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, 2014
Commission File Number:
333-185669
SPRIZA, INC.
(Exact name of
registrant as specified in its charter)
|
Nevada
|
90-0888324
|
|
(State or other
jurisdiction of incorporation or organization)
|
(I.R.S. Employer 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)
111 Penn
Street, El
Segundo, CA90245
(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 June 30, 2014, based upon the $0.75
per share closing price of such stock on that date, was $33,769,920.
As of April 15, 2015, there were 69,616,734
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, 2014
Table of Contents
CAUTIONARY NOTE
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.
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:
- Our ability to successfully
execute on our 2015 operating plan;
- Our ability to successfully launch
our international licensing model for international expansion in
Asia, Europe and South America;
- Our ability to generate sufficient
cash flow from operations to preserve our existing cash resources;
- Our continued ability to use our
cash and working capital resources to efficiently finance the rapid growth of
our business including financing receivables from our clients;
- Dilutive and other adverse effects
on our existing shareholders and our stock price arising from dilutive
securities such as stock options and warrants being exercised;
- Our continued ability to maintain
brand image and service quality;
- Our ability to attract and retain
key personnel, which would directly affect our efficiency and results of
operations;
- Our ability to protect our
trademarks and patent pending technology, which may prevent us from
successfully marketing our services and competing effectively;
- Litigation or legal proceedings,
which could expose us to significant liabilities and damage to our reputation;
- Our continued ability to sustain
proper information technology infrastructure;
- Our ability to compete successfully
against much larger established companies currently operating in the social
media industry;
- Our ability to comply with
regulations to which our business is subject.
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.
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.
1
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.
2
Our
competitors are in segments such as the following:
- Websites promoting deal of the day
gift certificates;
- Large social media networks with
deep distribution; and
- Innovative search websites with
local and national advertisers.
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.
Our competitors are in segments such as the following:
- Websites promoting deal of the day
gift certificates;
- Large social media networks with
deep distribution; and
- Innovative search websites with
local and national advertisers.
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, 2014 we spent $115,711 on this project and have allocated the cost to intellectual property; we are working on: mobile device support, do-it-yourself platform and agency tools;
- We have launched our corporate
splash page in preparation of our corporate website which has been completed
and the new corporate website is available to the public at www.spriza.com;
We have completed our SPRIZA™ rebranding
project including media kit, sales and marketing packages and corporate peripherals.
We also completed the following
achievements during 2014:
- Developed an
international licensing model;
- Identified
strategic partners in Asia, Europe and the United States;
- Entered
into a key agreement with Digital Marketing Philippines
(www.digitalmarketingphilippines.com);
- Entered
into a key agreement with When in Manila (www.wheninmanila.com);
- Hosted more
than 5,200 aggregated contests;
- Reached the
figure 100 in the number of active contests SPRIZA™ is currently hosting;
- Generated revenues, a significant milestone in the social media space;
In 2015 SPRIZA™ launched an Android mobile phone application to be followed by an iPhone app. Achieving this objective would further enhance the user experience giving direct access anytime, anywhere similar to Facebook, Twitter and other popular social media applications. The new app will also increase effectiveness to communicate new information, updates and location based details when required.
The Company also launched launch a Do-it-Yourself (“DIY”) contest building and toolbox platform for small and medium sized businesses in February of 2015 and an Agency Media Kit.
The DIY contest toolbox is available through Spriza’s
website (www.spriza.com) and through the business user’s private account
toolbox. Clients are now able to upload, self-administer and activate contests
within minutes through their own Spriza step-by-step business account.
The DIY contest platform will have three pricing tiers
to allow for flexibility of budgets and ease of entry onto the platform. Each
tier will give the client a robust option to build-out its contest marketing
strategy depending on their budget and needs. The addition of the DIY platform
will allow for greater access to Spriza’s marketing tools, capable of serving
the diverse needs of several business verticals. This will allow greater ease
of entry and flexibility for clients to market through Spriza; thus potentially
expanding the number of paying clients in our database.
3
The DIY toolbox platform has an extensive analytics
dashboard, providing the key metrics companies are looking for in their
marketing campaigns. With mounting pressure on the overall ROI of any marketing
initiative, more businesses are looking to marketing platforms that offer such
detailed information.
Opening the Do-it-Yourself platform will have a
positive effect on Spriza’s overall user’s statistics. The more contests that
are created through different business verticals the more users will filter
into the Spriza database, which in turn creates revenue through upfront fees,
affiliate revenue, lead generation, downloads and coupon conversion.
We are in the final stages of completing a North
American wide marketing campaign which will focus on driving the participation
of prospective Fortune 500 companies and large corporate sponsorship to the
contest platform.
Business strategy
Secure Necessary Funds
As at April 15, 2015 we have approximately $500,000 in cash. We will require additional funds during the remainder of fiscal 2015 to continue to aggressively grow our business and execute our 2015 business plan and to make strategic acquisitions.
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.
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 and hosted. During the year ended December 31, 2014 we spent $115,711 (2013 - $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 two geographic segments: North America and the Philippines.
4
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 April 15, 2015, 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.
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 2015
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 2015 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.
5
Since there is some doubt as to our ability to
continue as a going concern, as noted in RBSM, LLP’s opinion for the year ended
December 31, 2014, it may be difficult for us to effectuate our business plan.
We have incurred losses since our inception on
September 17, 2012. In 2013 our net losses were $484,398 and $1,233,765 at year end
December 31, 2014. We have not 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, or may
be delayed in efforts, to implement 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 and mobile 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:
- Websites promoting deal of the day gift
certificates;
- Large social media networks with deep
distribution; and
- Innovative search websites with local and
national advertisers
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.
6
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.
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 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(b) 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
and lower than what might otherwise have been the case.
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.”
7
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. Chris Robbins, our
Chief Financial Officer, joined us on October 25, 2013. Jay Cowles also joined
the management team and became a director and Chief Operating Officer in
February of 2015. 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 control 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(b), 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.
Our Chief Executive Officer and Chief Financial 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 Mr. Robbins 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.
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.
8
Our securities are traded on the Pink OTC Markets as an OTC BB 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 BB 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, 2014, our common stock traded at prices as low as $0.55 per share and as
high as $1.39 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:
- quarterly variations in operating
results;
- our ability to control costs and improve
cash flow;
- announcements of technological
innovations or new products by us or by our competitors;
- changes in investor perceptions
- new products or product enhancements by
us or our competitors.
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 $1000 per month,
which was inclusive in our contract that concluded January 2014.
ITEM
3. LEGAL PROCEEDINGS
In the ordinary course of business, we may
be involved in legal proceedings from time to time. As of the date hereof,
except as set forth herein, there are no known legal proceedings against the
Company. No governmental agency has instituted proceedings, served, or
threatened us with any complaints.
However, on March 4, 2015, the Alberta Securities Commission (Alberta) (the “ASC”) issued an order that all trading of the securities and derivatives of Spriza halt until the end of the day of March 25, 2015, or until the ASC revokes its order. On March 30, 2015, the ASC notified the Company that the order expired on March 24, 2015. On March 4, 2015, the Securities Exchange Commission (the “SEC”) issued a release announcing the temporary suspension of trading in the securities of Spriza. Spriza, through its attorneys, has been working to satisfy any concerns maintained by the ASC and the SEC.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
9
PART
II
ITEM 5. MARKET
FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
Market Information
Prior to November 4, 2013, there was no
public trading market for our securities. On November 4, 2013, our common stock
was quoted under the symbol “SPRZ” on the OTC BB operated by FINRA.
The following table sets forth the range
of high and low bid prices for our common stock for each applicable quarterly
period. The table reflects inter-dealer prices without retail mark-up,
mark-down or commissions and may not represent actual transactions.
Fiscal Year Ended December 31, 2013:
| |
|
Low ($)
|
High ($)
|
| |
First Quarter
|
nil
|
nil
|
| |
Second Quarter
|
nil
|
nil
|
| |
Third Quarter
|
nil
|
nil
|
| |
Fourth Quarter
|
0.25
|
0.75
|
Fiscal Year Ended December 31, 2014:
| |
|
Low ($)
|
High ($)
|
| |
First Quarter
|
0.75
|
0.94
|
| |
Second Quarter
|
0.75
|
0.75
|
| |
Third Quarter
|
0.55
|
0.90
|
| |
Fourth Quarter
|
0.65
|
1.39
|
Fiscal
Year 2015 to date:
| |
|
Low ($)
|
High ($)
|
| |
First Quarter to date
|
0.25
|
2.00
|
The closing price of our common stock on the OTC BB on April 13, 2015 was $0.10 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 that do not apply to our company.
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 April 15, 2015 there were 69,616,734 shares of our common stock issued and outstanding and approximately 522 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.
Stock Repurchases
There were no shares repurchased during
the year ended December 31, 2014.
10
Securities Issued in Unregistered
Transactions
During the year ended December 31, 2014,
we issued the following securities in unregistered transactions:
In Q1 of 2014 we issued a total
135,657 common shares to one foreign accredited investor for gross proceeds of
$40,698 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.
In the first quarter of 2014 we
also issued 1,540,800 units (each a “Unit”) to thirteen foreign accredited
investors for gross proceeds of $385,200 pursuant to a $0.25 Unit non-brokered
private placement which closed in March of 2014. Each Unit contained one common
share and one common share purchase warrant to acquire an additional share at
$0.50 per share expiring March 10, 2015. 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.
In the fourth quarter of 2014 we received
subscription funds of $150,000 from three foreign accredited investors by the
purchase of 300,000 common shares of the Company in a non-brokered private
placement at $0.50 per common share. We also received $47,500 from one foreign
accredited investor from the exercise of warrants at $0.50 per common share
attached to the March 2014 Unit offering. These subscriptions were received in
2014 but the shares were not issued until February of 2015 (See Subsequent
Sales). 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, 2014, we issued the
following securities in unregistered transactions:
On February 12, 2015 we issued a total of 1,600,000 common
shares at $0.50 per common share to fourteen foreign accredited investors for gross proceeds of $800,000
pursuant to our $0.50 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 February 12, 2015 we also issued 397,800
common shares for $198,900 from six foreign accredited investors from the
exercise of warrants attached to the March 2014 Unit 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.
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, 2014 and 2013 and the audited
statements of operations and cash flows for the year ended December 31, 2014 (“2014”)
and December 31, 2013 (“2013”).
Results of Operations for the year ended December 31, 2014
and December 31, 2013.
The net loss for 2014 increased by $749,367 to $1,233,765 (2013 - $484,398). This increase was due to a full twelve months of operations and development during 2014 and additions to our staff and business operations.
During 2014 we generated $78,056 (2013 - $7,000) in revenues. We expect to generate significant revenues during fiscal 2015.
During 2014 we incurred $1,332,895 in operating expenses (2013 - $482,421). During 2014 operating expenses consisted of: $293,635 (2013 - $79,479) of stock-based compensation due to implementing our 2013 Incentive Award Plan; $405,701 (2013 - $180,424) in consulting fees and salaries including $106,038 (2013 - $82,836) paid to our Chief Executive Officer; $71,307 (2013 - $37,745) in branding and marketing; $15,305 (2013 - $22,974) in regulatory fees, $250,587 (2013 - $89,709) in professional fees including legal and audit, $72,814 (2013 - $43,262) in travel and $99,500 (2013 - $22,321) in office expenses. We incurred total $86,546 (2013 - $6,507) in depreciation and amortization which include the depreciation of property and equipment of $6,748, (2013 - $4,271) and amortization of intangibles of $79,798 (2013 - $2,236). We expect that operating expenses will continue to increase as we are able to raise capital and further our business operations.
During 2014 we accrued no interest on short term
loans. In 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.
11
LIQUIDITY AND CAPITAL RESOURCES
As at December 31, 2014, the Company has a working capital deficit of $98,770. Our cash on hand was $41,262 which includes restricted cash of $10,000. At December 31, 2013 we had working capital of $451,205; cash on hand was $493,539 inclusive of the restricted cash of $10,000.
Over the fourth
quarter of 2014 and the first quarter of 2015 we increased our cash position by
$998,900. Subsequent to December 31, 2014, we had received $150,000 for the
$0.50 private placement and $47,500 in $0.50 warrants; we received a further $650,000
pursuant to our $0.50 common share private placement for a total of 1,600,000
common shares plus an additional $151,400 from the exercise of 397,800 warrants
in total and the Company issued 397,800 common shares..
The following table sets forth the major
sources and uses of cash for our last two fiscal years ended December 31, 2014
and 2013:
| |
2014
$
|
|
2013
$
|
|
|
Net cash used in operating activities
|
|
(809,490) |
|
|
(350,881) |
|
|
Net cash used in investing activities
|
|
(149,550) |
|
|
(290,278) |
|
|
Net cash provided by financing
activities
|
|
470,897 |
|
|
1,132,258 |
|
|
Net increase (decrease) in cash
|
|
(488,143) |
|
|
491,099 |
|
Cash Used in Operating Activities
During 2014 operating activities used $809,490 in cash (2013 – $350,881). Use of cash was primarily attributable to funding the net loss of $1,233,765 in 2014 (2013-$484,398) offset by a non-cash charge of $86,546 (2013 - $6,507) for depreciation and amortization and a non-cash charge of $293,635, (2013-$79,479) for stock-based compensation. Our suppliers financed $72,697 in 2014 (2013-$47,531) of the net loss.
Cash Used in Investing Activities
During 2014 we used $149,550 (2013 - $290,278)
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 2014 we spent $115,711, (2013 - $227,596) on completion of this project and have allocated the cost to intellectual property. During 2014 we spent $132,813 (2013 - $44,711) on our corporate and contest website and $454, (2013 - $8,811) on trademarks. We also spent $7,276 (2013 - $3,910) on office furniture and computers.
Cash from Financing Activities
During 2014 financing activities provided $470,897 in cash consisting of:
- $182,700 received pursuant to the issuance of 1,540,800 Units of our $0.25 non-brokered private placement ($202,500 was received in 2013; and $40,697 received pursuant to a warrant exercised at $0.30; and
- $175,000 received pursuant to our $0.50 common share non-brokered private placement: and $47,500 received pursuant to a warrant exercised at $0.50.
- $25,000 short-term loans received from a related party.
Need for Additional Capital
We have approximately $500,000 in cash at April 15, 2015 raised from a private placement from fourteen foreign accredited investors closed in February 2015 for total proceeds of $800,000 at $0.50 per common share for 1,600,000 shares issued. We may require further capital to achieve our 2015 operating plan.
OFF BALANCE-SHEET ARRANGEMENTS
We have not had, and at December 31, 2014
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.
12
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, 2014 and December 31, 2013,
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.
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.
13
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
Spriza, Inc.
We have audited the accompanying balance sheet of Spriza, Inc. (“the Company”) as of December 31, 2014 and the related statements of operations, stockholders’ equity and cash flows for the year then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit 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. An audit also includes 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, as well as evaluating the overall financial statement presentation. We believe that our audit 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 Manhattan Scientifics, Inc. at December 31, 2014 and the results of its operations and its cash flows for the year then ended 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/ RBSM LLP
Las Vegas, NV
April 15, 2015
14
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Stockholders of Spriza, Inc.
We have audited the accompanying balance sheets of Spriza, Inc. (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
15
Spriza, Inc.
Balance Sheets
| |
|
December 31,
2014
$ |
|
|
December 31,
2013
$ |
|
| ASSETS |
|
|
|
|
|
|
| |
|
|
|
|
|
|
| Current Assets |
|
|
|
|
|
|
| |
|
|
|
|
|
|
| Cash |
|
5,396 |
|
|
493,539 |
|
| Restricted Cash |
|
10,000 |
|
|
- |
|
| Accounts Receivables (net of Allowance for Bad Debt of $37,500) |
|
25,866 |
|
|
- |
|
| |
|
|
|
|
|
|
| Total Current Assets |
|
41,262 |
|
|
493,539 |
|
| Property and equipment, net of accumulated depreciation of $11,019 and $4,271 (Note 4) |
|
25,166 |
|
|
24,638 |
|
| |
|
|
|
|
|
|
| Intangible assets, net of accumulated amortization of $82,033 and $2,236 (Note 4) |
|
336,610 |
|
|
284,132 |
|
| Deposits |
|
2,737 |
|
|
- |
|
| |
|
|
|
|
|
|
| Total Assets |
|
405,775 |
|
|
802,309 |
|
| |
|
|
|
|
|
|
| LIABILITIES AND
STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
| |
|
|
|
|
|
|
| Current Liabilities |
|
|
|
|
|
|
| |
|
|
|
|
|
|
| Accounts payable |
|
115,032 |
|
|
42,334 |
|
| Note payable –related party (Note 5) |
|
25,000 |
|
|
- |
|
| |
|
|
|
|
|
|
| Total Current Liabilities |
|
140,032 |
|
|
42,334 |
|
| |
|
|
|
|
|
|
| |
|
|
|
|
|
|
| |
|
|
|
|
|
|
| Stockholders’ Equity |
|
|
|
|
|
|
| |
|
|
|
|
|
|
| Preferred Stock, 10,000,000 shares authorized, $0.0001 par value, none issued |
|
- |
|
|
- |
|
| Common
Stock, 190,000,000 shares authorized, $0.0001 par value
67,618,934 and 65,942,477 issued and outstanding,
respectively (Note 6) |
|
6,762 |
|
|
6,594 |
|
| Additional Paid in Capital |
|
1,997,085 |
|
|
1,257,720 |
|
| Accumulated (Deficit) |
|
(1,738,104 |
) |
|
(504,339 |
) |
| |
|
|
|
|
|
|
| Total Stockholders’ Equity |
|
265,743 |
|
|
759,975 |
|
| |
|
|
|
|
|
|
| Total Liabilities and Stockholders’ Equity |
|
405,775 |
|
|
802,309 |
|
The accompanying notes are an integral part
to these financial statements.
16
Spriza, Inc.
Statements of Operations
| |
|
For the Year ended December 31, 2014
$ |
|
|
For the Year ended December 31, 2013
$ |
|
| |
|
|
|
|
|
|
| Revenue |
|
78,056 |
|
|
7,000 |
|
| Interest income |
|
74 |
|
|
- |
|
| |
|
|
|
|
|
|
| Total Revenue |
|
78,130 |
|
|
7,000 |
|
| |
|
|
|
|
|
|
| Expenses |
|
|
|
|
|
|
| Branding and marketing |
|
71,307 |
|
|
37,745 |
|
| Bad Debt |
|
37,500 |
|
|
- |
|
| Consulting |
|
218,121 |
|
|
97,588 |
|
| Consulting – related party |
|
187,580 |
|
|
82,836 |
|
| Depreciation and amortization |
|
86,546 |
|
|
6,507 |
|
| Office |
|
99,500 |
|
|
22,321 |
|
| Professional fees |
|
250,587 |
|
|
89,709 |
|
| Regulatory fees |
|
15,305 |
|
|
22,974 |
|
| Stock-based compensation |
|
293,635 |
|
|
79,479 |
|
| Travel |
|
72,814 |
|
|
43,262 |
|
| |
|
|
|
|
|
|
| Total Operating Expenses |
|
1,332,895 |
|
|
482,421 |
|
| |
|
|
|
|
|
|
| Net Loss before Other Income (Expense) |
|
(1,254,765 |
) |
|
(475,421 |
) |
| |
|
|
|
|
|
|
| Other Income (Expense) |
|
|
|
|
|
|
| Other Income |
|
21,000 |
|
|
- |
|
| Interest expense |
|
- |
|
|
(8,977 |
) |
| Net Loss |
|
(1,233,765 |
) |
|
(484,398 |
) |
| |
|
|
|
|
|
|
| Net Loss Per Share – Basic and Diluted |
|
(0.02 |
) |
|
(0.01 |
) |
| |
|
|
|
|
|
|
| Weighted Average Shares Outstanding – Basic and
Diluted |
|
67,386,199 |
|
|
53,300,000 |
|
The accompanying notes are an integral part to these financial statements.
17
Spriza, Inc.
Statements of Cash Flows
| |
|
For the Year ended December 31, 2014
$ |
|
|
For the Year Ended December 31, 2013
$ |
|
| Operating Activities |
|
|
|
|
|
|
| |
|
|
|
|
|
|
| Net loss |
|
(1,233,765 |
) |
|
(484,398 |
) |
| Add back non-cash items: |
|
|
|
|
|
|
| Depreciation and amortization |
|
86,546 |
|
|
6,507 |
|
| Stock-based compensation |
|
293,635 |
|
|
79,479 |
|
| Changes in operating assets and liabilities: |
|
|
|
|
|
|
| (Increase) in other assets |
|
(2,737 |
) |
|
|
|
| (Increase) in accounts receivable, accruals and allowance |
|
(25,866 |
) |
|
|
|
| Increase in accounts payable and accruals |
|
72,697 |
|
|
47,531 |
|
| |
|
|
|
|
|
|
| Net Cash Used in Operating Activities |
|
(809,490 |
) |
|
(350,881 |
) |
| |
|
|
|
|
|
|
| Investing Activities |
|
|
|
|
|
|
| |
|
|
|
|
|
|
| Restricted cash |
|
(10,000 |
) |
|
- |
|
| Purchase of equipment |
|
(7,276 |
) |
|
(3,910 |
) |
| Increase of intangible assets |
|
(132,274 |
) |
|
(286,368 |
) |
| |
|
|
|
|
|
|
| Net Cash Used in Investing Activities |
|
(149,550 |
) |
|
(290,278 |
) |
| |
|
|
|
|
|
|
| Financing Activities |
|
|
|
|
|
|
| |
|
|
|
|
|
|
| Short-term loan proceeds |
|
|
|
|
405,000 |
|
| Repayment of short-term loans |
|
- |
|
|
(25,000 |
) |
| Notes payable – related party |
|
25,000 |
|
|
- |
|
| Proceeds from common stock |
|
445,897 |
|
|
752,258 |
|
| |
|
|
|
|
|
|
| Net Cash Provided by Financing Activities |
|
470,897 |
|
|
1,132,258 |
|
| |
|
|
|
|
|
|
| Increase in Cash |
|
(488,143 |
) |
|
491,099 |
|
| |
|
|
|
|
|
|
| Cash - Beginning of Year |
|
493,539 |
|
|
2,440 |
|
| |
|
|
|
|
|
|
| Cash - End of Year |
|
5,396 |
|
|
493,539 |
|
| |
|
|
|
|
|
|
| Non-cash Financing and Investing Activities: |
|
|
|
|
|
|
| |
|
|
|
|
|
|
| Short-term loans and interest settled for shares |
|
- |
|
|
403,977 |
|
| |
|
|
|
|
|
|
| Supplemental Disclosures: |
|
|
|
|
|
|
| |
|
|
|
|
|
|
| Interest paid |
|
- |
|
|
- |
|
| Income taxes paid |
|
- |
|
|
- |
|
The accompany notes are an integral part to these
financial statements.
18
Spriza, Inc.
Statement of Stockholders’ Equity
| |
Shares
# |
Amount
$ |
Additional
Paid-in
Capital
$ |
Accumulated
Deficit
$ |
Total
$ |
| |
|
|
|
|
|
| Balance – December 31, 2012 |
41,000,000 |
4,100 |
24,500 |
(19,941) |
8,659 |
| Shares issued for cash at $0.005 per share pursuant to
an S-1 Registration 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 |
| Shares issued for cash at $0.25 per share |
1,540,800 |
154 |
182,546 |
- |
182,700 |
| Shares issued for cash at $0.30 per share pursuant to
warrants exercised |
135,657 |
14 |
40,684 |
- |
40,698 |
| 350,000 common shares subscribed for cash at $0.50 per
share |
- |
- |
175,000 |
- |
175,000 |
| 95,000 common shares subscribed for cash at $0.50 per
share pursuant to warrants exercised |
- |
- |
47,500 |
- |
47,500 |
| Stock-based compensation |
- |
- |
293,635 |
- |
293,635 |
| Net loss |
- |
- |
- |
(1,233,765) |
(1,233,765) |
| Balance – December 31, 2014 |
67,618,934 |
6,762 |
1,997,085 |
(1,738,104) |
265,743 |
The
accompany notes are an integral part to these financial statements.
19
Spriza, Inc.
Notes to Financial Statements
| |
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
|
| |
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 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. |
| |
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, 2014 and 2013, we have no impaired long-lived 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, 2014 and December 31, 2013, 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. |
| |
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. The revenues are derived from the agreements with the business that utilize the online platform developed by the Company. Revenue is recognized as per the terms negotiated with the client, most often with 50% received on the signing of the Statement of Work and the balance due 30 days of the completion of the contest. |
20
| |
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. |
| |
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, 2014 and 2013 due to their short-term nature. |
| |
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. |
| |
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, 2014 and December 31, 2013, 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, 2014 and 2013 is 9,304,435 and 7,994,291, respectively. |
| |
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. |
| |
In January 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-04, Receivables - Troubled Debt Restructurings by Creditors ("ASU 2014-04"), which intends to clarify when a creditor should be considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan such that the loan should be derecognized and the real estate recognized. ASU 2014-04 is effective for annual periods, and interim periods within those annual periods beginning after December 15, 2014. We will adopt this standard effective January 1, 2015. Our adoption of ASU 2014-14 is not expected to have a material impact on our financial statements. |
21
| |
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers ("ASU 2014-09"), which supersedes nearly all existing revenue recognition guidance under GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing GAAP. The standard is effective for annual periods beginning after December 15, 2016, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). We are currently evaluating the impact of our pending adoption of ASU 2014-09 on our financial statements and have not yet determined the method by which we will adopt the standard in 2017. |
| |
In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements—Going Concern. The provisions of ASU No. 2014-15 require management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, the amendments (1) provide a definition of the term substantial doubt, (2) require an evaluation every reporting period including interim periods, (3) provide principles for considering the mitigating effect of management’s plans, (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, (5) require an express statement and other disclosures when substantial doubt is not alleviated, and (6) require an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). The amendments in this ASU are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. The Company is currently assessing the impact of this ASU on the Company’s financial statements. |
| |
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. |
| 4.
|
Property and Equipment and Intangible Assets
|
| |
On October 17, 2012, we entered into an asset purchase agreement (the “APA”) 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, 2014 we spent $115,711 (December 31, 2013 - $227,596) on completion of this project and have allocated the cost to intellectual property. |
| 5.
|
Short-term Debt and Note Payable |
| |
We received 6% interest bearing, secured short-term loans of $395,000 during the years 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. |
| |
The Company received a short term non-interest bearing short-term loan from a related party of $25,000 in September of 2014 which was repaid in January 2015. The Company currently has no debt. |
| |
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. |
22
| |
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. |
| |
In March of 2014 we received $182,700 pursuant to the issuance of 1,540,800 Units of our $0.25 non-brokered private placement ($202,500 was received in 2013) and $40,697 received pursuant to a warrant exercised at $0.30. |
| |
In August through to year end in 2014 we received $175,000 pursuant to our $0.50 common share non-brokered private placement: and $47,500 received pursuant to a warrant exercised at $0.50. These common shares were subsequently issued in February of 2015. |
| |
As at December 31, 2014 we had 4,754,435 common share purchase warrants outstanding having an average exercise price of $0.36 per common share and having an average expiration date of 1.28 years. |
| |
|
Number of Warrants |
Weighted-Average
Price Per Share |
| |
Beginning Balance,
January 1, 2013 |
- |
- |
| |
Granted |
4,193,384 |
$0.30 |
| |
Exercised |
(749,093) |
$0.30 |
| |
Cancelled or
Expired |
- |
- |
| |
Ending Balance,
December 31, 2013 |
3,444,291 |
$0.30 |
| |
Granted |
1,540,800 |
$0.50 |
| |
Exercised |
(230,656) |
$0.32 |
| |
Cancelled or
Expired |
- |
- |
| |
Ending Balance,
December 31, 2014 |
4,754,435 |
$0.36 |
| |
Warrants
Outstanding |
|
Warrants
Exercisable |
| |
Weighted Average
Remaining Exercise Prices |
Weighted Average
Number Outstanding |
Average Remaining
Contractual Life (Years) |
|
Exercise Price |
Number Exercisable |
Contractual Life
(Years) |
| |
$0.36 |
1,808,434 |
1.68 |
|
$0.30 |
1,808,434 |
1.68 |
| |
$0.36 |
1,500,201 |
1.84 |
|
$0.30 |
1,500,201 |
1.84 |
| |
$0.36 |
1,445,800 |
0.19 |
|
$0.50 |
1,445,800 |
0.19 |
| |
|
4,754,435 |
1.28 |
|
$0.36 |
4,754,435 |
1.28 |
| 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, 2014, we recorded stock-based compensation of $293,635 and in December 31, 2013 - $79,479. |
| |
The weighted average grant date fair value of stock options granted during the year ended December 31, 2014 was $0.15. |
| |
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. |
| |
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. |
23
| |
The weighted average assumptions used for each of the year ended December 31, is as follows: |
| |
|
|
2014
|
|
|
2013
|
|
| |
Expected dividend
yield
|
|
0% |
|
|
0% |
|
| |
Risk-free interest
rate
|
|
1.61% |
|
|
1.29% |
|
| |
Expected volatility
|
|
65% |
|
|
82% |
|
| |
Expected option
life (in years)
|
|
4.00 |
|
|
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 |
|
| |
|
|
|
|
|
$ |
|
|
|
|
|
$ |
|
| |
Granted, October 29, 2013 |
|
4,550,000 |
|
|
0.15 |
|
|
4.83 |
|
|
2,684,500 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Outstanding,
December 31, 2013 |
|
4,550,000 |
|
|
0.15 |
|
|
4.83 |
|
|
2,684,500 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Granted |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Outstanding,
December 31, 2014 |
|
4,550,000 |
|
|
0.15 |
|
|
3.83 |
|
|
5,642,000 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Exercisable,
December 31, 2014 |
|
2,275,000 |
|
|
0.15 |
|
|
3.83 |
|
|
2,821,000 |
|
| |
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, 2013
|
|
4,550,000 |
|
|
0.15 |
|
| |
Granted
|
|
- |
|
|
- |
|
| |
Vested
|
|
2,275,000 |
|
|
0.15 |
|
| |
|
|
|
|
|
|
|
| |
Non-vested at
December 31, 2014
|
|
2,275,000 |
|
|
0.15 |
|
| |
As at December 31, 2014, there was $70,314 of unrecognized compensation cost related to non-vested stock options expected to be recognized over a weighted average period of 0.83 years. |
| 9.
|
Related Party Transactions
|
| |
The President and Chief Executive Officer of the Company was paid a total of $106,038 during the year (2013 - $82,836). The Chief Financial Officer of the Company was paid a total of $17,792. As at December 31, 2014 there were no employment agreements in place for any of the named executive officers or employees. |
| |
The Company received a short term non-interest bearing short-term loan from a related party of $25,000 in September of 2014 which was repaid in January 2015. The Company currently has no debt. |
| |
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. |
24
| |
The effective tax rate on the net loss before income taxes differs from the U.S. statutory rate as follows: |
| |
|
|
December 31, |
|
| |
|
|
2014 |
|
|
2013 |
|
| |
|
|
|
|
|
|
|
| |
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 |
|
2014 |
|
|
2013 |
|
| |
Net operating losses |
|
483,000 |
|
|
105,170 |
|
| |
|
|
|
|
|
|
|
| |
Less valuation allowance |
|
(483,000 |
) |
|
(105,170 |
) |
| |
Deferred tax asset - net valuation allowance |
$ |
- |
|
$ |
- |
|
| |
We have a net operating loss carryover of approximately $1,380,000 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, 2014 and December 31, 2013. |
| |
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, 2014 and December 31, 2013 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 $336,610 at December 31, 2014 and $284,132 December 31, 2013. |
| |
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: |
| |
In February 2015 the Company increased its cash position by $998,900. Subsequent to December 31, 2014 where we had received $150,000 for the $0.50 private placement and $47,500 in $0.50 warrants; we received a further $650,000 pursuant to our $0.50 common share private placement for a total of 1,600,000 common shares plus an additional $151,400 from the exercise of 397,800 warrants in total. |
| |
On February 5, 2015 Justin Sather resigned as a director of the Company. Mr. Jay Cowles joined the Board as a director and was appointed the Chief Operating Officer effective February 2, 2015. |
| |
On March 4, 2015, the Alberta Securities Commission (Alberta) (the “ASC”) issued an order that all trading of the securities and derivatives of Spriza halt until the end of the day of March 25, 2015, or until the ASC revokes its order. On March 30, 2015, the ASC notified the Company that the order expired on March 24, 2015. On March 4, 2015, the Securities Exchange Commission (the “SEC”) issued a release announcing the temporary suspension of trading in the securities of Spriza. Spriza, through its attorneys, has been working to satisfy any concerns maintained by the ASC and the SEC. |
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 Chris 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, 2014. Based on
that evaluation our chief executive officer and our chief financial officer
concluded that our disclosure controls and procedures were not effective as of
December 31, 2014.
Changes in internal controls
There were no changes in our internal
controls over financial reporting that occurred during the quarter ended
December 31, 2014 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:
- pertain to the maintenance of records
that, in reasonable detail, accurately and fairly reflect the transactions
and dispositions of our assets;
- provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial
statements in accordance with U.S. generally accepted accounting principles,
and that receipts and expenditures are being made only in accordance with
authorizations of management and directors; and
- provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use or
disposition of assets that could have a material effect on the financial
statements
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, 2014 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
On January 20, 2015, Spriza, Inc. (the “Company”) was notified that L.L. Bradford & Company, LLC had resigned as our auditor.
The report provided by L.L. Bradford & Company, LLC in connection with the Company's financial statements for the fiscal year-ended December 31, 2013, did not contain an adverse opinion or disclaimer of opinion, nor was the report qualified or modified as to uncertainty, audit scope, or accounting principles, except that L.L. Bradford & Company, LLC's report contained an explanatory paragraph regarding substantial doubt about the Registrant's ability to continue as a going concern.
26
There were no disagreements between the Company and L.L. Bradford & Company, LLC on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreements, if not resolved to the satisfaction of L.L. Bradford & Company, LLC, would have caused L.L. Bradford & Company, LLC to make reference to the subject matter of the disagreements in connection with its reports on the company's financial statements; and there were no other reportable events as that term is described in Item 304(a)(1)(v) of Regulation S-K.
As reported above, on January 21 2015, the Audit Committee appointed RBSM LLP to be the Company's independent registered public accountant for the fiscal year ending December 31, 2014. During the two most recent completed fiscal years and through January 21, 2015, neither the Company nor anyone on its behalf consulted with RBSM LLP regarding any of the following: (i) the application of accounting principles to a specific transaction, either completed or proposed; (ii) the type of audit opinion that might be rendered on the company's financial statements, and none of the following was provided to the Company (a) a written report, or (b) oral advise that RBSM, LLP concluded was an important factor considered by the Company in reaching a decision as to an accounting, auditing or financial reporting issue; or (iii) any matter that was subject of a disagreement, as the term is defined in Item 304(a)(1)(iv) of Regulation S-K, or a reportable event, as described in Item 304(a)(1)(v) of Regulation S-K
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:
|
Name
|
Age
|
Present Positions
|
|
Rob Danard
|
42
|
President and Chief Executive Officer
and a Director
|
|
Chris Robbins
|
56
|
Chief Financial Officer, Treasurer and
Secretary and a Director
|
|
Russell Krywolt
|
41
|
Director
|
|
Justin Sather
|
40
|
Director (Resigned February 5, 2015)
|
|
Jay Cowles
|
44
|
Director and Chief Operating Officer
(Effective February 2, 2015)
|
Rob Danard – President and Chief Executive
Officer and a Director
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 qualified to be a director based on
his extensive experience in the social media industry.
Chris Robbins – Chief Financial Officer, Treasurer,
Secretary and a Director
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 Gungnir 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 – Director
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.
27
Justin Sather – Director
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. Mr. Sather resigned as a director on February 5, 2015.
Jay
Cowles
A successful financial markets entrepreneur whose
integrity has earned him the respect of colleagues and clients, Mr. Cowles brings
a wealth of experience managing corporate growth. In his ten years at Globex
Foreign Exchange (now Firma FX), he was instrumental in planning and
implementing strategies to scale up operations from the startup level to its
present 250 employees.
As
a regional director, Mr. Cowles personally managed the establishment of various
branches around the world. Globex’s annual trading volume now approaches $6
billion, and in 2007 the firm was Ernst & Young’s Entrepreneur of the Year.
Mr.
Cowles advises on early stage technology companies both in the private and
public sectors most recently with an online payment solution providing
flexible, convenient options for clients called Vogogo.com. His combination of building teams, software
platforms and funding projects at seed level is an invaluable asset to any
company seeking advisement from early stages to thriving ventures. Mr. Cowles
was elected to the board on February 2, 2015.
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.
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, Chris Robbins and Jay Cowles, 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) Russell Krywolt is 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,
2014, 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 Chris
Robbins and Russell Krywolt, with Mr. Sather elected as Chairman of the
Committee. Our Board of Directors has determined that Mr. Krywolt is
“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, 2014. 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.
28
Nominating and Corporate Governance Committee
Our Governance and Nominating Committee consists of Rob Danard and Chris
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 Chris Robbins, with Mr. Danard elected as Chairman of the
Committee. Our Board of Directors has determined that neither of Messrs. Danard
or Robbins 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 and 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:
|
Name and Principal Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock
Awards
($)
|
Option
Awards
($)
|
Non-Equity Incentive Plan Compensation
($)
|
Nonqualified Deferred Compensation Earnings
($)
|
All Other
Compensation
($)
|
Total
($)
|
| |
2014
|
106,038 |
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
106,038 |
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
|
| |
|
|
|
|
|
|
|
|
|
Chris Robbins,
Chief
Financial
Officer, Treasurer
and Secretary |
2014
2013 |
17,792
Nil
|
Nil
Nil
|
Nil
Nil
|
Nil
17,468
|
Nil
Nil
|
Nil
Nil
|
Nil
Nil
|
17,792
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 $0.15 being the then current fair market value. A total of
25% vested on each of April 30, 2014 and October 31, 2014 with a further 25% scheduled
to vest on each of April 30, 2015 and October 31, 2015.
29
The table below summarizes all unexercised
options, stock that has not vested, and equity incentive plan awards for each
named executive officer as of December 31, 2014:
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
|
OPTION AWARDS |
STOCK AWARDS |
|
Name |
Number of Securities Underlying Unexercised Options
(#) Exercisable |
Number of Securities Underlying Unexercised Options
(#) Unexercisable |
Equity Incentive Plan Awards: Number of
Securities Underlying Unexercised Unearned Options
(#) |
Option Exercise Price
($) |
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
($) |
Equity Incentive Plan Awards: Number of
Unearned Shares, Units or Other Rights That Have
Not Vested
(#) |
Equity Incentive Plan Awards: Market or Payout Value
of Unearned Shares, Units or Other Rights That Have Not Vested
(#) |
|
Rob Danard |
- |
2,000,000 |
Nil |
0.15 |
10/29/2018 |
Nil |
Nil |
Nil |
Nil |
| |
|
|
|
|
|
|
|
|
|
|
Chris Robbins |
- |
1,000,000 |
Nil |
0.15 |
10/29/2018 |
Nil |
Nil |
Nil |
Nil |
Compensation of Directors
The table below summarizes all
compensation paid to our directors during the year ended December 31, 2014:
|
DIRECTOR
COMPENSATION |
|
Name |
Fees Earned or
Paid in
Cash
($) |
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 |
Nil |
| |
|
|
|
|
|
|
|
|
Justin Sather |
Nil |
Nil |
6,987 |
Nil |
Nil |
Nil |
Nil |
We did not pay our directors, Rob Danard
and Chris Robbins, who also act as senior officers, any fees or other
compensation for acting as a director during our fiscal year ended December 31,
2014 and 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 April 15, 2015 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
|
18,500,000 |
|
26.57 |
|
Chris Robbins |
250,000 |
|
* |
|
Russ Krywolt² |
3,000,000
|
|
4.31
|
|
Justin Sather
|
842,374
|
|
1.21
|
|
Jay Cowles |
3,000,000 |
|
4.31 |
|
Shareholders of Greater than 5% of
Issued and Outstanding Stock |
N/A |
|
|
|
30
* Less than one percent.
(1) Based on 69,616,734 shares of common stock issued and outstanding as of April 15, 2015. 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.
(2) Consists 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.
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 2014 we paid Rob Danard, our President and Chief Executive Officer, a total of $106,038 (2013 - $82,836) Our Chief Financial Officer was paid $17,792 in 2014 and $Nil in 2013. As at December 31, 2014 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 $24,000 in 2015 and $8,620 accrued to Chris Robbins, our Chief Financial Officer in 2014. Jay Cowles who joined our board as a director and Chief Operating Officer on February 2, 2015 is considered a related party and had loaned the company $25,000 in September of 2014; subsequently repaid in January 2015.
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.
31
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 2014 and 2013 for
professional services rendered for the fiscal year ended December 31, 2014 and December
31, 2013:
|
Fee
Category
|
|
2014
Fees
|
|
|
2013
Fees
|
|
|
Audit Fees
|
$ |
|
|
$ |
|
|
| L.L. Bradford & Company, LLC |
|
12,792 |
|
|
22,500 |
|
| RBSM LLP |
|
19,000 |
|
|
- |
|
|
Tax Fees
|
|
- |
|
|
- |
|
|
All Other Fees
|
|
- |
|
|
- |
|
|
Total Fees
|
$ |
31,792 |
|
$ |
22,500 |
|
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 2014 or 2013.
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.
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 2014 Annual 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.
32
EXHIBIT
INDEX
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
33
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: April 15, 2015
| |
Spriza, Inc.
By: /s/ Rob Danard
Name: Rob Danard
Title: Chief Executive Officer (principal executive officer) |
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
|
| |
|
|
| /s/ Rob Danard
|
President, Chief Executive
Officer and Director
|
April 15, 2015 |
| |
|
|
| /s/ Chris Robbins
|
Chief Financial Officer,
Treasurer, Secretary and Director
|
April 15, 2015 |
| |
|
|
|
/s/ Russ
Krywolt
|
Director
|
April 15, 2015 |
| |
|
|
|
/s/ Jay
Cowles
|
Director
|
April 15, 2015 |
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, 2014 (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: April 15, 2015 |
|
| |
/s/ 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, Chris Robbins, hereby certify that:
(1) I have reviewed this annual report on
Form 10-K for the year ended December 31, 2014 (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: April 15, 2015 |
|
| |
/s/ Chris 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, 2014 (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.
/s/ Rob Danard,
Chief Executive Officer
(principal executive officer)
/s/ Chris Robbins,
Chief Financial Officer
(principal accounting officer)
Date: April 15, 2015
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