UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED: MARCH 31, 2015
OR
[ ] TRANSITION REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 333-185669
SPRIZA, INC.
(Exact name of registrant as specified in its charter)
|
Nevada
|
90-08883246
|
(State or other jurisdiction of
incorporation of
organization)
|
(I.R.S. Employer Identification No.)
|
111 Penn Street, El Segundo, CA 90245
(Address of principal executive offices)
650-204-7903
(Registrant’s telephone number)
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 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
|
[ ]
|
|
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]
As of May 15, 2015, there were 69,616,734 shares of our
common stock issued and outstanding.
SPRIZA, INC.
FORM 10-Q
INDEX
FORWARD-LOOKING STATEMENTS
This Report on Form 10-Q contains forward-looking statements within the
meaning of the “safe harbor” provisions of the Private Securities Litigation
Reform Act of 1995. Reference is made in particular to the description of
our plans and objectives for future operations, assumptions underlying such
plans and objectives, and other forward-looking statements included in this
report. Such statements may be identified by the use of forward-looking
terminology such as “may,” “will,” “expect,” “believe,” “estimate,”
“anticipate,” “intend,” “continue,” or similar terms, variations of such terms
or the negative of such terms. Such statements are based on management’s
current expectations and are subject to a number of factors and uncertainties,
which could cause actual results to differ materially from those described in
the forward-looking statements. Such statements address future events and
conditions concerning, among others, capital expenditures, earnings,
litigation, regulatory matters, liquidity and capital resources, and accounting
matters. Actual results in each case could differ materially from those
anticipated in such statements by reason of factors such as future economic
conditions, changes in consumer demand, legislative, regulatory and competitive
developments in markets in which we operate, results of litigation, and other
circumstances affecting anticipated revenues and costs, and the risk factors
set forth under the heading “Risk Factors” in our Annual Report on Form 10-K
for the fiscal year ended December 31, 2014 filed on April 15, 2015.
The forward-looking statements
made in this report on Form 10-Q relate only to events or information as of the
date on which the statements are made in this report on Form 10-Q. Except
as required by law, we undertake no obligation to update or revise publicly any
forward-looking statements, whether as a result of new information, future
events, or otherwise, after the date on which the statements are made or to
reflect the occurrence of unanticipated events. You should read this
report and the documents that we reference in this report, including documents
referenced by incorporation, completely and with the understanding that our
actual future results may be materially different from what we anticipate.
Unless otherwise indicated, in this Form
10-Q, references to “we,” “our,” “us,” the “Company,” “Spriza” or the
“Registrant” refer to Spriza, Inc., a Nevada corporation.
YOU SHOULD NOT PLACE UNDUE RELIANCE ON
THESE FORWARD-LOOKING STATEMENTS
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
These
financial statements have been prepared in accordance with accounting
principles generally accepted in the United States of America for interim
financial information and the SEC’s instructions to Form 10-Q. In the opinion
of management, all adjustments considered necessary for a fair presentation
have been included. Operating results for the interim period ended March 31,
2015 are not necessarily indicative of the results that can be expected for the
full year.
Spriza, Inc.
Condensed Balance Sheets (Unaudited)
| |
|
March 31,
2015
$ |
|
|
December 31,
2014
$ |
|
|
ASSETS
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
| Cash |
|
510,519 |
|
|
5,396 |
|
| Cash – restricted |
|
10,000 |
|
|
10,000 |
|
| Accounts Receivable (net of Allowance for Bad Debt of $37,500) |
|
- |
|
|
25,866 |
|
| |
|
|
|
|
|
|
| Total Current Assets |
|
520,519 |
|
|
41,262 |
|
| |
|
|
|
|
|
|
| Property and equipment, net of accumulated depreciation of $12,857 and $11,019, respectively (Note 4) |
|
25,030 |
|
|
25,166 |
|
| Other assets |
|
|
|
|
|
|
| Intangible assets, net of accumulated amortization of $104,017 and $82,033, respectively (Note 4) |
|
335,673 |
|
|
336,610 |
|
| Deposits |
|
2,737 |
|
|
2,737 |
|
| Total Other Assets |
|
338,410 |
|
|
339,347 |
|
|
Total Assets
|
|
883,959 |
|
|
405,775 |
|
| |
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
| Accounts payable and accrued liabilities |
|
9,913 |
|
|
115,032 |
|
| Note payable –related party (Note 5) |
|
- |
|
|
25,000 |
|
| Total Current Liabilities |
|
9,913 |
|
|
140,032 |
|
| |
|
|
|
|
|
|
|
Contingencies (Notes 1 and 3)
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
Stockholders’ Equity
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
| Preferred Stock, 10,000,000 shares authorized, $0.0001 par value, no shares issued and outstanding |
|
- |
|
|
- |
|
| Common Stock, 190,000,000 shares authorized, $0.0001 par value, 65,942,477 and 41,0000,000 issued and outstanding, respectively (Note 6) 69,616,734 and 67,618,934 shares issued and outstanding, respectively |
|
6,962 |
|
|
6,762 |
|
| |
|
|
|
|
|
|
|
Additional Paid in
Capital
|
|
2,817,452 |
|
|
1,997,085 |
|
|
Accumulated Deficit |
|
(1,950,368 |
) |
|
(1,738,104 |
) |
|
Total Stockholders’ Equity
|
|
874,046 |
|
|
265,743 |
|
|
Total Liabilities and Stockholders’
Equity
|
|
883,959 |
|
|
405,775 |
|
The accompany notes are an integral part to these
financial statements.
4
Spriza, Inc.
Condensed Statements of Operations
(Unaudited)
| |
|
Three Months
Ended March 31,
2015 |
|
|
Three
Months
Ended March 31,
2014 |
|
| |
|
$ |
|
|
$ |
|
|
Revenue |
|
- |
|
|
- |
|
| |
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
| Branding and marketing |
|
6,188 |
|
|
25,586 |
|
| Consulting |
|
38,944 |
|
|
43,833 |
|
| Consulting – related party |
|
43,852 |
|
|
40,939 |
|
| Depreciation and amortization |
|
23,822 |
|
|
13,404 |
|
| Foreign Exchange |
|
(12,692 |
) |
|
- |
|
| General and administrative |
|
27,007 |
|
|
13,696 |
|
| Professional fees |
|
30,647 |
|
|
73,954 |
|
| Regulatory fees |
|
4,519 |
|
|
6,383 |
|
| Stock based compensation |
|
44,168 |
|
|
113,542 |
|
| Travel |
|
5,809 |
|
|
20,265 |
|
| |
|
|
|
|
|
|
|
Total Operating Expenses |
|
212,264 |
|
|
351,602 |
|
| |
|
|
|
|
|
|
|
Net (Loss) before Other Expense |
|
(212,264 |
) |
|
(351,602 |
) |
| |
|
|
|
|
|
|
|
Other Income (Expense) |
|
|
|
|
|
|
| Interest Income |
|
- |
|
|
- |
|
| Interest expense |
|
- |
|
|
- |
|
|
Net (Loss) |
|
(212,264 |
) |
|
(351,602 |
) |
| |
|
- |
|
|
|
|
|
Net (Loss) Per Share – Basic and
Diluted |
|
(0.00 |
) |
|
(0.00 |
) |
| |
|
|
|
|
|
|
|
Weighted Average Shares Outstanding
– Basic and Diluted |
|
67,832,397 |
|
|
56,624,994 |
|
The accompany notes are an integral part to these
financial statements.
5
Spriza, Inc.
Condensed Statements of Cash Flows
(Unaudited)
| |
|
For the Three Months Ended |
|
| |
|
March 31, |
|
|
March 31,
|
|
| |
|
2015
|
|
|
2014
|
|
| |
|
$
|
|
|
$
|
|
|
Operating
Activities
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
| Net loss |
|
(212,264 |
) |
|
(351,602 |
) |
| Adjustments to reconcile net loss to net cash (used) by operating activities: |
|
|
|
|
|
|
| Depreciation and amortization |
|
23,822 |
|
|
13,404 |
|
| Stock-based compensation |
|
44,168 |
|
|
113,541 |
|
| Changes in operating assets and liabilities: |
|
|
|
|
|
|
| (Increase) in other assets |
|
- |
|
|
(2,737 |
) |
| (Increase) decrease in accounts receivable |
|
25,866 |
|
|
- |
|
| (Decrease) increase in accounts payable and accrued expenses |
|
(105,118 |
) |
|
(16,857 |
) |
| |
|
|
|
|
|
|
|
Net Cash (Used) in
Operating Activities
|
|
(223,526 |
) |
|
(244,251 |
) |
| |
|
|
|
|
|
|
|
Investing Activities
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
| Restricted cash |
|
- |
|
|
- |
|
| Purchase of equipment |
|
(1,703 |
) |
|
(7,060 |
) |
| Additions to intangible assets |
|
(21,048 |
) |
|
(26,931 |
) |
| |
|
|
|
|
|
|
|
Net Cash (Used) in Investing
Activities
|
|
(22,751 |
) |
|
(33,991 |
) |
| |
|
|
|
|
|
|
|
Financing Activities
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
Short-term loan
proceeds
|
|
- |
|
|
- |
|
|
Repayment of short-term
loans
|
|
(25,000 |
) |
|
- |
|
|
Proceeds from the
issuance of common stock
|
|
776,400 |
|
|
219,520 |
|
| |
|
|
|
|
|
|
|
Net Cash Provided by
Financing Activities
|
|
751,400 |
|
|
219,520 |
|
| |
|
|
|
|
|
|
|
(Decrease) Increase in
Cash
|
|
505,123 |
|
|
(58,722 |
) |
| |
|
|
|
|
|
|
|
Cash - Beginning of Period
|
|
5,396 |
|
|
493,539 |
|
| |
|
|
|
|
|
|
|
Cash - End of Period
|
|
510,519 |
|
|
434,817 |
|
| |
|
|
|
|
|
|
|
Non-cash Financing and
Investing Activities:
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
| Short-term loans and interest settled for shares |
|
- |
|
|
- |
|
| Acquisition of assets for common shares |
|
- |
|
|
- |
|
| |
|
|
|
|
|
|
|
Supplemental
Disclosures:
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
| Interest paid |
|
- |
|
|
- |
|
| Income taxes paid |
|
- |
|
|
- |
|
The accompany notes are an integral part to these
financial statements.
6
Spriza, Inc.
Statement of Stockholders’ Equity
(Unaudited)
| |
Shares
# |
Amount
$ |
Additional
Paid-in
Capital
$ |
Accumulated
Deficit
$ |
Total
$ |
| |
|
|
|
|
|
| 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 |
| Shares issued for cash at $0.50 per share |
1,600,000 |
160 |
624,840 |
- |
625,000 |
| Shares issued for cash at $0.50 per share pursuant to
warrants exercised |
397,800 |
40 |
151,360 |
- |
151,400 |
| Stock-based compensation |
- |
- |
44,168 |
- |
44,168 |
| Net loss |
- |
- |
- |
(212,264) |
(212,264) |
| Balance – March 31, 2015 |
69,616,734 |
6,962 |
2,817,452 |
(1,950,368) |
874,046 |
The
accompany notes are an integral part to these financial statements.
7
Spriza, Inc.
Notes to Financial
Statements
(Unaudited)
| |
The interim financial statements included herein, presented in accordance with United States generally accepted accounting principles and stated in US dollars, have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. |
| |
These statements reflect all adjustments, consisting of normal recurring adjustments, which, in the opinion of management, are necessary for fair presentation of the information contained therein. It is suggested that these interim financial statements be read in conjunction with the financial statements of the Company for the period ended December 31, 2014 and notes thereto included in the Company's Form 10-K. The Company follows the same accounting policies in the preparation of interim reports.
Results of operations for the interim periods are not indicative of annual results. |
| 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. |
| |
Revenue is recognized in accordance with Accounting Standard Codification (ASC) 605-10 (previously Securities and Exchange Commission Staff Accounting Bulletin No. 104, Revenue Recognition). 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 businesses that utilize the online contest platform developed by the Company. |
| |
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. |
8
| |
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. |
| |
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. |
| |
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. |
9
| 4.
|
Property and Equipment and Intangible Assets
|
| |
On October 17, 2012, we entered into an Asset Purchase Agreement with Raptify Marketing Systems Ltd. (“Raptify”), whereby we acquired certain assets from Raptify in exchange for 5,000,000 shares of our common stock, 3,000,000 shares of which were received by Raptify and 2,000,000 shares of which were received by certain other stakeholders of Raptify. The fair value of the assets acquired was $25,000 which was allocated to identifiable assets as follows: intellectual property $1 and computer systems, $24,999. |
| |
On May 15, 2013 we contracted a San Francisco consulting firm with technology development capabilities in the Philippines to complete the redevelopment of our technology platform. On December 1, 2013 we completed SPRIZA™ and on March 18, 2014 unveiled it to the public with real-time contests being run. SPRIZA™ includes: subscriber portal, mobile device support, do-it-yourself platform and tools allowing us to develop a database of concurrent customers and users. During the quarter ended March 31, 2015 we spent $17,048 (March 31, 2014 - $49,961) on completion of this project and have allocated the cost to intellectual property. |
| 5.
|
Short-term Debt and Note Payable
|
| |
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. |
| |
During the first quarter of 2015 the Company issued 1,997,800 common shares for proceeds of $776,400 from a non-brokered private placement of 1,600,000 shares and exercise of warrants of 397,800 shares. Note: $175,000 of the $0.50 Units and $47,500 of the warrants were booked in the last quarter of 2014 and issued in the first quarter of 2015. |
| |
As at March 31, 2015 we had 3,308,635 common share purchase warrants outstanding having an average exercise price of $0.30 per common share and having an average expiration date of 1.51 years. |
| |
Number
of
Warrants
|
Weighted-
Average
Price
Per Share
|
|
Beginning
Balance, January 1, 2014
|
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 |
|
Granted
|
- |
- |
|
Exercised
|
(302,800) |
$0.50 |
|
Cancelled
or Expired
|
(1,143,000) |
$0.50 |
|
Ending
Balance, March 31, 2015
|
3,308,635 |
$0.30 |
10
|
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
|
1.44
|
|
$0.30
|
1,808,434
|
1.44
|
|
$0.36
|
1,500,201
|
1.59
|
|
$0.30
|
1,500,201
|
1.59
|
| |
3,308,635
|
1.51
|
|
$0.30
|
3,308,635
|
1.51
|
| 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% vested on April 30, 2014, with a further 25% vesting on each of October 31, 2014, April 30, 2015 and October 31, 2015. On November 15, 2014, we granted 300,000 stock options to a consultant to acquire 300,000 common shares at $0.50 per share having an option life of one year. A total of 25% vested on February 15, 2015, with a further 25% vesting on each of May 31, 2015, August 15, 2015 and November 15, 2015. Stock options granted to non-employees are recognized based on the value of the vested portion of the award over the service period. During Q1-2015 we recorded stock-based compensation of $44,168 (Q1-2014 - $113,542). |
| |
The weighted average grant date fair value of stock options granted during the period ended March 31, 2015 was $0.50. |
| |
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. |
| |
The weighted average assumptions used for each of the period ended March 31, 2015 is as follows: |
| |
2015
|
2014
|
|
Expected dividend
yield
|
0%
|
0%
|
|
Risk-free
interest rate
|
0.23%
|
1.61%
|
|
Expected
volatility
|
60%
|
65%
|
|
Expected option
life (in years)
|
1.00
|
4.00
|
| |
The following
table summarizes the continuity of our stock options:
|
| |
|
Number
of
Options
|
Weighted
Average
Exercise
Price
|
Weighted-Average
Remaining
Contractual
Term
(years)
|
Aggregate
Intrinsic
Value
|
| |
|
|
$
|
|
$
|
| |
Outstanding,
December 31, 2014
|
4,550,000 |
0.15 |
3.83 |
5,642,000 |
| |
|
|
|
|
|
| |
Granted
|
300,000 |
0.50 |
0.63 |
37,500 |
| |
|
|
|
|
|
| |
Outstanding, March,
31 2015
|
4,850,000 |
0.17 |
3.05 |
1,477,500 |
| |
|
|
|
|
|
| |
Exercisable, March
31, 2015
|
2,392,094 |
0.16 |
3.29 |
720,000 |
11
| |
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, 2014
|
2,275,000 |
0.15 |
| |
Granted
|
300,000 |
0.50 |
| |
Vested
|
(75,000) |
0.50 |
| |
|
|
|
| |
Non-vested at March
31, 2015
|
2,500,000 |
0.16 |
| |
As at March 31, 2015, there was $125,065 of unrecognized compensation cost related to non-vested stock options expected to be recognized over a weighted average period of 0.60 of a year. |
| 9.
|
Related Party Transactions
|
| |
The President and Chief Executive Officer of the Company was paid a total of $23,894 during the three months ended March 31, 2015 (Q1 2014 - $31,974). The Chief Financial Officer of the Company was paid a total of $(nil) during the three months ended March 31, 2015 (Q1 2014 - $8,965). Jay Cowles the Chief Operating Officer was paid $19,958 during the three months ended March 31, 2015 (Q1 2014 - $Nil) |
| |
We have evaluated all subsequent events through the date of these financial statements were issued and determined that there are no subsequent events to record or disclose. |
Item
2. Management’s Discussion and Analysis of Financial Condition and Results of
Operations
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 Quarterly Report on
Form 10-Q. 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.
12
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.
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.
13
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.
14
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.
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 period ended
March , 2015 we spent $17,048 on this project and have allocated the cost to
intellectual property; we are continuing
to work 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 and the first quarter of 2015:
- Developed an
international licensing model;
- Identified
strategic partners in Asia, Europe and the United States;
15
- 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.
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 May 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.
16
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.
The discussion that follows is derived from our
unaudited balance sheets as of March 31, 2015 and December 31, 2014 and the
unaudited statements of operations and cash flows for the three months ended March
31, 2015 and December 31, 2014.
Results of Operations
During the three months ended March 31, 2015 we continued to produce
contests as a proof of concept to showcase the platform’s design and
functionality to interested advertising parties. Although we did not record any
new revenues in the first quarter we increased our client pipeline and fully
expect to engage in revenues for the balance of 2015. We generated $Nil in
revenues during the first quarters of 2015 and 2014. We were also focused on
proving our platform and received valuable user signups
and data in the process. Contests that are produced by us through third agencies
or brands were produced by us and prizes were sponsored and paid for by the participating
vendors.
During the first quarter of 2015 we also signed
our first repeat client with a new contest initiated in April of 2015.
Results of Operations for the three months ended March
31, 2014 and 2014
The net loss for the first quarter of 2015 was $212,264
compared to a net loss of $351,602 for Q1-2014 a decrease of $139,338. This decrease
was mostly incurred in savings related to professional fees and stock based
compensation.
During Q1-2015 operating expenses consisted of: $44,168
(Q1-2014 - $113,542) of stock-based compensation due to the vesting of options
granted and vesting in the applicable quarter under our 2013 Incentive Award
Plan; $82,796 (Q1-2014 - $84,772) in consulting fees and salaries including $23,894
(Q1-2014 - $31,974) paid to our Chief Executive Officer; $Nil paid to our
Chief Financial Officer (Q1-2014 - $8,964); $19,958 paid to our Chief Operating
Officer (Q1-2014 - $Nil); $6,188 (Q1-2014 - $25,586) in branding and marketing;
$4,519 (Q1-2014 - $6,383) in regulatory fees, $30,647 (Q1-2014 - $73,954) in
professional fees including legal and accounting fees, $5,809 (Q1-2014 - $20,265)
in travel and $27,007 (Q1-2014 - $13,696) in general and administrative
expenses. We incurred $23,822 (Q1-2014 - $13,404) in depreciation and
amortization of property and equipment and added $17,408 in intangible assets (Q1-2014 - $11,717). We expect that our administrative and operating expenses will continue to increase as we further our business operations.
Liquidity and Capital Resources
As at March 31, 2015, working capital was $510,606.
Our available cash on hand was $510,519 and $10,000 in restricted cash. At the
end of the first quarter of
2015 our available and restricted cash position increased from the 2014 year
end. As at December 31, 2014, the Company
has a working capital deficit of $98,770. Our cash on hand was $41,262 which
included the restricted cash of $10,000. Accounts receivable at March 31, 2015 was $Nil
compared to $Nil for March 31, 2014. 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.
17
The following table sets forth the major
sources and uses of cash for the three months ended March 31, 2015 and 2014:
| |
2015
$
|
|
2014
$
|
|
|
Net cash used in operating activities
|
|
(223,526)
|
|
|
(244,251)
|
|
|
Net cash used in investing activities
|
|
(22,751)
|
|
|
(33,991)
|
|
|
Net cash provided by financing
activities
|
|
751,400
|
|
|
219,520
|
|
|
Net increase (decrease) in cash
|
|
505,123
|
|
|
(58,722)
|
|
Cash Used in Operating Activities
During 3 Month-2015 operating activities used $223,526
in cash (3 Month-2014 - $244,251). Use of cash was primarily attributable to
funding the net loss of $212,264 (3 Month-2014 - $351,602) offset by a non-cash
charge of $23,822 (3 Month-2014 - $13,404) for depreciation and amortization
and a non-cash charge of $44,168 for stock-based compensation (3 Month-2014 - $113,541).
Cash Used in Investing Activities
During 3 Month-2015 we spent $22,751 (3Month-2014
- $33,991) in investing activities. During 3 Month-2015 we spent $1,703 acquiring equipment and $17,048
developing intangible assets (3Month-2014 - $7,060 and $26,932 respectively).
Cash from Financing Activities
During 3 Month-2015 financing activities provided $776,400
(3 Month-2014 - $219,520) in cash consisting of:
- $625,000 received pursuant to
our $0.50 Unit non-brokered private placement for 1,600,000 shares; and
- $151,400 from the exercise of 397,800 warrants at
$0.50 per warrant share.
- Note: $175,000 of the $0.50
Units and $47,500 of the warrants were booked in the last quarter of 2014
and issued in the first quarter of 2015.
Need for Additional Capital
Although we do have approximately $500,000 in cash in
hand at March 31, 2015 we expect that we will require $1,000,000 of 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.
Critical
Accounting Policies
In
December 2001, the SEC requested that all registrants list their most “critical
accounting polices” in the Management 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. We do not believe that any accounting policies applicable to our
company currently fit this definition.
Recently
Issued Accounting Pronouncements
We do
not expect the adoption of recently issued accounting pronouncements to have a
significant impact on our results of operations, financial position or cash
flow.
Item
3. Quantitative and Qualitative Disclosures about Market Risk
A
smaller reporting company is not required to provide the information required by
this Item.
Item
4. 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 March 31, 2015. 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 March
31, 2015.
18
We plan to take steps to enhance and improve the
design of our internal control over financial reporting. Additionally we plan
to continually adopt sufficient written policies and procedures for accounting
and financial reporting.
Changes in internal controls
There were no changes in our internal
controls over financial reporting that occurred during the quarter ended March
31, 2015 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 March 31, 2015 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 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.
Remediation Plan to Address the Material Weaknesses in Internal Control over Financial Reporting
Limitations on the Effectiveness of Controls: Our Board of Directors and management,
including our Chief Executive Officer and Chief Financial Officer, do not
expect that our disclosure controls and procedures or internal control over
financial reporting will prevent all errors and all fraud. Controls, no matter
how well conceived and operated, can provide only reasonable, not absolute,
assurance that the objectives of the controls are met. Further, we believe that
the design of prudent controls must reflect appropriate resource constraints,
such that the benefits of controls must be considered relative to their costs.
Because of the inherent limitations in all controls, there can be no absolute
assurance that all control issues and instances of fraud, if any, applicable to
us have been or will be detected. These inherent limitations include the
realities that judgments in decision-making can be faulty, and that breakdowns
can occur because of simple errors or mistakes. Additionally, controls can be
circumvented by the individual acts of some individuals, by collusion of more
than one person, or by management override of the control. The design of any
system of controls also is based in part upon certain assumptions about the
likelihood of future events, and there can be no assurance that any design will
succeed in achieving its stated goals under all potential future conditions;
over time, controls may become inadequate because of changes in conditions, or
the degree of compliance with the policies or procedures may deteriorate.
Because of the inherent limitations in a cost-effective control system,
misstatements due to error or fraud may occur and not be detected.
19
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the three months ended March 31, 2015 that have materially affected, or are reasonable likely to materially affect, our internal control over financial reporting.
PART II – OTHER INFORMATION
Item 1. Legal Proceedings
We are
not a party to any pending legal proceeding. We are not aware of any pending
legal proceeding to which any of our officers, directors, or any beneficial
holders of 5% or more of our voting securities are adverse to us or have a
material interest adverse to us.
Item 1A. Risk Factors
A
smaller reporting company is not required to provide the information required
by this Item.
Item 2. Unregistered Sales of Equity Securities and
Use of Proceeds
During the three month period ended March 31, 2015
financing activities provided $776,400 (3 Month-2014 - $219,520) in cash
consisting of:
- $625,000 received pursuant to
our $0.50 Unit non-brokered private placement for 1,600,000 shares; and
- $151,400 from the exercise of 397,800 warrants at
$0.50 per warrant share.
- Note: $175,000 of the $0.50
Units and $47,500 of the warrants were booked in the last quarter of 2014
and issued in the first quarter of 2015.
These funds were used for
general working capital.
Item
3. Defaults
upon Senior Securities
None
Item 4. Mine Safety Disclosures
Not
applicable
Item 5. Other Information
None
20
Item
6. Exhibits
| 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.
|
| 4.
|
Incorporated herein by reference to the Annual Report on Form 10-K filed on March 31, 2014.
|
* Filed herewith
**Furnished
herewith
21
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
| |
Spriza, Inc.
|
| |
|
|
Date:
|
May 15, 2015
|
| |
|
|
By:
|
/s/ Rob Danard
|
| |
Rob Danard
|
|
Title:
|
Chief Executive Officer
and Director
|
CERTIFICATIONS
I, Rob Danard, certify that;
| 1. |
I have reviewed this quarterly report on Form 10-Q for the quarter ended March 31, 2015 of Spriza, Inc. (the “registrant”); |
| 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 officer 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 consolidated 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 officer 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 the registrant’s board of directors (or persons performing the equivalent functions): |
| |
a. |
All significant deficiencies and material weaknesses 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. |
Date:
May 15, 2015
/s/
Rob Danard
By: Rob
Danard
Title:
Chief Executive Officer
CERTIFICATIONS
I, Christopher Robbins,
certify that;
| 1. |
I have reviewed this quarterly report on Form 10-Q for the quarter ended March 31, 2015 of Spriza, Inc. (the “registrant”); |
| 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 officer 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 consolidated 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 officer 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 the registrant’s board of directors (or persons performing the equivalent functions): |
| |
a. |
All significant deficiencies and material weaknesses 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. |
Date:
May 15, 2015
/s/
Christopher Robbins
By: Christopher
Robbins
Title:
Chief Financial Officer
CERTIFICATION
OF CHIEF EXECUTIVE OFFICER AND
CHIEF FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the quarterly Report of
Spriza, Inc. (the “Company”) on Form 10-Q for the quarter ended March 31, 2015 filed with the Securities and Exchange Commission (the “Report”), I, Rob
Danard, Chief Executive Officer of the Company and I Chris Robbins, Chief
Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
| 1. |
The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and |
| 2. |
The information contained in the Report fairly presents, in all material respects, the consolidated financial condition of the Company as of the dates presented and the consolidated result of operations of the Company for the periods presented. |
| By: |
/s/ Rob Danard |
| Name: |
Rob Danard |
| Title: |
Principal Executive Officer
and Director |
| Date: |
May 15, 2015 |
| |
|
| By: |
/s/ Chris Robbins |
| Name: |
Chris Robbins |
| Title: |
Principal Financial Officer
and Director |
| Date: |
May 15, 2015 |
This certification has been furnished solely
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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