As filed with the Securities and Exchange Commission on February 3, 2015
Registration No. 333-_____________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Spindle, Inc.
(Exact name of registrant as specified in its charter)
Nevada |
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7389 |
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20-8241820 |
(State or jurisdiction of |
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(Primary Standard Industrial |
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(I.R.S. Employer |
incorporation or organization) |
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Classification Code Number) |
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Identification No.) |
8700 E Vista Bonita Dr. , Suite 260
Scottsdale, Arizona 85255
(Address and telephone number of principal executive offices)
William Clark
Chief Executive Officer
8700 E Vista Bonita Dr. , Suite 260
Scottsdale, Arizona 85255
(800) 560-9198
(Name, address and telephone number of agent for service)
Copies to:
Melanie Figueroa, Esq.
Richardson & Patel, LLP
The Chrysler Building
405 Lexington Avenue, 49th Floor
New York, NY 10174
(212) 931-8713
(917) 677-8165 (fax)
Approximate date of commencement of proposed sale to the public: From time to time after the effective date of this registration statement.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box. [X]
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]
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. (Check one):
[ ] Large accelerated filer |
[ ] Accelerated filer |
[ ] Non-accelerated filer |
[X] Smaller reporting company |
Title of Each Class of Securities to be Registered |
Amount to be Registered(1) |
Proposed Maximum Offering Price Per Share(2) |
Proposed Maximum Aggregate Offering Price(2) |
Amount of Registration Fee |
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Shares of Common Stock, par value $0.001 per share |
4,034,314 |
$0.57 |
$2,299,558.98 |
$267.21 |
(1) This Registration Statement shall also cover any additional shares of common stock which become issuable by reason of any stock dividend, stock split, recapitalization or other similar transaction effected without the registrants receipt of consideration which results in an increase in the number of the outstanding shares of registrants common stock.
(2) Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(c) under the Securities Act of 1933, based on the average of the bid and ask price of the registrants common stock as reported by the OTCQB on January 30, 2015.
The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
The information in this prospectus is not complete and may be changed. The selling stockholders named in this prospectus may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
PRELIMINARY PROSPECTUS |
SUBJECT TO COMPLETION, DATED FEBRUARY 3, 2015 |
Prospectus
SPINDLE, INC.
4,034,314 Shares of Common Stock
This prospectus relates to the offer and sale of up to 4,034,314 shares of common stock, par value $0.001 per share, of Spindle, Inc., a Nevada corporation (the Company, Spindle, us, our, or we) by the selling stockholders.
We are not selling any securities under this prospectus and will not receive any of the proceeds from the sale of shares by the selling stockholders.
The selling stockholders may sell the shares of common stock described in this prospectus in a number of different ways and at varying prices. See Plan of Distribution for more information about how the selling stockholders may sell the shares of common stock being registered pursuant to this prospectus.
We will pay the expenses incurred in registering the shares, including legal and accounting fees. See Plan of Distribution.
Our common stock is quoted on the OTCQB under the ticker symbol SPDL. The last reported sale price was $0.57 on January 30, 2015.
An investment in our common stock involves a high degree of risk. You should consider carefully the risk factors beginning on page 4 of this prospectus before purchasing any of the shares offered by this prospectus.
We may amend or supplement this prospectus from time to time by filing amendments or supplements as required. You should read the entire prospectus and any amendments or supplements carefully before you make your investment decision.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this prospectus is_________, 2015
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SPINDLE, INC.
TABLE OF CONTENTS
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ABOUT THIS PROSPECTUS
You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with information different from that contained in this prospectus. The selling stockholders are offering to sell and seeking offers to buy shares of our common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of our common stock. The prospectus will be updated and updated prospectuses made available for delivery to the extent required by the federal securities laws.
No person is authorized in connection with this prospectus to give any information or to make any representations about us, the selling stockholders, the common stock being sold or any matter discussed in this prospectus, other than the information and representations contained in this prospectus. If any other information or representation is given or made, such information or representation may not be relied upon as having been authorized by us or the selling stockholders. This prospectus does not constitute an offer to sell, or a solicitation of an offer to buy the securities in any circumstances under which the offer or solicitation is unlawful. Neither the delivery of this prospectus nor any distribution of securities in accordance with this prospectus shall, under any circumstances, imply that there has been no change in our affairs since the date of this prospectus. This prospectus will be updated and updated prospectuses made available for delivery to the extent required by the federal securities laws.
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PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus. You should read the entire prospectus carefully, including, the section entitled Risk Factors before deciding to invest in our common stock.
About Our Business
We supply mobile marketing and payments products and services that enable merchants to attract and retain customers through the use of our proprietary platforms and systems. Our integrated payment and marketing services are available through a single mobile- or website-based interface that allows a merchant to simply and securely market to and transact business with new customers in as little as 10 minutes.
We also deliver mobile products and services to consumers, allowing them to discover new merchants, subscribe to their personal favorite merchants, and make purchases using their mobile devices.
Our target market is small and medium sized businesses, because due to their limited resources, limited expertise, and a lack of turnkey mobile applications, we believe that the majority of these merchants are at a competitive disadvantage in the rapidly evolving mobile economy. Our products enable small and medium sized businesses and consumers to interact within a mobile environment and engage in commerce in real-time virtual and physical marketplaces.
Since our acquisition of Spindle Mobile, Inc. in December 2011, we have expanded our business by acquiring assets that facilitate electronic payment processing services to merchants, allow us to develop, market and license a mobile marketing platform for use by small and medium sized merchants and consumers, and provide retail coupons through a mobile application.
Our goal is to expand the use of our products and services, which we are doing in two ways. First of all we engage in direct selling using employees and contract labor, web or app store traffic and referrals from our customers and merchants. Aside from direct selling, we have also signed several reseller agreements to extend our reach into specialized markets such as mobile advertising and display, micro mobile merchant aggregation via physical cellular locations (mPOS), independent sales offices (ISOs), SaaS based point of sale (POS), and website merchant services (eCommerce). We consider these sales indirect. Indirect sales are made when we provide the technology and/or bundle our marketing and payment systems with the resellers products. In some cases our systems carry the Yowza!! brand, while in other cases our systems are branded under the resellers name, imaging, and logos.
Corporate Information
The address of our corporate headquarters is 8700 E. Vista Bonita Dr., STE 260, Scottsdale, AZ 85255 and our telephone number is (800) 560-9198. Our website can be accessed at www.spindle.com. The information contained on, or that may be obtained from, our website is not a part of this prospectus.
The Offering
This prospectus relates to the offer and sale, from time to time, of up to 4,034,314 of our common stock by the selling stockholders listed in this prospectus (the Selling Stockholders). We are also registering for sale any additional shares of common stock which may become issuable by reason of any stock dividend, stock split, recapitalization or other similar transaction effected without the receipt of consideration, which results in an increase in the number of outstanding shares of our common stock.
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Acquisition of MeNetwork Assets
On March 20, 2013 (MeNetwork Closing Date), pursuant to that certain Asset Purchase Agreement, dated March 1, 2013, the Company assumed certain liabilities and acquired substantially all the assets of MeNetwork, Inc. (MeNetwork) used in connection with its business of developing, marketing and licensing a mobile marketing platform for use by merchants and consumers (the MeNetwork Assets). In conjunction with the acquisition, we issued an aggregate of 2,750,000 shares of common stock to the stockholders of MeNetwork, of which 350,000 shares were held in escrow for a period of one year from the MeNetwork Closing Date for the purposes of satisfying any indemnification claims. The escrow has been terminated and the shares of common stock have been released. In addition, upon the earlier of 180 days following the MeNetwork Closing Date or a change in control of Spindle, we agreed to issue an additional 750,000 shares of common stock to Ashton Craig Page, the director and Chief Operating Officer of MeNetwork and a current director of Spindle. On October 7, 2013 the 750,000 shares were issued to Mr. Page pursuant to the terms and conditions of the MeNetwork Agreement. Pursuant to the Asset Purchase Agreement, we agreed to provide certain registration rights with respect to sales by certain former members of MeNetwork of the shares of our common stock issued to them in the acquisition of MeNetwork.
Acquisition of Yowza Assets
On January 3, 2014, pursuant to that certain Asset Purchase Agreement, dated December 10, 2013, the Company acquired substantially all of the assets of Y Dissolution, Inc. (formerly Yowza International, Inc.) (the Yowza Assets). In conjunction with the acquisition, we issued 1,642,000 shares of our common stock to the holders of Y Dissolution, Inc.s outstanding capital stock, and certain executive management members and advisors of Y Dissolution, Inc. Pursuant to the Asset Purchase Agreement, we agreed to provide certain registration rights with respect to sales by certain former members of Yowza of the shares of our common stock issued to them in the acquisition of the Yowza Assets
All of the shares of common stock owned by the Selling Stockholders received in the acquisition of MeNetwork and Yowza are subject to a Registration Rights and Leak-Out Agreement between us and the Selling Stockholder pursuant to which we agreed to register all of the restricted shares of common stock owned by such holders in exchange for Selling Stockholders agreement (a) not to (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend or otherwise transfer or dispose of, or (ii) enter into any swap or other agreement, arrangement or transaction that transfers to another, in whole or in part, directly or indirectly, any of the economic consequence of, ownership of all of the shares of common stock of the Company owned by such holder for a period of 180 days beginning as of the effective date of the registration statement (the Leak-Out Period), the Selling Stockholders shall be allowed to sell 1% of the shares of common stock during each month thereafter; provided that, (a) the total number of issued and outstanding shares of the Companys common stock as reported on the Companys last annual or quarterly period report filed with the Commission is equal to or less than 40 million shares of common stock (the Outstanding Shares Threshold) and (b) the 90 calendar day average daily trading volume of the Companys common stock as reported by the OTC Markets Group, Inc. is 25,000 or less (Average Daily Volume Threshold). In the event either the Outstanding Shares Threshold or the Average Daily Volume Threshold shall have increased at the time of any proposed sale, the Leak-Out Threshold for each Shareholder shall also be increased on a pro rata basis. Yowza Shareholders agree that all sales of the Companys common stock will be made with a single limit order per day at no less than the current best bid price, and no sales will be made with an open market order for the Shares.
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Securities Offered
Common Stock offered by the selling stockholders |
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4,034,314 shares. |
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Common Stock Outstanding |
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41,068,773 shares as of January 14, 2015 |
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Common Stock to be Outstanding Immediately after the Offering |
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41,068,773 shares (1) |
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Terms of the Offering |
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The selling stockholders will determine when and how they will sell the common stock offered in this prospectus. The selling stockholders will offer and sell the shares of our common stock at prices related to the then-current market price, or at privately negotiated prices in transactions that are not in the public market. |
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Termination of the Offering |
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The offering will conclude upon the earliest of (i) such time as all of the common stock has been sold pursuant to the registration statement or (ii) such time as all of the common stock becomes eligible for resale without volume limitations pursuant to Rule 144 under the Securities Act, or any other rule of similar effect. |
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Trading Market |
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Our common stock is quoted on the OTCQB under the symbol SPDL. |
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Use of Proceeds |
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We are not selling any shares of the common stock covered by this prospectus. As such, we will not receive any of the offering proceeds from the registration of the shares of common stock covered by this prospectus. |
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Dividend Policy |
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We have never declared any cash dividends on our common stock. We currently intend to retain all available funds and any future earnings for use in financing the growth of our business and do not anticipate paying any cash dividends for the foreseeable future. See Dividends under the section DESCRIPTION OF SECURITIES TO BE REGISTERED. |
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Risk Factors |
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The common stock offered hereby involves a high degree of risk, and investors should read and consider these risks before making an investment decision. See Risk Factors beginning on page 4. |
(1) |
Excludes shares issuable upon exercise of outstanding options and warrants, and issuances of additional shares of common stock subsequent to January 16, 2015. |
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RISK FACTORS
We are subject to various risks that may materially harm our business, prospects, financial condition and results of operations. An investment in our common stock is speculative and involves a high degree of risk. In evaluating an investment in shares of our common stock, you should carefully consider the risks described below, together with the other information included in this prospectus.
If any of the events described in the following risk factors actually occurs, or if additional risks and uncertainties that are not presently known to us or that we currently deem immaterial later materialize, then our business, prospects, results of operations and financial condition could be materially adversely affected. In that event, the trading price of our common stock could decline, and you may lose all or part of your investment in our shares. The risks discussed below include forward-looking statements; our actual results may differ substantially from those discussed in these forward-looking statements.
Risks Related to Our Business
We have incurred losses since our inception and cannot assure you that we will achieve profitability.
We had an accumulated deficit of $6,330,395 and $2,616,613 as of December 31, 2013 and 2012, respectively, and an accumulated deficit of $11,794,023 as of September 30, 2014. The extent of our future operating losses and the timing of profitability are highly uncertain and we may never achieve or sustain profitability. We cannot assure you that we will ever generate sufficient revenues from our operations to achieve profitability. If revenues grow slower than we anticipate, or if operating expenses exceed our expectations and cannot be adjusted, we may not ever achieve profitability and the value of your investment could decline significantly.
These factors create a substantial doubt about our ability to continue as a going concern and our auditors have included a going concern qualification in their report on our audited financial statements.
We are in the early stages of our operations and have a limited operating history. Our failure to address the risks that we may encounter as an early stage company could have a material adverse effect on our business, prospects, financial condition and results of operations.
Following the acquisition of certain assets and intellectual property from Spindle Mobile, Inc. (Spindle Mobile) in December 2011, we began generating revenues from our operations during the quarter ended December 31, 2011. We have a limited operating history on which to base an evaluation of our business and prospects. For example, we are in the early stages of building our sales and marketing strategy and organization. Our operations and development are subject to all of the risks inherent in the growth of an early stage company such as fluctuations in expenses, competition, lack of operating capital, an inability to keep pace with rapid technological changes in the electronic payment processing market and lack of demand for our technology.
We cannot provide any assurance that we will be successful in addressing the risks that we may encounter, and our failure to do so could have a material adverse effect on our business, prospects, financial condition and results of operations.
If we are unable to obtain additional capital, we may be unable to proceed with our long-term business plan, and we may be forced to curtail or cease our operations.
The revenues we earn are not adequate to either sustain or expand our operations. During the year ended December 31, 2013, we earned $1,313,621 in revenues but our cost of sales and expenses totaled $4,943,989 resulting in a net operating loss of $3,713,782. During the nine month period ended September 30, 2014, we earned $676,351 in revenues but our costs of sales and expenses totaled $6,138,372 resulting in a net operating loss for the period of $5,462,021. We have relied primarily on sales of our securities and loans from related parties to support our operations, and we will require additional working capital to support our business plan, which includes identifying suitable targets for horizontal or vertical mergers or acquisitions, so as to enhance the overall productivity and benefit from economies of scale. We expect to pursue acquisitions of, or investments in, businesses and assets in new markets that complement or expand our existing business. Our working capital requirements and the cash flow provided by future operating activities, if any, will vary greatly from quarter to quarter, depending on the volume of business during the period and payment terms with our channel partners.
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We may not be able to obtain adequate levels of additional financing, whether through equity financing, debt financing or other sources. Additional financings could result in significant dilution to our earnings per share or the issuance of securities with rights superior to our current outstanding securities. In addition, we may grant registration rights to investors purchasing our equity or debt securities in the future. If we are unable to raise additional financing, we may be unable to implement our long-term business plan, develop or enhance our products and services, take advantage of future opportunities or respond to competitive pressures on a timely basis, if at all. In addition, a lack of additional financing could force us to substantially curtail or cease operations.
Pressures from competitors with more resources may limit our market share, our ability to become profitable, and our growth.
We operate in the highly fragmented and very competitive electronic payment processing and mobile marketing industries. We do not currently represent a significant presence in either of these industries. Our competitors include large organizations, such as PayPal and Amazon, as well as other newly emerging organizations. Some of our competitors may be able to more quickly develop or adapt to new or emerging technologies, better respond to changes in the requirements or preferences of our channel partners, or devote greater resources to the development, promotion, and sale of their products. Some of our competitors have, in relation to us, longer operating histories, larger customer bases, longer standing relationships with customers, greater name recognition, and significantly greater financial, technical, marketing, customer service, public relations, distribution, or other resources. Some of our competitors are also significantly larger and have increased their presence in our markets in recent years through internal development, partnerships, and acquisitions. There has also been significant consolidation among our competitors, which has improved the competitive position of several of these companies and enabled new competitors to emerge in our markets. In addition, we may face competition from solutions developed internally by our channel partners. Because price and related terms are key considerations for many of our channel partners, we may have to accept less-favorable payment terms, lower the prices of our products and services, and/or reduce our cost structure, including reducing headcount or investment in research and development, in order to remain competitive. Certain of our competitors have become increasingly aggressive in their pricing strategy, particularly in markets where they are trying to establish a foothold. To the extent we cannot compete effectively, our market share and, therefore, our ability to become profitable and to grow our business, could be materially adversely affected.
We need to continue to develop our direct sales force in order to obtain new customers. If we cannot successfully hire and develop direct sales personnel, our growth will be impeded.
Our performance depends on our ability to successfully sell our services to channel partners such as banks, cellular carriers, and other third party companies looking to offer a mobile payment solution by purchasing our software-as-a-service platform rather than building an in-house solution. We believe that our future growth will depend on the continued development of our direct sales force and their ability to obtain new customers, particularly large enterprise customers, and to manage our existing customer base. Our ability to achieve significant growth in revenue in the future will depend, in large part, on our success in recruiting, training and retaining a sufficient number of direct sales personnel. New sales personnel require significant training and may, in some cases, take more than a year before becoming productive, if at all. If we are unable to hire and develop sufficient numbers of productive direct sales personnel, sales of our software and services will suffer and our growth will be impeded.
Our business is dependent upon our ability to attract and retain skilled personnel. If we are unsuccessful in our recruiting efforts or if we lose the services of skilled personnel, our business will be adversely affected.
The success of the Company is dependent to a significant degree upon the skill and experience of its founders and other key personnel including Bill Clark, Christopher Meinerz and others. The loss of the services of any of these individuals could adversely affect the Companys business. The Company cannot assure prospective investors that it would be able to find adequate replacements for these key individuals. In addition, the Company believes that its future success will depend in large part upon its continued ability to attract and retain highly skilled employees, who are in great demand. If we are unsuccessful in our recruiting efforts, or if we are unable to retain key employees, our ability to develop and deliver successful products and services may be adversely affected. Effective succession planning is also important to our long-term success. Failure to ensure effective transfer of knowledge and smooth transitions involving key employees could hinder our strategic planning and execution.
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The financial services industry is the subject of increasing regulatory focus, which may result in the imposition of costly new compliance burdens on us and our channel partners and may lead to increased costs and decreased transaction volumes and revenue, which could have a material adverse affect on our business and results of operations.
Regulation of the financial services industry has seen rapid change in recent years, including the passage of the Patriot Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the Dodd-Frank Act), including the Durbin Amendment. We are subject to regulations that affect the electronic payment industry in which our service is used. In particular, the banks and financial institutions that we provide services to are subject to regulations applicable in the United States and abroad, and, consequently, we are at times affected by such regulations.
Increased regulation may result in costly compliance burdens and/or may otherwise increase our costs, which could materially and adversely influence our financial performance. Similarly, increased regulation of our channel partners may cause them to reduce the volume of transactions processed through our systems, which could reduce our revenues materially and adversely influence our financial performance. Finally, failure to comply with the laws and regulations to which we are subject could result in fines, sanctions or other penalties, which could materially and adversely affect our reputation, results of operations and overall business.
The Dodd-Frank Act may have a material adverse impact on our revenue, our prospects for future growth and our overall business, financial condition and results of operations.
The Dodd-Frank Act establishes regulation and oversight by the U.S. Federal Reserve Board of debit interchange rates and certain other network industry practices. Among other things, it requires debit and prepaid interchange transaction fees (referred to in the Dodd-Frank Act as fees established, charged or received by a payment card network for the purpose of compensating an issuer for its involvement in an electronic debit transaction) to be reasonable and proportional to the cost incurred by the issuer with respect to the transaction. We believe that, as a small issuer with less than $10 billion in consolidated assets, our payment service is exempt from this provision of the Dodd-Frank Act. If we are not exempt from this provision of the Dodd-Frank Act of if the law is changed so that it applies to small issuers, our business, financial condition and results of operations could be materially adversely affected.
Additionally, the Dodd-Frank Act provides that neither an issuer nor a payment card network may establish exclusive debit network arrangements or inhibit the ability of a merchant to choose among different networks for routing debit transactions. Under alternative rules proposed by the Federal Reserve, either (1) a debit card would meet the requirements of the Dodd-Frank Act as long as it could be used in at least two unaffiliated networks, or (2) each debit card would be required to function in at least two unaffiliated networks for each method of authorization that the cardholder could use for transactions (i.e., two signature and/or two PIN networks). Some of our services will use a debit card or prepaid card product for consumer funds. Should there be additional legal challenges in the credit card processing industry or other laws such as the Dodd-Frank Act, we may be restricted in the services it can provide.
The Dodd-Frank Act also created two new independent regulatory bodies in the Financial Reserve System. The Consumer Financial Protection Bureau will have significant authority to regulate consumer financial products, including consumer credit, deposit, payment, and similar products; although it is not clear whether and/or to what extent the Bureau will be authorized to regulate broader aspects of payment card network operations. The Financial Stability Oversight Council is tasked, among other responsibilities, with identifying systemically important payment, clearing and settlement systems that will be subject to new regulation, supervision and examination requirements, although it is not clear whether Spindle would be deemed systemically important under the applicable statutory standard. If Spindle were deemed systemically important, it could be subject to new risk management regulations relating to its payment, clearing, and settlement activities. New regulations could address areas such as risk management policies and procedures; collateral requirements; participant default policies and procedures; the ability to complete timely clearing and settlement of financial transactions; and capital and financial resource requirements. In addition, a systemically important payment system could be required to obtain prior approval from the U.S. Board of Governors of the Federal Reserve System or another federal agency for changes to its system rules, procedures or operations that could materially affect the level of risk presented by that payment system. These developments or actions could increase the cost of operating our business and may make payment card transactions less attractive to card issuers, as well as consumers. This could result in a reduction in our payments volume and revenues.
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If issuers, acquirers and/or merchants modify their business operations or otherwise take actions in response to this legislation which have the result of reducing the number of debit transactions we process or the network fees we collect, the Dodd-Frank Act could have a material adverse impact on our revenue, our prospects for future growth and our overall business, financial condition and results of operations. Failure by our channel partners or by us to adjust our strategies successfully to compete in the new environment would increase this impact.
General economic and political conditions may adversely affect trends in consumer spending, which would have an adverse effect on our results of operations.
The electronic payment industry depends heavily upon the overall level of consumer, business and government spending. General economic conditions (such as unemployment and changes in interest rates) and continuing political gridlock in Congress, which has resulted in a failure to extend unemployment benefits or to raise the minimum wage, may adversely affect our financial performance by reducing the number or average purchase amount of transactions involving payment cards carrying our brands. Any such reduction would have an adverse effect on our results of operations.
If our transaction processing systems are disrupted or we are unable to process transactions efficiently or at all, our revenue or profitability would be materially reduced.
Our processing systems may experience service interruptions as a result of process or other technological malfunction, fire, natural or man-made disasters, power loss, disruptions in long distance or local telecommunications access, fraud, terrorism, accident or other catastrophic events, the probability or severity of which we cannot determine or predict. A disaster or other problem at our primary and/or back-up facilities or our other owned or leased facilities could interrupt our services. Our visibility in the global payments industry may also attract terrorists, activists or hackers to attack our facilities or systems, leading to service interruptions, increased costs or data security compromises. Additionally, we rely on third-party service providers for the timely transmission of information across our data transportation network. Inadequate infrastructure in lesser developed markets could also result in service disruptions, which could impact our ability to do business in those markets. If one of our service providers fails to provide the communications capacity or services we require, as a result of natural disaster, operational disruption, terrorism or any other reason, the failure could interrupt our services, adversely affect the perception of our brands reliability and materially reduce our revenue or ability to achieve profitability.
Account data breaches involving card data stored by third parties or us could adversely affect our reputation and revenue.
We, our channel partners, merchants, and other third parties store cardholder account and other information in connection with payment cards bearing our brands. In addition, our channel partners may sponsor third-party processors to process transactions generated by cards carrying our brands and merchants may use third parties to provide services related to card use. Although we use what we believe to be industry standard, reasonable security precautions and protections, a breach of the systems on which sensitive cardholder data and account information are stored could lead to fraudulent activity involving cards carrying our brands, damage the reputation of our brands and lead to claims against us. In recent years, there have been several high-profile account data compromise events involving merchants and third party payment processors that process, store or transmit payment card data, which affected millions of MasterCard, Visa, Discover and American Express cardholders. As a result of such data security breaches, we may be subject to lawsuits involving payment cards carrying our brands. While most of these lawsuits would not involve direct claims against us, in certain circumstances, we could be exposed to damage claims, which, if upheld, could materially and adversely affect our profitability.
Any damage to our reputation or that of our brands resulting from an account data breach could decrease the use and acceptance of payment processing services, which in turn could have a material adverse impact on our transaction volumes, revenue and prospects for future growth, or increase our costs by leading to additional regulatory burdens being imposed upon us.
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If we are not able to keep pace with the rapid technological developments in our industry to provide customers, merchants and cardholders with new and innovative payment programs and services, the use of our technology and services could decline, which could reduce our revenue and income or limit our future growth.
The payment card industry is subject to rapid and significant technological changes, including continuing developments of technologies in the areas of smart cards, radio frequency and proximity payment devices (such as contactless cards), electronic commerce and mobile commerce, among others. We cannot predict the effect of technological changes on our business. We rely in part on third parties, including some of our competitors and potential competitors, for the development of and access to new technologies. We expect that new services and technologies applicable to the payments industry will continue to emerge, and these new services and technologies may be superior to, or render obsolete, the technologies we currently use in our card programs and services. In addition, our ability to implement new services and technologies that we develop may be inhibited by a need for industry-wide standards, by resistance from customers or merchants to such changes, by the complexity of our systems or by intellectual property rights of third parties. Our future success will depend, in part, on our ability to develop or adapt to technological changes and evolving industry standards. If we are unable to do this, our revenue may decline and our future growth may be limited.
As we continue to grow and to develop our intellectual property, we expect to receive notifications from competitors alleging infringement of intellectual property. We may incur substantial costs as a result of litigation or other proceedings relating to intellectual property rights and our commercial activities could be disrupted.
We and/or the entities we have acquired have received notices or inquiries from other companies suggesting that we may be infringing their intellectual property and that we will be required to license use of the intellectual property to avoid infringement. As we continue to grow and to develop our intellectual property, we expect to receive such notices. If we cannot resolve such matters, the cost to us of litigation or other proceedings relating to intellectual property rights, even if resolved in our favor, could be substantial, and the litigation would divert managements attention from our day-to-day operations. Some of our competitors may be able to sustain the costs of complex litigation more effectively than we can because they have substantially greater resources. If we do not prevail in this type of litigation, we may be required to pay monetary damages; stop commercial activities relating to our product; obtain one or more licenses in order to secure the rights to continue marketing certain products; or attempt to compete in the market with substantially similar products. Uncertainties resulting from the initiation and continuation of any litigation could limit our ability to continue some of our operations.
Changes to payment card networks or bank fees, rules, or practices could harm our business.
We must rely on banks or other payment processors to process transactions, and therefore, must pay fees for this service. From time to time, payment card networks have increased, and may increase in the future, the interchange fees and assessments that they charge for each transaction using one of their cards. Our payment card processors have the right to pass any increases in interchange fees and assessments on to us as well as increase such processors own fees for processing. Increases in interchange fees and assessments could increase our operating costs and reduce our profit margins. Any material reduction in credit or debit card interchange rates in the United States or other markets could jeopardize our competitive position against traditional credit and debit card processors.
We are required by our processors to comply with payment card network operating rules, and we have agreed to reimburse our processors for any fines they are assessed by payment card networks as a result of any rule violations by us or our channel partners. The payment card networks set and interpret the card rules. Payment card networks could adopt new operating rules or re-interpret existing rules that we or our processors might find difficult or even impossible to follow, or costly to implement. As a result, we could lose our ability to give customers the option of using payment cards to fund their payments. If we were unable to accept payment cards, our business would be seriously damaged.
We are also required to comply with special operating rules enacted by the payment card networks for payment service providers and payment facilitators. We and our payment card processors have implemented specific business processes for merchant customers in order to comply with these rules, but any failure to comply could result in fines, the amount of which would be within the discretion of the payment card networks. We also could be subject to fines from payment card networks if we fail to detect that merchants are engaging in activities that are illegal or that are considered high risk, primarily the sale of certain types of digital content. For high risk merchants, we must either prevent such merchants from using our services or register such merchants with payment card networks and conduct additional monitoring with respect to such merchants.
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System failures or slowdowns, security breaches and other problems could harm our reputation and business, cause us to lose our channel partners and revenue, and increase our service costs.
Our business is based upon our ability to securely, rapidly and reliably receive and transmit data through our systems. One or more of our platforms could slow down significantly or fail, or be breached, for a variety of reasons, including:
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failure of third party equipment, software or services utilized by us,
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undetected defects or errors in our software programs, especially when first integrated into production,
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unexpected problems encountered when integrating changes, enhancements or upgrades of third party equipment or software with our systems,
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computer viruses,
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inability to secure Payment Card Industry compliance certification at the required level to operate as a registered PSP/PF,
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natural or man-made disasters disrupting power or telecommunications systems generally, and
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damage to, or failure of, our systems due to human error or intentional disruption such as physical or electronic break-in, sabotage, acts of vandalism and similar events.
We may not have sufficient redundant systems or backup telecommunications facilities to allow us to receive and transmit data in the event of significant system failures. Any significant security breach degradation or failure of one or more of the sub-systems on which we rely, including the networks of our vendors and customers, could disrupt the operation of our network and cause our channel partners to suffer delays in transaction processing, which could damage our reputation, increase our service costs, or cause us to lose channel partners and revenues.
Risks Related to our Common Stock
Because we were a shell company prior to the acquisition of the assets of Spindle Mobile, holders of our common stock may be unable to sell their shares under Rule 144 until April 28, 2015, provided that the Company is subject to the Exchange Act Reporting Requirements at the time of such sale.
Our Common Stock is subject to risks arising from restrictions on reliance on Rule 144 by shell companies or former shell companies. The SEC defines a shell company as a company that has (a) no or nominal operations and (b) either (i) no or nominal assets, (ii) assets consisting solely of cash and cash equivalents; or (iii) assets consisting of any amount of cash and cash equivalents and nominal other assets. Under Rule 144, a person who has beneficially owned restricted securities of an issuer and who is not an affiliate of that issuer may sell them without registration under the Securities Act provided that certain conditions have been met. One of these conditions is that such person has held the restricted securities for a prescribed period, which can be 6 months or 1 year, depending on various factors. However, when the reporting company has previously been a shell company, as we were prior to the acquisition of assets from Spindle Mobile, Rule 144 is unavailable for the resale of securities until the following conditions have been met:
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The issuer of the securities that was formerly a shell company is subject to the reporting requirements of Sections 13 or 15(d) of the Exchange Act and has ceased to be a shell company; and
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At least one year has elapsed from the time that the issuer filed current comprehensive disclosure with the SEC reflecting its status as an entity that is not a shell company, including audited financial statements ("Form 10 Information").
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The transactions completed by the Spindle Mobile Agreement have been accounted for as a reverse capitalization with a shell company, thereby requiring the filing of Form 10 Information. As a result of the Companys prior status as a shell company, stockholders who receive our restricted securities will not be able to sell them pursuant to Rule 144 without registration until at least one year has elapsed from the time that the issuer filed Form 10 Information with the Commission (the One Year Anniversary Date); provided, that the Company is subject to the reporting requirements of Sections 13 or 15(d) of the Exchange Act and if and for so long as we have complied with our reporting requirements in the 12 months immediately prior to the One Year Anniversary Date. While the Company believes the equivalent of Form 10 Information was filed with the Commission on August 6, 2013, while the Company was a voluntary reporter, in the Amendment No. 1 to the Companys Form 10-K for the fiscal year ended December 31, 2011, the Company has not received any assurances that Exchange Act reports filed while the Company was a voluntary reporter, and not subject to the Exchange Act reporting requirements, will satisfy the conditions of Rule 144 for prior shell companies. As a result, the Company can only provide assurances that its securities will be eligible for resale pursuant to the exemption from registration under Rule 144 on April 28, 2015, the date upon which the Company has been subject to the reporting requirements for one full year, without objection from the Commission; provided that, the Company is current in its reporting obligations at the time of any individual sale.
Shares eligible for future sale may adversely affect the market.
From time to time, certain of our stockholders may be eligible to sell some or all of their shares of common stock pursuant to the safe harbor of Rule 144 under the Securities Act, subject to its availability and certain limitations thereunder, or pursuant to the exemption from registration provided by Section 4(1) of the Securities Act. In general, pursuant to Rule 144 as in effect as of the date of this prospectus, a stockholder (or stockholders whose shares are aggregated) who has satisfied the applicable holding period and is not deemed to have been one of our affiliates at the time of sale, or at any time during the three months preceding a sale, may sell their shares of common stock; provided that, (1) one year has elapsed since the filing of Form 10 Information; (2) we are subject to the Exchange Act reporting requirements and (3) we are current in filing our Exchange Act reporting requirements. In addition, Section 4(1) of the Securities Act provides an exemption from registration under the Securities Act for transactions by any person other than an issuer, underwriter or dealer, and such exemption may be an available exemption to certain stockholders desiring to resell their shares of our common stock, albeit without the safe harbor provided by Rule 144. Registration of re-sales of our shares of common stock, as we are doing for the selling stockholders, also increases the amount of shares eligible for resale. Any substantial sale, or cumulative sales, of our common stock pursuant to Rule 144 or Section 4(1) under the Securities Act or pursuant to any resale registration statement may have a material adverse effect on the market price of our securities. As of the date of this prospectus, greater than 3/4 of our outstanding shares of common stock would be eligible for resale pursuant to Rule 144 if and when Rule 144 becomes available to our stockholders and 36,057,828 shares of our common stock, which represents approximately 88% of our outstanding common stock, will be eligible for resale if the registration statement, of which this prospectus is a part, is declared effective by the SEC.
Our shares of common stock are subject to penny stock regulation. Because our common stock is penny stock, holders of our common stock may find it difficult or may be unable to sell their shares.
The SEC has adopted rules that regulate broker/dealer practices in connection with transactions in penny stocks. Penny stocks generally are equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange system). The penny stock rules require a broker/dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document prepared by the SEC that provides information about penny stocks and the nature and level of risks in the penny stock market. The broker/dealer also must provide the customer with bid and offer quotations for the penny stock, the compensation of the broker/dealer, and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customers account. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from such rules, the broker/dealer must make a special written determination that a penny stock is a suitable investment for the purchaser and receive the purchasers written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in any secondary market for a stock that becomes subject to the penny stock rules, and accordingly, holders of our common stock may find it difficult or may be unable to sell their shares.
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Our stock price may be volatile and you may not be able to resell your shares at or above the price you paid. In addition, volatility in the price of our common stock may subject us to securities litigation resulting in substantial costs and liabilities and diverting managements attention and resources.
The market price of our common stock is likely to be highly volatile and could fluctuate widely in price in response to various factors, many of which are beyond our control, including the following:
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our ability to execute our business plan;
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changes in our industry;
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competitive pricing pressures;
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our ability to obtain working capital financing;
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additions or departures of key personnel;
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limited public float in the hands of a small number of persons whose sales or lack of sales could result in positive or negative pricing pressure on the market price for our common stock;
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sales of our common stock (particularly following effectiveness of the registration statement of which this prospectus is a part);
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operating results that fall below expectations;
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regulatory developments;
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economic and other external factors;
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period-to-period fluctuations in our financial results;
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our inability to develop or acquire new or needed technologies;
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the public s response to press releases or other public announcements by us or third parties, including filings with the SEC;
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changes in financial estimates or ratings by any securities analysts who follow our common stock, our failure to meet these estimates or failure of those analysts to initiate or maintain coverage of our common stock;
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the development and sustainability of an active trading market for our common stock; and
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any future sales of our common stock by our officers, directors and significant stockholders.
In addition, the stock market in general, and the market for technology companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies. These broad market and industry factors may seriously harm the market price of our common stock, regardless of our actual operating performance.
FINRA sales practice requirements may also limit a stockholders ability to buy and sell our stock.
In addition to the penny stock rules described above, FINRA has adopted Rule 2111 that requires a broker-dealer to have reasonable grounds for believing that an investment is suitable for a customer before recommending the investment. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customers financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. The FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.
We have not paid any cash dividends and do not intend to pay any cash dividends for the foreseeable future.
We have never declared or paid any cash dividends on our common stock. For the foreseeable future, we intend to reinvest any earnings in the development and expansion of our business, and do not anticipate paying any cash dividends on our common stock. Any future determination to pay dividends will be at the discretion of the board of directors and will be dependent upon then existing conditions, including our financial condition and results of operations, capital requirements, contractual restrictions, business prospects and other factors that the board of directors considers relevant. Therefore, there can be no assurance that any dividends on the common stock will ever be paid.
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Because we are a small, unproven company, stockholders may find it difficult to sell their common stock in the public markets.
Our common stock is currently traded on the OTCQB under the symbol SPDL. The number of persons interested in purchasing our common stock at or near bid prices at any given time may be relatively small or non-existent. This situation is attributable to a number of factors, including the fact that we are a small company which is still relatively unknown to stock analysts, stock brokers, institutional investors, and others in the investment community that generate or influence sales volume, and that even if we came to the attention of such persons, they tend to be risk-averse and would be reluctant to follow an unproven company such as ours or purchase or recommend the purchase of our common stock until such time as we became more viable. Additionally, many brokerage firms may not be willing to effect transactions in our securities. As a consequence, there may be periods of several days or more when trading activity in our common stock is minimal or non-existent, as compared to a seasoned issuer which has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on the stock price. We cannot give you any assurance that an active public trading market for our common stock will develop or be sustained, or that trading levels will be sustained.
Future issuances of our preferred stock could dilute the voting and other rights of holders of our common stock.
Our board of directors has the authority to issue shares of preferred stock in any series and may establish, from time to time, various designations, powers, preferences and rights of the shares of each such series of preferred stock. Any issuances of preferred stock may have priority over the common stock with respect to dividend or liquidation rights. Any future issuance of preferred stock may have the effect of delaying, deferring or preventing a change in control of our company and may adversely affect the voting and other rights of the holders of our common stock.
Due to our limited resources and number of employees, our management has concluded that our internal control over financial reporting as of December 31, 2013 and 2012 was ineffective. This may cause investors to lose confidence in our financial reporting and have an adverse effect on the trading price of our common stock.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. As defined in Exchange Act Rule 13a-15(f), internal control over financial reporting is a process designed by, or under the supervision of, the principal executive officer and the principal financial officer and effected by the board of directors, management and other personnel, 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 and includes those policies and procedures that: (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements. Our internal control over financial reporting as of December 31, 2012 and December 31, 2013 was ineffective due to our limited resources and personnel, resulting in limited segregation of duties. Because of this material weakness, investors could lose confidence in our reported financial information, which could have an adverse effect on the trading price of our common stock.
If we are unable to comply with the financial reporting requirements mandated by the SECs regulations, investors may lose confidence in our financial reporting and the price of our common stock could decline.
If we fail to maintain effective internal controls over financial reporting, our ability to produce timely, accurate and reliable periodic financial statements could be impaired. If we do not maintain adequate internal control over financial reporting, investors could lose confidence in the accuracy of our periodic reports filed under the Exchange Act. Additionally, our ability to obtain additional financing could be impaired or a lack of investor confidence in the reliability and accuracy of our public reporting could cause our stock price to decline.
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Our directors, executive officers and controlling persons as a group have significant voting power and may take actions that may not be in the best interest of shareholders.
Our directors, executive officers and controlling persons as a group beneficially own approximately 20% of our Common Stock. They will have the ability to exert substantial influence over all matters requiring approval by our stockholders, including the election and removal of directors and any proposed merger, consolidation or sale of all or substantially all of our assets. In addition, they could dictate the management of our business and affairs. This concentration of ownership could have the effect of delaying, deferring or preventing a change in control, or impeding a merger or consolidation, takeover or other business combination that could be favorable to stockholders. This significant concentration of share ownership may also adversely affect the trading price for our Common Stock because investors may perceive disadvantages in owning stock in a company with controlling affiliated stockholders.
USE OF PROCEEDS
This prospectus relates to shares of our common stock that may be offered and sold from time to time by the selling stockholders. We will receive no proceeds from the sale of shares of common stock by the selling stockholders in this offering. The proceeds from the sales will belong to the selling stockholders.
The Company will bear the cost of this registration statement .
FORWARD-LOOKING STATEMENTS
Statements in this prospectus may be forward-looking statements. Forward-looking statements include, but are not limited to, statements that express our intentions, beliefs, expectations, strategies, predictions or any other statements relating to our future activities or other future events or conditions. These statements are based on current expectations, estimates and projections about our business based, in part, on assumptions made by management. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may, and are likely to, differ materially from what is expressed or forecasted in the forward-looking statements due to numerous factors, including those described below and those discussed from time to time in this prospectus, including the risks described under Risk Factors, and Managements Discussion and Analysis of Financial Condition and Results of Operations in this prospectus and in other documents which we file with the Securities and Exchange Commission. Other factors that might cause such a difference include, but are not limited to:
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general economic conditions, including consumer spending, because they may affect our ability to expand our business and to raise money;
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our ability to raise enough money to continue our operations;
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changes in regulatory requirements that adversely affect our business;
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the pace at which our services are accepted by consumers;
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the loss of key employees;
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our ability to expand our customer base;
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our ability to compete effectively with other providers in the mobile marketing and payment services business;
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changes in the prices for third party banking services that adversely affect our business; and
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other uncertainties, all of which are difficult to predict and many of which are beyond our control
Any forward-looking statements speak only as of the date on which they are made, and we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of this prospectus, except as may be required under applicable securities laws.
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MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
We were originally incorporated in the State of Nevada on January 8, 2007 as Coyote Hills Golf, Inc. We were previously an online retailer of golf-related apparel, equipment and supplies, however, we generated minimal revenues from that line of business. With our acquisition of Spindle Mobile, Inc. in December 2011, we became a commerce-centric company with four primary customers: 1) individual consumers (buyers); 2) individual businesses (merchants or sellers); 3) third party channel partners (financial institutions and other non-bank partners such as wireless carriers); and 4) advertisers (retail, brands, and destinations). We generate revenue under the Spindle product line through our patented cloud-based payment processes. We believe that our secure payments process as well as coupons, offers and loyalty programs and open consumer feedback about the products consumers purchase from the merchants we serve creates trust between consumers and merchants. We provide the platform for the secure movement of funds between these parties as well as provide to brands, merchants, and institutions the conversion tools necessary to deliver a seamless frictionless finance system.
We have been growing our business through acquisitions and we expect to continue to expand in this manner.
On December 31, 2012 (the Parallel Acquisition Closing Date), pursuant to that certain Asset Purchase Agreement (the Parallel Agreement) by and between us and Parallel Solutions Inc., a Nevada corporation (Parallel), we acquired substantially all of the assets used in connection with Parallels business of facilitating electronic payment processing services to merchants (the Parallel Assets), assumed certain specified liabilities and hired seven Parallel employees in exchange for 538,570 unregistered shares of our common stock, of which 53,857 shares (the Indemnification Escrow) and 100,000 shares (the Deferred Consent Escrow) were deposited in escrow with our transfer agent. The Indemnification Escrow was held for a period of one year from the Parallel Acquisition Closing Date and was available to compensate us, pursuant to the indemnification obligations of Parallel under the Parallel Agreement, and for any necessary accounts receivable adjustment after the Parallel Acquisition Closing Date. The Indemnification Escrow has been terminated and the common stock has been released. The terms of the Parallel Agreement provided that the Deferred Consent Escrow would be held for a period of up to five years following the Parallel Acquisition Closing Date and would be released to Parallel or its legally permitted assign(s) incrementally as and when certain specified contract assignments or residual revenue streams were properly assigned to us or the residual revenue streams in respect of such specified contracts were bought out by the applicable third party. As of the date of this prospectus, these conditions have been satisfied and the Deferred Consent Escrow has been terminated and the common stock has been released.
On March 20, 2013 (the MeNetwork Closing Date), we assumed certain liabilities and acquired substantially all the assets of MeNetwork, Inc. (MeNetwork) used in connection with its business of developing, marketing and licensing a mobile marketing platform for use by merchants and consumers (the MeNetwork Assets), pursuant to an Asset Purchase Agreement, dated March 1, 2013 (the MeNetwork Agreement). As consideration for the assumption of the liabilities and the acquisition of the MeNetwork Assets, we issued an aggregate of 2,750,000 shares of common stock to the stockholders of MeNetwork, of which 350,000 shares were held in escrow for a period of one year from the MeNetwork Closing Date for the purposes of satisfying any indemnification claims. The escrow has been terminated and the shares of common stock have been released. In addition, upon the earlier of 180 days following the MeNetwork Closing Date or a change in control of Spindle, we agreed to issue an additional 750,000 shares of common stock to Ashton Craig Page, the director and Chief Operating Officer of MeNetwork and a current director of Spindle. On October 7, 2013 the 750,000 shares were issued to Mr. Page pursuant to the terms and conditions of the MeNetwork Agreement.
On January 3, 2014 (the Yowza Closing Date), the Company acquired substantially all of the assets of Yowza International Inc. (renamed Y Dissolution, Inc.) (Yowza!!) used in connection with its business of providing retail coupons through a mobile application (the Yowza Assets), and assumed certain liabilities of Yowza!! in an amount equal to $15,000 for consideration equal to (1) $500,000 in cash paid to Yowza!! and certain creditors and holders of outstanding promissory notes issued by Yowza!! and (2) an aggregate of 1,642,000 unregistered shares of our common stock (the Aggregate Share Consideration), issuable to the holders of Yowza!!s outstanding capital stock. Ten percent of the Aggregate Share Consideration was issued to certain executive management members and advisors of Yowza!! in accordance with consulting or employment agreements and subject to certain vesting provisions.
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In addition, an aggregate of 197,052 shares of common stock (the Indemnification Escrow), representing approximately 12% of the Aggregate Share Consideration, was deposited in escrow for a period of one year from the Yowza Closing Date for the purpose of satisfying Yowzas indemnification obligations under the Asset Purchase Agreement, and for any necessary accounts receivable adjustment after the Yowza Closing Date. As of the date of this prospectus, the escrow has been terminated and the shares of common stock have been released..
Because our operating expenses exceed our revenues, we have relied primarily on sales of our securities and loans from related parties to fund our operations. In the third quarter of 2014, we received proceeds in the amount of $342,500 in connection with the sale of our securities. We will continue to require substantial funds to support our operations and carry out our business plan. Our working capital requirements and the cash flow provided by future operating activities, if any, will vary greatly from quarter to quarter, depending on the volume of business during the period and payment terms with our channel partners. We may not be successful in raising additional funds as needed or if, successful we may not be able to raise funds on terms that are favorable to us. We cannot guarantee that we will ever be profitable. As a result, , our independent registered accounting firm has expressed doubt about our ability to continue as a going concern.
Our potential revenue streams are relatively new and have only recently begun to contribute materially to our operations. As a result, we are unable to forecast future revenue. Our management is hopeful that as our base of operations continues to grow, we will see a corresponding increase in licensing and transactional revenue.
Results of operations for the three months and nine months ended September 30, 2014 as compared to the three and nine months ended September 30, 2013
Revenues and Cost of Sales
Revenues from ongoing operations are expected to be derived from our patented conversion and networked payment processes under the Spindle product line and licensing of our intellectual property. During the three and nine months ended September 30, 2014, we generated $200,478 and $676,351 in revenues, respectively, from our payment and transactional platform. The cost of sales, which are comprised of equipment cost of goods sold, web hosting fees, merchant and interchange fees, and commissions paid to the independent sales agents, for the three and nine months ended September 30, 2014 were $50,677 and $243,683, respectively. The Company realized a gross profit of $149,801 and $432,668 for the three and nine months ended September 30, 2014. This compares to revenues during the three and nine months ended September 30, 2013 of $278,021 and $983,166 and cost of sales of $135,801 and $368,336, respectively. Gross profit during the three and nine months ended September 30, 2013 was $142,220 and $614,830, respectively.
The year-over-year decrease in revenues and gross profit is due to managements decision to focus the majority of resources on platform integration and development at the expense of short-term revenue generation, based on our belief that it was more important to bring a full-featured comprehensive platform to the market, rather than trying to sell a piecemeal solution.
The decision to embed new and innovative features in our software platform, along with the increased complexities of integrating the YOWZA!! and MeNetwork platforms, delayed our sales efforts. Management also reviewed the profitability of all of our customer relationships, which resulted in the strategic cancellation of contracts that did not generate positive cash flow to us. Management believes that the full technology platform development has now reached the stage where we can begin to aggressively sell our solutions to the market. We expects to see increase in licensing and transactional revenue in future quarters by bringing the full platform to market.
Operating Expenses
In the course of our operations, we incur operating expenses composed largely of general and administrative costs and professional fees. General and administrative expenses are essentially the cost of doing business, and encompass, without limitation, the following: research and development; licenses; taxes; general office expenses, such as postage, supplies and printing; rent; utilities; bank charges; and other miscellaneous expenditures not otherwise classified. Accounting fees include: auditing by our independent registered public accountants, bookkeeping, tax preparation fees for filing Federal and State income tax returns and other accounting-specific consulting services.
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Professional fees include: transfer agent fees for printing stock certificates; consulting costs for marketing and advertising; general business development; legal fees; and costs related to the preparation and submission of reports and information statements with the Commission.
For the three and nine months ended September 30, 2014, we incurred operating expenses in the amount of $1,285,204 and $5,894,689, respectively, as compared to $885,501 and $2,882,740 for the three and nine months ended September 30, 2013, respectively. The amounts for the three and nine months ended September 30, 2014 are comprised of $152,809 and $437,324 in depreciation and amortization expense related to our intellectual property and fixed assets; $21,425 and $90,879 in promotional and marketing; $353,397 and $1,593,784 in consulting fees; $569,900 and $2,303,200 in salaries and wages; $44,839 and $129,839 in directors fees; $79,641 and $851,385 in professional fees; and $63,193 and $488,278 in general and administrative expenses, respectively.
The increase in operating expenses is primarily the result of transaction specific consulting fees related to our acquisition of Parallel Systems Inc., MeNetwork, Inc. and Yowza!! Additionally, our emergence from the development stage into full operations has resulted in an increase in salaries and wages as anticipated. We expect this expense to continue and increase at a rate in direct proportion to our growth.
Interest Income and Expense
During the three and nine months ended September 30, 2014, we recognized interest expense of $338 and $1,606, respectively. This compares to $5,693 and $16,757 in interest expense for the three and nine months ended September 30, 2013, respectively, offset by interest income of $1,947 and $3,882, respectively.
Net Losses
We have experienced net losses in all periods since our inception. Our net loss for the three and nine months ended September 30, 2014 was $1,135,741 and $5,463,627, respectively. Net losses are attributable to the Companys recent acquisition and integration of Yowza!!, ongoing Payment Card Services (PCI) certifications and maintenance, extensive internal software development, and deployment of our initial suite of payment products. During the three and nine months ended September 30, 2013, we incurred a net loss of $747,027 and $2,280,785, respectively.
We anticipate incurring ongoing operating losses and cannot predict when, if at all, we may expect these losses to plateau or narrow.
Liquidity and Capital Resources
Cash used in operating activities during the nine months ended September 30, 2014 was $1,635,781 compared to $1,252,170 of cash used in operations during the comparable period ended September 30, 2013. The increase in the use of cash for operating activities is primarily the result of our acquisition of Yowza!! Additionally, our emergence from the development stage into full operations has resulted in an increase in salaries and wages as anticipated. We expect this use of cash to continue and increase at a rate in direct proportion to our growth. Our professional fees were significantly higher for the nine months ended September 30, 2014 as compared to the same period ended September 30, 2013, due to our acquisition activities and regulatory compliance.
During the nine months ended September 30, 2014, net cash used by investing activities totaled $871,497, of which $501,367 was utilized in the acquisition of Yowza!! and $370,130 is attributable to labor costs related to software development costs. During the comparable nine month period ended September 30, 2013, net cash used in investing activities totaled $345,454, of which $9,016 was utilized in the purchase of fixed assets and $336,438 was attributable to labor costs related to software development.
During the nine months ended September 30, 2014, net cash provided by financing activities totaled $1,940,000 comprised of $1,895,000 which was received from investors purchasing shares of our common stock, $100,000 which was classified as a note payable from a related party, offset by $55,000 in debt repayment to related parties. In comparison, during the nine months ended September 30, 2013, financing activities provided $1,604,756, comprised of $1,732,322 which was received from investors purchasing shares of our common stock, $27,566 was utilized in the repayment of debt to non-related parties and $100,000 was utilized in debt repayment to related parties.
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As of September 30, 2014, we had $153,045 of cash on hand, which includes $20,000 in restricted cash. Our management believes this amount is not sufficient to maintain our operations for at least the next 12 months. We are actively pursuing opportunities to raise additional capital through sales of our equity and/or debt securities for cash. We cannot assure you that any financing can be obtained or, if obtained, that it will be on reasonable terms. As such, our principal accountants have expressed doubt about our ability to continue as a going concern because we have limited operations and have not fully commenced planned principal operations.
We do not have any off-balance sheet arrangements.
Results of operations for the year ended December 31, 2013 as compared to the year ended December 31, 2012
Revenues and Cost of Sales
During the year ended December 31, 2013, we generated a total of $1,313,621 in revenues and incurred $563,478 in cost of sales, which produced a gross profit of $750,143 as compared to the year ended December 31, 2012, when we generated a total of $83,412 in revenues and incurred $19,701 in cost of sales. In the period ended December 31, 2012, we generated $63,711 in gross profit. The significant increase in revenue and in cost of sales resulted from our acquisition of Parallel Solutions Inc. and MeNetwork, Inc.
Operating Expenses
In the course of our operations, we incur operating expenses composed largely of general and administrative costs and professional fees. General and administrative expenses are essentially the cost of doing business, and encompass, without limitation, the following: research and development; licenses; taxes; general office expenses, such as postage, supplies and printing; utilities; bank charges; website costs; and other miscellaneous expenditures not otherwise classified. Accounting fees include: auditing by our independent registered public accountants, bookkeeping, tax preparation fees for filing Federal and State income tax returns and other accounting-specific consulting services. Professional fees include: transfer agent fees for printing stock certificates; consulting costs for marketing and advertising; general business development; and costs related to the preparation and submission of reports and information statements with the U.S. Securities and Exchange Commission.
During the year ended December 31, 2013, operating expenses totaled $4,380,511. Comparatively, in the period ended December 31, 2012, we incurred $2,372,613 in operating expenses. Depreciation and amortization was $244,818 and $51,567 for the years ended December 31, 2013 and 2012, respectively. General and administrative expenses were $242,248 in 2013 compared to $45,041 in 2012. Software and internet costs in 2013 were $66,918 compared to $38,686 in 2012. Consulting expenses increased from $492,410 in 2012 to $1,013,917 in 2013, which included retainers and one time common stock expenses for rendered services. Salaries, wages, and benefits increased from $964,742 in 2012 to $1,498,446 for the period ending December 31, 2013 due to the increase in client services, management, and internal development resources, which included a non-cash stock option expense of $234,266. Directors fees of $200,850 in 2013 represented the amortization of stock compensation expense related to stock option grants. Promotional and marketing expenses decreased from $84,641 in 2012 to $81,783. Travel expenses increased to $119,781 in 2013 from $73,674 in 2012. Rent also increased in 2013 to $63,368 from $32,942 in 2012. Professional fees increased from $588,910 in 2012 to $808,882 of which, approximately 75% of total fees billed related to our merger and acquisition activities and are anticipated to be onetime expenses.
Other Expense
Net loss on settlement in the amount of $63,864 for the fiscal year ended December 31, 2013 relates to the issuance of 1,424,075 previously authorized shares of our common stock held in escrow in connection with our Net MoneyIn (NMI) acquisition in 2011. The release of shares occurred as a result of a final settlement agreement dated November 27, 2013. Pursuant to the agreement, we agreed to release a total of 800,000 of the aforementioned shares and forgive two notes receivable acquired through our acquisition of NMI with a total balance of principal and interest totaling $302,625. In addition we agreed to issues the remaining 624,075 escrowed shares in settlement of a note payable previously assumed by our chief executive officer and a director, together with accrued interest totaling $238,761.
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In exchange for the shares, notes receivable in the aggregate amount of $302,625 and a note payable of $238,761 (including accrued interest) held by the plaintiffs in the legal action were extinguished and a release from claims was executed between the parties.
We recognized interest expense on notes payable for the year ended December 31, 2013 of $23,642 compared to $18,940 for the year ended December 31, 2012. The increase in expense year over year is directly related to an increase in our debt financing and is primarily due to related parties. As we continue to implement our business plan, we anticipate utilizing debt financing as a component of our overall capitalization strategy and therefore we will continue to recognize interest expense in the near term.
Net Losses
Our net loss for the year ended December 31, 2013 was $3,713,782 compared to a net loss of $2,320,361 for the year ended December 31, 2012. We anticipate incurring ongoing operating losses and cannot predict when, if at all, we may be profitable.
Liquidity and Capital Resources
Cash used in operating activities during the year ended December 31, 2013 was $1,815,661 compared to $1,010,025 for the year ended December 31, 2012.
Cash used in investing activities was $528,877 during the year ended December 31, 2013, specifically related to the purchase of capitalized software and domain names, as compared to $388,922 of cash used in investing activities during the year ended December 31, 2012 for the purchase of fixed assets.
During the year ended December 31, 2013, net cash provided by financing activities totaled $2,933,059, of which $3,165,625 was received from investors purchasing shares of our common stock, partially offset by repayment of notes payable to related parties and net settlement of notes payable and notes receivable. In comparison, during the period ended December 31, 2012, financing activities provided $1,507,422 in cash, primarily from sales of our common stock and the proceeds of notes payable to related parties.
As of December 31, 2013, we had $700,323 of cash on hand.
Critical Accounting Policies
Managements Discussion and Analysis of Financial Condition and Results of Operations discusses our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of the financial statements 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 revenues and expenses during the reporting period. On an on-going basis, we evaluate our estimates and judgments, including those related to revenue recognition, recoverability of intangible assets, and contingencies and litigation. We base our estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The most significant accounting estimates inherent in the preparation of our consolidated financial statements include estimates as to the appropriate carrying value of certain assets and liabilities which are not readily apparent from other sources, primarily the valuation of intangible assets. The methods, estimates and judgments we use in applying these most critical accounting policies have a significant impact on the results we report in our consolidated financial statements.
Intangible assets
Management regularly reviews property, equipment, intangibles and other long-lived assets for possible impairment. This review occurs quarterly, or more frequently if events or changes in circumstances indicate the carrying amount of the asset may not be recoverable. If there is indication of impairment, then management prepares an estimate of future cash flows expected to result from the use of the asset and its eventual disposition. If these cash flows are less than the carrying amount of the asset, an impairment loss is recognized to write down the asset to its estimated fair value.
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Management believes that the accounting estimate related to impairment of its property and equipment, is a critical accounting estimate because: (1) it is highly susceptible to change from period to period because it requires management to estimate fair value, which is based on assumptions about cash flows and discount rates; and (2) the impact that recognizing an impairment would have on the assets reported on our balance sheet, as well as net income, could be material. Managements assumptions about cash flows and discount rates require significant judgment because actual revenues and expenses have fluctuated in the past and are expected to continue to do so.
We review the carrying value of intangible assets for impairment whenever events and circumstances indicate that the carrying value may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. In cases where undiscounted expected future cash flows are less than the carrying value, an impairment loss is recognized equal to the amount by which the carrying value exceeds the fair value. The factors considered by management in performing this assessment include current operating results, trends and prospects, the manner in which the property is used, and the effects of obsolescence, demand, competition and other economic factors.
Software development costs
We account for the cost of computer software developed or obtained for internal use of its application service by capitalizing qualifying costs, which are incurred during the application development stage, and amortizing them over the softwares estimated useful life. Costs incurred in the preliminary and post-implementation stages of our products are expensed as incurred. The amounts capitalized include external direct costs of services used in developing internal-use software and for payroll and payroll-related costs of employees directly associated with the development activities. We amortize capitalized software over the expected period of benefit, which is three years, beginning when the software is ready for its intended use.
Revenue recognition
We recognize revenue when all of the following conditions are satisfied: (1) there is persuasive evidence of an arrangement; (2) the service has been provided to the customer; (3) the amount of fees to be paid by the customer is fixed or determinable; and (4) the collection of our fees is probable.
Sales related to long-term contracts for services (such as engineering, product development and testing) extending over several years are accounted for under the percentage-of-completion method of accounting. Sales and earnings under these contracts are recorded based on the ratio of actual costs incurred to total estimated costs expected to be incurred related to the contract under the cost-to-cost method based budgeted milestones or tasks as designated per each contract. Anticipated losses on contracts are recognized in full in the period in which losses become probable and estimable.
For all other sales of products or services, we recognize revenues based on the terms of the customer agreement. The customer agreement takes the form of either a contract or a customer purchase order and each provides information with respect to the product or service being sold and the sales price. If the customer agreement does not have specific delivery or customer acceptance terms, revenue is recognized at the time of shipment of the product to the customer.
Reclassifications
Certain reclassifications have been made to the prior years financial statements to conform to the current year presentation. These reclassifications had no effect on previously reported results of operations or retained earnings.
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OUR BUSINESS
Company History
Spindle was originally incorporated in the State of Nevada on January 8, 2007 as Coyote Hills Golf, Inc. We were previously an online retailer of golf-related apparel, equipment and supplies and generated minimal revenues from that line of business.
On December 2, 2011, we acquired certain assets and intellectual property from Spindle Mobile, Inc., which was in the business of data processing, mobile payments and other related fields, in exchange for approximately 80% of our issued and outstanding common stock, which shares were distributed to the stockholders of Spindle Mobile, Inc. pursuant to the terms and conditions of an Asset Purchase Agreement dated December 2, 2011. Concurrent with the closing of this acquisition, we amended our Articles of Incorporation to change our name from Coyote Hills Golf, Inc. to Spindle, Inc. Since this acquisition, we have completed additional acquisitions, including, (1) on December 31, 2012, substantially all of the assets of Parallel Solutions, Inc. (Parallel) used in connection with its business of facilitating electronic payment processing services to merchants, (2) on March 20, 2013, substantially all of the assets of MeNetwork, Inc. (MeNetwork) used in connection with its business of developing, marketing and licensing a mobile marketing platform for use by merchants and consumers, and (3) on January 3, 2014, substantially all of the assets of Yowza International Inc. (Yowza!!) used in connection with its business of providing retail coupons through a mobile application.
Business
We are a mobile commerce company focused on small to medium businesses and their current and potential customers. We supply mobile marketing and payments products and services that enable merchants to attract and retain customers through the use of our proprietary platforms and systems. Our integrated payment and marketing services are available through a single mobile- or website-based interface that allows a merchant to simply and securely market to and transact business with new customers in as little as 10 minutes.
We also deliver mobile products and services to consumers which enable them to discover new merchants, subscribe to their personal favorite merchants (creating a direct one-to-one connection between the merchant and the consumer), and make purchases using their mobile devices.
Mobile Commerce Market Dynamics
Mobile Commerce Market :
According to IDC Financial Insights Worldwide Mobile Payments 2012-2017 report, which presents a worldwide forecast of consumer and business spending through mobile networks over the next five years, worldwide purchase volume over mobile devices will surpass $1 trillion by 2017 (Source: IDC Nov 14 2012).
Mobile marketing spending is expected to reach $20 billion in 2015. That spending is expected to translate to $401 billion in transactional revenue sales in 2015 (Source: Mobile Marketing Association and IHS Global May 2013).
There are a variety of reports in the market place to demonstrate that mobile commerce spending, consisting of payments, offers, and loyalty solutions, is sharply on the rise. Nearly everything we do in todays marketplace can be done via a mobile device. We believe that the use of mobile devices for business transactions is a trend that will increase as integrated and seamless solutions make these transactions commonplace.
Mobile Industry Problem:
Small and medium sized businesses, which we define as businesses with under $15 million in annual revenues and less than 250 fulltime employees, must attract and retain customers to keep their businesses viable. Small businesses also must compete with larger businesses that have the financial resources to develop mobile applications (apps) that drive consumer engagement and retention. According to the United States Census Bureau, there are approximately 6.5 million small and medium sized merchants located in the United States.
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Due to limited resources, limited expertise, and a lack of turnkey mobile applications for use by small and medium sized businesses, we believe that the majority of merchants are at a competitive disadvantage in the rapidly evolving mobile economy.
The Spindle Solution:
We have developed a product for small and medium sized businesses that combines the benefits of a commercial mobile marketing platform with a highly secure and full-function mobile payment platform. The combined platform separates Spindle from the current mobile solution suppliers who focus on just one of these functions. We have built a platform that enables businesses and consumers to interact within a mobile environment and engage in commerce in real-time virtual and physical marketplaces. We believe that our mobile marketing and mobile payment applications can help to strengthen the relationship between a small or medium sized business (for example, a restaurant or boutique retailer) and its customers.
Our delivery of the combined marketing and payment service was made possible with the technology acquisition and software platform integration of MeNetwork, which we acquired in the first quarter of 2013. As a result of this acquisition, Spindle delivers products and services in the market in three ways:
·
as a full service payment services provider, helping merchants and consumers consummate successful transactions using a mobile device;
·
as a mobile marketing software-as-a-service (SaaS) branded the Yowza!! , which is distributed and downloadable through the web, Apple, and Google; and
·
as the complete mobile commerce solution provider with our Yowza!!360 product, which is a bundled solution sold to small and medium sized businesses, merchants, retailers, and channel partners that combines mobile marketing and mobile payment acceptance and processing solutions integrated at the point of sale.
Each of these methods of deliver is discussed below.
Full Service Payment Service Provider
Businesses are looking for simple to use and efficient ways to obtain merchant accounts and process consumer card-based transactions. We believe that last mile challenges related to the friction caused by antiquated financial services systems and outdated point of sale terminals can be corrected through mobile connectivity. Spindle combines proprietary, device agnostic, and cloud based technologies with an automated and modernized approach to payment services for small and medium businesses that accept cards issued by Visa, MasterCard, American Express, Discover, and pre-paid and debit cards in addition to other payment services small and medium sized businesses may enjoy outside of these traditional services.
We accomplish our automation and efficiencies through a modern process which includes bearing the risk of underwriting merchants on our payment platform, streamlining processes via technology, and other proprietary approval guidelines that create a reduction in the time and cost in acquiring a merchant. As compared to a formal underwriting process, which is intrusive, manual and time consuming, we believe our technology addresses a broad audience of potential merchants by servicing lower margin merchants requiring competitive processing fees and higher margin merchants requiring instant approval.
Mobile Demand Marketing Platform
The Yowza!! Merchant Experience
With Yowza!!, a small business, merchant, or retailer has access to a mobile marketing platform at a monthly price that removes the traditional financial barrier that may prevent smaller establishments from entering into mobile marketing. Using our Yowza!! Merchant Tool, which is accessible from any cloud aware device or computer with an internet connection and available by downloading the application online at www.themenetwork.com, www.spindle.com , various affiliate websites, channel partners, and from the Apple and Google stores, a small business, merchant, or retailer can create and initiate a timely and relevant mobile marketing campaign, subscription reward, or loyalty program to its mobile subscribers in under 3 minutes.
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Merchants have complete control over aspects of their campaigns which include publishing offers (incentives), events (promotions), and announcements which they create within the Yowza!! merchant interface. The Merchant Tool is also connected to popular social media channels including Facebook and Twitter supporting simultaneous publishing of offers in a variety of networks. We also enable content distribution through our platform interface to third party products in conjunction with edo (www.edo.com) and TruEffect (www.trueffect.com) to push (publish) direct consumer interaction outside of the Yowza!! community, thereby reaching over 25 million card linked and display advertising communities within the United States.
The Yowza!! Consumer Experience
Consumers play a critical role in mobile commerce. We have built the Yowza!! mobile marketing platform around the consumers evolving needs. The mobile application for consumers is downloadable via a subscribing merchant advertisement, our website and mobile destination, and Apple and Google stores. The application offers timely and relevant events at restaurants, retailers, bars, hotels, attractions, entertainment venues, spas, salons, and more. Upon downloading the application onto a mobile device (mobile phone, mobile tablet, or any mobile connected device) the application locates the user and presents the consumer with the names of nearby merchants who are currently posting (publishing) special offers, incentives, and events. Consumers may also subscribe to individual merchants and will receive a push notification each time their favorite merchant posts a timely and relevant promotion. If a consumer activates Follow Me, the Yowza!! will alert them when theyre within 3 miles of a merchant that has an offer or event in a category the consumer follows.
Yowza!! also makes it easy for consumers to earn, track, and redeem rewards from their favorite merchants, and to do it entirely on their mobile devices. We believe we have within the Yowza!! platform a process which reduces the cost and increases the adoption and use of reward and loyalty programs verses traditional paper punch programs. The Yowza!! application manages loyalty program sign-up, progress tracking, reward redemption, and social media sharing to Facebook, Twitter, and our third party advertising networks.
Yowza!! Cloud POS
We believe we solve a problem in mobile commerce through the integration of several disciplines including traditional, online and mobile marketing and payments. We have created a single platform which integrates these disciplines into a simple, mobile, and secure cloud based product called Yowza!! Cloud POS which we make available to small and medium sized businesses, merchants, and retailers via downloading of the application to any cloud aware or connected device (mobile phone, tablet, point of sale (POS) register, cloud aware SaaS point of sale, etc.). Prior to Yowza!! Cloud POS, consumers were required to download, learn, navigate, and manage multiple applications to locate merchants, review, track and earn loyalty rewards, make purchases, and share their discoveries with their community of friends, family, and colleagues. Merchants are without simple and affordable ways to join the mobile economy, facilitate mobile commerce transactions, and reach a network of active mobile consumers. We believe Yowza!! Cloud POS solves issues in mobile commerce with a combined single solution approach that attracts new consumers to merchants and through a single interface enables a merchant to attract, transact, incentivize and retain those consumers.
Merchants may process credit card and mobile payment transactions at the point of sale (POS) using the free Yowza!! Cloud POS application for Apple (iOS) and Google (Android) smartphones and tablets. Yowza!! Cloud POS, our product focused on micro merchants and retailers, includes a plug-in card swiper to facilitate easy card present acceptance. Yowza!! Cloud POS also includes an integrated mobile payment option that allows consumers using the Yowza!! application to initiate a purchase directly from their mobile device via our integrated and cloud based mobile wallet. Our secured payment facilities, hosted by Amazon Web Services, are Payment Card Industry Level 1 certified and securely manage all sensitive credit card information end to end. Our products do not store any information related to card data or authorization on the device itself. Instead we use a proprietary process for uniquely identifying every transaction on or through our payment platform connecting the small business, merchant, or retailer with the consumer and the individual transaction.
For ease of use, consumers may store credit cards, debit cards, and bank information in the Yowza!! Wallet on the consumer application, and simply select and pay at any merchant subscribing to Yowza!! Cloud POS. As described above no credit card or transaction data is stored on the consumers device. Additionally no credit card data is shared with the merchant at the time of purchase. When a consumer decides to make a purchase, the transaction receives a unique identification, is paired with the consumers selected payment method, and the transaction is consummated entirely within our cloud based systems.
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Spindle delivered its first product in the unattended payments market segment and has generated revenues from it since late May 2012. Our entry into the unattended vending market came as a result of efforts at Bank of America Merchant Services, our sponsoring bank for merchant acquiring. In November 2012 we began the process of internal architecture design, development certification, and deployment for distribution of our full service payment processing platform which required compliance with Federal and State regulations, Payment Card Industry certifications, risk management, and merchant underwriting functions, including end of month statement processes and settlement and funding capability. The result of this effort has enabled Spindle to earn sponsorship and registration with the card associations VISA, MasterCard, American Express, and Discover Card as a Payment Service Provider/Payment Facilitator. As a Payment Service Provider we enable small and medium sized businesses, merchants, retailers, and channel partners (ISOs, VARs and resellers) to immediately bring onto the platform new merchants, qualify them, and issue a unique sub-merchant identification number. We are certified as a Payment Card Industry Level 1 Service Provider, which is the highest certification level by a processing platform. Payment Card Industry certifications are a requirement for delivering products and services as a payment processing platform (in our case, a Payment Service Provider) in the regulated and secure payment card processing industry. With our registered Payment Service Provider designation and sponsoring bank partner, Bank of America Merchant Services, we directly board sub-merchants under our processing connection to accept credit card payment transactions to service our participating small and medium sized businesses, merchants, and retailers. Additionally, for convenience, we process electronic checks and Automated Clearing House transactions for merchants and sub-merchants who request those services through our payment platform.
In the first quarter of 2014, we completed the asset acquisition of Yowza!!, a mobile marketing technology platform based in Denver, Colorado. In the time since, we have invested internal resources to integrate the Yowza!! mobile platform with the Spindle payment services platform while continuing to invent and enhance the overall commerce solution. As described above, the Yowza!! Cloud POS iOS and Android applications are also branded for customers or delivered under the Yowza!! brand, which allows us to offer an instant payment processing merchant account for merchants using our service on mobile devices. We also supply every merchant boarded on the marketing service with a processing account which enables them to process payments for the redemption of offers delivered through the Yowza!! consumer application.
We are currently generating revenue through processing of payment card transactions and through monthly subscriber fees paid for the use of our Yowza!! products.
As a result of our acquisition of Yowza!!, we anticipate merging the couponing features and functionality of the Yowza!! product into our current Yowza!! platform. We believe this will add value to our overall solution for merchants and consumers who engage in mobile transactions via offers and couponing promotions.
Our Growth Strategy
Sales
We supply services to three categories of customers: 1) individual consumers, who we sometimes refer to as buyers; 2) individual businesses, which we sometimes refer to as merchants or sellers; and 3) third party resellers (advertising and content media companies, financial institutions and other resellers such as SaaS based point of sale companies). We derive revenue from the sale of our services to merchants and reseller partners. The services enable merchants to attract, market to, and retain their customers though our advertising platform as well as to process payments for goods and services sold to consumers through a face-to-face transaction using the Yowza!! platform, website based shopping cart, or by accepting card swipe transactions on the Yowza!! Cloud POS or enabled reseller mobile app.
We reach merchants in two ways, either by direct sales or by indirect sales through reseller channels. Direct sales are derived using employees and contract labor, web or app store traffic, and by viral methods such as referrals from our customers and merchants. Additionally we have signed several reseller agreements to extend our reach into specialized markets such as mobile advertising and display, micro mobile merchant aggregation via physical cellular locations (mPOS), independent sales offices (ISOs), SaaS based point of sale (POS), and website merchant services (eCommerce). We consider our reseller agreements to be indirect sales. These originate from internal sales efforts where we will provide the technology and/or bundle our marketing and payment systems with the resellers products. In some cases our systems carry the Yowza!! brand, while in other cases our systems are branded under the resellers name, imaging, and logos.
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We have signed agreements with a number of resellers, some of which resell the Yowza!!Pro branded solution and others, who we designate as white label partners, who place their brand on the product. Resellers represent a way to leverage the benefits of Spindles technology and the resellers product in a single product offering. Contracting with resellers is one of the core tenants of our growth plans. During 2014 we intend to focus on the joint development projects needed to create the connection between our systems and the reseller. These projects connect our resellers systems to our payment processing platform so the reseller can sell a combined service to its customers. No single reseller represents more than 20% of our revenue.
Acquisitions
We expect to grow not only through the addition of merchants using our products and services, but by means such as acquisitions. We have made acquisitions over the past two years, including the acquisition of Parallel Solutions Inc. in the fourth quarter of 2012, MeNetwork in the first quarter of 2013 and Yowza!! in the first quarter of 2014. We will continue to search and identify unique opportunities that we believe will enhance our product features and functionality, revenue goals, and technology. Our acquisitions have been consummated through the issuance of a combination of our common stock and cash.
Government Regulation
We are subject to regulations that affect the electronic payment industry in which our service is used. In particular, the banks and financial institutions that we provide services to are subject to regulations applicable in the United States and abroad, and, consequently, we may be affected by such regulations. Regulation of the financial services industry has seen rapid change in recent years, including the passage of the Patriot Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, including the Durbin Amendment (the Dodd-Frank Act). The Dodd-Frank Act establishes regulation and oversight by the U.S. Federal Reserve Board of debit interchange rates and certain other network industry practices. Among other things, it requires debit and prepaid interchange transaction fees (referred to in the Dodd-Frank Act as fees established, charged or received by a payment card network for the purpose of compensating an issuer for its involvement in an electronic debit transaction) to be reasonable and proportional to the cost incurred by the issuer with respect to the transaction. We believe that, as a small issuer with less than $10 billion in consolidated assets, our payment service is exempt from this provision of the Dodd-Frank Act. If at any time these regulations should change there would be an impact on our business model due to the costs of compliance with such regulations.
Additionally, the Dodd-Frank Act provides that neither an issuer nor a payment card network may establish exclusive debit network arrangements or inhibit the ability of a merchant to choose among different networks for routing debit transactions. Under alternative rules proposed by the Federal Reserve, either (1) a debit card would meet the requirements of the Dodd-Frank Act as long as it could be used in at least two unaffiliated networks, or (2) each debit card would be required to function in at least two unaffiliated networks for each method of authorization that the cardholder could use for transactions (i.e., two signature and/or two PIN networks).
The Dodd-Frank Act also created two new independent regulatory bodies in the Financial Reserve System. The Consumer Financial Protection Bureau has significant authority to regulate consumer financial products, including consumer credit, deposit, payment, and similar products; although it is not clear whether and/or to what extent the Bureau will be authorized to regulate broader aspects of payment card network operations. The Financial Stability Oversight Council is tasked, among other responsibilities, with identifying systemically important payment, clearing and settlement systems that will be subject to new regulation, supervision and examination requirements, although it is not clear whether Spindle would be deemed systemically important under the applicable statutory standard. If Spindle were deemed to be systemically important, it could be subject to new risk management regulations relating to its payment, clearing, and settlement activities. New regulations could address areas such as risk management policies and procedures; collateral requirements; participant default policies and procedures; the ability to complete timely clearing and settlement of financial transactions; and capital and financial resource requirements. In addition, a systemically important payment system could be required to obtain prior approval from the U.S. Board of Governors of the Federal Reserve System or another federal agency for changes to its system rules, procedures or operations that could materially affect the level of risk presented by that payment system. These developments or actions could increase the cost of operating our business and may make payment card transactions less attractive to card issuers, as well as consumers. This could result in a reduction in our payments volume and revenues.
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We are also required to comply with Payment Card Industry data protection policies. We employ an external Payment Card Industry audit firm to ensure that we are following best practices and have the required system reviews. We are currently certified by Trustwave Holdings, Inc. to operate as a Service Provider at Level 1, which is the highest certification.
Intellectual Property
Our intellectual property portfolio supports and enhances our enterprise payment solutions, which is developed both internally and through acquisition. We own 4 patents and we have an additional 2 patent applications pending with the United States Patent & Trademark Office (U.S.P.T.O) and 3 applications in various stages of completion. Our patent portfolio plays an integral role in technology platforms and services we believe foundational to the methods used in networked payments. The patent portfolio includes one continuation patent in a family of patents related to Processing Payment on the Internet now pending with the U.S.P.T.O. The issue date and expiration date of our issued US patents are included in the table below.
U.S. Patent No. |
Issue Date |
Expiration Date |
Filing Date |
Title |
5,822,737 |
10-13-1998 |
10-13-2018 |
02-05-1996 |
Financial Transaction System |
5,963,917 |
10-05-1999 |
10-05-2019 |
10-05-1998 |
Financial System of Computers |
5,991,738 |
11-23-1999 |
11-23-2019 |
11-12-1997 |
Automated Credit Card Processing |
6,381,584 |
04-30-2002 |
04-30-2022 |
09-07-2000 |
Computers in a Financial System |
Employees
We currently employ 15 employees, including executive management, sales (including channel management), client services, technology development and IT infrastructure management, technical administration and implementation, and reception. We outsource some of our core technology development. We have no labor union contracts and believe relations with our employees are satisfactory.
Properties
Our headquarters are located at 8700 E Vista Bonita Dr., Suite 260, Scottsdale, AZ 85255 and consists of approximately 4,881 square feet of office space that we lease from Brentwood Scottsdale, LLC at a rate of $6,203 per month. The lease term is 40 months and expires December 31, 2016. We believe that the office space we occupy is suitable for our current operations.
Management does not currently have policies regarding the acquisition or sale of real estate assets primarily for possible capital gain or primarily for income. We do not presently hold any investments or interests in real estate, investments in real estate mortgages or securities of or interests in persons primarily engaged in real estate activities.
MANAGEMENT
The following table sets for the names and ages of our directors and executive officers:
Name |
Age |
Position |
William Clark |
56 |
President, Chief Executive Officer and Chairperson of the Board |
|
|
|
Christopher J. Meinerz |
48 |
Chief Financial Officer, Chief Compliance Officer, Secretary, Treasurer and Director |
|
|
|
John Devlin |
70 |
Chairman of Audit Committee and Director |
|
|
|
Glenn Bancroft |
58 |
Chairman of Compensation Committee and Director |
|
|
|
Dr. Jack Scott |
61 |
Chairman of Nominating Committee and Director |
|
|
|
Tony Van Brackle |
56 |
Director |
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Terms of Office
Our directors are elected by the stockholders and serve until their successors are elected and qualified, or until he or she resigns or is removed in accordance with our bylaws and the provisions of the Nevada Revised Statutes.
Our officers are appointed by our board of directors and serve at the pleasure of the board or until the officers resignation.
Background of Executive Officers, Directors, Promoters and Control Persons
William Clark has served as our President, as our Chief Executive Officer since April 17, 2013 and as a director since February 27, 2014. From January 18, 2012 until April 15, 2014 he also served as our Principal Financial Officer. He joined Spindle in January 2011, and through his leadership, we have developed a unique mobile commerce solution that combines multiple aspects of mobile payments and mobile marketing technologies. Mr. Clark achieved this by combining our custom built payment platform with capabilities acquired through targeted acquisitions of four leading technology companies. Before joining Spindle, from April 2005 to January 2011, Mr. Clark served as executive vice president and general manager for Aprivas Point of Sale division, where he led Aprivas expansion to become North Americas leading provider of wireless payment technology. Prior to Apriva, Mr. Clark served as general manager of wireless products for First Data Merchant Services. During his 17 year tenure with First Data, he pioneered the delivery and sales of emerging technologies over a wide range of markets, including Internet banking, electronic bill presentment, web-based merchant services, chip cards, and the release of Internet and wireless acquiring products. Mr. Clark holds a Bachelor of Science degree in Electronics and Management from Southern Illinois University and an MBA from University Nebraska Omaha. Mr. Clarks extensive experience in wireless payment technology led us to believe that he should serve as a director.
Christopher J. Meinerz was appointed to serve as Chief Financial Officer and Chief Compliance Officer effective April 15, 2014 and as a director on July 28, 2014. On June 19, 2014, Mr. Meinerz was elected as Secretary and Treasurer of the Company. Prior to joining the Company, Mr. Meinerz served as Chief Financial Officer and Chief Compliance Officer at Next Generation Insurance Group (NGI), a national specialty insurance marketing firm located in Phoenix, Arizona, since October 2011 until April 2014. In this capacity, he was responsible for the companys financial planning, treasury management, and compliancy activities. Before his tenure at NGI, from October 2010 through October 2011, Mr. Meinerz was Global Vice President of Finance for MedAire, Inc., an international healthcare, medical and security assistance, and concierge services company. From January through October 2010, Mr. Meinerz was Executive Vice President of Finance and Treasury for DDi Corp., an Anaheim, California-based provider of circuit board engineering and manufacturing services. In addition, Mr. Meinerz served as global Vice President of Finance for eTelecare of Scottsdale, Arizona, from 2006 to December 2009, where he successfully helped launch that companys initial public offering in 2007. Mr. Meinerz is a graduate of the University of Wisconsin with degrees in accounting and finance. He began his career in public accounting with BDO Seidman in Chicago, Illinois, and Grant Thornton in Madison, Wisconsin. Mr. Meinerzs background in accounting and finance led us to believe that he should serve as a director.
John Devlin has served as a director and Chairman of the audit committee since October 31, 2011. From October 31, 2011 until June 19, 2014 he also served as our Secretary and Treasurer. Since February 2009, Mr. Devlin has served as a Director and Audit Committee Chairman of Hipcricket, Inc. (formerly Augme Technologies, Inc.), a publicly traded company specializing in mobile technology. Mr. Devlin has been in the investment and asset management business for over 33 years. From October 2008 to October 2011, he served as the Managing Director/Financial Consultant of the American Irish Historical Society (AIHC), responsible for managing day-to-day operations, administration and financial oversight of the AIHC and its Fifth Avenue Brownstone headquarters. From October 2003 to October 2008, Mr. Devlin was the Vice Chairman of McKim & Company LLC, a venture capital source firm for start-up companies in the $1 million to $20 million bracket, where he was responsible for providing strategic planning and direction. From 1986 to 2003, he was with J.P. Morgan Investment Management, where he started as a Fixed Income Trader, was later selected for a Special Overseas Assignment and later became a Senior Relationship Manager. Mr. Devlin was also the Committee Chairman for client portfolio guidelines, compliance and performance review for J.P. Morgan accounts with an asset size over $200 billion. Before retiring from J.P. Morgan Investment Management, he held various positions with U.S. Steel Corporation and the Carnegie Pension Fund between 1974 to 1986, where he was involved in directing investment activity of the U.S. Steel & Carnegie Pension Funds with an asset size of over $7 billion.
26
Mr. Devlin received an MBA from Pace University and completed his undergraduate degree in Finance at Georgetown University. Mr. Devlins education and his experience in the finance industry led us to believe that he should serve as a director.
Glenn Bancroft has served as a director since December 6, 2011. Mr. Bancroft is the Chief Executive Officer of Bancroft & Associates, a real estate investment and management firm Mr. Bancroft founded in 1981. Under Mr. Bancrofts management, Bancroft & Associates has represented over $250 million in sales, and has directed a portfolio of more than $500 million in property management. Mr. Bancroft is an entrepreneur and investment professional with more than thirty years of experience in domestic and international real estate. Mr. Bancroft was the former Chief Financial Officer of NetMoney Inc., which was acquired by Spindle Mobile, Inc., and actively provides management consulting to corporations, and successfully runs a large real estate investment firm. His contribution as a director of Spindle Mobile, Inc. led to his appointment to Spindle Inc. board. Mr. Bancrofts skills and experience in his consulting practice with organizational development, and personnel profiling and placement led us to conclude that he should serve as a director.
Tony Van Brackle has served as a director since November 14, 2014. Mr. VanBrackles career in the payments sector extends back well over three decades. Since 2011, Mr. VanBrackle has been the managing member of Payment Ventures, LLC, an investment firm that specializes in the mobile commerce and payment sectors. In 2000, Mr. VanBrackle founded Solveras Payment Solutions and served as its Chief Executive Officer until its sale in 2011. Mr. VanBrackle serves as a board member for Phoenix Managed Networks, a provider of secure data transaction solutions, since 2011, and is a member of the advisory board for MicroVentures, an online equity crowdfunding platform for startups and investors, since 2012. He also serves on the boards of several other businesses, including Convexcel Group, and Cardflight, since 2012 and 2011, respectively. Previously, Mr. VanBrackle served as chairman of the board for several industry-leading businesses, including Electronic Check Alliance Processing, and Smart Pay Solutions. Mr. Van Brackles extensive knowledge of the electronic payments industry led us to conclude that he should serve as a director.
Dr. Jack Scott has served as a director since September 1, 2014. Dr. Scott has a diverse technical and business background spanning more than 35 years that includes applied research, consulting, sales and sales management, executive positions, and ownership of a group of eight recycling and manufacturing businesses, including two joint ventures, through a holding company, Canadus Technologies, LLC. Dr. Scott is a founding member of Canadus Technologies, LLC since February 2000. Prior to his experience with Canadus Technologies, LLC, from February 1997 to January 2000 Dr. Scott was President and CEO of Encycle, Inc., a $300 million recycling company with more than 1,000 employees. Prior to Encycle, Inc., Dr. Scott held various senior management positions with several other companies in the recycling and manufacturing industries. Dr. Scotts extensive business experience led us to conclude that he should serve as a director.
Family Relationships
There are no family relationships among our directors and executive officers.
Involvement in Certain Legal Proceedings
To the best of our knowledge, none of our directors or executive officers has, during the past ten years, been involved in any legal proceedings described in subparagraph (f) of Item 401 of Regulation S-K.
Director Independence
Our board of directors has determined that John Devlin, Glenn Bancroft, John Reardon, Jack Scott, and Tony VanBrackle are independent directors as such term is defined by Nasdaq Marketplace Rule 5605(a)(2).
27
EXECUTIVE COMPENSATION
The following summary compensation table indicates all compensation awarded to, earned by or paid to our principal executive officer and each of the other two highest paid executive officers, if any, whose total compensation exceeded $100,000 during the years ended December 31, 2014, and 2013 (the named executive officers).
Summary Compensation Table
Name and Principal Position |
Year |
Salary ($) |
Bonus ($) |
Stock Awards ($) |
Option Awards ($) |
Non- Equity Incentive Plan Compens ation ($) |
Non- qualified Deferred Compens ation Earnings ($) |
All Other Compens ation ($) |
Total ($) |
William Clark |
2014 |
100,000 |
|
673,300 (1) |
262,974 (1) |
- |
- |
- |
1,036,274 |
President and Chief Executive Officer |
2013 |
136,525 |
- |
60,500 (1) |
- |
- |
- |
- |
197,025 |
|
|
|
|
|
|
|
|
|
|
Christopher Meinerz |
2014 |
135,000 |
- |
29,000 (1) |
168,113 (1) |
- |
- |
- |
332,113 |
Chief Financial Officer and Chief Compliance Officer |
2013 |
- |
- |
- |
- |
- |
- |
- |
- |
|
|
|
|
|
|
|
|
|
|
Tom Lineen* |
2014 |
50,000 |
- |
- |
58,946 |
- |
- |
- |
108,946 |
Executive Vice President |
2013 |
139,744 |
- |
- |
65,000 (1) |
- |
- |
- |
204,744 |
|
|
|
|
|
|
|
|
|
|
Michael Stevens* |
2014 |
62,500 |
- |
- |
277,339 |
- |
- |
- |
339,839 |
Executive Vice President |
2013 |
123,541 |
- |
- |
37,500 (1) |
- |
- |
- |
161,041 |
*Messrs. Lineen and Stevens left the Company during 2014.
(1)
The value of the stock and stock option compensation was computed using the Black-Scholes Option 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.
Outstanding Equity Awards at December 31, 2014
The following table sets forth certain information concerning outstanding equity awards for our named executive officers at December 31, 2014. No options were exercised by our named executive officers during the last fiscal year.
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Option Awards |
||||||||||
Name |
|
Number of securities underlying unexercised options (#) Exercisable |
|
|
Number of securities underlying unexercised options (#) Unexercisable |
|
|
Option exercise price ($) |
|
Option expiration date |
William Clark |
|
500,000(1) |
|
|
0 |
|
|
0.50 |
|
Oct. 29, 2022 |
|
|
150,000(2) |
|
|
0 |
|
|
0.50 |
|
Jan. 29, 2024 |
|
|
|
|
|
|
|
|
|
|
|
Christopher Meinerz |
|
90,000(3) |
|
|
0 |
|
|
0.50 |
|
Mar. 29, 2024 |
Tom Lineen |
|
0 |
|
|
0 |
|
|
- |
|
- |
Michael Stevens |
|
175,000(4) |
|
|
0 |
|
|
0.50 |
|
Jan. 15, 2015 |
(1) The vesting of shares subject to this option occurred on the one year anniversary of the grant, October 30, 2013.
(2) The shares subject to this option vest annually over a three-year period beginning on January 31, 2014 in increments of 1/3rd per year.
(3) The shares subject to this option vest annually over a three-year period beginning on April 1, 2014 in increments of 1/3rd per year.
(4) The shares subject to this option vest annually over a three-year period beginning on March 26, 2013 in increments of 1/3rd per year. Due to Mr. Stevens separation from the Company during 2014, the option expiration date changed to January 15, 2015 per the provisions of the Plan.
2012 Stock Incentive Plan
On October 29, 2012, our stockholders approved the 2012 Stock Incentive Plan (the Plan) that governs equity awards to our management, employees, directors and consultants. On November 7, 2013, our stockholders approved an amendment to the Plan which increased the total authorized amount of common stock issuable under the Plan from 3,000,000 to 6,000,000 shares. There are 6,000,000 shares of common stock currently reserved for issuance under the Plan. As of December 31, 2014, 3,460,834 options to purchase common stock were granted under the Plan and 2,116,251 were fully vested.
Unless previously terminated, the Plan will terminate 10 years after the earlier of (i) the date the Plan was adopted by the board of directors, or (ii) the date the Plan was approved by the stockholders. The types of awards permitted under the Plan include qualified incentive stock options, non-qualified stock options, and restricted stock. Each option will be exercisable at such times and subject to such terms and conditions as the board of directors may specify. Stock options generally vest over three years and expire no later than ten years from the date of grant.
Compensation of Directors
The following table sets forth information with respect to the compensation of our directors, including employee directors. As of December 31, 2014, we had accrued $242,339 in directors fees. Our directors are entitled to receive reimbursement of pre-approved out-of-pocket expenses.
Name |
Fees earned or paid in cash ($)(1) |
Stock awards ($) |
Option awards ($) |
Non-equity incentive plan compensation ($) |
Nonqualified deferred compensation earnings ($) |
All other compensation ($) |
Total ($) |
(a) |
(b) |
(c) |
(d) |
(e) |
(f) |
(g) |
(h) |
Bill Clark |
25,000 |
|
325,000 |
- |
- |
- |
350,000 |
Christopher Meinerz |
12,823 |
|
45,000 |
- |
- |
- |
57,823 |
John Devlin |
52,500 |
|
225,000 |
- |
- |
- |
277,500 |
Glenn Bancroft |
52,500 |
|
225,000 |
- |
- |
- |
277,500 |
Dr. Jack Scott |
10,000 |
|
- |
- |
- |
- |
10,000 |
Tony VanBrackle |
3,750 |
|
- |
- |
- |
- |
3,750 |
David Ide* |
48,750 |
|
- |
- |
- |
- |
48,750 |
John Reardon* |
39,516 |
|
- |
- |
- |
- |
39,516 |
Craig Page* |
42,500 |
|
- |
- |
- |
- |
42,500 |
Total |
287,339 |
|
820,000 |
- |
- |
- |
1,107,339 |
* Messrs. Ide, Reardon and Page resigned as directors in 2014.
29
(1) Effective as of April 1, 2013, our board of directors approved compensation in the amount of $2,500 payable to each member of our board of directors per month. In addition, our directors are entitled to reimbursement of any fees and expenses in connection with performing their obligations as directors.
On January 31, 2014, we issued options to purchase 150,000 shares of our common stock to each of David Ide, John Devlin and Glenn Bancroft and options to purchase 50,000 shares of our common stock to each of John Reardon and Craig Page. The options have an exercise price of $0.50 per share, a vesting period of 12 months and a 10-year term.
Compensation Arrangements
William Clark, our President and Chief Executive Officer, is currently receiving a salary of $197,000 per year consisting of cash and stock.
In April 2014, the Company entered into an offer letter with Christopher Meinerz to serve as our Chief Financial Officer and Chief Compliance Officer. Pursuant to the offer letter, Mr. Meinerz originally received a cash salary of $180,000 per annum, which increased to $200,000 per annum as of July 2014. In December 2014, Mr. Meinerz received 20,000 shares of Common Stock in lieu of $10,000 of cash compensation.. Additionally, the Company agreed to grant Mr. Meinerz a stock option to purchase up to 90,000 shares of the Companys Common Stock at an exercise price of $0.50 which vests annually over a three-year period beginning on April 1, 2014 in increment of 1/3 rd per year.
Except for the compensation paid to Messrs. Clark and Meinerz, we are not currently a party to any existing agreements or understandings with any of our executive officers with respect to compensation for services rendered to us.
Ide Consulting Agreement
The Company entered into a Consulting Services Agreement with David Ide, effective as of March 1, 2013, until February 28, 2014 (the Ide Agreement). Pursuant to the Ide Agreement, Mr. Ide agreed to provide services relating to intellectual property, corporate governance, financial reporting, and mergers and acquisitions activity. Additionally, Mr. Ide agreed to devote approximately forty hours per week in connection with such services. The Company agreed to pay Mr. Ide 250,000 shares in exchange for his services and reimbursement of pre-approved travel expenses.
Bancroft Consulting Agreement
The Company entered into a Consulting Services Agreement with Glenn Bancroft, effective as of May 1, 2013 until April 30, 2014 (the Bancroft Agreement). Pursuant to the Bancroft Agreement, Mr. Bancroft agreed to provide services relating to general management, personnel, executive development and coaching, sales team development and organizational behavior assistance. The Company agreed to pay Mr. Bancroft 100,000 shares in exchange for his services and reimbursement of pre-approved travel expenses. The Bancroft Agreement was renewed for an additional twelve months on April 30, 2014 through April 30, 2015 for compensation of 100,000 shares.
Potential Payments Upon Termination or Change-in-Control
We currently have no employment agreements with our named executive officers nor any compensatory plans or arrangements with them that may require payments upon the resignation, retirement or any other termination of any of our named executive officers, including as a result of a change-in-control, or from a change in any named executive officers responsibilities following a change-in-control.
30
LEGAL PROCEEDINGS
On February 21, 2014, we filed an action against a former employee (the "Former Employee") in the United States District Court for the District of Arizona. Prior to this suit, the Former Employee alleged that we owed him a bonus payment and certain stock options stemming from his employment with us and that the termination of his employment violated Texas employment law. The Former Employee claimed that we owed him approximately $350,000. Our suit seeks, among other things, a declaratory judgment that no amounts are owed to the Former Employee. On April 14, 2014, the Former Employee filed counterclaims for, among other things, wrongful termination, common law fraud and breach of contract. The Former Employee is seeking damages for lost wages, benefits, and stock options the Former Employee alleges he is owed, punitive damages, and other relief. On June 20, 2014, we filed a motion to dismiss the counterclaims. On October 2, 2014, the court entered an order that granted, in part, and denied, in part our motion. Among other things, the court dismissed the Former Employees common law fraud counterclaim. Subsequent to the courts order, the Former Employee voluntarily dismissed his counterclaim for breach of contract. As of the date of this prospectus, the Former Employees only remaining counterclaim is for wrongful termination. We intend to vigorously pursue our claims and our defense in this matter.
SELLING STOCKHOLDERS
This prospectus includes 4,034,314 shares of common stock offered by the selling stockholders. We are filing the registration statement of which this prospectus forms a part pursuant to (i) the Asset Purchase Agreement dated as of March 1, 2013 relating to the acquisition of the MeNetwork Assets, under which we agreed to provide certain registration rights with respect to sales by certain former shareholders of MeNetwork of the shares of our common stock issued to them in the acquisition of the MeNetwork Asset, and (ii) the Asset Purchase Agreement dated December 10, 2013 relating to the acquisition of the Yowza Assets, under which we agreed to provide certain registration rights with respect to sales by certain former members of Yowza of the shares of our common stock issued to them in the acquisition of the Yowza Assets. The selling stockholders, may, from time to time, offer and sell pursuant to this prospectus any or all of the shares that they hold or that may be acquired by them from the Company. We do not know how long the selling stockholders will hold the shares before selling them, and other than the above-mentioned acquisition agreements and six-month lockup agreements, we have no other agreements, arrangements or understandings with the selling stockholders regarding the sale of any of their shares.
The following table presents information regarding the selling stockholders and the shares that they may offer and sell from time to time under this prospectus. The table is prepared based on information supplied to us by the selling stockholders, and reflects their holdings as of January 16, 2015.
Except for the following officers, none of the selling stockholders nor any of their affiliates currently holds an executive office, or has any other material relationship, with us or any of our predecessors or affiliates: none.
As used in this prospectus, the term selling stockholders includes each of the selling stockholders and any donees, pledgees, transferees or other successors in interest selling shares received after the date of this prospectus from the selling stockholders as a gift, pledge or other non-sale related transfer. Beneficial ownership is determined in accordance with Rule 13d-3(d) promulgated by the SEC under the Exchange Act. The percentage of shares beneficially owned prior to the offering is based on 41,068,773 shares of our common stock outstanding as of January 14, 2015.
31
* Less than 1%
32
(1) |
Under applicable SEC rules, a person is deemed to beneficially own securities which the person has the right to acquire within 60 days through the exercise of any option or warrant or through the conversion of a convertible security. Also under applicable SEC rules, a person is deemed to be the beneficial owner of a security with regard to which the person directly or indirectly, has or shares (a) voting power, which includes the power to vote or direct the voting of the security, or (b) investment power, which includes the power to dispose, or direct the disposition, of the security, in each case, irrespective of the persons economic interest in the security. Each selling stockholder has sole investment and voting power with respect to all shares of common stock shown as beneficially owned by him, her or it. |
|
|
(2) |
As of January 14, 2015, there were 41,068,773 shares of our common stock issued and outstanding. In determining the percentage of common stock beneficially owned by the selling stockholders as of January 14, 2015, (a) the numerator is the number of shares of common stock beneficially owned by a selling stockholder (including the shares that he has the right to acquire within 60 days of January 14, 2015), and (b) the denominator is the sum of (i) the 41,068,773 shares of common stock outstanding on January 14, 2015 and (ii) the number of shares of common stock which the selling stockholder has the right to acquire within 60 days of January 14, 2015. |
(3) |
Voting and investment power over these securities is held by Jeff Anderson, trustee of Anderson Family Trust. |
|
|
(4) |
Voting and investment power over these securities is held by Thomas H. Boje, Manager of Boje Investments LLC. |
|
|
(5) |
Voting and investment power over these securities is held by Raymond D. Croghan, Manager of Croghan Investments, LLC. |
|
|
(6) |
Voting and investment power over these securities is held by Michael Green, Manager of Dakota Financial, LLC. Excludes securities held by South Street Capital Partners, LLC, which Mr. Green also has voting and investment power over as Managing Member. |
|
|
(7) |
Voting and investment power over these securities is held by William E. Fisher, Manager of FFI, LLC. |
|
|
(8) |
Voting and investment power over these securities is held by Frank Singer, trustee of the Frank and Rona Singer Family Trust. |
|
|
(9) |
Voting and investment power over these securities is held by Suzanne Spence, Managing Member of Investar Group, LLC. |
|
|
(10) |
Voting and investment power over these securities is held by James Brandt, trustee of James Z. Brandt 1999 Article IV Trust. |
|
|
(11) |
Voting and investment power over these securities is held by A. William Kernen, Managing Member and CEO of Kernen Capital, LLC. |
|
|
(12) |
Voting and investment power over these securities is held by William T. Quicksilver, CEO and Managing Partner of Manatt, Phelps & Phillips LLP. |
|
|
(13) |
Voting and investment power over these securities is held by Roger W. Miles, President of Milies Media Group, LLLP. |
|
|
(14) |
Voting and investment power over these securities is held by Edith Gould, Secretary of MPP Holdings, LLP. |
|
|
(15) |
Voting and investment power over these securities is held by Jeffrey Scheinrock, President and CFO of Originate, Inc; and Robert Meadows, CEO of Originate, Inc. |
|
|
(16) |
Voting and investment power over these securities is held by Jeff Linden, Vice President of RSB Wholesale Inc. |
|
|
(17) |
Voting and investment power over these securities is held by Michael Green, Managing Member of South Street Capital Partners, LLC. Excludes securities held by Dakota Financial, LLC, which Mr. Green also has voting and investment power over as Manager. |
|
|
(18) |
Voting and investment power over these securities is held by Daniel A. Seigel, sole trustee of the Daniel and Elaine Seigel Revocable Trust. |
|
|
(19) |
Voting and investment power over these securities is held by Richard W. Hallock and Anne K. Hallock, trustees of the The Richard and Anne Hallock Family Trust. |
|
|
(20) |
Voting and investment power over these securities is held by John Selep, trustee of the Selep Family 2004 Revocable Trust. |
|
|
(21) |
Voting and investment power over these securities is held by David Teichner, trustee of the Teichner Family Trust. |
|
|
(22) |
Voting and investment power over these securities is held by Thomas Boje, Dwight Hanson, and William Fisher. |
33
PLAN OF DISTRIBUTION
The selling stockholders, which as used herein includes donees, pledgees, transferees or other successors-in-interest selling shares of common stock received after the date of this prospectus from the selling stockholders as a gift, pledge, or other transfer, may, from time to time, sell, transfer or otherwise dispose of any or all of his, her or its shares of common stock on any stock exchange, market or trading facility on which the shares are traded or in private transactions. These dispositions may be at fixed prices, at prevailing market prices at the time of sale, at prices related to the prevailing market price, at varying prices determined at the time of sale, or at negotiated prices. We have not been advised by any selling stockholder of any arrangements for the sale of any of the common stock owned by him, her or it.
The selling stockholders may use any one or more of the following methods when disposing of shares or interests therein:
·
ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;
·
block trades in which the broker-dealer will attempt to sell the shares as agent, but may position and resell a portion of the block as principal to facilitate the transaction;
·
crosses, where the same broker acts as an agent on both sides of the trade;
·
purchases by a broker-dealer as principal and resale by the broker-dealer for its account;
·
an exchange distribution in accordance with the rules of the applicable exchange;
·
privately negotiated transactions;
·
short sales;
·
through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise;
·
broker-dealers may agree with a selling stockholder to sell a specified number of such shares at a stipulated price per share;
·
a combination of any such methods of sale; and
·
any other method permitted pursuant to applicable law.
The selling stockholders may, from time to time, pledge or grant a security interest in some or all of the shares of common stock owned by them and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell the shares of common stock, from time to time, under this prospectus, or under an amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act amending the list of selling stockholders to include the pledgee, transferee or other successors in interest as selling stockholders under this prospectus. The selling stockholders also may transfer the shares of common stock in other circumstances, in which case the transferees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus; provided, however, that prior to any such transfer the following information (or such other information as may be required by the federal securities laws from time to time) with respect to each such selling beneficial owner must be added to the prospectus by way of a prospectus supplement or post-effective amendment, as appropriate: (1) the name of the selling beneficial owner; (2) any material relationship the selling beneficial owner has had within the past three years with us or any of our predecessors or affiliates; (3) the amount of securities of the class owned by such security beneficial owner before the transfer; (4) the amount to be offered for the security beneficial owners account; and (5) the amount and (if one percent or more) the percentage of the class to be owned by such security beneficial owner after the transfer is complete.
The selling stockholders may also sell shares under Rule 144 under the Securities Act, if available, rather than under this prospectus.
All of the shares of common stock owned by the Selling Stockholders received in the acquisition of MeNetwork and Yowza are subject to a Registration Rights and Leak-Out Agreement between us and the Selling Stockholder pursuant to which we agreed to register all of the restricted shares of common stock owned by such holders in exchange for Selling Stockholders agreement (a) not to (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend or otherwise transfer or dispose of, or (ii) enter into any swap or other agreement, arrangement or transaction that transfers to another, in whole or in part, directly or indirectly, any of the economic consequence of, ownership of all of the shares of common stock of the Company owned by such holder for a period of 180 days beginning as of the effective date of the registration statement (the Leak-Out Period), the Selling Stockholders shall be allowed to sell 1% of the shares of common stock during each month thereafter; provided that,
34
(a) the total number of issued and outstanding shares of the Companys common stock as reported on the Companys last annual or quarterly period report filed with the Commission is equal to or less than 40 million shares of common stock (the Outstanding Shares Threshold) and (b) the 90 calendar day average daily trading volume of the Companys common stock as reported by the OTC Markets Group, Inc. is 25,000 or less (Average Daily Volume Threshold). In the event either the Outstanding Shares Threshold or the Average Daily Volume Threshold shall have increased at the time of any proposed sale, the Leak-Out Threshold for each Shareholder shall also be increased on a pro rata basis. Yowza Shareholders agree that all sales of the Companys common stock will be made with a single limit order per day at no less than the current best bid price, and no sales will be made with an open market order for the Shares.
DESCRIPTION OF SECURITIES TO BE REGISTERED
This prospectus includes 4,034,314 shares of our common stock offered by the selling stockholders. The following description of our common stock is only a summary and is subject to and qualified by our Articles of Incorporation, as amended, and our bylaws, both of which have been filed as exhibits to the registration statement of which this prospectus is a part, and by the provisions of applicable corporate laws of the State of Nevada.
General
We are presently authorized under our Articles of Incorporation to issue 300,000,000 shares of common stock and 50,000,000 shares of preferred stock.
Common Stock
Voting Rights
Holders of our common stock are entitled to one vote per share on all matters to be voted upon by the stockholders. Holders of our common stock are not entitled to cumulative voting rights with respect to the election of directors. Our board members serve until their successors are elected or until their death, resignation or removal. Directors are elected by a plurality of the votes cast by our stockholders, unless a vacancy exists which is not filled by the remaining directors or a director has been removed, in which case the vacancy must be filled by the vote of a majority of the shares entitled to vote.
Dividends
Subject to limitations under Nevada law and preferences that may apply to any shares of preferred stock that we may decide to issue in the future, holders of our common stock are entitled to receive ratably such dividends or other distributions, if any, as may be declared by our board of directors out of funds legally available therefor.
Liquidation
In the event of the liquidation, dissolution or winding up of our business, holders of our common stock are entitled to share ratably in all assets remaining after payment of liabilities, subject to the liquidation preference of any outstanding preferred stock we may decide to issue in the future.
Rights and Preferences
Our common stock has no preemptive, conversion or other rights to subscribe for additional securities. There are no redemption or sinking fund provisions applicable to our common stock. The rights, preferences and privileges of holders of common stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of preferred stock that we may designate and issue in the future.
35
Fully Paid and Non-Assessable
All outstanding shares of our common stock are validly issued, fully paid and non-assessable.
Preferred Stock
We have no preferred stock outstanding and no immediate plans to issue shares of preferred stock.
MARKET FOR OUR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market information
Our common stock, $0.001 par value per share, has been quoted on the OTCQB marketplace operated by OTC Markets Group, Inc. under the symbol SPDL since January 18, 2012. The following table sets forth the quarterly high and low reported last bid prices for our common stock during each quarter of fiscal years 2013 and 2012 and the first and second quarter of 2014. Our stock is thinly traded, and there is currently no active market in the trading of our stock. These quotations reflect inter-dealer prices, without retail mark-up, markdown or commission and may not represent actual transactions.
Quarter Ended |
|
High |
|
Low |
||
March 31, 2012 |
|
$ |
2.25 |
|
$ |
0.01 |
June 30, 2012 |
|
$ |
2.25 |
|
$ |
1.50 |
September 30, 2012 |
|
$ |
2.25 |
|
$ |
1.80 |
December 31, 2012 |
|
$ |
3.00 |
|
$ |
1.50 |
March 31, 2013 |
|
$ |
1.70 |
|
$ |
1.70 |
June 30, 2013 |
|
$ |
1.70 |
|
$ |
0.99 |
September 30, 2013 |
|
$ |
1.02 |
|
$ |
0.35 |
December 31, 2013 |
|
$ |
1.92 |
|
$ |
1.88 |
March 31, 2014 |
|
$ |
2.95 |
|
$ |
1.76 |
June 30, 2014 |
|
$ |
2.16 |
|
$ |
1.31 |
September 30, 2014 |
|
$ |
1.45 |
|
$ |
0.84 |
On January 30, 2015, the last sale price of our common stock was $0.57.
Securities that may be Issued or Sold in the Future
As of January 14, 2015, we have options outstanding for the purchase of 3,460,834 shares of our common stock and warrants outstanding for the purchase of 250,000 shares of our common stock. We also have 36,147,828 shares of common stock that may be sold pursuant to Rule 144 once (i) we are subject to the reporting requirements of section 13 or 15(d) of the Securities Exchange Act of 1934 (the Exchange Act); (ii) we have filed all reports and other materials required to be filed by section 13 or 15(d) of the Exchange Act (other than Current Reports on Form 8-K); and (iii) at least one year has elapsed since we filed Form 10 information with the Securities and Exchange Commission reflecting our status as an entity that is no longer a shell company. (See Risk Factor on Page 4 regarding Rule 144 availability.)
Holders
We have approximately 305 record holders of our common stock as of January 14, 2015 according to a stockholders list provided by our transfer agent as of that date. The number of registered stockholders does not include any estimate by us of the number of beneficial owners of common shares held in street name. The transfer agent and registrar for our Common Stock is Manhattan Transfer Registrar Co., 57 Eastwood Road, Miller Place, New York, 11764.
36
Dividends
We have never declared nor paid any cash dividends on our common stock and we do not anticipate that we will pay any cash dividends on our common stock in the foreseeable future. Any future determination regarding the payment of cash dividends will be at the discretion of our board of directors and will be dependent upon our financial condition, results of operations, capital requirements and other factors as our board of directors may deem relevant at that time.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table presents, as of January 14, 2015, information regarding the beneficial ownership of our common stock with respect to each of our name executive officers, each of our directors, each person known by us to own beneficially more than 5% of the common stock, and all of our directors and executive officers as a group. Beneficial ownership is determined under the rules of the Securities and Exchange Commission and generally includes voting or investment power over securities. Each individual or entity named has sole investment and voting power with respect to the shares of common stock indicated as beneficially owned by them, subject to community property laws, where applicable, except where otherwise noted.
Shares of common stock subject to options or warrants that are currently exercisable or exercisable within 60 days from January 14, 2015, are considered outstanding and beneficially owned by the person holding the options or warrants for the purpose of computing the percentage ownership of that person but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.
Name, Title and Address of Beneficial Owner of Shares (1) |
|
Amount of Beneficial Ownership |
|
Percent of Class (2) |
||
|
|
|
|
|
|
|
William Clark, Chief Executive Officer, President and Director |
|
|
1,740,751 (3) |
|
|
4.2% |
|
|
|
|
|
|
|
Christopher J. Meinerz, Chief Financial Officer, Chief Compliance Officer and Director |
|
|
50,000 (4) |
|
|
* |
|
|
|
|
|
|
|
John Devlin, Director |
|
|
445,000 (5) |
|
|
1.1% |
|
|
|
|
|
|
|
Glenn Bancroft, Director |
|
|
724,075 (6) |
|
|
1.7% |
|
|
|
|
|
|
|
Tony VanBrackle, Director |
|
|
67,500 (7) |
|
|
* |
|
|
|
|
|
|
|
Dr. Jack Scott, Director |
|
|
1,961,300 (8) |
|
|
4.8% |
|
|
|
|
|
|
|
Tom Lineen |
|
|
538,570 (9) |
|
|
1.3% |
|
|
|
|
|
|
|
Michael Stevens |
|
|
482,601 |
|
|
1.2% |
All Directors and Officers as a group (8 persons) |
|
|
6,009,797 (10) |
|
|
14.2% |
|
|
|
|
|
|
|
5% Beneficial Owners |
|
|
|
|
|
|
|
|
|
|
|
|
|
David Ide |
|
|
4,600,000 (11) |
|
|
11.0% |
*Represents a percentage under 1%.
(1) The address for our named executive officers and directors is c/o Spindle, Inc., 8700 E. Vista Bonita Drive, Suite 260, Scottsdale, Arizona 85255.
(2) The percentage of outstanding shares beneficially owned is based on 41,068,773 shares issued and outstanding as of December 29, 2014.
(3) Includes 965,701 shares of common stock, 200,050 shares of common stock owned of record by Ameriprise Trust Company FBO William E. Clark, 25,000 shares of common stock owned of record by Mr. Clarks wife, 500,000 shares which represent the vested portion of a stock option to purchase 500,000 shares of our common stock at an exercise price of $0.50 per share that expire on October 28, 2022, and 50,000 shares which represented the vested portion of a stock option to purchase 150,000 shares of our common stock at an exercise price of $0.50 per share that expire on January 29, 2024.
37
(4) Includes 20,000 shares of common stock and 30,000 shares which represent the vested portion of a stock option to purchase 90,000 shares of our common stock exercisable at $0.50 per share that expires on March 29, 2024.
(5) Includes 95,000 shares of common stock owned of record by Mr. Devlin, 300,000 shares which represent the vested portion of a stock option to purchase 300,000 shares of our common stock at an exercise price of $0.50 per share that expire on October 30, 2022, and 50,000 shares which represent the vested portion of a stock option to purchase 150,000 shares of our common stock at an exercise price of $0.50 per share that expire on January 29, 2024.
(6) Includes 374,075 shares of common stock owned of record by Mr. Bancroft, 300,000 shares which represent the vested portion of a stock option to purchase 300,000 shares of our common stock at an exercise price of $0.50 per share that expire on October 30, 2022, and 50,000 shares which represent the vested portion of a stock option to purchase 150,000 shares of our common stock at an exercise price of $0.50 per share that expire on January 29, 2024.
(7) Includes 67,500 shares of common stock owned of record by MPP Holdings LLP. MPP Holdings LLP is a private investment entity over which Mr. VanBrackle has investment discretion.
(8) Includes 1,961,300 shares of common stock.
(9) Includes 538,570 shares of common stock owned of record by Parallel Solutions, Inc.
(10) Includes 3,923,677 shares of common stock held by executive officers and directors, 806,120 shares of common stock owned by entities controlled by executive officers and directors, and 1,280,000 shares issuable upon exercise of stock options held by executive officers and directors.
(11) Includes 4,000,000 shares of common stock, 300,000 shares which represent the vested portion of a stock option to purchase 300,000 shares of our common stock at an exercise price of $0.50 per share that expire on October 30, 2022, 50,000 shares which represent the vested portion of a stock option to purchase 150,000 shares of our common stock at an exercise price of $0.50 per share that expire on January 29, 2024, and 250,000 shares issuable upon exercise of a common stock purchase warrant at $1.00 per share that expires on November 13, 2021.
Change of Control
To our knowledge, there are no present arrangements or pledges of our securities of that may result in a change in control.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND CORPORATE GOVERNANCE
Director independence
As noted above, using the definition of independent in Rule 5605 of the Rules of The Nasdaq Stock Market, we have determined that John Devlin, Glenn Bancroft, Dr. Jack Scott, and Tony VanBrackle are independent.
Transactions with related persons
Since January 1, 2011, the directors, executive officers, or holders of more than 5% of our common stock, or members of their immediate families, as described below, have completed transactions with us in which they had direct or indirect material interests that exceeded the lesser of $120,000 or 1% of the average of our total assets at year end for the last two completed fiscal years.
During the year ended December 31, 2011, we issued a promissory note in the amount of $25,000 to David Ide, formerly a director. The note is non-interest bearing, unsecured and matures on November 13, 2014. Additionally, Mr. Ide was issued a warrant to purchase up to 250,000 shares of our common stock at $1.00 per share as additional consideration for his promissory note. We have imputed interest at a rate of 2% per annum and allocated the fair value of the warrants and recorded a discount in the amount of $10,640 which is amortized to interest expense over the term of the note. We repaid $25,000 of principal owed to Mr. Ide as of September 30, 2013. During the Reporting Period, $25,000 was the largest aggregate amount of principal outstanding.
During the year ended December 31, 2011, we also issued a Revolving Credit Grid Note to Mr. Ide covering cash advances up to $60,000. The Note was subsequently amended in May 2012 to increase the principal amount of advances to $250,000. The note is non-interest bearing, unsecured and matured on December 15, 2014; however, as of the date of this prospectus, such note has not been repaid. We imputed interest at a rate of 2% per annum and recorded a discount in the amount of $17,709 which is amortized to interest expense over the term of the note. As of September 30, 2014, the outstanding balance of this note is $72,052.
38
On December 15, 2012, we issued a promissory note in the amount of $100,000 to William Clark, our Chief Executive Officer, for amounts previously advanced to us for working capital. The note is non-interest bearing, unsecured and matured on December 15, 2014; however, as of the date of this prospectus, such note has not been repaid. We imputed interest at a rate of 2% per annum and recorded a discount in the amount of $2,059 which is amortized to interest expense over the term of the note. We repaid the full principal balance of the loan as of December 31, 2013. During the Reporting Period, $100,000 was the largest aggregate amount of principal outstanding.
On December 17, 2012, the Company issued a promissory note in the amount of $50,000 to April Kilfoyle, who is related to Mr. Ide by marriage. The note is non-interest bearing, unsecured and matured on January 15, 2013. In the event of default, the loan was to bear interest at a default rate of interest at 10% per annum. We imputed interest at a rate of 2% per annum and recorded a discount in the amount of $44 which was amortized to interest expense over the term of the note. The note was repaid as of December 31, 2013. During the Reporting Period, $50,000 was the largest aggregate amount of principal outstanding.
On December 28, 2012, we sold 200,050 shares of our restricted common stock to William Clark, our President and Chief Executive Officer for an aggregate purchase price of $100,025.
On December 31, 2012, we issued options to purchase 300,000 shares of common stock to each of David Ide, Glenn Bancroft and John Devlin, each of whom was a member of our board of directors. The exercise price is $0.50 per share and the options have terms of 10 years. Also on December 31, 2012, we issued an option to purchase 100,000 shares of common stock to John Reardon, a former member of our board of directors. The exercise price is $0.50 per share and the option has a term of 10 years.
On March 20, 2013, we assumed certain liabilities and acquired substantially all the assets of MeNetwork used in connection with its business of developing, marketing and licensing a mobile marketing platform for use by merchants and consumers. As consideration for the assumption of the liabilities and the acquisition of the MeNetwork assets, we authorized the issuance of an aggregate of 3,500,000 shares of common stock to the stockholders of MeNetwork, of which 350,000 shares are being held in escrow for a period of one year from the closing date for the purposes of satisfying any indemnification claims and 750,000 shares of common stock were issued to Ashton Craig Page, the director and Chief Operating Officer of MeNetwork and formerly a member of our board of directors.
On May 1, 2013 we issued an option to purchase 100,000 shares of our common stock to Ashton Craig Page, formerly a director. The option has an exercise price of $0.50 and a term of 10 years.
On January 31, 2014, we issued options for the purchase of 150,000 shares of common stock to William Clark, our Chief Executive Officer and a director, and to each of David Ide, Glenn Bancroft and John Devlin, who, at the time of the transactions, were members of our board of directors. We also issued options for the purchase of 50,000 shares of common stock to each of John Reardon and Ashton Craig Page, who, at the time, were members of our board of directors. The options have 3 year terms and an exercise price of $0.50 per share.
Pursuant to David Ides consulting agreement, Mr. Ide was issued 250,000 shares of common stock on July 31, 2014 for his services rendered.
Pursuant to Glenn Bancrofts consulting agreement, Mr. Bancroft was issued 100,000 shares of our common stock for his services rendered.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
On January 23, 2015, the Company was notified by L.L. Bradford & Company, LLC (Bradford) that the firm resigned as the Companys independent registered public accounting firm. In connection with the resignation, Bradford informed the Company that it will no longer service SEC reporting companies because partners in its SEC practice moved to RBSM, LLP (RBSM). In connection with the resignation, the Audit Committee of the Companys Board of Directors approved the engagement of RBSM as the Companys new independent registered public accounting firm.
Neither the report of Bradford for the years ended December 31, 2012 and 2013, nor subsequent interim periods contained an adverse opinion or disclaimer of opinion, or was qualified or modified as to uncertainty, audit scope or accounting principles, except that the Company's audited financial statements in its Form 10-K for the years ended December 31, 2012 and 2013 contained a going concern qualification. We have had no disagreements with Bradford, whether or not resolved, on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which, if not resolved to Bradfords satisfaction would have caused them to make reference to the subject matter of the disagreement in connection with their reports on our financial statements.
39
During the years ended December 31, 2013 and 2012 and through January 23, 2015, there were no reportable events, as defined in Item 304(a)(1)(v) of Regulation S-K, except for the material weaknesses in the Companys internal control over financial reporting identified in the Companys Annual Report on Form 10-K for the fiscal years ended December 31, 2013 and 2012.
During the most recent fiscal year, since inception, and the interim periods preceding the engagement, the Company has not consulted RBSM regarding any of the matters set forth in Item 304(a)(2)(i) or (ii) of Regulation S-K.
ADDITIONAL INFORMATION
We have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to the common stock offered hereby. This prospectus does not contain all of the information set forth in the registration statement and the exhibits and schedules thereto. Some items are omitted in accordance with the rules and regulations of the SEC. For further information with respect to us and the common shares offered hereby, we refer you to the registration statement and the exhibits and schedules filed therewith. Statements contained in this prospectus as to the contents of any contract, agreement or any other document referred to are summaries of the material terms of the respective contract, agreement or other document. With respect to each of these contracts, agreements or other documents filed as an exhibit to the registration statement, reference is made to the exhibits for a more complete description of the matter involved. A copy of the registration statement, and the exhibits and schedules thereto, may be inspected without charge at the public reference facilities maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549. Copies of these materials may be obtained by writing to the Public Reference Section of the SEC at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference facilities. The SEC maintains a website that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC. The address of the SECs website is http://www.sec.gov.
We file periodic reports and other information with the SEC. Such periodic reports and other information are available for inspection and copying at the public reference room and website of the SEC referred to above. You may access our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports that we have filed or furnished with the SEC pursuant to Sections 13(a) or 15(d) of the Exchange Act free of charge at the SECs website.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
Section 78.7502 of the Nevada Revised Statutes permits a corporation to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, except an action by or in the right of the corporation, by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses, including attorneys fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with the action, suit or proceeding if he:
(a)
is not liable pursuant to Nevada Revised Statute 78.138, or
(b)
acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful.
In addition, Section 78.7502 permits a corporation to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses, including amounts paid in settlement and attorneys fees actually and reasonably incurred by him in connection with the defense or settlement of the action or suit if he:
(a)
is not liable pursuant to Nevada Revised Statute 78.138; or
(b)
acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation.
To the extent that a director, officer, employee or agent of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to above, or in defense of any claim, issue or matter, the corporation is required to indemnify him against expenses, including attorneys fees, actually and reasonably incurred by him in connection with the defense.
40
Section 78.752 of the Nevada Revised Statutes allows a corporation to purchase and maintain insurance or make other financial arrangements on behalf of any person who is or was a director, officer, employee or agent of the corporation or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise for any liability asserted against him and liability and expenses incurred by him in his capacity as a director, officer, employee or agent, or arising out of his status as such, whether or not the corporation has the authority to indemnify him against such liability and expenses.
Other financial arrangements made by a corporation pursuant to Section 78.752 may include the following:
(a)
the creation of a trust fund;
(b)
the establishment of a program of self-insurance;
(c)
the securing of its obligation of indemnification by granting a security interest or other lien on any assets of the corporation; and
(d)
the establishment of a letter of credit, guaranty or surety.
No financial arrangement made pursuant to Section 78.752 may provide protection for a person adjudged by a court of competent jurisdiction, after exhaustion of all appeals, to be liable for intentional misconduct, fraud or a knowing violation of law, except with respect to the advancement of expenses or indemnification ordered by a court.
Any discretionary indemnification pursuant to NRS 78.7502, unless ordered by a court or advanced pursuant to an undertaking to repay the amount if it is determined by a court that the indemnified party is not entitled to be indemnified by the corporation, may be made by the corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances. The determination must be made:
(a)
by the stockholders;
(b)
by the board of directors by majority vote of a quorum consisting of directors who were not parties to the action, suit or proceeding;
(c)
if a majority vote of a quorum consisting of directors who were not parties to the action, suit or proceeding so orders, by independent legal counsel in a written opinion, or
(d)
if a quorum consisting of directors who were not parties to the action, suit or proceeding cannot be obtained, by independent legal counsel in a written opinion.
Under our Articles of Incorporation, our directors are not liable for monetary damages for breach of fiduciary duty, except in connection with (i) acts or omissions that involve intentional misconduct by the director or a knowing violation of law by the director, (ii) conduct violating the Nevada Revised Statutes, or (iii) any transaction from which the director will personally receive a benefit in money, property or services to which the director is not legally entitled
Our Articles of Incorporation and bylaws require us to indemnify our directors against reasonable expenses incurred by the individual in advance of final disposition of the proceeding, without regard to the limitations in Nevada Revised Statute 78.7502, or any other limitation that may hereafter be enacted, to the extent such limitation may be disregarded if authorized by the Articles of Incorporation, to the full extent and under all circumstances permitted by applicable law.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling us pursuant to the foregoing provisions, we have been informed that, in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by us is against public policy as expressed hereby in the Securities Act and we will be governed by the final adjudication of such issue.
41
LEGAL MATTERS
Richardson & Patel LLP, with an office at 1100 Glendon Avenue, Suite 800, Los Angeles, California 90024, will pass upon the validity of the shares of common stock offered by this prospectus. As of January 14, 2015, Richardson & Patel LLP and its principals and attorneys or entities controlled by its principals own 1,803,884 shares of our common stock (the RP Shares), a portion of which it accepted as payment for certain legal services rendered to us. No RP Shares included for registration on this registration statement. Although Richardson & Patel LLP is not under any obligation to accept shares of our common stock in payment for services, it may do so in the future.
EXPERTS
Our financial statements as of December 31, 2013 and 2012 included in this prospectus and elsewhere in the registration statement have been audited by L.L. Bradford & Company, LLC, independent registered public accounting firm (which contain an explanatory paragraph related to our ability to continue as a going concern as described in Note 2 to our financial statements) as set forth in their report. We have included these financial statements in the prospectus and elsewhere in the registration statement in reliance upon the report of L.L. Bradford & Company, LLC, given on their authority as experts in accounting and auditing.
42
SPINDLE, INC.
Index to Financial Statements
|
Page |
Audited Financial Statements (as of and for the years ended December 31, 2013 and 2012) |
|
|
|
Report of Independent Registered Public Accounting Firm |
F-1 |
|
|
Balance Sheets |
F-2 |
|
|
Statements of Operations |
F-3 |
|
|
Statements of Stockholders Deficit |
F-4 |
|
|
Statements of Cash Flows |
F-5 |
|
|
Notes to Financial Statements |
F-6 |
|
|
Unaudited Financial Statements (as of September 30, 2014 and December 31, 2013 and for the three and nine months ended September 30, 2014 and 2013) |
|
|
|
Balance Sheets |
F-16 |
|
|
Statements of Operations |
F-17 |
|
|
Statements of Cash Flows |
F-18 |
|
|
Notes to Financial Statements |
F-19 |
43
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of
Spindle, Inc.
We have audited the accompanying balance sheets of Spindle, Inc. as of December 31, 2013 and 2012 and the related statements of operations, stockholders equity, and cash flows for the years ended. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audits.
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 misstatements. An audit 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 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 Spindle, Inc. as of December 31, 2013 and 2012 and the results of its operations, stockholders equity, and cash flows for the years then ended in conformity accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has suffered losses from operations, which raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/
L.L. Bradford &Company, LLC
Las Vegas, Nevada
March 31, 2014
F-1
Spindle, Inc.
Consolidated Balance Sheets
December 31,
December 31,
2013
2012
Assets
Current assets:
Cash
$
700,323
$
111,584
Restricted cash
20,000
20,000
Accounts receivable, net of allowance of
$10,967 and $0, respectively
171,696
37,362
Prepaid expenses and deposits
168,816
135,535
Inventory
61,050
-
Notes receivable, net of notes payable of
$0 and $230,736, respectively
-
64,586
Total current assets
1,121,885
369,067
Fixed assets
, net of accumulated depreciation of
$5,525 and $2,031, respectively
27,370
17,078
Other assets:
License agreements, net of accumulated amortization of
$116,347 and $75,878, respectively
116,346
156,815
Domain names, net of accumulated amortization
of $1,210 and $0, respectively
73,790
-
Capitalized software costs, net of accumulated amortization
of $199,646 and $0, respectively
1,240,632
547,657
Residual contract revenue
589,294
589,294
Deposits
12,342
3,842
Goodwill
2,679,970
-
Total other assets
4,712,374
1,297,608
Total assets
$
5,861,629
$
1,683,753
Liabilities and Stockholders Equity
Current liabilities:
Accounts payable and accrued liabilities
$
646,064
$
353,811
Accrued liabilities - related party
16,851
11,831
Total current liabilities
662,915
365,642
Long-term liabilities:
Notes payable - related party, net of debt discount of
$8,358 and $23,266, respectively
143,442
333,534
Note payable
-
27,566
Total long-term liabilities
143,442
361,100
Total liabilities
806,357
726,742
Stockholders equity:
Preferred stock, $0.001, par value, 50,000,000 shares
authorized, no shares issued and outstanding
-
-
as of December 31, 2013 and 2012, respectively
Common stock, $0.001 par value, 300,000,000 shares
authorized, 32,663,065 and 18,427,919 shares issued and
outstanding as of December 31, 2013 and 2012, respectively
32,663
18,428
Common stock authorized and unissued, 662,200 and 2,513,820
shares as of December 31, 2013 and 2012, respectively
662
2,514
Additional paid-in capital
11,401,078
3,835,683
Unamortized equity-based compensation
(48,736)
(283,001)
Accumulated deficit
(6,330,395)
(2,616,613)
Total stockholders equity
5,055,272
957,011
Total liabilities and stockholders equity
$
5,861,629
$
1,683,753
The accompanying notes are an integral part of these consolidated financial statements.
F-2
Spindle, Inc.
Consolidated Statements of Operations
The Years Ended
December 31,
2013
2012
Revenue:
Sales income
$
1,313,621
$
83,412
Cost of sales
563,478
19,701
Gross profit
750,143
63,711
Operating expenses:
Depreciation and amortization
244,818
51,567
General and administrative expenses
242,248
45,041
Software and internet costs
66,918
38,686
Consulting fees
1,013,917
492,410
Consulting fees - related party
39,500
-
Salaries and benefits
1,498,446
964,742
Directors Fees
200,850
-
Marketing
81,783
84,641
Travel
119,781
73,674
Rent
63,368
32,942
Professional fees
808,882
588,910
Total operating expenses
4,380,511
2,372,613
Net operating (loss)
(3,630,368)
(2,308,902)
Other income (expense):
Interest expense, net
(2,214)
3,668
Interest expense - related party
(17,336)
(15,127)
Gain (loss) on settlement
(302,625)
-
Gain (loss) on settlement - related party
238,761
-
Total other (expense)
(83,414)
(11,459)
Loss before provision for income tax
(3,713,782)
(2,320,361)
Provision for income taxes
-
-
Net (loss)
$
(3,713,782)
(2,320,361)
Weighted average number of common shares outstanding
26,094,975
17,164,341
Net (loss) per share - basic and fully diluted
$
(0.16)
$
(0.14)
The accompanying notes are an integral part of these consolidated financial statements.
F-3
Spindle, Inc.
Consolidated Statements of Stockholders Equity
Additional
Common
Unamortized
Common Stock
Paid-in
Stock
Equity
Accumulated
Shares
Amount
Capital
Payable
Compensation
(Deficit)
Total
Balance, December 31, 2011
16,480,000
$
16,480
$
711,811
$
1,425
$
-
$
(296,252)
$
433,464
Repurchase and cancellation of shares
(1,000,000)
(1,000)
1,000
-
-
-
Shares issued for services
763,918
764
655,645
550
-
656,959
Shares issued for cash
2,184,001
2,184
1,089,817
-
-
1,092,001
Asset acquisition with Parallel Solutions
-
-
588,755
539
-
589,294
Stock options granted for services
-
-
774,140
-
(283,001)
-
491,139
Imputed interest - related party
-
-
14,515
-
-
14,515
Net loss
-
-
-
-
(2,320,361)
(2,320,361)
Balance, December 31, 2012
18,427,919
18,428
3,835,683
2,514
(283,001)
(2,616,613)
957,011
Shares issued for services
1,433,499
1,433
768,144
100
-
-
769,677
Shares issued for accounts payable
898,952
899
448,577
-
-
-
449,476
Shares issued for cash
5,865,000
5,865
3,159,294
465
-
-
3,165,624
Shares issued for compensation - related party
-
-
60,379
121
60,500
Shares issued in litigation settlement
1,424,075
1,424
-
(1,424)
-
-
-
Asset acquisition with MeNetwork
2,750,000
2,750
3,129,000
750
-
-
3,132,500
Shares previously authorized
1,863,620
1,864
-
(1,864)
-
-
Stock option amortization
-
-
-
-
234,266
-
234,266
Net loss
-
-
-
-
-
(3,713,782)
(3,713,782)
Balance, December 31, 2013
32,663,065
$
32,663
$
11,401,077
$
662
$
(48,735)
$
(6,330,395)
$
5,055,272
The accompanying notes are an integral part of these consolidated financial statements.
F-4
Spindle, Inc.
Consolidated Statements of Cash Flows
The Years Ended
December 31,
2013
2012
Operating activities
Net loss
$
(3,713,782)
$
(2,320,361)
Adjustments to reconcile net loss to
net cash (used in) operating activities:
Shares issued for services
752,950
585,408
Depreciation and amortization
244,818
52,616
Amortization of debt discounts - related party
14,908
10,232
Amortization of options issued for services
234,266
491,139
Increase in allowance for doubtful accounts
10,967
-
(Gain) loss on settlement, net
63,864
-
Changes in operating assets and liabilities:
Increase in restricted cash
-
(20,000)
Increase in accounts receivable
(134,334)
(26,395)
Decrease (increase) in prepaid expenses
35,869
(135,535)
Increase in inventory
(61,050)
-
(Increase) decrease in interest receivable
7,282
1,227
Increase in deposits and other assets
(8,500)
(3,842)
Increase in accounts payable
741,729
355,486
Decrease in accrued interest
(9,449)
-
Increase in accrued interest - related party
5,019
-
Net cash used in operating activities
(1,815,661)
(1,010,025)
Investing activities
Purchase of fixed assets
(13,786)
(388,922)
Purchase of domain name and trademark
(75,000)
-
Additions to capitalized software development
(440,091)
-
Net cash used in investing activities
(528,877)
(388,922)
Financing activities
Payments on notes payable
(27,566)
-
Cash acquired from acquisition
-
27,566
Proceeds for notes payable - related party
-
317,331
Payments on notes payable - related party
(205,000)
-
Proceeds from the sale of common stock
3,165,625
1,162,525
Net cash provided by financing activities
2,933,059
1,507,422
Net increase in cash
588,739
108,475
Cash - beginning
111,584
3,109
Cash - ending
$
700,323
$
111,584
Supplemental disclosures
Interest paid
$
-
$
-
Income taxes paid
$
-
$
-
Non-cash transactions
Shares issued for services
$
752,950
$
585,408
Shares issues for accounts payable
$
449,476
$
-
Shares issued for officer compensation
$
60,500
$
-
Shares issued for acquisitions
$
3,132,500
$
589,294
Options issued for services
$
234,266
$
774,139
The accompanying notes are an integral part of these consolidated financial statements.
F-5
Spindle, Inc.
Notes to Consolidated Financial Statements
NOTE 1 - ORGANIZATION OF THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES
Organization
We were originally incorporated in the State of Nevada on January 8, 2007 as Coyote Hills Golf, Inc. We were previously an online retailer of golf-related apparel, equipment and supplies. Prior to the acquisition of the assets of Spindle Mobile, Inc. (
Spindle Mobile
), as described below, we generated minimal revenues from that line of business.
On December 2, 2011, we acquired certain assets and intellectual property from Spindle Mobile, a Delaware corporation in the business of data processing, mobile payments fields and other related fields, in exchange for approximately 80% of our issued and outstanding common stock of the Company, which shares were distributed to the stockholders of Spindle Mobile, pursuant to the terms and conditions of an Asset Purchase Agreement (the
Spindle Mobile Agreement
).
Concurrent with the closing of the Spindle Mobile Agreement, we amended our articles of incorporation to change our name from Coyote Hills Golf, Inc. to Spindle, Inc. Additionally, we increased our authorized capital from 100,000,000 shares of common stock and 100,000,000 shares of preferred stock, $0.001 par value to 300,000,000 shares of common stock, and 50,000,000 shares of preferred stock, $0.001 par value. The actions were approved on November 11, 2011 by the consent of the majority stockholders who represented 90% of our issued and outstanding common stock, and were effective on of December 2, 2011.
On December 31, 2012 (the
Parallel Acquisition Closing Date
), pursuant to that certain Asset Purchase Agreement (the
Parallel Agreement
) by and between the Company and Parallel Solutions Inc., a Nevada corporation (
Parallel
), the Company acquired substantially all of Parallels assets used in connection with its business of facilitating electronic payment processing services to merchants (the
Parallel Assets
), assumed certain specified liabilities and hired seven employees of Parallel in exchange for 538,570 unregistered shares of common stock, of which 53,857 shares (the
Parallel Indemnification Escrow
) and 100,000 shares (the
Parallel Deferred Consent Escrow
) were deposited in escrow with our transfer agent. The Parallel Indemnification Escrow was released on January 23, 2014. On October 29, 2013, the Parallel Deferred Consent Escrow was released to Parallel after certain specified contract assignments and residual revenue streams were assigned to the Company pursuant to the Parallel Agreement.
On March 20, 2013 (the
MeNetwork Closing Date
), the Company assumed certain liabilities and acquired substantially all of the assets of MeNetwork used in connection with its business of developing, marketing and licensing a mobile marketing platform for use by merchants and consumers (the
MeNetwork Assets
), pursuant to an Asset Purchase Agreement dated March 1, 2013 by and between Spindle and MeNetwork (the
MeNetwork Agreement
). As consideration for the assumption of the liabilities and the acquisition of the MeNetwork Assets, the Company issued an aggregate of 2,750,000 shares of common stock to the stockholders of MeNetwork, of which 350,000 shares are being held in escrow for a period of one year from the MeNetwork Closing Date for the purposes of satisfying any indemnification claims. In addition, on October 7, 2013, the Company issued an additional 750,000 shares of common stock to Ashton Craig Page, the former director and Chief Operating Officer of MeNetwork and a current director of the Company, pursuant to the terms and conditions of the MeNetwork Agreement.
F-6
On January 3, 2014 (the Closing Date), the Company acquired substantially all of the assets of Yowza International Inc. (renamed Y Dissolution, Inc.) (Yowza!!) used in connection with its business of providing retail coupons through a mobile application (the Yowza Assets), and assumed certain liabilities of Yowza!! in an amount equal to $15,000 for consideration equal to (1) $500,000 in cash paid to Yowza!! and certain creditors and holders of outstanding promissory notes issued by Yowza!! and (2) an aggregate of 1,642,000 unregistered shares of our common stock (the Aggregate Share Consideration), issuable to the holders of Yowza!!s outstanding capital stock. Ten percent of the Aggregate Share Consideration is issuable to certain executive management members and advisors of Yowza!! in accordance with consulting or employment agreements and subject to certain vesting provisions. In addition, an aggregate of 197,052 shares of common stock (the Indemnification Escrow), representing approximately 12% of the Aggregate Share Consideration, has been deposited in escrow for a period of one year from the Closing Date. The Indemnification Escrow is available to compensate Spindle pursuant to the indemnification obligations of Yowza!! under the Asset Purchase Agreement, and for any necessary accounts receivable adjustment after the Closing Date in the event Spindle is unable to collect the acquired outstanding accounts receivable of Yowza!! within 120 days after the Closing Date.
Principles of consolidation
For the fiscal years ended December 31, 2013 and 2012, the consolidated financial statements include the accounts of Spindle, Spindle Mobile, MeNetwork and Parallel. All significant intercompany balances and transactions have been eliminated. Spindle, Spindle Mobile, MeNetwork and Parallel will be collectively referred herein to as the Company.
Cash and cash equivalents
For purpose of the statements of cash flows, the Company considers cash and cash equivalents to include all stable, highly liquid investments with maturities of three months or less.
Restricted cash
The Company maintains a restricted cash balance as part of its operating requirements in a non-interest-bearing account that currently does not exceed federally insured limits totaling $20,000.
Accounts receivable
Accounts receivable is reported at the customers outstanding balances, less any allowance for doubtful accounts. Interest is not accrued on overdue accounts receivable.
Allowance for doubtful accounts
An allowance for doubtful accounts on accounts receivable is charged to operations in amounts sufficient to maintain the allowance for uncollectible accounts at a level management believes is adequate to cover any probable losses. Management determines the adequacy of the allowance based on historical write-off percentages and information collected from individual customers. Accounts receivable are charged off against the allowance when collectability is determined to be permanently impaired.
Inventory
Inventories consist of merchandise held for sale in the ordinary course of business, including cost of freight and other miscellaneous acquisition costs, and are stated at the lower of cost, or market determined on the first-in-first-out basis. The Company records a write-down for inventories, which have become obsolete or are in excess of anticipated demand or net realizable value. The Company performs a detailed review of inventory each period that considers multiple factors including demand forecasts, market conditions, product life cycle status, product development plans and current sales levels. If future demand or market conditions for the Companys products are less favorable than forecasted or if unforeseen changes negatively affect the utility of the Companys inventory, it may be required to record additional write-downs, which would negatively affect gross margins in the period when the write-downs are recorded. If actual market conditions are more favorable, the Company may have higher gross margins when products incorporating inventory that were previously written down are sold.
F-7
Property and equipment
Property and equipment is recorded at cost. Expenditures for major additions and improvements are capitalized and minor replacements, maintenance, and repairs are charged to expense as incurred. When property and equipment is retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the results of operations for the respective period. Depreciation is provided over the estimated useful lives of the related assets using the straight-line method for financial statement purposes. The Company uses other depreciation methods (generally accelerated) for tax purposes where appropriate. The estimated useful lives for significant property and equipment categories are as follows:
Computer Software
3 years
Computer Equipment
5 years
Office furniture and equipment
7 years
The Company reviews the carrying value of property and equipment for impairment whenever events and circumstances indicate that the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. In cases where undiscounted expected future cash flows are less than the carrying value, an impairment loss is recognized equal to an amount by which the carrying value exceeds the fair value of assets. The factors considered by management in performing this assessment include current operating results, trends and prospects, the manner in which the property is used, and the effects of obsolescence, demand, competition and other economic factors. Based on this assessment there was no impairment as of December 31, 2013 and 2012.
Intangible assets
Management regularly reviews property, equipment, intangibles and other long-lived assets for possible impairment. This review occurs quarterly, or more frequently if events or changes in circumstances indicate the carrying amount of the asset may not be recoverable. If there is indication of impairment, then management prepares an estimate of future cash flows expected to result from the use of the asset and its eventual disposition. If these cash flows are less than the carrying amount of the asset, an impairment loss is recognized to write down the asset to its estimated fair value. Management believes that the accounting estimate related to impairment of its property and equipment, is a critical accounting estimate because: (1) it is highly susceptible to change from period to period because it requires management to estimate fair value, which is based on assumptions about cash flows and discount rates; and (2) the impact that recognizing an impairment would have on the assets reported on our balance sheet, as well as net income, could be material. Managements assumptions about cash flows and discount rates require significant judgment because actual revenues and expenses have fluctuated in the past and are expected to continue to do so.
The Company reviews the carrying value of intangible assets for impairment whenever events and circumstances indicate that the carrying value may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. In cases where undiscounted expected future cash flows are less than the carrying value, an impairment loss is recognized equal to the amount by which the carrying value exceeds the fair value. The factors considered by management in performing this assessment include current operating results, trends and prospects, the manner in which the property is used, and the effects of obsolescence, demand, competition and other economic factors. During the years ended December 31, 2013 and 2012, there was no impairment necessary.
Software development costs
The Company accounts for the cost of computer software developed or obtained for internal use of its application service by capitalizing qualifying costs, which are incurred during the application development stage and amortizing them over the softwares estimated useful life. Costs incurred in the preliminary and post-implementation stages of the Companys products are expensed as incurred. The amounts capitalized include external direct costs of services used in developing internal-use software and for payroll and payroll-related costs of employees directly associated with the development activities. The Company amortizes capitalized software over the expected period of benefit, which is three years, beginning when the software is ready for its intended use.
F-8
Revenue recognition
The Company recognizes revenue when all of the following conditions are satisfied: (1) there is persuasive evidence of an arrangement; (2) the service has been provided to the customer; (3) the amount of fees to be paid by the customer is fixed or determinable; and (4) the collection of our fees is probable.
Sales related to long-term contracts for services (such as engineering, product development and testing) extending over several years are accounted for under the percentage-of-completion method of accounting. Sales and earnings under these contracts are recorded based on the ratio of actual costs incurred to total estimated costs expected to be incurred related to the contract under the cost-to-cost method based budgeted milestones or tasks as designated per each contract. Anticipated losses on contracts are recognized in full in the period in which losses become probable and estimable.
For all other sales of product or services the Company recognizes revenues based on the terms of the customer agreement. The customer agreement takes the form of either a contract or a customer purchase order and each provides information with respect to the product or service being sold and the sales price. If the customer agreement does not have specific delivery or customer acceptance terms, revenue is recognized at the time of shipment of the product to the customer.
Advertising and marketing costs
The Company expenses all costs of advertising as incurred.
Income taxes
The Company accounts for its income taxes under the provisions of ASC Topic 740, Income Taxes. The method of accounting for income taxes under ASC 740 is an asset and liability method. The asset and liability method requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of temporary differences between tax bases and financial reporting bases of other assets and liabilities.
Loss per common share
Net loss per share is provided in accordance with ASC Subtopic 260-10. We present basic loss per share (EPS) and diluted EPS on the face of statements of operations. Basic EPS is computed by dividing reported losses by the weighted average shares outstanding. Except where the result would be anti-dilutive to income from continuing operations, diluted earnings per share has been computed assuming the conversion of the exercise of stock options and warrants. Loss per common share has been computed using the weighted average number of common shares outstanding during the year. For the years ended December 31, 2013 and 2012, exercise of stock options and warrants are anti-dilutive due to the Companys net losses and are excluded in determining diluted loss per share.
Stock-Based Compensation
The Company accounts for stock-based payments to employees in accordance with ASC 718, Stock Compensation (ASC 718). Stock-based payments to employees include grants of stock, grants of stock options and issuance of warrants that are recognized in the consolidated statement of operations based on their fair values at the date of grant.
The Company accounts for stock-based payments to non-employees in accordance with ASC 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.
F-9
The Company calculates the fair value of option grants and warrant issuances utilizing the Black-Scholes pricing model. The amount of stock-based compensation recognized during a period is based on the value of the portion of the awards that are ultimately expected to vest. ASC 718 requires forfeitures to be estimated at the time stock options are granted and warrants are issued to employees and non-employees, and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The term forfeitures is distinct from cancellations or expirations and represents only the unvested portion of the surrendered stock option or warrant. The Company estimates forfeiture rates for all unvested awards when calculating the expense for the period. In estimating the forfeiture rate, the Company monitors both stock option and warrant exercises as well as employee termination patterns. The resulting stock- based compensation expense for both employee and non-employee awards is generally recognized on a straight-line basis over the requisite service period of the award.
Use of estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Fair value of financial instruments
Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of December 31, 2013 and 2012. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. Fair values were assumed to approximate carrying values for cash and payables because they are short term in nature and their carrying amounts approximate fair values or they are payable on demand.
Long-lived assets
The Company accounts for its 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 or carrying value of an asset may no longer be appropriate. The Company assesses recoverability of the carrying value of an asset by estimating the future net cash flows expected to result from the asset, including eventual disposition. If the future net cash flows are less than the carrying value of the asset, an impairment loss is recorded equal to the difference between the assets carrying value and its fair value or disposable value. As of December 31, 2013 and 2012, the Company determined that none of its long-term assets were impaired.
Concentration of business and credit risk
The Company has no significant off-balance sheet risk such as foreign exchange contracts, option contracts or other foreign hedging arrangements. The Companys financial instruments that are exposed to concentration of credit risks consist primarily of cash. The Company maintains its cash in bank accounts, which may at times, exceed federally insured limits.
Year-end
The Companys year-end is December 31.
New Accounting Pronouncements
The Company continually assesses any new accounting pronouncements to determine their applicability to the Company. Where it is determined that a new accounting pronouncement affects the Companys financial reporting, the Company undertakes a study to determine the consequence of the change to its financial statements and assures that there are proper controls in place to ascertain that the Companys financials properly reflect the change. There are no new accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA, and the SEC did not or are not believed by management to have a material impact on the Company's present or future financial statements.
F-10
NOTE 2 - GOING CONCERN
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As shown in the accompanying financial statements, the Company has incurred a net loss of ($3,713,782) and ($2,320,361) for the fiscal years ended December 31, 2013 and 2012, respectively and has an accumulated deficit of ($6,330,395).
In order to continue as a going concern, the Company will need, among other things, additional capital resources. The Company is significantly dependent upon its ability, and will continue to attempt, to secure equity and/or additional debt financing. The Company has recently issued debt securities and may conduct an offering of its equity securities to raise proceeds to finance its plan of operation. There are no assurances that the Company will be successful and without sufficient financing it would be unlikely for the Company to continue as a going concern.
The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue in existence. These conditions raise substantial doubt about the Company's ability to continue as a going concern. These financial statements do not include any adjustments that might arise from this uncertainty.
NOTE 3 - ACCOUNTS RECEIVABLE
Accounts receivable consist of the following:
December 31,
December 31,
2013
2012
Due from customers
$
182,662
$
37,362
Less allowance for bad debts
(10,967)
-
$
171,696
$
37,362
NOTE 4 - PREPAID EXPENSES AND DEPOSITS
On February 7, 2012, the Company entered into a legal retainer agreement with a law firm, for which the Company paid a legal retainer of $5,000. The retainer will be expensed at the sole discretion of the law firm and all ongoing legal fees are billed to the Company as incurred. During the year ended December 31, 2013, the Company recognized legal expenses of $623,423. As of December 31, 2013, the entire amount of the retainer has been amortized.
During 2012, the Company entered into a business marketing agreement for term of one year. In accordance with the terms of each agreement, the Company issued 350,000 fully vested shares of common stock valued at $175,000 as a non-refundable retainer for services. The estimated fair value will be amortized on a straight-line basis of the term of the agreement. As of December 31, 2013, the Company recorded $122,500 as consulting expense related to the service and the entire amount of the retainer has been amortized.
On January 23, 2013, the Company entered into a public relations consulting agreement for a term of two years. In accordance with the terms of the agreement, the Company issued 500,000 fully vested shares of common stock on the date of agreement and an additional 340,000 shares during the remainder of the year. The fair value of the complete grant totaled $420,000 and the first phase of the agreement has been completed. Accordingly, the entire amount has been recorded as consulting services expense for the year ended December 31, 2013. The Company did renew the contract for the second year in early 2014 and will recognize expense associated with the remaining term during the subsequent fiscal year.
F-11
NOTE 5 - NOTES RECEIVABLE
Notes receivable consisted of the following:
December 31,
December 31,
2013
2012
Notes receivable, 2.59% interest, and due on demand
$
-
$
288,040
Interest receivable
-
7,282
Total principal and interest receivable
-
295,322
Less:
Notes payable
-
221,287
Interest payable
-
9,449
Total principal and interest payable
-
230,736
$
-
$
64,586
Notes receivable and notes payable balances were settled in November of 2013 commensurate with the settlement of litigation related to the Spindle Mobile Agreement (see Legal Proceedings footnote).
NOTE 6 - FIXED ASSETS
Fixed assets consisted of the following at:
December 31,
December 31,
2013
2012
Office furniture & equipment
$
32,895
$
19,109
Less: Accumulated depreciation
5,525
2,031
Total fixed assets, net
$
27,370
$
17,078
NOTE 7 - CAPITALIZED SOFTWARE COSTS AND INTELLECTUAL PROPERTY
Capitalized software costs and license agreements consisted of the following at:
December 31,
December 31,
2013
2012
Capitalized software costs
$
1,440,278
$
547,657
Less: accumulated amortization
199,646
-
Total capitalized software costs
1,240,632
547,657
License agreements
232,693
232,693
Less: Accumulated depreciation
116,347
75,878
Total licenses
116,346
156,815
Total intellectual property, net
$
1,356,978
$
704,472
NOTE 8 - DOMAIN NAMES
Domain names consisted of the following at:
December 31,
December 31,
2013
2012
Domain Names
$
75,000
$
-
Less: Accumulated depreciation
1,210
-
Total fixed assets, net
$
73,790
$
-
F-12
NOTE 9 - RESIDUAL CONTRACTS
On December 31, 2012, the Company bought the residual income stream from Parallel Solutions (PSI). This revenue is perpetual as long as the vendor's contract stays with PSI. The company received all the contracts except for two: Chesspay and TRK. The Company did the due diligence on PSI around November 2012 and based the calculations on the new income for the period November of 2011 to October 2012. The Company used an industry standard multiple (1.1) to put a value on the asset and came up with a value of roughly $589,294. The income stream associated with PSI vendors in 2013 was greater than the residual contracts asset.
NOTE 10 - NOTES PAYABLE - RELATED PARTY
On December 15, 2011, the Company issued a Promissory Grid Note to a director of the Company whereby formalizing various advances previously received from the director in the amount of $51,300 and allowing for future advances up to $250,000. The note is non-interest bearing, unsecured and matures on December 15, 2014. The Company imputed interest at a rate of 2% per annum and recorded a discount in the amount of $10,640. In connection with one of the previous advances in the amount of $25,000, the Company issued warrants to purchase up to 250,000 shares of the Companys common stock at a price per share of $1.00 resulting in an additional discount of $17,709. The total discount attributable to the Grid Note totaled $28,349 and is being amortized to interest expense over the term of the note. During the year ended December 31, 2013, the Company repaid $55,000 of the principal balance of the loan and recorded interest expense of $9,422 related to the discount.
On December 15, 2012, the Company issued a promissory note in the amount of $100,000 to it chief executive officer for amounts previously advanced to the Company for working capital. The note is non-interest bearing, unsecured and matures on December 15, 2014. The Company imputed interest at a rate of 2% per annum and recorded a discount in the amount of $2,059 which is amortized to interest expense over the term of the note. During the year ended December 31, 2013, the Company repaid the entire principal balance of $100,000 and recorded interest expense of $2,059 related to the discount.
On December 17, 2012, the Company issued a promissory note in the amount of $50,000 to a related party, the note is non-interest bearing, unsecured and matures on January 15, 2013. In the event of default, the loan will bear a default rate of interest at 10% per annum. As of December 31, 2013, the entire principal balance of $50,000 was paid and the Company recorded related party interest at the default rate in the amount of $5,019.
NOTE 11 - STOCKHOLDERS EQUITY
The Company is authorized to issue up to 300,000,000 shares of $0.001 par value common stock and up to 50,000,000 shares of $0.001 par value preferred stock.
During the year ended December 31, 2013, the Company issued a total of 1,533,499 shares of common stock to various individuals and companies for consulting services valued at $769,677. As of December 31, 2013, 100,000 shares were unissued. In addition, the Company also issued 550,000 shares previously authorized in 2012.
During the year ended December 31, 2013, the Company authorized the issuance of 5,865,000 shares of its common stock for cash proceeds totaling $3,165,625. As of December 31, 2013, 465,250 shares were unissued.
During the year ended December 31, 2013, the Company issued 898,952 shares of its common stock as payment for previously accrued legal fees. The estimated fair value of the shares totaled $449,476 and has been recorded as a reduction to accounts payable.
On March 20, 2013, the Company authorized the issuance of 3,500,000 shares with an estimated fair value of $3,132,500 in connection with an asset acquisition. The Company agrees to issue 750,000 of such shares upon the satisfaction of certain conditions. (See Note 13). As of December 31, 2013, the 750,000 shares were unissued.
On November 27, 2013, the Company issued 1,424,075 shares from previously authorized shares of the Companys common stock held in escrow in connection with our Net MoneyIn (NMI) acquisition in 2011. The release of shares occurred as a result of a full and final settlement agreement dated November 27, 2013. Pursuant to the agreement, we agreed to release a total of 800,000 of the aforementioned shares and forgive two notes receivable acquired through our acquisition of NMI with a total balance of principal and interest totaling $302,625. In addition we agreed to issues the remaining 624,075 escrowed shares in settlement of a note payable previously assumed by our chief executive officer and a director, together with accrued interest totaling $238,761
F-13
During the year ended December 31, 2013, the Company authorized the issuance of 121,000 shares of common stock to the chief executive officer as compensation for services. As of December 31, 2013 the shares were unissued.
NOTE 12 - WARRANTS AND OPTIONS
On November 14, 2011, the Company issued warrants to purchase shares of the Companys common stock to a related-party in conjunction with a promissory note. The warrant holder was granted the right to purchase 250,000 shares of common stock of the Company for an aggregate purchase price of $250,000 or $1.00 per share. The aggregate fair value of the warrants totaled $387,500 based on the Black Scholes Merton pricing model using the following estimates: 2.75% risk free rate, 65% volatility and expected life of the warrants of 10 years.
The following is a summary of the status of all of the Companys stock warrants as of December 31, 2013:
Number
Of Warrants
and Options
Weighted-Average
Exercise Price
Outstanding at December 31, 2011
-
$ -
Granted
2,515,000
0.549
Exercised
-
-
Cancelled
-
-
Outstanding at December 31, 2012
2,515,000
$ 0.549
Granted
322,000
-
Exercised
-
-
Cancelled
(238,500)
-
Outstanding at December 31, 2013
2,598,500
$ 0.549
Exercisable at December 31, 2013
1,999,550
$ 0.581
NOTE 13 - BUSINESS ACQUISITIONS
On December 31, 2012 (the
Parallel Acquisition Closing Date
), pursuant to that certain Asset Purchase Agreement (the
Parallel Agreement
) by and between the Company and Parallel Solutions Inc., a Nevada corporation (
Parallel
), the Company acquired substantially all of Parallels assets used in connection with its business of facilitating electronic payment processing services to merchants (the
Parallel Assets
), assumed certain specified liabilities and hired seven employees of Parallel in exchange for 538,570 unregistered shares of common stock, of which 53,857 shares (the
Parallel Indemnification Escrow
) and 100,000 shares (the
Parallel Deferred Consent Escrow
) were deposited in escrow with our transfer agent. The Parallel Indemnification Escrow was released on January 23, 2014. On October 29, 2013, the Parallel Deferred Consent Escrow was released to Parallel after certain specified contract assignments and residual revenue streams were assigned to the Company pursuant to the Parallel Agreement.
On March 20, 2013 (the
MeNetwork Closing Date
), the Company assumed certain liabilities and acquired substantially all of the assets of MeNetwork used in connection with its business of developing, marketing and licensing a mobile marketing platform for use by merchants and consumers (the
MeNetwork Assets
), pursuant to an Asset Purchase Agreement dated March 1, 2013 by and between Spindle and MeNetwork (the
MeNetwork Agreement
). As consideration for the assumption of the liabilities and the acquisition of the MeNetwork Assets, the Company issued an aggregate of 2,750,000 shares of common stock to the stockholders of MeNetwork, of which 350,000 shares are being held in escrow for a period of one year from the MeNetwork Closing Date for the purposes of satisfying any indemnification claims. In addition, on October 7, 2013, the Company issued an additional 750,000 shares of common stock to Ashton Craig Page, the former director and Chief Operating Officer of MeNetwork and a current director of the Company, pursuant to the terms and conditions of the MeNetwork Agreement.
F-14
NOTE 14 - SUBSEQUENT EVENTS
On January 3, 2014 (the Closing Date), the Company acquired substantially all of the assets of Yowza International Inc. (renamed Y Dissolution, Inc.) (Yowza!!) used in connection with its business of providing retail coupons through a mobile application (the Yowza Assets), and assumed certain liabilities of Yowza!! in an amount equal to $15,000 for consideration equal to (1) $500,000 in cash paid to Yowza!! and certain creditors and holders of outstanding promissory notes issued by Yowza!! and (2) an aggregate of 1,642,000 unregistered shares of our common stock (the Aggregate Share Consideration), issuable to the holders of Yowza!!s outstanding capital stock. Ten percent of the Aggregate Share Consideration is issuable to certain executive management members and advisors of Yowza!! in accordance with consulting or employment agreements and subject to certain vesting provisions. In addition, an aggregate of 197,052 shares of common stock (the Indemnification Escrow), representing approximately 12% of the Aggregate Share Consideration, has been deposited in escrow for a period of one year from the Closing Date. The Indemnification Escrow is available to compensate Spindle pursuant to the indemnification obligations of Yowza!! under the Asset Purchase Agreement, and for any necessary accounts receivable adjustment after the Closing Date in the event Spindle is unable to collect the acquired outstanding accounts receivable of Yowza!! within 120 days after the Closing Date.
F-15
SPINDLE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
|
SEPTEMBER 30, |
|
DECEMBER 31, |
||
|
2014 |
|
2013 |
||
ASSETS |
|
|
|
||
Current assets: |
|
|
|
||
Cash |
$ |
133,045 |
|
$ |
700,323 |
Restricted cash |
|
20,000 |
|
|
20,000 |
Accounts receivable, net of allowance of $9,250 and $10,967, respectively |
|
75,950 |
|
|
171,696 |
Prepaid expenses and deposits |
|
299,837 |
|
|
168,816 |
Inventory |
|
109,290 |
|
|
61,050 |
Total current assets |
|
638,122 |
|
|
1,121,885 |
|
|
|
|
|
|
Fixed assets , net of accumulated depreciation of $9,444 and $5,525, respectively |
|
23,451 |
|
|
27,370 |
|
|
|
|
|
|
Other assets: |
|
|
|
|
|
License agreements, net of accumulated amortization of $151,251 and $116,347, respectively |
|
81,442 |
|
|
116,346 |
Domain names, net of accumulated amortization of $9,218 and $1,210, respectively |
|
75,782 |
|
|
73,790 |
Capitalized software costs, net of accumulated amortization of $479,646 and $199,646, respectively |
|
1,530,762 |
|
|
1,240,632 |
Residual contract revenue, net of accumulated amortization of $110,493 and $0, respectively |
|
478,801 |
|
|
589,294 |
Deposits |
|
10,500 |
|
|
12,342 |
Goodwill |
|
5,976,198 |
|
|
2,679,970 |
Total other assets |
|
8,153,485 |
|
|
4,712,374 |
TOTAL ASSETS |
$ |
8,815,058 |
|
$ |
5,861,629 |
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
Accounts payable and accrued liabilities |
$ |
671,470 |
|
$ |
533,564 |
Accrued liabilities - related party |
|
310,008 |
|
|
129,351 |
Notes payable - related party, net of discount of $443 and $8,358, respectively |
|
171,719 |
|
|
143,442 |
Total current liabilities |
|
1,153,197 |
|
|
806,357 |
|
|
|
|
|
|
Stockholders equity: |
|
|
|
|
|
Preferred stock, $0.001 par value, 50,000,000 shares authorized, no shares issued and outstanding as of September 30, 2014 and December 31, 2013, respectively |
|
- |
|
|
- |
Common stock, $0.001 par value, 300,000,000 shares authorized, 39,755,273 and 32,663,065 shares issued and outstanding as of September 30, 2014 and December 31, 2013, respectively |
|
39,755 |
|
|
32,663 |
Common stock authorized and unissued, 729,000 and 662,200 shares as of September 30, 2014 and December 31, 2013, respectively |
|
729 |
|
|
662 |
Additional paid-in capital |
|
19,415,400 |
|
|
11,401,078 |
Unamortized equity-based compensation |
|
- |
|
|
(48,736) |
Accumulated deficit |
|
(11,794,023) |
|
|
(6,330,395) |
Total stockholders equity |
|
7,661,861 |
|
|
5,055,272 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY |
$ |
8,815,058 |
|
$ |
5,861,629 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
F-16
SPINDLE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
|
|
THE THREE MONTHS ENDED |
|
THE NINE MONTHS ENDED |
||||||||
|
|
SEPTEMBER 30, |
|
SEPTMEBER 30, |
||||||||
|
|
2014 |
|
2013 |
|
2014 |
|
2013 |
||||
Revenue: |
|
|
|
|
|
|
|
|
||||
Sales income |
|
$ |
200,478 |
|
$ |
278,021 |
|
$ |
676,351 |
|
$ |
983,166 |
Cost of sales |
|
|
50,677 |
|
|
135,801 |
|
|
243,683 |
|
|
368,336 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
149,801 |
|
|
142,220 |
|
|
432,668 |
|
|
614,830 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
152,809 |
|
|
112,164 |
|
|
437,324 |
|
|
159,086 |
Promotional and marketing |
|
|
21,425 |
|
|
18,043 |
|
|
90,879 |
|
|
43,094 |
Consulting |
|
|
353,397 |
|
|
162,784 |
|
|
1,593,784 |
|
|
520,945 |
Salaries and wages |
|
|
569,900 |
|
|
314,142 |
|
|
2,303,200 |
|
|
1,128,893 |
Directors fees |
|
|
44,839 |
|
|
26,505 |
|
|
129,839 |
|
|
79,515 |
Professional fees |
|
|
79,641 |
|
|
140,653 |
|
|
851,385 |
|
|
554,120 |
General and administrative |
|
|
63,193 |
|
|
111,210 |
|
|
488,278 |
|
|
397,087 |
Total operating expenses |
|
|
1,285,204 |
|
|
885,501 |
|
|
5,894,689 |
|
|
2,882,740 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating loss |
|
|
(1,135,403) |
|
|
(743,281) |
|
|
(5,462,021) |
|
|
(2,267,910) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expense: |
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
- |
|
|
1,947 |
|
|
- |
|
|
3,882 |
Interest expense |
|
|
- |
|
|
(1,517) |
|
|
- |
|
|
(4,521) |
Interest expense - related party |
|
|
(338) |
|
|
(4,176) |
|
|
(1,606) |
|
|
(12,236) |
Total other expense |
|
|
(338) |
|
|
(3,746) |
|
|
(1,606) |
|
|
(12,875) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before provision for income taxes |
|
|
(1,135,741) |
|
|
(747,027) |
|
|
(5,463,627) |
|
|
(2,280,785) |
Provision for income taxes |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(1,135,741) |
|
$ |
(747,027) |
|
$ |
(5,463,627) |
|
$ |
(2,280,785) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding - basic and diluted |
|
|
38,922,980 |
|
|
26,317,700 |
|
|
37,682,150 |
|
|
24,454,806 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) per share - basic and fully diluted |
|
$ |
(0.03) |
|
$ |
(0.03) |
|
$ |
(0.14) |
|
$ |
(0.09) |
The accompanying notes are an integral part of these condensed consolidated financial statements.
F-17
SPINDLE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
THE NINE MONTHS ENDED |
||||
|
SEPTMEBER 30, |
||||
|
2014 |
|
2013 |
||
Operating activities |
|
|
|
||
Net loss |
$ |
(5,463,627) |
|
$ |
(2,280,785) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
Shares issued for services |
|
1,710,553 |
|
|
283,965 |
Shares issued for officer compensation |
|
586,725 |
|
|
- |
Depreciation and amortization |
|
437,324 |
|
|
159,086 |
Amortization of debt discount - related party |
|
2,611 |
|
|
11,161 |
Share based compensation expense |
|
447,805 |
|
|
210,686 |
(Decrease) Increase in allowance for doubtful accounts |
|
(1,717) |
|
|
66,423 |
Changes in operating assets and liabilities: |
|
|
|
|
|
Decrease (increase) in accounts receivable |
|
97,462 |
|
|
(149,400) |
Decrease in prepaid expenses |
|
128,271 |
|
|
30,814 |
Increase in inventory |
|
(48,240) |
|
|
- |
Increase in interest receivable |
|
- |
|
|
(6,679) |
Decrease (increase) in deposits and other assets |
|
1,842 |
|
|
(3,500) |
Increase in accounts payable and accrued expenses |
|
303,888 |
|
|
417,871 |
Increase in expenses - related party |
|
166,341 |
|
|
- |
Increase in accrued interest |
|
- |
|
|
4,522 |
(Decrease) increase in accrued interest - related party |
|
(5,019) |
|
|
3,666 |
Net cash used in operating activities |
|
(1,635,781) |
|
|
(1,252,170) |
|
|
|
|
|
|
Investing activities |
|
|
|
|
|
Purchase of fixed assets |
|
- |
|
|
(9,016) |
Acquisition of intellectual property |
|
(501,367) |
|
|
- |
Additions to capitalized software development |
|
(370,130) |
|
|
(336,438) |
Net cash used in investing activities |
|
(871,497) |
|
|
(345,454) |
|
|
|
|
|
|
Financing activities |
|
|
|
|
|
Payments on notes payable |
|
- |
|
|
(27,566) |
Net proceeds (payments) for notes payable - related party |
|
45,000 |
|
|
(100,000) |
Proceeds from the sale of common stock |
|
1,895,000 |
|
|
1,732,322 |
Net cash provided by financing activities |
|
1,940,000 |
|
|
1,604,756 |
|
|
|
|
|
|
Net (decrease) increase in cash |
|
(567,278) |
|
|
7,132 |
Cash - beginning |
|
700,323 |
|
|
111,584 |
Cash - ending |
$ |
133,045 |
|
$ |
118,716 |
|
|
|
|
|
|
Non-cash transactions |
|
|
|
|
|
Shares issued for services |
$ |
1,710,553 |
|
$ |
286,965 |
Shares issued for officer compensation |
$ |
586,725 |
|
$ |
- |
Shares issued for prepaid expenses |
$ |
259,292 |
|
$ |
- |
Shares issued for accounts payable |
$ |
165,979 |
|
$ |
- |
Shares issued for acquisitions |
$ |
3,004,861 |
|
$ |
3,132,500 |
Options issued for share based compensation expense |
$ |
392,605 |
|
$ |
210,686 |
Shares issued for share based compensation expense |
$ |
55,200 |
|
$ |
- |
The accompanying notes are an integral part of these condensed consolidated financial statements.
F-18
SPINDLE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The interim condensed consolidated 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 (the 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 condensed consolidated financial statements be read in conjunction with the financial statements of the Company for the year ended December 31, 2013 and notes thereto included in the Company's Annual Report on Form 10-K. The Company follows the same accounting policies in the preparation of interim reports.
Results of operations for the interim periods are not indicative of annual results.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and cash equivalents
For purpose of the statements of cash flows, the Company considers cash and cash equivalents to include all stable, highly liquid investments with maturities of three months or less.
Concentration of credit risk
The Company primarily transacts its business with one financial institution. The amount on deposit in that one institution may from time to time exceed the federally-insured limit.
Use of estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Income taxes
The Company accounts for its income taxes under the provisions of ASC Topic 740, Income Taxes. The method of accounting for income taxes under ASC 740 is an asset and liability method. The asset and liability method requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of temporary differences between tax bases and financial reporting bases of other assets and liabilities.
Revenue recognition
Revenue is derived on a per message/notification basis through the Companys patented technologies and a modular, adaptable platform designed to create multi-channel messaging gateways for all types of connected devices. The Company also earns revenue for services, such as programming, licensure on Software as a Service (SaaS) basis, and on a performance basis, such as when a client acquires a new customer through our platform. Revenue is recognized in accordance with Staff Accounting Bulletin (SAB) No. 101, Revenue Recognition in Financial Statements, as revised by SAB No. 104. As such, the Company recognizes revenue when persuasive evidence of an arrangement exists, title transfer has occurred, the price is fixed or readily determinable, and collectability is probable. Sales are recorded net of sales discounts.
Accounts receivable
Accounts receivable is reported at the customers outstanding balances, less any allowance for doubtful accounts. Interest is not accrued on overdue accounts receivable.
F-19
SPINDLE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Allowance for doubtful accounts
An allowance for doubtful accounts on accounts receivable is charged to operations in amounts sufficient to maintain the allowance for uncollectible accounts at a level management believes is adequate to cover any probable losses. Management determines the adequacy of the allowance based on historical write-off percentages and information collected from individual customers. Accounts receivable are charged off against the allowance when collectability is determined to be permanently impaired.
Property and equipment
Property and equipment are stated at cost. Major renewals and improvements are charged to the asset accounts while replacements, maintenance and repairs that do not improve or extend the lives of the respective assets are expensed. At the time property and equipment are retired or otherwise disposed of, the asset and related accumulated depreciation accounts are relieved of the applicable amounts. Gains or losses from retirements or sales are credited or charged to income.
Depreciation is computed on the straight-line and accelerated methods for financial reporting and income tax reporting purposes based upon the following estimated useful lives:
Computer software |
3 years |
Computer hardware |
5 years |
Office furniture |
7 years |
Long-lived assets
The Company accounts for its long-lived assets in accordance with Accounting Standards Codification (ASC) Topic 360-10-05, Accounting for the Impairment or Disposal of Long-Lived Assets. ASC Topic 360-10-05 requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the historical cost carrying value of an asset may no longer be appropriate. The Company assesses recoverability of the carrying value of an asset by estimating the future net cash flows expected to result from the asset, including eventual disposition. If the future net cash flows are less than the carrying value of the asset, an impairment loss is recorded equal to the difference between the assets carrying value and fair value or disposable value. The Company determined that none of its long-term assets at September 30, 2014 were impaired.
Capitalized software development costs
The Company capitalizes internal software development costs subsequent to establishing technological feasibility of a software application. Capitalized software development costs represent the costs associated with the internal development of the Companys software applications. Amortization of such costs is recorded on a software application-by-application basis, based on the greater of the proportion of current year sales to total of current and estimated future sales for the applications or the straight-line method over the remaining estimated useful life of the software application. The Company continually evaluates the recoverability of capitalized software costs and will charge to operations amounts that are deemed unrecoverable for projects it abandons.
Stock-based compensation
The Company accounts for stock-based payments to employees in accordance with ASC 718, Stock Compensation (ASC 718). Stock-based payments to employees include grants of stock, grants of stock options and issuance of warrants that are recognized in the consolidated statement of operations based on their fair values at the date of grant.
The Company accounts for stock-based payments to non-employees in accordance with ASC 505-50, Equity-Based Payments to Non-Employees. 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. The Company calculates the fair value of option grants and warrant issuances utilizing the Binomial 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.
F-20
SPINDLE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Stock-based compensation, continued
The Company estimates forfeiture rates for all unvested awards when calculating the expense for the period. In estimating the forfeiture rate, the Company monitors both stock option and warrant exercises as well as employee termination patterns. The resulting stock-based compensation expense for both employee and non-employee awards is generally recognized on compensation under ASC Topic 505-50, In accordance with ASC 505-50, the cost of stock-based compensation is measured at the grant date based on the value of the award and is recognized over the vesting period. The value of the stock-based award is determined using the Binomial or Black-Scholes option-pricing models, whereby compensation cost is the excess of the fair value of the award as determined by the pricing model at the grant date or other measurement date over the amount that must be paid to acquire the stock.
Loss per share
The Company reports earnings (loss) per share in accordance with ASC Topic 260-10, "Earnings per Share." Basic earnings (loss) per share is computed by dividing income (loss) available to common shareholders by the weighted average number of common shares available. Diluted earnings (loss) per share is computed similar to basic earnings (loss) per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. Diluted earnings (loss) per share has not been presented since the effect of the assumed conversion of warrants and debt to purchase common shares would have an anti-dilutive effect. Potential common shares as of September 30, 2014 that have been excluded from the computation of diluted net loss per share amounted to 4,343,500 shares and include 250,000 warrants and 4,093,500 options. Of the 4,343,500 potential common shares at September 30, 2014, 1,770,556 had not vested.
Recent accounting pronouncements
The Company continually assesses any new accounting pronouncements to determine their applicability to the Company. Where it is determined that a new accounting pronouncement affects the Companys financial reporting, the Company undertakes a study to determine the consequence of the change to its financial statements and assures that there are proper controls in place to ascertain that the Companys financials properly reflect the change.
In August 2014, The FASB issued Accounting Standards Update (ASU) No. 2014-15, Presentation of Financial Statements - Going Concern (Subtopic 205-40). ASU 2014-15 provides guidance for disclosure of uncertainties about an entitys ability to continue as a going concern. In doing so, management will need to perform an evaluation at each interim and annual reporting period to determine whether or not there are conditions or events, considered in the aggregate, that raise substantial doubt about the entitys ability to continue as a going concern within one year after the date that the financial statements are issued. If these conditions exist, the entity should evaluate whether the doubt is mitigated by managements plans or events and should make such required disclosures. This guidance will be effective for the Company for its interim reporting for the quarter ended March 31, 2017.
NOTE 3 - GOING CONCERN
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As shown in the accompanying financial statements, the Company has incurred a net loss of ($1,135,741) and ($5,463,627) for the three and nine months ended September 30, 2014, respectively, and has an accumulated deficit of ($11,794,023).
In order to continue as a going concern, the Company will need, among other things, additional capital resources. The Company is significantly dependent upon its ability to secure equity and/or additional debt financing. There are no assurances that the Company will be successful and without sufficient financing it would be unlikely for the Company to continue as a going concern.
The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue in existence. These conditions raise substantial doubt about the Company's ability to continue as a going concern. These financial statements do not include any adjustments that might arise from this uncertainty.
F-21
SPINDLE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 4. ACCOUNTS RECEIVABLE
Accounts receivable consist of the following:
|
SEPTEMBER 30, |
|
DECEMBER 31, |
||
|
2014 |
|
2013 |
||
|
|
|
|
||
Due from customers |
$ |
85,200 |
|
$ |
182,663 |
Less allowance for bad debts |
|
(9,250) |
|
|
(10,967) |
Total accounts receivable, net |
$ |
75,950 |
|
$ |
171,696 |
NOTE 5 - PREPAID EXPENSES AND DEPOSITS
On January 23, 2013, the Company entered into a public relations consulting agreement for a term of two years. In accordance with the terms of the agreement, the Company issued 500,000 fully vested shares of common stock on the date of agreement and an additional 340,000 shares during the remainder of 2013. The fair value of the complete grant totaled $420,000 and the first phase of the agreement has been completed. The Company renewed the agreement in early 2014, and as of September 30, 2014, has issued 700,000 shares for the annual agreement period at a fair value of $619,500. As a result, $192,500 and $360,208 were recorded to consulting expense related to the service for the three and nine months ended September 30, 2014 respectively. The remaining prepaid balance at September 30, 2014 totaled $259,292.
NOTE 6 - FIXED ASSETS
Fixed assets consisted of the following at:
|
SEPTEMBER 30, |
|
DECEMBER 31, |
||
|
2014 |
|
2013 |
||
|
|
|
|
||
Office furniture & equipment |
$ |
32,895 |
|
$ |
32,895 |
Less: accumulated depreciation |
|
(9,444) |
|
|
(5,525) |
Total fixed assets, net |
$ |
23,451 |
|
$ |
27,370 |
NOTE 7 - CAPITALIZED SOFTWARE COSTS AND INTELLECTUAL PROPERTY
Capitalized software costs and license agreements consisted of the following at:
|
SEPTEMBER 30, |
|
DECEMBER 31, |
||
|
2014 |
|
2013 |
||
|
|
|
|
||
Capitalized software costs |
$ |
2,010,408 |
|
$ |
1,440,278 |
Less: accumulated amortization |
|
(479,646) |
|
|
(199,646) |
Net capitalized software costs |
|
1,530,762 |
|
|
1,240,632 |
|
|
|
|
|
|
License agreements |
|
232,693 |
|
|
232,693 |
Less: accumulated depreciation |
|
(151,251) |
|
|
(116,347) |
Net licenses |
|
81,442 |
|
|
116,346 |
Total intellectual property, net |
$ |
1,612,204 |
|
$ |
1,356,978 |
F-22
SPINDLE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 8 - DOMAIN NAMES
Domain names consisted of the following at:
|
SEPTEMBER 30, |
|
DECEMBER 31, |
||
|
2014 |
|
2013 |
||
|
|
|
|
||
Domain names |
$ |
85,000 |
|
$ |
75,000 |
Less: accumulated amortization |
|
(9,218) |
|
|
(1,210) |
Total domain names, net |
$ |
75,782 |
|
$ |
73,790 |
NOTE 9 - RESIDUAL CONTRACTS
On December 31, 2012, the Company acquired the residual income stream of Parallel Solutions Inc. (PSI). This revenue is perpetual, provided that the vendors contract with PSI is not terminated. The calculations for the value associated with anticipated new income resulting from the acquired PSI residual contracts was determined based on PSIs residual revenue stream for the period from November of 2011 to October 2012 of $535,722 and historical PSIs termination rates of nil. The Company used the lowest industry standard multiple of (1.1) to determine the fair value of the contractual revenue stream of the date of acquisition which was estimated to be $589,294. During the nine months ended September 30, 2014, management reviewed the carrying amount of the asset and determined as a result of diversification in the Companys business model due to its acquisitions, that the previously estimated indefinite life be revised to reflect the Companys future business development goals. The Company estimated a finite remaining useful life of forty-eight months and has recorded amortization expense as of September 30, 2014 as follows:
|
SEPTEMBER 30, |
|
DECEMBER 31, |
||
|
2014 |
|
2013 |
||
|
|
|
|
||
Residual contracts |
$ |
589,294 |
|
$ |
589,294 |
Less: accumulated amortization |
|
(110,493) |
|
|
- |
Total domain names, net |
$ |
478,801 |
|
$ |
589,294 |
NOTE 10 - NOTES PAYABLE - RELATED PARTY
On December 15, 2011, the Company issued a Promissory Note (Note) to a director of the Company formalizing various advances previously received from the director in the amount of $51,300 and allowing for future advances of up to $250,000. The note is non-interest bearing, unsecured and matures on December 15, 2014. The Company imputed interest at a rate of 2% per annum and recorded a discount in the amount of $10,640. In connection with one of the previous advances in the amount of $25,000, the Company issued warrants to purchase up to 250,000 shares of the Companys common stock at a price per share of $1.00 resulting in an additional discount of $17,709. The total discount attributable to the Note totaled $28,349 and is being amortized to interest expense over the term of the note. During the nine months ended September 30, 2014, the Company repaid $55,000 of the loan.
During the nine months ended September 30, 2014, the Company recorded a $100,000 note payable to a director of the Company. The note is non-interest bearing and unsecured. The Company imputed interest at a rate of 2% per annum and recorded a discount in the amount of $110.
During the three and nine months ended September 30, 2014, respectively, interest expense of $338 and $1,606 related to amortization of the discount and interest on the unpaid notes was recorded.
F-21
SPINDLE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 11 - STOCKHOLDERS EQUITY
The Company is authorized to issue up to 300,000,000 shares of common stock, par value $0.001.
During the nine months ended September 30, 2014, the Company authorized the issuance of 3,790,000 shares of its common stock for cash proceeds totaling $1,895,000. As of September 30, 2014, 300,000 of these shares were unissued.
During the nine months ended September 30, 2014, the Company issued a total of 1,170,853 shares of common stock to various individuals and companies for services valued at $1,558,500. As of September 30, 2014, 365,853 of these shares were unissued. Additionally, the Company also canceled 50,000 shares previously issued for consulting services in 2012 for services valued at $4,000.
During the nine months ended September 30, 2014, the Company issued 322,958 shares of its common stock as payment for previously accrued legal fees. The estimated fair value of these shares totaled $581,324. Of the total fair value, $161,479 has been recorded as a reduction to accounts payable and $419,845 was recognized as additional paid-in-capital and professional fees expense for the excess of the fair value.
During the nine months ended September 30, 2014, the Company authorized the issuance of 243,490 shares of common stock valued at $572,225 to the Chief Executive Officer as compensation for services and bonus. As of September 30, 2014 23,490 of these shares were unissued.
During the nine months ended September 30, 2014, the Company authorized the issuance of 10,000 shares of common stock valued at $14,500 to the Chief Financial Officer as compensation for services. As of September 30, 2014 these shares were unissued.
During the nine months ended September 30, 2014, the Company authorized the issuance of 30,000 shares of common stock valued at $55,200 to an employee as compensation for services. As of September 30, 2014 these shares were unissued.
On January 3, 2014, the Company authorized the issuance of 1,642,000 shares with an estimated fair value of $3,004,861 in connection with an asset acquisition. The Company issued 1,445,000 shares at closing (see Note 13). As of September 30, 2014, 197,052 shares remain in escrow.
NOTE 12 - WARRANTS AND OPTIONS
On November 14, 2011, the Company issued warrants to purchase shares of the Companys common stock to a related-party in conjunction with a promissory note. The warrant holder was granted the right to purchase 250,000 shares of common stock of the Company for an aggregate purchase price of $250,000 or $1.00 per share. The aggregate fair value of the warrants totaled $387,500 based on the Black Scholes Merton pricing model using the following estimates: 2.75% risk free rate, 65% volatility and expected life of the warrants of 10 years.
The following is a summary of the status of all of the Companys stock warrants and options as of September 30, 2014:
|
Number of Warrants and Options |
|
Weighted-Average Exercise Price |
|
Outstanding at December 31, 2012 |
2,515,000 |
|
$ |
0.549 |
Granted |
322,000 |
|
|
- |
Exercised |
- |
|
|
- |
Forfeited/Cancelled |
(238,500) |
|
|
- |
Outstanding at December 31, 2013 |
2,598,500 |
|
$ |
0.549 |
Granted |
2,687,500 |
|
|
- |
Exercised |
- |
|
|
- |
Forfeited/Cancelled |
(942,500) |
|
|
- |
Outstanding at September 30, 2014 |
4,343,500 |
|
$ |
0.529 |
Exercisable at September 30, 2014 |
2,572,944 |
|
$ |
0.549 |
F-22
SPINDLE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 13 - BUSINESS ACQUISITION
On January 3, 2014, (the Closing Date), the Company acquired substantially all of the assets of Yowza International Inc. (renamed Y Dissolution, Inc.) (Yowza!!) used in connection with its business of providing retail coupons through a mobile application, and assumed certain liabilities of Yowza!! in an amount equal to $15,000 for consideration equal to (1) $500,000 in cash paid to Yowza!! and certain creditors and holders of outstanding promissory notes issued by Yowza!! and (2) an aggregate of 1,642,000 unregistered shares of our common stock (the Aggregate Share Consideration), issuable to the holders of Yowza!!s outstanding capital stock. Ten percent of the Aggregate Share Consideration is issuable to certain executive management members and advisors of Yowza!! in accordance with consulting or employment agreements and subject to certain vesting provisions. In addition, an aggregate of 197,052 shares of common stock (the Indemnification Escrow), representing approximately 12% of the Aggregate Share Consideration, has been deposited in escrow for a period of one year from the Closing Date. The Indemnification Escrow is available to compensate Spindle pursuant to the indemnification obligations of Yowza!! under the Asset Purchase Agreement, and for any necessary accounts receivable adjustment after the Closing Date in the event Spindle is unable to collect the acquired outstanding accounts receivable of Yowza!! within 120 days after the Closing Date.
NOTE 14 - SUBSEQUENT EVENTS
The Companys management has reviewed all material events through the date of this report in accordance with ASC 855-10, and believes there are no material subsequent events to report.
F-23
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
We will pay all expenses in connection with the registration and sale of the common stock by the selling stockholder. The estimated expenses of issuance and distribution are set forth below.
SEC filing fee |
|
$ |
267.21 |
(1) |
Legal expenses and expenses |
|
$ |
35,000 |
* |
Accounting fees and expenses |
|
$ |
3,500 |
* |
Miscellaneous |
|
$ |
1,500 |
* |
Total |
|
$ |
40,267.21 |
* |
* Estimate
(1) Paid on January 28, 2015.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 78.7502 of the Nevada Revised Statutes permits a corporation to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, except an action by or in the right of the corporation, by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses, including attorneys fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with the action, suit or proceeding if he:
(a)
is not liable pursuant to Nevada Revised Statute 78.138, or
(b)
acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful.
In addition, Section 78.7502 permits a corporation to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses, including amounts paid in settlement and attorneys fees actually and reasonably incurred by him in connection with the defense or settlement of the action or suit if he:
(a)
is not liable pursuant to Nevada Revised Statute 78.138; or
(b)
acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation.
To the extent that a director, officer, employee or agent of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to above, or in defense of any claim, issue or matter, the corporation is required to indemnify him against expenses, including attorneys fees, actually and reasonably incurred by him in connection with the defense.
Section 78.752 of the Nevada Revised Statutes allows a corporation to purchase and maintain insurance or make other financial arrangements on behalf of any person who is or was a director, officer, employee or agent of the corporation or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise for any liability asserted against him and liability and expenses incurred by him in his capacity as a director, officer, employee or agent, or arising out of his status as such, whether or not the corporation has the authority to indemnify him against such liability and expenses.
II-1
Other financial arrangements made by a corporation pursuant to Section 78.752 may include the following:
(a)
the creation of a trust fund;
(b)
the establishment of a program of self-insurance;
(c)
the securing of its obligation of indemnification by granting a security interest or other lien on any assets of the corporation; and
(d)
the establishment of a letter of credit, guaranty or surety.
No financial arrangement made pursuant to Section 78.752 may provide protection for a person adjudged by a court of competent jurisdiction, after exhaustion of all appeals, to be liable for intentional misconduct, fraud or a knowing violation of law, except with respect to the advancement of expenses or indemnification ordered by a court.
Any discretionary indemnification pursuant to NRS 78.7502, unless ordered by a court or advanced pursuant to an undertaking to repay the amount if it is determined by a court that the indemnified party is not entitled to be indemnified by the corporation, may be made by the corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances. The determination must be made:
(a)
by the stockholders;
(b)
by the board of directors by majority vote of a quorum consisting of directors who were not parties to the action, suit or proceeding;
(c)
if a majority vote of a quorum consisting of directors who were not parties to the action, suit or proceeding so orders, by independent legal counsel in a written opinion, or
(d)
if a quorum consisting of directors who were not parties to the action, suit or proceeding cannot be obtained, by independent legal counsel in a written opinion.
Under our Articles of Incorporation, our directors are not liable for monetary damages for breach of fiduciary duty, except in connection with (i) acts or omissions that involve intentional misconduct by the director or a knowing violation of law by the director, (ii) conduct violating the Nevada Revised Statutes, or (iii) any transaction from which the director will personally receive a benefit in money, property or services to which the director is not legally entitled
Our Articles of Incorporation and bylaws require us to indemnify our directors against reasonable expenses incurred by the individual in advance of final disposition of the proceeding, without regard to the limitations in Nevada Revised Statute 78.7502, or any other limitation that may hereafter be enacted, to the extent such limitation may be disregarded if authorized by the Articles of Incorporation, to the full extent and under all circumstances permitted by applicable law.
RECENT SALES OF UNREGISTERED SECURITIES
From January 1, 2013 through the date of filing this registration statement, we sold or issued the following securities not registered under the Securities Act. Except as stated below, no underwriting discounts or commissions were payable with respect to any of the following transactions.
On November 27, 2013, we transferred to Mark Ogram and the Rod Living Trust, our Chief Executive Officer and a Director an aggregate of 1,424,075 shares of common stock, having a value of approximately $0.38 per share. The shares of common stock were issued as part of the consideration for a full and final settlement of a legal action brought by Mark Ogram and the Rod Living Trust related to our acquisition of Net MoneyIn in 2011.
During the twelve months ended December 31, 2013, we issued to accredited investors a total of 6,331,250 shares of common stock at a price of $0.50 per share for total cash proceeds of $3,165,625.
II-2
During the year ended December 31, 2013, we issued a total of 1,533,499 shares of common stock to various individuals and companies for consulting services valued at $769,677.
During the year ended December 31, 2013, we issued 898,952 shares of our common stock to our legal counsel as payment for accrued legal fees in the amount of $449,476.
During the year ended December 31, 2013, we authorized the issuance of 121,000 shares of common stock having a value of $0.50 per share to our Chief Executive Officer as compensation for his services.
In accordance with the terms and conditions of the MeNetwork acquisition which was completed on March 20, 2013, we authorized the issuance of 3,500,000 shares of our common stock having a value of $1.79 per share. 2,750,000 of the shares were issued to the stockholders of MeNetwork and 750,000 of the shares were issued to Ashton Craig Page, our director.
On January 3, 2014, the Company acquired substantially all of the assets of Y Dissolution, Inc. (formerly Yowza International, Inc.). In conjunction with the acquisition, we issued 1,642,000 shares of our common stock to the holders of Y Dissolution, Inc.s outstanding capital stock, and certain executive management members and advisors of Y Dissolution, Inc.
From January 1, 2014 through the date of this registration statement, we have issued an aggregate of 3,105,000 shares of common stock for an aggregate purchase price of $1,552,500.
From July 1, 2014 until September 30, 2014, we entered into Securities Purchase Agreements (the SPAs) with seven (7) accredited investors relating to the issuance and sale of the Companys common stock in a private placement, which terminated on September 30, 2014 (the Private Offering). The Company sold 685,000 shares of common stock at $0.50 per share, for an aggregate purchase price of approximately $342,500 with net proceeds to the Company of $342,500.
On December 12, 2014, the Company, and Ashton Craig Page, in his capacity as the representative of MeNework and the MeNetwork stockholders (the Representative), entered into an Amendment and Waiver to Asset Purchase Agreement (the "Amendment), pursuant to which the Company agreed to issue and the Representative agreed to accept on behalf of MeNetwork and the MeNet stockholders an acceleration of the issuance of up to an aggregate of 1,000,000 shares of common stock (Earnout Shares) on or before December 31, 2014 in full satisfaction of all obligations of the Company to issue the earnout shares pursuant to the Purchase Agreement during the Earnout Period (as defined in the MeNetwork Agreement). The Company relied on Rule 506 of Regulation D under the Securities Act of 1933, as amended, for the offer and sale of the Earnout Shares to the MeNet Stockholders, inasmuch as (i) the MeNet Stockholders were either accredited investors or sophisticated investors that received information about the Company that was generally the same as information required to be delivered in a registered offering; and (ii) the Company did not use general solicitation or advertising to market the securities issued.
As discussed in the sections of this registration statement titled Executive Compensation and Certain Relationships and Related Transactions, and Director Independence, we have issued common stock and options to purchase common stock to our officers and directors. We relied on Rule 701 promulgated under the Securities Act of 1933 and/or Section 4(a)(2) of the Securities Act to issue these securities.
Unless otherwise specified above, we believe that all of the above transactions were transactions not involving any public offering within the meaning of Section 4(a)(2) of the Securities Act, since (a) each of the transactions involved the offering of such securities to a substantially limited number of persons; (b) each person took the securities as an investment for his/her/its own account and not with a view to distribution; (c) each person had access to information equivalent to that which would be included in a registration statement on the applicable form under the Securities Act; and (d) each person had knowledge and experience in business and financial matters to understand the merits and risk of the investment.
II-3
EXHIBITS
Exhibit No. |
Description |
|
|
2.1 |
Asset Purchase Agreements, dated December 2, 2011, by and by and between Coyote Hills Golf, Inc., a Nevada corporation, Spindle Mobile, Inc., Mitch Powers, Stephanie Erickson, and Kamiar Khatami (2) |
2.2 |
Addendum No. 1 to Asset Purchase Agreement entered into on March 29, 2012 between Spindle, Inc., Spindle Mobile, Inc., Mitch Powers, Stephanie Erickson and Kamiar Khatami (3) |
3.1 |
Articles of Incorporation, as amended (1) |
3.2 |
Bylaws (1) |
4.1 |
Specimen Common Stock Certificate of the Company* |
5.1 |
Legal Opinion of Richardson & Patel LLP* |
10.1 |
Asset Purchase Agreement entered into on December 31, 2012 between Spindle, Inc. and Parallel Solutions Inc. (1) |
10.2 |
Asset Purchase Agreement entered into on March 1, 2013 between Spindle, Inc. and MeNetwork, Inc. (4) |
10.3*** |
Amendment and Waiver to Asset Purchase Agreement entered into on December 12, 2014 between Spindle, Inc. and Ashton Craig Page* |
10.4 |
Asset Purchase Agreement entered into on December 10, 2013 between Spindle, Inc. and Y Dissolution, Inc. (formerly Yowza International, Inc.) (1) |
10.5 |
Spindle, Inc. 2012 Stock Incentive Plan (1) |
10.6 |
Form of Subscription Agreement in Private Offering* |
10.7 |
Form of Securities Purchase Agreement in Private Offering* |
10.8 |
Consulting Services Agreement by and between Spindle, Inc. and David Ide* |
10.9 |
Consulting Services Agreement by and between Spindle, Inc. and Glenn Bancroft* |
10.10 |
Offer Letter by and between Spindle, Inc. and Christopher Meinerz* |
16.1 |
Letter from L.L. Bradford & Company LLC (6) |
21.1 |
List of subsidiaries of Spindle, Inc.* |
23.1 |
Consent of L.L. Bradford & Company* |
23.2 |
Consent of Richardson & Patel LLP (included in exhibit 5.1)* |
101.INS |
XBRL Instance** |
101.SCH |
XBRL Taxonomy Extension Schema** |
101.CAL |
XBRL Taxonomy Extension Calculation** |
101.DEF |
XBRL Taxonomy Extension Definition** |
101.LAB |
XBRL Taxonomy Extension Labels** |
101.PRE |
XBRL Taxonomy Extension Presentation** |
*Filed herewith.
**XBRL information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
*** Schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company will furnish supplemental copies of any omitted schedules as exhibits to the SEC upon request.
(1) Incorporated by reference to the registrants Form 10 Registration Statement filed with the Securities and Exchange Commission on February 25, 2014.
(2) Incorporated by reference to the Current Report on Form 8-K filed by the registrant with the Securities and Exchange Commission on December 6, 2011.
(3) Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 2011 filed by the registrant with the Securities and Exchange Commission on March 30, 2012.
(4) Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended March 30, 2013 filed by the registrant with the Securities and Exchange Commission on September 3, 2013.
(5) Incorporated by reference to the Current Report on Form 8-K/A filed by the registrant with the Securities and Exchange Commission on March 21, 2014.
(6) Incorporated by reference to the Current Report on Form 8-K filed by the registrant with the Securities and Exchange Commission on January 26, 2015.
II-4
UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement to:
(i) To include any prospectus required by Section 10(a)(3) of the Securities Act.
(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Securities and Exchange Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the Calculation of Registration Fee table in the effective registration statement; and
(iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;
(2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to securities offered therein, and the offering of the securities at that time shall be deemed to be the initial bona fide offering thereof;
(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering;
(4) That, for the purpose of determining liability under the Securities Act to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
II-5
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Scottsdale, State of Arizona on the 3rd day of February, 2015.
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SPINDLE, INC. |
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A Nevada corporation |
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By: |
/s/ William Clark |
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William Clark, President and Chief Executive Officer (Principal Executive Officer) |
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By: |
s/ Christopher J. Meinerz |
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Christopher J. Meinerz, Chief Financial Officer |
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(Principal Financial and Accounting Officer) |
Each person whose signature appears below constitutes and appoints William Clark and Christopher Meinerz as his or her true and lawful attorneys-in-fact and agents, each acting alone, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any or all amendments to the Registration Statement, and all pre-effective and post-effective amendments thereto, and to file the same, with all exhibits thereto, and all documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, each acting alone, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities indicated below on the dates indicated.
Dated: February 3, 2015 |
/s/ William Clark |
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William Clark, President, Chief Executive Officer, Director |
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Dated: February 3, 2015 |
/s/ Christopher J. Meinerz |
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Christopher J. Meinzer, Chief Financial Officer, Chief Compliance Officer, Director |
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Dated: February 3, 2015 |
/s/ Tony Van Brackle |
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Tony Van Brackle, Director |
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Dated: February 3, 2015 |
/s/ John Devlin |
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John Devlin, Director |
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Dated: February 3, 2015 |
/s/ Jack Scott |
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Jack Scott, Director |
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Dated: February 3, 2015 |
/s/ Glenn Bancroft |
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Glenn Bancroft, Director |
II-6
February 3, 2015
VIA EMAIL
Spindle, Inc.
8700 E. Vista Bonita Drive, Suite 260
Scottsdale, Arizona 85255
Gentlemen:
We have acted as counsel to Spindle, Inc., a Nevada corporation (the Company ), in connection with the preparation and filing with the Securities and Exchange Commission (the Commission ) on February 3, 2015 under the Securities Act of 1933, as amended (the Securities Act ), of the Companys registration statement on Form S-1 (the Registration Statement ) relating to the registration of 4,034,314 shares of common stock of the Company, par value $0.001 per share ( Common Stock ), that may be offered for sale from time to time by the selling stockholders named therein (the Selling Stockholders ) that have been issued to the Selling Stockholders (the Shares ). This opinion is delivered pursuant to the requirements of Item 601(b)(5) of Regulation S-K under the Securities Act.
As your counsel in connection with this opinion, we have examined such corporate records, documents, and instruments of the Company and reviewed such questions of law as we have deemed necessary for the purpose of rendering the opinions set forth herein and we have examined the proceedings proposed to be taken by the Company relating to the issuance and sale by the Company of the Shares. We have also examined the Registration Statement as filed with the Commission in accordance with the provisions of the Securities Act, and the rules and regulations of the Commission thereunder.
We have examined such documents and considered such legal matters as we have deemed necessary and relevant as the basis for the opinion set forth below. With respect to such examination, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as reproduced or certified copies, and the authenticity of the originals of those latter documents. As to questions of fact material to this opinion, we have, to the extent deemed appropriate, relied upon certain representations of certain officers and employees of the Company.
Based upon the foregoing, and subject to the limitations, qualifications, exceptions, and assumptions expressed herein, we are of the opinion that the Shares are validly issued, fully paid, and non-assessable.
This opinion is given as of the date hereof and we have no obligation to update this opinion to take into account any change in applicable law or facts that may occur after the date hereof.
The opinions expressed herein are limited to the general corporate laws of the State of Nevada, and Federal law of the United States of America, including the statutory provisions, and applicable provisions of the Nevada Constitution, Nevada Revised Statutes, and the reported judicial decisions interpreting those laws and to Federal law of the United States of America currently in effect.
We hereby consent to the use of this opinion as an exhibit to the Registration Statement, to the use of our name as your counsel, and to all references made to us in the Registration Statement and in the prospectus forming a part thereof. In giving this consent, we do not hereby admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act, or the rules and regulations promulgated thereunder. This opinion is given as of the effective date of the Registration Statement, and we are under no duty to update the opinions contained herein.
Very truly yours,
/s/ RICHARDSON & PATEL LLP
RICHARDSON & PATEL LLP
KF/BB
AMENDMENT AND WAIVER TO ASSET PURCHASE AGREEMENT
THIS AMENDMENT AND WAIVER TO ASSET PURCHASE AGREEMENT (this Amendment ), dated as of December 12, 2014, is entered in to by and between SPINDLE, INC., a Nevada corporation ( Buyer ), and Ashton Craig Page, representative of MeNetwork, Inc., a Delaware corporation (the Seller) and the Seller Stockholders (the Representative ). Terms used herein without definition shall have the meanings ascribed to them in the Asset Purchase Agreement (defined below).
RECITALS
WHEREAS , Buyer and Seller are parties to that certain Asset Purchase Agreement, dated as of March 1, 2013 (as amended, modified and supplemented from time to time, the Asset Purchase Agreement ), pursuant to which Buyer agreed to purchase the Assets of the Business of Seller in exchange for the Aggregate Share Consideration and the Assumed Liabilities;
WHEREAS , in accordance with Section 2.3(e) of the Asset Purchase Agreement, the Buyer and the Seller agreed that following the Closing, all rights of the Seller with respect to the Earnout would be exercised and administered by the Representative on behalf of the Seller and in accordance with Section 10.1 of the Asset Purchase Agreement, the Representative was appointed to serve as representative of the Seller Stockholders;
WHEREAS , since the Closing, the Buyer has determined that certain Assets acquired pursuant to the Asset Purchase Agreement are incompatible with the Buyers products and has determined to cease use of such Assets and as a result there is no opportunity for the Performance Target Thresholds required in connection with any Earnout payments to be satisfied (the Product Sunset ); and
WHEREAS , in full satisfaction of any shares of common stock issuable or other amounts payable in connection with the Earnout as set forth in Section 2.3(c) of the Asset Purchase Agreement, the Buyer has agreed to accelerate and issue and the Representative has agreed to accept, on behalf of the Seller and the Seller Stockholders, that portion of the Earnout up to an aggregate of 1,000,000 shares of restricted common stock of the Buyer (the Earnout Shares ) to be allocated pro-rata among the Seller Stockholders.
NOW, THEREFORE , in consideration of the foregoing and the mutual covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:
AGREEMENT
1.
Incorporation of Recitals . The recitals to this Amendment are an integral part of this Amendment and are hereby incorporated as a part of this Amendment as if set forth in it.
2.
Earnout Adjustment and Amendment . In consideration of the Product Sunset, on or before December 31, 2014, in lieu of any shares of common stock issuable or other amounts payable in connection with the Earnout as provided in accordance with Section 2.3(c) of the Asset Purchase Agreement, the Buyer hereby agrees to accelerate and issue and the Representative, on behalf of the Seller and the Seller Stockholders, agrees to accept, the Earnout Shares, to be issued and registered in the name of the Seller Stockholders in accordance with Schedule 1 attached hereto, in full satisfaction of Buyers obligations to Seller and the Seller stockholders in connection with the Earnout. Upon the execution and delivery of this Agreement, subject to the issuance of the Earnout Shares in accordance with this Section 2, Buyer and Seller agree that no further Earnout payments are due from Buyer to Seller pursuant to the Asset Purchase Agreement.
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3.
Waiver of All Claims to Earnout . The Representative, on behalf of the Seller and the Seller Stockholders, agrees that none of the Seller or Seller Stockholders are entitled to receive, will not claim and expressly waives any entitlement to any rights, benefits or compensation, including but not limited to any equity securities of the Company, related to the Earnout other than as expressly set forth in this Amendment.
4.
Waiver and Release by Seller Parties .
(a)
Release. The Representative, Seller and Seller Stockholders (the Seller Parties ) shall irrevocably and unconditionally release, remise and forever discharge Buyer, all of its past and present employees, officers, directors, stockholders, owners, representatives, assigns, attorneys, agents, insurers, employee benefit programs (and the trustees, administrators, fiduciaries and insurers of such programs) and any other persons acting by, through under or in concert with any of the persons or entities listed in this subsection from any and all of the Seller Parties Claims, described in subsection (b) of this Section 4, whether known or unknown, suspected or unsuspected, in law or in equity, under federal, state or other law which the Seller Parties now have, or hereafter can, shall or may have whatsoever. The Seller Parties understand the significance of this release of unknown claims and their respective waiver of any statutory protection against a release of unknown claims. The Seller Parties expressly waive the protection of any such governmental statutes or regulations.
(b)
Claims Released. The claims released include all claims, promises, debts, liabilities, damages, causes of action or similar rights of any type or nature which in any way relate to the incompatibility of the Assets with Buyers products (the Seller Parties Claims ).
(c)
Ownership of Claims. Seller Parties represent that none of Seller Parties have assigned or transferred, or purported to assign or transfer, all or any part of any Seller Parties Claims released by this Amendment.
5.
Seller Parties Promises .
(a)
In addition to the release of the Seller Parties Claims provided for in Section 4, the Seller Parties promise never to file or prosecute a lawsuit, administrative complaint or charge, or other complaint or charge asserting any claims that are released by this Amendment. Seller Parties represent that each has not filed or caused to be filed any lawsuit, complaint or charge with respect to any claim this Amendment releases. Seller Parties further agree to request any government agency or other body assuming jurisdiction of any complaint or charge relating to a released claim to withdraw from the matter or dismiss the matter with prejudice.
(b)
Seller Parties represent and warrant to Buyer that each has reviewed the terms of this Amendment with its respective board of directors or management, as applicable, and has obtained all consents necessary for this Amendment to be valid, binding and enforceable against Seller Parties in accordance with its terms. Seller Parties confirm that each is entering into this agreement voluntarily and without duress after full opportunity to consult with counsel of its choosing.
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6.
Waiver and Release by Buyer .
(a)
Release. Buyer on behalf of itself, all of its past and present employees, officers, directors, stockholders, owners, representatives, assigns, attorneys, agents, insurers, employee benefit programs (and the trustees, administrators, fiduciaries and insurers of such programs) and any other persons acting by, through, under or in concert with any of the persons or entities listed in this subsection (collectively, the Buyer Parties ) irrevocably and unconditionally release, remise and forever discharge the Seller Parties, including all of Seller Parties past and present employees, officers, directors, stockholders, owners, representatives, assigns, attorneys, agents, insurers, employee benefit programs (and the trustees, administrators, fiduciaries and insurers of such programs) and any other persons acting by, through under or in concert with any of the persons or entities listed in this subsection from any and all Buyer Parties Claims, described in subsection (b) of this Section 6, whether known or unknown, suspected or unsuspected, in law or in equity, under federal, state or other law which the Buyer Parties now have, or hereafter can, shall or may have whatsoever. The Buyer Parties understand the significance of this release of unknown claims and their respective waiver of any statutory protection against a release of unknown claims. The Buyer Parties expressly waive the protection of any such governmental statutes or regulations.
(b)
Claims Released. The claims released include all claims, promises, debts, liabilities, damages, causes of action or similar rights of any type or nature which in any way relate to the incompatibility of the Assets with Buyers products (the Buyer Parties Claims )
(c)
Ownership of Claims. The Buyer Parties represent that none of them has assigned or transferred, or purported to assign or transfer, all or any part of any Buyer Parties Claims released by this Agreement.
7.
The Buyer Parties Promises .
(a)
In addition to the release of Buyer Parties Claims provided for in Section 6, the Buyer Parties promise never to file or prosecute a lawsuit, administrative complaint or charge, or other complaint or charge asserting any claims that are released by this Amendment. The Buyer Parties represent that none of them has filed or caused to be filed any lawsuit, complaint or charge with respect to any claim this Amendment releases. The Buyer Parties further agree to request any government agency or other body assuming jurisdiction of any complaint or charge relating to a released claim to withdraw from the matter or dismiss the matter with prejudice.
(b)
Buyer represents and warrants to Seller and the Representative that it has reviewed the terms of this Amendment with its board of directors and has obtained all consents necessary for this Amendment to be valid, binding and enforceable against Buyer in accordance with its terms. Buyer confirms that it is entering into this agreement voluntarily and without duress after full opportunity to consult with counsel of its choosing.
8.
Consequences of Violation of Promises . If either party breaks any of the promises in this Amendment, such as, by way of example and not by way of limitation, by either party filing or prosecuting a lawsuit or charge based on claims that have been released, or if any representation made by a party in this Amendment was false when made, the party violating the promise will pay reasonable attorneys fees and all other costs incurred as a result of such breach or false representation, such as, by way of example and not by way of limitation, the innocent partys cost of defending any suit brought with respect to a claim released by him or it.
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9.
Effect of this Amendment . Except as amended and set forth above, the Asset Purchase Agreement shall continue in effect in accordance with its terms without modification.
10.
Choice of Law . The validity of this Amendment, the construction, interpretation, and enforcement hereof, and the rights of the parties hereto with respect to all matters arising hereunder or related hereto shall be determined under, governed by, and construed in accordance with the law of the State of Nevada without regard to conflicts-of-laws principles that would require the application of any other law. Any proceeding arising out of or relating to this Amendment may be brought in the state or federal courts located in the Borough of Manhattan, City of New York, New York and each of the parties irrevocably submits to the exclusive jurisdiction of each such court in any such proceeding, waives any objection it may now or hereafter have to venue or to convenience of forum, agrees that all claims in respect of the proceeding shall be heard and determined only in any such court and agrees not to bring any proceeding arising out of or relating to this Amendment in any other court.
11.
Counterparts . This Amendment may be executed in any number of counterparts and by different parties and separate counterparts, each of which when so executed and delivered, shall be deemed an original, and all of which, when taken together, shall constitute one and the same instrument. Delivery of an executed counterpart of a signature page to this Amendment by facsimile, pdf or other similar method of electronic transmission shall be effective as delivery of a manually executed counterpart of this Amendment.
12.
Entire Agreement . This Amendment, together with the Asset Purchase Agreement, and all exhibits and schedules attached hereto and thereto, constitute the entire agreement among the parties hereto pertaining to the subject matter hereof or thereof, and any and all other written or oral agreements existing among the parties hereto are expressly cancelled.
[Signature page follows.]
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IN WITNESS WHEREOF, the parties have entered into this Amendment as of the date first above written.
BUYER :
SPINDLE, INC.,
By: /s/ William Clark
Name: William Clark
Title: President
APPOINTED SELLER REPRESENTATIVE :
/s/ Ashton Craig Page
ASHTON CRAIG PAGE
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SUBSCRIPTION APPLICATION
(for Accredited Investors Only)
This Subscription Application is being delivered to you in connection with your investment in SPINDLE, INC., a Nevada corporation (the Company ). The Company is conducting a private placement offering (the Offering ) in accordance with that certain Private Placement Memorandum, dated July 15, 2014 (the Memorandum), of up to 1,000,000 shares (the Shares) of common stock, par value $0.001 per share, of the Company (the Common Stock ), on a best efforts basis, at a purchase price of $0.50 per share; provided, however, that the number of Shares offered may be increased to such higher number that may be approved or authorized by the Companys board of directors in its sole discretion. All funds received in the Offering, upon fulfillment of the conditions precedent set forth herein, shall be delivered to the Company, and thereafter the Shares subscribed for as further described below shall be delivered. The Company may continue to offer and sell the Shares and conduct additional closings for the sale of additional Shares after the initial closing until the termination of the Offering.
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Name of Co-Subscriber, if any |
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Address of Subscriber (1) |
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Address of Co-Subscriber (if different) (1) |
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Aggregate number of Shares subscribed to purchase (2) |
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Check enclosed (or wire transfer) in the amount of |
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PERSONAL AND CONFIDENTIAL
The undersigned (the Subscriber ) hereby makes an application to purchase from the Company, the number of Shares set forth above, pursuant to a Securities Purchase Agreement substantially in the form annexed hereto as Exhibit A (the Agreement ). The Subscriber understands and agrees that this Subscription Application to purchase the Shares is binding and irrevocable on the Subscribers part, and that acceptance by the Company shall be in its sole discretion and otherwise in accordance with the terms set forth in this Subscription Application and the Agreement (the Agreement, together with the exhibits, schedules and attachments thereto, this Subscription Application, and the Memorandum are sometimes referred to collectively herein as the Offering Materials ).
[ Subscriber Questionnaire Follows ]
1. CONFIDENTIAL SUBSCRIBER INFORMATION
_________________________________________________________________________________ Name of Subscriber |
_________________________________________________________________________________ If Subscriber is an Entity Provide Name Year Formed State of Formation |
_________________________________________________________________________________ Street Address City State Zip |
_________________________________________________________________________________ Subscriber SS# or EIN/TIN Work Phone Number Home Phone Number |
_________________________________________________________________________________ Subscribers Age Date of Birth |
_________________________________________________________________________________ Name in which Shares will be held (check one below)
[ ] Individually [ ] A married man(woman) as his(her) separate property [ ] Community property [ ] JTWROS [ ] Tenants in common [ ] Other (Describe): ________________________________ |
__________________________________________________________________________________ Aggregate Number of Shares Amount Invested ($) |
_________________________________________________________________________________ Subscribers Signature Date |
2.
SUBSCRIBERS ACCREDITED STATUS
(a) Accredited Investor (Regulation D) . The Subscriber is an Accredited Investor as that term is defined in Rule 501 of Regulation D promulgated under the Securities Act of 1933, as amended (the Securities Act ), as follows:
(b) Individuals . (Check all that apply)
[ ] The Subscribers individual net worth* or combined net worth* with his or her spouse, excluding the net value of such persons or married couples primary residence, exceeds $1,000,000;
[ ] The Subscribers individual income,** exclusive of any income attributable to his or her spouse, was in excess of $200,000 for the two most recent calendar years preceding the calendar year of this Subscription Application, and the Subscriber reasonably expects an income,** exclusive of any income attributable to his or her spouse, in excess of $200,000 in the current calendar year; and/or the Subscribers combined income** with his or her spouse was in excess of $300,000 for the two most recent calendar years preceding the calendar year of this Subscription Application and the Subscriber and his or her spouse reasonably expect a combined income** in excess of $300,000 in the current calendar year.
* For purposes of this Subparagraph, the term net worth means the excess of total value over total liabilities.
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CONFIDENTIAL
** The Subscriber may determine income by adding to his, her or its adjusted gross income any amounts attributable to tax exempt income received, losses claimed as a limited partner in any limited partnership, deductions or claims for depletion, contributions to an IRA or Keogh retirement plan, alimony payments and any amount by which income from long-term capital gains has been reduced in arriving at adjusted gross income.
(c) Entities . (Check all that apply)
[ ] Entity With Value Exceeding $5 Million . The Subscriber is a corporation, partnership (general or limited), limited liability company, limited liability partnership or Massachusetts or similar business trust which: (1) was not formed for the specific purpose of acquiring the Shares, and (2) has total assets in excess of $5,000,000.
[ ] Entity Comprised of Accredited Investors . The Subscriber is a corporation, partnership (general or limited), limited liability company, limited liability partnership or Massachusetts or similar business trust in which all of the Subscribers equity owners are Accredited Investors.
[ ] Revocable Trust . The Subscriber is a revocable trust (also commonly known as a family or living trust) established to facilitate the distribution of the estate of the settlors (grantors): (1) which may be revoked or amended at any time by the settlors (grantors); (2) which passes all tax benefits of investments made by such trust through to the settlors (grantors) individually; and (3) in which all of the settlors (grantors) are Accredited Investors.
[ ] Trust Whose Assets Exceed $5 Million . The Subscriber is a trust that has total assets in excess of $5,000,000, and the person making the investment decision on behalf of the trust has such knowledge and experience in financial and business matters that such person is capable of evaluating the merits and risks of an investment in the Shares.
[ ] Financial Institution as Trustee . The Subscriber is a financial institution which: (1) is a bank, savings and loan association, or other regulated financial institution; (2) is acting in its fiduciary capacity as trustee; and (3) is subscribing for the purchase of the Shares on behalf of the subscribing trust.
[ ] Employee Benefit Plan (including Keogh Plan) With Self-Directed Investments and Segregated Accounts . The Subscriber is an employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974, as amended ( ERISA ), and: (1) such plan is self-directed and provides for segregated accounts; (2) the investment decision to purchase the Shares is being made by a plan participant who is an Accredited Investor; and (3) the investment in the Shares is being made solely on behalf of such Accredited Investor.
[ ] Employee Benefit Plan (including Keogh Plan) With Financial Institution As Trustee . The Subscriber is an employee benefit plan within the meaning of ERISA, and the decision to invest in the Shares was made by a plan fiduciary (as defined in Section 3(21) of ERISA), which is either a bank, savings and loan association, insurance company, or registered investment adviser.
[ ] Employee Benefit Plan (including Keogh Plan) With Assets Exceeding $5 Million . The Subscriber is an employee benefit plan within the meaning of ERISA and has total assets in excess of $5,000,000.
[ ] Tax Exempt 501(c)(3) Organization . The Subscriber is an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended, which organization was not formed for the specific purpose of acquiring the Shares, and which organization has total assets in excess of $5,000,000.
[ ] Bank . The Subscriber is a bank as defined in Section 3(a)(2) of the Securities Act.
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CONFIDENTIAL
[ ] Savings and Loan Association . The Subscriber is a savings and loan association or other institution as defined in Section 3(a)(5)(i) of the Securities Act.
[ ] Insurance Company . The Subscriber is an insurance company as defined in Section 2(14) of the Securities Act.
[ ] Investment Company . The Subscriber is an investment company registered under the Investment Company Act of 1940.
[ ] Business Development Company . The Subscriber is a business development company as defined in Section 2(a)(48) of the Investment Company Act of 1940.
[ ] Small Business Investment Company . The Subscriber is a small business investment company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958.
[ ] Private Business Development Company . The Subscriber is a private business development company as defined in Section 202(a)(22) of the Investment Advisors Act of 1940.
[ ] Registered Broker or Dealer . The Subscriber is a broker or dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934.
3. REPRESENTATIONS AND WARRANTIES OF SUBSCRIBER
The Subscriber and, if the Subscriber is an entity, each of its officers, directors, partners, managers, members, trustees, beneficial owners, principals and/or agents, hereby represents and warrants to the Company, each of which is deemed to be a separate representation and warranty, as follows:
(a) Residence . The Subscribers permanent legal residence and domicile, if the Subscriber is an individual, or permanent legal executive offices and principal place of business, if the Subscriber is an entity, was and is at the address designated on the cover page of this Subscription Application at both the time of the offer and the time of the sale of the Shares to the Subscriber.
(b) Age . The Subscriber, if a natural person, is age twenty-one (21) or over.
(c) Investment Knowledge and Experience; Sophistication (Regulation D; Blue Sky) . The Subscriber (together with his, her and/or its Advisors (as defined in subsection (f) below)) has such knowledge and experience in business, financial and tax matters including, in particular, investing in private placements of securities in companies similar to the Company, so as to enable the Subscriber to utilize the information made available in connection with this offering to: (i) evaluate the merits and risks of an investment in the Company and to make an informed investment decision with respect thereto; and (ii) to reasonably be assumed to have the capacity to protect the Subscribers own interests in connection with the transaction contemplated by this Subscription Application.
(d) Minimum Net Worth (Blue Sky) . An investment in the Shares will not exceed ten percent (10%) of the Subscribers net worth if the Subscriber is an entity, or joint net worth with his or her spouse if the Subscriber is a natural person.
(e) Receipt and Review of Offering Materials and Company Information . The Subscriber: (i) has received the Offering Materials; and (ii) has read each of the Offering Materials in its entirety and fully understands the matters discussed therein and the terms of thereof.
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(f) Independent Review of Investment Merits; Due Diligence . During the course of the transactions contemplated by this offering, and before purchasing the Shares: (i) the Subscriber had the opportunity to engage such investment professionals and advisors including, without limitation, accountants, appraisers, investment, tax and legal advisors (collectively, the Advisors ), each of whom are independent of the Company and its advisors and agents (including its legal counsel) to: (1) review the terms and conditions of this Subscription Application, the Agreement, and the information and disclosures contained herein and therein; (2) conduct such due diligence review as the Subscriber and/or such Advisors deemed necessary or advisable, and (3) to provide such opinions as to (A) the investment merits of a proposed investment in the Shares; (B) the tax consequences of the purchase of the Shares and the subsequent disposition of all or any portion of the Shares; and (C) the effect of same upon the Subscribers personal financial circumstances, as the Subscriber and/or such Advisors may deem advisable; and (ii) to the extent the Subscriber availed himself, herself or itself of this opportunity, received satisfactory information and answers from such Advisors.
(g) Opportunity to Ask Questions and to Review Documents, Books and Records; Opportunity to Meet with Representatives of the Company; Full Satisfaction . Without limiting the generality of subsections (e) and (f) above, during the course of the transaction contemplated by this Subscription Application, and before purchasing the Shares, the Subscriber and/or his, her or its Advisors had the opportunity, to the extent they determined to be necessary or relevant in order to verify the accuracy of the information contained in the Offering Materials and/or to evaluate the merits of an investment in the Shares: (i) to be provided with financial and other written information about the Company (in addition to that contained in the Offering Materials) to the extent the Company has such information in its possession or could acquire it without unreasonable effort or expense; (ii) to meet with representatives of the Company and to ask questions and receive answers concerning the terms and conditions of the Offering Materials, an investment in the Shares, and the business of the Company and its finances; (iii) to review all documents, books and records of the Company, including the public filings of the Company; and (iv) to the extent the Subscriber and/or his, her or its Advisors availed themselves of this opportunity, received satisfactory information and answers.
(h) Acceptance of Investment Risks . The Subscriber understands and acknowledges that: (i) an investment in the Shares: (1) is a speculative investment with a high degree of risk of loss and the Subscriber must, therefore, be able to presently afford a complete loss of this investment; (2) the Subscriber must be able to hold the Shares indefinitely ; and (3) it may not be possible for the Subscriber to liquidate the Shares in the case of emergency and/or other need and the Subscriber must, therefore, have adequate means of providing for the Subscribers current and future needs and personal contingencies, and have no need for liquidity in this investment; and (ii) the Subscriber has evaluated the Subscribers financial resources and investment position in view of the foregoing, and is able to bear the economic risk of an investment in the Shares.
(i) Shares Purchased For Subscribers Own Account . The Subscriber is purchasing the Shares: (i) as principal and not by any other person or entity; (ii) with the Subscribers own funds and not with the funds of any other person or entity; and (iii) for the account of the Subscriber, and not as a nominee or agent and not for the account or benefit of any other person or entity. The Subscriber is purchasing the Shares for investment purposes only for an indefinite period, and not with a view to the sale or distribution of any part or all thereof, by public or private sale or other disposition. No person or entity other than the Subscriber will have any interest, beneficial or otherwise, in the Shares, and the Subscriber is not obligated to transfer the Shares to any other person or entity, nor does the Subscriber have any agreement or understanding to do so. The Subscriber understands that (1) the Shares may not be sold, hypothecated, pledged, transferred, assigned or disposed of except in accordance with the substantial restrictions on transfer described herein or that otherwise apply to the Shares, and (2) the Company is relying, in material part, upon the Subscribers representations as set forth in the Agreement and herein for purposes of claiming the Federal Exemptions or Blue Sky Exemptions (as those are defined in subsection (l) below), and that the basis for such exemptions may not be presented if, notwithstanding the Subscribers representations, the Subscriber has in mind merely acquiring the Shares for resale of all or a portion of the Shares upon the occurrence or nonoccurrence of some predetermined event, and the Subscriber has no such intention.
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(j) Compliance With Investment Laws . The Subscriber has complied with all applicable investment laws and regulations in force relating to the legality of an investment in the Shares by the Subscriber in any jurisdiction in which he, she or it purchases the Shares or is otherwise subject, and has obtained any consent, approval or permission required of him, her or it for the purchase of the Shares under such investment laws and regulations.
(k) Unregistered Shares . The Subscriber understands and acknowledges that: (i) the Shares have not been, and when issued will not be, registered with the Securities and Exchange Commission (the Commission ) under Section 5 of the Securities Act in reliance upon one or more exemptions afforded by the Securities Act and/or rules promulgated by the Commission pursuant thereto which may be selected by the Company in its sole discretion including, without limitation (collectively and severally, the Federal Exemptions ): (1) Section 4(2) of the Securities Act for private offerings; and (2) Rule 506 of Regulation D promulgated under Section 4(2) of the Securities Act for private offerings; and (ii) the Shares have not been, and when issued will not be, registered or qualified with any applicable state or territorial securities regulatory agency in reliance upon one or more exemptions afforded from registration or qualification afforded under the securities laws of such state or territory (the Blue Sky Laws ) which exemptions may be selected by the Company in its sole discretion (collectively and severally, the Blue Sky Exemptions ).
(l) Resale Restrictions On Shares Pursuant to Securities Laws . The Subscriber understands and acknowledges that: (i) should the Company elect to rely upon the exemptions afforded by Rule 506 under Regulation D, the Shares will be classified, pursuant to Rule 502(d) of Regulation D of the Securities Act, as restricted securities acquired in a transaction under Section 4(2) of the Securities Act, which cannot be sold without registration under the Securities Act or an exemption therefrom such as, by way of example and not limitation: (1) Section 4(1) of the Securities Act; (2) the so-called Section 4(1½) Exemption to the Securities Act which, pursuant to Section 4(1) of the Securities Act, exempts from the provisions of the Securities Act requiring the registration of securities certain private sales which are effectuated in a manner similar to private placements by issuers under Section 4(2) of the Securities Act; and (3) Rule 144 and/or Rule 144A of the Securities Act; (ii) if the Subscriber is an Affiliate of the Company (as such term is defined below), he, she or it generally will not be able to sell, transfer, assign, or otherwise dispose of the Shares except under Rule 144; (iii) the Shares will also be subject to applicable state securities laws that may require registration or qualification of the Shares in connection with their resale, unless an exemption from such registration or qualification is available. In general, an Affiliate is defined as a person who is a director or officer of a company, or who directly or indirectly controls a company. As a rule of thumb, ownership of 10% or more of a companys voting stock generally will be deemed to constitute control, while ownership of less than 5% of a companys voting stock will generally not be deemed to constitute control. In general, assuming that the Company is current in filing reports with the Commission and that the Subscriber is not an Affiliate, a minimum of six (6) months must elapse following the purchase of the Shares before the Subscriber may re-sell the Shares under Rule 144 of the Securities Act. As a result of the Companys prior status as a shell company, stockholders who receive our restricted securities will not be able to sell them pursuant to Rule 144 without registration until at least one year has elapsed from the time that the issuer filed current comprehensive disclosure with the Commission reflecting its status as an entity that is not a shell company, including audited financial statements (Form 10 Information) with the Commission (the One Year Anniversary Date); provided, that the Company is subject to the reporting requirements of Sections 13 or 15(d) of the Exchange Act and if and for so long as we have complied with our reporting requirements in the 12 months immediately prior to the One Year Anniversary Date. While the Company believes the equivalent of Form 10 Information was filed with the Commission on August 6, 2013, while the Company was a voluntary reporter, in the Amendment No. 1 to the Companys Form 10-K for the fiscal year ended December 31, 2011, the Company has not received any assurances that Exchange Act reports filed while the Company was a voluntary reporter, and not subject to the Exchange Act reporting requirements, will satisfy the conditions of Rule 144 for prior shell companies. As a result, the Company can only provide assurances that its securities will be eligible for resale pursuant to the exemption from registration under Rule 144 on April 28, 2015, without objection from the Commission; provided that, the Company is current in its reporting obligations at the time of any individual sale.
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(m) Satisfaction of Counsel of Company As to Transfers of Shares . The Subscriber understands and acknowledges that: (i) prior to any sale, transfer, assignment, pledge, hypothecation or other disposition of the Shares in accordance with the terms and conditions of the Agreement, the Subscriber must either: (1) furnish the Company with a detailed explanation of the circumstances surrounding the proposed disposition; furnish the Company with an opinion of legal counsel (which may be the Companys), in form and substance reasonably satisfactory to the Company and its legal counsel, to the effect that such disposition is exempted from the registration and prospectus delivery requirements under the Securities Act and the securities laws of the state in which the Subscriber is then resident; and legal counsel for the Company shall have concurred in such opinion and the Company shall have advised the Subscriber of such concurrence; or (2) satisfy the Company that an appropriate form of registration statement under the Securities Act with respect to the Shares proposed to be so disposed of shall then be effective, and that such disposition shall have been appropriately qualified or registered in accordance with the applicable Blue Sky Laws; and (ii) notwithstanding the foregoing, if in the opinion of counsel for the Company, the Subscriber has acted in a manner inconsistent with the representations and warranties in this Subscription Application or the Agreement, the Company may refuse to transfer the Shares until such time as counsel for the Company is of the opinion that such transfer: (1) will not require registration of the Shares under the Securities Act, and registration or qualification of the Shares under the applicable Blue Sky Laws; or (2) will otherwise comply with the Securities Act or the applicable Blue Sky Laws with respect to the sale or transfer of the Shares. The Subscriber understands and agrees that the Company may refuse to acknowledge or permit any disposition of any portion of the Shares that is not in all respects in compliance with this Subscription Application, and the Company intends to make an appropriate notation in its records to that effect.
(n) Legend on Certificates to Comply with Securities Laws . The Subscriber understands and agrees that the certificate representing the Shares of Common Stock, when issued, shall each bear such restrictive legend as the Company may deem reasonably necessary or advisable to facilitate compliance with the Securities Act and the securities laws of the state or territory of the Subscribers residence, including, without limitation, substantially the following legend:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION (THE COMMISSION) UNDER SECTION 5 OF THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE SECURITIES ACT), IN RELIANCE UPON ONE OR MORE EXEMPTIONS FROM REGISTRATION OR QUALIFICATION AFFORDED BY THE SECURITIES ACT AND/OR RULES PROMULGATED BY THE COMMISSION PURSUANT THERETO. THE SECURITIES REPRESENTED HEREBY HAVE ALSO NOT BEEN REGISTERED OR QUALIFIED (AS THE CASE MAY BE) UNDER THE SECURITIES LAWS OF ANY STATE OR TERRITORY OF THE UNITED STATES (THE BLUE SKY LAWS), IN RELIANCE UPON ONE OR MORE EXEMPTIONS FROM REGISTRATION OR QUALIFICATION (AS THE CASE MAY BE) AFFORDED UNDER SUCH SECURITIES LAWS. NEITHER THE COMMISSION NOR ANY SECURITIES REGULATORY AGENCY OF ANY STATE OR TERRITORY OF THE UNITED STATES HAS REVIEWED OR PASSED UPON OR ENDORSED THE MERITS OF THE OFFERING CONTEMPLATED HEREBY, AND ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THESE SECURITIES HAVE BEEN ACQUIRED FOR THE HOLDERS OWN ACCOUNT FOR INVESTMENT PURPOSES ONLY AND NOT WITH A VIEW FOR RESALE OR DISTRIBUTION.
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THESE SECURITIES ARE RESTRICTED SECURITIES WITHIN THE MEANING OF RULE 144 PROMULGATED UNDER THE SECURITIES ACT. THESE SECURITIES MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED, OR OFFERED FOR SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION, WITHIN THE UNITED STATES OR ANY OF ITS TERRITORIES OR TO A UNITED STATES PERSON, UNLESS: (i) THE SECURITIES ARE REGISTERED PURSUANT TO SECTION 5 OF THE SECURITIES ACT AND/OR REGISTERED OR QUALIFIED PURSUANT TO ANY APPLICABLE BLUE SKY LAWS; OR (ii) THE PROPOSED TRANSACTION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF THE SECURITIES ACT AND THE REGISTRATION AND QUALIFICATION PROVISIONS OF ANY APPLICABLE BLUE SKY LAWS. AS A RESULT, THESE SECURITIES ARE SUITABLE ONLY FOR CERTAIN SOPHISTICATED AND QUALIFIED INVESTORS WHO CAN BEAR THE FINANCIAL RISK OF AN INVESTMENT IN THESE SECURITIES FOR AN INDEFINITE PERIOD OF TIME.
(o) Completeness and Accuracy of Information . All information which the Subscriber has heretofore furnished or furnishes herewith to the Company or its agents is complete and accurate and may be relied upon by the Company in determining the availability of an exemption from registration under federal and state securities laws in connection with the offer and sale of the Shares to the Subscriber in particular.
(p) Material Changes in Information . The Subscriber will notify and supply corrective information to the Company immediately upon the occurrence of any material change(s) in any information provided by the Subscriber to the Company occurring prior to the Closing, (as defined in the Agreement), of the purchase by the Subscriber of the Shares.
(q) Cooperation . Within five (5) days after receipt of a request from the Company, the Subscriber will provide such information and deliver such documents as may reasonably be necessary to comply with any and all laws and ordinances to which the Company is subject.
(r) Offering Representations and Communications . No person has provided any information (other than the Offering Materials) or made any verbal or written representations or warranties to the Subscriber and/or his, her or its Advisors, if any, about the Company, the Shares or this offering, other than as stated in Section 3 of the Agreement.
(s) Reliance Upon Offering Materials and Information Provided . In evaluating the suitability of an investment in the Shares, the Subscriber has not relied upon, and agrees that he, she or it may not rely upon, any representation, warranty or other information (verbal or written) other than as stated in Section 3 of the Agreement.
(t) No Awareness of Public Advertising . The Subscriber is unaware of, is in no way relying on, and did not become aware of this offering, through or as a result of any form of public advertising including, without limitation, any advertisement, article, notice, leaflet or other communication (whether published in any newspaper, magazine, or similar media or broadcast over television, internet or radio, or otherwise generally disseminated or distributed).
(u) No General Solicitation . The Subscriber did not subscribe to purchase the Shares, or become aware of this offering, through or as the result of any public or promotional seminar or meeting to which the Subscriber was invited by, or any solicitation of a subscription by, a person not previously known to the Subscriber in connection with investments in securities generally.
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(v) Pre-Existing Relationship with Company . The Subscriber represents that he, she or it has a pre-existing personal or business relationship*** with the Company or any of its managers, officers or controlling persons.
*** The term pre-existing personal or business relationship includes any relationship consisting of personal or business contacts of a nature and duration which would enable a reasonably prudent purchaser to be aware of the character, business acumen and general business and financial circumstances of the person with whom the relationship exists.
(w) USA Patriot Act; Anti-Money Laundering . The Subscriber should check the Office of Foreign Assets Control (OFAC) website at <http://www.treas.gov/ofac> before making the following representations:
The Subscriber represents that the amounts invested by it in the Company in the Offering were not and are not directly or indirectly derived from activities that contravene federal, state or international laws and regulations, including anti-money laundering laws and regulations. Federal regulations and Executive Orders administered by OFAC prohibit, among other things, the engagement in transactions with, and the provision of services to, certain foreign countries, territories, entities and individuals. The lists of OFAC prohibited countries, territories, persons and entities can be found on the OFAC website at <http://www.treas.gov/ofac>. In addition, the programs administered by OFAC (the OFAC Programs) prohibit dealing with individuals[1] or entities in certain countries regardless of whether such individuals or entities appear on the OFAC lists;
To the best of the Subscribers knowledge, none of: (1) the Subscriber; (2) any person controlling or controlled by the Subscriber; (3) if the Subscriber is a privately-held entity, any person having a beneficial interest in the Subscriber; or (4) any person for whom the Subscriber is acting as agent or nominee in connection with this investment is a country, territory, individual or entity named on an OFAC list, or a person or entity prohibited under the OFAC Programs. Please be advised that the Company may not accept any amounts from a prospective investor if such prospective investor cannot make the representation set forth in the preceding paragraph. The Subscriber agrees to promptly notify the Company should the Subscriber become aware of any change in the information set forth in these representations. The Subscriber understands and acknowledges that, by law, the Company may be obligated to freeze the account of the Subscriber, either by prohibiting additional subscriptions from the Subscriber, declining any redemption requests and/or segregating the assets in the account in compliance with governmental regulations. The Subscriber further acknowledges that the Company may, by written notice to the Subscriber, suspend the redemption rights, if any, of the Subscriber if the Company reasonably deems it necessary to do so to comply with anti-money laundering regulations applicable to the Company or any of the Companys other service providers. These individuals include specially designated nationals, specially designated narcotics traffickers and other parties subject to OFAC sanctions and embargo programs;
To the best of the Subscribers knowledge, none of: (1) the Subscriber; (2) any person controlling or controlled by the Subscriber; (3) if the Subscriber is a privately-held entity, any person having a beneficial interest in the Subscriber; or (4) any person for whom the Subscriber is acting as agent or nominee in connection with this investment is a senior foreign political figure[2], or any immediate family[3] member or close associate[4] of a senior foreign political figure, as such terms are defined in the footnote below; and
____________
[1] These individuals include specially designated nationals, specially designated narcotics traffickers and other parties subject to OFAC sanctions and embargo programs.
[2] A senior foreign political figure is defined as a senior official in the executive, legislative, administrative, military or judicial branches of a foreign government (whether elected or not), a senior official of a major foreign political party, or a senior executive of a foreign government-owned corporation. In addition, a senior foreign political figure includes any corporation, business or other entity that has been formed by, or for the benefit of, a senior foreign political figure.
[3] Immediate family of a senior foreign political figure typically includes the figures parents, siblings, spouse, children and in-laws.
[4] A close associate of a senior foreign political figure is a person who is widely and publicly known to maintain an unusually close relationship with the senior foreign political figure, and includes a person who is in a position to conduct substantial domestic and international financial transactions on behalf of the senior foreign political figure.
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If the Subscriber is affiliated with a non-U.S. banking institution (a Foreign Bank ), or if the Subscriber receives deposits from, makes payments on behalf of, or handles other financial transactions related to a Foreign Bank, the Subscriber represents and warrants to the Company that: (1) the Foreign Bank has a fixed address, other than solely an electronic address, in a country in which the Foreign Bank is authorized to conduct banking activities; (2) the Foreign Bank maintains operating records related to its banking activities; (3) the Foreign Bank is subject to inspection by the banking authority that licensed the Foreign Bank to conduct banking activities; and (4) the Foreign Bank does not provide banking services to any other Foreign Bank that does not have a physical presence in any country and that is not a regulated affiliate.
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The Subscriber has executed and delivered this Subscription Application to Spindle, Inc. as of the date set forth below.
SUBSCRIBER:
By: ____________________________________
(Signature)
Name: __________________________________
Title: ___________________________________
Date: ___________________________________
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FORM OF SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this Agreement ) is made as of the later date set forth on the signature pages hereto, by and among Spindle, Inc., a Nevada corporation (the Company ), and the purchaser whose name and address are set forth on the signature page annexed hereto (the Purchaser ). The foregoing parties are sometimes referred to hereinafter individually as a Party or collectively as the Parties.
RECITALS
WHEREAS, this Agreement is being delivered to the Purchaser in accordance with and subject to the terms and conditions of the Subscription Application of the Purchaser of even date herewith (each a Subscription Application ) and the Private Placement Memorandum of the Company, dated July 15, 2014, as amended or supplemented from time to time, including all attachments and annexes thereto (the Memorandum ), and pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended (the Securities Act ), and Rule 506 promulgated thereunder, the Company desires to sell to the Purchaser and the Purchaser desires to acquire from the Company that number of shares of the Companys common stock, par value $0.001 per share (the Common Stock ) as are set forth on the Purchasers signature page annexed hereto (the " Shares "), at a price of $0.50 per share, subject to the terms and conditions of this Agreement and the other documents or instruments contemplated hereby.
NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties do hereby covenant and agree as follows:
AGREEMENT
Section 1.
Sale and Issuance of Shares .
1.1
Subject to the terms and conditions of this Agreement, the Subscription Application and Memorandum, the Companys board of directors has authorized the sale and issuance of up to 1,000,000 shares of Common Stock (the Offering ). At the Closing (as defined below), the Company shall sell and issue the Shares to the Purchaser, and the Purchaser shall purchase the Shares from the Company. The Company intends to enter into this same form of purchase agreement with certain other purchasers (collectively, the Other Purchasers , and collectively with the Purchaser, the Purchasers ) and expects to complete sales of Shares to them. The maximum number of Shares that the Company may sell to the Purchasers is 1,000,000, unless a higher amount is authorized by the Companys board of directors in its sole discretion. The Purchasers obligations hereunder are expressly not subject to or conditioned on the purchase of Shares by any or all of such Other Purchasers.
1.2
The aggregate purchase price for the Shares to be purchased by the Purchaser (the Purchase Price ) shall be the amount set forth on the Purchasers signature page hereto.
Section 2.
The Closing .
2.1
The closing of the sale and issuance of the Shares to the Purchaser (the Closing ) shall occur on the date when the Purchaser delivers to the (i) the Company, (a) this Agreement and (b) the Purchaser's Subscription Application (collectively, the " Transaction Documents ") executed by Purchaser; and (ii) the Escrow Agent (defined below), a wire transfer of funds in the amount of the Purchase Price, which shall be made contemporaneously with the execution and delivery of the Transaction Documents in accordance with the following instructions:
[REDACTED]
2.2
Richardson & Patel, LLP, the Companys counsel, shall act as escrow agent (the Escrow Agent ) for the sale and issuance of the Shares, pursuant to the Escrow Agreement, dated July 15, 2014, between the Company and the Escrow Agent.
2.3
Within five (5) business days of the Closing, the Company shall instruct its transfer agent to issue and deliver to the Purchaser a certificate representing the Shares, against receipt by the Company of a certified bank check or wire transfer in an aggregate amount equal to the Purchase Price for the number of Shares set forth on the Purchasers signature page hereto.
Section 3.
Representations and Warranties of the Company .
The Company hereby represents and warrants to the Purchaser as follows:
3.1
Organization .
The Company is duly organized, validly existing and in good standing under the laws of the State of Nevada and is qualified to conduct its business as a foreign corporation in each jurisdiction where the failure to be so qualified would have a material adverse effect on the Company.
3.2
Authorization of Agreement, Etc .
The execution, delivery, and performance by the Company of its obligations under the Transaction Documents has been duly authorized by all requisite corporate action on the part of the Company; and this Agreement and the Transaction Documents have been duly executed and delivered by the Company. Each of the Transaction Documents, when executed and delivered by the Company, constitutes the valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium, or other similar laws affecting creditors rights and remedies generally, and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity).
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3.3
Issuance of Shares .
The Shares are duly authorized and, when paid for and issued in accordance with the Transaction Documents, will be duly and validly issued, fully paid, and nonassessable, free and clear of all liens.
Section 4.
Representations and Warranties of the Purchaser .
The Purchaser hereby represents and warrants to the Company as follows:
4.1
Authorization of the Documents .
The Purchaser has all requisite power and authority (corporate or otherwise) to execute, deliver, and perform its obligations under the Transaction Documents, and the execution, delivery, and performance by the Purchaser of its obligations under the Transaction Documents has been duly authorized by all requisite action on the part of the Purchaser and each such Transaction Document, when executed and delivered by the Purchaser, shall constitute the valid and binding obligation of the Purchaser, enforceable against the Purchaser in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or other similar laws affecting creditors rights and remedies generally, and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity).
4.2
Investment Representations .
All of the representations, warranties, and information of the Purchaser as set forth in the Purchasers Subscription Application are incorporated by reference herein, shall be deemed to be a part hereof, and shall be true and correct at the Closing with the same force and effect as if made by the Purchaser as of the date thereof.
4.3
Access to Company Information .
The Purchaser acknowledges that it has been afforded access and the opportunity to obtain all financial and other information concerning the Company that such Purchaser desires (including the opportunity to meet with the Companys executive officers, either in person or telephonically). The Purchaser has reviewed copies of all reports filed by the Company (the Filings ) with the Securities and Exchange Commission (the Commission ) under the Securities Exchange Act of 1934, as amended (the Exchange Act ), since December 31, 2011, all of which are available for review at www.sec.gov . The Purchaser further acknowledges that it is familiar with the contents of the Filings and that there is no further information about the Company that the Purchaser desires in determining whether to acquire the Shares in the Offering.
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4.4
Risk Factors
The Purchaser acknowledges that an investment in the Shares is extremely speculative and that there is a substantial risk that the investor may lose the Purchasers entire investment in the Shares. The Purchaser acknowledges, understands and confirms that the Purchaser has reviewed the risk factors disclosed in the Memorandum.
Brokers and Finders .
Unless the Company shall engage a placement agent in connection with the Offering or shall otherwise determine in its sole discretion, the Company shall not be obligated to pay any commission, brokerage fee, or finders fee based on any alleged agreement or understanding between the Purchaser and a third person in respect of the transactions contemplated hereby. The Purchaser acknowledges and agrees that the Company may pay up to 7% of the Purchase Price and issues warrants to purchase shares of the Companys common stock in an amount up to 7% of the Shares, as commissions, to one or more FINRA registered broker-dealers pursuant to an agreement or agreements between the Company and such broker-dealer(s). The Purchaser hereby agrees to indemnify the Company against any claim by any third person for any commission, brokerage fee, finders fee, or other payment with respect to this Agreement or the transactions contemplated hereby based on any alleged agreement or understanding between the Purchaser and any such third person, whether express or implied from the actions of the Purchaser or anyone acting or purporting to act on behalf of the Purchaser.
Section 6.
Indemnification by the Purchaser .
The Purchaser hereby agrees to indemnify and defend (with counsel acceptable to the Company) the Company and its officers, directors, employees, and agents and hold them harmless from and against any and all liability, loss, damage, cost, or expense, including costs and reasonable attorneys fees, incurred on account of or arising from:
(a)
any breach of or inaccuracy in any of the Purchasers representations, warranties, or agreements made herein, in any of the Transaction Documents, or in any document or instrument contemplated hereby or thereby; and
(b)
any action, suit, or proceeding based on a claim that the Purchasers representations, warranties or agreements made herein, in any of the Transaction Documents, or in any document or instrument contemplated hereby or thereby, were inaccurate or misleading, or otherwise cause for obtaining damages or redress from the Company or any current or former officer, director, employee, or agent of the Company under the Securities Act.
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Section 7.
Registration Rights .
The Company shall use commercially reasonable efforts to register the Shares (the Registrable Securities ) with the Commission, on a "resale" registration statement (the Registration Statement ) providing for the resale of all of the Registrable Securities on or prior to the 60 th day following the expiration of the Offering (the Filing Date ), for an offering to be made on a continuous basis pursuant to Rule 415 under the Securities Act. The Company shall use its commercially reasonable efforts to cause the Registration Statement to be declared effective under the Securities Act as promptly as possible after the filing thereof and to keep such Registration Statement continuously effective under the Securities Act until such date as is the earlier of (x) the date when all Registrable Securities covered by such Registration Statement have been sold or (y) the date on which the Registrable Securities may be sold pursuant to Rule 144 under the Securities Act. If the Company shall determine in its sole discretion, as a result of a Rule 415 comment or otherwise to limit the number of shares to be registered, the Company may limit the number of Registrable Securities to be included in such registration on pro rata basis among all holders without further notice or consent from the holder. Notwithstanding the foregoing, if, at any time prior to the effective date of the Registration Statement filed in connection with this Section 7, the Company shall determine for any reason not to register or to delay registration of such securities, the Company may, at its election, give written notice of such determination to each record holder of Shares and, following such notice, (i) in the case of a determination not to register, shall be relieved of its obligation to register any Shares in connection with such registration, and (ii) in the case of determination to delay registering, shall be permitted to delay registering any Shares for such period as the Company shall determine to be necessary or advisable.
Section 8.
Successors and Assigns .
This Agreement shall bind and inure to the benefit of the Company, the Purchaser, and their respective successors and assigns.
Section 9.
Entire Agreement .
This Agreement and the other writings and agreements referred to in this Agreement or delivered pursuant to this Agreement contain the entire understanding of the Parties with respect to the subject matter hereof and supersede all prior agreements and understandings, whether written or verbal, among the Parties with respect thereto.
Section 10.
Notices .
All notices, demands and requests of any kind to be delivered to any Party in connection with this Agreement shall be in writing and shall be deemed to have been duly given if personally delivered or if sent by internationally-recognized overnight courier or by registered or certified mail, return receipt requested and postage prepaid, addressed as follows:
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if to the Company, to:
Spindle, Inc.
8700 East Vista Bonita, Suite 260
Scottsdale, AZ 85255
Attention: William Clark, Chief Executive Officer and President
with a copy to:
Richardson & Patel LLP
The Chrysler Building
405 Lexington Avenue, 49th Floor
New York, NY 10174
Attention: Melanie Figueroa
if to the Purchaser, to:
at the address of the Purchaser set forth on the Purchasers signature page hereto;
or to such other address as the Party to whom notice is to be given may have furnished to the other Parties to this Agreement in writing in accordance with the provisions of this Section. Any such notice or communication shall be deemed to have been received (i) in the case of personal delivery, on the date of such delivery, (ii) in the case of internationally-recognized overnight courier, on the next business day after the date when sent and (iii) in the case of mailing, on the third business day following that on which the piece of mail containing such communication is posted.
Section 11.
Amendments .
This Agreement may not be modified or amended, nor may any provision of this Agreement be waived, except as evidenced by a written agreement duly executed by the Company and holders of at least 51% of the Shares purchased by the Purchaser pursuant to the Transaction Documents and all Other Purchasers combined, and any such agreement shall be binding on the Purchaser and all other Purchasers.
Section 12.
Governing Law; Waiver of Jury Trial .
All questions concerning the construction, interpretation, and validity of this Agreement shall be governed by and construed and enforced in accordance with the domestic laws of the State of Nevada without giving effect to any choice or conflict of law provision or rule (whether in the State of Nevada or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Nevada. In furtherance of the foregoing, the internal law of the State of Nevada will control the interpretation and construction of this Agreement, even if under such jurisdictions choice of law or conflict of law analysis, the substantive law of some other jurisdiction would ordinarily or necessarily apply.
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Section 13.
Submission to Jurisdiction .
Any legal action or proceeding with respect to this Agreement may be brought in the courts of the State of New York and the United States of America located in the Borough of Manhattan, City of New York, and, by execution and delivery of this Agreement, the Company hereby accepts for itself and in respect of its property, generally and unconditionally, the jurisdiction of the aforesaid courts. The Purchaser hereby irrevocably waives, in connection with any such action or proceeding, any objection, including, without limitation, any objection to the venue or based on the grounds of forum non conveniens , which it may now or hereafter have to the bringing of any such action or proceeding in such respective jurisdictions. The Purchaser hereby irrevocably consents to the service of process of any of the aforementioned courts in any such action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to it at its address as set forth herein.
Section 14.
Severability .
It is the desire and intent of the Parties that the provisions of this Agreement be enforced to the fullest extent permissible under the law and public policies applied in each jurisdiction in which enforcement is sought. Accordingly, in the event that any provision of this Agreement would be held in any jurisdiction to be invalid, prohibited, or unenforceable for any reason, such provision, as to such jurisdiction, shall be ineffective, without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction. Notwithstanding the foregoing, if such provision could be more narrowly drawn so as not to be invalid, prohibited, or unenforceable in such jurisdiction, it shall, as to such jurisdiction, be so narrowly drawn, without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction.
Section 15.
Independence of Agreements, Covenants, Representations and Warranties .
All agreements and covenants hereunder shall be given independent effect so that if a certain action or condition constitutes a default under a certain agreement or covenant, the fact that such action or condition is permitted by another agreement or covenant shall not affect the occurrence of such default, unless expressly permitted under an exception to such covenant. In addition, all representations and warranties hereunder shall be given independent effect so that if a particular representation or warranty proves to be incorrect or is breached, the fact that another representation or warranty concerning the same or similar subject matter is correct or is not breached will not affect the incorrectness of or a breach of a representation and warranty hereunder. The exhibits and any schedules annexed hereto are hereby made part of this Agreement in all respects.
Section 16.
Counterparts .
This Agreement may be executed in any number of counterparts, and each such counterpart of this Agreement shall be deemed to be an original instrument, but all such counterparts together shall constitute but one agreement. Facsimile or PDF counterpart signatures to this Agreement shall be acceptable and binding.
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Section 17.
Headings .
The section and paragraph headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.
Section 18.
Expenses .
Each Party shall pay its own fees and expenses incurred in connection with the negotiation, execution, delivery and performance of this Agreement, the Transaction Documents and any document or instrument contemplated hereby or thereby.
Section 19.
Preparation of Agreement .
The Company prepared this Agreement and the Transaction Documents solely on its behalf. Each Party to this Agreement acknowledges that: (i) the Party had the advice of, or sufficient opportunity to obtain the advice of, legal counsel separate and independent of legal counsel for any other Party hereto; (ii) the terms of the transactions contemplated by this Agreement are fair and reasonable to such Party; and (iii) such Party has voluntarily entered into the transactions contemplated by this Agreement without duress or coercion. Each Party further acknowledges that such Party was not represented by the legal counsel of any other Party hereto in connection with the transactions contemplated by this Agreement, nor was he or it under any belief or understanding that such legal counsel was representing his or its interests. Each Party agrees that no conflict, omission, or ambiguity in this Agreement, or the interpretation thereof, shall be presumed, implied, or otherwise construed against any other Party to this Agreement on the basis that such Party was responsible for drafting this Agreement.
Section 20.
Lock-Up/Leak-Out Agreement; Market Stand-Off Agreement .
(a)
Lock-Up Agreement . For the 120 days after the effective date of the Registration Statement, the Purchaser may not (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend or otherwise transfer or dispose of, or (ii) enter into any swap or other agreement, arrangement or transaction that transfers to another, in whole or in part, directly or indirectly, any of the economic consequences of ownership of the Shares (the Lock-Up Period ). Upon the expiration of the Lock-Up Period, for a period of 180 days thereafter (the Leak-Out Period ), each Purchaser shall be permitted to sell up to ten percent (10%) of such Purchasers Shares, calculated as of the time of sale, during each month thereafter. Upon the expiration of the Leak-Out Period, each Purchaser shall be entitled to sell or otherwise dispose of such Purchasers Shares in any manner as such Purchaser sees fit. All Shares sold during the Leak-Out Period shall be sold on a non-cumulative basis, meaning that if a Purchaser did not sell all of the Shares the Purchaser was entitled to sell during a particular month in the Leak-Out Period, the Purchaser may not cumulate the unsold portion of that months allotment to the next months allotment. The Purchaser agrees that all sales of the Companys common stock will be made at no less than the best asked prices, and no sales will be made at the bid prices for the Shares.
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(b)
Market-Stand Off .
The Purchaser agrees that, if the Purchaser is requested by the Company or an underwriter (an Underwriter ) of shares of the Companys Common Stock or other securities of the Company, the Purchaser will not directly or indirectly sell, assign or otherwise transfer or dispose of any Common Stock, warrants or other securities of the Company held by it or under its control for a specified period of time (not to exceed 180 days) following the effective date of a registration statement filed by the Company under the Securities Act in connection with any offering of the Companys securities. Although the provisions of Section 20 of this Agreement shall be binding upon the Purchaser and the Purchasers successors and assigns without the execution of any further agreements or documents memorializing this obligation, if the Company or an Underwriter so requests, the Purchaser will execute such further agreements and documents as are requested to further memorialize this obligation. Any such further agreements or documents shall be in a form satisfactory to the Company and the Underwriter, if applicable. The Company may impose stop-transfer instructions with respect to the Shares or other securities owned by such Purchaser, subject to the foregoing restriction until the end of the specified period.
Section 21.
Use of Proceeds .
The Company shall use the net proceeds from the Offering for general working capital and general corporate purposes and debt service obligations.
[ Signature Pages Follow ]
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IN WITNESS WHEREOF , each of the undersigned has duly executed this Securities Purchase Agreement as of the later date set forth on the signature pages below.
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Date: _______________, 2014 |
SPINDLE, INC. |
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By: /s/ William Clark |
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Name: William Clark |
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Title: Chief Executive Officer and President |
[ Purchaser Signature Page Follows ]
PURCHASER SIGNATURE PAGE TO SPINDLE, INC.
SECURITIES PURCHASE AGREEMENT
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CONSULTING SERVICES AGREEMENT
This Consulting Services Agreement (the Agreement) is entered into by and between Spindle, Inc., a Nevada corporation, with an address at 8700 E Vista Bonita Dr., STE 260, Scottsdale, AZ 85255 (Company), and David J. Ide, [an individual], with an address at 10230 Mountain Spring Rd., Scottsdale, AZ 85255, (Consultant) and shall be effective on March 1, 2013 (the Effective Date).
RECITALS
A.
Company desires the assistance of Consultant to provide services and advice in connection with various special projects.
B.
Consultant desires to assist Company and provide services and advice in connection with such special projects.
C.
Company desires to engage Consultant and Consultant desires to provide certain services and advice to Company in accordance with the terms of this Agreement.
NOW THEREFORE , in consideration of the covenants and conditions contained herein, and for other valuable consideration, the sufficiency and adequacy of which is hereby acknowledged, the parties hereto agree as follows:
TERMS
1.
SCOPE OF RETENTION .
1.1
Retention
Company hereby retains Consultant, as an independent contractor and not as an employee, and Consultant hereby accepts such retention. Consultant agrees to render the Services as hereinafter described, to the highest professional standards, upon the terms and conditions set forth herein. Consultant is not authorized to provide any services or take any actions not specifically authorized by this Agreement or in writing by Company.
1.2
Time Requirements
Consultant shall give reasonable priority to providing the Services. Generally, Consultant is expected to devote an average of 40 hours each calendar month to providing the Services described herein. Consultant represents that other obligations he may have will not interfere with his responsibilities and obligations under this Agreement.
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2.
PERFORMANCE OF SERVICES .
Consultant shall act as an advisor to Company and provide the Services described in Exhibit A . Consultant will determine the method, details and means for performing the Services and will be entirely responsible for Consultants actions and inactions in connection with performing the Services. If the Services provided do not comply with the criteria or standards set forth in Exhibit A , or elsewhere hereunder, Consultant shall perform the additional work required to bring the Services to an acceptable level at no charge to the Company.
3.
TERM .
The term of this Agreement shall begin on the Effective Date and unless earlier terminated as provided in Section 12, shall continue in effect for a period of twelve months through February 28, 2014. This Agreement may be renewed by mutual written agreement of Company and Consultant.
4.
STATUS .
It is expressly understood that Consultant is an independent contractor. Nothing contained in this Agreement shall be deemed or construed to create a joint venture, partnership, principal-agent or employment relationship between the parties. Consultant acknowledges that Company shall have no obligation to provide any workers compensation, unemployment compensation, health or accident insurance or any other type of insurance coverage with respect to Consultant. Consultant further agrees that any persons engaged by Consultant to perform any of the services described herein (collectively, "Associates"), will not be entitled to any benefits available to Company employees including, but not limited to, medical, unemployment, vacation and pension benefits. Consultant understands and agrees that as an independent contractor, Consultant is responsible for maintaining adequate insurance coverage for Consultant and, if appropriate, for all Associates, representatives, and agents. Adequate insurance coverage shall, at all minimum, include any legally required benefits and insurance, including Workers Compensation and automobile liability insurance for the operator of all motor vehicles used in the performance of this Agreement.
Further, Consultant shall not act or attempt to act or represent himself directly or by implication as an agent of Company, or in any manner assume or create or attempt to assume or create any obligation, or make any contract, agreement, representation or warranty on behalf of or in the name of Company except as authorized in writing by Company.
5.
REPRESENTATIONS .
Consultant represents and warrants that he:
(a)
is free to enter into this Agreement with Company;
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(b)
is not bound by any employment agreement, nondisclosure agreement, noncompetition agreement or any other agreement or obligation that may infringe on his ability to perform or in any manner prevent him from performing any of the duties that may be required of him under this Agreement, or that may in any way result in any involvement by Company in any matter, action, suit or proceeding concerning his employment with any former employer or the termination thereof;
(c)
will not provide to Company or utilize when providing the Services any confidential information of any third party;
(d)
has the skills, know-how, training, capability, experience, facilities, financial resources, registrations, licenses, permits and governmental approvals necessary to timely and competently perform the Services in a professional matter; and
(e)
shall perform the Services in full and strict compliance with all applicable laws, regulations, rules, ordinances and orders of any governmental authority, including, without limitation, the provisions of all applicable federal, state and local health, safety and environmental laws and regulations.
6.
FEES AND PAYMENT .
As full consideration for the Services rendered by Consultant pursuant to this Agreement, Company shall pay Consultant the fees as described in Exhibit B .
All fees for the Services shall be paid without any deduction including, without limitation, any deduction for social security, federal or state or withholding taxes or unemployment insurance. Consultant acknowledges that he is responsible for the proper reporting and payment of all taxes on such fees.
7.
BUSINESS EXPENSES .
Company acknowledges that Consultant will incur certain business expenses such as long distance calls and travel expenses, in performing the Services. Company agrees to reimburse Consultant for the cost of all such reasonable business expenses incurred by Consultant in performing the Services in accordance with Exhibit B , provided however , (i) such expenses must be deductible by Company for U.S. Federal income tax purposes, (ii) Consultant must provide Company with an itemized account of such expenses together with supporting vouchers and receipts, and (iii) Consultant must have pre-approval for expenses. Consultant agrees to submit such expenses for reimbursement on a monthly basis along with the invoices. Expenses over 90 days from time of expense will not be reimbursed.
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8.
NON-COMPETITION AND NON-SOLICITATION .
Consultant agrees that during the term of the Agreement, Consultant will not, without the Company's express written consent, engage in any independent contractor relationship or business activity that would conflict with Contractors independent contractor relationship with the Company. Contractor agrees further that for the term of the Agreement and for two (2) years after the date of termination of the Agreement, Consultant will not, either directly or through others, solicit or attempt to solicit any employee, independent contractor or consultant of the Company to terminate his or her relationship with the Company in order to become an employee, consultant or independent contractor to or for any other person or entity.
9.
DISCLOSURE OF CONFIDENTIAL INFORMATION .
9.1
Definition
The term Confidential Information means any and all information, regarding Company or its affiliates or parents customers or potential customers, regardless of whether the information is personally identifiable or not; all information concerning Companys or its affiliates or parents business records and plans, Trade Secrets, proprietary ideas, technological developments, objectives and results, business methods, customer lists and records, computer programs and listings, source codes and /or object codes, financial results and financial strategies; any documents marked as Confidential and all other oral or written presentations or information which are marked as Confidential and any information developed by Consultant, including without limitation, Work Product and Intellectual Property, both as hereinafter defined. The term Trade Secrets shall be given its broadest possible interpretation and shall mean, without limitation, any information, including customer lists, services, formulas, patterns, compilations, programs, devices, methods, techniques, or processes that: (i) derive independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use; and (ii) are the subject of efforts that are reasonable under the circumstances to maintain its secrecy.
9.2
Nondisclosure
Consultant acknowledges that from time to time he may be provided with Companys Confidential Information and further acknowledges his fiduciary obligations in respect thereof. Without limiting the scope of such fiduciary obligations, Consultant agrees that he shall not, at any time or in any manner, directly or indirectly, use for his own benefit or the benefit of any other person or entity, or otherwise divulge, disclose, or communicate to any person or entity any information concerning any Confidential Information of Company without the prior express written consent of Company. All files, records, computer printouts, documents, objects, drawings, specifications, patterns and similar items relating to the business of Company or concerning Confidential Information, including copies thereof, whether prepared by Consultant or otherwise coming into his possession, shall remain the exclusive property of Company. Company and Consultant shall each establish and maintain commercially reasonable policies and procedures to comply with the obligations set forth in this Section 9. Consultant will return all Confidential Information in his possession within ten (10) business days after the termination or expiration of this Agreement and shall not retain any copies. This covenant of nondisclosure and Consultants liability for breach of such covenant shall survive the expiration or termination of this Agreement.
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9.3
Liability For Disclosure Of Confidential Information
Consultant acknowledges that each of the restrictions contained in this Agreement relating to the nondisclosure of Confidential Information is reasonable and necessary in order to protect legitimate interests of Company and that any violation thereof would cause irreparable injury to Company. Consultant agrees that in the event of any violation thereof, Company shall be entitled to obtain, from any court of competent jurisdiction, preliminary and permanent injunctive relief as well as an equitable accounting of all profits or benefits arising out of such violation and any damages for breach of this Agreement which may be applicable. The aforesaid rights and remedies shall be independent, severable, cumulative, binding on Consultants successors or assigns, agents, employees, subcontractors and administrators and shall be in addition to any other rights or remedies to which Company may be entitled.
10.
WORK PRODUCT, INTELLECTUAL PROPERTY .
10.1
Disclosure
Consultant agrees that during the term of this Agreement, all worldwide right, title and interest in and to any and all work product, works of authorship, trademarks, methods of doing business, sound recordings, pictorial reproductions, drawings, graphic representations, improvements, innovations, discoveries, inventions and improvements, whether patentable or unpatentable, whether copyrightable or uncopyrightable, made, developed, conceived, acquired, devised, discovered, created or reduced to practice by him, while performing Services under this Agreement whether by himself or jointly with others, whether by using Companys or its divisions, affiliates, or parents equipment, supplies, facilities, or Confidential Information, and which relate to or pertain in any way at the time of conception or reduction to practice of the invention or of creation of the work product or work of authorship to the business of Company, or its divisions, affiliates or parents or the actual or demonstrably anticipated research or development of Company or its divisions, affiliates or parents or which result from any Services performed by him for Company or its divisions, affiliates or parents (the Work Product) shall be promptly disclosed in writing by him to Company and shall be considered work-made-for-hire and ownership of the entire right, title and interest in the Work Product shall reside with Company.
10.2
Assignment
Consultant agrees that to the extent any of the Work Product does not qualify as a work-made-for-hire, then Consultant hereby irrevocably assigns to Company or its assignee, all of his right, title and interest in the Work Product, including without limitation, all patent rights, trademarks, service marks, copyrights, trade secret rights and other proprietary rights (collectively Intellectual Property) and agrees that Company is under no further obligation, monetary or otherwise, to him for such assignment. Consultant agrees to execute, acknowledge and deliver to Company, its successors and assigns, all documentation, including, but not limited to, applications for patents and/or copyrights, as Company may deem necessary or desirable to obtain and perfect the interests of Company, its successors and assigns, in any and all countries, in such Intellectual Property and to vest title thereto in Company. Consultant will maintain adequate and current written records of all Intellectual Property which at all times will be available to, and remain the property of, Company.
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10.3
Enforcement
Consultant acknowledges that any violation of this Section 10 would cause irreparable injury to Company. Consultant agrees that in the event of any violation of this Section 10, Company shall be authorized and entitled to obtain, from any court of competent jurisdiction, preliminary and permanent injunctive relief as well as an equitable accounting of all profits or benefits arising out of such violation and any damages for breach of this Agreement which may be applicable. The aforesaid rights and remedies shall be independent, severable, cumulative, binding on Consultants assigns, officers, agents, employees and subcontractors and administrators, and shall be in addition to any other rights or remedies to which Company may be entitled.
11.
USE OF NAME AND TRADEMARKS .
Consultant shall not use the name, trademarks, trade names, logos and Confidential Information of Company except with written permission of Company and in such event only in connection with performance of the Services.
12.
TERMINATION OF AGREEMENT .
12.1
Termination for Cause
This Agreement may be terminated by either party in the event that the other party breaches any term or condition of this Agreement and such breach is not cured within fifteen (15) days after written notice is given to the other party specifying the breach.
12.2
Termination Without Cause
This Agreement may be terminated by Company without cause, at any time during the term hereof hereof, by providing thirty (30) days prior written notice to Consultant.
12.3
Termination on Death or Disability
In the event of death, disability, or other incapacity of Consultant resulting in the inability of Consultant to perform the Services hereunder, this Agreement may be terminated by Company by providing three (3) days written notice, and all fees due Consultant hereunder through the effective date of termination shall be paid to Consultant or his estate as the case may be. For purposes of this Agreement, Consultant shall become disabled when he is unable by reason of injury, sickness or disease to perform any duty required of him pursuant to this Agreement for a period of sixty (60) consecutive days, as determined by Company in its sole discretion.
12.4
Bankruptcy
Either party may terminate this Agreement immediately in the event the other party becomes insolvent, files for voluntary bankruptcy or has involuntary bankruptcy proceedings filed against it, or makes an assignment for the benefit of creditors.
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12.5
Obligations Upon Termination
Upon termination or expiration of this Agreement, Consultant shall deliver to Company, within five (5) business days from the effective date of termination, all manuals, letters, notes, notebooks, reports and all other materials in the possession of or under the control of Consultant, and all products or property of Company in possession of or under the control of Consultant, including, but not limited to, any and all Confidential Information; Work Product and Intellectual Property.
12.6
NO DAMAGES FOR TERMINATION
NEITHER COMPANY NOR CONSULTANT SHALL BE LIABLE TO THE OTHER FOR DAMAGES OF ANY KIND, INCLUDING INCIDENTAL OR CONSEQUENTIAL DAMAGES, ON ACCOUNT OF THE TERMINATION OF THIS AGREEMENT IN ACCORDANCE WITH THIS SECTION 12. CONSULTANT WAIVES ANY RIGHT, UNDER ANY LAW, HE MAY HAVE TO RECEIVE ANY COMPENSATION OR REPARATIONS UPON THE TERMINATION OF THIS AGREEMENT. THE PARTIES ACKNOWLEDGE THAT THIS SECTION 12.6 HAS BEEN INCLUDED AS A MATERIAL INDUCEMENT FOR COMPANY TO ENTER INTO THIS AGREEMENT AND THAT COMPANY WOULD NOT HAVE ENTERED INTO THIS AGREEMENT BUT FOR THE LIMITATIONS OF LIABILITY AS SET FORTH HEREIN.
13.
INDEMNIFICATION .
Consultant hereby agrees to indemnify, defend and hold Company, its parents, subsidiaries and affiliates and their respective officers, directors, shareholders, employees and agents harmless from and against any and all allegations, claims, liabilities, losses, suits, judgments, damages, expenses and costs (including reasonable attorneys fees and expenses) of any kind or character (each a Claim) arising out of or in any way related to (a) any misrepresentation of Consultant related to his performance under this Agreement, (ii) any breach by Consultant of his representations and warranties herein, and (iii) any actual violation by Consultant of any law, statute, regulation or ordinance. Consultant agrees to promptly notify Company of any Claim. Company may defend the same and any expense, including reasonable attorneys fees and expenses which Company may pay or incur in defending the Claim, and any judgment which Company may be required to pay in connection with any Claim, shall be paid to Company by Consultant after demand by Company.
14.
ARBITRATION .
Except as prohibited by law, each party to this Agreement agrees that, any claim, controversy or legal dispute between them or between Consultant and any officer, director, shareholder, agent or employee of the Company (or its affiliates), each of whom is hereby designated a third party beneficiary of this agreement regarding arbitration, (a Dispute) arising out of this Agreement will be resolved through binding arbitration in Maricopa County, Arizona under the Commercial Arbitration Rules of the American Arbitration Association. THE PARTIES UNDERSTAND THAT BY AGREEING TO ARBITRATE DISPUTES THEY ARE WAIVING ANY RIGHT TO A JURY TRIAL.
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This arbitration provision is not intended to modify or limit the remedies available to either party, including the right to seek interim relief, such as injunction or attachment, through judicial process, which will not be deemed a waiver of the right to demand and obtain arbitration. Any Dispute that is not arbitrated, including any judicial action to enforce this arbitration provision will be litigated exclusively in federal or state courts located in Maricopa County, Arizona and the parties hereby consent and submit to the jurisdiction and venue of such courts.
15.
MISCELLANEOUS .
15.1
No Assignment
This Agreement is a personal one, being entered into in reliance upon and in consideration of the singular personal skill and qualifications of Consultant. Consultant shall therefore not voluntarily or by operation of law assign or otherwise transfer the obligations incurred on its part pursuant to the terms of this Agreement without the prior written consent of Company. Any attempted assignment or transfer by Consultant of its obligation without such consent shall be wholly null, void, and of no effect whatsoever.
15.2
Notices
All notices to be given shall be in writing and shall be deemed to have been duly given: (i) when hand delivered, (ii) three (3) business days after being mailed, postage prepaid, by registered or certified mail, return receipt requested, or (iii) the next business day after such notice is delivered to an overnight delivery service of prominent national reputation (such as Federal Express or DHL). Notices shall be delivered to the parties at the following addresses:
If to Company: |
Spindle, Inc. ATTN: William Clark 8700 E Vista Bonita Dr., STE 260 Scottsdale, AZ 85255 |
If to Consultant: |
David J. Ide |
or to such other address as the parties hereto may specify, in writing, from time to time.
15.3
Entire Agreement
This Agreement supersedes any and all other agreements, either oral or in writing, between the parties hereto with respect to the subject matter hereof, and contains all of the covenants and agreements between the parties with respect to said subject matter.
15.4
Modification of Agreement
This Agreement may be modified only by a written agreement duly executed by both parties.
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15.5
Severability
If any term, provision, covenant, or condition of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the provision shall remain in full force and effect and the remainder of this Agreement shall in no way be affected, impaired or invalidated.
15.6
Waiver of Breach
The failure of either party to enforce any of the provisions of this Agreement or any rights with respect thereto shall in no way be deemed to be a waiver of such provisions or rights or in any way affect the validity of this Agreement.
15.7
Attorneys Fees
In the event any action is brought to interpret or enforce any provision of this Agreement, the prevailing party shall be entitled to reasonable attorneys fees together with costs and expenses, including appellate fees and costs, incurred pursuant to such action.
15.8
Captions
The captions of the Sections of this Agreement are for reference only and in no way define, limit, extend or describe the scope of this Agreement or the intent of any of its provisions.
15.9
Governing Law
This Agreement has been executed and delivered in the State of Arizona, and its interpretation, validity and performance and enforcement shall be construed and in accordance with the laws of the State of Arizona, excluding its conflict of laws principles.
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IN WITNESS WHEREOF , the parties hereto have executed this Agreement, as of the date set forth hereunder.
COMPANY |
CONSULTANT |
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Spindle, Inc. |
David J. Ide |
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Signature: /s/ William E. Clark |
Signature: /s/ David J. Ide |
Print Name: William E. Clark |
Print Name: David J. Ide |
Title: CEO |
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Date: February 18, 2014 |
Date: 2/28/14 |
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EXHIBIT A
Services
Intellectual property review and strategy consulting
Corporate governance consulting
Financial reporting and restatement support
M&A Activity consulting
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EXHIBIT B
Fees
Consultant will be paid 250,000 shares of S-8 registered shares on or about the anniversary of the start date; following the companys ability to issue S-8 registered Shares.
Contract may be amended for renewal annually.
Reimbursement of actual travel expenses, including, but not limited to airfare, accommodations, meals, materials, etc. All expensed will comply with Company travel policy guidelines and will be pre-approved.
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CONSULTING SERVICES AGREEMENT
This Consulting Services Agreement (the Agreement) is entered into by and between Spindle, Inc., a Nevada corporation, with an address at 18835 N Thompson Peak Parkway, STE 210, Scottsdale, AZ 85255 (Company), and R. Glenn Bancroft, [an individual], with an address at 3056 N Spirit Dancer Trail, Tucson, AZ 85749, (Consultant) and shall be effective on May 1, 2013 (the Effective Date).
RECITALS
A.
Company desires the assistance of Consultant to provide services and advice in connection with various special projects.
B.
Consultant desires to assist Company and provide services and advice in connection with such special projects.
C.
Company desires to engage Consultant and Consultant desires to provide certain services and advice to Company in accordance with the terms of this Agreement.
NOW THEREFORE , in consideration of the covenants and conditions contained herein, and for other valuable consideration, the sufficiency and adequacy of which is hereby acknowledged, the parties hereto agree as follows:
TERMS
1.
SCOPE OF RETENTION .
Retention
Company hereby retains Consultant, as an independent contractor and not as an employee, and Consultant hereby accepts such retention. Consultant agrees to render the Services as hereinafter described, to the highest professional standards, upon the terms and conditions set forth herein. Consultant is not authorized to provide any services or take any actions not specifically authorized by this Agreement or in writing by Company.
Time Requirements
Consultant shall give reasonable priority to providing the Services. Generally, Consultant is expected to devote an average of 40 hours each calendar month to providing the Services described herein. Consultant represents that other obligations he may have will not interfere with his responsibilities and obligations under this Agreement.
2.
PERFORMANCE OF SERVICES .
Consultant shall act as an advisor to Company and provide the Services described in Exhibit A . Consultant will determine the method, details and means for performing the Services and will be entirely responsible for Consultants actions and inactions in connection with performing the Services. If the Services provided do not comply with the criteria or standards set forth in Exhibit A , or elsewhere hereunder, Consultant shall perform the additional work required to bring the Services to an acceptable level at no charge to the Company.
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3.
TERM .
The term of this Agreement shall begin on the Effective Date and unless earlier terminated as provided in Section 12, shall continue in effect for a period of twelve months through April 30, 2014. This Agreement may be renewed by mutual written agreement of Company and Consultant.
4.
STATUS .
It is expressly understood that Consultant is an independent contractor. Nothing contained in this Agreement shall be deemed or construed to create a joint venture, partnership, principal-agent or employment relationship between the parties. Consultant acknowledges that Company shall have no obligation to provide any workers compensation, unemployment compensation, health or accident insurance or any other type of insurance coverage with respect to Consultant. Consultant further agrees that any persons engaged by Consultant to perform any of the services described herein (collectively, "Associates"), will not be entitled to any benefits available to Company employees including, but not limited to, medical, unemployment, vacation and pension benefits. Consultant understands and agrees that as an independent contractor, Consultant is responsible for maintaining adequate insurance coverage for Consultant and, if appropriate, for all Associates, representatives, and agents. Adequate insurance coverage shall, at all minimum, include any legally required benefits and insurance, including Workers Compensation and automobile liability insurance for the operator of all motor vehicles used in the performance of this Agreement.
Further, Consultant shall not act or attempt to act or represent himself directly or by implication as an agent of Company, or in any manner assume or create or attempt to assume or create any obligation, or make any contract, agreement, representation or warranty on behalf of or in the name of Company except as authorized in writing by Company.
5.
REPRESENTATIONS .
Consultant represents and warrants that he:
(a)
is free to enter into this Agreement with Company;
(b)
is not bound by any employment agreement, nondisclosure agreement, noncompetition agreement or any other agreement or obligation that may infringe on his ability to perform or in any manner prevent him from performing any of the duties that may be required of him under this Agreement, or that may in any way result in any involvement by Company in any matter, action, suit or proceeding concerning his employment with any former employer or the termination thereof;
(c)
will not provide to Company or utilize when providing the Services any confidential information of any third party;
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(d)
has the skills, know-how, training, capability, experience, facilities, financial resources, registrations, licenses, permits and governmental approvals necessary to timely and competently perform the Services in a professional matter; and
(e)
shall perform the Services in full and strict compliance with all applicable laws, regulations, rules, ordinances and orders of any governmental authority, including, without limitation, the provisions of all applicable federal, state and local health, safety and environmental laws and regulations.
6.
FEES AND PAYMENT .
As full consideration for the Services rendered by Consultant pursuant to this Agreement, Company shall pay Consultant the fees as described in Exhibit B .
All fees for the Services shall be paid without any deduction including, without limitation, any deduction for social security, federal or state or withholding taxes or unemployment insurance. Consultant acknowledges that he is responsible for the proper reporting and payment of all taxes on such fees.
7.
BUSINESS EXPENSES .
Company acknowledges that Consultant will incur certain business expenses such as long distance calls and travel expenses, in performing the Services. Company agrees to reimburse Consultant for the cost of all such reasonable business expenses incurred by Consultant in performing the Services in accordance with Exhibit B , provided however , (i) such expenses must be deductible by Company for U.S. Federal income tax purposes, (ii) Consultant must provide Company with an itemized account of such expenses together with supporting vouchers and receipts, and (iii) Consultant must have pre-approval for expenses. Consultant agrees to submit such expenses for reimbursement on a monthly basis along with the invoices. Expenses over 90 days from time of expense will not be reimbursed.
8.
NON-COMPETITION AND NON-SOLICITATION .
Consultant agrees that during the term of the Agreement, Consultant will not, without the Company's express written consent, engage in any independent contractor relationship or business activity that would conflict with Contractors independent contractor relationship with the Company. Contractor agrees further that for the term of the Agreement and for two (2) years after the date of termination of the Agreement, Consultant will not, either directly or through others, solicit or attempt to solicit any employee, independent contractor or consultant of the Company to terminate his or her relationship with the Company in order to become an employee, consultant or independent contractor to or for any other person or entity.
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9.
DISCLOSURE OF CONFIDENTIAL INFORMATION .
Definition
The term Confidential Information means any and all information, regarding Company or its affiliates or parents customers or potential customers, regardless of whether the information is personally identifiable or not; all information concerning Companys or its affiliates or parents business records and plans, Trade Secrets, proprietary ideas, technological developments, objectives and results, business methods, customer lists and records, computer programs and listings, source codes and /or object codes, financial results and financial strategies; any documents marked as Confidential and all other oral or written presentations or information which are marked as Confidential and any information developed by Consultant, including without limitation, Work Product and Intellectual Property, both as hereinafter defined. The term Trade Secrets shall be given its broadest possible interpretation and shall mean, without limitation, any information, including customer lists, services, formulas, patterns, compilations, programs, devices, methods, techniques, or processes that: (i) derive independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use; and (ii) are the subject of efforts that are reasonable under the circumstances to maintain its secrecy.
Nondisclosure
Consultant acknowledges that from time to time he may be provided with Companys Confidential Information and further acknowledges his fiduciary obligations in respect thereof. Without limiting the scope of such fiduciary obligations, Consultant agrees that he shall not, at any time or in any manner, directly or indirectly, use for his own benefit or the benefit of any other person or entity, or otherwise divulge, disclose, or communicate to any person or entity any information concerning any Confidential Information of Company without the prior express written consent of Company. All files, records, computer printouts, documents, objects, drawings, specifications, patterns and similar items relating to the business of Company or concerning Confidential Information, including copies thereof, whether prepared by Consultant or otherwise coming into his possession, shall remain the exclusive property of Company. Company and Consultant shall each establish and maintain commercially reasonable policies and procedures to comply with the obligations set forth in this Section 9. Consultant will return all Confidential Information in his possession within ten (10) business days after the termination or expiration of this Agreement and shall not retain any copies. This covenant of nondisclosure and Consultants liability for breach of such covenant shall survive the expiration or termination of this Agreement.
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Liability For Disclosure Of Confidential Information
Consultant acknowledges that each of the restrictions contained in this Agreement relating to the nondisclosure of Confidential Information is reasonable and necessary in order to protect legitimate interests of Company and that any violation thereof would cause irreparable injury to Company. Consultant agrees that in the event of any violation thereof, Company shall be entitled to obtain, from any court of competent jurisdiction, preliminary and permanent injunctive relief as well as an equitable accounting of all profits or benefits arising out of such violation and any damages for breach of this Agreement which may be applicable. The aforesaid rights and remedies shall be independent, severable, cumulative, binding on Consultants successors or assigns, agents, employees, subcontractors and administrators and shall be in addition to any other rights or remedies to which Company may be entitled.
10.
WORK PRODUCT, INTELLECTUAL PROPERTY .
Disclosure
Consultant agrees that during the term of this Agreement, all worldwide right, title and interest in and to any and all work product, works of authorship, trademarks, methods of doing business, sound recordings, pictorial reproductions, drawings, graphic representations, improvements, innovations, discoveries, inventions and improvements, whether patentable or unpatentable, whether copyrightable or uncopyrightable, made, developed, conceived, acquired, devised, discovered, created or reduced to practice by him, while performing Services under this Agreement whether by himself or jointly with others, whether by using Companys or its divisions, affiliates, or parents equipment, supplies, facilities, or Confidential Information, and which relate to or pertain in any way at the time of conception or reduction to practice of the invention or of creation of the work product or work of authorship to the business of Company, or its divisions, affiliates or parents or the actual or demonstrably anticipated research or development of Company or its divisions, affiliates or parents or which result from any Services performed by him for Company or its divisions, affiliates or parents (the Work Product) shall be promptly disclosed in writing by him to Company and shall be considered work-made-for-hire and ownership of the entire right, title and interest in the Work Product shall reside with Company.
Assignment
Consultant agrees that to the extent any of the Work Product does not qualify as a work-made-for-hire, then Consultant hereby irrevocably assigns to Company or its assignee, all of his right, title and interest in the Work Product, including without limitation, all patent rights, trademarks, service marks, copyrights, trade secret rights and other proprietary rights (collectively Intellectual Property) and agrees that Company is under no further obligation, monetary or otherwise, to him for such assignment. Consultant agrees to execute, acknowledge and deliver to Company, its successors and assigns, all documentation, including, but not limited to, applications for patents and/or copyrights, as Company may deem necessary or desirable to obtain and perfect the interests of Company, its successors and assigns, in any and all countries, in such Intellectual Property and to vest title thereto in Company. Consultant will maintain adequate and current written records of all Intellectual Property which at all times will be available to, and remain the property of, Company.
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Enforcement
Consultant acknowledges that any violation of this Section 10 would cause irreparable injury to Company. Consultant agrees that in the event of any violation of this Section 10, Company shall be authorized and entitled to obtain, from any court of competent jurisdiction, preliminary and permanent injunctive relief as well as an equitable accounting of all profits or benefits arising out of such violation and any damages for breach of this Agreement which may be applicable. The aforesaid rights and remedies shall be independent, severable, cumulative, binding on Consultants assigns, officers, agents, employees and subcontractors and administrators, and shall be in addition to any other rights or remedies to which Company may be entitled.
11.
USE OF NAME AND TRADEMARKS .
Consultant shall not use the name, trademarks, trade names, logos and Confidential Information of Company except with written permission of Company and in such event only in connection with performance of the Services.
12.
TERMINATION OF AGREEMENT .
Termination for Cause
This Agreement may be terminated by either party in the event that the other party breaches any term or condition of this Agreement and such breach is not cured within fifteen (15) days after written notice is given to the other party specifying the breach.
Termination Without Cause
This Agreement may be terminated by Company without cause, at any time during the term hereof hereof, by providing thirty (30) days prior written notice to Consultant.
Termination on Death or Disability
In the event of death, disability, or other incapacity of Consultant resulting in the inability of Consultant to perform the Services hereunder, this Agreement may be terminated by Company by providing three (3) days written notice, and all fees due Consultant hereunder through the effective date of termination shall be paid to Consultant or his estate as the case may be. For purposes of this Agreement, Consultant shall become disabled when he is unable by reason of injury, sickness or disease to perform any duty required of him pursuant to this Agreement for a period of sixty (60) consecutive days, as determined by Company in its sole discretion.
Bankruptcy
Either party may terminate this Agreement immediately in the event the other party becomes insolvent, files for voluntary bankruptcy or has involuntary bankruptcy proceedings filed against it, or makes an assignment for the benefit of creditors.
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Obligations Upon Termination
Upon termination or expiration of this Agreement, Consultant shall deliver to Company, within five (5) business days from the effective date of termination, all manuals, letters, notes, notebooks, reports and all other materials in the possession of or under the control of Consultant, and all products or property of Company in possession of or under the control of Consultant, including, but not limited to, any and all Confidential Information; Work Product and Intellectual Property.
NO DAMAGES FOR TERMINATION
NEITHER COMPANY NOR CONSULTANT SHALL BE LIABLE TO THE OTHER FOR DAMAGES OF ANY KIND, INCLUDING INCIDENTAL OR CONSEQUENTIAL DAMAGES, ON ACCOUNT OF THE TERMINATION OF THIS AGREEMENT IN ACCORDANCE WITH THIS SECTION 12. CONSULTANT WAIVES ANY RIGHT, UNDER ANY LAW, HE MAY HAVE TO RECEIVE ANY COMPENSATION OR REPARATIONS UPON THE TERMINATION OF THIS AGREEMENT. THE PARTIES ACKNOWLEDGE THAT THIS SECTION 12.6 HAS BEEN INCLUDED AS A MATERIAL INDUCEMENT FOR COMPANY TO ENTER INTO THIS AGREEMENT AND THAT COMPANY WOULD NOT HAVE ENTERED INTO THIS AGREEMENT BUT FOR THE LIMITATIONS OF LIABILITY AS SET FORTH HEREIN.
13.
INDEMNIFICATION .
Consultant hereby agrees to indemnify, defend and hold Company, its parents, subsidiaries and affiliates and their respective officers, directors, shareholders, employees and agents harmless from and against any and all allegations, claims, liabilities, losses, suits, judgments, damages, expenses and costs (including reasonable attorneys fees and expenses) of any kind or character (each a Claim) arising out of or in any way related to (a) any misrepresentation of Consultant related to his performance under this Agreement, (ii) any breach by Consultant of his representations and warranties herein, and (iii) any actual violation by Consultant of any law, statute, regulation or ordinance. Consultant agrees to promptly notify Company of any Claim. Company may defend the same and any expense, including reasonable attorneys fees and expenses which Company may pay or incur in defending the Claim, and any judgment which Company may be required to pay in connection with any Claim, shall be paid to Company by Consultant after demand by Company.
14.
ARBITRATION .
Except as prohibited by law, each party to this Agreement agrees that, any claim, controversy or legal dispute between them or between Consultant and any officer, director, shareholder, agent or employee of the Company (or its affiliates), each of whom is hereby designated a third party beneficiary of this agreement regarding arbitration, (a Dispute) arising out of this Agreement will be resolved through binding arbitration in San Diego, California under the Commercial Arbitration Rules of the American Arbitration Association. THE PARTIES UNDERSTAND THAT BY AGREEING TO ARBITRATE DISPUTES THEY ARE WAIVING ANY RIGHT TO A JURY TRIAL.
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This arbitration provision is not intended to modify or limit the remedies available to either party, including the right to seek interim relief, such as injunction or attachment, through judicial process, which will not be deemed a waiver of the right to demand and obtain arbitration. Any Dispute that is not arbitrated, including any judicial action to enforce this arbitration provision will be litigated exclusively in federal or state courts located in San Diego, California and the parties hereby consent and submit to the jurisdiction and venue of such courts.
15.
MISCELLANEOUS .
No Assignment
This Agreement is a personal one, being entered into in reliance upon and in consideration of the singular personal skill and qualifications of Consultant. Consultant shall therefore not voluntarily or by operation of law assign or otherwise transfer the obligations incurred on its part pursuant to the terms of this Agreement without the prior written consent of Company. Any attempted assignment or transfer by Consultant of its obligation without such consent shall be wholly null, void, and of no effect whatsoever.
Notices
All notices to be given shall be in writing and shall be deemed to have been duly given: (i) when hand delivered, (ii) three (3) business days after being mailed, postage prepaid, by registered or certified mail, return receipt requested, or (iii) the next business day after such notice is delivered to an overnight delivery service of prominent national reputation (such as Federal Express or DHL). Notices shall be delivered to the parties at the following addresses:
If to Company: |
Spindle, Inc. ATTN: William Clark 8700 E Vista Bonita Dr., STE 260 Scottsdale, AZ 85255 |
If to Consultant: |
R. Glenn Bancroft 3056 N Spirit Dancer Tr Tucson, AZ 85749 ] |
or to such other address as the parties hereto may specify, in writing, from time to time.
Entire Agreement
This Agreement supersedes any and all other agreements, either oral or in writing, between the parties hereto with respect to the subject matter hereof, and contains all of the covenants and agreements between the parties with respect to said subject matter.
Modification of Agreement
This Agreement may be modified only by a written agreement duly executed by both parties.
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Severability
If any term, provision, covenant, or condition of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the provision shall remain in full force and effect and the remainder of this Agreement shall in no way be affected, impaired or invalidated.
Waiver of Breach
The failure of either party to enforce any of the provisions of this Agreement or any rights with respect thereto shall in no way be deemed to be a waiver of such provisions or rights or in any way affect the validity of this Agreement.
Attorneys Fees
In the event any action is brought to interpret or enforce any provision of this Agreement, the prevailing party shall be entitled to reasonable attorneys fees together with costs and expenses, including appellate fees and costs, incurred pursuant to such action.
Captions
The captions of the Sections of this Agreement are for reference only and in no way define, limit, extend or describe the scope of this Agreement or the intent of any of its provisions.
Governing Law
This Agreement has been executed and delivered in the State of Arizona, and its interpretation, validity and performance and enforcement shall be construed and in accordance with the laws of the State of Arizona, excluding its conflict of laws principles.
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IN WITNESS WHEREOF , the parties hereto have executed this Agreement, as of the date set forth hereunder.
COMPANY |
CONSULTANT |
|
|
Spindle, Inc. |
R. Glenn Bancroft |
|
|
|
|
|
|
Signature: /s/ William Clark |
Signature: /s/ R. Glenn Bancroft |
Print Name: William Clark |
Print Name: R. Glenn Bancroft |
Title: CEO |
Title:___________________ |
|
|
Date: __________________ |
Date: ___________________ |
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EXHIBIT A
Services
General Management services
Personnel profiling and placement
Executive development and coaching
Sales team development consulting
Organizational behavioral assistance
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EXHIBIT B
Fees
Consultant will be paid 100,000 shares of S-8 registered shares on or about the anniversary of the start date.
Contract may be renewed annually.
Reimbursement of actual travel expenses, including, but not limited to mileage, fuel, airfare, accommodations, meals, materials, etc. All expensed will comply with Company travel policy guidelines and will be pre-approved.
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April 1, 2014
Mr. Christopher J. Meinerz
2517 East Desert Willow Drive
Phoenix, AZ 85048
RE: Offer of Employment
Dear Christopher:
On behalf of SPINDLE,INC.(the Company), I am pleased to offer you the position of Chief Financial Officer and Chief Compliance Officer beginning on April1, 2014. The offer terms and conditions are as follows:
You will be expected to perform various duties consistent with your position. You will report to [William Clark, Chief Executive Officer]. The Company may change your position, duties, and work location from time to time as it deems necessary.
Your employment with the Company will be at-will, which means that it will be for no specified term and your employment may be terminated by you or the Company at any time, with or without cause or notice.
Your initial compensation will be at the annual rate of $180,000 less payroll deductions and all required withholdings. You will be paid semi-monthly or otherwise as required by applicable State law.
The Company acknowledges and agrees that the initial compensation is based upon this agreement having a minimum term of three months and you will, at your discretion and as the Company's requirements for your services allow, continue to dedicate one day per work week in the physical office of your former employer until such services are no longer required by your former employer. At such time that your services are no longer required by your former employer, your initial compensation will be increased to an annual rate of $200,000 less payroll deductions and all required withholdings. You will provide no less than 30 days' notice of your change in status with your former employer.
You will be entitled to participate in any employee benefit or group insurance plan that may from time-to time be adopted by the Company that is generally available to the other full-time employees of the Company, subject to the terms and conditions of such benefits and plans. The Company reserves the right to amend, modify or cancel any employee benefit or insurance plan it offers at any time for any reason. The Company currently offers a PPO health insurance plan, which is currently provided by Blue Cross of AZ, as well as a dental and vision plan.
You will earn Paid Time Off ( PTO ) at the rate of 15 days per year or 10 hours per month (5 hours per pay period), accruing prospectively from the date that you become employed by the Company. PTO may be used if you are sick, for any personal reason, or for vacation. PTO must be fully used each calendar year and will not rollover.
Upon the commencement of your employment with the Company, and at the next grant cycle, you will be eligible to receive a stock option grant of 90,000 options to purchase shares of the Company's common stock. Such option grant shall be made in accordance with, and subject to the vesting terms and conditions of the Company's option plan.
As a condition of employment, you will be required to sign and comply with the terms of the Spindle Inc. Confidentiality, Noncompete, Nonsolicit and Assignment Agreement (the Agreement), a copy of which accompanies this letter.
This letter, together with the Agreement, forms the complete and exclusive statement of the terms of your employment with the Company. To the extent there is any conflict between the terms of this letter and any other Company document or policy, the terms of this letter control. The terms of this letter agreement cannot be modified, except in a writing signed by a Company officer.
As required by law, this offer is subject to satisfactory proof of your right to work in the United States. This Agreement will be binding upon your heirs. executors. administrators. and other legal representatives and will be for the benefit of the Company, its successors, and its assigns.
Please sign and date this letter, and return it to me by April 1, 2014, if you wish to accept employment with the Company under the terms described above. By signing and accepting this offer, you represent that (i) you are not subject to any preexisting contractual or other legal obligation with any person, company or business enterprise which may impede your employment with, or your providing services to, the Company as its employee, and (ii) you do not have, and will not bring onto Company premises, or use in the course of your employment with the Company, any confidential or proprietary information of another person, company or business enterprise to whom or to which you previously provided services.
We look forward to your favorable reply and to a productive and enjoyable work relationship. If you have any questions regarding this letter, please contact me at (480) 295-8059.
Sincerely,
Spindle, Inc.
/s/ William Clark
William Clark
Chief Executive Officer, President and
Director
Accepted and Agreed:
/s/ Christopher J. Meinerz
Christopher J. Meinerz
4/1/14
Date
CONFIDENTIALITY, NONCOMPETE, NONSOLICIT AND ASSIGNMENT AGREEMENT
This Agreement is entered into as of April 1, 2014, (the Effective Date) by and between Spindle Inc. (the Company), and Christopher J. Meinerz (Employee).
Employee agrees as follows:
1.
Confidentiality
(a)
Confidential Information means proprietary and other confidential information that the Company has or will develop, compile or own, or that the Company receives from third parties under conditions of confidentiality. The term is to be broadly interpreted and includes (i) information that has, or could have, commercial value for the business in which the Company or its customers are engaged, or in which they may engage at a later time, and (ii) information that, if disclosed without authorization, could be detrimental to the economic interests of the Company. Confidential information includes, without limitation, any patent application, copyright, trademark, trade name, service mark, service name, know-how, negative know-how, trade secrets, customer and supplier identities, characteristics and terms of agreements, details of customer or consultant contracts, pricing policies, operational methods, marketing plans or strategies, product development techniques or plans, business acquisitions plans, science or technical information, ideas, discoveries, designs, computer programs (including some codes), financial forecasts, unpublished financial information, budgets, processes, procedures, formulae, improvements or other proprietary or intellectual property of the Company, whether or not in written or tangible form, and whether or not registered, and including all memoranda, notes, summaries, plans, reports, records, documents and other evidence thereof. The term 'Confidential Information does not include, and there shall be no obligation hereunder with respect to, information that becomes generally available to the public other than as a result of an unauthorized disclosure by Employee.
(b)
Employee acknowledges that the information, observations and data obtained by him while employed by the Company concerning the business and affairs of the Company are the property of the Company. Therefore, Employee agrees that, during and after the term of employment, Employee will not, directly or indirectly, in one or a series of transactions, disclose to any person, or use or otherwise exploit for Employee's own benefit or for the benefit of anyone other than the Company, any Confidential Information; provided however that Confidential Information may be disclosed to officers, representatives, employees and agents of the Company who need to know such Confidential Information in order to perform the services or conduct the operations required or expected of them in the business. Employee shall use his best efforts to cause all persons or entities to whom any Confidential Information shall be disclosed by him hereunder to observe the terms and conditions set forth herein as though each person or entity were bound hereby. Employee shall have no obligation hereunder to keep confidential any Confidential Information if and to the extent disclosure of any such information is specifically required by applicable law; provided, however, that in the event disclosure is required by applicable law, Employee shall provide the Company with prompt notice of such requirement, prior to making any disclosure, so that the Company may seek an appropriate protective order. At the request of the Company, Employee agrees to deliver to the Company, at any time during the term of employment, or thereafter, all Confidential Information which he may possess or control. Employee agrees that all Confidential Information of the Company (whether now or hereafter existing) conceived, discovered or made by him during the term of employment exclusively belongs to the Company and not to the Employee. Employee will promptly disclose such Confidential Information to the Company and perform all actions reasonably requested by the Company to establish and confirm such exclusive ownership.
2.
Non-Competition
(a)
Employee acknowledges that in the course of his work for the Company, he will become familiar with the Company's Confidential Information and that his services will be of special, unique and extraordinary value to the Company.
(b)
Employee agrees that during his Employment with the Company, and for either (i) a period of twelve months after the termination of his employment with the Company or (ii) a period of time after the termination of his employment with the Company equal to the duration of his employment with the Company if such duration is less than twelve months, he will not, except on behalf of the Company, perform any work or services, directly or indirectly, with respect to any person or entity, if such work or services is of any type performed by Employee for the Company with respect to the same such person or entity, or any affiliate of the same such person or entity, during the prior year.
3.
Non-Solicitation
Employee agrees that while employed by the Company, and for either (i) a period of twelve months after the termination of his employment with the Company or (ii) a period of time after the termination of his employment with the Company equal to the duration of his employment with the Company if such duration is less than twelve months, he will not directly or indirectly, for himself or on behalf of any other person or entity:
(a)
solicit, seek to employ, or seek to retain the services of any person who is providing services to Company as an employee, independent contractor or consultant; or
(b)
solicit, persuade, or induce any person or entity who is or was a customer of Company to (1) refrain from being a customer of Company or (2) become a customer of another business in competition with the Company.
4.
Inventions, Discoveries Employee acknowledges that any inventions, discoveries or trade secrets, whether patentable or not, made or found by Employee in the scope of his employment with the Company constitute property of the Company and that any rights therein now held or hereafter acquired by Employee individually or in any capacity are hereby transferred and assigned to the Company, and agrees to execute and deliver any confirmatory assignments, documents or instruments of any nature necessary to carry out the intent of this paragraph when requested by the Company without further compensation, whether or not Employee is at the time employed by the Company.
5.
Equitable Remedies
Employee acknowledges and agrees that performance of Employee's covenants, agreements, and other obligations, as set forth herein, are vital and unique to Company, and that any breach or default would give rise to significant and irreparable injury to Company for which money damages are an inadequate remedy. Therefore, if any action or proceeding is instituted by or on behalf of Company to enforce any of the terms or provisions of this Agreement, Employee hereby waives the claim or defense thereto that Company has an adequate remedy at law or has not been, or is not being, irreparably injured thereby, and the same shall be enforceable by temporary or permanent injunction, restraining order, or decree of specific performance (without the requirement of any bond).
Employee further agrees that in the event any such action is instituted by or on behalf of Company, Employee shall be responsible for all damages incurred by Company in connection with such breach or default, including the reasonable fees of Company's attorneys and their support staff. The remedies provided in this Paragraph shall be cumulative and not exclusive, and in addition to any other remedies that Company may have pursuant to this Agreement or applicable law.
6.
Governing Law
This Agreement shall be subject to and governed by the laws of the State of Arizona without regard to conflicts of law principle
Dated: April 1, 2014 |
/s/ Christopher J. Meinerz |
|
Signature |
Exhibit 21.1
List of Subsidiaries
None.
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the use in the Prospectus constituting a part of this Registration Statement of our report dated March 31, 2014, relating to the consolidated financial statements of Spindle, Inc., which are contained in that Prospectus.
We also consent to the reference to us under the caption Experts in the Prospectus.
/s/ L.L. Bradford & Company
L.L. Bradford & Company
February 2, 2015
Las Vegas, Nevada
702-735-5030 * 8880 West Sunset Road, Third Floor, Las Vegas NV 89148 * www.llbradford.com