NOTES TO CONDENSED FINANCIAL STATEMENTS
(unaudited)
NOTE 1 - BASIS OF PRESENTATION
The interim condensed financial statements included herein, presented in accordance with accounting principles generally accepted in the United States of America (GAAP), have been prepared by the Company, without audit, pursuant to the rules and regulations of the SEC. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading.
These statements reflect all adjustments, consisting of normal recurring adjustments, which, in the opinion of management, are necessary for fair presentation of the information contained therein. It is suggested that these interim condensed financial statements be read in conjunction with the financial statements of the Company for the year ended December 31, 2016 and notes thereto included in the Company's Annual Report on Form 10-K. The Company follows the same accounting policies in the preparation of interim reports.
Results of operations for the interim periods are not indicative of annual results.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and cash equivalents
The Company considers cash and cash equivalents to include all stable, highly liquid investments with an original maturity of three months or less from the date of purchase.
Use of estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Revenue recognition
Revenue is derived on a per transaction basis through the Companys gateway and payments platforms. The Company also earns revenue for services, account establishment fees and licensure on Software as a Service (SaaS) basis, and on a performance basis, such as when a client acquires a new customer through our platform. Revenue is recognized in accordance with Staff Accounting Bulletin (SAB) No. 101, Revenue Recognition in Financial Statements, as revised by SAB No. 104. As such, the Company recognizes revenue when persuasive evidence of an arrangement exists, title transfer has occurred, the price is fixed or readily determinable, and collectability is probable. Sales are recorded net of sales discounts.
Accounts receivable, net
Accounts receivable is reported at the customers outstanding balances, less any allowance for doubtful accounts. An allowance for doubtful accounts on accounts receivable is charged to operations in amounts sufficient to maintain the allowance for uncollectible accounts at a level management believes is adequate to cover any probable losses. Management determines the adequacy of the allowance based on historical write-off percentages and information collected from individual customers. Accounts receivable are charged off against the allowance when collectability is determined to be permanently impaired.
Inventory
Inventories consist of merchandise held for sale in the ordinary course of business, including cost of freight and other miscellaneous acquisition costs, and are stated at the lower of cost or market. The Company records a write-down for inventories which have become obsolete or are in excess of anticipated demand or net realizable value. The Company periodically performs a detailed inventory review that considers multiple factors including demand forecasts, market conditions, product life cycle status, product development plans and current sales levels. If actual demand or market conditions for the Companys products are less favorable than forecasted or if unforeseen changes negatively affect the utility of the Companys inventory, additional inventory write-downs may be required.
7
Property and equipment
Property and equipment are stated at cost. Major renewals and improvements are charged to the asset accounts while replacements, maintenance and repairs that do not improve or extend the lives of the respective assets are expensed. At the time property and equipment are retired or otherwise disposed of, the asset and related accumulated depreciation accounts are relieved of the applicable amounts. Gains or losses from retirements or sales are credited or charged to income.
Depreciation is computed on the straight-line and accelerated methods for financial reporting and income tax reporting purposes based upon the following estimated useful lives:
| |
Computer software
|
3 years
|
Computer hardware
|
5 years
|
Office furniture
|
7 years
|
Long-lived assets
The Company accounts for its long-lived assets in accordance with Accounting Standards Codification (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. The Company assesses 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 assets carrying value and fair value or disposable value.
Fair value of financial instruments
We account for non-recurring fair value measurements of our non-financial assets and liabilities in accordance with ASC 820-10 Fair Value Measurement. This guidance defines fair value, establishes a framework for measuring fair value and addresses required disclosures about fair value measurements. This standard establishes a three-level hierarchy for fair value measurements based upon the significant inputs used to determine fair value. Observable inputs are those which are obtained from market participants external to the Company while unobservable inputs are generally developed internally, utilizing management
s estimates, assumptions and specific knowledge of the assets/liabilities and related markets. The three levels are defined as follows:
·
Level 1 - Valuation is based on quoted prices in active markets for identical assets and liabilities.
·
Level 2 - Valuation is determined from quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar instruments in markets that are not active, or by model-based techniques in which all significant inputs are observable in the market.
·
Level 3 -Valuation is derived from model-based techniques in which at least one significant input is unobservable and based on the companys own estimates about the assumptions that market participants would use to value the asset or liability.
If the only observable inputs are from inactive markets or for transactions which the Company evaluates as distressed, the use of Level 1 inputs should be modified by the company to properly address these factors, or the reliance of such inputs may be limited, with a greater weight attributed to Level 3 inputs.
Due to the short-term nature of our financial assets and liabilities, we consider their carrying amounts to approximate fair value.
Goodwill
The Company accounts for goodwill in accordance with ASC Topic 805-30-25, Accounting for Business Combinations (ASC Topic 805-30-25) and ASC Topic 350-20-35, Accounting for Goodwill - Subsequent Measurement (ASC Topic 350-20-35).
8
ASC Topic 805-30-25 requires that the acquirer recognize goodwill as of the acquisition date as the excess of the fair value of the consideration transferred over the fair value of the net acquisition-date amounts of the identifiable assets and liabilities assumed.
ASC Topic 350-20-35 requires that goodwill acquired in a purchase and determined to have an indefinite useful life is not amortized, but instead tested for impairment annually or more frequently when events or circumstances indicate that the carrying value of a reporting unit more likely than not exceeds its fair value. The Companys annual goodwill impairment testing date is December 31 of each year. The Company first assesses qualitative factors to determine whether its necessary to perform the two-step goodwill impairment test. Impairment is the condition that exists when the carrying amount of goodwill exceeds its implied fair value. If the qualitative assessment results in an indication that its more likely than not that the fair value of a reporting unit is less than its carrying amount, then a quantitative assessment must be performed. Management has determined that the Company has one reporting unit for purposes of testing goodwill.
The quantitative analysis involves estimating the fair value of its reporting unit utilizing a combination of valuation methods including market capitalization, the income approach and cash flows. Income and cash flow forecasts were used in the evaluation of goodwill based on managements estimate of future performance. If goodwill is determined to be impaired as a result of this analysis, an impairment loss is recorded equal to the difference between the assets carrying value and fair value. The Company recorded no impairment to goodwill during the three months ended March 31, 2017 and March 31, 2016. Goodwill was fully impaired at December 31, 2016.
Capitalized software development costs
The Company capitalizes internal software development costs after establishing technological feasibility of a software application. Capitalized software development costs represent the costs associated with the development of the Companys software applications used to generate revenue from our customers. Amortization of such costs is recorded on a software application-by-application basis, based on the greater of the proportion of current year sales to the total of current and estimated future sales for the applications or the straight-line method over the remaining estimated useful life of the software application. The Company continually evaluates the recoverability of capitalized software costs, if any, and charges to operations amounts that are deemed unrecoverable for projects it abandons. The Company did not impair any software development expenses during the three months ended March 31, 2017 and March 31, 2016. Capitalized software development costs were zero at December 31, 2016.
Beneficial Conversion Feature
If the conversion features of conventional convertible debt provide for a rate of conversion that is below market value, this feature is characterized as a beneficial conversion feature (BCF). A BCF is recorded by the Company as a debt discount pursuant to ASC Topic 470-20 Debt with Conversion and Other Options. In those circumstances, the convertible debt is recorded net of the discount related to the BCF and the Company amortizes the discount to interest expense over the life of the debt using the effective interest method.
Debt Discount
The Company determines if the convertible debenture should be accounted for as liability or equity under ASC 480, Liabilities - Distinguishing Liabilities from Equity (ASC 480). ASC 480, applies to certain contracts involving a companys own equity, and requires that issuers classify the following freestanding financial instruments as liabilities. Mandatorily redeemable financial instruments, obligations that require or may require repurchase of the issuers equity shares by transferring assets (e.g., written put options and forward purchase contracts), and certain obligations where at inception the monetary value of the obligation is based solely or predominantly on:
·
A fixed monetary amount known at inception, for example, a payable settleable with a variable number of the issuer
s equity shares with an issuance date fair value equal to a fixed dollar amount,
·
Variations in something other than the fair value of the issuer
s equity shares, for example, a financial instrument indexed to the S&P 500 and settleable with a variable number of the issuer
s equity shares, or
·
Variations inversely related to changes in the fair value of the issuer
s equity shares, for example, a written put that could be net share settled.
9
If the entity determined the instrument meets the guidance under ASC 480 the instrument is accounted for as a liability with a respective debt discount. The Company records debt discounts in connection with raising funds through the issuance of promissory notes (see Notes 8 and 9). These costs are amortized to non-cash interest expense over the life of the debt. If a conversion of the underlying debt occurs, a proportionate share of the unamortized amounts is immediately expensed.
Stock-based compensation
The Company accounts 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.
The Company accounts for stock-based payments to non-employees in accordance with ASC 505-50, Equity-Based Payments to Non-Employees (ASC 505-50). Stock-based payments to non-employees include grants of stock, grants of stock options and issuances of warrants that are recognized in the 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. The Company calculates 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.
The Company estimates forfeiture rates for all unvested awards when calculating the expense for the period. In estimating the forfeiture rate, the Company monitors 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 as compensation under ASC Topic 505-50. In accordance with ASC 505-50, the cost of stock-based compensation is measured at the grant date based on the value of the award and is recognized over the vesting period. The value of the stock-based award is determined using the Black-Scholes option-pricing model, whereby compensation cost is the excess of the fair value of the award as determined by the pricing model at the grant date or other measurement date over the amount that must be paid to acquire the stock.
Loss per share
The Company reports earnings (loss) per share in accordance with ASC Topic 260-10, "Earnings per Share." Basic earnings (loss) per share is computed by dividing income (loss) available to common shareholders by the weighted average number of common shares available. Diluted earnings (loss) per share is computed similar to basic earnings (loss) per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. Diluted earnings (loss) per share has not been presented since the effect of the assumed conversion of warrants and debt to purchase common shares would have an anti-dilutive effect. Potential common shares as of March 31, 2017 that have been excluded from the computation of diluted net loss per share amounted to 3,862,920 shares and include 1,625,420 warrants and 2,237,500 options. At March 31, 2017, 905,834 of the 2,237,500 potential common shares that could be issued upon the exercise of the options had not vested, and 100,000 of the 1,625,420 common shares that could be issued upon the exercise of the warrants had not vested.
Income taxes
The Company accounts for its income taxes under the provisions of Income Taxes (ASC 740). The method of accounting for income taxes under ASC 740 is an asset and liability method. The asset and liability method requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of temporary differences between tax bases and financial reporting bases of other assets and liabilities.
Recent accounting pronouncements
The Company continually assesses any new accounting pronouncements to determine their applicability to the Company. Where it is determined that a new accounting pronouncement affects the Companys financial reporting, the Company undertakes a study to determine the consequence of the change to its financial statements and assures that there are proper controls in place to ascertain that the Companys financials properly reflect the change.
10
In January 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2017-04 Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (ASU 2017-04). This guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. Under the amended guidance, a goodwill impairment charge will now be recognized for the amount by which the carrying value of a reporting unit exceeds its fair value, not to exceed the carrying amount of goodwill. This guidance is effective for interim and annual periods beginning after December 15, 2019, with early adoption permitted for any impairment tests performed after January 1, 2017.
In January 2017, the FASB issued Accounting Standards Update (ASU) 2017-01 Business Combinations (Topic 805): Clarifying the Definition of a Business (ASU 2017-01), which clarifies the definition of a business and assists entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. Under this guidance, when substantially all the fair value of gross assets acquired is concentrated in a single asset (or group of similar assets), the assets acquired would not represent a business. In addition, in order to be considered a business, an acquisition would have to include at a minimum an input and a substantive process that together significantly contribute to the ability to create an output. The amended guidance also narrows the definition of outputs by more closely aligning it with how outputs are described in FASB guidance for revenue recognition. This guidance is effective for interim and annual periods beginning after December 15, 2017, with early adoption permitted.
In August 2016, the FASB issued Accounting Standards Update (ASU) 2016-15 Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (ASU 2016-15). The standard is intended to eliminate diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 will be effective for fiscal years beginning after December 15, 2017. Early adoption is permitted for all entities. The Company is currently evaluating the impact of this guidance on its financial statements.
In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (ASU 2016-09). The standard is intended to simplify several areas of accounting for share-based compensation arrangements, including the income tax impact, classification on the statement of cash flows and forfeitures. ASU 2016-09 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016, and early adoption is permitted. Accordingly, the standard is effective for us on September 1, 2017 and we are currently evaluating the impact that the standard will have on our financial statements.
NOTE 3 - GOING CONCERN
The accompanying condensed financial statements have been prepared assuming we will continue as a going concern. As shown in the accompanying condensed financial statements, the Company incurred a net loss of ($848,091) for the three months ended March 31, 2017, and at March 31, 2017, the accumulated deficit was ($29,042,063).
To continue as a going concern, the Company may need, among other things, additional capital resources. There are no assurances that without generating new revenue during 2017 that the Company will be successful without additional financing. Should revenues not grow sufficiently and should the Company be unable to secure additional financing through the sale of its securities or debt, it would be unlikely for us to continue as a going concern for one year from the issuance of the financial statements.
The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue in existence. These conditions raise substantial doubt about our ability to continue as a going concern. These financial statements do not include any adjustments that might arise from this uncertainty.
11
NOTE 4 - ACCOUNTS RECEIVABLE, NET
Accounts receivable consist of the following at:
|
|
|
|
| |
|
MARCH 31,
|
|
DECEMBER 31,
|
|
2017
|
|
2016
|
Due from customers and vendors
|
$
|
32,902
|
|
$
|
32,913
|
Due from processing activity
|
|
67,109
|
|
|
50,000
|
Total accounts receivable, net
|
$
|
100,011
|
|
$
|
82,913
|
NOTE 5 - PREPAID EXPENSES AND DEPOSITS
Prepaid expenses and deposits consist of the following at:
|
|
|
|
| |
|
MARCH 31,
|
|
DECEMBER 31,
|
|
2017
|
|
2016
|
Prepaid insurance
|
$
|
34,361
|
|
$
|
46,489
|
Prepaid consulting fees
|
|
95,079
|
|
|
113,791
|
Other prepaid expenses
|
|
432
|
|
|
--
|
Deposits
|
|
9,239
|
|
|
--
|
Total prepaid expenses and deposits
|
$
|
139,111
|
|
$
|
160,280
|
NOTE 6 - PROPERTY AND EQUIPMENT, NET
Property and equipment, net consist of the following at:
|
|
|
|
| |
|
MARCH 31,
|
|
DECEMBER 31,
|
|
2017
|
|
2016
|
Office furniture & equipment
|
$
|
34,425
|
|
$
|
34,425
|
Less: accumulated depreciation
|
|
(21,485)
|
|
|
(20,141)
|
Total property and equipment, net
|
$
|
12,940
|
|
$
|
14,284
|
During the three months ended March 31, 2017 and 2016, the Company recorded depreciation expense of $1,344 and $1,327, respectively.
NOTE 7 - OTHER INTANGIBLE ASSETS, NET
Other intangible assets, net consist of the following at:
|
|
|
|
| |
|
MARCH 31,
|
|
ACCUMULATED
|
|
MARCH 31,
|
|
2017 GROSS
|
|
AMORTIZATION
|
|
2017 NET
|
License agreements and contracts
|
$ 75,000
|
|
$ (13,750)
|
|
$ 61,250
|
Domain names
|
75,000
|
|
(32,661)
|
|
42,339
|
|
$ 150,000
|
|
$ (46,411)
|
|
$ 103,589
|
|
|
|
|
|
|
|
DECEMBER 31,
|
|
ACCUMULATED
|
|
DECEMBER 31,
|
|
2016 GROSS
|
|
AMORTIZATION
|
|
2016 NET
|
Capitalized software costs
|
$ 25,000
|
|
$ --
|
|
$ 25,000
|
License agreements and contracts
|
75,000
|
|
(10,000)
|
|
65,000
|
Domain names
|
75,000
|
|
(30,242)
|
|
44,758
|
|
$ 175,000
|
|
$ (40,242)
|
|
$ 134,758
|
During the three months ended March 31, 2017 and 2016, the Company recorded amortization expense of $6,169 and $108,369, respectively.
12
Because of change in management in January 2017 and subsequent change in strategy, on March 3, 2017, the Company sold all the assets associated with Yowza!! for $25,000. The assets were sold to iOT Broadband LLC, an LLC owned by Michael Kelly, a previously reported 5% shareholder of the Companys common stock. On January 3, 2014, the Company had acquired substantially all the assets of Yowza International Inc. and assumed certain liabilities of Yowza!! for cash and stock consideration. In the subsequent periods the Company also allocated development resources to the enhancement of the Yowza!! product and capitalized expenses as internal use software.
The $25,000 consideration received on March 3, 2017 is less than the carrying value of internal use software, domain name, and goodwill on the balance sheet as of December 31, 2016. Because of the sale on March 3, 2017, the Company has impaired the value of the Yowza!! assets to $25,000, recording impairment for the remaining amount of carrying value effective December 31, 2016.
NOTE 8 - NOTES PAYABLE AND CONVERTIBLE NOTES PAYABLE, NET OF UNAMORTIZED DISCOUNT
In December 2016, we entered into a $10,500 Bridge Note Agreement with one of our directors and a $5,000 Bridge Note Agreement with one of our investors. Both Bridge Notes are secured by the Companys assets and include warrants to purchase two shares of the Companys common stock for each dollar loaned to Spindle. The total discount attributable to these transactions is $1,627. During the three months ended March 31, 2017, interest expense related to the warrants and the beneficial conversion factor totaled $1,627. At March 31, 2017, the $10,500 Bridge Note was paid in full, and no payments had been made on the $5,000 Bridge Loan. The holder of the $5,000 Bridge Note, which was due 45 days from the date of the note, waived the 45-day term. No warrants related to either of the Bridge Loans have been exercised.
During the three months ended March 31, 2017, we entered into three Bridge Note Agreements totaling $46,000 with one of our investors.
These three Bridge Notes are interest free, are secured by the Companys assets, are convertible to shares of the Companys restricted stock at $0.10 per share and have maturity dates of April 30, 2017. The Bridge Notes also include warrants to purchase two shares of the Companys common stock, at a price of $0.135, for each dollar loaned to Spindle. The total discount attributable to these transactions is $32,716. During the three months ended March 31, 2017, interest expense related to the warrants and the beneficial conversion factor totaled $18,574. At March 31, 2017, no payments were made on these Bridge Loans nor have the related warrants been exercised.
On May 18, 2016, we converted a $182,000 payable to an investor in the Company and entered into a Convertible Promissory Note (Note) with that investor. The Note bears an interest rate of 6% per annum and has a maturity date of May 18, 2018. The total value of the note, if converted to stock, would be $404,444 and therefore a discount in the amount of $182,000 was recorded, as the conversion feature cannot be greater than the amount of the debt. This amount is amortized to interest expense over the term of the note. During the three months ended March 31, 2017, interest expense of $2,471 and interest expense related to amortization of the discount on the unpaid notes of $20,589 was recorded. The balance of the unamortized discount at March 31, 2017, was $107,845. During the three months ended March 31, 2017, the Company made no payments to the Notes principal balance. At March 31, 2017 the balance of the Note was $162,000 and is presented as a note payable on our Condensed Balance Sheets.
On December 15, 2011, we issued a Promissory Grid Note (Grid Note) to a former director of the Company which formalized various advances previously received from the former director in the amount of $51,300 and allowing for future advances of up to $250,000. The Grid Note was non-interest bearing, unsecured and matured on December 15, 2014. We imputed interest at a rate of 2% per annum and recorded a discount in the amount of $10,640. In connection with one of the previous advances in the amount of $25,000, we issued warrants to purchase up to 250,000 shares of our common stock at a price per share of $1.00 resulting in an additional discount of $17,709. The original discount attributable to the Grid Note totaled $28,349 and was previously amortized to interest expense over the original term of the Grid Note. During the three months ended March 31, 2017 and March 31, 2016, the Company repaid $0 and $3,000 of the principal balance of the Grid Note, respectively. For the three months ended March 31, 2017, interest expense related to the beneficial conversion factor totaled $1,626. At March 31, 2017, the balance of the Grid Note was $48,552.
13
NOTE 9 - CONVERTIBLE NOTES PAYABLE - RELATED PARTY, NET OF UNAMORTIZED DISCOUNT
On March 3, 2017, we entered into a $100,000 Bridge Note Agreement with a 7% stockholder of the Company. The Bridge Note was secured by the Companys assets, was convertible to shares of the Companys restricted stock at $0.10 per share and included warrants to purchase two shares of the Companys common stock, at a price of $0.15, for each dollar loaned to Spindle. This Bridge Note had no stated maturity date. The total discount attributable to this transaction was $100,000. The Bridge Note was converted to Spindle stock on March 3, 2017, and interest expense related to the warrants and the beneficial conversion factor totaling $100,000 was recorded. At March 31, 2017, the warrants related to the Bridge Loan had not been exercised.
On March 25, 2016, we entered into an agreement with a 12% stockholder of the Company. This agreement is for a $100,000 promissory note, convertible to stock under certain circumstances. The note bears an interest rate of 6% per annum and has a maturity date of March 25, 2018. The total value of the note, if converted to stock, would be $133,333 and therefore a discount in the amount of $33,333 was recorded. This amount is amortized to interest expense - related party over the term of the note. During the three months ended March 31, 2017, interest expense of $1,479 and interest expense related to amortization of the discount on the unpaid note of $4,110 was recorded. The balance of the unamortized discount at March 31, 2017 was $16,393.
NOTE 10 - STOCKHOLDERS DEFICIT
The Company is authorized to issue up to 50,000,000 shares of preferred stock, par value $0.001. There are no shares issued or outstanding as of March 31, 2017
The Company is authorized to issue up to 300,000,000 shares of common stock, par value $0.001. During the three months ended March 31, 2017, the Company:
·
Authorized the issuance of 397,148 shares of common stock for cash proceeds totaling $47,490. 100,000 of these shares were unissued at March 31, 2017.
·
Issued 164,500 shares of previously authorized common stock that was unissued at December 31, 2016.
·
Authorized the issuance of 1,870,000 shares of common stock valued at $187,000 as an incentive to purchase Company intangible assets and for related advances from third parties. At March 31, 2017, 370,000 of these shares were unissued.
·
Authorized the issuance of 1,000,000 shares of common stock to as repayment of debt thru the conversion of a $100,000 note payable.
·
Authorized the issuance of 96,000 shares of common stock to third-party consultants as payment for their services. The estimated fair value of these shares totaled $11,300. At March 31, 2017, 20,834 of these shares were unissued.
·
Authorized the issuance of 2,011,508 shares of common stock to Company directors and employees for their services. The estimated fair value of these shares totaled $217,817. At March 31, 2017, 187,000 of these shares were unissued.
NOTE 11 - OPTIONS AND WARRANTS
On October 29, 2012, our stockholders approved the 2012 Stock Incentive Plan (the Plan) that governs equity awards to our management, employees, directors and consultants. On November 7, 2013, our stockholders approved an amendment to the Plan which increased the total authorized amount of common stock issuable under the Plan from 3,000,000 to 6,000,000 shares.
14
Options:
During the three months ended March 31, 2017, the Company granted 690,000 options to employees and consultants to purchase shares of common stock at an exercise price of $0.23 per share, with grant date fair values of $0.05. The options vest ratably on an annual basis over three years, and expire ten years from grant date.
|
|
|
|
| |
|
Number of Options
|
|
Weighted-Average
Exercise Price
|
|
Weighted Average
Remaining
Contractual Life
(in years)
|
Outstanding at December 31, 2015
|
2,990,000
|
|
$ 0.426
|
|
8.10
|
Granted
|
-
|
|
-
|
|
-
|
Exercised
|
-
|
|
-
|
|
-
|
Forfeited/Cancelled
|
(1,442,500)
|
|
-
|
|
-
|
Outstanding at December 31, 2016
|
1,547,500
|
|
$ 0.357
|
|
7.56
|
Exercisable at December 31, 2016
|
1,431,666
|
|
$ 0.345
|
|
7.44
|
|
|
|
|
|
|
Outstanding at December 31, 2016
|
1,547,500
|
|
$ 0.357
|
|
7.56
|
Granted
|
690,000
|
|
-
|
|
-
|
Exercised
|
-
|
|
-
|
|
-
|
Forfeited/Cancelled
|
-
|
|
-
|
|
-
|
Outstanding at March 31, 2017
|
2,237,500
|
|
$ 0.287
|
|
8.07
|
Exercisable at March 31, 2017
|
1,431,667
|
|
$ 0.345
|
|
7.19
|
Warrants:
In conjunction with the sale of Spindle intangible assets, during the three months ended March 31, 2017, the Company granted common stock purchase warrants that entitle the buyer to purchase 50,000 additional shares of Spindle common stock at a price of $0.135 per share. The holder may exercise his purchase rights at any time up to the third anniversary of the agreement.
In conjunction with the Stock Purchase Agreements in three months ended March 31, 2017 (SPA), the Company granted common stock purchase warrants that entitle the holders to purchase 200,000 additional shares of Spindle common stock at a price of $0.135 per share. The holder may exercise his purchase rights at any time up to the third anniversary of the agreement.
In conjunction with the Bridge Loan Agreements in the three months ended March 31, 2017, the Company granted common stock purchase warrants that entitle the holder to purchase 92,000 additional shares of Spindle at a price of $0.135 per share. The holder may exercise his purchase rights at any time up to the third anniversary of the agreement.
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The following is a summary of the status of the Companys stock warrants as of March 31, 2017:
|
|
|
|
| |
|
Number of Warrants
|
|
Weighted-Average
Exercise Price
|
|
Weighted Average
Remaining
Contractual Life
(in years)
|
Outstanding at December 31, 2015
|
600,000
|
|
$ 0.500
|
|
1.47
|
Granted
|
883,420
|
|
-
|
|
-
|
Exercised
|
-
|
|
-
|
|
-
|
Forfeited/Cancelled
|
(200,000)
|
|
-
|
|
-
|
Outstanding at December 31, 2016
|
1,283,420
|
|
$ 0.249
|
|
2.99
|
Exercisable at December 31, 2016
|
1,183,420
|
|
$ 0.228
|
|
3.12
|
|
|
|
|
|
|
Outstanding at December 31, 2016
|
1,283,420
|
|
$0.249
|
|
|
Granted
|
342,000
|
|
-
|
|
|
Exercised
|
-
|
|
-
|
|
|
Forfeited/Cancelled
|
-
|
|
-
|
|
|
Outstanding at March 31, 2017
|
1,625,420
|
|
$ 0.225
|
|
2.78
|
Exercisable at March 31, 2017
|
1,525,420
|
|
$ 0.207
|
|
2.90
|
NOTE 12 - SUBSEQUENT EVENTS
On April 5, 2017, the Company issued 363,805 shares of restricted common stock that were previously approved but unissued. The Company also issued 104,000 shares with a value of approximately $24,000 in relation to a third-party consulting agreement.
On April 19, 2017, the Company announced that it has finalized an agreement to acquire specific digital marketing software assets from CoverCake, Inc., specifically, CoverCake's intelligent algorithms for data mining and consumer engagement. CoverCake's software is expected to enhance both the sophistication and proprietary strengths of Spindle's CATALYST Platform. CoverCake's software capabilities include intelligent content aggregation; data mining on various social media data feed platforms, and a robust Content Management System (CMS) backend that will be a significant enhancement to the CATALYST CRM. CoverCake has been utilized in the past by enterprise level merchants as well as television and radio broadcast organizations. The purchase price will be 300,000 shares of Spindle unregistered common stock valued at $43,500 along with launch and revenue based payments as certain performance targets are met.
NOTE 13 - SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
The following table presents certain supplemental cash flow information:
|
|
|
|
| |
|
Three Months Ended March 31,
|
|
2017
|
|
2016
|
Cash paid for interest
|
$
|
818
|
|
$
|
590
|
Cash paid for income taxes
|
$
|
--
|
|
$
|
--
|
Debt converted into common stock
|
$
|
100,000
|
|
$
|
--
|
Cash advances converted to common stock
|
$
|
12,000
|
|
$
|
--
|
Shares issued for services
|
$
|
200,365
|
|
$
|
--
|
Shares returned for legal settlement
|
$
|
--
|
|
$
|
(1,595,000)
|
Beneficial conversion feature on convertible notes
|
$
|
100,000
|
|
|
--
|
16