the Option. Except as set forth in this Section 5.2(d), all of the provisions of the Plan shall be applicable to Awards granted to Independent Directors hereunder.
ARTICLE 6.
RESTRICTED STOCK AWARDS
6.1 Grant of Restricted Stock. The Committee is authorized to make Awards of Restricted Stock to any Eligible Individual selected by the Committee in such amounts and subject to such terms and conditions as determined by the Committee. All Awards of Restricted Stock shall be evidenced by an Award Agreement.
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6.2 Issuance and Restrictions. Restricted Stock shall be subject to such restrictions on transferability and other restrictions as the Committee may impose (including, without limitation, limitations on the right to vote Restricted Stock or the right to receive dividends on the Restricted Stock). These restrictions may lapse separately or in combination at such times, pursuant to such circumstances, in such instalments, or otherwise, as the Committee determines at the time of the grant of the Award or thereafter.
6.3 Forfeiture. Except as otherwise determined by the Committee at the time of the grant of the Award or thereafter, upon termination of employment or service during the applicable restriction period, Restricted Stock that is at that time subject to restrictions shall be forfeited; provided, however, that, the Committee may (a) provide in any Restricted Stock Award Agreement that restrictions or forfeiture conditions relating to Restricted Stock will be waived in whole or in part in the event of terminations resulting from specified causes, and (b) in other cases waive in whole or in part restrictions or forfeiture conditions relating to Restricted Stock.
6.4 Certificates for Restricted Stock. Restricted Stock granted pursuant to the Plan may be evidenced in such manner as the Committee shall determine. If certificates representing shares of Restricted Stock are registered in the name of the Participant, certificates must bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Restricted Stock, and the Company may, at its discretion, retain physical possession of the certificate until such time as all applicable restrictions lapse.
ARTICLE 7.
STOCK APPRECIATION RIGHTS
7.1 Grant of Stock Appreciation Rights.
(a) A Stock Appreciation Right may be granted to any Eligible Individual selected by the Committee. A Stock Appreciation Right shall be subject to such terms and conditions not inconsistent with the Plan as the Committee shall impose and shall be evidenced by an Award Agreement.
(b) A Stock Appreciation Right shall entitle the Participant (or other person entitled to exercise the Stock Appreciation Right pursuant to the Plan) to exercise all or a specified portion of the Stock Appreciation Right (to the extent then exercisable pursuant to its terms) and to receive from the Company an amount equal to the product of (i) the excess of (A) the Fair Market Value of the Stock on the date the Stock Appreciation Right is exercised over (B) the Fair Market Value of the Stock on the date the Stock Appreciation Right was granted and (ii) the number of shares of Stock with respect to which the Stock Appreciation Right is exercised, subject to any limitations the Committee may impose.
7.2 Payment and Limitations on Exercise.
(a) Subject to Sections 7.2(b), payment of the amounts determined under Sections 7.1(b) above shall be in cash, in Stock (based on its Fair Market Value as of the date the Stock Appreciation Right is exercised) or a combination of both, as determined by the Committee in the Award Agreement.
(b) To the extent any payment under Section 7.1(b) is effected in Stock, it shall be made subject to satisfaction of all provisions of Article 5 above pertaining to Options.
ARTICLE 8.
OTHER TYPES OF AWARDS
8.1 Performance Share Awards. Any Eligible Individual selected by the Committee may be granted one or more Performance Share awards which shall be denominated in a number of shares of Stock and which may be linked to any one or more of the Performance Criteria or other specific performance criteria determined appropriate by the Committee, in each case on a specified date or dates or over any period or periods determined by the Committee. In making such determinations, the Committee shall consider
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(among such other factors as it deems relevant in light of the specific type of award) the contributions, responsibilities and other compensation of the particular Participant.
8.2 Performance Stock Units. Any Eligible Individual selected by the Committee may be granted one or more Performance Stock Unit awards which shall be denominated in unit equivalent of shares of Stock and/or units of value including dollar value of shares of Stock and which may be linked to any one or more of the Performance Criteria or other specific performance criteria determined appropriate by the Committee, in each case on a specified date or dates or over any period or periods determined by the Committee. In making such determinations, the Committee shall consider (among such other factors as it deems relevant in light of the specific type of award) the contributions, responsibilities and other compensation of the particular Participant.
8.3 Dividend Equivalents.
(a) Any Eligible Individual selected by the Committee may be granted Dividend Equivalents based on the dividends declared on the shares of Stock that are subject to any Award, to be credited as of dividend payment dates, during the period between the date the Award is granted and the date the Award is exercised, vests or expires, as determined by the Committee. Such Dividend Equivalents shall be converted to cash or additional shares of Stock by such formula and at such time and subject to such limitations as may be determined by the Committee.
(b) Dividend Equivalents granted with respect to Options or SARs that are intended to be Qualified Performance-Based Compensation shall be payable, with respect to pre-exercise periods, regardless of whether such Option or SAR is subsequently exercised.
8.4 Stock Payments. Any Eligible Individual selected by the Committee may receive Stock Payments in the manner determined from time to time by the Committee. The number of shares shall be determined by the Committee and may be based upon the Performance Criteria or other specific performance criteria determined appropriate by the Committee, determined on the date such Stock Payment is made or on any date thereafter.
8.5 Deferred Stock. Any Eligible Individual selected by the Committee may be granted an award of Deferred Stock in the manner determined from time to time by the Committee. The number of shares of Deferred Stock shall be determined by the Committee and may be linked to the Performance Criteria or other specific performance criteria determined to be appropriate by the Committee, in each case on a specified date or dates or over any period or periods determined by the Committee. Stock underlying a Deferred Stock award will not be issued until the Deferred Stock award has vested, pursuant to a vesting schedule or performance criteria set by the Committee. Unless otherwise provided by the Committee, a Participant awarded Deferred Stock shall have no rights as a Company stockholder with respect to such Deferred Stock until such time as the Deferred Stock Award has vested and the Stock underlying the Deferred Stock Award has been issued.
8.6 Restricted Stock Units. The Committee is authorized to make Awards of Restricted Stock Units to any Eligible Individual selected by the Committee in such amounts and subject to such terms and conditions as determined by the Committee. At the time of grant, the Committee shall specify the date or dates on which the Restricted Stock Units shall become fully vested and non-forfeitable, and may specify such conditions to vesting as it deems appropriate. At the time of grant, the Committee shall specify the maturity date applicable to each grant of Restricted Stock Units which shall be no earlier than the vesting date or dates of the Award and may be determined at the election of the grantee. On the maturity date, the Company shall, subject to Section 10.5(b), transfer to the Participant one unrestricted, fully transferable share of Stock for each Restricted Stock Unit scheduled to be paid out on such date and not previously forfeited.
8.7 Term. Except as otherwise provided herein, the term of any Award of Performance Shares,
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Performance Stock Units, Dividend Equivalents, Stock Payments, Deferred Stock or Restricted Stock Units shall be set by the Committee in its discretion.
8.8 Exercise or Purchase Price. The Committee may establish the exercise or purchase price, if any, of any Award of Performance Shares, Performance Stock Units, Deferred Stock, Stock Payments or Restricted Stock Units; provided, however, that such price shall not be less than the par value of a share of Stock on the date of grant, unless otherwise permitted by applicable state law.
8.9 Exercise upon Termination of Employment or Service. An Award of Performance Shares, Performance Stock Units, Dividend Equivalents, Deferred Stock, Stock Payments and Restricted Stock Units shall only be exercisable or payable while the Participant is an Employee, Consultant or Director, as applicable; provided, however, that the Committee in its sole and absolute discretion may provide that an Award of Performance Shares, Performance Stock Units, Dividend Equivalents, Stock Payments, Deferred Stock or Restricted Stock Units may be exercised or paid subsequent to a termination of employment or service, as applicable, or following a Change in Control of the Company, or because of the Participant’s retirement, death or disability, or otherwise; provided, however, that any such provision with respect to Performance Shares or Performance Stock Units shall be subject to the requirements of Section 162(m) of the Code that apply to Qualified Performance-Based Compensation.
8.10 Form of Payment. Payments with respect to any Awards granted under this Article 8 shall be made in cash, in Stock or a combination of both, as determined by the Committee.
8.11 Award Agreement. All Awards under this Article 8 shall be subject to such additional terms and conditions as determined by the Committee and shall be evidenced by an Award Agreement.
ARTICLE 9.
PERFORMANCE-BASED AWARDS
9.1 Purpose. The purpose of this Article 9 is to provide the Committee the ability to qualify Awards other than Options and SARs and that are granted pursuant to Articles 6 and 8 as Qualified Performance-Based Compensation. If the Committee, in its discretion, decides to grant a Performance-Based Award to a Covered Employee, the provisions of this Article 9 shall control over any contrary provision contained in Articles 6 or 8; provided, however, that the Committee may in its discretion grant Awards to Covered Employees that are based on Performance Criteria or Performance Goals but that do not satisfy the requirements of this Article 9.
9.2 Applicability. This Article 9 shall apply only to those Covered Employees selected by the Committee to receive Performance-Based Awards. The designation of a Covered Employee as a Participant for a Performance Period shall not in any manner entitle the Participant to receive an Award for the period. Moreover, designation of a Covered Employee as a Participant for a particular Performance Period shall not require designation of such Covered Employee as a Participant in any subsequent Performance Period and designation of one Covered Employee as a Participant shall not require designation of any other Covered Employees as a Participant in such period or in any other period.
9.3 Procedures with Respect to Performance-Based Awards. To the extent necessary to comply with the Qualified Performance-Based Compensation requirements of Section 162(m)(4)(C) of the Code, with respect to any Award granted under Articles 6 or 8 which may be granted to one or more Covered Employees, no later than ninety (90) days following the commencement of any fiscal year in question or any other designated fiscal period or period of service (or such other time as may be required or permitted by Section 162(m) of the Code), the Committee shall, in writing, (a) designate one or more Covered Employees, (b) select the Performance Criteria applicable to the Performance Period, (c) establish the Performance Goals, and amounts of such Awards, as applicable, which may be earned for such Performance Period, and (d) specify the relationship between Performance Criteria and the Performance Goals and the amounts of such Awards, as applicable, to be earned by each Covered Employee for such
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Performance Period. Following the completion of each Performance Period, the Committee shall certify in writing whether the applicable Performance Goals have been achieved for such Performance Period. In determining the amount earned by a Covered Employee, the Committee shall have the right to reduce or eliminate (but not to increase) the amount payable at a given level of performance to take into account additional factors that the Committee may deem relevant to the assessment of individual or corporate performance for the Performance Period.
9.4 Payment of Performance-Based Awards. Unless otherwise provided in the applicable Award Agreement, a Participant must be employed by the Company or a Subsidiary on the day a Performance-Based Award for such Performance Period is paid to the Participant. Furthermore, a Participant shall be eligible to receive payment pursuant to a Performance-Based Award for a Performance Period only if the Performance Goals for such period are achieved. In determining the amount earned under a Performance-Based Award, the Committee may reduce or eliminate the amount of the Performance-Based Award earned for the Performance Period, if in its sole and absolute discretion, such reduction or elimination is appropriate.
9.5 Additional Limitations. Notwithstanding any other provision of the Plan, any Award which is granted to a Covered Employee and is intended to constitute Qualified Performance-Based Compensation shall be subject to any additional limitations set forth in Section 162(m) of the Code (including any amendment to Section 162(m) of the Code) or any regulations or rulings issued thereunder that are requirements for qualification as qualified performance-based compensation as described in Section 162(m)(4)(C) of the Code, and the Plan shall be deemed amended to the extent necessary to conform to such requirements.
ARTICLE 10.
PROVISIONS APPLICABLE TO AWARDS
10.1 Stand Alone and Tandem Awards. Awards granted pursuant to the Plan may, in the discretion of the Committee, be granted either alone, in addition to, or in tandem with, any other Award granted pursuant to the Plan. Awards granted in addition to or in tandem with other Awards may be granted either at the same time as or at a different time from the grant of such other Awards.
10.2 Award Agreement. Awards under the Plan shall be evidenced by Award Agreements that set forth the terms, conditions and limitations for each Award which may include the term of an Award, the provisions applicable in the event the Participant’s employment or service terminates, and the Company’s authority to unilaterally or bilaterally amend, modify, suspend, cancel or rescind an Award.
10.3 Limits on Transfer. No right or interest of a Participant in any Award may be pledged, encumbered, or hypothecated to or in favor of any party other than the Company or a Subsidiary, or shall be subject to any lien, obligation, or liability of such Participant to any other party other than the Company or a Subsidiary. Except as otherwise provided by the Committee, no Award shall be assigned, transferred, or otherwise disposed of by a Participant other than by will or the laws of descent and distribution or pursuant to beneficiary designation procedures approved from time to time by the Committee (or the Board in the case of Awards granted to Independent Directors). The Committee by express provision in the Award or an amendment thereto may permit an Award (other than an Incentive Stock Option) to be transferred to, exercised by and paid to certain persons or entities related to the Participant, including but not limited to members of the Participant’s family, charitable institutions, or trusts or other entities whose beneficiaries or beneficial owners are members of the Participant’s family and/or charitable institutions, or to such other persons or entities as may be expressly approved by the Committee, pursuant to such conditions and procedures as the Committee may establish. Any permitted transfer shall be subject to the condition that the Committee receive evidence satisfactory to it that the transfer is being made for estate and/or tax planning purposes (or to a “blind trust” in connection
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with the Participant’s termination of employment or service with the Company or a Subsidiary to assume a position with a governmental, charitable, educational or similar non-profit institution) and on a basis consistent with the Company’s lawful issue of securities.
10.4 Beneficiaries. Notwithstanding Section 10.3, a Participant may, in the manner determined by the Committee, designate a beneficiary to exercise the rights of the Participant and to receive any distribution with respect to any Award upon the Participant’s death. A beneficiary, legal guardian, legal representative, or other person claiming any rights pursuant to the Plan is subject to all terms and conditions of the Plan and any Award Agreement applicable to the Participant, except to the extent the Plan and Award Agreement otherwise provide, and to any additional restrictions deemed necessary or appropriate by the Committee. If the Participant is married and resides in a community property state, a designation of a person other than the Participant’s spouse as his or her beneficiary with respect to more than 50% of the Participant’s interest in the Award shall not be effective without the prior written consent of the Participant’s spouse. If no beneficiary has been designated or survives the Participant, payment shall be made to the person entitled thereto pursuant to the Participant’s will or the laws of descent and distribution. Subject to the foregoing, a beneficiary designation may be changed or revoked by a Participant at any time provided the change or revocation is filed with the Committee.
10.5 Stock Certificates; Book Entry Procedures.
(a) Notwithstanding anything herein to the contrary, the Company shall not be required to issue or deliver any certificates evidencing shares of Stock pursuant to the exercise of any Award, unless and until the Board has determined, with advice of counsel, that the issuance and delivery of such certificates is in compliance with all applicable laws, regulations of governmental authorities and, if applicable, the requirements of any exchange on which the shares of Stock are listed or traded. All Stock certificates delivered pursuant to the Plan are subject to any stop-transfer orders and other restrictions as the Committee deems necessary or advisable to comply with federal, state, or foreign jurisdiction, securities or other laws, rules and regulations and the rules of any national securities exchange or automated quotation system on which the Stock is listed, quoted, or traded. The Committee may place legends on any Stock certificate to reference restrictions applicable to the Stock. In addition to the terms and conditions provided herein, the Board may require that a Participant make such reasonable covenants, agreements, and representations as the Board, in its discretion, deems advisable in order to comply with any such laws, regulations, or requirements. The Committee shall have the right to require any Participant to comply with any timing or other restrictions with respect to the settlement or exercise of any Award, including a window-period limitation, as may be imposed in the discretion of the Committee.
(b) Notwithstanding any other provision of the Plan, unless otherwise determined by the Committee or required by any applicable law, rule or regulation, the Company may determine whether to deliver to any Participant certificates evidencing shares of Stock issued in connection with any Award or instead whether such shares of Stock shall be recorded in the books of the Company (or, as applicable, its transfer agent or stock plan administrator).
10.6 Paperless Administration. In the event that the Company establishes, for itself or using the services of a third party, an automated system for the documentation, granting or exercise of Awards, such as a system using an internet website or interactive voice response, then the paperless documentation, granting or exercise of Awards by a Participant may be permitted through the use of such an automated system.
ARTICLE 11.
CHANGES IN CAPITAL STRUCTURE
11.1 Adjustments.
(a) In the event of any stock dividend, stock split, combination or exchange of shares, merger, consolidation or other distribution (other than normal cash dividends) of Company assets to stockholders, or any other change affecting the shares of Stock or the share price of the Stock other than an Equity
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Restructuring, the Committee shall make such equitable adjustments, if any, as the Committee in its discretion may deem appropriate to reflect such change with respect to (a) the aggregate number and kind of shares that may be issued under the Plan (including, but not limited to, adjustments of the limitations in Sections 3.1 and 3.3); (b) the terms and conditions of any outstanding Awards (including, without limitation, any applicable performance targets or criteria with respect thereto); and (c) the grant or exercise price per share for any outstanding Awards under the Plan. Any adjustment affecting an Award intended as Qualified Performance-Based Compensation shall be made consistent with the requirements of Section 162(m) of the Code.
(b) In the event of any transaction or event described in Section 11.1 or any unusual or nonrecurring transactions or events affecting the Company, any affiliate of the Company, or the financial statements of the Company or any affiliate, or of changes in applicable laws, regulations or accounting principles, the Committee, in its sole and absolute discretion, and on such terms and conditions as it deems appropriate, either by the terms of the Award or by action taken prior to the occurrence of such transaction or event and either automatically or upon the Participant’s request, is hereby authorized to take any one or more of the following actions whenever the Committee determines that such action is appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan or with respect to any Award under the Plan, to facilitate such transactions or events or to give effect to such changes in laws, regulations or principles:
(i) To provide for either (A) termination of any such Award in exchange for an amount of cash, if any, equal to the amount that would have been attained upon the exercise of such Award or realization of the Participant’s rights (and, for the avoidance of doubt, if as of the date of the occurrence of the transaction or event described in this Section 11.1 the Committee determines in good faith that no amount would have been attained upon the exercise of such Award or realization of the Participant’s rights, then such Award may be terminated by the Company without payment) or (B) the replacement of such Award with other rights or property selected by the Committee in its sole discretion;
(ii) To provide that such Award be assumed by the successor or survivor corporation, or a parent or subsidiary thereof, or shall be substituted for by similar options, rights or awards covering the stock of the successor or survivor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices;
(iii) To make adjustments in the number and type of shares of Common Stock (or other securities or property) subject to outstanding Awards, and in the number and kind of outstanding Restricted Stock or Deferred Stock and/or in the terms and conditions of (including the grant or exercise price), and the criteria included in, outstanding options, rights and awards and options, rights and awards which may be granted in the future;
(iv) To provide that such Award shall be exercisable or payable or fully vested with respect to all shares covered thereby, notwithstanding anything to the contrary in the Plan or the applicable Award Agreement; and
(v) To provide that the Award cannot vest, be exercised or become payable after such event.
(c) In connection with the occurrence of any Equity Restructuring, and notwithstanding anything to the contrary in Sections 11.1(a) and 11.1(b):
(i) The number and type of securities subject to each outstanding Award and the exercise price or grant price thereof, if applicable, will be equitably adjusted. The adjustments provided under this Section 11.1(c)(i) shall be nondiscretionary and shall be final and binding on the affected Participant and the Company.
(ii) The Committee shall make such equitable adjustments, if any, as the Committee in its discretion may deem appropriate to reflect such Equity Restructuring with respect to the aggregate number and kind of shares that may be issued under the Plan (including, but not limited to, adjustments of
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the limitations in Sections 3.1 and 3.3).
11.2 Acceleration Upon a Change in Control. Notwithstanding Section 11.1, and except as may otherwise be provided in any applicable Award Agreement or other written agreement entered into between the Company and a Participant, if a Change in Control occurs and a Participant’s Awards are not converted, assumed, or replaced by a successor entity, then immediately prior to the Change in Control such Awards shall become fully exercisable and all forfeiture restrictions on such Awards shall lapse. Upon, or in anticipation of, a Change in Control, the Committee may cause any and all Awards outstanding hereunder to terminate at a specific time in the future, including but not limited to the date of such Change in Control, and shall give each Participant the right to exercise such Awards during a period of time as the Committee, in its sole and absolute discretion, shall determine. In the event that the terms of any agreement between the Company or any Company subsidiary or affiliate and a Participant contains provisions that conflict with and are more restrictive than the provisions of this Section 11.2, this Section 11.2 shall prevail and control and the more restrictive terms of such agreement (and only such terms) shall be of no force or effect.
11.3 No Other Rights. Except as expressly provided in the Plan, no Participant shall have any rights by reason of any subdivision or consolidation of shares of stock of any class, the payment of any dividend, any increase or decrease in the number of shares of stock of any class or any dissolution, liquidation, merger, or consolidation of the Company or any other corporation. Except as expressly provided in the Plan or pursuant to action of the Committee under the Plan, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number of shares of Stock subject to an Award or the grant or exercise price of any Award.
11.4 Restrictions on Exercise. In the event of any pending stock dividend, stock split, combination or exchange of shares, merger, consolidation or other distribution (other than normal cash dividends) of Company assets to stockholders, or any other change affecting the shares of Stock or the share price of the Stock including any Equity Restructuring, for reasons of administrative convenience, the Company in its sole discretion may refuse to permit the exercise of any Award during a period of 30 days prior to the consummation of any such transaction.
ARTICLE 12.
ADMINISTRATION
12.1 Committee. Unless and until the Board delegates administration of the Plan to a Committee as set forth below, the Plan shall be administered by the full Board, and for such purposes the term “Committee” as used in this Plan shall be deemed to refer to the Board. The Board, at its discretion or as otherwise necessary to comply with the requirements of Section 162(m) of the Code, Rule 16b-3 promulgated under the Exchange Act or to the extent required by any other applicable rule or regulation, may delegate administration of the Plan to a Committee consisting of two or more members of the Board. Unless otherwise determined by the Board, the Committee shall consist solely of two or more members of the Board each of whom is an “outside director,” within the meaning of Section 162(m) of the Code, a Non-Employee Director and an “independent director” under the rules and regulations of the NASDAQ Global Market (or other principal securities market on which shares of Stock are traded); provided that any action taken by the Committee shall be valid and effective, whether or not members of the Committee at the time of such action are later determined not to have satisfied the requirements for membership set forth in this Section 12.1 or otherwise provided in any charter of the Committee. Notwithstanding the foregoing: (a) the full Board, acting by a majority of its members in office, shall conduct the general administration of the Plan with respect to all Awards granted to Independent Directors and for purposes of such Awards the term “Committee” as used in this Plan shall be deemed to refer to the Board and (b) the Committee may delegate its authority hereunder to the extent permitted by Section 12.5. In its sole discretion, the Board may at any time and from time to time exercise any and all rights and duties of the Committee under the Plan except with respect to matters which under Rule 16b-3 under the Exchange Act or Section 162(m) of
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the Code, or any regulations or rules issued thereunder, are required to be determined in the sole discretion of the Committee. Except as may otherwise be provided in any charter of the Committee, appointment of Committee members shall be effective upon acceptance of appointment; Committee members may resign at any time by delivering written notice to the Board; and vacancies in the Committee may only be filled by the Board.
12.2 Action by the Committee. Unless otherwise established by the Board or in any charter of the Committee, a majority of the Committee shall constitute a quorum and the acts of a majority of the members present at any meeting at which a quorum is present, and acts approved in writing by a majority of the Committee in lieu of a meeting, shall be deemed the acts of the Committee. Each member of the Committee is entitled to, in good faith, rely or act upon any report or other information furnished to that member by any officer or other employee of the Company or any Subsidiary, the Company’s independent certified public accountants, or any executive compensation consultant or other professional retained by the Company to assist in the administration of the Plan.
12.3 Authority of Committee. Subject to any specific designation in the Plan, the Committee has the exclusive power, authority and discretion to:
(a) Designate Participants to receive Awards;
(b) Determine the type or types of Awards to be granted to each Participant;
(c) Determine the number of Awards to be granted and the number of shares of Stock to which an Award will relate;
(d) Determine the terms and conditions of any Award granted pursuant to the Plan, including, but not limited to, the exercise price, grant price, or purchase price, any reload provision, any restrictions or limitations on the Award, any schedule for lapse of forfeiture restrictions or restrictions on the exercisability of an Award, and accelerations or waivers thereof, any provisions related to non-competition and recapture of gain on an Award, based in each case on such considerations as the Committee in its sole discretion determines; provided, however, that the Committee shall not have the authority to accelerate the vesting or waive the forfeiture of any Performance-Based Awards;
(e) Determine whether, to what extent, and pursuant to what circumstances an Award may be settled in, or the exercise price of an Award may be paid in, cash, Stock, other Awards, or other property, or an Award may be cancelled, forfeited, or surrendered;
(f) Prescribe the form of each Award Agreement, which need not be identical for each Participant;
(g) Decide all other matters that must be determined in connection with an Award;
(h) Establish, adopt, or revise any rules and regulations as it may deem necessary or advisable to administer the Plan;
(i) Interpret the terms of, and any matter arising pursuant to, the Plan or any Award Agreement; and
(j) Make all other decisions and determinations that may be required pursuant to the Plan or as the Committee deems necessary or advisable to administer the Plan.
12.4 Decisions Binding. The Committee’s interpretation of the Plan, any Awards granted pursuant to the Plan, any Award Agreement and all decisions and determinations by the Committee with respect to the Plan are final, binding, and conclusive on all parties.
12.5 Delegation of Authority. To the extent permitted by applicable law, the Board may from time to time delegate to a committee of one or more members of the Board or one or more officers of the Company
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the authority to grant or amend Awards to Participants other than (a) Employees who are subject to Section 16 of the Exchange Act, (b) Covered Employees, or (c) officers of the Company (or Directors) to whom authority to grant or amend Awards has been delegated hereunder. Any delegation hereunder shall be subject to the restrictions and limits that the Board specifies at the time of such delegation, and the Board may at any time rescind the authority so delegated or appoint a new delegatee. At all times, the delegatee appointed under this Section 12.5 shall serve in such capacity at the pleasure of the Board.
ARTICLE 13.
EFFECTIVE AND EXPIRATION DATE
13.1 Effective Date. The Plan is effective as of the date the Plan is approved by the Board (the “Effective Date”), subject to the approval by the Company’s stockholders within twelve (12) months following the Effective Date. The Plan will be deemed to be approved by the stockholders if it is approved either:
(a) By a majority of the votes cast at a duly held stockholders meeting at which a quorum representing a majority of outstanding voting stock is, either in person or by proxy, present and voting on the plan; or
(b) By a method and in a degree that would be treated as adequate under Delaware law in the case of an action requiring stockholder approval.
13.2 Expiration Date. The Plan will expire on, and no Award may be granted pursuant to the Plan after, the tenth anniversary of the Effective Date, except that no Incentive Stock Options may be granted under the Plan after the earlier of the tenth anniversary of (a) the date the Plan is approved by the Board or (b) the Effective Date. Any Awards that are outstanding on the tenth anniversary of the Effective Date shall remain in force according to the terms of the Plan and the applicable Award Agreement.
ARTICLE 14.
AMENDMENT, MODIFICATION, AND TERMINATION
14.1 Amendment, Modification, and Termination. Subject to Section 15.14, with the approval of the Board, at any time and from time to time, the Committee may terminate, amend or modify the Plan; provided, however, that (a) to the extent necessary and desirable to comply with any applicable law, regulation, or stock exchange rule, the Company shall obtain stockholder approval of any Plan amendment in such a manner and to such a degree as required, and (b) stockholder approval shall be required for any amendment to the Plan that increases the number of shares available under the Plan (other than any adjustment as provided by Article 11). Notwithstanding any provision in this Plan to the contrary, absent approval of the stockholders of the Company, no Option may be amended to reduce the per share exercise price of the shares subject to such Option below the per share exercise price as of the date the Option is granted and, except as permitted by Article 11, no Option may be granted in exchange for, or in connection with, the cancellation or surrender of an Option having a higher per share exercise price. Subject to Article 11, the Board shall not, without the approval of the stockholders of the Company, authorize the amendment of any outstanding Award to reduce its price per share. Furthermore, subject to Article 11, no Award shall be cancelled and replaced with the grant of an Award having a lesser price per share without the further approval of stockholders of the Company. Subject to Article 11, the Board shall have the authority, without the approval of the stockholders of the Company, to amend any outstanding award to increase the price per share or to cancel and replace an Award with the grant of an Award having a price per share that is greater than or equal to the price per share of the original Award.
14.2 Awards Previously Granted. Except with respect to amendments made pursuant to Section 15.14, no termination, amendment, or modification of the Plan shall adversely affect in any material way any Award previously granted pursuant to the Plan without the prior written consent of the Participant.
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ARTICLE 15.
GENERAL PROVISIONS
15.1 No Rights to Awards. No Eligible Individual or other person shall have any claim to be granted any Award pursuant to the Plan, and neither the Company nor the Committee is obligated to treat Eligible Individuals, Participants or any other persons uniformly.
15.2 No Stockholders Rights. Except as otherwise provided herein, a Participant shall have none of the rights of a stockholder with respect to shares of Stock covered by any Award until the Participant becomes the record owner of such shares of Stock.
15.3 Withholding. The Company or any Subsidiary shall have the authority and the right to deduct or withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy federal, state, local and foreign taxes (including the Participant’s employment tax obligations) required by law to be withheld with respect to any taxable event concerning a Participant arising as a result of this Plan. The Committee may in its discretion and in satisfaction of the foregoing requirement allow a Participant to elect to have the Company withhold shares of Stock otherwise issuable under an Award (or allow the return of shares of Stock) having a Fair Market Value equal to the sums required to be withheld. Notwithstanding any other provision of the Plan, the number of shares of Stock which may be withheld with respect to the issuance, vesting, exercise or payment of any Award (or which may be repurchased from the Participant of such Award within six months (or such other period as may be determined by the Committee) after such shares of Stock were acquired by the Participant from the Company) in order to satisfy the Participant’s federal, state, local and foreign income and payroll tax liabilities with respect to the issuance, vesting, exercise or payment of the Award shall be limited to the number of shares which have a Fair Market Value on the date of withholding or repurchase equal to the aggregate amount of such liabilities based on the minimum statutory withholding rates for federal, state, local and foreign income tax and payroll tax purposes that are applicable to such supplemental taxable income.
15.4 No Right to Employment or Services. Nothing in the Plan or any Award Agreement shall interfere with or limit in any way the right of the Company or any Subsidiary to terminate any Participant’s employment or services at any time, nor confer upon any Participant any right to continue in the employ or service of the Company or any Subsidiary.
15.5 Unfunded Status of Awards. The Plan is intended to be an “unfunded” plan for incentive compensation. With respect to any payments not yet made to a Participant pursuant to an Award, nothing contained in the Plan or any Award Agreement shall give the Participant any rights that are greater than those of a general creditor of the Company or any Subsidiary.
15.6 Indemnification. To the extent allowable pursuant to applicable law, each member of the Committee or of the Board shall be indemnified and held harmless by the Company from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by such member in connection with or resulting from any claim, action, suit, or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action or failure to act pursuant to the Plan and against and from any and all amounts paid by him or her in satisfaction of judgment in such action, suit, or proceeding against him or her; provided he or she gives the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled pursuant to the Company’s Certificate of Incorporation or Bylaws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless.
15.7 Relationship to other Benefits. No payment pursuant to the Plan shall be taken into account in determining any benefits pursuant to any pension, retirement, savings, profit sharing, group insurance, welfare or other benefit plan of the Company or any Subsidiary except to the extent otherwise expressly provided in writing in such other plan or an agreement thereunder.
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15.8 Expenses. The expenses of administering the Plan shall be borne by the Company and its Subsidiaries.
15.9 Titles and Headings. The titles and headings of the Sections in the Plan are for convenience of reference only and, in the event of any conflict, the text of the Plan, rather than such titles or headings, shall control.
15.10 Fractional Shares. No fractional shares of Stock shall be issued and the Committee shall determine, in its discretion, whether cash shall be given in lieu of fractional shares or whether such fractional shares shall be eliminated by rounding up or down as appropriate.
15.11 Limitations Applicable to Section 16 Persons. Notwithstanding any other provision of the Plan, the Plan, and any Award granted or awarded to any Participant who is then subject to Section 16 of the Exchange Act, shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 under the Exchange Act) that are requirements for the application of such exemptive rule. To the extent permitted by applicable law, the Plan and Awards granted or awarded hereunder shall be deemed amended to the extent necessary to conform to such applicable exemptive rule.
15.12 Government and Other Regulations. The obligation of the Company to make payment of awards in Stock or otherwise shall be subject to all applicable laws, rules, and regulations, and to such approvals by government agencies as may be required. The Company shall be under no obligation to register pursuant to the Securities Act, as amended, any of the shares of Stock paid pursuant to the Plan. If the shares paid pursuant to the Plan may in certain circumstances be exempt from registration pursuant to the Securities Act, as amended, the Company may restrict the transfer of such shares in such manner as it deems advisable to ensure the availability of any such exemption.
15.13 Governing Law. The Plan and all Award Agreements shall be construed in accordance with and governed by the laws of the State of Delaware.
15.14 Section 409A. To the extent that the Committee determines that any Award granted under the Plan is subject to Section 409A of the Code, the Award Agreement evidencing such Award shall incorporate the terms and conditions required by Section 409A of the Code. To the extent applicable, the Plan and Award Agreements shall be interpreted in accordance with Section 409A of the Code and Department of Treasury regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued after the Effective Date. Notwithstanding any provision of the Plan to the contrary, in the event that following the Effective Date the Committee determines that any Award may be subject to Section 409A of the Code and related Department of Treasury guidance (including such Department of Treasury guidance as may be issued after the Effective Date), the Committee may adopt such amendments to the Plan and the applicable Award Agreement or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, that the Committee determines are necessary or appropriate to (a) exempt the Award from Section 409A of the Code and/or preserve the intended tax treatment of the benefits provided with respect to the Award, or (b) comply with the requirements of Section 409A of the Code and related Department of Treasury guidance and thereby avoid the application of any penalty taxes under such Section.
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Signature Page
I hereby certify that the foregoing Plan was duly adopted by the Board of Directors of Spriza, Inc. on October 29, 2013.
/s/ Robert Danard
Robert Danard, CEO
I hereby certify that the foregoing Plan was duly adopted by the Board of Directors of Spriza, Inc. on October 29, 2013.
/s/ Chris Robbins
Chris Robbins, CFO, Corporate Secretary
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SPRIZA, INC.
CODE
OF
BUSINESS CONDUCT AND ETHICS
TABLE OF CONTENTS
Page
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SPRIZA’S CODE OF BUSINESS CONDUCT AND ETHICS
POLICY STATEMENT
It is the policy of Spriza, Inc. (“Spriza” or the “Company”) to conduct its affairs in accordance with all applicable laws, rules and regulations of the jurisdictions in which it does business. This Code of Business Conduct and Ethics (“Code”) applies to the Company’s employees, officers and non-employee directors, including the Company's principal executive officer, principal financial officer, principal accounting officer or controller, and persons performing similar functions (“Designated Executives”). This Code is the Company’s “code of ethics” as defined in Item 406 of Regulation S-K. This Code is designed to promote:
● | honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; |
● | full, fair, accurate, timely and understandable disclosure in the reports and documents the Company files with, or submits to, the Securities and Exchange Commission and in other public communications made by the Company; |
● | compliance with applicable governmental laws, rules and regulations; |
● | the protection of Company assets, including corporate opportunities and confidential information; |
● | fair dealing practices; |
● | the prompt internal reporting to the appropriate person of violations of this Code; and |
● | accountability for adherence to this Code. |
Spriza, Inc. has established standards for behaviour that affects the Company, and employees, officers and directors must comply with those standards. The Company promotes ethical behaviour and encourages employees to talk to supervisors, managers, or other appropriate personnel when in doubt about the best course of action in a particular situation. Non-employee directors are encouraged to talk to the chief of the board committee responsible for compliance in such situations. Anyone aware of a situation that he or she believes may violate or lead to a violation of this Code should follow the guidelines under “Compliance and Reporting” below.
The Code covers a wide range of business practices and procedures. It does not cover every issue that may arise, but it sets out basic principles to guide you. Specific Company policies and procedures provide details pertinent to many of the provisions of the Code. Many of these policies and procedures can be found at http://www.Spriza.com. Although there can be no better course of action than to apply common sense and sound judgment, do not hesitate to use the resources available whenever it is necessary to seek clarification.
APPROVALS AND WAIVERS; AMENDMENTS; INTERPRETATION
Certain provisions of this Code require you to act, or refrain from acting, unless prior approval is received from the appropriate person. Employees requesting approval pursuant to this Code should request such approval in writing from the President of the Company. Approvals relating to executive officers and directors must be obtained from the Company’s Board of Directors. All other approvals may be granted by the President of the Company, or such officer’s designee.
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Other provisions of this Code require you to act, or refrain from acting, in a particular manner and do not permit exceptions based on obtaining an approval. Waiver of those provisions relating to executive officers and directors may only be granted by the Company’s Board of Directors and waivers relating to executive officers and directors must be promptly disclosed to shareholders. All other waivers may be granted by the President of the Company, or such officer’s designee.
Changes in this Code may only be made by the Board of Directors and must be promptly disclosed to shareholders. In some situations it may not be clear whether a provision of the Code is intended to apply to particular conduct. In such situations the Board of Directors and the Nominating and Governance Committee have full power and authority to interpret the Code in a manner that they believe reflects the intent of the Board, and no determination that the Code was not intended to apply to such conduct shall be deemed to be a waiver of the Code’s prohibitions.
CONFLICTS OF INTEREST
A conflict of interest arises when your personal interests interfere with your ability to act in the best interests of the Company. Employees must discharge their responsibilities on the basis of what is in the best interest of the Company independent of personal consideration or relationships. Non-employee directors must discharge their fiduciary duties as directors of the Company.
Employees should disclose any potential conflicts of interest to the President of the Company or such officer’s designees, who can advise the employee as to whether or not the Company believes a conflict of interest exists. An employee should also disclose potential conflicts of interest involving the employee’s spouse, siblings, parents, in-laws, children and members of the employee’s household. Non-employee directors may discuss any concerns with the chief of the committee of the Board of Directors responsible for conflicts of interest matters.
Activities Outside the Company
Although Spriza has no interest in preventing employees from engaging in lawful activities during nonworking hours, employees must make sure that their outside activities do not conflict or interfere with their responsibilities to the Company. For example, without approval by the Company, a Spriza employee generally may not:
● | engage in self-employment or perform paid or unpaid work for others in a field of interest similar to the Company; |
● | use proprietary or confidential Company information for personal gain or to the Company’s detriment; |
● | use Company assets or labor for personal use, except for incidental use permitted under the Company’s policies; |
● | acquire any interest in property or assets of any kind for the purpose of selling or leasing it to the Company; or |
● | appear to represent Spriza as the participant in an outside activity unless the Company has authorized the employee to represent Spriza. |
Community Activities
Spriza encourages you to be actively involved in your community through volunteer service to charitable, civic and public service organizations, and through participation in the political process and trade associations.
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Employees must make sure, however, that their service is consistent with their employment with Spriza and does not pose a conflict of interest. This is particularly important before accepting any leadership position (such as membership on the board of a charitable or civic organization), before seeking or accepting political office and before soliciting a charitable contribution.
Service on Outside Boards of Directors
Serving as a director of another corporation may create a conflict of interest. Employees must disclose such service to the President of the Company and obtain prior approval before serving on the board of another company, whether or not such company is a competitor of Spriza.
Competitor Relationships
Employees should avoid even the appearance of a conflict of interest in their relationships with competitors. Without approval employees may not:
● | provide compensated or uncompensated services to a competitor, except for services rendered under a valid Spriza contract with the competitor; |
● | disclose any Company proprietary information to a competitor, unless a nondisclosure agreement is in place; or |
● | utilize for any unauthorized purposes or disclose to a competitor or other third-party any proprietary data that has been entrusted to the Company by a customer or supplier. |
Corporate Opportunities & Resources
You are prohibited from taking for yourself personal opportunities that are discovered through the use of corporate property, information or position without approval. Without approval, you may not use corporate property, information or position for personal gain. No employee may compete with the Company, directly or indirectly, except as permitted by Company policies.
All employees should protect the Company's assets and ensure their efficient use. Theft, carelessness and waste have a direct impact on the Company's profitability. All Company assets should be used for legitimate business purposes.
Company resources may be used for minor personal uses, so long as such use is reasonable, does not interfere with your duties, is not done for pecuniary gain, does not conflict with the Company’s business and does not violate any Company policy.
Indirect Interests and Relationships
A conflict of interest can also arise because of the business activities of your close relations. For example, an employee may have a potential conflict of interest wherever a close relative has a significant relationship with, or has a significant financial interest in, any supplier, customer or competitor.
An employee may not make or attempt to influence any decision that could directly or indirectly benefit his or her close relative. To protect the employee and the Company from the appearance of a conflict of interest, he or she should make appropriate disclosure of the interest to the President of the Company or such officer’s designee.
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BUSINESS RELATIONSHIPS
Spriza seeks to outperform its competition fairly and honestly. The Company seeks competitive advantages through superior performance, not unethical or illegal business practices. Each employee must endeavour to deal fairly with the Company's customers, suppliers, competitors and employees and must not take advantage of them through manipulation, concealment, abuse of privileged information, misrepresentation of material facts, or any unfair-dealing practice.
Customer Relationships
Our customers are of the utmost importance to Spriza. Spriza’ employees must always treat customers and potential customers according to the highest standards of business conduct.
Moreover, the Company may be entrusted with property or valuable information belonging to customers, suppliers, the Company’s employees, or other persons. Without approval, you may not use for personal gain any property or valuable information provided to the Company by customers, suppliers, the Company’s employees, or other persons.
All employees must use the same care to protect any property or valuable information entrusted to the Company which belongs to customers, suppliers, the Company’s employees, or other persons, as must be used to protect the Company’s assets.
You may never use for any personal purpose any property or valuable information entrusted to the Company which belongs to customers, suppliers, the Company’s employees, or other persons.
It is Spriza’ policy to sell our products and services on their merits and to avoid making disparaging comments about the products and services of competitors unless they can be substantiated. Employees should be careful in this regard in commenting upon the character, financial condition, or potential legal or regulatory problems of competitors.
Suppliers
Spriza’ suppliers - companies and individuals that sell products and services to the Company - are important to our business. Spriza’ employees should always treat suppliers and potential suppliers in accordance with the highest standards of business conduct.
Suppliers must be selected on the basis of objective criteria, such as value (quality for price), price, technical excellence, service reputation and production/service capacity.
Employees working with current suppliers must never intentionally interfere with a supplier’s contracts or business relations with a competitor of Spriza.
Individuals with procurement responsibility should review the sections of this Code concerning fair competition and should be familiar with applicable laws and Company policies.
FAIR COMPETITION
Fair competition laws, including the U.S. antitrust rules, limit what Spriza can do with another company and what Spriza can do on its own. Generally, the laws are designed to prohibit agreements or actions that reduce competition and harm consumers. You may not enter into agreements or discussions with competitors that have the effect of fixing or controlling prices, dividing and allocating markets or territories, or boycotting suppliers or customers. U.S. and foreign antitrust laws also apply to imports and exports.
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GIFTS, GRATUITIES, ENTERTAINMENT AND OTHER CONSIDERATIONS
Use of Company funds or other Company property for illegal, unethical or otherwise improper purposes is prohibited. The purpose of business entertainment and gifts in a commercial setting is to create goodwill and a sound working relationship, not to gain personal advantage with customers or suppliers.
Gifts
Except as set out below, without approval by the President of the Company or such officer’s designees, employees must refrain from giving and receiving business-related gifts.
● | No Spriza employee or agent may solicit or accept a gift (including any payment, compensation, loan or other financial favor) to or from a person or organization with the intention of influencing the recipient’s business judgment or conduct. Giving or accepting any unsolicited gifts having a value of not more than $50.00 where there is a business benefit or purpose for the gift and any benefits received do not influence, or appear to influence, selection and purchasing decisions is permitted. In some countries, gifts having a greater value are customary and may be given or accepted with the approval of the President of the Company or such officer’s designees. |
● | It is never appropriate or permissible to accept or give cash or a cash equivalent from or to a vendor, supplier or customer outside the Company’s normal business. Cash equivalents include, among other things, checks, money orders and vouchers. |
● | Rules relating to U.S. and foreign government personnel are more stringent. See “Doing Business Internationally”and “Government Contracting”below. |
● | No employee may accept a customer, vendor or supplier discount for themselves unless it is generally available to the public or is approved and available to all Spriza employees. |
Spriza’ employees may entertain socially friends or relatives doing business with the Company provided that the entertainment is clearly not related to Company business. No expenses of such entertainment are reimbursable by the Company.
Loans
Employees may not accept loans from any person or entities having or seeking business with the Company. Designated Executives and directors may not receive loans from the Company, nor may the Company arrange for any loan.
Meals, Entertainment, and Travel
Employees may provide or accept meals and entertainment, including attendance at sporting or cultural events, as long as it is associated with an occasion at which business is discussed and is provided as a normal part of business. The value of the activity must be reasonable and permissible under Spriza’ expense account procedures. Each employee should express care to insure that such activities are necessary and that their value and frequency are not excessive under all the applicable circumstances. Rules relating to U.S. and foreign government personnel are more stringent. See “Doing Business Internationally” and “Government Contracting” below.
Investment Activities
Unless an employee has sought and received pre-approval, an employee may not:
● | participate in so-called “directed shares,” “friends and family,” and similar stock purchase programs of customers, vendors or suppliers of Spriza; |
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● | invest in non-public companies that are, or are likely to be, customers, vendors or suppliers of Spriza; or |
● | invest in non-public companies in which Spriza has made or is expected to make an investment. |
Investments in non-public companies that do not exceed the lesser of five thousand dollars ($5,000) or 5% of that company’s equity securities are exempt from this restriction.
Bribes and Kickbacks
The use of Company funds, facilities or property for any illegal or unethical purpose is strictly prohibited; provided, that certain facilitating payments discussed in “Doing Business Internationally” are permitted.
● | You are not permitted to offer, give or cause others to give, any payments or anything of value for the purpose of influencing the recipient’s business judgment or conduct in dealing with the Company other than facilitating payments. |
● | You may not solicit or accept a kickback or bribe, in any form, for any reason. |
DOING BUSINESS INTERNATIONALLY
Spriza is committed to the highest business conduct standards wherever it operates. The Company observes these standards worldwide, even at the risk of losing business. While no one can anticipate all the situations that may present challenges to Spriza employees doing business in the worldwide marketplace, the following guidelines always apply:
● | Observe all laws and regulations, both U.S. and non-U.S., that apply to business abroad. |
● | Paying bribes to government officials is absolutely prohibited, even if those bribes are common practice, except for facilitating payments. You may not give, promise to give or authorize the giving to a foreign official, a foreign political party, or official thereof or any candidate for foreign political office any money or offer, gift, promise to give or authorize the giving of anything of value to influence any act or decision, to induce such official, party or candidate to do or omit to do any act in violation of the lawful duty of such official, party or candidate, or to induce such official, party or candidate to use his or her influence with a foreign government or agency to affect or influence any act or decision of such foreign government or agency. |
● | Do not cooperate with illegal boycotts. |
● | Observe all licensing requirements and the requirements of applicable import and export control laws. |
● | Do not enter into an agreement with an agent or consultant that relates to Spriza’ business outside the United States unless it has been approved by the Company. |
● | Observe all privacy and data protection laws and regulations of other countries (such as Japan, Hong Kong, Australia, Canada and Argentina) and authorities (such as the European Union). |
The laws governing Spriza’s business in foreign countries are extensive and complex, and may be different from those in the United States. No new Spriza services or products should be offered in any new country without prior approval, and then only in accordance with the applicable local country’s regulations and requirements.
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Facilitating Payments to Low-Level Non-U.S. Governmental Employees and Officials for Non-Discretionary Action
Spriza is committed to complying with the laws of the countries where it operates. In some countries, a very limited category of small payments to facilitate or expedite routine nondiscretionary governmental actions may be permitted as exceptions to anti-bribery laws, including the U.S. Foreign Corrupt Practices Act (“FCPA”). The requirements pertaining to such payments are complex. Spriza employees engaged in international business activities must obtain prior approval of the President of the Company before making any such payment.
These “facilitating payments” to non-U.S. governmental officials are distinguished from payments made to influence a discretionary decision or to cause violation of, or an act in conflict with, the interests of an individual’s employer, which are strictly prohibited.
Anti-Boycott Compliance
The United States has enacted anti-boycott regulations which make it unlawful for U.S. persons to participate in any activity that could have the effect of promoting or supporting a boycott or restrictive trade practice of another country against customers or suppliers located in a country friendly to the U.S. or against a U.S. person, firm or corporation. Boycott issues arise most frequently in connection with the Arab boycott of Israel. Prohibited actions include, but are not limited to, furnishing information about business relationships with boycotted countries, or information about race, religion, sex or national origin. Any request to participate in such activity relating to Spriza should be immediately reported to the President of the Company or the officer’s designee.
GOVERNMENT CONTRACTING
Detailed laws and regulations govern virtually every aspect of doing business with the U.S. government and its agencies. Activities that might be permitted when working with the private sector may be improper or even illegal when a national or local government is the customer.
Spriza employees should seek to adhere to the highest standards of honesty and integrity in their relations with government officials and employees. For example, employees should observe the following principles when bidding or performing government contracts:
● | Do not offer or provide meals, transportation, gifts or other consideration to government employees except as permitted under applicable law and Company policy. |
● | Obey the regulations governing current and post-government employee conflicts of interests. Obtain all appropriate government approvals prior to recruiting or hiring current or former government employees. |
● | Obtain appropriate licenses prior to exporting or even discussing certain technologies with citizens of other countries. |
● | Obey any requirements that may restrict access to source selection or competitive information. |
Employees of the Company who deal with government representatives are responsible for knowing and obeying the laws and regulations applicable to doing business with the U.S. government.
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POLITICAL CONTRIBUTIONS AND LOBBYING
No political contributions are to be made using Spriza’ funds or assets, or the funds or assets of any Spriza subsidiary, to any political party, political campaign, political candidate or public official in the United States or any foreign country, unless the contribution is lawful and expressly authorized in writing. In addition, you may not make a political contribution on behalf of Spriza, or with the appearance that such contribution is being made on behalf of Spriza, unless expressly authorized in writing. A “contribution” is any direct or indirect payment, distribution, loan, advance, deposit, or gift of money, services or anything of value in connection with an election or to an organization or group formed to support or defend a referendum or ballot issue.
Nothing in this Code is intended to discourage you from making contributions of your own time or funds to political parties or candidates of your choice. However, you will not be compensated or reimbursed by Spriza for any personal contributions.
Employees must obtain prior written approval to hire outside counsel or a public affairs firm to contact government officials regarding legislation, regulatory policy, or rule making. This includes grassroots lobbying contacts.
ACCURACY OF REPORTS, RECORDS AND ACCOUNTS
You are responsible for the accuracy of your records, time sheets and reports. Accurate information is essential to Spriza’ ability to meet legal and regulatory obligations and to compete effectively. The records and books of account of Spriza must meet the highest standards and accurately reflect the true nature of the transactions they record. Destruction of any records, books of account or other documents except in accordance with Spriza’ document retention policy is strictly prohibited.
You must not create false or misleading documents or accounting, financial or electronic records for any purpose relating to Spriza, and no one may direct an employee to do so. For example, expense reports must accurately document expenses actually incurred in accordance with the Company’s policies. You must not obtain or create “false” invoices or other misleading documentation or invent or use fictitious entities, sales, purchases, services, loans or other financial arrangements for any purpose relating to Spriza. Employees are also responsible for accurately reporting time worked.
No undisclosed or unrecorded account or fund may be established for any purpose. No false or misleading entries may be made in the Company’s books or records for any reason. No disbursement of corporate funds or other corporate property may be made without adequate supporting documentation or for any purpose other than as described in the documents. All employees must comply with generally accepted accounting principles and the Company’s internal controls at all times.
GOVERNMENT INVESTIGATIONS
You must promptly notify counsel of any government investigation or inquiries from government agencies concerning Spriza. You may not destroy any record, books of account, or other documents relating to Spriza except in accordance with the Company’s document retention policy. If you are aware of a government investigation or inquiry, you may not destroy any record, books of account, or other documents relating to Spriza unless advised by the President of the Company or the officer’s designee, that you may continue to follow the Company’s normal document retention policy.
You must not obstruct the collection of information, data or records relating to Spriza. The Company provides information to the government that it is entitled to during an inspection, investigation, or request for information. You must not lie to government investigators or make misleading statements in any investigation relating to Spriza. You must not attempt to cause any employee to fail to provide accurate information to government investigators.
Employees have the right to consult their own legal counsel at their own expense.
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REGULATORY COMPLIANCE
The Company operates in a highly regulated environment. The agencies that regulate its business include the Securities and Exchange Commission, plus many other federal, state and local agencies. The Company and its employees must comply with the regulatory requirements of these agencies. Employees are expected to take an active role by being knowledgeable about all applicable laws and regulations, attending trainings and requesting information. Employees are required to immediately report regulatory violations, suspected regulatory violations, or potentially harmful or dangerous conditions to a supervisor or the President of the Company.
INSIDER TRADING; COMMUNICATIONS WITH THIRD PARTIES
Employees, officers and directors who have access to the Company’s confidential information are not permitted to use any confidential information for their personal benefit or the benefit of others, or share that information for stock trading purposes or for any other purpose, except when the use is primarily for the purpose of benefiting the Company in the conduct of its business.
Insider Trading
Inside information is material information about a publicly traded company that is not known by the public. Information is deemed “material” if it could affect the market price of a security or if a reasonable investor would attach importance to the information in deciding whether to buy, sell or hold a security. Inside information typically relates to financial conditions, such as progress toward achieving revenue and earnings targets or projections of future earnings or losses of the Company. To the extent material and non-public, inside information also includes changes in strategy regarding a proposed merger, acquisition or tender offer, new products or services, contract awards and other similar information. Inside information is not limited to information about Spriza. It also includes material non-public information about others, including the Company’s customers, suppliers, and competitors.
Insider trading is prohibited by law. It occurs when an individual with material, non-public information trades securities or communicates such information to others who trade. The person who trades or “tips” information violates the law if he or she has a duty or relationship of trust and confidence not to use the information.
Trading or helping others trade while aware of inside information has potential serious legal consequences, even if the Insider does not receive any personal financial benefit. Insiders may also have an obligation to take appropriate steps to prevent insider trading by others.
Confidential Information
You must maintain the confidentiality of information entrusted to you by the Company or its customers, suppliers, employees or other persons except when disclosure is authorized or legally mandated. Confidential information includes all non-public information, including information that might be of use to competitors or harmful to the Company or its customers if disclosed.
The Company expects all of its employees to educate themselves about and be alert to threats to security of confidential information entrusted to the Company and its employees.
Confidential information within the Company’s possession falls into three general categories: (1) confidential proprietary information about the Company’s business including but not limited to trade secrets, other proprietary information, and information which may be patentable (“Proprietary Information”); (2) confidential information entrusted to the Company by third parties such as customers (including the U.S. government and its agencies), suppliers, or other third parties (“Third Party Information”); and (3) personally identifiable information received from employees, customers, suppliers, or other third parties (including but not limited to names, addresses, Social Security Numbers, background information, credit card or bank information, telephone or facsimile numbers, e-mail addresses and health information) (“Personal Information”) which if misused could result in identity theft, credit card fraud or other serious harm.
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Personal Information may be subject to protection under federal, state or local laws in the U.S., or under laws of other countries. No Personal Information may be transmitted from one country to another country without prior managerial approval. No Personal Information may be disposed of except pursuant to the Company’s approved methods of disposal.
The Company has an extensive Information Security Program protecting Proprietary, Third Party and Personal Information, which all employees are required to carry out while performing their daily duties. The Information Security Program has three important elements: (1) Physical security; (2) Network security; and (3) Workforce security.
Each of these elements is discussed in detail in the Company’s policies located at [insert appropriate location]. Any employees with questions about how to appropriately handle or dispose of Proprietary, Third Party or Personal Information should immediately bring their questions to the attention of management before taking any action with respect to such Proprietary, Third Party or Personal Information.
TECHNOLOGY USE AND PRIVACY
Spriza provides various technology resources (including computers, telephones, software, copying machines, Internet access, and voice mail) to you to assist in performing your duties on behalf of the Company. You have the responsibility to use the Company’s technology resources in a manner that complies with applicable laws and Company policies.
Authorization
Access to the Company’s technology resources is within the sole discretion of the Company and subject to Company policies. Generally, employees are given access to the Company’s various technologies consistent with their job functions. The Company reserves the right to limit such access by any means available to it, including revoking access altogether.
Prohibition Against Violating Copyright Laws
You may not use the Company’s technology resources to copy, retrieve, forward or send copyrighted materials unless you have the author’s permission or are accessing a single copy only for your own reference.
Other Prohibited Uses
You may not use any of the Company’s technology resources for any illegal purpose, in violation of any Company policy, in a manner contrary to the best interests of the Company, in any way that discloses Proprietary Information, Third Party Information, or Personal Information on an unauthorized basis, or for personal gain.
OUR WORK ENVIRONMENT
The diversity of the Company’s employees is a tremendous asset. Spriza is firmly committed to providing equal opportunity in all aspects of employment and will not tolerate any illegal discrimination, harassment, or retaliation. In addition, the Company strives to provide each employee with a safe and healthy work environment. Each employee has responsibility for maintaining a safe and healthy workplace for all employees by following health and safety rules and practices and reporting accidents, injuries and unsafe equipment, practices or conditions.
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ENVIRONMENTAL
Spriza must fully comply with all state and federal laws relating to the protection of the environment in the conduct of its business. Employees must use, store and dispose all hazardous materials properly and in accordance with applicable regulations. Employees must report, in accordance with Company policies, all circumstances under which hazardous materials or wastes come in contact with the environment, are improperly handled or disposed of, or where a potential violation of law may exist.
COMPLIANCE AND REPORTING
Compliance
Any employee who violates the provisions of this Code will be subject to disciplinary action, up to and including termination. Willful disregard of criminal statutes underlying this Code may require the Company to refer such violation for criminal prosecution or civil action.
Reporting Procedures and Other Inquiries
Questions regarding the policies in this Code may be directed to the President of the Company or the Board of Directors. Managers and supervisors are also resources who can provide timely advice and guidance to employees on ethics and compliance concerns. Any employee having knowledge of, or questions or concerns about, an actual or possible violation of the provisions of this Code is encouraged to promptly report the matter to his or her immediate supervisor or the President of the Company. Directors are encouraged to discuss any issues or concerns with the chief of the board committee responsible for overseeing such matters.
If you have concerns relating to Spriza’ accounting, internal controls or auditing matters, you may also confidentially, and anonymously if you desire, submit the information in writing to the President of the Company or the Board of Directors.
When submitting concerns, you are asked to provide as much detailed information as possible. Providing detailed, rather than general, information will assist us in effectively investigating complaints. This is particularly important when you submit a complaint on an anonymous basis, since we may be unable to contact you with requests for additional information or clarification. If you submit your concerns anonymously, please provide details in a manner that does not inadvertently disclose your identity (e.g. refer to “John Smith” rather than “my supervisor, John Smith”).
We are providing these anonymous reporting procedures so that you may disclose genuine concerns without feeling threatened. However, the Company prohibits retaliation against employees who choose to identify themselves when submitting a report in good faith, and takes measures to keep confidential the identities of employees who choose to identify themselves when submitting their reports. Employees who identify themselves may be contacted in order to gain additional information.
All conversations, calls and reports made under this policy in good faith will be taken seriously. Any allegations that are knowingly false or without a reasonable belief in the truth and accuracy of such information will be viewed as a serious disciplinary offense.
Policy Prohibiting Unlawful Retaliation or Discrimination
Neither the Company nor any of its employees may discharge, demote, suspend, threaten, harass or in any manner discriminate against any employee in the terms and conditions of employment based upon any lawful actions of such employee who in good faith:
● | provides information or assists in an investigation relating to or regarding any conduct which the employee reasonably believes constitutes a violation of Fraud Laws (as defined below); |
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● | files, testifies, participates or otherwise assists in a proceeding that is filed or about to be filed (with any knowledge of the Company) relating to an alleged violation of a Fraud Law; |
● | provides truthful information to a law enforcement officer relating to the commission or possible commission of any federal offense; or |
● | engages in any other conduct protected by law. |
This policy applies in any instance where such information or assistance provided to, or the investigation is conducted by, a federal regulatory or law enforcement agency, any member or committee of Congress, or any person with supervisory authority over the employee or the authority to investigate misconduct relating to potential securities violations by the Company or its employees. For purposes of this policy, a “Fraud Law” is a violation of federal criminal law involving:
● | securities fraud, mail fraud, bank fraud or wire, radio or television fraud; |
● | violations of SEC rules or regulations; or |
● | violations of any federal law relating to fraud against shareholders. |
This document is not an employment contract between Spriza and its employees, nor does it modify their employment relationship with the Company.
This Code is intended to clarify your existing obligation for proper conduct. The standards and the supporting policies and procedures may change from time to time in the Company’s discretion. You are responsible for knowing and complying with the current laws, regulations, standards, policies and procedures that apply to the Company’s work. The most current version of this document can be found at www.Sprizainc.com.
END OF PAGE
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BOARD MEMBER ACKNOWLEDGEMENT
I acknowledge that I have received and read a copy of Spriza’ Code of Business Conduct and Ethics (the “Code”). I understand that I am responsible for knowing and complying with the policies set forth in the Code during my tenure as a member of the Board of Directors of the Company.
I also acknowledge my responsibility to report any violation of this Code to the Board of Directors or President of the Company.
I further understand that the policies contained in the Code are not intended to create any contractual rights or obligations, express or implied. I also understand that, consistent with applicable law, the Board of Directors of the Company has the right to amend, interpret, modify or withdraw any of the provisions of the Code at any time in its sole discretion, with or without notice.
Finally, I understand and agree that the terms of this Acknowledgement, and my relationship with the Company, may not be modified or superseded except by a written agreement signed by the President of the Company; that no other employee or representative of the Company has the authority to enter into any such agreement; and that any agreement inconsistent with this Acknowledgement or agreeing to employ me for a specified term will be unenforceable unless in writing and signed by the President of the Company.
Board Member Name: | ||
(please print) |
Signature | Date |
_________________________________ | ________________________________ |
Exhibit 31.1
Certification
of the Chief Executive Officer
Pursuant
to §240.13a- 14 or §240. 15d- 14 of the Securities Exchange Act of 1934, as
amended
I, Rob Danard, hereby certify that:
(1) | I have reviewed this annual report on Form 10-K for the year ended December 31, 2013 (the “report”) of Spriza, 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 officers 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 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; 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; and |
(5) | The registrant's other certifying officers 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 registrant's board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies 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. |
Dated: March 31, 2014 | |
Rob Danard Chief Executive Officer (principal executive officer) |
Exhibit 31.2
Certification
of the Chief Financial Officer
Pursuant
to §240.13a- 14 or §240. 15d- 14 of the Securities Exchange Act of 1934, as
amended
I, Christopher Robbins, hereby certify that:
(1) | I have reviewed this annual report on Form 10-K for the year ended December 31, 2013 (the “report”) of Spriza, 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 officers 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 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; 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; and |
(5) | The registrant's other certifying officers 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 registrant's board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies 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. |
Dated: March 31, 2014 | |
Christopher
Robbins Chief Financial Officer (principal financial and accounting officer) |
Exhibit 32
CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), the undersigned officer of Spriza, Inc., a Nevada corporation (the "Company"), does hereby certify, to the best of his knowledge, that:
1. | The Annual Report on Form 10-K for the year ending December 31, 2013 (the "Report") of the Company complies in all material respects with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Rob Danard,
Chief Executive Officer
(principal executive officer)
Christopher Robbins,
Chief Financial Officer
(principal accounting officer)
Date: March 31, 2014
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Going Concern
|
12 Months Ended | |||
---|---|---|---|---|
Dec. 31, 2013
|
||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||
Going Concern |
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. We have begun operations but have not generated significant revenue to date. These conditions give rise to doubt about our ability to continue as a going concern. These financial statements do not include adjustments relating to the recoverability and classification of reported asset amounts or the amount and classification of liabilities that might be necessary should we be unable to continue as a going concern. Our continuation as a going concern is dependent upon our ability to obtain additional financing and to generate profits and positive cash flow. We will require a cash injection of $1,000,000 over the next twelve months to continue to grow our business. In December of 2013 we offered 2,000,000 units (each a Unit) at $0.25 per Unit to raise an additional $500,000. Each Unit contained one common share and one common share purchase warrant exercisable at $0.50 per share for one year. We raised $202,500 as at December 31, 2013 and a further $182,500 subsequently. We have issued these shares and warrants and have closed this offering. |